Article Business Practice Data Management Loss Prevention

Retention of documents – how long is long enough?

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Tags: documentation insurance liability storage

Introduction

How long is a piece of string?  Tricky.  Twice the length from one end to the middle, you say?  Well, yes, but still not very helpful in determining how long the string actually is, is it?  We can do slightly better with the question as to how long a business should retain its professional appointment documents; but a definitive answer is almost as elusive.

Firstly, it should be emphasised that this note deals with general considerations relating to professional appointment documents only.  For the myriad of other documentation and regulatory intervention that today’s firms need to be aware of, for example, in the fields of financial and accounting information, personal information and when dealing with public bodies, specialist advice should be sought.

With the increasing sophistication of computer storage systems, it is now possible to store many hundreds of thousands of documents relatively cheaply.  With the drop in price of file servers and the associated backup hardware, digitising newly produced documentation is a real possibility for many.  Many practices may never need consider purging documents; they simply digitise newly produced documentation as it is created.  Nevertheless, for those of us with many years of old paper files to consider, the cost and time implications of digitising these can be a drain on resources.

As arrangers of Professional Indemnity (PI) insurance to various professions, the document retention question is one which we are often asked.  If it is one you have already grappled with, then hopefully, this paper will do nothing more than reinforce the advice already given.  Alternatively, if it’s something you have never considered, now might be the time to do so.  With many practices struggling with burgeoning documentation, deciding when it is finally safe to destroy files is of increasing importance.

Document retention

Be it schematics for the construction of a building, advice issued to clients on a negligence claim, or papers supporting the valuation of a house, documents are produced which are vital to the service that is provided.  Indeed, the documents produced might be the very service itself.  Storage space is finite for all businesses – everything cannot be stored indefinitely.  The danger with destroying document early, however, is readily apparent.

Document retention

Although general guidance can never address the specifics of individual situations, and we always recommend that you take specific advice, the following areas should definitely frame the debate:

  1. PI policy requirements
  2. Contractual requirements and liability periods
  3. Other factors

Professional Indemnity policy requirements

We suggest the first port of call in trying to answer this question is to look at the terms of your PI policy.  Different insurers have different requirements ranging from remaining silent on the issue, to imposing quite onerous terms as to both how long you must store your documents and in what state they must be retained.  The reasons for insurers taking an interest in how you keep your documents are obvious; in the event of an allegation of negligence, the notes you have taken, the minutes of meetings held and the written advice given, will all be crucial to mounting a defence.

Griffiths & Armour’s PI insurance schemes for construction professionals have no particular requirements relating to the retention or storage of documents and you are at liberty to make whatever arrangements you consider commercially prudent.  It would be extremely foolish, however, to ignore the issue.  As previously mentioned, project documents can be crucial in mounting a defence and as our latest risk management book ’Reinforcing the Simple Messages’ shows, a claim can fail or succeed on the accuracy and/or sufficiency of project records.

Other PI policies, however, can contain fairly demanding requirements, such as:

 

‘The Insured, as a condition precedent to their right to be indemnified under the Policy, must keep all documents in a suitable secure location outside of normal business hours and shall maintain duplicates of all computer related records off site for a period of not less than 12 years following completion of the commission to which the documents relate.’
‘The Insured shall make available to Insurers at all reasonable times and Insurers shall have a right to inspect and copy during the period of insurance and thereafter, all books, papers and other records of the Insured and its agents or brokers in connection with this policy or the subject matter hereof.’

 

 

 

 

 

 

It is important that you check with your broker exactly what conditions apply to your particular policy, so as to ensure that you can comply.  Often, retaining the documents for the period and in the manner specified in the policy will be a ’condition precedent of cover’ (i.e. if you don’t comply, the policy will not respond to the claim).  Even conditions at the less onerous end of the spectrum can allow insurers to reject claims, should they consider your actions ‘prejudice their position’.

Contractual requirements and liability periods

Quite aside from the conditions within your PI policy, your client may well require that you retain documents on a particular project for a specified number of years.  Although it is unusual for clients to specify the manner in which the documents are kept, the requirement to store project documentation for ‘x years’ will often be combined with a right for the client to inspect the documents too.

The document retention period imposed by clients in contract often matches the relevant limitation period applicable to the project in question (i.e. the period after which claims become ‘time barred’).  Knowing when your liability expires is essential when considering how long to retain your documents, even if the contract is silent on the matter.  Usually, the liability period will expire a number of years following completion of the services you are providing or completion of the project to which they relate.  The limitation period is usually six or twelve years depending on the form of contract and what you have agreed with your client.

In certain circumstances, where so-called latent defects are present, the law can impose liability up to 15 years following completion of your services and this, for most categories of claim you are likely to face, should be considered the ‘long-stop’ of liability.  It follows that, generally, speaking this can also be used as the ’long-stop’ for retaining documents

Other factors

Many more issues may well impact upon your decision as to whether or not to retain documents and, if so, for how long.

Some clients view historical records as a potential revenue stream. They view them as a useful tool in securing work in the future from, for example, clients refurbishing a building an engineer had previously worked on.

Special consideration should be given to certain categories of documents, for example, the certain financial documents (for example, balance sheets etc) as there may well be specific legislation (e.g. the Companies Act) which deals with how long these should be kept and specialist advice should be sought in this regard.

Article Business Practice Data Management

Builders Profile

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Tags: Builders database NSCC specialist

Is Builders Profile the answer to Pre-Qualification Questionnaires?

When Members of the National Specialist Contractors Council (NSCC) complained about the number and length of pre-qualification questionnaires, the NSCC Director, Susannah Nichol, set off on a quest to find a solution.

CDM requires the employment of competent contractors.  Good management and robust risk management requires the employment of competent professionals and contractors. Clearly, therefore, abandoning prequalification is not an option and the only viable way forward is to find a way of making the system work.

