IN THE MATTER OF AN ADJUDICATION UNDER THE JBCC PRINCIPAL BUILDING

AGREEMENT EDITION 6 .1 M A R C H 2 0 1 4 – DISPUTE RESOLUTION IN TERMS OF

CLAUSE 30
 
 
Natty Dread Builders (Pty) Limited Claimant
 
 
 
 
and
 
 
 
Dubstep Pharmacare Limited Defendant
 
 
 
 
CLAIMANTS REFERRAL 1
 
 
 
 
 
 
The Parties
 
 
 
1. The claimant is Natty Dread Builders (Pty) Ltd a company incorporated and
registered in accordance with the laws of the Republic of South Africa, having
its principal place of business at 17 Burning Spear Way, Trenchtown Business
Park, Johannesburg, South Africa.
 
 
2. The defendant is Dubstep Pharmacare Ltd, a duly registered and
incorporated company, registered in accordance with the laws of the
Republic of South Africa, with its principal place of business at Corner
Electric Avenue and Skatalite Rd, Clarkville, Johannesburg, South Africa.
 
 
3. The claimant and defendant shall be referred to collectively as “the parties”.
 
 
 
4. The defendant’s Principal Agent (PA) appointed in terms of the Contract
was John Clark of Clark Architects (Pty) Ltd.

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 Background
 
 
 
5. On or about 31 January 2014 the claimant, duly represented by its
commercial manager, and the defendant concluded a written agreement
based on the JBCC Principal Building Agreement – Edition 6.1 (“JBCC”) for
the construction of a high volume oral medical liquid manufacturing and
packing facility at Clarkville, Johannesburg (“the Works”).
 
 
6. The JBCC was supplemented by the Contract Variables (including the Pre-
Tender and Post-Tender Information), Bill of Quantities, Programme for the
Works, Bulk Earthworks Specification, Laboratory Test Results, Soil Profiles,
Ground Investigation Report, Safety, Health and Environmental documents,
Summary of Insurance Arrangement and Site Inspection Certificate. For the
purposes of this referral, the Contract document in totality shall be referred
to as “the Contract”.
 
 
The portions of the Contract relevant to this referral are found in the JBCC.
The particular amendments to the JBCC, relevant to this dispute are set out
further below.
 
 
7. A dispute has arisen between the parties regarding amounts deducted from
payment certificates premised on unsubstantiated damages for out of
tolerance floor levels.
 
 
Jurisdiction of the Adjudicator
 
 
 
8. The JBCC provides:
 
 
 
8.1. That the default dispute resolution process is adjudication;

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 8.2. In the event of the parties being unable to agree to the appointment of the
Adjudicator, an adjudicator should then be nominated and appointed by the
Association of Arbitrators.
 
 
9. Clauses 30.1 and 30.2 of the JBCC state that:
 
 
 
30.1 Should any disagreement arise between the employer and his principal
agent or agents and the contractor as to any matter arising out of or in connection
with this agreement either party may give notice to the other to resolve such
disagreement.
 
 
30.2 Where such disagreement is not resolved within 10 (ten) working days of
receipt of such notice it shall be deemed to be a dispute.

30.3 The dispute shall be referred to Adjudication within 10 (ten) working days
of the expiry of the period [30.2] by means of a notice of adjudication by the
party (the referring party) which gave the notice of disagreement.”
 
 
Referral of this disputes
 
 
 
10. On 21 November 2016 the claimant notified this dispute. The notice identified the
disputes as the Principal Agent’s action in deducting monies for out of tolerance floor
levels. These deductions were reflected in Interim Payment Certificate No’s. 31, 32,
33 and 34.
 
 
11. Following a lack of response to the claimant’s letter dated 21 November 2016, on 5
December 2016, the claimant addressed a letter to the defendant confirming that the
disagreements as notified in its letter dated 21 November 2016 with regards to the
deductions for out of tolerance floor discrepancies had not been resolved in terms of
the Contract. The letter further stated:
 
 
“With reference to the relevant correspondence regarding the above
disagreements, we therefore elect to proceed as follows:
 
1. In terms of Clause 30.1 the disagreement remains unresolved and is now a
dispute.
2. In terms of clause 30.2 we elect adjudication as a process to reach a
resolution of the disputes.

