If your project is being run using JCT contract, it will include a “Final Certificate clause” (usually clause 1.9 of the unamended JCT Standard Building Contract and Design and Build forms). The Final Certificate clause states that the Final Certificate issued by the Architect or Contract Administrator is binding and conclusive and that a party has 28 days after its issue in which to challenge it. This is to make sure that if any disputes arise after Practical Completion, they are determined as swiftly as possible.
If a party decides to challenge the Final Certificate within 28 days – either by adjudication, arbitration or issuing court proceedings - it will then only be conclusive concerning matters that are not in dispute. The conclusiveness in respect of the matters that are disputed will be postponed pending conclusion of the proceedings.
If a party does not challenge the Final Certificate within 28 days, the Final Certificate becomes conclusive as set out in the Final Certificate clause.
Application of the Final Certificate clause
Several cases have dealt with the Final Certificate clause. One of the leading cases in this area is Marc Gilbard 2009 Settlement Trust (trustees of) v OD Developments and Projects Limited [2015] EWHC 70 (TCC).
Marc Gilbard 2009 Settlement Trust (the “Trust”) engaged OD Developments and Projects Limited (“OD Developments”) to carry out some construction works in Mayfair. The contract incorporated the terms of the JCT Standard Building Contract 2009. The Contract Administrator issued a Final Certificate under the contract on 3 December 2013, showing a sum of over £200,000 due from OD Developments to the Trust.
On 20 December 2013, OD Developments issued proceedings in the Technology and Construction Court (“TCC”), disputing the validity and correctness of the Final Certificate. Due to the conduct of the parties, proceedings in the TCC progressed slowly and 13 months later OD Developments looked to refer the dispute to adjudication. The Trust argued that OD Developments was barred from bringing further proceedings under the Final Certificate provisions and sought a declaration from the court as to the proper interpretation of clause 1.9.3 of the Contract, which stated:
“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.”
As noted above, the general position is that a Final Certificate is binding and conclusive unless challenged within 28 days of issue. Therefore, Marc Gilbard v OD Developments raised the question of whether a challenge to the Final Certificate made in 28 days in one forum allows a party to challenge in another forum despite the 28 days passing.
The Trust's position in this instance was simple. The Final Certificate was not conclusive evidence in any proceedings issued within 28 days of the Final Certificate (such as any litigation or adjudication begun within these 28 days). The Final Certificate however is conclusive evidence in proceedings not issued within those 28 days, including any future adjudication.
OD Developments argued that it had challenged the Final Certificate within 28 days by issuing court proceedings. Therefore, the Final Certificate was now inconclusive in all other proceedings and as such it could now choose to refer a dispute over the valuation of the Final Certificate to adjudication. The court called this the "foot in the door" argument.
In addition, OD Developments argued that should the conclusivity provisions be given effect to in the present circumstances then OD's right to refer the dispute to adjudication "at any time" under the Housing Grants, Construction and Regeneration Act 1996 (the “Construction Act”) would be fettered.
Mr Justice Coulson found that:
"the proper construction of clause 1.9.3 is that […] the challenger has to challenge the Final Certificate in one set of proceedings, and that it is those proceedings which constitute the only vehicle by which the Final Certificate is capable of being challenged."
There is only one qualification to the judge’s statement above, which is provided in clause 1.9.4. If adjudication is the first choice of the challenging party under clause 1.9.3, the challenging party can begin arbitration or court proceedings within 28 days of the date of the adjudicator's decision.
Mr Justice Coulson further said that clause 1.9 did not fetter the right to adjudicate "at any time" under the Construction Act. OD Developments had the right to challenge the Final Certificate within 28 days by way of adjudication as well as in court proceedings. However, OD Developments chose to litigate only. After 28 days, OD Developments was free to refer a dispute to adjudication. However, in that adjudication, it is likely that the adjudicator would find the Final Certificate to be conclusive.
The court therefore found in favour of the Trust.
Summary
Marc Gilbard v OD Developments confirms the widely held view in the construction industry. If a party wishes to challenge the conclusivity of a Final Certificate, then it needs to act quickly (within 28 days) and consider the best forum in which to resolve the dispute. This may include commencing an adjudication and/or issuing court proceedings.
As is clear from the outlined above, parties to JCT contract should pay close attention to the Final Certificate clause as there can be a significant risk and commercial implications arising from a failure to comply.
