House of Lords

12 February 1974

Lord Reid , Lord Morris of Borth-Y-Gest , Lord Hodson , Viscount Dilhorne and Lord Salmon

1973 Dec. 11, 12, 13; 1974 Feb. 12
735

February 12, 1974. LORD REID stated the facts and continued. My Lords, the case for the respondents (the architects) is that there is a rule of law, which absolves architects from liability for negligence in issuing certificates. It is said that the architect's duty is only to act honestly, and it is not disputed that the respondents did act honestly. But it is said that in issuing certificates, an architect owes no duty to his client to exercise care or professional skill. There is authority for this rather startling proposition and the Court of Appeal with obvious reluctance felt bound to follow it. But your Lordships are free to reconsider the whole matter. If it is held that the architects did owe a duty to their client to exercise care and skill, then it is not now disputed that the respondents failed in that duty and it is agreed that damages should be assessed at £2,000.

The argument for the respondents starts from the undoubted rule, based on public policy, that a judge is not liable in damages for negligence in performing his judicial duties. The next step is that those employed to perform duties of a judicial character are not liable to their employers for negligence. This rule has been applied to arbitrators for a very long time. It is firmly established and could not now be questioned by your Lordships. It must be founded on public policy but I am not aware of any authoritative statement of the reason for it. I think it is right but it is hardly self-evident. There is a general rule that a person employed to perform duties of a professional character is liable in damages if he causes loss to his employer by failure to take due care or to exercise reasonable professional skill in carrying out his duties. So why should he not be liable if the duties which he is employed to perform are of a judicial character?

The reason must, I think, be derived at least in part from the peculiar nature of duties of a judicial character. In this country judicial duties do not involve investigation. They do not arise until there is a dispute. The parties to a dispute agree to submit the dispute for decision. Each party to it submits his evidence and contention in one form or another. It is then the function of the arbitrator to form a judgment and reach a decision.

In other forms of professional activity the professional man is generally left to make his own investigation. In the end he must make a decision but it is a different kind of decision. He is not determining a dispute: he is deciding what to do in all the circumstances. He may go wrong because he has at some stage failed to take due care and that may not be difficult to prove. But coming to a wrong but honest decision on material submitted for adjudication is rarely due to negligence or lack of care, and it is seldom due to such gross failure to exercise professional skill as would 736 amount to negligence. It is in the vast majority of cases due to error of judgment and there is so much room for differences of opinion in reaching a decision of a judicial character that even the most skilled and experienced arbitrator or other person acting in a judicial capacity may not infrequently reach a decision which others think is plainly wrong.

But a party against whom a decision has been given that is generally thought to be wrong may often think that it has been given negligently, and I think that the immunity of arbitrators from liability for negligence must be based on the belief - probably well founded - that without such immunity arbitrators would be harassed by actions which would have very little chance of success. and it may also have been thought that an arbitrator might be influenced by the thought that he was more likely to be sued if his decision went one way than if it went the other way, or that in some way the immunity put him in a more independent position to reach the decision which he thought right.

But whatever be the grounds of public policy which have given rise to this immunity of persons acting in a judicial capacity, I do not think that they have anything like the same force when applied to professional men when they are not fulfilling a judicial function.

The point can perhaps be most clearly illustrated by considering the case of a skilled man engaged to value some property or object. The circumstances may vary very much. The owner may wish to sell or insure the property and want to know its market value. No one doubts that in that case the valuer may be sued for negligence if his negligent valuation has caused loss to the owner. Or the owner may have reason to believe that a particular person A would buy the property from him and would accept a valuation by a skilled man. Or he may have agreed with A to sell at a price to be fixed by a skilled valuer, or by this particular valuer. and he may or may not have told the valuer about this when engaging him.

There is modern authority to the effect that if the valuer knows that his valuation will affect or bind another person besides his client, the owner, then he can claim an arbitrator's immunity. But why should that be? The valuer is in each case engaged by only one party and he has exactly the same task to perform in all these cases. He must, to the best of his ability, estimate the market price of the property. I do not believe that a professional man would approach his task in any different spirit or be influenced in any significant way because he knew that the interests of some other person besides his employer would be affected by the conclusion which he reached.

On the other hand, the valuer could be engaged by both parties as an arbitrator if there is a dispute about the value of certain property. The dispute would be submitted to him for decision and the parties would put their contentions before him. Then he would have to judge between them and have an arbitrator's immunity.

Now I can come to the position of an architect. He is employed by the building owner but has no contract with the contractor. We do not in this case have occasion to consider whether nevertheless he may have some duty to the contractor: I do not think that a consideration of that matter would 737 help in the present case. The R.I.B.A. form of contract sets out the architect's functions in great detail. It has often been said, I think rightly, that the architect has two different types of function to perform. In many matters he is bound to act on his client's instructions, whether he agrees with them or not; but in many other matters requiring professional skill he must form and act on his own opinion.

Many matters may arise in the course of the execution of a building contract where a decision has to be made which will affect the amount of money which the contractor gets. Under the R.I.B.A. contract many such decisions have to be made by the architect and the parties agree to accept his decisions. For example, he decides whether the contractor should be reimbursed for loss under clause 11 (variation), clause 24 (disturbance) or clause 34 (antiquities); whether he should be allowed extra time (clause 23); or when work ought reasonably to have been completed (clause 22). And, perhaps most important, he has to decide whether work is defective. These decisions will be reflected in the amounts contained in certificates issued by the architect.

The building owner and the contractor make their contract on the understanding that in all such matters the architect will act in a fair and unbiased manner and it must therefore be implicit in the owner's contract with the architect that he shall not only exercise due care and skill but also reach such decisions fairly, holding the balance between his client and the contractor.

For some reason not clear to me a theory has developed and is reflected in many decided cases to the effect that where the architect has agreed or is required to act fairly he becomes what has often been called a quasi-arbitrator. and then it is said that he is entitled to an arbitrator's immunity from actions for negligence. Others of your Lordships have dealt with the- older authorities and I shall not say more about them than that they are difficult to reconcile and often unconvincing. They are not confined by any means to cases involving architects and one view of them has recently, in Arenson v. Arenson [1973] Ch. 346 , 370, been succinctly expressed by Buckley L.J.:

'In my judgment, these authorities establish in a manner binding upon us in this court that, where a third party undertakes the role of deciding as between two other parties a question, the determination of which requires the third party to hold the scales fairly between the opposing interests of the two parties, the third party is immune from an action for negligence in respect of anything done in that role.'

I can see no good grounds for this view. If there is any validity in my conjecture as to the reason of public policy giving rise to the immunity of arbitrators, those reasons do not apply to this situation. Persons who undertake to act fairly have often been called 'quasi-arbitrators.' One might almost suppose that to be based on the completely illogical argument - all persons carrying out judicial functions must act fairly, therefore all persons who must act fairly are carrying out judicial functions. There is nothing judicial about an architect's function in determining whether certain work is defective. There is no dispute. He is not jointly engaged by the parties. They do not submit evidence as contentious to him. He makes 738 his own investigations and comes to a decisions. It would be taking a very low view to suppose that without his being put in a special position his employer would wish him to act unfairly or that a professional man would be willing to depart from the ordinary honourable standard of professional conduct.

The leading authority on which the respondents rely is Chambers v. Goldthorpe[1901] 1 K.B. 624 , where it was held by a majority of the Court of Appeal that an architect was not liable for negligence in ascertaining the amount due to the contractor under a building contract. A. L. Smith M.R. said that the question was whether the architect acted solely as the agent for the building owner to protect his interests as against the builder, or as an arbitrator between the building owner and the builder. Then he continued, at p. 634:

'I cannot think, as suggested by the defendant's counsel, that the plaintiff's duty was only to protect the interests of the building owner, in other words to cause the building owner to pay to the builder as little as possible for his work.'

If that was the argument for the owner I am not surprised that it failed. Then he dealt with some of the authorities but he never examined the difference of function between that of an arbitrator and that of an architect.

Collins L.J. too appears to have thought (pp. 638-639) that the crucial question was:

'Can he address himself to his duty in the matter of giving that certificate free from any obligation towards that other party, or is he placed in a position in which it is his duty to exercise his judgment impartially as between the parties to the contract?'

This appears to mean that he had undertaken a duty to the contractor. But the architect had no contract with the contractor and in those days duty in this chapter of the law depended on contract.

I need not deal with the dissenting judgment of Romer L.J. because I have already adopted a good deal of his reasoning.

There was nothing very new in the views of the majority. The importance of the Chambers case is that it is virtually indistinguishable on its facts from the present case. So if this appeal is allowed it must be overruled. I have the less hesitation in doing that because here and in other parts of the Commonwealth a number of judges have expressed doubts or disapproval of it.

With regard to the earlier cases I do not think that it is practicable to examine them and determine to what extent they are affected by the views of this House in this case. Many, probably most, of the decisions can be justified on their facts. and there are borderline cases where it is far from easy to determine whether there was a sufficient judicial element to require an arbitrator's immunity to attach. If that immunity is claimed, then it is for the person claiming it to show that the functions in the performance of which he was negligent were sufficiently judicial in character.

I would allow this appeal.

