Henry Boot Construction Ltd v Alstom Combined Cycles Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DYSON,Lord Justice Thomas,The Vice-Chancellor |
| Judgment Date | 16 June 2005 |
| Neutral Citation | [2005] EWCA Civ 814 |
| Docket Number | Case No: A3/2004/1236 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 June 2005 |
[2005] EWCA Civ 814
The Vice-Chancellor
Lord Justice Dyson and
Lord Justice Thomas
Case No: A3/2004/1236
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
His Honour Judge Humphrey Lloyd QC
Sitting as judge arbitrator
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Stephen Furst QC and Mr Tim Lord (instructed by Messrs Davies Arnold Cooper) for the Appellant
Mr Roger Ter Haar QC and Mr Alastair Walton (instructed by Messrs Lovells) for the Respondent
Introduction
This is an appeal from part of the award dated 21 April 2004 of HH Judge Humphrey Lloyd QC sitting as judge arbitrator in accordance with section 93 of the Arbitration Act 1996. Leave to appeal was given by Clarke LJ on the grounds that the issues raised were of general public importance. They concern the question of when a cause of action arises in respect of claims for interim and, more importantly in this case, final payment under construction contracts. This must always be a question of construction. But the essential payment terms of the standard forms of contract have many features in common, including provisions for payment on certificates, usually issued by an engineer or architect. The contract in the present case incorporated the ICE Standard Form (6 th edition), with amendments which are immaterial to the issues that arise on this appeal. These issues are of considerable significance to those who are engaged in the construction industry.
Henry Boot Construction Limited ("Boot") was employed by Alstom Combined Cycles Limited ("Alstom") as contractor for the main civil works for the construction of a power station at Connah's Quay, North Wales ("the Works"). The contract, which was under hand, was made in 1994.
Boot started work on 11 April 1994 and achieved substantial completion of the Works on 28 May 1996. The defects correction certificate was issued on 15 August 2000. Boot submitted its final account in stages, the final part being submitted on 29 June 2001. The total sum claimed in the final account was £102.08 million. The Engineer issued the final certificate on 9 October 2002 in the sum of £44.43 million.
On 1 March 2003, Alstom served a notice of dispute pursuant to clause 66(2) of the conditions of contract, challenging the valuation in the final certificate and raising the issue that the claim was barred by the Limitation Act 1980. On 3 March 2003, Boot served two notices of dispute, the first of which related to Alstom's refusal to pay the sum certified as due under the final certificate.
On 23 May 2003, the Engineer gave his decision in relation to all three notices. In response to Alstom's notice, he decided that the value of the final account was £44.38 million (thereby reducing the amount certified by £43,000). He made no decision on the limitation issue raised by Alstom. In relation to Boot's first notice, he decided that a sum of at least £2.9 million became overdue for payment to Boot on 8 December 2002.
This arbitration was commenced on 27 May 2003. Alstom sought a review of the Engineer's decision not to decide whether Boot's claims were statute-barred. Alstom also contended that Boot's claims were statute-barred at the date of the final certificate, so that, contrary to the decision of the Engineer, no sum was due to Boot. The limitation defence was tried as a preliminary issue. The judge arbitrator decided that all or almost all the claims were statute-barred, because the relevant causes of action had arisen when the work was done or when the events on which the claims were based had occurred, ie more than 6 years before the date when the arbitration proceedings were started.
Summary of issues
(i) Did Boot's contractual right to receive payments for the value of work done and materials supplied arise upon the work being done and materials being supplied, or only upon the issue of a certificate?
(ii) If it only arose upon the issue of a certificate, did it arise once and for all as soon as Boot was entitled to have the sum certified in an interim certificate, or did Boot have a continuing right to have the sum certified in subsequent certificates, and in particular in the final certificate, so that (where the sum was not certified) each failure to certify in accordance with the contract gave rise to a new cause of action?
(iii) To what extent are Boot's claims for interest pursuant to clause 60(7) of the conditions of contract statute-barred?
(iv) Was the Engineer obliged only to certify sums in respect of claims which he considered not to be statute-barred?
