| Date | 20 July 2005 |
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| Judgment | Henry Boot Construction Ltd v Alstom Combined Cycles Ltd, CA 4 July 2005 |
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| The Issue | Application of the Limitation Act to payment claims. |
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| Implication |
A
contractor's right to payment under the ICE standard construction
contract arises when an Engineer's certificate is issued, or ought
to have been issued, and not when the work is done. |
printUnder a traditional standard form of construction contract, does a contractor's right to payment arise when the work is done, or when an architect or engineer's certificate is issued? This important question was answered by the Court of Appeal in the recent case of Henry Boot Construction v Alstom Combined Cycles. Boot was employed by Alstom as contractor for the main civil works for the construction of a power station at Connah's Quay in North Wales. The contract was in the ICE standard form 6th Edition. Work started in April 1994 and Boot achieved substantial completion in May 1996. The defects correction certificate was not issued until August 2000. Boot submitted its final account in stages, the final part being submitted in June 2001. The total sum claimed in the final account was £102 million. The Engineer issued his final certificate in October 2002 in the sum of approximately £44 million. Despite this extraordinarily large shortfall against the amounts claimed by Boot, it was the employer, Alstom, that commenced arbitration in May 2003. Alstom contended that Boot's claims were statute barred at the date of the final certificate and that no further monies were due to Boot. The contract between the parties was a simple contract such that the limitation period for bringing claims under the contract was six years from the date when the cause of action first arose. Alstom claimed that Boot's relevant causes of action had arisen when the work was done or when the events on which claims were based had occurred. Since the work had been carried out between April 1994 and May 1996, this meant that six years had already elapsed before commencement of the arbitration proceedings. Alstom argued that it was irrelevant that the final certificate had not been issued by the Engineer until October 2002, and therefore there was a complete defence to the claims now being made by Boot. His Honour Judge Humphrey Lloyd QC, sitting as a judge arbitrator, agreed with Alstom. Judge Lloyd noted that clause 60(2) of the ICE contract, dealing with the Engineer's payment certificate, required the Engineer to form an opinion as to what "is due" to the contractor. Judge Lloyd saw significance in the fact that the reference was to "is due" rather than "will be due". He made other linguistic points on the wording of other clauses of the ICE contract which he said were consistent only with the certificate of the Engineer substantiating an existing right or obligation as to payment. He concluded that the certification provisions of the ICE contract were written on the basis that the contractor was already entitled to the amounts. These findings challenged the orthodox view of the relevance of an Engineer's certificate and to put it mildly, no doubt came as something of a surprise to Boot. The matter progressed to the Court of Appeal where Lord Justice Dyson reversed Judge Lloyd's findings. Lord Justice Dyson commented that it was clear that Boot's entitlement to interim payment did not arise until the Engineer had issued his payment certificate. The machinery for interim payment contained within the contract was inconsistent with the proposition that Boot's cause of action in respect of interim payments arose earlier than the date on which an interim certificate had been issued. Dyson noted that he did not see how it was possible to construe the contract in such a way that the right to interim payment arose brick by brick or day by day, or in any other way unrelated to certificates. Additionally, Boot's cause of action in respect of an Engineer's failure to include a sum in an interim certificate was not the same as its cause of action in respect of a failure to include a sum in the final certificate, even if the two sums happened to be the same. This was because interim certificates were no more than provisional estimates of the sum to which Boot would be entitled by way of instalment. Alstom argued that a final certificate dispute could involve claims for work carried out or events which occurred as far back as April 1994. If the appeal was allowed, such a dispute would not be statute barred until six years after the date when the final certificate was issued. By that time relevant documents may well have been destroyed, witnesses died or disappeared and so on. This was contrary to the public policy upon which the Limitation Acts were drawn. Lord Justice Dyson was not persuaded by these observations. He noted that large construction contracts of this kind are often executed as deeds, thereby attracting a 12 year limitation period. Practical problems of the type described by Alstom are not unusual in such contracts and any difficulties which may be thrown up by the passage of time would be mitigated by the contract requirements for the contractor to give notices and keep records. In conclusion, Boot's appeal was allowed. As a matter of construction of the contract, the contractor's right to payment arose when a payment certificate was issued, or ought to have been issued under Clause 60, and not when the work was done.
CJ-0528
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