Do you work for friends as a favour on the side? This could make you think twice.
Are you happy to share your expert knowlege to help a friend? The recent case of Mr and Mrs Burgess v Mrs Lejonvarn may change your mind.
Here, the court found that a professional consultant did owe a duty of care in tort when performing gratuitous services for friends.
In 2012, Mr and Mrs Burgess decided to landscape their garden in Highgate, London. They obtained a quote from a well-known landscape designer of approximately £200,000. They considered this to be too expensive and consulted their friend and former neighbour, Mrs Lejonvarn, a Netherlands-registered architect living in London.
Mrs Lejonvarn informed the Burgesses that she believed the works could be completed within a smaller budget. Mrs Lejonvarn, who had in the past provided gratuitous design services for the Burgesses, began to provide design and project management services for the landscape project. The parties did not sign a formal contract and Mrs Lejonvarn did not ask for payment from the Burgesses. It was her intention to charge a fee for detailed design work at a later stage in the project.
Ultimately the Burgesses commenced proceedings against Mrs Lejonvarn. The maximum value of the claim was approximately £265,000
However, as the project progressed, the Burgesses became concerned about the quality and cost of the works. The relationship between Mrs Lejonvarn and the Burgesses deteriorated. Ultimately the Burgesses engaged the landscape designer who had provided the original quote to complete the project. The Burgesses then commenced proceedings against Mrs Lejonvarn, claiming in both contract and tort for the increased cost of completing the works (including remedial works). The maximum value of the claim was approximately £265,000.
At this particular trial, the court considered certain preliminary issues in the case in the hope that the answers would clarify matters and enable the parties to settle their differences without recourse to a full trial.
Accordingly, the judge held that there was no contract between the parties: there had been no offer and acceptance capable of giving rise to a contract, as well as no consideration. Therefore the Burgesses’s claim in contract failed and the judge went on to consider the claim in tort.
In this respect, the judge observed that the losses claimed by the Burgesses were ‘pure economic losses’ (see definition below), and noted that while there were conflicting authorities as to whether a professional designer in the construction sphere owes a duty of care in respect of pure economic loss, on balance, a duty is capable of being owed and that ‘a duty of care extends to the protection against economic loss in respect of both advice and any service in which a special skill is exercised by a professional’.
The judge therefore found that Mrs Lejonvarn owed a duty of care in tort to the Burgesses. The duty covered the selection and procurement of contractors and professionals, project management and supervision of the works, and detailed design work. The judge qualified the duties by holding that Mrs Lejonvarn should be judged by the standards of a reasonably competent architect and project manager, and not by the standards of a structural or geotechnical engineer.
Finally, the judge held that the Burgesses and Mrs Lejonvarn had discussed a budget of £130,000 on two occasions and that Mrs Lejonvarn knew the Burgesses were relying on that figure. Mrs Lejonvarn therefore assumed responsibility to the Burgesses for the accuracy of the budget figure.
While this judgment highlights the inherent risk to professionals in offering informal advice, it is important to note that the court emphasised that: ‘this was a significant project … approached in a professional way. This was not a piece of brief ad hoc advice of the type occasionally proffered by professional people in a less formal context. Instead, the services were provided over a relatively lengthy period of time and involved considerable input and commitment on both sides.’
Stacy Sinclair, Fenwick Elliott LLP
IN PLAIN ENGLISH
Pure economic loss
This is a loss which is purely financial. It is not caused by physical injury, damage to ‘other’ property. The cost of repairing patently defective work or any diminution in the value of a property as a result of the presence of a patent defect generally is pure economic loss.
Where parties are not in contract with each other, the law is hesitant to impose a duty of care in respect of pure economic loss, as it would lead to the ambiguous situation of liability in an indeterminate amount, for an indeterminate time, to an indeterminate class of people (Ultramares v Touche, 1931).
In this case, Mrs Lejonvarn did not deny that a duty of care could arise, but challenged the scope of the duty, arguing that a duty of care in respect of pure economic loss could arise from advice given, but not from a duty to perform a service. The judge rejected this argument.
Further, the judge referred to the case of Lidl Properties v Clarke Bond Partnership (1997) where a duty of care had been found to exist with regard to the giving of gratuitous advice in the construction sphere.