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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG LOCAL DIVISION, JOHANNESBURG

CASE NUMBER: 2104/18

In the matter between:

MURRAY & ROBERTS LTD                                                                              APPLICANT

and

ALSTOM S&E AFRICA (PTY) LTD                                                               RESPONDENT

 

J U D G M E N T

 

UNTERHALTER J

 

INTRODUCTION

1. The Applicant, Murray & Roberts Limited ( M&R ), seeks to enforce the decision of an adjudicator. The Respondent, Alstom S&E Africa (Pty) Ltd ( Alstom ) resists enforcement on the basis that the decisions are impossible of performance.

2. The issue arose in this way. Alstom was appointed by Eskom Holdings Soc Ltd to undertake certain works at the Kusile power station. The works included the erection of large vessels, referred to as absorbers.

3. Alstom appointed M&R as its subcontractor to erect the absorbers.

4. Alstom supplied the steel plates to be used by M&R for the erection of the absorbers. A dispute arose between the parties in respect of the materials supplied by Alstom.  Each of the steel plates supplied by Alstom was to have had a marking that corresponds to a material certificate ( also referred to as a mill certificate ) that specifies the composition of the steel  so as to establish that the steel complies with  the required specifications. Certain of the steel plates supplied did not have the required markings and could not be traced to material certificates or were not accompanied by material certificates.

5. M&R contended that Alstom was obliged to provide the material certificates in respect of the steel it supplied to M&R. Absent the certificates, M&R was not obliged to proceed to erect the absorbers. Alstom demurred. As a result, M&R notified Alstom of a dispute.  In terms of the subcontract, the dispute was referred to the Dispute Adjudication Board ( “ the Board “) for adjudication. The parties agreed to appoint Judge Nugent as the sole member of the Board, (“ the Adjudicator’) who accepted the appointment.

6. On 1 September 2017, the Adjudicator rendered his decision. His decision was as follows:

“My decision is that under the terms of the subcontract

1. Alstom was obliged to provide Murray & Roberts with traceability and material certificates (with an authentic test record) in compliance with EN10204 type 3.1 certification in respect of all the free issue materials for the erection of the absorbers in respect of unit 3 at Kusile.

2. In the event that the free issue materials for the erection of the absorbers in respect of unit 2 at Kusile cannot be positively identified with a material certificate (with an authentic test record) provided; and/or there is no legible stamping/marking ) issued by Alstom; and/or there is no legible stamping/marking on the materials ; then Alstom is obliged to have such materials subjected to appropriate testing that will positively identify the material and to provide Murray & Roberts with the testing records in compliance with EN10204 type 3.1 certification in respect of such materials.

3. Murray & Roberts was not obliged to continue with the welding of materials where a material certificate ( with an authentic test record) was not available or if the material could not be positively identified with the test record by legible stamping or marking.

4. For the avoidance of doubt, should there be any, those obligations existed at the time work was done on both units, and continue to exist as far as work is yet to be done.”

7. Clause 67.5 of the general conditions of subcontract provide that the decision of the Board is binding and shall promptly be given effect to unless and until the decision is revised by amicable settlement or arbitral award. A party dissatisfied with the decision of the Board may give notice of dissatisfaction within 28 days of receiving the decision, and have the dispute finally settled by arbitration. However, if no notice of dissatisfaction is given within the 28 day period, then the decision of the Board becomes final and binding.

8. Alstom issued a notice of dissatisfaction a few hours outside the 28 day period. It appears to be common ground that the Adjudicator’s decision is , accordingly , final and binding.

9. M&R sought an undertaking that Alstom would comply with the Adjudicator’s decision. Alstom declined to give the undertaking, nor did it comply with the decision.

10. M&R then brought the application now before this court to secure compliance with the Adjudicator’s decision. Alstom does not dispute that the Adjudicator’s decision is final and binding and gives rise to contractual obligations. Rather, Alstom submits that if these obligations cannot be performed, then a court will not enforce such obligations. In other words, a court will not order the specific performance of obligations arising from the Adjudicator’s decision that are impossible of performance. That is so even where the Adjudicator’s decision has not been set aside on review, nor revised by subsequent arbitration, nor even, where the defence of impossibility was not raised before the adjudicator. Alstom says that compliance with the decision is impossible of performance. And to the extent that there is a dispute of fact on this issue, Alstom, in motion proceedings, must prevail.