LORD MORRIS OF BORTH-Y-GEST. My Lords, the question which is 739  raised in this appeal is whether an architect who is appointed as such for the purposes of a building contract in the Standard Royal Institute of British Architects Form of Contract (1963 ed., 1963 issue) is liable in damages to his employer, the building owner, for loss which he causes to his employer by negligent over-certification in interim certificates for payment issued under clause 30 (1) of the conditions of contract.

As the statement of the question demonstrates, there were two separate and distinct contracts. There was a contract between the building owner and the architect. There was a contract between the building owner and the contractor. Under the former contract the architect was employed by the owner and was to be paid by the owner to perform certain duties both preliminary to and in connection with the second contract, i,e., that made between the owner and the contractor. Prima facie, but subject to some exceptions, a person who is employed to perform certain duties will be liable to pay damages if he causes loss as a result of negligence in the performance of those duties. Brett J. in Turner v. Goulden (1873) L.R. 9 C.P. 57 , 60-61 said that where

'a person undertakes to carry on a business for reward, he is bound to bring to the exercise of it an ordinary degree of skill, and to act with reasonable care and diligence. For a default in either respect, an action will lie against him.'

If in a building contract an owner makes a promise to a contractor as follows, 'I will pay you whatever sum my architect certifies as being payable to you,' then the owner will be obliged to pay the certified sum to the contractor. But if the architect has, by negligence, overstated the sum payable and if loss results to the owner, is there any reason why the architect should not be liable to his employer, the owner?

Is the position any different if the owner agrees with the contractor that a certificate of the architect is to be treated as conclusive evidence that work has been duly completed? If the architect has negligently given a certificate which must so be treated - is there any reason why he should not be liable to his employer for any loss that he may have caused? What is said is that an architect may by certain contractual provisions be placed in the position of an arbitrator and will enjoy the immunities of an arbitrator in respect of what he does when in that position. Though an architect may have many duties to perform for and in the interests of his employer (such, for example, as the duty of supervision) it is said there may come a stage when he is, so to speak, translated to a position where he is the neutral impartial judge adjudicating between the disputant contentions of the owner and the contractor and that in such position (unless there be fraud or dishonesty or collusion or the like) he is secure from assailment.

In the present case the Court of Appeal, being bound by authority, came, with regret, to the conclusion that when the respondents issued two interim certificates they were functioning in an arbitral capacity and were not liable to the owner even though (as was held) they had been negligent.

Before examining certain authorities the facts leading to the present appeal can be briefly stated. Since it is always open to parties to a building contract to make special arrangements it is necessary to ascertain the terms of the agreement in any particular case. The appellant had for some time 740 been thinking of building a house. He found a site in 1961. He got in touch with a representative of the respondent firm and the firm agreed to act as architects in the design and construction of the house to be built. The house was to be of high quality and the design was to be in accordance with the owner's specific requirements: he was to be advised as to the employment of contractors: the firm was to supervise the construction. Tenders were sought and some were received. On October 1, 1963, the owner entered into a building contract with contractors. The contract was in the standard R.I.B.A. form (1963 ed,, 1963 issue). The house was to be built for £22,368. The respondents were named in the contract both as 'the architect' and also as 'the quantity saner.' The contractors undertook to carry out and complete the building of the house upon and subject to the conditions of the contract. The date for completion was January 31, 1964. Though work had been begun before October 1, 1963 (i.e., in July 1963), progress was slow and the appellant made complaints as to the quality of the work, In June 1964 the appellant, for reasons held by the learned official referee to have been sufficient, turned the contractors off the site. Other contractors were employed to finish the building.

By writ dated March 26, 1968, the appellant claimed damages from the respondents for negligence and breach of duty (a) in the course of supervising the building and (b) in certifying for work not done or improperly done by the contractors. As regards (b) the complaint related to interim certificates numbers 9 and 10 dated May 25, 1964, and July 1, 1964. There had been no document recording expressly the terms of the agreement between the appellant and the respondents but in the statement of claim certain implied terms were pleaded. One was that the respondents would use reasonable care in issuing certificates in respect of work performed by the contractors. This implied term was at first admitted but in a re-amended defence the respondents denied that they were under any duty to the appellant to use reasonable care in issuing certificates.

The finding of the learned official referee was that negligence in supervision had not been proved but that negligence in issuing the interim certificates dated May 25 and July 1, 1964, had been proved. The original contractors had obtained judgment against the appellant on their claim under the two certificates. As a consequence the appellant had been obliged to pay too much to the contractors who later went into liquidation. The appellant had therefore suffered loss. Furthermore, he was unable to recover the cost that he incurred in remedying defective work. The official referee gave judgment in the appellant's favour. If the appellant is entitled to have the judgment in his favour restored the amount of it is by agreement to be re-adjusted.

The question now arising is whether the respondents were functioning in an arbitral role when they issued the two interim certificates dated May 25 and July 1, 1964. It was with the object of so asserting that by the re-amended defence the pleader denied that the respondents owed any duty to the appellant to use reasonable care in issuing certificates. If this were right the position would be strangely anomalous and illogical. An examination of the R.I.B.A. contract shows how manifold are the duties of the architect. Being employed by and paid by the owner he 741 unquestionably has in diverse ways to look after the interests of the owner. In doing so he must be fair and he must be honest. He is not employed by the owner to be unfair to the contractor. If work to a certain specification is to be done under the contract there is neither unfairness nor partisanship in ensuring that the work is properly carried out. It would be unfair to the owner to permit work that is inferior to the contract terms: it would be unfair to a contractor to require work that is superior to the contract terms. So a proper and reasonable discharge of his duties by an architect demands supervision on his part. If by reason of negligent supervision on the part of an architect loss or damage results for an owner it could hardly be contended, and indeed it is not contended, that the architect could escape liability to the owner for such negligent supervision. If this is so - why should he be immune if the interim certificates which he issues incorporate and set out the results of his faulty supervision? The certificates will merely be the expression of and will result from his preceding negligence. If, as I think is agreed, an architect is not acting as an arbitrator when he supervises the work being done neither should he be regarded as an arbitrator if what he does is to certify more than he would have certified had his supervision been careful rather than careless. The same result should follow in a case where the negligent issuing of interim certificates is not the consequence of any negligence in supervision. In the present case the learned official referee found that there was not negligence in supervision. The respondents' architect knew that there was defective work. What apparently happened was that there was a breakdown in communication within the respondents' organization and in particular as between the representative who acted as architect and the representative who acted as quantity surveyor. The finding of the learned official referee was as follows:

'I am driven to the conclusion that in the steps that they took or rather failed to take, the defendants were at fault in the preparation of interim certificates 9 and 10, but more particularly No. 10. They failed in my view in that respect to act as any reasonably competent architect would have acted. They knew, or ought to have known at the time, that the plaintiff had ordered the contractors to leave, they had written to the contractors on June 26 confirming that they were to leave, and stating that a list of defects and outstanding work would be produced. They must have known at least of the possibility that these contractors would not be recalled to remedy those defects. They knew that the contract had been nearing completion. In these circumstances, I consider that it was their plain duty to be particularly accurate in their valuation of the work properly executed, to that date. Unfortunately, as I find, they failed in this respect. They failed to keep Mr. Robinson, their quantity surveyor immediately concerned, informed as to the state of the work. They knew of defects which had come to light, certainly in the course of May and June which they either had not required, or had failed to get, the contractors to put right, and they failed to bring these to his attention, and therefore to exclude that defective work from those certificates. By so doing they overstated the value of the work not by miscalculation, but by ignoring 742 the existence of the defects, for the purpose of that certificate. They were therefore responsible for the plaintiff having to pay the contractors for work which they had not properly executed, and in the result he has suffered damage.'

In deciding whether on those findings the respondents are entitled to the immunity from liability for negligence which an arbitrator enjoys it is necessary to consider the terms of the contract between the appellant and the original contractors. Unless under its terms the respondents were placed in the position of an arbitrator it is not suggested that there was any other agreement under which they were appointed to arbitrate. It is suggested, however, that even though they were not at any time formally appointed to act in an arbitral capacity they nevertheless enjoyed immunity for the reason that they were required to act in an arbitral capacity with the result that they enjoyed the status of what has been called a 'quasi-arbitrator' and were entitled to the like immunity as that enjoyed by an arbitrator.

Condition 30 (1) of the contract is as follows:

'At the period of interim certificates named in the appendix to these conditions the architect shall issue a certificate stating the amount due to the contractor from the employer, and the contractor shall, on presenting any such certificate to the employer, be entitled to payment therefore within the period for honouring certificates named in the appendix to these conditions. Interim valuations shall be made whenever the architect considers them to be necessary for the purpose of ascertaining the amount to be stated as due in an interim certificate.'

Under the contract the period for honouring of certificates was 14 days. Condition 30 (2) provides as follows:

'The amount stated as due in an interim certificate shall, subject to any agreement between the parties as to stage payments, be the total value of the work properly executed and of the materials and goods delivered to or adjacent to the works for use thereon up to and including a date not more than seven days before the date of the said certificate less any amount which may be retained by the employer (as provided in sub-clause (3) of this condition) and less any instalments previously paid under this condition. Provided that such certificate shall only include the value of the said materials and goods as and from such time as they are reasonably, properly and not prematurely brought to or placed adjacent to the works and then only if adequately protected against weather or other casualties.'

