Loss of profit, copyright and legal negotiations were all thrown in the mix when Bridget Sheppard’s client defaulted on its fees. She describes the struggle, offering advice with hindsight, with interjections from intellectual property rights specialist Robert Stevenson
Relegated to the back of most architects’ minds is the concept of copyright. We are taught that we are creators of ‘artistic works’ which are protected under the Copyright Design and Patents Act 1988. Architects grant a licence to their clients to use and to benefit from their copyrighted works. The works are ‘published’ when the building is under construction.
My story starts with the betrayal of trust by my clients. I designed a town house for them (under SW99 Minor Works). The project had reached tender stage before problems with payments occurred. My clients required copies of my tender documents and I sent my invoice immediately after handing the documents over. The payment never materialised. I sent reminders and a letter of demand to no avail. By the time my letters and emails requesting payment had been exchanged a total of 60 days had passed. During this time they had in fact fixed a start date for the building of the house – directly engaging one of the contractors invited to tender – using my design. I only learned of this because another of the original tenderers contacted me after happening to pass by the site when he had seen the work commence. My clients had previously stated that the high tenders had caused them to put the project on hold. Initially I believed that I was merely chasing fees, I soon came to realise that my copyright was also being breached.
BS advises: The problem is that most architects’ standard agreements work in advance and get paid in arrears. My advice now is never to issue drawings until payment is received.
> I asked my clients to join me in mediation, which they ignored. I then sought advice from a solicitor as to whether I could have the building work stopped by an injunction. He advised me not to take this course of action.
Both the protocol which governs construction disputes, and the Code of Practice which governs intellectual property disputes, enjoin parties to set out their claim in full in writing and for there to be a detailed response to that claim, and for the parties then to consider mediation before starting litigation. A failure to properly consider mediation may have cost consequences in those proceedings. It would be rare for a court to grant an injunction to prevent an architect’s plans being used if the underlying reason for the architect’s claim is that he has not been paid his fees, even though there may be a simultaneous breach of copyright.
BS: If a judge thought I was seeking to stop the work on the unproven suspicion that the house was being built to my design it may have been me who could be charged with damages because, on the face of it, I was only suing for a default in fees and could not yet prove a breach of copyright.
> Instead I began what turned out to be a lengthy legal action against my client.
My original county court claim consisted of two main elements: breach of contract (for the unpaid fees) and breach of copyright (for the unauthorised use of my drawings). A third element was compensation for loss of profit.
BS: I was hasty claiming breach of copyright before seeing the completed building. Fortunately the case took so long to be called to court I was not put in an embarrassing position where I could not demonstrate clearly that the house used my designs. Wait before claiming.
RS comments: Whether the client’s use of the drawings is a breach of copyright will depend on the terms, or lack of terms, in the appointment. To prove a copyright case you have to show that the client had used your drawings, after your services had been dispensed, by checking whether they were incorporated in the building.
> In response my clients counterclaimed for damages for professional negligence. They claimed this meant I had surrendered both my rights to any fees due and my copyright.
BS: Negligence does not trump copyright – they are entirely separate issues arising from different statutes. Negligence does not cause loss of copyright.
RS: True negligence and copyright are separate claims but the law permits one claim to be set off against the other where there is a close connection. Once negligence is alleged the court spends much more time on that than the fee claim. Claims for negligence have to be supported by expert evidence from another architect; if they are not your lawyer should seek to have them struck out.
Professional indemnity insurers take a ‘commercial’ view of such claims, and will sometimes pay their insured their outstanding fees as part of a compromise which means the negligence claim will be dropped.
> My clients claimed their losses – due to my alleged negligent calculation of the contract sum – extinguished my fee claim and that they were entitled to damages. I had been executing the County Court claim unrepresented but the counterclaim triggered my professional indemnity insurers to become involved. They appointed a corporate legal representative. The focus of my main claim for fees then moved into a prolonged battle as to whether or not I had been negligent and what amount would be lost from my claim if I had.
BS: Compensation for work I did not perform can be claimed because my ‘artistic work’ continued to ‘perform’ without me. Your copyrighted works are legally protected whether you continue in a personal capacity in the execution of your contract or not – your rights sit with the artistic works.
> Two months after work had started on site and after confirming that copies of my drawings were being used I launched separate county court proceedings against the client’s contractor for flagrant breach of copyright.
BS: This is a specific aspect of copyright, triggered when the claimant can demonstrate that the defendants knew they had no right to the drawings and proceeded to use or publish the works anyway. It carries potentially punitive damages and criminal liability.
RS: Flagrant breach is hard to prove, particularly if a client has acquired a licence to drawings anyway on delivery, depending on the terms of appointment.
> The builder’s lawyers claimed I had sued in the wrong entity by naming him in person and not as a director of his company. The case was struck out. I spent four months corresponding with the county court and quite a large sum of money getting the case reinstated.
BS: Under copyright law I could have sued either party. To avoid inexperienced County Court circuit judges I strongly advise taking any claim for breach of copyright directly to the specialist Patents County Court. Or during a case management conference elsewhere seek this option and have the case transferred.
> As the dispute developed, over some 14 months, my clients (now living in the completed house) and their builder then took a different position. They stated that their contractor had not used the tender drawings but had referred only to my planning drawings – which they had paid for – to build the house.
BS: In some contracts the use for any purposes other than to achieve planning permission, eg my SW99 contract, is regarded as an extension of that phase of the project and, as such, requires payment of a licence fee.
> The client also argued that because the front door and dormer had been changed they were not in breach of copyright as the finished house was different to my drawings.
BS: To sue for breach of copyright you need only show substantiality, not exact replication of your design, so it did not matter that the front door and dormer were different.
> On a regular basis – late Friday afternoon by fax – my clients’ solicitor, in an attempt to demoralise me and to deviate the focus away from my claim, sent further counterclaims of professional negligence against me. These were all without substantiation yet inclined my insurer’s solicitors to doubt the full strength of my case. I also received letters from the contractor’s solicitor insulting my drawings and concocting entirely fabricated stories such as that I had broken into his van. The issue for my insurers became one of damage limitation rather than fighting for the justice of my case. My insurer’s solicitors advised me to drop my claim in exchange for the clients dropping their counterclaim. Their remit was solely to deal with the negligence claim.
BS: Architects can only receive legal support for recovery of fees if they purchase specific insurance intended for such.
RS: Other options include free advice to RIBA members via the Information Centre and specialist practice consultants on the recovery of their fees. Lawyers may be willing to take on a case on a no win no fee basis or a conditional fee arrangement. If the fee claim is below £5,000 there is the small claims court, where no costs are recoverable, and in cases of appointment which are not with residential occupiers, adjudication is a low cost alternative.
> I was advised, via an independent pro bono lawyer, to consolidate the two claims. The insurer had no remit against pursuing the alleged wrongful acts of the contractor – for them it just complicated the case. I understood the wisdom of this advice because damages for breach of copyright on the same facts cannot be awarded twice. I prepared to bring the client and its builder together at the Patents Court.
My insurer’s solicitors worked for many months trying to get my clients to agree to meet in mediation and I wrote letter after letter to ask the builder to do the same. Eventually they all agreed to meet with me in mediation. At the end of mediation an order was signed in my favour to recover my fees. I was also awarded the payment of a licence fee. The question of my professional negligence never arose.
Prepared with the help of intellectual property rights specialist Robert Stevenson of Berrymans Lacey Mawer