Case Note: Ampleforth Abbey Trust v Turner & Townsend

Case Note: Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd

Case Note: Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd
[2012] EWHC 2137

This case concerned a claim by the trustees of an educational college in Yorkshire, England (the "Claimant(s)") against a project management company they had appointed to manage the construction and development of boarding accommodation at the college. The trustees also took an action against the Contractors, Kier Regional Limited, which settled following mediation.

The Court held that the project managers owed a duty to the Claimant to use reasonable skill and care to put in place an executed building contract between the Claimant and the Contractor. This duty was breached by allowing the project to proceed on the basis of a number of letters of intent in the absence of a formal building contract. This breach resulted in a loss to the Claimant as they were placed at a disadvantage in their claim against the Contractors due to the fact that no formal building contract was in place. The court held that the project management company was:

"Engaged to perform the full range of duties of a project manager, and these included facilitating, assisting and being involved in the procurement of the building contractor and the building contract...the execution of a contract is to be seen not as a mere aspiration but rather as fundamental....by contrast, letters of intent such as those used in the present case are contracts of a skeletal nature; they pave the way for the formal contract, once executed, to apply retrospectively to the works they have covered but they expressly negative the application of most of the provisions of the formal contract until it has been executed.”

The Court further held that a term in the project manager’s appointment limiting their liability to the actual fees paid to them under the contract was unreasonable, under the terms of the Unfair Contract Terms Act 1977, particularly in circumstances where the appointment also required the project manager to maintain professional indemnity insurance of £10,000,000. The Judge suggested that the cost of the insurance would as a matter of "commercial reality", be passed on to the Claimants as part of the project manager's fees. It was therefore unreasonable for their appointment to limit the effect of the insurance policy as the greater part of the policy “would be rendered illusory”. He added that having built up a relationship with the Claimant over previous projects, it was unreasonable to introduce such a "draconian term" without drawing it to the explicit attention of the Claimant prior to signing.

The Claimant was entitled to recover damages of £226,667 from the project management company for professional negligence with a counterclaim allowed for £37,167 for additional fees due to extended involvement with the project on the part of the project management company.

Whereas the outcome of this case and the Unfair Contract Terms Act 1977 do not specifically apply in this jurisdiction the Judge’s decision could be considered persuasive authority. Project Managers or Quantity Surveyors in our experience are increasingly being relied upon by their clients to collate all contract documentation required for construction projects and this case serves as a reminder of the issues that can arise when relying upon letters of intent.

Consultants should take care to set out in detail the services which they are contracted to provide and if necessary those services they do not believe are applicable to their role to ensure both parties are clear from the outset. 

Care should also be taken to highlight any limitations in liability contained within the consultant’s standard terms and conditions and/or appointment. For example the Conditions of Engagement prepared by the Institutes of Engineers of Ireland provide that in the absence of the parties agreeing otherwise an engineer's liability is limited to €635,000 or ten times the total fee due, whichever is the lesser. Whereas a court could still consider a specific limitation unreasonable it would be of assistance to be able to show that all limitations on liability were made clear to the employer before an appointment was signed.