Winter 2008 Volume 2: Number 5
SCS
REVIEW Consolidation
Margin
Sta
sis
Reco Good gri
Merger Cashflow
Everybody’s talkin’ at me Govt Contracts: Your questions answered Advice: How not to get sued Finance: Manage your cashflow
President’s news
Welcome to the Christmas Winter edition of the SCS Review. Since the last edition of the Review was published, the SCS Annual Conference has taken place and I was delighted to see so many members in attendance. I was also pleased to see the level of media interest surrounding the event. Reports of the conference were included in all of the national written press and it was also featured in the TV3 News that evening. My sincere thanks to all on the committee and our speakers for their hard work in ensuring the success of the 9th SCS Annual Conference. In attending events throughout the country in my capacity as President of the Society, the question of the economic outlook for Ireland frequently arises and the opinions of our profession are sought. Many of our political commentators have agreed that the two big drivers of growth, consumer spending and construction, will weaken further in the short term. Our unemployment rate is set to rise to 8% and 9% during 2009 and 2010; however, the ESRI has predicted that Gross National Product will increase from an anticipated -0.7% in 2009 to 3.9% during 2010. In its pre-budget submission to the Government, the Society called upon the Minister for Finance, Brian Lenihan, to take advantage of the fall in construction tender prices to the benefit of the Exchequer by actually increasing NDP activity instead of decreasing it. The SCS acknowledges the announcement that gross capital spending will be approximately 5% of projected Gross National Product in 2009, which equates to €8.2bn and its commitment to, at a minimum, maintain this rate of investment in 2010 and 2011. However, many of us working in the sector have felt the unwelcome impact of an informal policy emanating from government departments where the delivery of major construction projects has been ‘paused’, or it is taking a longer period for projects to get up and running and for contractors to get paid. This in turn has a severe negative impact in all areas of the construction and property industry and the wider economy. John Minihane’s article in this edition in relation to prompt payments is of interest in this regard.
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The effect on those of us employed in the construction and property industry has also taken its toll, with redundancies now commonplace across our sector. The Society Council has decided to take the initiative and implement supportive action by providing a facility for those members who face difficult times ahead to retain their membership of the Society at a nominal rate over the next 12 months – details of this measure will be announced in the notice of membership subscription renewals. We are also seeking to establish some practical support measures for those members in the form of ‘career transition’ training and support details of this programme will also be made available shortly. Members should also be aware of the availability of the Lionheart benevolent fund to all members in Ireland, details of which are also enclosed. So what of the economic outlook and the opinions of our profession in this regard? It is now apparent that 2009 will be very challenging for all of us and the outlook for 2010 may be similar. However, with strong political leadership from our Government, an easing of the ‘credit squeeze’ and control on inflation levels, we as a profession, based on these positive assumptions, can look forward to rebuilding confidence in the market during 2010.
Sean McCormack ASCS, MRICS, ACI, Arb. President, Society of Chartered Surveyors
Contents
30 The Society of Chartered Surveyors, 5 Wilton Place, Dublin 2. Tel: Fax: Email: Web:
01-676 5500 01-676 1412 info@scs.ie www.scs.ie
EDITORIAL BOARD Chairman:
John Oliver Costello
Board:
Tom Cullen John Minihane Ciara Murphy Paul O’Grady Gillian Reynolds Derry Scully
PUBLISHERS Published on behalf of SCS by Think Media Ltd Editorial:
Ann-Marie Hardiman Paul O’Grady
Design:
Tony Byrne Tom Cullen Ruth O’Sullivan
Advertising: Pat Murray
www.scs.ie
Views expressed by contributors or correspondents are not necessarily those of the Society of Chartered Surveyors or the publisher and neither the Society of Chartered Surveyors nor the publisher accept any responsibility for them.
Time is of the essence.
Editorial
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Coping with difficulty
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04 News
Submission on Arbitration Bill, Past Presidents’ Dinner, and more
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Obituaries
Brendan Merry and Peter Flanagan
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The 75th Young Chartered Surveyors Black Tie Ball
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YCS Ball
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Repairs
Management
Rural practice
Finance
Annual Conference SCS Annual Conference
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Euro news
Nous sommes des Européens
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Can we have a word ...
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Redundancy
Finding the silver lining – the
Legal matters
Dilapidations and the burden of repair
How not to get sued
If you go down to the woods today
Much obliged! Time to join forces Managing your cashflow
Case law review
Government contracts GCCC documents Q&A
Insurance
Time is of the essence
NEW SECTION…new initiative see page 31 CLASSIFIED SCSREVIEW 3
News
Editorial
Coping with difficulty
If there is a theme running throughout this packed edition of the SCS Review, it is assistance in coping with the difficulties we all currently face.
Our publication is designed to assist all members to weather the storm and we hope you find it helpful.
Cashflow has to be minded carefully and prompt payment to us and by us is even more important than normal. All options have to be considered and in this edition, there is information on coping with redundancy and upskilling; looking at the route of mergers and acquisitions; ensuring that we avoid getting sued; and, a hugely helpful question and answer article on the new Government contracts.
Wishing you a happy Christmas and a peaceful and prosperous 2009.
John Oliver Costello Honorary Editor
Thankfully, most of the experts at our recent Annual Conference were of the view that if we can weather the current economic storm, the medium-term outlook for Ireland is quite good.
Submission on Arbitration Bill
The Arbitration Bill 2008, which was published in June of this year by the Department of Justice, is a Bill to further and better facilitate resolution of disputes by arbitration and to give the force of law to the UNCITRAL Model Law on International Commercial Arbitration. The Bill, if passed, will repeal the three Acts governing this area that are in force at the moment: the Arbitration Act 1954; the Arbitration Act 1980; and, the Arbitration (International Commercial) Act 1998. The popularity of arbitration as a method of resolving commercial disputes has grown substantially over the past number of years and its use is well established within the construction and property sectors. Many Chartered Surveyors in Ireland practising in construction, property or building surveying are actively involved in arbitration and other forms of dispute resolution relating to: n rent reviews; n construction projects, both public and private; and, n disputes arising under commercial leases and under other landlord and tenant relationships. As such, the Society established a working group to consider the contents of the Bill and make a submission to the Department of Justice. In its submission, the SCS has welcomed the proposals to consolidate and modernise the law relating to Irish domestic arbitration. By virtue of its language and the manner in which it is drafted, the SCS is of the view that the UNCITRAL Model Law is straightforward, easily readable, readily understood, and its provisions are consistent with good arbitration practice. It is also noted that the UNCITRAL Model Law is a widely accepted framework for the regulation of arbitration. The Society has urged the Department to ensure that, in integrating the Model Law into Irish law, the changes will improve the arbitral process and not make the process slower, more complex or cumbersome, or more costly for the parties involved. The Society has also submitted a detailed comment on the Bill, a copy of which is available for perusal on the SCS website – www.scs.ie
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News
SCS Past Presidents’ Dinner
The annual Past Presidents’ Dinner of the Society of Chartered Surveyors took place in Wilton Place on Thursday, November 13, 2008. Some 30 past Presidents attended the gathering, which was hosted by current SCS President, Sean McCormack. Addressing the past Presidents, Sean McCormack spoke of how honoured he was to be among such esteemed members, and acknowledged their contribution to the Society over the years. Also in attendance at the event were Ken Cribbin, SCS Senior Vice President, Ciara Murphy, Director General, Zöe O’Connor, Education Officer, and Tony Smith, Registrar, SCS Registration Body.
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1. Larry Martin 2. John Daly 3. Tony Smith 4. Jim Dent 5. Derry Scully 6. Brendan Sheridan 7. Bill Nowlan 8. Tom D’Arcy 9. Barry Smyth
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10. Sean McCormack 11. Tom Dunne 12. Brendan O’Meara 13. Joe Bannon 14. Harry Whittaker 15. Conor Hogan 16. Pat Duffy 17. David Kelly 18. Felix McKenna
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19. Fred Devlin 20. John Bruder 21. Padraig Mulcahy 22. Kevin Callan 23. Noel McDonagh 24. Ciara Murphy 25. Des Byrne 26. Anthony Leonard 27. John Costello
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News
Lionheart swing into action
BARRY SMYTH reports on the golf outing which raises funds for the industry’s benevolent society. The 22nd annual golf outing of the Society of Chartered Surveyors in aid of Lionheart, the RICS Benevolent Fund, was held yet again at Woodbrook Golf Club by kind permission of the Captain and Committee on Friday June 13, 2008. A golf outing was originally identified by the Benevolent Fund committee as a way to raise money for the Benevolent Fund in addition to the usual contributions from subscriptions and annual dinner tickets. Over the years the event has raised considerable funds for Lionheart, putting the Society almost invariably at the top of the list of contributors on a per capita basis. Records are nonexistent and memory weak, but recollection is that the founding fathers of this event included, among others, David Kelly, Stuart Harrington, Sean McDermott and Henry Tierney (apologies to anyone whose name has been omitted). This year’s event was held in blazing sunshine (could that be true in 2008?) and 36 teams of three took part. Traditionally there has been a
dinner at the end of the event, but drink driving considerations now mean that a meal is available to participants as they complete their rounds, with a smaller number now attending the later dinner. The major prize for the individual winner, keenly sought after in the golfing world, has always been a large watercolour of Dublin or Wicklow landscapes by Brid Clarke, wife of member Pat Clarke, and Brid yet again provided us with the prize this year. Last year, as the outing was on Bloomsday, Brid provided a fascinating painting of Molly Bloom clearly in the middle of her soliloquy. The outing is organised by a stalwart committee whipped into line by Paddy O’Donohoe and otherwise comprising Edward Lyons, Eoin Mc Dermott, Brendan Merry (RIP), Barry Smyth and Derek Jolly. A constant entrant and serious competitor in this competition over the years was the late Joe Bardon and it is with much sadness that we note his passing earlier this year. As everyone must be aware, we also lost a most valued committee
President Sean McCormack presenting the winning team prize to Philip Chambers.
member and hard working organiser of the event in recent weeks after a short illness, Brendan Merry. May they both rest in peace. Among the major prize winners this year were Ron Buckley, who won the individual prize, and Philip Chambers, winner of the first team prize, who in the previous year scored a hole in one. €12,500 was raised, and this donation has been gratefully acknowledged by Lionheart with a formal document displayed in the hall in Wilton Place. Over the past 22 years there have
been good times and bad in our industry but the golf outing has always been terrifically supported and we hope this will continue to be the case. It is regarded as a very good event on a wonderful course with a good social atmosphere afterwards. We would love to see some of the younger members taking part rather than assuming that this is an event only for senior members. The 2009 event will be on Friday June 12, again at Woodbrook, so put this date in your diary now and treat it as a priority in your charitable donations for 2009.
Lionheart From time to time, members may find themselves falling on hard times and Lionheart is a facility available to all members of the Society should the need arise. Further enquiries can be made in confidence to Barry Smyth, Lionheart Steward, Tel: 01 676 8300.
Southern Region Annual Dinner The SCS Southern Region Annual Dinner took place on Friday, November 7, 2008 in the Maryborough House Hotel. Over 250 members attended the popular event, which was hosted by Southern Region Chairman, Michael Barrett. Guest speaker Bill O’Herlihy gave a light-hearted and entertaining after dinner speech.
