Firms need to put legal ethics at the heart of their business
The recent judgment of Redbourn Group Ltd v Fairgate Developments Ltd  EWHC 658 highlights the importance, for a developer appointing a consultant to carry out services on a construction project, of ensuring the appointment terms are clear on: (a) circumstances entitling the developer to terminate the Consultant’s employment and (b) any amounts payable by the developer to the consultant on such termination.
Fairgate Developments Ltd (“Developer”) appointed Redbourn Group Ltd (“Consultant”) as the development and project manager on a proposed development in Wembley. Under the terms of the appointment, the Consultant’s fee entitlements were split out in accordance with the various stages of the project. During stage 3/4, the Developer terminated the Consultant’s appointment. The Consultant successfully brought proceedings against the Developer for wrongful repudiation and the issue of the amount of damages to be awarded to the Consultant following the repudiation came before the Technology and Construction Court.
The Consultant claimed that it was entitled to all the fees which would have been payable to it had it carried out all the services under the appointment for all stages of the project (less any costs not yet incurred, but which it would have incurred had it been required to provide the remaining services). The TCC held that the Consultant could only claim those fees which would have been payable up to the point that the appointment could have been lawfully terminated.
In assessing at what point in time the appointment could have been lawfully terminated, the TCC interpreted a clause which only allowed for termination in narrow circumstances as: (a) not separating an exclusive ground for termination; and (b) not implying that the Developer would necessarily employ the Consultant for every stage of the project. The TCC took account of the commercial reality that planning permission would not have been granted and so the Developer would not have proceeded to future stages. The Consultant was therefore only awarded as damages the remaining fees which would have been payable for the stage prior to planning consent being granted.
Although in the end the Developer did not have to pay the Consultant the entire fee under the appointment, the fact that this case reached the TCC, demonstrates the importance for developers of ensuring that consultancy appointments contain sufficiently broad termination provisions in favour of the developer. For example, a right to terminate the consultant’s engagement under the appointment for convenience should always be allowed for (although the courts would look behind the reasons for a purported termination under such a provision and so it cannot be used as a basis for a client to dispose of a consultant purely due to personality clashes for example).
The appointment should also make clear what fees the developer will be liable for in the event of termination, e.g. a fair and reasonable fee for the services provided up to the point of termination only and the consultant’s reasonable costs incurred in bringing the services to an end.
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