Successful action by firm of chartered surveyors for fees — Despite length of report the issue was a fairly simple one, namely whether plaintiffs’ contract to provide a comprehensive service for a projected development was lawfully terminated or whether they were entitled to damages for wrongful termination — The project involved the demolition of existing buildings and the construction of a new office block — After carrying out a great deal of work the plaintiffs’ employment was terminated by the defendants and the redevelopment was ultimately completed by a firm of architects — The change, which was made reluctantly by the defendants, was due to the insistence of a finance company which was the mortgagee of the site — No question arose as to liability to the plaintiffs for work already done, but there was an issue as to whether they should have been permitted to see the project through to completion and to be remunerated accordingly — After considering the evidence and the submissions made on behalf of the parties the judge held that the plaintiffs were entitled to be employed to the end of the project, provided that the defendants carried it through, and that the plaintiffs were accordingly entitled to damages for breach of contract — The judge had earlier made a finding that the agreed professional fees were on the basis of 10% of the cost of the works (to include any payments which the plaintiffs would have to make to structural engineers or quantity surveyors) — The question of the amount of damages for breach of contract and the amount due in respect of any counterclaim were, however, left by the judge to be determined by an official referee, the hope being expressed by the judge that the parties might be able to resolve any remaining differences without further lengthy and costly litigation
This was an
action for damages for breach of contract in which the plaintiffs were Edwin
Hill & Partners, chartered surveyors, of London SE1. The first defendants
were Leakcliffe Properties Ltd and the second defendant was Alan R Pulver,
solicitor, of Alan R Pulver & Co, of Watford. The project which gave rise
to the litigation concerned the construction of a new office block, to be
called Wellington House, on a site in Waterloo Road, London SE1.
I Judge QC and
Richard L Davies (instructed by Rowe & Maw) appeared on behalf of the
plaintiffs; I Krolick and Maurice Cottle (instructed by Alan R Pulver & Co,
of Watford) represented the defendants.
Giving
judgment, HUTCHISON J said: Between the end of 1973 and March 1979, the
plaintiffs, a firm of chartered surveyors carrying on practice in London,
undertook a great deal of work at the behest of the second defendant, who is a
solicitor who, at that time, had an extensive and active interest in property redevelopment
in connection with a site in Waterloo Road. The project as ultimately conceived
involved the demolition of the existing buildings and the construction of a new
office block, named Wellington House, and in this judgment I shall use the
latter name to refer to the site and the project.
Over the whole
of that period, the only sum that the plaintiffs received by way of fees was
£10,000 on account. In March 1979 the plaintiffs’ employment was terminated and
the redevelopment was ultimately completed by the defendants employing a firm
of architects in place of the plaintiffs. Despite the fact that this case has
generated agreed bundles of documents comprising more than 3,000 pages and
required getting on for three weeks to try, the central issue with which I am
concerned can be very simply stated. It is, as Mr Judge formulated it in his
closing address, whether the contract between the parties was lawfully
terminated on March 6 1979 in the sense that the defendants were then
exercising a right which the contract gave them to dismiss the plaintiffs, or
whether that termination was wrongful in the sense that it involved a breach of
the agreement between the parties.
It is conceded
by the defendants — I am not for the moment drawing any distinction between
them, though obviously I must say something about their respective positions
and liabilities later — that they are obliged to pay the plaintiffs for the
work that they did up to March 6 1979, subject only to the set-off and
counterclaim on which the defendants rely. The question is whether the
defendants are obliged in addition to pay the plaintiffs damages for wrongful
termination of their employment on the basis that they should have been
permitted to see the project through to completion.
Another remarkable
feature of the case is that despite the length of time it has occupied, there
have been very few issues of fact between the parties and none which in my view
is crucial to the determination of the issue I have to try. Three witnesses
were called — on behalf of the plaintiffs, two partners, Mr Anthony Farino
[FRICS] and Mr John Harlow [FRICS] and on behalf of the defendants, Mr Pulver
himself. It was clear to me that, not surprisingly, all three were in
difficulty in remembering precise details of events that happened in some cases
as much as 10 years ago and were to a large extent dependent upon the
contemporary documents. However, I should state at the outset that all three
impressed me as honest witnesses who were doing their best to give a truthful account
of what occurred and of their own beliefs and impressions. Throughout the whole
of the period with which I am concerned, they were all on the best of terms,
working together as friends for the common object of bringing the projected
development to a successful conclusion; but, as friends often do, they allowed
their relationship to be characterised by a degree of informality and lack of
precision without which, I feel reasonably sure, these proceedings would never
have been necessary.
I must begin
by saying something about the relationship between the parties that led up to
the plaintiffs’ engagement on this project. The pleadings suggest, and when the
case was opened it seemed as though, much was going to turn on the previous
course of dealings between the parties in connection with other projects. In
his closing submission, however, Mr Judge suggested, rightly in my view, that
the only real relevance of the previous dealings was in relation to the issue
of whether it was ever agreed that the plaintiffs should be remunerated at a
particular rate. Moreover, on the view I take of the case, those previous
dealings are not decisive of, nor are they necessary to determine, the rate of
remuneration on the Wellington House project.
Mr Pulver’s
first contact was with Mr Harlow. He saw some work on which Mr Harlow had been
engaged and, being impressed with it,
with a property in Golden Lane which he wished to refurbish. Mr Harlow explained
to him how their office worked and what services they would provide — namely,
that they gave a full service and would deal with everything from their own
office, including the preparation of plans, the preparation of a specification,
putting the work out to tender and supervising building works. He indicated
that their fee would be 8% of the total cost of the works. Plainly, what was
being offered was a comprehensive service to see the client right through from
beginning to end.
On March 17
1970 Mr Pulver wrote to confirm his instructions to the plaintiffs and his
understanding of the basis of the contract. Mr Harlow replied. In the event, as
one sees, fees were charged at the rate of 6% only, but this was because the
work had proved to be more expensive than envisaged and Mr Harlow was anxious
to please a new client. The importance of this transaction, apart from its
being the first, is that it was the only one when the parties took the trouble
to spell out in writing the basis of their contract; thereafter, under the
influence of mutual trust, satisfaction and friendship, they never bothered to
do so.
By November
1973, when the Wellington House project began, the plaintiffs had already
undertaken a number of projects. Initially, Mr Harlow dealt with them on behalf
of the plaintiffs, but in due course, because he was too busy to undertake all
the work that Mr Pulver put his way, he introduced the latter to Mr Farino and
thereafter he it was in the main who dealt with the affairs of Mr Pulver, in
particular with the project relating to Wellington House. A project involving a
development in Basildon New Town was the first of those undertaken by Mr
Farino, but I do not think it is necessary that I should say anything about the
details of that project of which, in any event, I know comparatively little.
The Wellington
House site was part of the property of a company called David Greig Ltd, and
the plaintiffs were involved because they acted for the vendors. Knowing that
Mr Pulver might be interested in the development potential of the site, the
plaintiffs notified him of its availability and in due course he got in touch
with Mr Farino. Mr Farino’s evidence is that Mr Pulver’s instructions were, as
had by then become commonplace, to offer the partnership services on the usual
comprehensive basis in order to produce a development project. What was
contemplated was the demolition of all the buildings on the site and the
construction of a new block for office development purposes. It is worth
noticing that this project was very much larger than anything that Mr Pulver
had previously undertaken and plainly, therefore, the problems of financing the
purchase of the site and also the development itself were of quite a different
order from any that Mr Pulver had previously encountered. On this occasion, as
he had previously done, he sought finance from First National Finance
Corporation Ltd (FNFC) and this was forthcoming in that they agreed to advance
the money to enable him to purchase the site.
