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We are pleased to present the third issue of the EPA NAL Newsletter. The NAL Commit-tee of the EPA is committed to keep members of the Namibian construction industry informed of developments both locally and abroad. The purpose of this Newsletter, then, is to brief interested persons on matters relating to alternative dispute resolution.
With the kind permission of The Society of Construction Law and the author, we are fortunate to publish a paper by Nicho-las Gould entitled Establishing Dispute Boards – Selecting, nominating and appointing Dispute Board Members. This paper, which is unfortunately too substantial for inclusion in this Newsletter is published on the two NAL forums viz the NATDAB and the DABFORUM. Should anyone not having access to either of the forums, kindly request a copy from the Editor. We do however include some highlights.
“In order to establish a Dispute Board, it will be necessary to identify potential appropri-ate candidates, to nominate them and then to appoint them. Contractors and employers tend not to focus on disputes at the start of projects. DBs are therefore frequently not appointed and established at the commencement of projects. In those projects where a dispute subsequently arises, the contractor and employer will then struggle to agree upon and establish their DB. It is perhaps arguable that the benefits of it are substan-tially reduced by not having those individuals available at the commencement of the project.” Nicholas Gould . See highlights on page 3.
International Trends
Special points of interest:
See the call for Ex-
pression of Interest
to act as Adjudica-
tor on dispute
boards, on page 4
Inside this issue:
International Trends 1
Upcoming Event 1
Registered Adjudica-
tors: Adequate Stan-
dards Maintained?
2
NAL : how does it
work?
2
The Development of
Dispute Boards
3
Must the Employer
pay?
7
Upcoming Event: Introduction into Alternative Dispute Resolution in the Construction Industry — Seminar
Alternative dispute resolution (ADR) has been around in Na-mibia for a number of years, primarily through the use of arbi-tration. Since dispute adjudication has been introduced more recently, it is time to reflect on recent developments in ADR. The EPA in collaboration with the ACEN will be hosting a semi-nar during October this year, to discuss the current status and trends of ADR in Namibia, the region and internationally. The event is aimed to inform and enlighten key role players and interested members of the local construction industry of the latest developments in the growing field of alternative dispute resolution. We are excited to have speakers representing the industry locally and abroad, and hope to attract attendees from across the industry. Details of the event will be made available in a subsequent issue of this Newsletter.
NATIONAL ADJUDICATORS LIST (NAMIBIA) ADMINISTRATED BY THE ENGINEERING PROFESSIONS ASSOCIATION OF NAMIBIA
NEWSLETTER
June/ July 2011 Volume 1, Issue 3
Engineering Professions
Association of Namibia
2
The EPA NAL prides itself that all efforts are made to ensure that adjudicators regis-
tered with the NAL in one of the three categories (i.e Junior Adjudicator, Adjudicator
and Senior Adjudicator) are well qualified to act on dispute boards. In addition to a
robust evaluation and accreditation regime based on experience and qualifications
requirements for purposes of initial registration on the NAL, adjudicators are re-
quired to achieve a minimum number of continued learning credits to stay registered.
A system of performance review is in its finals stages of adoption upon which such
system can be used to further monitor adjudicator performance.
This Newsletter is published by the NAL Committee of the Engineering Professions
Association. Any enquiries regarding any article or information contained herein,
or contributions for inclusion in the next issue can be directed to the NAL Regis-
trar, Engineering Professions Association, telephone 223009, fax 223009 or e-mail
as follows: [email protected].
Where case law summaries are included in this publication, the comprehensive
judgement can be requested from the Editor via e-mail:
Adjudicators registered with the NAL: Are adequate
standards maintained?
FROM THE PUBLISHING SUB-COMMITTEE
Page 2 NEWSLETTER
THE NAL: How does it work?
One of the obstacles in establishing dispute boards on construction contracts is the diffi-
culties experienced b y the parties to source suitable members that are suitably experi-
enced and qualified to execute the function of a dispute board. This is particularly the
case in a rather small local construction industry.
The NAL (National Adjudicators List of Namibia) registers accredited persons for pur-
poses of nomination of dispute board members. It thus acts as an independent nominat-
ing authority, which can be approached by parties to a construction contract that wish to
establish a dispute board.
The NAL has published a document that makes it easier for representatives of the con-
tracting parties to understand the nomination process, and to make a request. The docu-
ment ‘Overview of the Procedures and Guidelines for the Nomination of Adjudicators’ can
be obtained from the Registrar of the EPA—NAL, Ms T Bednarek, via e-mail:
More information is available on the website: www.engineers-namibia.org/NAL.
