Practical Completion and Early Possession under the JCT forms: how the clauses work

The concept of Practical Completion and Partial Possession are familiar concepts to users of the JCT forms. However, the Partial Possession clause in the JCT forms has rarely been considered in case law. The issue arose recently, however, in a case before Judge Thornton - Skanska Construction (Regions) Limited -v- Anglo-Amsterdam Corporation Limited.

In that case, Skanska had carried out works for Anglo-Amsterdam under the JCT 1981 form With Contractor's Design. Its works were completed late. Anglo-Amsterdam claimed that they were not completed until April 1996, because the air conditioning had not been completed and because the O&M manuals had not been handed over. It deducted liquidated damages for delay up to the April date from Skanska as a result.

Skanska disputed Anglo-Amsterdam's entitlement to deduct liquidated damages and the matter went to arbitration. Skanska disputed the date of Practical Completion alleged by Anglo-Amsterdam (although by the time the appeal from the Arbitrator's Award was heard, it had dropped this point). However, Skanska also said that the fact that the Works may not have been practically complete until April 1996 was irrelevant, as Anglo-American had taken partial possession of the whole of the Works in February 1996 in accordance with the "partial possession" clause in the JCT form (Clause 17). As a result, in accordance with that clause, Practical Completion was deemed to have taken place on the date of partial possession.

Clause 17 states (amongst other things): "if at any time or times before Practical Completion of the Works the Employer wishes to take possession of any part or parts of the Works and the consent of the Contractor (which consent shall not be unreasonably withheld) has been obtained, then, notwithstanding anything expressed or implied elsewhere in this Contract, the Employer may take possession thereof". The Arbitrator found, because of this wording that Clause 17 could only apply if part of the Works only had been taken over. In this case, if anything, Anglo-Amsterdam had taken partial possession of the whole of the Works and the Arbitrator thus found that Clause 17 could not apply. He therefore found that Anglo-Amsterdam was entitled to deduct liquidated damages for delay to the April 1996 date.

Skanska appealed from this Award. On appeal, Judge Thornton found that Clause 17 could apply where the Employer takes partial possession of the whole of the Works.

The question then arose as to whether Anglo-Amsterdam had in fact taken possession of the whole of the Works. On reviewing the Arbitrator's decision, the Judge decided that the "irresistible conclusion" was that possession had been handed over to Anglo-Amsterdam in February 1996, with a licence being granted to Skanska to return to site thereafter to carry out the outstanding works, on condition that it made adequate security arrangements for carrying out those works.

The Judge therefore varied the Arbitrator's Award to provide that Skanska was entitled to repayment of liquidated damages for the period between February and April 1996.

Despite the wording of the Partial Possession clauses in the JCT contracts, it now seems clear that it can apply even if the Employer takes over possession of the whole, rather than part, of the Works. However, issues such as the effect of the absence of a written statement from the Contractor identifying the part or parts of the Works taken over by the Employer (which is required by the partial possession clause), and the inter-relationship of the partial possession clause with the clause in the JCT contracts permitting use or occupation of the site by the Employer prior to Practical Completion for the purposes of storage of goods, were not dealt with by the Judge, as he decided that Anglo-Amsterdam had raised these as issues too late in the day. These issues will no doubt surface again when partial possession clauses in the JCT contracts are next considered by the Courts.

For further information please contact Victoria Peckett at victoria.peckett@cms-cmck.com or on +44 (0)20 7367 2544.