The Trustees of the Ampleforth Abbey Trust v Turner & Townsend Project Management
Technology and Construction Court, July 2012
Ampleforth appointed Turner & Townsend (T&T) as project manager on three projects to construct accommodation at Ampleforth College. This case concerns the third project.
Kier was selected as main contractor and instructed to start work under a letter of intent in November 2003 while a JCT contract was finalised. The letter of intent included a date for practical completion, but made no provision for liquidated damages.
In spite of substantial agreement over the contract terms by March 2004, the contract was not signed. Over time, updated letters of intent were issued in its place, the last of which authorised around £5m of work. By September 2004 the project was behind schedule and practical completion was ultimately achieved in March 2005, four months later than intended and without a contract being in place.
The resulting dispute between Ampleforth and Kier was settled at mediation. Ampleforth then sued T&T alleging that it:
- should have advised of the limited protection afforded by letters of intent compared with the JCT contract; and/or
- should have taken, or advised it to take, resolute action to procure Kier’s execution of the contract.
The judge found in Ampleforth’s favour and awarded it, on a “loss of chance” basis, two thirds of the better outcome he found they might have achieved in a settlement with Kier if a contract had been in place.
Peter Stockill’s analysis
The judge did not say precisely what T&T should have done to discharge its duty of care to see that a contract was put in place. However, he considered that T&T’s approach demonstrated a failure to appreciate the importance of having a contract
in place. It wrongly believed that the letters of intent entitled Ampleforth to liquidated damages and the judge considered this a negligent misapprehension.
The use of letters of intent is, of course, commonplace, but T&T exposed itself to criticism by continuing to use them, thereby putting Ampleforth at risk, in circumstances where (so the judge found) T&T failed to: (a) follow up on its initial advice about the use of letters of intent to highlight the heightened risk of using them as the project matured and (b) take steps that could have resolved the outstanding issues and led to a contract being executed.
T&T argued that the contractor was “slippery” and that they it was managing the risk of them walking off site, but the judge was unimpressed by these arguments. He felt T&T showed a lack of resolve because it failed to appreciate the risks. This case highlights the importance of the project manager’s role in seeking to ensure that a contract is put in place and reiterates that chasing for the execution of a contract may not be sufficient to discharge their duty of care.
Project managers need to take stock as time passes, review their approach and advise their client of steps that could be taken. This requires the project management team to have a good understanding of the contractual documentation as well as commercial risks, or to recognise the need for advice on these issues. They should also be wary of making assumptions about their client’s understanding and advise them appropriately, considering how the maturing of the project may affect the client’s negotiating position.
Finally, T&T sought to rely on a clause in their appointment limiting its liability to the lesser of £1m or its fee. This was held to be unenforceable on the basis that it was inconsistent with the requirement for a higher level of professional indemnity insurance and it was not brought to Ampleforth’s attention, in spite of it being a change from the terms of T&T’s previous two appointments. Those seeking to rely on such clauses in their standard terms cannot be confident that they will be upheld unless they are highlighted in some way.
Peter Stockill MSc FCIArb is a partner in the construction team at law firm Berrymans Lace Mawer email: [email protected]
