54 Planning permission was obtained for a small building. The building owner wants to press ahead with a larger building without further reference to Planning. The architect knows that the Planning Department would refuse the large building out of hand. Should the architect continue to do the drawings and administer the contract on site?
It is the architect’s duty to advise the client on all aspects of the building process about which the architect professes expertise. Obviously, town planning is one area where the architect should have expertise – not the expertise of a town planner or an expert planning consultant or a lawyer skilled in this area of the law, but certainly knowledge of the ordinary aspects of town planning that one would normally expect as part of the general architectural skills.1
In this case, planning permission had been obtained for a particular building. The client had a change of mind and wanted a bigger building on the same site. There is nothing wrong with that, but architects have a duty to advise the client about seeking planning permission again in such circumstances. Pressing ahead without obtaining planning permission would be unlawful, and the architect has a duty to make that crystal clear to the client. In addition, if the architect knows for certain that making a planning submission would be pointless, there is an added duty to convey this to the client in the strongest terms.
The architect is being asked to finish the drawings for the larger building that would not gain planning approval even if application were made. The architect knows that the purpose for which the drawings are intended is the unlawful construction of a building. Architects placed in this position should flatly refuse to have anything further to do with the project. This would not amount to repudiation at law, much less be in breach of any part of the professional Code of Conduct; quite the contrary, as the larger building is not something for which the architect was engaged. In other words, it is not part of the terms of engagement (for the smaller building for which planning permission has been obtained), and therefore the architect cannot be in breach by refusing to do the work.
For an architect to collaborate with the client in enabling the construction of a building for which it is known that planning permission would be refused is an unlawful act and one that is contrary to the Code of Conduct. If the architect did not know that planning permission was not to be sought or that it could not be obtained, there would be no wrongful behaviour until the architect knew, or should have known, the true situation. On becoming aware of the true situation, the architect would have no option but to stop work if advice to the client fell on deaf ears.
55 If an architect is engaged to apply for planning permission by a certain date, is the architect liable if that date is missed?
It is becoming common for clients to try and bind their architects into agreements which include a programme for significant stages of the work. In view of the many imponderables in the design and construction process, signing an agreement with such timing requirements is inadvisable. Nevertheless, architects do sign such agreements, and questions arise about liability if the dates are not met. A crucial date is often the application for planning permission. A recent case illustrates the problem.
In Elvanite Full Circle Ltd v AMEC Earth and Environmental (UK) Ltd,2 AMEC was engaged to make a planning application to use a site for recycling purposes. AMEC had contracted on their own terms. Elvanite was a demolition and recycling contractor. The agreement was that the application should be made by the end of November 2007, but it was not made until April 2008. Elvanite withdrew the application and terminated AMEC’s appointment. Elvanite then engaged another consultant who obtained planning permission a year later.
Elvanite said that if the application had been made by the end of November 2007, planning permission would have been granted in April 2008 and they could then have sold the site to a well-known waste contractor for £1,350,000. Although planning permission was granted in 2009, the market had declined and they could not find a buyer at an acceptable price. Elvanite claimed damages for breach of contract and/or negligence arising out of the timing and content of the 2008 application. The damages, amounting to £561,000, were in the form of loss of profit calculated by reference to the £1,350,000 figure less the cost of the site.
Elvanite’s position was very simple: AMEC had been engaged to apply for planning permission on a certain date and had not done so; therefore, they must be liable. The question was, what was the real cause of the alleged loss by Elvanite?
The court concluded that although the contract stated an application would be made by the end of November 2007, there was an implied term that the date would be extended if there were delays caused by Elvanite. Although AMEC were in minor breach of contract because they did not complete two necessary assessments by the end of November 2007, those minor breaches did not cause the delay. The delay was caused by Elvanite’s various revisions of the site layout. It is a basic principle that a person cannot complain that something is not done or not done by a certain time if it is that person’s fault that it is not done. In addition, there was no clear evidence as to the value of the site with planning permission. In any event, AMEC had a term restricting claims if not notified within a year, and Elvanite had not done so.
Therefore, even if the agreement states that an architect will apply for planning permission by a certain date, the architect will only be liable for a failure to do so if the delay is solely the responsibility of the architect. If the employer contributes to the delay in some way or if some unforeseen circumstance arises, the architect will have no or a reduced liability.
