The recent TCC case of Burgess & Anor v Lejonvarn serves as a salutary warning to those providing professional services to consider how they are holding themselves out, whether to offer free advice (even to those they consider to be close friends) and to ensure terms are agreed.
Summary of the facts in Burgess
- The defendant and the claimants were friends. During their 10 year friendship, the defendant had provided various professional services to the claimants, including in relation to the development of residential apartments, whilst employed by PAPA Architects
- The defendant lived in the UK and was a registered architect in the Netherlands. Despite not being registered in the UK, the defendant had always described herself as an architect to the claimants (and on a social media site). The claimants understood the defendant to be an architect
- In 2013, the claimants wanted some landscaping works for their garden and, following a series of emails between the parties (dealing with a mixture of formal and informal matters), works commenced. The project was split into 2 phases. Under phase 1, the defendant procured a contractor to carry out earthworks (and did so on a gratuitous basis). Under phase 2, and for a fee, the defendant was to undertake design work herself
- The relationship broke down over costs issues and before phase 1 was complete. The claimants maintained that the work carried out under the defendant's supervision was defective and remedial works were required.
Was there a contract?
The Court held that a valid contract did not exist. It was simply impossible to extract an offer and acceptance from the exchanges between the parties. There was also a lack of consideration and certainty of time for which the contract would be in force. In addition, the Court was of the view that the parties did not intend to be legally bound.
If there was no contract, did the defendant nonetheless owe a duty of care in tort?
The key points are that:
The Court held that a duty of care existed
- The relevant ingredients giving rise to a duty in this case (assumption of responsibility by the provider and reliance by the recipient of the service) were present. The leading case on negligence is Hedley Byrne & Co Ltd v Heller & Partners Ltd which established that a duty of care emerges when a professional uses their specific skill set for the benefit of another party and that other party relies on the professional's skill set to their detriment. The Court relied on the case of Galliford Try Infrastructure Ltd v Mott MacDonald Ltd in emphasising that, when determining whether a defendant has assumed responsibility, the Court only needs to consider that the parties behaved towards each other in a professional manner from an objective perspective rather than consider their subjective intentions.
A defendant can be sued in tort by a claimant who only suffers financial loss
- The claimants sought compensation for financial loss only. They sought damages for the difference between the price of the works as they believed was agreed and the actual cost of the landscaping work, as well as payment for the cost of the remediation works. As a general rule, a claimant who has suffered pure economic loss does not have a claim outside the realms of contract law. Henderson v Merrett Syndicates Ltd established an exception to this rule and made damages available for pure economic loss so long as the ‘assumption of responsibility’ test is satisfied. This test requires the defendant to have voluntarily assumed responsibility for a task (although the defendant need not have consented to being legally liable for that task). In Burgess the Court found that the defendant had assumed responsibility by holding herself out as a project manager and could therefore potentially be held liable for the financial loss which the claimants had suffered as a result of the defective groundworks she had supervised.
A duty of care can arise in respect of advice given as well as services performed
- There is no distinction between provision of advice and provision of services. The Court rejected the defence’s argument that the defendant's duty of care should not extend to her supervision of the contractor and found that she was potentially liable for negligent supervision. It was relevant in establishing a duty of care that the defendant was in regular communication with the on-site workers and therefore played more than a distant supervisory role.
A defendant can be sued for services provided free of charge
- Architects and other professionals are expected to provide a level of care which can be reasonably expected from professionals in their industry, whether or not money is exchanged. So long as the defendant owes a duty of care to the claimant, and breach of that duty causes the claimant to suffer loss, the defendant’s liability will not be affected by any payment made. Burgess in this respect follows the position established in Henderson in which Lord Goff confirmed that liability can arise when negligent services, or advice, are provided on a gratuitous basis.
What was the nature and extent of the defendant's duty?
The Court found that the extent of the defendant’s involvement meant that the defendant was providing project managerial and architectural services. As such, the Court held that the defendant owed a duty in respect of the selection and procurement of contractors and professionals for the project, the preparation of designs which were necessary for the accuracy of pricing and construction of the project, inspection and supervision of the works, the review of applications of payment by the contractor and costs control.
The lack or inadequacy of terms of agreement between an architect and client is the single most common ground for disciplinary proceedings against architects and a common source of dispute in claims brought against architects. An architect in the UK may only describe himself as such if he is registered with the Architects' Registration Board. Under the ARB's Code of Conduct architects are expected to have in place a written agreement prior to undertaking work, to include the scope of work, fee or method of calcul
The Burgess decision provides a warning to architects and other professionals about the ease with which the lines between a personal and professional relationship can become blurred. Professionals should not lose sight of the need to put in place formal arrangements which ultimately serve to protect them and the client alike. As Mr Alexander Nissen QC noted:
"In view of their former friendship and the fact that the services were said to have been gratuitous, the case serves as something of a cautionary tale".