Planning permission: Who’s responsible for it?

This article first appeared in Construction News.

The recent case of Jean-François Clin v Walter Lilly & Co. Ltd [2018] EWCA Civ 490 confirms that, without express terms to the contrary in the contract, the employer will usually be responsible for obtaining planning permission for the works it wants carried out. However, for certainty, you should expressly allocate risk under a construction contract. Leaving the courts to decide whether certain risks were allocated to certain parties is a risky business, not to mention time consuming and costly.

Background

Mr Clin owned two adjoining properties within the Kensington Palace Conversation Area. He entered into a JCT Building Contract with Quantities 2005 edition incorporating Revision 2 (2009) with Walter Lily on 25 September 2012 (the “Contract”). The works consisted of demolition, reconstruction and refurbishment to the buildings to create a single dwelling-house (the “Works”).

A dispute arose between the parties after the Royal Borough of Kensington and Chelsea Council sent a letter to Walter Lily on 17 July 2013 asserting that the Works amounted to “substantial demolition” requiring conservation area consent. The Works were then suspended. Planning permission (for a revised proposal) was granted on 19 June 2014 and the Works began on 26 August 2014. On 22 May 2015 Walter Lily issued a claim seeking a 53.2 week extension of time and loss and expense.

The case first went to the Technology and Construction Court (“TCC”). Questions were then raised by both parties on appeal and cross-appeal to the Court of Appeal (“CA”). This article focuses on whether there was an implied term that the employer was responsible for applying for any relevant and requisite planning approvals and, if so, how was the implied term framed and what was its affect on the allocation of risk between the parties?

Implied term that the employer was responsible to applying for planning permission in the absence of an express term

The Contract did not expressly impose on either party any obligation to apply for, let alone obtain, planning permission or conservation area consent. However, the parties accepted, in principle, than an appropriate term should be implied into the contract to allocate the responsibility.

An application for planning permission may be made by anyone, whether or not the person owns an interest in the land to which the proposal relates. However, the CA found that the employer will generally bear the responsibility of obtaining the necessary planning permission (in the absence of an express term to the contrary), given that the execution of the work would otherwise be unlawful. The CA found it relevant that only Mr Clin knew what his whole project actually involved and so the implied term was needed to give business efficacy to the Contract. However the CA emphasised that this will not always be the case for all contracts.

Scope of the implied term limited to use all due diligence

The scope of the implied term found by the CA was limited for the employer to “use all due diligence” to obtain any permission/consent etc. as is required by law. All “due diligence” includes an obligation to make a timely application which assists each party in the performance of its obligations with a view to avoiding delay, to ensure sufficient information is provided to the local authority and to co-operate with the authority in the statutory process.

Allocation of risk

The CA concluded the parties’ existing allocation of risk under the Contract was sufficient to address the various potential consequences of the implied term. Moreover the CA thought it would be “difficult, indeed unwise, to answer the preliminary issues in a factual vacuum”.

Conclusion

The case serves as a useful reminder that it is always best to expressly allocate risk under any contract, especially if the parties require something to be done which is handled by a third party they have no control over.

In the absence of express terms, the parties are left uncertain about who is responsible for the obligations and who bears the risk if the obligation is not carried out. Uncertainty in construction leads to wasted time and money being spent on legal issues when the focus should be getting the project completed.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.