day-01_1025 engineer's roles and risks - adrias tan

Adrias TanMSc BSc(Hons) LLB(Hons) FCIArb FSIArb

Senior Legal Counsel, Hyundai Engg & Construction Co Ltd

Engineer’s Roles and Risks

© 2015 Adrias Tan MSc BSc(Hons) LLB(Hons) FCIArb FSIArb


Senior Legal Counsel, Hyundai Engineering & Construction Co LtdFellow, Chartered Institute of ArbitratorsFellow, Singapore Institute of ArbitratorsFellow, Singapore Institute of Builders

Member, Society of Construction Law, UKMember, Society of Construction Law, SingaporeAssociate Member, Singapore Academy of Law

Associate Lecturer, Royal Melbourne Institute of Technology (SIM Singapore)Panel of Arbitrators, SIArb

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Engineer’s Roles and Risks Communication of Risks to the Employer/Contractor

Importance of Aligning Engineer’s Contractual Obligations under His Agreement with the Employer, with the Provisions of the Head Contract

Limits of Engineer’s Authority

Execution of Engineer’s Work within Required Parameters of Time, Cost and Quality

Required Extent of Inspections during Construction

Particular Conditions, Misuse and Core Clauses

Questions & Answers

© 2015 Adrias Tan MSc BSc(Hons) LLB(Hons) FCIArb FSIArb 3

Engineer’s Roles and Risks Introduction

Acting solely as the agent of the Employer; any default by the Engineer deemed as a default by the Employer (duty of care contractual nexus)

Employer not liable for acts and omissions of the Engineer; disputes finally determined by the Engineer subject to Dispute Adjudication Board’s review and dispute resolution process like arbitration

Any perceived conflicts of interest vis-à-vis independent role to act impartially, professional duty to make fair determination of certain matters, including certification, claims for cost and time; approval of submissions, review of value engineering proposals, etc.



Conflated and Intertwined Roles of the Engineer Employer’s Representative

Designer issuing construction drawings, design revisions, design development, resolve design discrepancies

Site Supervisor on Quality Assurance and Quality Control of Permanent Works and Defects

Project Manager on Progress, Co-Ordination

Contracts Administration in issuing Site Instructions, Variations; Assessing, Evaluating and Determining Claims for Cost and Time; and Adjudicating Disputes

Adjudicator to Determine Disputes and Claims



Perceived Conflicts: Engineer is also Designer of the Permanent Works, issues

contract and construction drawings; originator and author of own design deficiencies, lack of critical information, late issuance of requests for information

Regularising of design revisions as valid variations arising from Engineer’s own design deficiencies and not arising from Change in Employer’s Requirements

Delay, impediment or acts of prevention caused by the Engineer on the Site, affecting regular site progress, approval process, etc



Because of the Engineer’s wearing so many hats and subsuming multiple roles in a Project, he is often indispensable, to the extent that for some reasons he is absent, sick or on home leave, engaged in multiple management or technical meetings, site works can practically screech to a halt as nobody would venture to approve, consent, determine, inspect or reject on his behalf!

Risks of delay in communication of instructions from the Employer to the Contractor in terms of Changes in Employer’s Requirements

Appointment of Engineer’s Assistants with delegated but limited powers to act for and on behalf of the Engineer



Engineer’s Determination, administered on behalf of the Employer

Engineer’s role as mediator or conciliator and adjudicator in resolving disputes which invariably originates from his own office, eg., lack of information, discrepancies, validity of instructions constituting as variations, etc

Upholding maxim “nemo judex in causa sua” – one cannot adjudge his own cause

Each role in itself is an expertise and profession with institutionalised training and accreditation, presumably the Engineer is duly trained and qualified to subsume the roles and discharge such duties with impartiality, independence, fairness



Each role as mediator or conciliator and adjudicator is to be discharged as an independent and neutral party without undue influence from third parties. Can the Engineer perform this role without bias and influence

Impartial: “not favouring one party or side more than another, unprejudiced, unbiased, fair, just, equitable”

Engineer’s duty to consult with each party in an endeavour to reach agreement prior to a Determination regarding any dispute, claims or entitlement. Whether each party is deemed to include representatives of the Employers themselves, or the Engineer is acting as the Employer’s Agent or deemed to act for the Employer?