It will be
observed from a letter signed by Mr Pulver and addressed to FNFC that at that
stage it was contemplated that the purchase should be effected and the
development carried out by a company called Snow Hill Securities Ltd. It was,
perhaps not surprisingly, Mr Pulver’s practice to undertake his various
projects through the medium of companies, usually specifically formed for the
purpose of a particular enterprise and controlled by himself and his wife. On
some occasions he had an outside partner, though not in the case of Wellington
House. As I have already indicated, in this particular case, for reasons which
I shall explain, nothing very much turns upon the intervention of a company. I
mention Snow Hill Securities Ltd at this stage merely for the purpose of
drawing attention to the fact that they are not defendants in the action and
were not ultimately the company through the medium of which Mr Pulver carried
out the development.
I accept Mr
Farino’s account of the nature of the instructions that he received from Mr
Pulver in the latter part of 1973. Mr Pulver himself said that he did not
remember any detailed discussions with Mr Farino about what exactly was
involved, but he reiterated more than once that, following the discussions
between himself and Mr Farino, it was his understanding that they had been
engaged for the development project. He agreed that if in November 1973 he had
been asked who would be the architects for the project if the building went
ahead, he would have said ‘Edwin Hall & Partners, of course’, and would
have agreed that he would pay the proper professional fees for their services.
A little later in his cross-examination he said that it was never in his mind
that he had instructed them to the end and that if he had been asked to sign a
contract to that effect he would not have done so; and he sought to draw the
distinction between intending and understanding that they would be employed to
the end and his having a contractual liability to that effect. While such
distinctions are material having regard to the issues in this case and might
well have been appreciated by Mr Pulver, an intelligent and meticulous lawyer,
had he thought about them at the time, my strong impression is that he did not
do so and that his earlier answers represented his true state of mind at the
time — namely, that he was instructing the plaintiffs in this project, as he
had in others, to provide him with a comprehensive service in the projected
development. It was his understanding and intention that if the development
went ahead they would be employed throughout and he recognised that that was
their understanding and intention also. I do not believe that it ever entered
his head what the position would be as a matter of strict law if,
notwithstanding an intention to continue with the development, he decided that
he wished to employ other consultants.
The first
written reference to the plaintiffs’ employment on this project is to be found
in the letter that Mr Pulver wrote to the plaintiffs on December 20 1973. From
that letter, it is plain that the plaintiffs had already begun work and it also
appears that something had happened to make Mr Pulver doubtful of his ability
to carry out the projected total redevelopment. It is necessary that I should
say a word about what it was that had implanted these doubts in his mind
because otherwise the subsequent history of the transaction will not be
understood.
As is well
known, during the early 1970s there was a boom in office development in London.
In 1974 there occurred the spectacular collapse of the property market with the
failure of a number of secondary banks, necessitating the rescue operation
mounted by the Bank of England. The collapse started at the end of 1973 and it
was on December 17 of that year that the Government imposed an embargo on
office development in London. It was necessary, if anyone was to carry out such
development, that he should first obtain an office development permit, and the
obtaining of such a permit where what was contemplated was speculative office
development was extremely difficult and, indeed, almost impossible. This
embargo came at a peculiarly unfortunate time for Mr Pulver because he had
contracted, in the name of Snow Hill, to purchase the Wellington House property
on November 1 and in order to do so had had to borrow a large amount of money
from FNFC which he hoped to recoup by the successful development of the site,
involving the erection of new office premises, and its sale at a profit. The
letter of December 20 1973 reflects some of the difficulties that now
confronted him and his recognition of the fact that he might have to content
himself with the much less attractive, because potentially less profitable,
option of refurbishing the premises — while not completely abandoning his hopes
of a total redevelopment.
During the
next two years the efforts of the plaintiffs and Mr Pulver were devoted to
obtaining an office development permit. An application was made in September
1974 and refused in October. The application was renewed in November and
ultimately was successful when an office development permit was granted on
December 1 1975. This was, it appeared, the first office development permit to
be granted for speculative office development and represented a considerable
coup for Mr Pulver and the plaintiffs. They worked very hard to assist him in
bringing it off and he has not sought in any way to minimise the extent or the
quality of their efforts, of which he was obviously most appreciative. He and
the plaintiffs then turned their attention to the almost equally difficult task
of obtaining planning permission, which occupied most of the next two years.
But, before I bring the outline history of the matter up to the grant of
planning permission, I must say something about other events which occurred in
the period after the grant of the office development permit.
It is common
ground between the parties that nothing had been said when Mr Pulver initially
instructed the plaintiffs to act on his behalf in relation to Wellington House
about the basis of their remuneration. As I have already indicated, the basis
on which the plaintiffs normally charged when they were providing a
comprehensive service was to stipulate for a percentage of the overall cost of
the development. Precisely what that percentage was depended on the nature of
the work involved, but the evidence is, and I accept it, that what the
plaintiffs were looking for was 6% for themselves. Accordingly, in cases where
the work did not involve
In cases where such services were involved, they would normally expect to
recover 10% — themselves being responsible for payment of the fees of any
outside consultants employed to do the structural engineering or quantity
surveying work. Where what was involved was refurbishing rather than new work,
they might look for a higher remuneration than 6% for themselves.
The reason
that I can deal with these matters in a relatively summary way, rather than
embarking upon a detailed and exhaustive examination of each of the other
projects in turn, has been foreshadowed by something I said at the beginning of
this judgment — namely, that the emphasis initially placed on the course of
dealing as a means of establishing the terms of the contract in the Wellington
House case is very much less now at the end of the case than it was at first.
Moreover, and I regard this as of fundamental importance, the evidence of Mr
Harlow and Mr Pulver is in total agreement on one matter, that in all the other
projects the plaintiffs always made a point of discussing and specifically
agreeing with Mr Pulver the rate of their remuneration. This was not always
done — indeed, it was usually not done — at the beginning of their engagement
for any particular project; but before Mr Harlow sent in an interim fee note he
would always speak to Mr Pulver, agree the rate of remuneration and obtain Mr
Pulver’s agreement for payment of whatever interim sum he was concerned to
recover.
It must be
remembered that these earlier developments took place at the height of the boom
that I have mentioned and one can understand Mr Pulver’s evidence that he never
queried any fee that the plaintiffs sought to recover. The plaintiffs assert
that in the present case their fees were agreed by Mr Pulver at the sum of 10%
of the total cost, such fees to include the liability, which the plaintiffs
themselves undertook, to pay the fees of the structural engineers and quantity
surveyors who would necessarily be involved in a project of this size.
In my
judgment, the plaintiffs have established this assertion, which is crucial to
their case, and have done so not on the basis of relying upon any previous
course of dealing but on the basis of the contemporary documentary evidence and
the inferences legitimately to be drawn from it. I must explain briefly why I
have reached this conclusion.
