An overview with specific reference to Legal Risk Management

Summary of presentation by J.J. Viljoen, Viljoen Inc. consultant to Glenrand M.I.B. Ltd., South Africa

Each and every project, notwithstanding how carefully planned and expertly staffed, is exposed to risk. The ability of those involved to foresee or anticipate possible problems and potential claims ensures that any problems that may arise creating potential liabilities will be either avoided, minimised or properly managed.

In general, the following procedure outlines the action which should be taken in order to minimise and manage the risk element on a project::

i) Identify the risk.
ii) Analyse / evaluate the risk.
iii) Control the risk.
iv) Funding the risk.

In the process of following these procedural outlines it is inevitable that the legal liability facing the profession of the consulting engineer, will be indentified.

One of the most common ways in dealing with this legal liability is the purchasing of professional indemnity insurance.
Insurance is, notwithstanding its popularity not necessarily the one and only answer to the legal liability of the consulting engineer. Notwithstanding the existence of insurance, there is always an excess payable, and in addition to that, being involved in litigation, is not only time consuming, but costly in the sense that the time spent in court and consulting with other professionals is time that could have been spent more productively in earning fees.

The Origin of Professional Liability

Professional liability exists because the community is dependent on expert advice and may suffer damage as a result of such advice. The South African Law Commission summarises the situation as follows:

"Courts face a particular difficulty is establishing a rational approach to professional liability. On the one hand provision has to be made for adequate protection of the consumer, client or patient and on the other hand human ability has to be taken into account The solution laid down by the courts is to require that professionals have to comply with a minimum standard of skill and exercise reasonable care in the provision of services. This general approach has been applied almost unchanged in the English courts over the past 150 years."

In Badgley verses Dickson (1886), a case involving an architect, the judgment read as follows:

"As architect he is in the same position as any other professional or skilled person, and whether It be the preparation of plans and s~fications, or the deeming of any other professional work for reward, is responsible If he omits to it within ordinary and reasonable degree of care and skill."

The above case, and various others dating as far back 1833, have been followed through in the South African cases. Clearly, the standard as to the exercising of reasonable skill care and diligence is stated in these cases.

The Extent of the Liability of the Consulting Engineer

As far as the extent of the consulting engineers liability is concerned the professional engineer is faced with the unique situation that the exposure to risk in respect of past or completed projects do not end once the project is completed. The risk unfortunately remains in existence at least for the duration of the life cycle of the project. It is therefore not uncommon that claims do arise 10, 20 or 30 years after the completion of a project.

In South Africa the common law position with regard to liability is dealt with in the Prescription Act, Act 68 of 1969. The Act specifically refers to debts as being a broad term covering all obligations and liabilities.
Chapter (iii) of the Prescription Act deals specifically with prescription of debts and the relevant portion of the Acts reads as follows:

"10. Extinction of Debts by Prescription

i) Subject to the provisions of this chapter and chapter iv, a debt shall be extinguished by prescription after the lapse of the period which in terms of a relevant law applies in respect of the prescription of such debt.

11. Period of Prescription of Debts

The period of prescription of debts shall be the following: 

a. 30 years in respect of -

i) Any debt secured by mortgage bond,

ii) Any judgment debt.

iii) Any debt in respect of any taxation imposed or levied by or under any law.

b. 6 years in respect of a debt arising from a bill of exchange or other negotiable instrument . ........

c. Save where an Act of Parliament provides otherwise, 3 years in respect of any other debt.

12. When Prescription Begins to Run

i. Subject to the provisions of sub-sections (ii) and (iii), prescription shall commence to run as soon as a debt is due.

ii. A debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises: provided that a creditor shall be deemed to have such knowledge if he could have acquired it by exercising reasonable care. "

The Act further specifically provides that the running of prescription shall be interrupted by an express or tacit acknowledgment of liability by the debtor, and if the running of prescription is interrupted as contemplated in this manner, prescription shall commence to run afresh from the day on which the interruption takes place.