The solution that Suzannah came up with was ‘Builders Profile’.  The name is unfortunate – but civil engineering professionals and contractors should try to overcome their antipathy and consider whether this is a system that could work.

What is Builders Profile?

An online system of providing pre-qualification information.  Builders Profile have compiled a questionnaire that covers all common PQQ information.  This is stored in a secure online database.  Fill it in once, and the data is there for release to potential clients.  Furthermore, there are checks in place to ensure that the data remains up to date and automatic prompts are sent out when critical information such as insurance details are due for renewal.

How does it work and what does it cost?

Once the information is stored, the Member can send their pre-qualification information simply by creating a Profile for each client and ‘submitting’ it.  This can be done without cost.

For an annual payment of £275 a specialist can become a Premium Member of Builders Profile.  This enables them to create and store a single Profile so that it can be sent to several enquirers at once, via an email link, with no setup requirements or additional costs.  If the main contractor or client in question is already a user of Builders Profile, the details are already available to him without needing to take any action at all.

Why should a client/main contractor accept information from Builders Profile?

Prequalification is also a problem for clients/main contractors.  Once a client creates a Builders Profile Main Contractor Account they can immediately see the ‘headline details’ of every subcontractor using the service, and can use the online search to refine what they want to see.  Once confirmed as a bona fide ‘main contractor’, they can access the full service functionality and request new profiles, or updated profiles. At the click of a mouse they can see the full Profiles of all Premium Members who have authorised them to see their details, along with all Basic Members who have specifically submitted their Profile to the contractor, plus the headline information about every other company who is using the Builder’s Profile service.  Membership is free.

What should a specialist contractor do when a paper PQQ is received?

If a paper PQQ arrives on a specialist contractor’s desk from a company that is not using the Builder’s Profile, the specialist should resist filling it out.  Instead, log onto the Builder’s profile and send an automated email to the contractor containing a link to your Profile.

Will it work?

The NSCC has over 30,000 Members who are all being encouraged to sign up.  Additionally, NSCC and Builder’s Profile are actively pursing main contractors, in particular, to convince them of the advantages.

It won’t solve all the problems today.  Some contracts are just too valuable  – if you are asking ‘how high?’ when the enquirer says ‘jump!’ this is probably not the right time to mention Builder’s Profile.  But for the rest – give it a go!   The £275 annual fee won’t break the bank. It will save several hours of form filling today and it could save you a full-time salary tomorrow.

It’s chicken and egg – clients won’t use it until there are sufficient specialist contractors signed up.  Specialist contractors won’t sign up unless they think there will be potential employers wanting to use it.  But once the band wagon starts to roll – the momentum could drive away the waste of time, effort and money that current PQQ represents and usher in a greener, cheaper, more timely, online equivalent to replace it.

www.buildersprofile.co.uk

Article Contaminated Land Loss Prevention

The Big Question

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Tags: Environment waste

Q&A:  Liabilities of The Qualified Person Arising from Definition of Waste:

Development Industry Code of Practice

Introduction
The Definition of Waste: Development Industry Code of Practice was published by CL:aire in 2008 (www.Claire.co.uk).  It was prepared by the development and remediation industry in consultation with the Environment Agency.  The Code of Practice (CoP) was designed to allow the development industry to demonstrate that wastes (derived from/ during remediation etc) have been “fully recovered” and therefore are no longer “waste”.  This self regulation relies upon the professional integrity of all of the parties involved, but particularly upon the “Qualified Person” – a term which the CoP introduces.  The CoP requires the Qualified Person to sign off a Declaration that all of the appropriate lines of evidence are in place to demonstrate compliance with / adherence to the Code.
Concerns have been raised by some in the industry that the Qualified Person could face potential liabilities in signing off the Declaration which are not compensated by the level of fee – for example, in the event of subsequent activities by third parties.

The response from the Loss Prevention Group’s legal advisor (Zita Mansi) to two of the most commonly raised concerns is set out below.

The Qualified Person’s Declaration

The CoP sets out an auditable system to demonstrate that the CoP has been adhered to on a site by site basis.  This system includes a Declaration by a Qualified Person (“QP”).  The Environment Agency (“EA”) will audit a certain number of Declarations at random, to check that the CoP is not being abused.

The QP’s Declaration (which is set out in full at Appendix 6 of the CoP) includes confirmation:

  1. That he/she has reviewed the relevant documents set out in the checklist (these include the Materials Management Plan (“MMP”), the Risk Assessment and the Remediation Strategy/Design Statement);
  2. The MMP contains all the information required by Appendix 4 of the CoP;
  3. The Risk Assessment concludes that the objectives of preventing harm to human health and pollution of the environment will be met if materials are used in the proposed manner; and
  4. the relevant regulatory bodies have not objected to the proposed development on the basis that the use of any material is likely to cause harm.

The Declaration is addressed to the person commissioning the works (likely to be the person employing the QP) but must be sent to the EA.

Q&A

Questions have been raised by an AGS member regarding the potential liabilities of the QP to his/her client and/or to the EA in the following scenarios:

  1. The QP provides a Declaration and subsequently the MMP is not followed by those carrying out the works.
    Paragraph 3.17 provides that the responsibility of the QP is limited to review of the documentation detailed in the Declaration.  Responsibility for carrying out the development in an appropriate manner, and the duties pursuant to waste legislation, remain with the person commissioning the excavation works and those executing the works.

    After providing his/her Declaration, the QP has no further involvement in the project and has no inspection, monitoring or auditing duties.  Hence he/she has no control over whether or not the MMP is adhered to and cannot be held responsible for any adverse consequences of the works deviating from it.

    Paragraph 3.12 of the CoP allows deviations from the original MMP provided they are recorded and subsequently detailed in the Verification Report.  The QP has no involvement in or responsibility for the Verification Report.

