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Lejonvarn v Burgess - The Perils of Providing Services Free of Charge

July 2017 - Issue 95

Introduction

The recent Court of Appeal decision in Lejonvarn v Burgess, in which an architect and project manager was sued for damages of £265,000 for a job she did free of charge, provides a sobering reminder to professionals and their insurers that the provision of free information, advice and services can come at a price.

Background

The parties had been friends for over ten years when, in the summer of 2012, the Burgesses showed Mrs Lejonvarn their design for a landscape garden they hoped to build in their back garden. The designer had quoted £150,000 for the work, which Mrs Lejonvarn (who described herself as an architect and project manager) thought was a bit steep. Before long Mrs Lejonvarn found herself agreeing that she and her team would carry out the work. Mrs Lejonvarn undertook various services in relation to these works, including procuring a contractor to carry out earth works and monitoring the works. Mrs Lejonvarn carried out these works on a gratuitous basis, the intention being that, as the works proceeded to their next phase, she would prepare a design for a fee.

However, before the first phase was complete, the relationship broke down after costs overran. Mrs Lejonvarn, who had no previous experience managing major landscaping projects, was unable to implement the Burgesses’ dream design.  The claimants sued, alleging that the work carried out under Mrs Lejonvarn’s supervision was defective and remedial works were required. Mrs Lejonvarn then found herself defending a claim for £265,000 without any professional indemnity insurance.

The trial was limited to the evaluation of certain preliminary issues –

The judge held that no contract existed between the parties. Basic elements of contract formation were absent, including offer and acceptance, certainty of key terms and consideration (i.e. the payment of fees). This is unsurprising given the informality of the parties’ relationship and Mrs Lejonvarn’s decision to provide her services gratuitously. However, it was held that Mrs Lejonvarn owed a duty of care in tort. Mrs Lejonvarn offered her skills knowing that the Burgesses would expect and need a quality service. She did not have to provide the services, but to the extent that she did, she owed a duty to exercise reasonable skill and care in the provision of them. This was important as it provided the legal basis for the claimants to seek to recover their alleged losses from Mrs Lejonvarn.

Mrs Lejonvarn appealed the decision.

Court of Appeal

The Court of Appeal agreed with the judge at first instance, finding that Mrs Lejonvarn did owe a duty of care to the claimants to prevent pure economic loss.

A duty of care can still be owed in the absence of a contract

The judge at first instance had concluded that there was no contract but the parties’ relationship was ‘akin to a contractual one’. Mrs Lejonvarn sought to argue that if there was no contract there could not be a relationship, however, the Court of Appeal upheld the view that even if a contract was not formed, a duty could still arise in tort.

The correct test for establishing a duty of care

The general rule is that a claimant cannot recover pure economic loss in tort. This is because defendants are usually not held to have assumed a duty of care to prevent pure economic loss. An exception to the rule is if the assumption of responsibility test is satisfied. It was decided that Mrs Lejonvarn had assumed responsibility and thus the claimants could, in principle, recover their pure economic losses from her. On appeal Mrs Lejonvarn argued that the assumption of responsibility was the wrong test to apply; the judge should have instead applied something called the Caparo test.

The key question here was the third stage of the Caparo test regarding whether it was fair, just and reasonable to impose a duty of care. Mrs Lejonvarn argued that the court should consider this as a separate standalone issue and submitted that in this instance it was not fair, just or reasonable. The Court of Appeal disagreed and argued that the assumption of responsibility test was appropriate in the instance of a defendant voluntarily providing services in circumstances where they know or ought to know that an identified claimant will rely on their advice. Thus it was concluded that Mrs Lejonvarn had assumed responsibility to prevent pure economic loss to the Burgesses.

Duties in tort can only be negative duties

One of the key differences between duties owed in contract and tort is that contract can, and often does, impose positive obligations. Tort, by contrast, can only impose a negative obligation. Such a negative obligation is normally phrased as a duty to act with reasonable skill and care. Mrs Lejonvarn argued that some of the judge’s decisions at first instance imposed a positive duty, for example, that she had a positive duty to inspect the works. This went beyond the realms of tort.

The Court of Appeal agreed with the principle that tort can only impose negative duties. It therefore rephrased the duties to make it clear that there was no positive obligation on Mrs Lejonvarn to carry out the services in question. However, to the extent she carried out the services, she owed the claimants a duty to carry out those services with reasonable skill and care.

In concluding, Hamblen LJ defined the actions in which Mrs Lejonvarn had owed a duty to exercise reasonable skill and care as –

Conclusion

This case serves as a warning to all professionals not to lose sight of the need to put in place formal arrangements which ultimately serve to protect them and the client alike. It is already established that work carried out for a fixed fee must be completed to the ordinary standard of care, even if it is unremunerated (Investors Friend Ltd v Leathes Prior (2011)). Lejonvarn is a stark reminder that even where advice or services are provided at no cost, it is still important to take the usual steps in mitigation of risk, such as putting in writing exactly what the professional has and hasn’t agreed to do for the client.

What are the implications for construction professionals?

As the judge was at pains to point out, this was not simply a piece of ad hoc advice imparted to a friend over dinner. Mrs Lejonvarn’s involvement is the project was extensive and ongoing for several months, and the intention was that it would lead to paid work. She assumed responsibility for procuring contractors, supervising on site, reviewing payment applications and overseeing the project budget. The Burgesses relied on her professional expertise. Although the parties were friends, her services were provided in a professional context and on a professional footing. Helping a friend in need for free does not therefore always mean that you will be liable.

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