11. M&R contends that the Adjudicator’s decision is both binding and enforceable. But in any event, the defence of impossibility cannot hold because, properly interpreted, the Adjudicator’s decision is capable of performance and is enforceable by this court.

 

SPECIFIC PERFORMANCE AND ADJUDICATION

12. It is well settled in our law that courts enjoy a general equitable discretion to refuse specific performance, upon a consideration of all the relevant facts.[1] One circumstance in which that discretion is engaged is where an order of specific performance, if granted, would be impossible to perform. If performance is not possible, whether objectively or by reason of the conduct or circumstances of the debtor, the court will not order what cannot be done. And that is generally the case even where the debtor has made it impossible to perform. A person who makes a double sale of his property, and passes ownership to one buyer, cannot be required to effect delivery of the property to the second buyer. The aggrieved party will be confined to a claim for damages.[2]

13. Are these well known principles of application to the decision of the Adjudicator ? Alston contends that the enforcement of the Adjudicator’s decision is no different from any other claim of specific performance: if the decision is impossible of performance, no order should issue to compel what cannot be done. M&R argues that the Adjudicator’s decision is the outcome of an agreed mechanism of dispute adjudication that is binding and must be given effect to. The decision is enforceable and should be enforced.

14. Clause 67.5 of the general conditions of subcontract sets out how the parties to the agreement may obtain the adjudication of a dispute. The following features of Clause 67.5 are salient.

15. First, the definition of a dispute that may be referred by a party to the Board for its decision is widely cast. A dispute of any kind whatsoever in connection with or arising out of the subcontract or the execution of the works may be referred. A dispute is required to be interpreted in the widest sense and includes the interpretation and application of the subcontract; the rights and obligations in terms of and arising out of the subcontract; and the enforceability of the subcontract. There can be little doubt that the subcontract intended the definition to be capacious so as to bring almost every dispute the parties may have under the subcontract within the contractual scheme of adjudication.

16. Second, while either party may refer a dispute in writing to the Board, once a party has done so, the Board is required to give its decision within a stipulated period. And then to use the language of Clause 67.5 , “ the decision shall be binding on both Parties, who shall promptly give effect to it, unless and until it shall be revised in an amicable settlement or an arbitral award as described below.”

17. Third, if either party is dissatisfied with the Board’s decision, either party may within 28 days after receiving the decision, give notice of its dissatisfaction. The parties must attempt to settle the dispute amicably, but absent settlement, arbitration may then be commenced ( Clause 67.6). However, if the Board has given its decision, and no notice of dissatisfaction has been given within the 28 day after the decision was received, then the decision shall become final and binding upon the parties.

18. It is clear from this scheme that once the Board has rendered its decision, the decision is immediately binding upon the parties and gives rise to an obligation promptly to give effect to the decision. That obligation is not suspended while a party decides whether to give notice of dissatisfaction, nor even if such notice is given and arbitration proceedings commence ( see the language quoted above “ unless and until “ ) And if notice of dissatisfaction is not given or not given timeously, then the decision becomes final and binding and so too does the obligation promptly to give effect to the decision.

19. In Tubular Holdings[3], the court, interpreting clauses in the same type of subcontract used for the Kusile project, came to the same conclusion: parties were obliged to give prompt effect to the decision of adjudicators, despite notices of dissatisfaction, and ordered the respondent forthwith to give effect to the decision.

20. The question that then arises is this: even if the rendering of the Adjudicator’s decision gives rise to an obligation promptly to give effect to the decision, can this obligation be enforced by a court order in the face of the contention by Alstom that the decision is impossible of performance?

21. That the decision of the Adjudicator is binding and must be given effect to may be said to amount to little more than a stipulation that performance is due, whether or not notice of dissatisfaction has been given. But, it may be argued, the fact that performance is due under the contract, of which the adjudication and its outcome form part, does not alter the remedial discretion of the courts to decide whether to order specific performance in the face of the claim that the performance due is impossible of performance.

22. The difficulty with this line of argument is that it fails to observe the strictures of the scheme of adjudication agreed in terms of clause 67.5.  It is a scheme that provides the means by which the parties to the subcontract can secure the resolution of their disputes. The scheme is plainly intended to bring about the final determination of a dispute – hence the language  “ final and binding“. That comes about either by way of the Adjudicator’s decision where no notice of dissatisfaction is given ( or is not given timeously ), or by amicable settlement or by an arbitral award.