  2. The QP provides a Declaration and subsequently the EA audits the project and decides that the MMP and Risk Assessment are inadequate or inappropriate because, for example, the materials were not suitable for re-use, were used or planned to be used in excessive quantities, or were likely to cause harm.
    Paragraphs 3.17 and 3.18 of the CoP suggest that the QP’s role is limited to “review” of the documentation detailed in the Declaration.  Paragraph 3.18 of the CoP states that the QP is not required to re-work or check the Risk Assessment or Remediation Strategy/Design Statement.  The precise nature of the QP’s obligations when “reviewing” the documentation is not entirely clear.  The wording of the Declaration (as set out above) is key.  The QP confirms that the MMP contains all the information required by Appendix 4 of the CoP but this is not the same as confirming that the information is correct.  In addition, the Declaration includes a statement that the QP has advised the person commissioning the works that if materials are not used in accordance with the MMP or Risk Assessment or if it is discovered that materials were not suitable for use, were used in excessive quantity or in such a manner as to harm human health or pollute the environment, the EA may conclude that those materials were discarded and were waste.  This appears to place responsibility for these matters upon the person commissioning the works, which is consistent with the wording of the CoP.

    In any event, the question of whether a particular material is waste is ultimately a decision for the Courts and the fact that the EA do not agree with the conclusions of the Risk Assessment and MMP does not necessarily mean that those documents have been negligently prepared or that the QP was negligent for providing the Declaration.  (Paragraph 3.17 of the CoP provides that a QP who “recklessly” or “falsely” completes a Declaration may be subject to prosecution under waste legislation, but this requires more than mere negligence on the part of the QP.)

    If, for any reason, the QP is held to have been negligent, he may be liable to his client for any losses that result from the client’s reliance on the Declaration.  The extent of the QP’s liability to the client will ultimately be governed by the terms of his/her appointment.  The QP should therefore ensure that none of the terms of the appointment place him/her under any higher obligation than to use reasonable skill and care in carrying out his/her duties under the CoP (he/she should not, for example, warrant that the Declaration will satisfy the EA) and it should be made clear in the appointment that he/she is not responsible for the information provided to him/her or liable for defects in it.

Article Business Practice Data Management Loss Prevention

Markets for Professional Indemnity insurance – the not so ‘super market’

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Tags: insurance

The aim of this paper is to summarise the workings of the UK Professional Indemnity insurance market and the hard/soft cycle that has such an influential effect on premium levels. We will also attempt to predict what the future might hold as the market moves inexorably out of its soft phase and into harder times.

Insurance Markets
Most specialist insurance classes – including Professional Indemnity (PI) – are placed either with Lloyd’s syndicates or with insurance companies operating outside the Lloyd’s environment.

The UK general insurance market as a whole wrote in excess of £40 billion in premium during 2008 covering a wide range of risks, both domestically and internationally. However, the PI market is very much niche in its nature – but just how niche? UK liability premiums for 2007 totalled £3.8 billion, but this included a number of classes of insurance wide of PI, such as Public and Employers’ liability. We estimate that, of the £3.8 billion total, less than £1 billion relates solely to PI insurance. Of this, the largest element is the PI market for solicitors which accounts for around a third of this.

The construction PI sector is thought to represent a smaller proportion of the total premium although exact figures are not available. However, what is clear is that construction PI represents a very small proportion, less than 0.5%, of the UK’s overall premium spend.

Consequently, as specialist PI brokers, the sector of the insurance market with which we work is, necessarily, very narrow.

The Claims Background

Our statistics show that the number of claims and potential claims are increasing year on year – and this trend is also borne out by figures from the Technology and Construction Court. 2008 saw nearly 400 new cases reaching the court, on top of year on year increases previously.  Nearly half of the Court’s work now relates to construction and professional negligence claims. We should also remember that the vast majority of claims involving professionals are settled out of court – court cases are really just the tip of the iceberg.

Of equal concern to the increasing claims numbers are their increasing complexity, profile and cost.  The longest trial at the TCC last year ran for 109 days and claims have been made for damages of £100m plus against consultants.

Against the back-drop of increasing claim numbers, severity and cost, writing PI business is once again becoming a triumph of hope over expectation.

Premiums Received and Claims Paid
For long-tail classes of insurance such as PI, it is often the case that premiums received are not, of themselves, sufficient to pay claims. Investment income becomes a critical part of the equation particularly when, even now, construction PI claims take an average of five years to reach settlement.

Data from the ABI illustrates just how infrequently insurers make a technical or ‘pure’ underwriting profit on their accounts – only in 4 out of the last 10 years have they been in the black.  It is also notable that very often it is the liability insurance market that suffers so significantly from poor levels of profitability

The PI Cycle
The insurance cycle – which affects all sectors to varying degrees at differing times – is the name given to the periodic rise and fall of relative premium levels. As with all markets, the insurance cycle is driven as much by the effects of supply and demand as by the underlying cost of risk.

Catastrophic insurance claims are relatively rare events, but given their size they can make accurate pricing models difficult – too frequent to ignore, too infrequent to model. As large claims are also likely to be complex and involve the vagaries of the legal system, their outcomes are often difficult to interpret.

As a consequence, the forces of supply and demand are often the dominant factors in setting premium levels. Insurers may be prepared to set premium levels below the price of risk in the soft phase against an expectation of generating sufficient income in the hard market to have created an overall profit across the cycle.

However, where individual insurers price risk too low and for too long the consequences can be catastrophic – as we will see later.

In summary, the PI cycle is best seen as something like this:-

If we start in “hard market conditions” with high premiums and the real prospect of good rates of return on the capital invested”, capital enters the insurance market.  New entrants to the market look to build up books of business and do so by competing on price. In order to sustain growth (or for more established players to limit lost business) insurers are pressurised to further reduce premiums and/or provide a wider basis of cover.

