Contract Administrators Treading The Thin Blue Line

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An overview of common issues related to contract administration from our experience of regularly advising on such issues

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  • All of us construction professionals dread the complaint and possible claim against out PI. Why claim against the professionals
  • Contract Administrators Treading The Thin Blue Line

    1. 1. The role of the Contract Administrator – where do you stand? Jon Close (Partner) David Holmes (Solicitor)
    2. 2. Introduction <ul><li>Who are you? </li></ul><ul><li>The starting point of defining the responsibilities and liabilities of a contract administrator lies in the terms of engagement between that person and the employer, read in conjunction with the construction contract. </li></ul><ul><li>But that’s not the end of the story … what about … </li></ul><ul><li>Duties and obligations under common law, statute, and tort </li></ul><ul><li>Less common forms of contract </li></ul><ul><li>Employers behaving badly </li></ul>
    3. 3. The Duty of Care <ul><li>The standard of care imposed on a professional person at common law is to carry out its services with ‘reasonable skill and care’ </li></ul><ul><li>Bolam v Friern Hospital Management Committee [1957] 1 WLR 582; [1957] 2 All ER 118 </li></ul><ul><li>The same standard of care is also imposed on the provider of services by the Supply of Goods and Services Act 1982, Section 1 </li></ul><ul><li>Alternative wording: </li></ul><ul><ul><li>All skill and care </li></ul></ul><ul><ul><li>All proper skill </li></ul></ul><ul><ul><li>Due professional skill </li></ul></ul><ul><ul><li>Due skill and care </li></ul></ul><ul><li>Be careful – could impose a higher obligation than ‘reasonable’ </li></ul>
    4. 4. <ul><li>Townsend (Builders) Ltd v Cinema News & Property Management Ltd (1959) 20 BLR 118; </li></ul><ul><li>B.L. Holdings v Robert J. Wood & Partners (1979) 12 BLR 1; </li></ul><ul><li>West Faulkner Associates v London Borough of Newham (1994) 71 BLR 1; </li></ul><ul><li>Pozzolanic Lytag Ltd v Bryan Hobson Associates [1999] BLR 267; </li></ul><ul><li>1 TCLR 233; 63 ConLR 81; 15 Const LJ 135; </li></ul><ul><li>Royal Brompton Hospital NHS Trust v Hammond (No. 9) [2002] EWHC 2037 (TCC) </li></ul>
    5. 5. The Duty to Act Fairly and Impartially <ul><li>Sutcliffe v Thackrah [1974] AC 727, HL </li></ul><ul><li>“ The employer and the contractor make their contract on the understanding that in all matters where the architect has to apply his professional skill he will act in a fair and unbiased manner in applying the terms of the contract.” </li></ul><ul><li>An architect is not an arbitrator but he 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”. </li></ul><ul><li>AMEC Civil Engineering Ltd v Secretary of State for Transport [2005] 1 WLR 2339 at 2354, CA – the decision of the certifier does not have to be reached by a judicial process or comply with the rules of natural justice </li></ul>
    6. 6. <ul><li>Scheldebouw BV v St James Homes (2006) BLR 113 </li></ul><ul><li>“ There is no reason why we cannot appoint ourselves as the construction manager. This is a construction management contract whereby the construction manager, whoever that is, acts on our behalf to manage the works in relation to the contracts entered into between us and the trade contractors. Under construction management, as opposed to management contracting, the construction manager acts entirely as our agent to protect our interests. The construction manager is not appointed as some quasi independent certifier, as you imply, such as is the position of an architect, for instance, under a JCT contract … there is no obligation on us to act independently and impartially as there was not on Mace ”. </li></ul>