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PHOTO LEFT From left: Bill O’Herlihy, guest speaker; Sean McCormack, SCS President; Ciara Murphy, SCS Director General; Deputy Lord Mayor, Cllr Laura McGonigle; and, Michael Barrett, Southern Region Chair.
PHOTO RIGHT From left: Committee members Brian O’Driscoll, John Lyden, Brian Edwards, and Tim O’Sullivan.
News
Michael Long Memorial Lecture
The Long family.
The Geomatics Division of the Society hosted an evening memorial lecture and social event on October 16 in the Society offices in Wilton Place in honour of their first Chairperson, Michael Long (RIP). Michael, a longstanding member of the Society and the first land surveying professional to join the SCS, was warmly regarded by his fellow Society Officers, who recognised his professionalism and
commitment to the Society. Through his foresight, determination and hard work, the Geomatics Division developed from its inception as a special interest group to its current status as a fully fledged and highly active Division. In the initial stages of his career, Michael was a very well travelled surveyor, spending time practising and advising surveyors abroad,
particularly in Africa. On returning to Ireland he spent the majority of his remaining career in the Property Registration Authority (PRA; formerly known as the Land Registry) and was a font of knowledge in all matters relating to boundary surveying and land registry mapping in Ireland. Although rising to a very senior level in the PRA, he was always approachable and available to
assist younger surveyors and to guide them on their way to becoming chartered. The memorial event, chaired by Society President Sean McCormack, was attended by Michael’s widow Ita and his adult children, who had an opportunity to view the Geomatics Chain of Office, which is dedicated to Michael’s memory – his name being inscribed on it. A select number of invited guests from the Society, industry, the PRA and academia also attended the evening lecture, which focused on the surveyor’s role in society. Professor Stig Enemark, President of the International Association of Surveyors (FIG), was the principal speaker and provided a very entertaining talk on where the focus of the surveying profession should lie in a global context. Other speakers included Tony Smith, a long time personal and professional friend of Michael’s, and Diarmuid Clancy, Deputy Registrar of the Property Registration Authority, Michael’s former employer. It was a wonderful event and one which was truly a fitting tribute to Michael’s memory.
From left: Stig Enemark, President, FIG; Audrey Martin, Chairman, Geomatics Division; and, Sean McCormack, President, Society of Chartered Surveyors.
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News
Sisk contract win John Sisk & Son has been awarded the contract for the re-development of the PJ Carroll Building at Dundalk Intitute of Technology. The contract, which commenced in October, involves a re-roof of the entire building, remedial works to the listed external calcium silicate brickwork and curtain walling, and a complete fit out. Dundalk Institute of Technology acquired the PJ Carroll Cigarette Factory adjacent to the campus in 2002 for €16 million. The property consists of 17,780m2 of office and factory space sitting on 18 hectares. The factory itself, designed by Ronnie Tallon of Scott Tallon Walker in the late 1960s, is a listed property of national and international significance. The refurbishment programme will create new state of the art teaching, laboratory and staff areas. It will involve the refurbishment of over 11,000m2 of space within the factory area and will be completed by the end of 2009. The heavily serviced internal fit out includes recording studios, tiered lecture theatres, sonic and IT labs, offices, dance rehearsal studios and open communal areas. The contract is valued at €17.9m. The refurbished scheme has been designed by the original architects, Scott Tallon Walker, and includes many innovative architectural and special purpose design features. These include a substantial emphasis on the use of renewable energy systems with, for example, the Institute’s wind turbine being used to create ice banks at off-peak times to reduce reliance on grid supplied electrical energy for air conditioning. The development is an important element in the Dundalk 2020 Renewable Energy Initiative being spearheaded by Sustainable Energy Ireland with the campus and adjacent areas being at the centre of a new Renewable Energy Zone.
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The new tourism and leisure building at Waterford Institute of Technology.
Providing sustainable buildings
WIT Healy Kelly Turner & Townsend has been providing cost advice to Waterford Institute of Technology (WIT) for the construction of the new €21m tourism and leisure building, which is the largest single capital project the Institute has undertaken. Sustainability was a key factor in the design, which has been implemented to exacting standards in order to achieve airtightness figures that will have a significant effect on the building’s energy performance. Mark Kelly, Managing Director of Healy Kelly Turner & Townsend, commented: “We are delighted to have played a key role in the successful completion of the tourism and leisure building, which
will reinforce WIT’s standing as one of Ireland’s leading third-level education providers”.
IPS HQ Meanwhile, another Healy Kelly Turner & Townsend project, the new €18.5m Irish Prison Service HQ Building in Longford has been officially opened, having been completed on time and within budget. The fit out of the building was to an extremely high specification, providing facilities such as a cafeteria and gymnasium, in addition to extensive office space. The cost drivers for several different proposals were examined to help choose the most economical proposal over the complete life cycle of the building, and these
alternative proposals were also modelled using state-of-the-art environmental modelling tools. Healy Kelly Turner & Townsend is a construction and management consultancy with offices in Dublin, Waterford and Belfast.
The new Irish Prison Service Headquarters Building in Longford. (Photographs: Andy Mason.)
News
Appointments at Colliers Jackson-Stops
The Board of Directors at Colliers Jackson-Stops is delighted to announce a number of new appointments at the firm. Shane Cahir MRICS ASCS (right) has been appointed Associate Director – Retail. A qualified Chartered Surveyor, Shane has been with the company for three years.
Part of the Colliers retail set-up, Shane currently advises retailers such as Tempest, Menarys, River Island and Barratts, as well as developers such as North Quay Developments (Bridgewater Centre) and Walls Properties. Paul Finucane MRICS ASCS (centre) has been appointed Associate
Director – Commercial. Previously with AIB Property, Paul is also a qualified Chartered Surveyor, and has been with the firm for four years. He specialises in industrial and commercial lettings, acting for clients such as Rohan Holdings, Bosch Siemens and Albion Properties. Finally, part of the Colliers team for some six years, Caroline Ashcroft (left) has been appointed Associate Director and Office Manager for the company. Caroline’s broadranging role as office manager encompass HR, marketing, and the smooth and efficient day-to-day running of the office. Colliers Jackson-Stops is one of Ireland’s leading property consultancies, advising on all ranges of commercial, investment and retail properties, as well as having a significant residential and country property division. Additionally, it is a member of Colliers International, providing an ability to serve clients’ property needs in over 260 offices throughout 55 countries.
Davis Langdon PKS
Davis Langdon PKS is pleased to confirm the following promotions and additions to further strengthen their management team. From left: Stuart Griffin, Associate; Tomás Kelly, Regional Director; John Quinlan, Associate; Norman Craig, Managing Director; Dominic Kearney, Associate; Anthony McDermott, Associate; and, Michael O’Driscoll, Associate.
European operations
Bruce Shaw has announced the appointment of Ciarán Chesser MBA FSCS FRICS FCI.Arb MAPM as General Manager of European Operations. Based in the Bucharest office, he will be responsible for projects in the CEE region. Ciaran has previously been partner/director in two respected international consultancies and joins us with strong cost and project management experience, starting from a contractor background. Projects have varied from leading edge ‘green’ building through Hong Kong Airport, New Town Development, offshore and much more. Current projects include: Park Lake Plaza Retail Development, Bucharest; Basarbia Residential Development, Bucharest; and, various speculative developments in Poland, Ukraine and Russia. Bruce Shaw Project Consultants Srl. delivers cost and project management services for developments in the CEE region. Combining the extensive resources of Bruce Shaw with the local market knowledge and experience of Bruce Shaw project consultants, we provide a variety of value-added construction consultancy services throughout Europe.
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Obituaries
Brendan Merry The quantity surveying profession and the construction industry lost a great colleague with the recent death of Brendan Merry. Brendan, was brought up in Glasnevin. His secondary education was at Belvedere College and he retained contact with the College and his school friends throughout his life. Brendan studied quantity surveying through the College of Estate Management passing the professional examinations of the Royal Institution of Chartered Surveyors to become a Chartered Quantity Surveyor in 1962. It was in Aidan Whelan & Associates that Brendan started his career in the early 1960s. Eight years later he founded Brendan F. Merry & Associates, which went from strength to strength and provided quantity surveying services on landmark construction projects in both the public and private sectors. Under his direction, the practice developed and became Brendan Merry & Partners, bringing a continued commitment to providing excellent service to clients, which was and still is the ethos of the practice. Brendan’s dedication to detail, his calm manner, great humour and infectious laugh are well known and stood to him in many tricky situations. He was held in the highest regard by the many clients, architects, engineers, surveyors and contractors he worked with. He was also a great listener and gave sound advice to those who sought it.
Peter Flanagan It is with great sadness that we remember our friend and colleague Peter Flanagan who died suddenly in his home on September 13. Peter, a native of Liverpool of Irish extraction, started his quantity surveying career the old fashioned way. He joined a QS practice straight from secondary school and qualified as a Chartered Surveyor via the RICS direct membership exams. He came to Ireland in his early twenties and worked in Galway with Patrick Butler & Associates. It was during his time that he met his wife Peggy, then a medical student in the National University of Ireland, Galway. Following Peggy’s graduation, they married and moved to Dublin. Peter worked on both the client and subcontractor sides of the industry, and was employed by Mulcahy McDonagh, Cape Insulation and Murray & O’Brien before joining Bruce Shaw Partnership in 1989. In 1991 he moved to Yorkshire and worked as QA Manager for a local authority. On his return to Dublin in 1997, he rejoined Bruce Shaw assuming the role of QA & Training Manager, a job that he was particularly suited to. Peter had an in-depth technical knowledge of measurement, contract law administration and claims and disputes. This knowledge, combined with his ability to communicate with young people, made him a wonderful Training Manager. Working closely with the SCS, Peter mentored countless Bruce Shaw surveyors through their professional competency exams and they are forever indebted to him for his guidance and support. In addition to training, Peter also managed Bruce Shaw’s quality assurance system and this too was a role at which he excelled.
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He gave generously of his time to the Society of Chartered Surveyors. He was Chairman of the QS Division in 1976 and 1977 and Chairman/President of the Society in 1981. During his tenure he participated in the negotiations with the RICS resulting in the Society of Chartered Surveyors coming into existence as an independent body. Brendan also represented the Society in the construction industry and was a past Chairman of the Construction Industry Liaison Committee. Brendan had a great interest in all sports and the depth of his knowledge was awesome. His great passion was rugby and he had a life long association with Old Belvedere, of which he was a past President and Trustee. He was a familiar figure at home and away fixtures and at functions. He was also a keen golfer and a member of Woodbrook Golf Club. Brendan also enjoyed the Surveyors Golfing Society outings. Brendan was a devoted family man who, together with his wife Evelyn, raised a wonderful family in Helen, Suzanne and Niall. Brendan developed idiopathic pulmonary fibrosis in early 2007 and required a lung transplant. Brendan put all his energies and determination into getting onto the lung transplant list. With the support of his family, they campaigned for the organ donor scheme to be reversed so that it is assumed that everybody wants to donate their organs unless they specify otherwise. Brendan had his hopes of a lung transplant dashed on three occasions. The best tribute that can be paid to this exceptional person is to support the introduction of legislation so the opt out organ donor scheme can be brought in and to support funding events organised by the Irish Lung Fibrosis Association. He will be greatly missed by his family, his brothers and their families, his work colleagues, his professional colleagues and many friends. May he rest in peace.
