The dual nature of the employer’s agent role

Karen Morean is a construction partner and Patrick Trevor is a solicitor at Devonshires

Most standard-form building contracts envisage the role of an independent party making administration decisions under the contract. The JCT design-and-build suite refers to this role as the employer’s agent (EA) while other JCT standard forms refer to a contract administrator. Some forms of the International Federation of Consulting Engineers (FIDIC) contract similarly nominate the engineer for this role, while NEC contracts use the project manager.

“When exercising a decision-making function under the contract, the EA should not determine such matters simply as the employer directs”

The role is not intended to be that of hired gun – it is meant to be an independent person who is paid for by the employer. However, the dual nature of this role can sometimes create tensions on site.

What are an EA’s duties?

While an EA’s scope of services will be defined in their appointment documents, these obligations ought to dovetail with those given to the EA under the building contract. For example, Article 3 of the JCT Design and Build Contract 2016 provides that an EA “shall have full authority to receive and issue applications, consents, instructions, notices, requests or statements and otherwise to act for the employer under any of the conditions”.

As summarised in section 4.6 of the Royal Institution of Chartered Surveyors (RICS) Professional Standards and Guidance, an EA is bound by their appointment with the employer to act as if they were one and the same as the employer. As a result, the duties that an EA owes their employer client includes the following:

  • Not to divulge any information of a confidential or private nature given by the employer where the employer has specifically requested.
  • Warn the employer of any potential breaches in the contract, and endeavour to enable the employer to fulfil its contractual obligations in a timely fashion.
  • Provide advice based on their knowledge and experience to assist the employer in making informed decisions on matters concerning the construction contract.

However, that is not to say that an EA is always required to act in the best interests of the employer (ie the appointing party). Rather, case law makes it clear that an EA is required to act impartially when discharging certain functions.

For instance, the court in Imperial Chemical Industries v Merit Merrell Technology [2017] EWHC 1763 (TCC), approved the following description:

“When performing his decision-making function, the decision-maker is required to act in a manner which has variously been described as independent, impartial, fair and honest. They connote that the decision-maker must use his professional skills and his best endeavours to reach the right decision, as opposed to the decision which favours the interests of the employer.”

This duty of impartiality is codified in section 4.5 of the RICS guidance, which states:

“While the employer’s agent is bound to the employer in his or her actions, the employer’s agent is required by the law to remain impartial with regard to the valuation of the works, processing of claims, and duties relating to certification.”

Therefore, when exercising a decision-making function under the contract, the EA should not determine such matters simply as the employer directs.

Does an EA owe a duty to contractors?

Notwithstanding that duty to act fairly and impartiality, EAs do not owe a duty to contractors, as was confirmed by the Court of Appeal in Pacific Associates v Baxter [1988] 44 BLR 33. It would take exceptional circumstances to deviate from that position, such as collusion or fraud.

Challenging the EA’s decision

It is common for contractors to disagree with an EA’s decision in relation to valuation or assessment of its claims. In our experience, however, contractors alleging a beach of a duty on the part of an EA are unlikely to receive much traction. That is doubly so if those allegations are made mid-project, where a continued working relationship is required.

Instead, we would advise contractors to consider what additional information it can provide to the EA to justify a different outcome. Examples might include:

  • Providing a critical-path analysis showing anticipated delay if an extension of time is being sought.
  • A comparison of tender drawings versus updated design drawings showing the extent of an instructed change.
  • Examples of market prices obtained for variations.

This strategy will also yield dividends should adjudication become a necessity. Adjudicators, unless in exceptional circumstances, rarely engage in arguments about an EA’s independence or impartiality, focusing instead on the valuation/assessment exercise. For that exercise, contemporaneous documentation carries a lot of weight.

A difficult role

The tension between an employer seeking to control budgets, time and quality on one hand versus a contractor seeking what it considers valid compensation on the other is a reality on many construction projects. It is the EA, employed and paid by the employer, whose duty it is to be the independent arbiter between the two on the project. It is often an unenviable task.

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