Case law analysis: Henry Boot Construction v Central Lancashire New Town Development

Contractors and employers frequently encounter problems with statutory undertakers (water, electricity, gas providers) during the construction process. Those problems can often manifest themselves as delays to project completion, creating disputes between the employer and contractor as to who is liable for the time and cost consequences of the delays on the part of a statutory undertaker. This matter was dealt with in the 1980 case of Henry Boot Construction Limited -v- Central Lancashire New Town Development Corporation.

The contractor was engaged by the employer to erect 296 dwellings. The contract was the 1963 Edition of the JCT Standard Form of Building Contract Local Authorities Edition with Quantities. The Contract bills contained provisional sums for work to be undertaken by statutory undertakers for the provision of electricity, gas and water. These provisional sums were only to be expended under the direct order of the employer. These services were provided by statutory undertakers engaged under contract by the employer and they were all paid by the employer. No contracts existed between the contractor and any of the statutory undertakers.

The points in issue between the parties were: (i) the statutory undertakers engaged by the employer as artists, tradesmen or others to execute work not forming part of the contract for the purpose of clauses 23(h) and 24(d) (ii) the statutory undertakers carrying out work pursuant their statutory obligations for the purpose of clause 23(I).

Both matters entitled the contractor to an extension of time, but the second matter did not entitle the contractor to claim loss and/or expense. The judge held that the operations of the statutory undertakers fell within the description of "work being done by others engaged by the employer". The judge rejected the second point since the statutory undertakers were not doing their work because statute obliged them to do so but because they had contracted with the employer to do it. Accordingly, the contractor was entitled to an extension of time and loss and/or expense.

The 1998 edition of the Standard Form has reformulated the provisions formerly to be found in the 1963 edition (now clauses 25.4.8.1 and 25.4.11 in the 1998 edition), and their effect would result in the same outcome as that described above in relation to the 1963 edition. The 2005 edition has also been reformulated and work undertaken by those engaged by the employer would now be captured by clause 2.29.6 "... any impediment, prevention... or default... by the employer or by the employer's persons...", as the 2005 edition contains no specific provision for work undertaken by those engaged by the employer. The use of clause 25.4.11 will, in practice, be of limited application, as it would only be effective when a statutory undertaker carries out work pursuant to its statutory power without having a contract. In most cases the statutory undertaker will usually enter into a contract with either the employer or contractor.

Problem arises

A further and now more frequently encountered problem arises where the employer issues an instruction to the contractor to place an order with a statutory undertaker based upon a statutory undertaker's quote attached to that instruction, and for which a provisional sum has been included within the contract. The inevitable question that arises is which of the parties is responsible for any delays caused by the statutory undertaker. Contractors will argue that they have no alternative, but to engage the statutory undertaker on its own, non-contestable terms as per the employer's instruction. Those non-contestable terms will usually contain no commitment to finishing the works by a particular date, and will exclude any liability for any delay that may occur in consequence of those works. Employers usually argue that, as the contractor has engaged the statutory undertaker, the contractor is liable for its performance and for any delays caused by it.

An answer to this problem can be found in the 1968 House of Lords case of Gloucestershire County Council -v- Richardson. The contractor was instructed by the architect to enter into a contract with a specialist company to provide pre-stressed concrete columns, based upon the tender submitted by that specialist contractor. The contractor was therefore bound to accept the specialist contractor and the terms of its standard conditions. Those conditions limited the specialist contractor's liability in respect of any defective goods supplied by it. The specialist contractor's work was defective and caused delay to the work, resulting in the contractor ultimately determining the contract between it and the employer. A dispute arose as to who was liable for the consequences of the defective products provided by the specialist contractor, with each party alleging that the other was responsible.

It was held that the contractor was relieved of any liability for defective work and delay caused by the specialist contractor, as the contractor had no alternative but to engage the specialist on its own, non-contestable terms as instructed by the architect. Accordingly, it was held that the contractor was entitled to rely on and invoke the extension of time clause in the contract. This is analogous with the more frequently encountered problem described above, and, on this basis, the contractor would be entitled to an extension of time and loss and/or expense when it has engaged a statutory undertaker on its own, non-contestable terms pursuant to an instruction from the employer.

The position would be different where a contractor engages a statutory authority on its own terms or in the absence of an instruction from the employer. The contractor would be liable for the time and costs consequences as the statutory authority would be carrying out work pursuant to a contract with the contractor, as the statutory undertaker would effectively be a domestic subcontractor.

In summary, employers can carry a greater degree of responsibility than expected for the delays and associated costs caused by statutory undertakers engaged directly by the employer, or by those engaged by a contractor pursuant to an instruction requiring the contractor to engage a statutory undertaker to carry out work on its own, non-contestable terms.