University of Warwick v Balfour Beatty Group Ltd

Under a contract providing for sectional completion, Practical Completion of an individual section does not require the whole of the works to be complete unless the contract clearly so provides. The court must identify the parties’ objective intention by construing the relevant language in its documentary, factual and commercial context. Clear contractual wording must be applied, even if the resulting bargain appears imprudent. The existence of separate completion dates and liquidated damages for different sections may demonstrate that sectional completion was intended. The court should not focus on an isolated word or import additional wording that defeats the contractual sectional-completion regime.

The claimant employer engaged the defendant contractor under an amended JCT 2011 Design and Build contract for the construction of a research facility. The contract divided the works into four sections, provided separate completion dates and specified separate liquidated damages for each section.

An adjudicator accepted the contractor’s construction that a section could not achieve Practical Completion until the whole works were complete, potentially rendering the liquidated damages provisions inoperable. The claimant sought a declaration on the proper construction of the contract. The central issue was whether Practical Completion of a section required completion of the works and property as a whole.

1. Construction principles. The court adopted the approach stated by Lord Neuberger in Arnold v Britton [2015] AC1619. The task was to identify the objective meaning of the contractual language, assessed in its documentary, factual and commercial context. The natural and ordinary meaning of the words remained the primary consideration. Commercial common sense could not be used retrospectively to rescue a party from an imprudent bargain, and the court could not rewrite clear wording.
2. Meaning of Practical Completion. The contractor’s construction placed excessive weight on the word “Property” and disregarded the wider contract. The references to “the Works or a Section” indicated alternatives rather than a requirement that the whole works be complete before any section could be completed. The definition required the relevant section to be sufficiently complete to allow use and occupation, with the stated conditions satisfied insofar as they related to or affected that section.
3. Contractual context. Separate completion dates and separate liquidated damages for the sections demonstrated an intention to permit completion of one or more sections before completion of the works as a whole. The sectional-completion provisions would serve no purpose on the contractor’s interpretation and would be rendered otiose.
4. Commercial common sense. Even if the wording were ambiguous, commercial common sense supported the claimant’s construction because otherwise there would have been no purpose in providing for sectional completion.
5. Disposition. The claimant was entitled to the declaration sought. It was unnecessary to determine the alternative argument that the liquidated damages provisions had become inoperable or penal. The judge nevertheless indicated that, if necessary, he would have concluded that the provisions were operable. The parties were expected to agree an order, including costs.

The judgment describes an adjudication decision dated 2 May 2018, in which the adjudicator accepted the contractor’s construction. The High Court determined the contractual construction issue at first instance and granted the claimant the declaration sought.