The Trustees of The Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Coulson |
| Judgment Date | 22 January 2015 |
| Neutral Citation | [2015] EWHC 70 (TCC) |
| Docket Number | Case No: HT-14-362 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 22 January 2015 |
[2015] EWHC 70 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Coulson
Case No: HT-14-362
Ms Anneliese Day QC (instructed by Dentons UKMEA LLP) for the Claimant
Ms Camille Slow (instructed by Fenwick Elliott LLP) for the Defendant
Hearing date: 16 January 2015
Introduction
Anyone familiar with the myriad JCT Forms of Contract will know that one of the things they all have in common is the intention to ensure that, after the works have been completed, any outstanding disputes between the parties can be swiftly and finally resolved. One way in which they seek to achieve this is by the use of a Final Certificate. If the employer's agent issues a Final Certificate, then the contractor (and occasionally the employer) has 28 days in which to challenge it. If there is no challenge, the Final Certificate becomes conclusive evidence in respect of a wide range of matters, from defects to delays to all remaining financial disputes. Because of the important effect of such Certificates, they are regularly the subject of debate. The present case is a good example.
The claimant employed the defendant contractor to carry out works at 32, Shepherd Street, Mayfair. The contract incorporated the JCT Standard Building Contract, Without Quantities, Revision 2 (2009). That contained Final Certificate provisions, set out in greater detail below. On 3 December 2013, the Contract Administrator, Ridge and Partners LLP, issued a Final Certificate showing a sum due from the defendant to the claimant of £232,153.54 plus VAT. On 20 December 2013, within the relevant 28 day period, the defendant issued Part 7 proceedings in the TCC disputing the validity and correctness of the Final Certificate. At the behest of the parties, those proceedings have, on any view, proceeded very slowly, with the result that, 13 months on, they are yet to fix a first Case Management Conference.
The defendant now wishes to refer to adjudication the matters raised in the Part 7 claim; in other words, the defendant would now like to have an adjudication, presumably with the existing litigation as some sort of fall-back arrangement if the adjudication does not resolve the disputes between the parties. The claimant contends that this is not an option that is open to the defendant and that, whilst the extant Part 7 proceedings constitute a legitimate challenge to the Final Certificate, no other proceedings could now do so, because any such proceedings would not have been commenced within 28 days of the Final Certificate. The parties having been unable to resolve this difference, so the claimant has issued Part 8 proceedings for declaratory relief as to the proper interpretation of clause 1.9, the provision dealing with the Final Certificate. Declarations are also sought in respect of the sum due under the Final Certificate itself.
The Terms of the Contract
Clause 1.9, as amended was in the following terms:
"1.9.1 Except as provided in clauses 1.9.2, 1.9.3 and 1.9.4…the Final Certificate shall have effect in any proceedings under or arising out of or in connection with this Contract (whether by adjudication, arbitration or legal proceedings) as
1. (deleted)
2. conclusive evidence that any necessary effect has been given to all the terms of this Contract which require that an amount be added to or deducted from the Contract Sum or that an adjustment be made to the Contract Sum, save where there has been any accidental inclusion or exclusion of any work, materials, goods or figure in any computation or any arithmetical error in any computation, in which event the Final Certificate shall have effect as conclusive evidence as to all other computations.
3. conclusive evidence that all and only such extensions of time, if any, as are due under clause 2.28 have been given; and
4. conclusive evidence that the reimbursement of direct loss and/or expense, if any, to the Contractor pursuant to clause 4.23 is in final settlement of all and any claims which the Contractor has or may have arising out of the occurrence of any Relevant Matters, whether such claim be for breach of contract, duty of care, statutory duty or otherwise…
3. 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.
(My emphasis)
4. In the case of a dispute or difference on which an Adjudicator gives his decision on a date which is after the date of issue of the Final Certificate, if either Party wishes to have that dispute or difference 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."
In addition, clause 9 sets out the parties rights in respect of the settlement of disputes. The relevant provisions are in the following terms:
" Mediation
9.1 Subject to Article 7, if a dispute or difference arises under this Contract which cannot be resolved by direct negotiations, each Party shall give serious consideration to any request by the other to refer the matter to mediation.
Adjudication
9.2 If a dispute or difference arises under this Contract which either Party wishes to refer to adjudication, the Scheme shall apply, subject to the following:
1. for the purposes of the Scheme the Adjudicator shall be the person (if any) and the nominating body shall be that stated in the Contract Particulars;
2. where the dispute or difference is or includes a dispute or difference relating to clause 3.18.4 and as to whether an instruction issued thereunder is reasonable in all the circumstances:
1. the Adjudicator to decide such dispute or difference shall (where practicable) be an individual with appropriate expertise and experience in the specialist area or discipline relevant to the instruction or issue in dispute;
2. if the Adjudicator does not have the appropriate expertise and experience, the Adjudicator shall appoint an independent expert with such expertise and experience to advise and report in writing on whether or not the instruction under clause 3.18.4 is reasonable in all the circumstances."
The Law
A number of authorities have been cited to me in respect of the parties' competing constructions of clause 1.9. They divide into three categories: those dealing with commercial common sense as an aid to construction; those dealing with the interpretation and effect of conclusivity provisions generally; and those concerned with the interplay between such provisions and adjudication.
(i) Commercial Common Sense
As to commercial common sense, it is trite law that, as Lord Reid put it in Wickman Machine Tool Sales v L Schuler AG [1974] AC 235:
"The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear"
This approach was re-emphasised in clear language by Lord Clarke in Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, when he said:
"The language used by the parties will often have more than one potential meaning. I would accept the submission made on behalf of the appellants that the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other."
(ii) Conclusivity Clauses Generally
As to the purpose of Final Certificates and conclusive evidence clauses, the following citations are relevant:
(a) Conclusivity clauses "provide some limits to uncertainties and expense of arbitration and litigation": see Lord Denning in Agro Company Canada Ltd v Richmond Shipping ("the Simonburn") [1973] 1 Lloyds Rep 292.
(b) Conclusive evidence clauses were devised "to obviate cumbersome and painstaking enquiries to prove out-standings on running accounts…": see VK Rajah J in the High Court of Singapore in Standard Chartered Bank v Neocorp International Ltd [2005] SGHC 43.
(c) Conclusive evidence clauses are intended "to provide contractually agreed limits to the scope of disputes and to provide clarity as to the parties' obligations once a project is complete": see the recent judgment of Carr J in University of Brighton v Dovehouse Interiors [2014] BLR 432, which concerned the same clause of the JCT Contract as the present case.
(iii) Final Certificates and Adjudication
There are four reported cases concerned with the interplay between conclusivity clauses and adjudication. Three are concerned (one way or another) with what might happen if a valid adjudication had not been commenced within 28 days of the Final Certificate, whilst the fourth dealt with the effect of not challenging an adjudicator's decision on the Final Account, in circumstances where the contract provided that such a decision would be conclusive if not challenged within 28 days.
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