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It is often the case that consultants are involved in construction projects at the preliminary stages for speculative projects. There can be a willingness to be involved on what could be a profitable development and it is not unusual for the terms of appointment, and more importantly the fees, not to be agreed at the time of commencing the preliminary work. This can leave the consultants’ right to payment uncertain if the project does not proceed, or the parties fall out before a fee is agreed.

The Court of Appeal* have upheld a High Court decision and ordered payment by a developer of a fee agreed after the work was carried out, notwithstanding that there was no agreement to fees when the services began.

Details

Whilst this decision turns on the facts of the particular case, the main issue was whether payment was for services previously undertaken, or for further work to be undertaken but not carried out.

In the early stages it appeared that there would be payment, although there was no binding agreement in place for this. The developer later became dissatisfied with the progress on the project and engaged another consultant.

The parties later agreed that the consultant would be paid. The agreement stated that further performance was not necessary and that the payment would be due on the granting of a building permit. The consultant claimed for the agreed payment, but payment was not made as the developer argued that further work was required before payment was due. The Judge held that this did not make sense given the previous statement that no further performance was required.

Comment

This case serves as a reminder that there is a need for clarity on payment for services to avoid uncertainty and possible disputes at a later date. There should be clear communication between the parties as to what work is and isn’t going to be  paid for. Even if it is the intention to enter into a full appointment once a project proceeds, it would be good practice to agree the position regarding fees and possibly enter into an interim agreement setting out the clear requirements to protect the position of both parties.

For more information, email blogs@gateleyplc.com.

*D&K Drost Consult GmbH & Anor v Foremost Leisure (Holding) Ltd [2015] EWCA Civ 73 (12 February 2015)


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.