Amec Civil Engineering Ltd v Secretary of State for Transport [2004] EWHC 2339 (TCC)

"1. If any dispute or difference of any kind whatsoever shall arise between the employer and the contractor in connection with or arising out of the contract or the carrying out of the works, including any dispute as to any decision opinion instruction direction certificate or valuation of the engineer (whether during the progress of the works or after their completion and whether before or after determination, abandonment or breach of the contract) it shall be referred to and settled by the engineer who shall state his decision in writing and give notice of the same to the employer and the contractor. Unless the contract shall have been already determined or abandoned, the contractor shall in every case continue to proceed with the works with all due diligence and he shall give effect forthwith to every such decision of the engineer unless and until the same shall be revised by an arbitrator as hereinafter provided. Such decisions shall be final and binding upon the contractor and the employer unless either of them shall require that the matter be referred to arbitration as hereinafter provided. If the engineer shall fail to give such decision for a period of three calendar months after being requested to do so or if either the employer or the contractor be dissatisfied with any such decision of the engineer, then and in any such case either the employer or the contractor may within three calendar months after receiving notice of such decision or within three calendar months after the expiration of the said period of three months (as the case may be) require that the matter shall be referred to the arbitration of a person to be agreed upon between the parties or (if the parties fail to appoint an arbitrator within one calendar month of either party serving on the other party a written notice to concur in the appointment of an arbitrate) a person to be appointed on the application of either party by the president for the time being of the Institution of Civil Engineers ... Any such arbitration shall be deemed to be a submission to arbitration within the meaning of the Arbitration Act 1950 or the Arbitration (Scotland) Act 1984 as the case may be or any statutory re-enactment or amendment thereof for the time being in force. Any such reference to arbitration may be conducted in accordance with the Institution of Civil Engineers Arbitration Procedure (1983) or any amendment or modification thereof being in force at the time of the appointment of the arbitrator and in cases where the president of the Institution of Civil Engineers is requested to appoint the arbitrator, he may direct that the arbitration is conducted in accordance with the aforementioned procedure or any amendment or modification thereof. Such arbitrator shall have full power to open up review and revise any decision opinion instruction direction certificate or valuation of the engineer and neither party shall be limited in the proceedings before such arbitrator to the evidence or arguments put before the engineer for the purpose of obtaining his decision above referred to. The award of the arbitrator shall be final and binding on the parties ..."

"The investigation work is being managed by our managing agents Atkins with input from the original designers Pell Frischmann. Given that the failure may have a connection with the work executed by yourselves under the renovation contract, you may wish to contact our agents and make arrangements to inspect the damaged bearings."

"The factual report on the problems with the additional bearings/bearing plates is still awaited from Atkins but will be available early next week and forwarded to you then. In summary, there are seven additional roller bearings and a total of 19 top or bottom bearing plates which are cracked, spread across 16 additional piers, excluding the original problems on pier 5 ... I explained at the meeting that we had initiated works to Pier V as emergency works aimed at mitigating the traffic disruption caused by the closure of most of the northbound running lanes. You should be aware that the likely costs of these works ... will be in the region of £3.5 million to £4 million. Treatment of the additional 16 piers will depend on the management strategy for the structure currently being prepared by Atkins on our behalf. I therefore have no feel at this stage for the likely costs associated with these works but I would expect them to be substantial. As you are aware, no detailed work has yet been undertaken to establish why these problems have arisen within six years of the viaduct being refurbished. Notwithstanding that detailed work, the Highways Agency's stance is firmly that there is a defect to be addressed here by one or more of the parties involved and the Highways Agency will be looking for the costs of correcting that defect (or defects) to be met by others. In the light of the latest developments on the additional piers, I would appreciate a formal response from your company, including any proposals to address the problems identified once you have received the factual report referred to earlier."

"Further to the receipt of the Highways Agency's letter of 2nd October 2002, faxed to you earlier today, it is clear that the Highways Agency have recorded a potential claims situation where they expect costs to be borne by others. In view of this, I believe it would be prudent that you notify any other parties relative to your situation that are or may become involved, ie insurers, in order that we are aware of their requirements in proceeding with this issue."