This is a question that crops up fairly frequently. Architects are prone to ask it just before making an important contractual decision; contractors ask it when they are particularly annoyed with an architect’s conduct. In general, it is usually easier for the contractor to claim against the employer than the architect, because the contractor and the employer are related by the building contract while the contractor has no contractual relationship with the architect. Therefore, a contractor finds it relatively easy to claim under the terms of the contract against the employer for a breach of the contract. Claims by the contractor against the architect must be made in tort. Since 1990,3 negligence claims in the absence of a contractual relationship have become very difficult to sustain. A contractor making a claim against an architect would almost certainly do so under the reliance principle.4 It usually applies to professionals, although courts have extended the scope in some instances. The principle, in brief, is that if a professional gives advice to another person or class of people knowing that the person or persons will rely on it, and if the person or persons do rely on the advice and suffer a loss as a result, the loss will be recoverable from the professional. This is irrespective of any fee paid or not paid to the professional and even though there is no contractual relationship.
The contractor sued both employer and architect in Michael Salliss & Co Ltd v ECA Calil,5 claiming that the architects owed a duty of care to the contractor. Although the contractor was unsuccessful in arguing that the architect owed the contractor a duty to provide accurate and workable drawings, it was successful in its claim that it relied on the architect to grant an adequate extension of time and to properly certify the value of work done. The court appeared to think that this was self-evident. It remarked that if the architect unfairly promoted the employer’s interest by inadequate certification or merely failed properly to exercise reasonable care and skill in the certification, it was reasonable that the contractor should not only have rights against the owner but also against the architect to recover damages.
Three years later, Pacific Associates v Baxter6 seemed to overturn this position, but although the court said that a question mark hung over the Salliss case, it stopped short of saying that it was wrongly decided. Pacific Associates was effectively the contractor under a FIDIC contract for work in Dubai. The contractor claimed that it had encountered unexpectedly hard materials and that it was therefore entitled to a substantial extra payment. The engineers would not certify the amount claimed, and the contractor sued them. The claim alleged that the engineers acted negligently in breach of their duty to act fairly and impartially in administering the contract. In a judgment upheld by the Court of Appeal, the court struck out the claim on the basis that the contractor had no cause of action or, in other words, that it could not make a claim in that particular way. In making that decision, the court was mindful that there was provision for arbitration between employer and contractor, and therefore the contractor could have sought arbitration on the dispute.
The court also referred to a special exclusion of liability clause in the contract by which the employer was not to hold the engineers personally liable for acts or obligations under the contract or answerable for any default or omission on the part of the employer. The fact that the engineers were not a party to the FIDIC contract – just as architects are not parties to JCT contracts – seems to have been ignored by the court.
The question mark appears to properly hang over the Pacific Associates case rather than the Salliss case. Whether a duty of care exists does not depend on the existence of an exclusion of liability clause, except to the extent that the existence of such a clause suggests acceptance by the engineer that there is a duty of care which, without such a clause, would give rise to the liability. The clause in fquestion might well be deemed unreasonable under the provisions of the Unfair Contract Terms Act 1977.7 Why the inclusion of an arbitration clause should exclude engineers from liability to the contractor is not immediately (or even subsequently) obvious. The fact that the parties chose to settle their disputes by arbitration cannot excuse the engineers from their duty to both parties.
In Lubenham Fidelities & Investment Co v South Pembrokeshire District Council and Wigley Fox Partnership,8 the Court of Appeal (by which the court in the Pacific Associates case should have been bound) expressly confirmed that the architect owed a duty to the contractor in certifying. The architects in that case were not held liable, but that was because the chain of causation was broken and the contractor’s damage was caused by its own breach in wrongfully withdrawing from site. But the court reached its conclusion with reluctance because the architects’ negligence was the source from which the sequence of events began to flow. The court expressly stated that because the architects were appointed under the contract, they owed a duty to the contractor as well as to the employer to exercise reasonable care in issuing certificates and in administering the contracts correctly. By issuing defective certificates and advising the employer as they did, the architects acted in breach of their duty to the contractor.
The court was simply following the precedent of earlier courts. In Campbell v Edwards,9 the Court of Appeal said that contractors had a cause of action in negligence against certifiers and valuers. Until Pacific Associates it had not been doubted that architects owed a duty to contractors in certifying. In Arenson v Arenson,10 in reference to the possibility of the architect negligently under-certifying, it was said that in a trade where cash flow is perceived as important, it might have caused the contractor serious damage for which the architect could successfully have been sued. In F G Minter Ltd v Welsh Health Technical Services Organisation,11 the court remarked that an unreasonable delay in ascertainment would completely break the chain of causation, which might give rise to a claim against the architect.
57 If the contract requires an architect to ‘have due regard’ to a code of practice, does that mean the architect must comply with it?
