Architect – Termination of engagement – RIBA Standard Conditions – Adjudication – Defendant being engaged by claimant to complete design and prepare documents for reserved matters planning application – Dispute arising in relation to responsibilities of defendant – Claimant terminating agreement – Defendant submitting account for work to date – Adjudicator making award in favour of defendant – Claimant applying for declarations as to the true construction of contract – Defendant applying for summary judgment to enforce adjudicator’s decision – Whether claimant giving reasonable notice of termination – Whether claimant being required to serve pay less notice – Judgment for the claimant in part
The claimant company was a property developer which proposed to development 202 homes on land at Loddon, Norwich, for which it had outline planning permission. The defendant architect had already done some preliminary work in relation to the development and was invited to submit a fee proposal for completing the design and preparing the documents necessary for a reserved matters planning application. The defendant submitted a revised fee proposal on 7 October 2015 which was accepted by the claimant by letter of 19 October 2015 and/or by its conduct during that month. Following the submission of its proposal, the defendant proceeded to carry out the works.
The basis of the defendant’s engagement was a document entitled Reserved Matters Application Fee Proposal, which consisted of: (a) a description of the proposed work and other details; (b) supplementary information with a number of contractual provisions; and (c) the RIBA Standard Conditions of Appointment for an Architect, 2012 edition, modified by the supplementary information. There were three regimes for suspension or termination of the services: suspension by the client requiring “not less than seven days’ notice”; termination requiring “reasonable notice” (by either party); and termination in the event of insolvency or death which could be effected “immediately”.
A dispute arose between the parties concerning the responsibilities of the defendant. On 2 December 2015, the claimant purported to terminate a substantial part of the defendant’s services. In response the defendant suspended work on the development and on 3 December 2015, submitted its account for the work done up to that date. Thus their agreement ended, giving rise to a dispute about the payments due to the defendant for the work already carried out. The matter was referred to adjudication and an award was made in the defendant’s favour on the basis that the failure to serve a pay less notice meant that the claimant was deemed to have agreed that the sum of £45,490.68 notified by the defendant as the sum due was the amount for which the claimant was liable.
The claimant applied for declarations in relation to the true construction of the contract between the parties. The defendant applied for summary judgment to enforce the decision of the adjudicator.
Held: Judgment was given for the claimant in part.
(1) There was clearly a contract made by the submission of the defendant’s October fee proposal and its acceptance by the claimant. There was no reason why termination should be an “all or nothing” option but the claimant had not given notice of the termination. The decision was simply notified to the defendant for the first time in the e-mail of 2 December 2015 in clear breach of contract which the defendant must have regarded as going to the root of the contract. Its immediate response to that e-mail was a declaration that its original scope of work was void and the suspension of work. Accordingly, part of the original fee proposal did not remain in force and was not effective. The submission of the defendant’s account for the work done up to 3 December was an acceptance of a repudiatory breach of contract by the claimant, so that neither party was required to perform its primary obligations under the contract any further, including, in the claimant’s case, the service of a pay less notice. Instead, the claimant became liable to pay damages.
(2) Under the requirement to issue a notice in clause 5.15 of the RIBA Standard Conditions, an intention to pay less only arose where the client disputed the amount of the “notified sum”. That was the amount that the architect considered to be due at a “payment due date”, being a date specified in the schedule of fees and expenses: it was not a sum that the architect considered to be due following a termination of his engagement. Very clear words would be required to make a post termination account irrevocably due if a pay less notice was not served within five days of its submission. There were no such words here.
(3) How the defendant’s engagement had been terminated was not material because either the contract was discharged by breach so that neither party was required to perform its primary obligations any further or the defendant was entitled to submit a final account in accordance with clause 5.14 or to submit a termination account under clause 5.17. Whichever way, there was no requirement for the claimant to serve a pay less notice if it did not agree the amount of the defendant’s account. Accordingly, the claimant was entitled to a declaration that it was not required to serve a pay less notice in response to the defendant’s account submitted on 3 December 2015. The design work of completing the house types after 2 December 2015 was done under a separate agreement from the fee proposal and the court was not concerned with any sum which the defendant might be entitled in respect of that work. The adjudicator’s decision as to the amount due could not be severed and so the conclusion that the claimant was not required to serve a pay less notice disposed of the dispute referred to the adjudicator in its entirety. Accordingly, the defendant’s application for summary judgment had to be dismissed.
(4) The adjudicator based his decision on costs on clause 5.20 of the RIBA Conditions, which applied to the defendant’s engagement as architect. Clause 9.2.4 provided that the adjudicator might allocate between the parties the costs relating to the adjudication, including the fees and expenses of the adjudicator, in accordance with the provisions of clause 5.20. However, the decision-making role of the adjudicator in relation to costs under clause 5.20 was limited to deciding the amount once the entitlement had arisen. Those provisions appeared to be intended to give effect to section 108A of the Housing Grants, Construction and Regeneration Act 1996, as amended. Irrespective of whether or not clauses 5.20 and 9 fell within that section, it was clear that clause 9.2.4 satisfied the saving in section 108A(2)(a). So far as the fees and expenses of the adjudicator were concerned, the use of the verb “may” indicated that under clause 9.2.4 the adjudicator was entitled to decide for himself how they should be paid. Unlike the parties’ own costs, how they should be paid was not dependent on success alone.
(5) Although clause 9.2.4 did not state it expressly, it seemed inescapable that any allocation by the adjudicator in relation to his fees and expenses formed part of his decision. An adjudicator’s decision as to liability to pay fees was final and was not subject to challenge in subsequent arbitration/litigation. He or she could, like the courts, take into account the conduct of the parties, other issues that were raised and the overall course of the referral. However, in the present case, the outcome did not rest on the decision of the adjudicator. The provisions of clause 5.20 applied equally to costs incurred by the client as well as by the architect. The claimant was entitled under that clause to its costs of successfully resisting the claim brought by the defendant. There was no reason why the fees and expenses of the adjudicator, once paid by a party, should not form part of its costs of successfully resisting a claim brought by the other. The adjudicator’s decision in relation to his fees and expenses had to be complied with by the claimant. However, once those fees and expenses had been paid, the claimant would have a contractual right to recover them from the defendant under clause 5.20. Castle Inns (Stirling) Ltd v Clark Contracts Ltd [2005] CSOH 178; [2006] PLSCS 33 applied; TSG Building Services v South Anglia Housing [2013] EWHC 1151 (TCC); [2013] PLSCS 112 considered.
(6) The defendant had clearly carried out a certain amount of work and there was nothing to suggest that it was not entitled to a sum of the order claimed. Nevertheless, the actual amount had not been proved which raised issues that could not and should not be resolved on the present application. It followed that the claimant was not entitled to a declaration that it was not liable to pay the sum claimed in the defendant’s account submitted on 3 December 2015. The court was not in a position to make a finding either way.
(7) So far as the outcome of the two applications was concerned, the claimant had succeeded. However, to avoid two sets for proceedings, it would have been reasonable for it to agree that, if its application failed, it would pay the sums ordered by the adjudicator, together with appropriate interest. Since it had declined to give a clear undertaking to do so, the claimant’s costs would be assessed and the resulting figure reduced by an amount that reflected the saving that would have been achieved if there had been only one set of proceedings.
Jessica Stephens (instructed by Myers Fletcher & Gordon, of Hammersmith) appeared for the claimant; Robert Stevenson (instructed by BLM LLP) appeared for the defendant.
Eileen O’Grady, barrister
To read a transcript of Halsbury Homes Ltd v Adam Architecture Ltd click here