23. Clause 67.5 defines the disputes to which the scheme is of application in the widest terms. It is intended to capture almost every conceivable dispute that could arise out of the subcontract. Its jurisdictional scope is cast wide so as to permit the parties to resolve their disputes by recourse to a mechanism that is expeditious.

24. The definition of dispute under clause 67.5 is not confined to the rights and obligations of the parties. A dispute is to be interpreted in the widest sense ( that is the language used ) and includes the enforceability of the subcontract. This necessarily entails  the following. First, that the dispute a party may refer for adjudication includes the remedies that are sought in the decision to be made by the adjudicator and the award of the arbitrators. Second, that the adjudicator and the arbitrators enjoy the competence in determining the dispute to provide in their decision or award the remedies they consider warranted. It could hardly be otherwise. The adjudication  under clause 67.5 is not an abstract determination of rights and obligations. It is intended to resolve disputes and, to do so, decision-making must often result in remedies that will, amongst other things, require a party to take certain actions. Thus clause 67.5 requires that a decision is not simply binding but must promptly be given effect to.

25. The remedial remit of adjudication under clause 67.5 is of importance in determining whether this court can or should entertain Alstom’s contention that the Adjudicator’s decision is impossible of performance and hence no order for specific performance should issue.

26. The dispute that was referred by M&R required of the Adjudicator a decision by way of a declaration of rights as to the obligations of Alstom to provide traceability and material certificates and, in the event that Alstom could not do so, then the further obligations that Alstom was to assume. As the Adjudicator observed in paragraph [18] of his decision, there was no suggestion that the terms of the decision requested by M&R fell outside his jurisdiction.

27. Although the form of the decision sought was by way of a declaration of rights, there can have been no doubt that the decision sought by M&R was to exact performance of the obligations it sought to impose upon Alstom. The Adjudicator’s decision as to Alstom’s obligations carried with it the obligatory consequence stipulated in the subcontract that Alstom was required promptly to give effect to the decision. The Adjudicator’s decision is thus, in substance, an order of specific performance.

28. This is clear also from the reasoning of the Adjudicator. In considering the precise terms of the decision he was to give, the Adjudicator considered whether testing should be required to comply with certain standards referenced in Annexure N to the API 650. He declined to do so on the basis that there was disagreement as to the nature and content of the testing required and observed that this had not been fully explored. Consequently, the Adjudicator left this matter for later adjudication should the parties not be able to resolve their differences on this issue.

29. The Adjudicator plainly understood that because his decision required Alstom to comply with the obligations he had declared to subsist under the terms of the subcontract, the decision should not be framed so as to reflect matters that had not been properly addressed by the parties.

30. If, as I find, the Adjudicator’s decision is one for specific performance, then the question is whether this court should consider the question as to whether Alston can comply with that decision in order to determine whether to make the decision an order of this court.

31. Had the referral of the dispute proceeded to arbitration under clause 67.7, and an award been made in favour of M&R in terms similar to those of the Adjudicator’s decision, there can be little doubt that Alstom’s contention as to impossibility of performance would not be countenanced as a basis for resisting the award being made an order of court in terms of section 31 of the Arbitration Act 42 of 1965 (“ the Arbitration Act “ ). Nor would impossibility found a basis to set aside an award in terms of section 33. An arbitration agreement gives to the arbitrator the competence to determine the appropriate remedy in a dispute referred to arbitration , and hence the competence to exercise the discretion that is appropriate to the remedy of specific performance. To Alston’s complaint as to impossibility of performance, a court, deciding whether to make an award an order, would simply hold that it was for Alston to raise the issue of impossibility before the arbitrator. If it failed to do so, it cannot seek to have the court prise open the merits of the remedy the arbitrator has determined.

32. Mr Gautschi SC, who appears for Alstom, distinguishes the position had the dispute proceeded to arbitration, and a decision that is not an award regulated under the Arbitration Act. The Adjudicator’s decision simply gives rise to obligations under the subcontract that are subject to the ordinary supervisory powers of this court in determining whether to order specific performance.

33. That gives rise to the anomaly that the same decision rendered by an adjudicator and by an arbitrator under the scheme of adjudication in clause 67.5 could be enforced by order of court in the case of an award, but not in the case of an adjudicator’s decision. It might be said that this is simply a flaw in the design of the scheme, but cannot alter the incidence of this court’s powers to determine whether to enforce an adjudicator’s decision.

