During the ground works it was discovered that part of the ground was unsuitable. The DTP was responsible (pre-novation) for the geotechnical investigations, which they commissioned Borers LTD (‘specialist’) to carry out. On enquiry the specialist advised that they could only test 50% of the site, as access was restricted to the remaining site by the occupying school for pupil safety reasons. This was reported back to DTP whom made the decision that a 50% test would be a sufficient enough in most circumstances.
Due the ground issues the project has been repositioned, this potentially added 8 weeks to the completion date and increased costs from the contractor along with additional costs for re-engineering/designing the project, totalling £1m. The DTP/contractor is not accepting liability for the failure.
Further to this, whilst the site was closed waiting for a revised solution, a pupil managed to gain access to the site compound and an unlocked container which contained chemicals. Unfortunately the chemicals were spilt causing the pupil to suffer severe burns. The site remained closed for 2 weeks whilst HSE conducted investigations.
The client is claiming the additional £1m costs (breakdown below) should be absorbed by the contractor as they are responsible for the design. The contractor is stating it is the client’s responsibility as the DTP was their responsibility during the original investigations. The specialist is stating that they advised the DTP of the results and that they are not accepting liability for ground conditions which were not apparent unless a full survey was conducted, which the DTP accepted. On top of all this the pupils parents are planning to sue the contractor.
Contract Selection
The client being a public one was working in line with OGC’s recommendations in selecting the NEC3 Short Form contract, which is also endorsed by Latham (1994).
The contract is a very clear and simple document focusing on good management and relationships of the parties involved, clause 10.1 of the core clauses requires the Employer and Contractor to “act in a spirit of mutual trust and cooperation”. The contract is suitable for many disciplines and adaptable for use with in-house, contractor led, or combination design.
There are provisions for early warnings, programmes and compensation events, variation orders, delays, ground conditions etc.
The contract interface is noted as being between the client and contractor, which was suitable for this instance as the client would be dealing directly with the contractor after the DTP was novated, post contractual signing.
Apart from this, the contract document provided adequate consideration for contractor’s offer, client’s acceptance, price list, conditions of contract, works information, defects and payments along with:
Contractor’s Responsibilities
Work to be provided, sub-contracting and access are detailed as well as completion date, defects and the price for work done to date. The responsibility of full design liability was stipulated here.
Compensation events
There is a list of events covered including events that delay completion by more than 2 weeks and that which is out of the reasonable prevention of the contractor.
Termination & Disputes
Comprehensive termination and dispute clauses, with amending clauses to cover contracts that fall under the Housing Grants, Construction & Regeneration Act 1996.
The contracts performance in general was good with clear definition of responsibilities and accountability. Unfortunately some of the issues stemmed from a period prior to implementation of this contract and could adversely affect it, but there is a clear mechanism to manage this. However the accident on site will only be resolved outside of the contract via an action under the Law of Tort.
Design Liability
The design was created and initially the responsibility of the DTP including the geotechnical surveys, but after novation all responsibilities from outset shifted to the contractor.
The specialist advised the DTP that they only assessed 50% of the site due to access issues. However DTP decided that 50% was adequate and did not arrange for further samples. It could be said that the specialist did not breach any duty of care owed to DTP as they had done all that an ordinary competent practitioner would do in a similar situation (based on advice that 100% surveys are recommended).
As the responsibility of the geotechnical surveys was expressly within the ‘Client & Architect agreement’ the responsibility lay with the DTP. Delegation of the geotechnical surveys that were carried out without the express permission of the client, were done so with the responsibility of the findings solely remaining with the designer. As in Columbus v Clowes [1903] 1 KB 244 it was found that certain investigations provide by a third party were incorrect and it was the duty of the designer to ensure correct investigations were taken prior to proceeding. In this case the DTP is aware of the potential issues and thus should have taken adequate precautions to eliminate them.
The contractor and DTP entered into a traditional form of novation (ab initio), which ensures the original conditions agreed with the client are carried over to the contractor. In essence the relationship continues with the contractor as if this relationship was formed from the outset with an undertaking that the DTP owed a duty of care to the contractor.
As the contractor accepted full contractual responsibility for the entire project, they then owed a standard for ‘reasonable care and skill’ to the client and therefore have liability to the client. DTP have liability for design to the contractors. This standard will be implied if not expressly stated in the ‘client & architect agreement’ or ‘novation agreement’.
