THE COST OF MIXING FRIENDS WITH BUSINESS
October 20, 2017
Lejonvarn v Burgess & Anor  EWCA Civ 254
In Lejonvarn v Burgess & Anor, the Court of Appeal of England and Wales (the Court of Appeal) found that an architect who had volunteered her project management and design services to friends free of charge, owed them a duty of care in tort and was liable to pay damages.
The Claimants owned a residential property in London. They obtained a quote for a total of £175,622 from a landscape architect to carry out landscaping. The Architect, a friend of the Claimants, had previously provided paid architectural and project management services to the Claimants. The Architect suggested to the Claimants that the quote they received was too high.
After speaking with the Architect, the Claimants asked if ‘her guys could do our garden’. The ‘guys’ were labourers with whom the Architect had a good working relationship and had worked on one of the Claimants’ earlier projects managed by the Architect. The Architect agreed to ‘go over the job’ in order to price it. She went further. She proposed a contractor; discussed the scope of work with that contractor; provided quantified estimates for the work; created further detailed design drawings; performed interval site inspections; and prepared an overall budget of £130,000 for the project. There was no written contract between the parties and the Architect was not paid for her services. However, evidence at trial established an understanding she would be remunerated in the future by the awarding of further work, and that the opportunity to work on the Claimant’s project would benefit the Architect in developing her practice.
After some time, and after instalments payments were made, the Claimants expressed concern about the progress of the project and whether the project was on budget. A controversy arose as to the agreed budget. The Claimants denied that a budget of £130,000 had been agreed and asserted that the agreed budget was £78,000. The total projected cost was expected to be marginally over the £130,000 budget, but the disagreement led to the breakdown of both the professional and personal relationships. The Claimants then contracted with one of the workmen directly to complete the works. After some heavy rain, the earthworks started to collapse. The original landscape architect was then engaged to complete the project.
The Claimants sued the Architect for £275,000 in damages. They alleged that the works were defective, and that there had been a breach of contract and a breach of the Architect’s duty of care.
First instance decision
The trial judge did not find that a contract existed between the Claimants and the Architect. However, the trial judge did find that the Architect owed the Claimants a duty of care, despite the fact that the services were provided gratuitously. The Architect appealed.
The focus on appeal was whether there was a duty of care owed at all. The award of damages was not contested on appeal.
The Court of Appeal upheld the trial judge’s decision that the Architect owed the Claimants a duty of care to prevent economic loss.
The Court of Appeal concluded that the absence of a written document did not mean that the parties’ relationship could not be akin to a contract; nor did it preclude a finding that the Architect’s assumption of responsibility had given rise to a duty of care. The factors the Court of Appeal emphasised included:
- That the Architect agreed to and did in fact provide a series of professional services; as distinct from brief, ad hoc, informal or social advice
- the degree of confidence the Architect had in her ability to perform the tasks inherent in the provision of her professional services, and that she held herself out as having the professional skills to do so
- the similarity between the services she provided in earlier projects to the services she was providing in the present project meant that reliance on her was reasonable
- her role as representative of the Claimants’ interests and the fact that she conceded that she would be acting in her clients’ (that is, the Claimants’) best interest
- the fact that the services were professional services being provided in a professional context
- the fact that she knew or ought to have known that the Claimants would be relying on her and incurring large expense, and that it was foreseeable that economic loss would be caused to them, and
- although the architect did not charge a fee initially, the expectation was that she would be paid for later work.
The Court of Appeal held that the duty was limited to exercising reasonable care in the performance of each of the professional services she agreed to, and in fact did undertake (such as the design of the project to enable it to be priced, exercising cost control, preparing a budget, and overseeing the expenditure and so on). This was to be distinguished from a duty to provide such services.
It therefore followed that there was no positive duty to conduct periodic inspections. The Court of Appeal agreed with the Architect’s submission that it would not be appropriate for a duty of care to involve a positive obligation to act in a specific manner in the future. However, to the extent that she did perform inspections, she had a duty of care to act with reasonable care when performing that inspection.
A professional performing work without fee can still owe a duty of care, even in the absence of a contractual retainer.
There might also be coverage implications if the insuring provision in the professional’s policy is cast narrowly to confine the cover to services performed for reward or remuneration.
Authored by Anthony Scott, Partner and Alycia Amanatidis, Lawyer, Melbourne.
July 4, 2017
AAI Limited v GEO Group Australia Pty Ltd  NSWCA 110 GEO was the private operator of a prison in NSW.…Continue reading
December 12, 2017
Shane Holcombe v Numurkah Hospital District Health Service & Roland Hunt  VSC 666 This decision concerned an application by the…Continue reading
May 23, 2017
Cam & Bear Pty Ltd v McGoldrick  NSWSC 1894 Introduction While the preparation of the financial statements of a Self-Managed…Continue reading