Amec Civil Engineering Ltd v Secretary of State for Transport

MR JUSTICE JACKSON: This judgment is in seven parts: namely, part 1, introduction; part 2, the facts; part 3, the proceedings to challenge the jurisdiction of the arbitrator; part 4, was there a dispute on 11th December 2002; part 5, was Pell Frischmann's document, dated 18th December 2002, a valid decision under clause 66; part 6, is the engineer's jurisdiction limited to claims in respect of defects A, B and C as identified in the engineer's decision; part 7, conclusion.

These proceedings concern a challenge to the jurisdiction of an arbitrator, pursuant to section 67 of the Arbitration Act 1996. AMEC Civil Engineering Ltd is the claimant in these proceedings and the respondent in the arbitration. I shall refer to this company as "AMEC".

The Secretary of State for Transport is respondent in these proceedings but claimant in the arbitration. I shall refer to this party as "the Secretary of State".

The Highways Agency at all material times acted as agent for the Secretary of State. I shall refer to the Highways Agency as "HA".

Pell Frischmann Consultants Ltd is a firm of engineers which was named as "the engineer" in the contract with which this court is concerned. I shall refer to this firm as "Pell Frischmann".

The issues between the parties arise out of renovation works which were carried out to Thelwall Viaduct in the mid-1990s. Thelwall Viaduct is the viaduct which carries the M6 motorway across the Manchester Ship Canal, the River Mersey and Warrington Road.

The scheme of this judgment is as follows: I shall first outline the relevant facts. I shall then describe the course which proceedings have taken thus far. I shall then address the three challenges which AMEC mount to the jurisdiction of the arbitrator.

In the factual section of this judgment, I shall refer to certain letters which are headed "Without Prejudice". The phrase "without prejudice" has been used inappropriately by the writers of certain letters in this case. The use of this phrase has no practical effect. In no instance has the letter thereby become privileged. I shall therefore generally make no reference to the fact that a particular letter is headed "Without Prejudice".

In the course of this judgment I shall make references to the oral evidence. That oral evidence was called before the arbitrator at a hearing on 13th February 2004. A transcript of that oral evidence has been placed before this court. It is agreed that I should treat this as evidence in the present proceedings.

The witnesses who gave oral evidence were Mr Rodney Chilton and Mr John Gallagher of Pell Frischmann and Mr David Grunwell of HA.

Finally, I should mention that on 19th December 2002 the Treasury Solicitor, on behalf of the Secretary of State, served a document headed "Notice of Dispute to Refer and to Concur in the Appointment of an Arbitrator." For simplicity, I shall refer to this document as "the notice of arbitration".

That concludes the introductory remarks. It is now necessary for me to outline the relevant facts.

By a contract not under seal, made on 31st March 1995, the Secretary of State engaged AMEC to carry out renovation works at Thelwall Viaduct. The contract incorporated the ICE conditions, 5th edition, subject to certain amendments. Clause 66 of the ICE conditions, as amended by the parties for the purpose of this contract, so far as material, provided as follows:

Pell Frischmann were named as engineer in the contract. The work which was specified in the contract included the replacement of the existing reinforced concrete deck slab of Thelwall Viaduct and the provision of new roller bearings which permit the slab or other elements of the viaduct to move.

Whilst clause 8 (b) of the ICE conditions as amended provides for various design responsibilities to be imposed on AMEC, there is a possible issue as to the extent, if at all, that all or some of those responsibilities were transferred to the engineer.

The works to Thelwall Viaduct were substantially completed on 23rd December 1996 and were so certified by the engineer. In June 2002 defects came to light. The roller bearings on pier V had deteriorated and one of those bearings, namely bearing number 5, had failed. In July, HA informed Pell Frischmann of this development, and over the following months Pell Frischmann gave considerable help to HA and its various consultants in dealing with the problem.

On 19th July Pell Frischmann informed HA that the bearing design had been carried out by AMEC and suggested that AMEC be contacted.

