Sasol South Africa (Pty) Ltd v Murray & Roberts Limited

On 15 March 2015, Sasol and Murray & Roberts concluded an NEC3 Engineering and Construction Contract for work at Sasol's Secunda plant. The contract was a time charge contract providing for a project manager to assess payments and a dispute resolution process involving adjudication followed by arbitration. Due to budget constraints, in March 2017 the project manager issued PMC200 instructing Murray & Roberts to demobilise resources and began deducting costs from payment applications, resulting in approximately R42 million in deductions. Murray & Roberts disputed these deductions (Disputes 1 and 2) which the adjudicator initially upheld. Murray & Roberts then referred Disputes 1 and 2 to arbitration. While the arbitration was pending, the project manager continued applying PMC200 to subsequent payment applications (Disputes 3, 5, 6, 8-12), which the adjudicator also upheld. On 9 October 2018, the arbitrator ruled in favour of Murray & Roberts, finding that PMC200 was not contractually binding and that timesheets submitted by Murray & Roberts were contractually binding. When Murray & Roberts requested the project manager to implement the award across all 10 disputes, he did so only partially on Sasol's instruction. Murray & Roberts then referred Dispute 16 to the adjudicator, challenging the project manager's refusal to apply the arbitrator's principles to payment advice 38. The adjudicator found in favour of Murray & Roberts on 12 May 2019, ordering payment. Sasol refused to comply, arguing the adjudicator's decision was invalid.

• Whether a party to a construction contract is entitled to refuse to comply with an adjudicator's decision on the ground that it considers the decision to be invalid
• Whether an adjudicator exceeded his jurisdiction by applying principles established in an arbitration award to disputes not directly subject to that award
• Whether the adjudicator was precluded from reconsidering disputes that were the same or substantially the same as disputes he had previously decided
• Whether the adjudicator failed to notify his decision within the time period prescribed by the contract
• Whether the adjudicator's jurisdiction ceased when a party issued a notice of dissatisfaction before the decision was rendered
• Whether the adjudicator breached the audi alteram partem principle by failing to provide one party with an opportunity to address certain evidence

The appeal was dismissed with costs, including reserved costs for the application for leave to appeal and costs of two counsel where employed. The high court order was varied only to reflect the correct amounts still outstanding after certain payments had been made by Sasol. Sasol was ordered to pay Murray & Roberts ten specific amounts (ranging from R102,842.50 to R10,888,833.76) plus VAT on each amount, together with interest calculated daily at ABSA Bank's prime lending rate compounded annually from 10 June 2019 to date of payment.

The ratio decidendi of this case comprises several binding principles: (1) An adjudicator's decision under an NEC3 construction contract is binding and enforceable as a contractual obligation, and a party cannot refuse to comply with it simply on the ground that it considers the decision invalid - the proper recourse is to apply to court to set it aside. (2) When an arbitrator's award establishes principles of contractual interpretation or application that are binding between the parties, a project manager is contractually obliged under clauses 50 and 51.3 to apply those principles when assessing subsequent payment applications. (3) When reviewing a project manager's refusal to apply principles established in an arbitration award, an adjudicator acting under clause W1.3(5) is not reconsidering his own prior decisions but is performing the function the project manager should have performed, and therefore does not violate clause 2.1 of the adjudicator's contract which prohibits deciding disputes that are the same or substantially the same as previously decided disputes. (4) Under NEC3 contracts, where there is a conflict between the adjudicator's contract and the construction contract, the adjudicator's contract prevails (clause 1.7). (5) The four-week period for an adjudicator's decision under clause W1.3(8) commences from "the end of the period for receiving information," which includes any additional information requested under clause W1.3(5) or additional clause 2.5 of the adjudicator's contract. (6) An arbitration award is final and binding on the parties until and unless set aside on review, and establishes binding principles that must be applied to related matters.

The Court made several obiter observations. The Court noted with apparent approval the principle from Carillion Construction v Devonport Royal Dockyard Ltd that where an adjudicator has acted in excess of jurisdiction or in serious breach of natural justice rules, the court will not enforce the decision - though this principle did not apply on the facts. The Court discussed the general rule from Hollington v F Hewthorn & Co Ltd regarding inadmissibility of judgments from other tribunals as evidence in separate proceedings between different parties, and the criticism this rule has received, though ultimately finding this principle inapplicable to the case at hand where the arbitrator's award established contractual principles binding between the same parties. The Court observed that Sasol's calculation and quantum of amounts reflected in timesheets were never genuinely in dispute, suggesting that objections raised about failure to address timesheets were somewhat tactical rather than substantive. The Court also commented on the practical implications of requiring each dispute to go through the full adjudication and arbitration process even where an arbitrator has already established applicable principles, noting this would put contractors to unnecessary expense and contradict the underlying practicalities and principles of the contract. Finally, the Court noted that Sasol had brought an application to review and set aside the arbitration award which was dismissed by the high court, and that Sasol's petition for leave to appeal that dismissal was also refused by the Supreme Court of Appeal, reinforcing the finality of the arbitration award.

This judgment is significant in South African construction law for several reasons. First, it reinforces the binding nature of adjudicator's decisions under NEC3 construction contracts and clarifies that parties cannot unilaterally refuse to comply with such decisions simply because they believe them to be invalid - the proper recourse is to seek a court order setting the decision aside. Second, it establishes that when an arbitrator's award establishes binding principles on contractual interpretation or application, a project manager is obliged to apply those principles to subsequent assessments, and an adjudicator has jurisdiction under clause W1.3(5) to review a project manager's failure to do so. Third, the judgment provides important guidance on the interpretation of time periods in NEC3 contracts, particularly regarding the interaction between clause W1.3(3), clause W1.3(8) and additional clause 2.5 of the adjudicator's contract, clarifying that the adjudicator's contract prevails over the construction contract where there is conflict (clause 1.7). Fourth, it emphasizes the hierarchy of dispute resolution processes in construction contracts and the finality of arbitration awards unless set aside on review. The judgment promotes certainty and efficiency in construction dispute resolution by preventing parties from circumventing binding decisions through technical objections to jurisdiction or timing.