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IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE CIRCUIT LOCAL DIVISION, EAST LONDON

CASE NO: EL 1105/2016

ECD 2605/2016

In the matter between:

AMANZ’ ABANTU SERVICES (Pty) Ltd                                                           Plaintiff

and

THE MVULA TRUST                                                                                          Defendant

JUDGMENT

STRETCH J.:

[1]          When this matter came before me, I was informed that the Judge President of this Division had directed that the parties be called upon to determine (in terms of a ‘stated case’), the defendant’s special pleas of res iudicata and stay pending adjudication and/or arbitration. There is no directive or order on record to this effect, but I presume the ruling was intended to invoke the provisions of rule 33(1), (2) and (3) of the Uniform Rules of this Court. Two bundles, headed ‘stated case’ have been filed, one for the plaintiff and one for the defendant. They are not the same and do not comply with the provisions of the rule.[1] It nevertheless appears that the parties have made their best endeavours to come up with a joint reply,  the upshot of which is the following:

Agreed facts

[2]      It is agreed that the following is common cause:

a.    That on 29 November 2013 the plaintiff submitted a contractor tender (“the Contract”) to the defendant (which was accepted the same day) for the implementation of phase one of the Eastern Cape Schools Water and Sanitation Operation and Maintenance Program for a total price of R61 785 289,23;

b.    That as far as payment was concerned, it was agreed that the plaintiff would invoice the defendant monthly in arrears, that payment would be 30 days from the cut off period of the monthly invoice, and that interest would be levied on amounts outstanding for more than the 30 days equivalent to the base prime interest rate plus two per cent calculated monthly and added to the amount due;

c.    That the plaintiff has submitted invoices ranging from April 2015 to March 2016  reflected in a schedule dated 30 June 2016, and that the defendant has (despite demand) refused to pay;

d.    That the Contract contains a dispute resolution process at clause 93 thereof;

e.    That the plaintiff referred the non-payment of the invoices for 1 April to 28 October 2015 (“claim one”) for adjudication;

f.     That the adjudicator made a determination;

g.    That neither party referred this determination to arbitration;

h.    That the plaintiff did not refer the non-payment of invoices for 1 November 2015 to 31 March 2016 (“claim two”) to adjudication.

The defendant’s contentions

[3]          The defendant contends that the plaintiff’s claim for payment of claim one is res iudicata in that it is for the same thing, on the same ground, and against the same party as the claim in respect of which the adjudicator has already made a final and binding decision.

[4]          In terms of the contract, the adjudicator’s decision is final and binding if neither party has notified the other within the time frame stipulated that it intends to refer the matter to arbitration. This was not done.

[5]          If the aforementioned plea is dismissed, claim one should be stayed pending adjudication/arbitration.

[6]          With respect to claim two, the defendant pleads that the plaintiff failed to comply with the contractual ADR process as it did not refer the dispute to the adjudicator (as happened with claim one), and that this claim too should be stayed pending adjudication/arbitration.

The plaintiff’s contentions

[7]          The plaintiff contends that its cause of action is not res iudicata in that it has not been finally determined. It is the defendant’s pleaded case (a fact which is common cause) that the adjudicator did not make a finding on the plaintiff’s entitlement to payment but merely stated that the claim is competent in law, and did not make any monetary award in the plaintiff’s favour. The issue has accordingly not been finally determined between the parties and the special plea falls to be dismissed with costs.

[8]          Once the special plea has been dismissed, it consents to an order that the claim (incorporating claims one and two) be referred to arbitration on certain conditions. Its formal notice of consent to an order reads as follows:

‘NOTICE OF CONSENT TO AN ORDER

WHEREAS the Defendant has raised a Special Plea of res judicata in respect of the period April 2015 to October 2015.

AND WHEREAS the Plaintiff has disputed that the claim is res judicata, and persists with such opposition.

AND WHEREAS the Defendant has pleaded that the Plaintiff’s claims should be stayed in the event that the Special Plea of res judicata is not upheld (paragraph 14 of the Special Plea).