On 29th July Mr Grunwell of HA wrote to AMEC informing them about problems with the roller bearings. In the third paragraph, Mr Grunwell wrote:

Upon receiving this letter, AMEC appreciated that a claim might be made against them by the Secretary of State. AMEC made a written note that they should contact their insurers and also their suppliers, a firm known as "FIP".

On 20th September a meeting was held in Manchester to discuss the Thelwall Viaduct bearings. Representatives attended from HA, Atkins (who were HA's current advisers), FIP, Pell Frischmann and AMEC.

The history of events to date was outlined. Proposed future investigations were discussed. The question of responsibility was discussed. Pell Frischmann expressed the view that they were not to blame. AMEC also expressed the view that they were not responsible. See the minutes of that meeting, Pell Frischmann's letter of 15th October supplementing those minutes, and the evidence-in-chief of Mr Chilton at pages 38-39 of the transcript.

On 2nd October, HA wrote to AMEC enclosing copies of the minutes of the meeting on 20th September. This letter included the following passages:

In the event, HA never did send to AMEC the factual report promised in this letter. For their part, AMEC did not send to HA the formal response requested in the last paragraph of this letter.

On 7th October, AMEC faxed to FIP a copy of HA's letter dated 7th October. In another fax of the same day to FIP, AMEC wrote:

Also on 7th October, AMEC wrote to Mr Grunwell of HA requesting much detailed information concerning the roller bearings on the piers. HA stated that they would need such information before they could make the formal response which HA had requested. HA did not send to AMEC the extensive further information which had been requested. Instead, on 6th December HA sent to AMEC a letter of claim in the following terms:

HA sent a copy of that letter by fax to Pell Frischmann. Curiously, HA did not also send a copy by fax to AMEC, the addressee. Instead, HA sent the letter by post. AMEC received that letter on Monday, 9th December. On the next day, namely 10th December, AMEC sent the following response to that letter:

On 11th December HA wrote to Pell Frischmann as follows:

HA did not send a copy of this letter to AMEC, so AMEC at this stage remained unaware that an engineer's decision was being sought under clause 66. The other event on 11th December which I should mention is this: HA sent a letter of claim to Pell Frischmann holding that firm responsible for the defects on Thelwall Viaduct.

On 18th December Mr Gallagher issued the engineer's decision under clause 66 of the contract conditions. The operative part of that decision reads as follows:

Pell Frischmann duly sent copies of that decision both to HA and to AMEC. On 19th December the Treasury Solicitor came on to the scene. In a letter to AMEC sent by fax at 1.53 pm, the Treasury Solicitor stated that he acted for the Secretary of State. The Treasury Solicitor referred to the engineer's decision and then continued as follows:

No response was received by the Treasury Solicitor during the course of that afternoon. Accordingly, at the end of the afternoon the Treasury Solicitor sent a notice of arbitration to AMEC both by post and by fax. That notice recounted the history of events and included the following passages:

Thus an arbitration was commenced in which the Secretary of State was claimant and AMEC was respondent. In due course Mr Robert Akenhead QC was appointed arbitrator. It will be noted that the arbitration was commenced just four days before the end of the limitation period.

It was against this background that AMEC brought proceedings to challenge the jurisdiction of the arbitrator.

At an early stage in the arbitration, AMEC raised three objections to the jurisdiction of the arbitrator, which I would summarise as follows:

AMEC raised these three objections before the arbitrator in accordance with section 31 of the Arbitration Act 1996. The matter was argued and evidence was called at a hearing before the arbitrator on 13th February 2004. By an interim award dated 30th March 2004, the arbitrator rejected all three of AMEC's contentions. The arbitrator ruled that he had jurisdiction in relation to the dispute relating to the contents of HA's letter to AMEC dated 6th December 2002: see page 57 of the interim award.

AMEC were aggrieved by the arbitrator's decision concerning jurisdiction. Accordingly, on 27th April 2004 AMEC issued the present proceedings in the Technology and Construction Court, in order to challenge the arbitrator's interim award pursuant to section 67 of the Arbitration Act 1996.

By its Particulars of Claim in the present proceedings, AMEC contends that the arbitrator erred in rejecting each of AMEC's three contentions. AMEC asks this court to set aside the interim award and to make a declaration as to the arbitrator's lack of jurisdiction or alternatively as to the limited extent of the arbitrator's jurisdiction.