Peter was a man with many interests; an avid Everton Football Club supporter, he was also a keen mountaineer and experienced alpinist. As a hill walker he had a particular fondness for Connemara and The Lake District. He was a great conversationalist with a passionate interest in Irish and world affairs and had an encyclopedic knowledge of the history of these islands. Peter was also a loving husband and father. Following his wife’s diagnosis with multiple sclerosis a number of years ago, he, with the support of his family and friends, cared for her in their home in Ballymore Eustace, County Kildare until his untimely death on September 13. He is also survived by his two sons Seamus and Oisin. Peter is very sadly missed by his friends and colleagues in Bruce Shaw and all those who knew him within the industry. May he rest in peace.
SCS event
Lisa Corcoran and Katy Norton of Jones Lang LaSalle.
Head table guests FRONT ROW (from left): Collette Nugent; Sarah Stapleton; and, Jessica Ramsey. BACK ROW: Andrew Nugent; Peter Stapleton; Kieran Curtin, Vice Chairman, YCS; Andrew Ramsey, Chairman, YCS; Gavin Moran; and, Ciaran Johnston.
At the Ball The 75th Young Chartered Surveyors (YCS) Black Tie Ball took place in October at the Alexander Hotel, Dublin. There was a fantastic turnout with over 300 people taking the time out to attend. These included our very special guests, Junior Vice President of the Society of Chartered Surveyors, Peter Stapleton and his wife Sarah, and Andrew Nugent and his wife Colette. This year we were also jointed by Gavin Morgan, Chairman of Matrix Northern Ireland. Andrew Ramsey spoke about the importance of becoming a Chartered Surveyor. Peter Stapleton advised on the important role the Society is playing in lobbying the Government on a number of issues. The ethos of the night is small amounts of business, medium amounts of
networking and large amounts of enjoyment and fun. While there was talk of the recession and the recent demise of the Celtic Tiger, it most certainly didn’t dampen any spirits. During and after the dinner there were a number of prizes up for grabs. These included a virtual golf lesson, a tomtom sat-nav and a number of iPods. There was a large jar of sweets and people arriving were asked to guess the quantity. As with all great nights, a lot of organisation was involved, so a very special thanks has to be given to the YCS Social Committee without whose efforts the night would not have happened.
Katrina Kopecma, Sarah Jane Kiernan, Jackie Kidney and Lisa-Marie Hogan of Irish Estates.
Young Chartered Surveyors Social Committee From left: Emma Dakin; Andrew Ramsey; Yvonne Kieran; and, Kieran Curtin.
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SCS event
Finding the silver lining This year’s Annual Conference was a packed affair in every sense, with professionals from every sector of the industry keen to hear expert views on the future. Here’s a pictorial record of the event.
The main sponsors of the Conference, with SCS President Sean McCormack, were Paula Hodson, Travelers and Joe Grogan, Marsh.
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It was Professor John FitzGerald of the ESRI who probably expressed the key thought of the day at this year’s SCS Annual Conference – can we find a silver lining in this recession? In fact, several speakers including FitzGerald, identified that while it will be late 2009, or more probably 2010, before we
Tony Cullen, Thorntons Chartered Surveyors and Derry Scully, Bruce Shaw Partnership
Pat McGovern, Pat McGovern and Associates; Peter Stapleton, Lisney and Andrew Nugent, Andrew Nugent and Associates.
SCS event
The O’Reilly Hall provided the perfect venue for the Annual Conference, with an ideal lobby for delegates to socialise and discuss topics of mutual interest.
see the earliest signs of recovery, the medium-term outlook for the Irish economy is quite good. Tom Costello of John Sisk and Son Ltd stated that the construction industry had hit a peak of €36 billion worth of work in 2007, but a level of €20 billion is sustainable in the long run. This compares with a level of €8 billion in 1994. All of the speakers: the above plus Pat Walsh of Anglo Irish Bank; Professor
Stig Enemark, President of FIG; John Bruder of Treasury Holdings; and, David Strahan, journalist and author, presented the difficulties and challenges that face the economy in general and the commercial property industry specifically without pulling any punches. David Strahan left the audience with the thought that if we don’t change, consumption will consume us! The day was well-attended and packed with useful insights.
SCS President, Sean McCormack, with speakers Professor John Fitzgerald, ESRI and Tom Costello, John Sisk and Son Ltd.
Ciara Murphy, Director General with speaker David Strahan.
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Euro news
Nous sommes des Européens The SCS is affiliated to three European representative bodies and co-operates on matters of mutual interest to building and construction professionals. European estate agents representation Established in 1990, the Conseil Europeen des Professions Immobilieres (CEPI) is an international non-profit making association which has its headquarters in Brussels. It represents more than 200,000 estate agents and property managers across Europe. The SCS GP/Valuation Division appoints two representatives to represent the views of the SCS in CEPI. CEPI’s mission is to support European and cross-border property transactions by developing the work and activities of real estate professionals with the interests of the consumer in mind. Its main objectives are: n to become the favoured reference and the rallying point for European property professionals; n to strengthen working relationships between professionals; n to oversee the professional ethics of estate agents and property managers and the quality of their education; and, n to improve market knowledge and to strengthen professional practice. These objectives are mainly achieved through lobbying both European and national authorities, by promoting research into property markets and services, by increasing CEPI internal and external communications, and by supporting the education of future real estate professionals via common educational programmes. During 2008, CEPI, together with a number of national associations, organised a ‘lobby day’ to ensure that MEPs become better acquainted with real estate matters. Many parties within the Commission and the Parliament are concerned about the lack of regulation at national and European level for the real estate sector, as well as for other sectors, and are waiting for the current commissioner in charge of the internal market to be replaced at the end of the term by a less radical key figure.
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Active topics of discussion at CEPI include the environment and energy issues and the European Standard, CEN, in relation to the services of real estate agents, which when adopted will force CEN members to comply with the CEN/CENELEC Internal Regulations. The Association d’Experts Européen du Bâtiment et de la Construction (AEEBC) was established in 1990 and represents building surveyors and construction experts who are professionally qualified in the technological and management processes by which buildings are designed, constructed, renewed and repaired in accordance with the national legislation of individual countries. The AEEBC was formed to facilitate the promotion of the building surveying and construction professions in Europe and the exchange of experience and information between professionally qualified building surveyors and construction experts. It represents the profession’s interests to the European Commission and other European institutions. It was also formed to promote the building surveying and construction expert professions throughout Europe, to facilitate training, qualification and mutual support and recognition, to establish practice guidelines, and to support and promote the development of construction industry services in line with EC policy. To date it has 17 organisations from 14 member countries which range from Finland in the north to Italy in the south. It is estimated that each country and its representative organisations would represent an overall membership close to 250,000 across Europe. The SCS was a founder member of the AEEBC and is represented in all policy and innovations within the organisation.
Euro news
Current objectives On September 30, 2005 the new EU General Directive 2005/36/EEC on the Mutual Recognition of Professional Qualifications became law. This is intended to facilitate migration between EU Member States by waiving compensation measures where possible. Currently the AEEBC is developing a common platform or card (Euro BE) for the recognition of its members to work in member European States. In theory this card would facilitate migration between EU member states by waiving compensation measures where possible within the defined profession and role.
Leonardo da Vinci programme The Leonardo da Vinci programme links policy to practice in the field of vocational education and training (VET). Projects range from those giving individuals the chance to improve their competences, knowledge and skills through a period abroad, to Europe-wide co-operation between training organisations. Part of the European Commission's Lifelong Learning Programme, the programme funds a wide range of actions, notably: cross-border mobility initiatives; co-operation projects to develop and spread innovation; and, thematic networks. Innovation projects have always been at the core of the Leonardo da Vinci programme. They aim to improve the quality of training systems through the development and transfer of innovative policies, contents, methods and procedures within vocational education and training. The AEEBC has sponsored a successful Leonardo da Vinci bid for funding which focuses on the creation of manuals promoting common platforms of managerial qualifications in the field of construction. Robert Patterson MRICS ASCS Building Surveying is the Society of Chartered Surveyors’ representative (email: rpatterson@kla.ie).
CEEC – the European Body for Quantity Surveyors Conseil European des Economistes de la Construction (The Council of European Construction Economists or CEEC) was formed nearly 30 years ago by the coming together of representatives of various national institutions representing the field of construction economics (quantity surveying to the English speaking nations) in their own countries with the aim of promoting the profession at a European level. The organisation comprises three voting member delegates representing the national organisations meeting at a general assembly bi-annually in various cities in Europe, where the many issues concerning the construction economist are debated and a number of projects promoted. The organisation’s work is overseen by the current President from Ireland, Gerard O’Sullivan FSCS FRICS, Barrister at Law; the General Secretary, John Papworth FRICS; and, two vice presidents – Peter Van der Pjil NVBK, Netherlands, and Jacques Philippe Charpy, UNTEC president, France. At the recent CEEC meeting held in Munich in October 2008, the following items were discussed: 1. Publication of Steel Price Book for German construction market due in November. This publication is available on www.constructala.de. Our French colleagues at UNTEC produce a similar guide for the French construction market. 2. A presentation was given by Bob Charette from Montreal, Canada on Life Cycle Costing, which is also available on the CEEC website.
3. A CEEC Review on cost planning on infrastructure projects will be published in the New Year encompassing surveys from Finland, Ireland and the Netherlands. 4. A project concerning cost planning for sustainable development residential projects is underway headed by Tim de Jonge from the Netherlands, to research to prepare an inventory of existing initiatives and sustainability trials, in order to assess their success and cost effectiveness. The project team has been formed and is set to deliver within nine months. Michael O’Connor ASCS MRICS is representing Ireland on the team. 5. Richard O’Carroll is involved in the CEEC educational project which includes an assessment of European-based courses. Further information on this project will be available on the CEEC website shortly. 6. The CEEC is also working on a revised office cost model and a suitable drawing/project has been identified. Using the CEEC cost plan model each country is to prepare their costs based on January 1, 2007 and January 1, 2008. This data should be ready for publication by mid-2009. 7. The CEEC also facilitates an educational project for students. Students are invited to write an essay/report on a relevant topic. A prize for the best project is awarded and the winner is enabled to present their project at one of the bi-annual CEEC meetings. Details of this initiative will be announced shortly. The SCS representatives are Conor Hogan, Michael O’Connor, and Richard O’Carroll. Further information on the CEEC is available at www.ceecorg.eu.
