Key points
• JCT contracts provide for final certificates to be conclusive unless challenged within 28 days
• The TCC has upheld that approach stressing that the challenging party is normally only entitled to bring a single challenge within the 28-day period
In The Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Limited [2015] EWHC 70 (TCC), Coulson J stressed the importance of final certificates in the Joint Contracts Tribunal (JCT) suite of contracts. He highlighted the need for any challenge to a certificate to be issued within 28 days because where “there is no challenge, the final certificate becomes conclusive evidence in respect of a wide range of matters, from defects to delays to all remaining financial disputes”.
Gilbard, while being the latest in a long line of cases on final certificates, still raises a novel point of law.
The facts
The claimant trustees employed the defendant as main contractor for construction work in Mayfair, using the JCT 2009 without quantities form. The contract contained the usual JCT provisions regarding the final certificate. Clause 1.9.1 provided that a final certificate would be conclusive evidence as to variations, extensions of time and loss and expense.
Clause 1.9.3 stated that any final certificate “shall have effect as conclusive evidence as provided in clause 1.9.1” save only in respect of matters referred to in “any adjudication, arbitration or other proceedings” commenced by either party with 28 days after the final certificate. Clause 1.9.4 also allowed the parties to issue court proceedings in relation to an adjudicator’s award handed down after the final certificate, so long as those proceedings are commenced within 28 days of the date of the award.
In December 2013, the contract administrator issued a final certificate stating that the claimant owed the defendant £232,153 plus VAT. Within 28 days, the defendant commenced court proceedings challenging that certificate.
Unusually for the Technology and Construction Court (TCC), little progress had been made in 13 months.
The defendant then decided to issue adjudication proceedings dealing with the same challenge to the final certificate as the court case. Coulson J had to decide whether it could do so under clause 1.9.3. Did the court proceedings (issued in time) mean the defendant had preserved the right to adjudicate on the same issues? Or was the adjudication out of time because of the 28-day time bar?
The law
Coulson J’s starting point was to emphasise that the law required him to interpret clause 1.9.3 in a manner that made commercial common sense. Relying on judgments such as Wickman Machine Tool Sales v L Schuler AG [1974] AC 235 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, he stressed that where a clause has two possible interpretations, “The court is entitled to prefer the construction which is consistent with business common sense and reject the other” (Rainy Sky).
The judge then highlighted a range of authorities (including Agro Company Canada Ltd v Richmond Shipping (The Simonburn) [1973] 1 Lloyds Rep 392 and University of Brighton v Dovehouse Interiors [2014] BLR 432, which also dealt with clause 1.9.3 of the same JCT contract) regarding conclusive evidence clauses in general; all of which support the principle that conclusive evidence clauses “provide some limits to the uncertainties and expense of arbitration and litigation” (The Simonburn).
Finally, Coulson J considered a number of authorities that dealt with conclusivity clauses and adjudication. These included his earlier decision in Cubitt Building and Interiors v Fleetglade [2006] EWHC 3413 which dealt with the risk faced by a party challenging a certificate by way of adjudication when, through no fault of their own, the adjudicator’s decision was a nullity. The judge had acknowledged that there was a risk that the parties would lose their ability to challenge the certificate and, in the current edition of his book Coulson on Construction Adjudication, he had suggested it would be prudent for a party challenging a final certificate by way of adjudication also to commence court or arbitral proceedings as a fall-back.
The judgment
The judge rejected the defendant’s argument. First, he held that on its ordinary meaning, clause 1.9.3 intended there to be one set of proceedings to challenge the certificate. The clause did not mean that once a set of proceedings had been commenced in time, further proceedings could be started out of time (even when the later proceedings deal with the same matters as the earlier one). In the judge’s view, his interpretation made commercial common sense and helped to achieve the certainty regarding future disputes that is the underlying goal of a conclusive evidence clause such as 1.9.3.
In fact, the judge allowed two exceptions. First, where the challenge to the certificate was by way of adjudication, the judge repeated the view from his book: protective court or arbitral proceedings were also permitted. Secondly, court proceedings as envisaged by clause 1.9.4 were permitted in relation to an adjudicator’s award issued after the final certificate, as long as they are commenced in time.
The judge rejected arguments that clause 1.9.3 fettered the defendant’s general right to refer disputes to adjudication at any time as envisaged by the Housing Grants, Construction and Regeneration Act 1996 or his decision would be unfair to the defendant in that the issue of the final certificate remained unresolved. There was no fetter; the defendant had chosen not to commence adjudication in time. And he placed the blame for the delay on the defendant’s shoulders.
