Whose Consultant is it Anyway?

Resolving disputes in construction contracts

Whose Consultant is it Anyway?

Most standard construction contracts allow for or require the owner to appoint an engineer or architect to act as a consultant for the work to be performed by the general contractor. One of the major functions that those architects and engineers perform as a consultant is to adjudicate disputes between the owner and the contractor. These disputes can run the gamut from minor disagreements over the interpretation of the specifications to significant monetary issues related to progress payments and delays. The fact that the consultant has been appointed to the role of adjudicator by the owner and is being paid to perform that role by the owner often raises concerns for the contractor about the fairness and impartiality of the consultant. That same conflict of interest can also make an architect or engineer, who may want to be employed again by the same owner, wary about siding with the contractor in a dispute.

While both the consultant and the contractor may have concerns about outside influences that may sway the judgment of the consultant, the courts have been very clear in requiring consultants to act “judicially” when interpreting contracts and adjudicating disputes. In Zurich Insurance Co. v. 356226 British Columbia Ltd., [1995] B.C.J. No. 2646 (S.C.), the British Columbia Supreme Court interpreted acting judicially in that context to require a consultant to act “fairly and reasonably.” It is important that owners and consultants be aware that a contractor will not be bound by a decision of a consultant if that consultant does not adhere to the provisions of the contract and acts arbitrarily, fails to exercise his or her duties in good faith or to act impartially, or makes a decision under the owner’s influence.

In addition to the obligations of the consultant to act judicially, in Dilcon Constructors Inc. v. British Columbia Hydro & Power Authority (1992), 7 C.L.R. (2d) 22 (B.C.S.C.), the British Columbia Supreme Court held that there is an implied term that the owner, who is given the power to name its own consultant as an arbiter or adjudicator of the other party’s claims, shall not interfere with the independence of that consultant in that adjudication.

The implied contractual obligation of an owner not to interfere with the consultant’s performance of his or her duty is consistent with the recent holding of the Supreme Court of Canada in Bhasin v. Hrynew, 2014 SCC 71. In Bhasin, the Supreme Court of Canada held that there is a general duty of honesty in contractual performance. While this specific issue has not been litigated, it appears likely that an owner who unduly influenced a consultant to get their way in a dispute with a contractor would be in breach of its duty of honest performance to the contractor.

In summary, in adjudicating disputes under a construction contract, the consultant’s duty is to decide claims and disputes impartially, fairly, and with professional competence. It is crucial to advise consultants to uphold these duties to ensure that their determinations are binding on the contractor. Similarly, it is important to advise owners not to attempt to influence their hired consultants, lest they be found to have breached their implied duty not to interfere, or the duty of honest performance of the contract.

Related Articles