Mears Limited v Costplan Services (South East) Limited & Others [2018] EWHC 3363 (TCC)

Mears Limited v Costplan Services (South East) Limited & Others [2018] EWHC 3363 (TCC) concerned the development of student accommodation in Plymouth. Mears Limited ("Mears") alleged that there were substantial and material deviations from the contractual drawings and sought declarations preventing the certification of practical completion, the practical effect of which was to allow Mears to terminate its agreement to take a lease of the accommodation.

Mears was an expedited trial and raised narrow issues of contractual construction particular to the specific facts of the case. However, it also gave rise to interesting and important questions about the meaning of "practical completion" and when a breach of contract can prevent practical completion. Waksman J's answers to those latter questions will be of some importance to practitioners in the area.

Simon Hale of 4 New Square represented Costplan Services (South East) Limited. The decision of Waksman J is considered by Nicholas Broomfield of 4 New Square.

The facts

The claim concerned the construction two student accommodation blocks in Plymouth known as Crescent Point ("the Property"). The Property was intended to comprise a mixture of studio apartments and "clusters" of flats with individual bathrooms but shared kitchen facilities. The Property was intended to house 348 students.

The Second Defendant, Plymouth (Notte Street) Ltd ("PNS"), was the registered proprietor of the Property. On 25 November 2016 PNS appointed the First Defendant, Costplan Services (South East) Limited ("Costplan"), to act as its agent in respect of the construction of the Property.

On 20 May 2016 Mears had entered into a tri-partite agreement with the Third Defendant, J R Pickstock Limited ("Pickstock") and PNS under the terms of which it would take a 21 year lease of the Property within five working days of practical completion ("the AFL"). The material terms of the AFL, the document at the centre of the dispute, are set out at [19] of Waksman J's judgment. The AFL:

Defined "Building Documents" as "the plans, drawings, specifications and other documents listed in Appendix A or as from time to time varied by agreement between the parties". Appendix A included a number of architect's drawings dated 2014 that had been used in the application for planning permission ("the Planning Drawings"). The Planning Drawings contained area measurements for each of the rooms at the Property. By clause 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 [Emphasis added]

6.2.2. result in materially increased maintenance costs or increase the frequency of component replacement cycles; or

6.2.3. are substantial or material."

3. By clause 15.7: "Except as provided in this Clause 15 (and in the Lease), with effect from the Date of Practical Completion, the Landlord is not to be liable to the Tenant under this agreement for any failure by the Landlord for any reason to comply with his obligations under Clauses 4, 5, 6, 7, 8, 9, 10, 11, 12, 14 and 15."

The AFL also contained a long stop provision which permitted Mears to terminate if practical completion had not taken place by 11 September 2018 ("the Long Stop Date").

PNS retained Pickstock to construct the Property under the terms of a JCT Design and Build Contract dated 27 May 2016 ("the Building Contract") and collateral warranties were given to Mears (in light of the AFL) by both Pickstock ("the Pickstock Warranty") and Costplan ("the Costplan Warranty").

The works were delayed and the original completion date of 11 August 2017 was missed. By June 2018 Mears had raised a number of complaints about both work that had not been completed and the quality of the completed works at the Property including, importantly, that approximately 50 rooms had been built smaller than contractually permitted by clause 6.2.1 of the AFL. However, Costplan disagreed with Mears' assessment and proposed to certify practical completion. Mears accordingly obtained an injunction on 22 August 2018 preventing certification, and an expedited trial of limited issues was ordered.

On the Long Stop Date (which had been varied to 18 September 2018 by agreement between the parties) Costplan indicated that it would have certified but for the...