In the recent Court of Appeal decision of D&K Drost Consult GmbH and another v Foremost Leisure (Holdings) Ltd  EWCA Civ 73, the Court held that a professional consultant could recover its fees for initial consultancy.
Foremost Leisure, a hotel developer, and D&K, an architectural firm, began working on a hotel development project in Germany. For several months, D&K undertook preliminary work on the project while negotiations were underway, but no binding agreement had been reached, in relation to their remuneration. In June 2006, Foremost Leisure became dissatisfied with D&K’s services and engaged another firm. Shortly afterwards, the parties agreed that the D&K would be paid £150,000 for their initial services.
Foremost Leisure refused to pay these fees and D&K sought payment under “quantum meruit”, or the reasonable value of services principle. The High Court found that D&K were entitled to payment for services which they had rendered in the acquisition and development of a hotel site. Foremost Leisure appealed, arguing that the agreement was for future work and not in respect of work already completed. Foremost Leisure relied on the fact that D&K had not raised an invoice in respect of the work done. The Court of Appeal rejected this argument and held that D&K’s fees were payable, particularly given that the agreement stated that no further performance was necessary.
This case highlights the importance of understanding and agreeing fees for services in a development from the outset to avoid future disputes. Both parties may agree that no fees will be charged for initial consultancy; however it would be good practice to put an interim contract in place mirroring the intentions of the party. In addition, parties should proceed with caution where intermediaries are used to negotiate with professional consultants.
For further information regarding this topic, please contact the Edwin Coe Property Litigation team.
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