Pickard Finlason Partnership Ltd v Lock & Anor [2014] EWHC 25 (TCC)

Case No 2MA50103[2014] EWHC 25 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Venue MANCHESTER DISTRICT REGISTRY
TECHONOLOGY AND CONSTRUCTION COURT
Venue Manchester Civil Justice Centre,, 1 Bridge Street West, Manchester M60 9DJDate 15 January 2014
Before
HIS HONOUR JUDGE STEPHEN DAVIESSITTING AS A JUDGE OF THE HIGH COURT
Between
PICKARD FINLASON PARTNERSHIP LIMITEDClaimant(1) ADELE LOCKDefendants(2) MATTHEW LOCKDefendant
Mr Alexander Hickey (instructed by Hill Dickinson Solicitors LLP, Manchester) for ClaimantMiss Lynne McCafferty (instructed by Meade King Solicitors LLP, Bristol) for DefendantsHearing Hearing dates: 4, 5, 6, 7, 8, 11, 12, 13, 14, 15, 21 November 2013Draft judgment sent: 17 December 2013
JUDGMENTHis Honour Judge Stephen Davies.His Honour Judge Stephen Davies:INTRODUCTION
[1]The claimant, Pickard Finlason Partnership Ltd (“PFP”), is a multidisciplinary professional building design consultancy practice, based in Hale, Cheshire. Its directors are Alex Finlason and Simon Pickard.[2]In 2008 the defendants, Adele Lock and Matt Lock (“the Locks”), purchased a grade 2 listed property in Prestbury, Cheshire, known as Butley Hall, with a view to its development. At the time Butley Hall was subdivided into 7 self-contained apartments. The Locks had purchased Butley Hall with the aid of funding from their bankers, Allied Irish Bank (“AIB”), who had also agreed in principle to make funding available for the development.[3]In April 2008 the Locks retained PFP to provide what was effectively a full professional service in relation to the design and construction of the development, in the following work stages:(1) Initial feasibility stage – stage one: to identify and advise upon the various development design options, to enable the Locks to decide whether to proceed and if so to choose their preferred scheme.(2) Scheme design stage - stage two: to develop the design of the preferred scheme through to making a planning application.(3) Detailed production information on stage - stage three: to complete the design of the preferred scheme, to apply for Building Regulations Approval, to prepare and send out tenders, and to negotiate a contract sum with the preferred contractor.(4) Implementation stage – stage four: to set up and administer the building contract, to manage the project through to practical completion, to deal with the final account and with the defects liability stage.[4]The parties agreed that for undertaking this work PFP would receive a fee equivalent to 10% of the final cost of the project. They also negotiated and agreed bespoke and, in some respects, complex terms as to payment, particularly in relation to work stages one and two. In summary:(1) PFP would be entitled to a fee of £25,000 for taking the design up to planning determination, payable in instalments of £6,250 in stage one, £12,500 in stage two, and the balance of £6,250 in the planning determination period.(2) Upon planning permission being obtained and the development cost accurately established, PFP would be entitled to a further payment to bring the amount payable up to 40% of the total fee.(3) The balance of the fee would be agreed as a lump sum, 35% of the whole to be paid upon completion of stage three and the final 25% upon completion of stage four.(4) PFP would also be entitled to an incentive payment, reflecting the gross development area achieved on planning permission, the amount of such payment to be calculated and paid on completion of the project.[5]PFP proceeded to design a scheme which included not only a refurbishment of Butley Hall itself but also the construction of a new two storey rear section including two wings, a courtyard and an underground car park, which would provide space for 12 apartments in total. In order to counter neighbour and planning objections about the scale of the rear extension the scheme was revised in July 2008, by reducing the height of the rear extension. However to achieve this without reducing the available space PFP’s revised design involved sinking what had been the ground floor below existing ground level, so as to create what has been referred to as a "semi-basement" level. This included the creation of a semi-basement section directly underneath the footprint of Butley Hall. It is the impact of this revised scheme upon the overall development, and specifically the feasibility of constructing the section below the existing building, having regard to the works necessary to support and protect the existing building both during and after the construction of the semi-basement, which is at the heart of this case. For convenience, I shall refer to these works as "the temporary works" even though from an engineering perspective they are more properly described as both temporary and permanent works.[6]In December 2008 an application for planning permission and listed building consent was submitted, and in March 2009 planning permission and listed building consent was granted for the revised scheme. Accordingly, PFP issued its invoice for the balance of the 40% to which it considered it was entitled at that point. However the fundamental problem which confronted the Locks at that point was that by that time AIB had decided that they were simply not prepared to fund a development of the scale then envisaged, and without that funding the Locks did not have the means to pay PFP its invoice. The Locks were also unhappy that by this point PFP had, as they saw it, failed to obtain firm costs from contractors which they could present to AIB or any other potential funder in order to move the development forward. In the result there occurred an irretrievable breakdown of the relationship between the parties and, as the Locks proceeded to explore other options, they reached the conclusion that PFP's revised scheme was fatally flawed, and that PFP had failed to give them proper advice at the relevant times about the risks and costs of the revised scheme.[7]Subsequently, after a number of detours, the Locks have obtained funding for and proceeded to develop Butley Hall in accordance with an alternative scheme which, instead of the construction of a rear section, involves the construction of a separate building in the grounds to provide additional apartment space (albeit not as much as provided under PFP’s revised scheme). That process is still underway.[8]However once it became clear that neither the Locks nor a potential purchaser was interested in developing Butley Hall in accordance with its revised scheme PFP decided that it was no longer prepared to wait for payment of its invoice and, in 2010, it instituted adjudication proceedings against the Locks. That claim was unsuccessful but, nothing deterred, PFP decided to pursue its claim through legal proceedings and, in October 2012, issued these proceedings in this court. The case was listed and came on for a 10 day trial in November 2013. The respective cases have been presented with skill, expedition and courtesy by both counsel. The evidence took 10 days to complete and, following a further day of oral submissions, I reserved judgment.[9]The outcome of the claim is of very considerable importance to both parties, both from a financial viewpoint and also because, it has seemed to me, this dispute has turned into a personal battle between Mr Finlason and Mr Pickard on the one hand and the Locks on the other. They have had ample opportunity to resolve the dispute without going to trial, but have not done so. On any view and regardless of the outcome it is a matter for regret that what had been an extremely good working relationship between the parties has deteriorated to such a level that the parties have been unable or unwilling to settle their differences and have instead expended such substantial amounts of time, money and, I am sure, stress and anxiety in the pursuit and defence of their respective claims.

SUMMARY OF CLAIMS

[10]PFP’s case includes a number of separate claims:(1) First and foremost, a claim for £181,979.52, being the VAT inclusive amount of its invoice for payment of the balance of the 40% fee ("the invoice claim").(2) Second, a claim for £93,693, being the VAT exclusive amount of its claim for payment of the incentive fee to which it contends it was entitled as a result of having achieved planning permission for the revised scheme ("the incentive fee claim”).(3) Third, a claim for £62,967.17, being the VAT exclusive amount of its claim for payment of what it contends was detailed design work done at the Locks’ request in advance of planning permission being achieved ("the stage three claim").(4) Fourth, a claim for £192,130.34, being a claim for damages for its loss of gross profit on the remaining work stages which it contends the Locks wrongfully prevented them from earning by preventing them from seeing the project through to completion ("the loss of profits claim”).(5) Fifthly, a claim under contract for its costs, including its time costs, of making these claims, and including the costs of the unsuccessful adjudication proceedings ("the costs claim").(6) Sixthly, and finally, a claim under contract or under statute for interest.[11]The defence, as contained in the Re-Re-Amended Defence and Counterclaim and as advanced at trial, raises the principal points:(1) PFP is not entitled to be paid the invoice claim because it failed to meet a condition precedent to rendering the invoice that it should establish, post-planning permission, a firm and accurate cost for the building works.(2) PFP is not entitled to be paid the invoice claim because it failed to undertake all of the stage one and stage two services required under the contract. In particular, in relation to stage one it failed to provide a feasibility report, including a cost estimate, for the revised scheme that it was putting forward as the preferred scheme, and in relation to stage two it failed to provide a competently prepared cost plan for that scheme. Furthermore, at both stages it failed to provide proper advice about the risks and costs associated with its revised scheme, when it should have advised against submitting a planning permission application until those risks and costs had been properly addressed. It is said that such obligations were sufficiently important, and such breaches sufficiently substantial, to disentitle PFP from receiving any payment for these work stages. Further or alternatively it is said that had PFP properly performed its duties in these respects the Locks would never have applied for – and thus obtained - planning permission for the revised scheme, with the result that the condition precedent to PFP’s entitlement to render an invoice would never have arisen. Further, it is said that PFP's breaches in these respects have caused the Locks to suffer loss and damage, which they are entitled to set off against the invoice claim.(3) PFP is not entitled to be paid the invoice claim because it failed to take reasonable care to design a scheme which was buildable, capable of being built in accordance with planning permission, or capable of being built at a reasonable cost so that it could reasonably be expected to be profitable. It is said that PFP's obligations in this regard were sufficiently important as to be conditions, and that its breaches are sufficiently substantial as to disentitle it to payment. Alternatively, it is said that PFP's breaches in these respects have caused the Locks loss and damage which they seek to set off against the invoice claim.(4) PFP has committed other breaches of duty, particularly that: (a) the revised scheme produced restricted lighting in the semi-basement apartments, and PFP failed to draw this to the Locks’ or their valuers’ attention; (b) PFP failed to advise the Locks of the importance of obtaining a proper ground investigation report before making a planning permission application, and the risks of not doing so, particularly given the obvious potential impact of adverse ground conditions upon the revised scheme, particularly the temporary works, and/or PFP failed to action the Locks’ clear instructions to obtain a ground investigation report before any planning application was submitted. On the Locks’ case the actual ground conditions as subsequently discovered revealed that the revised scheme was unbuildable, not commercially unviable, and not capable of being built in accordance with the planning permission.(5) As a result of these breaches the Locks claim to have suffered substantial loss and damage, as set out in their Counterclaim. In short, in addition to a claim for abortive costs incurred in pursuing the revised design (in the sum of £12,718.25) and for repayment of the £25,000 paid to PFP, there are substantial claims made in relation to what is said to be a delay of 27 months in completing the development, said to have been caused by PFP, comprising: (i) the prolonged costs of ownership of the property from June 2011 to September 2013, in the sum of £296,896; (ii) interest to compensate for the delay in receiving the profit on the completed development, in the sum of £154,801.(6) PFP is not entitled to the incentive claim because of its breaches as set out above. Further, since the incentive payment was only to be calculated and paid at the completion of the project, the Locks are not obliged to pay it since they were justified in terminating PFP's retainer because of its breaches. The Locks also contend that in circumstances in which they were unable to obtain funding for the revised scheme, and were only able to do so once different architects had obtained a different planning permission for a different design, it cannot be said that the development would ever have proceeded to completion on the basis of the revised design or on the basis of the gross area of development for which planning permission was obtained.(7) PFP is not entitled to the stage three claim, because it was never made clear to the Locks that PFP was undertaking work on the basis that it was stage three work for which it was entitled to claim payment, as opposed to work to achieve cost savings and more detailed and accurate cost estimates, which they contend that PFP had promised to provide in order to induce them to agree to submit a planning permission application for the revised scheme. It is also contended that PFP has failed to provide any evidence of the amount of its stage three claim.(8) PFP is not entitled to the loss of profits claim, because the Locks were justified in terminating PFP's retainer because of its breaches. It is also contended that in circumstances where the development which they have proceeded with is significantly different to the revised design, it cannot be said that the project has proceeded to completion so as to entitle PFP to payment on the basis of the revised design. It is also contended that PFP has failed to provide any evidence of the amount of its loss of profits claim.(9) PFP is not entitled to recover costs or interest under contract because the SFA 99 conditions, upon which PFP relies, were not incorporated into the contract. It is also said that PFP has failed to provide any or any acceptable evidence of its management time or cost spent on seeking to recover its claims.[12]I will address these competing arguments in this judgment under the following section headings:(1) The witnesses of fact: paragraphs 13 - 37.(2) Relevant events, including my findings on the disputed issues: paragraphs 38 - 192.(3) The expert evidence, including my findings on the disputed issues: paragraphs 193 - 274.(4) Consideration and decision on the issues: paragraphs 274 - 361.

THE WITNESSES OF FACT

[13]The most important witnesses of fact in this case are Mr Finlason, Mr Pickard, PFP’s other principal witness Mr Daccus, and Mrs Lock. There are a number of important factual disputes between the first three witnesses on the one hand and Mrs Lock on the other. This is not, however, a case where I was able to form a clear view that the evidence of one side was so obviously more reliable and credible than the other that I could safely prefer that side’s evidence in every material respect where there was a dispute. They all came across to me as fundamentally decent, honest people, none of whom were setting out to deceive the court. However I was not persuaded that any of them had a completely accurate independent recollection of events. That is not surprising, since the crucial matters in dispute date from 2008 - 2009, and it is inevitable that their memories of the detail of events, in circumstances where at the time there was no particular reason to remember every aspect of the detail in the context of a complex and fast moving project, will obviously have faded. Furthermore, given the acrimonious circumstances in which the relationship came to an end, and the determined pursuit of the claim and counterclaim by the parties, and the importance of the outcome of this case, it is not surprising in my view that each of the main protagonists has in certain respects persuaded themselves of a version of events most favourable to their own case. Although Mr Daccus is not personally involved in the litigation, I consider that he has also fallen victim to that process to some degree. It is a particular matter of regret that PFP failed to provide a contemporaneous written record of advice given in a number of significant meetings, by issuing minutes of meetings or letters recording the advice given, where there is now a dispute between the parties as to precisely what was said and done. Fortunately, however, there is sufficient material by way of contemporaneous documentation, including e-mail traffic, for me to reach a reasonably confident view as to what actually happened where there is a dispute, by testing the oral evidence against the contemporaneous documentation and my assessment of the inherent probabilities.[14]I refer to the individual witnesses in the order in which they gave evidence.

Alex Finlason

[15]Mr Finlason is a qualified architect with considerable knowledge and experience in matters architectural, especially the restoration and redevelopment of listed buildings, including dealing with the complexities of obtaining planning permission and listed building consent in relation to such projects. He clearly has a justified confidence in his ability to persuade both his clients and planning and conservation officers of the merit of his schemes.[16]As I have already indicated, he is one of the witnesses whose evidence I cannot accept as completely reliable, in his case for the following principal reasons:(1) His witness statement contained much in the way of comment and speculation, all of it adverse to the Locks, and some without any apparent foundation. To give just one example I refer to paragraph 131 where he appeared to accuse Mrs Lock, without any apparent basis, of seeking to cut PFP out of involvement going forwards with the scheme, with a view to her own profit.(2) His witness statement also contained a number of errors, either careless or worse, again all adverse to the Locks. For example: (a) paragraph 22, where he said that "no mention of the budget was included in the client briefing agenda" for the first design team meeting, when that was obviously not the case - see section 4 of the agenda. (b) paragraph 30, where he claimed that a written feasibility report had been "issued to the Locks for them to provide to their lawyers and AIB" when, as he had to admit in cross examination, in fact no report as such had ever been produced or provided, and what he was referring to was a document produced retrospectively for the purposes of the adjudication. This was particularly concerning since, as he must have known, PFP's failure to provide a written feasibility report has always been one of the Locks’ principal complaints, yet felt able to make a witness statement containing a very serious inaccuracy. (c) paragraph 39, where he claimed that he had discussed the revised scheme with Mrs Lock before a meeting with others on site on 15 July 2008 but, which he subsequently accepted in his supplementary witness statement and in cross examination, was “probably” not the case. (d) paragraph 50, where he claimed that Mrs Lock had not only seen a particular document containing costs information but was "fully aware of the proposed costs of the scheme as it then stood", thus conveying the clear impression that he could speak to her having been aware of these costs from having read the document, when in his supplementary witness statement and in cross examination he said that all he had done was to give it to her, and he did not see her read it (nor did he suggest that he had any subsequent discussion with her about it or was otherwise able to point to evidence that showed that she must have read it). (e) paragraph 62, where he claimed that it had always been the intention to undertake the temporary works using a contiguous piling solution rather than a mass concrete underpinning solution, whereas that was evidently not the case. In his supplementary witness statement he sought to clarify this, but still suggested that the change had been made in November 2008 when in fact it was not made until February 2009. This was also particularly concerning because it seemed to me that the error in relation to the date was not simply a careless mistake, but an attempt to defuse a criticism made by the Locks of the design of the temporary works at the time when it was agreed to submit the application for planning permission.(3) In cross examination he tended to stick to his version of events, even where it conflicted with contemporaneous documentation. Particular examples appear from the next section where I refer to the chronology.

Nick Daccus

[17]Mr Daccus was employed by PFP from September 2005 until March 2012 when he left to set up his own consultancy. He was an associate architect, and acted as project architect on this project under the supervision of Mr Finlason. I formed the clear view that he was very defensive both of his own role in the project and PFP's overall performance. His witness statement suffered from many of the same shortcomings as did Mr Finlason's. So for example:(a) in paragraphs 3 and 6 he made comments about whether it was Mr Finlason or Mrs Lock who had initiated the incentive scheme, by reference to meetings where he was not present;(b) in paragraph 18 he suggested that he had discussed the practicalities of piling within Butley Hall in August 2008, justifying that suggestion by reference to a document which I do not consider was likely in fact to have led to his having had that discussion at that time;(c) in paragraph 27 he supported - and indeed expanded upon - Mr Finlason's evidence about the production of the feasibility report when not only was his evidence about a feasibility report being submitted wrong but so, and even more so, was his further evidence to support his contention that it had been provided at the time;(d) in paragraph 34 he also gave the wrong date for the introduction of the revised design from mass concrete underpinning to contiguous piling. It seemed to me that he had been far too willing to include in his witness statement evidence which was supportive of PFP’s case without satisfying himself that he could properly speak to it from his own recollection. In his oral evidence he seemed to me to be rather guarded and rather reluctant to admit any error.

Chris Munro

[18]Mr Munro is a director of Bell Munro Consulting Ltd ("Bell Munro"), a structural surveying practice. He is a structural engineer by qualification and profession. Butley Hall was one of a number of projects on which he has worked with PFP. Due, it appears, to that close working relationship, he was willing to provide civil and structural engineering services and advice up to planning permission stage as a sub consultant to PFP on an "at risk" basis, in anticipation of being retained on a paid basis should the project proceed to detailed design and beyond.[19]His witness statement was extremely succinct, providing little if any real detail in relation to his involvement in the project, particularly in relation to the temporary works. It seemed to me that he was keen to dissociate himself from the structural design of the supporting works to Butley Hall to enable the semi-basement to be constructed. First he emphasised that so far as he was concerned he had never purported to provide any design of that element of the work, stating that this was a contractor design element as temporary work, rather than a structural engineer design element as permanent work. That was notwithstanding that in the drawings he had produced no such qualification was stated, and notwithstanding t that PFP's own engineering expert, Mr Tutt, agreed that these were temporary and permanent works. It is perhaps not surprising, given that he was working without reward, that he would not have been inclined to spend more time than absolutely necessary to this project at this stage. Indeed, in fairness to him, it could be said that he spent more time than others might have been willing to do, particularly in the later stages in assisting potential contractors in understanding the nature of the works for which they were being invited to put forward prices.[20]In giving evidence, he came across to me as generally supportive of PFP, but not betraying any particular ill will towards the Locks, and I consider his evidence to be broadly reliable.

Simon Pickard

[21]Mr Pickard does not state his professional qualifications, but describes his role within PFP as being primarily project management, consistent with his previous employments, and states that his input in relation to the redevelopment of Butley Hall was to coordinate the "broad cost plan" and programming that was to be provided to the Locks and to advise on matters of procurement.[22]As with Mr Finlason and Mr Daccus, the content of his witness statement showed that he did not have a completely objective view of the case. In places he expressed himself in extremely strong terms which I am satisfied were neither appropriate nor justified: for example paragraph 69 where he describes the Locks’ defence as "a contrived set of baseless allegations cynically put forward by a commercial developer to do nothing other than deprive a professional consultant of its fees". Indeed, it seemed to me that it was largely the intemperate tone of his initial correspondence in relation to the non-payment of the invoice, coupled it must be said with Mrs Lock’s equally intemperate response, which set the parties at loggerheads from the start of the dispute, and from which they were never really able to recover. By and large his oral evidence was more measured in tone, although again I formed the view that he was in many, although not all, respects reluctant to admit any errors even where his evidence was inconsistent with contemporaneous documentation.

Philip Hughes

[23]Mr Hughes is the managing director of PH Property Holdings Ltd (“PHP”), which is the company with whom the Locks entered into negotiations, and to whom they subsequently contracted to sell Butley Hall, after they had been unable to obtain funding to develop it in accordance with PFP's revised scheme. PHP's involvement in the matter was largely a matter of documentary record, and as such not contentious. Perhaps unfortunately Mr Hughes had allowed himself to be drawn into the debate between the parties as to the buildability and viability of PFP's revised scheme, and he had expressed himself in uncompromising terms both in a letter submitted in the adjudication and in his witness statement in these proceedings. Although he was cross-examined about these views, and about whether the letter was written with the deliberate intention of making it appear contemporaneous rather than recording events which had already occurred, these issues are not directly relevant to my determination, and I need express no view about them. The only other relevant aspect of his evidence was his confirmation, if indeed it was necessary, that in 2008 - 2010 the state of the economy and, in particular, the property sector, was such that developers and funders were particularly nervous of any developments involving significant elements of risk.

Daniel Gale

[24]Mr Gale is the sales director of PHP. His evidence added little, if anything, to that of Mr Hughes, and I need not refer to him or his evidence separately.

Sharon Catterall

[25]Ms Catterall is the managing director of Flourish Capital Ltd ("Flourish"), the provider of mezzanine finance facilities to the Locks for the new scheme. She gave evidence as to its lending criteria both in 2012, when it in fact advanced monies to the Locks' company, and earlier in 2009 - 2010, and I accept her evidence in these respects. She had also in her witness statement expressed a view that Flourish would not have been prepared to lend to the Locks in 2009 - 2010 to redevelop based on the PFP revised scheme, given her perception of the risks associated with that scheme. Whilst I have no reason to doubt the genuineness of that view, I do not regard it as directly relevant to my determination, since I think that it is based to a significant degree on second hand knowledge and hindsight.

Mark Roberts

[26]Mr Roberts is a financial broker, who introduced the Locks to Flourish and to Close Brothers, the provider of senior finance facilities to the Locks for the new scheme. He gave evidence as to the state of the funding market for property development in 2009 - 2010, which I accept.

Michael Kyte

[27]Mr Kyte is a chartered surveyor and valuer practising in the Prestbury office of local estate agents Gascoigne Halman. In that capacity he had provided a valuation appraisal of the development as represented by PFP's revised scheme in January 2009. He gave evidence to the effect that at that time he had assumed that all of the proposed apartments had ample natural light and good orientation, which I accept on the basis that I would not have expected him when providing what was effectively a free marketing appraisal to conduct a painstaking review of the PFP plans. He also however gave evidence that if he had known then what he now understood to be the true position he would have reduced his valuation of the affected apartments by 15 - 20%. Whilst I deal with this point when I come to review the expert valuation evidence, I should say here that I do not accept his evidence on this point, because I consider it to be retrospective opinion evidence made without a full understanding of what the true position actually was.

Kevin Hargreaves

[28]Mr Hargreaves is a design director of Globe Management Services Ltd ("Globe"), a construction management company which was involved on PFP's instigation in 2008 - 2009 to provide an estimate of construction costs for the project and which, in due course, provided a tender for the works. He was called as a witness by the Locks, although PFP also places considerable reliance on his evidence. He came across as an obviously independent and knowledgeable witness with a reasonably good recollection of events, bearing in mind the passage of time and the fact that Globe had destroyed most of the documentation which it had held at the time – perfectly reasonably I should add, given that it related to a tender for a project which did not proceed.

Edward Naden

[29]Mr Naden is an estate agent with Holmes-Naden estate agents, also with an office in Prestbury. He had provided a sales appraisal of the development as represented by PFP's revised scheme in autumn 2008, which was extremely positive. His evidence, like that of Mr Kyte, was to the effect that at the time he was unaware of any restriction on the quality of the natural lighting in certain of the apartments. However, unlike Mr Kyte, his evidence to this effect was vigorously challenged as being contrary to Mr Finlason's evidence, supported by Mr Daccus, to the effect that he had been specifically alerted to the position when taken through the plans at a meeting in September 2008. As I find, I prefer Mr Naden's evidence on this point, for reasons I shall give. Again, however, Mr Naden's evidence was that he would have significantly discounted his valuation of the affected apartments had he known the true position and, indeed, he went so far as to say he would have positively advised Mrs Lock not to proceed at all with the development on that basis. I am unable to accept that evidence for the same reasons as I am unable to accept that of Mr Kyte. I also suspect that Mr Naden was also a little defensive at this stage because, as it transpired, his appraisal was significantly higher than any of the other contemporaneous appraisals or valuations.

Simon Powell

[30]Mr Powell is a director in the banking division of Close Brothers, to whom I have already referred. He gave evidence about Close Brothers’ activity in the lending market in 2009 - 2010, which I accept.