However, none of this, of course, necessarily reflects any improvement in the underlying risk profile. It is market forces that are driving down premium levels and not necessarily a reduced exposure to claims. Claims still tend to be at the same levels as when premiums were high. As a consequence, claims exceed premiums and insurers start to lose money. Poor economic conditions and reduced investment returns can exacerbate the position.

At this stage we see the mirror image of the cycle. The PI market is now perceived as a poor home for capital and it withdraws relatively quickly to find better investments elsewhere. Reduced capacity (normally provided at this stage by long-term, experienced PI insurers) results in higher prices and reduced policy terms – and so the cycle begins again.

And the Consequences…
Insurers who fail to adequately manage pricing over the insurance cycle – by charging too little for too long – can face catastrophic consequences, as the following two examples indicate.

[a] Case Study – The Independent Collapse
The Independent Insurance Company was founded in 1986 and traded successfully for several years and quickly became the darling of the City. However, all was not well and a failure to adequately reserve for claims led to the Independent’s collapse in 2001 triggering £350m of compensation claims by some half a million policyholders. A subsequent investigation by the Financial Services Authority concluded that the company’s asset base was insufficient to support its business plans.

[b] Case Study – HIH Collapse
The collapse of HIH during 2001 saw the demise of Australia’s second largest insurer. The fundamental problem for HIH was that over a wide range of classes of insurance it failed to charge premiums which could adequately cater for future claims. HIH’s liquidators estimate that it collapsed with debts of £2.1 billion. Company executives have been sentenced to prison terms and thousands of insureds worldwide were affected.

Where are we now – and the future?
The PI market is coming off the back of a prolonged soft market period, which saw many insurers put volume ahead of profit.

And what of the future? It is certain that at some stage the market will enter harder conditions. There is uncertainty as to when the market might harden and by how much. Invariably the deeper and more prolonged the soft market the more pronounced the adjustment will be when it comes.

If the solicitors market is anything to go by, then we could be in for a rough time ahead.  With every solicitors practice in the country sharing a common renewal date, the scramble to the 31st October (is it??) is always fraught.  This year has been particularly so.  Rating increases of between 50 – 100% have not been uncommon, with all practices suffering to some degree.  Even those practices as the “less risky” end of the spectrum have seen their rate increase substantially.  Where insurers have perceived particular risk factors, even more so, with certain firms being effectively blackballed because of certain practice traits.

Events in insurance, as in life, are powerful and unpredictable. What future events might conspire, individually or collectively, to prompt a return to harder market conditions? The following is a list, by no means exhaustive, of the likely culprits:-

The Credit Crunch
The credit crunch had had (and will continue to have) three adverse effects on the insurance market. First, the cost of capital has increased as its availability becomes scarce. Second, a reduction in the asset base of major insurers as investment losses erode balance sheets – further reducing the capital available to underwrite risks. Third, an increase in credit crunch liability claims as those who have suffered losses (home owners, shareholders etc.) seek to recover from professional advisors, company directors etc.

Investment Income
A combination of increased stock market volatility and reduced interest rates is severely curtailing insurer’s ability to generate investment income.

Environmental Factors
After two relatively benign years of (insured) natural catastrophes, 2008 saw the second worst year on record for catastrophe claims with in excess of $50bn (£35bn) paid out.

Economic Factors
A downturn in the economy hits the insurance industry in two ways: (1) recessions invariably lead to an increase in claims; (2) the contraction in economic activity leads to a reduction in premium income leaving insurers with a reducing pool of money to pay claims.

Our Approach
Our approach will continue by:

a) placing cover with first class markets who are long term players in the construction PI market;
b) looking to charge premiums which reflect the long term cost of risk without prejudicing the position of our clients in the soft market; and
c) offering the guarantee that, absent fraud, all valid claims made will be paid.

And our commitment to proactive risk management will also continue unabated.

And Finally
There is no doubt that some sectors of the liability insurance market have seen severe corrections.  How long consultants in the engineering professions can continue to escape such corrections and how severe they will be when they come is always difficult to predict.  There is no doubt that we have hit the bottom of the current soft market and that next year will see rates on the way up.  As ever, forewarned is, or should be, forearmed.

Article Laboratories

Geophysics and the Search for Homer’s Ithaca

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Tags: geologist geophysical

An extract from the paper presented at SAGEEP 2009
Greg Hodges, Fugro Airborne Surveys, Mississauga, CA
David Kilcoyne, Fugro-Aperio, Wallingford, U.K.
Rod Eddies, Fugro-Aperio, Wallingford, U.K.
John R. Underhill, University of Edinburgh, Scotland, UK”

Ithaki, Cephalonia and PalikiIdentifying the location of the island of Ithaca, legendary home of Odysseus, has been a problem for historians for centuries.  The modern island of Ithaki, in the Ionian Sea, does not match the description in Homer’s epic poem.  It is the hypothesis of Robert Bittlestone, working with geologist John Underhill and classicist James Diggle, that the westernmost part of Cephalonia, the Paliki peninsula, was ancient Ithaca.  Their book, Odysseus Unbound: The Search for Homer’s Ithaca, gives a detailed description of the evidence supporting the hypothesis, and the story of its development.  There is one major sticking point:  Paliki is joined to the larger part of the island of Cephalonia, by an isthmus as much as 180m above sea-level.    Figure 1 shows a Landsat 7 image of the islands today, and the Thinia valley fills the isthmus between Paliki and the rest of Cephalonia.  The new hypothesis requires a channel through the isthmus, perhaps in the location shown in Figure 2.

