UK: Does The Conclusivity Of A JCT Final Certificate Unlawfully Fetter A Party’s Right To Adjudicate?

Last Updated: 23 March 2015
Article by Alex Barker

Where a project is governed by a JCT form of contract, the Final Certificate is intended to ensure that disputes arising after practical completion are resolved with a degree of finality and speed. The usual provision is that a party has 28 days in which to challenge the Final Certificate, once it has been issued. In the absence of a challenge, the Certificate will become conclusive evidence of many aspects that might be the subject of a later dispute. The recent TCC case of The Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Limited [2015] EWHC 70 (TCC) dealt with the question of whether a party could, having commenced litigation within the 28 day period, proceed to commence adjudication in respect of the same issues after the expiry of the same period.

Facts

The Claimant employed the Defendant to carry out works under the JCT Standard Building Contract (Without Quantities) Revision 2 (2009) ("the Contract"). The Contract contained some typical provisions in relation to the Final Certificate, including that the Final Certificate would be "conclusive evidence" in any proceedings as to a host of matters (defects, extensions of time, loss and expense etc.). This was subject to the usual saving provision as follows:

If any adjudication, arbitration or other proceedings are commenced by either Party within 28 days after the Final Certificate has been issued, the Final Certificate shall have effect as conclusive evidence as provided in clause 1.9.1 save only in respect of the matters to which those proceedings relate.

The contract administrator issued the Final Certificate showing that the Defendant owed the Claimant £232,153.54 plus VAT. Within the 28 day contractual period, the Defendant commenced litigation in the TCC disputing the Final Certificate. However, over a year later, the Defendant also wished to commence adjudication in respect of the same matters contested in the existing litigation (presumably so that the ongoing court proceedings could act as a fall-back option in the event that the adjudication failed to resolve the mater to its satisfaction).

The Claimant sought a declaration as to the proper interpretation of the above contractual provision. It was their case that commencing adjudication was not an option available to the Defendant because they would be commencing following the expiry of the 28 day period, notwithstanding the fact that the same matters were being legitimately dealt with in the existing litigation (which, it was agreed, was validly commenced within the 28 day period). In the Claimant's alternative submission, the Contract could not be interpreted as allowing proceedings to be commenced outside of the 28 day period as a matter of business common sense (a reference to the approach to contractual interpretation set out by Lord Clarke in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900).

The Defendant argued that the key word in the clause was "matters", so that the Final Certificate should not have effect as conclusive evidence in relation to all "matters to which those proceedings relate" ("those proceedings" being those commenced within the 28 day period). This would leave the door open for subsequent proceedings to be issued outside of the period, provided they related to the same "matters" (ie the same issues). In the Defendant's submission, if such subsequent proceedings could not be issued it would constitute an unlawful fetter on the statutory right to adjudicate.

As Coulson J neatly summarised, at paragraph 23:

"The real point on the interpretation issue is whether [the clause]  envisages one set of proceedings (whether adjudication, arbitration or court proceedings) issued within the 28 days to challenge the Final Certificate, or whether it envisages an initial set of proceedings in which the relevant "matters" can be raised, but then permits the challenger to commence other proceedings, outside the 28 days, which (provided only that those same matters were raised in the subsequent proceedings) would be equally legitimate."

The Decision of Coulson J

The Court found in favour of the Claimant. Coulson J highlighted the value of these types of clauses concerning the Final Certificate, in that they offer a degree of certainty and clarity. He also said that, in response to the Defendant's submission, the use of the word "matters" did not refer to the same "matters" for all time, both within and beyond the 28 day period, but rather to the "matters raised in those proceedings which are caught by the saving provision, but nothing else". The clause therefore did not envisage more than one set of proceedings. This conclusion was also in accordance with "business common sense".

As to the point about fettering adjudication, Coulson J found that there was no fetter. The Defendant could still commence adjudication (although it would presumably be imprudent to do so), and indeed could have done so within the 28 day period. The Defendant "had a right to adjudicate...but chose instead to litigate".

Comment

This decision should be welcomed by the construction industry. It offers a clear endorsement of Final Certificate conclusivity provisions and avoids the uncertainty that would have been created by a decision in favour of the Defendant (which would have undermined the clarity of the 28 day period). Whilst there may be doubt amongst some commentators about whether restricting the right to adjudicate in this manner is consistent with the Construction Act 1996, most in the sector will see the value of a decision that prioritises commercial certainty over the freedom to engage in dispute resolution.

This case also illustrates the importance of the parties carefully drafting the Final Certificate provision in the Contract to ensure that it is only conclusive of those matters that can be dealt with, by way of commencing dispute resolution, within the 28 day period.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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