Kobus le Roux

Planning and Construction Contract Expert

 

JBCC rescue – Can a contractor hold a principal agent or other agents personally liable for damages?

By Kobus le Roux

What happens when a principal agent discharges his/her duties in a manner which clearly demonstrate incompetence and lack of skill? Or worse, blatantly and unashamedly act prejudicial towards one party at the expense of the other?

There is a very important legal backdrop to this question.  A principal agent has two primary duties:

  • The first is to act and carry out his/her assigned duties with reasonable skill and care while exercising reasonable and professional judgement, In other words, their judgement cannot be interfered with by the employer. This is a contractual and common law duty that we cannot escape as professionals, even if you are part of the employer’s organisation!
  • Secondly, they must protect the employer’s interest.

This sounds like a misnomer doesn’t it? But let me post an excerpt from the Hoffmans’ case (Hoffman v Mever) where the learned Judge Ogilve Thomson J observed the following (I’ve added my own emphasis to the passage):

“The architect’s function in issuing the final certificate is to determine what is finally due and owing by his employer, the building owner to the contractor. In discharging that function the architect is. so it seems to me, primarily still acting in the protection of his employer’s interest. He must, of course – as also in the case of interim certificates – be honest and impartial in determining what is the contractors due. The circumstance that he is engaged by the owner does not entitle him to cheat the contractor.

Although the particular case had a unique factual matrix, the conclusions drawn by courts thereafter have been that:  a principal agent or other professional agents must act fairly and impartially in accordance with the terms of the contract as a primary set of boundaries and, within those boundaries, they must look after the employer’s interest.  They cannot step outside their professional duty of impartiality to cheat the contractor or any party for that matter, and then claim that he/she is merely acting in the best interest of the employer.  The duties are entwined and not separable or flexible in any manner.

Another case in point is the judgement in the Hyde Construction case where Judge P.A.L Gamble noted that when a principal agent accepted the appointment as principal agent, that person knew that he would have to make decisions on behalf of his principal which would directly affect other contracting parties. As such he would have known that he was required to behave impartially and could not be seen to be “cheating? (to use the analogy in Hoffman v Meyer) either the employer, the contractor or any of the sub-contractors to the project. Similarly, those other parties would have been entitled to look to the principal agent to discharge his functions professionally, fairly and in accordance with accepted practices. (My own emphasis)

And here comes the kicker:

Can the contracting parties with whom the principal agent has no contractual privity (Contractor, Subcontractors) impose a liability on him where he fails to act impartially and cause damage or loss to one of these parties?

Technically in law, the answer is yes, but do read further as we have precedent on this.

There is a delictual liability on the principal agent, other agents and any professional person.  A delictual liability in laymen’s terms is a liability that all of us have – for instance, I have a delictual duty toward every other person, not to harm or cause them loss by my negligent actions.  If I wildly swing a bat in your direction and dislodge a knee-cap, we do not need an agreement between us or any contractual relationship for you to claim your losses from me for my negligent action.

So, in delict, a principal agent owes the other parties, such as the contractor and subcontractors, a duty to act impartially, professionally and fairly.  Should the principal fail to act in such a manner and cause a loss or harm to one of these parties, they would have a right to claim such damages in delict, from the principal agent.

The courts did however find it to be unnecessarily burdensome on principal agents to expose them directly to delictual claims where contractors already have other adequate legal redress as I’ll explain below:

Last must-read section:

Our courts applied a “balancing of identifiable norms” in this instance and refrained from opening the door to multiple claims from contractors and subcontractors directly.  However, the delictual liability and claimability of losses from delict is still possible in certain cases and professionals should not think it is impossible for such a claim to succeed in future.

In this particular instance, the court felt that there is sufficient contractual recourse for both contractors and subcontractors in terms of the indemnity clause of the JBCC.  In essence, the clause states in versions 4.1, 5.0 and 6.1 that the employer shall indemnify the contractor against any harm or losses suffered as a result of an action by the employer or one of his agents.

A contractor suffering loss as a result of an action by a principal agent, would be able to claim this from the employer.  The employer, in turn would be able to hold the principal agent liable contractually or in delict.

It is therefore imperative for any professional agent on a JBCC contract to understand this crucial important duty of impartiality.  Although contractors or subcontractors would not readily be able to lodge direct delictual claims, they have recourse through the contract to claim for losses caused by the prejudicial actions of an agent.  That action automatically opens the door for claims against the professional by the employer.  So, no comfort or space for maneuvering.

I am continuously stunned by the shenanigans of some principal agents and other agents on projects we are engaged on as consultants. Many of them routinely, and unashamedly partake in blatant acts of partiality in terms of their duties.

As professionals, it is our duty to remind our employers of this principle when they request you to reduce a certificate’s value, or ask you not to include default interest on late payments, or ask you to deliberately cut the extension of time claim of a contractor.  “Yes, but the employer will fire me from the project and not use my services again”: I hear many people protest.  Let’s get clear on this, you have two choices, (a) you are either professional and impartial or (b) you are cheating someone else and liable for the losses suffered by them as a result.  Our industry and specifically the JBCC contract rely on the principle of fairness and of a facilitator who is impartial.  If this breaks down, we compromise the integrity of the contract and harm our industry.

If you have any specific questions, comments or unique circumstances you would like some clarity on, feel free to send it to us at info@lerouxconsulting.com.

This post was compiled by  Kobus le Roux for Le Roux Consulting, all rights reserved. Please contact us for your professional project planning, project control, claims or adjudication assistance services in the heavy civil and building industry.

https://www.lerouxconsulting.com/

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