Professional Fees: The Architect, the Debt Collectors, and the Maserati
Every now and then a case comes along in which the facts are so incredible you couldn’t make it up! Michael Phillips Architects Ltd v Riklin is one such case.
MPA was controlled by Michael Phillips, who was also the director a development company called Lowe E Life Ltd.
MPA shared an office block with a building contractor, Rimus Ltd, whose director was also a director of Lowe E Life Ltd. MPA and Rimus shared the same bookkeeper.
MPA was appointed by the Riklins in relation to the renovation of a £1.4 million part Georgian listed property.
Based on the endorsement of MPA, the Riklins appointed, you guessed it, Rimus as the building contractor. The agreed Contract Sum was £383K.
4 months after starting work Rimus went into liquidation, at which point due to MPA’s failure to carry out certification, the Riklins had overpaid Rimus to the tune of £80K. The Riklins therefore had to employ replacement contractors to finish the work at a total cost of £583K. As an aside, the Judge found as a fact that Mr Phillips must have known of Rimus’ precarious financial position at the time of the endorsement.
MPA sent an invoice for £147K in respect of its fees which was based on a time spent/hourly rate basis. Not surprisingly a dispute arose over the terms of MPA’s appointment and the amount due in respect of fees.
In the meantime, MPA appointed debt collectors to chase the invoice and who employed bullying tactics, made menacing visits to the Riklins, and even poured acid over Mr Riklin’s maserati! This resulted in separate injunction proceedings.
Mr Phillips was also subject to a disciplinary hearing before the Architects’ Registration Board for failing to record the agreement with the Riklins in writing before commencing his services.
By the time the matter came before the Court MPA had reduced its claim to £66K based on its assessment of a “reasonable sum”.
The Court had to decide was a “reasonable sum” was. To do this it had to look at:
•what a “reasonable” percentage rate would be;
•the value of the service(s) actually provided;
•what figure the rate should be applied to
It was agreed that MPA was appointed to provide a “full service” in accordance with RIBA guidelines.
The Court held that 10% of construction cost was reasonable, together with a 2% mark up for the listed building element. However, this was to be discounted to 9% to take into account MPA’s failure to perform its services adequately.
This rate was to be applied to the amount paid to Rimus at the time it left site, and not the actual final construction cost.
However, taking into account the Riklin’s counterclaim for defective design (and damage to the maserati) MPA ended up paying money to the Riklins.
COMMENT: This is yet another case where a dispute has arisen, at least in part, due to the parties’ failure to adequately record their agreement in writing. Incredibly, in this case, the Court was persuaded that MPA had fabricated a retainer letter – which was never actually sent to the Riklins – in defence of the Architects Registration Board complaint.
Another issue here was that MPA had secured other lucrative work which meant that there was a lack of supervision on the Riklin’s project which resulted in the architectural assistant leaving the practice with stress.
This case demonstrates the importance of contractors and professionals alike not only having a written contract, but also having agreed terms in the first place – particularly if a Code of Professional Conduct requires it!