Adele Lock

[31]Mrs Lock is a woman in her 30’s, married to Mr Lock with whom she has two children. She is an entrepreneur from a business family background. She had started her career working in her parents' business, and had also been responsible for managing the conversion of a property into flats for her parents. She and Mr Lock had founded, and continue to own and run, a male grooming products business. She and Mr Lock had also developed two properties, whilst living in them at the same time. In 2008 she was looking for a further and more substantial development opportunity, and found it in Butley Hall. Although the project was very much a joint one, it is also clear that it was Mrs Lock who led on the project, no doubt because Mr Lock was concentrating more of his time and energy on the grooming business. Mrs Lock was not however, in the same way as was Mr Hughes, an experienced property developer, but she was obviously keen to project herself as having experience in property development in her dealings with PFP.[32]As with PFP’s witnesses, her witness statement also demonstrated a lack of objectivity and a considerable measure of hindsight. Her oral evidence suffered from the same vices. She was unwilling at times to accept points which were put to her and which really there was no basis for contesting. There were other occasions when she speculated about what had or what had not happened. In short, for substantially the same reasons as with the other crucial witnesses I was unable to accept her evidence as completely reliable.[33]I should, however, say that in so far as it was suggested that she had manufactured documents, I reject that suggestion. This point particularly arose by reference to three documents which she said she had produced at the time when the parties were discussing the terms of PFP's retainer, and which at certain points she had claimed she had provided to Mr Finlason as representing what had been discussed and agreed. In her evidence she accepted that the first two had not in fact been provided to Mr Finlason, although insisting that she had produced them at the time for her own use as an aide memoire, but continued to assert that she had provided the third to Mr Finlason. Whilst I am satisfied that she was wrong about that, equally I am satisfied that these documents were produced by her at the time on the Locks’ computer, for use as an aide memoire to assist her in her discussions with Mr Finlason. In short, insofar as it was suggested that they were manufactured once the dispute had arisen to seek to support her case, I reject that assertion.[34]There were, however, also a number of occasions where Mrs Lock had made statements or assertions in contemporaneous documentation which could be shown to be incorrect. For example on a number of occasions she had asserted that it had been demonstrated that a scheme with fewer than 12 apartments was not financially viable, when there is no evidence that this had in fact been demonstrated, and on another occasion she had suggested to PFP that it should describe an apartment as having two bedrooms and one study instead of three bedrooms, in order to head off an objection about the total occupancy of the revised scheme. Although there may be a fine dividing line between what a business person would regard as acceptable in business dealings and what others might regard as untruthful, my view is that these demonstrate Mrs Lock to be a hard nosed business woman willing, on occasion, to "bend" the truth in her commercial dealings, rather than anything worse.

Matt Lock

[35]Mr Lock provided a very short witness statement, confirming Mrs Lock's statement, and addressing separately a point about whether or not it was possible to obtain metadata from the computer on which Mrs Lock had produced the three documents to which I have referred in paragraph 33 above. Since as I have said Mrs Lock was the primary driver on this project, that explains why she produced the substantive witness statement. In those circumstances, I need say nothing more about his evidence, other than to record his frank acceptance of the fact that he had signed a witness statement for use in the adjudication which had been produced by his solicitor without first reading it.

AIB witnesses not called

[36]The Locks' dealings with AIB were conducted principally through Mr Flynn, who was a corporate business manager at its Manchester office and the Locks’ relationship manager. In his opening address Mr Hickey had questioned why the Locks had not produced a statement from, or proposed to call, Mr Flynn to give evidence to support their case that it was the unacceptable nature of the PFP revised scheme, rather than anything else, which had caused AIB to decline to fund the development in March 2009 and subsequently. However there was no evidence from the Locks, whether elicited in examination in chief or cross examination, as to what if any steps they had taken to seek to obtain witness evidence from AIB.[37]In my view this is not a case where the nature of the issues raised, or the relationship between the Locks on the one hand and either AIB in general or Mr Flynn in particular on the other, is such as to justify me in drawing any adverse inference against the Locks by reason of their failure to produce witness evidence from AIB or Mr Flynn. The Locks have confirmed that they have made disclosure of all contemporaneous documentation passing between themselves and AIB in their possession, and I have no reason to doubt that. Of course, in so far as they are unable to produce sufficient evidence to enable me to make a specific finding as to what was in AIB's mind at the time they must bear the consequences of that and indeed I do not find that PFP’s revised scheme was the, or even a, substantial reason for AIB taking the decision which it did, but that is as far as it goes in my judgment. RELEVANT EVENTS Butley Hall

RELEVANT EVENTS

[38]Butley Hall is a grade 2 listed building in Prestbury, Cheshire which is well known, at least locally, as an affluent and desirable Cheshire village, within commuting distance of the Greater Manchester conurbation. Although interesting, it is not necessary to provide a full history or description of Butley Hall. For present purposes it suffices to say that there is an original medieval timber framed structure, including certain internal "wattle and daub" walls which feature in the case, a subsequent 18th century stone structure, and further subsequent extensions and alterations. As well as the wattle and daub walls other features of interest internally which are relevant to this case are an impressive Jacobean staircase, and what is known as the “spine wall”, which is a brick wall at ground level, running for approximately one half of the length of the house through the middle of the house, intersecting as it does with various cross-walls, including two wattle and daub walls. The building stands in reasonably extensive grounds, which slope down to the rear towards a wooded area. It was converted into separate apartments in the 1960s and, by the time the Locks came to be interested in it in 2007, it was in a rather sorry and neglected state, albeit seemingly basically structurally sound.

The Locks’ initial proposals

[39]As I have already said, in 2007 Mrs Lock was looking for another, more ambitious, development project. She came across Butley Hall, and decided that it was suitable for her purposes. By August 2007 she had instructed a firm of architects who she had used on her previous projects to provide some preliminary ideas, and they came up with three potential schemes: first a purely cosmetic refurbishment; second a more substantial refurbishment; and third a refurbishment with an extension to increase the number of apartments from 7 to 10. Mrs Lock was most interested in the third, and in August 2007 she wrote to Mr Flynn at AIB enclosing a financial appraisal identifying projected sales revenue of £5 million (being £500 per square foot based on 10,000 ft.²) which, after deducting development costs (including construction costs of £1 million, based on a build cost per square foot of £100 together with a 10% contingency) would produce a gross profit of £2.23 million, equating to a 44.6% profit.[40]It is apparent from this that Mrs Lock was sufficiently knowledgeable to produce a basic financial appraisal, familiar with estimating construction costs using a cost per square foot basis. It is also apparent that she was sufficiently persuasive that by October 2007 AIB had indicated its willingness in principle, although of course without formal commitment, to fund 100% of the acquisition and development costs.[41]It was not until March 2008 that the Locks exchanged contracts with the vendors of Butley Hall, the sale price being £1.15 million and the contract being conditional upon the vendors obtaining vacant possession from the remaining tenants. AIB was willing to, and did, fund 100% of the purchase price.

First contact with PFP

[42]In the meantime the architect the Locks had previously used had relocated to Dubai, so that they needed to find a replacement. They approached a number of practices, including PFP, and a meeting was arranged with Mr Finlason on 6 March 2008. Mr Finlason clearly impressed Mrs Lock, particularly his knowledge of listed buildings and his commercial approach, and she was also impressed with PFP's multidisciplinary approach and its existing relationship with AIB.[43]Mr Finlason produced a handwritten note of that meeting, from which it is apparent that he was informed of Mrs Lock’s idea for a 10 apartment scheme, and that his contemporaneous estimate of construction costs was £150 per square foot producing a construction cost of £1.5 million. It is also apparent that he discussed the possibility of building a separate house in the grounds, but that subsequently this was not pursued because the planning officers were against the idea. It is also apparent that there was some discussion about fees, and that Mr Finlason wrote a note saying: "incentive led".[44]There is an issue between the parties as to whether, as PFP contends, it was always Mrs Lock’s intention from the outset to maximise the number of apartments in the development, with a view to maximising profits, and it was her strategy to encourage PFP to achieve that by offering an incentive fee or whether, as Mrs Lock contends, it was Mr Finlason who as part of his sales pitch suggested that PFP could achieve permission for a scheme involving a greater number of apartments, and that PFP would be willing to “back that up” by agreeing to accept part payment based on an incentive arrangement. In my view it does not really matter which however having reviewed the evidence, I am satisfied that it was Mr Finlason who instigated this "maximisation strategy" as part of his sales pitch, but that Mrs Lock also enthusiastically bought into this strategy from the outset. In short, that is because there is no evidence that Mrs Lock had previously been interested in anything more than a 10 apartment scheme, the contemporaneous note records that this was the scheme which Mrs Lock introduced as being what she was interested in at the first meeting, and it is quite clear – and indeed Mr Finlason accepted – that the incentive fee idea first came from him.[45]Discussions continued up to 23 April 2008, when Mrs Lock e-mailed Mr Finlason asking for him to provide a written proposal so that they could make a decision on which architect to appoint. It is clear from this e-mail that there had already been discussion about PFP deferring some part of its fee until after planning permission was obtained, and also some discussion about AIB's involvement in funding the project. Mr Finlason says, and I accept, that he was not told by Mrs Lock that she needed 100% funding from AIB. Equally, as he accepted in cross-examination, he was aware that the Locks were looking to AIB for funding and that they would need, in the normal way, to satisfy AIB (or any other potential funder) of the viability of the project before they would agree to provide funding. It is clear that he was also aware that the Locks had limited personal funds available to them; this is apparent from page 8 of the service and fee proposal, where the fee proposal is stated to recognise the "need to keep the value of expenditure low until planning determination when you can raise further funds against the increase in value".[46]PFP submitted its service and fee proposal on 24 April 2008. It is a comprehensive 11 page document, and it is common ground between the parties that its terms, as amended by a subsequent letter dated 30 April 2008, contain the terms of the agreement between the parties. Since there are some significant disputes as to its precise meaning and effect it is necessary to refer to it in some detail.

The terms of the service and fee proposal

[47]The service and fee proposal comprises a number of separate sections, namely:(i) a covering letter;(ii) details of the professional service offered by PFP;(iii) details of the professional fees to be charged by PFP;(iv) PFP’s "general terms - service and fee conditions";(v) the "confirmation of appointment" to be signed by the clients to confirm PFP’s appointment on the terms of the service and fee proposal.

The professional services offered by PFP

[48]In the professional service section the design work to be undertaken by PFP and the stages in which it is to be undertaken are set out in some detail, by way of a summary of the standard RIBA work stages A to L. I have already summarised the four stages in the introduction to this judgment. For present purposes I summarise stages 1 to 3 as follows:(1) feasibility stage one, in which PFP begin by explaining the possibilities and the likely cost of the project and then refine and develop their proposals into a "preferred option, including an indication of the magnitude of the costs; these would be discussed with you prior to progressing further in order that you are fully satisfied with the emerging design solution". This stage concludes by being "summarised in a simple bound report that can be used to present to banks and funders and ultimately guides the subsequent decision to progress with the more detailed design stages".(2) scheme design stage two, in which PFP develop the preferred option through CAD plan, section and elevation drawings for discussion and refinement. As part of this process a "broad cost plan would be developed which reflects your budgetary requirements, identifying clearly those items that are included in any estimate that we prepare. This, together with the drawings, would be signed off by you representing your general agreement to the proposals before progressing further". This stage concludes with the proposals being “fully developed sufficient to make a detailed planning application and conservation area consent”.(3) detailed production information stage three, in which PFP develop the detailed design and cost plan, prepare tenders and conclude a contract with the preferred contractor.[49]In the section identifying the key aspects of the feasibility stage, PFP stated that "it would be advisable to carry out a number of bore/trial holes to the area within the basement and the perimeter of the building in order to provide guidance on the existing foundation depth, ground conditions and to inform the design of the possible new lower level accommodation and foundations. We will review this and it will inform the possible structural solutions. Our structural engineer will assist by organising for this work to be carried out by a suitable contractor and you will pay for this directly". A number of points arise from this:(1) This was only said to be "advisable", in contrast to the "full dimensional survey of the building" which it was made clear needed to be undertaken. It was largely common ground between the factual and expert witnesses, and I am satisfied, that it would not have been necessary for a ground investigation report to be obtained before a planning permission application was submitted, in the sense either that the application could not be made without one or that no competent building professional would have advised the client to do so without one, but that it would have been preferable in this case for the client to do so, and a competent building professional would have so advised, as indeed PFP did here.(2) The reference to "our structural engineer" conceals the fact that PFP did not in fact have in-house structural engineering expertise; they "bought" it in from Bell Munro who were prepared to act, as I have said, on an at risk basis due to their existing relationship with PFP.(3) It was always the case, and Mrs Lock clearly understood, that she would have to pay for any necessary inspections and reports, including a ground investigation report, separate from and additional to the fee payable to PFP, but it would be arranged by PFP for her if she asked for it.[50]There was also some debate about whether the provision of a bound report at the end of the feasibility stage was an absolute requirement. Mr Finlason contended that it was simply an offer to provide one, and that it was not necessary if the client did not require it and if all of the work required to be done at feasibility stage had in fact been done. Whilst I have no doubt that it was always open to the client to dispense with the need for a bound report, it is quite clear in my judgment that unless the client did so it was intended to be an important part of the professional service which PFP was offering to provide. That was firstly because it would enable the client to see in one simple document a summary of the various alternatives, including their advantages and disadvantages and indications of cost, with the preferred option being identified. And secondly, it would perform the important commercial function of being something which the client could present to its proposed funders, because everyone would have understood the importance of being able to demonstrate to proposed funders what was being proposed, not least of course because if the proposed funders did not like either the preferred option or the indicated costs the client would need to know sooner rather than later in order not to waste time and cost in proceeding with an unfundable scheme.[51]The professional service section concludes with a sub-section headed "PFP multi-professional service", which again gives the impression that all of the services referred to were provided in house. In addition to architect design, planning advice, civil and structural engineering services and other specialist services, PFP's service was said to include "project coordination and cost control". However there was no express statement that it included quantity surveying services. In fact it was always PFP's intention and, I assume, practice to provide the cost element of the service through Mr Pickard who was not, so far as I have been made aware, a qualified or trained quantity surveyor. I accept, however, that it was not clearly explained to Mrs Lock, who on her previous projects had employed a quantity surveyor separate from and additional to an architect, that the costing element of the service would not be provided through a quantity surveyor, and that she had assumed that it would be. Indeed Mr Finlason accepted in cross-examination that so far as he was concerned there was no need for the Locks to retain a quantity surveyor additional to retaining PFP and nor, therefore, did he give any advice to that effect.[52]Nonetheless, in the absence of any pleaded material to support the Locks' pleaded case that it was an implied term of the contract that the costing element of the service should be provided to the standard of a competent quantity surveyor, that allegation was struck out at an earlier interlocutory hearing. At trial, Miss McCafferty relied instead upon the fact that the RIBA work stages, to which the service proposal expressly referred, included alternative options for where a quantity surveyor was and was not appointed, and in the latter case the architect was obliged at the equivalent of stage 1 to review the cost implications of the alternative design and construction approaches, and at the equivalent of stage 2 to prepare an approximation of construction costs and then to prepare a cost estimate. In short, the RIBA standard form envisaged that an architect could provide cost services without needing to involve a quantity surveyor and it is on that basis, I am satisfied, that PFP offered and agreed to act.

PFP’s proposed fees

[53]In the professional fee section PFP’s proposed fees were set out in narrative and in schedule form. In short, it proposed to charge a discounted fee of 10% of the "final out turn cost of the project". In a sub-section headed "preliminary professional fee illustration" it was said that at this stage it was not possible to "predict the construction cost of the proposed development", so that for stages one and two its fees would be calculated upon a "lower than expected broad cost estimate". It then continued, importantly, that "the fees would be adjusted later on once planning is determined and the cost estimates are refined and the contract sum is known".[54]PFP then provided a "preliminary fee illustration based on a notional 10,000 ft.² of mixed refurbishment and new build and a cost of £140 per square foot, i.e. a potential construction cost with a notional value of external works totalling £1.5 million". In the following subsection headed "proposed fee payment schedule" it said “In accordance with RIBA guidelines we are entitled to 40% of our overall fee for the work up to planning determination, however for your project we recognise the need to be flexible and we therefore offer to reduce our invoicing to 20%". It then continued, importantly, with the following statement: “Our fee entitlement remains at 40% but this proposal keeps our fee payments low during the early stages of a project. Once planning is obtained a more accurate cost of the building and contract works can be established and the professional fee entitlement and overall fee is recalculated and the balance of our fees due becomes payable. At that stage we would agree a lump sum for the remainder of our fees".[55]Over the page, the schedule identified the payments to be made in stage one and stage two, concluding with the words "we will recalculate and re-advise you of our fee entitlement when the development area and cost become firm". The schedule stated in respect of stage 3 that “the cumulative fee up to start on site is 75%”, and also stated “NOTE: the client may elect to continue with stage three whilst planning permission is being sought”.[56]It is also important in my judgment to note that both the planning determination period and the stage three period were expected to take 3 months. It should also be noted that at the foot of page 5, referring to the option to start on stage three before planning consent was obtained, it said: “Generally, clients prefer to wait until they have planning consent before progressing with this stage, which focuses upon the production of more detailed construction drawings. In your case, where the permission is likely to be less contentious, we would gauge the planner's reaction to the proposals at the time of the planning submission so that you can make an informed judgment as to continuing with the detailed design during the planning process. This would save a number of months."

Construction of the payment provisions

[57]All of this raises the important question, relevant to the Locks’ first defence, namely that PFP did not comply with the condition precedent to rendering its invoice for the balance of the 40%, which is precisely what it is which PFP had to do post planning permission before they were entitled to payment for the balance of the 40%.[58]PFP's case is that all that it was required to do was to revisit its cost plan as provided under stage two and to undertake any recalculation of that cost plan as might be necessary consequential upon the outcome of the planning application. Thus if, for example, the planning application was for a development of 20,000 ft.², but the planning permission limited the development to 15,000 ft.², it would be necessary to recalculate the cost plan accordingly. The same would be true, for example, if a condition of the planning permission required the Locks to undertake some further expensive works not included for in the cost plan. It did not, however, require PFP to undertake any further detailed design to refine costs, or to enter into discussions with contractors to obtain a price estimate, or indeed to take any other of the steps which were required under stage three.[59]The Locks' case is that it required PFP, post-planning permission, to establish an accurate cost of the building and contract works so that the cost becomes firm. When further considered, it seems to me that this could connote two possible scenarios. The first is that all that is required is that a more detailed cost plan should be provided, perhaps with the benefit of price estimates provided by prospective contractors. The second is that PFP must provide such of the stage three services as are reasonably necessary to procure a tender from a contractor which the Locks are ready, willing and able to accept, such that there is thus a known contract sum.[60]I have to confess that my initial impression was that the Locks’ argument was inconsistent with a commonsense commercial approach to the construction of the contract. At first blush it appears inherently unlikely that PFP should have proposed or agreed a payment term whereby the balance of the 40%, to which they stated that under RIBA they were entitled upon planning determination, should become payable not once planning permission has been obtained, but also only after the stage three services had been completed, or at least after some further considerable work was required. That is particularly so when, as is apparent from the schedule, once stage three is completed a further 35% of the total fee would become payable. However, as the Locks say I have to construe the whole document. When I do so it is striking, in my judgment, that words are used which appear to make it quite clear that the cost only become “firm” once the “cost estimates are refined and the contract sum is known” and once “a more accurate cost of the building and contract works is established”. In my judgment the ordinary or normal meaning of these words, in the context of the whole document, is that they require the completion of the processes contemplated by stage three so as to reach the point where there is a tender from a contractor to undertake the work for a contract sum which the clients are ready, willing and able to accept. It is impossible in my judgment to give the words “contract sum” and “building and contract works” any other sensible meaning.[61]PFP invite me to reject these words as absurd or inconsistent with the rest of the contract. However, I am unable to do so, by particular reference to two factors which I regard as consistent with the words to which I have already referred ("once the contract sum is known" and "when the cost becomes firm") being given their ordinary or normal meaning. They are that:(1) There are two expressly stated purposes of establishing the cost of the works. The first is to establish the balance of the 40% fee entitlement. The second is to establish the “overall fee” so that “at that stage we would agree a lump sum for the remainder of our fees”. In my judgment it could not be possible for a lump sum to be agreed until, at the earliest, such time as there is an agreed contract sum. It would on any view not be possible to do so on the basis of the broad cost plan, adjusted as necessary post-planning permission, which is all that PFP say they were required to do. It would I suppose be possible for PFP to argue that there are two separate stages involved here, the first is the time at which the 40% becomes payable, which is post planning permission once the development area is known and the cost plan can then be made firm, and the second is the time when the contract sum is known so that the fee can be recalculated and a lump sum agreed. However, that is not in my judgment what the contract says. The contract clearly envisages in my judgment that both stages should take place at the same time.(2) The timetable which PFP effectively recommend is that within the three months it envisages it would take for the planning application to be determined it could virtually complete the stage three works, so that on this basis there would be little or no delay anyway between planning permission being obtained and the balance of the 40% fee becoming payable. This point is supported by p.2 of the proposal, which as I have said suggests that the client can make the choice whether or not to proceed with the stage three work whilst awaiting planning determination once the likely reaction of the planners is known. It also suggests that one other way of reducing the overall period would be to “negotiate the construction cost with a suitable contractor and cut out the tender period”. In short, the contract itself envisages that there will not necessarily be a need for a further substantial amount of work to be done, and time to elapse, from receipt of planning permission before PFP can undertake the stage three work, or some agreed simplified and shortened version of it, so as to enable a contract sum to be arrived at and for PFP to render its catch-up invoice.[62]I would accept that the phrase as used in the schedule (“when the cost becomes firm”) is in itself ambiguous as to what has to be done to arrive at a firm cost, and could be said to have more than one possible construction. I do not however accept that I should prefer PFP’s construction because it is the only one which is consistent with commercial commonsense. To the contrary, for the reasons I have given it seems to me that the Locks’ construction is more consistent with the plain and ordinary meaning of the words used in the service and fee proposal which elucidate this question. Moreover, it is at its lowest not inconsistent with commercial commonsense as revealed from the face of the document, namely that PFP was willing to wait until the tender process had been completed and a contract sum agreed because it did not consider it likely that in this case it would result in any significant delay in being paid, and because it would enable the whole question of its fee entitlement going forwards to be settled at the same time. In the circumstances I ought I consider to prefer that construction.[63]PFP’s argument, it seems to me, involves placing too much weight on the phrase “In accordance with RIBA guidelines we are entitled to 40% of our overall fee for the work done up to planning determination”. This is not a case where PFP invited the Locks to contract on the standard SFA/99 form; to the contrary, what it was proposing was its own bespoke terms consistent with a professional and client partnering or risk sharing type of approach, which was tailored to the particular client and the particular project. That is apparent from the immediately following words:
“however for this project we recognise the need to be flexible and we therefore offer to reduce our invoicing to 20%”
. Thus there is no reason, in my judgment, to start from the viewpoint that what the parties must both have objectively intended to achieve, was a position whereby so soon as planning permission was obtained the balance of the 40% immediately became payable. Whilst I accept that the Locks’ construction could raise questions as to what would happen if, for whatever reason, PFP negotiated a reasonable tender offer but the Locks were not willing to accept it, the answer to that in my view would have to depend upon what, if any, obligations should properly be imposed on the Locks in such circumstances and the reasons why they did not do so. On one view it might be said that if the Locks failed to act reasonably or in good faith to accept the offer they should become liable for the 40% fee; on another it might be said that this is part of the “gain / pain share” approach which PFP so clearly proposed with a view to selling its services. Moreover, since both parties would have envisaged that both would have wanted the project to proceed to contract and completion if and when planning permission was obtained and a good price secured, I do not think that such a point should prevent me from construing the contract in the way which appears to be consistent not only with the words used but also a reasonable commercial analysis of the intentions of the parties at the time.[64]Ms McCafferty also submitted that since this is a document promulgated by PFP, if there is any remaining genuine ambiguity after an application of the normal principles of construction the question should be determined in the manner most favourable to the Locks (the contra proferentum principle). I need not proceed down this route, given the conclusions I have just reached. If, however, contrary to those conclusions there is still ambiguity as to what is meant by the phrase “when the cost becomes firm”, then I agree that it should be resolved against PFP on the basis that it was the drafter of this contract and it is now seeking to rely on a particular construction of the contract to enforce a right to payment where there is genuine ambiguity as to its meaning.[65]For completeness, I should also record that I have not heard submissions on whether or not reg. 7 of the Unfair Terms in Consumer Contracts Regulations 1999 apply to this case and, if it does, what impact if any it might have had on the determination of this question.

SFA/99

[66]Turning to the “General Terms”, only two are relevant for present purposes:(1) The first is entitled "form of appointment", and reads as follows: "Our professional duties would be generally in accordance with "normal" services as defined within the RIBA SFA 99 (Royal Institute of British Architects, Standard Form of Agreement for the Appointment of an Architect), revised 2004."(2) The second is not entitled, but reads as follows: “This service and the proposal is provided upon the basis that, should the project progress, then PFP is appointed to continue with the subsequent RIBA work stages.”[67]The first is relevant because it is relied upon by PFP in support of its case that the conditions of engagement which form part of SFA 99 are incorporated into the contract between the parties. Miss McCafferty however submits that this is a reference only to a particular part of SFA 99, namely schedule 2 which details the services which the architect is required to perform under SFA 99. She submits that this is consistent with the other reference to SFA 99, appearing at page 2 of the proposal, to which I have already referred.[68]In my judgment Miss McCafferty is plainly right in her submission on this point. SFA 99 is a self-contained document which is intended to be used in its entirety as a contractual document. Thus it includes a memorandum of agreement to be completed and executed by the parties, together with four separate schedules to be completed as appropriate. It is article 1 of the memorandum of agreement which incorporates the conditions of agreement. There is no separate reference in schedule 2 to the conditions of engagement. Accordingly, there is no basis in my judgment for reading that very limited reference to SFA 99 as incorporated in the totality of that contract form or the conditions of engagement. If PFP had wanted to conclude a contract in accordance with SFA 99, so as to bring in the conditions of engagement, it would have been easy for it to do so. It chose not to do so, and made no attempt expressly to incorporate the conditions of engagement. In those circumstances there is no basis for its contention that they were incorporated by the limited references to SFA 99 to which I have referred.[69]The second is relevant to the loss of profits claim, to which I shall refer at the appropriate time below but need say no more about at this point.

The letter of 30 April 2008

[70]It is common ground that after receiving the service and the proposal a meeting was arranged and took place at PFP's offices on 30 April 2008, attended by Mr Finlason and the Locks. It is also common ground that during that meeting some revisions were made to the fees proposal, which were incorporated in a letter and a revised schedule which were produced in the course of that meeting and given to the Locks together with a further version of the “confirmation of appointment", which they both signed on that date. The only revisions were to reduce the first stage payment from £30,000 down to £25,000, and to introduce the provision for payment of an incentive, which read as follows:
"You have offered (and we have accepted) an additional incentive payment to us of £3 per square foot of gross area achieved over 11,000 ft.², calculable and payable at completion of the project. This is in addition to our professional fees stated elsewhere."
[71]Although there are disputes between the parties as to who said what and who produced what at the meeting since it is, as I have said, common ground that the contract is contained in the documents to which I have referred, those disputes are irrelevant from a contractual perspective. There is no pleaded case by the Locks that the terms of the written contract should be varied by reference to what they say was discussed, agreed or produced. Accordingly it is not necessary for me to consider, for example, whether or not Mrs Lock is right in her claim that it was expressly agreed that the balance of the 40% should not be payable until after the Locks had obtained funding post planning permission. It is also not necessary for me to consider whether or not Mrs Lock did produce and hand over at the meeting the document entitled "working relationship proposal" which she claims that she did. Insofar as I do need to decide these questions I am satisfied that there was no such express agreement and nor was the document handed over.