Judicial interruption of prescription is interrupted by the service on the debtor of any process whereby the creditor claims payment of the debt.

The above Act specifically deals with the extent of liability insofar as time is concerned.

The actual monitory value as an extent of the consulting engineer's liability is perhaps more daunting than the time element. The exposure to claims for damages in a monetory value would obviously be closely related to the value of each specific project and the possible costs of remedial work that need to be effected in the event of any defects in the professional services rendered becoming evident.

In addition to merely calculating the monetory value of remedial works to be effected, there is the ever present possibility of claims relating to personal injury suffered by third parties due to professional negligence. The value of these claims vary widely depending on the nature and severity of injuries and the earning capacity of a claimant.

Arrears Where Claims Commonly Originate

1. Lack of precision in brief.
2. Unrealistic time constraints.
3. Responsibility for supervision / monitoring.
4. Preparing or agreeing to an unrealistic budget.
5. Sub-division of design responsibility.
6. Site investigations.
7. Failure to advise a client timeously of possible problems.
8. The use of computers.
9. Getting advice outside the brief.
10. The need to supervise important parts of the construction work.
11. Incorrect certification or measurement.
12. Assuming responsibility / liability not normally forming part of the duties of the consulting engineer.

Contractual Claim in Comparison with Dellictual Claims

The most commonly encountered claims are those arising out of the contractual arrangement between the consulting engineer or the contractor and the employer on whose behalf they render these services.
The more easily describable claim is that arising out of the breach of contract by one of the parties thereto. It is normally a specific term of a contract that the professional services to be rendered, shall be rendered with due skill care and diligence. Should the consulting engineer fail to meet this requirement, he will be held to be in breach of his contractual obligation.

In comparison with the claims arising out of breach of contract one has the claims arising out of the Law of Delict. Simply put, the Law of Delict, the English law equivalent being the Law of Tort, regulates the legal situation between individuals not standing in a contractual relationship to each other. The Law of Delict requires that an individual should act, or refrain from acting, in a certain way under specific circumstances.

In order to succeed under an action for Delict against a defendant, the claimant must prove that:

a. A legal duty existed with the party to act in certain manner or to refrain from certain actions. 
b. An obligation to exercise due care towards the claimant rested on the defendant. Furthermore the claimant must prove that on a balance of probabilities:

i) The act or omission of the defendant was wrongful.
ii) The defendant was negligent.
iii) Damages were suffered.
iv) There was a causal connection between the act and or omission of the defendant and the damage so suffered.

Similarly, in an action arising from a contract the claimant must show that:

i) In terms of an agreement between the parties the defendant has certain obligations to perform,
ii) That the defendant failed to properly fulfill his obligations in terms of that agreement which effectively means that he must allege that there was a breach of contract on the part of the defendant, and
iii) That damage was suffered as a result of the breach of contract and
iv) That there was a causal connection between the breach of contract and the damages so suffered.

Vicarious Liability

Vicarious liability is the liability which is attributed to an employer due to the negligent acts of his employees which case damage to other parties.

A Comparison of the Liability of Partners, Directors or Companies and Members of Close Corporation

There are four important forms under which business can be conducted. These are the sole proprietorship, a partnership, a close corporation and a company.

1. Sole Proprietorship

The sole proprietorship is normally conceived to be a relatively small concern with capital invested by only one person, the owner or the sole proprietor. It is obvious that the sole proprietor is the only person involved in the business who carries the risk of any loss, howsoever occurring. It is also obvious that a sole proprietorship has limited growth potential because of the fact that the capital of only one individual is involved and that any business that has to be done, has to be done by one individual only.

