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Riva Properties Ltd & Ors v Foster + Partners Ltd
Factual and Procedural Background
This action concerns a professional negligence claim brought by four companies controlled by a businessman, referred to as the Plaintiff, against the Defendant, an architectural practice referred to as Company A. The Plaintiff, through various corporate vehicles, engaged Company A to design a hotel project at a site near a major airport in The City. The project was to be designed within a budget initially set at £70 million, later increased to £100 million. Company A produced a design which, when costed by a costs consultant engaged by the Plaintiff, was estimated at £195 million, far exceeding the budget.
The Plaintiff alleges that Company A breached its duty to exercise reasonable care and skill by failing to design within the budget and by advising that the project could be "value engineered" down to the budgeted figure, which was not possible. Planning permission was obtained for the design, but the Plaintiff could not obtain funding to build the hotel due to the excessive cost and financial crisis effects. The project stalled, and the planning permission has since lapsed. The Plaintiff claims losses including abortive professional fees and lost profits.
The Defendant denies the existence of any communicated budget, denies liability for the alleged breaches, and raises defences including contributory negligence and limitation. The Defendant also relies on a professional indemnity insurance limit of £10 million, which is less than the claimed losses. The trial was originally to take place in Bristol but was transferred to a nearby location due to unforeseen circumstances. Multiple factual and expert witnesses testified, including architects, quantity surveyors, and accountants.
Legal Issues Presented
- Whether the contracting party (the First Claimant) can recover losses suffered by the other claimant companies not party to the contract.
- Whether the Defendant owed a duty of care in tort to the non-contracting claimant companies.
- Whether a cause of action was transferred to a fourth claimant company pursuant to an Asset Purchase Agreement (this issue fell away).
- Whether the Defendant was informed of the Plaintiff’s budget and the nature of that budget.
- Whether the Defendant knew of the Plaintiff’s intention to value engineer the design to meet the budget.
- Whether the Defendant warned the Plaintiff that value engineering to the budget was not possible.
- Whether the Defendant advised the Plaintiff to proceed with planning permission on the expensive design and value engineer afterwards.
- What advice was given by the Defendant regarding costs and how the Plaintiff reacted.
- Scope of the Defendant’s retainer and duties, including obligations regarding budget and cost advice.
- Whether the Defendant breached its duties as alleged.
- Causation and loss issues, including which costs were caused by breach, whether sums were abortive, and entitlement to repayment of fees.
- Whether the claimant companies were contributorily negligent.
- Whether any claims are time-barred (this issue fell away).
- What sums each claimant is entitled to recover from the Defendant.
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Wisniewski v Central Manchester Health Authority [1998] PIQR 324 | Adverse inferences may be drawn from absence of witnesses with material evidence. | The court considered but did not find sufficient grounds to draw adverse inferences from absence of witnesses for the Plaintiff. |
| Society of Lloyd's v Jaffray [2002] EWCA Civ 1101 | Failure to call witnesses may justify adverse inferences where evidence points against a party. | Applied the principle but found no justification for adverse inferences against the Plaintiff. |
| Energy Solutions v Nuclear Development Authority (No.2) Liability [2016] EWHC 1988 (TCC) | Adverse inferences in procurement challenges when relevant personnel are not called. | Referenced in context of drawing inferences, but not applied against Plaintiff here. |
| Caparo Industries plc v Dickman [1990] 2 AC 605 | Three-fold test for duty of care: foreseeability, proximity, and fair, just and reasonable. | Applied to determine no duty of care was owed to non-contracting claimant companies. |
| Carradine Properties v D J Freeman (1982) [1955-95] PNLR 219 | Scope of professional’s duty depends on client’s experience and instructions. | Considered in relation to Defendant’s duty to advise on costs and budget. |
| J Jarvis v Castle Wharf Developments [2001] EWCA Civ 19 | Duty to advise arises if advice is sought, especially for experienced clients. | Applied to distinguish duty owed to Plaintiff who sought advice. |
| Minkin v Landsberg [2016] 1 WLR 1489 | Clarifies scope of solicitors' duty to advise based on client’s circumstances. | Referenced in relation to Defendant’s duty to Plaintiff. |
| Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 | Effective or dominant cause of loss required for damages to be recoverable. | Applied to assess causation and whether Defendant’s breach caused losses. |
| Borealis AB v Geogas Trading SA [2010] EWHC 2789 (Comm) | Causation principles; novus actus interveniens and chain of causation. | Applied to reject argument that Plaintiff’s conduct broke chain of causation. |
| Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 | Contributory negligence defence available in contract if liability corresponds to tort liability. | Applied to determine contributory negligence defence availability. |
| Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 | “No loss” argument: only party suffering loss can recover damages absent direct remedy. | Applied to limit recovery to contracting party; mechanisms for third party warranties not operated here. |