Setting new standards of service to clients worldwide
Quantity Surveyors Graduate Quantity Surveyors – South Africa (job id 897) based in the Johannesburg and supporting various projects in South Africa and the African continent. Multi disciplined projects, Electrical, Mechanical and Civil in Power, Mining and Rail Sectors. Must have a B.Sc Quantity Surveying and some industry experience in work placements. We offer a QS graduate development programme over 24 Mths together with an assigned mentor. Senior Quantity Surveyors based in Saudi Arabia (Job ID 645) • A degree in Quantity Surveying • 6+ years experience to include at least 2 years previous international exposure • Experience on industrial/power or petrochemical projects • Familiarity with Electrical and Controls Installation works DUTIES WILL INCLUDE • Review of enquiry documents and input into proposals • Negotiation of contracts with Clients and Joint Venture/Consortium Partners • Managing the Quantity Surveying Function on a number of projects or a single major project • Contractual Correspondence • Procurement of specialist subcontracts and services • Ensuring cost control against defined budgets • Monthly Cost/Value Reconciliation and reporting • Identification of changes in scope and schedule and negotiating agreement on valuation of same • Preparation, negotiation and agreement of final accounts. Quantity Surveyors x4 based in Saudi Arabia (Job ID 644) • A degree in Quantity Surveying • 3+ years experience to include some international exposure • Experience on industrial/power or petrochemical projects • Familiarity with Electrical and Controls Installation works DUTIES WILL INCLUDE • Re-measure and Valuation of work in progress • Pricing Changes • Progression of Final Accounts • Ensuring cost control against defined budgets • Interface with other departments, purchasing/finance/planning and construction WE OFFER • Attractive TAX FREE REMUNERATION commensurate with location • Interesting projects and lifestyle experiences • Internal skills enhancement courses • Excellent potential for progression and further travel within an expanding organsation.
Please forward CV to mryan@kentz.ie referencing Job ID: 644 and 645.
www.kentz.com
SCSREVIEW 15
Redundancy
Can we have a word…
EOGHAN McDERMOTT gives advice on how to cope if the worst really does come to the worst and you find yourself out of a job.
It never seemed possible, but it’s now moving from possible to probable in many companies. For many surveyors, every day brings the real dread of a request to “have a word with the boss” and the certainty that the conversation will not be about an exciting new project, but rather about the reduction of days worked or, worst of all, termination of employment. It’s devastating when it happens. Personally devastating. Even though each individual affected knows that a) they didn’t cause the problem, and b) can do nothing to solve it, it is experienced as a personal blow. Surveyors who have been productively employed for many years face, not just the loss of the day job, but the loss of the circle of colleagues, friends and activities implicit in the day job. That represents a cumulative challenge which, at first glance, seems insurmountable, particularly when the wider context is taken into account.
The figures Economically, we are in the doldrums. The Economic and Social Research Institute (ESRI) predicts that unemployment will soar to an average of 8% next year, compared with a figure of 6.1% estimated for 2008. The number of people in work is expected to have fallen by 14,000 by the end of the year and by a massive 47,000 in 2009. There were 6,513 redundancies in building and civil engineering alone already this year. In the metal manufacturing, engineering and other manufacturing sectors, some 6,588 redundancies have happened. While, in other areas, particularly the lower-skilled and part-time sectors of the economy, the people losing their jobs have been mostly female, in the construction-related sector, more than two-thirds of the people made redundant were male. Simply put, people are losing their jobs when they never expected to, and finding it tougher to get a new one.
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The recruitment market The market has done a complete 180˚ turn since this time last year. It has moved from a buyer’s market to a seller’s. In ’06 and ’07 candidates would fire their CVs off to a few recruitment companies and then sit back and wait for the offers to roll in. Now this has all changed. In 2008, candidates need to get hold of every opportunity that they otherwise would have let pass them by. This means working hard at the other things too. Good networking is not about meeting tons of people, each of them desperately hunting business. Good networking is building and using an informal web of people who you actually have a relationship with and who can vouch for you and give you a hand. When looking at going into different roles or organisations remember that Ireland is a village and people you know should be the first port of call when you’re seeking an opportunity. People like friends, ex-colleagues, relations. They love to be asked for advice and help. But the manner of asking is important. When a friend is approached in a panic, with the naked assumption that they might have a job to offer, the friend is likely to feel guilty and avoidant, because they simply can’t help. When a friend is approached in a coolly professional way with a good CV and asked to keep at the back of their mind the possibility of recommending the CV’s owner, should the opportunity arise, they are empowered to be genuinely helpful.
Use professional help Professional help is important too. A deflationary approach to one’s own career (“I can’t afford to pay a professional”) is not a good idea. If you’ve been a surveyor for many years, the one thing it’s fair to suggest is that you probably lack job-seeking skills and the capacity to re-position yourself in the
Redundancy
market. An investment in help – even in ostensibly simple tasks like updating your CV – can be money well spent. And, with luck, employers who can do so will extend some financial assistance in this area. Three years ago, a CV would get added to a list for consideration without much difficulty. Talking to a client recently, I mentioned our policy of binning CVs if they contain misprints. He said that his company had done the same until 2003, when they found themselves so desperate for staff that they ignored poor spelling, grammar and, in some cases, coherence. Those days are gone. Employers are now in the position of power. And it will take more than good grammar to get past their cull. In a recent survey from UrHired.ie, 54% of employers said they noticed a significant increase in the number of CVs being sent to them so far in 2008. CVs must now contain elements that get the HR person saying: “God, I wouldn’t mind talking to your man”. The requisite experience will have to be there and it’ll have to be expanded upon to show, not just what you did, but what you gained from it. Every piece of experience you cite should prove a skill, not an occurrence; if you managed a group of people, how did you do it well? If you negotiated a deal, what shows you got a good outcome? If you planned a strategy, what proves it was any good? Once you’ve got the CV in the door the next step is the interview. The civil service in this country pioneered what’s called ‘competency-based’ interviewing whereby, instead of asking general questions of a candidate, interviewers would probe areas of the person’s character relevant to the job. In other words, if they’re hiring a surveyor they’re going to ask them to prove they’re good with projects and can negotiate, rather than seeking opinions on the banking crisis. It brings a clarity to interviewing that was absent for a long time, but it also proves a principle we’ve been hammering home to interviewees for years; figure out the characteristics you need to do the job well and prove you have them.
Provide the evidence The easiest way to figure out what’s required is to ask yourself what your first day at work would be like and what skills you’d deploy. If it’s a day of meetings, then you need communications skills. If you’re starting with a team briefing, then you need to be able to motivate staff. If you’re going to be developing a project, then you need a capacity to plan and implement. When you figure these out, isolate one at a time and work out how you can illustrate that specific ability through examples of past experience. Here’s a good rule to follow: no assertion without evidence. So, go back to the skills and begin to examine your career to date to find that evidence. What’s your best example of managing people, or communicating, or motivating, or managing a project? Remember, when you’re looking at your examples, it’s not just your experience that matters, but how and why you did what you did. Too often interviewers get a list of experiences, not any demonstration of what the interviewee did and how this fits with the job they’re seeking. Show the interviewer what you learned from each experience, then link to the role on offer. Above all, give yourself time and teach yourself resilience. The new phase in your career may not begin immediately. But if you stay focused and optimistic, it will begin.
Eoghan McDermott
Eoghan is Head of Careers at The Communications Clinic.
Eloise Heron – back to the future Chartered Surveyor Eloise Heron says that now is a great time to upskill. For anyone facing any sort of difficult professional situation, adding skills to your CV makes sense. In Eloise’s case, her motivation was slightly different. Having spent 17 years in the commercial property business, she wanted to develop her knowledge and her skills in a very precise direction. She signed up for a 15 month programme leading to the award of a Masters in Sustainable Development. Eloise left her position as Divisional Director, Professional Services Department, Lisneys, and is now in class three days a week and in work placement two days a week. Her placement is with the Property Division of An Taisce where she is working on the re-opening of the Boyne river and its complex of canals, which circumvent the river’s rapids. She feels that the course opens up many possibilities to her, as the course is very relevant and complimentary to her primary degree and is certain that it is a positive experience that she would recommend to others.
Options for further study The SCS accredits several post-graduate courses: n MSc in Real Estate – DIT Bolton Street; n MSc in Planning and Development – DIT Bolton Street; n MSc in Spatial Planning – DIT Bolton Street; n MSc in Spatial Information Management – DIT Bolton Street; and, n MSc in Rural and Urban Planning – University College Dublin.
The DIT also has a MSc in Quantity Surveying, for which it has applied for accreditation. The Society also recognises RICS-accredited qualifications. RICS accredits a number of UK-based distance-learning courses, including a number of them at the College of Estate Management.
SCSREVIEW 17
Repairs
Dilapidations and the burden of repair
PAT McGOVERN reviews that key part of the landlord–tenant relationship – the tenant’s obligation to repair. Landlords have invested considerable sums in their property portfolio during the boom times of the Celtic Tiger. As the current recession takes hold and there is an overall slowdown in economic activity, it is essential that landlords and property investors take time to consider their investment and put in place a policy of good estate management. As tenants concentrate on their core activities and attempt to reduce costs across the board, they may potentially choose to become ignorant of their repairing obligations in their leases. Maintenance costs, repairs and decoration could be far down the list on a tenant’s priorities and it is under this economic cloud that landlords need to take a pro-active approach to ensure that their property portfolio remains in good tenantable condition and continues to yield a good return over the long term. The Chartered Building Surveyor is expertly placed to advise landlords in all aspects of good estate management and landlords should now be actively considering carrying out interim Schedules of Dilapidations on their portfolios.
The obligation to repair Most tenants hold their premises under a full repairing and insuring (FRI)
lease, and for the most part are unaware of the significance of the repairing
clauses to which they have committed.
In commercial leases the repairing covenant is usually split into a number of
separate clauses:
n the basic obligation to repair;
n a separate obligation to redecorate periodically; and,
n a covenant to yield up in repair.
Generally this means keeping the building in repair, i.e., in good tenantable
condition. A tenant is bound to keep the property of the landlord in
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“substantial repair”, but is not bound to do “mere ornamental repairs”. It is very important that the tenant reads the lease as a whole and not read any one clause in isolation from the rest of the lease. The tenant should obtain legal advice before entering into any lease arrangement and the premises should also be inspected by a Chartered Building Surveyor.
Repairing obligations What typically should a tenant be concerned about in terms of their repairing obligations? During the term of a lease, a landlord can serve a ‘Schedule of Dilapidations’ on a tenant, which is essentially a notice to repair. The tenant must now decide what their obligations are under the terms of the lease. Take the roof, which is always a significant element of repair both in terms of cost and disruption to the day to day running of the business should it happen to fall into disrepair. The big issue for a tenant is how far he/she should go in repairing the landlord’s building, e.g., a flat roof covered with asphalt that is leaking. A tenant’s approach to this repair will differ significantly, depending on whether the schedule is an interim situation served perhaps midway through the lease or a terminal situation at the end of the lease period. The only obligation on the tenant is to repair, so technically going up with a bucket of bitumen and a trowel will comply with his repairing obligations. However, this will necessitate annual/ongoing maintenance and the risk of increased water damage to the interior is obvious. A prudent tenant will choose to overlay the roof with a torch-on felt, giving them perhaps a 15- to 20-year repair. In the case of a terminal schedule, the landlord may not be happy with such a patch repair. He may not even want to accept a torch-on overlay and insist on an asphalt renewal. However, the obligation on the tenant is to repair and the difficulty for the two surveyors acting for the tenant and the landlord is to agree on a satisfactory acceptable solution. Very often a monetary contribution towards the cost of replacing the roof is agreed on. Another example is blemishes to cladding: a surveyor can argue that this is not disrepair. It is a blemish only, which is not having any detrimental disrepair effect on the building. It does not affect the landlord’s reversionary interest and there is no loss.
