Be warned: there’s an extremely architect-friendly clause hidden in RIBA SFA/99. So friendly, and so hidden, that it has been ruled ‘unusual and onerous’
This one is for all you architects to read. Oh, and maybe all you other fee earners who charge by the hour. Some of you are pretty loose about keeping timesheets and can easily come a cropper. Architect Munkenbeck & Marshall did.
The firm provided architectural services for one Michael Harold, who owned a central London property. The professional fee was 9.5% of final building cost. The form of contract was the everyday RIBA SFA/99. Architect and client fell out. The last £54,000 of the fee was held back. But before the trial, the matter was resolved by agreement. Mr Harold paid up and dropped his counterclaim.
But that wasn’t the end of the story. They remained at odds about what interest was payable to the architect on the lump of cash, and whether the costs of the claim and counterclaim should be on what is called the “standard” basis or the more architect-friendly “indemnity” basis. They also disagreed about whether Mr Harold should pay the architect’s legal costs and whether the architect should be paid £15,950 for the time it spent fighting its client. These odds and sods came to trial. Let’s talk about the last item first.
It is important because the RIBA standard form has a standard term at clause 9.6 that is a boon to the architect. It requires the client to pay the architect’s legal fees, win or lose, in a dispute over its professional fees, on top of a reasonable sum for the time the architect spent on the dispute. Nice one – if you can make it stick.
And, since it is tucked away in the smallprint of RIBA SFA/99, there is a good chance it will be signed up to. The £15,950 was for all the hours spent by the architect in connection with fighting Mr Harold. So, the judge dealt with how much of the £15,950 should be paid. The architect presented a spreadsheet as evidence of time spent – and this is where it boobed.
This schedule, it said, was started in June 2003. I think it dithered when cross-examined and the judge lost confidence in the architect’s recollection. It seems the judge believed the record was not prepared until long after the events it records. Plainly the architect had spent time working on the case, but the judge could not make even an approximate finding as to the amount of time. So it got nowt. Fee earners take heed.
There is more. Even if the architect had accurately and contemporaneously recorded its time, it would still have got nowt. Its client was a “consumer”. And the consumer can rattle the Unfair Terms in Consumer Contracts Regulations 1999. Mr Harold said clause 9.6 was unfair on poor old consumers. Not that he is poor. His property will support a loan of £5m, and he intends to spend another £1m on revisions. But he is still a consumer. The judge applied a test to the clause. Does this standard form cause a significant imbalance in the party’s rights and obligations? Remember, the client is asked to stump up architect’s fees for time spent fighting the case, win or lose. The judges found that this was “unusual and onerous”. It was not drawn to the customer’s attention; the customer didn’t see it; he wasn’t even sent it; it was tucked away in the smallprint. So that term is unfair and was struck down as unenforceable. For the same reasons, the judge also struck down the clause in RIBA SFA/99 that provides interest on outstanding debts of 8% over Bank of England rates, or 12%. The architect got 8% only.
The costs of the settled claim and counterclaim were already agreed payable by Mr Harold. The judge saw no grounds for the “indemnity” treatment of costs but ordered an immediate interim payment of one-third of the bill, leaving it to go for scrutiny by a costs judge. By the way, the bill is £186,000! As for the odds and sods, the architect failed on most of them, so Mr Harold gets 90% of those particular costs.
The RIBA will have to give some thought to the relationship between architect and consumer client when using SFA/99, or any form for that matter. Either drop “unusual and onerous” terms or highlight them. Try big red writing with a big red hand pointing to the big red writing. As for the architect, it is also a good idea to at least send the form to your client, or you may well come a cropper too.
Tony Bingham is a barrister and arbitrator specialising in construction
The clause was not drawn to the customer’s attention; the customer didn’t see it; he wasn’t even sent it; it was tucked away in the smallprint