Condition 30 (6) deals with the issue of final certificates and condition 30 (7) provides as follows:

'Unless a written request to concur in the appointment of an arbitrator shall have been given under clause 35 of these conditions by either party before the final certificate has been issued or by the contractor within 14 days after such issue, the said certificate shall be conclusive evidence in any proceedings arising out of this contract (whether by arbitration under clause 35 of these conditions or otherwise) that the 743 works have been properly carried out and completed in accordance with the terms of this contract and that any necessary effect has been given to all the terms of this contract which require an adjustment to be made to the contract sum, except and in so far as any sum mentioned in the said certificate is erroneous by reason of (a) fraud, dishonesty or fraudulent concealment relating to the works, or any part thereof, or to any matter dealt with in the said certificate; or (b) any defect (including any omission) in the works, or any part thereof which reasonable inspection or examination at any reasonable time during the carrying out of the works or before the issue of the said certificate would not have disclosed; or (c) any accidental inclusion or exclusion of any work, materials, goods or figure in any computation or any arithmetical error in any computation.'

Condition 30 (8) provides as follows:

'Save as aforesaid no certificate of the architect shall of itself be conclusive evidence that any works materials or goods to which it relates are in accordance with this contract.'

Condition 35 (1) provides for arbitration as follows:

'Provided always that in case any dispute or difference shall arise between the employer or the architect on his behalf and the contractor, either during the progress or after the completion or abandonment of the works, as to the construction of this contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith (including any matter or thing left by this contract to the discretion of the architect or the withholding by the architect of any certificate to which the contractor may claim to be entitled or the measurement and valuation mentioned in clause 30 (5) (a) of these conditions or the rights and liabilities of the parties under clauses 25, 26, 32 or 33 of these conditions), then such dispute or difference shall be and is hereby referred to the arbitration and final decision of a person to be agreed between the parties, or, failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an arbitrator, a person to be appointed on the request of either party by the president or a vice-president for the time being of the Royal Institute of British Architects.'

Condition 35 (2) provides as follows:

'Such reference, except on article 3 or article 4 of the articles of agreement, or on the questions whether or not the issue of an instruction is empowered by these conditions, whether or not a certificate has been improperly withheld or is not in accordance with these conditions, or on any dispute or difference under clauses 32 and 33 of these conditions, shall not be opened until after practical completion or alleged practical completion of the works or termination or alleged termination of the contractor employment under this contract, or abandonment of the works, unless with the written consent of the employer or the architect on his behalf and the contractor.'

744 From a consideration of these conditions it would appear that in the case of a final certificate unless either party requested arbitration before it was issued or unless the contractor requested arbitration within 14 days after it was issued, the final certificate was 'conclusive evidence' that the works had been properly carried out and completed. In the case of interim certificates the contractor, subject to the arbitration provisions, would be entitled to be paid by the employer (the building owner) within 14 days of presenting the certificate. The amount to be recorded in an interim certificate as being due was 'the total value of the work properly executed and of the materials and goods delivered...'

As in the contract there was an express provision for arbitration in the terms set out in condition 35 (1) there would seem to be a strong indication that the named architect in the contract was not an arbitrator. But though there was provision in the contract for arbitration, does the fact that the architect had to issue interim certificates upon which the contractor would be entitled to receive and the employer be bound to pay and which would record the total value of the work 'properly executed,' place him (the architect) in the position at least of being a 'quasi-arbitrator'? If the reasoning of the majority in Chambers v. Goldthorpe [1901] 1 K.B. 624 points to such a conclusion, should that case be followed?

I think that it must now be accepted that an action will not lie against an arbitrator for want of skill or for negligence in making his award. The reason for this may be that the public interest does not make it necessary for the courts to exercise greater powers over arbitrators than those which they possess, such as the power of removing for misconduct or of correcting errors of law which appear on the face of an award.

Furthermore, as a matter of public policy it has been thought to be undesirable to allow an action against an arbitrator (for lack of care or skill) for the reason that his functions are of a judicial nature.

If there is no arbitration to which the provisions of the Arbitration Act apply but if two or more people informally agree to refer a disputed matter to the decision of some person of their own selection they may place him in the position of a quasi-arbitrator and the common understanding of them all may be that the chosen person in accepting the charge does not expressly or implicitly undertake to do more than to give his honest opinion. Were the respondents in the present case in that position?

They were employed and paid by the appellant. The duties involved that the architect would act fairly: he was to act fairly in ensuring that the provisions of the building contract were faithfully carried out. He was to exercise his care and skill in so ensuring. But his function differed from that of one who had to decide disputes between a building owner and a contractor. When interim certificates were issued it was necessary to have regard to the contract terms and to exercise care and skill in certifying the value of work done. If the contractor thought that the sum certified was too little the contractor could call for arbitration. If the employer paid the amount certified and later found that there was over-certification as a result of the architect's negligence I can see no reason why, if loss resulted to him, he should not sue his architect.

As parties to a building contract or to a contract of sale are in general 745 free to introduce whatever terms they wish into their contract it follows that it is quite possible for them to arrange that someone who at one stage is the agent of one party may at another stage become an arbitrator as between the parties. But this must be a definite arrangement. The mere fact that an architect must act fairly as between a building owner and a contractor does not of itself involve that the architect is discharging arbitral functions.

One of the features of an arbitration is that there is a dispute between two or more persons who agree that they will refer their dispute to the adjudication of some selected person whose decision upon the matter they agree to accept. As an example, the dispute may involve an issue as to what a particular article is worth or as to the value of work that has been done. It follows that the task of an arbitrator may in some cases be the task of arriving at a valuation. In some circumstances, therefore, someone might be regarded both as a valuer and an arbitrator. But it by no means follows that everyone who has a duty of valuing, a duty which obviously must be fairly and honestly discharged, is an arbitrator. A valuer may not be exercising any judicial function.

There may be a situation in which two people wish to know the value of some property with a view possibly to their making some contract in regard to it. They may have no dispute because neither has any precise idea as to the value. Suppose that they both agree to employ a valuer or surveyor to make a valuation. His carefully and honestly formed opinion would not make him liable to an action merely because in the opinion of some other honest and careful valuer it was thought to be wrong. But suppose it was proved that he had clearly been negligent and so had given a wrong figure - I see no reason why there should not then be liability at the suit of either party who could prove that loss had resulted.

In Jenkins v. Betham (1855) 15 C.B. 168 a question arose as to the sum which an incoming rector was entitled to receive from his predecessor in respect of dilapidations. Each party appointed a valuer. There was a provision that if the two valuers disagreed then there was to be reference to an umpire. The parties had agreed that any valuation was to be final and conclusive. The two valuers did agree and the amount of the dilapidations was paid to the plaintiff on the agreed basis which the plaintiff said was incorrectly fixed at too low a figure. It was held that if the plaintiff's valuer had failed in the performance of his duty he could be held liable to the plaintiff for loss which resulted.

A similar result was reached in Turner v. Goulden, L.R. 9 C.P. 57 where there was a contemplated purchase of a business by the plaintiff. Each party employed a valuer. There was a provision that if the two valuers differed an umpire would be appointed. But they did agree. In an action brought by the plaintiff against his valuer for failing to exercise due skill and care a question arose whether interrogatories should be allowed. Lord Coleridge C.J. said that if the defendant had been acting as an arbitrator or as a quasi-arbitrator no action as brought would lie against him and consequently the plaintiff would not need interrogatories. The interrogatories were allowed.

It is quite possible for parties to a contract to agree that someone who 746 at one stage is acting for one party should in the event of a dispute be an arbitrator between the two parties. This was well illustrated in the case of Pappa v. Rose (1871) L.R. 7 C.P. 32 . The plaintiff employed the defendant for reward as selling broker to sell raisins. The sale note recorded various terms which had to be construed by the court. One term provided as follows: 'fair average quality in opinion of selling broker.' The plaintiff claimed that the defendant had been negligent and showed lack of skill when he had declared his opinion that the raisins tendered were not of fair average quality. The case proceeded on the basis that what was in issue was whether an arbitrator was liable for lack of skill. The plaintiff was non suited and a rule nisi for a new trial was discharged. The non suit was on the ground that the defendant was in the position of a quasi-arbitrator who by agreement between the parties was finally to decide a matter in dispute between them. Keating J. held that an examination of the raisins was not something to be done by the defendant in his ordinary capacity as a broker (p. 38):

'It is true that he was a broker, and that he made the contract. But he was only to decide upon the quality of the raisins, in the event of a dispute arising between the parties. It might have been that the buyer was satisfied with the fruit tendered, and in that case the functions of arbitrator would not have come into operation at all. If, on the other hand, the fruit tendered was rejected as not complying with the contract, the opinion of the referee either way would be a binding decision on the matter; and for any mistake which he might make he clearly would not be liable.'

Brett J. agreed with the ruling made at the trial (pp. 39-40):

'The ruling upon that was, not that the defendant was in the strict sense of the term an arbitrator, but that he was a person filling a position which brought him within an exception well known to the law of England, viz. that a person who is appointed and is acting as an arbitrator to determine a matter in difference between two or more persons does not enter into an implied promise to bring to the performance of the duty entrusted to him a due and reasonable amount of skill and knowledge. The question is merely one of implied undertaking; and the law says there is none such. Was, then, the defendant within that exception? I apprehend that every person falls within it who has taken upon himself to determine a disputed matter between two persons who have agreed to be concluded by his opinion. The parties had so agreed here: and that opinion could not be called for until the fact was in dispute.'

