UK: Project Management: The Liability and Standards Expected of a Project Manager

Last Updated: 14 July 2011
Article by Nicholas Gould

Introduction

The services offered by Project Managers ("PMs") vary considerably, as do the qualifications and experience of the people putting themselves forward for this role. There is no defined group of services for them to undertake and only a limited number of standard form contracts for their performance. The qualifications and experience of people practising as PM may stem from the professional side of the construction industry, as in Architects, Quantity Surveyors or Engineers, or may emanate from the contracting side, such as in the management teams of major main contractors.

The package of services offered may include providing, through others, all the design and consultancy services required for the project, with or without co-ordinating or chasing up the administration and supervision of any relevant construction main or sub-contract(s). In other cases, a PM may simply exist as an additional tier of advice and administration between the Architect/Engineer on one hand and the Employer on the other, in other words act as the Employer's agent in all contractual matters, sometimes including the engagement and briefing of the Architect, the Quantity Surveyor and other consultants.

The role and services of a Project Manager

The Chartered Institute of Builders has produced a Code of Practice for Project Management for Construction and Development. The definition of project management in the 2002 third edition is worth comparing to the 2010 fourth edition. The third edition stated:

"Project management is the professional discipline which separates the management function of a project from the design and execution functions".

The fourth edition states that project management is:

"...an established discipline which executively manages the full development process, from the client's idea to funding, co-ordination and acquirement of planning and statutory controls, approvals, sustainability, design delivery, through to the selection of procurement of the project team, construction, commissioning, handover review, to facilities management co-ordination".

As with all construction professionals, the primary obligations owed will be found in the express and implied terms of the PM's appointment. As there is, as yet, no formal legal recognition of a distinct profession of PM, it is likely that when ascertaining the relevant duty of skill and care, the court will look at the profession from which the PM comes. In other words, if the PM is an Architect, the standard will be the standard of skill and care to be expected of a reasonably competent architect holding himself out as carrying on project management work.

Legal liability

A number of general observations regarding the role of PMs were made in the case of Royal Brompton Hospital NHS Trust–v- Hammond (2003) 88 Con LR 1 in 2003, when the Judge said that:

  1. Project management is still an emergent professional discipline, in which professional practices as such have not yet developed or become clearly discernable. The standard of care required of a PM is therefore likely to depend upon his particular terms of engagement and of the demands of the particular project;
  2. Nevertheless it was clear that a central part of the role of PM was to be "co-ordinator and guardian of the client's interest";
  3. Moreover, the terms of engagement of other consultants will be material in defining the scope of the PM's duties, since duplication of the function is not expected. For example, on the facts of that case, although the Architect was the contract administrator formally appointed under the contract, that function had been transferred de facto to the PM;
  4. The PM is the Employer's primary representative and should be regarded by other consultants as, in effect, an Employer (albeit a highly informed Employer) and should be kept fully advised by them. The expertise and knowledge of the PM will affect only the extent to which advice needs to be spelled out; the essential elements of the advice must always be clearly given although it may be thought to be pointing out the obvious;

In the case of Chesham Properties Limited –v- Bucknall Austin Project Management Services [1996] BLR 2, the claimant sued both the Architect and the PM in respect of what it alleged were excessive extensions of time together with loss and expense awarded to the Contractor. The Court found that where it would have been apparent to a reasonably competent PM that the Architect, Engineer and/or Quantity Surveyor were not performing their respective duties, he had an obligation to inform the Employer. The case illustrates the potential width of the duties owed by PMs managing the professional input of a variety of multi-disciplined contributors, particularly given that the conventional professional team had been engaged for some period of time before the PM came on board. The Judge was of the view that:-

"The Project Manager was plainly under a duty, on the true construction of the contract in such terms and made in such context, to report to the plaintiff on deficiencies in performance on the part of its co-defendants."

There are relatively few reported cases concerning PMs alone; most claims are likely to be ancillary to claims against other professionals. When considering how much of the loss should be borne by the PM, the court should have regard to the extent to which poor management was really the cause of the problem. In Palermo Nominees Pty Limited and Micro Bros Pty Limited –v- Broad Construction Service Pty Limited (Supreme Court of Western Australia, Parker J, CIV 2439 of 1996, the PM was held to have fallen short of their contractual duties and undertakings by failing to recommend the appointment of an external consultant to report on internal acoustics in respect of a project involving the design and construction of a nightclub.

