Judge slams construction manager in landmark case

Industry experts this week defended construction management despite the landmark judgment in the case of Great Eastern Hotel vs John Laing.

Laing, a former contractor, was criticised in court over its role as construction manager on a £61m hotel refurbishment. The ruling means that it will have to pay damages of more than £10m, although it may appeal.

This is the first court case to deal with a CM contract – previous disputes have been settled out of court.

Law firm Fenwick Elliott, which acted on behalf of the hotel, denied it would have a fatal impact on CM if the construction manager did its job effectively.

Partner Richard Smellie said: “If you are construction-managing properly you would see where your obligations were on this job in the first place. Construction management does carry a curious risk for all concerned but when done properly it can be efficient.”

The case hinged on whether a construction manager was liable for organising trade contractors and could therefore be held responsible for losses that ensued if this was not done properly. Judge Wilcox ruled that it was and that therefore Laing was liable.

Laing had a professional obligation to protect its client by giving objective advice. They were in breach of that obligation and thereby encouraged their client to throw good money after bad

Judge Wilcox’s judgment on Laing

The plaintiff in the case, which was heard at the Technology and Construction Court, was the Great Eastern Hotel Company, a joint venture involving restaurant group Conran and US hotelier Wyndham International.

The hotel was one of a handful of schemes for which Laing retained liability after it sold its construction division to O’Rourke for £1 in 2001.

The hotel had originally claimed £17m for breach of contract on the refurbishment, which was completed nearly a year late in 2000.

Construction management has been under a shadow since it was attacked last year during Lord Fraser’s inquiry into the £431m Scottish parliament project.

Mace chairman Bob White, two of whose colleagues gave expert evidence for the Great Eastern Hotel, conceded that the case would not do the reputation of CM much good but defended its record.

Tony Caletka was lacking in thoroughness in his research and unreliable by reason of his uncritical acceptance of the favourable accounts put forward by Laing

Judge Wilcox’s judgment on Laing’s expert witness

He said: “We are still using the procedure and are delivering successful buildings. The reality is there are few better ways of doing a complex and sizeable project than construction management. It’s still relevant in the right environment.”

In his 58-page summary of the verdict, the judge delivered an indictment of Laing’s performance on the scheme and expert witness Tony Caletka.

He said that Laing’s team had no construction management experience and that it had failed to report delays on a monthly basis from November 1997 onwards.

He found against Laing’s claim that project delays were caused by late design information.

His view of Caletka was described by one legal expert as “probably the worst criticism of a construction industry expert I have ever seen”.

The case only lasted 35 days instead of six months, the usual length for such a complex dispute.