Mears Ltd v Costplan Services (South East) Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Newey,Lord Justice Lewison |
| Judgment Date | 29 March 2019 |
| Neutral Citation | [2019] EWCA Civ 502 |
| Docket Number | Case No: A1/2018/3112 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 March 2019 |
[2019] EWCA Civ 502
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
TECHNOLOGY & CONSTRUCTION COURT
Mr Justice Waksman
HT-2018-000250
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lord Justice Newey
and
Lord Justice Coulson
Case No: A1/2018/3112
Mr Stephen Dennison QC & Ms Camille Slow (instructed by Mischon de Reya LLP) for the Appellant
Mr Andrew Rigney QC & Mr Dermot Woolgar (instructed by Silver Shemmings Ash LLP) for the 2 nd Respondent
Written Submissions were received from the 1 st Respondent The 3 rd Respondent did not appear and was not represented
Hearing date: Wednesday 13th March 2019
Approved Judgment
Introduction
The third respondent (“Pickstock”) is both a developer and a building contractor. By a building contract dated 27 May 2016, Pickstock was engaged by the second respondent (“PNSL”) to design and build two blocks of student accommodation at Notte Street, in Plymouth (“the property”). Pursuant to an Agreement for Lease (“AFL”) dated 20 May 2016, the appellant (“Mears”), a company in the business of providing managed student accommodation, contracted with PNSL to take a long lease of the property following completion.
Amongst other things, the AFL prohibited PNSL from making any variations to the building works which materially affected the size of the rooms (clause 6.2.1). The clause stipulated that a reduction in size of more than 3% was deemed to be material. In the event, Waksman J found that some of the rooms were more than 3% smaller than the sizes shown on the relevant drawings. That finding of fact was the subject of Declaration 5. There is no appeal against that conclusion. The appeal was presented on the basis that there were 56 such rooms.
It is Mears' case that, pursuant to the AFL, any failure to meet the 3% tolerance was, without more, “a material and substantial breach” of the AFL, the existence of which automatically meant that: a) Mears was entitled to determine the AFL; and b) the Employer's Agent could not validly certify practical completion. In a judgment dated 7 December 2018 ( [2018] EWHC 3363 (TCC)), Waksman J rejected Mears' claims for declarations to that effect (Declarations 1–4). Mears now appeal against the refusal to make Declarations 1–4.
Before turning to the AFL, and the two issues which arise, it is necessary to make two introductory observations.
First, Declarations 1–4 were drafted in very wide terms. They were said to arise either as a matter of construction of the AFL or as a matter of law. They were not related to the particular facts of the case. Although at a very late stage of the trial, Mears sought to argue that there had been a material and substantial breach of clause 6.2.1 on the facts (ie because 56 rooms were beyond the 3% tolerance), for the reasons explained at [44] – [50] of the judgment, no amendments to that effect were ever formulated and Waksman J declined to deal with the claimed declarations by reference to the facts. As we shall see, that poses certain difficulties for Mears, particularly in relation to Issue 2 (concerned with practical completion), which is conventionally regarded as a matter of fact and degree.
Secondly, the arguments on appeal about the construction of the AFL, and whether practical completion can ever occur if the outstanding matters cannot be economically remedied, might be thought to be some way removed from the real dispute between the parties, which is whether, on the facts, Mears are entitled to refuse to execute the Lease because of PNSL's breaches of contract. The court was told that PNSL's separate claim for specific performance was issued on 20 December 2018 and that the claim is defended by Mears.
Thus, this court is keenly aware that, because the declarations sought are unconnected to the facts (and therefore theoretical), and because the arguments as to construction and as to practical completion are not determinative of the claim for specific performance (and the defence to it), the matters addressed below may be of limited utility to the parties.