34. However, what the parties to the subcontract agreed upon was a scheme of adjudication for the resolution of their disputes. And in so doing, the parties agreed that an adjudicator’s decision would be final and binding in respect of a dispute referred to the adjudicator, where no notice of dissatisfaction was given. And since the decision contains the remedy decided upon by the adjudicator, finality also attaches to the remedy. In this case, the remedy decided upon by the Adjudicator is, in substance, the  performance by Alstom of a number of obligations.

35.  This has significant entailments. In a standard case that comes before the courts, one party to the contract seeks an order that the counter party be required to perform an obligation due under the contract. It is then for the court to exercise its discretion to determine whether specific performance should be ordered or some other remedy imposed.

36. The case before me is different. Here, the Adjudicator has decided upon the remedy in his decision. Under the terms of the subcontract the parties have reposed in the Adjudicator the competence to do so. The parties have also agreed that the Adjudicator’s decision is final and binding and must be given effect to.

37. What Alstom wishes this court to do is to refuse to give effect to the decision. To do so, this court must consider whether the obligations that the Adjudicator decided to exact from Alstom should be given effect to.

38. Put simply, this court is not being asked to decide whether to order specific performance of a primary obligation owed by a party to a contract, where the court is at large to determine the correct remedy. Rather, the court is being asked to decide whether to make an order enforcing an adjudicator’s decision where the adjudicator has already decided upon the remedy, in circumstances where the parties gave him the competence to do so and had undertaken to treat his decision as final and binding.

39.  This distinction does not mean that this court is placed in the position it would be if impossibility of performance was raised to resist an award in an arbitration being made an order of court. There the courts are constrained by the Arbitration Act. I allow that, in circumstances where the parties to a contract have agreed to have their disputes decided by an adjudication that is not an arbitration, the courts are not required to make the decision an order of court, absent some challenge akin to section 33 of the Arbitration Act. The courts’ have an inherent power to regulate their own process and develop the common law in virtue of section 173 of the Constitution. One incident of that power is the competence to decide whether to make an adjudicator’s decision, arising from an agreement, enforceable by order of court. The courts’ remedial competence is not constrained by the strictures of the Arbitration Act. It is exercised upon just and equitable considerations which take account of the fact that parties agreed to repose in an adjudicator remedial decision making power.

40.  The considerations relevant to the exercise of this discretion will be different to the exercise of discretion when the court is deciding de novo whether to refuse the specific performance of a party’s obligations.

41.  Where, as in this case, an adjudicator has decided upon the remedy, by reason of a competence the parties to the contract have given him, the following will be relevant. First, did the adjudicator decide the dispute now raised before the court ? If not, could the party contending for impossibility have raised the issue before the adjudicator, and if so, did the party do so, and if not, why not ?  Second, why should the party contending for impossibility escape its obligations to be bound by the outcome of the adjudication, to treat it as final and give effect to it ? Third, what are the consequences of permitting a party to escape the enforcement of the decision ? In the standard case, a refusal of specific performance simply requires the wronged party to seek damages or some other appropriate remedy. But in the case where the enforcement of the decision of an adjudicator is in issue, it is the adjudicator that has determined the merits of the case and decided upon a remedy. Here the decision of the court is binary: enforce the decision or leave the applicant without the benefit of the decision. The equities of such an outcome require careful consideration. Fourth, what are the systemic risks if agreed procedures for dispute resolution that are intended to be quick and avoid disruption to large construction projects nevertheless give rise to lengthy litigation before the courts. Fifth, is there a risk that the impossibility relied upon will indeed , if an order is made, require what cannot be done and expose the defaulting party to the risk of contempt proceedings ?  This is by no means a closed list.

 

EXERCISING THE DISCRETION

42. It is apparent that a number of these considerations weigh against Alstom’s submission that this court should not enforce the Adjudicator’s decision. Alstom agreed to be bound by the decision and give effect to it. Alstom did so as part of an agreed scheme of adjudication intended to secure that disputes are resolved quickly so as to avoid delay to an important construction project.

43. What Alstom seeks is that the decision is not enforced by order of this court. This would mean that M&R secures nothing from the decision and enjoys no alternative remedy. That is a harsh outcome. Alstom does say that the absorber in unit 2 has been accepted by Eskom and is fully operational and that Alstom has undertaken  non-destructive chemical analysis and portable hardness testing. Alstom raised a very similar argument before the Adjudicator, saying that M&R need have no concerns. Alstom engineers have undertaken retrospective analysis of the vessels and are satisfied they are fit for purpose, and Eskom is willing to accept the works. The Adjudicator rejected the argument. He said that M&R did not undertake to erect merely a safe structure, but one that conformed with a particular design, and with specifications appropriate to that design. I agree. To deny M&R enforcement of the decision deprives the company of significant benefits to which the Adjudicator found M&R to be entitled .

