By Arianne King
The topic of planning permission has hit the headlines recently, following a Court of Appeal ruling on the case Clin vs Walter Lilly.
The Court of Appeal decided that, whilst it is not the law that, absent an express term, such an implied term will always be implied into a building contract, it is generally acknowledged that, an employer will be responsible for obtaining planning permission and relevant consents.
However, with regard to the extent of the implied term, the Court said that it was not an absolute obligation, but rather the employer should use “all due diligence” to obtain the required consents and, in the absence of an express term to the contrary, the employer did not have an absolute obligation to secure the consent, because they could not guarantee that consent would be granted.
In this case, the Court of Appeal found no justification for imposing on the employer (Clin) sole responsibility for the consequences of capricious conduct by the local authority, despite the fact that the he had failed to obtain the conservation consent in good time to avoid any delays.
Background of case
Significant delays were caused when the contractor (Walter Lilly) received a letter from Royal Borough of Kensington and Chelsea Council stating that the works being carried out amounted to ‘significant demolition’ and, accordingly, conservation consent was required. As such, the contractor stopped carrying out any works, as they would be unlawful.
The design of the scheme was changed and an application for planning permission for the revised proposal was finally granted around a year later. The contractor sought a declaration that ‘Relevant Event’ and ‘Relevant Matters’ as defined in the contract had occurred and therefore, it was entitled to an extension of time for 53.2 weeks and damages for the loss suffered.
The employer averred that he was not under and ‘absolute obligation to obtain all (or indeed any) of the contents necessary for the works to be carried out’. The contractor’s response was that even if the employer’s obligation was limited, he had failed to comply with the same.
Warning for contractors
Here the contract was silent in reference to ‘planning permission’ and the Court considered that in effect both parties were responsible and that neither should benefit by way of a claim for loss and time, or damages. Therefore, to avoid unnecessary exposure, the responsibility of retrieving planning permission should be expressly stated within the construction contract.
This case highlights that it is critical for the contractor to ensure there are specific terms expressed within the contract which state that the employer is responsible to obtain all relevant consent and permission within the project and, beyond that, include an express entitlement to recover damages in the event that planning permission is delayed (by way of an absolute obligation).
This decision should urge contractors to assess and explore the realms of responsibility which may be ‘implied’ within their contracts.
It is critical that as a contractor you recognise all necessary consents (in particular those which require approval from third parties) and, to avoid complication (and lengthy and expensive court proceedings), expressly state what is required by the employer and what is required by the contractor, in clear terms.
Contractors should include express terms which allocate risk should consent fail to be obtained or is rejected. Terms should also expressly state who is responsible to appeal decisions and in what circumstances.