AND WHEREAS the Defendant has further pleaded that the Plaintiff’s claims should be stayed for referral by the Plaintiff to arbitration (paragraph 24.1 of the Special Plea) both in respect of the claim from April 2015 to October 2015 and for the claim from November 2015 to April 2016 (Special Plea, paragraph 31.1).

NOW THEREFORE the Plaintiff records its agreement that, in the event that the Special Plea of res judicata is dismissed (which is not conceded) (sic), that the Plaintiff’s claim for payment for April 2015 to April 2016 be referred to arbitration on the following terms:

1.    That a suitable Arbitrator be appointed by agreement between the parties,

2.    That the Arbitrator will commence the enquiry de novo, for liability in respect of invoices from April 2015 to April 2016.

3.    That the Plaintiff’s claims in Case No. EL 1105/2016 be stayed, with costs of the action being reserved for decision by the Arbitrator.’

Issues to be determined

[9]      The parties accordingly agree that the issues for determination are the following:

a.    Whether the plaintiff’s cause of action with respect to claim one is res iudicata in that it has been finally determined;

b.    Whether, if it is found that claim one is not res iudicata, the claims should be stayed before this court pending their referral by the plaintiff for adjudication or arbitration in accordance with the dispute resolution process set forth in clause 93 of the contract; alternatively, whether the claims should be stayed pending arbitration on the conditions preferred by the plaintiff.

The background to the ‘stated case’

[10]       On 16 October 2017, at a rule 37 conference attended by the parties’ respective attorneys, the following was minuted:

‘ …The Defendant disputes that the above Honourable Court has jurisdiction to preside over this matter in its Special Plea and that the matter should be adjudicated upon before appearing before the above Honourable Court. The Plaintiff’s attorney raised the point that the matter has already been adjudicated upon. Reference is made to both Plaintiff’s and Defendant’s Discovery Affidavits, which annex the Adjudicator’s Award. The Defendant’s correspondent attorney agreed to seek further instructions from her instructing attorney regarding the contradiction between the Defendant’s Special Plea and Defendant’s Discovery Affidavit. …

It was agreed between the parties that there is no need for mediation/arbitration. …’

[11]       On 5 December 2017 the parties filed a ‘draft case management order in terms of paragraph 8 of the case management practice directive’ stating that the defendant’s correspondent attorney could not confirm an instruction regarding the defendant’s special plea and advised that she would obtain instructions from the instructing attorneys.

[12]       On 1 August 2018 the defendant filed a notice of intention to amend its special plea (which amendment was subsequently effected) dealing with the pleas of res iudicata and adjudication and/or arbitration. On 23 October 2018 the correspondent attorneys held a second rule 37 conference. Thereat the defendant once again disputed that this court has jurisdiction and recorded that the matter should have been referred to arbitration subsequent to the adjudication. The plaintiff recorded that the ADR process had been exhausted. Thereafter the defendant’s correspondent attorney (for reasons which are quite beyond comprehension regarding the nature of the claim) argued for a separation of the merits and quantum.

[13]       On 12 July 2019 the plaintiff’s attorney filed a notice in terms of rule 3, estimating the duration of the trial on the special plea to be three days.

[14]       On 16 October 2019 the parties filed a ‘preparation checklist for certification of trial readiness of cases subject to case flow management’ (form 1(a)), clearly reflecting that the plaintiff intended leading oral evidence at the hearing of the special pleas. On the same day they also filed a ‘roll call trial preparation checklist’. In response to the question of whether oral evidence will be led at the hearing of the special plea, or whether the parties intend agreeing on a stated case for adjudication in terms of rule 33, the  response (for the second time) was that the plaintiff intended leading oral evidence.

