Redbourn Group v Fairgate Developments (2018) 177 ComLR 207 TCC
Fairgate appointed Redbourn as development manager and project manager for a proposed development in Wembley with fixed fees to be paid at various stages and at stage 5 a 2% percentage fee of the estimated building cost. Fairgate sacked Redbourn for alleged breaches of contract when the project had only reached the planning consent stage but had gone no further. There had been no building works. Redbourn claimed the £200,000 that was payable on the grant of planning consent, and 2% of an estimated building cost which they calculated at £1,032,000, plus a final performance fee which had been agreed in advance at £250,000.
Fairgate had decided not to proceed with the development, and it was entitled to abandon the planning application process. Whether or not Fairgate was guilty of breach of contract, it was in any event entitled to determine Redbourn’s appointment. In the circumstances the losses which Redbourn was claiming were never going to arise and there was no basis to award compensation. Redbourn’s claim was dismissed.
- Redbourn was not able to demonstrate that, but for the alleged wrongful termination, the works would have proceeded and produced the profit it was claiming.
- Construction professionals often make serious investments against the future plans and needs of their clients. This case illustrates:
a) speculative development contracts are dependent upon circumstances and feasibility (which can change very quickly depending on the state of the economy, etc); also
b) the importance of studying the client’s termination provisions and trying to amend them to provide for at least some minimum compensation against cancellation “for convenience”;
- Although arguably Fairgate was at fault in the way that it determined Redbourn’s contract, the fact was that no significant loss could be demonstrated to flow from this since in any event Redbourn could have legally terminated in the economic circumstances of the case. Non-fault termination is a growing phenomenon in commercial terms of appointment and construction professionals need to be aware of the serious risks to cash flow.