Riva Properties Ltd v Foster + Partners Ltd [2017] EWHC 2574 (TCC) concerned a proposed five-star hotel near Heathrow. The developer, Mr Dhanoa, engaged Foster + Partners in 2007. His budget was approximately £70 million. The design the practice produced was costed by the quantity surveyors at around £195 million. The budget was raised to £100 million, on the developer's case in reliance on assurances that the scheme could be value engineered down to that figure. It could not. The project was abandoned and the developer sued for the wasted fees and costs.
The court found the architects negligent on two grounds. First, they had failed to ascertain and take proper account of the client's budget. A budget is a constraint on the design, not background information, and a reasonably competent architect designs within it or tells the client that it cannot be done. Second, the practice had failed to advise that the design could not realistically be value engineered to the revised figure.
Damages of approximately £3.6 million were awarded, largely representing professional and other fees and expenses wasted in pursuing a scheme that was never affordable.
Riva is not a technical design failure. Nothing fell down. The negligence was commercial: designing a building the client could not pay for and not saying so clearly enough or early enough. That makes it directly relevant to practices whose risk management focuses on technical competence and treats budget and programme as the quantity surveyor's problem.
The judgment also contains pointed observations about the practice's record keeping and about the quality of some of its factual evidence. Where the contemporaneous file does not show the advice that the practice says it gave, the court will resolve the conflict on the documents.
Claims of this kind are for wasted expenditure rather than physical damage, which raises two coverage questions worth checking in the wording.
The first is whether the policy covers claims for pure financial loss arising from advice, which most professional indemnity wordings for architects do, but some construction-focused wordings limit. The second is the treatment of fees. Some wordings exclude the return of fees paid to the insured, or make it subject to a sublimit. A Riva-type award includes the practice's own fees among the wasted costs, so the exclusion can carve out part of the claim.
Practices taking on projects where the client is under-capitalised, or where the brief and the budget are visibly mismatched, should treat that as a risk to be managed at appointment stage rather than at design stage. The same discipline applies to management consultants and other advisers whose recommendations commit clients to expenditure they may not be able to sustain.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.