The Supreme Court has affirmed the importance of engaging independent experts in construction disputes to resolve disagreements over deductive costs resulting from revised construction plans. The Court emphasized that arbitral tribunals should employ all reasonable means to ascertain facts, especially when disputes involve complex technical matters within the construction industry’s expertise. This ruling highlights the need for objective information to achieve fair and well-informed resolutions in construction arbitration.
Quantifying Fairness: When Construction Revisions Spark Expert Intervention
This case arose from a construction agreement between Federal Builders, Inc. (Federal) and Daiichi Properties and Development, Inc. (Daiichi) for the Orient Plaza project. Daiichi revised the construction plans, reducing the concrete strength, which led to a decrease in the required quantities of cement, steel bars, and labor. The dispute centered on how to calculate the deductive cost resulting from these revisions. Daiichi proposed calculating the deductive cost by comparing the quantities of materials required under the original plan with those under the revised plan, while Federal argued for comparing the guaranteed maximum quantities in the construction agreement with the quantities under the revised plan.
Because of these differing computations, Daiichi sought to commission an independent quantity surveyor to determine the actual quantities of materials required under both the original and revised plans. The Arbitral Tribunal of the Construction Industry Arbitration Commission (CIAC) denied Daiichi’s motion, stating that commissioning an independent surveyor was unnecessary unless both parties agreed. Daiichi challenged this denial in the Court of Appeals, which sided with Daiichi and ordered the Arbitral Tribunal to commission an independent quantity surveyor. Federal then appealed to the Supreme Court.
The Supreme Court upheld the Court of Appeals’ decision, emphasizing that the proper remedy to question the appellate court’s ruling was a petition for review under Rule 45, instead of a Special Civil Action for Certiorari under Rule 65. Regardless of this procedural defect, the Supreme Court affirmed that the Court of Appeals had not committed any grave abuse of discretion in reversing the orders of the Arbitral Tribunal. The Supreme Court reinforced the principle that arbitral tribunals must use every reasonable means to ascertain facts in each case, especially in disputes involving technical matters specific to the construction industry.
Article 1, Section 3 of the Rules of Procedure Governing Construction Arbitration exhorts arbitrators to “use every and all reasonable means to ascertain facts in each case speedily and objectively and without regard to technicalities of law or procedure.”
The Court also referred to Section 5, Chapter XV of the Rules of Procedure Governing Construction Arbitration, which says:
“Section 5. Appointment of Experts. – The service of technical or legal experts may be utilized in the settlement of disputes if requested by one of the parties x x x.”
The Supreme Court explained that denying Daiichi’s motion to commission an independent quantity surveyor prevented Daiichi from presenting evidence critical to its case. The Court highlighted that independent experts could provide invaluable objective information, crucial for resolving complex and contradictory claims made by the parties. The Court emphasized the significance of accurate and detailed information for the judicious resolution of construction disputes, especially concerning the quantities of materials required to complete projects under original and revised plans.
To illustrate, consider this comparative table:
| Arguments | Federal Builders, Inc. | Daiichi Properties and Development, Inc. |
|---|---|---|
| Formula for Deductive Cost | Compares quantities required under the construction agreement with quantities under the revised plan. | Compares quantities required under the original plan with quantities under the revised plan. |
| Role of Independent Survey | Unnecessary, as Daiichi already submitted estimates from an independent quantity surveyor. | Crucial for determining actual quantities under both original and revised plans; an independent survey ensures objectivity. |
In conclusion, the Supreme Court directed the Arbitral Tribunal to commission an independent surveyor to determine the actual quantities of materials required under the original and revised plans and to resolve the main case accordingly. This case clarifies the duty of arbitral tribunals to employ all reasonable means to ascertain facts, especially when technical expertise is necessary. It underscores the vital role that independent experts play in providing objective and detailed information essential for resolving construction disputes fairly and efficiently.
FAQs
| What was the central issue in this case? | The central issue was determining the correct approach to calculate the deductive costs resulting from revisions in construction plans and whether the Arbitral Tribunal should commission an independent surveyor to ascertain these costs. |
| Why did Daiichi request an independent quantity surveyor? | Daiichi sought an independent quantity surveyor to determine the actual quantities of materials required under both the original and revised plans, believing it was crucial for accurately calculating deductive costs. |
| What was Federal’s argument against the independent surveyor? | Federal argued that an independent surveyor was unnecessary because Daiichi had already submitted estimates from a quantity surveyor and that the original plans were irrelevant since they were never implemented. |
| What did the Court of Appeals decide? | The Court of Appeals set aside the Arbitral Tribunal’s orders and directed the Tribunal to commission an independent quantity surveyor to determine the materials required under the original and revised plans. |
| What did the Supreme Court rule in this case? | The Supreme Court affirmed the Court of Appeals’ decision, emphasizing that arbitral tribunals must employ all reasonable means to ascertain facts, particularly in technical construction disputes. |
| Why did the Supreme Court emphasize the need for an independent surveyor? | The Supreme Court highlighted that an independent surveyor provides objective information, ensuring a fair and well-informed resolution, particularly when parties present conflicting technical claims. |
| What does the ruling mean for construction arbitration? | The ruling emphasizes the duty of arbitral tribunals to seek objective evidence, especially in technical disputes, and reinforces the importance of independent experts in resolving complex construction disagreements. |
| What specific rule did the Supreme Court cite in its decision? | The Supreme Court cited Article 1, Section 3 of the Rules of Procedure Governing Construction Arbitration, which urges arbitrators to use all reasonable means to ascertain facts objectively and without regard to legal technicalities. |
In summary, the Supreme Court’s decision underscores the importance of unbiased, expert insight in resolving intricate construction disputes. By affirming the necessity of commissioning independent quantity surveyors, the ruling promotes equitable and informed resolutions, solidifying the role of arbitration as a reliable mechanism in the construction industry.
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Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Federal Builders, Inc. v. Daiichi Properties and Development, Inc., G.R. No. 142525, February 13, 2009