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Issue 7 |
After some introductory remarks, the speaker explained that he would be concentrating on the relationship between law and civil/structural engineering, since that was where his background lay, but the principles would apply in other engineering fields too. There were numerous myths about how the law operated, e.g. that it involved lengthy and expensive procedures of no benefit to engineering or indeed to anybody, but he hoped to show that they were indeed myths, at least where technical disputes were involved. This talk would explain the genesis of technology disputes and how they can be resolved efficiently and effectively.
When a dispute arises, there needs to be a process for dealing with it, following defined rules and reaching a conclusion. There has to be information, and an approach to analysing it. One might make a comparison between the process of analysis in engineering design and that in law. In engineering, the design process uses data which by applying formulae and other experience arrives at a design of the item that will hopefully be built. In law, there is a background of experience in existing laws and judicial precedents and there is data in the form of the evidence relating to the case. Applying the experience of law to the evidence leads to a judgment, which will decide the matter and may be stored as a further precedent for future cases.
Why do engineering disputes cause so much difficulty? There can be an incompatibility between legal processes and the complexities of engineering disputes. Is a legal trial intended to lead to "justice", whatever that is, whatever the time and cost may be, or is it intended simply to lead to a cost-effective solution? A trial usually results in a winner and a loser. In the familiar TV reports of cases the winner often rejoices before the cameras that "he has got justice", while the loser complains of the injustice of the process. There is no obvious engineering analogy to the winner and loser.
Justice requires a fair trial, which means there has to be evidence which needs to be assessed in terms of proof. In civil cases the party must prove its case on the balance of probability whilst a higher standard is required in criminal cases where guilt has to be proved beyond reasonable doubt. The process must lead to an answer, but it must also be cost-effective. A balance is needed. A murder trial is a more serious matter than one involving a minor assault, and a dispute involving the construction of Wembley Stadium is likely to more serious than a small claim involving a car accident. The legal process needs to be adaptable - hence the recent development of new ways of solving technology and engineering disputes.
There has always been a choice between private arbitrators and the public courts. Since the 18th century, the customary way for an individual or public body to employ a contractor was for him to engage an architect or engineer who would not only do the design but also supervise the construction, certify that the contractor had satisfactorily completed some portion of the work and authorise that he be paid for it. This person would also adjudicate when variations might be requested by either side, perhaps by the employer who had changed his mind about what he wanted, or by the contractor because of constructional difficulties not originally foreseen. And someone needed to define what was acceptable quality in the work undertaken. So the Architect or Engineer came to hold a key position in the contract between employer and contractor.
The role of the Engineer and the effect of Engineer's certificates were considered in a number of cases. Ideally a person in the position of the Engineer (or the Architect in building contracts) should be independent. But, someone appointed or employed by the employer or owner could hardly be viewed as truly independent, particularly by the contractor! Contractors often sought to obtain payment by commencing proceedings in court but were met by a defence that the certificate of the Engineer or the Architect was required to obtain payment. Only if collusion, corruption or fraud was found could the Engineer be impeached and the certifying process avoided.
In the 1854 case of Ranger v GWR, there was a dispute between a contractor and the Great Western Railway. Payments to the contractor were to be made on the certificates of the GWR's Principal Engineer, in this case, the well known Isambard Kingdom Brunel. The contractor complained that the Engineer was not only an employee of the GWR, but also a substantial shareholder in it, with a vested interest in ensuring that the contractor should not receive any additional payment. The Court of Appeal agreed with the contractor, saying that Brunel was "acting as a judge in his own cause". But the House of Lords took the opposite view, that the Engineer was not intended to be impartial, so his shareholding was irrelevant, and the case was decided in favour of the GWR - the Engineer's certificates could not be disregarded.
In a case in 1911, Hickman v Roberts, the contractor wrote to the architect asking for an extra payment in what was meant to be a fixed-price contract. The architect was willing to approve the request, but his employer was not willing to make the payment. The architect therefore told the contractor that his hands were tied by his client's instructions, so he could not authorise the payment whatever his private views might be. The case eventually went to the House of Lords, which held that in the circumstances the contractor did not need a certificate from the architect, but was entitled to ask the Court to rule on the amount to be paid. Lord Atkinson said that the architect (Hobden by name) had been "led astray" by his desire to satisfy his employer, but that there was no suggestion of "collusion, corruption or fraud". This widened the scope to which a certificate could be impeached, in that if someone had "influenced" a certifier, then he could not be said to be independent and the contractor could recover without a certificate.
The role of the Architect was considered in the 1967 case of Sutcliffe v Thakrah. A judge acting in a private capacity proposed to build a house and employed architects to produce drawings and engage a contractor to build it. The judge became dissatisfied with the work and terminated the contract, but then discovered that, on the basis of the architect's over-certification, he had overpaid the contractor by £2000 and could not recover the sum from the contractor. Could he sue his architect for that sum? There was an argument that the certifier was acting in a quasi-judicial capacity and therefore was immune from suit in the same way as a judge or arbitrator is. In giving judgment, Lord Reid said that an architect had two different functions. In one capacity, as a designer, he had to follow his employer's instructions; but in the other, as certifier, he had to decide for himself. He said that it was therefore implicit that the architect was obliged to act with due care and skill, and in an unbiased manner. This opened the way for employers to sue their certifiers.
