Amec Civil Engineering Ltd v Secretary of State for Transport

A dispute does not arise merely because a claim is notified. It arises when, viewed objectively, the claim is not admitted. The circumstances may include express rejection, prevarication or silence after a reasonable period. The required period depends on the facts and the contractual structure. A claimant’s deadline does not automatically curtail the reasonable response period. An engineer deciding a matter under an ICE clause 66 procedure must act independently and honestly, but need not comply with elaborate natural justice procedures unless the contract requires this. Where clause 66 permits referral of “the matter” to arbitration, that means the matter initially referred to the engineer, not merely the defects identified in the engineer’s decision.

The Secretary of State engaged AMEC to renovate Thelwall Viaduct under a contract incorporating amended ICE conditions. Defects later emerged in roller bearings and bearing plates. The Secretary of State’s agent sent AMEC a letter of claim, followed by a request to the engineer for a decision under clause 66. The engineer decided that AMEC had breached the contract, and the Secretary of State commenced arbitration.

The arbitrator rejected AMEC’s jurisdictional objections. AMEC then applied under section 67 of the Arbitration Act 1996, challenging the existence of a dispute, the validity of the engineer’s decision, and the scope of the arbitration.

1. Rehearing. A challenge under section 67 of the Arbitration Act 1996 proceeds by way of rehearing rather than review.
2. Existence of a dispute. The word “dispute” has its ordinary meaning. Notification of a claim does not immediately create a dispute. A dispute arises when it emerges that the claim is not admitted. This may be shown by express rejection, discussions, prevarication or silence for a reasonable period. The relevant period depends on the facts and the contractual structure. A deadline imposed by the claimant is relevant but does not automatically shorten the reasonable period. A claim so nebulous that the respondent cannot sensibly answer it is unlikely to generate a dispute.
3. On the facts, the Secretary of State’s letters were claims and AMEC’s response was, in context, a non-admission. A dispute therefore existed before the reference to the engineer.
4. Engineer’s decision. The engineer under clause 66 was a conventional certifier, required to act independently and honestly. The contract did not require a hearing or compliance with the more elaborate rules of natural justice applicable to adjudication. The engineer’s decision was therefore valid, notwithstanding the alleged procedural defects and conflict of interest.
5. Scope of arbitration. The expression “the matter” in clause 66 referred to the matter initially referred to the engineer. The arbitrator’s jurisdiction was consequently not confined to defects identified as items (a), (b) and (c) in the engineer’s decision. It extended to the dispute covered by the Secretary of State’s letter of claim.
6. All three challenges failed. The interim award was confirmed under section 67(3)(a) of the Arbitration Act 1996. AMEC was ordered to pay costs assessed at £12,798.50. Permission to appeal was granted under section 67(4).

This was a first-instance challenge under section 67 of the Arbitration Act 1996 to the arbitrator’s interim award dated 30 March 2004. The court confirmed that award and granted permission to appeal.