44. It is important to consider what it is about the decision that Alston contends is impossible of performance. The relevant portion of the decision that is said to give rise to impossibility provides that, if Alstom cannot comply with its obligation to provide M&R with material certificates :

“Alstom is obliged to have such material subjected to appropriate testing that will positively identify the material and to provide Murray and Roberts with the testing records in compliance with EN10204 type3.1 certification in respect of such materials”

45. Alstom says that the Adjudicator has imposed upon it a testing obligation and a certification obligation. As to the testing obligation, Alstom contends that no testing method will positively identify the particular grade of steel. That can only be done with full material traceability. Tests can only identify the mechanical and chemical properties so as to conclude that the materials tested are of similar grade to the material specified. As to the certification obligation, Alstom contends that only the original manufacturer can issue an EN10204 type 3.1 certificate and then only when the material is under the control of the original manufacturer. Since this cannot be done, Alstom cannot provide these certificates.

46. Alstom’s claims as to impossibility of performance must be considered , in the first place, in virtue of what transpired before the Adjudicator. As I explain in what follows, the Adjudicator decided that there must be appropriate testing, but in the event of disagreement between the parties as to what constitutes appropriate testing , this issue will require further adjudication. As to the question of certification, there is a dispute as to what the Adjudicator required. Was it certification which, says Alstom , can only be issued by the original manufacturer, or simply test records that can be produced by a qualified person that need not be the original  manufacturer ?

47. The Adjudicator recognized that the principal question before him was whether Alstom was required to furnish any authentication at all. That question was answered in the affirmative. As to precisely what testing was required of Alstom, the Adjudicator considered it just and equitable not to decide this issue because it had not been properly addressed. The Adjudicator concluded as follows : “ If that cannot be resolved between the parties it will necessarily need to be left for another time, whether before me in an extension of these proceedings, or before another adjudicator. “

48.  This aspect of the Adjudicator’s decision came about in this way. The Adjudicator found that when the contractor supplies materials, as Alstom has done, the contractor is in no different position to the subcontractor that supplies materials. The materials must conform strictly with the specifications, and material certificates and test records must be available to authenticate compliance in due course.  Hence Alstom was  obliged to provide authentication by way of material certificates and relevant test records. As the Adjudicator observed: “ It is inconceivable that a subcontractor is obliged to erect a structure, designed to withstand massive stress, for which the designer has established specifications, using material that the subcontractor knows to be not compliant, provided only that the non-compliance is not visible.”

49. The question that then arose was this: what is to happen when material certificates cannot be produced? M&R contended before the Adjudicator that API Standard 650 was incorporated into the contract; and where material cannot be positively identified with reference to test records, API 650 requires the material to be subjected to chemical and physical tests. Alstom contended that not all the provisions of API 650 were of application to the subcontract. The Adjudicator found that the subcontract is silent as what is to occur if material certificates and associated test records are not available , but that API 650 fills the gap. The Adjudicator then went on to consider the specifics of the decision that M&R sought. The Adjudicator found that M&R was entitled to a decision substantially in the terms claimed, but with one important modification. Since the parties were not in agreement as to the extent to which API 650 applies to the contract, and the matter had not been fully explored, the Adjudicator framed the decision, on this aspect, on the basis that there should be “ appropriate testing that will positively identify the material and to provide Murray and Roberts with the test records”, without deciding precisely what testing is required. This was left for later determination, should the parties not resolve the issue.

50.  This recitation of the reasoning by which the Adjudicator came to his decision gives rise to two salient matters. First, Alstom was fully aware that what M&R sought was a decision to impose an obligation on Alstom to comply with Annexure N of API 650 and have such materials subjected to chemical analysis and physical tests. This formulation is to be found in M&R’s submission to the Adjudicator. As I have explained, the Adjudicator did not decide that testing in accordance with API 650 must be carried out by Alstom, responsive to his caution that there was disagreement between the parties as to the nature and content of the testing that might be required. Hence the formulation in his decision of appropriate testing.

51. What does not appear either from the decision or Alstom’s account of the proceedings is that Alstom contended before the Adjudicator that appropriate testing is impossible. Rather, and as reflected in the decision, there was disagreement between the parties as to “ the nature and content of testing that might still be required”. Of this, the Adjudicator allowed that the matter had not been fully explored and might require a future  decision by an adjudicator.

