| Date | 22 April 2008 |
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| Judgment | George Fischer (GB) Ltd -v- Davis Langdon & Everest and Others, ORB 10 February 1998 |
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| The Issue | Effect of qualified Certificates of Practical Completion. |
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| Implication |
A Certificate of Completion, whether qualified in respect of outstanding works or not, has wide reaching effect upon the rights and obligations of parties to the contract. A contract administrator may be negligent in failing to advise its client of these implications. |
printThe law and practice in relation to the completion of building and engineering projects is complex and it is perhaps no surprise that these issues often give rise to conflict. With the exception of the standard form contracts used in the process plant industry, standard form agreements used throughout the construction industry do not define completion. Instead they generally leave the matter for the discretion of the architect, engineer, contract administrator or supervising officer. The issue of a Certificate of Completion will generally have far reaching effects upon the rights and obligations of the parties to the contract, and for this reason alone professionals engaged in the process should proceed cautiously and should be sufficiently well versed in the subject to advise their clients accordingly. The various standard forms differ in their treatment of the transfer of rights and obligations between the parties at completion. The following have to be considered however: · Liability to pay damages for delay ceases (whether liquidated and pre-ascertained or unliquidated). · Possession of the site returns to the employer and the risk of security and damage to the works and third party liability transfers back to the employer. · The defects liability period commences. · Payment to the contractor of one half of the retention fund falls due. · Arbitration may be commenced upon any issue. · No further instructions may be issued for variation works. · The employer may assign the right to bring proceedings in its name. · The period for adjustment of the contract sum will commence. · Liability for frost damage is transferred from the contractor to the employer. · The period for final review of extensions of time will commence. · Protection under the main contractor's all-risk policy will come to an end. In addition to these mechanisms under the construction contract, the issue of a certificate of completion may have direct impact upon third parties such as for example, to bring an end to obligations of a surety in respect of a guarantee or performance bond. Considering the importance of the subject therefore, it is surprising that guidance available to the construction professional as to when completion should properly be certified is rather sparse. In the 1970 House of Lords decision concerning Westminster Corporation -v- J Jarvis and Sons, a fairly strict view was taken that completion meant completion of all the work that had to be done. Later case law including the 1982 case of H W Neville -v- William Press has suggested that completion may be achieved notwithstanding the existence of minor defects or uncompleted works. Apart from further analysis in the leading text books, there is little else in the way of precise definitions available to the practitioner. These issues were examined in the recent case between George Fischer (GB) Ltd -v- Davis Langdon & Everest and Others. DL&E had been engaged as employer's representative on a modified JCT81 Design and Build contract for the construction and fitting out of a substantial warehouse development. It was accepted that the roofs were defective and the employer, Fischer, had commenced proceedings against the design consultants, the roof and steel work contractors and the employer's representative. Amongst the myriad allegations being made against each party, it was alleged that DL&E had failed adequately to inspect and supervise the works in progress. Also alleged against them was that DL&E were in breach of contract in issuing a Certificate of Practical Completion which resulted in Fischer losing its right to call on a performance bond provided on behalf of the contractor. In common with general practice in the industry, at the date of completion there remained a substantial list of outstanding works and defects, and accordingly DL&E had issued a 'Substantial Completion' certificate accompanied by a two page document headed "Reserved Matters". One of these reserved matters referred to snagging sheets. Despite having issued this document using the words "certify" and "practical completion" and having described it as issued "under the terms of the contract", counsel for DL&E argued that this document was a qualified completion certificate and could not constitute certification of practical completion under the terms of the contract. The Court was not prepared to accept this argument. If works were uncompleted then it would be prudent for the certifier to refer to these matters within the Certificate of Completion. Strictly speaking this would not be by way of qualification to the certificate but as an addendum to it. This would not, however, affect the materiality of the certificate. The Certificate of Completion was by implication accepting these reserved matters as being consistent with practical completion. Accordingly the certificate, whether qualified in respect of defects or otherwise, had the effect of depriving the employer of the benefit of the performance bond, and by failing to advise their client of the relevance and importance of the certificate in that context, DL&E were held to be in breach of duty and negligent towards their client.
CJ-9815
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