Mears Ltd v (1) Costplan Services (South East) Ltd (2) Plymouth (Notte Street) Ltdand (3) J.R. Pickstock Ltd [2019] EWCA Civ 502  –  Practical Completion

On 29 March 2019 the Court of Appeal in London delivered this interesting decision which reviewed the legal principles associated the with meaning of the term Practical Completion.

The case involved several contracts.  A building contract (BC) for the construction of student flats, an engagement of an agent to administer and certify (AC) and a 21 year lease of the buildings by the owner to a property manage (lessor) (AL).   The AL included provisions precluding the making of variations. The dates for and thus the definition of practical completion under the BC and AL were linked. The lease was to be executed 5 days after PC.

56 of the flats were more than 3% under the required area in the BC and the AL.  The lessor sought declarations that because of the irremediable breaches practical completion had not been achieved, should not be certified as having been reached and accordingly it was not bound to execute the lease.  There was no dispute that the flats were undersized, however there was no evidence of consequential loss. 

The application failed in the TCC and the appeal was dismissed, the CA judgement was delivered by Coulson LJ who stated:

The 56 separate failures to achieve the 3% tolerance amounted to 56 separate breaches of contract. Whether or not those breaches, either singularly or taken together, were material or substantial such as to justify recission, is a matter of fact and degree, not a matter of the construction of the AL.

Practical points from the decision of the Court of Appeal 

• It is clear from this decision that if an owner wishes to specify that a particular failure will constitute a material and substantial breach of the contract, then it is necessary to state as much in the contract wording, leaving no ambiguity.
• As has long been the case, what constitutes Practical Completion will be determined principally by the terms of the contract between the parties, so that at the contract formation stage the wording must reflect will criteria the owner requires.
• When drafting a sequence of related contract documents, the critical terms in each agreement must align.  In this case at least neither party argued that there was a difference between the meaning of Practical Completion under the BC to that under AL. 

Professor Ian H Bailey AM SC

Society of Construction Law Australia Conference in Perth 1 to 3 August 2019

MTECC is once again sponsoring the SoCLA national conference held in Perth at the Westin from 1-3 August 2019. The conference theme is  “Doing it Overseas – the legal tips and tricks for taking Construction Smarts to foreign jurisdictions”. The details are here.
 

Society of Construction Law Australia presentation 28 May 2019

MTECC members Michael Whitten QC and Andrew Downie are presenting a seminar for SoCLA titled “Defects on large-scale construction projects – what you need to know following recent cases including Opal and Lacrosse”. The presentation is on 28 May 2019 from 5:45pm for a 6.00pm start at Corrs Chambers Westgarth Melbourne. The details are here.