Poor Choices

It’s an infrequent mistake, but it happens: Consultants and projects are chosen unwisely, and the architect must assume responsibility for the consequences. In these two stories, those errors are about to doom the projects . . . until a second—extremely rare—phenomenon occurs: Fate steps in and saves the day. The odds of winning Lotto Max are about 33 million to one. The odds of your architectural project being saved by blind luck are in about the same range. We call this episode "Poor choices." 

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It’s an infrequent mistake, but it happens: consultants and projects are chosen unwisely and the architect must assume responsibility for the consequences. In these two stories, those errors are about to doom the projects . . . until a second—extremely rare—phenomenon occurs: Fate steps in and saves the day. The odds of winning Lotto Max are about 33 million to one. The odds of your project being saved by blind luck are in about the same range. We call this episode, “Poor choices”.

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All’s Well that Ends Well

An architectural firm wins a commission to design a new theatre wing for a prestigious school. As the project progresses, the modest design that the school’s budget is based on, is soon buried by the artistic aspirations and the technical deficiencies of the consultants. Construction costs escalate. Both the Architects and the Client seem doomed to perdition, until a theatre angel descends and makes the problems vanish. As a theatre person once said, “All’s Well that Ends Well.”

The renowned Damon Lane School of Theatre Arts was founded in Winchester, Ontario, in 1892, catering mostly to students in residence. Originally a choir school, its curriculum evolved over the years to include instrumental music, dance and the theatre arts.

To celebrate its 125th anniversary, the School conducted a fundraising drive among its alumni and other theatre supporters, to finance a new facility: a theatre and opera venue. It would be a modest but important showpiece in this small city and would distinguish the School as a major contributor to arts education in Ontario.

When the target of 6 million dollars was reached, with great fanfare, an informal competition was held to select an architect.

The competition jury, consisting of the School principal, a municipal engineer and a few theatrical personalities, was unanimous in selecting local Architects Silver & James. They had presented excellent design concepts and had quoted a fee that seemed reasonable. But most important, where other competitors had balked at the frugal budget, Silver & James expressed complete confidence that the building, as contemplated, could be built for 6 million dollars.

At this point, a disinterested observer might have wondered what Silver & James knew that the other competitors didn’t know. But in fact, it was what Silver & James didn’t know that led them to agree to the budget, and to the problems that followed—which nearly ruined their reputation, their business and their client.

The Architects had an impressively wide range of experience, but very little of it involved theatre work—or theatrical clients. So, they were pleased when the School administration indicated that they were taking a hands-on approach. For Silver & James, this was just another academic project.

The School administration, on the other hand, viewed it as a grand theatrical production, in which they were the directors. And, having cast the leading roles—Silver & James—it was now their prerogative to cast the supporting characters as well. These roles included the Structural Engineer Craig Cravitz, and the theatre consultant Al Forsyth.

It soon became apparent that these “consultants” had no more experience in theatre design than the Architects did. So, the supporting cast that Silver & James were relying on, to help them deliver an efficient and effective production, were worse than unhelpful. They were an obstacle.

By the time the building was at last completed, the costs had more than doubled. The School had exhausted its financial resources and was now facing bankruptcy. The trustees were suing the Architects for the full amount of the cost overrun.

The Chair of the School’s Board of Trustees called Pro-Demnity directly, preferring to avoid the nuisance of involving the Architects. According to the School’s version of events, Silver & James had been hired specifically because they had agreed to the budget. Then, as soon as they got the job, they ignored it. Adding insult to injury, in their last invoice, they had billed for fees due on the cost overrun.

We agreed to look into the matter, but we pointed out that we were not a compensation fund. Furthermore, by the looks of things, they were the proud owners of an impressive new theatre wing that was probably worth every penny they had paid. They may not have suffered a compensable loss at all.

To the Chair, this stark bit of news was confusing. So we explained it to her: If you walk into a showroom to buy a Chevrolet and end up with a Mercedes, your budget may be shot, but you have a Mercedes, not a Chevy. You can’t really expect the dealer to reimburse you for the difference.

