| Date | 30 March 2005 |
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| Judgment | Amec Civil Engineering Limited v The Secretary of State for Transport, CA 17 March 2005 |
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| The Issue | The manner in which an engineer is required to make a decision under clause 66 of the ICE Conditions prior to the commencement of arbitration. |
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| Implication |
It is wrong to apply an over legalistic approach to the question of whether a dispute or difference has arisen for the purposes of a clause 66 decision. Whilst the engineer has to act independently and honestly he does not have to comply with the rules of natural justice in arriving at his decision. |
printIn December 1996 Amec Civil Engineering completed major renovation works to the Thelwell Viaduct which carries the M6 motorway across the Manchester ship canal, the River Mersey and Warrington Road in Lancashire. The work, which was carried out under the ICE Conditions of Contract, included replacing the existing reinforced concrete deck and providing new roller bearings permitting the deck and other elements of the viaduct to move. Some 5½ years later in June 2002 structural deficiencies became apparent in the viaduct. It appeared that some of the roller bearings had failed. The Highways Agency, acting as agent for the Secretary of State for Transport, set about investigating the failure. Amec had supplied and installed the roller bearings which had been supplied to them by a company in Italy. Amec had also designed the roller bearings but that design had been adopted by the Engineer, Pell Frischmann. Unsurprisingly, the Secretary of State turned first to Amec as responsible for the failure of the bearings and for the remedial costs which were likely to be very substantial. Crucially, however, the contract with Amec was a simple contract which meant that any proceedings the Secretary of State might commence against Amec would require to be commenced within the limitation period of 6 years from completion of the works. Time was therefore very tight. In July 2002 the Highways Agency wrote to Amec informing them of the problems with the roller bearings. Amec recognised that a claim might be made against them and set about contacting their insurers and suppliers. There were a number of meetings but no further written communications between the parties until the beginning of December 2002 when the Highways Agency sent Amec a formal letter of claim. The letter specifically held Amec responsible for the situation. Amec replied 4 days later to the effect that they were not in a position to comment on liability. At this point the Secretary of State had only 3 weeks remaining in which it would be required to initiate arbitration proceedings, failing which the claim against Amec would be statute barred upon expiry of the 6 year limitation period. A further difficulty however was that under the provisions of clause 66 of the ICE contract, it was necessary to obtain a written decision from the Engineer before a valid arbitration notice could be issued. Accordingly, 12 days before the limitation period was due to expire the Agency wrote to Pell Frischmann referring the dispute to them in accordance with Clause 66 of the conditions of contract. 7 days later Pell Frischmann gave a decision stating that Amec had installed roller bearings which were not in accordance with the contract. 1 day later the Secretary of State gave notice of arbitration. Amec immediately complained that there were no grounds upon which the arbitration could validly proceed. Amec contended that the Engineer's decision was invalid either because there was no dispute or difference capable of being referred to the Engineer at the relevant time, or because the process by which it was made was unfair. Amec argued that it had not been given the opportunity to make submissions to Pell Frischmann and that the decision had been made with undue speed. Moreover, Pell Frischmann was faced with a conflict of interest since the Highways Agency had made a parallel claim against them. Both the arbitrator and the judge on appeal rejected each of these contentions. The matter then came before the Court of Appeal. The Court of Appeal confirmed that there had been a dispute prior to the matter being submitted to the Engineer for the clause 66 decision. Lord Justice May noted that the reference to a "dispute or difference" in clause 66 was less hard edged than the word "dispute" alone. In his view, commercial good sense did not suggest that the clause should be construed with a legalistic rigidity so as to impede the parties from starting timely arbitration proceedings. If clause 66 was to be seen as a condition precedent to the ability to start arbitration proceedings within the period of limitation, the parties could not have intended to afford one another opportunistic technical obstacles to achieving this beyond those that the clause necessarily required. The formulation of a precisely detailed claim had been impossible within the short period available. Amec's complaints that no dispute had emerged were over legalistic and contrary to the proper construction of clause 66. Lord Justice May was similarly unimpressed with Amec's complaints concerning the clause 66 decision process. He was satisfied that although an Engineer acting under clause 66 had to act independently and honestly, he did not have to comply with the rules of natural justice. In the circumstances of the case, fairness had obliged Pell Frischmann to give a speedy decision but that decision had been properly and sufficiently considered. The appeal was dismissed and the arbitration allowed to continue.
CJ-0512
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