The designer was approached by a prospective client who was looking to purchase a block of land. The prospective client asked the designer ‘roughly how many townhouses could fit on the block’ and the designer responded via email with ‘roughly 5, depending on planning, council etc.’
No formal designs were made, no fees were paid.
Subsequent to purchasing the block, a design was drawn up (by a DIFFERENT designer) and submitted to council. Council rejected the development as there was a restricted covenant on the site. They could still develop, however, in a limited capacity.
The client alleges that they would not have bought the property if they had known that they could not develop what they wanted. They said that they paid above market rate and they had suffered a significant loss.
The client commenced proceedings against;
- Real estate agent
- Building designer 1 (the ACTUAL designer)
- Building designer 2 (our client who provided an initial opinion)
Costs in the vicinity of $400,000 for loss of land value, holding costs, acquisition and sale costs.
The case was scheduled for hearing and our client was listed as the 4th defendant. The real estate agent and the conveyancer were the 1st and 2nd defendants and had significant liability to this loss.
Our designer had an excellent defence in that;
- They were never formally engaged and did not owe a duty of care to the client
- There were no fees paid for the service
- No designs were ever put forward
- The designer stated that it would be subject to council etc.
The insurers didn’t want to settle, however, as the other defendants were preparing to settle it was a difficult situation. There were significant grounds to defend the claim, however, the insurer offered a $50,000 contribution during mediation.
The cost for the insurer to attend trial was going to be $70,000 for legal fees alone.
Begrudgingly, the client (and insurer) contributed $50,000 to the settlement and was released. They were the lowest contributor to the loss and the other parties were 6 figure settlements.
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