| Date | 1 December 1999 |
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| Judgment | Penwith District Council -v- V.P. Developments Limited, TCC 21 May 1999 |
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| The Issue | The issue of a final certificate under JCT contracts in the absence of agreement as to the amount of the final account. |
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| Implication |
It is not a pre-condition to the issue of the final certificate under JCT 98 that there should have been prior to that date an ascertained final sum properly issued in advance of the final certificate. |
printThe arrangements under JCT98 for the conclusion of the final account and final certificate are complex. Under clause 30.6 the contractor is to provide the architect or quantity surveyor with all documents necessary for the final account not later than 6 months after practical completion. Within 3 months of receipt of these documents the architect or quantity surveyor is to prepare and ascertain the final sum and send this to the contractor. The final certificate is then to be issued by the architect not later than 2 months after the end of the defects liability period, the issue of the certificate of making good defects, or the sending of the ascertained final sum to the contractor, whichever is the later. A valid final certificate is conclusive evidence, amongst other matters, that effect has properly been given to all the terms of the contract in respect of payments due to the contractor. Thus neither an adjudicator, arbitrator nor the court can alter the effect of the final certificate in respect of monies due to the contractor, unless proceedings have been commenced within 28 days of the issue of the final certificate. It is not uncommon for disputes concerning the final account to drag on for many months longer than the timetable set down in JCT 98. It is also not an uncommon ploy for employers, frustrated by the failure to agree a final account with their contractor, to seek to precipitate matters by issuing a final certificate in the expectation that should the contractor fail to commence proceedings within 28 days, the matter will become closed. These provisions were examined in the recent case between Penwith District Council and V.P. Developments Limited. Penwith had entered into two separate contracts with V.P. Developments for planned maintenance works to council houses. The contracts were based on JCT 80 which, in all material respects, remain unchanged in the new editions. V.P. Developments had submitted draft final accounts within four months of practical completion. The amount was disputed and it was not until some two years later that the contract administrator eventually issued a final certificate, together with a document summarising how the ascertained final sum had been arrived at. The employer might reasonably have thought that this had brought an end to the matter, but three years later V.P. Developments commenced arbitration proceedings. Mr James Fox-Andrews QC, a former official referee, was appointed as arbitrator. Clearly, Mr Fox-Andrews had to decide whether the issue of the final certificate some three years earlier was effective in bringing an end to the arbitration proceedings as conclusive evidence that no further monies were due to the contractor. He held this not to be the case. In Mr Fox-Andrews' view, the ascertained final sum should have been received by the contractor not later than 9 months after practical completion. This would be a minimum of three months before the final certificate could be issued. In his view it was contrary to the spirit of the contract for the final certificate to be issued on the same date as the ascertained final sum. Indeed by way of indication, a period of at least 28 days should have elapsed between the two before the final certificate could be regarded as having been validly issued. These findings could of course be unravelled if the contractor itself had failed to provide the necessary documentation to support the ascertained final contract sum. In conclusion, Mr Fox-Andrews was satisfied that it was a condition precedent to the final certificate being valid, that the statement of ascertained final sum should have been sent to the contractor at least 28 days prior to issue of the final certificate. In the case under consideration, the final certificate was therefore not valid and not conclusive evidence. The Council appealed and the matter came before Judge Humphrey Lloyd QC. He did not agree with Mr Fox-Andrews. He characterised the provisions for final payment and final certificate as a formality. It fell to the QS to ascertain the amount due. The requirement placed upon the contractor under clause 30.6 to provide all documents necessary to establish the final contract sum was, in Judge Lloyd's view, included to promote the process of finality by giving the contractor a last opportunity to put its house in order. This was aimed at ensuring that the employer's representatives knew the full extent of the entitlement to which the contractor considered itself entitled. If the contractor did not take advantage of this opportunity, and failed to submit the documents needed to establish the final sum, then the contract administrator and quantity surveyor would have to do the best they could using such information as was provided by the contractor and their own knowledge. Crucially however, the contract administrator and quantity surveyor could not decline to perform their functions by refusing to issue a final certificate under clause 30.8 which was otherwise due. That "would be to permit the contractor to control its issue". Disagreeing with Mr Fox-Andrews, Judge Lloyd confirmed that the issue of a statement of ascertained final sum prior to the final certificate was not a condition precedent either as a matter of construction or as a result of an implied term of the contract. In any event the contractor would not be prejudiced if the contract administrator and quantity surveyor proceeded under the terms of the contract to issue its statement and final certificate, since the contractor could commence arbitration proceedings to avoid the conclusive effect of the final certificate providing it did so within 28 days.
CJ-9946
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