Practical Law

Those of us familiar with the JCT standard forms of contract all know that they provide for a final certificate, which becomes conclusive evidence of the matters stated in it, unless it is challenged within 28 days. Equally, those familiar with adjudication know that either party to a construction contract has a right to adjudicate “at any time“.

So, what happens when the principles of “at any time” collide with those concerned with the conclusivity of final certificates?

It seems that Coulson J may have answered this question for us recently in The Trustees of the Marc Gilbard 2009 Settlement Trust v OD Developments and Projects Ltd.

Marc Gilbard v OD Developments

OD Developments and Projects Ltd (the contractor) was engaged by the Marc Gilbard Trust (the employer) to carry out works at a property in Mayfair, London. The parties entered into a contract using the JCT Standard Building Contract (Without Quantities), 2005 Edition, Revision 2 2009, which included:

• At clause 1.9, provision for a final certificate that was to be conclusive evidence of matters listed in the clause.
• At clause 9.2, a right to refer disputes to adjudication under the Scheme for Construction Contracts 1998.

At the end of the project, the contract administrator issued a final certificate. This required the contractor to pay the employer just over £232,000 plus VAT. The contractor disputed the “validity and correctness” of the final certificate and, in complying with clause 1.9, it issued court proceedings under CPR 7. That was in December 2013. Fast forward 13 months and the litigation hadn’t got very far, with the first case management conference (CMC) still to be fixed. The judgment suggests that it was the contractor’s fault that the court proceedings were progressing slowly, not least because it was advancing a “kitchen sink” claim, with “reams of detailed items in dispute” (which Coulson J described as a “Scott Schedule case”).

However, rather than taking positive steps to progress proceedings, the contractor referred the dispute to adjudication. I’m in no doubt that this referral would have triggered an immediate jurisdictional challenge from the employer, which the judgment suggests the parties could not agree on, hence the employer’s Part 8 application for declaratory relief on the proper meaning of clause 1.9. There is no mention of the adjudicator’s views on the challenge and whether he resigned or not (if someone had been appointed).

So, Coulson J had to decide the meaning of clause 1.9.

Conclusivity clauses

It probably doesn’t surprise anyone that Coulson J granted the employer the declaratory relief it sought, deciding that the final certificate was conclusive about everything except in relation to the contractor’s Part 7 claim. Further, he held that the clause was not a fetter to the contractor’s right to adjudicate “at any time” because:

• Either party could start an adjudication but, if it was started outside the 28 days, then the final certificate would be conclusive evidence on those matters listed in clause 1.9.
• The contractor had chosen not to start an adjudication within the 28 days, instead it had chosen to litigate. It had not been fettered when it made this choice, rather it had chosen not to “avail itself of that right”.
• The parties had agreed to limit contractually their right to adjudicate the final certificate to proceedings commenced within 28 days. This was not contrary to the provisions in the Construction Act 1996, rather that the JCT’s conclusivity provisions:

“provide a useful limit on (but not a bar to) post-completion disputes, and are therefore in accordance with the spirit and purpose of the 1996 Act.”

Coulson J considered a number of authorities and his own book in arriving at these conclusions. In three of those cases, the notice of adjudication was issued within the 28 day period and the parties’ concern was about whether the final certificate would still be conclusive if there was a procedural failure of some kind in the adjudication (which would render the adjudication invalid). In the fourth case, Jerram Falkus v Fenice Investments, it was an adjudicator’s decision that was not challenged within 28 days (which meant the decision could not be subsequently challenged).

Coulson J noted that the interplay between final certificates and adjudication had not been tested in a situation where a party had started court proceedings within the 28 day period, but then sought to adjudicate the same dispute over a year later.

It seems to me that in this judgment, Coulson J has confirmed the accepted position. As such, the case acts as a reminder of the need for parties to comply with contractual time limits, especially those connected to the final certificate. Further, as was noted in the judgment, if a party wants to protect itself, to adopt a cautious approach to any challenge to the final certificate, it should issue court proceedings at the same time as an adjudication notice “just in case something went wrong with the adjudication”.