Clin v Walter Lilly & Co Ltd  EWCA Civ 490
In a recent case, the Court of Appeal implied a term into a building contract to the effect that responsibility for obtaining planning permission and other consents was to be that of the employer. This case shows that it will generally be held, in the absence of express terms to the contrary in a building contract, that the employer is responsible for obtaining planning permission and other consents.
Under a JCT Standard Building Contract with Quantities 2005 edition, incorporating Revision 2 (2009), containing a Contractor’s Designed Portion and bespoke amendments, Walter Lilly was employed by Mr Clin to carry out demolition, reconstruction and refurbishment works to two adjoining houses in the Kensington Palace Conservation Area to create a single dwelling house. The Royal Borough of Kensington and Chelsea Council wrote to Walter Lilly stating that the proposed works amounted to “substantial demolition” for which conservation area consent was required. Walter Lilly downed tools until the requisite consents were obtained, and works re-commenced over a year later. Walter Lilly made an application for an extension of time for the delay caused by the failure of Mr Clin to obtain the requisite consents, and a dispute arose as to whether Walter Lilly was entitled to such an extension.
The building contract was silent as to whose responsibility it was to ensure planning consents were obtained, and where the liability fell for any delay caused or costs incurred due to the failure to obtain such consents.
Court of Appeal decision
The key issues to be decided by the Court of Appeal were:
- Was the first instance judge right that, in the absence of an express term as to who bears the responsibility for obtaining planning permission, or ensuring planning permission is obtained, a term should be implied placing responsibility with Mr Clin, as the employer?
The courts will not imply a term into a contract unless the exact wording has first been construed and deemed insufficient. After such analysis, a term shall be implied only if it is strictly necessary in order to give effect to the contract, taking into account “the surrounding circumstances known to both parties at the time of contract, commercial common sense, and the reasonable reader, or reasonable parties.”
The Court of Appeal concluded that, whilst it is not law that a term must be implied into the contract to place responsibility for planning and other consents with the employer, it follows that the employer will generally bear the responsibility of obtaining planning permission, or ensuring the same is obtained, otherwise the works would be unlawful. The employer, as opposed to the contractor, is best placed to know what consents are required as it is the employer who knows in advance the extent of the project.
- If such a term is implied, what is the scope of the responsibility?
The Court of Appeal found that the obligation on Mr Clin could not be an absolute one, as the process of obtaining planning permission is inherently uncertain and at the discretion of the local authority. However, the judge acknowledged that the responsibility must extend beyond the use of “reasonable endeavours”. He concluded that the implied term should require Mr Clin, as the employer, to “use all due diligence to obtain in respect of the Works” the requisite planning permission or conservation area consents. The judge then went on to state that, in this context, “all due diligence” meant making a timely application (or ensuring the same is made on the employer’s behalf); ensuring sufficient information is provided to the local planning authority to enable it to make its decision; and co-operating with the local planning authority.
- In light of the implied term, what are the consequences for the allocation of risk between the parties under the contract?
The Court held that it was not for the court to retrospectively imply terms into the contract to deal with a dispute that was not envisaged by the parties at the time the contract was entered into; and it was not the role of the court to improve an inadequate contract. The term dealing with responsibility for planning had been implied so as to give business efficacy to the contract, however the express terms of the contract relating to responsibility and risk were sufficient to deal with any situation where the grant of planning permission or other such consents is refused or delayed.
This case illustrates that if a contract is silent as to the responsibility for obtaining planning permission and other consents, the responsibility is likely to lie with the employer. JCT Contracts do not expressly deal with the allocation of responsibility for planning and other permissions, and the liability for any delay in this regard. The employer should therefore ensure that the contract deals with such matters and clearly allocates the risk between the parties, particularly where the employer wishes the contractor to be responsible for any such issue, or seeks to limit the scope of its own responsibility for the same.