Because I am a member of the British Institute of British architects (RIBA) …brag, brag, I receive a free copy of its monthly the RIBA magazine.
In this monthly copy there is an article which distraught me a lot so I wanted to share it with you. It is about the consequences of providing free professional advice to a friend just to show that we architects must always be on our guard.
The story goes as follows: In 2012, Mr and Mrs Burgess decided to landscape their garden in Highgate, London. They obtained a quote from a well-known landscape designer of approximately £200,000. They considered this to be too expensive and consulted their friend and former neighbour, Mrs Lejonvarn, a Netherlands registered architect living in London.
I can do it better.
Mrs Lejonvarn informed the Burgesses that she believed the works could be completed within a smaller budget. Mrs Lejonvarn, who had in the past provided gratuitous design services for the Burgesses, began to provide design and project management services for the landscape project. The parties did not sign a formal contract and Mrs Lejonvarn did not ask for any payment from the Burgesses. It was her intention to charge a fee for detailed design work at a later stage in the project.
What have we done…?
However, as the project progressed, the Burgesses became concerned about the quality and cost of the works. The relationship between Mrs Lejonvarn and the Burgesses deteriorated. Ultimately the Burgesses engaged the landscape designer who had provided the original quote to complete the project. The Burgesses then commenced proceedings against Mrs Lejonvarn, claiming in both contract and tort for the increased cost of completing the works (including remedial. The maximum value of the claim was approximately £265,000).
At this particular trial, the court considered certain preliminary issues in the case in the hope that the answers would clarify matters and enable the parties to settle their differences without recourse to a full trial.
Accordingly, the judge held that there was no contract between the parties: there had been no offer and acceptance capable of giving rise to a contract, as well as no consideration. Therefore the Burgess's claim in contract failed and the judge went on to consider the claim in tort.
Pure economic losses.
In this respect, the judge observed that the losses claimed by the Burgesses were pure economic losses (see description below) and noted that while there were conflicting authorities as to whether a professional designer in the construction sphere owes a duty of care in respect of pure economic loss, on balance, a duty is capable of being owed and that 'a duty of care extends to the protection against economic loss in respect of both advice and any service in which a special skill is exercised by a professional'.
The judge therefore found that Mrs Lejonvarn owed a duty of care in tort to the Burgesses. The duty covered the selection and procurement of contractors and professionals, project management and supervision of the works, and detailed design work. The judge qualified the duties by holding that Mrs Lejonvarn should be judged by the standards of a reasonably competent architect and project manager, and not by the standards of a structural or geotechnical engineer.
Finally, the judge held that the Burgesses and Mrs Lejonvarn had discussed a budget of £130,000 on two occasions and that Mrs Lejonvarn knew the Burgesses were relying on that figure. Mrs Lejonvarn therefore assumed responsibility to the Burgesses for the accuracy of the budget figure.
While this judgment highlights the inherent risk to professionals in offering informal advice, it is important to note that the court emphasised that: 'this was a significant project ... approached in a professional way.
This was not a piece of brief ad hoc advice of the type occasionally given by professional people in a less formal context (pint on hand). Instead, the services were provided over a relatively lengthy period of time and involved considerable input and commitment on both sides.
What is an economic loss?
This is a loss which is purely financial. It is not caused by physical injury, damage to 'other' property.
Where parties are not in contact with each other, the law is hesitant to impose a duty of care in respect of pure economic loss, as it would lead to the ambiguous situation of liability in an indeterminate amount, for an indeterminate time, to an indeterminate class of people (Ultra mares v Ieuehe, 1931).
In this case, Mrs Lejonvarn did not deny that a duty of care could arise, but challenged the scope of the duty, arguing that a duty of care in respect of pure economic loss could arise from advice given, but not from a duty to perform a service. The judge rejected this argument. Further, the judge referred to the case of Lidl Properties v Clarke Bond
Partnership (1997) where a of care had been found to exist with regard to the giving of gratuitous advice in the construction sphere.
All merits on this article are due to Stacy Sinclair, the person who wrote the original article.