Architect's Fees? A salutary tale

The case of Michael Phillips Architects Limited v Riklin and another [2011] EWHC 27 (TCC) involved a dispute over architect's fees in which the court had to consider the appropriate approach to calculating the "reasonable" fees payable where a dispute had arisen due to the failures of the architect, Michael Phillips Architects Limited ("MPAL"), throughout the project.

The facts of this case were that the Riklins engaged MPAL to assist with the renovation and refurbishment of a Grade II listed property. The Riklins had no knowledge of construction projects and so specifically requested that MPAL provide a project manager as part of the scheme and also to assist in selecting a contractor to carry out the works. MPAL's director Michael Phillips was also the director of Lowe E Life Limited, another director of which had his own construction company, Rimus Limited. As a result of this connection, MPAL recommended that the Riklins engage Rimus Limited as contractor on the project. Four months after starting the works, Rimus went into liquidation. It was alleged that due to the close relationship between MPAL and Rimus, the former must have been aware of the latter's financial problems when making the recommendation to the Riklins.

Further, MPAL failed to execute a formal professional appointment with the Riklins or to agree whether MPAL's fees were chargeable on an hourly or lump sum basis. This was contrary to the requirements of the Architects Registration Board.

Following various difficulties on the project, including delay and the liquidation of Rimus, whom the Riklins had overpaid by £80,000, a dispute arose between the parties in terms of MPAL's fees. Following non-payment by the Riklins and prior to trial, MPAL engaged a debt collection agency to recover the sums due. MPAL brought a claim for the sum of £94,430.21 from the Riklins who were in turn counterclaiming, which included a claim for £15,000 worth of damage caused to Mr Riklin's car by debt collection agents employed by MPAL.

The court considered the events that had occurred and awarded £48,353 to MPAL for services rendered. However, the court then awarded damaged of £58,880.98 to the Riklins. The court considered expert evidence brought by each party on how to assess the "reasonable fee" and dealt with the following questions:

• How should a reasonable fee be assessed?
• What was a reasonable percentage rate? and
  
• What contract price figure should be used?

The expert for MPAL took the approach that each separate element of the duties performed should be looked at in turn and then the relevant fees should be apportioned to that element. However, the Riklin's expert took the view that the whole of the services performed on the project should be assessed and MPAL's failures within the project should impact on the whole fee. The court favoured the latter approach and decided that the reasonable percentage rate was 12%, but then deducted 25% from this to account for MPAL's deficiencies in providing its service to the Riklins, stating that "where there is no architect's input, there should be no architect's benefit". In addition to this, the court held MPAL vicariously liable for the actions of its debt collection agency, despite that fact that MPAL were unaware of the debt collection methods employed.

This case is of interest to construction professionals both in terms of the approach the court will take in assessing reasonable fees, so that a failing in one aspect of the services not only reduces the fees payable for that element but may also impact on another part of the services and the overall value of those services, and also the responsibility such professionals have for their agents, in this case both the contractor recommended by MPAL and the debt collection agency. This case also further underlines the importance of adequately recording any agreement in writing, both in relation to the services to be provided and the fee to be charged, as is required by various industry professional codes of conduct.

If anyone has any queries arising from this article please contact, Stephen Homer on s.homer@ashfords.co.uk.

Ashfords LLP is regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice or as an alternative to taking professional advice relating to specific circumstances.