Some time
about the end of 1975 or the beginning of 1976 there was a meeting between Mr
Pulver and Mr Farino at which there was a discussion on the subject of fees. Mr
Farino, on the strength of a diary entry that he has for a meeting with Mr
Pulver at 2.30 on December 29 1975, thinks that it occurred on that date, but
since he has no specific recollection connecting the diary entry with the
meeting I cannot be sure that he is right. It is plain that the main reason for
the meeting was the plaintiffs’ desire to be paid something for all the work
that they had done, both on the Wellington House project and on various other
projects on which they had been working for Mr Pulver. Whenever it was that the
meeting occurred, it was followed by a letter of January 19 1976 — an important
letter. In it Mr Farino refers to a discussion on the matter of fees and
confirms agreement of a list showing what he describes as a close approximation
of fees outstanding to date. Against Waterloo Road, for what is described as
‘pre-planning’, appears the figure of £10,000. The letter continues:
With regard to
this latter fee we feel obliged to seek a payment as a contribution towards our
basic costs during these last two years because of the unusually protracted
effort but are nevertheless content with this in appreciation of the
substantial fees to follow on the design work.
We understand
that should the design work not issue to this practice you would increase this
to a sum commensurate with the true effort expended and the results gained.
The final para
of the letter reads:
Regarding the
design fee on Waterloo Road, we have always worked on your projects on a 10%
all-in basis where quantity surveying and engineering services are involved,
sharing the approximate 2% reduction. We would hope that you would consider
this a reasonable basis for this project, in which case we will be happy.
I should
interpolate that the reference to the approximate 2% reduction reflects the
fact which is common ground between the parties that if architects, structural
engineers and quantity surveyors were employed in the normal way the totality
of their fees would be likely to be 12% rather than 10%.
As to the
reference to fees, it is clear, as Mr Farino accepted, that the question of the
fees for Wellington House had not been discussed at the meeting to which the
letter refers. What Mr Farino was doing in the last paragraph was seeking his
client’s agreement in the manner which Mr Harlow said was invariably done to
the rate of remuneration. Mr Pulver said that he had no recollection of
receiving this letter and that the original was not on his file when he went
through it for the purpose of preparing the case for trial. He confirmed,
however, that he did, indeed, pay the sum of £10,000 and in cross-examination
he agreed that if he had seen the letter and read it he would have replied
saying that he agreed the suggested fee of 10%. There is no record of his
having done so, but in the present context the importance of his answer is that
it shows that in 1976 he would clearly have assented to the plaintiffs’
suggestion, which accorded with the general basis on which they had charged on
other contracts, that he should pay them 10% of the total cost of the work,
leaving them to pay the structural engineers and quantity surveyors.
In so far as I
have to make a finding on the matter, I have no doubt that the letter was, in
fact, sent and, in the absence of any positive evidence from Mr Pulver that it
was not received, I must presume that it was received and that he has forgotten
that he received it. The fact that the £10,000 was paid, though admittedly a
good deal later, tends to confirm this, as do matters which I shall mention shortly.
Before parting
from this letter, I should perhaps deal with another aspect of the contractual
position on which it has a bearing. Mr Krolick, on behalf of the defendants,
suggested that the second and third paras which I have read indicated that the
writer did not regard the contract into which the plaintiffs had entered as one
for the entire project, since the writer appears to contemplate that the design
work may not ‘issue to this practice’. In my judgment, however, when read in
context what these paras amount to is simply this. Mr Farino is pointing out
that he has done a great deal of work without payment and asking for a modest
sum on account — modest because he recognises the substantial remuneration
which will accrue if and when the project goes through. The third para is
written in recognition of the possibility that, for one reason or another — for
example, the refusal of planning permission or the sale of the property
because, maybe, Mr Pulver cannot obtain the requisite finance to carry out
redevelopment — the project may not go through and the plaintiffs may not be
able to earn their full fees. The writer is making it clear that in that event
he will, of course, expect to be paid at a proper rate for the work to date and
will not be content with the modest payment on account suggested in the letter.
It should be
remembered, although I have not yet mentioned the point, that it was understood
by all parties, both in this and the other projects in which they collaborated,
that if for any reason the development was not carried through by Mr Pulver or
one of his companies then the plaintiffs were entitled to be paid merely the
appropriate sum for the work that they had, in fact, carried out.
I have already
said that it took almost two years from the grant of the office development
permit to obtain planning permission and it is unnecessary to rehearse why
these delays occurred. What is important is that until planning permission was
obtained there was no real point in the plaintiffs going ahead with detailed
design work and, accordingly, the question of fees was, no doubt, somewhat in
the background. However, in March 1977 the planning authority indicated
informally that outline permission would be granted and permission was, in
fact, formally granted on September 26 that year. Once it was known that
planning permission was going to be granted, the plaintiffs and Mr Pulver
applied themselves seriously to the other problem, that of obtaining finance.
In April the plaintiffs sent to Mr Pulver a copy of a letter they had prepared
to some solicitors it was thought might be interested in providing the finance
for the project, to which were attached some figures showing the projected
cost. The importance of these figures is that having set out the projected
building costs on the basis of so much per sq ft, the plaintiffs, in order to
arrive at the total projected expenditure, included provision for professional
fees in the following terms, ‘Add fees at 10%’, against which appeared the
appropriate percentage figure. Mr Pulver, when he received the letter, spotted
that there had been a mistake in the area taken by the plaintiffs and he took
the trouble to alter a copy of the letter and the enclosed figures, which
alteration involved a consequential alteration of the figure appearing against
the words, ‘Add fees of 10%’. Having made these alterations, he returned the
draft to the plaintiffs.
Mr Pulver was
asked about these alterations and agreed that he had made them and that when he
saw the figure of 10% it did not strike him as unusual or as calling for any
comment. If it were necessary to
evidence of the agreement by Mr Pulver of the plaintiffs’ proposal on January
19 1976 as to the rate of their remuneration. As it is, there are other
documents which amply support the view that Mr Pulver had agreed this figure.
It proved very
difficult to raise the necessary finance and Mr Pulver circulated viability
studies to various individuals and companies with a view to interesting them in
providing it. On June 9 1977 there is a letter written by Mr Pulver to Mr
Farino referring to an approach to one such company, Gleesons, and enclosing
for Mr Farino’s use the viability study that Mr Pulver had sent to Gleesons and
they had subsequently returned to him. In a breakdown of the projected cost
appear the words, ‘Architects, quantity surveyors and engineers fees agreed at
10%’. And, in the notes as Note 5 appear the words:
It will be
noted that professional fees have been agreed at 10%. These will, however, have
to be paid as the work progresses and they have therefore been included in the
interest calculation.
When Mr Pulver
was asked about this document he agreed that there had been no further meeting with
the plaintiffs to discuss fees, that he was responsible for the document and
that he did not feel the need to make any inquiry of the plaintiffs as to
whether the fees had been agreed; but he maintained that they had not, in fact,
been agreed at this time. He said that he wrote it because it was necessary to
create certainty in the mind of the proposed financier, who would have expected
professional fees to amount to 12% rather than 10%. He said that in the first
study he prepared he did not include an assertion that the fees were agreed and
that this elicited an inquiry so that thereafter he always stated that the 10%
professional fees were agreed. He said that this was true to the extent that he
was confident that the fees could be agreed within that figure, but that it was
not strictly true because they had not, in fact, been agreed. He said that he
had no qualms about writing in this way and intended the recipient to rely on
what was said as being true and did not intend to be misleading. He said that
he wanted to convey a certainty that the fees could be agreed at 10%. He gave
substantially the same answers in relation to the letter of July 1 1977 to Mr
Stoodley.