We contacted the Architects, whose version of events was very different, and decidedly more nuanced. Yes, the budget had been exceeded, but it wasn’t their fault.

To begin with, construction industry prices had risen considerably during the time that the design was being developed. There was no way of getting around it. Then, the theatre consultant hired by the School, Al Forsyth, had brought to the project much more extravagant aspirations than anything contemplated in the original budget. Without any doubt, his ideas had contributed to the creation of a sophisticated multi-media facility, but the technical equipment he required was a far cry from the platform and curtains that the School had budgeted for at the competition stage. His advice had increased the scope, the complexity and the affordability of the job . . . substantially.

Then, there was the Structural Engineer, also hired by the School. Craig Cravitz was a competent specialist . . . in apartment building design, that is. He had never worked on anything theatrical, or even on anything with curved walls, which he regarded as an “architectural affectation.” He was an unsympathetic character in every sense, and held architects, and their “artistic designs,” in low regard.

As a reflection of this indifference, his structural solution for the theatre included steel columns that rose out of the floor, interrupting the audience’s line of vision and interfering with the operation of the curtain. Not only was this structural design completely inappropriate, but the alterations required to modify it had required expensive change orders which, in turn, had called for additional—and completely justifiable—architectural fees. 

When we interviewed him, Cravitz blamed everything on the Architects. After all, Engineers don’t dimension drawings. It’s the Architects’ job to coordinate it all. Furthermore, we ought to know that straight pieces of steel are a lot cheaper than curved ones. And anyway, he wasn’t paid enough to do anything fancy. He certainly had no interest in helping to mediate the matter.

The theatre consultant Forsyth, whose advice had contributed most to the budget balloon, was as insubstantial as much of his advice. He was not insured and had no discernible assets, making him “judgement-proof.” It was pointless to consider him as a possible contributor.

Pro-Demnity tried in vain to persuade the School Trustees that they had no real cause of action. The overrun in costs was not due to architectural errors, but the result of incompetent advice for which the School’s own consultants were responsible. A certain number of discrepancies might be expected in this sort of complex building, but the structural engineers, as well as the mechanical and electrical consultants, should also be called to task, and not the Architects alone.

It was to no avail. Litigation loomed.

The Statement of Claim issued by the School Trustees was, not surprisingly, greatly exaggerated and included alleged defects in nearly every aspect of the work. The astronomical figure attached to the claim was undoubtedly the result of their mistaken expectation that very large insurance funds were available. 

Pro-Demnity presented a vigorous defence of the Architects and claimed against the Engineer.

Settlement negotiations started in earnest almost immediately. We knuckled down for a fierce battle with the school, whose Board of Trustees included some big names in the theatre world. We knew, however, that as weak as the School’s case might be, it would be presented by individuals skilled in the arts of rhetoric and persuasion. This was a concern to us.

Then, as sometimes happens in theatrical productions, but rarely in architectural projects, divine providence intervened. Unexpectedly, one of the Board members recognized that the prospect of the School’s bankruptcy accompanied by a protracted—possibly unsuccessful—court battle could result in a tragedy of theatrical proportions. The Board member offered an enormous cash donation, which was quickly accepted . . . and the matter was resolved.

With bankruptcy averted, the litany of defects and allegations of negligence subsided. The theatre was now seen as a beautiful addition to the School and the community . . . and much more elaborate than expected. Regarding the Architects’ outstanding fees, a reasonable compromise was struck. The matter settled and releases for everyone followed.

In many claims, things are not exactly as they seem: allegations are made and inflexible positions are taken in order to postpone or avoid unacknowledged and often unconnected consequences. In this claim, the reputation of a venerable institution was at stake. The School had committed itself to building a theatre, had collected millions from alumni and others and, due to optimism and unbounded desires, had found itself in a tight spot. Once the angel had appeared and the financing gap was bridged, everyone went back to being actors, singers and dancers and happily forgot the litigation episode.

