One might think, after all of this time, that every issue capable of arising in construction law has already arisen, and been the subject of some sort of judicial guidance. But no, there always seems to be room for a question which has never arisen before, and such a question has recently been on my desk.

It is this: does the existence of a Ruxley defect stand in the way of practical completion?

The decision of the House of Lords in Ruxley v Forsyth [1995] 3 All ER 268; 73 BLR 1 is of course concerned with damages rather than completion. The facts of the case are now well-known; the contractor was building a swimming pool for the owner, and the depth of the swimming pool at the deep end was less than specified by the contract: 6 feet instead of 7 foot 6 inches. The House of Lords found that the owner was not entitled to recover damages representing the cost of rebuilding the swimming pool, since the swimming pool was perfectly serviceable as it was. Lord Jauncey said this:

I take the example suggested during argument by my noble and learned friend Lord Bridge of Harwich. A man contracts for the building of a house and specifies that one of the lower courses of brick should be blue. The builder uses yellow brick instead. In all other respects the house conforms to the contractual specification. To replace the yellow bricks with blue would involve extensive demolition and reconstruction at a very large cost. It would clearly be unreasonable to award to the owner the cost of reconstructing because his loss was not the necessary cost of reconstruction of his house, which was entirely adequate for its design purpose, but merely the lack of aesthetic pleasure which he might have derived from the sight of blue bricks. Thus in the present appeal the respondent has acquired a perfectly serviceable swimming pool, albeit one lacking the specified depth. His loss is thus not the lack of a useable pool with consequent need to construct a new one. Indeed were he to receive the cost of building a new one and retain the existing one he would have recovered not compensation for loss but a very substantial gratuitous benefit, something which damages are not intended to provide.

Applying that logic, would the owner have been entitled to have refused practical completion of the swimming pool, and to have applied whatever liquidated damages might have been payable under the contract for ever and a day, or until the contractor demolished the suing pool and construct a new one of the specified depth? The answer, self-evidently, would appear to be “no”.

But look at the classic tests which apply as to whether or not practical completion has been reached. There have been various formulations, but assuming that the owner was aware of the insufficient depth at the relevant time – in other words, assuming that the defect was patented and not latent – it is not obvious that these formulations pay any or any sufficient regard to the Ruxley situation. Thus for example

Per Viscount Dilhorne in Westminster v Jarvis

…; what is meant [by ‘practical completion’] is the completion of all the construction work that has to be done …; [Because of the ‘defects liability’ clause] it follows that a practical completion certificate can be issued when, owing to latent defects, the works do not fulfil the contract requirements and that under the contract the works can be completed despite the presence of such defects.

Per Judge Newey in H. W. Nevill (Sunblest) v William Press (1981) 20 B.L.R. 78:

I think that the word ‘practically’ in Clause 15(1) gave the architect a discretion to certify that William Press had fulfilled its obligation under Clause 21(1), where very minor de minimis work had not been carried out, but that if there were any patent defects in what William Press had done the architect could not have given a certificate of practical completion.

In Morgan v S & S Construction Ltd [1967] V.R. 149 the Full Court of the Supreme Court of Victoria was concerned, not with a provision based on “practical completion” but “completion” and found:

The proper view would appear to be that, until the work to be done under the contract had been carried out in accordance with the contract, both in respect of manner and materials (except for departures from the contract which were either latent or undiscovered or merely trivial), it would not be “completed”.

So, assuming a Ruxley defect is not latent at the relevant time, is it necessarily to be regarded as “very minor” or “de minimis” or “merely trivial”? That was not the Ruxley test.

In McLaren Murdoch & Hamilton Ltd v Abercromby Motor Group Ltd (2002) 100 Con LR 63 the Scottish Court supplied a slightly different test:

In my opinion … a pursuer will be entitled to the cost of making the works conform to contract except in two situations: firstly, where the cost involved is manifestly disproportionate to any benefit that will be obtained from it, in which case the court should take notice of the disproportion; and, secondly, where the defender leads evidence to show that there is a significant disproportion between the cost and the benefit. Even in the latter category of case, I consider that the balance between cost and benefit should not be weighed too finely.

Would a course of blue bricks instead of yellow bricks be de minimis? Perhaps. It was not a very good example, and perhaps House of Lords did not appreciate that, technically, it is by no means impractical to replace a course of bricks in a building. But what of a building where, for example, a contractor had built the foundations with screw piles instead of the specified driven piles? In those circumstances, the screw piles might well be entirely adequate for their intended purpose and such that it would be manifestly disproportionate for the building to be demolished and rebuilt on driven piles. Common sense would suggest that the owner should not be entitled to refuse to accept completion, and to charge liquidated damages for an indefinite period. There would be no practical way for the contractor to replace the piles without complete demolition and rebuilding.

There are those who would say that common sense has got nothing to do with it. They would say that whilst the common law can intervene with some common sense in terms of the appropriate award of damages, there is no room for the law to intervene with the contractual mechanism, and if the contract says that practical completion is not achieved until the building is compliant with the specification, then so be it.