| Mirant Asia-Pacific Construction (Hong Kong) Ltd v Over Arup & Partners International Ltd [2007] EWHC 918 (TCC) | Contracting party can recover losses suffered by associated company absent direct remedy. | Applied to allow recovery by contracting party for losses paid by other claimant companies. |
| Axon Well Intervention Products Holdings AS v Michael Craig [2015] CSOH 4 | Assignment clause does not prevent Panatown claim if assignment not effected. | Persuasive authority supporting recovery by contracting party despite involvement of other companies. |
| Robinson v Harman (1848) 1 Exch 850 | Damages for breach of contract aim to put claimant in position as if contract performed. | Applied to assess measure of damages on expectation basis. |
| The Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 | Damages reflect value of contractual bargain lost. | Applied in assessment of damages measure. |
| Cullinane v British Rema [1954] 1 QB 292; Anglia Television v Reed [1972] 1 QB 60 | Reliance damages as alternative to expectation damages. | Discussed as alternative claim not pursued due to findings on expectation damages. |
| Hadley v Baxendale [1854] EWHC J70 | Limits on recoverable damages based on foreseeability and remoteness. | Applied to funding-related costs recoverability. |
| Hughes-Holland v BPE Solicitors [2017] 2 WLR 1029 | Measure of damages for negligent misstatement and scope of duty. | Considered in relation to causation and scope of Defendant’s duty. |
| South Australia Asset Management Corp v York Montague Ltd [1997] AC 191 | Distinction between types of loss recoverable depending on scope of duty. | Discussed in relation to scope of Defendant’s duty and causation. |
| Stapley v Gypsum Mines Ltd [1953] AC 663 | Distinction between philosophical and juridical causation in damages law. | Referenced in analysis of causation and responsibility. |
Court's Reasoning and Analysis
The court carefully analysed the facts, contractual terms, and expert evidence to resolve the disputes. It found that the Defendant, Company A, was informed of the Plaintiff’s budget, initially £70 million rising to £100 million, and that this budget was a key requirement and constraint on the project. The Defendant failed to carry out the initial Work Stages A and B properly, which required identification and confirmation of key requirements and constraints including budget. Instead, Company A proceeded directly to design work without adequate regard to the budget.
The court accepted the Plaintiff’s evidence, supported by contemporaneous emails, that the Defendant knew the budget and that the design produced was costed at £195 million, far exceeding it. The Defendant advised the Plaintiff that the design could be value engineered down to £100 million, a claim which the court found to be negligent and incorrect, as confirmed by expert witnesses. The Defendant failed to warn the Plaintiff that value engineering to the budget was not possible.
The court found that the Plaintiff genuinely intended to build the hotel within the budget and had taken reasonable steps to obtain funding. However, the global financial crisis and tightened lending conditions were the effective causes of the failure to obtain funding and build the hotel, not the Defendant’s breaches. Therefore, the Plaintiff’s claim for loss of profits failed on causation grounds.
The court distinguished between costs advice, which was the province of quantity surveyors, and the Defendant’s obligation to design within the budget and advise on the feasibility of achieving the budget through value engineering. The Defendant’s failure to do so constituted breaches of duty.
The court rejected the Defendant’s arguments that it owed no duty to the non-contracting claimant companies and found no duty of care in tort to those entities. It held that only the contracting party was entitled to recover damages, but that the sums paid by the other companies would be used as the measure of losses recoverable by the contracting party.
Allegations of contributory negligence by the Plaintiff were considered and rejected, the court finding the Plaintiff was not negligent in the respects alleged.
In assessing damages, the court applied the expectation loss principle, awarding damages equivalent to the fees and expenses incurred on the abortive project that would be required to put the Plaintiff in the position as if the contract had been properly performed. The claim for loss of profits was dismissed due to causation.
Holding and Implications
The court's final decision is summarized as follows:
The Plaintiff is entitled to recover damages in the sum of £3,604,694.36 from the Defendant.
This sum represents the recoverable fees and expenses incurred on the abortive design project that would need to be incurred again to produce a design capable of construction within the budget. The claim for loss of profits is dismissed due to causation, as the financial crisis and inability to secure funding were the effective causes of the project’s failure to proceed.
The court found breaches of duty by the Defendant in failing to identify and consider the budget, failing to design within it, and giving negligent advice regarding value engineering. However, no duty of care was owed to the non-contracting claimant companies, and contributory negligence was not established.
No new legal precedent was set by this decision. The implications are confined to the parties: the Plaintiff recovers abortive fees but not loss of profits, and the Defendant is held liable for breaches of professional duty but not for the broader financial consequences caused by external economic factors.
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