The situation regarding the ground issues does not warrant a claim under the law of tort as the loss is purely economical.
However there was a duty of care owed by the contractor under the law of tort to the pupil injured on their site. The contractors legal position under the Occupiers liability Acts (OLA) 1984 (liability to trespassers) needs to be qualified. An occupier is a person/s exercising sufficient degree of control over who is allowed to enter the premises. This is a question of fact hence it could be a tenant, a contractor or owner or a combination or more.
In the contractors case the pupil was uninvited and would be governed by OLA 1984 where a common duty of care is required with consideration for degree of risk and foreseeability. A duty by the contractor is owed here as they are fully aware that the site is located alongside an occupied school.
Also a duty of care is owed due to the current nature of the property being a building site, hence the occupier ought to reasonably protect any person from it (s.1(3) OLA 1984). This can be seen in BRR v Herrington [1972] AC 877 where a child had got through a gap in the fence near the railway line. The board, as occupiers, were aware of the risk from previous trespasses but had failed to maintain the integrity of the fence so were held liable. The contractor would be liable under OLA 1984 unless they can prove that all reasonable care had been taken, this could be difficult in light of the ease of access by the pupil to the unlocked hazardous cupboard, along with the vicinity of the site to an operational school.
Any defences the contractor may have i.e. warnings and signs would be negligible as the trespasser here is a child whom may not understand danger or be able to read. Also the child’s parents cannot be held vicariously liable for the actions of the child so negligence would not assist here either.
Risk
Risk is apportioned jointly between the client and contractor under clause 60.1(12): ‘Only the difference between the physical conditions encountered and those for which it would have been reasonable to have allowed is taken into account in assessing a compensation event.’
- On the basis that the contractor is now fully responsible for the design and pre-novation ground tests, the recent findings of unsuitable ground condition was deemed as unreasonable and should have been prior considered, especially as the DTP only allowed for a 50% survey, which the contractor was aware of on novation. However the additional cost to the new design of the foundation and steel was deemed reasonable as this would have been the only solution in the first place, had 100% surveys been conducted on site.
Clause 60.1(19), which is an event which stops the contractor from completing the works, or stops the contractor from completing the works by the date shown on the accepted programme.
- This clause would normally allow for the additional plant costs including contractor uplift to be accepted, but as the responsibility of the cause now lay with the contractor this cost would have to be borne by them, which obviously would be claimed off DTP
Under clause 61.3, if the contractor does not notify a compensation event within eight weeks of becoming aware of the event, it is not entitled to a change in the prices, completion date or a key date unless the project manager/client should have notified the event to the contractor but did not.
- The contractor notified immediately upon discovery of the issue, which unfortunately was at the latter end of excavating for foundations.
The contractor/DTP risk continues as that as set with the original client. The DTP accepts liability for design errors that could be foreseeable.
Conflict Management
As identified previously the ground conditions to a point were unforeseen but could have been avoidable, if thorough surveys had been conducted.
The conflict management technique adopted by the contractor was an integrative approach. This was in line with the ethos of the contract to act in a spirit of mutual trust and co-operation as well as common interests existed between all involved and required joint input to solve the problem.
The reasoning behind this was the that all available facts leading to the occurrence of the issue are fully known to all, and an amicable solution would be best considering the contractor would be able to claim some costs for errors under their novation contract with the DTP, but ultimately they are at risk of tortious litigation and cannot afford to lose out on all sides.
Looking at the details and facts the parties agreed to work towards a solution, and as the contractual documentation was robust there was no question where liabilities lay.
The client agreed to pay the £515k difference in the material costs, which would have been the case anyway, if the site investigations had been carried out fully. This left the contractor to cover the remaining cost of the additional re-design works £110, which would be claimed off DTP. The additional 8 weeks required was reprogrammed to effectively become an accelerated programme and finish on time as it was fortunate that the new foundations would be going in at the start of the summer holiday allowing the contractors to increase working hours and also work on the weekends, which the contractor will cover.
WORDS: 1999
Biblography
Fenn, P. (2008), “Construction Law” (ICM Module 3 workfile), University of Bath
Latham, M. (1994), Constructing the Team, London: HMSO
Uff, J. (2009), Construction Law (10th ed.), Sweet Maxwell: London
Keenan, D. (2007), Smith & Keenan’s English Law (15th ed.), Pearson: Harlow
