In the recent case of Pickard Finlason Partnership Limited v Lock, the Claimant, a multidisciplinary professional building design consultancy practice, brought claims for payment of fees after the Defendants failed to proceed with a development project for which the Claimant had prepared a revised scheme. The Technology and Construction Court held that, based on the bespoke contract wording used, the Claimant was not entitled to payment of certain fees as it had not complied with a condition precedent in order for its fees to become due.
One of the issues that the Judge was required to decide was whether the Claimant was required, post planning permission, to establish accurate costs of the works before it could render an invoice. The findings of the Court are fact specific and turn on the bespoke wording used in the contract. It is therefore important to highlight some of the most pertinent payment provisions of the contract.
The contract stated that the Claimant was entitled to 40% of its overall fee, being 10% of the final cost of the project, upon planning permission being obtained and the development cost accurately established. As part of the bespoke terms, the Claimant agreed to reduce this percentage to 20%.
Importantly, the contract stated, “Our fee entitlement remains at 40% but this proposal keeps our fee payments low during the early stages of a project. Once planning is obtained a more accurate cost of the building and contract works can be established and the professional fee entitlement and overall fee is recalculated and the balance of our fees due becomes payable. At that stage we would agree a lump sum for the remainder of our fees.”
A schedule appended to the contract identified the payments to be made at different stages and stated “we will recalculate and re-advise you of our fee entitlement when the development area and cost becomes firm.”
After planning permission was obtained, the Claimant submitted its invoice for the balance of the 40% to which it considered it was entitled at that point. The Defendants argued that the Claimant had failed to obtain firm costs from contractors which they could present to potential funders in order to move the development forward.
The Defendants contended that the Claimant did not comply with the condition precedent to rendering its invoice for the balance of the 40%. The Claimant, however, considered that all it was required to do at that stage was to revisit the cost plan and recalculate costs as necessary. The Defendants argued that the Claimant was required, post planning permission, to establish an accurate cost for the building and contract works so that the cost became firm, something that the Judge accepted would involve considerable further work by the Claimant.
The Judge’s initial impression was that the Defendants’ argument was inconsistent with a common sense commercial approach to the construction of the contract. He said that it appeared unlikely that the Claimant would have intended the wording of the contract to mean that it would have to undertake considerable further work to be entitled to the balance of the 40%.
However, in considering the overall effect of the wording, the Judge held that he must construe the document as a whole. The Judge stated “When I do so it is striking…that the words are used which appear to make it quite clear that the cost only become “firm” once the “cost estimates are refined and the contract sum is known” and once “a more accurate cost of the building and contract works is established”. In my judgment the ordinary or normal meaning of these words, in the context of the whole document, is that they require the completion of the processes contemplated…so as to reach the point where there is a tender from a contractor to undertake the work for a contract sum which the clients are ready, willing and able to accept. It is impossible in my judgment to give the words “contract sum” and “building and contract works” any other sensible meaning”.
The Judge held that, whilst the Claimant’s construction of the contract was more consistent with a common sense commercial approach, he considered that the Defendants’ interpretation was “more consistent with the plain and ordinary meaning of the words used” in the contract.
Whilst a very fact specific case, the judgment is interesting in that it effectively dismisses what might be considered to be the common sense approach to contract determination in favour of giving the contract wording its natural and ordinary meaning. The finding of the Court turned on the specific bespoke wording of the contract so acts as a useful reminder to practitioners to avoid ambiguity when drafting such clauses as they may find themselves in a difficult position