Workshop 13 Design Build

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Workshop 13 Design - Build

• Onerous Terms in DC Agreements in Australasia

Tony Barry, President Association of Consulting
Engineers Australia
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Onerous Terms

• High standard of care
• Responsibility for client supplied information
• Absolute Fitness for Purpose warranties
• Strict compliance
• Open ended Indemnities
• Duty of Care to multiple parties
• Liability for delays outside control
• Disclosing terms of PI Policy

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Standard of Care

• High standards of care should only apply to
  expert commissions
• Highest well there is only one and you arent
  it
• Must be sustainable

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Client Supplied Information

• Client takes responsibility
• Client requires consultant to check/verify before
  use
• Client denies liability for it
• Client seeks warranty consultant does not rely on
  it
• Client requires consultant to take responsibility
  for it

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Fitness for Purpose

• Reasonably suitable for specified purpose given
  assumptions engineer might reasonably make
• Suitable for purpose specified
• Suitable for purpose by reference to third party
  documents eg leases
• Absolute fitness for purpose warranty
  guaranteeing performance outcome

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Strict Compliance

• Professional duty and judgement
• Explicit and detailed requirements process for
  reasonable departure
• Multiple specified outcomes and methods with
  highest standard applying
• Strict compliance contracts declare
  non-conformances
• Strict compliance
• Multi-party, multi contract compliance

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Indemnities

• None common law professional duty, common law
  exposure
• Fault based indemnity, common law exposure
• Fault based indemnity, all losses
• Open indemnity with Astley reduction for
  clients negligence
• Open indemnity (arising out of or in connection
  with the provision of the services)

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Duties to Multiple Parties

• Common law duty to public and third parties
• Contractual duty to client
• Implied duty to others in delivery process
• Deeds of covenant creating obligations to say
  clients Principal, Financier, Government what
  are their requirements can you meet them?
• Duties are independent

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Time and Delays

• No common law right to an extension of time
• Many contracts enable client to independently
  determine EoT entitlement without giving the
  consultant an express entitlement
• Obligation for client to act reasonably is
  helpful but not safe
• Must be explicit entitlement in the contract,
  otherwise can be held liable
• If no entitlement, get no liability clause for
  delays beyond reasonable control

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PI Policy Terms

• May not be specifically dealt with in policy
• May be regarded as prejudicing rights of
  subrogation of insurer by allowing client to
  target claims
• Increasing trend to disclose by those with
  captives dangerous
• Captives may act independently as may upper
  layers or re-insurers
• May have obligation to disclose exclusions
  relevant to services provided get advice

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The Solution

• Dont accept unreasonable terms walk away
• Negotiate a good contract to maintain a good
  relationship and a good business
• Use Limits of Liability above which Clients carry
  the risk
• Adopt commercially sustainable PI Insurance
  levels and guidelines

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Limits of Liability - the Firms Perspective

• reduces the impact of unreasonable indemnities
• dissuades clients from taking legal action where
  the prospect of recovery is small (often less
  than the legal costs involved in mounting and
  succeeding in a claim)
• assists in maintaining the firm as an attractive
  risk to insurers
• protects the livelihood of thousands employees
• protects the owners interests in the firm
• assists to maintain the professions as an
  attractive career

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Limits of Liability - the Clients Perspective

• reflects a realistic allocation of risk between
  the Consultant and the Client
• forces the Client to properly consider managing
  (and insuring) the risk which it in reality
  retains
• protects the Client from the impact of adverse
  outcome of proceedings against the Consultant
  which might be taken out by another client

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Limits of Liability - the Clients Perspective

• maintains PI insurance as being available to
  Consultants generally
• keeps the cost of providing consulting services
  reasonable
• assists to maintain professional services for the
  community
• equitable basis for tendering all required to
  offer same capacity
• avoid unsustainable risk culture

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Tony Barry Connell Wagner Pty Ltd on behalf
of Level 12, 75 Miller Street North
Sydney NSW 2059 (02) 99224711 www.acea.com.au
acea_at_acea.com.au