Summary of Boot's claims
Boot's claims pursuant to the contract (as distinct from its claims for damages for breach of the contract) were for: admeasure valuation pursuant to clause 56(1) and (2); valuation of Provisional Sums pursuant to clause 58(1)(a) and 52; valuation of Dayworks pursuant to clause 56(4) and 52; valuation of variations pursuant to clause 51 and 52(1) and (2); corrections of errors or omissions in the Bills of Quantities under clause 55(2);extra cost incurred as a result of the late information pursuant to clause 7(4); extra cost incurred as a result of unforeseen conditions under clause 12; extra cost incurred as a result of Engineer's instructions under clause 5 and 13(3); interest pursuant to clause 60(7) on payments which it is claimed should have certified by the Engineer; extra cost incurred in the circumstances referred to in clause 14(8); extra cost as a result of providing facilities to other contractors (clause 31(2)); extra cost as a result of suspension of work (clause 40(1)); extra cost as a result of failure to give possession (clause 42(3)); and cost of acceleration measures (clause 46(3)).
The conclusions of the judge arbitrator
In paras 83–91, the judge arbitrator explained why in his opinion the cause of action in relation to interim payments accrued when the work was done, and was not dependent on the issue of certificates. This he described as his "preliminary ground" for holding that "subject to one or two possible exceptions" and subject to the estoppel issue, Boot's claims were all statute-barred. At para 85, he drew attention to the language of the clauses. Thus, clause 60(2) required the Engineer to form an opinion as to what "is due to the Contractor", and saw significance in the fact that reference was to what "is due" rather than what "will be due" (after the certificate had been issued and the time for payment had arrived). He made other linguistic points on the wording of clause 52(4)(c)-(f) which he said was consistent only with the certificate "substantiating the existing right or obligation." He placed particular emphasis on clause 52(4)(f) which referred to the contractor being "entitled to have included in any interim payment certified by the Engineer pursuant to clause 60 such amount in respect of any claim as the Engineer may consider due to the Contractor provided that the Contractor shall have supplied sufficient particulars to enable the Engineer to determine the amount due", but "if such particulars are insufficient to substantiate the whole of the claim the Contractor shall be entitled to payment in respect of such part of the claim as the particulars may substantiate to the satisfaction of the Engineer." The judge arbitrator said that this "is language which presupposes the existence of a right, as it is directed to its quantification after appropriate proof of amount."
He then reviewed a number of authorities which he said support this interpretation. To the extent that I think it necessary to do so, I shall refer to these later in this judgment. The judge arbitrator considered that the House of Lords decision in Beaufort Developments Limited v Gilbert-Ash Limited [1999] AC 266 was of particular importance as showing that a certificate "is a convenient way of establishing the rights and duties at that stage". It followed that "a certificate does not of itself necessarily create any right or obligation; it is merely a recognition of them, as perceived by the architect".
He concluded at para 91 that the certification provisions of the contract were written on the basis that "the contractor is already entitled to the amounts. The only question is whether the entitlement will be recognised by the Engineer."
Having reached this conclusion, the judge arbitrator addressed the point that, taken to its logical conclusion, it would mean that "every cubic metre excavated, carted, tipped, spread, poured, lifted, applied etc would make the Employer liable for the applicable rate or price, at least as soon as it was measured for payment under clauses 55–57". That would be absurd. Accordingly, he went on to say:
"It is probably safer to base the decision on the alternative ground that the contractor's right to payment in respect of work, materials etc properly done or supplied arises when a certificate is issued or due to be issued. That result is conveniently encapsulated in the proposition that a certificate is a condition precedent to payment, but that is inaccurate or perhaps an overstatement. However it is a proposition that is endorsed by many cases, even if in a number of them, the point was not analysed as it has been by the submissions in this arbitration."
He then rejected the submission that, since certificates are cumulative, contractors gain a new right every time a certificate is issued which undervalues the work or does not include a sum to which the contractor is entitled. At para 93, he continued:
"Once all the...
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