Meaning of “Practical Completion”

Mears Limited v Costplan Services [2019] EWCA CIV 502, BLM 2019. Court of Appeal

Facts

A developer called Plymouth Notte Street was having student accommodation constructed by a contractor.  The developer had agreed with Mears, which specialised in managing student accommodation, that following the Certification of Practical Completion, by the developer’s Agent, Mears would take a long lease of the property.

When the construction was complete a number of the student rooms were smaller than the contractually agreed specification and Mears submitted that the works had not been properly carried out so they could not be said to be practically complete.

Held:

1. Although the dimensions of the many of the rooms were out by 3%, these shortcomings were very minor (referred to as “trifling” and also as “de minimis”), and did not prevent one from taking possession of the works and using the site as intended.
2. The question whether the works were “practically complete” or not was a factual question for the judgment of the certifier. On the evidence the certifier was satisfied that the rooms were reasonably compliant and were practically complete, and certified accordingly.  The Court of Appeal remarked (Coulson LJ) that the dimension problems were indeed “trifling”.

Comment

1. The key issue is the judgment of the certifier. Even if the works are “useable” or “habitable” despite the problem, this is not decisive, rather it is an indicative factor in his/her decision-making.
2. The works may be validly certified as practically complete even though there are items outstanding, or items of defective works which need to be remedied, hence the practice of issuing the Practical Completion Certificate with a snagging list.
3. Some defects may be incapable of being fixed, such as the distances between the walls and the room; however, this does not necessarily prevent practical completion, particularly where there is a remedy in damages.
4. Finally, the Court of Appeal observed that “practical completion is easier to recognise than it is to define, and it is not a matter that is governed by hard and fast rules”. This is a sensible decision by the Court, which trusts certifiers to make practical judgments without judicial interference.

NB Mears had also complained that defects in the room dimensions were “material breaches” of the contract entitling it to refuse to proceed with the lease.  It relied upon a clause in the lease agreement which bound the developer not to make any variations materially affecting the size of the rooms.  It was held that just because a clause refers to material variations does not mean that such variations are in turn material breaches.  On the facts, the actual breaches were not either so material or so substantial so as to justify repudiation of the contract.  In other words, a material variation in fact is not necessarily a material breach in law.

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