A requirement to have due regard to something is a common phrase in much legislation and in some contracts. It must be construed in the context of the surrounding words. For example, in SBC clause 3.18.4, if any work, materials or goods are not in accordance with the contract, the architect is required to have due regard to the code of practice attached to the contract before issuing instructions for opening up the work or testing. A requirement to have due regard to something is not the same as a requirement to comply with something. In SBC clause 3.10, the contractor must comply forthwith with architect’s instructions. In other words, the contractor must carry out the instructions. It would not be sufficient if the contractor merely had to have due regard to the instructions. A requirement to have due regard to something means that a person must carefully consider that thing and give appropriate weight to it in coming to a decision or in taking some action.
The code of practice referred to in SBC clause 3.18.4 is contained in schedule 4 to the contract. Its stated purpose is to assist in the fair and reasonable operation of the requirements of the clause. In order to have due regard to the code, an architect must read it and consider whether any of its contents are relevant to the decision to open up or test. However, there may be circumstances where the architect decides that no part of the code is relevant and, therefore, feels justified in giving no weight to it when making the decision.
Most terms of appointment of construction professionals contain what is known as a ‘net contribution clause’. A typical net contribution clause is as follows:
The liability of the Architect shall not exceed such sum as it is just and equitable for the Architect to pay having regard to the extent of the Architect’s responsibility for the loss and/or damage in question and on the assumptions that all consultants and contractors providing work or services for the Project have provided to the Client contractual undertakings on terms no less onerous than those of the Architect under this Appointment and that there are no exclusions of or limitations of liability nor joint insurance or co-insurance provisions between the Client and any other person referred to in this clause and that all the persons referred to in this clause have paid to the Client such sums as it would be just and equitable for them to pay having regard to the extent of their responsibility for that loss and/or damage.
The purpose of the clause is to make sure that the architect, or other professional who is sued by a client, pays no more than the amount of damages for which the architect is actually responsible. In the absence of such a clause, a consultant could be found to be liable to pay the whole of a claim for damages even though other consultants were partly responsible. Thus a consultant might have to pay 100 per cent of a claim for which they were only 30 per cent responsible. That is because such claims are made on the basis of joint and severable liability, and a client is free to choose which of the consultants to pursue for damages. The difficulty for a consultant pursued in this way is that he or she has to take legal action against the other consultants in order to recover the part of the damages for which they are liable. A danger is that one or more of the other consultants may become insolvent and unable to pay. These clauses are usually resisted by clients on the basis that it is unfair that a client should be obliged to take legal action against several consultants and possibly the contractor when there is a defect.
Net contribution clauses have been challenged in the courts on wording as being unfair under the Unfair Terms in Consumer Contracts Regulations 1999 and unreasonable under the Unfair Contract Terms Act 1977, but they have been supported by the Court of Appeal.13 The reference to co-insurance provisions was added to net contribution clauses following another case in the House of Lords.14
There is little doubt that an architect can be liable for advising the use of the wrong form of contract. Several legal commentators have made much of it. However, it would have to be demonstrated that the employer suffered a loss as a direct result of using the form and that the loss was not such as would have been suffered in any event and quite irrespective of the type of contract. In other words, it would have to be shown by an employer claiming damages for the bad advice that it was the bad advice and nothing else which was the cause of the loss. In practice, it is likely that some architects do give their clients poor advice about a suitable form of contract for a particular project. Often, there will be no adverse consequence simply because circumstances do not arise which necessitate the use of the part of the contract which would disadvantage the employer. For example, an architect may wrongly advise an employer to use a particular contract which happens to have terms for termination of the contract which are particularly advantageous to the contractor. If there is no need to terminate, there are no consequences from the bad advice. In a recent case, the court found that it would have been good practice for the architect to have specified a building contract which gave the contractor design responsibility and required professional indemnity insurance for the design of M & E services. However, in circumstances where the contractor’s detail design was subject to approval by the services engineer, the architect’s decision to specify a contract without design responsibility for the contractor was an approach that a reasonably competent architect could take.15
There is no doubt that the task of advising on the correct form of contract for a project is becoming more difficult. There are many different forms of contract available, and a comparison of the key terms is not easy unless an architect has an encyclopaedic knowledge of all the available contracts and the individual clauses and their significance. Moreover, changes in legislation, judicial decisions and other factors mean that standard contracts are regularly updated. If in doubt, architects should seek advice on behalf of their clients or advise their clients to seek further advice themselves. Obviously, if an architect spends a career engaged in one specific kind of building design at a particular price range, it is likely that the same contract will be suitable for all the projects. The danger tends to arise when an architect uses the same contract in all cases simply because it is a familiar document. The author has come across many instances of architects who refuse to use other than the Minor Works Contract, or sometimes the Intermediate Contract, whatever the size or scope of the Works. That approach is asking for trouble.