2. Partnerships

Partnerships are often entered into between two or more individuals to overcome the burdens and limitations of a sole proprietorship. A partnership can therefore be described as a consensual contract between two or more persons to place their money, goods, labour and skill, or some or all of them, in lawful commerce or business and to divide the profit and bear the loss in certain proportions. According to one of the well known authors of the Roman Dutch Law, Pothier, four essentials are required to make a partnership contract valid, namely:

a) a contribution by each partner, whether it be money, labour or skill, and
b) a business that must be carried on for the joint benefit of the partners concerned, and
c) the object to make a profit, and
c) a contract that must be legitimate.

The fourth requirement is in fact common to all contracts.

From the definition of a partnership it is clear that the partners jointly carry any losses incurred proportionate to their shareholding or as may be otherwise agreed upon. There is therefore a community of profit and loss.

In a partnership each partners is the agent of all the others in all matters failing within the scope of the partnership and then coupled with this, the onerous situation that a partner is responsible for another partner's wrongful acts failing within the scope of the partnership business.

The possibility of loss of capital invested in the partnership as well as any other personal assets not forming part of the partnership assets, is a risk that each and every partner carries. Whether that risk materialises in a loss or a claim will depend on the professional capability, integrity and general good business sense of each and every partner.

There are however limitations on partnerships and associations for gain. Section 30 of the Companies Act, Act 61 of 1973, reads as follows:

"30 Prohibition of Association or Partnership exceeding Twenty Members, and Exemption

i) No company, association, syndicate or partnership consisting of more than twenty persons shall be permitted or formed in the Republic for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association, syndicate or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other law, or was before 31 day of May 1962 formed in pursuance of Letter of Patent or Royal Charter."

From the contents of this section of the Companies Act, it is therefore clear that a partnership may not consist of more than twenty partners.

Section 30(2) of the Companies Act makes provision for an exception to the general rule set out in Section 30(1), as follows:

"2. The provisions of sub-section (1) shall not apply with reference to the formation by persons qualified to carry on any organised professions which are designated by the Minister by notice in the Gazette, of any association, syndicate or partnership, for the purpose of carrying on such professions and/or any combinations of such professions."

In terms of Section 30(2), the limitation of twenty partners to a partnership is not applicable to professional engineers in terms of a notice to that effect which appeared in Government Gazette No.R1813 dated 26 September 1975 and signed by the then Minister of Economic Affairs, JC Heunis.

Under normal circumstances the dissolution of a partnership can be brought about in various ways. The death of one of the partners under normal circumstances would lead to the automatic dissolution of the partnership unless the agreement of partnership clearly provides for continuation. The lapse or affliction of time, if originally entered into for a limited period, can lead to dissolution of the partnership. The completion of the partnership undertaking could also lead to the dissolution of a partnership, however the partnership does not necessarily end on completion of the venture but endures until the partners have gathered in and divided the profits arising from the partnership. The partnership can also be ended by mutual agreement and by change in the membership of the firm.

It is important to note that a partner who resigns and/or who has been bought out remains responsible for the partnership debts which may have been due on the date of the dissolution of the partnership.

3. Companies

In terms of the provisions of Section 19 of the Companies Act there are two types of companies that may be formed and incorporated in terms of the Act, namely:

a) a company having a share capital; or
b) a company not having a share capital and having the liability of its members limited by the Memorandum of Association.

A company having a share capital may be either a public company or a private company having shares of par value or shares of no par value.

All companies limited by guarantee shall be deemed to be public companies for the purposes of the Act.

A private company is a company having a share capital and which by its articles:

a) restricts the right to transfer its shares; and
b) limits the number of its members to 50; and
c) prohibits any offer to the public for the subscription of any shares or debentures of the company.

A private company will have to add to its name the suffix "(Proprietary) Limited".

A public company will have after the name the suffix "Limited".

For the purposes of this discussion the private company as an entity for consulting engineers to exercise their profession will be discussed.

A private company has shareholders, who are normally the individuals who inject capital into the company to enable the company to do business. The risk that an individual shareholder takes is limited to the loss of the amount of the capital so injected into the company.