Visit the EPA
website at
www.engineers -
namibia.org
URGENT REMINDER Continued Learning Re-
quirements for regis-tered adjudicators: Due
date for achieving minimum credits:
1 August 2011
Any contributions to
this Newsletter are
welcome!
3
From time to time the EPA NAL calls for expression of interest of persons that are interested
in dispute resolution to be registered as adjudicator on the NAL. A call for Expression of In-
terest was recently placed in the local print media. The application of interested persons usu-
ally entails the submission of a cv as well as the completion of a standard form that is avail-
able from the Registrar of the NAL, or on the website www.engineers-namibia.org and follow
the link to the National Adjudicator List pages.
Applicants can, by means of the application form, evaluate themselves to ascertain whether
they achieve the required credits for a particular category of registration.
Applicant are further required to attend a course in dispute resolution and adjudication that
will be arranged by the EPA this year. Details will be released in a subsequent issue of this
Newsletter.
During the evaluation cycle for new applications, provision will also be made for registered
adjudicators that wish to upgrade from one to another category of registration.
Expression of Interest for persons wishing to register on the NAL as Adjudicator
Page 3 Volume 1, Issue 3
The following are extracts from a paper by Nicholas Gould entitled Establishing Dispute Boards – Selecting, nominating and appointing Dispute Board Members
The development of international dispute boards
A limited number of standard form contracts are available, but those that are avail-
able set out a very similar approach to the appointment of DB members. The
‘standard form’ procedures that are available have principally arisen from the se-
quential development of adjudication:
1970: a contractual adjudication process was introduced into the domestic sub-
contractor standard forms in the UK in order to primarily resolve set-off issues
between the contractor and main contractor.
1994: Sir Michael Latham issued his final report reviewing procurement and contrac-
tual arrangements in the construction industry.
1995: FIDIC introduced a DAB in its Orange Book.
1996: FIDIC introduced as an option the DAB in the Red Book.
1996: Part II of the Housing Grants, Construction and Regeneration Act 1996
(‘HGCRA’) included adjudication provisions in Section 108.
1998: Part II of the HGCRA is introduced on 1 May, together with the exclusion or-
der (SI 1998 No 648) and the Scheme for Construction Contracts, England and
Wales (SI 1998 No 649).
1999: FIDIC adopted a DAB/Dispute Review Expert (‘DRE’) procedure in favour of
the additional approach of relying upon the engineer acting as the quasi-
arbitrator as well as an agent of the employer or owner. The DAB procedure
became mandatory rather than an option. The three major model forms includ-
ing DABs/DREs were:
Red Book: Conditions for Construction (a standing DAB comprising
three members or one member).
Yellow Book: Plant and Design Build (ad hoc DAB).
Silver Book: Engineer Procure and Construct (Turnkey) (again incorpo
rating an ad hoc DAB). To page 6...
Nicholas Gould BSc (Hons)
LLM FRICS FCIArb
MCIOB is a partner in the
specialist construction law-
yers Fenwick Elliott LLP,
where he conducts a mix of
international dispute resolu-
tion and non-contentious
work. He is a solicitor, char-
tered surveyor, accredited
adjudicator and CEDR Solve
lead mediator. He acts in a
wide range of construction
sectors in the UK and inter-
nationally, including general
construction, transport, in-
frastructure, rail, communi-
cations, industrial, process
plant, power stations, wind
farms, desalination plants,
airports, telecommunica-
tions, petrochemical, oil and
gas. Dispute resolution ex-
perience spans litigation,
arbitration (domestic and
international), adjudication,
DAB/DRB, mediation, early
neutral evaluation and ex-
pert determination. He regu-
larly acts as lead mediator in
multi-party multi million
construction, engineering,
commercial, insurance, negli-
gence and property disputes.
Mr. Gould is a certified adju-
dicator and sits on interna-
tional Dispute Boards.
4
“DBs help in
avoidance and
prevention of
disputes. ”
ADJUDICATOR NOMINATION
Employer Registration
For lower nomination fees,
organisations can register
with the EPA NAL.
Contact Registrar at e-mail:
NATDAB represented by:
Engineering Professions Association of Namibia; Standard Bank; City of Wind-hoek; Roads Authority; Namibia Water Corporation; Municipality of Swakop-mund; Municipality of Walvis Bay; NamPower; German International Coopera-tion.
