BUILD - 2018 Facilities Management Awards

9 2018 Facilities Management Awards Build doesn’t have a tenant or purchaser for the completed development, it could result in unwanted delays for the contractor. Understanding the implications At the contracting stage, parties may agree to a definition of practical completion that seems reasonable enough, or even advantageous. However, it’s critical that the parties are fully aware of what they are agreeing to and the associated pros and cons. In GB Building Solutions Ltd v SFS Fire Services Ltd (t/a Central Fire Protection), GB sub-contracted SFS to install a sprinkler system. The sub- contract required GB to co-insure SFS to cover flooding and other “perils” up to the date of practical completion of its works. The sub-contract defined practical completion as the date SFS gave notice that it considered practical completion to have occurred, subject to GB disagreeing with that date within 14 days of the notice. When the development flooded, GB sued SFS, alleging that the flooding was due to SFS’ negligent works. SFS responded that GB’s claim was barred because the development had flooded before practical completion under the main contract and therefore, SFS was still co-insured with GB. The court disagreed, holding that SFS gave notice of practical completion under the sub-contract before the flood, which GB had not disputed within 14 days. Therefore, practical completion had occurred and it was irrelevant whether the sub-contract works were actually complete when the flooding occurred or that practical completion hadn’t occurred under the main contract. It’s important to note that the fact that “practical completion” was capitalised in the main contract, and not in the sub-contract, directly impacted the court’s opinion in the case. This case highlights the importance of understanding what is being agreed to, being aware of any inconsistencies within the contract, as well as any potential pitfalls. The sub-contractor may have thought the provision empowering it to provide the date for practical completion was a boon, but may not have considered the downfalls of issuing practical completion notice before the work was actually complete or the effect notice had on its insurance cover on the project. Avoiding pitfalls later by preparing now The meaning of practical completion is a persistent source of disagreement in construction works, and potentially will continue to be, because whilst a broad definition of “practical completion” can be agreed upon, due to the bespoke nature of construction, determining whether or not practical completion has been achieved on a particular project is much more difficult and must ultimately be decided case by case. Likewise, because building construction isn’t like the manufacturing of goods, where definitive benchmarks and requirements can be outlined, differences of opinion will inevitably arise when the contractor considers the works to be complete but the architect, contract administrator or employer responsible for certifying practical completion disagrees. Amending the standard form JCT contract is one way to avoid problems in the future, but a carelessly worded or ambiguous amendment may be worse than none at all. Wording must be chosen carefully and clearly reflect the intentions of the parties. If the parties decide that the works must be “satisfactory” or “not different from design” in order to comply with practical completion, those terms must be sufficiently clear to avoid dispute later on. As the GB Building Solutions case demonstrates, even inconsistent capitalisation can have an impact on how practical completion is interpreted. As the saying goes, an ounce of prevention is worth a pound of cure, and it’s wise to consider any important issues and ambiguities prior to contracting, seeking legal advice before a dispute starts and not just after.