[15]       It is in my view, unfortunate that a decision was subsequently made that the matter should proceed by way of a ‘stated case’. Such an avenue simply does not allow for the interrogation of witnesses with respect to what transpired during the period between the adjudicator’s decision and the issue of summons. To my mind, oral evidence on this aspect would have been of assistance to this court in expediting the determination of this matter. It is clear from the minutes of what transpired at the rule 37 conferences that the correspondent attorneys (who are not at the coalface), who invariably attend pre-trial conferences, prepare draft case management notices, attend case management conferences before judges who are not seized with the trial, and who prepare roll call preparation checklists and attend roll call before judges who are not ultimately seized with the trial, find themselves agreeing to procedures which neither they, nor those who purport to make determinations on their behalf, will have to grapple with at the end of the day.[2]

Res iudicata

[16]       The exception rei iudicatae is based on the irrebuttable presumption that a final judgment on a claim submitted to a competent court is correct. This presumption is founded on public policy which requires that litigation should not be endless and on the requirement of good faith, which does not permit of the same things being demanded more than once.[3] The judgment or order must be final and definitive on the merits of the matter and it must be with respect to the same parties. The cause of action must be the same, and the same thing (relief) must have been claimed in both cases (ie the same issue must have arisen). It has been held that recognition of this defence requires careful scrutiny in each case and depends on the facts of the case with reference to equity and fairness to the parties and to others.[4]

[17]       It is common cause that the plaintiff’s present claim is one  for the same thing, on the same ground and against the same party as the claim which was (at least to a point) adjudicated upon by Trisk SC and in connection with which he gave a decision on 11 January 2016. The main issue to my mind is whether that decision amounted to a final adjudication of the claim by a court of competent jurisdiction.

[18]       According to the defendant’s plea on the merits, it terminated the agreement between the parties on 21 September 2015. It admits that the plaintiff submitted invoices to the defendant for work done, but because of the termination of the agreement, it denies in principle that it is liable to the plaintiff for these invoices or any portion thereof. In the plaintiff’s replication to the defendant’s plea over[5], the plaintiff denies that the defendant had any grounds to purport to terminate the agreement and pleads that the invoices are contractually valid. To my understanding, and in the absence of the record as to what exactly transpired before the adjudicator[6], it is this issue (ie whether the plaintiff was in principle entitled to a claim at all), which was adjudicated upon. I say so because it has been agreed between the parties that:

a.    The plaintiff submitted monthly invoices for payment and despite demand, the defendant has refused to pay.

b.    The contract contains a dispute resolution process.

c.    The plaintiff referred the non-payment of invoices for 1 April to October 2015 for adjudication.

d.    The adjudicator, in respect of the aforementioned referral, determined that the plaintiff’s claim (my emphasis) for unpaid invoices be allowed, subject to the defendant scrutinising the content and quantum of the claims reflected in each individual invoice, and in the event of disagreement (about the contents and quantum of each individual invoice), the defendant must motivate and explain such disagreement in order that the plaintiff might make an informed decision as to whether to pursue its entitlement (in respect of each and every invoice) for that which it had claimed, or for an amended amount, or to write off one or more individual claims altogether. This is encapsulated in the defendant’s rejoinder which makes it clear that the adjudicator did not make a finding on the [quantum] of the plaintiff’s entitlement to payment (by implication in respect of each and every individual invoice) but merely stated that the claim is competent in law, and declined at the time, to make a globular award (quantified in rands and cents), to the plaintiff.

e.    Neither party referred the adjudicator’s aforementioned decision to arbitration.

[19]    To sum up, the plaintiff contends that the award is not final for two reasons:

a.    In terms of the contract the adjudicator’s decision is binding only as a matter of contractual obligation;

b.    The adjudicator did not finally decide the disputed quantum of the invoices between the parties.

[20]       Despite having made the admissions which I have referred to, the defendant still maintains that the plaintiff’s claim is res iudicata.  In defence of this stance, it has been contended on the defendant’s behalf, that no ADR action having been taken after the adjudicator’s ruling, the parties are bound by what the adjudicator decided in respect of the invoices. It is contended that the plaintiff ought to have enforced the award made by the adjudicator in this forum, by, as I understand it, claiming the value it claimed before the adjudicator, in the absence of the defendant having shown that it is not entitled to do so. Differently put, where neither party has notified a challenge to the adjudicator’s decision (as in the case before me), the decision is final and binding.[7] In the circumstances it is contended that the plaintiff has approached this court with a new cause of action instead of following the proper dispute resolution process. As stated by counsel for the defendant, why should this court be in a better position than the adjudicator (who has already presided over this matter), to adjudicate over the remainder of the matter?

