This question was recently considered in the case of Octoesse LLP (“Octoesse”) v Trak Special Projects Ltd (“Trak”) [2016] EWHC 3180 (TCC).

The Facts

Octoesse engaged Trak under a JCT Intermediate contract to construct a residential and retail unit in London. Trak failed to complete the works by the completion date of 29 September 2014. On 3 October 2014 the contract administrator issued a certificate of non-completion.

Practical completion (PC) was issued on 13 February 2015. Trak thereafter submitted a claim for an 18 week extension of time (EOT) on 3 July 2015, for which the contract administrator (CA) granted 9.5 weeks in November 2015. No further certificate of non-completion was issued.

Octoesse gave notice of their intention to deduct liquidated damages and, upon receipt of the final certificate in May 2016, issued a pay less notice deducting circa £89,000 in liquidated damages.

The validity of the pay less notice was called into question.

The TCC’s Decision

The Court held that:

  • An EOT will cancel any certificate of non-completion already issued, regardless of whether PC has already been issued.
  • If the EOT does not cure the period of non-completion in full, the CA is required to issue a further certificate of non-completion.
  • In light of the EOT granted in November 2015, the certificate of non-completion issued in October 2014 was cancelled.
  • In the absence of any further certificate of non-completion being issued, Octoesse could not rely on the October 2014 certificate and so their pay less notice was not valid and they were not entitled to liquidated damages from Trak.

Conclusion for Employers

This decision is an important reminder that where an EOT is granted, even retrospectively after PC, a further certificate of non-completion should be issued where the contractor has failed to complete the works by any extended completion date and the Employer intends to deduct liquidated damages from sums otherwise due to the contractor.

Conclusion for Contractors

This decision is a useful reminder to check the timing of any certificates of non-completion alongside the granting of EOTs where the employer seeks to deduct liquidated damages from your final certificate.

Such a technical oversight could remove your liability to pay liquidated damages.