Any challenge under section 67 of the Arbitration Act 1996 to an arbitrator's decision on his own jurisdiction proceeds by way of rehearing rather than review: see Electrosteel Castings Ltd v Scan-Trans Shipping & Chartering SDN BHD [2002] EWHC 1993 (Comm); [2004]1 Lloyd's Law Reports 190 at paragraphs 19-23; and Peterson Farms Inc. v C&M Farming Ltd, [2003] EWHC 121 (Comm); [2004] 1 Lloyd's Law Reports 603 at paragraphs 17-18.

In the present case, the parties have very sensibly agreed that the written and oral evidence adduced before the arbitrator should stand as evidence in the present proceedings in this court. I have the same bundle of primary documents as the arbitrator had. I also have a transcript of the oral evidence which was called before the arbitrator.

The matter came on for substantive hearing on Friday, 8th October. AMEC was represented by Vivian Ramsey QC and Simon Hughes; the Secretary of State was represented by John Marrin QC and Sarah Hannaford. I am grateful to counsel on both sides for the excellence of their skeleton arguments and their oral submissions. In this case, as in many others, the Technology and Construction Court has been well served by the specialist counsel and specialist solicitors who practise before it.

The hearing on Friday lasted all day. At the end, I said that I would consider counsel's submissions over the weekend and give my decision on Monday morning. This I now do.

The question what constitutes a "dispute" for the purposes of clause 66 of the ICE conditions and a number of similar provisions is not one which is free from authority. Indeed, there is a rapidly growing jungle of decisions on this subject to which I am now being asked to add. Let me try to distill the effect of the principal authorities upon which counsel rely in this case.

In Monmouthshire County Council v Costelloe & Kemple Ltd (1965) 5 BLR 83, a contractor carried out road improvement works for the county council. The contract incorporated the ICE conditions, 4th edition. The works were completed in September 1961. In 1964 the contractor referred certain claims to the engineer for decision under clause 66 and thereafter commenced an arbitration.

The council responded by bringing proceedings in the High Court to challenge the validity of the arbitrator's appointment. The council contended that the contractor's claims had been referred to the engineer and settled by him some years previously. The Court of Appeal comprehensively rejected that argument. The court held that at the relevant earlier time, there was no dispute or difference in respect of some of the contractor's claims. Furthermore, there was no reference to the engineer of any dispute or difference under clause 66. Finally, the engineer's letter upon which the council relied did not constitute a decision under clause 66.

In relation to the first of those issues, Lord Denning MR said this:

One feature of the Monmouthshire County Council case which should be borne in mind is this: the various claims which the contractor was submitting to the engineer were claims which might be accepted or might be rejected. The engineer's reaction was in no sense a foregone conclusion. It is therefore quite clear why the Court of Appeal stressed the need for a clear rejection before any dispute could come into being.

In Tradax International v Cerrahogullari TAS [1981] 3 All ER 344, the plaintiff charterers repeatedly asked the defendant ship owners to pay certain dispatch money which was indisputably due. The defendants did not admit liability for the claim. They simply ignored it and all communications relating to it. Kerr J held that these facts gave rise to a dispute and thus triggered the arbitration clause which was incorporated in the charterparty.

Tradax illustrates that an express rejection of a claim is not required in every case in order to generate a dispute. If the recipient of a claim does not respond within a reasonable time, then he is taken not to have admitted that claim and thus a dispute arises.

In Ellerine Brothers (Pty) Ltd v Klinger [1982] 1 WLR 175 the plaintiffs repeatedly requested the defendant to account for certain receipts as required by an earlier agreement between the parties. The defendant delayed and his secretary made various non-committal responses. The Court of Appeal held that despite the absence of any express rejection a dispute had arisen between the parties. This dispute fell to be resolved by arbitration in accordance with the arbitration clause contained in the agreement between the parties. Accordingly, the litigation between the parties had to be stayed pursuant to section 1(1) of the Arbitration Act 1975.