Certainly, the express wording of the contract is likely to prevail in cases where what has been provided by the contractor is materially less good than what was specified by the contract. In Wm Cory & Son Ltd v Wingate Investments (London Colney) Ltd (1981) 17 BLR 104, for example, the contractor provided a tarmacadam hardstanding when the contract called for concrete. The evidence was that the tarmacadam hardstanding would have a significantly lesser life than concrete.

There may be many cases where the carrying out of remedial work to bring the building into line with the specification may be so entirely out of line with what the cost of those works would be and the nature of those works having regard to the nature of the building as a whole that the Court would gladly accept some other basis for the assessment of damages. But from first to last in the present case nobody has ever suggested that a concrete hard standing is either extravagant or something so utterly outside what would be found in a normal contract to provide a depot of this kind as to cause the Court to say that something cheaper but equally as good ought to be substituted. Indeed I do not myself know of any power in the Court to assess damages on such a basis. It might be one thing if the tarmacadam itself would last the 42 years of the two leases; but all the experts called before the learned deputy judge entirely refuted such a suggestion. It would last at the most, and after maintenance, something like ten years. So as far as tarmacadam is concerned this would not, without renewal, last the 42 years or even the remainder of that period. If it is a substitute for concrete, which itself is estimated to outlast the length of the two leases without renewal or repair, it is a poor substitute. Can it really be that the Court can substitute margarine for butter in this manner, even though many people cannot tell the difference? For myself I entirely refute any such suggestion; once it has to be admitted, as admitted it has been, that the macadam will need replacement by something else in the very near future, speaking for myself I think that is an end of this part of the case…

But what of the case where there is no substitution of margarine for butter, but the substitution of Dutch butter for Danish butter? It may be that in the circumstances a court would be inclined to say that the substitution is trivial, that the failure to follow the specification is not truly to be characterised as a defect at all, or simply to approach the matter on the basis that the building is in fact complete, albeit that the completed building is not entirely in accordance with the specification.

The textbooks have relatively little to say about this, but then again, the textbooks are never quite up-to-date, and was a recent case in which Edwards Stuart J considered essentially this point, Laing O’Rourke v Health Care Support [2014] EWHC 2595 (TCC). These cases inevitably require a detailed consideration of the contractual terms in question, but the overall thrust of the judgment is, as suggested above, that a mere technical disconformity is not be treated as something which prevents practical completion from being certified:

34. Miss Barwise did not shrink from the conclusion that, if her argument were correct, it meant that if the Trust could identify any non-conformity with the terms of the contract and bring it to the attention of the Independent Tester, he would be bound to refuse to issue a completion certificate if he agreed that the nonconformity alleged did in fact exist. On Miss Barwise’s approach it did not matter whether the nonconformity would or would not adversely affect the amenity value or functional use of the offices. Beguilingly though it was argued, this was clearly a bold submission…But in my view if the Independent Tester reasonably considers that a departure from the specification or the TCRs has not had and will not have any material adverse impact on the ability of the Trust to enjoy and use the buildings for the purposes anticipated by the contract, then he may conclude that the Completion Criteria have been met. As a matter of business efficacy and commercial common sense, I can 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.
    

44. It follows also that the existence of a dispute between the Trust and the Contractor as to whether or not some particular nonconformity with the specification or TCRs either exists at all or prevents the offices from being taken into use in the manner anticipated by the contract cannot be relevant to the exercise of the Independent Tester’s judgment. He must decide for himself, having received any representations from the parties, as to whether or not the nonconformity alleged (assuming that he accepts that it is a nonconformity) has or is likely to have a materially adverse effect on the enjoyment and use of the building by the Trust in the manner contemplated by the agreements. If he concludes that it will not, [2014] 1 BLR 733then he can issue the completion certificate and leave the Trust to its remedy in damages.
    

45. This is quintessentially a matter of fact and degree. During argument I put to Miss Barwise a hypothetical example. Suppose that the Contractor had misread the drawings with the result that the vertical distance between the floor slabs on each level was 50mm less than it should have been. The Contractor takes steps to mitigate the effect of this by reducing the void above the false ceilings by 25mm. The result is that the ceilings on each floor are 25mm lower than they should have been.
    

46. If, for the purposes of the argument, one assumes that the slightly lower ceilings will make absolutely no difference to people using the offices, for example, by raising the ambient temperature, and are barely noticeable from an aesthetic point of view, is the Independent Tester bound to refuse to issue a completion certificate? Miss Barwise says yes. Mr Fraser says no.
    

47. Of course, the practical answer may be that in those circumstances no reasonable body in the position of the Trust would object and so the question would be academic. However, experience shows that people and corporate bodies do not always behave reasonably. The hypothetical trust may already be in dispute with the contractor and so seizes on this nonconformity as a commercial lever to delay completion and improve its position in the negotiations. There is a suggestion that that is what is happening here, and it certainly looks as if there may have been an element of exaggeration in some of the witness statements, but that is not an issue before me and so I do not propose to say any more about it.

In the future, the textbooks might perhaps say that in addition to the two established categories of defects which do not prevent practical completion

• latent defects
• defects that are de minimis

a third category is to be added namely

• Ruxley defects.