 

Thinia valley with possible channel route.Ground, airborne and marine geophysical surveys are being used to study the potential for a channel under an area now largely covered by colluvium from the adjacent mountains.  Fugro’s airborne EM and magnetic data provide a regional overview of ground conductivity (Figure 3).  Ground EM, resistivity, gravity and refraction seismic surveys obtained by Fugro Aperio are being used to study the proposed channel zone in detail to determine the depth of fill and contours of the buried bedrock surface.  Marine seismic has been employed offshore by Fugro Oceansismica to analyze the drainage patterns at the low water levels of 3000 years ago.  High resolution airborne LIDAR mapping from Fugro’s Fli-Map provides detailed surficial information. All of these data sets are brought together to build a comprehensive geological model of the proposed channel area and to provide the ultimate test of the classical enigma.

 

Airborne Apparent Resistivity map (40kHz) on topography

 

(The full paper was presented at the EAGE Near Surface meeting in Dublin – 26th to28th September 2009, for further information contact Steve Poulter, Fugro Engineering Services Ltd 0870 4021423).

Article Safety

First Aid in the Workplace – Changes to Regulations

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Tags: Awareness regulations safety

The Health and Safety Executive (HSE), carried out an evaluation of first aid in the workplace and found that ‘although first aid awareness and penetration in workplaces was good, compliance was found to be more “in spirit” rather than the letter of the regulations and this exposed some important deficiencies in the format and content of guidance and in the proportionality of the current regulatory requirements for lower risk employees’.
The changes have been developed in consultation with employers and training providers and it is hoped that the new format will make it easier for employers to comply with the regulations.

The initial four day First Aid at Work (FAW) course will be shortened to three days and there will be a new qualification of Emergency First Aider in the Workplace (EFAW) that will require a one day training course. The FAW requalification remains unchanged at two days.
The HSE will also strongly recommend that FAW and EFAW students attend an annual three hour refresher course to prevent ‘skills fade’.
Both the FAW and EFAW courses will be approved by the HSE and must be taught by HSE approved first aid training providers.
FAW certificates will remain valid until their expiry date even if this is after October 1 2009.

For more information, visit www.hse.gov.uk/firstaid/index.htm

Article Data Management Loss Prevention

Successful Tender

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Tags: indemnify procurement tender

Question- Can a successful tenderer for a publicly procured project negotiate the terms of the contract post acceptance, but prior to contract award, in order to amend an obligation to indemnify the public body against all losses due to any breach of the appointment or failure to fulfil the obligations due under it, to an obligation to indemnify to the extent of any monies recoverable under the consultant’s Professional Indemnity (PI) insurance.

The public authority is arguing that (a) this would potentially be unfair to other tenderers and/or third parties and (b) such a limitation would be contrary to public policy in a public works consultancy agreement.  The consultant believed that by providing evidence of their insurance at tender stage, that was sufficient to limit their liability to the amount of the level of insurance (LOI).

Answer-

  1. A public procurement body may fall foul of the public procurement regulatory regime if the contract which is ultimately awarded does not accord with the particulars of the contract which was described in the contract notice published in OJEU. Not every change will be significant. The test which is usually applied is whether the proposed changes are so significant that the altered contract, if re-advertised, would attract responses from tenderers other than those initially admitted or would have allowed for the acceptance of a tender other than the one initially accepted. This may be the case where one or more important features of the contract have been changed (e.g. as to value, scope, timing or financing arrangements).  I had not seen the contract notice, so I was unable to advise definitively but I provided some initial views on this particular case.
  2. A public procurement body may fall foul of the public procurement regulatory regime if the public procurement authority awarded the contract on award criteria which are different from those which it has stated will apply to tenders.  I discussed that in the context of this case.
  3. The public body was correct in stating that the consultant’s confirmation of the level of its insurance cover (and in particular the limit of indemnity on its PI cover) does not amount to offering to provide the services subject to the consultant’s liability being limited to the amount of its PI cover. The tender criteria sought details of the PI insurance in respect of the criteria relating to the commercial viability/strengths of the interested tenderers.  Unless a consultant expressly states that its tender is subject to the insurance recoverable being the limit of any liability which the consultant may have for breach of the contract , then the mere provision of the insurance details in the tender is unlikely to have that effect.
  4. The proposed limitation of liability provisions are not contrary to public policy.  It is well established that parties are permitted to agree to limit their liability.  For example, clause 82.1 of the NEC3 Professional Services Contract provides for a cap on the consultant’s liability. The consultant’s total liability to the employer for all matters arising under or in connection with the contract, other than excluded matters, is limited to the amount stated in the Contract Data & applies in contract, tort or delict and otherwise to the extent allowed under the law of contract.  This contract is part of the NEC3 suite of contracts which have received OGC approval and which are approved as satisfying the “Achieving Excellence in Construction” principles.
Article Data Management Laboratories

Why AGS4?

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Tags: AGS4 format geoenvironmentalists

The AGS data format is being upgraded to version 4, this note explains the thinking behind the changes, gives the reasons for the changes and develops the potential advantages which this offers for the future.

A beta version of AGS4 will be available for public comment before the end of the year and comments will be welcome before final publication.

The AGS data transfer format consists of 3 parts, the data dictionary, the data structure and the transfer format itself which allows the computers to read and write the files. Each of these has been updated.

The data dictionary contains the list of data items which can be transferred.  This has been extended to include all the items required by the new Euro Codes and associated British Standards, the information necessary for accreditation of test results by external bodies and the typical information included in a Quality Assurance scheme.

The organisation of the laboratory test results have been restructured to provide separate groups for each test, using paired tables where appropriate.  A separate table has been introduced for the results of geotechnical chemical testing for the aggressivity of the ground to concrete in accordance with BRE Special Digest 1.

Rock testing has been divided into aggregate and geotechnical tests.

By working in close association with the geoenvironmentalists a new group, ERES, has been added for the test results for environmental samples.

Within the data dictionary an additional key field has been added to the sample table to be known as SAMP_SID, (sample identifier) which will enable the use of a single identifier for samples to be used where this is appropriate. This is particularly relevant for geoenvironmental studies, particularly when taking monitoring samples, and also facilitates the use of new technology in the form of ‘bar coded’ samples.