Templeman LJ, who gave the leading judgment, said this at page 1381:

In my view, this passage must be read in its context. The context in Ellerine was that the recipient of a claim was avoiding making any effective response. In that situation, a dispute does not arise at the very moment when the claim is delivered. A dispute only arises when the recipient, despite having had a reasonable time to say whether he admits the claim, simply prevaricates.

In Cruden Construction Ltdv Commission for the New Towns (1995) 2 Lloyd's Law Reports 37, a contractor built 145 houses and flats for the predecessor of the commissioner pursuant to a contract in the JCT standard form 1963 edition. On 7th October 1993, some years after completion, solicitors for the commission wrote to the contractor's solicitors saying that the current owner, a housing association, was alleging defects in the buildings. This letter went on to ask if the contractor's solicitors would accept service of notices of arbitration. The contractor's solicitors replied on 11th October as follows:

The commission thereupon served notices of arbitration. His Honour Judge Gilliland held that at the material time there was no dispute or difference between the parties. Therefore, the notices of arbitration were invalid. At page 393 Gilliland J said this:

As in the earlier cases, this passage must be read in context. The context here is that the contractor had not been told anything about the nature of the defects. Furthermore, the only party positively alleging defects was an outsider, namely the subsequent purchaser of the buildings.

I come now to Halki Shipping Corporation v Sopex Oils Ltd [1998] 1 WLR 726, a decision which has loomed large in counsel's submissions. In Halki, the plaintiffs were the owners of the motor tanker Halki which was chartered to the defendants Sopex Oils Ltd under a tanker voyage charterparty for the carriage of palm oil and coconut oil from various ports in the Far East to various ports in Europe. The vessel loaded cargo at five ports in the Far East and discharged at four ports in Europe. It was the plaintiffs' case that the defendants failed to load and discharge the vessel within the lay time provided by the charterparty, with the result that they claimed demurrage in the sum of US$517,473. The claim was in essence a claim for liquidated damages for breach of the charterparty. The defendants did not admit liability.

The plaintiffs commenced proceedings in the High Court claiming demurrage and applied for summary judgment under order 14 of the Rules of the Supreme Court, as then in force. The defendants countered by seeking an order staying the action under section 9 of the Arbitration Act 1996. Clarke J refused summary judgment and granted the defendants' application for a stay. The Court of Appeal by a majority upheld that decision.

The central issue in Halki was whether section 9 of the Arbitration Act 1996 applied to a claim which was so strong as to merit summary judgment under RSC Order 14. The ship owners argued that in such a situation there was no genuine dispute which merited reference to arbitration. On the other hand, the defendants argued that the prospects of a successful defence were irrelevant; any claim which was not admitted fell to be dealt with by arbitration and so the claimant was not entitled to apply to the court for summary judgment.

There are passages in the judgments of the Court of Appeal in Halki which at first blush appear to say that whenever a claim has been made but not admitted, a dispute exists for the purposes of the arbitration clause in the charterparty: see the judgment of Henry LJ at page 753 and the judgment of Swinton Thomas LJ at page 761. However, these passages must be read in context. The lord justices were not attempting to identify the precise moment in time at which a reference to arbitration could be made. They were focusing upon a different question, namely whether mere non-admission of a claim entitled the defendant to an arbitration, however flimsy his defence may be.

Let me now move on to the recent cases concerning adjudication. During 1998 the adjudication provisions of the Housing Grants Construction and Regeneration Act 1996 came into force. I shall refer to this as "the Housing Grants Act."

Section 108(1) of the Housing Grants Act provides:

During the six years since this Act has come into force there have sprung up numerous decisions on the question what constitutes a "dispute" for the purposes of section 108. I shall concentrate on those decisions which have been the subject of submissions in this case.

In Fastrack Contractors Limited v Morrison Construction Limited [2000] Building Law Reports 168, His Honour Judge Thornton QC held that certain alleged disputes had indeed arisen and accordingly that the adjudicator had jurisdiction. At paragraphs 27-29 Judge Thornton said this:

Thus Judge Thornton proceeded on the basis that the authorities concerning clause 66 of the ICE conditions and other arbitration clauses shed light upon the meaning of the word "dispute" in section 108 of the Housing Grants Act. The converse of this proposition must be that the growing mountain of cases on adjudication sheds light, or perhaps casts a lengthening shadow, over the meaning of the word "dispute" in arbitration clauses.