Scenario:

Contractor discovers errors, ambiguities, inconsistencies, inadequacies or other defects found in the drawings or Contract Documents, arising from design deficiencies and duly notifies the Engineer for clarification and instruction

Engineer finally resolves the design deficiencies, issues an instruction and the Contractor complies accordingly

Contractor duly submits Clause 20.1 Claims for Cost and Time due to the variation and additional works incurred

Duty of Engineer to seek approval from Employer before approving such cost and time claims




Stringent contractual procedures and protocol, with condition precedent to timeframe for notification of time and cost implications arising from any of the Contract Conditions

Stringent contractual procedures and protocol with regards to submission of fully detailed substantiation with supporting particulars of the basis of the claim and EOT or additional payment claimed, with time line, interim claims and final claims

Engineer exercising no discretion for minor lapses

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Engineer’s Roles and Risks Aligning Engineer’s Contractual Obligations under His

Agreement with the Employer, with provisions of Head Contract

Privity of Contract. The Employer engages the Engineer under a separate and independent Agreement to manage the Project for and on behalf of the Employer

The Engineer who issues an Instruction or makes a Determination on behalf of the Employer represents that he has the authority to act for and on behalf of the Employer

The absence of such Agreement between the Engineer and the Employer, with the express provisions of the Head Contract, is prima facie evidence that the Engineer has been impliedly authorised to represent the Employer

Hely Hutchinson v Brayhead [1968] 1 QB 549




Under the Agreement, Engineer is typically engaged as a Technical Expert, with functions including giving decision, opinion or consent, approve or disapprove, determine, evaluate or otherwise taking action which may affect the rights and obligations of the Employer or the Contractor

Only the Engineer has a legal relationship with the Employer. Contractor has no such contractual relationship with the Engineer, and as such the Engineer does not owe a duty of care to the Contractor

Spandeck Engg v Defence Science & Technology Agency [2007] SGCA 37



Agreement with the Employer, with provisions of Head Contract The Engineer is seldom required, or need to show proof, to be a

qualified or accredited mediator, conciliator, adjudicator or arbiter to discharge his professional duties in resolving disputes. Indeed, many such positions are filled with personnel who are only trained in engineering field, very ‘streetwise’, or at best Qualified Engineer, or even as a Quantity Surveyor

The Engineer is under duty to undertake the role of impartial arbitrager between the Employer and Contractor, to exercise his discretion impartially, and having regard to the circumstances

Even if Engineer’s neglect is proven, compensation for economic loss is too remote to succeedRSP Architects v Ocean Front [1985] 3 SLR(R) 653




Under Clause 3.1, the Employer’s Specific Approval must be obtained before the Engineer is permitted to take action or exercise such Specific Authority on certain matters, e.g.:

a) Subletting the Works

b) Approving of Variation Claims or VE Proposals

c) Granting Extension of Time

d) Expending Prime Cost and Provisional Sums

e) Suspension of Works

f) Adjudicating Disputes




The Engineer usually under directive to ensure that the Contractor gets only its entitlements in strict compliance with the Contract provisions, procedures and protocol

Sometimes, unwritten rule stipulates that Engineers are precluded from seeking Employer’s approval for funds to compensate the Contractor for variations and additional works arising from the Engineer’s own design deficiencies, resulting in the Engineer resorting to interpreting the Contract with onerous requirements to disentitle the claims


Engineer’s Roles and Risks Limits of Engineer’s Authority

The Engineer shall have no authority to amend the Contract

The Engineer has no authority to relieve either Party of any duties, obligations or responsibilities under the Contract

Examples:

Mandating extra contractual procedures or protocol not otherwise encapsulated in the Main Contract Documents or Particular Conditions

Administering the Contract with implied meaning and arbitrary interpretation of the contract terms, implied in fact rather than implied in law, so as to give effect to the Engineer’s stance



The Engineer shall have no authority to amend the Contract

The Engineer has no authority to relieve either Party of any duties, obligations or responsibilities under the Contract Challenge of the Engineer’s Determination

Contractor’s legal rights to void or set aside the Contract due to fundamental breach arising from Engineer’s failure to perform his duties under the Contract, or exercising his powers ultra vires in amending or deviating the Contract, or relieving the Contractor of his duties, obligations or responsibilities under the Contract

Whether contractual recourse available to seek Engineer’s Determination, DAB or arbitration to resolve these issues


Limits of Engineer’s Authority

Clause 20.1




Clause 20.1

Disputable interpretation of the clause:

“If the Contractor considers himself to be entitled to any EOT or any additional payment, under any Clause of these Conditions … the Contractor shall give notice to the Engineer”

Does this clause refer to costs which are related only to Loss and Expense costs in relation to any relevant event giving rise to the claim, including EOT related costs?

