Amec v S.S. for Transport [2005] EWCA 291 CA

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Guidance as to the meaning of "dispute" for the purposes of s108(1) of the Housing Grants Construction & Regeneration Act 1996. It is wrong to apply an over-legalistic approach to the question of whether a dispute or difference has arisen.

On appeal from the judgment of Mr Justice Jackson dated 11 October 2004

Lord Justice May, Lord Justice Rix and Lord Justice Hooper

17 March 2005

In 1995 AMEC was engaged by the Secretary of State to carry out renovation works at Thelwall Viaduct. The contract incorporated the ICE conditions, 5th edition, with some amendments. The contract was executed under hand, not as a deed. Pell Frischmann were named as engineer in the contract.

The works were certified by the engineer as complete on 23 December 1996 but in June 2002 defects came to light. In July 2002 AMEC was made aware of the defects and that the employer and engineer were investigating. Following a meeting of all parties in September 2002, at which both AMEC and Pell Frischmann expressed the view that they were not responsible for the defects, the Highways Agency ("HA") (acting as the Secretary of State's agent) wrote to AMEC on 2 October 2002 advising that AMEC would receive a factual report on the defects and that the Secretary of State would be seeking to recover the cost of the defects from the parties involved. AMEC never received the report, and heard nothing further from HA until 9 December 2002 when it received a claim letter from HA contending that AMEC was responsible for the defects and asking AMEC to confirm by close of business on 10 December 2002 that AMEC would indemnify the Secretary of State for all costs arising as a result of the defects. On 10 December 2002 AMEC replied to HA, asking for information that it had requested in October, advising that it had forwarded HA's letter to their bearings supplier for an urgent response, and concluding "we are not in a position to make any comment on liability".

On 11 December 2002, HA referred the dispute to Pell Frischmann for a decision under Clause 66 of the ICE conditions. On the same date, HA sent a claim letter to Pell Frischmann contending that Pell Frischmann was responsible for the defects on the Viaduct. HA did not advise AMEC that it had referred the dispute to Pell Frischmann. Pell Frischmann made its decision that AMEC was liable on 18 December, without any recourse to AMEC. The day after the engineer published its decision, the Secretary of State wrote to AMEC asking it to confirm immediately that it accepted the engineer's decision. As no response was received, the Secretary of State issued a notice of arbitration to AMEC that afternoon. The arbitration thus commenced 4 days before the end of the limitation period.

AMEC objected to the Arbitrator's jurisdiction on a number of grounds, one of which being that, at the time the dispute was referred to the engineer, there was no dispute and therefore the engineer's decision was invalid. The Arbitrator did not agree so AMEC referred the matter to the court.

The Technology & Construction Court

At first instance, Justice Jackson reviewed a number of authorities on the meaning of "dispute" for the purposes of the ICE Conditions, arbitration agreements and s108(1) of the Housing Grants Act. He derived the following seven propositions:

  1. The word "dispute" should be given its normal meaning.
  2. Despite the simple meaning of the word "dispute", there has been much litigation over the years as to whether or not disputes existed in particular situations. This litigation has not generated any hard-edged legal rules as to what is or is not a dispute, but has produced helpful guidance.
  3. The mere fact that one party notifies the other party of a claim does not automatically and immediately give rise to a dispute. A dispute does not arise unless and until it emerges that the claim is not admitted.
  4. The circumstances from which it may emerge that a claim is not admitted are Protean: an express rejection of the claim, discussions between the parties from which objectively it is to be inferred that the claim is not admitted, the respondent may prevaricate, or remain silent for a period of time, thus giving rise to the inference that he does not admit the claim.
  5. The period of time for which a respondent may remain silent before a dispute is to be inferred depends heavily upon the facts of the case and the contractual structure. Where the gist of the claim is well known and it is obviously controversial, a very short period of silence may suffice to give rise to this inference. Where the claim is notified to some agent of the respondent who has a legal duty to consider the claim independently and then give a considered response, a longer period of time may be required before it can be inferred that mere silence gives rise to a dispute.
  6. If the claimant imposes upon the respondent a deadline for responding to the claim, that deadline does not have the automatic effect of curtailing what would otherwise be a reasonable time for responding. On the other hand, a stated deadline and the reasons for its imposition may be relevant factors when the court comes to consider what is a reasonable time for responding.
  7. If the claim as presented by the claimant is so nebulous and ill-defined that the respondent cannot sensibly respond to it, neither silence by the respondent nor even an express non-admission is likely to give rise to a dispute for the purposes of arbitration or adjudication.