In Sindall Ltd v Solland (TCC) 15th June 2001, His Honour Judge Humphrey Lloyd QC held that at the date of Sindall's notice of adjudication, no dispute existed, therefore the adjudicator lacked jurisdiction. The facts of this case are instructive. On 11th January 2001 Sindall asked the contract administrator for an extension of time. On 9th February Sindall submitted three lever-arch files of material in support of its claim for an extension of time and requested a formal response within seven days. The contract administrator said that it needed more time in order to consider and investigate the claim. Sindall, undeterred, served its notice of adjudication on 16th February 2001.

In paragraph 15 of his judgment, Judge Lloyd said this:

Two comments should be made about this case. First, MEA, the contract administrator, could not simply admit or deny the claim. By reason of its special position MEA was under a duty to give a properly considered response to the claim for extension of time. Secondly, this case illustrates that failure to respond to a claim only gives rise to the inference of a dispute after the lapse of a reasonable time. What constitutes a reasonable time depends critically upon the facts of the case and the contractual structure within which the parties are operating.

In Beck Peppiatt Ltd v Norwest Holst Construction Ltd 2003 EWHC 822 (TCC); [2003] BLR 316, Forbes J held that a dispute existed on the date of a notice of adjudication. Accordingly, the adjudicator had jurisdiction. In reviewing the earlier authorities, Forbes J said this at paragraph 4 of his judgment:

From this review of the authorities I derive the following seven propositions:

I must now apply these propositions to the facts of the present case. Let me begin by summarising the contentions of the parties.

Mr Marrin for the Secretary of State in essence contends as follows:

It seemed to me that the third of these contentions was somewhat extreme and I pointed this out during argument. Mr Marrin relented only to this extent: AMEC needed to open the envelope and actually read the letter of claim before it could be said that a dispute within clause 66 had arisen.

Mr Ramsey for the claimant in essence argued as follows:

The letter of 2nd October was not a claim. The letter of 6th December was a claim but it had not been responded to before 11th December when HA purported to refer a dispute to the engineer. AMEC's letter dated 10th December did not amount to a non-admission. The lack of any positive response from AMEC between 9th and 11th December could not be characterised as prevarication. AMEC was quite reasonably awaiting necessary information concerning the claim. Furthermore, on 11th December there had not been a lapse of sufficient time to allow the inference of a dispute from AMEC's lack of response. Accordingly, clause 66 was not triggered.

My conclusions on this issue are as follows:

HA's letter of 2nd October 2002 to AMEC constituted a claim. By 2nd October the nature of the defects was apparent, although their precise extent and cause was being investigated. The gist of the claim against AMEC was apparent. AMEC had resolved to notify its insurers of the matter. The defects had been discussed at a meeting on 20th September. At that meeting AMEC had made it clear that it did not accept responsibility for the defects.

The fact that HA did not require any immediate response to the letter of 2nd October did not prevent that letter being a claim. HA's letter to AMEC dated 6th December 2002 also constituted a claim. By this stage the general positions of all parties were well defined and unsurprising. The Secretary of State, represented by HA, was seeking to recover the ongoing remedial costs from all parties who may be responsible, obviously including both Pell Frischmann and AMEC. Each party which had been involved in designing or constructing the defective elements of Thelwall Viaduct was seeking to protect its own position.

It was inconceivable that at this stage either Pell Frischmann or AMEC or any other party would expressly admit liability for the defects. In other words, it was a foregone conclusion that AMEC would decline to make the admission of liability requested in HA's letter dated 6th December.

