Architect/Engineer Role

© Daniel Atkinson 2005

NOTE

For previous caselaw on the issue of the role of Engineer/Architect refer to the previous article at "Architect-Engineer".

Conventional construction contracts have for some time provided for an Engineer or Architect to act for the employer and to administer the contract. This approach has worked very well for more than 50 years.

It has long been recognised that an Engineer has two functions. One is to act on the employer’s instructions whether he agrees with them or not. The other is to use his professional skill and act on his own opinion on matters such as valuations, the existence of defects and entitlements under the contract and particularly in deciding disputes referred to him. In this second function the principle that applies is that the Engineer is required to reach his decisions fairly, holding the balance between the employer and the contractor, known as the Sutcliffe Principle after the case of that name in 1974.

The introduction of adjudication as a new process of dispute resolution has raised everyone’s awareness of concepts such as “impartiality” and “natural justice”. The extent to which these concepts apply to an Engineer in conventional contracts depends on whether the role carried out by the Engineer is similar to that carried out by an adjudicator.

Two recent cases provide important insights into the role of Engineers.

The first case is the judgment of Mr Justice Jackson in Costain Limited v Bechtel Limited on 20 May 2005. One issue was whether or not the Project Manager under a form based on the New Engineering Form of Contract (“NEC”) was required to act impartially.

In NEC the Engineer’s role is largely taken by the Project Manager. It was argued however that the role was somehow different in NEC to conventional construction contracts. It was said that the NEC was more specific and contained more objective criteria.

Justice Jackson did not accept that argument. He decided that there were many instances in NEC where the Project Manager had to exercise his own independent judgment, in order to determine whether criteria were met and what precisely should be paid to the contractor. These were residual areas of discretion.

There were a number of other arguments put forward why the Project Manager was not required to act impartially such as, that his decision is not final, that only the adjudicator had an express obligation to act impartially and the description “project manager” itself. None of these arguments convinced Justice Jackson.

He held that when the Project Manager under the NEC exercises his discretion in the residual areas, the Sutcliffe Principle applied and he was required to act impartially. He observed that it would be a most unusual basis for any building contract to that every doubt should be resolved in favour of the Employer and every discretion should be exercised against the Contractor.

The second case is the judgment of the Court of Appeal in Amec Civil Engineering Ltd v Secretary of State for Transport decided on 17 March 2005.

That case was concerned with the role of the Engineer under the ICE form of contract, one of the conventional contracts referred to above.

The Highways Agency had referred the dispute to the Engineer to be decided under Clause 66, a pre-condition to arbitration. At the same time the Highways Agency informed the Engineer that the Engineer was responsible for the defects.

The Engineer gave his decision and the matter proceeded to arbitration. Amec challenged the jurisdiction of the arbitrator on several grounds, but including the ground that the Engineer’s decision was invalidated by the Engineer’s failure to observe a duty of fairness, in particular the duty to “hear the other side”.

Amec alleged for instance that no copy of the Highways Agency’s request for a clause 66 decision was sent to Amec, that Amec was not given an opportunity to make submissions to the Engineer before the Engineer made his decision, that the Engineer had substantially drafted his decision before receiving the formal request for a decision under clause 66, that the Engineer produced the final version of his decision with undue speed. Amec also alleged that because the Highways Agency was making a parallel claim against the Engineer, the Engineer was faced with so stark a conflict of interest that he could not properly discharge his duties.

Lord Justice Rix observed that if there had been no reference to arbitration and the Highways Agency were relying on the Engineer’s decision as a final and binding resolution of the parties’ dispute, its invalidity would be an answer to such reliance. He held, however, that it did not affect the jurisdiction of the arbitrator, even if the Engineer’s clause 66 decision was invalid and unenforceable. The fact that under clause 66 the failure of the Engineer to render a decision within three months of a reference allowed either party to refer the dispute to arbitration, demonstrated that a valid decision of the Engineer was not a pre-condition of arbitration.

Although that analysis must be right, the Court of Appeal made observations on the role of the Engineer which are still relevant.

Lord Justice May stated that the rules of natural justice were formalised requirements of those who acted judicially. Compliance with them was required of judges and arbitrators and those in equivalent positions, but not of an Engineer giving a decision under clause 66 of the ICE Conditions. The Engineer’s decision does not have to be reached by a judicial process.

Under clause 66 the Engineer was required to act independently and honestly.The term “impartiality” did not overlay independence and honesty with a requirement for natural justice.

Lord Justice May recognized that circumstances would arise in which the Engineer would use his knowledge of the project, and could properly make a decision under clause 66 on request from one or the parties without formal reference to the other.

The Engineer could give a speedy decision in circumstances where the limitation period for arbitration was a problem, provided that it was given honestly and independently and that it was a properly considered decision.

The Court of Appeal therefore decided that the decision was a valid Engineer’s decision under clause 66.The Engineer was not obliged to act judicially.

It is now clear that the role of the Engineer in deciding disputes is not the same as that of an adjudicator. The principles of fairness and impartiality apply but not the full judicial requirement of natural justice. The essential difference appears to be the Engineer’s knowledge and involvement with the project. It is however difficult to understand why that should make such a fundamental difference to the character of the process.