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What Does It Mean When It Is Required from an Employer’s Agent (Inter Alia an Engineer or Architect) to Act Fairly and Impartially, and Further to Afford Natural Justice.

7 March 2018

Numerous construction disputes have raised claims that the employer’s agent had failed to act fairly and impartially when it was required of him or her to inter alia certify payment certificates or to make a ruling or decision on a claim.

Supported by views and guidelines by industry authors, scholars and some court cases, I intend to explain what it means for an engineer (or any other employer agent) to act fairly, impartially and to afford natural justice when it is expressly required or implied in terms of a standard form construction contract, hoping that it would provide clarity, but also, to avoid a possible dispute in the future.

Under the FIDIC contract when there is a dispute and an agreement cannot be achieved, the engineer is required under clause 3.5 to make a fair determination of any claim subject to clause 3.5.[1]

The word “impartially” is not stipulated in the FIDIC contract, although when an engineer certifies payment certificates, it is expected, as a matter of general principle, that it would act fairly and impartially between the parties. [2]

In the very familiar case, Sutcliffe v Thacrah[3], the role of an architect (which is applicable on an engineer) where payments are made to the contractor, was dealt with. It stated that the employer and the contractor enters into a contract with the understanding that the architect (engineer) will act in a fair and unbiased manner.[4] This matter applies to both the NEC3 and the FIDIC contracts. The engineer should not only exercise due care and skill, but should also reach decisions fairly, holding the balance between the employer and the contractor.[5] The engineer in its certifying function, acts administratively and not quasi-judicially.[6]

In Costain v Bechtel[7],this view was held to apply to the engineer. The employer can be in breach of an implied term of the contract with the contractor if the engineer acts in a biased or unfair manner in making assessments or other decisions.[8]

In Amec Civil Engineering Ltd v Secretary of State for Transport[9], it was said that the concepts of independence, impartiality, fairness and honesty are overlapping but not synonymous and imply that the architect (or engineer in this case) must use its professional skills and best endeavours to reach the right decision, as opposed to a decision which favours the interest of the employer. The duty is to act fairly, so long as what is regarded as fair, is flexible and treated together with the particular facts and circumstances.[10]

In granting certificates, the engineer is not obliged to observe the rules of natural justice by inter alia giving the employer or contractor an opportunity to state their case, but is required to act independently, honest and fairly.[11] However, if the engineer’s conduct is in material breach of the contract (i.e. fraud or collusion with one of the parties[12]), it may have the effect that the certificate is not binding because the engineer did not comply with its contractual duties as instructed or there may be grounds for disqualification, which will have the effect that the certificate is not binding.[13]

In the event of a dispute between the parties, it is for the engineer to resolve such dispute to minimise any disruption to the works.[14] Thus, the engineer should have a good understanding and knowledge of the law and contract and should enforce the balance of rights and obligations stipulated therein between the parties.

  1. Keating on Construction Contracts 10th Edition, Chapter 22 – The FIDIC Standard Forms, section 4 – The Engineer, paragraph 012
  2. Ibid
  3. [1974] A.C. 727
  4. Keating on Construction Contracts 10th Edition, Chapter 23 – NEC3 Contract, paragraph 015
  5. Ibid. Further see Sutcliffe v Thackrah [1974] A.C. 727
  6. Hudson’s Building and Engineering Contracts 13th Edition, Chapter 2 – Construction Professionals, paragraph 077
  7. [2005] EWHC 1018
  8. Keating on Construction Contracts 10th Edition, Chapter 23-NEC3 Contract, paragraph 016
  9. [2005] 1 W.L.R 2339 at 2354, CA
  10. Ibid
  11. Keating on Construction Contracts 10th Edition, Chapter 5, paragraph 043
  12. Supra at paragraph 064
  13. Supra at paragraph 038
  14. Keating on Construction Contracts 10th Edition, Chapter 23-NEC3 Contract, paragraph 082

Barry Herholdt, senior associate.