PRACTICAL COMPLETION: MEARS V COSTPLAN
An important concept in construction contracts is the concept of “practical completion”. In the recent England and Wales Court of Appeal (“EWCA”) decision of Mears Ltd v Costplan Services (South East) Ltd & Ors [2019] EWCA Civ 502 (“Mears v Costplan”), the EWCA dealt with, inter alia, this very important concept.
Review of case law. In Mears v Costplan, at [62] – [74], Coulson LJ (with whom Newey and Lewison LJJ agreed), undertook a review of the various decisions that dealt with the law of practical completion and summarised the law on practical completion.
We note that in this review:
1. Coulson LJ referred to the “useful” decision of the Final Court of Appeal in Hong Kong in Mariner International Hotels Limited & Another v Atlas Limited & Another [2007] 10 HKCFAR 1, where the court rejected the argument that practical completion was achieved because the defects could be completed without affecting the operation of the building as a hotel ([67] Mears v Costplan).
2. Coulson LJ doubted whether Judge Thornton QC’s statement in [187] Bovis Lend Lease Ltd v Saillard Fuller & Partners (2001) 77 Con LR 134 that "what is meant by practical completion is that the works as a whole are substantially complete and are in a state that allows the building owner to take possession" (emphasis in Mears v Costplan) is a correct summary of the law ([70] Mears v Costplan).
3. Coulson LJ stated that he was “not quite so confident” that there is “now little difference between the meaning of practical completion, on the one hand, and substantial completion, on the other”, though Coulson LJ also made clear that it was not an issue that arose on appeal in Mears v Costplan ([71] Mears v Costplan).
Summary of the law. Coulson LJ summarised the law on practical completion at [74] Mears v Costplan. In brief:
1. There are no “hard and fast rules” on what practical completion is.
2. The existence of latent defects cannot prevent practical completion.
3. For patent defects, there is no difference between an item of work that has yet to be completed, and an item of defective work that has to be remedied.
4. Existence of patent defects (other than ones to be ignored as trifling) would prevent practical completion from being achieved.
5. Whether an item is trifling or not is a matter of fact and degree. It is fact sensitive: it does not mean that just because an employer can take possession and use the works as intended, the works must be regarded as practically complete.
6. The proposition that a defect is irremediable meant that the works were not practically complete is not supported by Ruxley Electronics & Construction Limited v Forsyth [1996] 1 AC 344.
Takeaway. While Mears v Costplan has yet to be applied in Singapore (as far as we are aware), it is likely that it would be a highly persuasive authority, coming not only from the EWCA, but from a highly experienced construction judge.
As it is not unusual for the phrase “practical completion” to be left undefined in construction contracts, it is therefore important to note that per Mears v Costplan:
1. Patent defects can prevent practical completion, save for “trifling” ones.
2. Just because the works can be used as intended, it does not mean that the defect is “trifling”.
It is also equally important to note that at [56] Mears v Costplan, Coulson LJ suggested that if parties contractually agreed that the breach of certain specifications would amount to a material breach of contract, then while such a breach might objectively be regarded as trifling, that breach would still preclude practical completion.
Lastly, we note that it is not uncommon for the terms “practical completion” and “substantial completion” to be used interchangeably. Mears v Costplan suggests that the two terms are (or at least can be) different, and contractors would be prudent to ensure that their contracts do not confuse the two terms.
Tags: Construction; Practical Completion; Patent defects; Mears v Costplan
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