Loss & Expense Claims – Cost implications due to any form of disruption, prolongation, suspension, abortive works, re-engineering, re-submission of documents



Clause 20.1


“If the Contractor considers himself to be entitled to any EOT or any additional payment, under any Clause of these Conditions … the Contractor shall give notice to the Engineer”

Does this clause refer to any Clause of these Conditions which expressly stipulates that if the Contractor suffers delay and incurs Cost … the Contractor shall give notice to the Contractor subject to this Clause 20.1

In other words, any other Clause without this stipulation is not subject to the protocol of Clause 20.1



Clause 20.1

Examples where Clause 20.1 is expressly stipulated that the Contractor must comply in the event of a claim:

Clause 1.9 – delayed drawings or instructions

Clause 2.1 – right of access, possession of site

Clause 4.7 – setting out

Clause 4.12 – unforeseeable physical conditions

Clause 4.24 – fossils

Clause 7.4 & 9.2 – testing



Clause 20.1

More examples where Clause 20.1 is expressly stipulated:

Clause 8.4 – Extension of Time for Completion

Clause 8.5 – delay caused by Authorities

Clause 8.9 – consequences of suspension of work

Clause 10.3 – interference with tests on completion

Clause 13.7 – changes in legislation

Clause 16.1 – suspension of work

Clause 17.4 – consequences of Employer’s Risks



Clause 20.1

Rationale why Clause 20.1 is expressly stipulated:

objective to enable Contractor to notify Employer as soon as possible when the situation of a claim arises, to enable Employer to do something to avert unintended consequences

scheme is where potential disputes can be resolved during the course of the project rather than until the works are complete

contract clause clearly states that the party with a claim will lose the right to bring that claim if it fails to comply with the required timescale



Clause 20.1


Bremer Handelgesellschaft v Vanden Avenne [1978] 2 LR 113, House of Lords held that a notice provision should be construed as a condition precedent, thus would be binding if:

i. it states the precise time within which the notice is to be served

ii. it makes plain by express language that unless the notice is served within that time the party making the claim will lose its rights under the clause



Clause 20.1


Multiplex Construction v Honeywell Control Systems [2007] EWHC 447 (TCC), Mr Justice Jackson held that:

“Contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose; such notice enables matters to be investigated while they are still current. Furthermore, such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.”



Clause 20.1

Examples where Clause 20.1 is not expressly stipulated in relation to a variation cost claim:

Clause 3.3 – Instructions of the Engineer

Clause 13 – Variations and Adjustments

In the above scenario, the Engineer will typically proceed to evaluate the claims and re-measurement in accordance with Clause 12 [Measurement and Evaluation]

Poser: Is the Engineer empowered to declare that the above submissions are also subject to Clause 20.1?



Clause 20.1

Rationale why Clause 20.1 is not expressly stipulated in relation to a variation cost claim:

Both parties are well aware of the variation, the Engineer issuing the variation, and the Contractor receiving the variation

there is no necessity to bring to the knowledge or awareness of the other party of the existence of such an entitlement, which technically is not even a claim per se

Therefore, such variations are intentionally tracked on a completely different contractual protocol



Clause 20.1

When Clause 20.1 is triggered in relation to a variation cost claim

Likely scenario is when and if the Contractor suffers disruption, prolongation or delay as a result of the variation instructed pursuant to Clauses 3.3 and 13, that he may proceed in accordance with Clauses 8.4 and 20.1 to notify the Engineer of the potential or real cost and time implications

in this case the cost implications refer to the loss and expense claims arising from the variation and not the costs of the physical permanent works arising from the variations per se



Clause 20.1

When Clause 20.1 is triggered in relation to a variation cost claim

Clause 8.4 – variations and additional works giving rise to an extension of time implication

Cost implications related to extension of time, such as preliminaries including insurances, extended site resources

Loss & Expense Claims – Cost implications related to the variations, such as disruption, prolongation, suspension, abortive works, re-engineering, re-submission of documents

NB: costs of additional works not submitted under Clause 20.1



Clause 20.1


“The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance”

Who is the judge or arbiter of when should the Contractor have become aware, or should have become aware of the event or circumstance?

If the Engineer rules that the Contractor should have become aware earlier than what the Contractor claimed, and rejects the claim, is the Engineer acting ultra vires?



Clause 20.1


“The notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, of the event or circumstance”

Is the Engineer empowered to declare that the date that the 28 days comes into effect is the date of the event itself, i.e., the date of issuance of the Engineer’s Instruction with design revisions, variations and additional works

Is the Contractor allowed sufficient and reasonable time to examine the drawings before this 28-days timeline is triggered?