"1. We refer to all the previous correspondence which has passed between the parties via themselves and their representatives, and to the meetings held, for the background to this dispute with which you are, of course, familiar. "2. The current position (which may of course alter in the future) with regard to Thelwall Viaduct is, in broad terms, as follows: "a. One large diameter roller has split into two 'halves' on Pier V and ultrasonic investigations suggest that two other rollers may be cracked on this pier. "b. Seven smaller diameter rollers are either visibly cracked or cracked as determined by means of ultrasonic testing. "c. A number of bearing plates are also either visibly cracked or cracked as determined by ultrasonic testing. "d. 136 roller bearings are in use on the viaduct. Most are 120mm diameter, with the exception of the four rollers on Pier V which are 340 mm diameter. "e. Testing of all the damaged bearings and the six smaller apparently uncracked bearings from piers T and N will be carried out as these are gradually removed from the structure. This information will be used to assist with prediction of the future life that can be reasonably expected for the remaining apparently undamaged rollers. "f. It is not yet clear whether all bearings will need to be replaced, though that is obviously possible. "g. It is not yet clear what the ultimate cost of all remedial works and all ancillary and related costs will be, however the possible costs range from around £5 million to £20 million. Costs have already been incurred in investigating this problem, in enclosing the northbound carriageway and for professional fees and traffic management. "3. We hold you responsible for the situation with Thelwall Viaduct in that you are in breach of your contractual and/or tortious obligations including regarding the works being carried out in a proper, good and workmanlike manner; using materials and/or components in accordance with the specification and/or materials and/or components of satisfactory quality; using materials and/or components fit for their intended purpose, when complete the works and/or materials and/or components being fit for their intended purpose, inspecting, testing and/or checking workmanship and/or components and/or materials, warning about defects or potential shortcomings in design and/or materials and/or components and/or workmanship, and regarding design generally. "4. The best details which we are able presently to provide of those breaches are as follows: "a. The bearings should last at least 30 years and have not done. "b. The materials of which the bearings are made were noncompliant with the bearings schedule/contract as regards loading strength and/or movement parameters and/or resistance and/or seating. "c. Alternatively, the materials of which the bearings are made have become noncompliant with the bearings schedule/contract as regards loading strength and/or movement parameters and/or resistance and/or seating. "d. The steel has corroded and should not have done. "e. The materials were poorly manufactured in that the quenching process resulted in steel with a brittle phase towards the interior of the bearings and an elastic phase towards the exterior of the bearings and/or there were grain boundaries and in any event inherent weaknesses or stress concentration and thus crack initiation points or otherwise. "f. The bearings were poorly assembled and/or installed in that the lower flanges distorted the bearing plate and/or the rollers were incorrectly aligned and/or the bearings snagged or were inappropriately loaded by the side guides. Alternatively the bottom plate of the flange was distorted, damaging the bearings, or inappropriately loading them, or otherwise. "g. Alternatively, the bearing plates were supplied deformed. "5. Please confirm by close of business on Tuesday, 10th December that you accept that you are responsible for the situation with Thelwall Viaduct and please confirm that you will pay damages and/or provide an indemnity in relation to the Secretary of State's damage arising from this situation, including the cost of remedial works and ancillary and related costs and costs already incurred."

"We refer to your letter of 6th December 2002 concerning the bearings on the above structure. "

"1. We copied you our letter to AMEC Civil Engineering Ltd dated 6th December 2002. "2. AMEC Civil Engineering Ltd has not acknowledged that it is responsible for the situation with Thelwall Viaduct by close of business on Tuesday, 10th December 2002. "3. We refer the dispute to you as engineer pursuant to clause 66 for your decision."

"Engineer's decision "

"a. One large diameter roller on Pier V has split into two halves, and ultrasonic investigations suggest that two other rollers on the same pier may also be cracked. "b. Seven smaller diameter rollers are either visibly cracked or have been determined as cracked by means of ultrasonic testing. "c. A number of bearing plates are also either visibly cracked or have been determined as cracked by means of ultrasonic testing. "

"Please confirm by 5pm today that you accept the engineer's decision. In the absence of a clear acceptance of the engineer's decision by this time, the employer will deem you to be dissatisfied with the engineer's decision and will take the necessary steps to protect the employer's position."

"4. By a letter dated 11th December 2002, the employer sought the engineer's decision on this dispute. On 18th December 2002 the engineer issued his clause 66 decision. On 19th December 2002 the Treasury Solicitor on behalf of the employer wrote to the contractor asking the contractor to confirm by 5 pm on 19th December that the contractor accepted the engineer's decision. No such confirmation has been received and the employer therefore understands that the contractor is dissatisfied with this decision and that a dispute or difference exists between employer and contractor. "5. The employer claims damages for breach of contract and/or for breach of any and all of the duties of care described at paragraph 1 above (ie which are intended to reflect all potential claims in negligence, whether described as negligence or negligent misstatement or negligent misrepresentation, et cetera); such breaches arising from failures on the part of the contractor including (but without limitation) breach of his contractual and/or tortious obligations including (but without limitation) regarding the works being carried out in a proper, good and workmanlike manner using materials and/or components in accordance with the specification and/or materials and/or components of satisfactory quality, using materials and/or components fit for their intended purpose, when complete the works and/or materials and/or components being fit for their intended purpose; inspecting, testing and/or checking workmanship and/or components and/or materials; warning about defects or potential shortcomings in design and/or materials and/or components and/or workmanship and regarding design generally. Further information and detail appears in the employer's letter dated 6th December 2002 and has been the subject of discussion between the parties, their servants and agents."

"The first point is this: was there any dispute or difference arising between the contractors and the engineer? It is accepted that in order that a dispute or difference can arise on this contract, there must in the first place be a claim by the contractor. Until that claim is rejected you cannot say that there is a dispute or difference. There must be both a claim and a rejection of it in order to constitute a dispute or difference."

"Again by the light of nature, it seems to me that section 1(1) is not limited either in content or in subject matter, that if letters are written by the plaintiff making some request or some demand and the defendant does not reply, then there is a dispute. It is not necessary for a dispute to arise that the defendant should write back and say 'I don't agree.' If on analysis what the plaintiff is asking or demanding involves a matter on which agreement has not been reached and which falls fairly and squarely within the terms of the arbitration agreement, then the applicant is entitled to insist on arbitration instead of litigation."

