Site conditions

The site

The site is defined in most construction contracts as “… the places where the Permanent Works are to be executed including storage and working areas and to which Plant and Materials are to be delivered, and any other places as may be specified in the Contract as forming part of the Site.”1

Thus, issues arise as to whether the site has been turned over to the contractor, its condition at turnover, responsibility for unforeseen ground conditions, interference with the use of the site by the contractor, and a host of other problems, such as access to adjacent property that is not legally part of the “site”. Complicating matters is the fact that many construction contracts exclude liability for information given by the employer about the site and, while generally held to be reasonable, many problems ensue.

Right to access

The employer is generally under the obligation to permit access to the site as usually the contractor’s work is, by its very nature, to be performed at the site. Accordingly, most construction contracts provide, as a standard term, that the contractor will be able to occupy the site so as to allow the contractor to perform its obligations under the contract. This is usually written directly into the contract and not left for interpretation and is of such a critical nature that, even if not written into the contract, a similar term will be implied. This was shown in Hounslow London Borough Council v Twickenham Garden Developments Ltd,2 where the court stated that:

“The [RIBA] contract necessarily requires the building owner to give the contractor such possession, occupation or use as is necessary to enable him to perform the contract ….”

Further, in Freeman & Son v Hensler,3 the court wrote:

“The contract clearly involves that the building owner shall be in a position to hand over the whole site to the builder immediately upon the making of the contract. I think there is an implied undertaking on the part of the building owner who has contracted for the buildings to be placed by the plaintiff on his land, that he will hand over the land for the purpose of allowing the (contractor) to do that which he has bound himself to do.”

Possession by whom?

While the contractor is entitled to possession of the site for the performance of the Works and, as against the actual owner of the site, once the contract is signed and possession falls to the contractor it is the contractor who is “in possession”, but this is not the same as the concept of “legal possession” of property. In a construction setting the word “possession” is used to signify the use of the site in furtherance of the construction project and not strict legal possession which would defeat the rights of the true owner of the property. Thus, the contract may confer the right of possession upon the contractor but this does not conclude the relationship between the parties for anything other than the construction process. In this regard the court in Hounslow4 stated:

“I am not at all sure that the matter is determined by the language of the contract. It is a standard form, and may be used in a wide variety of circumstances. In some, the building owner may be in manifest occupation of the site, and may remain so, despite the building operations. In others, the building owner may de facto, at all events, exercise no rights of possession or control, but leave the contractor in sole and undisputed control of the site …

The contract necessarily requires the building owner to give the contractor such possession, occupation or use as is necessary to enable him to perform the contract, but whether, in any given case, the contractor in law has possession must, I think, depend at least upon what is done as upon what the contract provides ….”

Or as Edmund Davies LJ wrote in English Industrial Estates v George Wimpey & Co Ltd:5

“Taking possession of a building is one thing, taking possession of building works another. Whether the former has taken place is generally less likely to be debatable than the latter.”

The discussion of what exactly is “possession” in a construction contract continues into the realm of licenses. Some authorities feel that possession in a construction sense is really another way of describing a license given by the actual landowner to the contractor. In this regard in HW Nevill (Sunblest) Ltd v William Press & Son Ltd,6 the court held that although the contract used the word “possession” what it really conferred upon the contractors was the licence to occupy the site up to the date of completion. On completion the licence came to an end, and then the contractor has a right to re-enter to such an extent as was necessary to remedy defects pursuant to a schedule prepared or instructions given by the architect.7

This idea of licence was discussed further in Surrey Heath Borough Council v Lovell Construction Ltd and Haden Young Ltd,8 where the court cited a passage to this effect from Hudson on Building and Engineering Contracts9 and held that the contractors “had no interest in the site or works”.

Does the contractor have a licence to enter the site?

If the contract is validly terminated the employer can expel the contractor from the site and in the process revoke any previously held “licence”. However, if the employer is acting in breach of contract, an injunction is available to the contractor to prevent his being expelled from the site. In the reverse, the employer, if acting under a valid breach of contract, can also obtain an injunction claiming that the contractor, the contract having ended, is now a mere trespasser.

