Jerram Falkus Construction Ltd v Fenice Investments [2011] EWHC 1935 (TCC)

JFC was engaged by Fenice to carry out the development of a site in Camden, London. The contract incorporated the JCT Design and Build Form 2005, as amended. The contract completion date was 25 May 2009. That was extended by Fenice’s agent to 15 June 2009 but the works were not practically complete until 9 September 2009, a delay of 86 days, for which Fenice levied liquidated damages. JFC argued that Fenice had prevented completion and that, by reason of the deletions to the extension of time provisions, which meant that no extension of time could be granted in relation to such acts of prevention, time was set at large. One result of this would be that Fenice could not levy any liquidated damages. Delay was the subject of the third adjudication as Fenice sought declarations that JFC were not entitled to any further extension of time for, amongst other things, alleged delays by utilities providers and alleged late instructions. The adjudicator found in favour of Fenice noting that there was no act of prevention by the Employer.

JFC tried to bring its prevention arguments before Mr Justice Coulson. However, Fenice said that the issues which JFC sought to raise in court were precisely the same as those decided by an adjudicator, and that, pursuant to the terms of the contract, JFC’s failure to challenge that decision in the stated time meant that that decision is conclusive. Clause 1.9 of the Contract, entitled ‘Eff ect of Final Account and Final Statement’ said:  

“1.9.1 The Final Statement, when it becomes conclusive as to the balance due between the Parties in accordance with clause 4.12.4, or the Employer’s Final Statement, when it becomes conclusive as to the balance due...shall, except as provided in clauses 1.9.2, 1.9.3 and 1.9.4 (and save in respect of fraud), have eff ect in any proceedings under or arising out of or in connection with this Contract (whether by adjudication, arbitration or legal proceedings) as: 1.9.4 In the case of a dispute or diff erence on which an Adjudicator gives his decision on a date which is after the date of submission of the Final Account and Final Statement or the Employer’s Final Account and Employer’s Final Statement, as the case may be, if either Party wishes to have that dispute or diff erence determined by arbitration or legal proceedings, that Party may commence arbitration or legal proceedings within 28 days of the date on which the Adjudicator gives his decision.”

The adjudicator’s decision was dated 28 October 2010. It was common ground that no proceedings had been issued within 28 days of that date. It was also common ground that the rectifi cation period under the contract ended on 13 January 2011 and that, as a result, unless Fenice challenged the Final Account, this would render the Final Statement conclusive as at 13 February 2011 (as per clause 4.12.4). However, Fenice’ on 24 January 2011 wrote a letter which included the comments that:

“I have considered and reviewed your Final Account submission in full ... Having completed this review, please fi nd enclosed ...response to your fi nal account identifying those adjustments to the Contract Sum identifi ed in your Final Account submission which are agreed and those which were incorrect in your original submission and so for the purpose of the Contract are identifi ed as disputed. Where an item is disputed, there is included in the enclosed response the correct valuation for that item...A balance of £122,102.36 is therefore due and payable to Fenice, ...and is required to be paid in accordance with ...Clause 4.12.9.”

JFC’s principal response to the conclusivity argument was to suggest that the dispute in the third adjudication was diff erent to the dispute raised before the court. This was summarily rejected by the Judge. The dispute which JFC wished to raise – namely delays caused by alleged acts of prevention in respect of EDF, British Gas and the instructions as to the levels – was exactly that which was decided in the third adjudication. Further, since that third adjudication had taken place after the Final Account had been submitted, there was equally no doubt that clause 1.9.4 had been triggered. The Judge accepted that nowhere in clause 1.9.4 did it say in terms that the adjudicator’s decision, if not challenged within 28 day, was conclusive. Further he noted that the requirement to challenge that decision within 28 days was not said to be mandatory but merely permissive (i.e. “may” not “must”).

However, the Judge also considered that these narrow points on the wording of the clause ignored two fundamental issues. The fi rst was the purpose of clause 1.9 itself. The clause was designed to provide for various circumstances in which, following the provision of the Final Account, the position between the parties can become conclusive, thereby precluding any further dispute. It must therefore be read the clause in that context, namely it is providing a deadline beyond which something becomes conclusive. It was providing a “last chance”. Second, if clause 1.9.4 was not providing some form of deadline, beyond which the result in a post-Final Account adjudication could not be challenged, then the provision was entirely redundant. Unless there was a consequence for failing to challenge the decision within 28 days, the provision would be meaningless. Clause 1.9.4 was plainly intended to ensure that, if there was an adjudication after the Final Account had been provided, the losing party had 28 days to bring a challenge. JFC had failed to do that, and as a result they could not now raise any argument to the eff ect that time is at large. That contention had been expressly considered and rejected by the adjudicator.

Then there was the question of the Final Account. Here the Judge noted that the whole point of conclusivity provisions is to provide the employer with an opportunity to challenge the Final Account, but to ensure that the time in which such a challenge may be made is restricted, so as to provide a measure of fi nality. Here, within the relevant period, there was a clear and detailed challenge, namely the January letter., which served to prevent that Final Account from becoming conclusive.