Practical Completion

Blog Author: Peter Hibberd

The recent Court of Appeal case of Mears v Costplan Services (2019) EWCA Civ 502 is seen by some to once again raise, amongst other things, the issue of whether contracts should precisely define what constitutes practical completion.

Practical completion is sometimes contrasted to substantial completion and even practically complete. However, none of these terms requires work to be completed in all respects before it is certified or is deemed to occur. As stated in Mears, ‘If there is a patent defect which is properly regarded as trifling then it cannot prevent the certification of practical completion, whether the defect is capable of economic remedy or not.’ The use of the term practically complete in the JCT Sub-Contract and Management Works Contract may tempt some to distinguish this term with practical completion but it is submitted that it is unlikely to be of import.

Under the JCT Standard Building Contract (SBC) and the Design and Build Contract (DB) practical completion is not defined. It is a matter of opinion for the contract administrator under SBC, which is certified forthwith (as soon as is reasonable) when it is achieved and the contractor has complied sufficiently with clauses 2.40 and 3.23, i.e. the provision of as built drawings’ where applicable and information for the health and safety file. Under DB the employer issues a statement to that effect when it occurs but here it is not a matter of opinion simply but one of fact, which theoretically is more difficult. Practical completion in respect of the Works or a Section (if applicable) takes place on the date stated in the certificate or statement.

By contrast the JCT Major Project Construction Contract (MP) requires the contractor (clause 15.4) to notify the employer when in their opinion Practical Completion has occurred. Where the employer agrees they then issue a statement which sets out the date Practical Completion occurred. If they do not agree they should inform the contractor of the work necessary to achieve Practical Completion. Under SBC and DB, the contractor will often indicate when they believe they have reached practical completion but are under no contractual obligation to do so.

Under MP, practical completion is defined; it states that it takes place when the Project is complete for all practical purposes and that the existence or remedying of minor outstanding works would not affect its use. In addition to the provision of as built drawings’ where applicable and information for the health and safety file it additionally includes the need to satisfy any stipulations in the Requirements that have to be met and that Statutory Requirements have been complied with and approvals obtained. That difference in approach raises the question as to why.

Traditionally JCT has adopted the view that defining practical completion for differing projects is highly problematic and consequently chose not to. As Keating states, ‘practical completion is easier to recognise than to define’.

Under SBC and DB any specific requirements to achieve practical completion e.g. commissioning of mechanical installation, could as appropriate be provided for by including them in the other contract documents or possibly amending the contract. As Lord Justice Coulson stated in Mears, ‘I do not doubt that the parties to a construction contract can agree particular parameters to guide and control a certifier in the exercise of his discretion in relation to practical completion.’ The extent to which this is done depends on the context. The MP contract came much later and it was thought that the criteria it refers to would always apply, hence their inclusion.

Under most contracts it is necessary to establish when practical completion is achieved and many of those charged with that duty will believe they know it when they see it (Keating’s point). Nevertheless, that person needs to take account of case law and the Mears judgment at paragraph 74, provides a valuable summary of the law.

When considering whether practical completion has been achieved one is primarily concerned with patent defects and incomplete work. Latent defects are by their nature as yet unknown. Snagging lists, not a contractual requirement under SBC and DB contracts, are often and sometimes inappropriately produced in order to establish what needs to be done to meet practical completion or that an item nevertheless remains a defect to be remedied during the Rectification Period. By contrast MP provides that where the employer does not agree with the contractor’s notice that it has reached Practical Completion, they need to notify the contractor of the work required for its achievement. The contractor then provides a further notice when this work is done and the employer, when satisfied, will issue a statement recording the date of Practical Completion.

MP generally provides less detail than many other JCT contracts but in this instance it does not. Does that mean practical completion on major projects is seen as more significant? Or, does it simply highlight a difference in approach that could be mirrored elsewhere?

Practical completion can apply to the works and to any defined sections of the works. Each section has its own practical completion certificate/statement and in addition there is one for the works which under MP is referred to as the Practical Completion of the Project (PCP): this has significance in that under this contract the Rectification Period for the whole works runs from the date stated in the PCP. Under SBC and DB each Section has its own Rectification Period.

Under SBC and DB practical completion is deemed to have taken place on the date stated in the certificate/statement for all the purposes of the Contract. That means that even though practical completion may not have been achieved it will be treated as though it had. A similar situation arises where the employer takes partial possession of the works (with the consent of the contractor) where particular attention is required in defining the part taken over. Because the practical completion certificate/statement (as distinct from mere practical completion of the Works) and any notice of partial possession provides a trigger to other important provisions great care must be taken in their issue.