When Turner & Townsend Project Management (TTPM) allowed a building project to reach completion under consecutive letters of intent, without ever getting a formal contract between client and contractor signed, it found itself in court.
High Court Judge Keyser QC held that Ampleforth Abbey Trust had suffered loss and damage as a result of negligence and breach of contract by TTPM.
TTPM failed to approach procurement of a signed building contract with the requisite urgency and focus. In Judge Keyser’s judgment, TTPM had failed to take the steps reasonably required of a competent project manager for the purpose of finalising the contract between the Trust and the Trust’s contractor, Kier Regional.
In Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd[2012] EWHC 2137 (TCC), the judge held that TTPM effectively treated the contract as a dispensable luxury. It seemed to think that the repeated issue of letters of intent was a proper response to continuing difficulties regarding the execution of the contract. The Trust argued that as a direct result of TTPM’s failure to procure the contract, it was unable to deduct liquidated and ascertained damages. The judge awarded the Trust £226,667 in damages in this respect.
The judgment records what the Trust’s expert witness said about TTPM’s breach of duty:
“TTPM's lack of urgency to procure the contract appears to be explained by its mistaken belief that the letters of intent were sufficient to enable the Trust to rely on the terms of the proposed JCT contract and, in particular, to claim liquidated damages in the event of delay. The Trust continued to issue letters of intent both because it was encouraged to do so by TTPM and because TTPM failed to advise it of the limited protection provided by letters of intent in the absence of a contract. If TTPM did not understand the risks of the continued use of letters of intent, it should have sought internal advice from its Contract Services Department; if it still felt unable to advise the Trust on the risks of continuing to use letters of intent, it should have explained the fact to the Trust, so that it could consider taking legal advice.”
The judgment does not ignore the fact that one cannot force another party to sign a contract, but it does give clear guidance that wherea letter of intent is issued:
- It is incumbent on the relevant project manager or advisor to bring urgency and focus to bear upon agreement of the contract by, for example, preparing a list of impediments to entering into the contract and eliminating them methodically.
- Advisors must regularly and comprehensively advise clients of the remaining impediments and the risk(s) of continuing under a letter of intent.
- Where a client needs specialist advice, outside of a project manager’s portfolio of specialist skills, that project manager should advise their client to take advice from a relevant specialist.
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