Practical Completion

Mears v Costplan Services (South East) Ltd and Others [2019] EWCA Civ 502

The question of what is Practical Completion arose within the arguments of this case. The factors of the decision, based upon a JCT Design and Build Contract (2011) form, are interesting and could need careful consideration when issuing such certificates.

Key facts are that the Employers agent could not issue the Practical Completion Certificate (PCC) as the dimensions of the accommodation units were outside of the Agreement for Lease which had a condition that the units could not vary by more than 3% tolerance.

The argument by the Apellant was that the failure to construct in accordance with the requirements of the 3% tolerance was a material breach and the Employers agent had no right to issue the Practical Completion Certificate as the works were not constructed to the Contractual requirements (patent defects).

At paragraph 13 of the decision the clause which gave Mears the right to review prior to PCC being issued is detailed[1]

At paragraph 14 of the decision the PCC is defined as:

“A certificate issued by the Employer’s Agent to the effect that practical completion of the Landlord’s Works has been achieved in accordance with the Building Contract.”

As such on the face of it a PCC could not be issued if the student accommodation was built out with the requirements of the lease operator of the 3% tolerance. Mears served notice that 40 rooms had been constructed more than the 3% smaller tolerance required under the contract.

The JCT form had at Clause 2.2.7 set out the provisions relating to practical completion. The wording of such terms are:
Practical completion

2.27       When practical completion of the Works or a Section is achieved and the Contractor has compiled sufficiently with clauses 2.37 and 3.16.5 then:

               1             in the case of the Works, the Employer shall forthwith issue a statement to that effect (the Practical Completion Statement);

               2             in the case of a Section, he shall forthwith issue a statement of practical completion of that section (a Section Completion Statement);

And practical completion of the Works or section shall be deemed for all purposes of this Contract to have taken place on the date stated in that statement.

As a number of the rooms were outside the 3% tolerance there were substantial defects and a material breach in accordance with Clause 6.2 and the Appellant would be left without cause for recovery if the PCC was issued without listing the rom sizes as a defect.

In the original hearing[2] Wakeman J held that the tolerance did not result in a material breach under Clause 6.2. even though he grant Declaration 5 that one or more rooms had been constructed outside of the tolerance was a breach of the Agreement for Lease. In his decision he accepts that breach has occurred in relation to requirements but not to the fact that variation in materials approval resulting in the size reduction is considered “material”, rendering the whole contract in breach.

However, the key matter about the issue of the PCC (declarations 1 -3 in the early hearing) and what constitutes PCC.

In the judgement Coulson LJ analyses the numerous cases pertaining what effects PCC. He considers the decisions in Jarvis & sons v Westminster Corporation, Kay v Hosier & Dickinson, HW Nevill v William Press and Emson Eastern Ltd v EME Developments Ltd.

The decision is that a PCC can be issued as long as the patent defects present entitle the intended use or operation of the Works without all elements being “perfect”.

The citation of Keating in the 9^th edition I believe is the benchmark and the test is:

1. works can be practically complete notwithstanding there are latent defects;
2. practical completion should not be certified if there are patent defects;
3. practical completion means the completion of all the construction work; and
4. the certifier is however given discretion to certify practical completion when there are very minor works left incomplete on “de minimis” principles.

Hence a more global approach is:

Is all major construction work completed and can the Works be used for their intended use with minor works (patent defects / de minimis) listed, so as to determine that the occupier of the Works has not be party to damage at a later date.

The thoughts to consider when issuing:

• Is the construction completed sufficiently to safely allow the Employer / Client to use the Works?
• Any outstanding works / patent defects (remedials) need to be stated with the notice.
• Failure to do the previous means that PCC or SCC[3] has been issued and the defects not listed have occurred following occupation by the Client / Employer.
• Minor issues (de minimis) are not considered grounds for withholding PCC or SCC.

[1] 14 – Practical Completion – clauses 14.1 and 14.4 of the agreement gave Mears the right of inspection prior to the PCC being issued.

[2] Mears Ltd v Costplan (South east) Ltd & Others [2018] EWHC 3363 (TCC)

[3] SCC – Sectional Completion Certificate