Is it ready yet (revisited)?

A look at the recent Court of Appeal Decision in Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502.

Background

This case considered the meaning of "practical completion" in the context of the construction of a student accommodation development in Plymouth. The first instance decision found that, despite the landlord’s failure to deliver the accommodation within an agreed tolerance (56 of the rooms were outside the agreed 3% floor area tolerance), such breach of the contract terms would not necessarily prevent practical completion nor automatically result in a right to terminate the relevant agreement for lease. The decision was appealed and the court provided a more detailed analysis of what practical completion means and when it can be certified.

Outcome

The appeal was dismissed and the decision of the court at first instance (TCC) was upheld.

Practical completion

The court’s findings reaffirm concepts addressed in the case of Jarvis & Sons Ltd v Westminster Corporation [1969] - the most recent prior occasion the appeal courts had opportunity to consider the meaning of “practical completion”. In considering the degree of a defect in construction works and whether or not “completion” of such defective works can (or should) be certified it must be balanced against the "purpose of allowing the employers to take possession of the works and use them as intended".

Coulson LJ (delivering leading judgement) agreed with Wacksman J’s decision that a patent defect in construction (whether or not capable of being remedied) will only be construed as rendering works incapable of being “practically completed” where such defect is more than “trifling”. The key point was that considered at first instance: whether or not, in the absence of an express definition of “practical completion” in the relevant contract (or more widely agreed in legal authorities / industry standards) the certifier could determine that the development had met the relevant threshold required for the certificate to be issued.

The court drew no distinction between an element of works yet to be executed and a defect that is yet to be remedied and found that "in the absence of any express contractual definition or control, practical completion is, at least in the first instance, a question for the certifier". The fact that Costplan was willing to issue the certificate demonstrated its opinion that the failure to meet the specified contractual tolerances could be properly described as trifling. However, the court noted that "[w]hether or not that view is correct is not a matter for this appeal".

The agreement for lease

The court found that the construction of 56 rooms within the development beyond the floor area tolerance of 3% specified in the Agreement for Lease did not automatically equate to a material breach of that contract. It was acknowledged that, although such departure from contractual provisions amounted to breach, the degree and effect of such breach would depend on circumstances.

The Court of Appeal noted that although parties were free to agree the circumstances in which there would be a material or substantial breach of contract, they had not done so in this case. Based on the wording found in the agreement, references to materiality related to the size of the rooms and not to breach of contract.

Comment

The findings in this case are useful insofar as they clarify that practical completion will be something for a certifier to determine on the facts at hand. The judgement does not however prevent this being an area that is litigated in future, since much turns on degree, materiality and purpose, each of which is open to interpretation. Furthermore, the fact that a occupiable building will not necessarily be a certifiable building and vice versa does not provide certainty to those most exposed to potential claims. This case will offer limited comfort to those professionals responsible for certifying practical completion since the distinction drawn between breach of contract and certifiability of a development leaves much open for debate.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.