• 2 min read

What is Practical Completion? A Mears misunderstanding

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Practical Completion is a critical stage of all construction projects: it is the moment that the works cross the summit, the end is in sight, and the project is nearly finished – subject to the rectification of defects period.

Practical Completion and dispute issues

Trethowans has recently handled a number of cases where the timing of Practical Completion has been a key issue in dispute. The date of Practical Completion has wide ramifications for a construction project, including the defects liability period, insurance, insolvency, collateral warranties, liquidated damages, release of retention monies, and the expiry of the limitation period for a breach of contract claim. This impacts not only the employer and main contractor, but also sub-contractors, contract administrators, design teams, and architects working on the project – whose contracts will also be framed with reference to the Practical Completion date.

Recognising Practical Completion

It is therefore crucial to accurately determine when Practical Completion has occurred. As famously quoted in Keating and by Coulson LJ in Mears Ltd v Costplan Services (S.E) Ltd & Ors:

Practical completion is easier to recognise than define”.

Except – is that always the case?

Contractual definitions vs factual assessment

Trethowans has identified an interesting trend in recent cases where parties skip straight to their own factual assessment of Practical Completion, using the Mears guidance on the extent of outstanding defects, without first reviewing the contract itself. It is often overlooked that Coulson LJ’s oft-cited judgment in Mears was delivered in the context of there being no express contractual definition of Practical Completion. The Mears guidance has no bearing when the contract already contains a contractual definition for Practical Completion.

Overlooked contractual definitions

Many contracts contain an overlooked definition of when Practical Completion is deemed to have occurred. Such clauses will commonly provide that Practical Completion is deemed to occur on the date specified in Practical Completion Certificate or Practical Completion Statement issued by a Contract Administrator or Employer, and for “all purposes of the contract”.

This amounts to an express contractual definition of Practical Completion, which bypasses any need for a factual assessment.

Key case: Swansea Stadium Management Co Ltd

In the case of Swansea Stadium Management Co Ltd v Swansea City and County Council, O’Farrell J considered whether an express deemed Practical Completion clause could be overridden by evidence of extensive patent defects in the works. The answer was no. The existence of patent defects or outstanding works did not preclude the operation of a deemed Practical Completion clause. A contractual definition does exactly what it says on the tin – and it is not open to the court to reinterpret Practical Completion in such circumstances.

Lessons learned

This is a timely reminder that there is no substitute for referring back to the contract terms when a dispute arises. It also endorses the old adage that prevention is better than cure; ensuring that the originating contract gives the level of certainty that the parties required level of certainty may help avoid costly and time-consuming litigation later.  

Conclusion

The main lesson? Whilst it is easy to get bogged down in the details of outstanding works and the nuances of what Practical Completion may be, the first question must always be: what does the contract actually say?

Should you wish to discuss any Practical Completion issues or contractual disputes, please contact Trethowans’ specialist construction dispute resolution team on 023 8202 4535.

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