Bovill C.J. before whom the cause had been tried said (p. 42):

'It by no means follows that, when two persons submit a matter in difference to the arbitration of a third, they agree to take a person of the greatest amount of skill or intelligence. No matter what may be the degree of skill he possesses, the decision of the person selected is final and conclusive; and he is not liable to an action if he makes a mistake. Here, it is want of skill only that is suggested. The defendant was in the nature of an arbitrator chosen by the parties, whose 747 decision is final. Upon general principles, no action lies against him. There is no implied contract on his part, except that he will act honestly and bona fide.'

The decision of the court was upheld in the Exchequer Chamber (1872) L.R. 7 C.P. 525 .

I do not find it necessary to express any opinion as to whether the case was rightly decided. But the case showed that if, on a proper construction of the contract, the parties had agreed that a disputed matter was to be referred to the decision of the broker and had agreed that they would abide by his decision, then in those circumstances the broker would have the immunity which an arbitrator enjoys.

The present case is quite different. In Pappa v. Rose the defendant could have been liable to the plaintiff if as a broker he had been negligent but the complaint against him was in reference to the decision which he made in the capacity of an arbitrator, as a matter of construction of the contract between seller and buyer the court held that they had both agreed to refer any dispute to the decision of the broker. In the present case the giving of an interim certificate was not the decision of a dispute between owner and contractor: there was no reference of any dispute to the architect: there was no agreement to abide by the decision of the architect as to the value of work done: the contractor if dissatisfied could have requested an arbitration before an independent person: the building contract made provision for this: the architect owed a duty to his employer, the owner, to exercise care and skill in the giving of certificates: the fact that the owner became obliged under the building contract to pay the amount that his architect certified did not make the architect an arbitrator: nor was he made an arbitrator merely by reason of the circumstance that he could only properly perform his duties if he was fair as between his employer (the owner) and the contractor.

It is manifest that each case must depend upon its circumstances and upon the contents of the particular contract in the case. In Tharsis Sulphur and Copper Co. Ltd. v. Loftus (1872) L.R. 8 C.P. 1 it was held that an average adjuster appointed by agreement between parties who were to accept his decision was in the position of an arbitrator and was not liable to be sued for want of care. It was pointed out in the judgments that Pappa v. Rose, L.R. 7 C.P. 32 had related to a claim for lack of skill against someone found to have been an arbitrator but it was held that there was equal immunity from a claim for lack of care; Bovill C.J. said that there was no precedent to support a contention that a person called upon to act as an arbitrator to settle disputes or to adjust accounts between parties was liable to an action for negligence. If parties agree to be bound by the decision of a third party they take him, as Keating J. put it (p. 8), 'for better or worse' and 'if he discharges his duty faithfully and honestly they must be satisfied.' It was argued for the plaintiffs that in order that there may be a quasi-arbitrator it is necessary that disputes should have arisen between the parties and that it did not appear that any disputes had arisen. Bevel C.J. interposed to say that the nature of the agreement set out assumed that the amount was in question between the parties. Keating J., in his judgment, said, at p. 7: 748

'Now, without deciding what is the proper definition of an arbitrator, it appears to me clear that the defendant is in the position of an arbitrator for the present purpose, inasmuch as he was a person by whose decision two parties having a difference agreed to be bound.'

Brett J. said, at p. 9, that

'if an arbitrator in the strict sense of the word is not liable for want of care, it follows that a person who has undertaken to decide a dispute between two parties is also not liable.'

I think, therefore, that the case can be regarded as one in which the appointment was by parties who had a difference or dispute. I express no opinion as to whether on the facts of that case the average adjuster ought or ought not to have been regarded as an arbitrator. The case merely shows that if it were assumed or if it was properly found that he was then he would be entitled to immunity.

In Stevenson v. Watson (1879) 4 C.P.D. 148 the defendant was the architect of the building owner under a contract made between the owner and the plaintiff who was the contractor. The plaintiff and the defendant were therefore not in direct contractual relationship. Under the building contract the architect could order additions or deductions and the amount of such additions to or deductions from the contract were to be ascertained by the architect in the same manner as the quantities had been measured. A clause provided as follows:

'The contractor and the directors will be bound to leave all questions or matters of dispute which may arise during the progress of the works or in the settlement of the account to the architect, whose decisions shall be final and binding upon all parties.'

The contractor, who was to be paid on the certificate of the architect, complained of under-certification whereby he had suffered loss and in his action alleged that the defendant had not used due care and skill. The defendant demurred on the ground that the statement of claim showed him to have been an arbitrator and, there being no allegation of fraud or mala fides, that there was no cause of action. The demurrer was allowed. Lord Coleridge C.J. drew a distinction between duties which he called, at p. 158, 'merely ministerial and clerically' and those which required the exercise of considerable skill and judgment. Lord Coleridge C.J. was prepared to say (this, be it noted, being in 1879) that though the defendant was no party to the building contract, yet, having undertaken to perform certain work under it, he might have been liable to the plaintiff under some circumstances: he might have been liable if the true view of the case had been that the contract

'imposed on him the duty of doing certain work requiring no judgment, no opinion, and requiring only the exercise of what I may call ordinary arithmetical powers, and the performance of his duty under that contract was necessary to the plaintiffs right to recover, yet the defendant had refused that duty, ...' (p. 156).

But as it was the defendant's duties were clearly not merely ministerial or clerically. As Denman J. said, they were very analogous to those of an 749 arbitrator. Though there was no actual dispute between the building owner and the contractor the architect occupied the position of an arbitrator.

Though parties to a building contract may agree that as to some matters the architect of the building owner will be the person to whom disputes will be referred and agree to accept his decision with the result that if and when he (the architect) is acting as arbitrator he will have the immunity which has been recognised by the courts, it does not follow that he will have any immunity if he is negligent while carrying out the duties for which he is employed by the building owner. In the present case the respondents were not, in my view, made arbitrators. If there was to be an arbitration, condition 35 prescribed who was to be arbitrator. When certifying, or when valuing, the respondents were, in my view, not exercising arbitral functions. But this view calls in question the decisions of the Court of Appeal in 1901 in Chambers v. Goldthorpe; Restell v. Nye [1901] 1 K.B. 624.

In those cases it was recognised in the Court of Appeal that if the architects were in the position of arbitrators then they could not be sued for negligence. It will suffice to consider the first case. A building owner employed an architect to prepare drawing plans and specifications for certain houses and to supervise the work of building. There were various clauses in the contract between the building owner and the contractor in reference to the powers of the architect in regard to such matters as variations and the re-execution of work which the architect considered defective and the issuing of certificates. One clause, clause 20, provided as follows:

'A certificate of the architect, or an award of the referee hereinafter referred to, as the case may be, showing the final balance due or payable to the contractor, is to be conclusive evidence of the works having been duly completed, and that the contractor is entitled to receive payment of the final balance, but without prejudice to the liability of the contractor under the provisions of clause No. 12.'

The mention of a referee resulted from there being an arbitration clause, clause 22. Many matters of dispute or difference could be referred to arbitration. One of the matters that could be so referred was whether the works had been duly completed. The building owner claimed damages against his architect for negligence alleging that the architect had negligently measured work and had certified accounts which included sums to which the contractor was not entitled. It was held by the majority of the court that in giving his certificate under clause 20 the architect was acting as an arbitrator. A. L. Smith M.R. said, at p. 634:

'I think that the effect of his agreeing to act under clause 20 of the contract was that he undertook the duty towards both parties of holding the scales even and deciding between them impartially as to the amount payable by the one to the other.'

He considered also that unless there was a dispute and a reference under clause 22 before the architect certified, the certificate of the architect (with regard to the amount which the building owner had to pay) was final. Collins L.J. agreed with A. L. Smith M.R. He distinguished at p. 640 between a formulated dispute and 750

'that sort of possible difference which underlies an agreement by two parties that what one is to pay and the other has a right to be paid in respect of a certain matter shall be ascertained by a third person.'

So his view was that no formulated dispute is necessary before such 'third person' has both the duties and also the immunities of a quasi-arbitrator. He had that status because he was 'clothed with the duty of exercising an impartial judgment' (p. 641). With every respect I prefer the minority view of Romer L.J. who considered that the architect had not, in certifying under clause 20, been acting in the capacity of an arbitrator. I agree with his clear reasoning when he said, at p. 642:

'Suppose a person undertakes for reward to value or estimate for another work about to be done for his principal by a third person; in my opinion, he does not, so far as his principal is concerned, become in the position of an arbitrator in regard to his valuation or estimate, merely because he knows that his principal and the third person have by contract between them agreed that, in default of dispute previously arising with regard to the matter, his valuation or estimate is to be taken as conclusive, and as determining the price to be paid by his principal for the work to be done by the third person.'