[21]       As for the second point raised by the plaintiff in respect of what exactly the adjudicator’s decision was, it is contended on the plaintiff’s behalf that the adjudicator did not make an award that is final and which brings an end to the lis between the parties.[8] On the other hand the defendant argues that whilst it is true that the adjudicator did not award a defined amount, the adjudicator did award the plaintiff’s claim (which was for a specific amount being the amount claimed by the plaintiff) subject to the defendant’s motivated objection.  In other words, what the adjudicator did not do was to specify the deductions to be made in the event that the defendant disputed the invoices. It is therefore contended that the present matter is in line with the decision of this Division in Kroon Meule CC v Wittstock t/a JD Distributors[9] where the following is stated:

‘The present award … states that a specific R472 506,85 is owed by the respondent to applicant, subject to reduction upon proof of specific ascertainable facts. It is clear from the wording of the award that respondent would be entitled to such credits upon production of the necessary documentary or other proof. The award, in other words, established the principle as well as the mechanics whereby the sum awarded could be reduced.’

Discussion

[22]       The primary concern of res iudicata is to ensure judicial certainty, and prevent contradictory conclusions on the same causes of action. The ‘same issue’ enquiry is really whether an issue of fact or law was an essential element of the judgment on which reliance is placed. Accordingly, each case will depend on its own particular facts, with the relevant considerations to include questions of equity and fairness. In the words of Cameron J:[10]

‘The doctrine of res judicata has ancient roots as an implement of justice.[11] It seeks to protect litigants and the courts from never-ending cycles of litigation. Its strict terms applied when a later dispute involve the same party, seeking the same relief, relying on the same cause of action.[12]

But the doctrine’s roots lay in good sense and fairness. This demanded wider application, that barred repeat cycles of litigation on less stringent exaction of the ‘same cause of action’ requirement.[13] …

And so it has become well accepted that enforcing the requirement of res judicata should yield to the facts in each case. Thus, the doctrine was enforced when a plaintiff demanded the same thing on the same ground, or (which is the same) on the same cause for relief, or further, where the same issue had been subjected to final previous judicial determination.[14] And the breadth of what is required when repeat litigation is barred is still being developed.’

[23]       To my mind there seems to be no problem with finding that the doctrine has application to the principle of the claim. As I understand it, a number of issues were referred for adjudication. Some claims were allowed, and others were not. Some were referred to arbitration culminating in a review application in this court.[15] I am given to understand that the dispute before me was referred to adjudication on the principle issue of the defendant’s liability to the plaintiff, and not necessarily the quantum thereof. Once the former had been decided (and it was) the parties were required to revert to the terms of the agreement between them in attempting to quantify the claim.

[24]       For reasons unbeknown to me, and which I have been unable to interrogate by virtue of the limited content of the stated case before me, they did not manage to do so. I am accordingly not satisfied, in these circumstances, and intending to apply “good sense and fairness”, that the entire lis has been decided between the parties. In the circumstances the plea of res iudicata cannot succeed.

[25]       That is not the end of the matter however. The defendant also relies on the alternative special plea of stay pending adjudication/arbitration.

Adjudication/Arbitration

[26]       As I understand the plea, the defendant contends that the plaintiff failed to exhaust its contractual ADR remedies (part of which had already been granted by the adjudicator) before approaching this court for relief. There has been much haggling between the parties on this point as well, and in the absence of any agreement, it is necessary to consider the terms and conditions of the Contract, and whether they were substantially complied with. The relevant clause of the Contract reads as follows:

‘93.     Dispute resolution

93.1    A dispute arising under or in connection with this contract is referred to and decided by the Adjudicator.

The Adjudicator

93.2  (1) The Parties appoint the Adjudicator under the NEC Adjudicators Contract current at the starting date. The Adjudicator acts impartially and decides the dispute as an independent adjudicator and not as an arbitrator.

