The recent case of The Trustees of Ampleforth Abbey Trust (the College) against Turner and Townsend Management Limited (the Project Manager) highlights the some of the duties owed to clients by project managers. The case happened to involve a construction project, but has wider implications for project mangers advising clients in relation to many other types of project.

The Project Manager was engaged by the College to procure the construction of a new girls boarding house at Ampleforth College in North Yorkshire. The College engaged Kier Regional Limited (Kier) as the contractor to complete the College in time for the next academic year. A letter of intent was initially issued to allow work to commence whilst design and budgets were finalised. However, the building contract was never concluded and instead the project proceeded under various letters of intent. There were eight letters in total, with the final letter covering the full contract sum and the duration of the works.

A dispute arose after completion and the College sought to levy liquidated and ascertained damages for delay (LADs) at the rate of £50,000 per week, as set out in the draft (but unfortunately unexecuted) building contract.

The letters of intent made no reference to LADs. The final letter of intent stated:

"neither of us will be bound by the intended contract unless the written document is executed by each of us"

Consequently Kier resisted the levying of LADs.

Following mediation, the dispute between the College and Kier was settled. The College then issued proceedings against the Project Manager for failure to exercise reasonable skill and care resulting in the College not being able to claim LADs.

HHJ Keyser sitting as a TCC judge found the Project Manger liable. In his view, the sheer number of letters of intent indicated that the signing of the building contract was seen as a "dispensable luxury" rather than a "fundamental".

Whilst letters of intent are commonly used in the construction industry, they should not used as alternatives to proper building contracts for the duration of a project, particularly in relation to significant developments such as College's project. The court found that the Project Manager's failure to properly advise the client had caused the College losses valued at £225,000 on the basis of the mediated settlement, which was less favourable than the College might have achieved if a proper building contract had been in place. The court considered that the project manager had an overarching role – he or she is the guardian of the client's interests and is vulnerable to criticism if anything goes wrong.

So what practical steps could a project manager take to protect its position?

  • Ensure that the scope of its services are clear in its appointment
  • Have good supervision and staff management systems, as on the facts of this case there had been a change in personnel with less experienced staff taking over partway through a project
  • Have good reporting systems to the client to minimise the scope for criticism
  • Be aware that non-developer clients are likely to be highly dependant on their project manager and rely on the project manager to guide them
  • In the current economic climate, where fees are keenly negotiated, document with the client any services which are expressly not included and/or to be performed by others.
  • Avoid allowing negotiations and the execution of contract documents to drift or get side tracked by budgetary or design considerations – ensure that proper documentation is agreed and signed as early as possible in the project. If this is not possible, document your attempts to get the contracts in place and keep the client informed.

This is likely to be the first in a line of cases so project mangers proceed with caution!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.