QSs and performance bonds

Just how far does a QS have to go for his client? When a main contractor isn’t doing what he is supposed to do according to the contract, how much cajoling, coaxing, palavering, hitting the roof, is the employer’s QS supposed to do?

Cyril Sweett Ltd, top dog quantity surveyors (now called Sweett UK Ltd) got into a to-do with its developer client, Michael Wight Homes Ltd because the main contractor did the not uncommon foot-dragging when supposedly putting the performance bond in place. It was for nigh-on £100,000 being 10% of the contract value for building six houses in Somerset. Actually, the bond never did get in place. Then, guess what? The main contractor went bust.

Let’s face it, you QSs, architects, engineers, project managers have got an entire kit-bag of cock-ups that you ought to share with your client

The developer turned on Sweett because Sweett was the QS and employer’s agent. Seemingly there was a promise in the professional services contract that the QS would “prepare contract documentation and arrange for such documentation to be executed by the parties thereto”. “You failed to do that,” said Michael White Homes Ltd. “You also failed to tell me what the risks are of not having the bond in place.” And by now the client was deprived of £100,000 which almost certainly would have been paid out by the bondsman to the developer to pay for completing the works.

It’s fairly clear that a QS is supposed to think about the risks that are consistent with the particular construction works by a developer client - and jolly well point them out. The risk that a builder might go down the pan is a first-rate example. And when it came to the usefulness of a bond Sweett won all the brownie points by telling the developer how that device reduces risk. Let’s face it, you QSs, architects, engineers, project managers have got an entire kit-bag of cock-ups that you ought to share with your client.

Interestingly, the judge listed Sweett’s schedule of duties to the developer. It was here that duty No. 4 said (in short) “arrange for contract documents to be executed”. That’s where the bond was included in the contractual bundle of stuff. Neat too was Sweett’s list of “exclusions”. In other words, they told their client precisely what they were not going to do as well as what they were going to do. The judge also picked up on the fact that the Sweett folk were members of the RICS. The judge seemed impressed and expected old-fashioned professional behaviour. It’s both a privilege and a burden being a professional; you are easily sued if you fall below the standards expected.

It’s both a privilege and a burden being a professional; you are easily sued if you fall below the standards expected

Counsel for the developer argued that Sweett’s contract provided a strict duty to see that the bond was executed - meaning more than merely take reasonable care to arrange for it to be put in place. Well now, let’s look at the law as to professional services. First, there is what’s known as the default obligation on professionals; it is limited to taking, and exercise of, reasonable care. Second, it requires special facts or clear language to impose an obligation on a QS, architect, engineer, project manager, stricter than that of reasonable care. Third, that a professional man will not readily be supposed to undertake to achieve a guaranteed result, and fourth, that if he is undertaking with care that which he was instructed to do, he will not readily be found to have warranted to be responsible for a misfortune caused by another.

So, the court then examined the words that were being relied on to see if they could be construed as imposing an obligation on Sweett to ensure the main contractor executed the bond. Counsel for the developer argued the words meant “ensure”, “but” said the judge, “the word ‘arrange’ is used” - “arrange for the bond to be executed”. That’s not the same as ensure. That meant there was no language enough to impose a special obligation on Sweett. The duty was that “default” rule only. And when the judge looked at how hard Sweett tried to get the main contractor to stump up the cash to the Bondsman Insurance Company and sign up, he was entirely satisfied as to their endeavours. They chased and chased. The contractor simply didn’t want to fork out the premium. Eventually he simply refused to do it and by now the work was well under way.

What about withholding the £100,000 from interim payments to cover the risk? Well, the job itself was going well and promises about the bond had been made by the builder. So it was no failure by Sweett to recommend that type of aggressive action. Sweett had behaved impeccably. Claim dismissed.

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