He further said, at p. 643:

'that [the architect] by the terms of his employment ... undertook to measure up from time to time the work to be done for his principal by the contractor, and to certify the amount in money the work represented, and in particular on completion of the work to certify the balance payable. For this work he was to be paid by his principal, and it is in respect of it that he is suing. It would follow that, if in doing that work, for which he was to be paid by his principal, he was guilty of negligence from which damage ensued to his principal, he would be prima facie liable. To enable him to escape from that liability, the onus would lie on him to shew that, by the terms of the contract between his principal and the contractor, he was freed from that prima facie liability. No doubt he might do so, if he could show that by those terms he was undoubtedly placed in the position of an arbitrator with regard to his certificates, and that the principal's complaint against him in regard to the certificates was for something done in his capacity of arbitrator. But he would not, in my opinion, succeed in showing this merely by reason of the fact that his principal and the contractor had by the contract agreed that, if no prior dispute a arose in reference thereto, his certificates should be treated as conclusive between them.'

He referred with approval to Wadsworth v. Smith (1871) L.R. 6 Q.B. 332 , and also to Rogers v. James (1891) Hudson on Building Contracts, 4th ed. (1914), vol. 2, p. 172.

In the present case the words in condition 30 (2) of the contract are less emphatic than those contained in clause 20 in Chambers v. Goldthorpe [1901] 1 K.B. 624 where the certificate was to be conclusive evidence of the works having been duly completed. All that condition 30 (2) provides is 751 that the amount stated as due in an interim certificate is to be the total value of the work properly executed and of the materials and goods delivered. Even if, contrary to my view, it was thought that the language of clause 20 in Chambers v. Goldthorpegave an approximate description of what might be regarded as an award the same cannot be said of condition 30 (2).

A situation where a building owner agrees with his contractor that he will pay on a certificate of his architect, which certificate he agrees is to be taken as certifying the total value of work done and as certifying that it has been properly done, is precisely the situation where, because he has so agreed, he may be involved in loss if his architect has negligently given the certificate. The fact that a building owner and contractor agree that they will treat the certificates of the owner's architect as conclusive evidence that work has been duly completed does not of itself establish that the architect was an arbitrator between them. Neither does the circumstance that by its very nature the architect's function involves that he will act impartially and fairly. He must certainly so act because, there being a contract for work to be done according to the terms of the contract, his function is to see that the contract is carried out. But that does not without more make him an arbitrator. His duty is to act fairly when exercising his professional skill in considering whether work done satisfied the contract requirements as to work to be done: if that circumstance constituted him an arbitrator then at almost every stage he would be an arbitrator. His duty to act fairly does not at all conflict with, but rather is a part of, his duty to safeguard and look after the interests of the building owner who has employed him.

The decision in Chambers v. Goldthorpe has not hitherto come directly before this House for consideration. In Hickman & Co. v. Roberts [1913] A.C. 229 there are passages in the speeches which indicate that when the architect (pursuant to the clauses of the contract in that case) gave his certificate he was in a quasi-judicial position of an arbitrator, and in R. B. Burden Ltd. v. Swansea Corporation [1957] 1 W.L.R. 1167 Lord Radcliffe, referring to the decision in Chambers v. Goldthorpe, said that it was an established principle of law that in granting a final certificate under a building contract the architect acts in an arbitral capacity. But in neither of those two cases was the authority of Chambers v. Goldthorpe directly challenged. Now that it is I consider for the reasons which I have set out that it should be overruled.

It is one part of the duty of an architect, a duty particularly arising before giving an interim certificate, to make an estimate of the value of work done. But to call him a valuer does not at all resolve the question whether he is or is to be regarded as an arbitrator. In some circumstances a valuer may be an arbitrator just as in some circumstances an architect may be. It must depend upon the contract or arrangement which is made. The case of Finnegan v. Allen [1943] K.B. 425 was somewhat special. Finnegan agreed to sell some shares to Gleeson. They agreed to have the shares valued by Allen whose decision was to be final and binding on them both. They were to pay his costs and expenses in equal shares. There was an agreement between Finnegan and Allen which contained many clauses laying down the method which was to be applied 752 in arriving at the value of the shares. That agreement was sent to Allen. Later Finnegan and Allen were told that the award was ready. Finnegan considered that the valuation had not been made according to the method to be applied and was a considerable under-valuation. He sued Allen for the half share of Allen's costs and expenses which he (Finnegan) had paid: he pleaded a breach of warranty. A summons to strike out the statement of claim failed before the master and before the judge but succeeded on appeal to the Court of Appeal. There was argument on a point as to whether a warranty arose when a letter was sent to say that the award was ready. But the case proceeded on the basis admitted by counsel in argument that no action would lie for want of care and skill in making the valuation. Lord Greene M.R. said, at p. 431:

'It is, of course, well known that, if an expert is employed to conduct a valuation, what he does is not an arbitration within the meaning of the Arbitration Act, but that does not touch the present question whether a person who is brought in by agreement between the parties to fix a term in their contract on which they cannot agree is liable, in the absence of bad faith, to be sued for damages. There are a number of decisions which, in my opinion, make it clear that he cannot.'

He then referred to Pappa v. Rose, L.R. 7 C.P. 32 , Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 and Stevenson v. Watson, 4 C.P.D. 148 . The words of Lord Greene together with the admission of counsel show that the case was one in which there was a formulated point of difference which was specially referred to a person chosen by both parties who agreed that his decision was to be final and binding. The valuer (Allen) was therefore fully in the position of an arbitrator. The case was really one in which a way was being sought to circumvent the rule that immunity is enjoyed by someone acting as an arbitrator. Goddard L.J. said that it is not possible to give a precise definition of a quasi-arbitrator but that some valuers are given the protection given to an arbitrator [1943] K.B. 425 , 436-437: 'The underlying principle is that, in accepting the task submitted to him, the valuer or arbitrator merely undertakes to give an honest decision between the parties.'

Having set out my views as to the principles which are applicable, I do not find it necessary to consider how they should be applied in reference to the particular facts and circumstances which gave rise to the case of Arenson v. Arenson [1973] Ch. 346 .

In summarizing my conclusions I must preface them by the observation that each case will depend upon its own facts and circumstances and upon the particular provisions of the relevant contract. But in general any architect or surveyor or valuer will be liable to the person who employs him if he causes loss by reason of his negligence. There will be an exception to this and judicial immunity will be accorded if the architect or surveyor- or valuer has by agreement been appointed to act as an arbitrator. There may be circumstances in which what is in effect an arbitration is not one that is within the provisions of the Arbitration Act . The expression 'quasi-arbitrator' should only be used in that connection. A person will only be an arbitrator or quasi-arbitrator if there is a submission to him either of a 753 specific dispute or of present points of difference or of defined differences that may in the future arise and if there is agreement that his decision will be binding. The circumstance that an architect in valuing work must act fairly and impartially does not constitute him either an arbitrator or a quasi-arbitrator. The circumstance that a building owner and contractor agree between themselves that a certificate of an architect showing a balance due is to be conclusive evidence of the works having been duly completed and that the contractor is entitled to receive payment does not of itself involve that the architect is an arbitrator or quasi-arbitrator in giving his certificate. Chambers v. Goldthorpe[1901] 1 K.B. 624 was wrongly decided. The fact that in the present case the architect had (in an interim certificate as to the amount due) to record the total value of work properly executed and of materials and goods delivered did not constitute him an arbitrator. He incurred liability for his negligence in over-certifying.

For the reasons that I have given I would allow the appeal and, subject to the agreed revision as to amount, I would restore the judgment of the learned official referee.

LORD HODSON. My Lords, I am in full agreement with the opinion of my noble and learned friend, Lord Reid, that the appeal should be allowed.

VISCOUNT DILHORNE. My Lords, the sole question for determination in this appeal is whether the respondents, who are architects, can be held liable for negligence in certifying that amounts were payable to building contractors by the appellant in excess of the amounts for which but for their negligence certificates would have been given.

The respondents were employed as architects by the appellant who on October 1, 1963, entered into a contract in the current R.I.B.A. form for the building of a house in Yorkshire. The contract between the appellant and the respondents was not in writing but it must have been a term of the contract that the respondents would discharge the duties imposed on the architect by the contract between the appellant and the builders.

Under clause 30 of that agreement it was the duty of the architect at monthly intervals to issue interim certificates stating the amount due to the builders from the appellant, being 'the total value of the work properly executed and of the materials and goods delivered' less retention money and money paid under earlier certificates.

After they had issued a certificate of practical completion the respondents had to issue a final certificate which stated the total paid under the interim certificates, and the amount of the retention fund and also the contract sum adjusted in accordance with the terms and conditions of the contract, and which certified the difference between the two as due from the appellant to the builders or vice versa.

It was the appellant's obligation to pay to the builders the amount certified by the respondents as due from him to the builders.
Clause 30 (7) provided that unless a written request for the appointment of an arbitrator was given before the final certificate was issued or by the builders within 14 days of its issue, the final certificate was to be 'conclusive evidence in any proceedings' that the works had been carried out and that any necessary effect had been given to the terms of the contract which 754

required an adjustment of the contract sum. The certificate was to be conclusive evidence except in so far as any sum mentioned in it was erroneous by reason (a) of fraud, dishonesty or fraudulent concealment, (b) any defect which would not have been disclosed on reasonable examination before the issue of the certificate, and (c) any accidental inclusion or exclusion of any work, materials, goods or figure in any computation or any arithmetical error in any computation.

Clause 30 (8) reads as follows:

'Save as aforesaid no certificate of the architect shall of itself be conclusive evidence that any works materials or goods to which it relates are in accordance with this contract.'

It was not disputed that many of the functions the respondents were required by the contract between the appellant and the builders to discharge were functions to be discharged on behalf of the appellant. Clause 1 (1) provided that upon and subject to the conditions of the contract the builders would carry out and complete the work 'to the reasonable satisfaction' of the respondents. Under a number of clauses the respondents were empowered to give instructions to the builders. They could require the builders to open up any work for inspection. In giving such instructions and in deciding whether or not work had been done to their reasonable satisfaction they were acting on behalf of the appellant and employed to use their professional skill and knowledge in so acting. It was not disputed that if when so acting, as a result of their negligence, damage was suffered by the appellant they would be liable.

It was not disputed that owing to negligence on their part they had issued two interim certificates certifying amounts due from the appellant to the builders in excess of the sums properly due from him in respect of the value of work properly executed and that the appellant had in consequence suffered loss, but it was contended that the respondents were not liable as in issuing interim certificates and the final certificate the respondents were required to act in an arbitral capacity and not solely on behalf of the appellant, and that when acting in an arbitral capacity they were not liable for negligence in the discharge of their arbitral functions.

That persons who are appointed as arbitrators, or as it has been called quasi-arbitrators, to resolve a dispute which has arisen or which may arise cannot be sued for negligence in respect of their decisions is, I think, clear law.

In some cases the terms of the contract between two parties will reveal that they have agreed that a third party shall discharge certain functions and be required to arbitrate between them on some issues. In Pappa v. Rose, L.R. 7 C.P. 32 , the defendant as a broker made a contract for the plaintiff for the sale of raisins. The contract note stated that they were to be 'fair average quality in opinion of selling broker.' It was held in the Court of Common Pleas that the broker was employed as a kind of arbitrator to determine between the parties any difference which might arise as to the quality of the raisins tendered in fulfillment of the contract, and that consequently he was not liable to an action for failing to exercise care and skill in coming to his decision that the raisins were not of fair average quality. In Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 755 C.P. 1 , a ship owner and the owners of cargo agreed to refer to an average adjuster the question what part of general average losses should be borne by each of them and agreed to be bound by his decision. It was held that the average adjuster was in the position of an arbitrator 'inasmuch as he was a person by whose decision two parties having a difference agreed to be bound' (perKeating J. at p. 7) and so could not be sued for negligence in the discharge of his functions.

In Stevenson v. Watson, 4 C.P.D. 148 , a building contract case, the contract between a company, the employers and the builder contained the following clause:

'The contractor and the directors will be bound to leave all questions or matters of dispute which may arise during the progress of the works or in the settlement of the account to the architect, whose decisions shah be final and binding upon all parties.'

The contractor sued the architect, alleging negligence on his part in failing to issue a certificate for the amount the contractor claimed was due to him. Denman J., at p. 161, said that he thought that the architect's duties under the contract were 'very analogous to the duties of an arbitrator,' a conclusion which it is not possible to question in view of the terms of the clause set out above. In an effort to get round this difficulty it was argued that all the architect was required to do was not to decide questions 'requiring exercise of discretion, skill, or, in one sense, judgment at all' but that the architect 'was a kind of appraiser or valuer, to look at certain work, cast up certain figures, and do rather clerically than judicial work, or the work of an arbitrator, which requires the exercise of skill and judgment' ( per Denman J. at p. 161); but this argument was rejected by the court.

It does not follow that if an architect is employed by a person who wants to have something built, whose employment necessarily involves the exercise by him of professional skill and knowledge, he is ipso facto placed in the position of an arbitrator or quasi-arbitrator between his employer and the builder. In every case regard must be had to the terms of the contract between the employer and the builders and under the contract in Stevenson v. Watson it is clear that the architect was to act in an arbitral capacity.

The terms of the building contract in Chambers v. Goldthorpe [1901] 1 K.B. 624 were very different. It contained no clause similar to that set out above in the contract in Stevenson v. Watson. It provided for the issue of interim certificates and for the issue of a final certificate which was to be conclusive evidence that the works had been duly completed and that the contractor was entitled to payment of the final balance. It also contained an extensive arbitration clause which began with the words: 'Provided always that, in case any question, dispute, or difference shall arise between the proprietor, or the architect on his behalf, and the contractor ...' The employer of the architect alleged that the architect had through negligence incorrectly measured the work done, had improperly allowed certain items and had consequently certified for a larger amount in his final certificate than he should have done, and claimed damages. 756

The Court of Appeal by a majority (A. L. Smith M.R. and Collins L.J., Romer L.J. dissenting) held that in ascertaining the amount due and certifying the same the architect occupied the position of an arbitrator and so could not be sued for negligence in the exercise of those functions.

As the Court of Appeal in this case pointed out, that decision has been much criticised. I agree with the Court of Appeal in the present case that, if it be the law that in giving his final certificate an architect is acting as an arbitrator, there is no valid distinction to be drawn between giving a final and an interim certificate and he must also be held, if the decision in Chambers v. Goldthorpe is right, to be acting as an arbitrator in relation to interim certificates where the contract between the employer and the contractor is similar to that in Chambers v. Goldthorpe and to that in this case.

In Chambers v. Goldthorpe [1901] 1 K.B. 624 , 634, A. L. Smith M.R. came to the conclusion that, the employer and contractor having agreed to be bound by the final certificate of the architect, the architect in relation to the issue of the certificate was 'to act impartially towards the building owner and the contractor, and this was his duty to both.' He held that it was not the architect's sole duty to protect the interests of the building owner against the builder. Collins L.J. was of the same opinion, holding that the architect was bound to exercise his judgment impartially between the parties and so that his position was that of a quasi-arbitrator.

Romer L.J., dissenting, began his judgment by stating his view of the principle to be applied. He said, at pp. 642-643:

'Suppose a person undertakes for reward to value or estimate for another work about to be done for his principal by a third person; in my opinion, he does not, so far as his principal is concerned, become in the position of an arbitrator in regard to his valuation or estimate, merely because he knows that his principal and the third person have by contract between them agreed that, in default of dispute previously arising with regard to the matter, his valuation or estimate is to be taken as conclusive, and as determining the price to be paid by his principal for the work to be done by the third person. In such a case, in giving his valuation or estimate, he would still be acting for his principal, and, so long as he acted without fraud, he would be under no obligation or liability to the third person, and, acting as he would do for his principal, if he was guilty of negligence, causing damage, would be liable to his principal in an action.
'In my opinion, the principle enunciated by Romer L.J. is the correct one. It should have been applied in Chambers v. Goldthorpe and the decision of the majority in that case should be regarded as wrong. It should be applied in this case. Here the architect is required to issue interim certificates for the 'total value of the work properly executed' and in valuing that work he has to use his professional skill and knowledge. He is not employed to be unfair to the builder. He is not required to determine a dispute between his employer and the builder. As I see it, there is no question of his having to act impartially between them. He must, if he exercises his professional skill and knowledge as it should be exercised, 757 assess the total value of the works properly executed at what he honestly believes to be its true value. If he does that, he is acting fairly.

The contract in this case contained an arbitration clause similar in all material respects to that in the contract in Chambers v. Goldthorpe. It began with the words 'Provided always that, in case any question, dispute, or difference shall arise between the proprietor, or the architect on his behalf, and the contractor.' That, to my mind, shows that the parties to the contract recognised that the architect in performing his duties under the contract would be acting on behalf of the employer. The inclusion of this arbitration clause of itself makes it highly improbable that the parties to the contract agreed that the architect should act as an arbitrator between them for then there might be an arbitration upon an arbitration.

In every case whether a person, who is to fulfill functions in relation to a contract between two other people, has to act as an arbitrator or quasi-arbitrator depends on the terms of the contract, and the decisions in Pappa v. Rose, L.R. 7 C.P. 32 in the Court of Common Pleas and in Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 were only correct if, on a true view of the contract, the broker in the former case and the average adjuster in the latter were appointed to act as arbitrators to resolve disputes between the parties to the contract which might arise or had arisen. In my opinion the contract in this case did not require the respondents so to act, and, that being so, they are, in my opinion, liable to the appellant for negligence in the discharge of the duties they undertook.

For these reasons in my opinion this appeal should be allowed.

LORD SALMON. My Lords, I will not weary your Lordships by repeating the facts nor the relevant sections of the R.I.B.A. form of contract which have already been fully recited by my noble and learned friend, Lord Morris of Borth-y-Gest.

This appeal raises the immediate question as to whether or not an immunity against being sued for negligence extends to an architect who, because of his negligence, has caused damage to his client, the building owner, by wrongly issuing an interim certificate. This question cannot, however, be satisfactorily answered without considering a wider issue, namely, the limits of the immunity which the law affords against claims in respect of negligence in general.