In those circumstances, and contrary to first appearances, the deadline for responding imposed in HA's letter was not an unreasonable one. The deadline was imposed for good reason, namely the fact that the limitation period was about to end. Furthermore, the deadline would not and did not cause AMEC any difficulty. The answer which AMEC sent to HA on 10th December was in substance a non-admission of liability. The clause "we are not in a position to make any comment on liability" must be read in context. In the circumstances of this case, where several parties were involved in design, manufacture, installation, supervising and checking, it was self-evident that AMEC would not be prepared to admit liability for massively expensive defects on the viaduct. Furthermore, AMEC's letter dated 10th December expressly refrained from making any such admission.

It will be recalled that in the letter dated 6th December 2002 HA had asked AMEC to acknowledge that AMEC was responsible for the situation with Thelwall Viaduct and to confirm that it would pay damages and provide an indemnity. It can be seen from AMEC's letter dated 10th December 2002 that AMEC was declining to make the admission of liability which had been requested.

For all these reasons I conclude that on 10th December 2002 a dispute existed between the parties. The disputed issue was whether HA's claim against AMEC as set out in HA's letter dated 6th December 2002 was well founded.

In relation to this issue, Mr Ramsey for AMEC contends that there are a number of instances of procedural unfairness. These matters, either individually or cumulatively, vitiate the engineer's decision dated 18th October. If I may draw together Mr Ramsey's oral and written submissions but depart from his system of numbering, the matters upon which Mr Ramsey relies are these:

Before evaluating these submissions, it is first necessary to identify what Pell Frischmann's duties were in relation to issuing the decision under clause 66.

In relation to this, Mr Ramsey cited Sutcliffe v Thackrah [1974] AC 727, in particular the speech of Lord Morris. Mr Ramsey submitted that there are three categories of person who hold the ring between employer and contractor: first, a certifier, secondly an arbitrator and, thirdly an intermediate category of person who is in the position of a quasi-arbitrator: see the speech of Lord Morris at page 744. Mr Ramsey went on to argue that when the engineer in this case prepared his decision of 18th December 2002 he fell into that intermediate category.

I am afraid that I do not accept this submission. As I read the speech of Lord Morris, this intermediate category only exists where the contract does not provide for a review by arbitration of the decisions made by the architect or engineer. In the present case, every engineer's decision under clause 66 was susceptible to review by an arbitrator. Pell Frischmann were in what I might call the conventional position of certifiers. It was Pell Frischmann's duty to issue certificates and make decisions independently and honestly. But Pell Frischmann did not have any additional duties flowing from or attaching to the label "quasi-arbitrator".

What then was the ambit of Pell Frischmann's duty in relation to the engineer's decision under clause 66 in this case? In this regard both counsel have drawn my attention to the helpful judgment of Megarry J in Hounslow London Borough Council v Twickenham Gardens Developments Ltd [1971] Ch. 233. At pages 259-260, Megarry J said this:

In formulating these principles, Megarry J drew assistance from two authorities which had not been cited to him in argument. The first was the House of Lords' decision in Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Company Ltd [1947] AC 428. The second was Richmond J's decision in the New Zealand Supreme Court in AC Hatrick (NZ) Ltd v Nelson Carlton Construction Co. Ltd [1964] NZLR 72.

The latter case had in fact gone to the New Zealand Court of Appeal and had been reported at [1965] NZLR 144. This reference is not picked up in the judgment of Megarry J. Nevertheless, I do not think that alters the position. The New Zealand Court of Appeal upheld the decision of Richmond J and adopted broadly the same line of reasoning.

Even though it is now 34 years since the decision in Hounslow, in my view the passages quoted above from the judgment of Megarry J are still broadly correct as a statement of the position of the architect or engineer under many of the standard form conditions which are in use. If the rules of natural justice were imported by implication into the first limb of clause 66 of the ICE conditions, the rights and remedies of the parties would become unduly convoluted. If either or both parties were dissatisfied with an engineer's decision, two different remedies would be available: a challenge in the High Court on procedural grounds and a challenge before an arbitrator on the merits.

This cannot have been intended by the parties. It is also completely unnecessary. What matters is the quality of the decision reached, not whether the engineer followed this or that procedural rule.