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 3. In terms of clause 30.6.1, the requirement is for us to mutually agree
the appointment of the adjudicator. In compliance with this process, we
herewith propose the names of three adjudicators for your
consideration….”
 
 
12. On 12 December 2016, the Principal Agent responded to the claimant’s letter
as follows:
 
 
“In terms of clause 30.2 the employer has agreed to appoint adjudicator
Adv Festus Nesta Isaacs or Retired Judge Titus Dube in this order of
preference.”
 
 
13. Due to Advocate Isaacs not being available to attend to the matter, Retired Judge
Dube was requested to indicate his acceptance of the position of Adjudicator for
the dispute resolution process.
 
 
14. On 7 January 2017, the Adjudicator confirmed his acceptance of appointment
as adjudicator in the matter.
 
 
15. On 12 March 2017 the claimant addressed a letter to the Adjudicator requesting
that the Adjudicator convene a preliminary meeting between the parties.
 
 
16. Such meeting was held on 5 April 2017. At the meeting, the parties raised no
issue with regards to the validity of the appointment of the Adjudicator. The parties
agreed to dispense with the time frames as contained in the JBCC Rules for
Adjudication and agreed that:
 
 
16.1. The claimant would submit its statement of claim on or before 17 May
2017;
 
 
 
16.2. The defendant would respond by 28 June 2017;
 
 
 
16.3. The claimant would replicate by 5 July 2017.
 
 
 
17. Given the above the claimant submits that the Adjudicator has the requisite
jurisdiction to decide this referred dispute.

 
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 Relevant provisions of JBCC

18. The provisions of the JBCC which are relevant to this referral are the
following:
 
 
18.1. Clause 1.0 defines:
 
 
 
18.1.1. The certificate of practical completion as a
certificate issued by the principal agent to the
contractor stating the date of which practical
completion was achieved.
 
 
18.1.2. Practical completion as the stage of completion as
certified by the principal agent where the works or a
section thereof has been completed free of patent
defects other than minor defects identified in the list
for completion and can be used for the intended
purpose [CD]
 
 
18.2. Clause 6.0 [Employer’s Agents]
 
 
 
“6.1 The employer shall appoint the principal agent as stated
in the schedule. The employer warrants that the
principal agent has full authority and obligation to act
in terms of the Contract.
 
 
6.2 The principal agent shall be the only person who
shall have the authority to bind the employer, except
where agents have issued contract instructions
under delegated authority.”
 
 
18.3. Clause 19 [Practical Completion]
 
 
 
“19.1 The principal agent shall:
 
 
19.1.1 From time to time inspect the works to give the
contractor interpretations and guidance on the
building standards and state of completion of the
works that the contractor will be required to
achieve for practical completion.
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19.1.2 inform the contractor of the period required for
inspection of the works related to the issue of
the certificate for practical completion.
 
19.2 The contractor shall:

19.2.1 inspect the works to satisfy himself that the state

of completion of the works in terms of 19.1 has
been achieved.
 
19.2.2 give timeous notice to the principal agent of the
anticipated date of practical completion to enable
the principal agent to inspect the works on or
before such date. Where, in the opinion of the
principal agent, after such inspection of the works:
 
19.3.3 When practical completion has been reached, the
principal agent shall forthwith issue a certificate
of practical completion to the contractor with a
copy to the employer. The certificate of practical
completion, unless otherwise agreed by the
parties, shall not be issued before the date for
practical completion as stated in the schedule or
revised in terms of 23.0
 
19.3.1 When practical completion has not been reached,
the principal agent shall forthwith issue a practical
completion list defining the outstanding work and
defects to be rectified to achieve practical
completion to the contractor.…
 
 
19.7 Upon the issue of the certificate of practical
completion certificate the employer shall be
entitled to possession of the works and the site.”
 
 
18.4. Clause 19.6 of the JBCC PBA was amended to read as follows:
 
 
“19.6 Should the contractor, in the opinion of the principal

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 agent, not have achieved practical completion of any
area of the works, the employer may, notwithstanding
the contractor’s on-going responsibilities, take
possession of any such area and such possession
by the employer shall not be construed as the
achievement of practical completion. Should such an
instance arise, the principal agent will give notice to
the contractor, in writing, that the employer is taking
immediate possession without practical completion
having been achieved in order to mitigate his
exposure to any expenses. The contractor’s
responsibilities and liabilities shall remain in full force
and effect until in the principal agent’s opinion,
practical completion is achieved. Access by the
contractor to any such area in possession of the
employer, prior to the contractor’s achievement of
practical completion, shall be at the employer’s
convenience, which will not be unreasonably
withheld.”
 