The Engineer unilateral powers and authority in interpreting the General Conditions and Particular Conditions of the FIDIC Form of Contract in a biased manner

What happens when such interpretation is ruled onerous under the contra proferentum rule, or totally misrepresenting the purposive intent and true meaning of the clauses, causing the Contractor to suffer undue losses

Does Contract become voidable when any party to the Contract is misled by undue influence, misrepresentation or fraud of any part of the Contract, resulting in a substantive deviation from the Contract



Effects of Misinterpretation of the Contract Terms

Rescission and Deceit Erroneous or false statement of the interpretation of the

contract, especially when the Engineer claims specialist knowledge as statements of fact

Remedy of rescission and damages; tort of deceit; damages for fraudulent misrepresentation of contract terms would include all loss flowing directly from the entry into contract, regardless whether or not such loss was foreseeable, including all consequential loss

Smith New Court Securities v Citibank [1996] 3 WLR 1051



Effects of Misinterpretation of the Contract Terms

Voidance of Contract Misstatement of facts, fraudulent misinterpretation of contract

terms persistently held as facts to administer the contract erroneously, to preclude contractual rights of claims

Heilbut, Symons v Buckleton [1912] UKHL 2

Statutory Remedy Misrepresentation Act, Cap 390, 1994 Rev Ed

Misrepresentation has become a term of contract

Damages in lieu of rescission, or voidance of contract


Engineer’s Roles and Risks Particular Conditions, Misuse and Core Clauses

Particular Conditions should only be employed to regulate the project and the country specifics, to suit local and project peculiarities; such as prescriptions for contractual procedures and protocols in compliance with the general conditions

They should not be used to re-allocate the risks, such as changing some fundamental terms of the General Conditions

One favourite clause being the subject of Particular Conditions is Clause 20.1 where the Contractor is to give a notice of claim within the original period of 28 days, being reduced to as short as 14 days, failing which the Contractor is not entitled to additional payment or time extension


Engineer’s Roles and Risks Particular Conditions, Misuse and Core Clauses

No clear rules on fully detailed claims with supporting particulars of the basis of claims and of EOT and additional payment claimed

As a result, Contractor’s submissions are subjected to repeated rejections for re-submissions due to Engineer’s purported reasons for lack of certain information or details, or imposing the onerous rule of strict proof

Parties should agree on these requirements through carefully drafted procedures enshrined in the Particular Conditions; eg., EOT Assessment based on Planned/Impacted/Actual Critical Path Network, framework for Loss & Expense Claims, Direct and Indirect Costs, etc


Engineer’s Roles and Risks Interactive Voting System – Multiple Choice Questions


Do you agree that the Engineer, in wearing so many hats and subsuming multiple roles in a Project, can invariably be in direct conflict of interests between the Employer and the Contractor, thus affecting his independent, unbiased and reasonable manner in discharging his duties?

(1) YES(2) NO

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Engineer’s Roles and Risks Interactive Voting System – Multiple Choice Questions


What do you like to see as a major revision in the FIDIC Suite of Contracts?

(1) Appointment of Engineer to be an External Independent Party, eg a Project Management Consultant

(2) The Engineer should be a Qualified Accredited Mediator, Conciliator and Arbitrator

(3) Re-define Guidelines for Particular Conditions

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Engineer’s Roles and Risks References, Bibliography and Acknowledgements

1. EIC/FIDIC Questionnaire: The Use of the FIDIC Red Book, Will Hughes, University of Reading, UK, Oct 1996

2. The Engineer under FIDIC’s Conditions of Contract for Construction, Issaka Ndekugri, Nigel Smith, Will Hughes, School of Engineering and the Built Environment, University of Leeds, UK, Sept 2007

3. FIDIC Conditions of Contract as a Model for an International Construction Contract, Dr Jur Tunay Kőksal, International Journal of Humanities and Social Science, Vol. 1 No. 8: July 2011

4. The FIDIC Contracts Guide, Peter L Booen, FIDIC, 2000

5. Obrascon Huarte Lain SA v Her Majesty Attorney General for Gilbratar [2014] EWHC 1028

6. Making Claims for Time and Money, Nicholas Gould, Fenwick Elliot



Adrias has more than two decades of practical working experience in the construction industry, working currently as in-house legal counsel for an MNC Company. Adrias is professionally trained in litigation, arbitration, adjudication, mediation and dispute resolution, and is an accredited arbitrator. He has handled several institutional and ad-hoc arbitral proceedings, as well as having tutored in SIArb, and conducted numerous workshops and seminars on diverse construction, contractual and legal issues including various Standard Forms of Contracts. He also lectures at the Royal Melbourne Institute of Technology, at the Singapore Institute of Management Campus teaching law subjects.Email: [email protected]

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