Out-Law Guide | 13 Oct 2022 | 10:20 am | 7 min. read
Claims for alleged professional negligence on infrastructure projects present many unique and challenging hurdles.
Failing to plan for these can lead to significant difficulties, or even a complete failure of a claim, further down the line. While it is not possible to prescribe a ‘one size fits all’ approach to these claims or cover all of the potential issues which may arise, a number of points are likely to form the bedrock of a typical claim. These can then be adapted and developed depending on the particular circumstances.
One key question to consider at the outset is what work a professional was obliged to do on a project. The answer sets the baseline for a consideration of whether the relevant duty or obligation has been discharged. Considering the position of a designer, for example, will usually involve a review of their formal appointment and possibly a novation. Depending on the identity of the claimant, collateral warranties may also need to be reviewed. These should be linked to the appointment and could come after a novation being entered into.
The precise details of the services the professional was appointed to undertake are typically set out in the schedule attached to formal appointment documents, although frequently the information is relatively brief. Further questions may follow on exactly what the stated services involve as a matter of practice, and one should consider how the professional’s appointment fits into those of the overall project team.
Professionals are often required to achieve a specific task on a project – known as an ‘absolute obligation’ – or to exercise ‘reasonable skill and care’ when carrying out their services. Contractual documents should usually set out these obligations expressly, or use implied terms to do so. Professionals generally try not to agree absolute obligations or guarantees in relation to design services because of difficulties in securing professional indemnity insurance to cover them.
When reviewing formal appointment documents and other related agreements, careful attention should be paid to any limitations or exclusions of liability in the relevant contractual documents. Compared to main contractors, it is far more likely that professionals will succeed in negotiating limitations or exclusions of liability in their appointments. It is essential to check that the claiming party is the one who has suffered any recoverable losses.
Written and electronic evidence is likely to be of crucial importance when determining whether a professional has failed to perform their obligations. For example, electronic evidence may show the allegedly negligent design, calculations or advice, or the information and issues which the professional should have been aware of but ignored or misinterpreted. Depending on the nature of the case, the alleged negligence may relate to a single drawing or calculation but in many cases a myriad of evolving designs, calculations or discussions will be relevant.
If a lead consultant and sub-consultants are involved, it may be useful to see the sub-consultants’ appointments and communications between the lead consultant and the sub-consultants. Did the lead consultant criticise or complain to a sub-consultant about their performance or refuse to pay them, or even accuse them of negligence? Is there evidence that a sub-consultant was not sent the information they needed to perform their services properly? Did they complain about that?
The review exercise will usually also highlight the need for independent expert assistance for a number of reasons. Most importantly, when a tribunal is asked to determine whether a professional has failed to act competently – particularly when the question concerns whether he or she has exercised reasonable skill and care – it will usually require assistance from an independent expert with experience in the relevant area.
Usually, unless there are any express contractual terms to the contrary, the expert will opine on what an ordinarily competent member of the relevant profession would have done or not done. The standard of skill and care is that of ‘a reasonable average’ member of the profession. He or she is not required to be ‘a paragon combining the qualities of polymath or prophet’. The tribunal will weigh the expert’s opinion when deciding whether the professional in question has acted competently or not. It is not for the expert to decide a professional has, or has not, been negligent.
When asking the expert for his or her opinion, it is essential that the right questions are asked. The tribunals should not examine whether the particular expert would have done things differently, but rather determine whether the relevant professional acted in a way that no other reasonable member of their profession would have done. If the project involved a multi-disciplinary team, then several independent experts could be required; a challenge that needs careful planning from the outset.
The consequences of any alleged failures are usually considered in financial terms. A claim may relate to defective or late design, or a failure to warn about the risks of using a particular design solution. Alternatively, there may have been a failure to administer a contract correctly or work to a particular budget.
Broadly, however, the exercise focuses on the extent to which the alleged failures caused the claiming party to incur additional costs and losses, known as a question of ‘causation’. In practice, this is a complex area and one where mistakes can be made. If a claimant was to look at the alleged failures to exercise reasonable skill and care, for example, and simply identify the additional costs incurred over those which it expected to spend, then that is likely to be incorrect.
A claiming party usually needs to establish the costs and losses it would have incurred ‘but for’ the alleged failure. In a typical professional negligence claim, a claimant should try to establish what a competent member of the profession would have done and how the claimant would have behaved in that case. This hypothetical analysis is often referred to as being ‘the counterfactual scenario’.
If, for example, a claimant was advised by his professional adviser that a certain material should be used in a design, but that material turns out to be inappropriate and it has to be removed and another put back in its place, the claim would not be for the difference between the costs of the original design and the costs of the final solution. Instead, the claimant would need to establish what a competent design might have looked like. If that design was likely to have been the same or similar to that which was used in practice, the claimant’s ‘loss’ may well be limited to the costs of removing the original material and any related costs. The costs of the replacement solution would always have been incurred.
The assessment of loss may be different where the claiming party maintains that had it been competently advised it would have acted differently - and avoided the losses claimed – but those actions depend on how a third party would have acted.
A contractor could claim, for example, that its professional has prepared a defective design that meant the contractor under-priced its tender which led to the agreed main contract price being too low. In such a case, the contractor’s claim might be for the ‘lost chance’ of negotiating a higher main contract price. The claimant must prove that there was a real and not merely speculative chance that the design would have been approved, and a higher price negotiated.
The value of the chance will be a matter for the quantification of damages and normally assessed as a percentage of the claimant’s maximum possible recovery. For example, if an architect negligently failed to provide the correct information to the planning authority for the purposes of an application for planning permission which was in fact dismissed, the tribunal would ask what the chance was that the authority would have granted permission had it been provided with the correct information.
When reviewing these questions analysis is also required on matters of concurrency: were there any other delays on the project at the time which would also have caused some, or all, of the financial matters in question? Which party is at risk for those other delays?
When analysing causation, it is necessary to consider whether the losses claimed are too remote from the specified failures. Put another way, the losses must have arisen naturally in the usual course of things or been contemplated by the parties as being a probable result of a breach at the time the contract was entered into.
On top of this, when considering the relevant losses, it is worth remembering that the aim of damages in breach of contract claim is to put the claimant – so far as money can do so – in the position they would have been had the professional properly discharged their obligations. Questions over whether the claimant has acted reasonably, or mitigated its losses, will often arise. That, however, is a matter for the defendant to raise. Be that as it may, a claiming party would be well served by bearing such points in mind as it deals with the consequences of the alleged failings and puts its case together.
It is important to consider how, and on what basis, these kinds of claims should be pursued. Claimants should implement a suitable strategy to prosecute their claims as effectively and efficiently as possible. Doing so will likely include involving insurers for the professional, which could change any settlement dynamic considerably. After all, a claim which arises between two parties who otherwise have a long standing and strong commercial relationship may not be easy to resolve given that insurers will play an active role in the management of the dispute, and any settlement parameters.
If formal proceedings are required, and the project is based in the UK, adjudication could be used once a dispute has crystallised. However, the complexities and challenges of professional negligence claims mean it is not used frequently. Instead, depending on the dispute forums agreed by the parties, the parties may choose to adopt the pre-action protocol for construction and engineering disputes. This allows each party to articulate its position and review the differences between them. A settlement may be possible either through discussions or by alternative dispute resolution (ADR). If not, formal proceedings can follow. Either way, while claims for professional negligence remain complex and are frequently difficult, focusing on the points outlined should help guide a claimant and minimise the challenges which may be faced along the way.