Construction law and dispute resolutionNdivhuwoMamukhwana
The majority of construction contracts have alternative dispute resolutions mechanisms. Such dispute resolution mechanisms include mediation, adjudication and arbitration.
Mediation is one of the alternative dispute resolution process whereby an independent party is appointed to assist the parties to negotiate a settlement. The process is a non-adversarial process which is quick, less formal and cost effective.
The contract between the parties will specifically refer to mediation as the dispute resolution process if it is required. The referring party will refer the dispute to mediation and the parties will agree to appoint a mediator. The mediator will assist the parties in attempting to reach a settlement agreement.
However, mediation is often used to assist the parties in establishing whether the dispute will be referred to adjudication or arbitration.
It is a process that allows parties to present their dispute to an independent party for a decision. It is generally elected when a dispute needs to be resolved speedily in order for the contract to continue. The party who is referring the dispute to adjudication is referred to as the claimant and the opposing party is referred to as the respondent.
The majority of the construction contracts will require the referring party to refer to the matter within a time-frame by way of a notice of dispute. Once the matter has been successfully referred, an adjudicator will be appointed and will consider the parties evidence and make a decision which is known as the determination (“the Determination”). Generally, the adjudicator has a specific time frame to make its Determination.
Once the Determination is being handed down to the parties, it will specify the time-frame in which the order must be given effect too. In the event that the unsuccessful party fails to make payment in terms of the Determination, the successful party may, inter alia, institute an enforcement application of the Determination in the relevant court in South Africa.
Subsequent to the Determination being handed down and pending an enforcement application, the unsuccessful party may refer the dispute to arbitration.
Payment must be made to the successful party in terms of the Determination despite the dispute being referred to arbitration. In the event that the Determination is overturned in arbitration, the monetary amount previously received, will be returned.
A party’s right to refer a dispute to arbitration generally depends on the contract between the parties. Arbitration is generally elected when the contract between the parties has been terminated and there is a dispute pertaining to outstanding monetary claims, such as the certification of the final payment certificate or penalties incurred from the termination. This is a longer and more costly process compared to the other forms of alternative dispute resolution.
The dispute is referred to arbitration by way of a notice. The referral process must be done within the allocated time-frames in the contract.
The contents and form will be specified in the contract between the parties. Once the dispute has been referred by the Claimant to arbitration, the parties will enter into an agreement whereby their rights and obligations are agreed upon and appoint an arbitrator and/or agree on the organisation which will appoint the arbitrator.
In an arbitration, written statements and reports of a technical nature are submitted by the respective parties. This will include all of the evidence which the party will rely upon during the arbitration hearing. Once all of the documentary evidence has been submitted by the parties, the parties will agree on a hearing date.
The arbitration hearing may take from a day to several months depending on the issues at stake. Once the arbitration hearing has taken place, the arbitrator will produce an award. Unlike the adjudication determination, this award is final and binding.
In the event that the unsuccessful party fails to execute the award, the successful party may immediately approach the High Court of South Africa and issue a writ of execution.