The first design team meeting of 9 May 2008

[72]This is important for a number of reasons. Although there is no post meeting minute, PFP did provide a very full client briefing note the day before the meeting, which I am satisfied was sent to Mrs Lock. Section 2, entitled "project brief - summary of key aspects gathered to date", identified the various options under preliminary consideration.[73]Section 4, entitled "budget" is sufficiently important to set out in full: “To be determined - dependent upon the gross development area achieved. Clients’ appraisal has been worked on £120 per square foot. PFP has advised this is likely to be too low - recent experience of a new build scheme of a good quality shows a cost of £140 per square foot, listed buildings are inherently difficult to predict out turn costs, high contingency will be required and adequate design reserve. Budget is to be developed as ideas are firmed up and outline proposals emerge."[74]A number of points arise from this. First, PFP have claimed that the Locks never set a budget, because all they were interested in was maximising the size of the development and hence the sale value of the completed apartments and hence the profit on the development. Whilst it is true that the Locks did not set a specific budget, I do not accept that they ever said in terms that there was no budget. Indeed, what this note envisages is that a budget was to be developed and determined; in other words that it was envisaged that once a preferred option emerged a budget would be discussed and agreed. Despite, however, Mrs Lock sending her indication of construction costs to PFP on two occasions subsequently, clearly expecting PFP to comment upon them, at no time did it do so, nor did it ever seek to develop or determine a budget. I am quite satisfied that the Locks were always interested in agreeing a budget, not because they had a figure beyond which they could not go, but because they knew that they needed approval from AIB to fund the project, and that AIB would not fund an unlimited cost project.[75]Second, although it is PFP's case that it worked throughout on a cost per square foot of £140, which is what Mrs Lock should have used to produce her own indication of costs, in fact what is said at this point is that £140 per square foot is an estimated cost for a good quality new build scheme, but that given that this is a listed building where costs are inherently difficult to predict it will be necessary to require a "high contingency" and an "adequate design reserve". In other words, it seems to me, what PFP was actually saying at this point is that £140 per square foot was only the starting point for an indication of costs, which should be higher given the uncertainties relating to costs.[76]It is suggested by PFP that at the meeting Mrs Lock was unwilling to accept its advice that her cost estimate of £120 per square foot was inadequate, and that she was fully aware of how to produce an indication of costs using the cost per square foot basis. I do not accept that there was any real discussion at this meeting about costs, and I certainly do not accept that Mrs Lock stated that she did not agree PFP's estimate. I do accept that Mrs Lock was always confident that she could use her negotiating skills to drive down costs, but I do not think that this is the same thing at all. Furthermore, I do not accept that there was any detailed discussion about the use of the cost per square foot basis. For reasons which I shall give, I am satisfied that subsequent events demonstrate that Mrs Lock did not in fact know how to use that as a precise tool given the ambiguities in the information which PFP subsequently produced.[77]Finally, section 6 refers to the surveys and investigations which would be required. Under the section dealing with ground investigations, it was said that "as a minimum on this project trial holes will be required" whereas boreholes would be required “if the possibility was established of an additional dwelling on site". It is clear that this was being left over for further consideration, perfectly reasonably in my judgment.

The initial scheme

[78]Following the first design team meeting PFP set to work on the feasibility stage. The initial preferred option involved two new two storey wings to the rear of Buckley Hall, thereby increasing the total number of apartments to 12, with a below ground car park between the two wings. A meeting was arranged with the planning and conservation officers on site on 15 July 2008, in order to discuss this preferred option.[79]In the meantime Mr Daccus had produced the first area schedule on 27 June 2008. This is a document produced on computer using Excel software, identifying the net internal area (NIA) of the individual apartments and the gross external area (GEA) of the whole development. According to PFP, it was produced for Mrs Lock's benefit, which is consistent in my view with the fact that it was produced on the same day as a scheduled meeting involving the Locks, Mr Finlason and AIB and thus, I have no doubt, was a useful document to be able to show Mr Flynn. In particular, if one multiplied the NIA by the expected sale price per square foot of the completed apartments, one could arrive at the gross development value (GDV) of the development. Moreover, according to PFP, if one multiplied the GEA by the expected construction cost per square foot, one could arrive at an estimate of construction costs. Of course, unless one knew that one should multiply the GEA and not the NIA to arrive at estimated construction costs, there was the risk of error, because as one would expect the NIA was always a smaller number than the GEA.[80]The area schedule contained a number of printed "disclaimers" which would have informed any reader such as Mrs Lock that reliance should not be placed on the data presented on it. It did not contain any costings. If, however, Mrs Lock had multiplied the GEA by £140, she would have arrived at an estimated construction cost of c.£2.5 million.[81]In fact, on 8 July 2008 Mrs Lock sent an e-mail to PFP saying that she had told the valuer instructed by AIB to value Butley Hall in connection with the forthcoming completion of its purchase that "approx refurb and extension cost based on the indicative scheme which I have said will be around £2.5-£3 million”.[82]In paragraph 58 of her witness statement Mrs Lock said that she “considers it likely” that she reached this figure by multiplying the GEA in the first area schedule by £140. In my view she is mistaken in that recollection, has adopted a mistaken retrospective reconstruction of what she in fact did, for the following two reasons:(1) If she had undertaken that approach, she would simply have said around £2.5 million, and in all other dealings with AIB and others Mrs Lock was keen, for obvious reasons, to minimise the anticipated estimated construction costs, so that I doubt she would voluntarily have added a further £0.5 million to the figure if she had believed that she was perfectly entitled simply to pass on the estimate produced by using the area schedule and the method advised to her by PFP.(2) I am satisfied that when she produced a subsequent estimate of construction costs in October 2008 she applied a rate of £120 to the NIA stated in the area schedule which she had by then received, so that it does not seem to me that she did in fact have a clear idea about how to use these area schedules to arrive at an accurate estimate of construction cost.[83]Mr Finlason's internal response to that e-mail is also of interest, because he asks Mr Daccus to liaise with Mr Pickard to provide costs, and to provide a feasibility study "status pack". In my view, he is - correctly - recognising at that point the need for a preliminary feasibility report identifying the then emerging preferred option and an indication of its costs. However nothing was provided by PFP to the Locks in response to that request.

The revised scheme

[84]At the meeting of 15 July 2008, as is apparent from the minutes of this meeting subsequently prepared by Mr Daccus, the planning officers were very concerned about the size of the proposed two storey wing extensions, in particular the effect they would have upon the neighbouring properties. It is also apparent from the minutes that in order to overcome this objection Mr Finlason suggested an alternative approach, which was to reduce the wing extensions down from two to one storey structures, by sinking them into the ground by one level. This would be done by excavating the existing levels so as to create a habitable lower floor of accommodation around an inner courtyard, thereby forming a "semi-basement”. The semi-basement was also to extend under the rear half of the Hall itself, in order to allow new apartments to be created to the rear of the Hall. Further, in order to achieve all of this, the car park would be sunk down a further level.[85]PFP says that the feasibility of this revision had been discussed prior to the meeting, both internally and with Mr Munro, who was already involved at this stage. As I have said, Mr Finlason had originally asserted that he also informed Mrs Lock of the idea before the meeting, but he has now withdrawn that suggestion. There is no documentary evidence that this was discussed before the meeting, but equally I have no reason to doubt that Mr Finlason would have discussed it with Mr Daccus as a possibility, or that they may have discussed it briefly with Mr Munro. Whether it was wise to spring this on the client without warning at this meeting is not something I need decide, because it is apparent that Mrs Lock was very pleased and impressed with the idea, which seemed to be the perfect solution to what would otherwise have been a very real difficulty.[86]What however is at the heart of this case is whether or not PFP subsequently took sufficient and prompt steps to assess the risks and costs of this revised design, involving as it did a considerable amount of excavation to the rear of the Hall and, in particular, underneath the rear section of the Hall itself, which inevitably would thus need temporary and permanent support if it was not to be damaged by these substantial underground works.[87]It is clear from Mr Finlason’s internal e-mail of the following day that he was in no doubt of the need to assess the risks and costs of the revised design. Thus he wrote as follows: “I have real concerns over the possible costs of the solution we are now developing and you need to tackle this during next week … it is important that we provide a simple statement back to Adele tomorrow just to warn her of our concerns. You will need to meet Simon asap so that you can begin the cost planning process. … I note from Adele's e-mail that she wants a cost meeting on Thursday 14th at which AIB will be present -- this is Simon's second week on holiday so you will need to agree the costing process with him before then. You now need to start using the full team and preparing a proper scheme and design document -- I suggest the target date is a month away Thursday 14th of August."[88]The e-mail from Mrs Lock he was referring to had been sent by her late the previous day, after the meeting on site with the planners, where she was seeking to arrange a meeting on 14 August 2008 with PFP "to discuss initial budget ideas" and then with AIB "to present the ideas/initial costings to them".[89]Although there was a meeting with Mrs Lock on the following day, there is no indication from the agenda which has been produced or any other evidence that any "simple statement" warning her of PFP's concerns was provided at that meeting, and neither Mr Finlason nor Mr Daccus suggested that they had done so on that occasion.[90]It does appear that there was some discussion about Mr Pickard getting potential contractors interested in the scheme from an early stage to help with costing and buildability issues, which Mrs Lock was enthusiastically supporting: see her e-mail of 23 July 2008. However, it appears from Mr Pickard's witness statement (paragraph 14) that nothing concrete in that respect had been obtained before he went away on holiday.

The meetings of 14 August 2008

[91]I turn now to 14 August 2008, being the date scheduled for PFP to produce the scheme drawings and costings to Mrs Lock and to present them to AIB at the meeting the same day. There is a very significant conflict of evidence between the parties about whether or not PFP provided any costs information to Mrs Lock on this date, which I shall have to resolve.[92]There was an exchange of e-mails on the previous day from which it appears that the original plan, of having a 12 noon meeting involving just Mrs Lock and PFP, before she took Mr Flynn out for lunch and returned with him after lunch to PFP's offices for them to present the scheme, could not take place because of Mr Finlason's and Mr Daccus’ unavailability.[93]However, it also appears from the drawings register that on 14 August 2008 the first CAD drawings of the revised scheme were produced by PFP, and it is common ground that copies of those drawings were handed over to Mrs Lock on that day.[94]PFP has also produced not just one but four further versions of area schedules, all of which are said to have been created on 14 August 2008. The first, created at 07:51, shows 13 apartments but does not give any NIA or GEA information. The second, created at 08:45, shows 12 apartments, shows NIA of 21,620 ft.², and GEA of 28,167 ft.² excluding the car park comprising 9189 ft.². It will be apparent that multiplying the NIA figure by £140 produces £3.02 million, and multiplying the GEA figure produces £3.943 million.[95]However, very significantly, there is a further schedule below the schedule of development area, entitled “construction costs”, which shows a total construction cost of £5.69 million. This is made up by producing separate costings not just for the residential refurbishment and new build elements, but also for the car park construction and the landscaping areas. Mathematically, if one were to adopt PFP's stated formula of arriving at costs by multiplying the GEA by the cost per square foot, that would produce a cost per square foot of £201, rather than the £140 which PFP have stated that they used throughout at this stage.[96]The third area schedule, created at 13:55, shows 11 apartments, and different figures for NIA and GEA, but no costings. Finally the fourth area schedule, created at 13:56, shows 12 apartments with similar, but not the same, figures for NIA and GEA as the second version, but contains no costings. The information as to when these documents were created was written on them subsequently by Mr Daccus from his examination of PFP's IT system. He notes that this fourth schedule was e-mailed to Mrs Lock on 23 September 2008 but, as is apparent from a comparison of the filename on this schedule with the filename recorded as being attached to the e-mail in question, I do not think that he can be right about this.[97]It follows, in my judgment, that there is no documentary evidence to show that any of these area schedules were given to Mrs Lock. However PFP claims that a copy of the second area schedule, i.e. the version with construction costs of £5.69 million, was physically handed over to Mrs Lock on 14 August 2008, whereas Mrs Lock disputes that it was, so that I must decide this important point.[98]It is common ground that Mr Daccus produced these area schedules using PFP's software system which enabled the relevant areas to be calculated from the drawings and inserted into these schedules. Mr Daccus said that he would have produced the construction cost information on the second schedule on the basis of conversations with Mr Finlason, Mr Pickard and others. Mr Pickard accepted in cross examination that he may have discussed the rates used with Mr Daccus previously, but denied giving him these rates to use in producing this area schedule.[99]In my judgment, what happened was that Mr Daccus had been left by Mr Finlason and Mr Pickard to do the best he could on the information he had, which is what he did in producing this construction cost estimate. It seems to me that he was adopting a perfectly sensible approach. Indeed, if one compares this with the way in which Mr Pickard subsequently went about producing his cost plan, one sees a similar approach, of identifying separately areas and rates for the separate work elements, the only difference being that Mr Pickard adopted significantly lower rates and different areas for the refurbishment, new build, and car park elements and chose a lump sum rate for landscaping.[100]In his evidence Mr Finlason was insistent that he gave Mrs Lock the drawings when she attended at PFP's offices before her lunch appointment with Mr Flynn. In his witness statement, Mr Daccus confirmed this, saying that he gave Mr Finlason a copy and he believed that Mr Finlason had given it to Mrs Lock. Mr Daccus was very clear in his evidence that he would not himself have provided any cost information to Mrs Lock as the client, because that was something which he would always have left either Mr Finlason or Mr Pickard as principals to do. Mrs Lock was equally insistent that she did not receive a copy, saying that if she had done she would undoubtedly have remembered it, because the cost was so significantly higher than anything that she had previously envisaged or discussed.[101]There is no contemporaneous documentary evidence recording, directly or indirectly, Mrs Lock having been given and thus being aware of the level of construction costs shown in this schedule. In that respect I note that although Mr Finlason referred to the fact that his diary entry for that day contained an entry saying "initial costings", that is written against the time of 3pm and, hence, I have no doubt was written to remind him as to the purpose of the afternoon meeting with Mrs Lock and Mr Flynn, rather than to record that this schedule containing these costings had been handed over on that day, according to him earlier that day.[102]It is also significant, in my judgment, that it is accepted by Mr Finlason that there was no mention of these estimated construction costs at the afternoon meeting with Mr Flynn. If, as is clear, the purpose of the meeting was to discuss not just the design but also the initial costings, the fact that they were not mentioned would be very surprising. Mr Finlason seeks to explain this in his supplemental statement by suggesting that he had been expressly instructed by Mrs Lock not to mention costings to Mr Flynn, referring to her "stage-managing" these meetings. However I found Mr Finlason's evidence about this thoroughly unconvincing. Not only is it inconsistent with the stated purpose of the meeting, it is not clear when on Mr Finlason's evidence he was given this instruction. In his principal witness statement he gave the impression that Mrs Lock had looked at the schedule and seen the costs, which might at least explain why - if she had been appalled at the size - she would have told him not to mention the costs at the meeting with Mr Flynn, but in his supplemental statement he said that she did not study the schedule, in which case why would she have given the instruction? It also begs the question how, if Mr Flynn understood that one purpose of the meeting was to discuss costs, Mr Finlason conducted the meeting without referring to costs. As he emphasised in a different context, PFP would never have been party to misleading a funder, particularly AIB with whom PFP had a good existing relationship.[103]I also note that only four days later, on 18 August 2008, Mr Finlason sent an internal e-mail to Mr Pickard saying "need to discuss broad appraisal and cost plan production for Nick. Adele is now away for two weeks - need something for when she gets back". The clear impression from that e-mail is that she had not so far received anything. There is certainly no reference to her having been provided with a £5.69 million estimate or that having been discussed with her.[104]I consider that this e-mail explains what really happened, which in my judgment is that Mr Daccus, having produced this cost estimate on 14 August 2008, showed it to Mr Finlason or told him about it, and that Mr Finlason was horrified at the idea of handing it to Mrs Lock immediately before an important meeting with AIB when, as he knew full well, it was substantially in excess of any figure previously discussed and could, if shown to Mr Flynn, create real problems in terms of obtaining funding and hence approval for his revised scheme, thus putting the whole project and – hence – PFP’s fees in jeopardy. Furthermore, since Mr Pickard, being on holiday, had I accept not played any part in its production, Mr Finlason would naturally not have wanted to show it to Mrs Lock as if it was PFP’s considered cost estimate without Mr Pickard having the chance to see it and, if appropriate, make amendments to it first. It is that which he was asking Mr Pickard to get on with in the e-mail to which I have referred.[105]My assessment of Mrs Lock is that if she had received this schedule with these costs at the time, and even if she had told Mr Finlason not to mention it to Mr Flynn at the meeting, there would have been an immediate e-mail from her to PFP subsequently referring to it and demanding that steps be taken to see how it could be reduced. The fact that she said nothing is a very strong indication in my judgment that she did not receive it. Although Mr Hickey suggested that it was possible she had received it but not read it, and then put it to one side without reading it, that does not seem to me to be remotely likely, given my assessment of her personality and approach. Indeed, had that happened, I have no doubt that Mr Finlason would have asked her, either in subsequent meetings or by e-mail, what she thought of the figures, and there would have been some further reference to them, whereas in fact there was none. PFP’s continuing failure to provide a feasibility report or costs information in the period leading up to the meeting on 1 December 2008[106]Again there is a paucity of hard evidence about what PFP did subsequent to the 14 August meeting in relation to costs. It appears from paragraph 54 of Mr Finlason's witness statement that the process of seeking to involve contractors continued, but again there is no evidence that anything concrete resulted.[107]Thus as at 16 September 2008, by which time everyone seems to have returned from their various holidays, there was a meeting involving Mr Finlason, Mr Daccus, Mrs Lock and Mr Naden, to obtain the latter's view on marketing and sale values, PFP had still produced nothing to Mrs Lock, whether in terms of a feasibility report or in terms of costs information.[108]There is, as I have said, an issue as to whether or not it was explained to Mr Naden at this meeting that the semi-basement apartments would contain rooms where natural lighting was provided only through roof lights. Mr Finlason, supported by Mr Daccus, says that he took Mr Naden through the plans, and specifically identified this point. Mr Naden said that he was not made aware of this aspect of the design, and that he would neither have had the expertise nor the need to work through the detail of these plans at his leisure in order to provide the marketing appraisal which he did. On balance I prefer Mr Naden's evidence. That is because:(i) there is no obvious reason why Mr Finlason would have wanted to spend time talking Mr Naden in exhaustive detail through the plans at this point;(ii) my assessment of Mr Finlason is that he would have been keen to emphasise the positive aspects of the scheme, rather than the negative aspects;(iii) neither he nor Mrs Lock would have had any particular reason to "talk down" the scheme when explaining it to Mr Naden;(iv) I accept Mr Naden's evidence that he would have been concerned had he been aware that six of the proposed 12 apartments suffered from some restriction in terms of lighting and/or view, particularly given that the apartments were being targeted at the affluent retired end of the market, whereas in fact it is clear that he was very enthusiastic and produced a very positive valuation of approximately £500 per square foot of NIA.[109]However, I do not accept Mrs Lock's evidence that she was not aware of the position in relation to lighting. It is clear that she was intimately involved in the design of the scheme, and cannot in my judgment have been unaware of the fact that the semi-basement level was sunk into the ground, so that although there was unrestricted lighting to the front of the apartments, around the courtyard area, there would have been restricted lighting to the rear. I am sure that she would have studied the plans with some care, and discussed them with Mr Finlason and Mr Daccus, who I have no doubt would have reassured her that the roof lighting would produce as much light as traditional wall windows, and she would have been quite happy with that assurance at the time.[110]In their witness statements both Mr Finlason and Mr Pickard claim that on or around 18 September 2008 they held an internal meeting at which costs were discussed and they agreed that they were satisfied that the estimated construction costs of the revised scheme rate were still in the region of £140 per square foot. However there is no documentary evidence of this, whether by the production of an internal rough costs plan, information from preferred contractors, internal e-mails, diary entries or otherwise, nor – even if they did - is there any evidence that this view was communicated to Mrs Lock. Mr Pickard in paragraph 19 of his statement specifically referred to there being an e-mail corroborating this, but the e-mail he refers to in fact dates from the end of July 2008, and sheds no light on what was being done, if anything, in relation to costs estimating in mid-September 2008.[111]Furthermore, if that is right, it would appear by reference to the further area schedule produced on 16 September 2008 that the estimated construction cost had increased to £3.926M (GEA of 28,040 x £140), yet there is no evidence that Mrs Lock was informed about this. That is particularly surprising when on 26 September 2008 Mrs Lock e-mailed PFP saying that:
"I have done some new figures based on the new layouts and sizes etc and I will need to review this with you next week as we need to conclude the feasibility stage ASAP and get a full report with supporting plans etc into the bank."
[112]It is clear that Mrs Lock was pressing for a full report, including an estimate of construction costs, in order to complete the feasibility stage and move onto the next stage, which is precisely what she had been promised in PFP's service proposal, yet it is equally clear that PFP provided nothing at all in response to this request. It seems to be PFP's position that there was no need to respond, because having sent the further area schedule to Mrs Lock on 23 September 2008 she would have been perfectly able to work out the estimated construction costs by multiplying the GEA by £140.[113]Even if that had otherwise been a tenable assertion, which I am satisfied it is not given the prior failure to provide any specific explanation of how Mrs Lock should use these area schedules, PFP could have been in no doubt that Mrs Lock did not understand how to use them by 23 October 2008, when she sent an e-mail to Mr Pickard enclosing her "first stab" at the financial appraisal for AIB, to discuss on her return from abroad in early November.[114]The "first stab" is a financial appraisal, similar in structure to the very first version which she had produced in August 2007, from which it is apparent that Mrs Lock has assessed construction costs for 12 apartments based on an area of 20,000 ft.² and a build cost per square foot of £120. The figure of 20,000 ft.² is consistent with the NIA figure given in the most recent area schedule, and completely inconsistent with the GEA of 28,040 ft.² also given in that schedule. However yet again PFP provided no response at all to that e-mail, even though she had asked PFP on no less than three occasions for a response over the following two weeks. When asked why he did not respond, Mr Pickard accepted that he should have done. His only explanation seemed to be that by this time he had already begun preparing a cost plan and, in short, he had overlooked the need to respond.[115]In my view this continuing failure is wholly unacceptable, not least given the content of an internal e-mail sent by Mr Finlason on 17 October 2008, referring to the fact that Mrs Lock wanted PFP's view on the “first stab” financial appraisal, prior to the meeting with AIB and Mr Naden which had been scheduled for early November 2008, and that PFP was to provide a “draft scheme design report” for that meeting which was to include a “broad order of costs” and a finalised version of the financial appraisal with PFP’s input. Despite Mr Finlason’s exhortation at the end of the e-mail that all three members of the PFP team needed to put in a lot of hard work to “secure this important project” between then and the meeting, it is quite clear that nothing at all was produced by PFP prior to the meeting of 5 November 2008.[116]In the meantime, it is apparent from Mr Flynn’s e-mail to Mrs Lock of 28 October 2008 that she had sent the first stab appraisal to AIB, and that his response was that “assuming it is robust, your development appraisal looks good”. Of course, PFP would have known that the construction costs set out in the first stab appraisal were anything but robust, applying their £140 per square foot figure to the GEA, rather than Mrs Lock’s £120 figure to the NIA, but did not see fit to inform Mrs Lock of that.[117]There is no suggestion that PFP provided any costs information at the meeting of 5 November 2008 either. In particular, there is no indication that there was any mention made of the fact that the most recent area schedule, produced only two days earlier, continued to show a GEA of 28,040 ft.², which applying the £140 per square foot figure would produce construction costs of £3.925 million, over £1 million higher than Mrs Lock’s estimate, which itself allowed for a £500,000 contingency. It appears that in the absence of any advice from PFP to the effect that Mrs Lock’s estimated construction costs were too low, Mr Flynn went away reasonably happy with the sales advice provided by Mr Naden and the quality of PFP’s presentation in relation to the revised design. That appears from Mrs Lock’s e-mail to Mr Naden sent later that day, where she said that: “I think it went really well and Anthony [Flynn] seemed very happy in the end! You know what banks are like these days! I have worked with AIB successfully since I was 19 so for over 12 years! However I have never seen them as nervous as they are these days! Sign of the times eh? Anyway it's all fine as we are clearly working with all the right people which they appreciate!" One indication of this “nervousness” was that following the meeting AIB made it clear that it required more than just one valuation, which is why Mrs Lock proceeded to instruct Mr Kyte to produce a further valuation following the meeting of 1 December 2008: see the exchange of emails on 2 December 2008.[118]The meeting held on 1 December 2008 is an important meeting in the context of this case. In preparation for that meeting Mr Pickard finally produced his cost plan, together with a financial appraisal and a due diligence and risk register, to which I must refer in some detail, although drafts were not produced to the Locks until the meeting itself. Before I turn to the meeting, however, I must address the position in relation to the structural design input from Mr Munro and the steps taken to obtain a ground investigation report in the run up to that meeting.