It is well settled that judges, barristers, solicitors, jurors and witnesses enjoy an absolute immunity from any form of civil action being brought against them in respect of anything they say or do in court during the course of a trial. This is not because the law regards any of these with special tenderness but because the law recognises that, on balance of convenience, public policy demands that they shall all have such an immunity. It is of great public importance that they shall all perform their respective functions free from fear that disgruntled and possibly impecunious persons who have lost their cause or been convicted may subsequently harass them with litigation: Rex v. Skinner, per Lord Mansfield C.J. (1772) Lofft. 55 , 56; Henderson v. Broomhead (1859) 4 H. & N. 569 ; Swinfen v. Lord Chelmsford (1860) 5 H. & N. 890 , 921; Marrinan v. Vibrate [1963] 1 Q.B. 528 and Rondel v. Worsley [1969] 1 758  

A.C. 191 . This does not mean that the law fails to recognise the obligation of judges, barristers, solicitors, jurors and witnesses to exercise care. The law takes the risk of their being negligent and confers upon them the privilege from inquiry in an action as to whether or not they have been so. The immunity which they enjoy is vital to the efficient and speedy administration of justice.

Since arbitrators are in much the same position as judges, in that they carry out more or less the same functions, the law has for generations recognised that public policy requires that they too shall be accorded the immunity to which I have referred. The question is - does this immunity extend beyond arbitrators properly so called, and if so, what are its limits?

It is well established that, in general, persons such as doctors, accountants, barristers (acting in an advisory capacity), valuers and architects owe their clients a duty to exercise reasonable care and skill in rendering the services for which they are engaged. If they commit a breach of this duty which causes their client damage, then they are liable to compensate him for the loss which their negligence has caused him. This is obviously just. The heresy (as it seems to me) has, however, grown up that if a person engaged to act for a client ought to act fairly and impartially towards the person with whom his client is dealing, then he is immune from being sued by his client - however negligent he may have been. In short, liability to compensate your client for the damage you have caused him solely by your own negligence is excluded because of your obligations to act fairly and impartially towards someone else.

May I give your Lordships some examples of the astonishing results to which this heresy leads?

A well-known dealer in l8th century English paintings is brought an l8th century English painting to value for a handsome fee. He is not told why his client requires the valuation. It may be because he intends to sell it or insure it, or perhaps just out of curiosity. The dealer values the picture (entirely honestly but wrongly) at £500. Relying on this valuation, the client asks £500 for the picture, and sells it for that sum. It is subsequently established that the picture was worth £50,000 and that this should have been obvious to anyone in the dealer's position who had exercised reasonable care and the skill which he professed. In such circumstances, the client would have an unanswerable claim against the dealer in negligence. Now suppose exactly the same facts, save that when the client brought the picture to the dealer he told him that the valuation was wanted because he was going to sell the picture to a friend, and the friend had agreed to buy the picture for the value which the dealer put upon it, providing he could afford to do so. It would appear on the authority of certain cases, to which I will refer later, that the dealer would then be immune from being sued by his client because of his additional duty to act impartially and fairly towards his client's friend. It is said that this factor, of itself, puts the dealer in the same position as if he were performing the functions of a judge or arbitrator; and accordingly, so the argument runs, public policy requires that he should have complete immunity in respect of his undoubted negligence, which had 759 admittedly caused his client a loss. I am afraid that I can find no sensible basis for such an astonishing proposition.

Take another example, an architect who has been engaged by a building owner to look after his interests in relation to the construction of a building is (as in the present case) the architect nominated in an R.I.B.A. form of contract entered into between the building owner and the contractor. Under that contract to which the architect is not a party, but of which he, of course, has knowledge, the parties agree, amongst other things, that the architect shall issue interim certificates stating the amount due to the contractor in respect of work properly executed, and that, within a specified period after the date of each certificate, the building owner shall pay the amount therein certified (clause 30). In the event of a dispute arising in relation to any such certificate, the contract provides that the parties may at any time submit the dispute to arbitration (clause 35).

No one denies that the architect owes a duty to his client to use proper care and skill in supervising the work and in protecting his client's interests. That, indeed, is what he is paid to do. Nevertheless, it is suggested that because, in issuing the certificates, he must act fairly and impartially as between his client and the contractor, he is immune from being sued by his client if, owing to his negligent supervision or (as in the present case) other negligent conduct, he issues a certificate for far more than the proper amount, and thereby causes his client a serious loss.

As in the case of the valuer, it is said that the architect is performing much the same functions and must, therefore, be regarded as being in the same position as a judge or arbitrator and must accordingly be accorded the same immunity. I confess that I can see no more reason for regarding the architect as being in the same position as a judge or arbitrator than there is for so regarding the valuer. No reason has ever been suggested. I suspect that this is because none exists. The descriptions 'quasi-arbitrator' and 'quasi-judicial functions' have been invoked but never defined. They cannot mean more than in much the same position as an arbitrator or judge. In reality, however, there are the most striking differences between the roles of the valuer and architect in the circumstances to which I have referred and the role of a judge or arbitrator. Judges and arbitrators have disputes submitted to them for decision. the evidence and the contentions of the parties are put before them for their examination and consideration. They then give their decision. None of this is true about the valuer or the architect who were merely carrying out their ordinary business activities. Indeed, their functions do not seem to me even remotely to resemble those of a judge or arbitrator. Moreover, in the case of the architect, the contract provided that the certificate was not binding and that, in the event of any dispute arising in relation to it, that dispute could be submitted to arbitration for decision. Like my noble and learned friend, Lord Reid, I suspect that the heresy that such valuers and architects are to be regarded as being in the same position as judges and arbitrators rests on the fallacy that since all judges and arbitrators must be impartial and fair, anyone who has to be impartial and fair must be treated as a judge or an arbitrator.

Finnegan v. Allen [1943] K.B. 425 (recently followed in Arenson v. 760 Arenson [1973] Ch. 346 ) is the case upon which the suggested immunity of the valuer rests. Suppose that Mr. Allen, the chartered accountant in that case, had been called in to value the shares in M. J. Gleeson Ltd. as between a willing seller and a willing buyer without being told the purpose for which his valuation was required, there can be no doubt that had he made his valuation negligently and any client for whom he had made it had thereby suffered loss, he would have been liable in damages. I do not understand how he could be immune from such liability merely because he was in fact sent a copy of a sales agreement which showed that the prospective seller and buyer of the shares had agreed to accept his valuation as the purchase price and that he was engaged by both to value the shares. In either case Mr. Allen would have carried out only what is the normal professional work of a chartered accountant. I cannot imagine how his knowledge of the agreement for sale could have affected the work which he did, his manner of doing it or his approach to it. I suppose that a cynic might say that in the postulated case he would have used all his care and skill lest he might be sued in negligence, whereas in the actual case - always supposing that he was familiar with the surprising view of the law which then prevailed - he would have taken much less care because he would have realised that he could not be touched except for fraud. I hardly think that public policy, even at its most unruly, could require immunity for a professional man in circumstances such as these.

My Lords, I desire to make it plain that all I am discussing is whether an action for negligence will lie on the assumption that negligence can be established. Everyone knows that there is no topic about which greater differences of informed opinion may sometimes exist than the value of shares in a private company unless it be the authenticity and value of certain pictures. It by no means follows that a professional valuation or opinion was negligently given because it turns out to have been wholly wrong. Nor does the fact that an architect's certificate was given for the wrong amount of itself prove negligence against the architect. Whether or not there has been negligence is, of course, a pure question of fact depending upon the particular circumstances of each case. I also recognise that in a particular case the facts may be such and the contract may be in such a form as to put an architect or a valuer in the same position as a judge or arbitrator. In which event he would enjoy the same immunity.

The supposed general immunity of an architect against a claim by his client in respect of a loss suffered by reason of the architect wrongly and negligently certifying a sum as due to the contractor is based on the majority judgment in Chambers v. Goldthorpe [1901] 1 K.B. 624 , in which the building contract was similar to the R.I.B.A. contract in the present case. The Court of Appeal rightly held that there was no material distinction between that case and the present and concluded, accordingly, that they were bound to find for the defendants. They reached that conclusion with marked reluctance since they clearly preferred the dissenting judgment of Romer L.J. So do I - for the reasons which I have already indicated.

Both in Chambers v. Goldthorpe and Finnegan v. Allen the Court of Appeal relied strongly upon a trilogy of cases which I do not find convincing and which indeed seem to conflict with other authorities to which I shall presently refer. The first of the trilogy was Pappa v. Rose L.R. 761 7 C.P. 32; L.R. 7 C.P. 525 . The defendant signed a contract as selling broker in the following terms: 'Sold by order and for account of Mr. D. Pappa, to my principals, Messrs. S. Hanson & Son, to arrive, 500 tons Black Smyrna raisins - 1869 growth - fair average quality in opinion of selling broker ...'

As appears from p. 34 of the report:

'There was no evidence to show that there was any recognised standard by which to estimate the fair average quality of Black Smyrna raisins generally, or the average of any given number of years, - they being an article of very limited demand in the London market, ...'

Nor is there anything to suggest that the defendant received any fee beyond his ordinary broker's commission. The defendant refused to pass the first two consignments on the ground that they were not fair average quality of 1869 growth. At the trial before Bovill C.J. there was conflicting evidence as to the quality of the raisins. The Chief Justice ruled that, on any view of the evidence or the contract, an action would not lie against the defendant because he had acted as judge or arbitrator in deciding the quality of the raisins. Accordingly he nonsuited the plaintiff.

The Court of Common Pleas upheld the non suit upon the grounds on which Bovill C.J. relied. No authority was referred to in any of the judgments save Jenkins v. Betham (1854) 15 C.B. 168 which the learned judges sought to distinguish.

