It’s so unfair

There continue to be adjudication cases on allegations of bias or breach of the rules of natural justice, and the old chestnut as to whether a dispute has arisen. But does the court follow the same principles when dealing with similar allegations in a forum other than adjudication? In a recent case the court looked at the process by which an engineer acted to resolve a dispute under clause 66 of the ICE conditions of contract.

Amec had carried out works for the Department for Transport to the Thelwall viaduct on the M6. The works were complete by 23 December 1996 but problems emerged in June 2002. Amec was made aware of the existence of the problems and that the employer and the engineer were investigating. In October Amec was told a report would be prepared setting out the findings. No further details were received until 9 December, when Amec was sent a letter from the employer claiming that it was responsible for the situation. The next day the employer requested the engineer to reach a decision on the alleged dispute under clause 66 of the contract and declare Amec liable. The engineer made the declaration without any recourse to Amec. The day after its decision was received the employer asked Amec to accept the engineer’s findings of fault. As no reply had been received by the employer within three hours of making the request it commenced arbitration proceedings. Why the hurry? Because the limitation period was about to expire.

Amec alleged that the engineer’s decision was invalid because there was no dispute at the time it was referred to the engineer, and second there were procedural irregularities in the way the engineer had reached its decision. The arbitrator rejected these objections so Amec went to court.

The first thing the judge considered was whether there was a dispute. The court came up with seven propositions. The first was that the word “dispute” should be given its normal meaning. Second, the case law provides guidance as to when a dispute exists. Third, notification of a claim does not automatically give rise to a dispute – that happens only when the claim is not admitted. Next, non-admission of a dispute can occur in a number of ways, including prevarication and remaining silent. The fifth proposition is that the required period of time to remain silent, before a dispute can be inferred, depends on the facts of the case and the contractual structure. Next, an unreasonable deadline set by one party for a response by the other does not curtail time for responding but may be relevant to the court in deciding whether or not there is a dispute. Finally, silence or non-admission is irrelevant if the claim is so ill defined that the respondent cannot respond to it. In those circumstances there is no dispute.

So what was the court’s decision? That there was a dispute and it arose in October.

On the issue of natural justice, Amec had not received a copy of the request by the employer to the engineer for it to make a decision under clause 66. Amec had not been given an opportunity to make representations to the engineer and the engineer had commenced the drafting of its decision before receiving a formal request from the employer. The engineer had been urged by the employer to reach a decision quickly and had been notified formally that it was also in the frame for claims.

The engineer must act independently and honestly but he is free to conduct the decision-making process as he likes

Now, imagine the same set of facts with an adjudicator rather than an engineer doing the deciding. One might reasonably expect that the court would not have too much difficulty in finding that there had been procedural unfairness sufficient to render the adjudicator’s decision unenforceable.

So what were the court’s reasons for rejecting Amec’s allegations? In summary, they were that the same rules of fairness do not apply to engineers’ decisions. While an adjudicator is required to abide by certain rules of natural justice, an engineer is not. The engineer must act independently and honestly but apart from that it is free to conduct the decision-making process as it likes.

The matter is understood to be going to the Court of Appeal.

Ashley Pigott is a partner in Wragge & Co in Birmingham