Structural design input and ground investigation report pre 1 December 2008

[119]Mr Munro has produced a handwritten note of his meeting with Mr Daccus on 4 August 2008, where he was given a summary of the revised design. He wrote "water table / bh’s” (“bh’s” as he confirmed being short for boreholes), and in cross examination agreed that it was particularly important to establish the ground conditions given the revised design involving the construction of an extension under and beyond the footprint of the existing listed building.[120]Mr Munro worked quickly and, within four days, he had produced a document entitled "structural philosophy" which noted that it was likely that the rear structure of the Hall would need underpinning which, at that stage, he considered would be of "traditional mass concrete form but depending on ground conditions piling may be required where new retaining situations occur". He also identified that "a detailed site investigation is required to determine the ground conditions at depth and also the likelihood of encountering groundwater during the relatively deep excavations".[121]Thus by this stage, if not before, PFP was fully aware of the need for a detailed ground investigation and report, as Mr Finlason accepted. He also accepted the importance of Mrs Lock being advised of this.[122]On the same day it was agreed that Mr Munro should obtain quotations for undertaking a ground investigation report, and Mr Daccus informed Mr Munro that Mrs Lock had suggested asking two particular contractors to provide quotations, one being a company known as Mini Soil Surveys, for reasons which became apparent subsequently. Again Mr Munro worked quickly, and four days later had sent invitations to tender to 3 companies, including one of the two recommended by Mrs Lock, but not Mini Soil Surveys. The contractors were asked to include for drilling boreholes down to 12 m in three locations and to provide information about any groundwater encountered. The returned tenders were sent on to PFP by 22 August 2008, but Mr Daccus did nothing with them before going away on two weeks holiday at the beginning of September. In the meantime it was agreed that Mr Lock's brother's company, which was already on site undertaking various preliminary works, should dig the trial holes adjacent to the walls of the existing building, but that still left the question of who should undertake the remaining ground investigation works, including the boreholes.[123]On 15 September 2008 Mr Munro e-mailed Mr Daccus recommending accepting a tender from a company known as RSK, who had quoted £6,900 and who had estimated a timescale of 5 to 7 weeks from start to finish. On the same day Mr Daccus, who had just returned from holiday, e-mailed Mrs Lock referring to the arrangement about the trial holes, and saying that he would forward the correspondence about the contractors’ tenders "in due course". There is no indication, however, that he did so until a much later date. PFP seek to excuse that apparent omission by contending that this was discussed at the meeting the following day with Mrs Lock, prior to the meeting with Mr Naden to which I have already referred above, and that Mrs Lock was provided with the RSK tender and advised of the risk of proceeding without a ground investigation, but that in an email sent the following day she instructed PFP to defer proceeding with the ground investigation work until "at least after the scheme had been submitted for planning": see paragraphs 58 - 59 of Mr Finlason's witness statement.[124]The e-mail in question begins by referring to the meeting with Mr Naden, continues by setting out Mrs Lock’s objective to submit the planning application "within the next 2 to 3 weeks maximum" and then says this: “I think that the other investigation works can run concurrently with the application".[125]Regrettably, but not untypically I am afraid, PFP produced no minutes of this meeting, nor did they record by way of letter or return e-mail either their understanding of what they believed they were instructed or their earlier advice as to the risks of proceeding in this way.[126]Mrs Lock says that she was referring to other investigations in that e-mail, not to the ground investigation which she disputed had been discussed at any meeting that day. It is true that there were other investigations under discussion at that time, and Mr Daccus accepted that one such investigation was to undertake structural investigations to the fabric of the Hall. Furthermore, PFP's case in this respect is fundamentally inconsistent with Mrs Lock's letter e-mail of 9 October 2008, where she said this: “Finally I do not appear to have the quotes for the soil survey and would appreciate them being e-mailed over. I think we may need to get on with them as we do not want to submit the scheme until we are sure the foundations are sound? What do you think?" It is also noteworthy that Mr Daccus response to that e-mail was to ask Mr Munro to send the tenders to him in electronic form so he could forward them to Mrs Lock, which seems to me to be consistent with his having done nothing in that regard after 15 September 2008.[127]In those circumstances, I am satisfied that Mrs Lock's recollection is the more reliable and, even if PFP did - mistakenly - assume that the reference in her e-mail to investigation works was a reference to the ground investigation works, that does not explain why they did not seek to clarify the position or to provide a clear written advice as to the risks. Furthermore, since even on the face of the e-mail Mrs Lock was not suggesting that the ground investigation works should be deferred indefinitely, and she was anticipating the planning application being submitted within two - three weeks, there was no basis in my judgment for PFP treating that e-mail as if it was, effectively, an instruction to suspend any further steps to procure a ground investigation report.[128]It is not clear when, if at all, Mr Daccus did send the quotations to Mrs Lock in response to her request of 9 October 2008. It is however clear that on 22 October 2008 Mrs Lock asked Mr Daccus to contact Mini Soil Surveys to ask them to quote for the work. When Mr Daccus forwarded this request to Mr Munro, he said that he would but also said he did not think that they had a rig which would enable them to bore down to 12 m. Mr Daccus forwarded that response without comment to Mrs Lock, who chased progress on 6 November 2008, with no apparent response. In the meantime, Mrs Lock was issuing regular action lists, including the soil survey as an item of work which needed to be done.[129]At this stage the document trail seems to run out. PFP obtained a witness statement from Mr Dunn, the proprietor of Mini Soil Surveys, who confirmed that he could not have drilled a borehole to 12 m with the equipment he had. However there is no evidence from him or anyone else as to when he advised Mr Munro or PFP to this effect. In paragraph 30 of his witness statement Mr Daccus said that "Mrs Lock was advised that Mini Soil Surveys was not suitable and that the recommendation to use RSK stood". Under cross-examination it was suggested to him that in fact he did not provide this advice, and that PFP effectively forgot about it. Although he did not accept that, in my judgment the absence of any further correspondence to show that PFP advised Mrs Lock about Mini Soil Surveys’ response or that they asked her for instructions to appoint RSK is compelling evidence that PFP just forgot about it, I suspect on the basis that it assumed that it could be left until after the planning permission application had been submitted and determined. Whilst I do not accept Ms McCafferty's suggestion that PFP deliberately decided not to do anything about it because they did not want to take the risk that it would reveal adverse ground conditions which would put the revised scheme in jeopardy, I do accept her alternative submission that they simply overlooked the need to action this important issue.[130]What PFP ought to have done, in my judgment, was to have sent Mrs Lock the contract tenders in mid September 2008. Had it done so, then I am sure that Mrs Lock would have asked Mr Daccus to ask Mini Soils Surveys to provide a quotation. If that process had been undertaken promptly, I have no doubt that by early to mid October 2008 PFP would have been able to report that they were not suitable, and that their recommendation was to instruct RSK to undertake the work without further delay. I also have no doubt that Mrs Lock would have agreed, and that an order would have been placed, and that the report would have been available by early to mid December 2008 at the latest. Indeed, this timetable is if anything over generous to PFP, since it ignores the failure to send them on before the end of August 2008 and it also begs the question why, if Mr Munro knew that Mini Soils Surveys were unlikely to be able to do the report, he did not simply phone them to confirm thus avoiding wasting unnecessary time. I do not think that this is unfair criticism with hindsight: everyone knew it was important to obtain a ground investigation report sooner rather than later. At the very least had there been clear written advice as to the risks of delay, I am sure that Mrs Lock would have taken steps to push matters forward.

The meeting of 1 December 2008

[131]I begin by referring to the documents which PFP produced in anticipation of the meeting.[132]First, there is a one page schedule which is entitled "Buckley Hall 12 apartment scheme financial appraisal 22 November 2008" but which has been referred to during the trial by its file name of "cost plan three". That is because this was the third version of the cost plan, the first having been produced on an unknown date and the second on 22 November 2008. As Mr Pickard acknowledged, there were some significant downward revisions to certain of the figures in the course of this process, reducing the construction costs by some £267,000. Mr Pickard claimed that this was done on the basis of information provided by Globe: although there is no documentary evidence to this effect, in the absence of cross-examination on the point I do not consider that it is open to me to make an adverse finding against Mr Pickard in this respect, although I have to say that I find it surprising that he felt able to do so, given the absence of documentary evidence to identify his thinking or his justification.[133]The document itself goes beyond providing construction costs. Thus it begins by taking Mr Naden's sales revenue estimate of £10.07M, and then proceeds to estimate the total project cost, under separate headings of acquisition costs, contractor costs, contingency, professional fees, others, marketing and finance. The total contract costs are estimated at £4.363 million which, together with a 5% contingency, produces a construction total of £4.581 million. It records what appears to be a very healthy, not to say attractive, profit figure of £3.371 million, or 50.32% (or 52.02% without expending contingency).[134]At the foot of the cost plan, it says "Refer to Butley Financial Report and Butley Area Schedule version 5".[135]The first document is headed "Butley Hall Financial Appraisal". It is a three page document. In my judgment it is clear from the terms of the document, particularly the first page, that it is intended to be a document to be submitted to AIB for its consideration as part of a funding application, with a view to seeking to persuade them to support the development. It is that, I consider, which explains the overwhelmingly positive tenor of the document whereby, in my judgment, the positives are emphasised, whereas the risks are either ignored or minimised.[136]Thus, under the heading "the project", after summarising the development works, the document refers to the involvement of three contractors in visiting the site. It does, as PFP emphasises, record that all are concerned about its complexity, and believe that it is at the "extreme end of the construction difficulty spectrum". It continues however as follows, in a paragraph worth setting out in full: “We have attached a due diligence and risk register the purpose of which is to identify those items that will need to be resolved immediately after the planning application in order that contractors are able to provide competitive prices. The risks that have been identified to be dealt with either by transferring the risk to third parties (ideally those that are best qualified to deal with them), further investigations undertaken in order to eliminate the specific risks or else by the provision of appropriate contingencies."[137]It continues by referring to the positive opportunity to obtain significantly lower tenders within the first six months of 2009, and recommends that a fixed cost should be established for the project within that period to take advantage. It continues by recommending a hybrid partnering approach between the Locks, PFP and the contractor, involving the work being carried out under a "design and build guaranteed maximum price contract".[138]It is worth noting that the financial appraisal does not refer at any point to the cost plan. It does not explain whether the contingency is inclusive or exclusive of the construction difficulty risks identified in the due diligence and risk register. Mr Pickard claims that he advised the Locks at the meeting that the contingency was exclusive of all items on the due diligence and risk register but, if that was really the intention, I am extremely surprised that it was not flagged up in the financial appraisal itself or on the cost plan. It does not identify what contingencies would currently be regarded as appropriate on the basis of the construction difficulties identified by the contractors.[139]It is also worth noting that although PFP records what the contractors have said about the difficulty of the works, it does not state whether or not PFP agrees with this, or which if any particular difficulties PFP consider are present, or how they are to be dealt with. Although Mr Hickey criticised the Locks’ architect expert, Mr Evans, for making this point, it seems to me to be a fair point, in that anyone reading this document would not know what PFP's own view was about the nature and extent of the construction difficulties and the nature and extent of the risks and costs associated with them. Instead, it is followed by the passage to which I am referred, which offers general reassurance that these risks can be managed without undue risk or difficulty.[140]In short, in my judgment there is little or nothing in this document which would enable a reader of cost plan 3 to understand whether, and if so to what extent, PFP's estimate of construction costs did, or did not, take into account all of the contingencies, and if so which ones, or to understand what was PFP's assessment of the "best case" and “worst case" construction costs.[141]The due diligence and risk register comprises a six page document with over 100 separate items, separated in two columns headed "description" and "responsibility", under separate headings such as "legal", "finance", "on site surveys and investigations", "planning" and so on. Under the third heading, there are 17 separate items, including one, with the description "borehole ground investigation for both new and existing" and the responsibility "organised by PFP".[142]As Mr Evans said, in my judgment this is really no more than a checklist of what needs to be done on this project. In no way is it a meaningful tool for identifying specific items of risk and how they should be dealt with. If anyone reading the financial appraisal had turned to this register to see which construction risks were being referred to as needing to be resolved immediately after the planning application, they might guess, but would have no way of knowing. Indeed, if they had seen the reference to a borehole ground investigation, they would have assumed that it had already been organised by PFP whereas, as I have said, as at 1 December 2008 that was very far from being the case.[143]In paragraph 31 of this witness statement Mr Pickard said that "the purpose of the risk register was to highlight to the Locks areas where risks would need to be managed … PFP considered the absence of a site investigation to be a risk, so I placed this on the risk register to bring it to the Locks’ attention which is what we did.” In my judgment, for the reasons I have given, I consider this to have been a thoroughly deficient attempt to achieve that important objective.[144]So far as the meeting itself is concerned, PFP did not even produce an agenda for the meeting, let alone any subsequent minute of the meeting, or subsequent letter or e-mail confirming what had been discussed, what they had advised, and the steps which had been agreed to be taken going forward.[145]So far as documentation is concerned, Mrs Lock accepts that she was provided with a copy of cost plan three, and has produced her version, annotated by her, where she has written against the contractor cost subtotal the words "too high" and against the item for PFP's fees the words “need lump sum discuss". I am satisfied that these are contemporaneous notes, the latter note has all the hallmarks of being contemporaneous, and certainly has nothing to do with the dispute as it subsequently emerged, and there is also a note as against the cost for kitchens and bathrooms which again seems to me to be obviously contemporaneous. Indeed PFP accept that at the meeting Mrs Lock expressed her concern about the size of the figure for construction costs.[146]On 2 December 2008 Mrs Lock e-mailed asking to be provided with "the first draft of the financial appraisal and also the supporting document we discussed at length with your background and summary info". That, it seems to me, is clearly a reference to cost plan three and the financial appraisal, but it appears from PFP's e-mail in response of 8 December 2008 that all that was sent was the cost plan.[147]Mr Finlason claimed in paragraph 14 of his supplemental witness statement that Mr Pickard, being a methodical man, went through the financial appraisal and risk register "line by line". Whilst I doubt that he would have gone through the 100 plus entries in the register line by line, it is clear from Mrs Lock's e-mail to which I have referred that there was a lengthy discussion.[148]Mrs Lock's evidence is that she was shocked by the total estimated construction cost, being hugely more than the £3 million she was expecting, and said it was highly unlikely that AIB would lend that amount of money. She said that it would be necessary to reduce costs, and Mr Pickard said that he would get the contractors already involved to see if savings could be made and a guaranteed price could be obtained. She says that she was advised to put in the planning application without further delay, on the basis that there was an impending merger of planning authorities which might affect the outcome, and also on the basis that once she obtained permission if there was a problem with funding it would always be possible to submit a application for a smaller and less expensive scheme at that stage. She accepts that she was still enthusiastic about the scheme, happy that the financial appraisal still showed a good profit return, and agreed to submit the application but on the basis that it would be necessary to get cost savings.[149]Mr Finlason and Mr Pickard largely accepted that the discussion ran along these lines, but they did not accept that her agreement to proceed was subject to a stipulation that the costs were reduced. Mr Pickard accepted that he did not warn in terms of the risk that the construction costs could be understated.[150]It is clear, in my judgment, that it was agreed that the planning application would be submitted, and that in the new year Mr Pickard would, having obtained further information from contractors, put together a revised cost plan, which hopefully would indicate a reduced figure and guaranteed maximum prices from contractors, which Mrs Lock could then submit to AIB with a view to obtaining itscontinued support.[151]Whilst I am satisfied that Mrs Lock was nervous as to AIB's reaction, I do not consider that at the time she believed that unless construction costs could be brought down significantly below £4 million there was no prospect at all of AIB continuing its support. Otherwise, I am satisfied, she would have said so in terms in the subsequent e-mails.[152]PFP contend that at the meeting they specifically explained the risks of proceeding without a borehole survey, but that Mrs Lock’s instructions were to defer this until after the planning application had been determined. However there is no contemporaneous documentation to support this, and I view this as inconsistent with her approach to this question in the earlier correspondence to which I have already referred. It seems to me that PFP assumed, mistakenly, that Mrs Lock had already decided to defer a formal ground investigation until after the planning application had been determined, and Mrs Lock either assumed, mistakenly but reasonably had she read the risk register, that it was in the process of being organised by PFP, or had simply forgotten about it in the heat and dust of everything else which was going on at the time.

The planning application

[153]It is common ground that after some further final revisions, and after a final meeting with the planning officers, the planning application was submitted on 18 December 2008, by Mrs Lock's father collecting it and hand delivering it to the council offices.

The structural design

[154]In late November 2008 Mr Munro sent some sketches to PFP, including SK007, which identified mass concrete underpinning under the existing spine wall and also that the basement underneath the Hall itself was to be a double basement rather than a single basement. It is common ground however that this was an error, because it was evident from a careful reading of PFP's drawings that there was only one basement, the "semi-basement", to be formed under the Hall. As well as the sketches, Mr Munro sent an updated version of his structural design philosophy statement, stating clearly, as shown on the sketch, that "the basement area under the existing hall shall be formed by underpinning the main spine wall and edges of the main cross walls with mass concrete". It appears that this structural assessment was submitted along with the planning permission application, whereas neither the sketches, nor the CAD drawings which Mr Munro sent on 9 December 2008 showing the same design, including the mistaken double basement design, accompanied the planning permission application.[155]On 3 February 2009 the same CAD drawings were sent to Mr Hargreaves of Globe for "budget pricing purposes". Drawing CP 06 is the drawing which shows the mass concrete underpinning and the mistaken double basement design. However on 16 February 2009 Mr Munro sent revised drawings to Mr Hargreaves, including a revised version of Drawing CP 06, entitled CP 06A, which showed the mass concrete underpinning replaced by two lines of "350 mm piles at 500 mm centres" either side of the spine wall, supporting a beam upon which the spine wall would rest, and which also showed the second basement level replaced instead by what I am satisfied was intended to be existing ground, locally excavated and then backfilled to allow the new structures to be formed.[156]It is apparent that the change from mass concrete underpinning to contiguous piling (contiguous in this context simply means that there is a gap between each pile) was introduced at the instigation of Globe and its intended piling subcontractor, Bullivant, in circumstances described by Mr Hargreaves, namely that they considered that whilst it would be feasible to install mass concrete underpinning as shown on Drawing CP 06, that was not the way which Globe considered that they would wish to do it, and with the benefit of Bullivant’s assistance decided that the contiguous piling solution was preferable.[157]Although the Locks and their advisers have sought to make much of this change, and although Mr Finlason in particular got himself in something of a pickle in his evidence in trying to explain away the change, in my judgment it is of very little significance. I am quite satisfied that the reason why Mr Munro originally showed mass concrete underpinning as the preferred design was because he viewed it, perfectly reasonably, as generally cheaper and easier than piling, no doubt because he was aware that to pile under the existing spine wall would involve bringing a piling rig into Butley Hall itself, which is not something which one would ordinarily contemplate in relation to a grade 2 listed building of uncertain structural integrity and with existing historic internal features. However I accept that there was no question of this being a design set in stone in December 2008, it would always have been subject to reconsideration as the design evolved and, in particular, once a ground investigation report was available. I am also satisfied that when Mr Munro issued the revised Drawing CP 06A, he did so for a number of reasons, one was to make a change in the design not material for present purposes, the other was to correct the double basement error, and the third was to record his acceptance of the proposal, from Globe, to use contiguous piling instead of mass concrete underpinning. I am quite sure that Mr Munro did not give that third alteration any great deal of thought at the time. I am sure that he simply accepted that if Globe and Bullivant, as reputable contractors, considered that to be more appropriate, he was quite happy to go along with it for present purposes. I do not think he gave the question of piling access any serious consideration at the time. I am sure he rationalised this in his own mind by considering it as temporary design, for the contractors rather than for structural engineers. I am also sure, as I have said, that he would have known that it would have to be looked at again anyway once ground investigation information was available.[158]I am also satisfied that PFP did not give this any serious attention at the time. All that it was concerned about was ensuring that Globe had the information it needed to provide its most competitive realistic price. In so far as Mr Finlason and Mr Daccus claimed that they had given positive thought to questions of access to pile using a low headroom mini piling rig, whether in August 2008 as they seemed to suggest or at any time subsequently, I do not accept that evidence.

AIB’s decision to refuse to support the development pre-planning permission

[159]On 2 March 2009 Mr Flynn of AIB sent an e-mail to Mrs Lock containing something of a bombshell. In short, he said that AIB had "no appetite to provide development funding for the proposed 12 apartment scheme". He said that the bank would be prepared to consider funding a limited refurbishment, and that its aim was to "make this property income producing as quickly, simply and cheaply as possible". There is no preceding correspondence to explain how this change of approach came about. In paragraphs 129-130 of her witness statement Mrs Lock said that in the absence of any firm prices from contractors she had to inform AIB of PFP's cost estimate. She says "as anticipated Mr Flynn did not wish to lend that amount of money. Also he did not like the underground elements of the PFP scheme … AIB never suggested to me that this was because of any problems with AIB's own financial issues. It was simply that they did not have an appetite to lend the amount of money required or lend on the PFP scheme".[160]I am quite satisfied that Mrs Lock did indeed provide a copy of PFP’s updated cost plan (amending the revenue figure to take into account Mr Kyte's valuation) to AIB sometime in February 2009, and it was this which precipitated its decision. I do not consider that AIB's decision would have been any different had any other 12 apartment scheme with similar costs being produced. I am quite satisfied from the tenor of the e-mail and, indeed, from the tenor of Mr Flynn's subsequent letter to the Locks dated 25 March 2009 that the bank, having re-assessed the proposition in the light of the cost plan, was simply not prepared to make available 100% funding for such a substantial redevelopment given the current economic situation including, I have no doubt, its own straitened financial circumstances. I am prepared to accept that the ambition and complexity of PFP's revised scheme, including the underground excavations below and adjacent to the listed building, played some part in that decision, but I do not consider that it was the primary reason.[161]Mrs Lock did not immediately inform PFP of this development. Instead, she continued to press for progress for the provision of contractor prices.

Planning permission

[162]On 23 March 2009 planning permission and listed building consent was granted in substantially the terms applied for. Not surprisingly, Mrs Lock expressed her pleasure in glowing terms in an e-mail sent that day, from which it is clear that she still fully intended to proceed with the project. I am satisfied that at that stage she still hoped and believed that between them she and PFP could produce a sufficiently firm reduced price to persuade either AIB or some other funder to back the project.[163]I need refer at this point only to condition 2 (which identified the approved plans), 9 (which required details showing the retention and protection of the Jacobean staircase to be submitted and approved before development commenced) and 13 (which required details of any pile driving activity to be approved before any such works took place). These conditions are relevant to the Locks’ case on buildability, and I shall deal with them at that point.

Contractor tenders

[164]On 8 April 2009 Globe submitted what it described as its tender, with the tender sum being £4.367 million. It was clearly intended, as Mr Hargreaves confirmed in his evidence, to be a serious tender, and it is also clear that a lot of time and effort had gone into preparing it. However, it is also clear, as Mr Hargreaves also confirmed, that there were a number of areas of uncertainty as to the design and the scope of the works, due to the lack of detailed information. As specifically stated in the covering letter, that included the “substructure and underpinning works [which were] at present included as a budget figure, contingent upon the receipt of a detailed ground investigation report”. That caveat was restated in more detail in the accompanying “clarification and design assumptions” document, where it was observed that post receipt “detailed design may then adjust the price and programme duration”. Thus, as is obvious, the ground investigation report might affect costs both directly, in relation to the scope of work involved, and indirectly, in prolonging the works and hence increasing the fixed “time” costs of the works. It can be seen from the contract sum analysis that the budget price for these works is £656k, and it can be seen from the priced schedule that the works to the semi-basement level are “assumed” in the absence of the lack of design or detail. It is clear from the tender, confirmed by Globe’s subsequent email of 8 May 2009, but contrary to what was suggested by PFP in its letter dated 6 May 2009 (but not pursued at trial), that it was not, nor did it purport to be, a guaranteed maximum price tender.[165]Under cross-examination Mr Hargreaves said that at the time of tender he believed that the project could have been built at an economical cost, but that a great deal more design work would have been necessary. He also confirmed that the impetus to change the design from mass concrete underpinning to contiguous piling came from the construction team’s assessment of what was required in terms of underpinning.[166]It appears from the design assumptions that Globe was working on the basis that it would be necessary to remove the existing floor structure at ground floor level, but it is not clear whether or not any assumption was made one way or another in relation to the existing walls. There is no evidence, whether directly or indirectly, from Globe or Bullivant as to whether they had considered in any detail the practicalities of piling inside Butley Hall.[167]On 22 April 2009 McGoff & Byrne (“McGoff”) sent what they described in the covering email as a “cost plan incorporating all known requirements”, amounting to £4.29M. It is a considerably less detailed document than that produced by Globe, containing no detail as to the nature and scope of works costed, and including a provisional sum of £75,000 for "under pin rear/support" and a further sum of £690,000 for "piled basement / car park / tanking system". In these circumstances, and in the absence of any evidence to explain the basis of which this was produced, it is difficult to place any real reliance on it other than, since I have no reason to believe that it was in any way collusive, it does tend to confirm that McGoff, as a reputable contractor, was prepared to provide a price estimate similar both in total and in allowance for underground works to that of Globe.[168]PFP did not forward these tenders to Mrs Lock, even though she was chasing for them. At the same time Mrs Lock was in discussions with Mr Beckley, a partner in Manchester's DTE Corporate Finance department, who was assisting her in her efforts to seek to obtain funding. Eventually, it was agreed that there should be a meeting between PFP and Mrs Lock on 11 May 2009, in advance of which Mr Pickard would produce a "financial and procurement strategy for the project".