On October 21
1977 Mr Pulver wrote to Mr Farino enclosing his estimate of the development
costs of Wellington House. The enclosure includes the words ‘Architects,
quantity surveyors and engineers fees agreed at 10%’. On May 3 1978 Mr Pulver
sent a copy of a report that he proposed using at a further meeting with a view
to obtaining finance, and while the copy of the report that appears in the
bundle may not be the precise one that was included with the letter, it is in
material respects identical. It, once again, includes the assertion that the
professional team — that is to say, the plaintiffs, the quantity surveyors
Parker & Browne and the engineers, Wheeler & Jupp:
have agreed
their fees at 10% of the final building cost
and the
cash-flow development figures listing payments due detail payments to be made
on that basis.
In relation to
all these instances where he is clearly asserting to all and sundry, including
the plaintiffs by sending them copies, that the fees of the professional team
have been agreed at 10%, Mr Pulver gave substantially the same explanation as
that that I have already rehearsed. I quote one more passage from his evidence,
in order to illustrate the dilemma in which questioning on this topic placed
him. When asked about a particular instance, he said that this was another
example of his expressing himself in a way which was not absolutely true,
because the professional team had not agreed their fee at 10%, but the 10% was
his understanding of what the package deal would be.
I stated at
the beginning of this judgment that I regarded all three witnesses who were
called in this case as people of integrity who were doing their best to tell me
the truth as they now recall it and what I am about to say is not intended to
detract, in the case of Mr Pulver, from that assertion. I am, however, driven
inexorably to the conclusion that at the time he wrote the many documents to
which I have referred, and there are many more than appear in the bundle, Mr
Pulver did indeed believe that the professional fees had been agreed at 10%. I
do not think as a solicitor, demonstrated by a number of documents in this case
to be capable of expressing himself meticulously and accurately, he would have
been guilty of misleading those from whom he was seeking finance by telling
them that the fees were agreed when, in fact, he knew that they had not been
agreed.
At the end of
his cross-examination on this topic I suggested to him the possible explanation
of the apparent contradiction between those documents and his resolute
assertion in evidence that there had been no agreement; and while it is fair to
say that he was not prepared to accept it, I am, nevertheless, convinced it is
the true explanation. What I think has happened is that Mr Pulver who, at the
time, I have no doubt regarded the matter of fees as having been agreed between
himself and the plaintiffs, when he came to go through the voluminous documents
many years later for the purpose of preparing for trial noticed that nowhere
was there any direct documentary evidence of such an agreement and has allowed
that discovery subconsciously to influence the evidence that he has given on
this topic.
As I have
said, I have no doubt whatsoever that had he been asked at the time he was
writing these documents whether it was true that the professional fees had, as
he was asserting, been agreed he would, without hesitation, have replied that
it was for the very good reason that it was.
I return now
to the history of events in order to show how it came about that the plaintiffs
were dismissed. As I have already said, Mr Pulver had great difficulty in
finding someone who would provide the necessary finance to enable him to carry
out the development. He and the plaintiffs made innumerable approaches to
potential sources of finance but always without success. By the end of 1978 an
approach had been made to Manufacturers Hanover Property Trust, and
negotiations proceeded to a stage where, as Mr Farino understood it, it was
virtually agreed that they should provide the finance and all that was awaited
was the sanction of FNFC who, of course, had an interest in these matters
because they were the mortgagees of the site and the proposals would,
apparently, have involved a partial surrender of postponement of their
security.
On February 23
1979 Mr Pulver was told by Mr Rutter of FNFC that he had both good and bad
news. The bad news was that FNFC were not prepared to co-operate with the
Manufacturers Hanover scheme, and the good news was that FNFC were prepared to
contemplate financing the development themselves. There was a dispute, which I
do not think is of particular importance, as to whether it was in the course of
this particular conversation on a Friday or only on the following Monday that
Mr Rutter also made it clear that the finance that FNFC were prepared to
provide in the first instance would only extend up to tender stage and that
they wished to substitute for the plaintiffs a firm of leading architects. What
is not in dispute is that immediately he heard from FNFC on the Friday Mr
Pulver telephoned Mr Farino and told him the bad news and the good news. The
difference of recollection that I have referred to is carried this much
further, that Mr Pulver’s evidence is that there followed a happy weekend,
whereas Mr Farino’s evidence is that on the occasion he was told the bad news he
was also told as part of the bad news that FNFC were insisting on the
employment of other professional advisers in the place of the plaintiffs. Mr
Pulver says that he only conveyed this piece of bad news on the following
Monday. In so far as it is necessary to resolve this difference of opinion, I
prefer the evidence of Mr Farino, who was quite definite in his recollection
that so far as the plaintiffs were concerned there was no weekend of rejoicing.
Mr Pulver was
very upset about the requirement that other consultants should be employed in
the place of the plaintiffs. He went and saw FNFC and argued the matter out
with Mr Rutter and Mr Otway, but without making any headway. He went to see the
plaintiffs and discussed the matter with Mr Farino and Mr Harlow. He explained
that FNFC were adamant in their requirement that if they were to provide the
finance there must be employed a leading firm of architects. The evidence of Mr
Farino and Mr Harlow is that at this meeting in which Mr Farino was indicating that
he would not accept FNFC’s requirement without putting up a fight Mr Pulver
told them in terms that if the worst happened they might rest assured that he
would pay them their full architectural fee whether they did the work or not.
Mr Pulver who, as will appear in a moment, admits that he made such a promise
at some stage denies that it was at this meeting. What is common ground is that
Mr Farino suggested that it would be a good idea if he were to go and see FNFC
himself and that Mr Pulver agreed and volunteered to make the arrangements,
which he did. Nothing came of Mr Farino’s meeting as the FNFC’s representatives
were obdurate.
Following the
meeting between Mr Farino and FNFC, there was a further meeting between the
plaintiffs and Mr Pulver. Mr Farino’s evidence is that at that meeting Mr
Pulver reiterated his promise that
dismissed he would pay them their fee in full whether they did the work or not.
Mr Pulver’s evidence is that the meeting at which this promise was made
occurred after he had sent to FNFC his letter of March 2 1979 and received
their reply of March 5. These letters are important and I shall refer to them
in a moment, but as to the promise, what Mr Pulver said was that having read to
the plaintiffs the reply from FNFC he immediately volunteered, without any
prior thought, that at the end of the day if there was any money left over he
would pay the plaintiffs’ fees in full as if they had carried out all the work
through to the end. He told me that he said this because he felt a sense of
moral obligation and felt sorry for Mr Farino, whom he did not want out of the
project. He said that it was just the sort of thing that he said without
thinking too much about it and it was a genuine expression of his intention. He
said that he could tell by Mr Farino’s reaction that he was astounded and
touched and that he said words to the effect: ‘Alan, that’s more than generous
of you.’ Mr Harlow’s evidence agrees
with that of Mr Farino — namely, that the promise was made twice — and they
were also in agreement in saying that it was not expressly subject to a proviso
such as Mr Pulver speaks of — namely, if there is any money left over.
