Nigel Witham Ltd v Smith & Anor

A professional services contract must be construed according to its agreed fee structure. A contractual entitlement to percentage fees for the basic workscope does not also create an entitlement to time-based fees for the same work. A claim for additional work or expenses requires compliance with the contractual framework, although a failure to give prior warning of additional fees is not necessarily a complete bar unless the contract makes it a condition precedent.

A party providing professional services cannot unilaterally stop work and demand new payment terms for services already covered by the contract. Such conduct may amount to repudiation. Where a contract calculates fees by reference to the most recent budget estimate, that ordinarily means the last estimate produced and provided before termination, not a later estimate prepared by a third party.

The claimant, a firm of chartered designers and planning supervisors, contracted with the defendants, owners of adjoining hotels, to provide design and project-management services for a redevelopment project. The claimant sought unpaid percentage fees, fees for alleged variations, suspension costs, legal costs, interest and other sums.

The defendants counterclaimed for losses arising from an earlier failure to establish the listed status of the buildings. The project was suspended because of funding difficulties and later terminated after the claimant stopped work and sought additional payment for project-management services. The central issues were the proper construction of the fee and termination provisions, the effect of the claimant’s conduct, and the valuation of the remaining claims.

1. Suspension claim. The claim for time-based fees for work within the original, unvaried workscope failed. Clauses 30 and 36 concerned extra work or expenses, not fees for the same work already remunerated through the percentage-fee mechanism. Alternatively, the parties had agreed, or assumed, that no suspension claim would be made, and the claimant was estopped from advancing it. The claim also sought double recovery and was unsupported by evidence of loss.
2. Termination. The claimant wrongfully repudiated the second agreement by unilaterally stopping work and seeking to recommence only on materially different terms, including additional payment for project-management services already included in the percentage fee. The defendants accepted that repudiation by their letter of 21 May 2006. Alternatively, that letter was a valid notice under clause 34.1. The claimant’s attempted termination under clause 35.1 was invalid because no fee was outstanding and the defendants had given an effective withholding notice.
3. Percentage fee. Clause 40 required calculation by reference to the claimant’s most recent budget estimate before termination. The applicable figure was the last estimate provided to the defendants, not a post-termination estimate prepared by Fileturn. The claimant’s own fees were excluded, other professional fees were included, and a 10 per cent contingency was allowed. Applying the agreed stage completion figures, the percentage fee was £36,116.90.
4. Other claims. The contractual provision for additional fees did not permit recovery of legal costs. The implied term principle stated in Trollope & Colls v North Western Regional Hospital Board [1973] 1 WLR 601 was applied to prevent recovery under the supplemental agreement where the claimant’s own wrongful repudiation caused the project to be aborted. Most variation claims were assessed by reference to the defendants’ expert evidence because the claimant’s timesheets were inherently unreliable.
5. After allowing £24,748 for variations, £2,380 for the listed-building application, £480 for a timesheet error and £38.26 interest and administration charges, and deducting the £1,000 counterclaim and sums already paid, the court gave judgment for the defendants in the sum of £1,320.08. Questions of VAT, interest and costs were reserved.