Dear Sir,

Dr Hendry concluded her informative and thought-provoking contribution in the April newsletter with two proposals.  The first was the statutory establishment of a specialist court ‘to which [construction] industry participants are required to refer disputes between them.’  The second is that a specialised law court similar to Technology and Construction Court (TCC) in England and Wales should be established.  The justification in both cases is the need to develop construction law in South Africa.  I have treated these suggestions as two separate proposals, as the first appears to relate to a court with compulsory jurisdiction in construction matters.  However, although construction disputes that are litigated in England and Wales are the preserve of the TCC, it does not have compulsory jurisdiction and the parties are free to agree to resort to arbitration (see the (UK) Housing Grants, Construction and Regeneration Act 1996, s 108(3)).

Should a specialist court for construction disputes be created, it need not and should not exclude the use of adjudication, because adjudication, as used in the construction industry, and litigation have different functions.  Adjudication is typically intended to provide a ‘quick and dirty’ interim solution to a construction dispute prior to practical completion of the works to promote cash flow (see Radon Projects (Pty) Ltd v NV Properties (Pty) Ltd 2013 (6) SA 345 (SCA) paras [4] to [9], pp. 348B to 350D).  If a party is dissatisfied with the decision, the party may refer it to litigation after practical completion and the court will consider the matter afresh.  The court will then finally determine the matter, subject to any right of appeal.

By giving a specialist construction court mandatory jurisdiction, so as to exclude arbitration, the parties who take their dispute to court and proceed to judgment are in effect paying for the development of construction law.  Commercial common sense indicates that they cannot be compelled to do this.  A party, after completion of the works, may decide to live with what it considers to be a bad decision by an adjudicator rather than to take the matter further.  Alternatively, the parties may agree to resolve the matter by negotiation (possibly facilitated by a mediator) even as late as the day of the trial.

Conferring mandatory jurisdiction on the construction court would render construction disputes non-arbitrable under South African law, which would negate the efforts of the Association of Arbitrators over many years to train construction professionals as arbitrators.  It would also undermine efforts supported by the International Arbitration Act 15 of 2017 to promote South Africa as a seat for international arbitration, in the case of construction disputes.

It is therefore suggested that a specialist construction court should have jurisdiction in disputes which the parties prefer to take to court rather than to arbitration.  The TCC in England and Wales is the successor to Official Referees, who originated in the 1870s because building disputes were obviously unsuitable for trial by jury.  The Official Referees’ Court only acquired original jurisdiction in 1982 (J Newey Official Referees’ Courts – practice and procedure (1988) vii-ix).  This court became the TCC with enhanced status in 1998.  In short, the establishment of a specialist court in England and Wales to develop construction law is the culmination of a long process.  Because of the complexity of its caseload, the Official Referees’ Court was also a trailblazer in improving procedural efficiency – to the benefit of arbitration (D Butler ‘Expediting commercial arbitration proceedings: recent trends’ (1994) South African Mercantile Law Journal 256, 264 – 265).

Subject to the reservations above, the establishment of a specialist construction court in South Africa is certainly an idea which merits support, also as a way of promoting judge management from an early stage and greater procedural efficiency in litigation.  Unfortunately, the current budgetary constraints confronting the Department of Justice and the courts may make the proposal one that is difficult to sell to those in authority.

David Butler
2 May 2021