Since this
conversation is not relied on as founding a claim, it is not vital to resolve
these differences, but I should state that I prefer the recollections of Mr
Farino and Mr Harlow and I think that the substance of what Mr Pulver was
saying was that, even if his efforts to secure the retention of the plaintiffs
in the project were unsuccessful, provided the development ultimately went
through he would see that they were paid. Mr Pulver’s evidence is that in
writing his letter of March 2 1979 he was concerned to argue as best he could
the case for retaining the plaintiffs and, indeed, the estate agents whom he
had engaged as joint letting agents for the completed development. He
acknowledged that he was also concerned not to upset FNFC unduly because he
was, of course, dependent upon their goodwill for finance of the project which
it was clear by then would not be forthcoming from anywhere else. The
plaintiffs placed particular reliance on p 2 of that letter which, they say,
indicates that Mr Pulver clearly regarded himself as under an obligation to employ
the plaintiffs to the end of the project. I read the material passage; Mr
Pulver says this in the middle of the page:
Other
repercussions follow from your decision, some of these being as follows:
1. Who is to
pay Edwin Hill and Partners for the work they have undoubtedly carried out to
date? I know the point has been made
that you owe them no obligation, but I cannot honestly believe that you will
pursue that path.
2. You must
recognise that I have a continuing commitment to Edwin Hill and Partners. Who
would be responsible for those fees?
3. What would
be the fees of a new firm of architects?
They may exceed the fees already agreed with Edwin Hill and Partners.
Who will be responsible for the extra cost?
4. I also
have a commitment to Churston Heard and Company
they are the
joint letting agents, estate agents
—
incidentally, it was a condition of my first advance from the Bank that I
should employ their predecessors, Sedley and Davidson as letting agents for
Snow Hill House — and I have continued to use their services ever since. Who is
to be responsible for their fees?
The letter
continues in the same vein, and the final paragraph, which is also particularly
relied on, reads as follows:
Finally I can
say categorically that it is solely due to the extraordinary efforts and
perseverance of Tony Farino that we have reached the happy stage where we can
foresee the fulfilment of this project. Are we all to act in such an unjust way
as to dismiss him so arbitrarily?
I do not think
that the plaintiffs get much help from the final para, because whether Mr
Pulver regarded himself as contractually obliged to employ the plaintiffs or as
merely under a moral obligation, the words he there uses are entirely
appropriate. On any view, the projected termination of the plaintiffs’
employment was arbitrary. However, it does seem to me that para 2 on the second
page of the letter very strongly suggests that when he wrote it Mr Pulver
believed that he was not entitled to dismiss the plaintiffs while continuing to
carry out the development. His evidence is that he was referring merely to a
moral commitment and on his behalf reliance is placed on para 4, where he talks
of a commitment to the estate agents and mentions fees when, in truth, because
of the terms under which they were employed it is common ground that there was
no legal obligation to continue to employ them and no obligation to pay fees
for such work as they had done to date.
What impresses
me, however, is the second sentence of para 2. One may ask how Mr Pulver could
possibly have been referring to payment of fees in respect of the continuing
commitment referred to in the first sentence, save upon the basis that he
recognised that there was some legal obligation for the future as well as the
past. I appreciate, of course, that this letter cannot be construed as though
it were a statute, but it is a letter written by a solicitor whom I have
already found was well able to express himself clearly and accurately and,
taken in conjunction with the promise made to the plaintiffs, to which I
referred a few moments ago, it does strongly suggest to me that at the time he
did regard himself as contractually bound to employ the plaintiffs to the end
of the project. Whether his impression is decisive of the matter or whether, as
Mr Krolick submits, the nature of the defendants’ obligation is to be
determined simply by considering objectively such facts as have been proved as
to the way in which and the terms upon which they were engaged is another
question.
It is common
ground that, at the discussions following the receipt of FNFC’s letter of March
5, both sides recognised that there was nothing more that Mr Pulver could do in
his efforts to secure the withdrawal of FNFC’s objection to the continued
employment of the plaintiffs and Mr Farino said that as from March 6 they
regarded themselves as having been dismissed.
On August 13
1979, solicitors instructed by the plaintiffs wrote a letter before action
containing a clear assertion that the plaintiffs had been wrongfully dismissed
and intimating that they had been instructed to issue proceedings to recover
both unpaid fees to date and damages in respect of the fees they would have
earned had they seen the project through, the latter quantified at some
£220,000. Mr Pulver’s main concern was that any such action might upset FNFC
and he wished to persuade the plaintiffs to delay any such projected claim and
he sought and obtained a meeting with the plaintiffs, which Mr Farino and Mr
Harlow attended on September 3. It was a somewhat emotional meeting, made more
so by the introduction by Mr Pulver of the suggestion that the worry of the
letter provoked a miscarriage in his wife, a suggestion which fortunately was
discovered during the meeting to be baseless and was handsomely withdrawn. He
told me that he sought to persuade the plaintiffs not to proceed and reminded
them of the promise he had made to pay their fees in full on the successful
outcome of the development. He said that the plaintiffs agreed to accede to his
wishes. Mr Farino’s evidence is that while he and Mr Harlow were sympathetic to
Mr Pulver’s predicament, they merely undertook to consider the matter. However,
what is interesting about this meeting is that it is common ground that at no
stage did Mr Pulver, in the course of the discussions, point out to the
plaintiffs that in his view they had no claim for damages for breach of
contract such as their solicitors’ letter suggested they had. He was
cross-examined about this and agreed that it would be astonishing, if he had properly
read the letter, for him not to have told them that he had a perfect right in
law to terminate their engagement. His explanation was that prior to the
meeting he had not read the letter sufficiently carefully to realise more than
that it was a claim for money to date. Bearing in mind the view I have formed
of Mr Pulver and the fact that he was a solicitor receiving what he must have
known was a letter before action, I think that his recollection is at fault in
this matter. I believe that he must have read the letter and must have
appreciated, because it is absolutely clear, that the plaintiffs’ solicitors
were advancing on their behalf a claim which involved that he had wrongfully
terminated their employment.
In the
circumstances, I find his failure to dispute this allegation at the meeting of
September 3 is entirely consistent with what I have already found on the basis
of other pointers to be his belief at the time — namely, that the plaintiffs
were entitled to be employed to the end of the project provided he, or one of
his companies, carried it through.
There was a
further meeting, again attended by Mr Pulver, Mr Farino and Mr Harlow, on
November 27 1979. It was at that meeting, as I find relying upon the
recollections of Mr Pulver and Mr Farino and rejecting Mr Harlow’s recollection
that it was at the September 3 meeting, that a draft letter was prepared and
handed to Mr Pulver. Considerable attention has been devoted to this draft in
the course of the trial and there has been much dispute as to the precise
circumstances in which Mr Farino drew it up. In the event (because I
accept Mr Krolick’s submission that it is explicable on the basis that what the
plaintiffs were seeking was, first, an explanation for any delay if they agreed
to delay their proceedings and, secondly, confirmation of Mr Pulver’s promise
that if the development went ahead he would pay them their fees in any event) I
do not think that it throws much light upon the important issues of what were
the terms of the primary contract on which the plaintiffs sue. What I do think
is of some importance is that at this meeting, just as at the September
meeting, Mr Pulver agrees that he said nothing about his having a right to
terminate the plaintiffs’ employment. His explanation was that he had not
reread the letter of October 13 before attending this meeting and that even by
this time it had not occurred to him that he had a right to terminate the
plaintiffs’ engagement.