52. In its Answering Affidavit Alstom now says that no testing method is available that will serve positively to identify material that does not have full material traceability, and hence Alstom cannot comply with the requirement to do appropriate testing. Alstom says further that the Adjudicator was wrong to impose this obligation. What Alstom does not say is that it raised the impossibility it now relies upon before the Adjudicator. Alstom does not explain its omission. Nor does it deny what the Adjudicator found there to be a disagreement between the parties as to what tests to apply, and not as to whether any test could be applied.

53.  That Alstom relies upon a claim of impossibility before this court on the question of appropriate testing that it did not advance before the Adjudicator, without explanation, counts against it. But there is a consideration of even greater moment. The decision requires appropriate testing, but allows that what precise testing is required may require further adjudication, absent agreement between the parties. There is plainly no such agreement. As a result, the matter can be determined by the Adjudicator, if Alstom resists doing the testing that M&R says is appropriate. No impossibility arises  because the Adjudicator has yet to decide what precise testing is required.

54. The dispute on the papers before me as to the impossibility of appropriate testing is demonstrative of the fragility of Alstom’s contentions. Alstom claims that the mechanical chemical and tensile strength testing that can be done will not be able to identify the particular grade of steel, at least where the results fall within overlapping ranges that may reference more than one grade of steel. This, it is said, does not permit of the positive identification of the material. M&R counters that the testing that is required is not to identify the grade of steel but whether the material complies with the specification. And this can be done and has been done. The characteristics of the material can be tested for chemical composition, tensile properties and strength.  M&R references a test report from SGS that certainly appears to test for tensile properties and chemical properties and says that the test requested is in accordance with the specifications provided.

55. The real dispute is not as to what tests can be done, nor what they can show. M&R does not suggest the tests can always identify the grade of steel. Alstom recognizes that chemical analysis and tensile strength testing can identify mechanical and chemical properties, but not the grade of steel. The dispute concerns whether the tests will properly identify the material as required by the decision. Alstom contends they will not because the identity of the material is its grade. M&R says the identity of the material is its properties from which one can determine whether the material conforms to the specification.

56. Oddly, Alstom interprets the decision as to what “positively identifies the material “ means  with more rigour than does M&R, so as to contend that it is not possible to do appropriate testing. I cannot discern any warrant to do so. As the Adjudicator indicated the point of appropriate testing, where material certificates cannot be produced, is to permit M&R to satisfy itself that the materials conform with the specifications. M&R says that it can do so with the testing it proposes. Alstom says more is required, and that cannot be done, so nothing should be required of it.

57. Alstom can simply accept the obligation to undertake the testing that M&R says will suffice to comply with the decision. That is not impossible. Alstom cannot avoid compliance altogether by holding out for a test that cannot be done. This resolution is also consistent with what the Adjudicator had in mind. He recognized there may be disagreement as to precisely what testing is required. But that does not prevent Alstom from accepting a test of less rigour that M&R is happy to accept. And, if Alstom nevertheless resists this solution, it may take up the Adjudicator’s invitation to have the matter further clarified.

58. I consider, in any event, that given that the point of appropriate testing is to permit M&R to be satisfied that the materials conform to the specification, and that can done by testing for the properties of the materials, there is no warrant to interpret what it is positively to identify the material with any more rigour. That would impose a burden on Alstom that is contends is impossible, and interpretation should always be informed by the necessity that practical efficacy be given to the decision of the Adjudicator.

59.  For these reasons, on the issue of Alstom’s obligation to have the materials subjected to appropriate testing, I cannot find that there is any impossibility of performance.

60. The second leg of Alstom’s impossibility claim concerns the requirement that it provides M&R with the testing records in compliance with EN10204 type 3.1 certification in respect of materials for which there are no material certificates.

61. The Adjudicator states plainly in his decision that there was no objection to specifying that certification is to be in compliance with EN10204 type 3.1. Hence, the Adjudicator adopted this standard in his decision. He specifically distinguished the adoption of this standard with the reference to API 650, as to which, as I have explained, the Adjudicator considered there to be disagreement, and dealt with this in his decision.

62. Alstom contends that only the original manufacturer of the material can issue an EN 10204 certificate ( “ the EN certificate ), and then only when the material is under the control of the original manufacturer. This cannot be done, and so Alstom says it cannot provide the EN certificates.

