Consultant appointments often contain provisions requiring the consultant to retain key personnel for the duration of the project. The following case demonstrates the importance of not overlooking the requirements in such provisions.
Fitzroy Robinson Ltd v Mentmore Towers Ltd & Others  EWHC 1552 (TCC)
The dispute arose out of a scheme to develop a private members club in London and associated country house hotel. The architect became involved in the project in the summer of 2005 and was to be involved in putting together a design and obtaining the planning permission.
In March 2006, before the various contracts were signed with the employer, the director of the architect responsible for development of the scheme (Mr Blake) resigned. Mr Blake was required by the architect to work his year’s notice. The employer had been told that Mr Blake would be the team leader and would be involved throughout the duration of the project. Mr Blake had been the reason that the architect was considered for the contract in the first place and had been involved in all pre-contract meetings and in putting together the design documents. The contract was executed by the employer in May 2006 but the employer was only told of Mr Blake’s resignation in November 2006.
A dispute arose between the parties concerning outstanding fees which totalled in the region of £1 million. One of the (many) issues raised by the employer by way of defence and counterclaim concerned allegations of misrepresentation arising from the dishonest conduct of the architect in connection with the resignation of its team leader.
Relevant contract terms
Clause 7 of the contract provided that the architect:
“shall procure that the Team Leader shall be personally available and responsible for the overall management supervision and co-ordination of the Services and that there will be no change of responsibility without the prior written agreement of the Employer (such agreement not to be unreasonably withheld or delayed)”
Misrepresentation: the legal principles
- To make a claim in fraudulent misrepresentation the employer needed to establish the following:
- That the architect made a representation to the employer before the relevant contract was entered into.
- That the representation was fraudulent (made without an honest belief in its truth).
- That the misrepresentation acted as an inducement to the employer to enter into the relevant contract.
- That the employer suffered a loss as a result.
Misrepresentation: Applying the principles
The judge found, on the facts, that:
- The architect had repeatedly represented to the employer during the pre-contract negotiations (at meetings and in the bid documents) that Mr Blake would be involved throughout the project in the role of team leader. This was not a statement of future intent but was a representation of fact as to the services and the personnel that the architect would provide to the employer.
- The statements about Mr Blake’s continuous involvement in the project as team leader were a material inducement to the employer to enter into the contract with the architect.
- The representation was false and deliberate and made for the specific purpose of ensuring that the architect won the contract.
- The false representation was knowingly and dishonestly not corrected by the architect (because it might well have affected whether or not the architect would have been awarded the contracts at all) and constituted a fraudulent misrepresentation.
The question of whether the employer had suffered any loss as a result of the misrepresentation centred on the employer’s argument that but for the misrepresentation the contracts with the architect would not have been entered into and that the employer had been deprived of the opportunity to engage an architect who would be able fully to address the requirements for the project without delay, disruption, change of personnel and loss of continuity.
The employer was unable to demonstrate that there was any delay or disruption to the project caused by Mr Blake’s departure. In the judge’s view the only potentially recoverable area of loss was likely to relate to the disruption to or duplication of work by the architect arising out of Mr Blake’s departure (i.e. getting Mr Blake’s replacement up to speed). The precise assessment of the financial consequences of this (if any) would have to wait till the hearing on costs because it would at most lead to a reduction in the fees otherwise due to the architect.
From a practical point of view employers might find it helpful to include an express term dealing with key personnel in professional appointments. For consultants it is clear that they should promptly inform their employers of changes in key personnel because of the importance that employers can attach to certain key players on a project.