From the ranks of the shareholders, individuals are nominated to act as directors of the company. These directors are then employed by the company, through whom the company then conducts its business. The risk of loss of a director who is also a shareholder, is normally limited to the value of the capital injected into the company.

Contrary to the situation between partners in a partnership, directors of a company are not jointly and severally liable to third parties or clients for or on behalf of the company. Each director is only liable or responsible for his own wrongful acts. Directors of companies are therefore not jointly and severally liable for the wrongful acts of the others.

4. "Incorporated Partnerships"

Only recently were various professions allowed to practice under the style of an incorporated company. Before this concession was made., professions were limited to practicing either as sole proprietors, partnerships or as '7ncoroorated partnerships" Immediately the question /5 asked as to where this strange animal comes from.

In October 1963 the government of the day decided that it would be prudent to appoint a Commission to consider amendments to the law relating to companies. This Commission was named the Van Wyk De Vries Commission. In the report of the Commission reference was made to the limitation of Section 4 of the 1926 Companies Act (the predecessor of the current Section 30 referred to above), causing a problem in certain types of professions, such as the accounting and attorneys' professions, where there was a need for partners in excess of the limited 20 members allowed in terms of the Act. The Commission therefore recommended the creation of a private company with unlimited concurrent liability of its directors with the company. It was further suggested that such a company should, to identify it, not use the words "(Proprietary) Limited" in its name but the word "Incorporated" or its abbreviation "Inc."

It was therefore the situation that should any profession wish to permit the incorporation of its members, it might find it convenient to use such a company. It was for the professions themselves to decide.

The suggestions of the Van Wyk De Vries Commission were accepted and the existing Section 53 of the Companies Act found its place in the provisions of the Act, Section 53 read as follows:

"53 Memorandum may contain special conditions and may provide for unlimited liability of directors.

The memorandum of a company may, in addition to the requirements of Section 52, 

a) contain any special conditions which shall apply to the company, and the requirements, if any, additional to those prescribed in this Act for the alteration of such conditions;
b) in the case of a private company, provide that the directors and past directors shall be liable jointly and severally, together with the company, for such debts and liabilities of the company as are or were contracted during their periods of office, in which case the said directors and past directors shall be so liable."

In pursuance of this specific section, Section 13(1) of the Stock Exchange's Control Act, Act No. 1 or 1985, has to be discussed. It reads as follows:

(i) A corporate body shall not be capable of becoming a member of any licensed stock exchange, unless it is a corporate body which is a private company having a share capital, incorporated and registered under the Companies Act, 1973 (Act No.61 of 1973), and whose memorandum of association states that its directors and former directors shall be liable, jointly and severally, together with the company, for such debts and liabilities of the company as are or were contracted during their period of office."

The wording with regard to Section 13(1) of the Exchange Control Act was discussed in a Supreme Court case in the Supreme Court of South Africa, Cape of Good Hope Provincial Division between Funds Trust (Pty) Limited in liquidation and the directors of George Huysamer Incorporated. This judgment was delivered on the 21" day of June 1995 where it was decided that the word "contracted" should be given its ordinary legal meaning leading one also to the conclusion that the legislature intended by its use in Section 53(b) to confine the liability of a director in an incorporated company to the contractual debts and liabilities of the latter.

Although it does not fall strictly within the ambit of professional liability arising from the practice of the profession, it is worth noting the provision of Section 424 of the Companies Act, which makes any person, including of course a director, who is a party to carrying on the business of a company recklessly with intent to defraud or for a fraudulent purpose, personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company. It is therefore a punitive provision for those who, in a company, act recklessly or fraudulently.

Close Corporations

In 1994 parliament passed an Act titled The Close Corporation Act, Act No. 69 of 1994. In terms of this Act any one or more persons not exceeding 10, who qualify for membership of a close corporation in terms of the Act, may form a close corporation and secure its incorporation by complying with the requirements of the Act in respect of the registration of its founding statement

One of the basic reasons for this Act was to create a legal entity similar to that of a company in terms of the Companies Act which was less regulated than a normal company but with the advantages of a company.

