Lessons from Fosters’ Heathrow hotel debacle
Stephen Homer and Lianne Edwards of Ashfords LLP, who acted for Riva in its successful High Court battle with Foster + Partners, explain the implications of the ruling.
The High Court recently ruled on a case concerning the duties of an architect – Foster + Partners – regarding budgetary constraints on a project, which offers much food for thought for designers and architects.
Judgment was given by Mr Justice Peter Fraser on 18 October 2017 in the case of Riva Properties Limited, Riva Bowl Ltd, Riva Bowl LLP and Wellstone Management (“Riva”) against Foster + Partners.
The case concerned the world famous architecture practice and its duty to design a five-star hotel in line with a budget indicated by the client, Riva.
The design in question included 13 floors, seven below ground, 600 bedrooms, conferencing and leisure facilities, a bowling alley and parking set out in a village theme at a site near Heathrow.
Riva informed Fosters that its budget was £70m, later increased to £100m. However, when Fosters’ design was costed, its build cost was estimated at £195m, more than double Riva’s original budget.
The design was carried out in 2007 and early 2008 under a bespoke appointment which incorporated RIBA Stages A – L – equivalent to the current RIBA work stages 0 - 6.
Riva alleged that Fosters had failed to carry out RIBA Stages A and B as Fosters had failed to consider Riva’s budget, and had designed a hotel that would cost more than twice its original intended budget to build. As a result of the build costs, the hotel never obtained development finance and was not built.
“Justice Fraser held that designing a project to match the constraint of budget is not synonymous with providing advice on costs and therefore an architect’s duty of care extended to consideration of a budget, irrespective of the appointment of a quantity surveyor.”
In his judgment, Justice Fraser noted that RIBA Stage A required Fosters to “identify requirements and possible constraints" and Stage B required Fosters to "confirm key requirements and constraints”.
He considered that “a client’s budget for a project is plainly a constraint”. In the circumstances, Justice Fraser considered that an architect must “establish whether there was a budget or not at an early stage, as that is the only way that all of the key requirements and constraints could have been identified”.
Justice Fraser further considered that the independent appointment of a quantity surveyor by the client does not affect the extent of a designer’s duty to consider the budget.
He held that designing a project to match the constraint of budget is not synonymous with providing advice on costs and therefore an architect’s duty of care extended to consideration of a budget, irrespective of the appointment of a quantity surveyor.
In the circumstances, it was clear that Fosters was required to identify any constraints and design the project to match the constraint of budget. However, the architecture practice appeared to have jumped straight to Stage C and designed without any thought for costs.
In addition to this main breach, further breaches were alleged against Fosters in respect of advice given by Fosters that the design could be value engineered from £195m to £100m. It was alleged Fosters failed to warn Riva that the design could not be value engineered to such an extent.
Given the fact it was so “blindingly obvious” that the Fosters design could not be value-engineered to £100m, Justice Fraser found that Fosters was in breach of contract for positively advising it could be value engineered or, having been made aware that the claimants intended to value engineer the design to £100m, failing to warn this was not possible.
Although Riva was not successful in claiming lost profits for reasons of causation, as a result of the breaches established, Justice Fraser awarded the Claimants £3,604,694 plus interest – the estimated cost to obtain a new hotel design and planning permission.
This case serves as a warning to designers that they cannot ignore the client’s budget. Cost and budget are 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.
This article is co-authored by Stephen Homer and Lianne Edwards of Ashfords LLP, which acted for the claimants