Material Breach Of Contract And Practical Completion

In 1970, Viscount Dilhorne' in the case of City of Westminster v Jarvis, said that:

"The contract does not define what is meant by 'practically completed'. One would normally say that a task was practically completed when it was almost but not entirely finished; but 'Practical Completion' suggests that that is not the intended meaning and that what is meant is the completion of all the C construction work that has to be done."

Almost 50 years later, Lord Justice Coulson was asked to consider again the meaning of practical completion. Jesse Way takes up the story.

Earlier this year, the Court of Appeal delivered its judgment in Mears Limited v Costplan Services (South East) Limited & Ors [2019] EWCA Civ 502 ("Mears"). In Mears, the Court of Appeal had to determine two issues.

The first was whether clause 6.2.1 of the agreement for lease ("AFL") between Mears Limited ("Mears") and Plymouth (Notte Street) Limited ("PNSL"), on its proper construction, deemed a breach of contract to be material so as to allow Mears to treat itself as discharged from its obligations under the AFL. Clause 6.2.1 provided:

"6.2 The Landlord shall not make any variations to the Landlord's Works or Building Documents which:

6.2.1 materially affect the size (and a reduction of more than 3% of the size of any distinct area shown upon the Building Documents shall be deemed material), layout or appearance of the Property; or..."

The second issue was whether, on a proper construction of the AFL, practical completion could be certified when there were known material or substantial defects or breaches of contract.

Mears had appealed from the first instance decision in Mears Limited v Costplan Services (South East) Limited & Ors [2018] EWHC 3363 (TCC) in which a number of declarations sought by Mears were rejected.

Background

Mears was a provider of student accommodation. PNSL had engaged a builder to design and construct two blocks of student accommodation. Under the AFL, Mears was to execute a long lease over the property within five days of the issue of a certificate of practical completion. If a certificate of practical completion was not achieved by the relevant date, either party could terminate the AFL. Mears' ultimate objective was to be discharged from its obligations under the AFL.

Prior to completion of construction, it became apparent that a number of the rooms had been constructed more than 3% smaller than as specified in the Building Documents. Mears took issue...