Best-laid plans...

12 Apr 2018

In Clin -v- Walter Lilly & Co Ltd [2018] EWCA Civ 490, the CA held an implied term would be implied into a building contract (based on amended JCT terms) to provide for the employer's obligations relating to planning permission or conservation area consent.

On 25 September 2012, Mr Clin (the Employer) engaged Walter Lily & Co. Limited (the Contractor) to convert two adjoining mid-Victorian terraced houses in Kensington into a single residence. The work consisted of demolition, reconstruction and refurbishment of the two buildings.

However, on 17 July 2013, an issue arose when the local authority declared the intended works to the rear wall of the buildings amounted to “substantial demolition” requiring conservation area consent, and works were suspended pending resolution with the local authority. Subsequently, Mr Clin was forced to change the design and resubmit a revised application for planning permission to the local authority. This caused considerable delay.

The revised planning permission was eventually granted and work re-commenced on 26 August 2014. As a result of the delay, Walter Lilly applied for an extension of time of 53.2 weeks. Mr Clin refused to award an extension of time and the parties became embroiled in litigation (first appearing before Akenhead J to argue the position in the TCC).

Edwards-Stuart J. held that a term was implied into the building contract that the employer was responsible for obtaining all necessary consents.

The Court of Appeal was asked to determine the extent of the Employer’s obligations to obtain planning permission in the absence of any express provision in the contract.

Walter Lilly argued that "the risk and responsibility for ensuring that all (including the Contractor’s Design Portion) necessary consents (including but not limited to planning consents) were applied for and obtained prior to the Works being carried out lay with Mr Clin", and that "Walter Lilly's obligations under clauses 2.1.1 and 2.3.7 were limited to carrying out the Works in accordance with those consents once they had been obtained".

Mr Clin contended that he was not under an absolute obligation to obtain any of the consents necessary for the Works to be carried out, instead it was an implied term of the Contract to use all due diligence to obtain planning permission but that did not amount to a warranty that there would not be interference by a third party and that Walter Lilly was obliged to obtain all consents arising from the CDP or temporary works.

The Court of Appeal held, in the circumstances of the case, that the onus was on Mr Clin to apply for planning permission for the Works, including in relation to the “Contractor’s Designed Portion”. The court acknowledged Mr Clin was well placed to take on responsibility of obtaining all necessary consents, as he was the owner and had an in-depth understanding of the entire scope of works (and an architect who was providing him with services relating to the planning application).

However, the court accepted Mr Clin could not have an absolute obligation to ensure planning permission and conservation area consent was granted, which would be neither realistic nor reasonable to impose on the Employer, as he could not be responsible for the end decision of the local planning authority which while not necessarily “capricious” in the legal sense may be “unwelcome” to the parties. A fact of life both parties to a building contract could be expected to have on board at the outset. However, the CA held that the appropriate implied term would be to use all “due diligence” to obtain the necessary planning permission. This extended to an obligation to ensure a timely application was made, ensure sufficient information was provided to the local planning authority and to co-operate with the authority in the statutory process.

The CA’s discomfort in making the requested preliminary rulings in a vacuum is evident from the decision. However, the case does provide useful guidance that an Employer should comply fairly assiduously to the requirements of the planning authority in obtaining the necessary approvals for the Works before and after commencement. Professional advisers advising on and at the planning stage should also take note.

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