The headnote in the report of the case in the Exchequer Chamber, L.R. 7 C.P. 525 , is misleading, for all the members of that court dismissed the appeal on the ground that the defendant had never held himself out as having any particular degree of skill in the valuation of Black Smyrna raisins. Blackburn J. said, at pp. 528-529:

'I do not stop to inquire whether the defendant stood in the position of an arbitrator or not. ... The case of Jenkins v. Betham does not affect this question. There, the defendants declared themselves to be persons possessed of proper skill in valuations.'

In my view, this case, as it emerged from the Exchequer Chamber, in reality only decided, no doubt rightly, that a man who did not hold himself out as possessing any particular degree of skill in assessing the quality of certain goods, could not be taken to have warranted that he did possess such skill. Accordingly, if he was appointed to assess the quality of such goods (incidentally without a fee) and, owing to lack of skill, made an honest mistake in his assessment, no action would lie against him on that account.

The second case of the trilogy was Tharsis Sulphur and Copper Co. Ltd. v. Loftus, L.R. 8 C.P. 1 . This was decided by Denman J. and the same three distinguished judges who had in the previous year decided Pappa v. Rose in the Court of Common Pleas. The plaintiffs were the owners of a cargo being carried by sea. The ship and cargo were damaged in a storm and incurred certain general average and other losses. The defendant was an average adjuster. The plaintiffs and the ship owners jointly employed the defendant for reward 762

'to investigate and examine the vouchers and accounts of the ... losses, ... and to ... prepare a statement showing the proportion of the ... losses, ... to be contributed and borne by the ... ship, ... and ... cargo respectively, according to the usage and custom of Lloyd's; ...' (see p. 2).

The plaintiffs and the ship owners agreed to abide by the defendant's apportionment. By their pleading the plaintiffs alleged that the defendant had acted with gross carelessness as a result of which they had paid the ship owners a sum far in excess of the amount due. They claimed this excess from the defendant as damages for negligence. The case came before the court upon demurrer and judgment was given for the defendant. The court, following its own decision in Pappa v. Rose, held that the defendant was immune from action because he was acting as an arbitrator or quasi-arbitrator. It was said that the only distinction between the two cases was that the first concerned lack of skill, and the second, chiefly lack of care, and that this distinction was irrelevant - as no doubt it was. I find the decision in the Tharsis Sulphur and Copper Co. Ltd. case difficult to accept. Contrary to what Bovill C.J. suggested during argument, there does not seem to me to have been any dispute between the parties. They both knew that a loss had been suffered which had to be apportioned between them, but there is nothing to show that they had any idea, let alone conflicting ideas, of what the correct apportionment should be. Each of them might have engaged a separate average adjuster to advise him; had these not agreed, a dispute could have arisen between the parties which they might have submitted to arbitration - a somewhat unusual course in business of this kind. Instead, they sensibly decided to avoid disputes and differences by jointly employing one average adjuster to advise them upon how the loss should be apportioned and agreed to accept and act upon his advice. I do not agree that he was employed solely to give his honest opinion. It was undoubtedly, in my view, an implied term of his contract that he would use the care and skill to be expected of a reasonably experienced and competent average adjuster: see In re Hopper (1867) L.R. 2 Q.B. 367 , 373. He may well have done so - but that is beside the point. He was engaged upon the ordinary business of an average adjuster in making his appraisal. I do not understand how public policy could in these circumstances possibly demand that he should be invested with an immunity against a claim for damages for a breach of the implied term in his contract. Moreover, the detrain laid down by the Court of Common Pleas in Pappa v. Rose, L.R. 7 C.P. 32 and the Tharsis Sulphur and Copper Co. Ltd.'s case, L.R. 8 C.P. 1 is very difficult to reconcile with Jenkins v. Betham, 15 C.B. 168 and Turner v. Goulden, L.R. 9 C.P. 57 . In each of those cases there was a sum admittedly due from A to B. The only question was as to the amount of that sum. A and B each appointed a valuer on the basis that if the valuers agreed a sum, then that was the sum which should be paid but that, if the valuers failed to agree, an umpire should be appointed. Both valuers knew that if they agreed a value, then their valuation would be final and conclusive as between A or B. In each case the valuers did agree and the sum agreed was paid. Then one of the parties sued the valuer he had employed for 763 negligently agreeing that sum and thereby causing him to suffer a loss. In both cases it was decided that the action would lie. In Turner v. Goulden, L.R. 9 C.P. 57 , 59, Lord Coleridge C.J. cited with approval what Cockburn C.J. had said in In re Hopper, L.R. 2 Q.B. 367 , 372-373:

'The authorities ... no doubt establish the proposition that, where the matter to be determined by the referee is merely one of value, that is not, strictly speaking, an arbitration. I am not at all disposed to quarrel with the cases ... but I think they must not be taken to comprehend every case of compensation or value; as where, in ascertaining the value of the property or amount of compensation to be paid, the matter assumes the character of a judicial inquiry, to be conducted upon the ordinary principles upon which judicial inquiries are conducted, by hearing the parties and the evidence of their witnesses. If it be the intention of the parties that their respective cases shall be heard, and a decision arrived at upon the evidence which they have adduced before the arbitrator, it would be taking too narrow a view of the subject to say that, because the object to be arrived at was the ascertaining of the value of property or the amount of compensation to be paid, the matter was not properly to be considered as one of arbitration.'

Lord Coleridge C.J. then said, L.R. 9 C.P. 57 , 60, and I would echo his words in the present case: 'There is nothing of that sort here.' Nor was there in Pappa v. Rose, nor in the Tharsis Sulphur and Copper Co. Ltd.'s case.

In In re Hopper Cockburn C.J., with whom Blackburn and Lush JJ. agreed, was in effect saying that the question as to whether anyone was to be treated as an arbitrator depended upon whether the role which he performed was invested with the characteristic attributes of the judicial role. If an expert were employed to certify, make a valuation or appraisal or settle compensation as between opposing interests, this did not, of itself, put him in the position of an arbitrator. He might, e.g., do no more than examine goods or work or accounts and make a decision accordingly. On the other hand, he might, as in In re Hopper, hear the evidence and submissions of the parties, in which case he would clearly be regarded as an arbitrator. Everything would depend upon the facts of the particular case. I entirely agree with this view of the law.

The third case of the trilogy was Stevenson v. Watson, 4 C.P.D. 148 , in which the plaintiff, a builder, sued the architect appointed under a building contract for negligently failing to certify sums alleged to be due to the builder by the building owners. The court in allowing a demurrer and giving judgment for the defendant relied upon what had been said by the Court of Common Pleas in the first and second case of the trilogy. I think that the decision in the third case was probably right, but not because of anything said in the first two cases. Under the very special terms of the contract in Stevenson v. Watson 'all questions or matters in dispute which [might] arise during the progress of the work or in settlement of the account' had to be left to the architect 'whose decision [was to be] final and binding upon all parties.' It seems to me that this architect may well have been put in the position of an arbitrator under the 764 exceptional terms of the contract. Moreover, since there was no contractual relationship between the architect and the builder, it is difficult to see how any action based on a duty of care could be got up on its feet against him; in those days the law of negligence was in a very early stage of its development.

In Stevenson v. Watson Lord Coleridge C.J. drew a distinction between a professional duty and a clerically duty. He concluded that the liability of a professional man to be sued for negligently giving a certificate or making a valuation or appraisal which he knew would be binding as between two others depended upon whether he was called on to use skill and judgment or only to exercise an administrative or clerically function. In the first case he could not be sued; in the second he could. Lord Denning M.R. made short work of that proposition in his dissenting judgment in Arenson v. Arenson [1973] Ch. 347 , 365-366. I respectfully agree with and adopt every word he said on that topic.

For the reasons I have indicated I have come to the conclusion that the trilogy of cases which were so strongly relied upon in Chambers v. Goldthorpe [1901] 1 K.B. 624 and Finnegan v. Allen [1943] K.B. 425 afford only a tenuous, if indeed any, support for the decision reached in those two cases.

I recognise that for many years the detrain which those cases enunciated has been generally accepted. As my noble and learned friend, Lord Reid, has said, it is succinctly expressed by Buckley L.J. in Arenson v. Arenson [1973] Ch. 347 , 370

'... where a third party undertakes the role of deciding as between two other parties a question, the determination of which requires the third party to hold the scales fairly between the opposing interests of the two parties, the third party is immune from an action for negligence in respect of anything done in that role.'

My noble and learned friend, Lord Morris of Borth-y-Gest, has cited passages from speeches in your Lordships' House from which it seems that the doctrine, being then unchallenged, was perhaps acceptable even here. This appeal is, however, the first occasion upon which your Lordships' House has had an opportunity of deciding whether or not the doctrine is good law. Clearly it is not a doctrine to be lightly overthrown, however fragile its foundations. Nevertheless I am convinced that, for the reasons I have given, it is contrary alike to principle, sound authority, reason and justice and that therefore we are obliged to overthrow it.

My Lords, I would accordingly overrule Chambers v. Goldthorpe and allow the appeal.

Appeal allowed.

Solicitors: Parker, Garrett & Co.; Grobel, Willey, Hargrave & Co.