Contractual Documentation

Approach to Contracts in Law

The general principles are that people must be held to contracts that they enter into voluntarily. People have freedom to decide whether or not to contract and once they have chosen to do so their agreement should be regarded as sacred and should not be interfered with lightly. In the case of Printing and Numerical Registering Company versus Sampson, the judge held as follows:

"If there is one thing which more than other public policy requires is that men of full and age competent understanding shall have the utmost liberty of contracting and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice."

In line with this decision the authors on Text Book on Contract, one Christie wrote: "If the parties have made an onerous or a one sided unreasonable or even grossly equitable contract it is not for the court to amend it out of sympathy with either or both of the parties.

Definition of a Contract

A contract can be described as an agreement which creates a legal obligation between the parties to it.

There are various requirements for a valid contract, namely:

1. There must be an agreement between the parties.
2. The parties must have capacity to act.
3. The performance must be lawful.
4. Performance must be physically possible.
5. Formalities must be complied with.

Essential Aspects to be Included in Contracts for Rendering of Professional Services

1. After having discussed and considered the liability of partners, directors of companies and members of close corporations, one cannot but realise that the correct description of a contracting party in a contract is of the utmost essence.

2. Limitation of liability

Taking into consideration the extent of the liability of a professional, one should always endeavour to limit your liability not only in time but also in monetory value.

The SAACE form agreement for consulting services, March 1995, limits the compensation payable to a client. The specific clauses reads as follows:

"65 Limit of Compensation

The maximum amount of compensation payable by either party to the other in respect of liability under this agreement is limited to the amount stated in the specific provisions or, where no such amount is stated, to an amount equal to twice the amount of fees payable to the consultant under this agreement, excluding reimbursements and expenses.

Each party agrees to waive all claims against the other insofar as the aggregate of compensation which might otherwise be payable exceeds the aforesaid maximum amount payable

Clause 6.4 of agreement reads as follows:

"6.4 Duration of Liability

Notwithstanding the terms of the Prescription Act, Act 68 of 1969 (as amended) or any other applicable statute of limitation neither the client nor the consultant shall be held liable for any loss or damage resulting from any occurrence unless a claim is formally made in terms of clause 8 within the period stated in the specific provisions, or, where no such period is stated, within a period of three years from the date of termination or completion of this agreement.

Any limitation of liability should be specifically stated and spelt out properly. No assumptions should be made.

3. A complete and specific description of the professional services to be rendered by the consulting engineer.

4. Non-variation clauses

Parties may agree that no changes may be made to their agreement unless reduced to writing and signed by the parties or their respective representatives. A typical example would be,: "no agreement to cancel, alter or vary this agreement shall be of any force or effect unless reduced to writing and signed by both parties or by the duly authorised representatives."

5. Waiver clauses

For the protection of parties against careless waivers regarding certain terms and conditions of contracts, the following clauses, as contained in clause 1,3 of GCC90 should be considered, namely:

'No grant by the employer or contractor to the other of an~, concession, waiver, compensation or allowance shall, in respect of any specific event or circumstance other than that in respect of which the grant was made, constitute a waiver of the rights of the grantor in terms of the contract or an estoppel of the grantors's right to enforce the provision of the contract'

Dispute Resolution

Mediation / Arbitration

The majority of contract documentation applicable to the construction industry contains clauses in terms of which any dispute is by agreement between the parties referred to arbitration or mediation for settlement.

