This article outlines the Court of Appeal judgment in the case of AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] EWCA Civ 291. The case concerned an appeal by AMEC against the decision of the High Court which had upheld an arbitrator’s jurisdiction in a dispute arising under an ICE Conditions of Contract. The core issues revolved around the validity of the Engineer’s decision and whether a valid dispute existed to be referred to arbitration. The Court of Appeal ultimately dismissed AMEC’s appeal, upholding the court of first instance.
Background to Dispute
The dispute arose from defects discovered in the bearings a pier of the Thelwell Viaduct, which was substantially completed by AMEC in December 1996. The Highways Agency (acting for the Secretary of State) identified the defects in June 2002. Following discussions where AMEC and their suppliers denied responsibility, the Highways Agency sent a letter of claim to AMEC on 6 December 2002 alleging breach of contract and/or tortious obligations. AMEC replied on 10 December 2002 stating they were not in a position to comment on liability. On 11 December 2002, the Highways Agency referred the dispute to the Engineer under the contract, for a decision under Clause 66. AMEC was not copied on this letter.
The Engineer issued a decision on 18 December 2002, stating that the contractor had provided and installed non-compliant roller bearings, constituting a breach of contract. This decision was sent to both parties. On 19 December 2002, the Treasury Solicitor, acting for the Secretary of State, gave AMEC notice of arbitration with reference to its claim in the 6 December letter. AMEC challenged the arbitrator’s jurisdiction on three grounds, all of which were rejected by the arbitrator and the High Court. These resurfaced in the Court of Appeal, two of which are discussed below.
Crystallised Dispute Challenge
The key issue to be decided was whether there was a dispute for the purposes of clause 66 of the ICE Conditions. AMEC argued that on 11 December 2002, no valid “dispute or difference” existed that could be referred to the Engineer under Clause 66, thus invalidating the Engineer’s subsequent decision and the basis for arbitration.
Reviewing the arbitration and adjudication judicial authorities, the High Court Judge Jackson J (as he then was) set out the following seven propositions to determine whether a dispute has crystallised:
“1) The word dispute should be given its normal meaning;
2) Despite the number of cases, there are no hard-edged legal rules as to what is and what is not a dispute. The accumulating judicial decisions have merely produced helpful guidance;
3) The mere fact that one party notifies the other of a claim does not automatically and immediately give rise to dispute. A dispute does not arise until it emerges that the claim is not admitted;
4) There are many circumstances from which it may emerge that a claim is not admitted. There may be an express rejection, there may be discussions from which objectively it can be said that the claim is not admitted, or a party may prevaricate thus giving rise to the suggestion that it has not admitted the claim. Silence may well also give rise to the same inference;
5) The period of time for which a party may remain silent depends upon the facts of the case and the contract. Where the gist of the claim is well known, a short period may suffice. Where the claim is notified to an agent of a respondent who has an independent duty to consider the claim, a longer period of time may be required;
6) If a party imposes a deadline for responding to the claim, the deadline does not have the automatic effect of curtailing what otherwise would be a reasonable time for responding. However, it is something for a court to consider; and
7) If the claim as presented is so nebulous and ill-defined that a party cannot sensibly respond to it, neither silence, nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.”
The court considered the meaning of dispute or difference, noting that “difference” may be a broader concept than “dispute“. It reviewed case law, including Monmouthshire County Council v Costelloe, Ellerine Bros v Klinger, and Halki Shipping Corporation v Sopex Oils, as well as first instance decisions relating to the Housing Grants Construction and Regeneration Act 1996. The court endorsed the propositions derived by the Jackson J, regarding when a dispute arises: a claim alone does not constitute a dispute, but a dispute arises when it emerges that the claim is not admitted. Non-admission can be express, inferred from discussions, prevarication, or silence after a reasonable time.
The court found that the Highways Agency’s letter of 6 December 2002 constituted a claim, and AMEC’s non-committal response of 10 December indicated non-admission, thus establishing a dispute. Lord Justice Rix also agreed, emphasizing that AMEC’s reply (“we are not in a position to make any comment on liability“) was a refusal to accept liability at that time. The imminence of the limitation period was considered a relevant factor in assessing the reasonableness of the timeline and the likelihood of a dispute. Lord Justice May stated: “in all the circumstances, including the imminence of the end of the statutory limitation period, there was a dispute or difference capable of being referred to the Engineer under clause 66 at any time after the meeting on 19 September 2002, when Amec indicated that they did not accept responsibility.”
Validity of the Engineer’s Decision
AMEC contended that the Engineer’s decision of 18 December 2002 was invalid due to procedural unfairness, citing several factors. They argued the Engineer acted in a quasi-arbitral role and failed to adhere to principles of natural justice. The Court of Appeal rejected this ground of appeal, holding that the Engineer was acting as a certifier, not a quasi-arbitrator, and was therefore only required to act independently and honestly. The court distinguished the role of the Engineer under Clause 66 (which is subject to review by arbitration) from that of a quasi-arbitrator who finally determines a dispute.
Obiter, Lord Justice Rix, while expressing some reservations about the extent to which the Engineer can disregard the need to hear from both sides, ultimately agreed that the Engineer’s decision, even if deemed “invalid and unenforceable” due to procedural flaws, still allowed the Highways Agency to refer the dispute to arbitration. He argued that a valid Engineer’s decision is not a “sine qua non” for arbitration under Clause 66 [84].
Conclusion
This case highlights the importance of clear communication between parties to a construction contract and the need to understand the specific requirements and interpretations of standard form contract clauses, particularly those relating to dispute resolution and limitation periods. It also clarifies the distinct role of the Engineer under Clause 66 compared to that of an arbitrator.
In respect of a crystallised dispute, the courts will adopt a pragmatic and inclusive approach, recognizing that a dispute can arise even without an explicit rejection of a claim, particularly in circumstances where non-admission can be reasonably inferred, such as a non-committal response or silence in the face of a claim, especially when limitation periods are approaching.
Finally, the Engineer is primarily seen as a certifier required to act independently and honestly, but not necessarily bound by the full rules of natural justice applicable to arbitrators or judicial bodies. While fairness is a relevant consideration, its application is flexible and context-dependent.
using WordPress and