The Civil Engineering Contractor March 2019 | Page 38

THOUGHT LEADERS
Principal agent’s
two duties
By Kobus le Roux
Can a contractor hold a principal agent or other agents personally liable for damages?
A
s a contractor today, it should
be easier for you to get paid,
obtain approval on your
extension of time claim, or to claim
back the default interest owed to you
by the employer on your project. The
reason is that our modern contracts
make provision for a fair and impartial
facilitator to ensure you are treated
fairly and in accordance with your
rights as per the contract. However,
we routinely find that principal agents
— the supposed custodians of fair
contractual implementation on a
project — fail to certify fair value, or
they deliberately reduce a fair
extension of time claim or they fail to
add default interest to a certificate
when it is due to the contractor.
The question is: what happens
when a principal agent discharges his/
her duties in a manner that clearly
demonstrates incompetence and
lack of skill? Or worse, blatantly and
unashamedly act prejudicial towards
one party at the expense of the other?
There is a crucial legal backdrop to
this question. A principal agent has two
primary duties:
• The first is to act and carry out his/
her assigned duties with reasonable
skill and care while exercising
reasonable and professional
judgement. In other words, their
judgement cannot be interfered
with by the employer. This is a
contractual and common law duty
from which we cannot escape as
professionals, even if you are part
of the employer’s organisation!
• Secondly, they must protect the
employer’s interest.
This sounds like a misnomer doesn’t
it? But let me post an excerpt from
36 | CEC March 2019
the Hoffman case (Hoffman v Mever),
where the learned Judge Ogilve
Thomson J observed the following (I’ve
added my own emphasis to the passage):
“The architect’s function in issuing the
final certificate is to determine what is
finally due and owing by his employer,
the building owner to the contractor. In
discharging that function, the architect
is, so it seems to me, primarily still acting
in the protection of his employer’s interest.
He must, of course — as also in the
case of interim certificates — be honest
and impartial in determining what is the
contractors due. The circumstance that he
is engaged by the owner does not entitle
him to cheat the contractor.”
Although the particular case had a
unique factual matrix, the conclusions
drawn by courts thereafter have
been that: a principal agent or other
professional agents must act fairly and
impartially in accordance with the
terms of the contract as a primary
set of boundaries and, within those
boundaries, they must look after the
employer’s interest. They cannot step
outside their professional duty of
impartiality to cheat the contractor or
any party for that matter, and then
claim that he/she is merely acting in
the best interest of the employer. The
duties are entwined and not separable
or flexible in any manner.
Another case in point is the
judgement in the Hyde Construction
case where Judge P.A.L. Gamble noted
that when a principal agent accepted
the appointment as principal agent,
that person knew that he would have
to make decisions on behalf of his
principal that would directly affect
other contracting parties. As such, he
would have known that he was required
to behave impartially and could not
be seen to be “cheating” (to use the
analogy in Hoffman v Meyer) either
the employer, the contractor, or any
of the subcontractors to the project.
Similarly, those other parties would have
been entitled to look to the principal agent
to discharge his functions professionally,
fairly, and in accordance with accepted
practices. (My own emphasis.)
Here comes the kicker
Can the contracting parties with whom
the principal agent has no contractual
privity (contractor, subcontractors)
impose a liability on him/her where
he/she fails to act impartially and causes
damage or loss to one of these parties?
Technically in law, the answer is
yes, but do read further as we have a
precedent on this.
There is a delictual liability on the
principal agent, other agents, and any
professional person. A delictual liability
in laymen’s terms is a liability that all of
us have — for instance, I have a delictual
duty towards every other person, not to
harm or cause them loss by my negligent
actions. If I wildly swing a bat in your
direction and dislodge a kneecap, we
do not need an agreement between us
or any contractual relationship for you
to claim your losses from me for my
negligent action.
So, in delict, a principal agent
owes the other parties, such as the
contractor and subcontractors, a duty
to act impartially, professionally, and
fairly. Should the principal fail to act
in such a manner and cause a loss or
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