    7. 7. Tort <ul><li>Townsends Ltd v Cinema News, etc. Ltd [1959] 1 WLR 119 CA </li></ul><ul><li>Reliance </li></ul><ul><li>Hedley Byrne v Heller & Partners [1964] AC 465, 503, 530 and 539 HL </li></ul><ul><li>But the consultant would probably not be liable if he expresses his statement to be given “without responsibility” or otherwise in such a way as to show that he does not accept a duty of care towards the contractor </li></ul>
    8. 8. The Employer’s Agent <ul><li>The employer’s agent is the employer’s representative and their relationship is governed by the law of agency </li></ul><ul><li>Dallman v King (1837) 7LJ CP 6 </li></ul><ul><li>the approval of the employer is not a condition precedent to payment </li></ul><ul><li>if the work does not meet with the employer’s approval he cannot refuse to pay under the contract, but can only seek a reduction in the contract price by way of set-off, or counterclaim for damages </li></ul>
    9. 9. The common law position - defects <ul><li>Does the agent have a duty to disclose defects in his own work? </li></ul><ul><li>Chesham Properties Ltd v Bucknall Austin Project Management Services Ltd [1996] 45 Bliss 4 </li></ul><ul><li>‘ provide management from inception to completion … appoint and co-ordinate consultants, construction managers, agents and contractors; monitor time cost and agreed targets; monitor progress of the works’ </li></ul><ul><li>“ Although what is to be monitored is not in this case explicitly the performance of the other consultants there is not much point in reporting on failure to meet time and cost targets or to maintain due progress of the works if the reports do not attempt to identify the causes of those failures” </li></ul>
    10. 10. ECC (NEC) and PPC2000 contracts <ul><li>Is the Project Manager under the ECC (NEC) Form of Contract an Independent Certifier? </li></ul><ul><li>Costain Ltd v Bechtel Ltd [2005] EWHC 1018 TCC </li></ul><ul><li>PPC2000 provides that the partnering team members owe each other a duty to use reasonable skill and care appropriate to their respective roles, expertise and responsibilities. </li></ul>
    11. 11. Employers Behaving Badly <ul><li>Page v Llandaff and Dinas Powis Rural District Council (1901) Hudson’s BC 4th ed. Vol.2 316 </li></ul><ul><li>Hickman & Co v Roberts (1913) AC 229 </li></ul><ul><li>“ in the face of their instructions to me I cannot issue a certificate whatever my own private opinion in the matter” </li></ul>
    12. 12. DWH <ul><li>Steps in Selecting Contractors & Contracts </li></ul><ul><li>Supervision </li></ul><ul><li>Administration of Building Contract </li></ul><ul><li>Certification </li></ul>
    13. 13. Steps in Selecting Contractors & Type of Contract <ul><li>Insolvency </li></ul><ul><li>Warranties, bonds and PCG’s </li></ul><ul><li>Giving recommendations </li></ul>
    14. 14. Water leak
    15. 15. Water leak
    16. 18. Heathrow Express
    17. 19. Channel Tunnel
    18. 20. Channel Tunnel
    19. 21. Level of Supervision <ul><li>Jameson and Smith (1899) </li></ul><ul><li>McGlinn and Waltham Contractors Limited (2007) </li></ul>
    20. 22. Administration of Building Contract <ul><li>Swine Flu </li></ul><ul><li>Extravagant expenditure </li></ul><ul><li>Jubilee Line Extension Project </li></ul><ul><li>Failure to proceed regularly and diligently </li></ul><ul><li>Incorrect Certification </li></ul><ul><ul><li>Completion non – completion </li></ul></ul><ul><ul><li>Financial – withholding notices etc </li></ul></ul><ul><li>Impartiality </li></ul>
    21. 23. Jubilee Line Extension Project
    22. 24. Jubilee Line Extension Project
    23. 25. Summary <ul><li>Do consider risk of insolvency </li></ul><ul><li>Do check work as often as is necessary </li></ul><ul><li>Don’t rely on building control or any other body </li></ul><ul><li>Act impartially and don’t over / under certify </li></ul><ul><li>Do bring in other consultants where appropriate </li></ul>
    24. 26. Thank you <ul><li>Jon Close </li></ul><ul><li>01242 248278 </li></ul><ul><li>[email_address] </li></ul><ul><li>David Holmes </li></ul><ul><li>01242 248268 </li></ul><ul><li>[email_address] </li></ul>

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