Letters of intent: I demand to see the manager

The idea of being a project manager has its attractions. But watch out, one of our best has just had its fingers burnt: Turner & Townsend Project Management Ltd. Burnt to the tune of £226,000. That’s what it has to stump up in damages to its client, Ampleforth Abbey Trust. I will tell you the story.

First though, this idea of having a project manager consultancy was not heard of that many years ago. Some newer forms of contract talk of a project manager but the title now pops up in all sorts of building contract endeavours, regardless of contractual small print. Project manager as a title can mean all sorts. Is it someone who is the contract administrator dealing with extensions of time, variations, valuations, certificates, and so on? Is this person managing the build-up to the project, managing expectations, managing resources, managing all the client’s affairs? Tricky. In this Turner & Townsend litigation the judge found that Turner & Townsend as project manager was “coordinator and guardian of the client’s interests”. That’s a big remark and a big job.

Kier Northern was the main contractor at Ampleforth College, York, for its new boarding house. It was all completed in November 2004. No problem arose about quality; but the work took longer than envisaged. Kier held its hand out for an extension of time and money. Ampleforth said no; it held its hand out for £750,000 liquidated damages. The end of that story is that Kier and Ampleforth did what we all used to do 100 years ago. Kier dropped its claim for prolongation and Ampleforth dropped its claim for the liquidated damages. Ah, but its not the end of the project manager story.

Get into the contract and its base line is an ordinary but crucial implied promise - you will exercise reasonable skill and care in the performance of your job, whatever the job

Turner & Townsend had acted as project manager for Ampleforth for five years. They became good friends. Three fair sized construction projects were completed in that time. An oddity, and a tad out of the ordinary on the latest job, is that Kier did all its work by way of a series of letters of intent issued as the job unfolded. Ages after Kier completed the project, the contract documents were signed up, though strangely signed up on terms at a mediation.

The deal in the now signed documents said there were no liquidated damages for delay and, I assume, no damages for delay at all. It all seems artificial but that became the deal and Kier went home.

But Ampleforth turned on Turner & Townsend. It called upon Turner & Townsend to pay the liquidated damages. I don’t think I have seen that sort of circumstance before. True, I have seen a letter of intent to get things going. Then seen two or three more letters of intent while each side indulges in bamboozling each other. But this one sticks out like a sore thumb. I am guessing, but I suspect that while Ampleforth’s lawyers were beavering away with the main contractor dispute, they cast a beady eye on whether the project manager let its client down.

See that phrase again “coordinator and guardian of the client’s interests”. Seemingly and sensibly, Kier and Ampleforth’s original contract deal was not to be a deal until the documents were signed. And they were never signed. Meanwhile by the way, everyone played the JCT rules as though they were in force. They were not. Presumably, Ampleforth’s lawyers could see that nailing Kier for the liquidated damages was unlikely to succeed even if Kier was not entitled to an extension of time. So where now? Go to the project manager’s door and ask it why the blazes this letter of intent affair was allowed to drag on? In every-day language, just ask what effort Turner & Townsend put in?

Get into a contract, any contract, and its base line is an ordinary but crucial implied promise. It says: you will exercise reasonable skill and care in the performance of your job, whatever the job is. It’s the same promise that arises out of the Supply of Goods & Services Act 1982. Escape from that is rare. The project manager role is, I guess, within the category of professional services. So the test for the standard of care is the ordinary standard of that profession. Would the opinion of that profession indicate thumbs up or down to the performance of this particular project manager?

Experts were wheeled into court to give their unbiased opinion about standards, or rather, the effort to be put in by a project manager, any project manager, to get the contract signed up and letters of intent dumped. I don’t think the judge needed all this expert help. There is an impressive remark by him tucked away in his detailed judgment: the nature of the functions under consideration involve the exercise of practical judgement and even common sense (of a project manager) rather than questions of deficiency in a technical skill.

The court decided Turner & Townsend owed a duty to exercise reasonable care and skill for the purpose of procuring from Kier a signed building contract. That duty was breached by insufficient focus on the matters holding up the signature. It was also breached by not bringing pressure on Kier to finalise the contract. These breaches by Turner & Townsend caused Ampleforth loss in that they lost the chance in their dispute with Kier of claiming liquidated damages. That loss of chance is calculated at £226,000 being the size of chance had Kier signed up to the contract.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple