Riva Properties v Foster & Partners Ltd [2017] EWHC 2574 (TCC)

This was a professional negligence action brought against the Defendant architect by the Claimant developer concerning the building of a five star hotel near Heathrow airport. The project went over budget and was not completed. The Claimant argued that he had told the Defendant that his budget was £70m. The design that the Defendant produced would cost £195m to build. The Claimant increased his budget to £100m and the Defendant said that they would be able to “value engineer” the project down to that price. It was not in fact possible to “value engineer” the project down to £100m. At around the same time as the Claimant was planning the hotel in 2008, the financial crash occurred which meant that it was unable to get funding for the hotel. The Claimant sued to recover the professional fees of £4m incurred in creating the design and for lost profits. The Judge held that the Defendant was in breach of contract and that the Claimant could therefore recover the fees paid to various professional experts. The Defendant had an obligation to identify the key requirements and constraints for the project, of which the budget was “plainly” one. A further breach derived from the Defendant’s advice that the project could be “value engineered” down to £100m. Both expert witnesses agreed that such advice was negligent, and in any event, given that the Defendant knew that the Claimant expected the project to be “value engineered” to £100m, they were under a duty to tell him that this was not possible. The advice as to value engineering the project caused the Claimant to continue to expend money on professional fees. However, the cause of his failure to acquire funding was primarily the financial crash. This would have happened in any event notwithstanding the Defendant’s negligence, and therefore the loss of profits was not recoverable. The Judge also held that the same result would have been reached by applying the analysis in Hughes-Holland and SAAMCo. The Claimant was therefore entitled to the cost of fees paid to the Defendant (~£3.6m).