Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd

A project manager engaged on a construction project must exercise reasonable care and skill to protect the client’s interests, including by pursuing execution of the intended building contract. Letters of intent may be appropriate to commence works, but repeated reliance on them is not a proper substitute for a formal contract where the contract defines important rights, duties and remedies. The project manager should identify outstanding matters, address them urgently, advise the client of the risks of continuing without a contract, and apply appropriate pressure to achieve execution. Where the breach consists of an omission and the counterparty’s response is uncertain, causation may be established by proving a real or substantial chance of the counterparty’s action. The court may then quantify the loss by valuing the lost benefit and assessing the chance. A contractual limitation clause may fail the reasonableness test where it makes substantial professional indemnity insurance effectively illusory.

The Trustees of Ampleforth Abbey Trust claimed damages from Turner & Townsend Project Management Ltd for professional negligence and breach of contract in relation to the management of construction works at Ampleforth College. The works proceeded under a series of letters of intent, but the intended building contract was not executed until after the works and a dispute with the contractor had been settled. The Trust alleged that Turner & Townsend should have procured execution of the contract, which would have improved its position in relation to delay and liquidated damages.

The issues included breach of duty, causation, loss of a chance, the incorporation and reasonableness of a limitation clause, and Turner & Townsend’s counterclaim for additional fees.

1. Liability. Turner & Townsend owed the Trust contractual and common-law duties to exercise reasonable care and skill. Those duties included facilitating and pursuing the execution of the building contract. The formal contract was fundamental because it defined the parties’ rights, duties and remedies, whereas the letters of intent provided only skeletal and limited protection.
2. The use of a letter of intent to commence works was acceptable. However, Turner & Townsend negligently treated repeated further letters of intent as an adequate response to continuing contractual difficulties. It failed to identify and resolve outstanding matters with sufficient urgency, failed adequately to advise the Trust of the risks of continuing without a contract, and failed to bring proper pressure to bear on the relevant parties. A reasonably competent project manager should have advised by the end of March 2004 that further letters of intent were inappropriate and that every effort should be made to execute the contract.
3. The case was not properly a Bolam case involving a body of professional practice. The expert evidence assisted by identifying relevant factors and professional judgments, but the court itself had to assess whether the conduct fell below the required standard.
4. Causation and loss. Applying Allied Maples Group Ltd v Simmons & Simmons [1995] 1 W.L.R. 1602, the Trust had to prove on the balance of probabilities that it would have acted on proper advice; that there would then have been a real or substantial, rather than speculative, chance that Kier would have signed the contract; that the contract would materially have improved the Trust’s position; and that the Trust would have used that improved position. The Trust satisfied those requirements. There was a two-thirds chance that Kier would have signed the contract, and the value of the lost benefit was assessed at £340,000. Damages were therefore £226,667.
5. The liquidated damages provision was not shown to be an unenforceable penalty. The limitation clause in Turner & Townsend’s terms was incorporated, but it failed the reasonableness test under the Unfair Contract Terms Act 1977. The obligation to maintain £10 million professional indemnity insurance was inconsistent with limiting liability to approximately £111,321, making most of the insurance cover illusory.
6. Orders. Judgment was entered for the Trust for £226,667. Turner & Townsend succeeded on its counterclaim for additional fees in the sum of £37,167.