He said in
cross-examination that it probably first occurred to him that he had a right to
terminate the engagement after the delivery of the statement of claim. In so
far as his belief as to his entitlement is material, this evidence seems to me
to be consistent with other evidence to which I have already referred and with
my stated conclusion that at this time Mr Pulver’s belief was that his
obligation was to employ the plaintiffs to the end of the development, provided
only that the development was carried out by him or his company.
For the sake
of completeness, I should record that the day after departing with a photostat
copy of Mr Farino’s letter Mr Pulver telephoned and indicated that he was not
prepared to sign such a letter. I accept the evidence of Mr Farino and that of
Mr Harlow, who overheard the conversation, that Mr Pulver was advancing two
objections. First, the suggestion that the liability was that of the first
defendant, Leakcliffe Properties Ltd, and not of Mr Pulver himself and, second,
that he wished to understand more fully what was meant by the words ‘the total
fee for architectural services’. Mr Farino said that he agreed that this must
be quantified because up until then they had been talking about a total package
whereas now it was necessary to look at the architectural fee in isolation.
There was some discussion about the scale fees, which are 5 1/2%, and Mr Pulver
said something to the effect that the fee looked like about £320,000, to which
Mr Farino replied that that would do him as it was about the same as their
claim. Mr Pulver suggested that his objections were more general, but conceded
that the figures of £325,000 might well have been mentioned the previous day at
the meeting and it did not come as a surprise to him. As I have said, I accept
Mr Farino’s and Mr Harlow’s recollection as substantially correct.
That completes
the history of the matter, but before summarising the submissions made on
behalf of the parties and my conclusions, I should mention that, as a result of
a submission made in the course of the hearing, I decided that the present trial
should, in effect, be concerned with the issue of primary hability only. This
decision meant not only that all questions as to damages, both on the claim and
the counterclaim, should be adjourned to the Official Referee but that there
should be adjourned to him also the question of determining the rights and
wrongs of the allegations which found the defendants’ counterclaim, on the
strength of which they assert that even if the plaintiffs’ version of the
contract be correct and they were obliged to employ them until the end of the
development, that contract was repudiated by the plaintiffs, which repudiation
the defendants accepted. All that I am concerned with at present, therefore, is
to determine the precise terms of the contract between the plaintiffs and the
defendants and whether, subject only to the plea of accepted repudiation, the
defendants were in breach of that contract in terminating the plaintiffs’
employment.
It is accepted
by the defendants, as I think I have already made clear, that, subject only to
the counterclaim, the plaintiffs are, on any view, entitled to a substantial
further payment on account of the very considerable amount of work that they
did during the five years or so that they worked on the project.
There are two
more specific matters that I ought to mention. The first is that Mr Farino
accepted in evidence, and the documents I have seen strongly support this view,
that by the beginning of 1979 Mr Pulver, who had been searching for finance for
a very long time, had effectively exhausted every possibility and was in a
position where, if he were to refuse FNFC’s offer of finance on such terms as
they were prepared to make it, his plans to develop the site would have had to
be abandoned or would have been frustrated. He owed FNFC a very large amount of
money in respect of the purchase of the site and interest and they were
mortgagees. Had he not taken up their offer of finance it seems overwhelmingly
likely that they would have enforced, or he would have felt obliged to ask for,
a sale of the property. I mention this matter because, while it seems to me
that it is material to the issue of damages only, Mr Krolick in his final
submission placed reliance upon it.
Secondly, I
have to deal with the relative positions and liabilities of Leakcliffe
Properties Ltd, the first defendants, and Mr Pulver himself, the second
defendant. I indicated earlier in this judgment that contrary to what one might
at first sight expect to be the position, nothing very much turns on the fact
that whereas the plaintiffs were receiving their instructions from Mr Pulver
those instructions involved a development being carried out by the defendant
company. I also mentioned that initially the company involved was not the
defendant company but Snow Hill Securities Ltd. Mr Farino’s evidence was that
he always regarded himself as instructed by and working for Mr Pulver and took
no cognisance of his various companies. He said that all along his
understanding had been that it was Mr Pulver who would pay and it was to him
that he could look rather than to this, that or the other company for his fees.
This evidence
of Mr Farino’s was never challenged in cross-examination. However, there is a
letter to which it is material to refer dated April 30 1974. On that date, by
which time the proposed development was still in its very early stages, Mr
Pulver wrote to Mr Farino as follows:
Dear Tony: I
am pleased to confirm that I have today completed the purchase of the above
properties.
‘the above
properties’ being 133-155 Waterloo Road etc
The properties
have been purchased by Leakcliffe Properties Ltd whose business address is at
114a High Street, Watford, Herts.
Your
instructions in this matter are therefore on behalf of Leakcliffe Properties
Ltd and your fees will be payable by that company, although of course I will
personally undertake to be responsible for these fees.
Will you
please ensure that any future plans bear the name Leakcliffe Properties Ltd
instead of Snow Hill Securities Ltd and of course your dealings with the London
Borough of Lambeth etc will be on behalf of Leakcliffe Properties Ltd.
Yours
sincerely, Alan.
A point was
taken in the pleadings as to whether the undertaking in the third paragraph
was, indeed, an undertaking by Mr Pulver personally or merely one on behalf of
the company, Leakcliffe Properties Ltd, but that point has been expressly
abandoned, it being accepted that it was a personal undertaking by Mr Pulver.
It was also accepted, or if not expressly accepted certainly not seriously
disputed by Mr Krolick, that what the letter was doing was substituting
Leakcliffe Properties Ltd ab initio so that no point can be taken to the
effect that fees up to April 30 1974 were recoverable from Snow Hill Securities
Ltd. This accords with my interpretation of the meaning of the letter.
Mr Krolick
further accepted that the letter might properly be construed as an indemnity by
Mr Pulver in respect of fees payable by the company, but suggested that it was
not a guarantee of performance of the contract and, on the basis of an argument
founded on Moschi v Lep Air Services [1973] AC 331, he sought to
draw a distinction in this connection between a possible liability for fees and
one for damages for breach of contract, asserting that Mr Pulver would, as an
indemnifier, be under no liability in respect of a claim for damages for breach
of contract. The conclusion that I have reached, however, is that the true nature
of the relationship between Mr Pulver, the company and the plaintiffs is as set
out in para 6a of the amended statement of claim and that the proper
interpretation of the letter is that Mr Pulver is there confirming an
arrangement such as is pleaded in para 6a — namely, one whereby their services
were provided to the first and second defendants, who were both liable as
principals. I feel sure that it was recognised by Mr Pulver that the plaintiffs
would not for a moment have contemplated undertaking the very substantial
amount of work that we know they did undertake if their only right to payment
was to go against a small company expressly formed for the purpose of carrying
out the development and having no substantial assets. I reach this conclusion notwithstanding
the fact that Mr Judge, on behalf of the plaintiffs, in his final submission
disclaimed any assertion that Mr Pulver was liable as a principal. Should I be
wrong, however, I accept the submission that Mr Judge did advance to the effect
that the proper construction of this letter involves that Mr Pulver was
promising that whether the plaintiffs were forced to claim fees outstanding or
a quantum meruit or damages for breach of contract, he would pay if the
company did not. It is for this reason that I conclude that in practice Mr
Pulver’s and the company’s liabilities are identical.