PFP’s invoice and the breakdown of the relationship

[169]It is apparent that on receipt of planning permission PFP considered that it was entitled to raise and submit its invoice for the balance of the 40% fee. And thus it produced an invoice on 31 March 2009, claiming the balance of 40% of its overall 10% fee, calculated on the total construction cost of £4.581million shown on cost plan three. It then sent that invoice to the Locks under cover of a letter dated 2 April 2009. However, as Mrs Lock subsequently explained, and as I am satisfied was the case, it was sent to an address which was no longer their current address, with the result that the Locks were completely unaware of the fact that it had been sent.[170]Curiously, given that there were a number of meetings and communications between PFP and Mrs Lock over the intervening period, PFP did not appear to have referred to the invoice over the following month, until PFP's letter dated 6 May 2009, being the financial and procurement strategy letter promised by Mr Pickard in advance of the planned meeting on 11 May 2009, reached Mrs Lock with, as I shall describe, such devastating results for their relationship.[171]The letter itself is a detailed six page letter, relevant for a number of reasons.[172]First, it referred to the amount of the Globe and McGoff tenders, saying that they reflected the design stage then achieved and "in broad terms, may reflect a plus or minus 15% accuracy". It identified a number of "key areas" not yet accurately defined, including ground investigations. It continued by saying "under normal circumstances we would expect to see prices be accurate to within 10% or less at this stage of design; however the complexity and nature of this new build and conservation project prevents this". I shall have to consider whether what is in this letter is consistent with PFP's approach as at 1 December 2008 in due course. For present purposes it suffices to note that it was Mr Pickard’s considered view that even after the work done in terms of design development and contract involvement over the last five months the costs were only accurate to within 15% either way, and even under normal circumstances he would have expected only 10% accuracy.[173]Second, it referred to the Locks' clear view that the figures presented are "too high and that a substantial price reduction is required if the project is to remain viable", and to PFP's understanding that what they required was "detailed prices to present to their potential funders … significantly less than those already presented … in order to attract lending institutions".[174]Third, and this was, I accept, a bombshell so far as the Locks were concerned, it was said that to do so would require PFP to undertake significantly more work to achieve what the Locks required, but that "PFP is now awaiting payment of professional fees (£182,000) as a result of successfully obtaining planning permission and cannot undertake further design work until these fees are paid (due 31 April 2009 and therefore now overdue)". This item was also the first item on the agenda for the meeting.[175]Fourth, it went on to consider a number of potential procurement routes which the Locks might consider in an attempt to achieve a significantly lower price. It did, however, observe that the Locks might not "fully appreciate the complexities and risks involved, and may not be able to secure funds to take the benefit” of such alternative routes.[176]Mrs Lock’s response, sent by e-mail the same day, was to say that she was "insulted" by the e-mail, being completely unaware of there being any overdue invoice, and also saying in effect that without "written detailed tenders" there was no possibility of achieving funding or, therefore, commencement. PFP responded by attaching a copy of the invoice, to which Mrs Lock replied by saying: “Needless to say that … we do not have this kind of money and we have always been transparent in this regard as a prerequisite was always the funding". As Mr Hickey observed in submissions, Mrs Lock was there being completely open about the fact that the Locks simply did not have the funds to pay PFP's invoice without obtaining funding.[177]Although not documented, it appears that the planned meeting did not take place, and the next communication included a strong response from Mr Pickard, in his letter dated 15 May 2009, but seemingly sent by e-mail the previous day, in which he said: “Your e-mail response of 6 May was predictable given that it is now time for you to pay PFP for the services that you have commissioned and which we have so successfully delivered. For you to say that you are "insulted" to have received the e-mail is frankly just silly and irrelevant … you have built up a very considerable debt with PFP which is not going to disappear and needs to be addressed immediately … To provide contractors with an appropriate level of detailed pricing information requires you to settle the debt you have incurred with us and to spend further money on both professional fees and investigations".[178]He did, however, conclude by restating PFP's willingness to have a meeting to discuss these issues and to move forward with the project.[179]Unfortunately Mrs Lock replied in equally strong terms. In an immediate reply e-mail dated 14 May 2009 she said that although she had been making arrangements for a meeting "needless to say I have now cancelled this as there is no chance in 1 million years I will see you ever again after this behaviour!", although in a subsequent e-mail dated 18 May 2009 she did, despite setting out her position in strong terms, nonetheless seek to leave the door open for a further meeting and a reconciliation, which she repeated in a further e-mail on 21 May 2009. Following that a meeting was eventually arranged and took place on 23 June 2009, in which there were discussions, but seemingly no agreement, about a revised payment proposal.[180]In the meantime, the Locks had already begun discussions with Mr Hughes of PHP and it is clear that PFP were hopeful that matters could be resolved if PHP were prepared to take over the scheme. However, as I have already said, PHP were not prepared to do so, although it does not appear that this was communicated in clear terms at the time. Eventually, on 28 September 2009 PFP wrote what was effectively a detailed letter of claim, to which Mrs Lock responded on 5 October 2009, setting out a number of complaints and reasons for refusing to pay the invoice. It is clear, in my judgment, that by that time at the latest the relationship between the parties had been terminated.

The Locks’ progression to the new scheme

[181]It is clear that the Locks approached a number of different prospective funders, including a number of high street financial institutions and others, but without any success. It is also clear that at this stage the Locks were unaware of either Close Brothers or Flourish as potential funders and, hence, did not approach them.[182]In short, I am satisfied that in principle Close Brothers and Flourish would have been prepared to advance funding at this time had they been approached by the Locks, but I am also satisfied that there would have been features of any proposition which the Locks could have produced at this time which would have led to their declining to fund. In short, I am satisfied that neither would have been prepared to fund a scheme in circumstances where the design was so obviously incomplete and the tenders so heavily qualified, and where there was significant uncertainty both as to the sales return and the construction costs.[183]PHP, although unwilling to proceed on the basis of PFP's design, or indeed to enter into any form of joint venture, was willing to enter into negotiations with a view to purchasing Butley Hall conditional upon obtaining planning permission for a revised scheme which it would have been happy to undertake. By October 2009 it had put forward an offer to purchase on that basis in the sum of £1.3 million.[184]The Locks were not particularly impressed with this as a proposal and, although they were prepared to continue negotiations, they also, at the same time, instructed another architect with a view to seeking to redesign PFP's scheme, so as to remove the semi-basement construction under Butley Hall and to physically separate the new wing extensions from Butley Hall. They also involved a firm of quantity surveyors, Cameron Middleton & Lees (“CML”), to provide a preliminary cost opinion on that revised project. The cost estimate provided by CML amounted to some £4.925 million, including a £500,000 budget for piling and temporary works which, according to them, brought "into question the financial viability of the project". Rather surprisingly, given what I have been told about Bullivant's previous involvement with Globe, CML said that they had held discussions with Bullivant regarding the piling works, which "raised significant issues in relation to buildability and risk when piling in close proximity to the existing building ". In the absence of any clear evidence as to the content of these discussions, since no-one from CML was called to give evidence about them, I do not consider that I can place any weight on this point.[185]In any event, since the Locks were unable to obtain funding, they could take this project no further. Accordingly, they considered that their only option was to sell to PHP, and following further negotiations they were able to persuade PHP to improve on its offer to £1.4 million which was agreed subject to contract early in 2010.[186]However it was not until June 2010 that everything was agreed to PHP's satisfaction and a conditional contract was entered into. By this stage PHP had involved alternative architects, Buttress Fuller, who produced a preliminary design, similar to one considered at the early stage by PFP but rejected, involving the refurbishment of Butley Hall and the construction of separate accommodation at the rear of the site.[187]Although PHP applied for planning permission in August 2010, it was only obtained after the expenditure of considerable time and effort in June 2011, and even then only for a smaller 10 apartment project. Unfortunately, PHP decided that it was not prepared to pay the £1.4 million which it had previously agreed to pay, on a conditional basis, but the Locks were not prepared to reduce the price, and the end result was a stand off and, eventually, PHP withdrawing from the contract and the Locks deciding to develop it themselves using the new scheme design. Even then, however, the opposition to the new scheme was sufficiently intense as to provoke a threat of judicial review which, in the end, was only bought off by the local planning authority agreeing to take further steps, so that it was not until June 2012 that the threat of judicial review was removed and the development could proceed.[188]In short, notwithstanding what the Locks may now say, it seems perfectly clear to me that the new scheme was never in substance an obvious, lower cost lower risk scheme, which they contend PFP ought to have advised them from the outset to have pursued. I consider that there would have been considerable, and perhaps insuperable, problems in obtaining planning permission at first application for such a scheme, and that the reality is that it was only as a result of the combination of circumstances, including the planning permission obtained by PFP, the subsequent involvement and "clout" of PHP and its advisers, and the sheer persistence of the Locks, that planning permission for this new scheme was eventually obtained in June 2011 and confirmed in June 2012.[189]As I have already said, in autumn 2012 the Locks were able to obtain funding for the new scheme from Close Brothers and Flourish. I should also note that this was facilitated through the assistance of Mrs Locke's parents, who were prepared to advance £587,000 by way of a loan to repay part of the AIB debt.[190]The Locks decided to incorporate a limited company in order to undertake this development, and did so, transferring Butley Hall to that company, known as Edengate Homes (Butley Hall) Ltd (“Edengate”), in November 2012.[191]In January 2012 construction began on site, which is currently scheduled for completion in September 2014. As matters currently stand contracts have already been exchanged on six of the properties, and reservation fees paid on 2 other properties, leaving only 2 to sell, and with a projected current profit forecast of approximately £2.5 million.[192]That then completes my account of the relevant chronology, and I turn now to the expert evidence which I have heard.

THE EXPERT EVIDENCE

[193]I shall refer to the expert evidence in the order in which it was given, namely the engineering evidence first, followed by the quantity surveying evidence, the architectural evidence and, finally, the valuation evidence.

Engineering evidence

[194]PFP called Mr Tutt; the Locks called Dr Roberts. Both were obviously well qualified and knowledgeable about engineering matters. They both presented overall as genuinely independent and fair minded. That said, both had on occasion taken on the mantle of advocate for their respective clients. Thus for example Mr Tutt in his report had drawn conclusions about why a ground investigation report had not been carried out, having only seen PFP's witness statements on the point, and when that was really a matter of fact for the court to determine in any event. For his part Dr Roberts had for example been persuaded into adding some detail into his report in relation to planning issues, which were not really within his sphere of expertise. However, in fairness to both experts, when these criticisms were put to them in cross-examination they accepted them as valid and I do not consider that they detracted in any serious way from my overall conclusion.[195]Furthermore, I consider that the differences of opinion between them were in large part more apparent than real. One substantial exception was as regards the significant issue as to whether or not it would be possible to install piling under the spine wall without damaging or removing the cross walls. However it seemed to me that in addressing that question they were both in the end very largely reliant upon what they had been informed by specialist piling contractors rather than upon their own direct knowledge and expertise as engineers.[196]Since they had produced a very helpful preliminary joint statement dated 3 October 2013, that is a convenient starting point for my consideration of their evidence.[197]They agreed that on this project ground conditions were a key issue, likely to have a material impact on the design, cost and risk. Dr Roberts’ opinion was that a competent engineer ought to have given a clear warning to this effect. In cross-examination Mr Tutt agreed that it would have been good practice for the client to be advised to obtain a ground investigation report prior to any application for planning permission being submitted in a case such as the present, which, of course, is what PFP says that it did.[198]The fundamental question which the engineering experts had to consider was the buildability or feasibility of PFP's revised scheme. There is obviously a difference between whether something is technically buildable, i.e. feasible purely from a technical engineering perspective, and whether something is practically buildable, i.e. feasible in a practical sense, when considering not just whether it can be done, but how it could be done, bringing in broad considerations of risk, cost and timing. If it is too difficult, too risky, too expensive or too time-consuming then it is not practically buildable. In a series of cases it has been held by judges of the TCC that one must consider not just technical but also practical buildability: see Equitable Debenture Assets Corporation Ltd v William Moss Group Ltd (1984) 2 Con LR 1, Department of National Heritage v Steenson Varming Mulcahy (1998) 60 Con LR 33, George Fischer Holding Ltd v Multi Design Consultants Ltd (1998) 61 Con LR 89, and Bole v Huntsbuild Ltd [2009] EWHXC 483 (TCC). In this case there is also an allegation about whether or not the design was buildable without infringing the planning permission and/or listed building consent, which raises further issues of practicality.[199]Dr Roberts, although describing it as an extremely complex scheme, did accept that it was buildable, subject to certain design alterations and to obtaining such permissions as were necessary. Mr Tutt accepted it was complex, particularly in its construction phase, but not that it was "extremely" complex. That, it seems to me, is really no more than a difference of emphasis.[200]So far as the double basement mass concrete underpinning scheme shown on drawing CP 06 was concerned, Dr Roberts said that it was impracticable. In cross-examination Mr Tutt effectively agreed. For his part Dr Roberts was prepared to accept in cross-examination that the semi-basement mass concrete underpinning scheme was technically possible, but thought it "not very wise", which seemed to me to be consistent with Mr Tutt's clear preference for the alternative piling schemes.[201]So far as the contiguous piling scheme shown on CP 06 A was concerned, Mr Tutt had considered it complex, but buildable. However that opinion, it seemed to me, had been arrived at on the assumption that there was consent for the removal of the floors and the walls in the areas concerned, which in my judgment is incorrect. Dr Roberts considered that it had two significant flaws, namely first that it assumed that the ground conditions were sufficient to enable it to be constructed, and second that the cross walls would need to be removed to construct it, for which there was no consent. Although Mr Tutt argued in cross-examination that by using grout in the piling operations one could end up in practice with effectively a continuous piled wall, he also accepted that there remained a risk of water and fine migration which it was important to avoid in the construction phase. That, of course, is why he came to suggest and to promote the alternative piling solutions which he did in his subsequent reports, to which I shall refer next. In my judgment, that was an implicit acceptance by him that in the light of the actual ground conditions, the contiguous piling scheme was not feasible.[202]The experts are agreed that the ground investigation report, undertaken as part of the design of the new scheme, revealed loose sand, low SPT results and water table levels as high as 1.5 m or less below ground level. They also agreed that these conditions made it difficult to underpin by traditional mass concrete methods and also to construct a contiguous piled wall. They also agreed that ground water control was required, and that in general excavations would be difficult.[203]Mr Tutt suggested that these conditions could be overcome by appropriate measures, such as secant piles and dewatering, which he considered would increase costs but which would not be excessively complicated. Secant piles are interlocking piles, producing a piled wall which forms an impervious barrier to movement of groundwater and fines. He introduced this in his August 2013 report as "one method” of dealing with the issues raised by Dr Roberts.[204]In his October 2013 report Dr Roberts considered this option in some detail, concluding that whilst he agreed it to be appropriate in engineering terms, in his view it raised serious concerns as to the extent of the demolition of the listed interior of the Hall which would be required to allow access for secant piling to be installed.[205]However in his October 2013 report Mr Tutt rather retreated somewhat from the secant piling solution. Thus he said that "if a secant pile wall is not practical", then a contiguous piled wall with the gaps between them grouted as necessary to provide temporary resistance to the passage of water could be provided instead. I shall refer to this as the piling/grouting solution. Although he did not explain in his report why the secant piling solution might not be thought practical, in cross-examination it became clear that it was on the basis that he had been advised by the specialist piling contractor he had consulted that it was not the best solution for this site, because it was very expensive and very time consuming, and not very practical. In short the problem, as I find it to be, is that as an economical solution it really requires larger diameter 500-600mm piles, but that these would be difficult if not impossible to install using a low headroom piling rig, which it is common ground is needed to allow piling inside the Hall without the need for demolition of the cross walls. This explanation was consistent with what Dr Roberts had been told by the specialist piling contractor he had consulted. In my view, it follows from the evidence of Mr Tutt and Dr Roberts in this regard that if a competent structural engineer had been asked in 2008 - 2009 to design the semi-basement works with the benefit of knowledge of actual ground conditions, he (or she) would almost certainly have approached a specialist piling contractor for advice and assistance and would equally almost certainly have been advised that secant piling was not a practically feasible solution.[206]This then brings me onto the piling/grouting solution. As I have said, it was first considered by Mr Tutt in his October 2013 report. It involves installing only one line of piles using a small low headroom piling rig, one in particular being a Klemn 702-1 machine, on the basis of its ability to pass through restricted door openings. In short, the proposal involves installing one line of 300 mm diameter grout piles at 450 mm spacing, with a follow on run installing grouting between the piles using the same machine to provide a seal to prevent loss of fines and water penetration.[207]Dr Roberts’ detailed observations on this solution appear in his supplemental report produced on 10 November 2013. In short:(1) From an engineering viewpoint, although he agreed that only one line of piling would be needed (subject to sufficient reinforcement being provided), he considered that there was a real risk that the secondary line of grouting might fail to prevent water or fine loss occurring. He noted that the specialist piling contractor he had consulted would not be willing to undertake these works.(2) He noted that it would be necessary to remove the entirety of the flooring, not just the floorboards. However as to that I am quite satisfied, having heard the evidence about the various components of the flooring, namely the floorboards, the floor joists and the brick sleeper walls, not only that there would be no difficulty in practice in obtaining listed building consent, whether formally or informally, to the removal of all of these items to allow piling to be undertaken, but also that any reasonable architect in the position of PFP would have been able to proceed on the basis that this was the case, since they have no historic significance.(3) He said that where the gable walls and the cross walls abut the spine wall, it would not be possible to pile right into the corner where the walls meet, with the result that unless permission could be obtained to remove these walls the design would be compromised because there would be a gap of between 2.4m and 3m in the piled wall at these locations. He explained that this was because the piling rig would need to work perpendicular to the spine wall, rather than working along the line of the spine wall.[208]These two fundamental issues, namely the efficacy of the piling/grouting solution as a cut-off wall, and the practicability of piling within Butley Hall without damaging the existing walls, were much debated at trial. As I have said, it became clear that both engineers were heavily reliant on advice from specialist piling contractors, which I do not regard as surprising given that this is a specialist activity where it is the practicability of operation rather than a technical engineering assessment which is at the heart of the issue. I have not heard evidence from either contractor. The Locks made a late application to adduce witness evidence from their contractor, but did not pursue it on the basis that both Mr Tutt and Dr Roberts could instead refer as necessary to information provided to them by the piling contractors. Indeed, as this issue developed during the course of the trial, even after Mr Tutt and Dr Roberts had finished giving evidence, further evidence from both contractors was adduced in the form of attachments to supplemental reports from the architectural experts, Mr Smart and Mr Evans. Whilst it is on any view unfortunate that the evidence continued to emerge in this way both shortly prior to and during the course of the trial, the view I took was that it was better to allow both parties to put in the evidence, particularly in circumstances where it could not clearly be said that it was one party rather than the other which was responsible for the need for this late evidence, rather than to exclude it.[209]Both contractors, a Mr Woodfield in the case of Mr Tutt, and a Mr Warner in the case of Dr Roberts, are with reputable firms, appear to have long-standing experience in piling operations, and are seeking to provide objective assistance to the respective experts and, ultimately, the court in reaching a fair determination of the issue. Although Miss McCafferty suggested that Mr Woodfield did not have the benefit of personal knowledge of Butley Hall, it transpired that neither did Mr Warner, even though his colleagues at Van Elle, the piling contractors by whom he was employed, have been undertaking piling operations on site. Furthermore, although Mr Hickey suggested that Mr Warner did not have experience of low headroom piling rigs, because his role within Van Elle was listed as piling in connection with rail projects, there seemed to be no hard evidence to doubt what he told Dr Roberts, which is that he did have such experience. Insofar as there was a confusion, I suspect it is because low headroom piling rigs are often used in connection with piling adjacent to railways, where there are likely to be overhead electrical lines and hence overhead safety concerns.[210]So far as the issue of efficacy is concerned, it was Dr Roberts' view that the secondary grouting was a "hit and miss" affair, with a significant risk of problems occurring during construction. Mr Tutt disagreed, referring to an e-mail from Mr Woodfield in which he expressed himself around 80% certain that only nominal sump pumping would be required to deal with any groundwater problem using the piling/grouting solution. In cross examination, Dr Roberts expressed some concern as to the effectiveness of sump pumping given his belief that any water encountered would be likely to be flowing at some pressure. However, apart from his knowledge of water at the lower rear section of the site, he was unable to point to specific evidence that the same conditions would have been encountered under Butley Hall itself.[211]The difficulty I face is that there is a lack of hard evidence either way on what is a fairly fine point. On balance, I am not satisfied that the piling/grouting solution is not a buildable or practically feasible solution. Whilst I accept that it would be necessary for the piling, grouting and sump pumping works to be carefully designed and undertaken, which would no doubt impact on the time and hence cost of the process, I am satisfied that on that basis any risk of the piling/grouting works not achieving their intended objective can be satisfactorily addressed by a comprehensive sump pumping programme. Whilst I can understand that the conservative approach would be to prefer secant piling, I am not satisfied that the piling/grouting solution is one which would not be recommended or undertaken by any competent engineer or piling contractor respectively.[212]Turning then to piling access, as the evidence emerged it became clear that there was some common ground between the parties. First, that only a low headroom piling rig would be suitable. Second, that in accordance with the planning permission granted for PFP's revised scheme there would be no difficulty in obtaining access into the Hall itself from either gable end. Third, that a low headroom piling rig could physically travel through the remaining internal doorways. Fourth, that it would be possible to pile using a low head room piling rig within the individual rooms, especially once the existing flooring has been removed.[213]The really contentious issue which remained was whether it would be possible to pile within the existing doorways, so as to allow an effective cut-off wall to be created which did not involve having to obtain permission to remove the existing cross walls and, more specifically, the two cross walls made of wattle and daub but which, on any view, are of historical significance even if not specifically the subject of a condition in the planning permission. Mr Smart accepted, in my judgment obviously correctly, that there would have been no realistic prospect of obtaining permission in advance to remove these walls purely in order to obtain access for piling. It is clear that since the planning permission did not expressly permit piling under the spine wall, and it would have been necessary to obtain written consent in advance before undertaking any piling, it would not have been possible to have proceeded on the basis that the permission to create the semi-basement implicitly carried with it permission to pile under the spine wall and thus to do all that was necessarily incidental for that purpose. Indeed, given that the other option of mass concrete underpinning would not have involved piling or any need for access for a piling rig within Butley Hall, that argument is in my judgment obviously unsound.[214]Dr Roberts gave two reasons why in his view it would not be possible to pile within the door openings. The first is because in his view the piling rig has to work perpendicular to the piling line, which it obviously cannot do where there is a cross wall in the way. The second is because in his view there would be insufficient height to work in, as opposed to travel through, the door openings due to the restricted height and width.[215]So far as the first objection is concerned, Mr Tutt's view was that it was only necessary to work perpendicular to the pile line where there was a risk of it toppling sideways in a potentially dangerous manner, for example working adjacent to a railway line or on a slope, but that this did not apply in the present case, where the piling rig would be working on a level surface with a piling mat. Dr Roberts was also concerned that the piling rig could not travel over piling already installed, whereas Mr Tutt took the view that this problem could be avoided either by the piling rig working backwards or by the reinforcement over the piles already laid kept down below ground level. Furthermore, although Dr Roberts’ opinion was that it was standard practice to work perpendicular, that seemed to me to be relying upon what he was told by Mr Warner as to what Van Elle's practice was, whereas Mr Woodfield had said in terms that so far as he was concerned there was no reason why one should not pile along the pile line. When pressed, the only reason which Dr Roberts could give was that one could not pile along the pile line through the door openings. In short, I do not consider that on the evidence I can prefer Dr Roberts’ view over that of Mr Tutt, and that the crucial question is whether it is possible to pile within the door openings.[216]Mr's Tutt’s evidence was that there was no reason in principle why the piling rig could not operate within the door openings, because the bore was positioned in front of the control section, so that the operator could operate the rig in the door opening from within the room, if necessary using a remote control facility. Dr Roberts did not disagree with this; his objection was as to the availability of sufficient headroom and width, as to which there was a late flurry of evidence, to which I shall turn.[217]So far as the headroom is concerned, it appears from the technical information attached to Mr Tutt’s report that the minimum operating height for the Klemn rig is 2450 mm. It appears that the height within the door openings from floor to frame is 2120 mm, thus presenting an immediate obstacle. However, if it is possible to remove the door frames and the oak work above up to the underside of the supporting steel beam, then it is common ground that there would be 2500 mm height available. In my judgment, there is no reason why it would not be possible to remove and, if necessary reinstate, the frame and oak work, and no convincing reason has been given to the contrary. Furthermore, if the flooring is removed here as well which, as I have said, I am satisfied it can be, that provides a further 400 mm working area. Accordingly, I am satisfied that there is no headroom obstacle to piling within the door openings. I do accept that PFP has not positively demonstrated, whether by way of experiment using the full paraphernalia of operating head, clamp, safety rig or winch, that this is possible. However in the absence of technical information to show that it is not, and given Mr Woodfield's evidence, as someone who uses this piling rig, that it is, I am satisfied on the balance of probabilities that it is.[218]So far as width is concerned, the minimum operating width using a standard safety cage for the head is agreed to be 1200 mm. It appears from the recent measurements that even with the frame removed there is only 1020 mm to 1060 mm width available for the doors in question, so that there is an immediate obstacle there as well. However Mr Tutt said that he was advised by Mr Woodfield that it was permissible to use a 900 mm safety cage, so that there would be sufficient room within these door openings. Dr Roberts had been unable to confirm this one way or another, but was sceptical. Whilst I appreciate Dr Roberts’ difficulty, there is clear evidence before me from an ostensibly reputable and competent specialist piling contractor that it would be possible to install piles in these door openings once the door frames are removed, which does not appear inconsistent with the technical information which I have. It is for the Locks to establish their case on buildability and, in my judgment, they have not been able to do so on the available information. In this respect I do consider that I have to stand back and take a realistic view of this. I am considering the practicability of piling along a length of 25m, where on the evidence the only obstructions are limited to 2 door openings. Given the dimensions in question, it would be surprising if it was not possible to find a piling rig which could not be operated by specialist contractors so as to install piling along a line which included these two door openings. Whilst it may be challenging to do so, it would be surprising if it was simply not technically or practically feasible to do so.[219]Having examined the evidence, I must set out my conclusions in relation to buildability allegations.[220]I must remind myself that, as Miss McCafferty confirmed in closing submissions, this is an allegation about a lack of reasonable care and skill: it is not an allegation that PFP was in breach of some absolute obligation to produce a buildable design. Furthermore, I must remind myself that I am not simply considering the question of buildability by reference to the design as it was as at the time the planning permission application was submitted. I am considering whether or not in the light of the information reasonably available to PFP at that time they were reasonably entitled to consider that the design would be buildable having regard to the further design work which on any view would need to be undertaken subsequently.[221]However, I must also remind myself that I must judge PFP not only on the standards of a reasonably competent architect but also, as a multidisciplinary partnership professing expertise in structural engineering matters, on the standards of a reasonably competent structural engineer. Furthermore, I must judge PFP on the basis that they should, as I have already held, have taken proper steps to ensure that a ground investigation report was obtained prior to planning permission being applied for, and that had they done so it would have been obtained by that time.[222]Having reminded myself appropriately, I am satisfied on the balance of abilities that a reasonably competent practice in PFP’s position would have come to the following conclusions:(1) That although it was technically buildable to construct a single storey semi-basement using a mass concrete underpinning scheme, and also capable to do so without breaching planning permission or listed building consent, in the light of the actual ground conditions it would be a challenging and complex exercise, carrying with it some significant risks and uncertainties and, hence, was not practically buildable.(2) That the contiguous piling solution shown in CP 06A was not, in the light of the actual ground conditions, buildable from a technical or a practical perspective.(3) That the most appropriate engineering solution in the light of the actual ground conditions, namely the adoption of the secant piling solution, was not capable of being implemented without breaching the planning permission and listed building consent, because it was not possible to operate the necessary size of piling rig required within Butley Hall without damaging the protected interior in a way which would not have been permitted.(4) That the piling/grouting solution was technically and practically buildable and also, subject to Mr Finlason exercising his undoubted abilities in his discussions with the relevant planning and conservation officers, capable of being implemented without breaching the planning permission and listed building consent, by obtaining permission to remove the existing flooring and the existing door frames, and by ensuring that the piling operations were carefully and properly designed and undertaken. Furthermore, although the need for exercising care and skill in the design and undertaking of these works would inevitably make it a more time-consuming and slower exercise than would otherwise be the case, that was not so great as to make it practically unbuildable.