Another particular problem arose in relation to the court's powers to deal with certificates. Building and engineering contracts, particularly in the past, often tended to specify arbitration by an independent arbitrator as the means by which disputes could be resolved. The arbitration clause frequently stated that the arbitrator had the power to "open up, review and revise" certificates. What then happened if the dispute went to court instead of the arbitration? In Crouch v NRHA the Court of Appeal held that the court did not have the same powers as arbitrators to decide disputes, so that certificates were binding in the courts and could not be opened up, reviewed or revised except in an arbitration. Thus, if there was no arbitration clause, the certificate was final, and the court could not interfere.
In a case from Northern Ireland, Beaufort Developments v Gilbert Ash, Lord Hoffman said that the certificate had a provisional validity, and determined matters if not challenged. If it were challenged then the court could determine the dispute. Also, he pointed out that the architect was the agent of the employer, a professional person, but not to be regarded as independent. He added a comment about the historical role of the architect and said that the question of conflict of interest had not been so well understood in past times as it was now.
A much more recent example of the role of the certifying Engineer was provided in AMEC Civil Engineering v Secretary of State for Transport. This case concerned the Thelwall Viaduct, which carries the M6 motorway over the Manchester Ship Canal. AMEC undertook the replacement of the roller bearings which supported the spans, and did so in 1996. In 2002 these bearings became defective under the weight of the traffic. But the law specifies a "limitation period" of six years from the completion of the work, within which any proceedings must be started. On 6 December 2002 the Highways Agency suddenly realised that this period would expire on the 23rd of that month. But the terms of Clause 66 of the ICE Contract forbade the appointment of an arbitrator until a dispute had arisen and been referred to the Engineer. The Arbitration could be commenced when a party was dissatisfied with the decision of the Engineer or if the Engineer failed to give one for three months after being asked to do so.
Somewhat late, the Department sent a letter to AMEC alleging breach of contract and negligence, and made the same allegation against their consulting engineer, who had been appointed to act as the Engineer under the contract. AMEC replied that "they were in no position to comment" on the allegation because they did not have sufficient information. So did a dispute exist yet which could be referred to the Engineer? The Highways Agency did not inform the Engineer of the response from the contractor but asked the Engineer for a decision about the contractor's liability, and gave him only a few days in which to do it. After eight days, on 18 December, and without seeking any comment from AMEC, the Engineer pronounced that AMEC were at fault. This meant that they could refer the dispute to the arbitrator on 19 December, just four days before the "drop dead" limitation date came into effect.
AMEC complained that the engineer had been put under undue pressure to take a decision in eight days, the normal time allowed being three months; he had not enquired whether they had any defence; and that both contractor and engineer had been blamed for the same fault. The case came to the Court of Appeal, who took a pragmatic view, deciding that the engineer had acted fairly and that the arbitration was validly commenced. This case provides a recent example of the difficult position in which the Engineer can find himself in such cases.
Such issues arising from disputes about the process of certification by the Engineer and the consequent arbitration or litigation of disputes meant that the resolution of technology disputes was often a long and complex process. But in the last 15 years there had been a remarkable change in how construction disputes were dealt with. The industry has changed and the report of Sir Michael Latham "Constructing the Team" has had a significant impact in this area.
The first change was in methods of procurement. In many current contracts, though still overall a minority, the functions of the Engineer have been replaced by three people: the project manager; the supervisor; and the adjudicator. What is more, contracting parties are encouraged to adopt cooperative rather than confrontational attitudes. Contracts now often include a preamble declaring that it is the intention of all parties to work together in a collaborative manner, sharing information openly and supplying feedback to each other and welcoming such feedback. There are statements that the parties will act in good faith and a spirit of mutual trust. This is quite a contrast to old-fashioned forms of contract. The speaker confessed that he was rather looking forward to a case where the purchaser was alleged to have "failed to welcome feedback offered in a spirit of mutual trust"!
The rise of the "Limited Liability Partnership" is a sign of the times when parties seek compensation for losses. Now there are many disputes between engineers and clients. The tendency for modern projects is for them to involve a whole raft of different suppliers and participants. In that mass of participants, there have traditionally been defined contractual relationships but these are often far fewer than the number of relationships between parties involved in the project. In the past the Common Law has sought to fill the contractual gaps so as to provide routes for claims in negligence where one party has been affected by the negligence of the other party. This led to a situation in the 1980s when almost anyone could sue anyone, but following a number of House of Lords decisions, this phase has now passed. Rather, contractual relationships are being created by forms of warranty which are given by all conceivable parties involved in procuring, designing or constructing the project to those who fund, own or occupy the building or structure. Thus, whilst liability for negligence at Common Law has contracted somewhat, liabilities under warranties have increased.
