Amec Civil Engineering Ltd v Secretary of State for Transport

A contractual “dispute or difference” is interpreted inclusively where it controls access to arbitration. A dispute may readily be inferred once liability is not accepted, although its existence always depends on the contractual and factual context.

An engineer deciding a dispute under clause 66 of the ICE Conditions must act independently, honestly and with flexible fairness. The engineer need not conduct a judicial process or invariably hear both parties. An inherent conflict arising from the engineer’s contractual role does not itself disqualify the engineer.

For the scope of a subsequent arbitration, “the matter” means the dispute or difference referred to the engineer, rather than only the points expressly decided by the engineer.

Serious defects appeared in roller bearings installed by Amec during renovation of the Thelwell Viaduct. Shortly before the perceived expiry of the limitation period, the Secretary of State asserted that Amec was responsible, referred the dispute to the contractual Engineer under clause 66 of the ICE Conditions, obtained a decision and served notice of arbitration.

The arbitrator rejected Amec’s jurisdictional objections. Jackson J dismissed Amec’s appeal under section 67 of the Arbitration Act 1996: [2004] EWHC 2339 (TCC).

The Court of Appeal considered whether a dispute or difference existed when the matter was referred, whether the Engineer’s procedure or conflict of interest invalidated his decision, and whether the arbitration was confined to the defects expressly itemised in that decision.

1. The appeal was dismissed unanimously. May LJ delivered the leading judgment, with which Hooper LJ agreed. Rix LJ agreed in the result but differed concerning the Engineer’s obligation of procedural fairness.

2. A dispute or difference capable of reference under clause 66 existed after the meeting at which Amec indicated that it did not accept responsibility. The words were ordinary English words whose meaning depended on context. “Difference” was wider and less hard-edged than “dispute”. Commercial good sense favoured an inclusive construction which did not create opportunistic technical obstacles to commencing arbitration before limitation expired. A claim need not be fully developed through completed technical investigation before a dispute can arise.

3. The Engineer was required to act independently and honestly. Fairness was a flexible obligation shaped by the facts and occasion; it did not import the rules of natural justice or require a judicial process. The Engineer could use existing knowledge of the contract and, where the other party’s position was already known, could decide without a formal invitation for further representations. If material representations beyond the request itself were received from one party, fairness might require an opportunity for the other to respond, but this was not an inflexible rule. A properly considered speedy decision could be requested and given where limitation was imminent.

4. The Engineer’s position as the Employer’s agent, and the possibility that the same defects might expose the Engineer to a claim, did not disqualify him. Such conflicts were an inherent potential consequence of the contractual machinery. On the facts, the decision was made independently, honestly and after sufficient consideration.

5. Rix LJ considered that the dispute-settlement role under clause 66 carried a stronger duty of fairness and that the Engineer should have heard Amec’s response. Nevertheless, even an invalid or unenforceable decision would remain a decision capable of triggering arbitration. A valid Engineer’s decision was not invariably a condition of arbitration because failure to decide within three months also permitted a reference.

6. “The matter” capable of reference to arbitration was the dispute or difference referred to the Engineer, not merely the matters expressly decided. The reference and notice embraced all actual or suspected defects within the asserted responsibility for the viaduct, including related defects revealed by later investigation.

1. Court of Appeal (Civil Division): Dismissed Amec’s appeal in [2005] EWCA Civ 291 and upheld the conclusion that the arbitration was validly commenced with the claimed scope.

2. High Court, Technology and Construction Court: Jackson J dismissed Amec’s appeal under section 67 of the Arbitration Act 1996 and granted permission for a further appeal: [2004] EWHC 2339 (TCC).

3. Arbitration: The arbitrator rejected Amec’s objections to jurisdiction and its proposed restriction on the scope of the arbitration.