The case of Pozzolanic Lytag Limited v Bryan Hobson Associates [1999] 89 BLR 267 considered whether a project manager owed a duty of care to the client to ensure that the professional indemnity insurance of the consultants was adequate. The case concerned the construction of a concrete dome, which due to a design defect collapsed causing considerable financial loss to the employer. The main contractor was primarily liable under the JCT Design and Build Form of Contract, but did not maintain adequate insurances required by the contract.

The TCC Judge held that the defendant engineer was liable to the employer for not ensuring that the contractor had adequate professional indemnity insurance, and for not ensuring that professional indemnity insurance was in place. The defendant engineer pleaded contributory negligence on the part of the employer for not himself checking the insurance. This plea was rejected by the Judge. The Judge held that the fact that the PM lacked the expertise necessary to assess the adequacy of the insurance arrangements which the Contractor did have in place did not relieve them of their responsibility. They could not simply act as "post-box".

The "good working rule" in Pozzolanic Lytag

The key question in Pozzolanic Lytag was set out on page 3 of the judgment:

"The case raises questions as to the scope of the duty owed by projects managers to their clients to ensure that suitable insurance arrangements are put in place by contractors."

In Pozzolanic Lytag reference was made to the Code of Practice for Project Management for Construction and Development. Although there was a misapplication of the 1996 edition the author listed duties and responsibilities undertaken during the management of a construction contract. The list included:

"(l) Compile all contract documents ... establish the client's requirements on such matters as ... insurance requirements ...

(o) ... Ensure the contractor has complied with insurance and bonding requirements".

Mr Justice Dyson accepted that this was "a good working rule" as to the scope of the duties to be undertaken by a project manager in relation to insurance. There were two caveats:

(i) There should not be a "slavish" application of the list; and

(ii) The list is subject to any "special requirements" made between the client and the project manager.

Mr Justice Dyson came to the conclusion that the project manager in that case owed a duty to the employer to take reasonable care to "ensure" that there was in place insurance that would cover the contractor's liabilities in respect to the building contract. No insurance was in place. The real or effective cause of the loss was the project manager's failure to ensure that the contractor had taken out the relevant insurance.

What does a PM need to do in order to "advise"?

In Pozzolanic Lytag Mr Justice Dyson stated on page 8:

"If a project manager does not have the expertise to advise his client as to the adequacy of the insurance arrangements proposed by the contractor, he has a choice. He may obtain expert advice from an insurance broker or lawyer. Questions may arise as to who has to pay for this. Alternatively, he may inform the client that expert advice is required, and seek to persuade the client to obtain it. What he cannot do is simply act as a "post box" and send the evidence of the proposed arrangements to the client without comment."

Mr Justice Dyson took the view that a project manager was to act in a proactive manner in respect of the insurances. Does this obligation relate only to the contractor's insurances, or does it extends to insurances that the Employer may need to obtain? Mr Justice Dyson was of the view that a project manager must inform the client and "seek to persuade the client to obtain" appropriate insurances. It is not adequate to simply act as a "post box" by sending evidence of the proposed arrangements to the client without comment.

The use of the word "persuade" suggests that a project manager should do more than just advise, but should make very clear to the client the importance of dealing properly with insurance. Also he is suggesting that even where the contractor is to take out the insurance, the client, meaning the employer, could be advised by the project manager to take out the insurance.

The case of Six Continents Retail Limited v Carford Catering Limited [2003] EWCA Civ 1790 concerned the construction of a restaurant which was damaged by fire during construction. Six Continents were the project managers and they engaged Carford to design and install the kitchen equipment. Once the restaurant had reopened, there was a problem with the spit-roaster. Carford had failed to follow the spit-roaster's manufacturing installation guidelines. The project manager had a duty in his appointment to check the condition and nature of the spit-roaster.

At first instance, the project managers were not liable. However, the Court of Appeal decided that the project manager was responsible. The project managers had escaped liability because they sent their client a letter from the spit-roast manufacturer that set out the recommendations for installation, but these were ignored by the restaurant. The Court of Appeal decided that simply forwarding a letter was not adequate. The project manager needed to be more proactive and should have assessed the fire risk and warned the client in much clearer terms.

Conclusion

These cases confirm a growing trend towards establishing some degree of legal accountability in the performance of project managers, albeit that the precise parameters of the duties owed are still evolving. In conclusion, the liability of project managers is onerous. They are not simply to act as a post-box, but they must fill their proactive and all-embracing planning, management and co-ordination role for the project. They need to think clearly ahead, advise the client accordingly about the costs risks and time implications of the project, not just at the start but on an ongoing basis.

This is an edited extract from a longer article on this topic by Nicholas Gould. To see a full copy of this article please go to www.fenwickelliott.com/articles/other

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nicholas Gould
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.