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Implied terms: nightmare on Kensington High Street

David Siesage

In Clin v Walter Lilly, the Court of Appeal held that it was necessary to imply a term into a construction contract to deal with planning permission.

Mr Clin had contracted with Walter Lilly to create a single house from two adjoining properties in Kensington – a project that would involve extensive demolition, reconstruction and refurbishment works.

Shortly after Walter Lilly began, the local authority warned that the construction works amounted to “substantial demolition” and therefore required conservation area consent. This caused significant delays to the project, through appeals, changes to the design, and applications.

A year later, consent was finally granted and construction restarted. However, Walter Lilly sought a declaration that, as a result of the delay, they were contractually entitled to an extension of time to complete the works. Mr Clin defended the claim.

This was an appeal of preliminary issues.  One question for the Court of Appeal was whether the judge was right to hold that a term should be implied into the building contract to provide for Mr Clin’s obligations as to planning permission or conservation area consent.

The court agreed with the judge that an implied term was indeed necessary in order to establish whose responsibility it was to seek planning permission, and further, held that this responsibility should fall on the employer (Mr Clin), not the contractor (Walter Lilly).

The judge at first instance had explained that a reasonable person who wishes to develop his land will know that either he must seek planning permission or that he must be satisfied his proposed development is exempt from such requirements. What’s more, the party best placed to obtain planning permission is the employer, as he knows well in advance what he intends to do.

The court set out what the appropriate implied term would be. It acknowledged that the planning process is inherently uncertain, so the implied term did not require Mr Clin to obtain planning permission, but simply that he use “all due diligence” to do so. It was explained that a diligent application would be made in a timely manner, while a diligent applicant would be co-operative and provide “sufficient information” to the local authority.

Comments published on Compact Contract do not necessarily reflect the views of Allen & Overy or its clients.

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