Russell & Anor v Stone (t/a PSP Consultants) & Anor

A professional negligence claim concerning construction cost overruns requires proof that the professional fell below the standard of reasonable competence and that the breach caused the loss claimed. A generalised risk, an incomplete design, or the use of provisional sums does not establish negligence without evidence of a specific inadequacy and its practical consequences.

Where a contractor’s programme is ambitious, a project manager may be negligent in failing to interrogate its achievability and warn the client of the resulting risks. That finding does not itself establish a wider pleaded breach or causation. The claimant must identify what would probably have happened with proper advice and provide a reliable comparator for the loss.

The claimants engaged the defendants as project manager, quantity surveyor and contract administrator for the construction of their home. They alleged that the defendants negligently managed the tender process, failed to warn about the risks of the successful contractor’s tender and programme, failed to obtain a performance bond, misvalued work, failed to monitor quality, and caused substantial overspend and related losses.

The defendants denied breach and causation and counterclaimed for additional fees. The central issues were whether the defendants’ services had been performed with reasonable care and skill, whether any breach caused the claimed losses, and whether the defendants were entitled to further payment.

1. The claim was dismissed. The defendants did not, cumulatively, fail properly to manage or advise on the tender process. The counterclaim for additional fees was also dismissed.
2. The applicable standard was that of the reasonably competent project manager, quantity surveyor and contract administrator. A finding of an individual failing did not necessarily establish the pleaded single breach, which concerned the tender process as a whole.
3. The tender documentation was sufficiently advanced for tendering on an employer-design basis. The court rejected a rigid approach based solely on RIBA design stages. Negligence required particular identification of an inadequacy, a material risk which ought to have been identified, and evidence of its consequences. No design-responsibility gap was established. The provisions relied on had been corrected or clarified before the letter of intent, and no resulting problem or additional cost was proved.
4. The defendants were negligent in one particular respect. They recognised that Ibex’s 39-week programme was ambitious but did not take sufficient steps to verify whether it was achievable or give adequate warnings about the risk of delay and associated claims. That finding did not amount to the pleaded single breach and no loss was shown to flow from it.
5. Causation was not established. Following and adopting the observations in William Clark Partnership Ltd v Dock St PCT Ltd [2015] EWHC 2923 (TCC), the court held that cost-overrun claims in this context require a detailed analysis of how the project would probably have proceeded without the breach. Loss could not be inferred merely from a finding of negligence. The claimants had not proved what advice should have been given, what they would have done, or a reliable like-for-like comparator.
6. The reasoning in South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 supported the need to establish what the claimants would have done if properly advised and to compare their actual position with the relevant counterfactual. The proposed comparison with the replacement contractor’s costs was unreliable and included changes of scope, market effects and replacement-contractor premiums.
7. The remaining claims failed. No negligence was established in relation to the performance bond, letter of intent, valuation of Ibex’s works, professional-team payments, kitchen procurement or monitoring of defects. The claim for repayment of fees failed because no cap of 5 per cent had been agreed. The counterclaim failed because the defendants could not rely selectively on an unfinalised appointment to establish entitlement to additional fees.