Who Is Liable for a Subconsultant’s Defective Work?

When a subconsultant’s work turns out to be defective, the first question is rarely who made the mistake. It is who promised what, and to whom. Liability follows the contracts, and on most projects there are at least two of them: the head agreement between you and your client, and your own appointment of the subconsultant beneath you.

If you engaged the subconsultant, you are usually the party who owes the client for the whole of the service, including the part you subcontracted. The client’s claim comes to you. Whether you can pass it on depends entirely on what your subconsultant agreement says, and on whether it matches the obligations you took on upstream.

That is where the gap opens. Head agreements are often negotiated hard by the client: a wide scope, a high or uncapped liability position, sometimes an obligation to a fitness-for-purpose standard rather than reasonable skill and care. The subconsultant is then engaged on their own short terms, with a low cap and a narrower standard. The difference between the two positions is carried by you, and no insurer has agreed to carry it for you.

Novation adds a further step. When your appointment moves across to the builder on a design and construct project, the consultant team beneath you is usually meant to move too. If the deed does not deal with the subconsultant appointments, you can be left holding obligations for work you no longer direct.

The principle is back-to-back. Whatever you promise your client in respect of a subconsultant’s part of the service, your agreement with that subconsultant should promise you the same thing, on the same standard, for the same period, and to at least the same limit. Wherever the two differ, the difference is your exposure. It is worth knowing its size before you sign rather than after a claim.

Start from the head agreement, because it sets the ceiling. Read the standard of care, the scope, the liability cap and how it is calculated, how long the obligation runs, and any requirement to hold insurance. Then draft downward from that, rather than accepting a subconsultant’s standard terms and hoping the two line up.

On the standard of care, resist an obligation you cannot pass down. Fitness-for-purpose promises and absolute warranties are difficult to insure and difficult to flow through a chain. Reasonable skill and care, expressed the same way at every level, is the workable position.

On caps, consistency matters more than size. A cap of the same amount, calculated on the same basis, at every level of the chain is more useful than a high cap in one agreement and a low one in the next. Watch the basis as well as the number: a cap expressed as a multiple of fees produces very different amounts at each level.

On insurance, require the subconsultant to hold professional indemnity cover at a level that reflects the risk of their part of the service, and to maintain it for a defined period after completion. Professional indemnity is usually written on a claims-made basis, so cover needs to exist when the claim is made, not only when the work was done. Ask for the certificate of currency rather than the assurance.

On novation and completion, settle what happens to the subconsultant appointments when yours is novated, and what survives when an engagement ends early. Both are far easier to agree at the outset than at the point they are needed.

One further point is often misunderstood. Most Australian states and territories have a proportionate liability regime that can apportion responsibility between concurrent wrongdoers for certain kinds of claim. The detail differs between jurisdictions, and in some the parties can affect the position by contract, so whether it assists in a particular matter needs checking against the Act that applies. What it does not do is change who is sued first. It is not a substitute for back-to-back terms.