Novation Case Study no.5

At any one time, Griffiths & Armour deals with a number of claims of this nature, but the following example is a classic case of a consultant doing almost all of the right things.

The consultant was initially appointed by a developer to provide architectural services in relation to a new retail development. The developer proposed a design and build procurement with a novation of the consultant’s appointment to the contractor and proposed an onerous ab initio form of novation agreement. Following some negotiation, the consultant persuaded the developer to replace the proposed novation agreement with the CIC standard switch novation. So far, so good. 

Tender negotiations progressed with several contractors, eventually leaving one preferred bidder with whom the building contract was certain to be placed. It was simply a question of when the novation would take place. During these late stage tender negotiations, the contractor sought advice from the consultant regarding an alternative design proposal.

The consultant was still appointed by the developer at the time and should arguably have kept the contractor at arm’s length. However, the ever helpful consultant, mindful that a novation would take place at some point in any event, was drawn into providing general advice on the contractor's proposed alternative to a wall design contained in the Employer's Requirements.

Outcome

The contractor later found that the alternative design imposed additional lateral loads on adjoining walls and buildings that he had not anticipated and which required re-design work causing significant delay to the project. Inevitably, the contractor is now seeking to recover the cost from the consultant, whom he alleges should have identified and advised on the problems with the alternative when he sought his advice ‘pre-novation’. In this situation, it seems unlikely that the CIC agreement will be able to fully protect the consultant’s interests. Had the consultant fallen back on the terms of his appointment with the original client, no claim could have been brought and his excess and insurance record would have remained unblemished.

To contact Griffiths & Armour about this story, please email contractualrisk@griffithsandarmour.com.