(2) If the Adjudicator is not identified in the Contract Data or if the Adjudicator resigns or is unable to act, the parties choose a new Adjudicator jointly. If the Parties have not chosen an adjudicator, either Party may ask the Adjudicator nominating body to choose one. The Adjudicator nominating body chooses an adjudicator within four days of the request. The chosen adjudicator becomes the Adjudicator.

(3) The Adjudicator, his employees and agents are not liable to the Parties for any action or failure to take action in an adjudication unless the action or failure to take action was in bad faith.

The adjudication

93.3    (1) A Party may refer a dispute to the Adjudicator if the Party notified the other Party of the dispute within four weeks of becoming aware of it and between two and four weeks have passed since the notification. If a disputed matter is not notified and referred within the times set out in this contract, neither Party may subsequently refer it to the Adjudicator or the tribunal.

(2) The Party referring the dispute to the Adjudicator includes with his referral information to be considered by the Adjudicator. Any more information is provided within two weeks of the referral. This period may be extended if the Adjudicator and the Parties agree.

(3) The Adjudicator may take the initiative in ascertaining the facts and the law related to the dispute. He may instruct a Party to take any other action which he considers necessary to reach his decision and to do so within a stated time.

(4) A communication between a Party and the Adjudicator is communicated to the other Party at the same time.

(5) If the Adjudicator’s decision includes assessment of additional cost or delay caused to the Contractor, he makes his assessment in the same way as a compensation event is assessed.

(6) The Adjudicator decides the dispute and notifies the Parties of his decision and his reasons within four weeks of the referral. This period may be extended by up to two weeks with the consent of the referring Party, or by any period agreed by the Parties. If the Adjudicator does not notify his decision within the time allowed, either Party may act as if the Adjudicator has resigned.

(7) Unless and until the Adjudicator has notified the Parties of his decision, the Parties proceed as if the matter disputed was not disputed.

(8) The Adjudicator’s decision is binding on the Parties unless and until revised by the tribunal and is enforceable as a matter of contractual obligation between the Parties and not as an arbitral award. The Adjudicator’s decision is final and binding if neither Party has notified the other within the times required by this contract that he intends to refer the matter to the tribunal.

Review by the tribunal

93.4    A Party may refer a dispute to the tribunal if the Party is dissatisfied with the Adjudicator’s decision or the Adjudicator did not notify a decision within the time allowed and a new adjudicator has not been chosen, except that neither Party may refer a dispute to the tribunal unless they have notified the other Party of their intention to do so not more than four weeks after the end of the time allowed for the Adjudicator’s decision.’

[27]     The relevant contract data state the following:

‘9         Termination and dispute resolution

Prior to initiating formal dispute resolution procedures, the Parties shall first attempt to resolve any dispute arising from this agreement informally and in good faith.

Either Party may refer any dispute arising, to the Parties’ respective chief executive officers by simultaneous written notice to them at the addresses chosen by the Parties. The Parties’ respective chief executive officers (or their nominees) (“Executives”) shall meet as often as the Parties reasonably determine is necessary, to gather and furnish to the other all information which the Parties believe to be relevant and appropriate in connection with the resolution of the matter in issue. The Executives shall discuss the problem and attempt to resolve the dispute informally. During the course of discussion, all reasonable requests made by one Party to the other for non-privileged information reasonably related to this agreement shall be honoured in order that each Party is fully advised of the other’s position. The format for the discussions shall be left to the discretion of the Executives.

Formal proceedings for the resolution of a dispute shall not commence until the earlier of:

·         The Executives concluding in good faith that amicable resolution through continued negotiation of the matter is not likely;

·         Seven (7) days after the matter has been referred to the Executives.

If the Parties fail to resolve any dispute in the manner contemplated by this clause, such dispute shall be submitted to arbitration in accordance with clause W1 on written demand of either Party.

The Adjudicator is … mutually agreed by the Employer and the Contractor, failing which the Adjudicator will be nominated by the Chairman of the Association of Arbitrators (Southern Africa).

The tribunal is … arbitration.

The arbitration procedure is … the latest edition of Rules for the Conduct of Arbitrations published by the Association of Arbitrators (Southern Africa) or its successor body.

The place where the arbitration is to be held is … East London, South Africa.

