The Architect and the Budget

 

By Graham Sutton, Associate Solicitor at Hay & Kilner Law Firm

Will an architect be in breach of his duty of care if his design fails to take into account the client’s budget? This point was considered by the Technology and Construction Court (TCC) in the case of Riva Properties Limited v Foster + Partners (2017 EWHC 2574).

A duty of care is there to ensure that another party does not suffer unreasonable harm or loss that can arise as a result of contractual obligations or tort of negligence. The first thing to consider is whether a duty is owed. The architect has a duty of care to provide adequate professional, financial and technical resources, and a duty to inform the client about progress and any issues that may affect the brief, construction cost, programme or quality.

Riva Properties Limited (Riva) engaged Foster + Partners Limited (Foster) in 2007 to design a 5-star hotel near Heathrow Airport.  Fosters’ appointment did not include a budget figure, but Riva claimed to have mentioned a figure of £70m at the beginning of the scheme. Foster produced a design that was originally costed at £195m, but later reduced assuring Riva that the project could be “value engineered” down to £100m. Acting upon that assurance, Riva proceeded with the scheme, which turned out to be unachievable on the £100m figure. Riva lodged a claim against Foster for substantial lost profits of the hotel complex, which consequently was not built and wasted expenditure. Foster denied that it had ever been informed of a budget for the project. The Court found that Foster was, in fact, aware of the initial budget figure, but even if he had not been told the figure, he should have made the relevant enquiries to find out what the budget was at an early stage, and rightly so.

The Court further said that Foster had acted negligently when he advised that the project could be reduced in value to bring it within Riva’s budget. Given that Foster knew that Riva expected the cost reduction to be achieved by value engineering, Foster was under an obligation to advise Riva that it was impossible. As a result, Foster was ordered to repay professional fees charged of £3.6m.

The Court’s decision makes it clear that an architect must undertake its design work in accordance with the client’s brief.  Cost and budget is a key constraint and should always be identified and considered when designing a project, even if the architect is not expressly required to provide cost advice.

Although the facts relate solely to the provision of architectural services, the case serves as a sharp reminder to all industry professionals of the importance of performing professional services by reference to the client’s objectives and budget requirements. Where a budget has been set, a frequent review of the viability of the scheme against the budget should always be carried out.  As Foster found out, failure to do so can painfully hit the pocket.

For more information on Constructing Excellence in the North East, please contact chief executive, Catriona Lingwood, on 0191 500 7880 or email catriona@cene.org.uk.