“All’s Well That Ends Well.” And this story ended well for all involved. Most especially for the Architects. The unnecessary litigation was mercifully short and economical. And, just as important: the School was actually very pleased with the building.

With happy endings like this one, there is sometimes a downside: When everything turns out fine, there is the danger that no lessons will be learned. All the more reason for the rest of us to look at the circumstances leading to the claim, and contemplate a much more probable outcome.

Lesson No. 1: When bidding on a project, make sure you have the knowledge and experience to properly evaluate the budget and to manage it throughout.

Lesson No. 2: When, as an Architect, you fail to coordinate effectively with consultants, neglect to manage budget expectations when a project grows in scope, and fail to issue clear warnings of overrun, you are taking huge risks. If things turn sour, as they may well do, blind luck is unlikely to save you.

***
Taking Over Trouble

When acquiring used merchandise—a car, an armchair or a business, for example—it’s wise to examine it carefully, to make sure that you aren’t buying someone else’s problems. There is always some risk involved in the transaction, and the more complicated the merchandise, the more likely it is that problems will go undetected. This is especially true if the merchandise you are acquiring is a seniors’ home or a half-built architectural scheme.

In this story, an Architect, Jon Chester, takes over a project after the structural frame is completed, without knowing that the structure has been under-designed. The legal problems that ensue threaten to sink his practice, until he is delivered by a bona fide miracle.

A large American corporation decided to move on from its core business, running retirement homes, and focus on the more lucrative and less precarious business of funeral homes. So they put their existing facilities up for sale. Another large American firm, Restocare, agreed to purchase the properties, “as is.” This meant that once Restocare had inspected the properties and signed the contract, it would be very difficult for them, afterwards, to claim for any alleged defects. They were agreeing to buy the liabilities as well as the assets. Little did they realize they were “taking over trouble”

Not long after the purchase, one of the homes—an up-market 12-storey urban location that included a health spa and medical facilities—developed serious problems. The concrete floors had been gradually deforming . . . and now corridor walls were beginning to bulge and crack, drywall was crumbling, and doors were jamming in distorted frames.

The new owners commissioned an engineering report, which revealed that the building was suffering from serious structural problems. Consequently, the City condemned the building as unsafe, and several hundred elderly residents had to be relocated. Some went to stay with relatives; others were lodged in rival retirement homes or hotels. All of them had to be compensated. It was a logistical and financial nightmare for the owners.

Clearly, Restocare had purchased a calamity and, thanks to the “as is” clause, they had little or no recourse against the original owners.

But, taking a broader view, they believed that, along with the building’s assets and liabilities, they had also assumed all of the former owners’ contractual rights. And, since the negligence of the builders and consultants was self-evident, they felt justified in suing everyone involved in the project: the Contractor, the original Architect, the replacement Architect, the Structural Engineer and The City of St. Bruno, Ontario. The claimed loss was 10 million dollars.

When the Architect Jon Chester called to inform us that he had received a notice of claim from a company he had never heard of, regarding a building project he had virtually forgotten about, the whole complicated story began to unfold.

Chester was not the building’s original Architect. That distinction belonged to Rudolph Beverly, AIA, an elderly practitioner who had spent most of his professional life doing cookie-cutter apartment buildings for speculative builders in the Chicago area. Operating with a temporary professional licence in Ontario, he had stuck with the project until the structural frame was completed. By that time, his health was starting to become a concern.

His contract had called for visual inspections only, along with the issuing of certificates. But each site visit had involved considerable travel time, plus a dismal night spent at the St. Bruno Inn. The contract administration was proving to be impractical as well as tiring. So, both he and his brother Saul, the project’s Structural Engineer, were happy to forgo the fee if a local architect could be hired by the original owner to take on the site review responsibilities.

