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Update on “practical completion”

Back in March this year, I wrote an article on practical completion, how it is defined (or not) and how people interpret phrases such as “beneficial occupation”. In the article I encouraged people to be prescriptive, but not too prescriptive.

Turn your mind back even further to some point in 2005. At that time, Laing O’Rourke Construction Ltd entered into a contract with Healthcare Support (Newcastle) Limited whereby Laing would design and build various hospital facilities for Newcastle upon Tyne Hospitals NHS Foundation Trust. This was a project to be carried out in nine phases, and the dispute which was decided by the TCC at the end of July 2014 concerned (thankfully) only Phase 8 and whether or not it was practically complete.

The aforementioned contract seemed to be clear on the meaning of “practical completion” – it even had defined Completion Criteria and an Independent Certifier. Like most construction contracts, the issuing of the Certificate of Practical Completion would not relieve the contractor of its obligations to return to deal with Defects (either latent or patent).

However, despite the apparent clarity, the parties disagreed with the application of the “Completion Criteria” – and specifically whether or not the Independent Certifier could look beyond the Completion Criteria. The Claimant submitted that “the building had to be fit for use and occupation consistent with the purposes for which it had been designed and built, as reflected by the provisions of the Project Agreement” and further that “a breach of the specification that did not have any materially detrimental effect on the amenity value and functional use of the building was not one that should prevent the issue of a completion certificate”.

The Trust (the end user) argued for a wider interpretation and submitted that to achieve practical completion the works had to be in accordance with “the Trust’s Construction Requirements”.

The TCC (Mr Justice Edwards-Stuart) focussed his consideration on the fact that the contract did not state that the practical completion certificate was to be conclusive evidence of the quality of the work or that the buildings as built were in accordance with the specification. The Judge concluded that:

“[The Independent Tester] must decide for himself, having received any representations from the parties, as to whether or not the nonconformity alleged (assuming that he accepts that it is a nonconformity) has or is likely to have a materially adverse effect on the enjoyment and use of the building… in the manner contemplated by the agreements. If he concludes that it will not, then he can issue the completion certificate and leave the Trust to its remedy in damages.”

So my own conclusion is that the TCC has kindly confirmed what I said back in March: it is sensible to be prescriptive but the independent certifier will ultimately still have to be free to exercise his discretion as to when/if PC has been achieved.

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These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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