When practical completion is deemed to have been achieved.

By Roelf Nel (RN Inc.)

Introduction 

Can practical completion be achieved by handing the keys to a workshop with a defective floor to the employer?

This is the questioned that had to be decided in an arbitration where we acted for the employer. 

The parties entered into a JBCC contract for the completion of a workshop.

It was the contractor’s case that a number of problems were experienced in the construction process that caused delays and resulted in the principal agents’ granting multiple extensions of time until 9 July 2020.

The employer was obliged to provide access to a tenant who had to install and calibrate 4 machines in the workshop before the end of July 2020 failing which the guarantees on the machines would lapse.

As a result of the urgent need to install and calibrate the machines the tenant accepted the keys of the workshop on 9 July 2020 and attempted to install and calibrate the first machine.

During this process it was discovered the floor screed was delaminating to such an extent that the tenant was unbale to install and calibrate the machine and accordingly removed the machines and attempted to hand the keys back to the contractor.

The contractor refused to accept the keys and alleged that a deemed practical completion had occurred.

Was there a deemed practical completion?

The contractor alleged that deemed practical completion is triggered by the mere possession of the building and not beneficial use or occupation.

The arbitrator, in considering the contractors allegation said that every employer who enters into a construction contract with a contractor does so on the basis that the final outcome of the project will be a structure that can be used in accordance with the intended purpose of that structure.

The phrase “deemed practical completion” must be interpreted within this context.

In this sense, there must be some link between such “possession” and the use of the structure for its intended purpose.

In the present case the end user was only able to move in one machine which had to be subsequently moved out in order to repair the floor.  As a result the warranties were lost as was other income generating revenue.

The arbitrator said, given the present facts, he could not infer that the Employer had agreed to take possession for purposes of deemed practical completion under these circumstances.

Conclusion

 In order to achieve deemed practical completion there has to be an agreement between the contracting parties that the employer will take possession of the works before practical completion is achieved in order to use the works for the purposes which the works was constructed.