Repairs
Role of the surveyor
Precautions a tenant can take
So how does a surveyor set about advising a client where there are failures by a landlord or tenant to comply with their legal obligations to repair, decorate or reinstate alterations? There are four basic steps a surveyor should consider: 1 clarify the instruction by issuing terms and conditions of engagement and advise on the likely fee. Be clear on whether or not it is an interim or terminal schedule that is required; 2 ensure that you as surveyor have no conflict of interest with either the landlord or tenant; 3 seek all relevant documentation relating to the tenancy/lease agreement, ingoing schedule of condition, licences or consents issued during the tenancy; and, 4 before going to site, be fully aware of the extent of the demise and the level of repairing obligation, e.g., is it a full repairing and insuring lease or is it confined to the interior only or particular floors within the building.
The tenant should carry out annual maintenance on the building to ensure that it is maintained to a reasonable standard. If this is not being done, then a Chartered Building Surveyor should be employed to assess the building’s condition, prioritise repairs and prepare a planned maintenance programme over a three-, five- or ten-year period. In this document, works will be prioritised and routine day-to-day maintenance will be scheduled in at the appropriate times. Prior to signing a lease, a tenant should consider an ingoing schedule of condition. The purpose of such a schedule is to record the condition of the property at a particular moment in time, i.e., at the signing of the lease. The usual purpose of the schedule, which should be agreed between both parties and then attached to a lease, is to modify or clarify the repairing obligations, the idea being that the tenant is not obliged to put the building back into any better condition than that existing at the commencement of the lease. Surveyors must take care not to put a “spin” on the schedule and it should be just an evidential record. Services such as heating, lighting, ventilation and air conditioning are an important consideration as these can represent up to 40% of the costs of maintaining a property. If opening up works are necessary, then this should be undertaken, e.g., suspected timber decay.
Doing the works vs damages When a landlord serves a Schedule of Dilapidations on a tenant, they
generally have two options:
a) physically do the repair works themselves; or,
b) pay damages, i.e., agree on a monetary settlement to cover the cost of
the landlord executing the works. Most tenants when running a business don’t have the time or resources to physically get the repair works done so the most common approach (and often the most expensive) is to pay a sum of money to the landlord. This is usually agreed between the landlord’s and tenant’s surveyors. A prudent tenant will have a sinking fund in place to cover the settlement of such a dilapidations claim. But how do they know how much to set aside? All leases are for a fixed term, so if a tenant’s financial advisor knows that a lease is coming to an end in five years, they can employ the services of a Chartered Building Surveyor to prepare a ‘Schedule of Anticipated Dilapidations’ and have these costed. This schedule will obviously be subject to negotiation with the landlord’s surveyor and his estimate of the cost of the claim. However, it will give a tenant a good indication for their exposure under the terms of the lease and a sum can be set aside each year to cover the anticipated claim (sinking fund).
Be prepared In conclusion, as landlords seek to maximise the return on their investment, tenants are coming under increased pressure to keep their premises in good condition. They must be aware of their repairing obligations under the terms of the lease and prepare financially for this inevitable outcome.
Pat McGovern Pat is the principal in Pat McGovern and Associates, Chartered Building Surveyors with offices in Dublin, Navan and Cavan.
SCSREVIEW 19
Management
Professional negligence and how not to GERARD O’SULLIVAN explores the law in relation to the professional responsibilities of the Chartered Surveyor. Surveying has taken its place among the many professions in the modern world which offer a person opportunity, respect and privileges. In partnership with those advantages go responsibilities and liabilities which are the focus of this article. For the professional surveyor, having achieved proficiency in their chosen skill, they will find their client expects a standard of service for which any failure on their part will grant the recipient compensation. So I must confess from the start that this article may not fulfil the intention of its title, but I hope it will give those in practice some guide as to how to avoid being successfully sued.
Professional competence Irish law has come up with a simple definition of the professional person as one: “…exercising and professing to have [a] special skill” (Blaney J, Hughes v JJ Power Ltd HC 11/5/1988). The law then imposes on a professional person duties to a client of a standard to be expected from a reasonably careful member of that profession. That duty can be summarised as a duty to use reasonable skill and care in the course of their employment. “Where you get a situation which involves the use of some special skill or competence, then the test as to whether there has been negligence or not is not the test of the man on top of the Clapham Omnibus, because he has not got the special skill. The test is the standard of the ordinary skilled man exercising and professing to have that special skill; it is well established law that it is sufficient if he exercises the ordinary skill of an ordinary competent man exercising that particular art.” (Bolam v Friern Hospital Management Committee [1957] 1 WLR 528). This duty can arise under both contract and tort of negligence. The courts will give due deference to customary practice, traditions, rules of self regulation and the high intellectual calibre of members, and they regard professions as being substantially competent to determine and require a satisfactory standard of competence in the performance of professional duties.
Professional negligence If a member of a profession can show they adhered to the customary, general or approved practice of their profession, this should normally be sufficient to relieve them from accusations of negligence. However, Irish law has somewhat qualified the reliance on customary and approved practice by noting that a professional: “..cannot be said to be acting reasonably if he automatically and mindlessly follows the practice of others when by taking thought he would have realised that the practice in question was fraught with peril for his client and was readily avoidable or remediable…. but if it can be said, if at the time, on giving the matter due consideration, he would have realised that the impugned practice was in the circumstances incompatible
20 SCSREVIEW
Management
get sued
with his client’s interest, and if an alternative and safe course of conduct was reasonably open to him, he will be held to have been negligent.” (Henchy J Roche v Peilow 1986 ILRM 189 SC). Generally the law does not imply a warranty that a professional delivering the service will achieve a desired result, but it does assume he or she will use reasonable care. “A surgeon does not warrant that he will cure the patient.” (Graeves v Baynham Meikle [1975] 4 BLR 56). “In relation to errors of judgement it may, or may not, be negligent; as it depends on the nature of the error. If it is one that would not have been made by a reasonable competent professional man professing to have the standard and type of skill the defendant held himself out as having and acting with ordinary care, then it is negligent.” (Lord Fraser –Whitehouse v Jordan [1981] 1 All ER 267). Where a professional “holds himself out as being a specialist in a particular field he is required to attain to the ordinary level of skill amongst those who specialise in the same field. He is not required to attain to the higher degree of skill and competence in that particular field.” (Walsh J O’Donovan v Cork City Council [1967] IR 173). The professional acts as an expert and independently of the client whilst still being the agent of the client. “The fact that the architect is not independent is perfectly consistent with the proposition that he is required to act in an independent manner in certain situations.” (Jackson J Scheldebouw B v St James Homes (Grosvenor Dock) Ltd [2006] EWCH 89). The Courts since Hedley Byrne & Co Ltd V Heller & Partners Ltd[1964] AC 465 have held that where it can be established that a special relationship exists between the service provider and the recipient, pure economic loss will be a recognised form of damage. “…if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon that skill, a duty of care will arise….” Lord Morris. Further, the Irish courts in McShane Wholesale Fruit and Vegetable ltd v Johnston Haulage Co Ltd [1997] 1 ILRM 86 Flood J, stated that: “the quality of the damage does not arise. It can be damage to property, to the person, financial or economic….the fact that damage is economic is not in itself a bar to recovery where the other elements above stated are present.”
[1907] AC 351 fraud was held to exist even when the representor did not necessarily know that his statement was false nor could he rely on the insertion of a clause stating the contractor was to verify all representations and not rely on their accuracy. However, later the more recent case of Dublin Port and Docks Board v Brittania Dredging Co Ltd 1968 IR 136 involving an inaccurate survey for a dredging contract where it deemed the contractor had inspected the site, the defendants were found not liable as the statement characterised it as innocent misrepresentation, provided honestly and in good faith. Under contract it is open to the client and the professional engaged to set down in writing specific conditions of engagement. However, under the Building Control Act 2007, quantity surveyors and building surveyors will now be obliged to comply with some of the following mandatory obligations to their clients: n provide only services for which they are qualified and be clear on what services are provided; and, n their conditions of engagement must be in writing with lawful, fair and reasonable terms naming the surveyor, contact details and registration number. If you are unfortunate to be found liable, even if only in part, the ability to limit the extent of your liability can be difficult. Under the Civil Liability Act 1961 Part III, subject to the rule that the plaintiff cannot recover more than the total amount of damages he has suffered, the injured party is allowed to recover the full compensation for his injuries from as many sources as possible. Concurrent wrongdoers should be entitled to recover fair contribution from each other in respect of damages due to a plaintiff, but that does not mean they can limit it to the portion for which they are liable (Iarnród Éireann v Ireland [1996] 2 ILRM 500 SC) particularly if the more guilty party is a man of straw and/or not insured.
Be careful and keep up Finally, the lesson to be learned is that if you want to practice your craft, keep up with the normal standards of your profession, buy sound insurance, be careful of free advice and don’t bite off more than you can chew.
Misstatement
Gerard O’Sullivan FRICS FSCS
As professionals we often make statements, either on our own behalf or on behalf of clients, which others may rely on. The law on fraudulent misstatement, as stated in Derry v Peek [1889], states that a fraud is shown when a false representation has been made knowingly or without belief in its truth, or recklessly. In Pearson v Dublin Corporation
Gerard is a barrister at law.
SCSREVIEW 21
Rural practice
If you go down to the woods today… WILLIAM MERIVALE looks at the issue of forest certification and the important role the Chartered Surveyor can play when specifying timber. At first glance many readers of the SCS Review might be forgiven for thinking that forest certification has little relevance to their work. In the course of this article, I hope I may be able to demonstrate how important it actually is to all those involved in the construction industry.
A short history It is universally accepted that the forests of the world, particularly the tropical world, are under threat and while the exact rate of deforestation is a matter of dispute, it is safe to say that an area equivalent in size to the island of Ireland – at the very least – is disappearing every year. Quite apart from the tragic loss of species, habitat and indigenous cultures, deforestation also accounts for about 20% of global carbon emissions. With regard to climate change it is a very serious problem indeed. The double tragedy is that when forests are properly managed their vital role as carbon sinks can be enhanced. The 1980s saw a number of international efforts aimed at regularising trade in timber products, ensuring sustainable forest management and combating widespread illegal logging, but despite these, tropical deforestation continued to accelerate. After the Rio Earth Summit in 1992, which aimed to get agreement for binding conventions on, amongst other things, the sustainable development of forests, some progress was made with the establishment of credible and independent mechanisms to verify claims made as to the provenance of timber products. Today, there are two international forest certification schemes of consequence – the Forest Stewardship Council (FSC), which was underwritten by the World Wildlife Fund and inaugurated in 1993, with about 90 million hectares now certified in 45 countries; and, the Programme for the Endorsement of Forest Certification Schemes (PEFC), a European grower-led initiative started in
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1999, and now the larger of the two with over 200 million hectares certified in 24 countries, and with 35 national member organisations. PEFC arose due to the initial difficulties, subsequently largely addressed, that FSC faced in Europe and North America. FSC’s origins lay in ensuring sustainable forest management practices in extensive areas of public lands leased to logging companies in the tropics, whereas most forests in the temperate world are privately owned and, especially in Europe, relatively small. As both schemes arise from the same source and work to the same internationally accepted definitions of sustainable forest management, the differences in content and methodology are minimal and the two are accepted as equivalent by most of the European governments who have prescribed timber procurement policies. Many stakeholders see forest certification on a global level as a battle between the two schemes; this is regrettable as this perception damages the credibility of certification and does not contribute to the overall goal of sustainable forest management. It is better to view the competition as both beneficial and necessary as it raises the standards of both organisations, keeps costs in check and increases supply options.
