News TERMINATION OF CONTRACTUAL RIGHTS TO OCCUPY LAND BY EMPLOYED LICENCE
You are the Contractor in possession of the site – to what extent can you keep possession? You are the Employer and want the Contractor off the site and to regain possession but the Building Contract is still in existence. How do you get the site back?
These are the questions discussed in this article. It goes without saying that all contracts are different. This article is specific to JCT Standard Form of Building Contract 1998 with Contractor’s Design incorporating amendments 1-5. Insofar as you wish to apply the contents of this article to your own contract it is essential that you check each of the relevant clauses and that the cross-referencing between clauses works in the same way as for JCT 98 WCD. This is even more important if you are using some form of bespoke contract in different standard form of contract.
Possession of the contract site, being the Works, is of fundamental significance to the party’s obligations. However, whilst always dealt with in standard forms of contract it is rarely dealt with in any detail. For example, whilst many forms of contract allow an Employer specifically to allow for delayed possession of the Works at the outset of the contract this is something that will usually require specific wording. In the absence of this, delayed or denied possession of the Works may be a breach of contract, perhaps amounting to a repudiatory breach which in turn will entitle the Contractor to determine the contract, render the Employer liable for damages and perhaps cause and/or create additional liabilities.
Under clause 23.3.1 the possession date referred to in Appendix 1 of the contract is evidenced and the position of and possession by the Contractor reinforced because it states:-
“Subject to clause 17, the Employer shall not be entitled to take possession
of any parts of the Works until that date.”
Clause 17 deals with partial possession by the Employer and states at clause 17.1 that:-
“If at any time or times before Practical Completion of the Works the
Employer wishes to take possession of any part or parts of the Works
and the consent of the Contractor (which consent shall not be unreasonably
delayed or withheld) has been obtained, then, notwithstanding anything
expressed or implied elsewhere in this Contract, the Employer may take possession thereof.”
However, let us presume and proceed on the basis that possession of the site is a contentious issue, which is after all the most likely scenario. The Contractor for whatever reason wants to retain possession and the Employer wants to remove the Contractor and obtain possession.
This scenario is most likely where the Contractor knows he has to retain possession as a bargaining tool to ensure ongoing payment or perhaps payment of outstanding interim applications.
The reason for this can be multiple and so varied as to prevent detailed consideration here.
However, let us imagine the Contractor has not breached the Contract is any way and remains in rightful occupation of the land being the Works. However, for whatever reason the Employer wants to remove the Contractor. This may be because the Employer wants to sell on the project (which is most likely to be an unfinished development) but requires vacant possession. In such circumstances it is likely the Contractor will be owed money, which the Employer will either not want to or be unable to pay. Perhaps the Employer simply considers the ongoing execution of the project works under the current form of the Contract is no longer economic and is seeking to replace the incumbent Contractor with another cheaper Contractor. Once again, the Employer does not want to make further payments to the Contractor but requires the Works back in order to hand them over to their new Contractor. Perhaps the progress of the Works is so painfully slow as to give rise to grounds of breach of contract under clause 27.2.1.2 (not regularly and diligently proceeding with the Works) but the Employer recognises that the issue is either arguable, or that as soon as any notice is served under clause 27.2.1 the Contractor will take such steps at to prevent further notice being given under clause 27.2.2.
Perhaps the Employer has failed to pay the Contractor and a valid suspension exists. Thus the Works are not progressing, the Employer is not paying and the Contractor is not leaving.
Now providing the suspension is valid, the Employer cannot serve notice under clause 27.2.1, and providing the Contractor does not breach some other provision of the Contract, then the Employer will have no grounds upon which to pursue the determination of the Contract and therefore regain possession of the Works through the Contract terms.
It is possible that the Employer could seek to apply clause 17.1 to take partial possession, but it should be remembered that given the various scenarios set out above it is the possession of the site in its entirety that is sought by the Employer. Therefore it is questionable whether partial possession would be sufficient in these circumstances.
Can the Contractor remain in possession? Whilst the Contract validly exists the Contractor must be validly and lawfully in occupation. See clause 23.3.1 above. Thus if the Contractor is to remain in that position it is essential that the Employer is not given any ground or grounds by or through which they can validly determine the Contract.
It should be noted that whilst the standard form deals with the Contractor’s rights of suspension under clause 30.3.8 and also makes clear that the Contractor is protected from the provisions of determination under clause 27, the Contract is silent as to the rights of occupation following the ending of the period of valid suspension. Indeed, the Contract is silent as to how that suspension is lifted and upon the question of occupation during such suspension.
It should be made clear that the right of suspension is expressed as being the right of the Contractor to:-
“suspend such performance of his obligations under the Contract to the
Employer until payment in full occurs.”
If a right to determine the Contract exists and such determination can be validly executed by the Contractor, then if the Contractor has no ongoing obligations under the Contract will their right of occupation end? This does not end their entitlement to payment, simply whether a determination can override the suspension?
However, if no such determination can take place, then in theory, at least, the Contractor is entitled to maintain the suspension until such time as they are paid in full. During this period they remain validly in occupation of the site. In these circumstances the Employer’s alternative approach is to claim that the implied licence of the Contractor to remain on the site has been revoked and continued occupation by the Contractor will amount to a trespass. In such a scenario the cases on which you might wish to refer and rely are:-
Chemar Productions Property Ltd v Pretest Property Ltd [1991]; Mayfield Holdings Ltd v Moana Reef Ltd [1973]; Graham Roberts Ltd v Maurbeth Ltd [1974];
These cases support the proposition that the Employer can revoke the Contractor’s implied licence to occupy, thereby regaining possession. The Courts viewed the question as entitling the Employer to determine such licence, thereby transforming the Contractor into a trespasser even though that determination of the licence might involve a breach of contract.
However, these cases should be viewed against Hounslow LBC v Twickenham Garden Redevelopments Ltd [1970] which held that a licence to occupy granted by a contract could only be brought to an end through the contract.
Thus the question may turn on the features of a bare licence, which, once revocation has occurred the contractor on failing to vacate will become a trespasser, BUT a bare licence is more complicated than that. There are four issues that will still fall to be considered and decided. Firstly, proprietary estoppel, secondly that a licence acted upon is not revocable, thirdly that to revoke a bare licence a packing up period may be required and finally that a bare licence may only be revoked on reasonable notice.