But how are courts, judges, juries, to decide whether someone has been negligent? If one asked a class of 150 students to design, say, a reinforced concrete beam, one would expect to get 150 different answers, which might, if arranged in order of merit, lie on something like a "bell curve", with most of them near the centre. Where on this curve would one put the threshold of negligence? Not presumably, close to the middle, but somewhere out to the side. How far out? Equally in terms of design the same question could be asked about an acceptable factor of safety. Is 2.5 acceptable? Or 2.0 or 1.05 or 0.99? Even the latter figure could be acceptable if the material were known to have considerable reserve capacity, or if a safety factor had already been applied to the expected loads or if the loading was unexpected and short term.
These matters are very difficult to decide. But we were invited to consider three different cases, to illustrate the complex issues that arise and the strict view that the courts have often taken where things have gone wrong.
First, in the 1960s the television mast on Emley Moor, owned by the Independent Broadcasting Authority, collapsed one night in March. Enquiries established that the causes were vortex shedding and asymmetric ice loading. The designers had not allowed for this latter possibility in their calculations. Were they negligent? Unfortunately for them, they had given a paper about the mast to the Institution of Structural Engineers, in which they raised the possibility of windy conditions and ice loading, although they had observed ice to be shaken off the stays. The court judged that the designers had been negligent in failing properly to consider that condition.
The second case concerned a methane explosion in Abbeystead water pumping station, full of visitors at the time, one of whom probably lit a cigarette thereby setting off the explosion. The methane was believed to have leaked from a natural reservoir into the water pipe, empty at the time, and hence into the station. The owners, designers and contractors were all sued and found liable, both in the lower courts and in the Court of Appeal. But one of the judges dissented. Lord Justice Bingham thought that the designers at least were not negligent. Engineers, he said, cannot be expected to be polymaths and prophets, and could not have been expected to foresee the cause of the accident.
Thirdly, there was the collapse of a tunnel being driven under Heathrow Airport. On a Health and Safety prosecution, the contractors Balfour Beatty did admit criminal liability, but the Austrian tunnelling consultant who had been advising them denied liability. The jury found him guilty of breaches of the legislation. It was accepted that the tunnelling method they recommended was safe if conducted under careful supervision, but they had failed to provide this.
So, how can the court decide? It has of course no expert knowledge itself, so must rely on expert witnesses to bring them up to a state of knowledge where they can take a decision. The law requires a professional man to exercise only the "ordinary" skill of his art, not that of the "highest expert". But the people called as expert witnesses are usually persons of distinction, and therefore likely to have rather more than "ordinary" skill. Whilst the experts have a duty to the court, their evidence almost always supports the case of the party that has instructed them.
The speaker suggested that in the first and second at least of the above cases, the court might have been expecting rather more than an "ordinary" standard of skill.
It can be seen that construction and technology disputes raise complex issues of practice and professional conduct. Just as practices in the industry have changed so in recent years have the methods of dispute resolution. The speaker described four that are now available:
A mediator is an independent person who tries to bring the parties together by informal negotiation. Many engineering disputes cases are now resolved in this way, since it provides an opportunity for both parties to work towards a cost-effective agreement. It is sometimes criticised as being in the nature of "horse-trading" and because the parties may be open to the exercise of unfair pressure. However, it allows parties to come to an agreed settlement on terms which they have negotiated and has proved to be very popular.
The Latham Report introduced this concept and it was then given statutory effect by the Housing Grants Construction and Regeneration Act 1996. All Construction Contracts must include a provision for adjudication. In this process, one party may apply for an adjudicator to be appointed within seven days. When appointed, he has 28 or 42 days to make a decision, which is binding until a final determination by the courts in arbitration. It will be enforced by the courts in the meantime so that, for instance, a party will have to make payment even if that party intends to challenge the decision. It provides a quick, temporary solution which in most cases is accepted as resolving the disputes or leads to a settlement. It can apply to any dispute but is perhaps not suitable for a case like that of Emley Moor.
This is frequently used on large infrastructure projects. The board usually has three members, one nominated by each of the two disputing parties, and the third an independent chairman. It meets on a regular basis and provides decisions which may be binding or non-binding depending on the form of procedure adopted. It allows for a group to become involved in the project and to give decisions based upon knowledge gained from that involvement.
If these or other procedures are not appropriate or cannot resolve the disputes then the courts provide a specialist facility for resolving those disputes. Although historically there were Official Referees who dealt with construction and technology cases, this court has recently been through a series of changes to establish a court where disputes can be resolved effectively and efficiently. The Technology and Construction Court or TCC, as it is known, is now seeing an increased workload and the introduction of permanent High Court judges as members of the court. The speaker had recently been appointed as judge-in-charge. The procedures in the TCC derive from the Civil Procedure Rules and now involve a necessary pre-action procedure. Once commenced, short cases can reach a hearing within 28 days and long cases reach trial within 12 to 18 months, with all the necessary steps being the subject of case management conferences between the parties and the TCC judge assigned to the case.
In addition, there are opportunities for Early Neutral Evaluation and a novel Court Settlement Process which is being piloted in London.
In conclusion, Sir Vivian hoped he had demonstrated that, in view of these new developments, there were efficient and effective ways of resolving complex technology disputes and that the legal system was not the dinosaur that it was often portrayed to be.
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