Mears Ltd v Costplan Services (South East) Ltd & Ors

A contractual provision deeming a reduction of more than 3% in room size to be material identifies a breach. It does not deem the resulting breach itself material or substantial, or make it automatically repudiatory or grounds for termination. Those questions remain matters of fact and degree. Practical completion is also fact-sensitive. It generally requires completion free of patent defects, apart from defects properly regarded as trifling, while latent defects do not prevent certification. The assessment reflects the purpose of allowing possession and intended use, but habitability alone is insufficient. An irremediable defect is not automatically a bar to practical completion. Its remediability concerns the measure of loss. The appeal was dismissed.

Pickstock agreed to design and build student accommodation for Plymouth (Notte Street) Limited, while Mears agreed to take a long lease under an agreement for lease. The agreement prohibited variations materially affecting room size and deemed a reduction exceeding 3% material. Fifty-six rooms were found to exceed that tolerance.

Mears sought declarations that each such breach was automatically material and substantial, entitled it to determine the agreement, and prevented valid certification of practical completion. It also sought declarations concerning patent defects, subsisting breaches and the effect of defects incapable of economic remedy. Waksman J granted a declaration concerning breach but refused the other declarations in [2018] EWHC 3363 (TCC). Mears appealed.

Lord Justice Coulson delivered the judgment, with Lord Justice Newey and Lord Justice Lewison agreeing. The appeal was dismissed.

1. Clause 6.2.1. The contractual deeming provision concerned the material effect of a variation on room size. It identified when a departure from the drawings constituted a breach. It did not deem the resulting breach itself to be material or substantial, and did not make it automatically repudiatory or entitle Mears to determine the agreement. Whether the breaches, individually or collectively, justified termination was a matter of fact and degree. The word substantial did not appear in the clause.
2. Practical completion. There are no hard and fast rules. In relation to patent defects, incomplete work and defective work are treated alike. The practical approach developed in H.W. Nevill (Sunblest) Limited v William Press & Son Limited (1981) 20 BLR 78 and Emson Eastern Limited (in receivership) v E.M.E. Developments Limited (1991) 55 BLR 114 was preferred to the stricter approach associated with Jarvis & Sons Limited v Westminster Corporation & Another [1970] 1 WLR 637 and Kaye v Hosier & Dickinson [1972] 1 WLR 146. Practical completion generally requires the works to be free from patent defects, except those properly regarded as trifling.
3. Whether an item is trifling is a matter of fact and degree, assessed against the purpose of allowing possession and intended use. A building’s being habitable or capable of operating does not, by itself, establish practical completion. The nature and extent of the outstanding or defective work and the context must be considered. The broader proposition in Bovis Lend Lease Ltd v Saillard Fuller & Partners (2001) 77 Con LR 134 was doubted.
4. The parties could have agreed contractual parameters controlling the certifier’s discretion, but clause 6.2.1 did not do so. In the absence of such control, practical completion was initially a matter for the certifier. Irremediability was irrelevant to that question: a trifling patent defect does not prevent completion merely because it cannot economically be remedied, while a more than trifling defect prevents completion regardless of remediability. Remediability bears on the measure of loss, consistently with the limited relevance of Ruxley Electronics & Construction Limited v Forsyth [1996] 1 AC 344.
5. The principle relied on from Alghussein v Eton College [1988] 1 WLR 587 did not apply because PNSL was not relying on its breaches to obtain an advantage. The requested declarations were therefore refused.

• Court of Appeal (Civil Division): dismissed Mears’s appeal against the refusal of declarations 1–4 in [2019] EWCA Civ 502.
• Queen’s Bench Division, Technology & Construction Court: Waksman J granted a declaration that one or more rooms breached the agreement for lease but refused declarations 1–4 in [2018] EWHC 3363 (TCC).