11 March 2021

With the vaccine roll out underway, there are positive signs that life will soon begin to return to normal. Governments are keen to reinvigorate the economy and in particular the hardest hit sectors including the performing arts.

You’ve just been appointed the lead consultant on the development of a new contemporary Arts Precinct at the disused container terminal at Glebe Island on Sydney’s foreshore. It’s a high-profile and complex project, and the appointment brings with it the difficult task of engaging many of the various sub-consultants. Before diving in, there are some considerations worth noting before embarking on this project.

First, you will be liable to your client for any sub-consultants you engage. This liability includes your negligence, any negligence and insolvency on the part of the sub-consultant and almost everything that the sub-consultant does. Therefore, engaging sub-consultants for a project of this size carries with it considerable risk, and it is important to ensure that you don’t inadvertently assume more risk than is necessary.

This Precinct will require you to engage sub-consultants both from your own discipline as well as others. This is an important distinction as some professional indemnity policies do not provide any explicit cover for liability for sub-consultants whereas others provide cover only in relation to the work of sub-consultants in the same discipline as your practice. Because of these policy variations, we suggest you speak with your Planned Cover account manager before appointing any subconsultants. While it’s likely you will have some cover, it is possible that you may not have any cover at all for the work of sub-consultants.

All the sub-consultants you engage should be by way of written agreement (ideally drafted by a solicitor). Ideally, the terms should be ”back to back”, that is they should mirror the terms contained within your head contract. If you agree that the agreement will take another form, watch out for any attempts by your sub-consultants to include limitation of liability clauses. Limitation of liability clauses can take many forms, some of which include monetary caps, time limits or exclusions of specific types of damages. Your client might seek to include one or a combination of these types of clauses or they may use a pro forma which has a standard term providing for a limitation of liability like the Conditions of Engagement by Consult Australia. If any clauses like these creep in, not only will you still be liable to your client for the full amount but you may also be potentially uninsured pursuant to any waiver of rights exclusion in your professional indemnity policy. This exposure might leave you with little or no protection.

We suggest checking, by way of obtaining a certificate of currency, that any sub-consultants you seek to engage have their own professional indemnity insurance with an indemnity limit matching that of your professional indemnity policy. The written agreements with your sub-consultants should contain provisions which require them to not only hold professional indemnity policies but also to renew their policies continually for 7 years.

Finally, choose wisely and price your risk accordingly.

These steps will help you limit taking on any unnecessary risk, reduce the likelihood of disputes arising should a sub-contractor not fulfill their duties, and ensure you can deliver a world-class Arts Precinct as we return to normal.

Kathryn Budd
NSW Risk Manager
informed by Planned Cover

This article is only general advice in respect of risk management. It is not tailored to your individual needs or those of your business, nor is it intended to be relied upon as legal or insurance advice. For such assistance you should approach your legal and/or insurance advisors.