Are you liable?

Don't make a misrepresentation
False statements to contractors made by your staff can render you financially liable

A quantity surveyor involved in an office development told the contractor that the project had planning permission. In fact, planning permission had not been obtained. The statement had been made to encourage the contractor to tender for the contract. As it turned out, the contractor had not relied on the statement and so the quantity surveyor was not liable. However, the case stands as a warning not to make statements on behalf of the employer that are not true. If you do and the person who you have made the statement to relies on it you may be liable.⁵

Insurance... it's your problem
If a contractor doesn't have insurance cover you may be next in line in the event of a claim

A firm of contractors were engaged to design and construct a dome for the storage of pulverised fuel ash. Due to defects in design the building collapsed causing losses in excess of £600,000. It was discovered that the contractor did not have indemnity insurance to cover the defects. The project manager was then in the frame for failing to ensure that appropriate cover was in place. Simply obtaining brokers details to evidence the insurance and passing them on to the employer is not good enough. You need to go further. If you don't have the expertise to advise on insurance you should either obtain expert advice or advise the employer to do so. ³

The world may be on your shoulders
As a project manager are you acting as principal or agent when entering into contracts?

A project manager was involved in the refurbishment and adaptation of a property in Chelsea and was engaged to enter into contracts for his employer. He was faced with the employer arguing that he was the principal under a contract and so was liable to the contractor. The project manager had believed that he was acting as the employer's agent. This is an important distinction. If you are the principal, you are responsible for anything that goes wrong in the contract with the contractor and could be liable if the employer breaches the contract. The distinction will depend on the facts of each case. Fortunately for the project manager, the court decided that he was an agent and had entered into the contract on his employer's behalf. If you want to make sure that you are not in the front line make it clear that you are entering into a contract on your employer's behalf and not on your own account and make sure your employer understands this too! ⁴

Health and Safety — Go to jail?
If you are the director nominated for health and safety you may face criminal law for breaches

If you are a director or are responsible for health and safety in your organisation you may personally be liable for health and safety failures. You cannot always hide behind your company. Recent HSC guidance suggests that a director should be nominated to champion health and safety issues. However, remember that if you do accept this responsibility, health and safety breaches could lead to criminal sanctions involving fines and/or imprisonment. Expectations are high. Beware the recent comments of an HSE investigating officer who said, "We would expect them to pay as much regard to health and safety as they do to the financial, production and quality functions of their business". In June 2000, a director of a scaffolding company was fined when the scaffolding, which had been grossly overloaded, collapsed causing injuries to several workers. It was held that everyone involved in the incident including the company director had some responsibility for preventing it.

You have a duty to warn!
Safety risks must be communicated in writing

A bakery burnt to the ground after some highly combustible panels used in its construction caught fire. The judge found that the project manager failed to advise his employer about the safety risks associated with the highly combustible panels, and said he had a specific duty to warn his employer about any serious or unacceptable risk. Note that an oral warning is not sufficient, so make sure that you set out any advice in writing. Interestingly, the project manager argued that his employer would have ignored his advice, if given on grounds that it would have been too expensive to use alternative materials. He did not succeed because it was found that the extra cost would have been modest and so the employer would not have necessarily rejected the advice. ²

Guilty by extension
Check your duties under the terms of your contract

Contractors were employed to build a six-storey hospital in London. The architect was found negligent in granting extensions of time because no reasonably competent person would have granted extensions of such excessive length. The project manager found that he was under the spotlight too, but lucky for him, his terms of engagement didn't require him to check the architect's assessment. His duty was merely to make sure that the architect dealt with the applications in a reasonable time and to ensure that the decision making process operated smoothly. Off the hook? Maybe, but make sure that you check the terms of your contract because duties may vary. Some employers may require that you check the architect's assessment and if you don't, you will be responsible. ¹