This was a judgment of preliminary issues concerning an extension of time in a contract for the renovation of a residential property. The contract between the parties had not expressly allocated the risk for a failure to obtain planning permission, and in those circumstances Edwards-Stuart J had to determine whether the contract would be subject to an implied term that either the employer or contractor was responsible for the risk or whether there was no implied term and the loss would just have to lie where it fell.
The contract between the parties was a JCT Building Contract with Quantities, 2005 Edn, incorporating Revision 2 (2009) with Contractor’s Designed Portion and bespoke amendments. The delay was triggered by a letter sent from the Royal Borough of Kensington and Chelsea (“RBKC”) which stated that the planned demolition works constituted “substantial demolition” and therefore went beyond the scope of the planning permission that had previously been obtained by the employer. Following receipt of the letter, the contractor halted the demolition works entirely and did not restart any work on the project for about a year.
Edwards-Stuart J had to determine the scope of the obligations under the contract notwithstanding the considerable factual uncertainties surrounding whether the planning application made by the employer had sufficiently covered the scope of the planned works and, accordingly, whether the letter from RBKC had been based on a false premise. He started by summarising the applicable principles on implied terms from Lord Hoffman’s judgment in Attorney General of Belize v Belize Telecom and, more recently, Lord Neuberger’s judgment in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited. The enquiry to be undertaken was therefore on the following terms:
“the court must conclude that the implication of that term is necessary in order to give business efficacy to the contract or, to put it another way, it is necessary to imply the term in order to make the contract work as the parties must have intended.”
Edwards-Stuart J started from the proposition that the reasonable man in the parties’ position would know that he is likely to need planning permission to develop his land, and that this would need to be obtained in advance of the works commencing. The obvious conclusion from this was that the parties must have intended that someone should bear the responsibility for applying for planning permission as without it the works could not be started at all. Edwards-Stuart J considered that this was a risk that would fall on the employer:
“it seems to me that it would be equally obvious to an informed bystander that the party best placed to obtain planning permission is the employer, not least because he is the party who knows well in advance what he wants to do. The contractor does not find that out until he is invited to tender, by which time it may be too late for planning permission or conservation area consent to be obtained in time. Any reasonable person would know that a failure to make a timely application for the necessary permission or consent might well result in delay.”
There was, however, a remaining uncertainty about the scope of the implied obligation on the employer. On one formulation, the implied term could have been an obligation on the employer to ensure that planning permission was obtained. Alternatively, it could have been an obligation to simply use reasonable diligence to obtain the necessary planning permission. Edwards-Stuart J considered both options, but ultimately settled for neither. The obligation on the employer was clearly stronger than one to use reasonable diligence and care, as understood by analogy with similar implied provisions in construction contracts requiring the employer to give the contractor all necessary information in good time. However, the obligation on the employer would not be absolute, as the employer ultimately had no control over whether planning permission was granted. The extent of the implied term was therefore as follows:
“[The employer] did not assume the risk that planning permission would be given: as I have said, his obligation was to ensure that the information reasonably required by the local authority was provided in good time.”
So long as the employer had provided all of the information reasonably required, then the remaining losses would lie where they fell and there was nothing inherently inequitable about this.
Edwards-Stuart J therefore gave a declaration that the contract was subject to that implied term.
[For more information, please refer to the case judgement.]