 
18.5. Clauses 25.4.4 and 25/4/5 entitle the claimant to claim default and
compensatory interest on payments that has not been received.
 
 
18.6. Clause 27.0 [Recovery of Expense and Loss]
 
 
 
“27.1 The principal agent shall issue a recovery statement
monthly to the employer and contractor
simultaneously with the payment certificate.
Explanatory documentation as may be necessary to
support the calculation of amounts stated shall
accompany the recovery statement. The principal
agent shall show on the recovery statement amounts
due to the employer for:
 
27.1.1 Penalties
 
 
27.2 The employer may recover expense and loss
incurred or to be incurred resulting from:
 
27.2.9 Default by the contractor if not less that 5 (five)

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 calendar days notice detailing such default has been
given before the issue of the next recovery statement
to allow contractor the opportunity to remedy such
default.”
 
27.3 The principal agent shall include an amount due in
terms of the recovery statement in the accompanying
payment certificate….”
 
 
18.7. The Contract Variables as per the PBA Contract Data:
 
 
 
The date for practical completion 18 March 2016 and
the penalty per calendar day R125 000.00”
 
 
18.8. Bill of Quantities Section 2
 
 
 
“All work must be done in accordance to SABS 1200 and the structural
engineer’s specifications.”
 
 
18.9. SABS 1200 G-1982 (attached as “SC 40”)
 
 
 
Clause 6.1.2 of SABS 1200 G-1982
 
 
 
“Methods of Measurement of Deviations:
Certain deviations will be measured as set out below:
 
 
“…any deviation from flatness of a plane surface will be measured as
a maximum deviation of the surface from any straight line of length 3
m joining two points on the surface, determined by means of a straight edge
the end of which are supported on identical blocks of suitable thickness
placed over each of the points.”
 
 
Clause 6.2 of SABS 1200 G-1982
 
 
 
“6.2.1 General
 
 
The contractor shall construct each of the various parts of the Works
within the limits of the applicable permissible deviation set out in 6.2.3

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 appropriate to the degree of accuracy specified in the project specification
or shown on the drawings. If no degree of accuracy is specified, Degree
of Accuracy II shall apply.
 
6.2.2 Concrete Surfaces
 
 
Any departure from flatness and the height or depth of any irregularity of
a finished plane concrete surface shall not exceed the maximum value
given in (d)(7) and (8) below…
 
6.2.3 Specified PD’s
 
 
(a) Formwork. Formwork shall be so constructed as to ensure that the
position of the finished work will be as specified, subject to the relevant
permissible deviation given in (c) or (d) below, as applicable.
 
5 (d) Elements or components above foundations (including floor slabs).
 
 
….
4) Level (deviation from designed level with reference to the nearest
transferred datum (TD) of the upper or lower surface, as may be specified,
of any slab or other element or component: -15 +5
 
7) Exposed concrete surface:
 
 
i) Flatness of a plane surface 5mm
ii) abrupt changes in a continuous surface 5mm”
 
 
19. The Contract provided for one practical completion date and it was not envisaged
that the completion of the Works would be in sections. During the operation of the
Contract, it became evident that it was more appropriate to define the Works in terms
of sections or “phases”.
 
 
20. The Adjudicator is referred to the addendum to the Contract where is was agreed
between the parties that the dates for practical completion and the penalty per calendar
day would be as follows:
 
 
Area PC Date Penalty Amount

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Section 1 – Phase A 15 June 2016 R30, 000

Section 2 – Phase B 15 June 2016 R 15, 000
Section 3 – Phase C 18 June 2016 R 30, 000
Section 4 – Phase D 29 June 2016 R 20, 000
Section 5 – Phase E 23 June 2016 R 15, 000
 
 
21. Further to the addendum signed by the parties regarding the revised practical
completion dates,
 
 
21.1. the phase 4 practical completion date was extended to 18 July 2016; and
 
 
 
21.2. the phase 5 practical completion date was extended to 29 June 2016.
 
