A (small) matter of construction: whether a breach was material
10 April 2019
In Mears v Costplan, the Court of Appeal looked at the question of material breach.
Pickstock contracted with Plymouth to build two blocks of student accommodation. Mears entered into an agreement for lease of the property with Plymouth. The agreement for lease prohibited Plymouth from making any variations to the building that "materially affect the size of the rooms (and a reduction of more than 3% of the size of any distinct area ...shall be deemed material)".
Several rooms were more than 3% smaller than the sizes shown in the drawings. Mears argued that any failure to meet the 3% tolerance was "a material and substantial breach" automatically entitling Mears to terminate and meaning that no practical completion certificate could be issued. Plymouth conceded that any failure to comply with the 3% tolerance was a breach, but argued that the provision said nothing about the nature of the breach. So what was material was the reduction in size not the breach of contract.
The court accepted that parties can agree in advance that breach of a specific clause would amount to a material breach. However that was not what they had done here. The court read the clause to mean that a 3% reduction in size was material and amounted to a breach, not that the resultant breach was itself material. It would be commercially unworkable for every variation from the drawings to amount to a breach. There had been breaches, but the materiality of those breaches was a question of fact and degree. Therefore, Mears was not discharged from its obligations under the lease.
For construction lawyers, the court gave a helpful overview of what practical completion means. It also held that the fact that a breach is irremediable does not, of itself, prevent practical completion. What matters is whether the defect is trifling. This was consistent with Ruxley (the case about the 7'6'' pool that turned out to be only 6').