A recent TCC decision has adopted a robust approach to the conclusivity provisions of the JCT Standard Building Contract in relation to Final Certificates. The decision confirms the need to commence proceedings to challenge a Final Certificate within 28 days and rules out the ability of parties to commence any supplementary or additional proceedings after the time limit has expired.
A trust fund engaged OD Developments to carry out works in Mayfair. The Contract incorporated the terms of the JCT Standard Building Contract, Without Quantities, Revision 2 (2009). Pursuant to the Contract, the Contract Administrator issued a Final Certificate on 3 December 2013, showing a sum of over £200,000 due from OD Developments to the Trust.
On 20 December 2013, OD Developments issued Part 7 proceedings in the TCC, disputing the validity and correctness of the Final Certificate. Due to the conduct of the parties, proceedings in the TCC progressed slowly and 13 months later OD Developments sought to commence adjudication proceedings. The Trust argued that OD Developments was barred from bringing further proceedings by virtue of the Final Certificate provisions and issued Part 8 proceedings seeking a declaration as to the proper interpretation of clause 1.9.3 of the Contract which stated:
“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 Trust submitted that the meaning of clause 1.9.3 was clear – the Final Certificate would take effect as conclusive evidence in any proceedings issued outside of the 28 day period. OD Developments argued that the effect of clause 1.9.3 was that the Final Certificate was not conclusive evidence in respect of the matters to which the original proceedings (launched within the 28 day period) related. On this view, OD Developments would be entitled to launch subsequent proceedings at any time, provided that they related only to the matters in dispute in the original proceedings. This was a slightly narrower argument than that which had been set out in correspondence between the parties, where OD Developments argued that launching proceedings within the 28 day period constituted a “foot in the door”, permitting any subsequent proceedings to be brought to challenge the Final Certificate.
Justice Coulson promptly dismissed the “foot in the door” approach, noting that it was contrary to the purpose of clauses of this kind (conclusivity clauses). The judge considered that:
“The real point on the interpretation issue is whether 1.9.3 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.”
Justice Coulson found in favour of the former interpretation, noting that conclusivity clauses were aimed at providing certainty and clarity, which the Trust’s interpretation achieved whereas OD Development’s did not and was contrary to business common sense.
Conclusion and implications
This decision provides important guidance for any party considering challenging a Final Certificate. Time limits for issuing proceedings will be enforced, and it is important to ensure that the scope and forum of any proceedings are carefully thought through. If adjudication proceedings are chosen, the JCT provisions allow a further 28 days during which a party can issue Court or arbitration proceedings to challenge an adjudicator’s decision as to the Final Certificate. However, if Court proceedings are commenced first, or if the reference to adjudication is flawed, a party may find themselves time barred from challenging the Final Certificate.
One approach endorsed by the court in this case is to issue adjudication proceedings simultaneously with court/arbitration proceedings within the 28 day period to protect the challenger’s position in the event that the reference to adjudication is flawed in some way or results in an unenforceable decision (or no decision at all).
The present case also leaves open the position under the JCT Design and Build Contract. Although a very similar provision to clause 1.9 of the SBC form is included, the DBC also allows the employer or contractor to give a notice “disputing anything in the Final Statement”. This notice must be given before the final date for payment, but otherwise it may provide an easier route for parties looking to challenge a Final Certificate under the DBC.