Quantity surveying evidence

[223]PFP’s quantity surveyor expert was Mr Michael Ulyatt; the Locks’ quantity surveyor expert was Mr David Vinden. In my judgment both were well qualified, knowledgeable, fair-minded and impressive expert witnesses. I do not, nor do I need to, distinguish between them as to their respective reliability overall. Where there were disagreements I explain whose evidence on a particular issue I prefer, and why. What I should say, however, is that Mr Vinden had a rather more difficult task than Mr Ulyatt, through no fault of his own, because he was put into the difficult position of having to cost, under severe time pressure, the secant piling scheme and then, of having to cost, under even more severe time pressure, the subsequent piling/grouting solution, when neither had been subject to detailed design or specification, and when he had little or any time to consult with specialist contractors. In contrast, Mr Ulyatt had the relative luxury of needing only to consider and respond to Mr Vinden’s costings.

Mr Vinden’s first report

[224]In his first report Mr Vinden was asked to provide an opinion as to whether or not PFP had complied with its obligations in relation to the provision of cost information. Although he was critical of PFP, he had reached his conclusion, as he stated, on the basis of express instructions to comment as if the work had been carried out by a quantity surveyor. The Locks’ case on that basis having been struck out in these circumstances I have outlined, that section of the report largely fell away.[225]He also attached to his first report as an appendix his feasibility budget, which he had produced in 2012, based upon the double basement mass concrete underpinning scheme, including the temporary works which he had been advised by Dr Roberts were reasonably required, but making no allowance for adverse ground conditions. This produced an estimated cost of £5.665 million plus 5% contingency and plus an allowance for increased costs. Including the former, but excluding the latter, so as to provide a proper comparison with PFP's cost plan three, that produced a total of £5.948 million, as compared to its £4.581 million, on any view a substantial difference. As he confirmed in cross examination, and as Mr Ulyatt also said, the difference between the two, allowing for a reasonable variation in other elements, was almost entirely related to the temporary works below Butley Hall.

Mr Vinden’s second report

[226]In his second report he costed Mr Tutt’s secant piled scheme, as interpreted by Dr Roberts and Mr Evans. It included the formation of a substantial access zone either side of the spine wall, the construction of a secant piled wall on three sides, together with a separate contiguous piled wall, and substantial dewatering provision. This estimate on this basis amounted to £8.374 million, where the increase over the previous estimate was almost exclusively referable to the underpinning works. It included provision for the piling to go down to 12 m, seemingly on the basis that the Locks’ experts were still working on the double basement design. Mr Vinden agreed in cross examination that this was a very different scheme to that which was under consideration in 2008 – 2009, or indeed by him in 2012. It is, I have no doubt, a full scale "bells and whistles" redesign of the underground works.

Mr Ulyatt’s report

[227]In his principal report Mr Ulyatt addressed a number of matters. In paragraph 3.1.4 he said that within an applicable margin for error (which he considered was 10 - 15% at initial design stage) there was no difference of significance between PFP's cost plan three, the contractors’ 2009 estimates or, indeed, Mr Vinden's 2012 estimate excluding the temporary works. In paragraph 3.1.5, he expressed the opinion that cost plan three could not be criticised as falling below the standard of a reasonably competent construction professional providing cost control advice, in terms of the level of detail provided. In expressing this opinion, he was careful to distinguish between what he would have expected from a quantity surveyor, and what he would have expected from someone in PFP's position. The other experts were inclined to accept, as do I, that there could be no basis for criticism solely on the grounds of the amount of detail provided in the cost plan.[228]In paragraph 3.1.6 he emphasised that in his view the prices provided by Globe and McGoff were of central importance in this case. In short, this opinion was that whilst, as he accepted, it was not clear precisely what either of them had priced or allowed for in terms of the temporary works, nonetheless the fact that they had gone through the pricing process, liaising with PFP, Bell Munro and (in Globe’s case) Bullivant, and had gone on to produce a tender, both within the same bracket both of each other and cost plan three, demonstrated that both they and PFP had produced a reasonable cost estimate of all of the works, including the temporary works, and that all must reasonably have assumed that there was a buildable, economical solution to the work required to construct the semi-basement. His view was that it was intrinsically unlikely that two experienced contractors would have "missed" the very substantial amount of work and cost which Mr Vinden had priced for. In contrast, Mr Vinden's view was that he was unable to place any reliance on the contractors’ prices, given their provisional and qualified nature, and the lack of any design detail.[229]In my view the answer lies somewhere between those two competing positions. In any individual case one has to consider, when deciding what weight one can place on such pricing, the design detail available to the contractor, the time and effort put in by the contractor (which may itself depend on whether the contractor believes he is in a genuine tender situation and really wants the work), the nature and quality of information provided by potential subcontractors, and the terms in which the estimate or tender is expressed, including qualifications and the like.[230]In this case I do not consider that very much can be derived from the McGoff cost estimate, since there is no evidence or indication either on the face of the estimate or otherwise as to what they believed they would need to do, or how they believed they would do it, and it is not, therefore, open to me to assume in PFP's favour that this was the product of careful investigation or consideration by them. I can however, I accept, derive rather more from Globe’s tender. It is clear that they spent a considerable amount of time and effort on their tender, and that they considered and discussed the temporary works necessary to create the semi-basement both internally and with Bullivant. Accordingly, I can properly infer that although they were clearly alert to the potential costs and risks, they considered that it was buildable. There is some indication that they considered the practicalities of how the work would be done inside Butley Hall, but not sufficient in my view to show that they considered the detailed practicalities of piling within the restricted areas there. In those circumstances, whilst I accept that Mr Ulyatt is entitled to place reasonable reliance on Globe’s tender, I do not think that he is entitled to place as much reliance on it as seeks to do.[231]In paragraph 3.1.7 Mr Ulyatt builds on his reliance on the Globe tender by using it as a starting point to value the cost of Mr Tutt's proposed additional grouting and water management works. In short, his opinion is that those additional works would increase costs by no more than £61,000, which he considers therefore still falls within an acceptable 10 - 15% tolerance. However, as Mr Ulyatt accepted in cross examination, a fundamental plank of this part of his opinion is his assumption that Globe produced a detailed and reliable costing for the temporary works. Although I have no reason to doubt that Globe did spend time and effort on this tender, nonetheless it is clear that it was, consciously, carefully qualified not just by reference to the absence of a ground investigation report but also by reference to the lack of detailed design. In the absence of evidence from Globe or from Bullivant, directly or indirectly, about what they assumed or provided for or excluded in terms of the temporary works or in terms of internal access to Butley Hall, it is difficult in my judgment to draw any clear conclusion as to the reliability of the costing of that element of the works. Whilst I accept that Globe genuinely wanted to win the work, that cuts both ways in relation to an element of the work which is qualified as provisional, since whilst Globe would of course want to put in a competitive but realistic price for those elements of its tender which were fixed, different considerations apply to work the subject of qualifications.[232]On balance, I consider that it is unsafe to adopt Mr Ulyatt's approach. In my judgment, the true position is that if and when Globe had been asked to provide a firm tender price on the basis of known ground conditions, a more detailed design, and an understanding of the access limitations within Butley Hall, they would have needed - in consultation with Bullivant - to have had another, more thorough, look at what work was required and, crucially, how long it would take to do the work with the care and attention necessary, and that this process would inevitably have had a fairly significant impact on the tendered cost.[233]Finally, in paragraph 3.1.8 of his report, Mr Ulyatt had been asked to consider Mr Vinden's estimate of costs for the secant piling solution, on the assumption that the nature and extent of the works were correctly set out by him. On that basis Mr Ulyatt's figure was £6.386 million.

The debate about the costs of the secant piling solution

[234]Mr Vinden and Mr Ulyatt had then held discussions and produced a very helpful joint statement in relation to the pricing of the secant piling solution, from which it was apparent that Mr Vinden’s total estimate was now £8.052 million and Mr Ulyatt’s was now £6.199 million. Helpfully, they had agreed that their assessment of all of the costs other than the temporary works fell within a 6% margin of each other, which they agreed was within a reasonable margin of difference and could, thus, be disregarded for present purposes. So far as the items of disagreement are concerned, I shall summarise them and decide on them item by item as follows.[235]Increased costs: £389K. Mr Vinden had included a sum for increased costs, on the basis that when estimating costs in late 2008 he considered that PFP should have made provision for a general increase in costs throughout the life of the construction project. Mr Ulyatt disagreed. There were two reasons for the difference between the experts. In relation to the first, which edition of Spons pricing book to use, Mr Vinden accepted in cross examination, rightly in my view, that the 2009 edition should be used. In relation to the second, which is whether any provision should have been made for an increase in circumstances where although an increase in costs was forecast in late 2008, in fact it never materialised, my view is that it depends upon why one is asking the question. If it is to consider what if any allowance a reasonably competent cost professional should have made in late 2008, then it seems to me that they should have had regard for reported potential cost increases, and the fact that subsequently there were no cost increases would be irrelevant. However, in PFP's financial appraisal it specifically addressed the question of forecast costs, came to a conclusion that they were likely to fall in the short term, and advised accordingly. Mr Vinden has not suggested that they were not entitled to reach this conclusion and, in the circumstances, I am not persuaded that it would be appropriate to allow any increase.[236]Removal and replacement of staircase: £10k. This is a minor issue. The simple question is whether or not this was always required and, hence, fell within the original allowance. I am satisfied that it was, and therefore agree with Mr Ulyatt on this issue.[237]Temporary supports to Butley Hall: £135k. In costing this work, Mr Vinden had taken the actual cost incurred by the current contractors. He had included a claim for £120K for extension of time and a further claim for £15k for professional fees, working on the basis, under severe time pressure, that it was reasonable to include the overall cost. However, since the question is not what it actually cost, but what reasonable allowance a competent cost professional would have made in late 2008, I do not consider that these additional costs can be allowed and, therefore, agree with Mr Ulyatt on this issue.[238]Piling costs: £500k. This substantial amount represents the difference between the cost estimate provided by Van Elle to Mr Vinden and that provided by Keller to Mr Ulyatt. As Mr Vinden accepted, it is difficult to obtain accurate competitive prices when, in order not to mislead, the surveyor has to make clear to the contractor that this is a hypothetical, rather than a real life, exercise. As Mr Vinden also accepted, there is no reason to believe that the person who had produced the cost estimate for Van Elle was any more familiar with the site than the person who had produced the cost estimate for Keller. Mr Vinden also had to accept that if there was no need for piles of 15m deep, and 10m deep would suffice, then the cost would be reduced pro rata. In my judgment,(a) Van Elle's cost estimate is too high because it makes allowance for too deep a piling solution;(b) in arriving at a cost estimate one would normally take the lower quotation unless some good reason was identified for not doing so. Accordingly I agree with Mr Ulyatt’s valuation.[239]Value engineering: £175k. This represents Mr Ulyatt's belief that it would have been possible to make savings by a process of "value engineering", i.e. identifying ways in which cost savings could be made without prejudicing the works. The particular point raised was whether it would be possible to save costs by using sheet piling, rather than contiguous piling, around the perimeter areas as, apparently, is being done under the current scheme. Mr Vinden accepted that in principle it would, unless the sheet piling had to be installed as silent sheet piling, to avoid disturbing neighbours, which is what he understood was being done under the current scheme. Given that this point arose at short notice, so that neither Dr Roberts nor Mr Vinden was able to address it properly, I am not satisfied that Mr Ulyatt has made out his argument on this point. It is clear from the terms of the planning permission that any piling scheme had to be approved in writing specifically because of the potential risk of disturbance to neighbours.[240]Duplications: £180k. Mr Ulyatt had identified some duplications, and Mr Vinden had accepted that some were present, but not others. Doing the best I can, I assess that duplications of in the region of £100,000 are demonstrated.

The debate about the costs of the piling / grouting solution

[241]In his supplemental report Mr Vinden had costed the piling/grouting solution in the amount of £7.383M, the difference between that and his cost for the secant piling solution being the reduced cost of underpinning preparatory works, including a reduction for the reduced length of the piles (see paragraph 238 above). Mr Ulyatt had no particular adverse comment to make on that approach.

The relevance of the quantity surveying evidence

[242]It is appropriate at this stage to consider the relevance of this evidence to the issues in dispute as between the parties. It is primarily relevant to the question as to what cost advice could and should have been given by PFP as a reasonably competent cost consultant, by reference to what could and should reasonably have been taken into account with the benefit of appropriate advice from structural engineers and appropriate input from contractors. In that respect I am satisfied, as I have already held, that at the point where in PFP produced cost plan three it ought to have had the benefit of a ground investigation report. I am also satisfied, for reasons I shall explain, that it should also at that point have had the benefit of appropriate advice from structural engineers and appropriate input from contractors having regard to such a ground investigation report. It follows, in my judgment, that PFP should have been aware of the need to cost a piling scheme which would provide support for Butley Hall as part of the temporary works, whilst addressing the problems of actual ground conditions, and which would need to be undertaken within the restricted access of Butley Hall.[243]It is simply not possible for me to provide anything other than a general figure or range of figures, which is not surprising given the nature and extent of the disagreements between the experts, which itself is reflective of the fact that in such circumstances it would still not have been possible to put forward a particular solution with complete confidence, so that neither would it have been possible to put forward a particular cost with complete confidence.[244]In broad terms, on PFP's case all that I would need to do would be to add the limited extra costs identified by Mr Ulyatt as being necessary by reference to the known ground conditions to PFP's cost plan three, whereas on the Locks’ case I would adopt Mr Vinden's cost estimate for the piling/grouting solution, adjusted as appropriate by reference to Mr Ulyatt’s criticisms of his cost estimate for the secant piling solution.[245]As will be apparent from what I have already said, I am satisfied that PFP's approach is incorrect, because it starts from the assumption that I can rely upon cost plan three, supported by the contractor cost estimates, as representing a considered realistic assessment of all of the costs required for such works, other than those specifically identified by Mr Tutt as necessitated by the ground conditions, when(a) there is no evidence from PFP as to how it arrived at its assessment of those costs;(b) I am not satisfied that reliance can be placed on either of the contractor cost estimates for the temporary works. Equally, however, I am also satisfied that the Locks approach is incorrect, because Mr Vinden has adopted the wrong starting point, namely the "bells and whistles" secant piling solution as developed by Dr Roberts and Mr Evans, so that even if I deduct the amounts where I agree with Mr Ulyatt's criticisms of the valuation, and the further reduction of £669K reflecting the change from the secant piling to the piling/grouting solution, I would still be starting from the wrong position.[246]Doing the best I can, I consider that a reasonably competent valuation of this scheme in late 2008 would have been somewhere between £5 million and £5.5 million. If I had to produce a precise figure, I would simply take the midpoint of £5.25 million. I reach this valuation on the following basis:(1) The starting point must be PFP’s cost plan three which, save for the temporary works, are accepted as being within a reasonable range of costs.(2) A reasonable starting point for the temporary works would be Globe’s allowance, but subject to the very important caveat that it is an extremely provisional estimate of the cost of an undesigned solution, assuming no difficulties with ground conditions and no particular difficulties with working within Butley Hall.(3) A competent cost consultant would have recognised the need to make a substantial allowance for the full costs of dealing with the difficulties due to the ground conditions, both in the temporary and permanent conditions, and thus to make provision for a carefully designed and constructed piling/grouting solution with full dewatering provision, and also to make provision for a carefully designed and constructed waterproofing solution for the underground levels, together with the need to allow for the increased costs of piling within Butley Hall so as to avoid damage to its important historic internal elements, particularly the spine wall and the cross walls. He would also have recognised the need to allow a significant contingency to reflect the risk that the planned scheme would encounter obstacles which might lead to the need for further temporary works and, possibly, even a redesign, with the consequential cost and time cost implications.(4) However, the competent cost consultant would still have wanted to keep a sense of realism about all this. In particular he would have been entitled to have in mind, as I do, that (1) the revised scheme was buildable, both technically and practically and in accordance with planning permission and listed building consent; (2) contractors such as Globe would have been very keen to take on at a competitive price in a challenging economic climate; (3) Mr Finlason would have been justifiably confident in this ability to get planning and conservation officers on board.(5) In short, I consider that the most likely end result would have been to add something in the region of £500,000 to the construction costs in cost plan three, and then to apply a contingency of around 10% to the total construction costs, which would have produced a cost estimate of the order of magnitude to which I have referred above.

Architectural evidence

[247]PFP relied upon the evidence of Mr Christopher Smart, and the Locks relied upon the evidence of Mr Robert Evans.[248]I have to say that I think both were guilty of descending into the arena and arguing the case for their respective clients from a very early stage in their respective involvement. Thus:(1) In his first report of August 2013 Mr Smart made some fairly intemperate criticisms of Mr Evans’ earlier report, for example in paragraph 6.18 he criticised Mr Evans for failing properly to read a letter, which in fact transpired to be a wholly unjustified criticism, and in paragraph 6.19 he made a criticism which was based on his own failure properly to read Mr Evans’ report. Furthermore, in his second report he expressed opinions based on his own interpretation of contemporaneous documents and his own commentary on disputed factual issues, in both cases overstepping the dividing line between expert opinion and factual determination.(2) In his report, submitted for use in the earlier adjudication, Mr Evans included significant elements of assertion, without making it clear to what extent those assertions were dependent either on his own interpretation of contested contemporaneous documents or on instructions received from his clients. However, to their credit, both experts seemed to me to be reasonably willing to accept that they had, in those respects, overstepped the mark when these points were put to them in cross examination.[249]In giving evidence, Mr Smart seemed to me to be knowledgeable and experienced on architectural practice, with experience -- albeit not much from 1996 onwards, according to his CV -- in historic building work. He came across as more independent and fair minded in his oral evidence than he did in his written reports.[250]Mr Evans was cross-examined at some length on the basis that his experience for many years had been more as an expert than as a practising architect. There is clearly some force in this point, since in 1991 he joined the well known construction consultancy James R Knowles and has since then undertaken predominantly expert work (albeit not solely in connection with disputes). It is also true that he does not have substantial experience of listed building projects, although I am satisfied that he has sufficient knowledge and experience to give an opinion on the application of good architectural practice in relation to such projects, particularly because this is not in my judgment a case which turns on the exercise of fine judgment in relation to the detail of dealing with listed buildings. It was also suggested to him that he had been cavalier in his evidence about whether or not the existing flooring was still intact when he had inspected Butley Hall, but I was satisfied that this criticism was unjustified. He was subject to a vigorous cross-examination, reflecting I have no doubt the extent to which PFP disagreed with his conclusions, and his answers were equally vigorous. Ultimately I found him a fairly impressive witness, subject only to the caveat as to his having earlier descended into the arena.[251]If I had to choose between the opinions expressed by Mr Smart and those expressed by Mr Evans, in relation to issues where their evidence is relevant, on balance I prefer Mr Evans’ views. I do not however consider that this is a case where it is vital for me to do so in many respects. That is because in my view expert architectural opinion is not particularly significant in relation to most of the particular issues of real significance in the case. Particular areas where I was more impressed by Mr Evans’ explanations and reasoning included the following:(1) The question as to whether or not PFP owed a duty to warn its clients about the increased complexity of the project and the increased risks, including the risk of increased costs, subsequent to the revised design in mid-July 2008. Mr Smart suggested that there was no duty to warn, because the Locks had set no limit on the budget and because the strategy was to maximise profit. I do not accept that opinion. In my judgment, as I have said, the Locks had never said that there was no limit on the budget, or that the only driver was profit, and one of the tasks which PFP had set itself, but did not undertake, was to determine the budget as part of the feasibility stage. Fundamentally, it is clear in my judgment that the revised scheme introduced increased complexity and risk, including the risk of increased costs, and it was the duty of PFP as architects to make that clear to its clients. Indeed, even if the only driver was profit, since the revised design did not introduce any more space, but had the potential to increase costs, it would have been necessary in my judgment to warn the Locks of the possible impact on profitability in any event. Further, since it was apparent from Mr Finlason's own e-mail of 16 July 2008 that he was fully aware of the risks, including the risk in relation to costs, and the need to bring those risks home to the clients, I found it surprising that Mr Smart felt able to maintain his view that there was no such duty.(2) The question as to whether or not PFP was obliged to provide a bound report at the end of the feasibility stage. Mr Smart had expressed the strong view that it was unnecessary to do so which, in my judgment, rested on his making unjustified assumptions in favour of his own client’s case on disputed issues of fact. He did not appear to understand the commercial importance to a client, dependent on attracting funding, of being provided with a bound report which he could read and show to prospective funders, and which would summarise the options considered, including their costs magnitude, and explain the preferred option. In contrast Mr Evans had referred to the Architects’ Job Book, identifying the importance of the feasibility report in establishing the basis upon which the project should proceed or identifying, if such be the case, that the job was not feasible or that the clients requirements, programme and cost limits could not be reconciled, which supported his own opinion on this issue.(3) Mr Evans was cross-examined about the quality of the cost of advice given from the perspective of a cost consultant. I was impressed by Mr Evans’ opinion as to the need to give clear advice in the cost estimates provided about the order of accuracy or the margin for error, and his opinion - which is consistent with Mr Ulyatt's opinion and PFP's subsequent letter of 6 May 2009 - that a contingency of 5% was a higher level of accuracy than could reasonably be reported at that stage. I was also impressed by his opinion of the need to give clear advice as to any foreseeable construction difficulties and any risks, including costs risks.

Valuation evidence

[252]PFP's valuation expert was Mr Andrew Massie; the Locks' valuation expert was Mr Neil Inman.[253]Their instructions, in accordance with directions given by the court, were to value Butley Hall on the following bases:(1) The sale value of PFP's revised scheme as at 2009;(2) The market value of Butley Hall in June 2009;(3) The sale value of Buttress Fuller’s new scheme as at 2009.[254]In my view the most important aspect of their evidence was to assist in resolving the question as to whether or not PFP's revised scheme was financially feasible. To do so, it is necessary to estimate the sale value in late 2008 / early 2009 of the apartments if constructed in accordance with the PFP revised scheme, so as to arrive at the gross development value (GDV), and then to deduct the estimated development costs, including construction costs, funding costs, land acquisition costs and the like, so as to arrive at the estimated profit on the development. By conducting a similar exercise one can arrive at the land value of Butley Hall as at that point in time, in other words what a commercial developer would pay for the opportunity of acquiring and developing the site, by deducting the estimated development costs from the GDV, and then deducting a notional percentage figure as representing the profit which a commercial developer would require to take on the development. As part of the process of estimating the sale value of the apartments if constructed in accordance with the PFP revised scheme, it was also necessary for the valuers to express their view as to the extent to which the rooflights to the affected apartments affected their sale value.

Gross development value of PFP’s revised scheme

[255]Mr Massie's valuation was £9.525 million, whereas Mr Inman's valuation was £8.535 million.[256]It is also helpful to remind myself of the contemporaneous valuations. Thus Mr Naden's valuation was £10.07 million. However, this is well in excess of any other valuation and, as he said and as I accept, it was produced in ignorance of the rooflights issue. Next there was Mr Kyte's valuation, in a range of between £8.435 million and £9.279 million, the midpoint being £8.857 million although again, as he said and as I accept, produced in ignorance of the rooflights issue. Next there was a sales valuation produced by Savills for the Locks in June 2009 of £9.4 million. Finally, there was a valuation produced by a Mr Maxwell for AIB at around the same time, giving a range of between £8.5 million and £9 million.[257]It is apparent from Mr Massie's report that he undertook his own retrospective evaluation. On the face of Mr Inman's report, he had not undertaken that exercise and, instead, had taken Mr Kyte's valuation and adjusted it in accordance with Mr Kyte's assessment of the reduction he would have applied had he been aware of the rooflights issue. When asked about this in cross examination, he said that he had also undertaken his own research to confirm Mr Kyte's evaluation, and that he had individually valued each apartment, however none of this appeared from the report itself. He also however noted that after making adjustments for the fact that each had been valuing slightly different areas, there was only a 4% difference between his valuation and Mr Massie's valuation, which he considered to be within an acceptable margin of difference.[258]I accept that Mr Inman was correct to rely upon the areas given in the most recent area schedule produced by PFP. I also consider that it would be wrong to place too much reliance on Mr Naden, Mr Kyte or Savills, because all were producing what were effectively, sales and marketing appraisals with a view to being appointed agents for any sales, rather than undertaking independent considered valuations. In contrast, Mr Maxwell's valuation was clearly more detailed and more considered and, in my view, was more likely to adopt a realistic approach given that he was being instructed by AIB as lender.[259]Taking all these factors into account, I consider that an appropriate valuation at the time was £8.75 million.[260]In relation to the new scheme, again there was a difference between the two valuers. Whilst I do not think it is necessary for me to make a finding, if I had to do so I would say that an appropriate valuation at that time was £8 million.

Effect of rooflights

[261]It is Mr Massie's view that the rooflights do not substantially undermine the marketability or value of the affected apartments. He said that he had taken the fact that the apartments have rooflights rather than traditional windows into account in his valuations of them, albeit that he did not consider that in isolation they were a significant factor. He said that he could not arrive as a percentage discount to reflect the effect which they had on value, although he did accept it was something a buyer would take into account. Whilst in general terms I accept his evidence on this point, I had to say that I struggled to accept that he was unable to arrive at a percentage figure. The reality, it seems to me, is that it must follow from his evidence that he is able to value an apartment with a traditional window and an apartment with a rooflight, and to convert the difference into a percentage figure. It seemed to me that he was unwilling, rather than unable, to do so.[262]That said, I found Mr Inman's evidence on this issue not particularly impressive. His report gave the clear impression that he had simply adopted Mr Kyte’s figure of 17.5%, which I regard as clearly excessive. On balance, I am quite satisfied that the percentage reduction is under 10%, I would expect in the region of 5%. Whilst I accept the point made that the affluent retired market, to which these apartments were particularly targeted, might be more resistant to the lack of traditional windows, I must also bear in mind that the affected rooms are only bedrooms rather than living rooms, and to some extent any detriment to those rooms would be compensated for by the impressively light living areas which would overlook the courtyard. Furthermore, even if there had been a additional window in those rooms, it would still have looked out over a contoured but restricted view, in contrast to the apartments at higher level.