The rules for the writing of the transfer file  have been simplified with the removal of the 256 character restriction which has deleted the need for the <CONT> line, a throw back to the days of 8bit computers.   This has permitted the addition of line headers which simplify the format even further. The  CSV format has been retained rather than move to XML as this is being investigated by others and taking much longer than expected. After four years of study there seems to be no commercial advantages to changing to XML at this time for the UK geotechnical industry.

Article Business Practice Data Management Loss Prevention

EN 1990 Alteration

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Tags: Eurocodes liability

EN 1990 Altered to Avoid UK Liability Problems

The head code, EN 1990, has been changed to make sure that civil and structural engineers avoid potentially uninsurable ‘fitness for purpose’ liabilities when using Eurocodes in the UK.

One of the basic requirements of EN 1990, as set out in clause 2.1 (1)P, was that a structure had to ‘remain fit for the use for which it is required’. This has now been altered to, ‘meet the specified serviceability requirements for a structural element’.

The changes have been made as the original version suggested a fitness-for-purpose obligation that would not be covered by professional indemnity insurance. The trouble arises because ‘fit for the use for which it is required’ has a legal meaning in Britain which is does not have in mainland Europe.

BSI is planning to publish a corrigendum to BS EN 1990 shortly which will be free to download from the BSI Eurocodes website.( http://www.bsi-global.com/en/Standards-and-Publications/Industry-Sectors/Eurocodes-a/Eurocodes_Corrigenda/ )

Further information can be found on this article at www.eurocodes.co.uk

Article Contaminated Land Laboratories

Weighing up the Risk

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Tags: assessments contaminants ecological soils

Ecological Risk Assessment (ERA)

A new framework for assessing risks to ecological systems from contaminants in soils was published by the Environment Agency in October 2008, superseding the draft methodology from 2004. The new methodology is designed to establish whether pollutant linkages are likely to exist between soil contamination and designated ecological receptors, and to gather information for making decisions on whether harm to receptors is occurring or could occur in the future.

The ERA framework fits into the established structure of the Environmental Protection Act 1990 (Part 2A Contaminated Land Regulations) for assessing risks from contaminated soil and is now a standard part of contaminated land assessments where ecological receptors are identified.

As well as the contaminated land regime, the guidance is relevant to planning and pollution control, habitats and conservation regimes, and the Environmental Damage Regulations. ERA will be applicable either for assessing risks during a due diligence process or for under-writing environmental insurance. It is also appropriate for assessments relating to environmental permit applications or for justifying an appeal against an Environmental Damage Notice.

The framework follows a three-tiered process:

  1. Screening: compares chemical data to UK published soil screening values (SSVs) or with published data from other countries;
  2. Survey: the use of ecological surveys and bioassays to gather evidence of harm to receptors;
  3. Assessment: the establishment of a connection between the established harm to the species or habitat and the soil contamination.
Soil Screening Values (SSVs) have been published for twelve compounds. The assessor can use the published values or derive a “predicted environmental concentration” specific to the site, using a simple “decision tool” that is available on the website.

SSVs are based on a “predicted no effect concentration” to an ecological receptor and are, therefore, extremely conservative. Published values are lower than equivalent guideline values for human health. Exceeding SSV triggers further assessment and is not an automatic requirement for remediation.

 

At PBA, we have already updated our existing assessment procedures to take account of the new framework and will continue to provide a full range of contamination and ecological services to enable effective management of ecological risks from soil contamination.

Jenny Allen (Environment)
jallen@peterbrett.com

Catherine Copping (Geo)
ccopping@peterbrett.com

Article Contaminated Land Safety

Understanding Bandings

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Tags: contaminants hazards health risk

This article has been superseded by Safety Guidance – Classification of Potentially Contaminated Sites for Intrusive Investigation Activities which was published in March 2024.

It’s a red site. So what?

It was the 15th century Swiss medical pioneer Paracelsus, who noted in his journals: “all substances are poisons; there is none which is not a poison. The right dose differentiates a poison.” Although he made this statement almost 500 years ago, it is now known and proven to be correct with substances known to be essential for human existence, such as salt, defined as toxic when administered in sufficient quantities. For this reason the classification used by the British Drilling Association (BDA) Guidance for Safe Intrusive Activities on Contaminated or Potentially Contaminated Land and part four of the Site Investigation Steering Group (SISG), where sites are classified into green, amber or red sites, must be fully understood and not applied casually. Failure to fully appreciate the relationship between quantity and substance classification could be as dangerous as doing nothing or impose expensive non essential protection measures.

The BDA guidance classifies red sites as the most hazardous, attributing this classification to sites where there are: ‘Substances that could subject persons to risk of death, injury or impairment of health. Examples would be any substances that are corrosive, acidic, carcinogenic, cause skin irritation or respiratory problems, affect the nervous system, affect the organs, etc.’ Unfortunately this classification takes no account of the quantities present which are critical to determining the risk category as even uncontaminated soils and dusts, if present in the correct quantities and form, could act as a skin irritant or be harmful to the respiratory system. It would be a rare site investigation which did not include these hazards and on this basis, all sites would be classed as red.

In the BDA guidance, reference is made to the need for a risk assessment and this is the key to correctly determining the nature and category of the site. The green, amber, red categorisation system provides a simple warning and flagging system but where the presence of hazards is known or suspected, an assessment of both the nature and the quantity of the substances is required and this poses a problem for conducting work on contaminated land. In the majority of cases the purpose of conducting a site investigation is to determine the presence and quantity of contaminants for human health risk assessments. Until such time as this is done it is impossible to produce a definitive risk assessment and as such some assumptions need to be made.

