The Obligation To Procure A Performance Bond

In the case of Sweett (UK) Ltd (formerly Cyril Sweett Ltd) v Michael Wight Homes Ltd, [2012] EW Misc 3 (CC), HHJ Wildblood QC had to consider whether or not the Consultant had acted in breach of its duty to the Employer in relation to the provision of a performance bond by the Contractor.

The Facts

Michael Wight Homes Ltd (the "Employer") engaged Sweett (UK) Ltd (the "Consultant") on 4 February 2008 to provide quantity surveying and employer's agent services in respect of a housing development in Martock, Somerset. The key events are summarised as follows:-

It was an express term of the Consultant's engagement that it would "prepare contract documentation and arrange for such documents to be executed by the parties thereto"; During pre-contract negotiations with Diamond Property Construction Limited (the "Contractor"), the Consultant made it clear that a performance bond was required; On 25 March 2008 the Contractor started work but the formal contract with Employer was not signed until 23 May 2008; It was an express term of the contract that the Contractor would provide a bond in the form annexed to the contract; Over the course of the following 6 months, and despite numerous attempts by the Consultant to resolve matters, the Contractor failed to provide the bond as required under its contract; On 10 September 2008 as a result of unpaid fees, the Consultant terminated its agreement with the Employer; On 15 September 2008 the Consultant pursued the Employer in respect of unpaid fees. The parties settled all aspects of the claim, save for the Employer's counterclaim in respect of the Consultant's failure to secure the bond; and The Contractor went into liquidation on 17 June 2009. The Issue

The principal issue that the Court was asked to determine, was whether the Consultant acted in breach of its duty to the Employer in relation to the provision of a performance bond by the Contractor.

The Employer argued that the Consultant owed an absolute obligation to ensure that the performance bond was provided by the Contractor. It relied on the fact that the Consultant's schedule of services stated that:

"Prepare contract documentation and arrange for such documents to be executed by the parties thereto."

Alternatively the Employer said that even if there was no absolute obligation on the Consultant to procure the performance bond, the Consultant still had a duty to take reasonable care to see that the bond was provided by the Contractor. The...