UK architect Foster + Partners is facing a £3.6m bill after a High Court judge found it had designed a five-star hotel near Heathrow Airport that would have cost its developer more than twice the original budget.
Commissioned in 2007, the hotel was never built because the developer couldn’t get financing in the aftermath of the financial crisis, but he pursued the renowned architect for loss of profits and for the cost of finding another design team who could stay on budget.
His lawyer said the victory warns architects "they cannot design in a vacuum".
Foster + Partners said it was "shocked and disappointed" by the decision, but that it would "see what lessons or actions should be taken".
After an 11-day trial ending 18 October the judge ruled in favour of Riva Properties Ltd and three other companies owned by developer John Dhanoa, who alleged they’d been left with a design – covered by a "distinctive layered glass shell", as Foster + Partners described it – that would cost £195m to build when their budget had been £70m, later revised up to £100m.
Riva failed in its claim for lost profits but was awarded £3.6m for losses incurred in finding a new team to design a hotel that could be built for £100m.
"This case serves as a warning to designers that they cannot design in a vacuum," said the claimants’ lawyer Stephen Homer of Ashfords LLP.
"Cost and budget is a key constraint and should always be identified and considered when designing any project, even when the provision of cost advice is expressly excluded from the designer’s obligations," said Homer.
"We are shocked and disappointed by the judgement," a spokesperson for Foster + Partners said, reports Construction Manager.
"We do however take the judge’s comments seriously and are undertaking a review led by our independent directors, supported by Travers Smith, an independent law firm, to see what lessons or actions should be taken from this case."
Heard in the Technology & Construction Court, a branch of the High Court, the case highlights the pitfalls to all parties in construction procurement.
Foster + Partners (Foster) was contacted in July 2007 and formally instructed to carry out RIBA Stages A – L in September 2007, records Ashfords.
The first drafts were completed around Christmas 2007 and involved a 600-bed hotel, seven floors above ground and seven underground on the Bath Road near Heathrow, with conference and leisure facilities, a bowling alley and parking, all set out in a village theme.
When it won planning permission in 2009 Foster described it as "characterised by a distinctive layered glass shell, which floods the public spaces with daylight".
"The rooms are contained within six pavilions," Foster said, "linked by bridges and wrapped in a unifying glass envelope, which acts as a barrier to aircraft noise. The entrance lobby has a floating glass deck with views down to the sunken restaurant level, shallow pool and waterfall."
Riva claimed it notified Foster of an intended overall budget of £70m, later increased to £100m. But when the hotel design was costed in January 2008, the estimated cost came in at £195m.
The claimant alleged Fosters said the hotel design could be "value engineered" – meaning adjusted for cost without drastic visual changes – to within a budget of £100m, which was impossible.
In its defence Foster denied ever being informed of the budget and denied giving any advice that the scheme could be "value engineered". Among other defences, it blamed Riva for not hiring a cost consultant early enough.
In a lengthy judgement, Mr Justice Fraser, among other rulings, agreed with Riva that Foster failed to carry out RIBA Stages A and B (now work stages 0 – 1) which includes a duty to establish the budget.
Justice Fraser also found Foster had advised Riva that the scheme could be value engineered to £100 million when, in the words of a witness, it was "blindingly obvious" that it could not.
Image: Architect’s interior render of the five-star hotel planned near Heathrow (Foster + Partners)
All the written evidence is in the contract paperwork.
Interesting judgement. I remember using Ashfords on a £150,000 flooring claim against my company. Despite receiving recommendations from them to offer a settlement I was determined to fight the claim. The floor cost to install was only £20,000 but client would not pay as the white floor needed to be cleaned. With claimants lawyers on no win no fee they would have been entitled to double their costs, which with my costs and £150,000 floor replacement claim could have ended up at £1,000,000 cost. Shows to me the injustice of legal cost to size of claim. Defending took 2 years of my time and 8 days in court. Thanks to good Barrister Nicholas Collings and perceptive judge we won the case including our full costs. However the 2 years of my time collecting and driving the evidence could not be claimed. Interesting that it is only the legal team that get paid for the case you have to put together yourself!
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