Arbitration and mediation have been accepted as a means of settling disputes due to the perception, and rightly so, that litigation through the normal courts is expensive and very time-consuming. In the High Courts of South Africa the waiting time for the allocation of a trial date could be anything between 8 and 18 months. In the lower Courts the situation has improved substantially, to the extent that the waiting time for trial date is approximately 3 months. In addition to the aforementioned waiting period for trial dates, the Rules of Court stipulate certain time periods, within which the exchange of pleadings setting out the respective parties' claims, defences and/or counter claims have been completed. From a practical point of view it takes a period of approximately six months to exchange pleadings when the stage is reached when an application for a trial date can be lodged. This has the effect that in the high courts it could take as long as 18 - 24 months before the matter is brought to trial, and in the lower courts, if the matter is pursued with some form of urgency, it could take anything between 9 - 12 months before it goes to trial.

When the matter is referred to mediation and/or arbitration, the matter can be heard within a period of between 3 and 6 months, depending on the nature of the dispute involved. It is obvious therefore that arbitration and mediation processes are much shorter than processes of the normal courts.. It is not necessarily cheaper to take a matter to arbitration, due to the fact that legal representation is allowed in arbitration proceedings. In mediation proceedings, however, normally no legal representation is allowed.

It should also be noted that during mediation and/or arbitration proceedings the engineer has to act in a certain way.

The mediation and arbitration clauses in the SAACE document are contained in Clause 8 on page 12 thereof. Clause 8 reads as follows:

"8 Settlement of Disputes

1.1 Settlement

The parties shall negotiate in good faith with a view to settling any dispute or claim arising out of or relating to this Agreement and may not initiate any further proceedings until either party has, by written notice to the other, declared that such negotiations have failed.

1.2 Mediation

Any such dispute or claim which cannot be settled between the parties may be referred by the parties, without legal representation, to mediation by a single mediator. The mediator shall be selected by agreement between the parties or, failing such agreement shall be nominated by the President of the South African Association of Consulting Engineers. The costs of the mediation shall be borne equally between the parties.

Arbitration / Mediation

If either party be unwilling to agree to mediation or be dissatisfied with the opinion expressed by the mediator or should the mediation fail then such party may:

1.2.1 Serve process instituting action arising out of such dispute or difference in a competent civil court; or

1.2.2 With the consent of the other party refer the dispute to arbitration by a single arbitrator to be mutually agreed upon or, failing agreement, to be nominated by the President of the South African Association of Consulting Engineers. The arbitration shall be in accordance with the provisions of the Arbitration Act of 1965, as amended, and shall be conducted in accordance with such procedure as may be agreed between the parties or, failing such agreement, in accordance with the Rules for the Conduct of Arbitrations published by the Association of Arbitrators current at the date the arbitrator is appointed,

1.2.3 Service of process under Clause 8.3.1 or referral to arbitration under Clause 8.3.2 shall take place within three calendar months of the date of notice from either party declaring that the settlement negotiations under Clause 8.1 have failed, or, if mediation is agreed on, within three calendar months of the date of the mediator's opinion or the date upon which the mediator declares that the mediation has failed. Claims not brought within the time periods set out herein will be deemed to be waived."

During discussion it should be noted that the settlement of disputes by way of mediation or arbitration is in fact in respect of any dispute notwithstanding the nature thereof. The procedure to be followed for the settlement of disputes is prescribed. It is not possible for either party to unilaterally deviate from the agreed settlement procedure. However, should the parties be in a position to agree an alternative procedure, this could be followed. It is however unlikely that this would occur because, normally, when a dispute has been left unresolved for a considerable period of time, any goodwill that may have existed in all probability would have been lost.

In terms of the provision of Clause 8.2, no legal representation is allowed, the mediation is chaired by a single mediator and the costs of the mediation are to be borne by the parties in equal shares.

In terms of Clause 8.3 the decision of the mediator is not final, and should any of the parties be unwilling to agree to mediation or be dissatisfied with the opinion expressed by the mediator, the matter would then be referred to litigation, in terms of Clause 8.3.1 or alternatively, in terms of Clause 8.3.2 with consent, be referred to arbitration. If an arbitrator or mediator can not be agreed upon, the President of the South African Association of Consulting Engineers will then be approached to appoint such mediator or arbitrator.