When Chester came on board to take over administration of the project, the building was not just structurally complete, but also enclosed, with interior work already underway. Everything seemed to be going smoothly, and he never thought to question the structural design. The building frame had been completed . . . and approved. Nevertheless, he was prudent enough to insert a clause into his contract that absolved him from liability for any pre-existing conditions.

Chester did an excellent professional job of completing the project. There was little chance that his work would be found deficient in any way. But he wasn’t entirely free and clear. What he hadn’t considered was that the protective clause in his contract might prove to be not nearly as protective as he imagined. But then, he was an Architect, not a lawyer.

Restocare’s claim, and the enormous sum attached to it, was based on the problems listed in the engineering report they had commissioned. The report cited serious structural under-design, to the extent that partial or total collapse of the building was a possibility. It appeared that the original engineer Saul Beverly of Evanston, Illinois had neglected to allow for superimposed floor loads. The slabs had consequently over-deflected, damaging walls, floors and doors, and compromising mechanical systems. In addition, the structure failed to meet Earthquake Code, which was possibly not an immediate problem, but was enough reason for the City to have issued an evacuation order.

To Restocare, the remedial costs and consequential damages of 10 million dollars seemed reasonable and the case would be an easy one to make. The facts spoke for themselves.

Each defendant adopted their own unique defence position.

The Engineer Saul Beverly took the most vigorous stance. He was convinced that his structural design was correct, that the deflections were the fault of the Contractors, Quibble Construction, and that the earthquake analysis was wrong in failing to recognize the stiffening effect of short return walls that were a feature of the design. He was keen to protect his reputation, so he needed to avoid a judgement against him, yet unaccountably, he wanted to defend himself, with minimal assistance from local counsel. More to the point, he had no insurance, and was financially compromised, having recently gone through a bankruptcy. His defence rested entirely on his calculations being proved correct—a dubious prospect under the circumstances.

The Architect Rudolph Beverly’s defence was less aggressive. Tending not to delve into matters too deeply, he had found no reason to question his brother’s structural design. They had worked together on countless residential projects, and he knew Saul to be a competent engineer. He also had no insurance, no substantial assets and no income beyond Social Security. There was no chance that Rudolph could contribute to any settlement.

The City of St. Bruno needed a rock-solid defence, since this suit involved a serious matter of principle. The plaintiffs were asserting that, by issuing a building permit and having building officials inspect construction, the city was, in fact, warranting the engineer’s design.

In the real world, the city should be able to accept the design of a duly licensed engineer and to rely on the Professional Engineer’s Seal. But if Restocare’s assertion were accepted, it would mean that building officials would be required to refer permit applications to their own in-house engineers or external consultants, to re-engineer every submission. The fees for this would at least double the cost of engineering on a project. It’s safe to assume that this cost would be reflected in the Building Permit fee, which would place a huge burden on the industry, as well as creating a liability for taxpayers. In short, the consequences for the whole permit process would be devastating.

The defence position of Quibble Construction was a matter of family pride. They were an established family firm, recently fallen on hard times. The third-generation owner, Jane Hollywell, was taking the position that they had constructed a building according to the drawings and had done nothing wrong. They were not engineers and had not questioned the engineering documents.

But they did have one small contractual problem. As part of an arrangement with the original building owners, Quibble had paid for some re-engineering directly, which made them, in essence, the client of the Structural Engineer Saul Beverly. It might therefore be argued that this re-engineering was the real cause of the failure. In any event, Quibble, like the Beverlys, claimed to have no money and no substantial assets.

At the end of this defensive line-up was Jon Chester, OAA, the only defendant who had any financial resources—or insurance—but was clearly innocent of any negligence. Pro-Demnity was absolutely certain of this and was determined to take an uncompromising stand.

Our defence position for Chester was simply that it was unjust for him to have been named in the action at all. We rejected the allegation that he had a duty to “thoroughly check” the “as-built” structure. This was not his mandate. His modest fees were based on coordinating the completion of the interior trades, nothing more.