"'... Whilst not in any way acknowledging or admitting that your clients have any basis for a claim against our clients, we confirm that we are authorised to accept on behalf of our clients service of any process of law or notices in connection with Tanterton sites 6 and 9. "

"The words 'dispute or difference' are ordinary English words and unless some binding rule of construction has been established in relation to the construction of those words in clause 35 of the JCT contract I am of the opinion that the words should be given their ordinary everyday meaning. The decisions in Tradax and in Ellerine show that a dispute can be said to exist where a claim in respect of some identified or specific matter has been made and either ignored as in Tradax or met with by prevarication as in Ellerine. Neither of those cases however in my judgment lays down any general principle of construction applicable to all arbitration clauses which contain a reference to disputes or to disputes and differences ... "

"A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section. "

"27. A 'dispute' can only arise once the subject matter of the claim, issue or other matter has been brought to the attention of the opposing party and that party has had an opportunity of considering and admitting, modifying or rejecting the claim or assertion. This is clear from a consideration of two decisions, one concerned with arbitration and the other with the dispute resolution procedure that is required to have been gone through in many civil engineering contracts before arbitration can be commenced. In the arbitration field, the Court of Appeal confirmed in HalkiShipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726 that a 'dispute', the existence of which is the statutory precondition of a party being entitled to enforce an arbitration clause and to have legal proceedings stayed for arbitration under the Arbitration Act 1996, has a wide meaning. The term includes any claim which the opposing party has been notified of which that party has refused to admit or has not paid, whether or not there is any answer to that claim in fact or in law. In the civil engineer field the Court of Appeal in Monmouthshire County Councilv Costelloe & Kemple Ltd (1965) 5 BLR 83, held that clause 66 of the 4th edition of the ICE Conditions of Contract, which only allowed for arbitration where there was a dispute or difference that had already been referred to and decided by the engineer required there to have been a claim by one party and its rejection by the other before a dispute or difference could be referred to the engineer. The Court of Appeal held that a rejection after claim does not necessarily occur when the claim is submitted to the engineer or during subsequent exchanges of views in relation to that claim. A dispute only arises when the claim is rejected in clear language. An obvious refusal to consider the claim or to answer it can however constitute such a rejection. "28. These cases help in showing that a claim and its submission do not necessarily constitute a dispute; that a dispute only arises when a claim has been notified and rejected; that a rejection can occur when an opposing party refuses to answer the claim; and a dispute can arise when there has been a bare rejection of the claim to which there is no discernible answer in fact or in law. "29. However, the essential first step in considering whether there is jurisdiction to appoint an adjudicator under the HGCRA is to identify the context of the suggested dispute. Only then is it possible to consider whether the claiming party has fulfilled the necessary precondition of a submission of the underlying claims to the other party, followed by that party subsequently rejecting them."

"I do not accept, first, that Sindall was entitled to say 'either let us have the result within seven days or otherwise there will be a deemed dispute' or secondly, and in any event, that MEA's failure to respond to the letter of 11th February by the time the adjudication notice was served constituted a deemed dispute. Both parties have referred to Fastrack Contractors Ltd v Morrison Construction Limited [2000] BLR 168. This and other decisions concerning what may constitute a dispute for the purpose of statutory adjudication show that the absence of a reply (for example, by a person in the position of contractor administrator) may give rise to the inference that there was a dispute eg where there was prevarication. But I am unable to reach that conclusion on the present facts. For there to be a dispute for the purposes of exercising the statutory right to adjudication, it must be clear that a point has emerged from the process of discussion or negotiation has ended and that there is something which needs to be decided ... Sindall asked MEA to look at a mass of information to which MEA had not previously been referred or specifically referred. Even if MEA had not said that it needed more time, it would not have been required to provide an answer within seven days. A person in the position of the contract administrator must be given sufficient time to make up its mind before one can fairly draw the inference that the absence of a useful reply means that there is a dispute."

"In my view the law is satisfactorily stated by His Honour Judge Lloyd QC in his unreported decision of Sindall v Solland in June 2001, in which he said this: "

"The real question for me, however, is whether the principles of natural justice apply to the architect's notice at all. Mr Neill's sheet anchor was Hickman v Roberts [1913] AC 229. That was a case of an architect who misapprehended his position. He allowed his judgment to be influenced by the billing owners and improperly delayed issuing his certificates in accordance with their instructions. Throughout the speeches in the House of Lords there are references to the arbitrator as a judge with a judicial position, a judicial attitude and so on. If an architect abdicates his somewhat special and delicate position of independence and becomes an instrument of the building owner, then I can well see that the building owner cannot rely upon the architect's certificate. That, however, does not carry the point that in all decisions that he makes, and in particular in issuing certificates, anything that he does without observing the rules of natural justice is null and void. The question is whether that ought to be the rule. "

"that the matter be referred to arbitration."

"that the matter shall be referred to the arbitration."

"while an application to the court under this section is pending"