‘Practical completion’ has become part of the day-to-day vocabulary for contractors, clients, project managers and surveyors across the length and breadth of the UK. Muckle LLP’s Adam Aston explains more.
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Adam Aston is a partner and construction and engineering lawyer at Muckle LLP, a Newcastle-based national law firm for businesses, who regularly advises developers, contractors and funders on major projects.
Whilst the precise wording used in different forms of contract can vary (JCT contracts refer to ‘practical completion’ whereas other contracts use a range of terms seemingly to mean the same thing), the concept of ‘practical completion’ is of huge importance in any construction project. It acts as a trigger for the employer’s obligation to insure the building and relieving the contractor of the obligation to pay liquidated damages for any delay.
Despite its importance and widespread use, ‘practical completion’ has no precise legal definition and most standard contracts choose not to define it.
With that in mind it is perhaps surprising that the Court of Appeal has recently heard its first case on the meaning of ‘practical completion’ in 50 years.
We summarise the key aspects of the case below: Mears Limited v Costplan Services [2019] EWCA CIV 502, BLM 2019. Court of Appeal.
Facts
A developer (Plymouth Notte Street) was having student accommodation constructed by a contractor. The developer agreed with a tenant (Mears) that following practical completion, Mears would take a 21-year lease of the property.
When the construction was complete a number of the student rooms were smaller than had been contractually specified and Mears claimed that the works had not been properly carried out and so could not be said to be ‘practically complete’ as had recently been certified by the employer’s agent (Costplan).
Held
The dimensions of 56 rooms were out by 3% relative to the agreed specification. It was held that this had a minor impact on the use and occupation of the rooms.
The question of whether the works were ‘practically complete’ or not was a question for the judgement of the appointed certifier.
On the evidence, the certifier was satisfied that the rooms were reasonably compliant, could be used/occupied as intended and were therefore practically complete.
To consider
The key aspect in determining whether ‘practical completion’ has been achieved is therefore the profound judgement of the certifier. Even if the works are ‘useable’ or ‘habitable’, this is not decisive in itself, but a suggestive factor in the decision making of the certifier.
It is important to note that works may still be ‘practically complete’ even if they are unfinished or have defects. Crucially, practical completion may also be said to have been achieved even where those defects are irremediable (although much will depend on the facts and the party seeking to contest ‘practical completion’ may also have a claim in damages).
The Court of Appeal observed that “practical completion is easier to recognise than it is to define and is not a matter that is governed by hard and fast rules”. This approach by the court places trust in certifiers to make practical, professional, sensible judgements without involving the courts.
The key lesson for clients is therefore to only appoint professional, experienced and trusted advisors to fulfil this important role.
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