The person or organisation who will choose an arbitrator – if the Parties cannot agree [on] a choice or – if the arbitration procedure does not state who selects an arbitrator, is … The Chairman for the time being or his nominee of the Association of Arbitrators (Southern Africa) or its successor body.’

[28]       In the matter before me the adjudicator ruled on 11 January 2016 that the relief sought by the plaintiff in respect of the payment dispute was competent and ought to be allowed subject to the qualification that the invoices in respect whereof the plaintiff seeks payment must be subject to scrutiny by the defendant, and in the event of them being disagreed by the defendant, such disagreement must be motivated and explained by the defendant in order that the plaintiff might make an informed decision as to whether to pursue its entitlements for the sum claimed by it, or for an amended sum or any sum at all.

[29]       The parties met in due course, and, having reached a deadlock, neither party did anything of substance, until the plaintiff issued summons out of this court. The defendant, in its special plea, has pointed out that in terms of the Contract a party may refer the dispute to the tribunal if it is dissatisfied with the adjudicator’s decision or if the adjudicator did not notify a decision within the time allowed and a new adjudicator has not been chosen. The plaintiff’s response to this is that it was not dissatisfied with the adjudicator’s decisions. The plaintiff has further, and correctly up to a point[16], replicated that the adjudicator’s ruling becomes “binding” if the parties do not take any further steps after the lapse of four weeks.

[30]       However the conundrum which the plaintiff now faces, as pointed out by the defendant’s counsel, is simply the following: If the plaintiff was satisfied with the adjudicator’s decision which had become both final and binding, what is it doing in this court? And having pleaded that it was quite content with the adjudicator’s decision, its further contention, that a referral to arbitration is discretionary in any event, simply falls away.

[31]       In my view it may well have been better for all concerned, had the adjudicator applied clause 93.3(3) by directing the parties to deal with the defendant’s scrutinising of the invoices within a stated time. But the fact that he did not do so, is not an excuse for the parties to simply do nothing after a deadlock is reached, only to take up the heated dispute de novo in this forum some seven months after the adjudicator’s decision became final and binding. Such an approach can never be in the spirit of ADR. There were options available to the plaintiff, once the defendant had scrutinised the invoices and persisted with an unwillingness to pay in principle (despite the adjudicator’s ruling) and without “motivating and explaining” its disagreement as instructed by the adjudicator. By the same token, the defendant, who still by all accounts denies that it is liable to the plaintiff in principle (despite the adjudicator’s finding) ought to have referred the dispute to the tribunal as provided for in clause 93.4 of the contract. One thing is certain. The issue of summons out of this court is not only inappropriate in the light of the ADR remedies available in terms of the contract, but also smacks of piecemeal litigation, which is not an approach which this court should readily countenance.

[32]       As I have mentioned, in the event of the plea of res iudicata not succeeding, the plaintiff has consented that its claims be referred to arbitration on certain terms. The plaintiff has not motivated why, by introducing these terms, I should place restrictions and constraints on an ADR process which the parties themselves have failed to comply with, and I can see no reason in fact or in law, why I should. This court should not have been approached at this juncture in the first place. To attempt to now use it as a registrar of obligations in my view, adds insult to injury.

Costs

[33]     To my mind the defendant has been substantially successful and there is no reason why costs should not follow the result. The order which I make is as follows:

a.    The special plea of res iudicata is dismissed.

b.    The special plea of stay pending adjudication and/or arbitration is upheld.

c.    The plaintiff’s action is stayed, with costs, pending its referral thereof (if so advised) to adjudication and/or arbitration.

_________________________

I.T. STRETCH

JUDGE OF THE HIGH COURT

Counsel for the plaintiff: S. H. Cole

Instructed by Russel Linde Attorney

c/o Difford Underwood Inc.

EAST LONDON

Ref. Ms Osborne

Counsel for the defendant: L.C. Segeels

Instructed by Mantengu Attorneys Inc.

c/o Smith Tabata Inc.

EAST LONDON

Ref. L. Bailing

Date heard: 19 November 2019

Date handed down: 25 February 2020

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