Clause 66 of the ICE conditions, like many other standard form construction contract conditions, provides for any engineer's decision which causes dissatisfaction to be fully reconsidered by an arbitrator. That provides sufficient protection for the parties. In a case such as the present, it is inconceivable that the engineer's decision will stand unchallenged. A reference to arbitration is inevitable.

Let me now focus specifically on the contract in this case.

There is no basis, either in law or in fact, to imply into the contract a term that Pell Frischmann would adhere to any particular procedure when giving a decision under clause 66.

Against this background, let me return to Mr Ramsey's specific contentions. For this purpose I will use the numbering system identified above rather than (a) the paragraph numbers of Mr Ramsey's skeleton argument or (b) the numbers which Mr Ramsey allocated to his points during oral argument.

No copy of HA's letter to the engineer seeking decision under clause 66 needed to be sent to AMEC. It does sometimes happen that the employer seeks a formal decision from the architect or engineer without informing the contractor. This may occur, for example, when the employer is seeking termination. If the engineer in this case felt that input from AMEC was needed, he could and would have asked AMEC for its comments.

It is quite true that Pell Frischmann did not receive a copy of AMEC's letter to HA dated 10th December. However, I do not see how this omission could possibly have affected the engineer's decision. Pell Frischmann were informed quite correctly that AMEC had not acknowledged responsibility for the defects on Thelwall Viaduct. The fact that AMEC wished to be given further and detailed information was unsurprising but not relevant to the engineer's decision.

Mr Gallagher of Pell Frischmann was the person who actually made the engineer's decision. He specifically considered whether to contact AMEC and invite their comments. He decided against this course for perfectly sensible reasons: see pages 114-115 of the transcript of evidence. In my judgment, it cannot be said that the engineer was under a legal duty to go any further than that.

The reason why the engineer started work in relation to his decision before a formal reference came under clause 66 was explained by Mr Chilton in evidence. Pell Frischmann were told on 9th December that HA would seek a decision under clause 66 if AMEC did not accept liability. It must have been obvious to Pell Frischmann that AMEC were not going to accept liability. It therefore made sense for Pell Frischmann to start work on considering the decision which would be required.

Mr Gallagher was told about the urgency of obtaining a decision under clause 66 from HA's point of view. However, Mr Gallagher did not regard that requirement of urgency as binding upon him. He took such time as he needed: see pages 128-131 of the transcript of oral evidence.

Furthermore, when viewed objectively, the time taken to produce the engineer's decision was not unduly short. Pell Frischmann started working on this exercise on 9th December 2002. The formal decision was issued on 18th December.

It is quite true that the engineer was in a position of conflict of interest. Pell Frischmann was facing a claim very similar to that which was made against AMEC. However, the possibility of such conflict of interest is inherent in clause 66 of the ICE conditions. Indeed, it frequently happens in this court or in arbitration that parallel claims are made by the client against both engineer and contractor. In that situation the engineer will still have to give a preliminary decision under clause 66 in respect of the claim against the contractor.

There cannot possibly be implied into clause 66 a requirement that the engineer must not be a judge in his own cause. Clause 66 requires that very thing to happen.

In relation to this part of his case, Mr Ramsey placed reliance upon a line of adjudication cases. These are summarised in paragraphs 16-140 to 16-141 of the first supplement to the 7th edition of Keating on Building Contracts. These show that an adjudicator is required to abide by the principles of natural justice. A number of adjudicators' awards have been overturned because an adjudicator adopted an inappropriate procedure. Mr Ramsey went on to submit that the same principles should apply to an engineer's decision under clause 66 of the ICE conditions. I am afraid that I cannot accept this last proposition. There is a great difference between an engineer's decision under clause 66 and an adjudicator's decision under the Housing Grants Act. For example, in practice an adjudicator's decision is likely to have a greater impact on the position of the parties during the period before it can be effectively challenged.

In conclusion, it seems to me that the engineer was under a duty to act independently and honestly, but the engineer was not under a duty to comply with the more elaborate procedural rules for which Mr Ramsey contends.