Our task now was to construct a defence strategy.

According to the principle of Joint and Several Liability, under Ontario law, when co-defendants cannot pay damages awarded, it falls to the remaining defendants to make up the shortfall—unless they have been totally absolved. So, if the court took the position that Chester should have questioned the structural design and had a local engineer check the work in place, he would have some liability, and we could be in real trouble.

Meanwhile, those obviously responsible for the catastrophe were going to waltz away as insolvent parties, leaving our architect, who had no excess insurance coverage, holding the bag.

It was also possible that the City of St. Bruno might be found liable to some degree. But we had no confidence that the case against the City was a sound one. If a Court were to find that St. Bruno’s building officials—not one of whom was a professional engineer—should have questioned Beverly’s calculations, it would create a precedent of truly alarming proportions, with far-reaching consequences.

Very little came out of the pre-trial discoveries that wasn’t known before they started. The plaintiffs had suffered an obvious loss, and the remedial costs had been forced upon them by the condition of the building. Not only that, but the City’s evacuation notice had added the expense of temporarily rehousing their residents. The facts were clear. Any attempt to demonstrate contributory negligence by the owners would be futile.

Settlement negotiations, which began a few days later, were simplified by the poverty of all the defendants—except, of course, for the City of St. Bruno and the Ontario Architect.

But, in our view, Chester was entirely blameless, so we chose not to cooperate, and offered no contribution at all toward the $10 million settlement.

Restocare was in a dilemma. The case was headed for the Superior Court of Ontario, and the only two solvent defendants—Chester and the City—were taking unyielding positions. Both of them had a lot riding on the outcome, and Restocare was justifiably concerned that the Court would find them both innocent. 

The logjam burst in a highly unusual and unexpected way. While we were all waiting in limbo for our case to be heard, The Sunday Times of London reported that the United Arab Emirates was about to start construction on the world’s largest science university. According to the feature article, Quibble had won the International Bid to construct it.

Granted, the firm that had won the contract was Quibble 2015 ltd., a new entity at “arm’s length” from Quibble Construction Inc., but it was little more than an alter ego. The owners, officers and staff were one and the same. So, while the personnel of Quibble Construction were pleading poverty, the same personnel, in the offices of Quibble 2015, were celebrating their imminent prosperity.

Restocare’s lawyers made a huge fuss. Quibble’s claim of “near bankruptcy” was a scam! Restocare would go public and tell the world.

The Hollywell family took note. The fear that they might lose the deal in the U.A.E. encouraged them, surprisingly, to find several hundred thousand dollars. The municipality, without admitting liability, kicked in a few hundred thousand more. The previous building owners, threatened with a separate claim for deception—alleging they had been aware of some of the more obvious problems—kicked in a few hundred thousand dollars of their own. Pretty soon the defendant group had a pool of just over a million dollars.

The matter settled with no further fuss.

This story appears to make our risk management advice completely irrelevant. If you just cross your fingers, maybe everything will turn out fine. The fact is that in any endeavour, fate may work for you—or against you. The architect’s wisest, safest, and only professional course is to anticipate problems and risks, and to prepare for them. This leads us to consider three important lessons.

Lesson No. 1: If you believe in blind luck, buy lottery tickets. Architectural practice might not be right for you. Your best bet in every situation - including those where you’ve done your best to manage the risk - is to work directly with your professional liability insurer. In Ontario, Pro-Demnity is always there for you when your luck runs out.

Lesson No. 2: Sometimes, doing everything correctly isn’t quite enough. It’s hard to know what Chester might have done to protect himself from the near disaster that confronted him—except refusing the job in the first place. He had written a clause in his architect-client agreement that protected him, at Contract Law. Unfortunately, this case revolved around Tort Law, and any subsequent owner of the project was not bound by the contract he signed with the original owner. 

Lesson No. 3: Bear in mind that “taking over” a project can sometimes be risky. When you assume the administration of a partially completed project, you may be getting more than you bargained for.