Other matters

[263]Mr Massie had been instructed to use the construction costs in cost plan 3 to arrive at his market value valuation, whereas Mr Inman had more recently produced schedules using construction costs based on Mr Ulyatt's estimate of the costs of the secant piling and piling/grouting costs. It is, of course, the case that neither valuation expert can give any evidence as to the appropriate construction costs to feed into the valuation, and neither purported to do so.[264]In relation to funding costs, Mr Inman had taken the 5.5% interest figure used by PFP in cost plan three, whereas Mr Massie had taken a 7% figure as a market value. That seemed to me to be the more appropriate rate to take, since a valuer would not be concerned with the individual costs of the individual developer, but with market value funding costs.[265]In relation to the percentage profit which the market would expect to obtain from this development, there was a marginal difference between the valuers, Mr Massie saying 15% and Mr Inman 16 - 17%. In so far as I need to choose, since my view overall is that Mr Massie is the more impressive expert I prefer his figure.[266]In that regard there was also some debate about the minimum percentage profit below which the development would be regarded as not viable. Mr Massie accepted that if it was 5% or less, it would be unlikely that a commercial developer would buy the property with that anticipated level of return, but he also made the fair point that here, of course, the Locks already owned it, so that their view as to whether or not it was worth developing for a lower percentage profit return would be different from the view of someone who did not already own it. Mr Massie did, however, accept that it was unlikely that someone in the Locks' position would be able to obtain 100% funding if the percentage profit figure was so low.[267]These debates served to illustrate, in my judgment, the difficulty of the Locks' argument in relation to financial feasibility, because it seems to me that there is no bright line above which the development is financially feasible but below which it is not. It must all depend upon the individual circumstances of the particular developer. It seems to me that the most that the Locks can say is that a development would obviously not be financially feasible if it could not be forecast to return any profit, or perhaps only a profit of 1% or 2%, but beyond that it is really impossible to say that a consultancy in the position of PFP would have been negligent to put forward a scheme which they knew or ought to have know would not produce a return of more than a specific figure. Ultimately, so long as the client is properly advised, it is a matter for him to decide whether to proceed to obtain that forecast return.

Financial feasibility

[268]Having considered the expert evidence, I am now in a position to reach a conclusion in relation to financial feasibility.[269]The starting point is the sale value of PFP's revised scheme in late 2008 / early 2009 as I have found it, namely £8.75 million. Although it could perhaps be argued that one should use the figure given by Mr Naden, since that was the figure used by the parties in December 2008, less than a 5% discount for the rooflights issue, that ignores the fact that by December 2008 AIB were already insisting on a further valuation, which is what led to Mr Kyte producing his valuation. In my view Mr Kyte’s valuation is clearly more realistic than Mr Naden's. Mr Kyte's midpoint figure, discounted by 5%, is not very different from my own assessment.[270]Adopting the formula used in Mr Inman's supplemental report, the relevant figures are as follows: GDV £8.75 million Land costs £1.15 million Construction costs £5.25 million Expenses £0.927 million Bank fees and interest £0.751 million Total costs £8.078 million Net profit £0.672 million (approximately an 8% return).[271]Doing a quick cross check, by feeding in these figures into cost plan three, including correcting certain arithmetical errors in relation to the finance costs, produces a profit of around £1 million, and thus an even greater percentage return.[272]Although the 8% return is less than the 15% return which Mr Massie considered a developer considering purchasing the property would require, as he said and I accept the Locks were in a different position, because they already owned the site, and thus would have to do something with it anyway, so that a return of £672K would not necessarily have appeared unattractive to them. Moreover, another point which Mr Massie made was that if, as here, the construction costs include a substantial 10% contingency, then a developer would know that if it was not used (and, as I have said, Mrs Lock was justifiably confident in her ability to limit costs) that would also come in as pure profit. PFP did not know, and were not retained to advise, on whether in the Locks’ particular financial circumstances they would be able to obtain 100% third party funding if the profit was only at that level.[273]In my judgment, what all of this demonstrates is that the Locks' complaint that PFP's revised scheme was not capable of being built at a reasonable cost so as to generate a reasonable profit is not made out, let alone their complaint that PFP was negligent in proposing its revised design on the implied basis that it was capable of being built at a reasonable cost so as to generate a reasonable profit. CONSIDERATION AND DECISION ON THE ISSUES THE CLAIM Was PFP entitled to present its invoice when it did?

CONSIDERATION AND DECISION ON THE ISSUES

[274]I have already expressed my opinion as to the proper construction of the payment terms in relation to the invoice claim at paragraphs 57-64 above.[275]As at 31 March 2009, being the date the invoice was raised, and as at 6 May 2009, being the date it was finally received by the Locks, it is apparent that PFP had not undertaken the further steps, which I am satisfied they were required to undertake before they could present the invoice, of providing such of the stage three services as were reasonably necessary to procure a tender from a contractor which the Locks were ready, willing and able to accept, such that there was a known contract sum.[276]It follows, in my judgment, that PFP was not entitled to present its invoice when it did. What PFP could and should have done was to disclose the Globe and the McGoff tenders to the Locks, with a view to seeing whether or not one or other of them could be refined or reduced as necessary into a tender which the Locks were ready, willing and able to accept. In fact PFP refused even to provide copies of the tenders, even though Mrs Lock was pressing them in correspondence to do so, and without giving any reason, good or bad, for that refusal. PFP’s stance, which I am satisfied was contrary to their contractual obligations, was that it was not prepared to invest any more time and effort into the enterprise until such time as its invoice was paid. It was that stance which in my judgment can be seen from the correspondence to have been the substantial cause of the eventual final breakdown in the relationship between the parties.[277]It follows, in my judgment, that it was PFP which was ultimately in repudiatory breach of contract because of its steadfast refusal to do what I have held it was obliged to do, even though I accept that it was acting on the basis of its genuine, but in my judgment mistaken, view as to what the contract required.[278]It also follows, in my judgment, that PFP’s invoice claim fails on this fundamental ground, which is that at no time prior to the contract coming to an end by reason of PFP’s repudiatory breach had it complied with the steps which needed to be taken before it could present its invoice.[279]For completeness sake, I should simply record that if I had decided in PFP’s favour on the question of interpretation, or even if I had decided that all that PFP needed to do was to obtain a firm price by obtaining at least one firm construction cost estimate from a contractor, then I would have been satisfied that it had complied with that obligation by obtaining the tender from Globe.[280]In those circumstances I would have held that the firm construction cost which PFP should have calculated its invoice on was the Globe tender, and since 40% of 10% of that tender amounts to £174,663.52, the amount due to PFP would have been that sum less the £25,000 paid, £149,663.52, plus VAT at 15% as claimed, total £172,113.05. However, as I have said, given my view as to the correct interpretation of the payment terms that question does not arise.

Did PFP give proper advice at feasibility study stage?

[281]I am quite satisfied that PFP failed to comply with its obligation to provide an indication of the magnitude of the cost of its revised scheme, being the preferred option, at any time during the feasibility stage. I am satisfied that it was not sufficient simply to provide the Locks with the limited information about costs contained either in the original service and fees proposal or in the client briefing agenda for the first design team meeting, coupled with the subsequent provision of the area schedules. This is particularly so in the context of the following:(1) Paragraph 4 of the client briefing agenda did not, as I have said, advise that £140 per square foot was in fact a reliable cost estimate for this development, and envisaged that further cost information would be provided as the preferred solution emerged, which never in fact happened, even after the revised design emerged on 15 July 2008 and Mr Finlason recognised in terms that it would be necessary to do so in his e-mail of the following day.(2) no explanation, written or oral, was given to the Locks as to how to use the area schedules to ascertain estimated build costs, even though it was far from obvious which figure should be used and, as subsequently appeared, in fact Mrs Lock did not understand how to use it as PFP intended it should be used. Instead, PFP assumed, without verifying that assumption, that Mrs Lock knew how to use it correctly.[282]Most significantly, in my judgment, PFP failed to perform its express obligation to provide a bound report at the end of the feasibility stage which included advice as to the complexities of the revised scheme and its risks, or an indication of the magnitude of the costs. This report was not a formality, nor was it waived; to the contrary Mrs Lock was pressing for it to be provided, and PFP recognised internally it should be provided. It was particularly important in this case, given that PFP was fully aware of the importance of continued funding approval from AIB. PFP ought to have provided this report by the end of September 2008 at the latest. By that stage the CAD drawings for the revised scheme had been produced and presented to Mrs Lock and AIB, who both seemed satisfied with them, the scheme had been presented to Mr Naden, who had given positive advice about sale values, and, in short, everyone was working on the basis that this was the preferred option to be taken forward. Mrs Lock was pressing PFP to "conclude the feasibility stage asap and get a full report with supporting plans etc in to the bank" on 26 September 2008, and that should have been done by PFP without further delay.[283]PFP has offered no acceptable explanation as to why they did not do so. I am satisfied that they failed to do so for two principal reasons. The first was that no one took overall responsibility for ensuring that it was provided. Mr Finlason left it to Mr Daccus and Mr Pickard to sort out between them, but it appears that neither did what they were required to do, and Mr Finlason did not ensure that they did. The second, is because PFP was only too aware, I am satisfied, of the potential impact of the revised design on the overall complexity and hence risks and costs of the project, and was only too aware of the likely negative reaction from Mrs Lock and AIB if they were presented with a feasibility report containing a warning of the complexities and potential risks and an indication of the magnitude of costs along the lines of that produced by Mr Daccus on 14 August 2008. As Mr Finlason said in cross examination when asked about this, "no point in starting a hare running if we could sort the issues out and if it was affordable". I am satisfied that PFP took the decision, consciously or unconsciously, not to produce a feasibility report providing that information at that stage, but instead chose to proceed directly to the scheme design stage, so as to obtain the benefit of further design and input from potential contractors, with a view to identifying cost savings and producing a cost plan at a level which it considered Mrs Lock and AIB were likely to approve. They did not, however, obtain the Locks’ consent to missing out this step and, instead, allowed the Locks to commit to taking the preferred option forward into scheme design and planning permission application stage without the opportunity of understanding the complexities, risks and costs or discussing them with AIB.[284]What advice should have been provided? It was obviously necessary to provide a summary of the various options considered and to identify and describe the preferred option, explaining its advantages and attractions, but also providing some explanation of any potential disadvantages and risks. It was also obviously necessary to provide an indication of the magnitude of costs. I accept that this would not have been required to be a detailed cost plan, with separate costs against separate items. There would have been nothing objectionable in saying that on the basis of an estimated gross external area of X square feet and an estimated cost per square foot of £Y the estimated cost would be £Z.[285]However, in my judgment, it was also necessary in this case to provide some indication as to an appropriate contingency or range of accuracy, particularly as regards the revised design. As Mr Ulyatt accepted in cross examination, and as seems to me to be plain and evident, it would be necessary to revisit the question of costs once the design had been revised, and there was an obvious risk that the revised design would be more expensive than the original design, given that it involved the two new wings being sunk down a level, and thus the need for excavations over a wider area, including excavations under Buckley Hall itself.[286]As to what cost estimate should have been provided, since Mr Daccus had produced a cost estimate at the time in the sum of £5.69 million, which I am satisfied he had produced on the basis of information obtained internally, from Mr Pickard and others, and since neither Mr Pickard nor anyone else suggested that those figures were wrong, the starting point in my judgment is that it is this estimate which should have been provided to the Locks at the time.[287]It is open however to PFP to argue, on my findings, that no cost estimate would have been provided without reference to Mr Pickard, and that Mr Pickard would not have produced a cost estimate in that sum. Insofar as Mr Pickard asserted that if he had been asked, he would have provided a cost estimate based on the GEA multiplied by £140 per square foot, I do not accept that he would have been justified in providing simply a figure based upon that exercise without making some allowance for the increased complexities and risks and thus without including some significant contingency or alternatively range of potential cost outcomes.[288]Although Mr Pickard had applied a contingency of 5% in cost plan three, I am quite satisfied by reference to what he said in his letter of 6 May 2009, consistent with what the experts have said, that in the circumstances appertaining at that stage, when the design was known to be complex with significant risks and uncertainties, it would not have been appropriate to have included anything less than a significant contingency of less than 10%, or a range of less than 15%. In short, in the context of the revised scheme involving, as it did, the construction of a complex structure with a need for substantial excavations both under and adjacent to an existing grade 2 listed building and close to adjoining properties, and with no knowledge of actual ground conditions, it seems to me to be inconceivable that a competent cost consultant would not have included either a substantial contingency or a significant range at that stage.[289]The GEA as shown on area schedule 2, excluding the car park, was 28,167 ft.² which, multiplied by £140 per square foot, produces £3.943 million. Applying a 15% range produces a range of between £3.35 million and £4.535 million. Even adding only a 5% contingency produces £4.140 million. All of these figures are substantially in excess of the figure given by Mrs Lock in October 2008, which I am satisfied she genuinely believed to be the realistic estimate of the construction cost for the revised scheme at the time, of £3 million.[290]I should not be taken as suggesting that PFP was obliged to provide advice which emphasised only the risks. Thus I accept that they were perfectly entitled to say, as they did in the subsequent financial appraisal, that it was possible that costs could be reduced by identifying cost savings and by discussions with interested contractors, and that once information about ground conditions was known it might be possible to reduce any contingency. However, PFP was obliged in my judgment to make the Locks aware that this was a complex scheme, with associated risks including costs risks, and of the importance of obtaining a full ground investigation report as soon as possible in order to obtain a better understanding of the risks and, as appropriate, to take steps to address them.[291]In the circumstances, I am satisfied that this allegation of breach is made out. What, on the balance of probabilities, would be Locks have done if competent advice had been given at feasibility stage?[292]This is in many ways the most difficult question in the case, because it is necessarily hypothetical and, of course, must be answered without applying hindsight.[293]It must be borne in mind that at the time the Locks were very impressed with PFP's revised design and overall approach, including the maximisation strategy, and had also received very positive advice from Mr Naden as to the saleability of the revised scheme. It must also be borne in mind that Mrs Lock was undoubtedly at the time extremely positive in her outlook and would not willingly have abandoned her desire to undertake what she believed was an extremely profitable development in accordance with PFP’s revised scheme.[294]Thus she would, I am sure, have wanted to explore all options for reducing or limiting risks and costs so as to be able to put forward the most positive submission to AIB. Although Mrs Lock now says that she would have been prepared to walk away from the revised scheme at this early stage, prior to investing so much time and money into the scheme, had she known the true risks and costs, I consider that that is a view based on the hindsight, rather than a true representation of what she would have done at the time. In reality, there were only a limited number of options. One was to find some way of retaining the 12 apartment scheme, but reducing or limiting risks and costs, by revising the design or otherwise. Another was reverting to a more modest 10 apartment scheme, or to a simple refurbishment scheme or, of course, simply selling Butley Hall without any refurbishment. I am satisfied that Mrs Lock would not have wanted to give up the seemingly very profitable 12 apartment option without a fight. Above all, it must be borne in mind that, so far as the Locks were concerned, they were not limited by their own funds. Thus, so long as they could demonstrate that the project was sufficiently sound and profitable to obtain the 100% funding they required, it would not matter to them very much whether they had to borrow sufficient to fund an estimated £3 million construction cost or an estimated construction cost of anything up to £5.69 million.[295]That, however, is the crux of the matter, which is that what was vital was what AIB thought of the project; if they could not persuade AIB (or some other funder) to provide the 100% funding they required, the project was dead in the water. I have no doubt that Mrs Lock would have realised at the time that it would be difficult to persuade AIB to extend their in principle offer of 100% funding to a project where the estimated construction costs had risen to £4 million plus. Thus I have no doubt that she would have asked PFP for ways in which they could put forward a credible proposition to AIB involving lesser costs.[296]I also have no doubt that PFP would have responded along the same lines as they did in fact, which is that it would be necessary to understand the risks better by obtaining a ground investigation report, to obtain structural engineering input in the light of the known ground conditions, and to develop the design and involve prospective contractors in order to obtain preferably a guaranteed maximum price, or at the least a reasonably firm tender or estimate, at the most competitive level, in order to put to AIB as part of a financial appraisal.[297]There is no reason to believe that PFP would not have been prepared to carry on working at risk on this basis, as they were in early 2009, and to persuade Bell Munro to continue to do so, and to get contractors such as Globe involved. Of course it would have been necessary for the Locks to pay for a ground investigation report but, as I have already said, I am satisfied that they were ready, willing and able to do so.[298]What would have been the outcome of this further effort? There is no reason to believe that it would not have been the same as materialised in fact. So there is no reason to believe that Globe and McGoff would have come up with any different tenders to that which they did. Indeed, with the benefit of a ground investigation report showing actual ground conditions, and the benefit of Bell Munro's analysis of those conditions and their implications for the works, I am quite satisfied that the need for more effective and, hence, more expensive temporary works would have been appreciated and costed for. In my judgment it is evident that the consequence is that any tenders produced would have been at least as high as those actually produced, but more likely significantly higher.[299]Moreover, by this stage it would have been possible for PFP to have produced a cost plan taking into account these developments. It would, if done carefully, not have included the errors which it in fact contained in relation to interest costs. It is likely that it would also have factored in a further valuation, such as that which was obtained from Mr Kyte in early 2009, which would have led to a reduced GDV, or at least a range where Mr Naden's valuation was the highest.[300]The end result, I am quite satisfied, is that the financial appraisal which the Locks would have had to put to AIB would have been no better and, I am satisfied, in all probability significantly worse, than that appearing on cost plan three.[301]What would AIB's response have been to this? In my judgment, it is readily apparent from what happened in practice, that they would have reconsidered their in principle offer of 100% funding and stated, as in fact they stated in March 2009, that they were simply not prepared to fund a 12 apartment development along the lines of PFP's revised scheme. From the evidence to which I have referred, it can be seen that up until around October 2008 AIB appeared reasonably happy with anticipated construction costs of around £2.5 - £3 million. In October 2008 they were not obviously unhappy with anticipated costs of £3.34 million, so long as the figures were “robust”. By November 2008 they were obviously becoming nervous, but seemingly willing to be persuaded, or at least not to pull the plug there and then. By January 2009, they were pressing for a cost plan and a financial appraisal including a second opinion on sales values. Finally, on receipt of the cost plan, and even before the planning application had been determined, they were simply not prepared to consider 100% funding for estimated construction costs of £4.58 million, even with a projected profit return of 50%.[302]In the absence of evidence from AIB, whether by production of internal documentation or from Mr Flynn, it is not possible to state with certainty the reasons for the change of view. It is possible that at around the £3.5 million level it was still just within its internal funding limits, but that at in excess of £4 million it was not. It is possible that there was a change in its lending policy in the meantime. It is possible, and more likely, that it was the result of a continuing change of attitude consistent with its financial problems, as recorded by Mr Pickard in his witness statement. The most light is shed by Mrs Lock's e-mail of 18 May 2009, where in her comments on PFP's earlier letter she refers, at page 3, to its “head office development finance funding restraints”. In short, I am satisfied on the balance of probabilities, that what happened was that once Mr Flynn had received the cost plan and financial appraisal from Mrs Lock in January or February 2009 he submitted it to head office, who made it clear that they were not prepared to provide 100% funding for a project involving significant construction costs in excess of £4 million.[303]I am satisfied that this is exactly what would have happened in the hypothetical circumstances that I am now considering, in other words that once a cost plan and financial appraisal was submitted to AIB, showing costs at this level, Mr Flynn would have submitted it to head office who would have declined it.[304]I am satisfied that this would have been the position regardless of whether the estimated construction costs were £4 million or in excess of that, and regardless of whether a contingency or range of 5%, 10% or 15% was used, and regardless of whether Mr Naden's sales valuation alone was used or some different sales valuation. Whilst the greater the estimated cost, the larger the contingency or range, and the lower the estimated GDP, the stronger the likelihood that this would have happened the reality is, I am satisfied, that AIB never had, as they made clear in March 2009, any appetite to provide 100% funding for a substantial scheme such as PFP's revised scheme. I am quite satisfied that through 2008 Mr Flynn, influenced by the persuasive force of the combination of Mrs Lock, Mr Finlason and Mr Naden, and the misleadingly low estimated construction costs presented by Mrs Lock and not contradicted by PFP, was persuaded to go along with the scheme for the time being pending the submission of a detailed financial appraisal backed by estimated construction costs produced by PFP and an estimate of GDP produced by valuers. However, as soon as those figures were provided, AIB's stance was made clear, that they were not prepared to 100% fund the scheme, and they never subsequently wavered from that stance. It was, in short, in my judgment, a scheme too far for AIB to support.[305]Of course I have no doubt that Mrs Lock would have sought to interest alternative potential funders, rather than simply giving up. However, as in fact occurred in April 2009, I have no doubt that she would not have succeeded. As is known, she did not even approach either Close Brothers or Flourish, and there is no reason to believe the position would have been different in this hypothetical situation. Even, however, if she had approached them, I am satisfied on the basis of the evidence I have heard that these funders would not have funded the Locks in relation to this scheme at this time, because:(1) there was no existing planning permission;(2) the Locks were not bringing any equity to the table, thus they could not demonstrate any added value to the property in the absence of planning permission and since the purchase had been 100% funded by AIB;(3) they would have been nervous of the risks associated with the revised scheme, namely the excavations underneath and adjacent to the existing listed building, and would have felt no need to invest in this project when there were any number of other, less risky, schemes to fund.[306]Accordingly, I am satisfied that in these hypothetical circumstances the Locks would have been unable to obtain funding, even in principle and subject to planning permission and formal approval, from any alternative funder.

Would the Locks nonetheless still have submitted the application for planning permission?

