REASONABLE SKILL, CARE AND DILIGENCE TO ACHIEVE A PARTICULAR RESULT
In the recent case of Lendlease Construction (Europe) Ltd v Aecom Ltd (Rev1) [2023] EWHC 2620 (TCC) handed down on 1 November 2023, Justice Eyre considered many issues, including whether the consultant was under an obligation to exercise reasonable skill and care only, or whether the consultant was obliged to achieve a particular result.
Background. The project in question is the construction of a new Oncology Centre at St James’s University Hospital, Leeds (the “Project”) ([1]).
The claimant, Lendlease Construction (Europe) Limited (“Lendlease”), engaged the defendant, AECOM Limited (“Aecom”), to provide mechanical and electrical consultancy services in relation to the Project under a consultancy agreement (the “Consultancy Agreement”) ([1]).
Disputes arose between the parties which culminated in a settlement agreement executed on 28 September 2012 ([7]).
As things transpired, proceedings were commenced against Lendlease in 2019 by Project Co, who had engaged Lendlease to design, construct, operate and maintain the Oncology Centre, and the company responsible for maintenance of the Oncology Centre, Engie Buildings Ltd (“Engie”) ([4], [9]).
And Lendlease subsequently commenced proceedings against Aecom, seeking to “pass down” liability for matters which Lendlease contends were the consequence of Aecom’s breaches of Aecom’s obligations under the consultancy agreement ([12] – [13]).
The dispute. As stated earlier, for the purposes of this blog, we focus only on the one of the issues, namely, whether Aecom had an obligation to perform its obligations so as to achieve a particular standard, as opposed to just exercising reasonable care, skill and diligence in the performance of its obligations ([129]).
This heart of this dispute is succinctly set out by Justice Eyre at [6], which we duplicate below:
“6. Lendlease and Aecom disagree about the scope of the Consultancy Agreement and Aecom's obligations under it. In short Lendlease says that Aecom was to be responsible for the design of the mechanical and electrical services in relation to the Project and to be the lead consultant responsible for the Fire Safety Strategy ("the Fire Strategy") and the design thereof. Lendlease says that it sub-contracted to Aecom its obligations to Project Co under the D&B Contract in respect of MEP services and fire safety design. Aecom says that when properly analysed its obligations under the Consultancy Agreement were rather more limited and were not an exact replication of Lendlease's obligations to Project Co. In addition in June 2005 Lendlease had engaged Rotary Yorkshire Ltd ("Rotary") as its installation sub-contractor for MEP services. A further aspect of the dispute about the extent of Aecom's obligations concerns the extent to which it was open to Aecom to leave matters of detail to Rotary.”
(our emphasis added)
So, in essence, Lendlease had been engaged by Project Co to build the Oncology Centre under a design and build contract (“D&B Contract”) ([5]). And Lendlease argued that as it had sub-contracted to Aecom its obligations to Project Co under the D&B Contract, therefore, “… Aecom was obliged to achieve the outcome which Lendlease had contracted to achieve under the D&B Contract” ([132]).
2 key provisions. There were two key clauses in the Consultancy Agreement.
The first is Clause 1.01 of the Consultancy Agreement, which provides as follows:
"The Consultant shall be deemed to have notice of and shall observe the Employer's Requirements and/or the Project Agreement and/or the Principal Agreement to the extent the same shall have been issued to the Consultant by the Contractor and to that extent shall be deemed to have full knowledge of the terms and conditions of the Employer's Requirements and/or the Project Agreement and/or the Principal Agreement. To the extent of the obligations of the Consultant as set out in this Agreement, the Consultant shall ensure that no act, default or omission of the Consultant shall cause or contribute to any breach by the Contractor of any of its obligations contained in the Employer's Requirements and/or the Project Agreement and/or the Principal Agreement."
The second is Clause 4.01 of the Consultancy Agreement, which provides as follows:
"The Consultant warrants that he has exercised and will exercise all reasonable skill care and diligence in conformity with the normal professional standards of a consultant holding himself out as a competent consultant experienced in the provision of such services for projects similar in scope and complexity to the Works and having regard for the dates and periods stated in the Contract Programme and Design Service Programme and duties herein described and will comply in all respects with the requirements of the local authority, statutes, regulations, and codes of practice in force and relevant to the design of the Works, including but not limited to fire, health and safety. Notwithstanding any other clause in this Agreement or the Principal Agreement or term implied by statute or common law, the Consultant shall not be construed to owing any greater duty in relation to this Agreement than the use of necessary reasonable skill, care and diligence pursuant to this Clause 4.01."
Consultancy Agreement. As Eyre J identified at [133], these two clauses, together with their proper interpretation in context of the Consultancy Agreement as a whole, determined whether Aecom was responsible to achieve a particular standard for not.
And in doing so, Eyre J considered at [134] – [136] the cases of MT Hojgaard A/S v E.ON Climate & others [2017] UKSC 59, Martlet Homes Ltd v Mulalley & Co Ltd [2022] EWHC 1813 (TCC), Consultants Group International v John Worman Ltd (1985) 9 Con LR 46 and Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC), and found them to be not helpful on this point as they concerned different clauses and different contracts.
As such, Eyre J returned to the wording of the clause, and held that at [137] that “… Clauses 1.01 and 4.01 are not readily to be seen as laying down competing requirements for a specified design and for specified performance criteria of the kind to which Lord Neuberger referred in Hojgaard nor can they readily be seen as setting out inconsistent design obligations.”
Eyre J held that the final sentence of Clause 4.01 is of particular significance (at [138]), holding that it is “necessary to give effect to that provision” as being to a “qualification on the duties which would otherwise be owed by Aecom under other provisions including clause 1.01.” (at [139]).
As such, Eyre J held that the Consultancy Agreement does not “step down” Lendlease’s obligation to Project Co to Aecom (at [141]).
But Eyre J further held at [142] – [143] that despite this, Aecom’s obligations were such “… A failure by Aecom to comply with the standards laid down by the applicable regulations and in particular to produce a design satisfying the requirements of HTM 81 is to be seen as a failure to exercise reasonable care, skill, and diligence in the absence of a compelling explanation to the contrary.” (our emphasis added).
Conclusion. So, even though Lendlease’s obligations to Project Co were not “stepped down” to Aecom, Aecom, in the end, had to comply with the applicable regulations and standards and produce a design that satisfied the requirements in order to discharge its duties of exercising reasonable care, skill and diligence.
Therefore, even though you may not be under an obligation to achieve a particular result and are only under a duty to exercise reasonable care, skill and diligence, the result may be practically the same in circumstances where a failure to achieve the (contracted for) result would amount a failure to exercise reasonable care, skill and diligence “in the absence of a compelling explanation to the contrary”.
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