To make an assessment there needs to be an understanding of the site and surrounding areas. A desk study should be able to identify the history of the site, in particular the industrial uses to which it has been put. This is the first stage but by no means the end of the process as not all uses may have been logged or recorded and they may not reflect the current use. Nothing substitutes a visit to site to examine the visible evidence but commercially, particularly on small sites, this is not always possible so any evidence such as photographs, discussions with clients etc. will help to build the picture.

Once the history and past uses of the site has been identified, an indication of the potential contaminants can be gathered but the available sources of guidance do little to clarify the situation. There are a number of publications used commonly to determine the presence of substances for the purposes of human health risk assessment, with the Environment Agency publication CLR8 – ‘Potential Contaminants for the Assessment of Land’ being recognised as the closest thing to definitive but the purpose for which it was developed does not fully suit our needs in term of occupational safety and health.

CLR8 is intended as an aid to determining the substances to be tested in a contamination study for human health but is not specific enough to assist completely in determining the requirements for the successful management of exposure in the course of site work or activities. CLR8 suggests everything is present in some quantity on nearly all sites but provides little indication of possible concentrations, the form of the substance or the exact location on the site. As an example, CLR8 identifies the presence of ‘oil / fuel hydrocarbons’ at airports, which although suggestive of contaminants which will certainly exist at some points on the site provides little guidance for occupational safety risk assessment. Hydrocarbons used for fuel vary from heavy oils such as diesel and more volatile substances such as pentane and if the whole site is treated as containing such substances, all area would be classified as ‘red’ under the BDA guidance as it is likely these hydrocarbons could contain benzene (a carcinogen), pentane (produces narcosis in higher volumes) and possible lead (causes damage to the peripheral nervous system).

A study undertaken by the author of this article, cross referenced all the potential contaminants present on sites as indicated by CLR8 with the risk phrases attributed to the compounds, suggested every site identified should be rated as the highest possible risk, if the categorisation of sites is dependant on the presence of substances alone, as suggested by the BDA guidance, all geotechnical sites would be classed as ‘red’ which is clearly unfeasible.

Article Loss Prevention

Payment and Protection

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Tags: legal payment

Introduction

In the present economic climate every business is feeling the pressure and it has never been more important to take all available steps to ensure you are paid for the services you provide. This article attempts to provide some guidance to assist with recovering consultants’ fees. Firstly it outlines some pre-emptive steps which can be taken by consultants to safeguard their position should they ever have to launch a fee claim. The second half then highlights some of the options available for recovering those fees.1

Section A: Establishing the right to payment

There are two hurdles you must overcome for a successful fee recovery:

1.         Establish that your client has a legal obligation to pay you;
2.         Satisfy both the procedural and legal requirements for a recovery of your fees.

1.         Establishing a legal obligation to pay

Firstly, make sure you identify who your client actually is. This is an obvious but crucial point. Consultants are often engaged through an intermediary or by one member of a group of companies, which can often cause problems later. To avoid this, always ensure you know who your true client is and, where possible, be engaged by a company with assets (rather than a shell or off-shore entity). If you have concerns about your true client’s ability to pay, then consider requesting third party security or advance payments. In certain situations it is possible to recover your fees from a party acting as the agent of the client, but ultimately fee recovery is so much easier if you have established who your client is before you undertake the work.

Secondly, the importance of agreeing and recording all the terms of your appointment in writing cannot be overstated. Subject to statutory intervention, parties are generally free to negotiate and agree whatever payment terms they want. However you should aim to make the terms as clear and unambiguous as possible. It is also important, especially when working for a lump sum fee, to define in writing the scope of your services and the value, scope and anticipated duration of the project. Ideally the appointment should contain mechanisms for varying the lump sum when these matters change. At the very least make sure you record the basis on which the fee is agreed. It is particularly important to ensure that all information or statements are recorded in the appointment, as the presence of an ‘entire agreement clause’ may well preclude you from relying on anything not specifically referred to in the document. Finally, the written appointment should also provide an entitlement to payment for additional services.

In the absence of a formal written appointment, keeping accurate written records is of paramount importance. To this end you should ensure oral agreements are confirmed in writing (usually by sending a letter to the client as soon as possible after discussions). In addition, even where there is no express agreement for payment, there is a rebuttable presumption that services provided by a professional will be paid for at a reasonable rate. However, again, fee recovery is so much easier if payment terms are clearly set out in writing before you undertake the work.

2.         Satisfying the procedural and legal requirements

When it comes to preparing a fee claim you must relate all sums claimed under the appointment back to the relevant terms to show that the requirements of the appointment have been complied with. The key to this is good housekeeping. Make sure you keep written records which:

  • confirm the instructions to proceed;
  • relate invoices back to the appointment/payment schedules;
  • confirm any agreed changes to billing arrangements and reasons for them;
  • particularly where the agreement is informal or under negotiation, record work done and time invested in order to show that the fee claimed is reasonable. Even when working under a lump sum or percentage fee, such records will be invaluable if a dispute arises.

 

Good housekeeping is equally crucial when undertaking additional services. Firstly, check the requirements of your appointment in relation to additional services. In any event, you should obtain prior written confirmation from the client that you are instructed to proceed with the additional services, their scope and the agreed fee/method of calculation. In addition, obtain written confirmation that they are additional services under your existing appointment, to avoid creating a separate contract. This will assist you if you later decide to adjudicate for any outstanding fees.

When claiming fees it is necessary to show that the work has been done and the contractual stage for payment has been reached. The following quote from a judge in a fee claim case illustrates this point:

  “A sum which was not due under the contract could not be turned  into a sum that was due merely by invoicing the employer and  stipulating a date by which the invoiced sum should be paid”.2

Section B: Options for enforcing the right to payment

So, you have set up your appointment correctly and provided the services in accordance with the appointment. However the date for payment has passed and your client has not paid. What can you do?