Having read all of the documentary evidence, including the e-mails in December 2002, and having considered the transcript of the oral evidence of Mr Chilton, Mr Gallagher and Mr Grunwell, I am satisfied that the engineer discharged his duty to act independently and honestly. Whether the engineer's decision was right or wrong is quite another matter. That will be determined in the arbitration.

In conclusion, for the reasons stated above, I reject each of the allegations of procedural unfairness which are made by AMEC. I therefore hold that Pell Frischmann's document dated 18th December 2002 is a valid engineer's decision under clause 66 of the contract conditions.

The first matter which I must address under this heading is the ambit of HA's letter of claim dated 6th December 2002. In my judgment, this letter embraces not only the specific defects identified on Pier V but also the other suspected defects which were to be investigated as stated in that letter. All these actual and suspected defects were embraced within the phrase "the situation with Thelwall Viaduct". That phrase appears in the letter at the paragraphs numbered 3 and 5.

The next document which I must construe is the notice of arbitration. The relevant parts of that notice are set out in part 2 above. It seems to me that the Secretary of State was attempting to refer to arbitration not only the defects identified as A, B and C in the engineer's decision but also all of the claims contained in HA's letter dated 6th December 2002: see in particular the last sentence of paragraph 5 of the notice of arbitration.

The next question which arises is whether clause 66 of the contract conditions permits that course. Mr Marrin submits that it does; Mr Ramsey submits that it does not.

This issue turns upon the meaning of the phrase "the matter" which appears in line 11 and line 17 of the clause 66. Mr Ramsey submits that "the matter" means the subject matter of the engineer's decision. Mr Marrin submits that "the matter" means that which was referred to the engineer for decision.

I have come to the conclusion that Mr Marrin is correct on this issue, for the following reasons.

The phrase "the matter" occurs twice in clause 66(1), namely in the third sentence and then again in the fourth sentence. The fourth sentence embraces two situations. These are, one, that the engineer fails to give a decision; two, that the engineer gives a decision with which one party is dissatisfied.

In the first of these situations the phrase, "the matter", must mean the matter which was initially referred to the engineer. It cannot mean the subject matter of the engineer's decision because there is no such decision.

The phrase, "the matter", in the fourth sentence must have a single fixed meaning. It cannot change its meaning if situation 2 arises. Furthermore, reading clause 66(1) as a whole, it seems to me that the phrase "the matter" in the third sentence must have the same meaning as the phrase "the matter" in the fourth sentence. Any other interpretation would be nonsensical.

It should be noted that in each of the two sentences the whole of the surrounding clause is virtually identical. In the third sentence the clause reads:

There is a further reason why I reject the construction for which Mr Ramsey contends. If Mr Ramsey is right, an employer in the position of the Secretary of State in this case would have to serve two notices. There would be an initial notice concerning the matters dealt with in the engineer's decision; there would then be a second notice approximately three months later concerning matters referred to the engineer but not dealt with. I cannot believe that the contracting parties intended to create such a bizarre procedure.

For all of these reasons my conclusion is that the arbitrator's jurisdiction is not limited to claims (a), (b) and (c) as identified in the engineer's decision. On the contrary, the arbitrator has jurisdiction relating to the dispute relating to all of the contents of HA's letter to AMEC, dated 6th December 2002.

For the reasons set out in paragraphs 4, 5 and 6 of this judgment, I reject each of AMEC's three challenges to the jurisdiction of the arbitrator. I therefore reach the same conclusions as the arbitrator has reached in his interim award.

It can be seen from a comparison of this judgment with the interim award that on some issues my reasoning coincides with that of the arbitrator; on other issues my reasoning and that of the arbitrator follow somewhat different tracks. This is unsurprising, as the hearing in this court is a complete rehearing rather than a review.

In the result, I am satisfied that the arbitrator has reached the right conclusion on each of the issues referred to him for decision.

I pay tribute to the arbitrator for the meticulous care and thoroughness with which he has prepared his interim award.

I would be grateful for counsel's submissions as to the correct form of order. My preliminary view is that this court should make an order under section 67(3)(a) of the Arbitration Act confirming the interim award.

Whether the AMEC letter dated 10th December was on its true construction a non-admission so as to trigger a dispute.