 
 
Facts giving rise to the dispute
 
 
 
22. In terms of the provisions of the Contract, the claimant was required to construct the
floors in accordance with the specifications contained in SABS 1200 and within such
tolerances provided for therein.
 
 
23. During August 2015, the claimant proceeded with the installation of the steel panel
partitioning in phase D of the Works. During such installation, it became evident that
the floors were not flat, as evidenced by certain gaps and undulations between the
steel panels and the floor.
 
 
24. Subsequent to the discovery that the floors were out of tolerance, on 31 August 2015
the principal agent requested the claimant to submit as built drawings showing all
levels on the floors already cast. Later that day, the principal agent issued a further
instruction to the claimant requesting submission of a detailed method statement for
repairing the out of tolerance floor levels. The claimant duly provided a method
statement for the remedial works to be done to the floors, which remedial works were
carried out over a period of time, during and after the erection of the steel paneling.
 
 
25. On 18 June 2016 a meeting was held at the principal agent’s offices to discuss the
floor levels for phases D and E and potential compensation for issues which the

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 defendant had with the floors. The relevant portions of the notes taken at the meeting
were:
 
 
“Clark Architects has rejected the floors for phases D and E on the basis that
the levels do not conform to the class 2 tolerance specifications … it was
agreed that it was not practical to carry out remedial works at this stage of the
project and financial compensation for the non-adherence to specifications is
expected and will be subject to discussion at a future meeting”.
 
 
26. As will be seen further herein, it is the claimant’s submission that no financial
compensation can be due as there has been no damage suffered by the defendant.
In any event, and at best, the above extract amounts to nothing more than an
agreement to agree 1.
 
 
27. Prior to the issue of the certificates of practical completion, the claimant remedied the
flatness of the floors at its own expense, as evidenced above, where after the
defendant completed the installation of its plant, equipment and furniture.
 
 
28. All issues with regard to the floor levels and flatness of the floors arose prior to the
issuance of the certificates of practical completion. Such certificates were issued as
follows:
 
 
28.1. In respect of phases A, B and C, the certificate was issued on 30 July 2016
recording that practical completion was reached on 15 June 2016;
 
 
28.2. In respect of phase D, the certificate was issued on 30 July 2016, recording
that practical completion was reached on 19 June 2016; and
 
 
28.3. In respect of phase E, the certificate was issued on 30 July 2016 recording
that practical completion was reached on 29 June 2016.
 
 
 
 
 
 
 
1
Premier of the Free State Provincial Government and Others v Firechem Free State (Pty) Ltd 2000 (4)
SA 413 (SCA)

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 Such certificates constitute approval of the Works 2 and indicate that, in the opinion of
the principal agent, the Works can be used for their intended purpose.
 
 
29. Interim Payment Certificate No. 31 indicated an amount to be recovered by the
defendant against the claimant as a result of “Default by the Contractor [27.2.3]”. As
a result, the amount of R1 million was withheld from the payment of such Interim
Payment Certificate. This amount is arbitrary and has to date not been substantiated.
 
 
30. On 6 November 2016 the claimant received Interim Payment Certificate No. 32. It
was indicated on such certificate that an amount of R10 million was now the amount
to be recovered from the claimant due to “Default by the Contractor [27.2.3]”. Again
no quantification of the alleged damages was provided.
 
 
31. In fact, the last correspondence that the claimant had had sight of in relation to such
quantification was an e-mail dated 22 August 2016 from the quantity surveyor replying
to an email from the principal agent stating:
 
 
“… as far as the floor is concerned, we do not know how to calculate the
“inconvenience” to Dubstep, we are still of the firm opinion that the floor should
have been rejected at the appropriate time. The fact that there was a lot of “tap
dancing” when John was making an issue of this floor, and now to think that
financial quantification must somehow now be ‘smoked up’ by the QS, is another
bizarre attempt to make us responsible for something we are not obliged to
do.”
 
 
32. On 21 November 2016 the claimant indicated its disagreement with the deduction of
the R10 million for floor tolerance discrepancies contained in Interim Payment
Certificate 32 and requested that same be substantiated in accordance with Clause
27 of the Contract.
 
