Their initial budget had been £300,000, although this was later increased to £350,000. Mr. Phillips had recommended Rimus Ltd. as contractors for the project. The director of Rimus, Mr. MacManus, was a joint director with the claimant of a property development company, Lowe E Life Ltd. Rimus went into liquidation four months after the project started. There had been no formal contract with the defendants, although the defendants had been keen to put things on a formal footing. A draft contract sent to Rimus had not been signed.
The terms of Mr. Phillips’ engagement were also the subject of some dispute. Mrs. Rilkin had written to the claimant asking him for his scale of fees. Because the house was an old one, and it was difficult to anticipate the actual scope of the works, in a letter dated 29 June 2007, Mr. Phillips had suggested that, in the interim, matters proceeded on a “time expended” see basis in accordance withy an attached schedule of rates. Once a final decisions had been made about the exact scope of the works, Mr. Phillips proposed that this could be changed to a lump sum fee which would be all encompassing. Mr. Phillips gave evidence that this letter had been given to Mrs. Rilkin at a meeting, but this was denied by her. There was no further mention of this letter until later when the dispute about fees came to a head.
Rimus went into liquidation, leaving the Rilkins to find an alternative contractor which pushed up the cost of the project to £583,000. Mr. Phillips’ performance had been less than adequate. He had failed to supervise the works adequately because his firm was so busy, and when his workload fell off, he had been unable to manage the job because he had laid off staff. He had even failed to turn up for a planning application meeting where he was supposed to represent the Rilkins.
Despite all this, he presented his invoice for fees, claiming £147,387.04 based on an hourly rate, plus an additional £32,730 for interior design services. He had never attempted to negotiate a lump sum. When the Rilkins failed to pay, he instructed a debt collection company, ESPI Ltd to enforce payment of the late invoiced sum.
ESPI used threatening and bullying behaviour. Mr. Phillips had known about this because the Rilkins’ solicitor had written to him, telling him that they had advised the Rilkins to report the matter to the police. This harassment continued, and matters came to a head when a corrosive liquid was poured over Mr. Rilkin’s Maserati motor car causing over £15,000 damage. The Rilkins obtained an injunction restraining Mr. Phillips from harassing them.
When Mr. Phillips’ claim for his fees came to court, the judge found that he had been aware of the police involvement with ESPI, which should have alerted him to the fact that something illegal was going on. He should have terminated ESPI’s involvement, and his failure to do so sent out the message that he was not imposing any restriction on how they collected the debt. He could have brought the intimidation to an end but had not done so, and had closed his eyes to the conduct of his agents. Vicarious liability can attach to the tort of harassment, and in the present case, Mr. Phillips was vicariously liable for ESPI’s conduct. He was liable for the cost of repairing the damage to Mr. Rilkin’s car and there was clearly an equitable set-off which was inseparably connected with the dealings or transactions which gave rise to the subject of the claim.
As for the recovery of his fees, the judge was satisfied that Mr. Phillips had know about Rimus’ precarious financial position, and he had been reckless in recommending them and failing to warn the Rilkins. Taking into account Mr. Phillips’ performance, the fee due to him was reduced by 25% to 9% as representing a reasonable fee percentage for his architectural services. This fee percentage was to be applied “to the final construction cost “executed under the architect’s direction”, as provided for in the RIBA guidance. There could be no justification for charging a fee percentage on money spent after Mr. Phillips had abandoned the project and the builder went bankrupt except where he could demonstrate that the increase in cost of works was a cost of construction that was part of the original project, or caused by a bona fide increase in scope executed under claimant’s direction. Where there was no architect’s input, however, there should be no architect’s benefit.
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Michael Phillips Architects Ltd. v Riklin and Riklin, [2011] EWHC 27 (TCC)
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