Menolly Investments 3 Sarl v Cerep Sarl (Rev 1)

Practical completion is a contractual concept assessed by reference to the works which the contractor agreed to provide. Where a certificate is final and binding subject to manifest error, the court must identify the decision entrusted to the certifier, determine what the certifier actually decided, and then consider whether the decision is challengeable under the contract.

A certifier may decide whether the specified works are practically complete, but is not thereby authorised to determine conclusively the meaning of the underlying building contract unless the parties have conferred that authority. A substantial omission may place the matter outside the certifier’s authority; a minor omission may be compatible with practical completion. A party may nevertheless be estopped from challenging certification where its representations or conduct induced reliance and resulting prejudice.

Menolly Investments 3 Sarl and Cerep Sarl disputed whether certificates of practical completion for works at 107 Cheapside validly triggered completion and payment obligations under a share sale agreement. Menolly Homes Ltd was joined so that it would be bound by the determination.

The certificates related to two sections of works. The principal issue was whether the absence of level access to retail units invalidated certification of practical completion. Related issues concerned the certifier’s authority, notice of inspection, manifest error, and estoppel or waiver. The judgment determined the validity of the relevant certificates, leaving certain questions concerning the earliest valid certificate and interest for possible later determination.

1. Construction of the works. The obligation to provide level access to the retail units formed part of the Works under the building contract. The Planning Condition Log was part of the Employer’s Requirements, and the access and egress obligation in Condition 22 of the planning permission applied to the retail units as part of the building. The absence of detailed design or approval did not remove that obligation.
2. Role of the certifier. The final and binding machinery in paragraph 10.4 of Schedule 5 to the SPA did not give the Employer’s Representative authority conclusively to determine the meaning of the Building Contract. The certifier had to decide whether the relevant section of the Works had reached practical completion, but construction of the contract remained a matter for the court. The case fell on the National Grid side of the distinction drawn in Norwich Union.
3. Effect on the certificates. Mr Ramsay had certified Section 1 on the basis that level access was outside the Works. Since that construction was wrong and he had not considered whether practical completion could be certified on the correct contractual basis, Certificate 7 was invalid. The same reasoning applied to Certificate 10 in the absence of evidence that the certifier had changed his approach.
4. Notice and estoppel. The inspection on 16 September 2008, attended by representatives of Menolly and CBRE, provided sufficient notice for paragraph 10.2 of Schedule 5. In any event, the evidence established that Menolly was estopped from relying on the absence of level access or challenging the practical completion of Section 1. Menolly had proceeded on the shared basis that Section 1 was complete, had failed to speak out, and Cerep had suffered prejudice.
5. Disposition. The court concluded that the SPA was due for completion no later than ten business days after Certificates 10 and 11. Outstanding issues concerning the earliest valid Section 2 certificate, the Completion Date, interest, and any financial adjustment for level access were reserved.