Ekurhuleni West College v Segal and Another

Ekurhuleni West College (the College), a public college established under the Continuous Education and Training Act 16 of 2006, engaged Trencon Construction (Pty) Ltd (Trencon) under a written building contract to construct a conference centre. By the time of practical completion, various disputes arose between the parties. Trencon referred 13 claims to the first respondent (the adjudicator) for adjudication in terms of clause 40 of the building contract and the JBCC Adjudication Rules. The adjudication followed a written procedure with statement of claim, defence, and replication. The adjudicator refused to consider the College's subsequent rejoinder (not provided for in the rules) and requested additional information from Trencon under rule 5.7.7. The College did not respond to this request. The adjudicator decided no hearing was necessary and issued a written determination on 14 March 2017 (revised 19 March 2017), allowing five of Trencon's claims totaling R3,253,484.41. On 28 March 2017, the College gave notice of dissatisfaction and referred the disputes to arbitration, but on 13 April 2017 launched a review application instead of making payment as required by the contract.

• Whether a review application may be entertained in respect of an adjudicator's determination when arbitration proceedings are pending and the determination is subject to revision in that arbitration
• Whether the rules of natural justice apply to contractual adjudication proceedings and, if so, whether they were breached
• Whether a court on judicial review may enter into the substantive merits of an adjudicator's determination
• Whether the power to review unterminated proceedings should be exercised in the circumstances
• Whether attorney and client costs were appropriately awarded on the counter-application

The appeal was dismissed with costs, including the costs of two counsel. The High Court's order dismissing the review application and granting the counter-application for enforcement of the determination (with attorney and client costs in both instances, including costs of two counsel) was upheld.

Where parties to a building contract agree to a two-tier dispute resolution mechanism involving interim adjudication followed by arbitration with full powers to revise the adjudicator's determination as if it had never been issued, a court will not entertain a review application against the adjudicator's determination while arbitration proceedings are pending, unless rare circumstances of grave injustice or impossibility of attaining justice by other means are shown. The principle from Wahlhaus that courts should only review unterminated proceedings in exceptional circumstances applies equally to contractual dispute resolution processes. Where an aggrieved party has invoked the contractual remedy of arbitration and no grave injustice would result from holding the party to its contractual obligations, there is no basis for premature judicial intervention by way of review.

The court made several obiter observations: (1) A judicial review is not concerned with the correctness of the substantive merits of a decision, but with the fairness and regularity of the procedure by which it was reached. The High Court therefore erred in determining the substantive merits of the claims (ground c). (2) In relation to contractual tribunals, the obligation to observe natural justice principles derives from express or implied terms of the agreement. The test for implying such terms is the ordinary test for tacit terms (the unexpressed intention of parties), not terms implied by law. Express contractual procedural provisions preclude the tacit importation of rules of natural justice. (3) The remedies of arbitration and review are not necessarily mutually exclusive in all circumstances - a review based on procedural unfairness differs from arbitration which involves a rehearing on the merits. (4) The absence of reasons for a costs order may indicate failure to exercise discretion judicially. (5) The review application constituted an abuse of process where the College intentionally frustrated Trencon's contractual rights by failing to make payment as required and launching litigation bound to fail despite having already invoked arbitration, justifying attorney and client costs.

This case establishes important principles regarding the reviewability of interim determinations in multi-tiered contractual dispute resolution processes in South African construction law. It affirms that where parties agree to a dispute resolution process involving interim adjudication followed by final arbitration with full revision powers, courts will generally not intervene by way of review before the contractual process is exhausted, unless grave injustice would otherwise result. The judgment reinforces the principle against piecemeal litigation and supports the enforceability of expedited interim adjudication mechanisms in construction contracts. It clarifies that parties who contractually agree to be bound by interim determinations pending final resolution must comply with those determinations and pursue their contractual remedies rather than seeking premature judicial intervention. The case also provides guidance on the application of natural justice principles to contractual tribunals, emphasizing that express contractual procedural provisions govern and that tacit terms will only be implied where necessary and not inconsistent with express terms.