EXPRESSION OF INTEREST TO ACT AS AD-JUDICATOR ON DISPUTE ADJUDICATION BOARDS All suitably qualified and experienced persons are invited to express their inter-est to act as members of Dispute Adjudication Boards as defined in the FIDIC Conditions of Contract for Building and Engineering Works Designed by the Em-ployer (1999 edition), as well as on Consulting Agreements, and to be listed for that purpose on the EPA’s National Adjudicators’ List.
The minimum requirements for adjudicators shall be as follows:
a) must be a natural person;
b) experience in adjudication, dispute resolution and contract law;
c) experience with engineering construction contracts;
d) suitable formal training in adjudication and contract law;
e) procedural knowledge, particularly of dispute resolution under FIDIC;
f) registered with an appropriate professional council;
g) must be independent and impartial.
All interested persons are requested to submit their applications in writing, and such applications shall include the following information:
1. Brief declaration of interest to act as member of Dispute Adjudication Boards;
2. Completed Standard Evaluation Form *
3. Documentary proof as required;
4. Proof of registration with professional council.
The Standard Evaluation Form as well as the rules may be obtained from the EPA website (www.engineers-namibia.org).
All interested persons that submit their applications and are found to fulfil the minimum requirements will be notified accordingly. Such persons will be re-quired to attend a 1½ - day seminar on dispute adjudication on 19/20 October 2011.
Applications to reach the following office after 01August 2011 and before 31 August 2011:
Engineering Professions Association of Namibia
Attention: Tanja Bednarek
20 Feld Street, Unit 4
Windhoek
Office hours 7h30 to 12h30
Enquiries: Mr Andreas Helmich (NAL Manager)
Telephone: (081) 128 4740
Email: [email protected]
5
“In situations where contracts do
not provide for timely and fair
dispute resolution mechanisms,
then it is highly likely that potential
bidders will consider adding
additional risk factors into their
proposals.”
“The proper approach of the contract is not to avoid disputes, but adequately and efficiently to manage such disputes as must inevitably and properly arise.” So said John Uff QC at the first Centre of Construction Law Conference in 1988. During the intervening period, the quest to establish adequate and effi-cient means of both avoiding and re-solving disputes arising in construction contracts has seen the emergence of two separate success stories - the ef-fective use of Dispute Review Boards, which aim to avoid, but not formally resolve disputes, and Adjudication, which provides a dispute resolution process which is fair, quick and eco-nomical. The two concepts have also been successfully combined in the form of Dispute Adjudication Boards and their use on international projects is
growing.
INTRODUCTION TO INTERNATIONAL ADJUDICATION - CONFERENCE 29, 30 June 2011 in London
EMPLOYER NEWS
The NATDAB, what is it? The NATDAB was initially formed by the City of Windhoek and Roads Authority to communicate with other industry role play-ers (particularly larger employer organisations with an interest in the construction industry). The NATDAB is constituted by rep-resentatives of some 15 such organisations, all having an inter-est in the availability of local adjudicators.
Representatives of major employer organisations in the Namib-ian construction industry, as well as related role players, may contact the Registrar of the NAL for further enquiries.
Recent Employer Developments One of the founding members of the NATDAB, the City of Wind-hoek, has recently extended it’s registration with the EPA NAL by an additional two years. The City has further aligned it’s require-ments and remuneration structure with the recommendations of the EPA NAL by adopting the following:
1. ‘Junior Adjudicators’ may be nominated for Dispute Boards on contracts of value up to N$15 million (revised up from a former value of N$5 million);
2. The remuneration (hourly fee) per registration category is now as follows:
Junior Adjudicator: 100% of the gazetted fee for Professional and Incorporated Engineers
Adjudicator: 120% of the gazetted fee for Professional and Incorporated Engineers
Senior Adjudicator: 140% of the gazetted fee for Professional and Incorporated Engineers
6
From page 3
2000: AAA Dispute Review Board Guidance Specification
2001: The World Bank introduced a new edition of its Procurement of Works procedure that made the
‘recommendations’ of the DRB or a DRE mandatory unless or until superseded by an arbitrator’s
award.
2002: ICC Task Force prepared draft rules for dispute boards (‘DBs’).
2004: The World Bank, together with other development banks, and .
2005: FIDIC started from May working towards a harmonised set of conditions for DAB.
2005: (February) ICE published a DB procedure; an alternative procedure is designed to be compliant
with the HGCRA.
The introduction in the 1970s of the limited contractual adjudication procedure is perhaps now of historical
interest. In the UK, the HGCRA was clearly a major turning point. However, it can certainly no longer be
considered merely a domestic UK turning point; it also represents a major international turning point in the
area of construction dispute resolution.
