NEWS / Affiliate / Collateral Damage from a Developer’s speculative approach?

Affiliate

02 JUL 2019

COLLATERAL DAMAGE FROM A DEVELOPER’S SPECULATIVE APPROACH?

Millgate Devlopments Ltd may be required to pull down 13 social houses built as part of a development at Exchange House, Maidenhead in Berkshire.

Alexander Devine Children’s Cancer Trust owned property adjacent to the development of 23 houses, and benefited from restrictive covenants which stated that the development land could not be used for building anything other than a car park. The Trust intended that its own land be used for a hospice for the care of terminally ill children, and considered that Millgate’s development reduced the amenity of the hospice.

Millgate pressed ahead with the project, and retrospectively applied for planning permission. They were initially granted planning permission, with the Upper Tribunal citing the public interest in not having houses built for the wider social good being removed. This was despite the developer having proceeded, when the owners of the land had already objected.

This position was appealed, and the Court of Appeal has overturned the Tribunal’s initial decision. The Court of Appeal returned to a more traditional point of view that restrictive covenants should be honoured, and was not swayed that no objections had been raised by the owners in the planning application itself – their objections having been made prior to the planning application.

It is not yet clear whether the Alexander Devine Children’s Cancer Trust will require the houses to be demolished, or whether a further financial settlement can be entered into between the parties. The Court of Appeal expressed doubt however whether financial compensation was appropriate to the issues presented by the situation.

It is not unknown for developers to elect to proceed with projects, with optimism that planning issues can rectified later. However the Millgate decision does provide a note of warning that this may not always be as straightforward as hoped, and that throwing more money at the issue may not fix the problem.

The relevance of this to the professional is the drafting of contractual obligations relating to planning in their appointments, and similar commitments to other parties within collateral warranties. As always, the dangers are generally created by widely drafted obligations, and where they are in a strict form (absolute obligations, warranties etc) rather than subject to reasonable skill and care.

Consider the following clause:

In carrying out the Services the Consultant warrants that the Consultant shall comply with any and all Statutory Requirements and Requisite Consents.

‘Requisite Consents’ being defined elsewhere in the contract as “any and all relevant permissions, consents, approvals, licences, certificates and permits as may be lawfully required in order to commence, carry out and complete the Project and which term includes but is not limited to any modification, variation or amendment to any relevant Requisite Consent”

This could to lead to unfortunate results for the professional, and particularly if coupled with another not uncommon clause describing a lack of sophistication and technical knowledge on the part of the professional’s client. For example:

The Consultant acknowledges that the Developer will rely on the Consultant’s professional expertise when performing the Services and the Developer may rely on any certificate or written approval or statement the Consultant give in respect of the Project. The Consultant acknowledges that the Developer is deemed not to have any intrinsic expert knowledge or skill relating to the Services.

Whilst the requirement to comply with consents might seem more relevant to some professionals than others (the architect for example), nevertheless there are regular instances of the drafters of a contract using one form of appointment as the basis for all the other appointments of the professional team - up to and including just changing the name of the consultant (ie architect to quantity surveyor, or civil & structural engineer) and the schedule of services. In such situations, it is easy for general project obligations of compliance, coordination and supervision to apply to all the professional appointments on the project.

This is something to be aware of and to watch out for, if a consulting engineer is not to find themselves financially backing a developer’s planning gamble on a project.

logo

Brunel is a leading independent professional indemnity insurance broker, with recognised commitment to competitive placement, differentiated offerings, sustainability and client understanding.

Visit website  arrow
James  Burgoyne

James Burgoyne

Director - Claims & Technical

Jim joined Brunel in 2009 and heads up the Technical and Claims Department. As well as representing Brunel on the ACE PII panel, he writes occasional pieces for us on insurance, risk and associated topics.

ALSO FROM OUR AFFILIATES