What constitutes practical completion

Readers may recall Lord Justice Coulson’s words when he granted leave to appeal the judgment concerning practical completion in Mears vs Costplan [2018] EWHC 3363 in December 2018: “The overlap between practical completion and patent defects and breaches of contract […] has never been the subject of modern or comprehensive guidance.” The Court of Appeal has now issued its judgment ([2019] EWCA Civ 502). Has it now given us that guidance?

A quick reprise of the facts: one of the issues before Mr Justice Waksman in the Technology and Construction Court was whether constructing rooms to a reduced size, outside the contractually stipulated tolerance of 3%, meant the employer’s agent under a JCT 2011 contract could or should refuse to certify practical completion. In other words, was this a “defect” that prevented practical completion? The contract was for building two student accommodation blocks.

The appeal court judge cautioned against putting the emphasis more on the use to which the building could be put and the possession by the employer rather than on the extent and nature of a ‘defect’

Although the judge refused to grant the declaration sought, he did so for other reasons, not because he had determined whether this non-conformity should prevent practical completion. He did, however, make certain findings on what constituted practical completion in the absence of a contractual definition.

Some of his findings are not new. For example, that practical completion can be certified if the outstanding defects are of a trivial or insignificant nature or incomplete work is “de minimis”. It is common practice to attach to a practical completion certificate a schedule of incomplete and non-conforming work, all of which could be classed as “defective work”.

So does this judgment give us the guidance on what constitutes practical completion that was promised?

Mr Justice Waksman, however, added to this his view that remediability of the “defect” was irrelevant and that the intent and purpose of a building was key to determining whether or not it was “to all intents and purposes” complete.

The Court of Appeal upheld the TCC decision. Lord Justice Coulson gave the judgment, with which Lord Justices Lewison and Newey agreed. In doing so he summarised the law as it stands on practical completion with reference to two tests. The first of these he categorised as the “stricter test” (from Viscount Dilhorn on appeal in the Jarvis vs Westminster Corporation case [1969] 1 WLR 1448 and Lord Diplock in Kaye vs Hosier and Dickinson [1972] 1 WLR 146), being “the absence of any patent defects in material or workmanship” and “”completion of all the construction work that has to be done”.

This he contrasted with the more “flexible/practical approach” – from Lord Justice Salmon in the same Jarvis case and as applied in subsequent cases – which was “ completion for all practical purposes, that is to say, for the purpose of allowing the employers to take possession of the works and use them as intended”.

However, he cautioned against putting the emphasis more on the use to which the building could be put and the possession by the employer rather than on the extent and nature of a “defect”. Against that background, he set out his findings as to what constituted practical completion:

• There is no distinction between incomplete/outstanding work and defective work which has to be remedied. The approach to both is the same.
• The irremediability of a defect does not automatically justify withholding practical completion.
• The works are practically complete if free from patent defects other than “trifling” ones.
• Whether works are “trifling” is a matter of fact and degree. The practical and preferred approach is to measure whether they are “trifling” against “the purpose of allowing the employers to take possession of the works and to use them as intended”.
• However, “this should not be elevated to a proposition that” for example, if a house is capable of being inhabited or a hotel opened for business, the works are practically complete  regardless of the nature and extent of the works that require to be completed or remedied.

Lord Justice Coulson did not apply these tests to the facts in Mears vs Costplan as he considered that the out-of-tolerance room sizes and the impact on practical completion was a matter of fact and degree. This was a question for the certifier. In this case the employer’s agent would have certified practical completion (had the ultimate tenant, Mears, not intervened). Whether that decision to certify was correct, he said, was not a matter for this appeal.

So, does this judgement give us the guidance on what constitutes practical completion that was promised? It endorses the “practical” approach. However, the use and possession of the project is not to “overrule” considerations of the nature and extent of the defect. Regardless of the redrafting of contractual definitions of practical completion likely to follow this decision, it will continue inevitably to be “a matter of fact and degree”. 

Lindy Patterson QC is a barrister, arbitrator and adjudicator at 39 Essex Chambers