Where an estimate produced by an engineer or quantity surveyor turns out to be wrong, is the employer entitled to redress from its author?
An estimate that turns out wrong is not, on its own, a right to recompense. The employer must prove a warranty of accuracy or a want of reasonable skill and care, and then prove a loss.
Not automatically: an incorrect estimate is not by itself a right of redress, and the employer must prove either that the accuracy of the figure was warranted by its author, which is rare, or that it was exceeded through a lack of reasonable skill and care, and then prove a resultant loss
Not automatically. An estimate that proves incorrect does not by itself entitle the employer to recompense. The employer must prove either that the accuracy of the figure was warranted by its author, which is rare, or that the figure was exceeded through a lack of reasonable skill and care. Reasonable skill and care is the ordinary skill of an ordinary competent person practising that art, as Bolam v Friern Hospital defined it. An estimate is not usually a guarantee: in Copthorne Hotel v Arup there was no warranty of accuracy, and in Paul Tsakok the estimate was never intended to be guaranteed. Liability did follow in Nye Saunders v Alan E Bristow, where the architect failed to allow for inflation or to flag its omission. Even a good claim recovers only nominal loss if the employer would have proceeded anyway; a real loss arises where tenders exceed the estimate and the scheme is then abandoned on financial grounds.
| Breach and loss | Both must be proved; a wrong figure alone gives no remedy |
| Reasonable skill and care | Bolam: the ordinary skill of an ordinary competent person |
| No warranty | Copthorne v Arup and Paul Tsakok: an estimate is not a guarantee |
| When liability follows | Nye Saunders: failing to allow for, or flag, inflation |
| Measure of loss | Nominal if the employer would have proceeded regardless |
The problem
To recover from an engineer or quantity surveyor for an estimate that proves wrong, the employer must establish two things: a breach of an obligation, and a financial loss flowing from that breach. The consultancy agreement can take many forms, from a specially drafted appointment or a standard ICE or RICS form to a simple exchange of letters or even an oral agreement, and its terms may be express or implied. Most such agreements require the engineer or quantity surveyor to carry out the work with reasonable skill and care, and where no express term says so, one is normally implied by law. An estimate that turns out to be inaccurate does not by itself give the employer a right of redress.
Reasonable skill and care
Reasonable skill and care sets the standard against which the professional is judged. It measures the conduct in preparing the estimate, not the accuracy of the final figure.
The court defined the standard of reasonable skill and care. A professional need not possess the highest expert skill to escape a finding of negligence; it is enough that the person exercises the ordinary skill of an ordinary competent person practising that particular art. Applied to an estimate, the engineer or quantity surveyor is judged by whether that ordinary competent standard was met in preparing the figure.
No warranty of accuracy
Short of proving a lack of reasonable skill and care, the employer may try to show that the estimate was a warranty of accuracy that has been breached. That argument rarely succeeds, because an estimate is not usually a guarantee.
An employer sued a consultant over inaccurate cost estimates, putting its case on breach of warranty. The consultant had produced budgets before any contract existed between the parties. Whatever was said at that stage, the court held, was not professional advice given under a contract, and at most a representation intended to induce the employer to make the appointment. There was no warranty as to the accuracy of the figure, so the cost overrun was not a breach of warranty.
An architect gave a client an estimate, then declined the client's instruction to revise all the drawings so that tenders would come within it, and claimed the fees. The court held that the parties never intended the estimate to be guaranteed. A consultant is not expected to be perfect, and the architect recovered the proper fees. The professional does not normally guarantee an estimate given to a client.
When the professional is liable
Where the estimate omits an item of likely cost and the professional fails to say so, liability can follow, even where the arithmetic itself was another consultant's work.
Architects appointed to submit a planning application on a house renovation gave the employer a budget estimate prepared by a quantity surveyor. The quantity surveyor omitted any allowance for inflation or contingencies and failed to draw attention to the omission. When the figure later rose sharply, largely because of inflation, the project was cancelled. At a time of high inflation the usual practice was to state whether a budget included or excluded it. The architect was held negligent for failing to provide for inflation in the first estimate or to flag its omission. It was the quantity surveyor who made the error, but the architect was liable to the client for the estimate.
Proving the loss
A successful action still turns on proving loss. An estimate can be wrong for reasons outside the professional's control, such as a change in market conditions, and that does not found a claim. Where an item of likely but uncertain cost, such as inflation, is excluded, the estimate must say clearly that no provision has been made for it.
If the employer would have proceeded with the project even had the estimate been correct, the recoverable loss is nominal, because the wrong figure did not affect the decision. Where tenders come in above the estimate and the scheme is then abandoned on financial grounds, the employer should be able to demonstrate a real loss.
Authorities
| Authority | Citation | What it decides |
|---|---|---|
| Bolam v Friern Hospital Management Committee | [1957] 2 All ER 118 | Reasonable skill and care is the ordinary skill of an ordinary competent person exercising that particular art; the highest expert skill is not required to escape a finding of negligence |
| Copthorne Hotel (Newcastle) Ltd v Arup Associates | [1996] 58 ConLR 138 | Budgets produced before any contract existed were at most a representation to induce the appointment, not a warranty of accuracy, so the cost overrun was not a breach of warranty |
| Paul Tsakok & Associates v Engineer & Marine Services (Pte) Ltd | (1991) | The parties never intended the estimate to be guaranteed; a consultant is not expected to be perfect, and the architect recovered the proper fees |
| Nye Saunders v Alan E Bristow | (1987) 37 BLR 92 | An architect was negligent for failing to allow for inflation in a budget estimate or to draw attention to its omission; the quantity surveyor made the error but the architect was liable to the client |