63.  The first difficulty confronting Alstom is that it knew that M&R sought in the adjudication that Alstom should provide material certificates in compliance with the EN certification. If that could not be done, Alstom should have raised its difficulty before the Adjudicator. The Adjudicator clearly apprehended no such argument and considered that there was no objection from the parties  that there should be compliance with the EN certification.

64.  Alstom now says in its answering affidavit that the Adjudicator is not correct in saying that there was no difficulty as to EN certification and references passages in its response to M&R that served before the Adjudicator.  The relevant passages simply say that M&R is not a manufacturer or fabricator of the materials and so the EN certification is not applicable. The response does not say that Alstom cannot secure the EN certification, nor is there anything to show that the contention of impossibility as now made by Alstom was squarely raised by Alstom before the Adjudicator.  Alstom should have done so , and its failure to do so must be weighed in considering why it should now be permitted to do so.

65.  The substance of the dispute concerning the certification requirement is this. Alstom, as I have indicated, contends that only the original manufacturer can issue an EN certificate and then under particular conditions, and that cannot be done. M&R says that Alstom has misinterpreted the decision in the relevant portion of paragraph 48.2. What is required is that Alstom provides the testing records in compliance with EN certification in respect of the materials, which is possible, and not EN certificates. Alstom counters that EN 10204 type 3.1 is not a testing method and makes no reference to a testing method. It provides simply for a certificate to be produced.

66. EN 10204 type 3.1 is attached to the papers. True enough it says that the document issued by the manufacturer declares the products supplied are in compliance with the order. But it also clearly states that such declaration is done with test results, and those results are to be carried out as defined by the product specification, the official regulation and corresponding rules.  Plainly, the certificate is based on test results. Since the issue before the Adjudicator was what should be required absent the material certificates, the Adjudicator required testing records that compy with EN 10204 type 3.1. That is what the decision says. The Adjudicator did not require a certificate. The Adjudicator required the testing records, ie results, that are done by way of the inspection carried out to produce a certificate. There is no reason why that must be done by the original manufacturer. Indeed, examples of test reports done in accordance with EN10204 type 3.1 by SGS MetLab are attached to the papers.

67.  For these reasons I find that Alstom is not unable to produce the test results required of it by the decision, and hence its contention of impossibility of performance is not availing.

68.  Alstom raises some procedural points concerning the dispute as to  impossibility of performance. Alstom complains that M&R dealt with the issue for the first time in its replying affidavit. But that was quite permissible, given that the issue of impossibility was put up in the answering affidavit. M&R had no duty to raise the matter preemptively. Alstom submits that there is a dispute of fact concerning impossibility, and Plascon Evans applies. I have found however that upon a proper interpretation of the decision, the issue of impossibility can be determined on facts that are not in dispute and documents that form part of the papers and are not contested.

69. Turning to other considerations relevant to the discretion I have to exercise, there are systemic matters of some moment. The scheme of adjudication agreed by the parties is intended to yield an expeditious resolution of disputes. This means that a court, while enjoying a supervisory jurisdiction over the orders it will issue, as I have recognized, will be careful not to subvert the very point of expedited adjudication by the Adjudicator. This court should not act as a court of appeal to determine the correctness of the decision. Yet in a number of passages in the answering affidavit that is precisely what Alstom invites me to do. The deponent says that the Adjudicator wrongly found in the decision that Alstom had obligations to perform that it now contests. But that is an invitation to consider the correctness of the decision and not its enforceability, and it is an invitation I decline because it would prise open the merits of the decision which the parties agreed the Adjudicator should determine.

70.  Furthermore, I am alive to the danger that enforcement proceedings should not become a means to use the courts to delay the implementation of a decision, given the scheme of adjudication to which the parties agreed. Consequently, my discretion should be exercised so as to avoid depriving a successful party of any benefit of the decision taken in its favour, unless there are compelling reasons to do so.

 

WEIGHING AND DISCRETION

71. I have weighed the various factors relevant to the exercise of my discretion. The Adjudicator decided upon a remedy that imposed obligations upon Alstom. Alstom does not seek to set aside the decision. Its central contention is that it is impossible to do what the decision requires of it. It could and should have raised this contention before the Adjudicator but did not do so. The contention of impossibility I have found to be unavailing. It rests upon an interpretation of the decision that is neither necessary, nor best likely to render the decision capable of performance. On the contrary, it is an interpretation that by construction renders the decision impossible of performance. It is not an interpretation that is warranted by the text, context or purpose of the decision.  The effect of Alstom’s contention would be to leave M&R without any remedy and hence deprive it entirely of the benefit of the decision. That is not equitable. The benefit of the decision is of importance. It permits M&R to satisfy itself that its own performance conforms to the specification of the vessels that are  designed to withstand massive stress.

