Practical completion - easier to recognise than define?

Background

Mears entered into an agreement for lease with a developer to take a 21-year lease of two blocks of student accommodation to be constructed in Plymouth. The developer engaged a contractor to build the blocks under a JCT Design and Build 2011 contract and appointed Costplan as its Employer’s Agent.

The project was delayed by almost a year. Mears alleged there were a number of defects in the works and, in particular, claimed that 56 student rooms had been constructed more than 3% smaller than specified in the agreement for lease. As a result, one of the disputes between the parties was whether practical completion of the works had occurred.

TCC

Mears sought, amongst others, a declaration that practical completion could not be achieved whilst there were patent (known) defects which were “material or substantial”. The TCC declined this declaration[2] and adopted a more flexible approach: defects which were not “de minimis” (i.e. trifling) may or may not prevent practical completion “depending on the nature and extent of [them] and the intended purpose of the building”.

Court of Appeal

Mears appealed on a number of issues. In relation to practical completion, the Court of Appeal carried out a comprehensive review of the authorities and adopted a narrower approach than the TCC. The key question was whether a defect was “de minimis” or trifling. If it was, it would not prevent practical completion. If it was not, practical completion could not be certified.

Having reviewed various previous cases, the Court of Appeal has also provided guidance on the meaning of practical completion:

• Practical completion is easier to recognise than define. There are no hard and fast rules.
• The existence of latent (unknown) defects cannot prevent practical completion (as they are unknown to the certifier).
• As to patent defects, there is no difference between an item of work that has yet to be completed (i.e. an outstanding item) and an item of defective work that has yet to be rectified. Snagging lists can and will usually identify both items of work without distinction.
• Patent defects that are trifling will not prevent practical completion.
• Whether or not an item is ‘trifling’ is a matter of fact and degree, to be measured against the purpose of allowing the employers to take possession of the works and to use the items as intended. (In Mears, the fact that 56 rooms were 3% smaller did not prevent them from being used as student accommodation. However, such an ability to use the accommodation would not necessarily mean that the works are practically complete.)
• The mere fact that a defect is irremediable does not mean the works are not practically complete. The question remains whether the defect is ‘trifling’ in nature.

Comment

This Court of Appeal decision is certainly relevant to the construction industry. It provides important clarification of the meaning of practical completion, particularly as that term remains undefined in most standard forms of building contract.

A more precise definition of completion is often applied in engineering contracts, including those involving water treatment and power generation. The ‘completion’ of such projects is only taken to occur if, for example, certain testing and commissioning is satisfactorily completed based on defined benchmarks, and following the provision of "as built" documents, operation and maintenance manuals and other documents.

Although practical completion often remains “easier to recognise than define”, the Court of Appeal has adopted a narrower approach than the original TCC decision and has provided useful guidance on its meaning. Any defects must be “trifling” if practical completion is to be certified, and significant defects cannot be discounted on the basis that they do not prevent the works from being used for their intended purpose.

For more information on this case, or to discuss any aspect of construction law, please contact Steve McCombe or another member of Thrings’ Construction and Engineering team.

[1] https://www.bailii.org/ew/cases/EWCA/Civ/2019/502.html

[2] https://www.bailii.org/ew/cases/EWHC/TCC/2018/3363.html