The Contracts and the Relevant Events
The AFL
The overall scheme of the AFL was that PNSL, as the Landlord, would carry out the Landlord's Works. Those were set out in the Building Documents, which were defined as being the documents listed in Annex A to the AFL. These included the Employer's Requirements, (which were also a key component of the building contract, separately entered into between PNSL and Pickstock). Pursuant to clauses 3 and 22.1, 5 days after the certification of practical completion, PSNL would grant Mears, and Mears would execute, a Lease in the terms set out at Annex B to the AFL.
PNSL's principal obligation was to carry out the Landlord's Works. That obligation was set out in clause 5 of the AFL as follows:
“ 5. Carrying out the Landlord's Works
5.1. The Landlord must commence the Landlord's Works as soon as reasonably practicable after the necessary Approvals have been obtained, and must diligently carry them out and complete them in a good and workmanlike manner and with sound materials of their respective kinds, in accordance with the terms of any Approvals, in accordance with the Building Contract, and otherwise in accordance with the provisions of this agreement.”
As the prospective tenant, but not a party to the building contract, Mears required protection against unauthorised or substantial changes to the Landlord's Works as the works progressed. One element of that protection was set out in clause 6 as follows:
“ 6 Variation and substitution of materials
6.1. Subject to clause 6.2, if the Landlord is unable, despite having used reasonable endeavours, to obtain any of the materials referred to in the Building Documents within a reasonable and proper time or at a reasonable and proper cost, he may, subject to promptly notifying the Surveyors of his intention to do so, substitute for them alternative materials of equivalent (or better) quality.
6.2. The Landlord shall not make any variations to the Landlord's Works or Building Documents which:
6.2.1. materially affect the size (and a reduction of more than 3% of the size of any distinct area shown upon the Building Documents shall be deemed material), layout or appearance of the Property; or
6.2.2. result in materially increased maintenance costs or increase the frequency of component replacement cycles; or
6.2.3. are substantial or material.
6.3. Subject to clause 6.2, the Landlord may make variations to the Landlord's Works without the Tenant's consent if:
6.3.1. the variations are insubstantial or immaterial and of routine nature; or
6.3.2. the variations are required by the terms of any Approval.
Subject to clause 6.2, any other variation to the Landlord's Works can be made by the Landlord with the consent of the Tenant (such consent not to be unreasonably withheld or delayed)…”
Additional protection for Mears was provided by clauses 8 and 9, which allowed Mears' surveyors access to the property and the opportunity to attend meetings and inspect documents. If their surveyors had concerns, Mears could issue defect notices pursuant to clause 9. As noted below, that is what happened, although many of those notices were issued only after the Employer's Agent had first indicated, in August 2018, that they were likely to certify that practical completion had been achieved.
Clause 13 was concerned with liquidated damages and termination. At clause 13.7.2 the AFL provided that “if the Certificate of Practical Completion has not been issued by 11 September 2018 then Mears or PNSL may at any time thereafter (but before the Date of Practical Completion) give notice to the other parties terminating this agreement”. It was common ground that this was extended by agreement to 18 September 2018. Accordingly, if the works were not the subject of a valid certificate of practical completion by this long stop date of 18 September 2018, either side was entitled to determine the AFL.
The specific provisions in relation to practical completion were set out at clause 14. The relevant parts were as follows:
“ 14 Practical Completion
14.1. The Landlord shall use reasonable endeavours to procure that the Employer's Agent does not issue a Certificate of Practical Completion without previously giving to the Surveyors not less than 5 working days' notice that he proposes to carry out an inspection on a date specified in the notice with a view to issuing the Certificate of Practical Completion.
…
14.4. The Surveyors may attend every inspection, and the Landlord shall use reasonable endeavours to procure that the Employer's Agent has due regard to any written representations made by them within 3 working days after the notice referred to in clause 14.3. The issue or non-issue of the Certificate of Practical Completion is to be in the sole professional discretion of the Employer's Agent but no Certificate of Practical Completion shall be issued until the Landlord has complied with the obligations to supply information and documentation and achieve the qualitative requirements listed in Part A of the list annexed to this agreement as Annex D.”