Domestic legislative adjudication procedures were first introduced into the UK by the Housing Grants Con-
struction and Regeneration Act 1996, which came into force on 1 May 1998. Other countries have fol-
lowed the approach of introducing a legislative procedure for the regulation of payment in construction in-
dustry backed by a rapid binding adjudication process.
The Olympic Delivery Authority has decided to adopt a BD approach to the resolution of disputes arising
in respect of the Olympics projects in London in preparation for the 2012 Games.
In summary, a variety of DB procedures have developed. FIDIC has in reality led the field. FIDIC has
produced a contractual framework for the establishment of dispute boards on projects, and the World Bank
has closely followed the FIDIC approach. The ICE, ICC and AAA complement construction contracts
with the provision of a default dispute board procedure.
Conclusion
In order to establish a DB, it will be necessary to identify potential appropriate candidates, to nominate
them and then to appoint them. Contractors and employers tend not to focus on disputes at the start of pro-
jects. DBs are therefore frequently not appointed and established at the commencement of projects. In
those projects where a dispute subsequently arises, the contractor and employer will then struggle to agree
upon and establish their DB. It is perhaps arguable that the benefits of it are substantially reduced by not
having those individuals available at the commencement of the project.
Ideally, the DB should be established before work starts on the site. The DB can then follow the project
and deal with any issues that might arise. The identification of appropriate DB members is crucial. Those
members will need to be impartial and experienced in a wide range of matters, such as the type of construc-
tion in question, interpretation of contract and legal issues. In addition, they will need to have excellent
management and communication skills, and be sufficiently available for the duration of the project, and
sufficiently available to deal promptly with any disputes that might arise.
7
CASE LAW Must the Employer pay once payment is certified by the Engineer?
The following is a brief summary of a recent court care heard by the Supreme court of Appeal of South Af-
rica on 3 March 2011. MSC Depots (Pty) Ltd v WK Construction (Pty) Ltd & another (157/10) [2011]
ZASCA 115 (08 June 2011).
Introduction
The Judgement Summary includes the following phrases:Contract – breach of – contractor entitled to
cancel where no opportunity afforded to remedy defects in construction works.
The case if of interst both due to the consideration of the Court of technical matters such as deisgn and
construction, as well as for its legal aspects. The question that arises is whether, under the JBCC Series (as
well as most modern suits of contract documents), the Eemployer is required to pay once such payment has
been certified by the Engineer or Principle agent, and what the consequences are if he does not pay.
The respondent in this case is the Contractor, a joint venture comprising of WK Construction (Pty) Limited
and Wynford’s Civil and Development CC, both carrying on business as civil contractors in Port Elizabeth,
was the first defendant in the court below in an action for damages instituted by the appellant. The
appellant is the Emploer, MSC Depots (Pty) Ltd. The parties concluded a written agreement in terms of
which the respondent was to carry out certain construction works, ‘comprising bulk earth-works, paving,
storm water, water and sewerage reticulation and mast lighting’ at the appellant’s container park in
Despatch in the Eastern Cape. In simple terms, the respondent was engaged to construct a container depot
where the appellant, a shipping company, was to store, in containers, motor vehicle parts which it would
deliver, when required, to Volkswagen South Africa, a motor manufacturer, at its premises in Uitenhage.
At, or close to, practical completion, certain deflections became visible on the interlocking pavement
surface.
Once the defect was noticed, the Employer’s director, Mr Georgiev, stopped payment which in turn
elicited a response from the Engineer that such a recommendation would constitute a breach of the
agreement. Notwithstanding, the amount was not paid, remains outstanding and the Contractor’s
entitlement thereto has clearly been established. . . . The JBCC 2000 vested the Engineer / Principal Agent
with full authority and obligation to act in terms of the agreement, but, despite the latter’s recommendation
that payment be effected, the Employer desisted from acting in compliance with the principal agent’s
recommendation. In the words of the Judge, ‘In such circumstances there can be no question that the
[appellant] prevented [Naidoo] from exercising its independent judgment regarding the performance of its
duty. Quite clearly the [respondent] suffered prejudice thereby, which entitled it to cancel the agreement.’
As a result of non-payment, the Contractor terminated the Contract. The Employer argued that the
Contractor was not entitled to do so, since the contractor itself was in breach of it;s own obligation to to
execute the work with due skill and expedience, which then denies it the right to terminate.
Contractor in breach?