Certification in practice Sustainability and certification have become two of the buzz-words of our time. (As I write, my eye is drawn to a full-page advertisement for coffee on the back cover of an Irish Times magazine with the caption “Now Kenco uses beans from Rainforest Alliance certified farms”.) Society is becoming increasingly aware that the world’s resources are finite, more so than ever because of the pressures of a rapidly expanding population. Chartered Surveyors are particularly well versed in sustainability measures as applied to
Rural practice
the built environment in terms of increasing energy efficiency; nevertheless, it remains a challenge to convince many within the construction industry of the importance of specifying certified timber, and consequently we continue to use huge volumes that derive from unsustainably managed and illegally logged forests. (It should perhaps be mentioned that the paper, print and publishing sectors are embracing the concept rather more quickly than the construction industry is.) The process of forest certification is designed to provide independent verification that forests are managed sustainably, according to prescribed standards of sustainable forest management. The basic objectives of certification are to ensure that consumers of forest-based products can be assured that those products originate from trees which have been harvested legally and from forests which have been independently assessed as meeting the most rigorous, practical standards of sustainable management. Certified forests have to meet those standards based upon the so called “Three Pillars of Sustainability” – the environmental, social and economic. Accordingly, forest management practices must ensure, for example, that no more wood is harvested than is re-grown, prevailing laws are adhered to, the rights of indigenous peoples, workers and owners are protected, wildlife habitats are maintained and biodiversity conserved. In practice, there are two separate certification processes. Firstly, the actual forest management standard which determines rules and guidelines for the management of the forests. However, its remit stops at the forest gate. Then there is “Chain of Custody” certification. The name of this process is essentially self explanatory and it is designed to prove that material which is verified as coming from certified forests is actually what it says it is. For the final consumer to be assured that he is buying material which originated from properly and legally certified forests, there has to be an unbroken chain of custody from the forest through all the production and conversion processes to the final user. Chain of Custody certification, then, is of particular relevance and importance to construction professionals involved in specifying the materials to be used, and in the promotion of the finished building to the eventual occupier as to its green credentials.
How to achieve Chain of Custody certification To be awarded a Chain of Custody certificate, an enterprise must put in place a robust and auditable system, which ensures that there is full control over incoming raw materials, through the manufacturing or conversion processes to eventual delivery to the customer. The system will be checked and audited by an independent certifier, who is accredited by the relevant certification scheme. The certificate will be valid for a number of years, usually five, but will be subject to annual audit to ensure that the enterprise continues to operate the systems required by the terms of the certificate. If there are existing management processes in place, such as ISO 9001, it is probable that Chain of Custody certification will be relatively easy to implement and the certifier will almost certainly be able to guide the applicant through the process at minimum cost. It is therefore recommended that an applicant considers implementing ISO 9001 and/or ISO 14001 (the environmental standard), if this has not already been done, before moving to Chain of Custody. However, this is not always practical, nor is it essential. Inevitably the process adds costs to an enterprise or project, but with the increasing need to “be seen to be green”, as well as a genuine desire on the part of many actually to be green, most certified companies agree that the benefits outweigh the costs. Meanwhile, with less than 300 million of the world’s almost 4,000 million hectares of forest certified as being sustainably managed there is still a big task ahead of us all, and many Chartered Surveyors are in a key position to promote the use of certified timber products to clients and project partners alike.
William Merivale A Chartered Rural Practice Surveyor, William is a partner in OBM Consultants, Cork, and is a director and the National Secretary of PEFC (Ireland) Ltd.
SCSREVIEW 23
Finance
Much obliged!
The Prompt Payment of Account Act 1997 obliges public sector organisations to pay their bills promptly. JOHN MINIHANE of Mason Hayes and Curran explains the details of the Act. The purpose of the Act is to ensure that certain public sector bodies, and public sector main contractors (purchasers) pay amounts due to their suppliers within specified time limits. An automatic entitlement for suppliers to receive interest is provided for in respect of amounts paid outside these time limits. Late payments arising in commercial transactions between commercial parties are regulated elsewhere (S.I. No 388/2002 – European Communities (Late Payment in Commercial Transactions) Regulations 2002). The Act came into operation on January 2, 1998. The original schedule of public sector bodies obliged to comply with the Act has been amended (please see S.I no. 383/2000- Prompt Payments of Accounts Act, 1997 [Amendment of Schedule] order 2000). The provisions of the Act are also applicable to subsidiaries of the relevant public sector bodies. The Act also applies to main contractors appointed under public sector contracts. So where a contractor sub-contracts or obtains goods or services from another party in respect of a public sector contract, the contractor must comply with the provisions of the Act.
What is “prompt payment”? For public sector bodies, the Act specifies that payment must be made to suppliers on or before the date on which payment is due under the terms of any written contract. In the absence of a written contract specifying a payment date, payment must be made within forty five days of the receipt of an invoice or delivery of goods or services, whichever is later. An invoice can be sent by post or electronic transmission. The Act obliges main contractors to public sector bodies to pass on to its suppliers or sub-contractors the benefits of being paid promptly by the public sector body. Therefore, the same time limits (as for public sector bodies) for payment apply to a main contractor.
payable until ten working days after the purchaser receives a corrected or replacement invoice. In circumstances where a purchaser requests an invoice later than the ten-day period for which the Act provides, the subsequent period will be reduced by the corresponding number of days. For example, if an invoice is returned by the purchaser to the supplier after 14 days then interest would become payable six days after the public body receives a corrected invoice. If the amount due is disputed by a public body then any portion due in respect of goods or services which are not in dispute must be paid for in compliance with the Act.
Disputes as to interest payment If the payment of or obligation to pay an interest penalty is disputed by a purchaser the supplier may refer the dispute to arbitration. The arbitrator may be selected by agreement between the parties or in default of such agreement be appointed by the President of the Law Society or by such other person prescribed by the Minister. The Act does not alter the right of the supplier to bring a case to the civil courts.
Penalties for late payment If a purchaser fails to make payment in accordance with the Act it must pay an interest amount on the outstanding payment. Interest is calculated in respect of the period starting on the date after the due date and ending on the date when payment is made. This interest payment cannot be waived by the supplier and should be included with the amount payable for the goods or services without demand for its payment being made by the supplier. The interest rate is fixed by order of the Minister for Enterprise and Employment after consultation with the Minister for Finance and the rate may be and has been amended periodically by the Minister. The current rate is 0.0294% per day.
Invoice queries The purchaser has ten working days to return an incorrect invoice which must be accompanied by a written statement identifying the alleged defects that prevent payment being made. In these circumstances interest will not become
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Requirements of suppliers The Act does not oblige payment to be made to a supplier who has failed or refused to comply with a request to produce a tax clearance certificate and it expressly extends the statutory time limit for payment where there are delays in furnishing a tax clearance certificate. Also the Act does not affect the deduction of withholding tax from any payment to a supplier.
John Minihane ASCS MRICS John is a partner, specialising in real estate, with Mason Hayes+Curran.
Finance
Time to join forces? MICHAEL NEARY looks at mergers and acquisitions in quantity surveying and asks - what are the strategic options available to professional firms?
The present economic environment presents challenges for businesses across all sectors. The current difficulties faced by the banks have been well highlighted in the media. However, amid the challenges it should be noted that there also are significant opportunities available to well-structured businesses. It is now an opportune time for strategic buyers with access to funds to acquire good businesses at prices that make economic sense. However, it is not always possible to acquire. This is especially true in the case of professional firms, where in our opinion the personnel skills involved make mergers the more efficient method of consolidation and growth. In any merger, the “people” factor is vital to the success of the transaction, and the principals must have the same vision for the future.
Advantages of mergers With the effects of the credit crunch currently causing company valuations to be revised downwards, a number of businesses should consider their strategic options. For firms within the quantity surveying sector the benefits of a merger can be plentiful: n quality staff and additional skills can be obtained, and valuable management and industry knowledge harnessed; n consolidation and regional or national growth can be achieved in a cost efficient manner; n diversification of services and long-term prospects through the acquisition of complementary businesses; n mergers provide an excellent opportunity to share and reduce costs. Mergers allow the participating businesses to restructure and achieve cost savings in areas such as employee restructuring, increased purchasing power, improved utilisation of office facilities and shared promotional costs, all of which can reduce unnecessary overheads; and, n mergers can be completed without taking on additional bank debt, a major advantage in today’s environment of limited credit.
Areas to be addressed in a merger A number of key issues need to be considered for a successful integration. Foremost among these are staff-related issues. Increased staff efficiencies should be targeted, and the need to make staff cuts may arise. Keeping staff informed of developments is crucial to obtaining their co-operation and minimising any potential disruption. Key staff need to be involved and retained, and areas such as relocation issues, pay differentials, and trade union matters all need to be adequately addressed. Successful integration in other areas such as technology and communication, invoicing and purchasing systems, HR policies and procedures payroll, etc., will all need to be attained to achieve the benefits associated with merging. Inadequate planning and ineffective control over the merging process can lead to numerous posttransaction difficulties, including: n the merged business does not perform as well as expected, and anticipated synergies are not achieved;
n expected cost savings do not materialise and inefficiencies arise; n the business cultures prove incompatible, resulting in process and personality clashes; and, n key people leave. Smaller, owner-managed businesses are often reliant on the presence of the owner or key staff to be successful, and deals should be structured to tie in these staff to the medium- to long-term interests of the new entity.
The decision to merge There are a number of areas a business needs to consider both in advance of and throughout the process of merging, including: n techniques such as SWOT analysis are beneficial in providing an assessment of the company’s current position and highlighting areas requiring attention; n management need to clearly identify their aims for any merger or acquisition, ensuring any proposed transaction is consistent with the strategic direction of their business; n a clear profile of the sort of firm required to achieve strategic goals is necessary and potential targets should be identified. Often the expertise of a professional firm can be of significant assistance in achieving this; n approaches need to be made to the owners of the target business. Issues such as the reasons for such a deal, methods of finance, future business plans, etc., will all need to be discussed; n evaluating and assessing the target business through financial and legal due diligence is important in ascertaining all liabilities and issues associated with the business, and professional advisers can help in this process; and, n agreement over the value of a business is a key element of any acquisition, and achieving the best price is a matter of skilful negotiation. Even in the event of a merger it is still beneficial to be aware of how much the other business is worth. In the current economic climate there will be significant opportunities available for quantity surveying firms seeking to merge. A successful merger can be the most effective way to achieve a number of strategic objectives, whether it be consolidation, a reduction in cost base or to achieve growth. With the correct strategy and effective management a merger allows these objectives to be realised, even in the current recessionary period.
