Thinking caps: Employer's agents

It was Bob Marley who sang the words: “Who the cap fit, let them wear it”, and I now choose them carefully because one of the common misconceptions I come across on building contracts is which hat is worn by those who represent the employer. This problem is most stark with the role of the employer’s agent under the JCT05 design-and-build contract.

Despite popular opinion, the employer’s agent (as provided in article three) is not performing the same function as the architect, contract administrator or project manager. Many adjudicators make this mistake, too. Yet the employer employs an agent to administer the conditions. Confused?

Well confusion is understandable, given that large chunks of the QS profession are at any one time taking on the roles of contract administrator, certifier, project manager or employer’s agent on behalf of their clients. However, what duties, if any, do they owe to the contractor?

The starting point for defining the role of the employer’s agent is always the appointment, read in union with the building contract. The true employer’s agent has little or no discretion, and must obey the employer’s instructions.

However, if the employer’s agent becomes a “certifier”, things change. A certifier has much wider discretion, and must act fairly in performing their functions. If the employer’s agent is also a certifier, they must exercise each role diligently and be mindful of the potential conflict. The JCT design-and-build contract envisages the employer’s agent undertaking the employer’s duties on behalf of the employer.

This issue was discussed in the case of JF Finnegan vs Ford Sellar Morris Developments. Here, the judge held that there was a world of difference between a certificate issued by an architect, which has a binding effect unless and until it is overturned by arbitration or litigation, and a notice of failure to complete the works given by the employer’s agent, which does not have a binding effect.

However, as I indicated at the outset, recent judgments have blurred the boundaries between the role of employer’s agent and certifier, none more so than the 2006 case of Scheldebouw BV vs St James Homes (Grosvenor Dock), where the functions and duties of certifiers and others with decision-making roles were examined.

A contract administrator must act in a manner which is independent, impartial or fair in making decisions on issues in which the employer’s and contractor’s interests may not coincide

In this case, Mr Justice Jackson said: “In many forms of contract a professional person retained by the employer has decision-making functions allocated to him. I will call that person ‘the decision-maker’. The decisions he makes are often required to be in the form of certificates, but not always. For example, there are many contracts in which extensions of time do not take the form of certificates.”

He said that three propositions had emerged from the authorities concerning the position of the decision-maker:

• The role and duties of the decision-maker will be determined by the terms of the contract under which they are required to act
• Generally the decision-maker is not, and cannot be regarded as, independent of the employer
• When performing their decision-making function, the decision-maker is required to act in a manner that has variously been described as independent, impartial, fair and honest. These concepts are overlapping but not synonymous.

However, what I really want to get at is this: a contract administrator must act in a manner that is independent, impartial or fair where they are required to make decisions on issues in which the employer’s and contractor’s interests may not coincide. So, too, the engineer has an express duty to act impartially, under the ICE Conditions (7th edition) and under the FIDIC 1999 Red and Yellow Books, where the engineer must make a “fair determination”. By contrast

• there is no such duty under the JCT design-and-build contract 2005 where the certifying function is carried out by the employer directly. The employer’s agent should take great care to act within the terms of their authority so that conflicts of interest and disputes are avoided.

So you will see that the distinction of the employer’s agent is important, but at the end of the day, the contractor can still transport that process before an adjudicator who can open up, review and revise any account, opinion, decision, requirement or notice issued, given or made. Therefore, if the contractor can show a perverse or unfair approach, or simply does not like what it hears, an adjudicator will nine times out of 10 unstitch some of the canvas.

You see? It’s all in the hats.