Under JBCC 200, if the Contractor is in breach of a meterial term, it may not terminate the Contract. It had
to be established whether, as contended by the Employer, the Contractor was in breach of his obligation to
exersise due skill and expedience during the construction process. During the hearings a number of expert
opinions werre submitted, and authors of these were cross questioned by the Court. Doyle’s (one such
expert witness) testimony on his findings and conclusions may be summarised thus: His observations as
reflected in his (Vawda Thompson) report were much the same as those recorded in the soils report, which
noted, inter alia, the presence of oversize material such as gravel (quarry) and stone within the layers and
varying thickness of the bedding sand below the interlock paving blocks. During the remedial work he
For clarity: Absolution: forgiveness / pardon prima facie: sufficient in law to establish a case or fact, unless disproved
8
noted that 40 per cent of the bedding sand was in excess of the specification required by the South African
Bureau of Standards. The compaction of the bedding sand varied between a thickness of 20mm to 50mm
across four test pits whereas the specified thickness is 15mm to 35mm. Several timber level pegs were
found within the layer works. It seemed that the paving blocks, which should have been laid from one side
for the interlock to meet up perfectly, were laid from two different directions, which made it almost
impossible to meet properly. The result was a butt joint with a series of cut blocks which dramatically
weakened the load characteristics of the pavement. The blocks started to break up against the butt joint and
the joint consequently failed. The manholes were damaged by the reach stackers running over their
concrete aprons. Doyle conducted an independent test of the bedding sand and noted that it did not meet the
required grading. A large percentage of it was considerably finer. As to the oversize material (he referred to
the stone as ‘boulders’) in the layer works he said the effect would be that during compaction the
compaction equipment would ride over it ‘without actually acting on the material that surrounds [it]’, with
the result that the desired compaction around the large material would not be achieved. The same would
apply to the area around the timber pegs. The in-situ material, he said, was poorly compacted, thus
impacting on the bearing capacity of the pavement.
The Judge noted that, iImportantly, Doyle confirmed what he noted in his report that the design works (for
the depot) by Naidoo were deficient in three respects, namely (a) the absence of beams to restrain the
paving blocks from substantial movement (caused by the weight of the load over areas where there was an
excess in the bedding sand) so as to keep creeping of the blocks to a minimum; (b) the manhole aprons
were not designed to have sufficient strength; and (c) no provision was made for drainage of both surface
and subterraneous water. In cross-examination he added that there was also a defect in the design of the
layer works in that there was no specific instruction for their stabilization with lime. He concluded,
however, that the failures in the pavement at 10 meter intervals across two lines traversed by the reach
stackers were indicative of a construction issue and not due to the defect in the layer works. He said the
failures would have been the result, possibly, of the contractor’s failure to properly compact the layer
works at ‘grid lines’ along which level pegs would be placed indicating the level of the layer works. But he
conceded that if the layer works design was insufficient for the pavement to take the load to which it was
subjected, then the layers will deflect. He also agreed with a view expressed by Dr Brian Shackle,16 an
engineer, in a summary of his expert opinion, that the absence of the drainage mentioned above was ‘a very
serious design defect’.
A further expert witness, McLeod, could not make a definitive statement that there was indeed a
construction deficiency in the pavement, because, he said, he had not been to the site but only looked at the
soils report and drew his conclusions of a possible construction fault from the Lockpave program. In
running the test (on the program) he used the Naidoo design specifications. He agreed in cross-examination
that the actual pavement was ‘modularly stronger’ than the Naidoo design, that is the work as constructed
was better than designed; that the materials used in the top four layers were better than those required by
the design and that the compaction in those layers was higher than the levels of compaction required in
terms of the contract.
It was found by the court that the Contractor was not in breach of his obligation to exersise reasonable skill
during the construction process.
Conclusion
The Judge explained that we are not here dealing with a claim for performance of a contractual obligation
the performance of which was conditional on the performance of a reciprocal obligation by the claimant. In
the present matter the respondent’s entitlement to payment of the amount certified, which payment
was stopped by Georgiev, was not dependent, or conditional on, any reciprocal obligation on its part. In conclusion, the Appeal Judge agrees with with the court a quo that where a contractor is willing and
able to attend to defects that manifested themselves prior to final completion being reached in terms of
clause 26, such contractor cannot be in breach of clause 15.3 provided he remedies such defects with due
skill, diligence, regularity and expedition.There being no prima facie evidence that the respondent was in
breach of its obligations under clause 15.3 of the agreement at the end of the appellant’s case absolution
(pardon) from the instance was, in his view, correctly granted by the court a quo.
It is clearly evident from this case, which is refreshingly devoid of numerous citations of earlier cases, that
the courts uphold the provisions of the contract, in this case the requirement of the Employer to pay upon
certification by the Engineer / Principal Agent.
9