The procedure to be followed in terms of this contract is in accordance with the provisions of the Arbitration Act of 1965, alternatively in accordance with the Rules for the Conduct of Arbitrations published by the Association of Arbitrators.

Clause 8.3.3 requires that the dispute be referred to arbitration or litigation within a period of 3 calendar months of the date of the mediator's opinion or the date upon which the mediator declares that the mediation has failed. After the expiration of the 3 month period, the claims will be regarded as having been waived, if the procedure was not followed as stipulated.

In terms of this agreement therefore it is possible to settle a dispute within a very short period of time.

DISCUSSION

A question was raised as to whether a client could take an engineer to task for drafting documents that are ambiguous to the extent that they cost the client much more money than was anticipated.

Mr Viljoen confirmed that this was possible. In terms of' SA law, when contracts are drawn by the client or consulting engineer, if' there is ambiguity, the rules of interpretation says that ambiguity must be interpreted against the person who drafted the agreement. In other words, if the consulting engineer drafts an ambiguous document, the decision must go against him and in favour of the client.

Responding to a question regarding all risks policy - from an insurance point of view, Mr Viljoen advised that one should look at each policy specifically. In general the contractors all risk policy covers the insurance of the works during the process of construction, insurance for injuries of individuals on site only. The contractors all risk policy, does not afford Indemnity insurance to the consulting engineer. It is however possible to take out what is referred to as "client controlled insurance policy" - where the client takes out a policy where he is insured, where the contractor in his capacity as contractor is insured, and the professional team from the architects down to the surveyors and consulting engineers are all insured in terms of one specific policy in respect of each ones specific professional duty. But the contractors all risk policy does not normally afford the consulting engineer an indemnity - it is specific to the contractor.

Mr Viljoen also confirmed that with the contract with the client if one is covered for financial liability and time, it would actually stand up in court although there are a few rules which are very important to note. When one gets a letter of appointment from the client to undertake a specific job, one should respond to thank the client for the appointment and state that the appointment wiII be in accordance with the FIDIC documentation which should be attached and request confirmation from the client that it is acceptable. If the terms and conditions have come to the specific party's knowledge, then he will be bound by that.

To claim from one's PI insurance one sometimes has to admit negligence before one get paid. As a general rule one should never admit anything. Once liability is admitted cannot be undone and you will also note that your insurance policies would specifically stipulate that you are not allowed to admit liability. As soon as a claim arrives, advise your insurers immediately and You should not get involved in an\, negotiations with the other contracting parties without the knowledge and assistance of your insurers.

It normally arises that the proof that the consulting engineer was negligent is because he did riot exercise due care and diligence as a professional person. For example in the new FIDIC documents the consulting engineer could be called upon to show that what lie designs has a fitness for purpose which is a step away from due care and diligence The term 'fitness for purpose' does not negatively affect your insurance or it does not vary the yardstick or requirement for due skill care and diligence. When one receives a brief to do the specific work, they expect you to render professional services or give a design for certain process that would be fit for the purpose. The question at the end of the day would be, In your design to reach the goal of 'flit for purpose' did you exercise due skill care and diligence?

When you settle a dispute on the basis that you do not admit liability, you are settling purely for the sake of economic convenience, and that is the basis under which you pay. The principle of 'without prejudice' discussions is that what you discuss is privileged and cannot be used against you at a later stage in other court proceedings, and if the opponents tender evidence that was given during the 'without prejudice' discussions, then your counsel should object to It immediately. From that point of view you must engage sharp counsel.

The legal risk management system was created by Glenrand MIB specifically for members of SAACE. Glenrand MIB gives seminars relating to legal risk management, contract documentation etc. Other issues that one should look at are labour legislation, occupation health and safety legislation and other legislations specific to countries that you work in, especially when you undertake cross border contracting. In the process, these seminars will become part of an accrediting system for the SAACE School of Engineering.

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