Paskin Kyriakides Sands (PKS) is facing possible bankruptcy after losing a legal case that leaves it with a huge liability shortfall, potentially as much as £21 million.
In a ruling that will have ramifications for other architects, PKS was held responsible for fire damage to a restaurant it designed, even though the client was negligent in its use of the building.
The finding, handed down earlier this month, could leave PKS facing damages of between £17 and £25 million. The practice was insured for just £3 million.
PKS designed the restaurant for Sahib Foods in 1994. When it burnt down in 1998, Sahib's insurers Norwich Union paid out £17 million to rebuild it. But in a bid to recoup its loss, Norwich Union took out a subrogate claim against the architect.
High Court Judge Bowsher found that while the client caused the fire through misuse of the cooking facilities, PKS was nonetheless responsible for the spread of the fire, by failing to anticipate the misuse and specify a higher level of fire-resistant materials.
PKS director Douglas Paskin said the practice had lodged an appeal, since he was assured by his lawyers that the judge had misunderstood the case. However, he admitted there was a possibility the firm could be bankrupted if the appeal failed.
'We have never had a claim in 30 years. It's a bit of a shock and pretty depressing, ' Paskin said.
But he denied that the firm had been underinsured. And he warned others to be vigilant about record-keeping when making risk assessments.
The AJ's legal expert, Kim Franklin, said the case did not provide a 'landmark' ruling, but that it did open the way for architects to be sued in similar circumstances. 'It is cause for an abundance of caution, ' she said.
And director of insurance broker RIBASure Gary Haylett said architects should buy as much insurance as they could realistically afford, in order to cover a worst-case scenario.