The AFL defined the ‘Certificate of Practical Completion’ as:
“A certificate issued by the Employer's Agent to the effect that practical completion of the Landlord's Works has been achieved in accordance with the Building Contract.”
Accordingly, on the face of it, the AFL and the building contract envisaged just one certificate of practical completion (as opposed to separate certificates under each contract). The parties operated throughout on the basis...
To continue reading
Request your trial
-
Wigan Borough Council v Scullindale Global Ltd
...Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502, [2019] 4 WLR 55 Moss v Barton (1866) LR 1 Eq 474 Proxima GR Properties Ltd v Spencer [2017] UKUT 450 (LC), [2018] L & T R 9 Rider v Ford......
-
Willow Corporation S.À.R.L. v MTD Contractors Ltd
...Mr Molloy. DISCUSSION 41 Practical Completion can be an elusive concept. In Mears Ltd v. Costplan Services (South East) Ltd [2019] EWCA Civ 502; [2019] 4 W.L.R. 55, Coulson LJ said at [74]: “I consider that the law on practical completion can therefore be summarised as follows: a) Practic......
-
Phoenix Interior Design Ltd v Henley Homes Plc
...the meaning of completion, the Claimant relies on authorities including the case of Mears Ltd v Costplan Services (South East) Ltd [2019] 4 WLR 55 (CA) [62]–[74], in which the meaning of completion was summarised at [74](d)-(e) “ as a state of affairs in which the works have been completed......
-
Ballyboden Tidy Towns Group v an Bord Pleanála, The Minister for Housing, Local Government and Heritage, Ireland and the Attorney General
...greater than 35 dwellings per hectare ……….” 149 §5.4 150 §5.10 151 §5.6 152 Mears Ltd v Costplan Services (South East) Ltd and others — [2019] 4 WLR 55; Keating on Construction Contracts, 10th ed (2016), para 20–169; 153 Hyper Trust Ltd v. FBD Insurance PLC [2021] IEHC 78 (High Court (Gene......
-
Construction Law: Our Christmas Top Ten For 2019
...concluded that liquidated damages did not apply to incomplete work. Mears Limited v Costplan Services (South East) Limited and Others [2019] EWCA Civ 502 Judgment: 29 March 2019 There are no hard and fast rules in relation to the concept of practical completion, but based on the facts of th......
-
Meaning Of Practical Completion
...of Appeal ("EWCA") in Mears Limited v Costplan Services (South East) Limited, Plymouth (Notte Street) Limited, J.R. Pickstock Limited [2019] EWCA Civ 502 considered the meaning of practical completion and when a breach of contract can prevent practical Pursuant to an Agreement for Lease ("A......
-
What Type Of Defect Can Prevent 'Practical Completion'?
...type of defect can prevent "practical completion"? In Mears Ltd v Costplan Services (South East) Ltd & Ors 2019 EWCA Civ 502, the Court of Appeal provided guidance on the meaning of "Practical Completion" for the first time in 50 years. But is the position any Mears, a provider of stude......
-
What Happens When A Building Is Built To The Wrong Size? Confirmation From The Court Of Appeal
...a right to terminate. Mears Limited v Costplan Services (South East) Limited, Plymouth (Notte Street) Limited, J.R. Pickstock Limited [2019] EWCA Civ 502 The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your s......
-
Defects
...used the term “defective work” to include work that has not been done at all. See also Mears Ltd v Costplan Services (South East) Ltd [2019] eWCA Civ 502 at [74(c)], per Coulson LJ. in Cannington Construction Co Pty Ltd v Pegler [1968] WASC 37, Negus J remarked (at p22): “i think it is perh......
-
Contract administration
...356 Including, it seems, omissions or defects that are incapable of being remedied: Mears Ltd v Costplan Services (South East) Ltd [2019] EWCA Civ 502 at [74(f )], per Coulson LJ. 357 See, eg, Morgan v S&S Constructions Pty Ltd [1967] VR 149 at 154–156; Westminster Corporation v J Jarvis & ......