The mystery of statutory undertakers

If you’re a Dedicated Follower of Archor, you’ll know that we recently hosted a webinar where we discussed the construction law questions everyone’s too afraid to ask. One of the topics I dealt with during the webinar was a contractor’s entitlement to an extension of time due to delays caused by statutory undertakers. Perhaps unsurprisingly, I’ve had a few questions e-mailed to me about this subject following the webinar, so I thought I’d set out the position in an article (with a prize for whoever emails me first with the hidden song theme running throughout!).

One of the most common causes of delay on construction projects is a delay caused by statutory undertakers.  Given how frequently this arises, it is important for all parties to understand whether the contractor is entitled to an extension of time because of such delay under the contract.

For the purpose of this article, I am going to focus on the wording in a JCT Design & Build Contract 2016, which provides that one of the Relevant Events is “the carrying out by a Statutory Undertaker of work in pursuance of its statutory obligations in relation to the Works, or the failure to carry out such work” (clause 2.26.7) and apply the relevant case law to such wording.

The first significant case

The first case to consider is Henry Boot Construction Ltd v. Central Lancashire New Town Development Corp [1981]. Henry Boot was the contractor, constructing a housing estate for Central Lancashire.  Henry Boot, Tired of Waiting for statutory undertakers to carry out their works, claimed an extension of time for the associated delays.  The actual detail on the case is scant, but Judge Edgar Fay QC’s judgment is clear.  He held that where a statutory undertaker was carrying out work pursuant to a contract it was not covered by clause 2.26.7 (or similar).  This is because the work being carried out by the statutory undertaker was not in pursuance of its statutory obligations, but rather under a contract.

Taking a short example: one Sunny Afternoon, a sewer on a construction site becomes blocked.  A Waterloo Sunset passes and Anglian Water enters the site, using its statutory powers to do so.  Anglian Water proceeds to carry out the necessary works to unblock the sewer: this takes All Day and All of the Night.  In doing this, Anglian Water causes a delay to the contractor’s works. In this scenario, the contractor is entitled to an extension of time under clause 2.26.7 as the delay has been caused by Anglian Water carrying out works “in pursuance of its statutory obligations” (assuming the blockage has not been caused by the contractor itself).  However, in practice, this rarely occurs.

The far more common scenario concerning statutory undertakers is where works are carried out under a contract, either with the employer or the contractor. In this scenario, the statutory undertaker is not carrying out works under its statutory obligations, but rather under a contract.  If this is the case, then there is no entitlement to an extension of time under clause 2.26.7.

The contractor may be entitled to an extension of time under a different Relevant Event if the contract was entered into between the employer and the statutory undertaker, however if the contract is with the contractor then any delay by the statutory undertaker is the contractor’s risk.

Considering the Henry Boot test    

More recently, in Jerram Falkus Construction Limited v. Fenice Investments Inc[2011], the TCC suggested that the test in Henry Boot may need to be revisited following the extensive privatisation of the utilities industries that has occurred since 1980. However, it noted that if a party is performing a function that is equivalent to a statutory undertaker then that party should be categorised as a statutory undertaker.  As such, Henry Boot remains good law.

Application of clause 2.26.7 in practice

In practice, it is rare for statutory undertakers to be carrying out works in pursuance of their statutory obligations.  Typically, it is the contractor who enters into a contract with the statutory undertaker for specific works relating to the project.  If the statutory undertaker’s works are late in this instance, then the contractor takes the risk for any delay and is not entitled to an extension of time under clause 2.26.7.

There are in fact very few circumstances when clause 2.26.7 will actually bite, as a contract will usually be in place with the statutory undertaker.  It will therefore be necessary to look at who has entered into this contract: the employer or the contractor. However, regardless of the contracting party, the contractor cannot rely on clause 2.26.7 for an extension of time.  You Really Got Me? I expect by This Time Tomorrow, having read this article, there may be some difficult conversations taking place about a contractor’s entitlement to an extension of time by virtue of clause 2.26.7.

This article is from May 2022’s edition of Aggregate. To read the complete newsletter as a PDF, click here.