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Top Cases for Quantity Surveyors to Consider

This is the fourth article in our series of “Cases your profession needs to know”. Last month we rounded up cases for project managers, employer’s agents and contract administrators, and this month we are going to look at cases relating specifically to quantity surveyors (including their role as monitoring surveyor for a project fund).

It is the role of a quantity surveyor (‘QS’) to ensure that costs are kept within budget without compromising value for money or their client’s standards. They are usually engaged from the outset to conduct feasibility studies, through to valuing completed works and arranging payments.

As the law stands, a QS’ duty is usually limited to issues of quantity and not that of quality (which usually falls on the architect). However, it will be best practice for a QS to make regular visits to the site to monitor the contractor’s workmanship, while checking on the materials used and whether or not the works are confirming to the specifications and drawings.

The first case we will take a look at is that of Bank of Ireland UK) PLC v Watts Group PLC [2017] EWHC 1667 (TC). In this case Derwent Vale York Ltd (the “Developer”) acquired funding of £1.4m from the Bank of Ireland (UK) PLC (the “Claimant”) before going into liquidation.

The proposed development was the construction of 11 apartments by way of an extension to a single storey shell. Watts Group PLC (the “Defendant”) was retained by the Claimant to consider the costings that were submitted by the Developer and to approve facility drawdowns as the works progressed.

The Claimant committed to provide the £1.4m build-out facility, but 3 months before PC the Developer went into liquidation. After a liquidator was appointed, the Claimant was left with a loss of approximately £750,000.00.

The Claimant brought a claim on the basis that had the Defendant’s Initial Appraisal Report (“IAR”) been properly prepared, it would not have permitted the drawdown of the loan. The Defendant denied this allegation and argued that it was the Claimant’s negligent decision to lend that caused their loss.

The court rejected the Claimant’s allegation of negligence and breach of contract and found that when the Defendant produced their IAR, they were not in receipt of the relevant drawings which would have shown that the project was being built differently to the secured planning permission.

It was held that it was reasonable for the Defendant to conclude that the costs estimate and cash-flow analysis provided by the Developer were achievable and adequate. The court also ruled that the claim had failed on the matter of causation and that the true cause of the loss was the decision to lend, not the IAR. The Claimant would have loaned the money notwithstanding any comment in the IAR.

It seems in this case that the bank was the master of its own downfall. The court also emphasised the importance of the fee charged by the professional. In his ruling, Judge Coulson commented that “I regard the size of the fee as good evidence of the limited nature of the service which Watts were expected to provide”. It was held that the Defendant was not expected to provide a complete cost calculation (as contended by the Claimant) but simply an independent overview by an expert QS. The small fee was good evidence of the limited nature of service the Defendant was expected to provide.

This case should hopefully provide some optimism for professionals seeking to minimise their potential exposure to liability. It is important for QS’ to be wary of the terms of their appointment, fortunately for the Defendant in this case, it was held that they only had a limited scope.

In a more recent ruling of Russell v Stone (trading as PSP Consultants) [2019] EWHC 831 (TCC) judgment was also found in favour of the QS when the TCC dismissed a professional negligence claim brought against a consultant in respect of increased costs of completing a project.

In this case, Mr and Mrs Russel (the “Claimants”) appointed PSP Consultants (the “Defendant”) to carry out a project management, contract administration and quantity surveying role in relation to the construction of their home in Hampstead.

The general thrust of the claim was that the Defendant’s negligence caused the Claimants to spend significantly more on their property than they ought to have done. In particular, it was alleged that the Defendants failed to properly manage and/or advise on the tender process; had the Claimants been properly advised on the errors in the contractor’s tender, they would have taken the opportunity to reconsider and re-evaluate the project.

When handing down judgment, the Justice Jefford quoted the following judgment in William Clark Partnership Ltd v Dock St PCT Ltd [2015] EWHC 2923 (TCC):

"…establishing causation in construction related professional negligence claims against design professionals such as quantity surveyors and project managers is notoriously difficult precisely because of the difficulty in showing how things would have turned out differently even if the professional had not acted negligently."

On the facts of the case, the court held that the Defendant had not been negligent in the management of the tender process. In any event, even if the Defendant was found to be negligent, the claim would have failed on the issue of causation.

There was no evidence to suggest that any sums which exceeded the contractor’s tender were expended by reason of the Defendant’s negligence. The Claimants were also unable to establish that they have would have done something different had the Defendant warned of a risk of an overrun and what the outcome would have been on the balance of probabilities.

This case is a warning that causation does not automatically follow from the finding of negligence. It is a reminder of the high level of scrutiny that is applied by the courts in establishing causation.

The final case we want to highlight is that of Wattret v Thomas Sands Consulting [2015] EWHC 3455 (TCC), this is slightly different to the two cases above as this case had the TCC considering whether expert evidence should be permitted.

In this case, Wattret (the “Claimant”) engaged a chartered QS (with dispute resolution experience), Thomas Sands Consulting (the “Defendant”) to act on its behalf in respect of a dispute with its builder which had been referred to arbitration.

The arbitration involved a final account dispute which involved many issues including one about termination. At arbitration, an award was made against the Claimant.

The Claimant commenced proceedings against the Defendant alleging amongst other things, that the Defendant gave them over-optimistic views of the strength of their position in the arbitration; failed to advise on procedures available through NHBC and ADR; and failed to take legal advice; and failed to advise the Claimant to obtain ATE insurance.

The parties were unable to agree whether or not expert evidence would be permitted and the Defendant argued that it was a general rule that an allegation of professional negligence must be supported by a relevant professional with the necessary expertise and requested that expert evidence from a QS with expertise in dispute resolution be permitted. The Defendants also contended that the claim was not akin to a solicitor’s negligence claim, and that solicitors and QSs are regulated by different codes of conduct and have completely different training.

The Claimant argued that expert evidence should be restricted to what is reasonably required to resolve the proceedings, and it was not required in this case. Also, that on the facts, there ought to be no difference in principle between the standards of a solicitor and QS experienced in dispute resolution and therefore the court should be able to determine the case without expert evidence.

It was ruled that the Defendant could adduce expert evidence on the basis that it was standard practice in a professional negligence case that evidence from someone in the same profession is required. The evidence was strictly confined to that which was required, the parties agreed a list which would form an agenda upon which the experts were to provide evidence.

It should be noted from this case that although expert evidence may be required in professional negligence disputes, it is not an absolute rule and the courts will determine the issue on the facts presented to it. The court is also keen to control the provision of expert evidence making sure it relates to the issues that are in dispute and will be of assistance to the court.

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

 

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