 
33. On 15 March 2017, a calculation was sent to the claimant for the replacement cost of
the rejected concrete floor (based on the amount derived from the actual quantities of
work executed multiplied to the rates in the Bill), totaling the amount of R11 919
450.08 for both the ground floor and the first floor.
 
2
See The Secretary of the South African Republic v Lagois 5 OR 233; Lowther v Swan & Co 1915 TPD
494 and Ballentine & Ano v Western Hotels 1960 (4) SA 137 (T).

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 Argument
 
 
 
34. The claimant admits that the flatness of the floors was not within the specified
tolerances but submits:
 
 
34.1. The concerns raised by the employer throughout have been in relation to the
flatness of the floor, which not only has been remedied by the claimant, but
which floors the defendant is currently utilsing on a daily basis with no
evidence of inconvenience and / or damages having been suffered.
 
 
34.2. The issuance of the certificates of practical completion by the principal agent
indicates that the Works have been approved and can be used for their
intended purpose.
 
 
34.3. To date the defendant has failed to prove any damages that it has suffered
as a result of the out of tolerance floor levels.
 
 
34.4. The amount submitted by the defendant in substantiation of the
compensation which it seeks to recover from the claimant is for the
replacement value of the floors, which replacement the claimant submits is
neither possible nor practical. In fact the defendant has, by its own actions in
accepting that financial compensation would be considered instead of
remedial action to the floors, precluded itself from seeking such
compensation.
 
 
34.5. There being no provisions in the Contract that deal with financial
compensation for defects to the Works that have been accepted by the
defendant, one would need to consider the law of damages to assist in
determining the quantification of such damages.

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 34.6. The method adopted by the defendant in quantifying its damages is incorrect
and as such its claim for such damages should fail. Visser and Potgieter’s
Law of Damages 3 states that:
 
 
“In the case of defective work the correct measure is usually the
reasonable cost of remedying any defect so that the work may measure
up to the standard prescribed in the contract.
 
In the case of Schmidt Plant Hire (Pty) Ltd v Pedrelli 4 it was held that our
courts have always used the reasonable cost of repairs as the
appropriate measure of damages in the case of defective construction
work. Thus the point of departure is cost of repairs and not the difference
in value between the performance received and the performance which
should have been received. A court will depart from the measure of
reasonable cost of repairs and adopt the difference in values only if it
would be unreasonable to use the former approach” 5
 
 
34.7. It is the claimant’s submission that the defendant’s basis of measuring its
damages as the replacement cost is patently wrong.
 
 
34.8. In a damages claim such as this, it is incumbent on the defendant to prove
its damages. The defendant has failed to provide the claimant with any proof
that any damages have been suffered by it, nor that there has been any
diminution in the value of the completed Works.
 
 
35. On the basis of these principles, the following is submitted:
 
 
 
35.1. The works have been accepted as practically complete and the defendant is
not entitled to damages;
 
 
35.2. Even if the defendant were entitled to damages, the defendant has failed to
prove that it has suffered any damage whatsoever and has rather deducted
an arbitrary amount, which
 
3
Law of Damages 2nd Edition (Juta & Co. Ltd) at page 325
4
1990 (1) SA 398 (D)
5
See Erasmus & Gauntlett 7 LAWSA 45: “The question is whether it would be reasonable to require a
correction of the work so as to make it conform to the contract. If it would not, the contractor would be
liable in damages to the extent to which the value of the completed work is less than the value of the
work contracted for.”

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35.2.1. it is not entitled to do; and
 
 
 
35.2.2. in any event does not represent the proper measure of damages.
 
 
 
36. Accordingly, the claimant seeks a decision that:
 
 
 
36.1. the defendant is not entitled to damages;
 
 
 
36.2. the defendants submission of an estimation of R11 919 450.08 for
replacement value of the concrete floors is wrong in fact and in law;
 
 
36.3. the claimant should be repaid the R10 million wrongfully withheld by the
defendant;
 
 
36.4. the claimant should be paid interest on the amount wrongfully withheld by
the defendant;
 
 
36.5. Further and / or alternative relief.
 
 
 
 
DATED at JOHANNESBURG this 17th day of MAY 2017.
 
 
 
 
 
 
 
Natty Dread Builders (Pty) Limited

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