Michael Neary Michael is Corporate Finance Partner at Grant Thornton which provides audit, financial planning and advisory services and is a leading accountancy firm.
SCSREVIEW 25
Finance
Managing your cashflow JOHN O’CALLAGHAN provides timely advice on managing cash in a downturn. As the media continues its relentless focus on the current economic downturn and the collateral damage that downturn has caused, it is becoming impossible to watch television or read a paper without getting the sense that we are witnessing the fundamentals of Irish business collapse around us. Strangely enough, for many there is also the feeling of a separation from the events taking place - like they are somehow immune to the effects of this current crisis. But rest assured that without proper strategic action, no one is. It is imperative for businesses to have a strategy addressing the effects of this downturn rather than risk becoming a victim of it. To have a complete strategy we must first deal with the metrics of our business. Professional practices have three key profit drivers. These are revenue (fees), direct costs (generally people costs) and overheads (rent and administration, etc.) and we should deal with each of these areas in turn.
Revenues Our clients drive our revenues, and while we collectively advocate keeping close to our clients, in reality this does not occur as much as it should. Ask yourself: when is the last time you caught up with a client just to see how they are? A close client relationship will facilitate better credit control policy and assist in negotiating more favourable billing practices where necessary. Maximising your relationship with existing clients is only half the battle. Firms must also be flexible to reap the benefits of a changing market. Construction based businesses are experiencing particular difficulties. Public Private Partnership (PPP) work is an area many businesses are particularly concentrating on. Keeping a sharp focus on this type of sector and also on expanding markets (e.g., Middle East) is important for generating workflow.
Direct costs As the economy expanded in past years, it was increasingly difficult to find and retain talented people. Now that business is contracting we see staff cuts being announced on a regular basis. A balance needs to be struck between reducing direct pay costs and potentially destroying a talent base built up over a number of years. Reducing salary costs is therefore an area requiring creativity whereby it may be possible to retain most of your people while reducing costs at the same time. Consider sabbaticals, school holiday leave, job sharing, salary cuts/freezes. These scenarios can minimise costs but preserve your intellectual asset.
Overheads Tight overhead control is critical and can generate savings which have little adverse effect on the business. All discretionary expenditure, e.g., travel, IT, administration, entertainment, etc., should be reassessed as to necessity. Senior managers would do well to review overheads on a line by line basis and balance their necessity against retaining staff.
All discretionary expenditure … should be reassessed as to necessity.
WIP Knowing your client and any potential assignment are crucial to generating cash. Exercise of robust credit control reviews prior to commencement of assignments will minimise future write-offs. Involvement of your finance team at an early stage will also identify areas where you will run into WIP build-up and an appropriate staged billing process should be negotiated if possible. In addition, where pre-agreed billing points exist, it is important to consider these in work allocation. Prioritising a job close to a billing point can help with cash generation. The challenge with WIP is to turn it into a debtor as soon as possible.
Debtors Collection of monies owed to your business will become more difficult as the economy contracts. Addressing this area early is important and your debt collection team may need strengthening. In addition, your professional staff will hopefully have a close working relationship with clients, and involving them as part of the collection process is important. A well-timed call from a project manager to their client counterpart can often elicit a payment promise earlier than respective finance departments contacting each other. Other issues to consider in converting debtors to cash include incentives for early payment and invoice discounting finance. In addition, many professional practices issue ‘payment requests’ rather than VAT invoices. This can have the effect of deferring the liability to pay VAT on sales until receipt of the debt. You should contact your tax advisor if you consider using this system. In general as mentioned above, the challenge with debtors is to turn them into cash as soon as possible.
The key messages In difficult times it is important to focus on areas you can control. In short:
n pay attention to key client relationships;
n be innovative in how you manage your people;
n watch overhead leakage; and,
n have strong WIP, debtor and cash management.
John O’Callaghan
Getting the balance sheet right Professional practices have three key balance sheet numbers: work in progress (WIP), debtors and cash. The challenge is to turn both debtors and WIP into cash as soon as possible.
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John is an Audit Partner with BDO Simpson Xavier.
Legal matters
Case law review
Hogan v Byrne & Anor; Laffoy J, [2008] IEHC 287 The plaintiff sought an order under s.38 of the Arbitration Act 1954 to set aside or, alternatively, an order under s.36 remitting for reconsideration an arbitration award. The award arose from the sale of an accountancy practice. The dispute related to the price payable. The arbitrator made an interim award in September 2003 and a final award in 2007. The plaintiff argued that there was an obvious and fundamental error on the face of the final award in that it was argued that there was a patent mistake in the monetary calculation (being one of the grounds set out in Keenan v Shield Insurance as sufficient to invoke s.36 of the 1954 Act). In dismissing the plaintiff’s application, the judge found that there was not a patent error because, as a matter of law, the arbitrator was not required to give reasons and therefore the request to remit the award to do so could not be granted. The judge also found that as the methodology for calculating the monetary sum was the subject of the interim award, and having also confirmed that the interim award and the final award were two awards, then the plaintiff could not challenge that distinct interim award as part of challenging the final award.
Córas Iompar Éireann and Iarnród Éireann (Applicants) and An Bord Pleanála (Respondent) and Sligo County Council (Notice Party) Clarke J; [2008] IEHC 295 This was a judicial review of a decision by the respondent relating to works completed at Ballymote Railway Station in Sligo. The applicants had commenced development work, which included the erection of several communication masts, when the notice party sought to have the station building declared a protected structure under the provisions of the Planning and Development Act 2000 (the “2000 Act”). A dispute then arose as to the planning status of the relevant mast involving the interaction of provisions of the 2000 Act exempting development relating to works carried out in connection with the proper running of railway lines and provisions of the same Act for the protection of protected structures. The Notice Party applied under s.5 of the 2000 Act to the Respondent seeking a declaration as to whether or not the works were exempted development and the Respondent declared that the works were not exempted development. The Applicants sought a judicial review of this decision. The judge found that, on the basis of the proper interpretation of the 2000 Act, s.57 has the effect of de-exempting any development which would otherwise be exempted unless the development concerned meets the criteria for not materially affecting relevant features of the protected structure as set out in that section of the 2000 Act. In reaching this view, he expressly
confirmed that while the established jurisprudence of the courts confers a very significant margin of deference to the planning judgments of the respondent, a different situation applies where it is alleged that the respondent has misconstrued any relevant statutory provisions. In such circumstances a decision of the respondent is liable to be quashed by the court if the court is satisfied that, in some material respect, the decision of the respondent was affected by an erroneous view of the relevant statute. However, he also held that as the development had lawfully commenced and had progressed to a significant extent during a time when it was exempted development, it would be unjust to preclude its completion as a single integrated development because the station building had subsequently been declared to be a protected structure.
Jackson & Anor v Stokes; McCarthy J [2008] IEHC 276 The plaintiff sought to recover an amount of approx €38,500 which it alleged was due in respect of interest arising from the delayed completion of the sale of a property. The sale closed on May 24, 2007, rather than the date in the contract, April 2, 2007. The judge found that the agreed closing date was, in fact, April 16, 2007. The contract contained the standard Law Society condition 40, which provides that if the sale has not completed by the agreed closing date then either seller or purchaser can give notice requiring completion to take place. This notice can only take effect if the serving party is able, ready and willing to complete or, if not so able, ready and willing to complete, then only by reason of the behaviour of the other party. Completion must take place within 28 days of the notice and time is of the essence in this regard. The judge found that as the 28 day notice had been served prior to April 16, the notice was bad and of no relevance. He further held that the plaintiffs were not able, ready and willing to close on April 16, nor on May 24, because they could not provide appropriate release documentation in respect of four charges registered on title, and that as there is no obligation to accept an undertaking in the place of strict legal rights, the defendant’s failure to close was not due to any fault on the defendant’s part and interest was not payable.
John Minihane ASCS MRICS John is a partner, specialising in real estate, with Mason Hayes+Curran.
SCSREVIEW 27
Government contracts
GCCC documents Q&A The Quantity Surveying Division Committee of the SCS recently established a Working Group to consider a number of problems being raised by members in relation to the new Government Forms of Contract. The following article outlines some of the queries raised by members and the answers presented represent the consensus of the opinions of this Working Group only. At this stage, the Government Forms of Contract have no precedent and only time and the courts will give definitive answers to problems arising. The following comments are not, in any way, to be construed as a legal opinion. The comments are made on the information provided in the question only, without any knowledge of the particular circumstances or other factors relating to the project and as such members must regard these comments in this light and proceed with due caution. 01 Where a project has been tendered on the basis of the New Form of Contract (Minor Works), and the tenders are in excess of the allocated budget, thereby requiring cost savings, is it possible to adjust the Contract Sum post-Contract Stage by means of Change Orders in order to reduce the project cost? Furthermore, I note that Post-Tender Reductions are precluded under the New Forms of Contract and contravene EU Procurement Laws; therefore, this would prohibit pre-contract negotiations in order to achieve the budget. In summary, it is our opinion that you cannot issue a Change Order under the Contract until you have signed a Contract, or at the earliest after the letter of acceptance when the contract comes into existence; therefore, the Tender Price cannot be adjusted but the Contract Sum can be adjusted later through Change Orders. Refer to page 93 of the ‘Guidance Note for Public Works Contract’ which confirms that - “any change [to the tendered lump sum figure] would be regarded as post tender negotiations, and would be in violation of the EU procurement rules”. This note relates to the balancing and correction of errors but the same principle would apply to negotiation of reductions. Note also: the Department of Education design team procedures third edition 2007 section 5.4 Stage 3 Tender action and Award: 5.4 (c) If the tender price exceeds the approved pre-tender cost limits the report shall provide a cost reconciliation indicating the cause of the cost over-run and identifying any possible savings needed to bring the cost within limit. 5.4 (d) It is noted that the Tender Sum is the Contract Sum and that any proposed reductions or savings are treated as Clarifications to the Contract (but forming part of the Contract Documents) and dealt with by means of Change Orders. It is clear that the intent to effect the reductions must be noted as a clarification but that the actual reduction is effected after the contract is effected by means of Change Orders issued by the ER. One would presume that the advice would be to ensure that, prior to award of the contract, the valuation of such proposed change orders be agreed with the intended contractor, but there is clearly a problem under the interpretation of EU Procurement Rules, where such reductions could involve new items with new rates, or omission of items where on costs, preliminaries, etc., would arise, which could not be easily identified from the pricing document and may be construed as pre-contract negotiations and therefore prohibited.
