| Date | 13 July 2005 |
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| Judgment | Tracy Bennett v FMK Construction Limited, TCC 30 June 2005 |
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| The Issue | Commencing adjudication proceedings following the issue of a final certificate under a JCT contract. |
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| Implication |
Providing
a notice of intention to refer a dispute to adjudication is given
within 28 days of the issue of a final certificate, the final certificate
will not be conclusive evidence as to matters raised in the adjudication. |
printClause 30.9 of the JCT Standard Form of Building Contract 1998 edition provides a rather complex set of rules in respect of the final certificate issued by the contract administrator at the end of the defects liability period. The clause provides that where a final certificate has been validly issued it will operate as conclusive evidence, firstly, that where the contract requires it, materials and goods have been provided to a quality or standard which meets the reasonable satisfaction of the architect, and secondly, conclusive evidence that the contract sum has been adjusted correctly in accordance with the contract and that all claims for extensions of time and direct loss and expense have been finally settled. The final certificate is therefore a critical document preventing either party from obtaining a remedy against the other in the event it later discovers a fault in any relevant materials or goods, or an error in the final account computations. There are two paths by which an exception to that position can be obtained. Firstly, if adjudication, arbitration or other proceedings have been commenced by either party before the final certificate has been issued, then the final certificate will be subject to any decision, award or judgment which flows from those proceedings. Secondly, either party has the right to commence adjudication, arbitration or litigation within 28 days of the issue of the final certificate. The conclusive effect of the final certificate will then not apply to any matters included within those proceedings. Where adjudication has been commenced the 28 day period for commencing arbitration or litigation will run from the date of the adjudicator's decision. Plainly, therefore, if either the employer or the contractor is concerned with any aspect of the final certificate it needs to move very quickly to commence proceedings to review the disputed matter otherwise the opportunity may be lost. The recent case of Bennett v FMK Construction examined these provisions where the contractor disputed the validity and the correctness of the final certificate. The final certificate had been issued on 11 March 2005. FMK issued a notice of intention to adjudicate the amount contained within the certificate 26 days later on 6 April 2005. 7 days later FMK applied to the Royal Institute of British Architects for the nomination of an adjudicator. An adjudicator was nominated the following day and the referral notice issued to him 3 days later. At this point Bennett complained to the adjudicator that his appointment was invalid in that, in breach of the contract, it had not been secured within 7 days of the date of the notice of intention to refer. The adjudicator agreed and promptly resigned. The following day, 22 April, FMK re-served the notice of intention to refer and re-applied to the RIBA for the appointment of an adjudicator. The same adjudicator was appointed 4 days later. To sum up the situation that now prevailed, starting from the date of the issue of the final certificate and bearing in mind the 28 day deadline, the first notice of intention to adjudicate had been served on day 26; the first nomination of the adjudicator had occurred on day 34; the referral notice was first communicated on day 38; the notice of intention had been re-served on day 42; the adjudicator reappointed on day 44 and the referral notice finally re-served on day 46. When all of this came before the Technology and Construction Court the question before the court was a simple one. Had all these shenanigans caused a situation where the final certificate would now be binding upon the parties, the adjudication process having apparently missed the 28 day deadline? His Honour Judge Richard Havery Q.C. plainly took the view that having initially given a notice of intention to adjudicate within the 28 day period, the contractor should be entitled to press on with the adjudication to test the correctness of the final certificate. The question was whether the precise terms of the contract admitted that conclusion. Firstly, Judge Havery concluded that there was no obligation to secure the appointment of an adjudicator within 7 days of the notice of intention. The provision contained at Clause 41A.2.2 of the contract was merely directory and not mandatory. That being the case, the adjudicator had had no cause to resign the first time around as his initial appointment had been perfectly valid. Nevertheless, having resigned, plainly the current adjudication proceedings had not been commenced within 28 days of the issue of the final certificate. The next question was whether the issue of the first notice of intention to adjudicate was sufficient to comply with the contract provisions to prevent the final certificate from being conclusive. Bennett argued that the first notice of intention to adjudicate was of no effect since the proceedings that flowed from that notice had been abandoned without a decision. Judge Havery disagreed. The new notice of intention was in the same terms as the old and it was the same dispute or difference that was referred to the adjudicator on the second occasion. Relying upon clause 41A.3 of the contract Judge Havery concluded that the adjudicator had been unavailable to adjudicate by reason of his resignation. Once he had been reappointed, however, his appointment effectively flowed from the first notice of intention to adjudicate. The date of that notice of intention and not the subsequent referral itself dictated when the adjudication proceedings had been commenced and accordingly FMK were entitled to proceed with the adjudication to challenge the validity of the final certificate.
CJ-0527
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