Neutral citation: Transnet SOC Ltd v Group Five Construction (PTY) & Others 7848/2015.

NEC contract topics: Interpretation of NEC3 contract dispute provisions, Option W1.

Form of contract: NEC3 Engineering and Construction Contract (June 2005 edition with June 2006 amendments).

Main areas of law: the legal enforceability of adjudication decisions, jurisdiction of courts relative to agreed contractual dispute resolution mechanisms, arbitration clauses.

 

Transnet entered into a NEC3 Engineering and Construction Contract with a joint venture comprising Group Five Construction (Pty) Ltd and Trotech Engineering Africa (Pty) Ltd for the design, supply, erection and testing of accumulators as part of a new pipeline project. The parties used various NEC3 standard documents dispute resolution Option W1 and the appointment of adjudicators and an arbitration process.

The dispute arose over the correct interpretation of provisions concerning adjudicator appointments. An adjudicator had previously been appointed in respect of one dispute. Transnet contended that this adjudicator remained in place for all future disputes under the contract. The joint venture disagreed, arguing the contract allowed for multiple or ad hoc adjudicator appointments depending on the nature and timing of disputes. Transnet approached the High Court for a declaratory order confirming its position. The contract included the following relevant clauses:

• Clause 11.W1.1: "The Adjudicator is – To be appointed under the NEC3 Adjudicator’s Contract (June 2005) if and when a dispute arises"

• Clause 12.1: "Words in the singular also mean in the plural and the other way round"

• Clause W1.3(1): Mandates strict timelines and references for dispute referral to adjudication

• Clause W1.4(1): Prevents referral to arbitration unless adjudication has occurred

The case centred on three legal questions. First, could Transnet approach the Court directly despite the dispute resolution clause mandating adjudication followed by arbitration? Second, did the contract require the appointment of a single adjudicator for all disputes or allow for different adjudicators for different disputes? Third, was Transnet estopped from claiming that only one adjudicator was to be appointed due to its past conduct in appointing various adjudicators? The respondents argued that the Court lacked jurisdiction due to the agreed two-tier dispute resolution process. They further contended that the contract's language and Transnet’s conduct supported a model of ad hoc adjudications. Transnet maintained that its interpretation of a single adjudicator throughout the contract period should be upheld.

 

The court ruled against Transnet on the jurisdictional point. Jeffery AJ found that where parties have expressly agreed to an arbitration procedure, including a preceding adjudication step, South African courts must give effect to that process unless certain statutory exceptions apply. The Court referenced the principle affirmed in Zhongji v Kamoto Copper (2015), which restricts court intervention in such circumstances.

Nevertheless, the court considered the merits in case its jurisdictional conclusion was incorrect. It applied modern principles of contractual interpretation, particularly those outlined in Natal Joint Municipal Pension Fund v Endumeni Municipality (2012) and subsequent appellate decisions. Clause 12.1, allowing singular words to mean plural, supported the notion of multiple adjudicator appointments. The phrase "if and when a dispute arises" suggested that the appointment of an adjudicator could occur for each dispute rather than implying one continuous appointment.

The Court concluded that it was commercially sensible and contractually consistent to interpret the contract as permitting the appointment of different adjudicators for different disputes. This flexibility would enable faster and more technically appropriate dispute resolution and align with the practical realities of a large-scale infrastructure project. The Court also noted that Transnet’s own conduct in appointing different adjudicators and proposing new ones, further evidenced such intention. The application was dismissed with an order for costs, including those of senior counsel. The Court did not make a finding on the estoppel argument, leaving it open.

AJ Jeffrey was critical of how the NEC contract had been drafted. He observed that it included:

 

“…a bewildering array of provisions derived from the various NEC options, several of which were incorporated into the contract by the parties and which follow neither a numerical sequence nor a uniform description.  Also, the words used in the blanks completed by the parties are often are couched in a cryptic shorthand style.”

 

This judgment offers several important clarifications for those using NEC3 contracts. Most notably, it affirms the enforceability of dispute resolution clauses, particularly the structured process involving adjudication followed by arbitration. It serves as a reminder that parties are generally bound to exhaust internal contractual processes before seeking judicial intervention.

The decision also highlights the interpretive flexibility built into the NEC3 framework. By confirming that the reference to "the Adjudicator" does not necessarily preclude the use of multiple adjudicators, the Court acknowledged the commercial and practical needs of large, complex projects. It reinforces the need for careful drafting in the Contract Data, especially when designating adjudicators or defining how and when they are appointed.

Practitioners should take note of the fact that conduct after contract formation may influence the interpretation of the parties’ intentions, particularly where ambiguity exists. The case is a valuable precedent for the proposition that the NEC3’s option clauses should be read not only in isolation but also in the wider commercial and contractual context.