Historically, unless a licence granted some proprietary interest to the contractor, the employer could revoke the licence at any time and the employer could then claim that the contractor was trespassing. The contractor was then left with the remedy of damages and that basically was all that could be done. Thus, in Wood v Leadbitter,10 the plaintiff had paid for admission as a spectator to Doncaster Racecourse but was later asked to leave and, not doing so, was expelled from the course by the officials. He commenced proceedings claiming an assault; however, the court held that the revocation of his licence rendered him a trespasser and that the defendants had used no more than reasonable force. Then, in Cowell v Rosehill Racecourse Co Ltd,11 the High Court of Australia reached the same result. There, the court wrote:

“Similarly an ordinary building contract enables the building contractor to go upon land for the purpose of conducting building operations so that he can perform his contract and earn his expected profit. This right continues to exist even if the building owner wrongfully repudiates the contract. But the only remedy of the building contractor for an infringement of the right is in damages. If he goes on the land against the will of the owner he may be treated as a trespasser.”

But should not the contractor be entitled to an irrevocable licence to enter and perform according to the terms of its agreement with the employer? This issue was dealt with in Hounslow London Borough Council v Twickenham Garden Developments Ltd,12 where the court found that a building owner who, under a building contract, grants a licence to a builder to enter on his land and do work there cannot terminate the licence other than in accordance with the contract.

Thus, under a building contract, the building owner was, in certain circumstances, entitled to determine the employment of the contractor if the contractor did not, within 14 days after being given notice by the architect, remedy his default in making progress with the work. The architect served the requisite notice and the plaintiff wrote to the contractor to determine his employment under the contract. The contractor denied the validity of the determination and continued with the work on the site. Having unsuccessfully attempted to eject the contractor from the site, the Council issued a writ claiming an injunction and damages for trespass. On a motion for interlocutory relief, it argued that it was entitled to determine the contractor’s bare licence to remain on the site independently of the contractual position and that, alternatively, the contract had been validly determined. The contractor contended that it had a licence which could not be arbitrarily determined by the Council and that the contract had not been determined, inter alia, because in giving his notice the architect had not complied with the rules of natural justice and given the contractor an opportunity to be heard.

The court refused the motion and held the contract, in which the licence was granted, contained an implied obligation by the Council not to revoke the licence otherwise than in accordance with the contract while the contract was in force. Further, the court would not assist the Council in breaking its contract by determining the licence if the contract was still in force, even if the contract was not specifically enforceable. The court further took the additional position that the requirements of natural justice did not apply to the architect’s contractual duty but, on the facts, the Council had not shown that the contract had been validly determined with the degree of certainty making it right to grant a mandatory injunction in interlocutory proceedings.

The court then summarised the law relating to contractual licences in four propositions, which were:

  1. A licence to enter land is a contractual licence if it is conferred by a contract: it is immaterial whether the right to enter the land is the primary purpose of the contract or is merely secondary;

  2. A contractual licence is not an entity distinct from the contract, which brings it into being, but merely one of the provisions of that contract;

  3. The willingness of the court to grant equitable remedies in order to enforce or support a contractual licence depends on whether or not the licence is specifically enforceable;

  4. But even if a contractual licence is not specifically enforceable, the court will not grant equitable remedies in order to procure or aid a breach of the licence.

It should be noted that there were many critics of this decision who were concerned that if an employer loses confidence in the contractor, or simply changes its mind about proceeding with the project, it would be wrong for the contractor to be allowed to maintain an irrevocable licence to continue to occupy the site.13 Another argument is that there would be very few circumstances in which actual damages would not be sufficient for the contractor to recover its actual losses rather than being allowed to remain on site and complete the contract, especially if it were eventually determined that the determination was wrongful.14 Conversely, the loss to the employer if constrained to continue to work with an inadequate contractor up to completion of the project may not be recognised in purely financial terms.

