Adjudication in South Africa’s construction sector is resulting in more settlements between parties during the adjudication process, indicating a new trend in dispute resolution.
This is according to construction law specialist MDA Attorneys, on the release of its annual adjudication survey results based on the many adjudications conducted by the firm during 2023.
Euan Massey, MDA Attorneys director, says, “In the past, it was rare for parties to reach a settlement during adjudication proceedings, but we are seeing the start of a new trend, with settlements reached in just over 13% of our adjudications during the period compared to zero in previous years.”
While there were fewer adjudications year-on-year, the value of the disputes referred for adjudication increased significantly. Almost half of the disputes had a monetary value of up to R5 million; 13% fell within the range of R5 million – R10 million and around 50% had a monetary value between R10 million – R50 million.
Nature of disputes
Interestingly, there were no claims for defective work and disputes on the enforcement of contractual rights were 25% lower than 2022. Continuing the trend in previous annual surveys, the most common disputes referred to adjudication were claims for extensions of time and time-related costs followed by claims for payment of outstanding monies/ incorrect certification.
Of the final adjudication decisions reached during the period, the vast majority were accepted by the parties. Says Massey, “This is an indication that the adjudication procedure is robust. Industry is confident in the success of adjudication, to the extent that there were no hearings during the period, in stark contrast to the early days of adjudication when hearings were common.”
In employer/contractor disputes, decisions were mostly in favour of the contractor, which is unsurprising as the contractor is the party that typically refers disputes to adjudication.
Change in construction contracts under dispute
There are several standard form contracts commonly used in the construction sector. Whereas the highest ranking contract causing disputes has been the NEC Suite, this year the largest portion of the contracts creating disputes is the JBCC, which is mostly used in building projects. This aligns with the higher number of building projects under adjudication during the period.
Also noteworthy is that no disputes have been declared under the GCC, which may be an indication of fewer-GCC related contracts being awarded by municipalities.