O'Rourke Construction Ltd v Healthcare Support (Newcastle) Ltd and others
There was no requirement that any breach of the specification however technical or minor must prevent the Phase Certificate of Practical Completion from being issued.
The proceedings arose out of the construction of facilities at two hospitals in Newcastle for an NHS Foundation Trust (the “Trust”). The project was undertaken under a Private Finance Initiative scheme. O'Rourke Construction Ltd (“O”) entered into an agreement dated 4 May 2005 with Healthcare Support (Newcastle) Ltd (“HSN”) to design and build the facilities (the “Construction Contract”). HSN entered into an agreement with the Trust on the same day by which it agreed to design, build and finance the redevelopment of the facilities and to provide other related services (the “Project Agreement”). The works under the Construction Contract were to be carried out in nine phases. Phase 8 concerned two Clinical Office Blocks. O contended that Phase 8 was completed in mid-2012. However, the Phase Certificate of Practical Completion was not issued by the independent tester (“Independent Tester”). The Claimant sought a declaration in relation to the manner in which the Independent Tester was to act when deciding whether or not to issue a Phase Certificate of Practical Completion. The Trust asserted that any breach of contract relating to the quality or conformity of the works required the Independent Tester to withhold the completion certificate, whereas O contended that all that was required was compliance with the completion criteria (“Completion Criteria”) set out in the Project Agreement and repeated in the Construction Contract in materially the same terms.
Edwards-Stuart J sitting in the Technology and Construction Court granted the declaration sought by O in part. He held that if the Independent Tester reasonably considered that a departure from the specification had not had and would not have any material adverse impact on the ability of the Trust to enjoy and use the buildings for the purposes anticipated by the contracts, then he might conclude that the Completion Criteria had been met. As a matter of business efficacy and commercial common sense, he could see no justification for importing a requirement that any breach of the specification, however technical or minor, must prevent the Phase Certificate of Practical Completion from being issued. It followed also that the existence of a dispute between the Trust and O as to whether or not some particular nonconformity with the specification either existed at all or prevented the offices from being taken into use in the manner anticipated by the contracts could not be relevant to the exercise of the Independent Tester's judgement. He must decide for himself, having received any representations from the parties, as to whether or not the nonconformity alleged had or was likely to have a materially adverse effect on the enjoyment and use of the building by the Trust in the manner contemplated by the contracts. If he concluded that it would not, then he could issue the completion certificate and leave the Trust to its remedy in damages.
Kiran Arora says:
"The case was decided very much on its facts and the drafting of the contracts. One of the limbs of the Trust’s case was that a clause of the construction contract referred to completion “in accordance with the Trust’s Construction Requirements, the Completion Criteria and this Contract” so the case illustrates the need for tight drafting in describing the parties’ criteria for practical completion."