Some kicks at clause 66

The Court of Appeal recently gave judgment in Amec Civil Engineering Ltd vs Secretary of State for Transport. It upheld the judgment of Mr Justice Jackson, which Ashley Pigott wrote about recently (21 January, page 57). Ashley highlighted an anomaly raised by the case: that an adjudicator must act in accordance with the rules of natural justice but an engineer giving a decision about a dispute under clause 66 of the ICE conditions does not. This judgment has added fresh impetus to this complaint.

Clause 66 came in for some criticism from Lord Justice May. If a dispute or difference arises between contractor and employer, it has to be referred to the engineer for a decision. The engineer is meant to give a decision in writing within three months of receiving the request. If they fail to do so within a further three months, either party can refer the dispute to arbitration. If the engineer produces a written decision in time, then within three months of that, the matter can still be referred to arbitration. These steps have to be followed before an arbitration can be started. They can take time. And when the expiry of a limitation period looms, they can cause problems.

Amec was engaged to renovate the Thelwell viaduct. Completion of the work was on 23 December 1996. In June 2002, six months before the limitation period expired, defects came to light. Lengthy investigations were necessary. Both the engineer and Amec said they were not responsible for the defects.

In early December, the employer sent Amec a formal letter of claim. Amec replied that it was not in a position to comment. On 11 December, the employer referred “the dispute” to the engineer. The engineer gave a decision under clause 66 on 18 December. The next day, the employer served notice of arbitration. This was two days before the limitation period expired.

Amec contended that the arbitration notice was not valid for two reasons. First, no dispute existed. Second, the engineer had not reached his decision by a fair process. On the first point the Court of Appeal agreed with Mr Justice Jackson’s careful exposition of the law and concluded that “a dispute or difference” had come into existence for referral to the engineer. It is the second ground that is more interesting.

Lord Justice May adopted what may be termed the traditional approach: in performing his functions under the contract the engineer was not required to act as a judge, arbitrator or adjudicator and comply with the rules of natural justice. He had to act independently and honestly, but no more. One of Amec’s central complaints was that the engineer had received submissions from the employer but had not allowed Amec to respond. Lord Justice May said that he did not have to. Lord Justice Hooper agreed.

The judge was reluctant to agree that the engineer could decide having heard only one of the parties

Lord Justice Rix, the third of the appeal judges, did not. He pointed out that past cases concerning architects or engineers had considered their duties in certifying or giving notices. No case had been cited relating to the engineer’s role as the decider of disputes under clause 66. This role was quite unlike its role elsewhere in the contract. The judge concluded that he would be reluctant to agree that the engineer was entitled to come to a decision having heard only one of the parties. This view certainly has its adherents.

In the event, this difference of opinion made no difference. Lord Justice Rix held that since a decision had been given, albeit possibly an invalid one, the notice of arbitration could be served. However the question remains.

Does the engineer have to give both parties the opportunity of being heard before making a decision? If Lord Justice Rix is right then it would add a new dimension to the engineer’s job under clause 66 – and make a complicated clause more complicated yet.

Tim Elliott QC is a barrister specialising in construction at Keating Chambers