Great Eastern Hotel Company Ltd v John Laing Construction Ltd & Anor

A construction manager’s obligation to procure compliance by trade contractors is construed in the context of the agreement as a whole. Words such as “procure” and “ensure” do not necessarily impose an absolute guarantee of trade-contractor performance where the construction manager provides professional services and the employer contracts directly with the trade contractors.

A construction manager must nevertheless exercise the reasonable skill, care and diligence expected of a competent manager, including effective procurement, co-ordination, supervision, programming, reporting and risk management. Where a breach is an effective cause of loss, liability is not avoided merely because another cause also contributed, subject to any contractual apportionment mechanism and the avoidance of double recovery.

The claimant engaged the defendants as construction manager for the refurbishment and extension of a major hotel. The project was carried out through trade contractors contracting directly with the claimant. Completion was substantially delayed, and the claimant claimed over £17 million for lost revenue, prolongation, disruption, professional fees and other losses.

The defendants denied breach, relied on alleged misrepresentations concerning the indicative programme and number of trade packages, and contended that delay was caused by concurrent events for which they were not responsible. The central issues were the proper construction of the construction management agreement, responsibility for delay and management failures, causation, and the recoverability and proof of the claimed losses.

1. Construction management obligations. The court rejected the claimant’s construction of clause 3.4 as imposing an absolute obligation to guarantee trade-contractor performance. Read as a whole, the agreement imposed professional obligations governed principally by the reasonable skill, care and diligence standard in clause 3.1. The direct contractual relationship between the employer and trade contractors, and the limited powers available to the construction manager, were material to that conclusion. The authority of John Mowlem & Co v Eagle Star and others 1995 CILL.1047 was distinguished.
2. The defendants nevertheless breached their obligations by failing competently to procure, scope, co-ordinate, supervise and monitor critical trade packages; by failing to protect the employer’s position in relation to the temporary roof; by delaying protection and relocation of the Railtrack services; by failing to co-ordinate setting out and trade interfaces; by removing temporary weather protection without adequate replacement measures; and by materially under-reporting delay.
3. The defendants’ reporting obligation required accurate and candid information about progress, completion dates and likely cost consequences. The deliberate alteration of programme logic and concealment of critical delay prevented the employer and professional team from taking timely corrective action and caused further loss.
4. On causation, the court accepted that a breach which materially contributed to loss and was an effective cause could attract liability for the whole loss, even where another effective cause contributed, provided there was no double recovery and no contractual provision requiring apportionment. The court relied on the approach in Heskell v Continental Express Ltd [1995] 1 All Eng 1033 and Banque Keyser SA v Skandia [1991] QB 668.
5. Acceleration expenditure was recoverable as reasonable mitigation where it was incurred on the defendants’ erroneous advice and the proposed recovery programmes were incapable of achieving their stated dates. The principle in Lloyds and Scottish Finance Ltd v Modern Cars and Caravans [1966] 1 QB 764 was applied.
6. The claim succeeded on substantial heads of liability and loss, including delay, trade-package scoping and specified management failures. Some individual items were rejected for failure to prove breach or causation. The counterclaim based on misrepresentation had no merit. Final monetary judgment was to be determined after further quantum analysis and submissions.