Radon Projects (Pty) Ltd v N V Properties (Pty) Ltd and Another

NV Properties (Pty) Ltd (employer) and Radon Projects (Pty) Ltd (contractor) concluded a contract for the construction of the East London Convention Centre using the JBCC Principal Building Agreement 4th ed March 2004. The agreed date for practical completion was 17 October 2008. During construction, the contractor submitted various claims to the principal agent under clause 29 for revisions to the date for practical completion due to delays. Some claims were granted, extending the date to 9 March 2009. The project reached practical completion on 14 December 2009, resulting in penalties of approximately R6 million. After practical completion, the contractor submitted a 'consolidated claim' comprising revised versions of earlier claims based on information that came to hand after completion. The principal agent failed to respond. The contractor requested a determination under clause 40.1, which was not provided. An arbitrator was appointed. The employer applied to the High Court contending the arbitrator had no jurisdiction over most claims. Da Silva AJ granted the order, and the contractor appealed.

• Whether the arbitrator had jurisdiction to consider the contractor's revised claims submitted after practical completion
• Whether disputes arising before practical completion must be resolved by adjudication rather than arbitration
• Whether claims that were initially refused during construction and became final and binding can be revised and resubmitted after practical completion
• Whether an arbitrator can inquire into and rule upon jurisdictional objections raised before him

The appeal was upheld with costs. The order of the High Court was set aside and substituted with an order dismissing the application with costs. The costs in each case were to include the costs of two counsel where two counsel were employed.

The binding legal principles established are: (1) Under the JBCC Principal Building Agreement clause 40, whether a dispute is to be resolved by adjudication or arbitration depends on when the dispute is submitted for resolution, not when it arose or its nature. (2) The jurisdiction of an arbitrator (or court) to consider a claim cannot be dependent on the merits of the claim - a tribunal must have jurisdiction to dismiss bad claims as much as to uphold good ones. (3) The power of a tribunal to answer a question cannot depend upon the answer to that question; jurisdiction cannot depend on whether a claim is good or bad. (4) An arbitrator confronted with a jurisdictional objection is not obliged to withdraw immediately, but may inquire into the merits of the objection to satisfy himself whether to proceed, though such inquiry has no binding effect on the parties' rights and any award made may be invalid if jurisdiction is lacking.

The Court made non-binding observations regarding: (1) The evolution of construction contract dispute resolution internationally, noting the modern trend toward provisional adjudication as a 'quick and dirty' cash flow measure before final arbitration or litigation, citing English and New Zealand precedents. (2) The Court noted that in many cases reference to the principal agent under clause 40.1 is 'little more than an irritating and time-wasting formality' as the decision is likely a foregone conclusion. (3) The Court provided guidance on how arbitrators should exercise judgment when confronted with jurisdictional objections, citing English authorities (Christopher Brown Ltd v Genossenschaft Oesterreichischer, Mustill and Boyd, and Russell on Arbitration) on best practices. (4) The Court indicated it need not decide whether the contractor was actually entitled to submit revised claims after practical completion, noting this goes to merits and 'might well be that there is no merit in its contention' - these were matters for the arbitrator to determine.

This case is significant in South African construction and arbitration law for: (1) interpreting the JBCC Principal Building Agreement dispute resolution provisions, particularly the distinction between adjudication (before practical completion) and arbitration (after practical completion); (2) establishing that the timing of submission for resolution, not the timing or nature of the dispute, determines whether adjudication or arbitration applies; (3) clarifying that jurisdictional challenges to arbitrators must be assessed based on whether the claim as pleaded falls within the arbitrator's jurisdiction, not on the merits of the claim; (4) reinforcing the principle from Makhanya that jurisdiction cannot depend on whether a claim is good or bad; and (5) providing guidance on how arbitrators should handle jurisdictional objections, confirming they may inquire into and rule on such objections rather than immediately declining to act.