Fitzroy Robinson Ltd v Mentmore Towers Ltd

Where a professional services contract provides for a fair proportion of a lump-sum fee after suspension, the assessment should reflect the services actually performed and the contractual allocation of risk. A percentage-completion approach based on the relevant RIBA Work Stages may be appropriate. Time spent is not the governing measure where the contract is not time-based.

A finding of fraudulent misrepresentation does not justify an arbitrary reduction of fees. Any reduction must reflect demonstrated loss or a specific effect on the fair fee. Statutory interest may apply to unpaid contractual instalments before suspension and to the assessed fee thereafter.

Fitzroy Robinson Limited provided architectural services for developments owned by Mentmore Towers Limited, Good Start Limited and Anglo Swiss Holdings Limited. The defendants suspended the services and had failed to pay contractual instalments.

Following an earlier liability judgment, [2009] EWHC 1552 (TCC), the remaining issues concerned the fair proportion of the contractual fees, the effect of an established fraudulent misrepresentation, alleged underperformance and delay, and interest.

The central questions were how the fee should be assessed under clause 16.3 and whether the defendants were entitled to further deductions or remission of statutory interest.

1. Fee assessment. Under clause 16.3, the appropriate method of assessing a fair proportion of the lump-sum fee was the percentage of the RIBA Work Stages completed before suspension. Incomplete stages were assessed by reference to the fair proportion of services actually performed. A time-based calculation would improperly convert the agreed lump-sum remuneration into an hourly entitlement and shift the contractual risk of delay and inefficiency to the defendants.
2. Fraudulent misrepresentation. The earlier finding of fraudulent misrepresentation did not entitle the defendants to withhold all further fees or obtain a general reduction. The only identified financial effect, duplication between Mr Blake and Mr Hobart, was already reflected in the percentage-completion methodology. No further deduction was warranted.
3. Quality, underperformance and delay. The allegations either should have been raised at the liability trial or lacked cogent evidence and proper pleading. In any event, the percentage-completion method did not reimburse inefficient working or delay. The prior finding that FRL was not responsible for delay could not be reopened.
4. Interest. The unpaid contractual instalments were qualifying debts under the Late Payment of Commercial Debts (Interest) Act 1998. Interest ran on those instalments from their due dates until 23 January 2008, when the suspension caused FRL's entitlement to change to the fair proportion assessed under clause 16.3. Interest thereafter ran on £550,218. The statutory rate was 8 per cent above base without remission. The fraudulent misrepresentation and the fact that the final assessed sum was lower than the invoiced instalments did not make remission just.
5. FRL was awarded £550,218 plus VAT, with interest calculated on the stated principal sums and periods. The parties were directed to agree the calculations for a final order concerning interest and costs.