Michael Phillips Architects Ltd v Riklin & Anr 

[2011] EWHC 27 (TCC)

The Riklins wished to renovate their residential property and engaged MPA for the full suite of architectural services as defined by the RIBA. The Riklins made it clear from the outset that they were cost conscious and anxious to complete the project by spring 2008. They also requested a project manager for on site supervision of the contractor; however, MPA assured them that the management capability of his professional staff was such that there was no need to do this. A contractor was engaged in April 2008, though no formal written contract was entered into. In July 2008, the contractor then went into liquidation. By this time, the Riklins had overpaid the contractor in excess of £80,000 but MPA had not performed any cost control or certification duties. In order to complete the project, the Riklins were forced to engage alternative contractors at a cost considerably over the original budget.

A dispute then arose over the payment of MPA’s fees. MPA first sought payment of £147k, being its fees based on an hourly basis and amounting to 1/3 of the originally agreed construction costs. No attempt was ever made by MPA to agree a percentage lump sum fee. Ultimately, MPA brought court proceedings seeking an architectural fee in the amount of £94,430.21. This was based on a percentage of the construction costs for architectural services and a time charge for interior design services. MPA contended that a letter was sent to the Riklins outlining that its fees would initially be on a "time expended" basis as it was a refurbishment of an existing Grade II listed building and once the exact scope of works was known, then the time charge fee would be converted to a lump sum fee. The Riklins denied that this letter was ever given to them.

The issue before the court was what was the reasonable value of the professional services provided by MPA and what was the proper approach to the assessment of a reasonable fee in the situation where no appointment was signed? Here, the Judge held that the necessity for the court to assess what was a reasonable fee for the services rendered by MPA arose out of MPA’s clear failure to comply with his professional obligation under Rule 11.1 of the Architects Code of Conduct, which requires him to record the appointment in writing. In assessing what was a reasonable fee, the Judge preferred the submission of the Rikllins’ expert who suggested that the approach should be to look at the value of the services provided by MPA that were in fact performed at each stage of the project, and value it against "the reasonable percentage rate".

The Judge did not agree with MPA’s expert who had suggested that each stage be examined to determine what point had been reached and then the proportion of the duties performed by MPA apportioned to it, applying the "reasonable percentage rate", irrespective as to how competently the services were performed. The reasonable percentage rate was 9%, that being 12%, minus a 25% fee reduction for non performance and part completion of the later stages. MPA had failed:

"to properly administer the project by providing the contractual tools to manage risk and to monitor and control costs and the failures to ensure compliance with building regulations and listed building consent, reduced not only the value of the administration elements but also serve to reduce the value of the earlier design elements to the client by reason of the delay, the excessive costs and subsequent adjustment to design to achieve planning consent and listed building compliance and pursuit of appeals."