Mr Judge’s
submissions are essentially very simple. He points to the undoubted fact that
between November 1973 and March 1979 the plaintiffs were employed as consultants
in connection with the architectural and ancillary services which might be
required for the development; that the plaintiffs undoubtedly understood and
intended that their employment should be for the entire project, provided only
that Mr Pulver carried it through and that Mr Pulver also, as the documents
show and as he agreed in evidence, understood and intended that the plaintiffs’
employment should be for the entire project. Mr Judge concedes that initially
no rate of remuneration had been agreed, but contends that that omission was
made good by Mr Pulver’s assent to the proposal made by the plaintiffs in their
letter of January 19 1976. He contends that there was no express right to
terminate the plaintiffs’ employment and that such a right cannot be implied.
In support of
these submissions Mr Judge relies on a decision of the Court of Appeal in the
case of Thomas v Hammersmith Borough Council [1938] 3 All ER 203
and on two passages in the judgments of Slesser and MacKinnon LJJ. He concedes
that both are strictly obiter, but contends that they are most
persuasive and should be followed. The two passages are the following: first,
in Slesser LJ’s judgment at p 208B, where he says:
In order to
arrive at a true conclusion as to the legal result of the council’s action in
this matter, I think it helpful first to consider what would have been the
agreement between the parties if the appointment had been simpliciter to
act as architect for the erection of the new town hall, without any provision
as to scale of charges, and if the council had then, before the work was
completed, without cause other than their mere volition, terminated the
agreement. In such case, I entertain no doubt that the architect would have
been entitled to reasonable remuneration for the work which he had already
done, and also to damages for the loss of remuneration which he had been
prevented from earning until the work was finished: see Planche v Colburn
(1831) 8 Bing 14 and Prickett v Badger (1856) 1 CBNS 296.
Although the contract in this assumed form would contain no express term to
this effect, I think that it would be implied that the council, having employed
the plaintiff to build their town hall, agreed with him that they would not
prevent him from doing the work, and so prevent him from earning his
remuneration. This, I think, if authority be needed, is supported by the case
in the House of Lords of Rhodes v Forwood (1876) 1 App Cas 256
where Lord Penzance, at p 274, quotes with approval the language of Cockburn
CJ, in Stirling v Maitland (1864) 5 B & S 840 at p 852, which
seems to me applicable in the present case: ‘that the defendant is bound to
continue a state of things which is necessary to the carrying out of his own
contract’.
The second
passage relied on is in the judgment of MacKinnon LJ at the bottom of p 211,
where he says this:
If, when the
plaintiff was appointed architect for the new town hall in June 1933 no special
terms as to his remuneration had been agreed, the defendants would have been
liable to pay him reasonable reward. Upon this abandonment of the scheme, and
dismissal of the architect, in July 1935, they would have been liable to pay
him reasonable remuneration for the work he had done already, together with
damages for preventing him from earning payment for the further work in
completion of his appointed task.
He then goes on
to consider the facts of the particular case which, of course, as is clear from
the two quotations that I have read, was a case which involved an appointment
not upon such terms.
Mr Krolick’s
answer to these submissions depended very largely on an analysis of the nature
of the plaintiffs’ claim for damages. He sought to argue that since, as he
contended, had the defendants not dismissed the plaintiffs the plaintiffs never
would have earned the balance of their fees, because finance would not have
been forthcoming from FNFC which, by then, was the only remaining possible
source, the present case is to be distinguished from Thomas’ case, where
plainly no such problems beset the defendants, who could, had they chosen, have
financed and carried out the development but chose not to do so. Another
unrelated limb of Mr Krolick’s submissions involves the assertion that in the
present case the defendants could, had they wished, have terminated the
contract without any breach and that that is a reason for refusing to hold that
the contract in the present case was one which obliged the defendants to employ
the plaintiffs for the whole project.
Mr Judge, in
my view rightly, submits that these arguments, which really relate to the
amount of damages, cannot be material to the question of what the primary
contractual obligations were. It may be that when deployed at the trial as to
damages they will result in the plaintiffs failing to recover more than nominal
damages in respect of that part of their claim which relates to the future,
but, says Mr Judge, that is not material for present purposes. In any event, he
submits, a further answer to the second limb of Mr Krolick’s submissions is
that on the basis of the contract for which the plaintiffs contend the
defendants were not free to determine the contract without breach. There was a
term, which both parties have accepted, that if for any reason the defendants
did not carry out the development the plaintiffs should be entitled only to be
paid for the work which they had done to date, but there was no term, express
or implied, entitling the defendants, notwithstanding that they carried the
project through, to dispense with the plaintiffs’ services. In my judgment this
submission is correct.
The case of Thomas
v Hammersmith Borough Council has, so far as Mr Judge’s researches have
gone, and Mr Krolick has not made any contrary submission, never been doubted.
Moreover, it is cited in all the leading textbooks as authority for the
proposition which Mr Judge relies upon. I have in mind in particular the
passages in Hudson’s Building & Engineering Contracts, 10th ed at p
101, and in Keating on Building Contracts, 4th ed at p 219.
In cases,
unlike the present, where the RIBA or RICS terms of engagement have been
incorporated in the contract, there exists a right to terminate on making the
appropriate payment having regard to the stage the work has reached. However,
where there is a simple agreement for the employment of an architect/surveyor
for a particular project and nothing is said as to determination, I consider
that the two passages I have cited from Thomas v Hammersmith Borough
Council correctly state the contractual obligations of the parties and I
propose to rely upon them in determining this case.
The question
remains whether the present is such a case as Slesser and MacKinnon LJJ were
describing. A careful consideration of the evidence and the relevant documents,
both of which I have already summarised, leave me in no doubt that it is. It
is, I hope, implicit in what I have said earlier in this judgment, and in so
far as it is not I now expressly find that, first, when the plaintiffs in the
person of Mr Farino were engaged by Mr Pulver it was on the basis that they
would provide a comprehensive service involving such architectural and
ancillary services as might be required in connection with the project to
develop Waterloo Road. Second, both parties at all material times understood
and intended that the plaintiffs’ employment should be for the entire project,
provided that Mr Pulver carried it through. If, but only if, he did not do so
the engagement would be treated as abortive and the plaintiffs would be paid an
appropriate fee for the work they had actually done up to that time. Third, on
January 19 1976 the plaintiffs proposed that their remuneration for the work
they had been engaged to perform should be 10% of the contract works, an all-in
fee which involved their being responsible for the fees of the structural
engineers and quantity surveyors; and Mr Pulver, who had agreed such a fee in
relation to other projects on which he had employed the plaintiffs, was quite
agreeable to this proposal and communicated his acceptance of it to the
plaintiffs by repeatedly describing the 10% as an agreed fee in various
documents of which he sent the plaintiffs copies. It follows, on the basis of
these findings, that there is fortunately a complete identity between the
actual understanding and intention of both parties at the time the contract was
concluded and, indeed, at all times thereafter until, following FNFC’s
insistence on the substitution of other architects, Mr Pulver specifically
addressed his mind to the question as to whether in law he might be entitled to
dismiss the plaintiffs. The legal consequences which, on the authority of Thomas
v Hammersmith Borough Council, flow from an engagement such as I find
that there was in this case also follow.