72. M&R has been found to be entitled to a remedy , judged by the Adjudicator as required in the event that material certificates cannot be produced. I cannot see why this court should decide on a lesser form of compliance. Nor is the suggestion by Alstom that M&R is trying to exact compliance with the Adjudicator’s decision by Alstom so as to extract concessions from Alstom in respect of other claims made by M&R of much weight. Either M&R is entitled to secure Alstom’s compliance with the Adjudicator’s decision or it is not. Its reasons for doing so, worthy or unworthy, cannot change that entitlement.

73. Finally, Alstom relies upon cases that have held that in exercising its discretion to order specific performance the court will not inflict undue hardship upon a respondent out of all proportion to the benefit that enforcement will secure for the applicant.[4] This forms part of the equitable discretion that I have recognized.

74.  Alstom says that destructive testing, by using cut samples , would be very costly to Alstom, and Eskom would lose revenue when unit 2 would not be operational to make this testing possible.  The same benefit would accrue to M&R if non-destructive testing was used.

75.  This case for hardship is sought to be made out in a rejoining affidavit. That aside, it does not move the equities  so as to favour Alstom. One central issue in a case for hardship is that there is an alternative remedy that will secure sufficient benefit to the applicant. Alstom says that non-destructive testing will do so. But the Intertek report that it references undertook hardness testing but does not say they are comparable to destructive testing. The report of Mr Pereira of SGS, relied upon by M&R, states plainly that they are not. The Adjudicator specifically rejected the contention that Alstom’s own retrospective analysis of the design of the vessels and their safety sufficed. Had non-destructive testing offered itself as a simple and less costly answer to the difficulty that material certificates were not available, one would have imagined that Alstom would have raised this matter before the Adjudicator. It did not. But to the extent that such testing is truly appropriate, it may still do so, given that the Adjudicator left this matter open for further adjudication. It will be recalled that the Adjudicator found there to be weighty reasons why M&R in performing the subcontract was entitled to proper authentication. That this may entail cost for Alstom is an incident of what the subcontract requires to which Alstom agreed. The consequential costs that might arise to Eskom is a matter that no doubt Eskom will take up with Alstom.

76. In my view, M&R is entitled to the remedy the Adjudicator has decided upon. I can find no compelling circumstances which would warrant this court withholding from M&R the further benefit of having the decision of the Adjudicator made an order of court so as to permit of its enforcement. Accordingly, I exercise my discretion in favour of issuing an order to enforce the decision.

77. There was no dispute that the costs should follow the result.

In the result, the following order is made:

1. The Respondent is obliged to comply with the decision of the Adjudicator which decision is dated 01 September 2017.

2. The Respondent is obliged to provide the Applicant with traceability and material certificates (with an authentic test record) in compliance with EN10204 Type 3.1 certification in respect of all the free issue materials for the erection of the absorbers in respect of Unit 3 at Kusile.

3. In the event that the free issue materials for the erection of the absorbers in respect of Unit 2 at Kusile cannot be positively identified with a material certificate ( with an authentic test record) provided; and/or there is no material certificate (with an authentic test record) for the materials (with legible stamping/marking) issued by the Respondent; and/or there is no legible stamping/marking on the material; then the respondent is obliged to have such material subjected to appropriate testing that will positively identify the material and to provide the Applicant with the test records in compliance with EN10204 Type 3.1 certification in respect of such materials.

4. The Applicant is, to the extent that the work has not been completed, not obliged to continue with the welding of materials where a material certificate (with an authentic test record) is not available or if the material cannot be positively identified with the test record by legible stamping or marking.

5. The Respondent is obliged to pay the costs of the Application.

 

 

____________________

Unterhalter J

Judge of the High Court

Gauteng Local Division: Johannesburg

Date of Hearing:  05 August 2019

Date of Judgement: 02 September 2019

 

Appearances

Applicant (Murray & Roberts Power & Energy)

Adv PHJ van Vuuren SC instructed by Tiefenthaler Attorneys Inc - C M van der Schyf

Respondent:  (Alstom S&E Africa (Pty) Ltd)
Adv Andre Gautschi SC instructed by Fasken Martineau - Tania Siciliano

 

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