Written by: Griffiths & Armour on: 09 Sep 2020
Working with Lay Clients: What could possibly go wrong?
For many years design and build projects have been identified as a recurring theme in claims against construction professionals. One of the reasons for this is that design and build (D&B) contractors operate in a highly competitive market where (it would appear) they will only win work if they are willing to take significant commercial and legal risks, many of which are then passed down the supply chain through onerous contract terms.
It is perhaps therefore surprising that lay clients such as individual householders, often perceived as being at the opposite end of the commercialism spectrum from D&B contractors, feature almost as heavily in claims against our clients. In this article we look at some simple reasons for that and suggest how professionals might re-evaluate their basis of relationship with lay clients.
Consumer Culture v The Commercial Environment
Remember that many lay clients with a domestic project may be dipping their toes for the first time into the ‘murky waters’ of construction and have unrealistic expectations of being protected against what might lurk beneath. That is partly a product of the strong consumer protection culture that we enjoy in western Europe – it has obvious benefits but it also makes it easy for people to forget how much risk they carry by default once they step outside the benign and safe environment of the status quo.
Some consumer protection exists in construction through (for example) professional bodies policing the conduct of member firms, but this cannot extend to other commercial risks such as supplier insolvency or unforeseen ground conditions. Those risks can often take lay clients by surprise.
There isn’t usually a positive duty on professionals to warn lay clients about these various residual risks, and indeed positive duties to warn are usually limited to health and safety situations. Most of the rest of the time consultants issue warnings in the form of caveats for their own protection rather than in order to discharge a positive obligation to the client.
There are however occasions when a wise and conscientious consultant might feel that something more is appropriate – such as suggesting that the client should consider appointing a professional agent to manage the project on their behalf, and to take responsibility for making sure that the client properly appreciates any such residual risks at the outset rather than only when they crystallise into problems. As ever, in the event of an allegation against the consultant at a later date it is enormously valuable if the consultant can demonstrate that this suggestion was made in permanent written form.
The Required Standard Of Care
In theory the law makes no distinction between a consultant working for a lay client and one working for a highly experienced developer, but in practice the courts recognise that lay clients (who have no experience of their own) are almost entirely reliant on the advice of their professional team. The very fact that our wise consultant in the previous paragraph might behave as outlined there reflects the very same reality.
In practice therefore the courts look closely at context and circumstances when assessing what amounts to reasonable skill and care, and this will include whether the consultant took proper account of the client’s level of experience. This means that consultants tend to be expected to hold a lay client’s hand somewhat tighter than that of a commercial client, and that on balance judges will tend to be more sympathetic to lay clients who have been let down by their advisers.
The same point also plays out in contributory negligence arguments – as defendants we are more likely to be able to run such arguments successfully where the claimant is a commercial entity (who, as it were, should have known better) than against a lay client who may not have been so well placed to look after their own interests.
Some of these points featured in the following case study claim against an architect client;
An elderly couple appointed our clients as architects and contract administrators for an extension to their cottage.
A fire occurred at the property part way through construction, but the damage to the extension was uninsured under the employers’ home insurance policy. The contractor had not insured the works either, because the draft version of the building contract which the architect had sent to him clearly indicated that insurances were the responsibility of the employer.
The owners of the cottage alleged that they had never been provided with a copy of the building contract and had not been advised on how to complete the draft form with the result that the contract was never formally executed and yet the contractor had been ‘allowed’ to start work. Specifically, they alleged that the architect had failed to advise them on how to go about completing the sections on liquidated and ascertained damages and insurances.
The architects were reasonably confident of their position in terms of having provided appropriate advice in various areas, however, crucially very little of that advice had been recorded in writing. They were therefore forced to rely on their recollections of oral advice given to the employers at meetings which had taken place a number of years previously. In response the couple were able to show that they had in fact been out of the country on some of those dates. Inevitably that dented the broader credibility of our evidence and our legal team advised that we should not expect to defend the claim successfully at trial.
Defining the Service
Our recommendation always to insist on written terms of engagement is particularly important where lay clients are concerned. It flows from some of the above observations that consultants who are engaged by lay clients should expect to have to take extra care in spelling out to the client precisely what service they are buying.
It cannot be taken for granted, for example, that lay clients will understand the purpose of periodic site visits. Insurers often have to incur avoidable costs defending claims that would not have arisen if only the consultant had clarified at the outset that the inspections were limited to, for example, checking for general compliance with Building Control rather than overall quality of workmanship.
It is always of heightened significance where a consultant has been persuaded to pare down its duties in order to contain cost. That will already be a familiar theme to many readers but is possibly more common where lay clients are typically running projects on a limited budget.
Dream Homes
Some of the highest value claims that we see against architects in particular emanate from ambitious once-in-a-lifetime projects for wealthy lay clients whose visions for their dream homes were arguably never likely to be fully realised without some degree of compromise. Massive personal investment by these individuals gives rise to an expectation of quality which is not necessarily unreasonable in itself. But when coupled with the emotive ties that we humans all have to our homes it makes it more likely that claims will follow if the delivered result doesn’t come up to scratch.
If this can be described as a risk in itself, then managing it can be difficult. Consultants simply have to think carefully about whether or not to operate at all in this otherwise highly attractive sector of the market; similarly choose their clients carefully; and tackle head on any areas where the client’s expectations appear to be misaligned with what the team believe they were engaged to provide.
Perhaps the best illustration of these issues can be found in the well-known case of McGlinn v Waltham Contractors (2007) in which the client gave the architect a walk-through tour of his luxury yacht in order to show him the standard of finish that he required – yet apparently those requirements were never distilled into written form by way of a specification, thus making some form of dispute almost inevitable.
It was an important and interesting case for a variety of legal reasons, particularly with regard to architects and their inspection obligations, but of particular interest in the current context are the introductory sections and numbered paragraphs 39-45. A link to those paragraphs and the judgment can be found here.
Conclusions
A high proportion of claims on our Professional Indemnity facilities relate to residential projects, which is perhaps unsurprising given the amount of fee income that our clients derive from the residential sector. What is possibly more surprising is the disproportionate number of claims by private individuals (as opposed to corporate entities) within that category, some of which result in significant payments by insurers in excess of £500k or £1m.
To categorise working for lay clients as being either higher or lower risk than working for, say, a commercial developer, would be too broad a generalisation to be in any way meaningful. It is however clear from our claims records that dealing directly with lay clients requires a particular style of risk identification, management and communication. Historically not all consultants have always got that right.
Griffiths & Armour Professional Risks Director, Stephen Hargreaves said,
A high proportion of claims on our Professional Indemnity facilities relate to residential projects, which is perhaps unsurprising given the amount of fee income that our clients derive from the residential sector. What is possibly more surprising is the disproportionate number of claims by private individuals (as opposed to corporate entities) within that category, some of which result in significant payments by insurers in excess of £500k or £1m.
To categorise working for lay clients as being either higher or lower risk than working for, say, a commercial developer, would be too broad a generalisation to be in any way meaningful. It is however clear from our claims records that dealing directly with lay clients requires a particular style of management and communication. Historically not all consultants have always got that right.
As always, we are happy to offer advice on either a general or project specific basis if issues arise along the lines of those touched upon in this paper and help to prevent any such issues evolving into disputes. For further assistance on considerations of working with Lay clients please get in touch with your Griffiths & Armour broker or you can contact the author, Stephen Hargreaves, by clicking below.