Moreover,
while Mr Pulver, faced with justifying his dismissal of the plaintiffs, has
now, I accept, genuinely convinced himself that he would never have regarded
himself as legally obliged to continue the plaintiffs’ employment to the end of
the project, I am quite satisfied that at all times prior to the commencement of
proceedings and certainly at all times prior to March 6 1979, his response to
the question: ‘Assuming that you carry out the redevelopment of Wellington
House, have you bound yourself to employ the plaintiffs for the entire
project?’ would have been ‘Yes’. I say
this because I cannot conceive that had his state of mind been otherwise he
would have written as he did in the letter of March 2 1979 or failed to mention
to Mr Farino and Mr Harlow at the September 3 and November 27 1979 meetings
that the contention that had been most explicitly made in their solicitors’
letter of August 13 1979 was not well founded. In reaching this conclusion, I
have taken into account what Mr Pulver said to the effect that the terms on
which FNFC had advanced money to him precluded his committing himself to employ
the plaintiffs for the whole project, but I cannot accept that at the time he
had any such considerations in mind.
Mr Krolick, on
behalf of the defendants, in addition to the arguments which I have said that I
do not find helpful because they go to damages only, made a number of other
submissions on the strength of which he asked me to conclude, contrary to the
findings I have just made, that this was a contract terminable at any time at
the defendants’ option. He began by drawing attention to paragraph 1399 of vol
1 of the 25th ed of Chitty on Contracts, which describes an entire
contract, and to the importance attached to the agreement of a lump sum
payment. He pointed out that in the present case no lump sum was agreed nor,
initially, was a percentage figure agreed. He submitted that if and when the
10% was agreed this did not alter the fundamental nature of the contract, since
it merely amounted to an agreement of what a reasonable fee would be. He asked
rhetorically what there was in the present case that took it out of what he
described as the ordinary run of architects’ cases where the contract is
terminable and submitted that the proper conclusion was that the plaintiffs
were instructed on the basis that they would be paid a reasonable fee for such
work as they did and their employment was terminable at any time. He pointed to
the fact that the present project was more than ten times as large as anything
on which the parties had previously been associated.
The whole
foundation of this submission, it seems to me, was the suggestion that the
ordinary rule is that an architect’s contract may be terminated at will.
However, while it may be true that architects are usually employed on terms
which give the building owner a right to terminate their employment on payment
of an agreed or a reasonable sum for the work they have done, the ordinary
rule, it seems to me, in the absence of such an express term is that formulated
in Thomas v Hammersmith Borough Council, as Mr Judge submits. If
this be correct, then it is really Mr Krolick, on behalf of the defendants, who
is inviting me to imply a term to the effect that this engagement to provide
the full service at what ultimately became an agreed fee of 10% of the cost of
the works was subject to an implied term that it might be terminated at any
time, presumably not merely by the defendants but also by the plaintiffs. Mr
Judge submitted that this was what Mr Krolick’s contentions amounted to and
drew my attention to a passage in the judgment of Buckley J in the Spenborough
Corporation case [1968] Ch 139, at p 146H. He submits, rightly in my view,
that in the circumstances of the present case it is for the defendants to
demonstrate the existence of a term giving them the right to terminate, that
they cannot do so by reference to any express term and that applying the
well-known tests for the implication of an implied term the defendants do not
begin to demonstrate that those tests are satisfied, because the evidence as to
the intention of the parties is to the opposite effect and, moreover, such a
term cannot be said to be necessary to give business efficacy to the contract.
The most
attractive way in which the argument in support of an implied right of
termination can be put, and Mr Krolick put it in this way, is to submit that if
the officious bystander had asked the parties: ‘If the development becomes
impossible while you, Edwin Hill & Partners, remain the surveyors and
architects, what will happen?’, they would both have replied: ‘Well, of course,
in that event Edwin Hill’s employment can be terminated subject to a reasonable
payment being made for work to date.’
This submission looks more attractive in the light of the events which
actually occurred — namely, that the defendants’ prospects of carrying out the
development had, by 1979, come to depend on FNFC’s requirement for the
dismissal of the plaintiffs being complied with. This means that if the
defendants did not have an implied right to terminate they were confronted with
the choice between unattractive alternatives — to dismiss the plaintiffs and
invite a claim for breach of contract or to refuse to dismiss them and provoke
action by FNFC which would have the effect of preventing their proceeding with
the development, in which case the plaintiffs would earn no further fees in any
event.
At one stage I
was impressed by this submission because it seemed to me that it could be said
that to construe the contract between the plaintiffs and the defendants in a
way which involved that the defendants might have to forgo the prospects of
bringing the scheme to fruition and perhaps sustain a very heavy loss as the
price of not dismissing the plaintiffs was unreasonable. However, Mr Judge
convinced me that this approach was unsound, pointing out that merely because
the refusal to imply a term involves that in certain events the defendants may
be faced with a choice between unenviable alternatives is not of itself a
sufficient reason for implying such a term. It was, he submitted, anticipated
that the projected development would be successful and there is nothing
incongruous in construing the contract as I have construed it and refusing to
imply a right of termination even though this involves that in certain
circumstances the defendants may be faced with choosing to go ahead with the
development and paying the price in terms of damages to the plaintiffs for
breach of contract. He pointed out that it would have been a very simple matter
to make express provision for a right of termination if this had been what the
parties had intended. He added that what Mr Pulver did when he made his promise
to pay the plaintiffs if and when the development was completed is entirely
consistent with there being no such implied term and with Mr Pulver’s recognition
that this was the position.
In the result,
I have concluded that the plaintiffs are entitled to complain that their
dismissal from their position as architects in March 1979 was a breach of
contract which, subject to the possible counterclaim, entitles them to claim
damages. That claim can be maintained against the defendant company and Mr
Pulver — as to the latter, even if I am wrong in considering him to be a
principal, on the basis that the letter of April 30 1974 properly construed not
only amounts to a promise of indemnity to the plaintiffs in respect of their
fees, but extends to any liability of the company whether expressed as a claim
for fees or as one for damages for breach of contract. These conclusions mean
that the plaintiffs succeed on the issues which I have been concerned with and
are, subject to the counterclaim, entitled to damages for breach of contract.
It will be
apparent from what I have said that, on consideration of the evidence and the
submissions made to me, it appeared to me that this case was, so far as
liability was concerned, one which raised a relatively short and simply stated
issue. Most of the documents and, indeed, much of the evidence and submissions
made upon it have not really had much bearing on that issue. Now that I have
determined it, and before parting with the case, I express the hope that the
parties may be able to resolve their remaining differences in a way which will
avoid further and much more lengthy and costly hearings and prolong this
litigation over several more years.
