Strict liabilities case study no.2

This second example concerns a case that was determined at arbitration. As with the Haswell case, the dispute was between a consultant firm and its design and build contractor client.

Griffiths & Armour
04 September 2014

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The background to the dispute is interesting as it also highlights some of the practical risks that can arise during novation [for more on novation risks, click here]. 

The project was for the construction of a new retail park and the consultant was originally employed as the developer’s designer. The engineer continued to work for the developer for 6 months preparing the civil and structural engineering designs. 

Whilst the consultant interpreted these requests as alterations to the programme, this approach was not formally agreed with the contractor. 

The developer then entered into a design and build contract with a contractor for the completion of the project. This contained a commitment from the contractor to complete the first phase of the project within 9 months. This was an extremely tight timeframe given the nature of the project and the fact that elements of the design required the Local Authority’s approval, which had yet to be obtained. The reason why the contractor committed to such a tight programme is unclear, but could well be down to a lack of due diligence on his part during the tendering process.

Shortly after the contractor’s appointment, the consultant’s appointment was novated from the developer to the contractor. At this point, the consultant was issued with a revised design programme by the contractor. The consultant made it clear that the programme was unattainable and revised programmes were issued on five occasions over the next few months.

Whilst disagreements over the programme were being resolved, the consultant’s team responded to a large volume of requests from the contractor for information to be issued on specified dates. The volume of information release requests issued by the contractor and the speed at which they were issued was such that the consultant had to give them priority over other elements of the programme.

Whilst the consultant interpreted these requests as alterations to the programme, this approach was not formally agreed with the contractor. 

The project was completed some 6 months late, as a result of which the contractor incurred significant additional costs and had to pay liquidated damages to the developer. The contractor sought to recover all of these costs from the consultant alleging that he was the sole cause of delay to  the project.

The contractor alleged that the consultant had not met theprogramme and he was therefore responsible for the delays.

The consultant, on the other hand, argued that the programme had always contained dates that were unattainable and that he had drawn attention to this fact whilst producing his design work within a reasonable time having regard to what could be achieved through the exercise of reasonable skill and care. 

Outcome

In reaching his decision the arbitrator focused on the following clause in the consultant’s conditions of contract:

“The consultant shall proceed regularly and diligently to carry out and complete the Services exercising reasonable skill and care in accordance with the programme.”

The arbitrator interpreted the latter part of this clause as imposing two separate obligations on the consultant, as follows:

1. a duty to “complete the Services exercising reasonable skill and care”; and,
2. a duty to “complete the Services in accordance with the programme”

On this interpretation, the two duties are mutually exclusive. What is more, the second duty imposes a strict obligation to comply with the programme, leaving no room for error.

Whilst the arbitrator’s interpretation of the clause may seem surprising and even a little harsh, it is not particularly unusual and merely reinforces the precedents set by the Courts in other similar cases.