Last edited 15 Mar 2020

Ampleforth Abbey Trust vs Turner & Townsend Project Management Limited

Ampleforth Abbey Trust (“The Claimants”) v Turner & Townsend Project Management Ltd (“The Defendants”) [2012] EWHC 2137 (TCC)

A letter of intent or a formal building contract and a Project Manager’s Duty.

The High Court considered whether a project management company was at fault by proceeding with a building project without putting a formal contract in place with the contractors.

Between 2000 & 2005, the Defendants acted for the Claimants as project managers on 3 separate building projects for the provision of new accommodation at Ampleforth College. The final project was significantly delayed and a dispute arose with the contractors, Kier, as to liability for liquidated damages in the sum of £750,000.

Kier were able to rely on the fact that no building contract had ever been entered into and were able to negotiate a settlement whereby the Claimants and Kier did not pursue each other for any further sums or damages due to the delay.

However, the Claimants then commenced proceedings against the Defendants arguing that they were liable for allowing all of the works to be undertaken by Kier under letters of intent and that they should have ensured that Kier entered a building contract expressly incorporating liability for liquidated damages for delay. The Claimants argued that it was extraordinary and unacceptable to just rely on issuing a letter of intent from time to time and that the Defendants had failed to exercise reasonable care and skill or comply with the standards and practice of the construction industry.

The Defendants argued that there were numerous reasons why it had not been possible to conclude a building contract with Kier during the project and they relied on the fact that it was accepted by the Claimant that, due to the need to complete the works as quickly as possible, it was legitimate to start the works on the basis of a letter of intent only.

The Court described a project manager as the representative of the employer for the purpose of co-ordinating the different aspects of the project. In this capacity a project manager's role involves acting as guardian of the client's interests. This includes dealing properly with the procurement of the building contractor and the building contract and, insofar as the project manager did not have the expertise to deal with legal, insurance, or other issues, it is their duty to advise the client to take expert advice in this respect from a relevant expert or professional.

Although the Court recognised the difficulties involved at the time, it held that the Defendants failed to appreciate how fundamental a contract is and the need to resolve the obstacles raised by Kier so as to ensure the contract was completed in or about April 2004 after the expiry of the initial letters of intent. By proceeding on the basis of a letter of intent only the Defendants put the Claimants at real risk because there were no detailed provisions covering the works and, in particular, no agreed provision for compensation in the event of delay.

Insofar as legal advice was required to deal with the contract, or the risks of proceeding without one, the Court held that the Defendants should have advised the Claimants to obtain such advice and it could not blame the Claimants for failing to do so. It also held that, the longer the Defendants allowed the works to continue without any contract, the more difficult it became to make the contractor enter one.

The Court then had to consider what would have happened if the Defendants had advised the Claimants that Kier should be required to complete the contract.

It held that there was a two-thirds chance Kier would have done so and, if it had, that the Claimants would have had a far better negotiating position in relation to liquidated damages as they could have relied on an express provision rather than having to argue there was some implied liability.

The Court concluded that, with the benefit of a contract, Kier could have been held liable for £340,000 by way of damages so, after factoring in the one-third risk that no contract would have been completed, this left damages of £226,667 payable by the Defendants.

NB an additional ruling was made in the case in relation to a conflict between a liability clause and insurance clause in conditions of engagement. See Professional Indemnity Insurance clause in conditions of engagement.

See also: Related findings in this case in relation to Professional Indemnity Insurance clause in conditions of engagement.

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