Case No. 0LS79020

90. Mr Hinchliffe’s opinion on issues of breach of duty was to the following effect.(1) In 2003 and 2004, the standards reasonably to be expected of a project manager were not as high as they are today. TTPM must be judged by the standards of the time, not by those of today.(2) Letters of intent were “almost always” properly to be used as a temporary measure to get the contractor onto the site. (This was referred to as their “classic” purpose.) Use of letters of intent to complete a project took one to “rare territory”, though “perhaps not unchartered”; he had experience of two previous projects that had been completed under letters of intent, though in both cases the works had been commenced and completed before the employer had acquired the relevant legal interest in the site. Mr Hinchliffe accepted that as the project progressed the letters of intent had been used for purposes other than their classic purpose and that the circumstances of the present case were exceptional.(3) Although it would have been negligent to fail to give advice as to the risks of using letters of intent for their classic purpose; however, he was “not sure” (a form of words he used more than once) that it was negligent to fail to give further advice regarding the risks of using letters of intent for other purposes, “bearing in mind that the client was aware of what was happening”. In particular: the wording of the letters of intent would have made it clear to any reasonable employer that there was no contract in place; and “the Trust were of a view that the risks involved in stopping the job were such that they couldn’t embark on any other course than continue with the letters of intent.”(3) Mr Binns’ acknowledgment (in a telephone conversation with a solicitor from BW on 4th May 2005) that after three letters of intent TTPM should have pressed for a contract represented “the conventional approach”. However, “once the train was underway, there was very little opportunity to do anything else than issue further letters or halt the project.” (4) Although it was to be expected that a contract would be signed within seven months of the commencement of the works, TTPM did everything it reasonably could to procure a written contract from Kier; there was no further step that it ought to have taken, and it was not able to force Kier to execute the contract. The reason why no contract was signed was not TTPM’s lack of effort but rather a sequence of issues that required to be resolved—in particular, the Shire claim and the warranty sought by AIB. By the time those issues were resolved, TTPM was “faced with Kier’s implacable attitude to not signing the contract”. The advantages to the contractor of having an executed contract were greater in the early stages than they were once much of the works had been completed under letters of intent, and in the present case the problems encountered by Kier in the performance of the H5 works served to make a contract commercially unattractive after May 2004.(5) A simple refusal to issue further letters of intent would have been a very risky course for the Trust to take, because of the risk that Kier would leave site in circumstances where it faced the prospect of incurring a loss on the project and being exposed to liability for liquidated damages. (6) TTPM was not to be criticised for failing to bring commercial pressure to bear on Kier at senior director level, because such pressure was unlikely to have borne fruit in circumstances where there was no likelihood of significant amounts of future work coming to Kier via TTPM and there was accordingly no incentive for Kier to take a commercially disadvantageous decision.(7) If TTPM’s belief that the letters of intent gave to the Trust a right to deduct liquidated damages was an error, it was an error that might have been made by a reasonably competent project manager, concerning as it did a difficult and disputed matter of law and of the construction of the letters of intent. Further, even if advice as to the possible non-recoverability of liquidated damages ought to have been given, it should only have been given in respect of the final letter of intent; the question did not arise in respect of the earlier letters of intent, which were issued for only a part of the H5 works.(8) TTPM was not negligent in failing to use the letters of intent to impose liability for design upon Kier. It was reasonable to suppose that they did impose such liability. However, any attempt to make the matter explicit by expressly including design liability in the letters of intent would probably have resulted in Kier refusing to accept such terms or insisting on additional payment as its price for doing so. (9) Although hindsight might suggest that the best commercial advice to the Trust would have been to pay Shire’s claim for additional fees, the matter had to be viewed in the light of a tight budget, which had been stretched to the limit and carried no contingency sum, and a bullish approach by Mr Bryan on behalf of the Trust. TTPM is not to be criticised for not giving advice to pay Shire’s claim. In this regard, Mr Talabani’s suggestion that, rather than pay Shire, the Trust should simply issue a letter of intent for the full value of the works was inappropriate and inappropriately expressed, but in substance it reflected the difficulty of the situation.