These arguments were recognised in the New Zealand case of Mayfield Holdings Ltd v Moana Reef Ltd,15 where the contractors sought an injunction restraining the employers from entering the site to expel the contractors or their subcontractors and where a counterclaim was brought by the employers for possession of the site and for an injunction restraining the contractors from impeding the employer’s completion of the work. The court followed Hounslow and held that the licence that a building owner grants to a builder, to enter its land in order to erect a building, is not ordinarily a licence coupled with an interest, so as to render it irrevocable in the absence of any lawful termination of the contract. The court, however, refused to discover any implied negative covenant on the part of the employer to the effect that he would not revoke the licence in breach of the building contract and in declaring that even if such a covenant did exist, equity would not restrain the breach of it by way of injunction. The court felt that to make such an award would be tantamount to granting the contractor specific performance of the contract and as such it “would offend the principle of mutuality”, because specific performance would ordinarily be denied to the employer himself.

It should be noted that the court in Mayfield suggests that the normal judicial policy of restoring possession to the employer should be limited to cases where there is a dispute amounting to an impasse relating to the construction of the Works, or where there is a complete or final breakdown in the contractual relationship or where the contractor’s departure from the contract terms is a matter of genuine controversy on the contractor’s part.

A situation develops where the contractor is given possession of the site and, while this is generally exclusive to the contractor, the owner allows others to enter the site to do work at the same time, or prior to and/or subsequent to the contractor. In the absence of a specific contractual provision (i.e. for the architect or the engineer to visit the site) no such right will be implied.16 Further, should such access be given to others, and if the contractor suffers any delay or loss, the contractor will be entitled to damages and/or time extensions.17

While the employer is free to allow others to work on the site independently of the contractor it must still give the contractor satisfactory possession of the site to allow the Works to be completed without interference from others on the site. This point was brought forth in The Queen in Right of Canada v Walter Cabott Construction Ltd.18 The case involved the construction of a hatchery building. Cabott’s contract was one of six contracts, which in total covered the entire project. As work progressed, other contractors interfered with Cabott by encroaching on the site. In an action for breach of an implied term, allowing for possession of the site, Cabott succeeded. The court reasoned that the clause in the contract explicitly stating that there were no implied terms was ineffective because providing “working space” was fundamental to a construction contract and that such working space should be provided “unimpeded by others”. The court wrote in this regard:

“The learned trial judge was correct in finding that the appellant was in breach of its contract with the respondent by denying the respondent a portion of the site of the work which she was obliged to furnish to permit compliance with the contract. The second breach found by the learned trial judge was that the appellant failed to observe an implied term that the respondent would have a sufficient degree of uninterrupted and exclusive possession of the site to permit it to carry out its work unimpeded and in the manner of its choice.

The appellant relied on general Condition 6 for demonstrating the alleged error of the learned trial judge. General Condition 6 reads as follows:

‘6. No implied obligation of any kind by or on behalf of Her Majesty shall arise from anything in the contract, and the express covenants and agreements herein contained and made by Her Majesty are and shall be the only covenants and agreements upon which any rights against Her Majesty are to be founded; and, without limiting the generality of the foregoing, the contract supersedes all communications, negotiations and agreements, either written or oral, relating to the work and made prior to the date of the contract.’

In my opinion, it has no application in the case at bar because it is fundamental to a building contract that work space be provided unimpeded by others. The proposition of law is succinctly put by the learned author of Hudson’s Building and Engineering Contracts, 10th edn (1970), at p 318, as follows:

‘Since a sufficient degree of possession of the site is clearly a necessary precondition of the contractor’s performance of his obligations there must be an implied term that the site will be handed over to the contractor within a reasonable time of signing the contract (see, e.g. Roberts v Bury Commissioners (1870) and in most cases it is submitted a sufficient degree of uninterrupted and exclusive possession to permit the contractor to carry out his work unimpeded and in the manner of his choice. This must particularly be so when a date for completion is specified in the contract document’

This statement of the law was adopted by Spence in the Penvidic case (1975). The learned trial judge was, therefore, in my opinion, clearly right when he found the second breach of contract.”

The principle that the contractor is entitled to damages if it is wrongfully excluded from the site or if, as just stated, that possession is interfered with during the course of construction, must be differentiated on the basis of who is doing the interfering, i.e. if it is the owner, damages will follow. In cases where the interference comes from unrelated third parties, then damages do not flow from the employer. This was shown to be the case in Porter v Tottenham Urban District Council,19

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