The Secretary of State contended that HA's letters of 2 October and 6 December 2002 constituted a claim; a dispute arose the very moment that AMEC received those letters of claim (counsel for The Secretary of State did concede that, before it said that a dispute had arisen, AMEC had to open the envelope and read the letter); in the alternative, that AMEC's letter of 10 December was a non-admission of a claim and thus gave rise to a dispute; and, also in the alternative, that AMEC's conduct amounted to prevarication thereby giving rise to a dispute.

AMEC responded that HA's letter of 2 October was not a claim. HA's letter of 6 December was a claim, but it had not been responded to before 11 December when HA referred the claim to the engineer; AMEC's letter of 10 December did not amount to a non-admission. The lack of response from AMEC between 9 and 11 December did not amount to prevarication; it was still waiting necessary information on the claim. Further, on 11 December there had not been a sufficient lapse of time to allow an inference of a dispute from AMEC's lack of response.

The Judge held that HA's letter of 2 October 2002 to AMEC constituted a claim; the gist of the claim against AMEC was apparent although the precise nature, extent and cause of the defects was still being investigated. The defects had been discussed at the meeting in September 2002 and AMEC made it clear that it did not accept responsibility. It was a foregone conclusion that AMEC would decline to make the admission of liability requested in HA's letter of 6 December. In the circumstances, the deadline for responding to HA's letter was not unreasonable as the limitation period was about to end. The deadline would not and did not cause AMEC any difficulty. AMEC's letter of 10 December was a non-admission of liability. Accordingly, the Judge found that a dispute existed between the parties on 10 December 2002.

The Court of Appeal

The matter then came before the Court of Appeal. Lord Justice May accepted that Justice Jackson's seven propositions (see above) correctly reflected the law and made some further observations of its own, the most important being:

  1. Clause 66 refers, not only to a "dispute" but also to a "difference". The Court of Appeal considered the term "Dispute or difference" to be less hard-edged than "dispute" alone.
  2. Commercial good sense does not suggest that clause 66 should be construed with such legalistic rigidity so as to prevent the parties from starting timely arbitration proceedings. The Court of Appeal favoured an inclusive interpretation of what amounts to a dispute or difference and warned against an over-legalistic approach to the proper construction of clause 66.
  3. If the clause 66 procedure is to be seen as a condition precedent to the ability to start arbitration proceedings within a period of limitation, the parties cannot have intended to establish "opportunistic technical obstacles" to commencing arbitration proceedings beyond those which the clause necessarily requires.

The Court of Appeal said that Justice Jackson's analysis of when a dispute or difference capable of referral to the Engineer had been entirely correct. In fact, the Court of Appeal went further and held that in all the circumstances, including the imminent 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.

The Court of Appeal rejected AMEC's submissions that Justice Jackson had been wrong to consider the concerns about limitation were relevant to what was a reasonable deadline for a response. The Court of Appeal considered that the fact that the period of statutory limitation was thought to be about to expire was relevant to both an understanding of the facts as applied to clause 66 and to any decision as to what was a reasonable time in which AMEC might respond.

Lord Justice Hooper agreed that the appeal should be dismissed for the reasons given by Lord Justice May. Lord Justice Rix agreed that the appeal should be dismissed but gave different reasons.

The appeal was therefore dismissed and the arbitration allowed to continue.

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