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The issue of the Change Order(s) would involve a valuation under the contract and a possible claim for sums which might not have been covered in the notified savings from the QS – a most unsatisfactory state of affairs but nevertheless the one implied by the interpretation of the procurement rules issued by the GCC. Care should also be taken to ensure that the suggested savings originate from the designers; otherwise, the QS may be deemed to be a designer under the new H&S regulations. 02 I am tendering for a project and Schedule Part 1, and 17k is marked NO for both Delay Event and Compensation Event. My reading of Item 17 is that any errors found in the BOQ pricing document, i.e., quantities, descriptions or items not measured, if these are greater than €500.00, the main contractor will not get compensated for any such error? Or is this only in relation to delays/extension of time? If it is as per my first point then we as the main contractor will need to check the BOQ document for any discrepancies, which is very onerous. I would like your interpretation on this. When this risk is transferred, the accuracy of the BOQ is at the sole risk of the contractor and a contractor would be advised to check the BOQ. This is similar to the position under the RIAI or GDLA blue forms of contract. We would note that Department of Finance Training Manual para 5.6 states “The policy is to have design developed so that ‘No’ can be inserted in this box“. 03 I am preparing tender documents and I have difficulty understanding the differences in the options for the selection of Specialists. Referring to the “Capital Works Management Framework, Guidance Note for Public Works Contracts, 14 September 2007: Paragraph 2.1.2” – 1. Specialist named by the Contractor, Restricted procedures (page 39) and 4. Specialist named by the employer, appear to be identical. Is there a difference in these procurement routes and documents that need to be prepared? 2.1.2.1 - Specialist named by the Contractor, Restricted procedures – This refers to the list of specialists that have been submitted by the prospective tenderer with his main contract expression of interest, but this list is “restricted” by the employer following a process of evaluation against the criteria for that area of specialisation. This means that the list submitted by each prospective tenderer will have to be assessed and each advised which, if any, of his specialists do not meet the minimum criteria before tendering. 2.1.2.4 - Specialist named by the Employer – is the list of specialists following advertisement and shortlisting by the employer without any input from the tenderers.
Government contracts
Consultants need to be very clear and spell out in the request for expressions of interest what route they are going to use. This may require different options for different types of specialists within one tender. 04 Contract: Public Works Contract for Building Works Designed by the Employer. BQ: Discrepancies between the BQ and the Works Requirement is NOT a compensation event. The BQ was sent out as a paper copy with the tender. Some contractors requested an electronic version, which was emailed to them. One of these contractors has asked for our measurement sheets to be attached to the electronic version so they can check our measurement. We do not want to give this information but would like the opinion of the SCS on the rights of the contractor in this situation. It is generally considered good practice to make all documents used in the preparation of a Bill of Quantities available for inspection, at the reasonable request of a tenderer. It should be made clear in the instructions to tender, if this option is being made available, that it is available to all tenderers on request.
08 I was wondering if you could help me re the new Government Form of Contract? Under Part K of Schedule 1 of the minor works contract, can you confirm where I can find the standard rates to determine the cost of plant (as of sub-clause 10.6.4[3]), e.g., IEI/CIF schedule of plant charges? We are not aware of any independent published building plant list in Ireland. There is a civil engineering list published in Britain, but how relevant this would be to building projects in Ireland is uncertain. In the event that the employer fails to provide such a schedule or specific methodology for calculating rates, there would be no agreed methodology in the form of contract; however, the parties are at liberty to come to an agreement as to how best the cost be calculated. The Competition Authority precludes the use of a standard schedule of plant charges by industry (but not by Government) and, as a result, no standard schedule exists in Ireland. You should request clarification of this from the Employer or Employer’s representative. 09 Are there recommendations/guidelines in relation to when a pricing document (with or without quantities) should or should not form part of the Works Requirements in the contracts designed by the client?
05 VAT: Are tender amounts to include or exclude VAT? Tender amounts should exclude VAT. The contract has been revised (August 1, 2008 edition) to state that the contract sum is exclusive of VAT – Article 3 and Clause 11.7 have likewise been amended. 06 Should Forms of Tender and Schedule 2 be returned as separate/stand-alone documents (even though bound into instructions to tenderers at invitation stage)? In order that a “Most Economical Advantageous Tender” comparison can be made, it is necessary to examine the Form of Tender and Schedule 2 for all tenders. For the purpose of this “MEAT” evaluation, the other components of the tender submission are not required. The existing good practice of not opening the Bill of Quantities, and any other tender documents, of the unsuccessful tenderers should be continued. It would be logical, therefore, for the Form of Tender and the Schedule to be returned in one envelope and the Bill of Quantities and all other documents in a second. 07 Should pricing documents returned by each contractor be opened? No, as noted in Query No 06, the existing good practice of not opening these should be continued. Once the tendering process has been completed and the successful contractor appointed, all unopened documents should be returned to the tenderers.
There are no guidelines; however, it is our opinion that the pricing document should not be included in the Works Requirements, on the assumption that the designers have done their jobs correctly. There should be no necessity for it to be in the Works Requirements as all design information will be in the specification or on the drawings. It was never envisaged that the pricing document would be part of the Works Requirements; indeed, in clause 1.3.1 the pricing document is subordinate to the Works Requirements and therefore clearly not part of them. If the pricing document is included in the Works Requirements and conflicts with the other components of the Works Requirements, the contract would treat them with equal importance, leading to obvious and unnecessary difficulty. If included, it would create a scope of works, but clarity would need to be introduced as to the status of such a document; it would need to be subordinate to the drawings and specifications. However, the preliminaries should be in the Work Requirements but not as a pricing document. The preliminaries will have no effect contractually unless they form part of the specification/work requirements. A FAQ section has been set up on the members section of the website featuring all questions received to date along with the answers provided by the working group. To view this section please log onto www.scs.ie, log into the members section and you will find the frequently asked questions on the government forms of contract under the QS section of the website.
SCSREVIEW 29
Insurance
Time is of
the essence
Recent case law highlights the need for early and detailed potential PI claim notification, writes KEVIN FINGLETON.
The issue of when to notify insurers of a potential claim under your professional indemnity (PI) insurance policy constantly creates uncertainty for firms which have arranged PI insurance to protect their business. A number of decisions by the UK courts in recent months have focused attention on this subject and highlight that the insured found out to their cost the implications of failing to advise their insurers on time of claims circumstances. The importance of timely notification cannot be over-emphasised as in many cases failure to advise insurers promptly can result in coverage disputes and potential declinature of coverage. Many insured parties who have to seek indemnity cover fail to recognise their policy obligation to notify matters. Failure to notify circumstances “likely to give rise to a claim” in a timely and accurate fashion, continues to be a hurdle to overcome by many firms who seek to have a claim paid under their PI policy. A recent report by UK law firm CMS Cameron McKenna highlighted that early notification “is vital from insurers perspective to have the opportunity to exercise control over a matter at an early stage in order to minimise any potential exposure and to enable the early setting of a reserve”. Notification clauses in most PI policies are generally drafted as “conditions precedent”, i.e., conditions which must be complied with for cover to operate. Failure to comply entitles insurers to repudiate cover in the event of breach.
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Recent cases Two recent UK cases are worthy of note in highlighting notification obligations. Kidsons v Lloyds Underwriters The background to this case is that the policyholder made various communications to its professional indemnity insurers relating to a potential problem in advice they had provided relating to a tax scheme which was held to be vague in so far as it did not outline comprehensive information as to the likely impact of the alleged error. The insurers were successful in their argument that the notifications were not effective and had not been notified “as soon as practicable” as specified in the policy. The Kidsons’ matter has been referred for appeal; however, initially, the High Court ruled that a proper notification should contain information which is “sufficiently clear and unambiguous that it leaves the reasonable recipient in no reasonable doubt that the policy holder is notifying a circumstance under the policy”. The case has clarified that a notification should be as specific, clear and precise as possible and should include all relevant information of which the policy holder is aware. There is often confusion as to what amounts to a “circumstance” and how likely that a resulting real claim might develop. In the Kidsons’ matter, the courts ruled that the claim notification simply needed to be at least a “possibility” or with “real” prospects rather than false, fanciful or imaginary. The ruling also set out an objective test that a notification should include at the very least: n notification to insurers with wording that leaves the reader in no doubt that the purpose of the communication is to notify a circumstance that may give rise to a claim; n details of the victim or potential claimant; n details of the error or act, omission or negligent or wrongful conduct that the policy holder is alleged to have committed; and, n details of the potential loss and, if possible, an indication of the quantum. Kajima UK Ltd v The Underwriter Insurance Company Ltd (TUIC) The case summary outlines that Kajima had been employed to design and build a block of flats. Shortly after practical completion, ponding of water occurred on the walkway balconies from the staircases to the front doors of various flats. Kajima carried out investigations into the cause of the ponding and concluded that it was due to excessive settlement which could distort adjoining roofing and balconies. Kajima notified its insurers, TUIC, accordingly in February 2001 and stated that further investigations were being carried out to confirm the cause. Kajima renewed their PI insurance with a different insurer in May 2002. In July 2005, following further investigations and remedial works arising out of issues relating to the settlement problems, Kajima was informed by engineers that the wind loading calculations for the building had been badly underestimated and that, as a result, lateral stability was a serious problem. All of the tenants in the building were therefore evacuated, with the remedial works estimated at £7.25 million. Kajima attempted to claim on its original February 2001 notification to its PI insurers for this amount. Kajima argued that the investigation referred to in the February 2001 notification led in time to further investigations which meant that in effect the losses, costs and liabilities incurred by Kajima following the discovery of stability problems in July 2005 all arose from the 2001 notified circumstances.
Insurance
The court, however, disagreed holding that the notification was "only effective in relation to the specific circumstances which were notified" in 2001. It was not enough that "there was a historical 'continuum' of investigation by various parties which coincidentally revealed a number of defects or deficiencies" which may or may not have had anything to do with the notified circumstances.
More detail These cases signify that a vague or partial preliminary notice will no longer be acceptable to trigger policy notification provisions. More detailed information will be required to ensure that policy conditions are met with ongoing updates and communication to insurers on developments. In the circumstances where the nature of the problem is genuinely unknown but a potential larger situation is envisaged, best practice is to notify the “big picture” worst case scenario and maintain communication throughout. Whilst UK precedent is of course not binding on Irish court rulings, it is often used and referred to as persuasive argument.
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Recovery The issue of notification obligations was also highlighted in two recent cases involving insurance companies who sought recovery under their reinsurance: Dornoch Ltd v Royal and Sun Alliance plc and AIG (Ireland) v Farraday Capital Ltd. Both cases were very similar – a policy holder notified a claim under their directors’ and officers’ insurance. The two insurers failed to notify the matter in time to their re-insurers under policy conditions which required “losses which may give rise to a claim”, that are “known” to the insurers, to be notified to re-insurers within a specific time period. As can be seen here, even insurers can get it wrong – and they too run into difficulty when they fail to notify in a timely fashion.
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Report, report, report The general advice has to be that notifications need to be timely. Some policies require notification within a matter of days, whereas others require notification “as soon as practicable.” Whilst “as soon as practicable” is the preferred language, the lessons learned from these recent cases and the majority of insurance disputes is that they could have possibly been avoided if the policy holder: n was more diligent in notifying their insurers; and, n kept them informed. A good risk management procedure in your practice is to abide by the mantra “report, report, report” all matters of concern, as your PI insurers will not generally penalise you for good reporting of potential circumstances which do not develop.
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