Contractors should beware of not reporting key personnel changes when bidding for large-scale contracts, following a recent decision of the High Court.
The case concerned a project to develop the former In & Out Club in Piccadilly, along with various adjoining buildings and a property in Buckinghamshire, Mentmore Towers, a former home of the Rothschild family.
Architects Fitzroy Robinson Ltd. (FRL) were engaged as project managers by the property owners – a group of offshore investment companies and trusts represented by Buckingham Securities Holdings Plc (BSH). FRL began their involvement in 2005.
The development project was estimated to last 38 months and commenced in March 2006 under three separate contracts. When the contracts were close to agreement (but not actually signed off), the original project leader – a Mr Jeremy Blake – resigned. BSH had been informed that he would remain the project leader until its completion. During evidence, it was stated that the property owners would not have engaged FRL without the involvement of Mr Blake, whom they considered key to the whole project.
By the end of May, all contracts had been finalised and signed off. BSH had still not been told of the resignation. The work proceeded and some of the earlier stages were completed when, in December 2007, FRL received notice of suspension.
In April and May 2008, FRL commenced proceedings for unpaid fees totalling over £1 million. BSH made a counterclaim for delays and negligence in respect of a planning application, and for deception – because it had not being informed of the resignation of Mr Blake. There were no Alternative Dispute Resolution (ADR) arrangements in place.
During his summing up, the judge stated that he found the evidence of Mr Blake preferable to that of FRL Chief Executive, Mr Nicholas Thompson. The judge described a witness statement from Mr Thompson as having been so artfully ‘spun’ that it was wholly unreliable. Mr Thompson had tried to play down the part of Mr Blake in the project.
The judge concluded that, owing to various delays and failings on the part of FRL, adjustments to the amount of fees due were required, with the amounts of the adjustments to be referred back to the two parties. He further concluded that the failure of FRL to inform its clients of the resignation of Mr Blake amounted to a misrepresentation, although the impact of the misrepresentation claim was expected to be ‘quite modest’.
A further claim of professional negligence against FRL was rejected.
“Professional firms engaged in projects should always disclose significant changes in circumstances to clients and should include in the contract appropriate machinery for the resolution of disputes,” says <<CONTACT DETAILS>>.