[307]I must also, however, consider whether or not the Locks would nonetheless still have proceeded to submit the application for planning permission in these hypothetical circumstances. This, in my judgment, is a key question, because unless I am persuaded on the balance of probabilities that they would not have done, then if the application had been submitted it would, as it was, have been granted and, subject to compliance with the conditions precedent to submit its invoice, PFP would have been entitled to be paid the balance of the 40% fee. In other words, this defence does not operate as a freestanding defence to the invoice claim unless either I am satisfied that but for PFP's breach the Locks would not have submitted the application for planning permission, or I am satisfied that the breach was sufficiently serious as to disentitle PFP to receive payment for securing planning permission, or I am satisfied that as a result they have suffered loss and damage sufficient to extinguish their liability under the invoice claim. At this stage I am considering this question on the basis that all that PFP had to do to render its invoice was to obtain planning permission and, if necessary, revise its cost plan by reference to the development area permitted and/or indicative contractor cost estimates. I do so, even though I have in fact found that PFP was required to do more, because given my primary conclusion that PFP was not, in fact, entitled to render its invoice this point only arises as a relevant issue if I am wrong in that primary conclusion.[308]PFP's submission is that since in fact the Locks were prepared to submit a planning application in December 2008, at a time when they knew that PFP had estimated construction costs as being £4.581 million, and believed that AIB were unlikely to fund a scheme of this estimated cost, there is no reason why they would not have done the same in these hypothetical circumstances.[309]However, that begs the question whether the Locks submitted the planning application at that time they knew that if permission was granted, but no funding could be obtained, they would still have to pay PFP the balance of the 40%. I am quite satisfied that they did not. That is because:(1) there is no evidence that PFP actually advised of the Locks that this was the position in December 2008 or before;(2) there is no evidence that the Locks actually appreciated that this was the effect of the contract at any time from entering into the contract down to May 2009;(3) I am satisfied that, notwithstanding what the contract objectively says, that is not how they understood the contract. Instead, as demonstrated by their correspondence in May 2009 and their subsequent defence to the invoice claim, their firm belief was (and still is, notwithstanding legal advice and the abandonment of that claim) that in the absence of funding there is no liability.[310]In December 2008 I am satisfied that they decided to submit the planning permission application on the basis that so far as they were concerned, there was no real downside in doing so, in that the work to prepare it for submission had been done, there was no reason to delay submission, and PFP had positively advised them that:(1) there was a risk that delay might lead to a different approach from the new planning authority when the application came to be determined;(2) in the meantime PFP would take steps to reduce the estimated construction costs by proceeding with the tender process involving the interested contractors;(3) if they obtained planning permission but could not get funding, they could always seek approval for a modified smaller scheme. They were not aware, I am satisfied, of the risk that if planning permission was granted but they were unable to obtain funding, they would still be liable to pay PFP the balance of the 40%, in circumstances where they simply did not have the funds to pay that invoice in the absence of obtaining funding.[311]However it would be open to PFP to argue that this is irrelevant, because there is no reason to believe that the Locks would have been under any different belief in the hypothetical circumstances under consideration. PFP could argue that it was not its fault that the Locks held this mistaken belief as to the terms of the contract, since PFP did not know that this was what the Locks believed and owed no obligation to advise them in this respect.[312]The answer in my view to this objection is that what must be assumed in these hypothetical circumstances is that PFP had fully and properly performed its contractual obligations to the Locks. I accept that PFP's role as a multidisciplinary construction practice is not akin to the role of - for example - a solicitor, where it might be argued that there was a fiduciary or similar obligation to advise as to the contractual consequences vis-a-vis PFP of submitting a planning application in such circumstances. Nonetheless, PFP's obligation was to advise not merely as an architect but also as a cost consultant. And that, in my view, would involve giving proper advice in relation to all construction costs, including the associated professional costs, as indeed was done in cost plan three, and also including the costs associated with all options under consideration. PFP would have been obliged to provide proper advice on the options as to whether or not to submit a planning permission application without completing the cost refinement process and obtaining in principle funding approval from AIB. That would include, in my judgment, advice about the financial consequences and risks of proceeding down that path. Had it done so, it would have become readily apparent that PFP’s position was that it would be entitled to the balance of the 40% on planning permission.[313]That conclusion is fortified in my view by what actually happened where, as I have found, PFP did take it upon itself to give advice as to the benefits of applying for planning permission. Even if it did not owe a freestanding obligation to give such advice nonetheless, having taken it upon itself to give advice as to the benefits of applying for planning permission, it owed a duty in my view to give full and proper advice, identifying not only the benefits but also the risks. In this case it is obvious that one such risk was that the Locks would be obliged to pay PFP the balance of the 40%. Of course it is possible that simply obtaining planning permission would increase the value of the development, which would enable the Locks to raise funding to discharge the invoice even if they could not get funding to undertake the development, but I doubt that the Locks would have wanted to take that risk, since it was never their intention simply to obtain planning permission and then sell on and realise the planning gain.[314]My assessment of Mrs Lock is that she would have made a decision having weighed up the factors for and those against. Of course to delay in submitting the application for planning permission brought with it a risk of possible change in approach, and also delay generally would involve increased financing costs. However, at that time, there would have been no reason to expect any significant delay and, moreover, PFP would have been working at the same time both to prepare the scheme to be ready to submit for permission and also to refine the design and the costs. As I have said, this advice should have been given by late September at the latest, and in those circumstances I have no reason to believe that in fact the prospect of delay would have been so significant as to lead the Locks to decide to proceed with the application before they were satisfied that AIB would continue to fund the development.[315]For all of these reasons I am satisfied, on the balance of probabilities, that what would have happened, as it in fact did, was that there would have been a meeting where there would have been a discussion about whether or not to apply for planning permission before obtaining AIB's continued in principle support, and that once PFP had given full and proper advice the Locks would have decided not to apply for planning permission until that support had been obtained. In my judgment, it is quite clear that although Mrs Lock might have believed there was always the possibility of approaching other funders, especially if and when planning permission was obtained, she well understood the importance of AIB's continued support and would not have wanted, I consider, to have taken the risk of applying for planning permission without AIB's in principle approval of the revised scheme in the light of the known costs. Furthermore I am satisfied, for the reasons I have already given, that once AIB had been approached, they would have declined to provide support, the Locks would have been unable to obtain funding from elsewhere, and they would have had to rethink their options. I accept that it is probable that in the end, as eventually occurred, they would have proceeded to make an application for planning permission on the basis of some further or revised design. However, on any view that would not and could not have been PFP's revised design and, in the circumstances, there can be no question of PFP claiming to be entitled to the balance of its 40% fee on the basis that the Locks would have submitted an application for planning permission, and obtained planning permission, for a completely different scheme.[316]For all of these reasons I am satisfied that if PFP had properly performed its obligation to provide a feasibility report, which included a proper assessment, in broad terms, what PFP’s revised scheme might cost, that would have led to a process whereby it would have been revealed that there was no realistic prospect of the Locks being able to obtain funding to undertake that revised scheme. In the circumstances either PFP would not have proceeded to the point where a planning application could have been made before that fundamental problem was revealed or the Locks would have decided not to submit a planning application until such time as they had the assurance of in principle funding approval, which would never have materialised. In the circumstances, there is a clear casual connection between PFP’s failure to do what it was obliged to do under the contract and the circumstances in which the Locks agreed to submit the planning application which, having been granted, rendered them liable to pay the substantial invoice claim to PFP even though without funding they were unable to undertake the development in accordance with the revised scheme and unable even to pay the invoice claim. Thus it follows in my judgment that there is a clear causal connection between PFP’s breach and the loss which the Locks have suffered as a result of being liable to pay the invoice claim. In the circumstances I am satisfied that the defence of circuity of action operates to prevent PFP from being able to succeed on its invoice claim, because if PFP succeeded on its invoice claim the Locks would be able to recover the same amount as damages for breach.[317]I should stress that in so finding I am in no way criticising PFP’s revised scheme on its merits, or on its buildability or financial viability, nor indeed am I saying that PFP always knew or should have known that any scheme with estimated costs of £4 million plus would never be acceptable either to the Locks or their funders. What I am saying is that there is a very obvious reason for having a clear dividing line between the feasibility stage and the scheme design stage, where a feasibility report is produced and signed off before proceeding to the next stage, which is that the clients can make an informed decision at the end of the feasibility stage whether or not the preferred option is suitable for them and, crucially in this and I suspect many other cases, one which their funders are willing to support. Had PFP performed its role properly it would have emerged, at a significantly earlier stage than it in fact did, that the Locks’ funders were not willing to support it and, accordingly, that it was not a feasible scheme for the Locks given their particular circumstances. Accordingly, they should not have to pay the balance of a fee payable on obtaining planning permission for a scheme which would never, had PFP properly performed its duty, have been submitted for planning permission.[318]Whilst I will deal with the counterclaim later in this judgment, it is convenient at this point to address the Locks’ alternative argument that the obligation in question was so important and the breach so serious that, regardless of any question as to what the Locks would have done if PFP had properly performed its duty, it should still not be entitled to payment. The difficulty which the Locks face here, which was recognised by Miss McCafferty, is that it is regarded as well-established that in relation to contracts for professional services where the obligation in question has been substantially performed the professional is entitled to his fee and there is no scope for applying the doctrine of abatement: see the discussion in Jackson & Powell on Professional Liability at paragraphs 3-008 to 010 and at paragraphs 9-331 to 332, referring in particular to the decision of the Court of Appeal in Hutchinson v Harris (1978) 10 Build LR 19 and the review of the law by Jackson J (as he then was) in Multiplex Construction v Cleveland Bridge [2006] EWHC 1341 (TCC). In this case, PFP’s argument, which I consider plainly correct on the current state of the law, is that:(1) The obligation in question is the performance of stages one and two, because the 40% fee is only payable on completion of both stages.(2) It is clear that PFP substantially performed stages one and two, because it did refine the various options into the preferred option and then develop that design through to making the planning application.(3) Whilst it did not, as I have held, provide the bound report at the end of the feasibility stage, it did provide the CAD drawings of the preferred option, and it did provide the area schedules, and it did provide some (albeit as I have held, inadequate) cost information, and it did orally discuss the alternatives and indeed it was involved in oral presentations to AIB.(4) In the circumstances it cannot be said that the failure to provide the bound report meant that there was no substantial performance of the stage one services, so that the Locks cannot rely on this failure as a justification for non-payment. Nor, as a matter of law, is abatement available to reflect the fact that this part of the stage one services was not performed.[319]Finally, although I have as I said been addressing this issue on the assumed basis that the liability to pay the 40% arose as soon as planning permission was granted, I should for completeness note that it would have made no difference to my eventual analysis had I proceeded on what I consider to be the correct analysis of the payment terms, viz that PFP had to go further and establish the contract price first. That is because:(1) On my primary analysis the Locks would never have got to the stage where they would have needed to decide whether or not to make the application for planning permission without knowing whether or not AIB was prepared to continue its in-principle support on a full and informed basis.(2) Even if they had been in a position where they would have needed to make a decision, and had decided to submit the application, and permission had been obtained, nonetheless it is plain that the condition precedent to payment would never have arisen, because for all of the reasons I have given they would never have been able to obtain funding and it follows that they would never have agreed a tender price from a contractor which they could not have afforded to pay in the absence of funding.

Did PFP give proper advice at scheme design stage?

[320]Given the conclusions I have already reached in relation to the feasibility stage, I can address this issue rather more shortly.[321]In short, I am satisfied that the advice given at this stage, as contained in the cost plan, financial appraisal and risk register, in relation to the complexities, risks and costs was inadequate and negligent. As I set out in more detail elsewhere, I am satisfied that there was a failure to provide proper advice as to the complexities of the temporary works, their risks and uncertainties, particularly in the absence of any ground investigation report, and a failure to provide any sufficient contingency to reflect those matters, or to make it clear that there was a considerable range of potential cost outcomes, particularly given those matters, which could result in the estimated costs being anything up to 15% higher than the figure given.[322]I am also satisfied that had PFP provided proper advice at this stage in relation to such matters, then that would have led to precisely the same discussion and eventual outcome as I discussed in such detail above in relation to feasibility stage. Even if, contrary to the conclusions I reached above, it could be said that PFP properly performed its services at feasibility stage, so that the first time that the Locks were confronted with the true position was at the meeting of 1 December 2008, I am satisfied that had PFP properly brought home to them the risks, specifically the costs risks, at that meeting, and had the Locks also been made aware of the risk of submitting and receiving planning permission without the comfort of continued in principle funding approval, they would on the balance of probabilities have decided to defer submitting the application until such time as the process of obtaining firm contract price estimates with the benefit of a ground investigation report, had been undertaken.[323]Accordingly, I am also satisfied that there is a direct and effective causal connection between PFP's breaches in this regard and the Locks suffering loss in being exposed to the liability to pay PFP's invoice claim, so that this also operates as a substantive defence to the invoice claim, for the same reasons.

Did PFP give proper advice as regards buildability and/or financial viability

[324]I can deal with this very shortly. For the reasons I gave above when addressing the expert evidence, I am satisfied that these allegations are not made out.[325]For completeness, I should also say that even if I had found these allegations made out, I would not have been prepared to accept Miss McCafferty's argument that this term was so important as to amount to a condition, so that breach would justify the Locks in treating themselves as discharged from any obligation to pay PFP's invoice claim.

The incentive payment claim

[326]Since the incentive payment would only fall due as and when planning permission was obtained, it is clear from the conclusions I have already reached that since there would, had PFP properly performed its obligations, have been no application for planning permission made and, hence, no planning permission granted, this claim must fail as well and for substantially the same reasons.[327]In closing submissions a question arose as to the fact that in the letter of 30 April 2008 it stated that the incentive payment would be "calculable and payable at completion of the project". Miss McCafferty submitted that since the Locks chose not to proceed with the project on the basis of PFP's scheme for which planning permission had been obtained, there never came a time when the incentive fee became payable. Meeting this argument, Mr Hickey submitted that there must be implied, whether by way of construction or implied term, an obligation upon the Locks to pay the incentive fee on the basis of the development area obtained on planning, if they chose not to proceed with the project for reasons unconnected with any breach of obligation on the part of PFP. Although, given the conclusions I have already reached, I do not have to decide this question, if I had needed to do so I would have accepted Mr Hickey's argument on this point, so that if there had been no justification vis-a-vis PFP for the Locks not proceeding with the scheme in accordance with PFP revised design then they would have been obliged to pay the incentive fee as well as the balance of the 40% fee.

The stage three work claim

[328]The position, as I have found, is that it was agreed at the meeting of 1 December 2008 that whilst the planning application was proceeding to determination, PFP would undertake the process of attempting to obtain a competitive firm price estimate from contractors, which could then be presented to AIB with a view to obtaining the necessary funding.[329]However, it has not been suggested by PFP that they made it clear to the Locks, either at that meeting or subsequently, that this was on the basis that they were proceeding to begin stage three work or that if, for whatever reason, the project did not proceed as far as completion of stage three, they would be entitled to a pro rata payment for the work done. Although not identified in the particulars of claim, PFP seeks to rely upon Mrs Lock’s e-mail of 7 January 2009, referring to the plan to proceed to proceed down the "route to tender … whilst planning is being determined". However, there is no recognition in that e-mail or in other contemporaneous correspondence, nor did Mrs Lock accept in cross examination, that she was made aware or agreed that she would have to pay for this work pro rata in the event that, for whatever reason, the project did not proceed to completion of stage three.[330]In those circumstances the position, it seems to me, must be determined on general contractual principles. If PFP was able to establish that the Locks were in repudiatory breach of contract in terminating the retainer before the completion of stage three, it would be entitled to damages which would include its fee entitlement payable upon completion of stage three, giving appropriate credit for any benefit derived from not having to complete the work on that stage. If, however, the Locks were able to establish that they were entitled to terminate the retainer for good cause, then they would not be obliged to pay.[331]Given the conclusions I have reached, I am satisfied that it was PFP which was in repudiatory breach in refusing to undertake any more work unless it was paid its invoice claim, at a time when it was not contractually entitled to do so. Furthermore, since in those circumstances the reason why the Locks wanted PFP to undertake this work was because, as a result of PFP's breaches, they were proceeding with the planning permission application without first ensuring that they had continued in principle funding approval from AIB, they are entitled, in my judgment to rely upon those breaches as a complete defence to any liability to make any payment for the stage three work undertaken. Furthermore, as I said in paragraph 279 above, I am satisfied that if PFP had properly performed its obligations to the Locks at feasibility stage and the scheme design stage, the results would have been a discussion where PFP would have agreed to continue working at risk pending planning permission, so that would have been no basis for claiming payment for stage three work in such circumstances.[332]For all of those reasons, I am satisfied that PFP is not entitled in principle to advance a claim for payment for stage three work.[333]Furthermore, even if I had reached the contrary conclusion, I would not have been satisfied that PFP had proved its case so far as the quantification of any claim is concerned. In the particulars of claim, verified by statement of truth signed by Mr Pinkard and Mr Finlason, it was asserted that PFP had incurred costs of £62,967.17 for stage 3 work carried out. However, no particularisation of that sum was provided, whether in the body of the statement of case or supporting appendix. The Locks, in their defence, put PFP to strict proof of its entitlement to the amount claimed. PFP did not, in its witness evidence, deal with the quantification of this claim. Following on from oral submissions, I invited Mr Hickey to confirm that my understanding that there was no relevant evidence from PFP on this point was correct. In his reply he so confirmed, but also enclosed a spreadsheet showing the breakdown of the claim which he said, on instructions, had been disclosed but through error not included in the trial bundle. In response Miss McCafferty objected to the further evidence being adduced, on the basis that PFP had failed to provide any evidence, witness or documentary, to support this claim, and that it was now too late to seek to adduce and rely upon this schedule, not supported by documentary evidence, when the Locks had been deprived of the opportunity to cross-examine upon it. Her instructions were to the effect that her instructing solicitors had no recollection of seeing this schedule before, whether by way of formal disclosure or otherwise.[334]In short, I am satisfied that there is no proper justification for allowing this further evidence to be adduced. PFP must have known of the need to establish this claim, and there is no explanation as to why it was not dealt with in its witness evidence even if the schedule had been disclosed. Furthermore, as Miss McCafferty submits, there are real questions about the spreadsheet which she would have wanted, and been entitled, to put to Mr Piccard in cross examination. It was not produced until November 2009, and thus is not on its face a contemporaneous document. It is a document which must have been produced by reference either to contemporaneous documentation as to what work was done by which personnel in relation to this project, or by reference to oral recollection, or to both. However, so far as I am aware no contemporaneous documentation, such as timesheets or any other record of time spent and work done, has been disclosed to support it. Furthermore there is no evidence to support the hours claimed, or the hourly rates. Still further, it includes claims for civil and structural engineering work when, as I have noted, it was Mr Munro's evidence that his practice received no fees for the work undertaken. In the circumstances, even if I had been prepared to admit it into evidence, I would have felt unable to place any reliance upon it. In the circumstances, there being no acceptable evidence to support the claim, I would have been unable to make any award in PFP's favour, even if they had persuaded me that in principle they were entitled to payment for this work done.

The loss of profits claim

[335]In the case of a contract such as the present, where the professional is retained to undertake defined items of work in separate work stages, with provision for separate payments for each stage, the normal position, in my judgment, would be that the client would be entitled to elect to instruct the professional not to move onto the next stage without thereby being in breach of contract and thus liable in principle to compensate the professional for his loss of profit on the work which he was deprived of the opportunity of undertaking. Although PFP would have sought to rely upon clause 5.16 of the SFA/99 conditions to establish a right to claim loss or damage due to determination other than for breach, that cannot avail it because, as I have said, those conditions were not incorporated into the contract.[336]Accordingly, PFP seeks to rely upon the clause in its general terms to the effect that PFP should be appointed to continue with the subsequent stages "should the project progress". That, however, raises the question as to whether that provision is engaged in circumstances where - as in this case - the client chooses, even if not for reasons of breach by PFP, not to proceed with the project on the basis of the design put forward by PFP and for which planning permission is granted. In my judgment it is not, so that there is no entitlement to claim loss of profit in such circumstances.[337]In any event, since on the findings I have made the Locks were entitled not to appoint PFP to continue with the project in circumstances where it was in repudiatory breach by refusing to continue work without being paid its invoice claim, and since the project would not have got beyond stages one and two anyway had PFP properly performed its obligations at those stages, the question does not arise.[338]Furthermore, in the same way as with the previous claim, following oral submissions I questioned Mr Hickey as to whether or not there was any evidence to support PFP’s case that its average gross profit rate was 69.9% of turnover, when that had not been addressed in the evidence submitted by PFP. That produced confirmation that there was not, but also an application to rely upon a further document, being a letter from the payroll manager at PFP's accountants, dated 9 November 2009, providing details of PFP's turnover and gross profit for the three years to 31 May 2008, to support the average gross profit rate claimed. Mr Hickey said that he was instructed that this document had been disclosed in the previous adjudication, but accepted that it had not been put in evidence at trial. Again, that was objected to by Miss McCafferty, for substantially the same reasons. She submitted that the letter was not signed, that the underlying accounts had not been produced, and that in any event there was no basis for concluding that the same - seemingly very high - gross profit rate would have been earned during the period over which the remainder of the contract works would have been performed, namely 2009 - 2010.[339]Again I agree with Miss McCafferty that there is no proper basis for allowing this evidence to be adduced at this late stage. I also agree that in any event it is not sufficient, in itself, to establish the claim. As Miss McCafferty submitted, it is the gross profit rate which would have been earned in 2009 - 2010 which is the relevant comparator, and it is not sufficient for PFP to adduce evidence of the gross profit rate it achieved in earlier years, when circumstances may well have been very different, even allowing for the impact of the non-payment of the invoice.[340]For all of these reasons, this claim fails.

The costs claim

[341]This claim fails because in order to succeed PFP must establish that the SFA/99 conditions were incorporated, so as to justify the claim under clause 5.15 of those conditions, which it has failed to do.[342]Furthermore, in circumstances where PFP has failed to recover any amounts in this litigation on the basis that they were not paid when due, there is no basis for making this claim as a freestanding claim. I should record that no separate argument has been advanced as to whether or not it would be proper for PFP to be allowed to recover the costs of its unsuccessful adjudication claim, and I need express no opinion on that point.[343]Still further, I am not satisfied that PFP has sufficiently established any claim for the time costs of pursuing the claim or defending the counterclaim. The only evidence for the claim appears from paragraphs 7 and 8 of Mr Pickard's supplementary witness statement dated 6 November 2013. In short, he says that because PFP works on the basis that their fees are calculated by reference to a percentage of the construction cost, it does not record time spent on time sheets and, hence, is unable to identify the time spent in relation to this claim. In effect, Mr Pickard invited the court to make a fair and reasonable allowance by reference to its assessment of the time and effort which must have been spent in relation to this claim, both in the original adjudication and in the proceedings. The difficulty with that argument, in my judgment, is that even if it is in general reasonable for PFP not to record its own time spent on individual projects (and I note that this appears inconsistent with the schedule belatedly produced by PFP to support the stage three work claim), that omission cannot possibly be justified when the specific basis for this claim is, as stated in clause 5.15 of the SFA 99 conditions, a time cost basis. In those circumstances, it would simply not be possible, in the absence of any sufficient evidence, to make any award for time costs. In the absence of any argument that it was objectionable in some way to use this standard condition to hold the Locks liable to pay PFP’s costs of an adjudication which it lost, in circumstances where there is no jurisdiction on an adjudicator to make an adverse costs order, I would have been willing to allow PFP its established disbursements of £11,200, but no more.

THE COUNTERCLAIM

[344]In principle, as a result of my findings the Locks are entitled to maintain a claim for damages arising out of PFP's breaches in relation to the failure to provide a bound report with estimated costs at feasibility stage, the failure to provide proper advice as to the risks and costs at scheme design stage, and the failure to take proper steps to procure a ground investigation report, but are not entitled to maintain a claim for damages arising out of their other allegations, and particularly those in relation to buildability or financial viability.

Wasted costs

[345]On the findings which I have made, I am satisfied that the Locks would have proceeded to do everything which they in fact did other than the actual submission of the planning permission application in any event. Hence, all of the expenditure would have been incurred anyway, with the sole exception of the cost of the planning permission application itself, amounting to £1,675.[346]Further, on the basis of the findings I have made, particularly my conclusion that there is no basis for approaching this case other than on the footing that PFP substantially performed its obligations under work stages one and two, there is no basis for a claim for repayment of the £25,000 paid to PFP under the service and fee proposal in relation to these work stages.[347]Accordingly, this claim succeeds as to £1,675, but not otherwise.

Delay in development

[348]The starting point must be to identify any relevant period of delay caused by any established breaches on the part of PFP.[349]It follows that in this case the only relevant period of delay is that caused by PFP’s failure to provide proper advice in relation to the estimated costs at stages one and two. The consequence of that failure was that whilst it was not in fact until March 2009 that the Locks discovered that AIB was not prepared to fund the development, had PFP provided proper advice by – as I have held – no later than September 2008 the parties would have engaged in the process by which it would have been revealed that the project was unfundable at some earlier point. Given that, as I have held, this would have involved obtaining a ground investigation report as well as liaison with Bell Munro and the interested contractors it cannot be assumed in my judgment that this process would have been taken any less than 3 months and hence would have been completed any earlier than early January 2009. It follows in my judgment that the relevant period of delay in no more than 2 months.[350]Whilst that might appear surprising at first blush, given the overall period of delay to the project, it must be borne in mind that what I am considering is the consequence of a very limited breach, with a very limited consequence. I am not considering, because I have not found proven, an allegation that PFP produced a scheme which was not buildable at all or in accordance with the planning permission, and/or was not financially viable, and a complaint that PFP ought to have produced a scheme which was buildable and/or was financially viable.[351]I should address briefly what I would have found had I found in favour of the Locks on that point.[352]In short, it is clear from Mrs Lock's evidence that by late 2009, having appreciated what on the Locks' case were the problems with PFP's design, she instructed a new architect, Mr Morris, to produce a further scheme which would avoid the perceived difficulties with PFP’s revised scheme. It is also clear that whilst he was able to do so, the fundamental problem was that no funder would agree to fund that scheme either, given the projected construction costs and the Locks' requirement for 100% funding, all of course set against the context of the prevailing economic climate. It was for this reason that the Locks had to decide to cut their losses and sell Butley Hall to PHP, who proceeded to instruct Buttress Fuller to design and submit the new scheme for permission. It was only PHP’s subsequent refusal to complete the conditional sale agreement at the agreed price that led to the situation where eventually, with the benefit of financial assistance from Mrs Lock's parents and funding from funders of whom the Locks were unaware in 2009, they reverted to the original plan of developing Buckley Hall themselves.[353]However, there is no evidence that the revised Morris scheme was not buildable at all or in accordance with planning permission or that it was not economically viable. The problem was simply that at that time the Locks were not in a financial position to be able to take advantage of it. The question in those circumstances is whether or not the Locks can say that PFP should be liable for the consequences of that position. It appears from the discussion in Chitty on Contracts 31st edition at paragraph 26-081 to 084 that the question in contract is not one of mitigation, where the principle now established is that a claimant’s impecuniosity cannot be used against him to found an argument based on a failure to mitigate (Lagden v O’Connor [2003] UKHL 64), but of reasonable foreseeability, where the Hadley v Baxendale principles still apply. I am reluctant to lengthen this judgment by considering legal questions which do not arise on my actual findings. In short, it seems to me that whilst PFP was obviously aware that the Locks needed funding, it did not know that the Locks were dependent on obtaining 100% funding or that, in effect, the Locks would be unable to obtain funding even for a more modest, buildable and economically viable scheme without the benefit of a loan from Mrs Locks’ parents and the involvement of two specialist senior and mezzanine finance providers. It follows, in short, in my judgment, that the Locks cannot visit PFP with the financial consequences of any delay beyond September 2008, when on this assumption PFP was responsible for causing the Locks to move forward with its revised scheme as the preferred option, to February 2010, when the Locks decided to sell Butley Hall to PHP, a delay period of 17 months.

Cost of ownership in the period of delay

[354]In principle, damages flowing from any delay in development are of course recoverable. However, on my finding, the only relevant delay would be the two month period from early January 2009 to early March 2009. The Locks' difficulty is that the claim as pleaded and advanced is for the costs of ownership for a period of 27 months within a period from January 2011 to September 2014.[355]I have considered whether I have sufficient uncontroversial evidence from which I could assess damages over the two months in question. I have concluded that I do not. The most significant cost of ownership is, unsurprisingly, the interest payable under the loan agreement with AIB to fund the purchase of Butley Hall. That provides for interest to be charged at 2% above AIB base rate on a loan of £1.125 million. However, in the absence of evidence as to what the AIB base rate was over the relevant period, or bank statements showing what interest was charged, I am unable to produce a figure. The same is true in relation to the other elements of claim, being the costs of insurance and electricity, where information is only available for a later period.[356]In the circumstances, I do not consider that I can assess any damages for this period of two months. The only consolation for the Locks is that it would, no doubt, have been relatively modest anyway compared to the overall costs which they have incurred on this project.[357]One further point which would have arisen for determination had I accepted the Locks’ primary case was whether or not the Locks could have recovered costs incurred by Edengate after they had transferred ownership of Butley Hall to that company and had decided to undertake the development through the medium of Edengate. As to this, I was referred by Miss McCafferty to the well-known decision of the Court of Appeal in Esso Petroleum Ltd v Mardon [1976] QB 801 where it was held that an individual could recover losses suffered by the private limited company in which he and his wife held all the shares. Again, there is no need to prolong this judgment by addressing this point in any detail, since it is not necessary to do so. In short, I am satisfied that a distinction is properly to be drawn between cases where an individual claimant is seeking to recover profits which would have been earned by the company and received by him as dividend, and cases where the claimant is seeking to recover costs which have been incurred by the company. In the latter case, it seems to me that where, as here, the claimants have chosen to incorporate a company to undertake the development with the effect that they would be insulated from any personal liability for such costs, and where there is no connection between that decision, taken for purely commercial reasons, and any conduct of the defendant, it would not be right to permit them to recover such corporate losses in a case such as this.

Delayed receipt of profits over that period

[358]Again, in principle, I am satisfied that the Locks would be entitled to recover as damages the loss attributable to the delayed receipt of the profit on the development. However, the difficulty the Locks face here, in my judgment, is that there is insufficient certainty as to what, if any, profit the Locks will eventually secure on the development. As I have said, the development is far from complete, and there is no guarantee either as to what the Locks will obtain once the apartments are completed and sold, or the total costs which they will incur to get to that point. These issues have not been addressed by Mr Vinden, so that there is no expert evidence on the point. In those circumstances, in my judgment, there is an insufficiently certain evidential base from which to award such damages. Again, given the modest period for which any loss would be awarded, the Locks can be consoled that any award would also have been modest.[359]The Esso Petroleum point would also have arisen here had I decided otherwise, so that I would have needed to consider whether or not the Locks could have recovered damages on the basis that the profits will be earned by Edengate. Here I would have been satisfied that the Locks, being the sole owners and controllers of this special purpose vehicle development company, would have been entitled to recover as damages losses which, in truth, represent the delay in their recovery, in their capacity as owners and controllers of the company, of the profit on this development. In particular, I would have noted that PFP were well aware in April 2008 that the Locks were considering doing exactly the same thing through the medium of the then limited company which they had set up, so that there would be no injustice to PFP in this result.

OVERALL CONCLUSIONS

[360]On the basis of the conclusions I have reached it would appear that the claim must be dismissed, and there should be judgment for the defendants on their counterclaim in the sum of £1,650. There will, no doubt, be a modest claim for interest on that sum which can be agreed, but if not will have to be assessed. There will also, no doubt, be questions as to costs.

Cited in 2 later judgments