A contractor on a design-and-build job that gets duff advice and loses money may be tempted to sue whoever gave it that advice. Well, that’s easier said than done
The industry is probably facing more claims against consultants than at any time since the early nineties. But over this period, the landscape has changed dramatically. Now, claims are mostly driven by contractors undertaking design-and-build contracts in situations where the construction contract itself is fixed price or lump sum, so there is little or no prospect of recovery from the client. Much is said about the consultant’s duty to take reasonable care, but what does this really mean? And when and how can a claim by a contractor succeed against a consultant?
First, there must be a contract between the contractor and consultant. Operating as if there were a contract or as if novation had taken place is not good enough. Only in exceptional circumstances will a claim outside a contract relationship succeed.
The consultant’s services can be divided into those at tender stage and those following contract award, and each has its own difficulties.
Consultants often play a key role in assisting a contractor to price the job. The types of negligence claim that arise at this stage are when the contractor discovers, following a successful tender, that its allowance for certain elements of the work has been too low. There is no change to the works so it can’t recover from the employer. The question then is whether it can claim against the consultant. There are some principles to bear in mind here:
- A shortfall between the tender price and actual quantities or prices is not proof of negligence. In the 1996 case between Copthorne Hotel and Arup Associates, the pre-tender assessment of piling costs was less than half the actual costs, with no variations. In this case, negligence was not established.
- There is unlikely to be one definitive figure as to what should have been allowed by the consultant – if the figure provided is within an acceptable range, that will be sufficient to get the consultant off the hook.
- The contractor must prove it relied on the figures provided by the consultant. For example, in Gable House Estates vs Halpern Partnership, 1996, it was shown that the employer would have taken a course of action regardless of the consultant’s actions, which meant that there was no loss recoverable.
- Evidence of a shortcoming in the standards of the consultant’s advice will normally be expected from an expert witness in the same field, who will interpret the standard of reasonable skill and care.
- The difficulty in succeeding with a claim for negligence pre-tender is that of establishing what the contractor would have done if appraised of the correct information. Would it have increased its tender? Would it have won the job? If the increased price would not have won it, what is the loss to the contractor? Is it the loss of profit on the whole job? How might that be established?
A carefully drafted consultant’s appointment, recording what is expected of and relied upon from the consultant, is essential
The consultant will typically provide information to the contractor and subcontractor that they then use to develop and co-ordinate the design. Post-tender issues may include the late supply of drawings or a design that does not meet regulations or codes of practice.
Even without express terms to this effect in the consultant’s appointment, such obligations are likely to be implied.
The contractor must show first that these drawings were late or contrary to Building Regulations. Then it must prove that a loss has been suffered as a result. Was the contractor held up waiting for these drawings or was it late for other reasons?
Whether the design complies with the Building Regulations or any other code of practice may be a matter of judgment. Is it obvious that it doesn’t comply? The extent of the loss may be more easily measured than with pre-tender claims but the cost incurred as a result of any such failures has to be clearly identified.
The task of establishing negligence and associated loss is not easy, so to avoid unnecessary complication, a carefully drafted consultant’s appointment recording what is expected of and relied upon from the consultant is essential.
Lindy Patterson is a partner in Dundas & Wilson.
Original print headline: 'Contractors vs consultants'.