1.         Legal position

Most fee claims are claims for payment of monies due under a contract. Your client has promised payment in return for you providing services. Therefore once the services have been duly performed (and the contractual final date for payment has passed), you have a cause of action in debt for payment. To recover your fees you must prove that the debt is due and payable, however you do not have to prove any actual loss and also the rules for recovery of damages (e.g. as to remoteness, mitigation and penalties) do not apply. However you should of course be prepared for any counter arguments the client may put forward, whether they be abatement, set off, cross claim or counterclaim.

If the debt claim arises out of a simple contract you have six years to bring a claim from when the cause of action accrued, whilst if the contract is a deed the period is 12 years. In addition it is worth remembering that you can usually claim interest on the amount outstanding.

2.         Options

Firstly, there is of course the traditional option of commencing proceedings through the courts. Alternatively there is the fashionable option of attempting ADR (Alternative Dispute Resolution). Where applicable and appropriate, you could negotiate, mediate, arbitrate or adjudicate. However in addition to these now well known options there are a range of other, perhaps less well known weapons in the fee recovery armoury.

Solicitor’s letter of demand

Instructing your solicitor to send a formal letter demanding payment frequently prompts the client to pay. Often the involvement of solicitors also assists in disposing of unmeritorious claims and defences.

In addition, a well drafted solicitor’s letter also has the benefit of kick starting the Pre-Action Protocol for Construction & Engineering Disputes, which must be complied with anyway before you commence court proceedings.

Statutory Demand

A statutory demand is usually used as part of the insolvency process, as the failure to comply with it provides the court with proof that a company is insolvent. However it is also a powerful weapon in the fee recovery armoury.

A statutory demand requires the debtor to pay the outstanding amount within a specified period, which is clearly stated in bold on the front of the demand. The advantage is that a debtor knows that failure to comply can be relied upon by a creditor when presenting a winding up petition against the debtor.

However a statutory demand should only be served where there is no dispute that the sum is due, there is no genuine argument to resist the demand and no prospect of the claim of set off being raised. If the debtor produces a credible argument of a genuine triable issue then it may be better to withdraw the demand rather than have it set aside with a potential adverse costs order.

Exercising a lien over documents until payment is received

You are entitled to retain documents you have prepared as part of your services until the client has paid for them. However, the lien will be lost if you provide copies of the documents. Beware of terms in proposed appointments which would nullify your ability to exercise your lien.

Appropriation of payments

Where a client has paid money without appropriating it to a particular debt (i.e. paying a cheque but not in respect of a particular application for payment or invoice), you may appropriate the money to any debt you choose. However, the money must be due as a debt (e.g. it cannot be appropriated against an invoice which is not in law due).

Banking cheques received in settlement

Frequently, cheques for less than the full amount due are sent in ‘full and final’ settlement of fee claims.  Banking or retaining a cheque and not rejecting the offer immediately is viewed by the courts as strong evidence of acceptance of the offer. If you accept the cheque as part payment only, the safest course is to hold the cheque and seek immediate confirmation from the payer that it can be banked on account, alternatively, return it.  A further, but more risky, option is to bank the cheque whilst immediately rejecting the offer, to demonstrate that it has not been banked in satisfaction of the claim.

Termination or suspension

If you are engaged in an ongoing project for a client, but they are refusing to pay you as your fees become due under the appointment, then the following two options may also be relevant:

Treating non-payment as a repudiatory breach of contract

In certain situations a breach of contract may entitle the innocent party to terminate the contract. However the breach must either be so fundamental that it deprives the innocent party of substantially the whole benefit that it was intended to obtain from the contract, or the parties have agreed (expressly or by implication) that the breach will entitle the innocent party to terminate.

Non payment may constitute such a breach and you may therefore be able to terminate the contract. However, this option comes with a health warning especially when dealing with failure to pay by instalments. Whether a failure to pay by instalments due under a contract is a sufficiently fundamental breach is a question of fact in each case. However there is case law indicating that the failure to pay three instalments was insufficient, where the client had not demonstrated an intention not to pay at all. In addition if the client can ultimately demonstrate that the instalments relied upon to treat the contract as at an end were not in fact due, then you will have  put yourself in breach by having terminated the contract.

Suspension of performance of the services

Subject to the Construction Act 19963 applying to the contract, s112(1) provides you with a right to suspend your services. The right can be exercised when a sum due under the appointment is not paid in full by the final date for payment and no effective withholding notice has been given. However the right cannot be exercised without first giving to your client at least 7 days’ notice of intention to suspend performance, stating the grounds on which it is intended to suspend performance. Furthermore the right to suspend ceases when your client makes payment in full of the amount due.

Suspension of performance can be a very effective threat. However, the risk in suspending is that if the client can demonstrate that the monies were not due as claimed, then you will be in breach for withholding your services.

Settlement

Finally, if you have agreed terms for settlement for your fee claim it is crucial to record the terms formally. This is of particular importance if it has been agreed that you will compromise your fee claim in exchange for the release of negligence claims which have been notified against you by the client. Do not leave your position exposed by not recording these terms in writing and allowing the client to send you a cheque which purports to be in settlement of the fee claim only. Should the client later pursue the negligence claim, you will have a much more difficult time proving the basis of the settlement if the only written evidence is that of payment of the fee claim.  A strategically prepared compromise agreement could obtain a wider release of claims than might be in dispute in the fee claim.

 

This article is for guidance only and should not be relied upon for legal advice. In any particular case specific legal advice should be sought.

1. This article is based on talks given on 18.11.2008 by Guy Lane, Robert Stevenson & Peter Stockill of Berrymans Lace Mawer solicitors.

2. HHJ Thornton QC in CWF Architects v Cowlin Construction Ltd [2006] EWHC 6 (TCC) 35

3. Full title of the Act is the Housing Grants Construction & Regeneration Act 1996 (HGCRA).