Summary

In the recent decision of Lejonvarn v Burgess [2017] BLR 277, the Court of Appeal confirmed that a project manager/architect who had carried out professional services gratuitously will, in the absence of a contract, owe a common law duty of care to carry out such services as are actually provided with all reasonable skill and care and for economic loss.

The facts

The Burgess' engaged their friend and former neighbour, Mrs Lejonvarn, to act as project manager and architect in relation to a project on their house in North London. Thy subsequently claimed that the services carried out by Mr Lejonvarn were defective and claimed damages in the sum of £265,000 for the cost of carrying out the necessary remedial work.

Mrs Lejonvarn denied liability. She contended (1) that no valid contract had been concluded with the Burgesses, and (2) that in the absence of a valid contract, it would not be fair, just and reasonable to impose a duty of care on her in relation to the services that were carried out gratuitously.

The decision

(a) Existence of a duty of care

At first instance the judge held that there was no concluded contract between the parties. It was impossible to identify any offer and acceptance from the written exchanges between the parties. In addition to no discussion or agreement on the level of remuneration, nothing had been said about the duration of the services, about the termination of appointment or any other clauses of the type typically to be expected in a professional terms of engagement. The parties had never discussed or mentioned that they would be entering into a contract. In those circumstances, the parties had not intended to be bound by contractual relationship.

Nevertheless, it was held that Mrs Lejonvarn owed a duty of care in tort to the Burgesses to avoid economic loss. On the evidence it was apparent that Mrs Lejonvarn had carried out services of a professional nature to the Burgesses (who she had described as her clients), and had assumed a responsibly for the work actually undertaken to them. Where a party had a special skill and exercised that skill in circumstances where there was an assumption of responsibility, a duty of care arose.

On appeal Mrs Lejonvarn argued that the judge had erred in applying the test of assumption of responsibility. She argued that the assumption of responsibility test was only appropriate where (1) there was fiduciary relationship between the parties, or (2) where there had been a voluntary assumption of responsibility in cases that were akin to a contract. As no contract had been concluded, it could not be said that their relationship was akin to a contract. Consequently, the correct test to determine whether a duty of care arose was that set out in Caparo Industries plc v Dickman [1990] AC 605, namely:

  • Whether the damage suffered was reasonably foreseeable;
  • Whether there was a sufficient relationship of proximity between the parties; and
  • Whether, in all the circumstances of the case, it was just and reasonable to impose a duty of care.

Mrs Lejonvarn contended that as no contract had been entered into between the parties this was not a case akin to a contract, there was not a sufficient relationship of proximity and that in all the circumstances it was not just and reasonable to impose a duty of care.

The Court of Appeal upheld the judge's decision that Mrs Lejonvarn owed the Burgesses a duty of care notwithstanding the fact that there were services undertaken and done so gratuitously. The absence of a contract did not mean that the relationship was not akin to a contract and result in the conclusion that there was no duty of care. Mrs Lejonvarn had agreed to provide a number of specific professional services as architect and project manager. Those services were provided in a professional context and on a professional footing over a period of time and involved the Burgesses in significant financial expenditure. The Burgesses were referred to as Mrs Lejonvarn's client. The work was undertaken in the hope of securing a paid commission in the future.

Mrs Lejonvarn's contention that to impose a duty of care the judge should have first expressly and separately considered whether it was fair, just and reasonable to do so was dismissed. The correct test was the assumption of responsibility. The factors giving rise to the assumption of responsibility supported the conclusion that it was fair, just and reasonable to impose a duty of care. Where there had been an assumption of responsibility the question of whether it was fair, just and reasonable to impose a duty of care was subsumed as part of the task of considering whether there had been an assumption of liability.

Mr Lejonvarn sought to contend that it was not just, fair and reasonable to impose a duty of care as it would be anomalous if she were to have such a duty when a builder did not ordinarily owe a duty of care in tort to protect against economic loss in relation to the execution of his work to third parties or to his direct client (see Murphy v Brentwood District Council [1991] UKHL 2 and Robinson v P. E. Jones [2011] EWCA Civ 9). The Court of Appeal drew a distinction between the position of a builder and a professional. In order for the Burgess' project to be successful, the services of Mrs Lejonvarn were required. As accepted by the court in Robinson v P E Jones, professionals were taken to assume responsibility for economic loss to their clients. They gave advice, prepared reports, drew up accounts etc. They expected their clients and others to act in reliance upon their work product.

(b) Nature of the duty of care

The Court of Appeal stressed that any duty of care imposed was not a duty of care to provide the services that Mr Lejonvarn said she would carry out in correspondence. It was a duty to exercise reasonable skill and care in providing those services that she did in fact provide in relation to the project. On the facts of the case, those duties included:

  • A duty to direct, inspect and supervise the contract's work, its timing and progress;
  • A duty of exercise reasonable skill and care in providing designs to enable the project to be constructed;
  • A duty to exercise reasonable skill and care in receiving applications for payment from the contractor and advising and directing the Claimants in respect of their payment;·
  • A duty to exercise reasonable skill and care in exercising cost control by preparing a budget for the works, and overseeing actual expenditure against it.

The precise scope of the duty of care owed, and whether Mrs Lejonvarn was in breach of that duty, was left for trial.

Conclusion

  • A professional who gratuitously provides services that are professional in nature, which are provided on a professional footing and in circumstances where the beneficiary has relied upon that professional's skill in carrying out those services, will be regarded as having assumed responsibility for the carrying out of those services and will owe a duty of care to avoid economic loss.
  • The precise nature and scope of the duty will depend upon the facts of any given case.
  • However, absent a valid contract, a professional will not be under an obligation to provide professional services not commenced. The duty to exercise reasonable skill and care will only extend to those works and services that are actually carried out and performed.
  • Whilst this conclusion may not be surprising, it may cause some difficulties for clients who were expecting a professional to carry out a full range of services, notwithstanding the absence of a contract. In those circumstances, notwithstanding the liability imposed upon the Mrs Lejonvarn in this case, employers would be well advised to ensure that a valid contract is concluded.
  • The legal position of professionals is to be contrasted with that of building contractors who generally do not owe (distinct from their contractual obligations) a duty of care to either third parties or to their clients to protect against the economic loss arising out of the execution of their works. This is a distinction that may be tested in future decisions.