Architect — Duty to provide information — Basis for assessing damages — Claimant architect failing to warn defendant that plans for racecourse stand not meeting defendant’s required capacity — Arbitrator making award to defendant — Whether architect under duty to provide information — Whether same principles applicable to architects as to valuers — Claim allowed in part
The defendant was the lessee of Aintree racecourse and the organiser of the Grand National. It required a replacement for a stand that was adjacent to the winning post at the racecourse. The work was to be commenced after the 1997 Grand National and completed in time for the 1998 race. The specifications for the new stand included a requirement for a standing capacity on the viewing terrace of at least 2,800, a number calculated by reference to the minimum annual income stream that would be needed in order for the project to be financially viable. In October 1996, the defendant dismissed its original choice of architect, and, in November, it appointed the claimant. Redesigns of the planned stand meant that the capacity on the viewing terrace was reduced to 2,000. After the stand was completed, a number of disputes arose. The defendant terminated the claimant’s appointment, and the disputes went to arbitration.
The defendant’s main complaint was that the claimant had breached its duty by failing to advise of the reduced standing capacity before the defendant finally decided to go ahead with the scheme. Its argument was that if the claimant had so advised, it would have postponed the project for a year in order to find a redesign that would be capable of providing the required capacity. It sought to recover, inter alia, the financial loss suffered by reason of the reduced capacity.
The arbitrator accepted the defendant’s arguments and made an award in its favour. The claimant appealed under section 69 of the Arbitration Act 1996 on a question of law as to the correct basis upon which the arbitrator should have quantified the damages to be awarded.
Held: The claim was allowed in part.
The principles to be applied in quantifying the defendant’s recoverable damages were those set out in South Australia Asset Management Co Ltd v York Montague Ltd [1996] 2 EGLR 93. Those principles were not confined to valuation cases, but applied, at the very least, where: (i) a professional was engaged to provide information for a specific transaction or project; (ii) the client was to decide whether or not to proceed with that transaction or project; (iii) the information to be supplied was to be relied upon by the client as part of that decision-making process; but (iv) the decision as to whether to proceed was not to be participated in by the professional and was not dependent upon his advice: Bank of Credit & Commerce International (Overseas) Ltd (in liquidation) v Price Waterhouse (No 4) [1999] BCC 351, Petersen v Rivlin (deceased) [2002] EWCA Civ 194; [2002] Lloyd’s Rep PN 386, Aneco Reinsurance Underwriting Ltd (in liquidation) v Johnson & Higgins Ltd [2001] UKHL 51; [2002] 1 Lloyds Rep 157 and Oyston Shipways Ltd v Platform Home Loans Ltd [1999] 1 EGLR 77 considered.
Although the claimant was providing the defendant with a wide-ranging architectural service, the only service to which the dispute related was the duty to provide the defendant with information that the standing capacity of the proposed stand had dropped below 2,800. That information was required in order to assist the defendant in deciding whether to postpone the project. The case was a “no-transaction” case, within the meaning of South Australia, in that the transaction of building the stand designed by the first architect would not have gone ahead had accurate information been provided to the defendant, and an entirely different transaction, involving a complete redesign, would have been undertaken instead. Damages should therefore be limited to the loss arising from the claimant’s actual course of action on the matter. Although other losses might have been foreseeable, the scope of the claimant’s duty to warn was confined to avoiding such losses as would result from a failure to provide the relevant information, and from the defendant taking a decision to proceed with the project on the basis that the stand would have a capacity of 2,800, when it was actually much less. The arbitrator’s award would accordingly be varied and certain items remitted to him for reconsideration.
Marcus Taverner QC (instructed by CMS Cameron McKenna) appeared for the claimant; Bernard Livesey QC (instructed by Winward Fearon) appeared for the defendant.
Sally Dobson, barrister
