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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Henry Boot Construction Ltd. v Alstom Combined Cycles Ltd.  EWCA Civ 814 (16 June 2005)
Cite as:  3 All ER 932,  EWCA Civ 814,  1 WLR 3850
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
His Honour Judge Humphrey Lloyd QC
Sitting as judge arbitrator
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE DYSON
LORD JUSTICE THOMAS
| Henry Boot Construction Ltd
|- and -
|Alstom Combined Cycles Ltd
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Roger Ter Haar QC and Mr Alastair Walton (instructed by Messrs Lovells) for the Respondent
Crown Copyright ©
LORD JUSTICE DYSON :
Summary of issues
(ii) If it only arose upon the issue of a certificate, did it arise once and for all as soon as Boot was entitled to have the sum certified in an interim certificate, or did Boot have a continuing right to have the sum certified in subsequent certificates, and in particular in the final certificate, so that (where the sum was not certified) each failure to certify in accordance with the contract gave rise to a new cause of action?
(iii) To what extent are Boot's claims for interest pursuant to clause 60(7) of the conditions of contract statute-barred?
(iv) Was the Engineer obliged only to certify sums in respect of claims which he considered not to be statute-barred?
Summary of Boot's claims
The conclusions of the judge arbitrator
"It is probably safer to base the decision on the alternative ground that the contractor's right to payment in respect of work, materials etc properly done or supplied arises when a certificate is issued or due to be issued. That result is conveniently encapsulated in the proposition that a certificate is a condition precedent to payment, but that is inaccurate or perhaps an overstatement. However it is a proposition that is endorsed by many cases, even if in a number of them, the point was not analysed as it has been by the submissions in this arbitration."
"Once all the ingredients which would justify an application or a statement from the contractor are present, the cause of action accrues, perfected, if need be, at the time when the certificate is due. Once the Engineer has failed to issue a certificate for what is due, then time runs against the contractor in respect of the undervaluation or omission—why otherwise is interest payable under clause 60(7)? This is in my judgment fully borne out by the provisions of clause 52(4) and 60 and the authorities to which I have referred."
The first issue
"60. (1) The Contractor shall submit to the Engineer at monthly intervals a statement (in such form if any as may be prescribed in the Specification) showing
(a) the estimated contract value of the Permanent Works executed up to the end of that month
(b) a list of any goods or materials delivered to the Site for but not yet incorporated in the Permanent Works and their value
(c) a list of any of those goods or materials identified in the Appendix to the Form of Tender which have not yet been delivered to the Site but of which the property has vested in the Employer pursuant to Clause 54 and their value and
(d) the estimated amounts to which the Contractor considers himself entitled in connection with all other matters for which provision is made under the Contract including any Temporary Works or Contractor's Equipment for which separate amounts are included in the Bill of Quantities
unless in the opinion of the Contractor such values and amounts together will not justify the issue of an interim certificate.
Amounts payable in respect of Nominated Sub-contracts are to be listed separately.
(2) Within 28 days of the date of delivery to the Engineer or Engineer's Representative in accordance with sub-clause (1) of this Clause of the Contractor's monthly statement the Engineer shall certify and the Employer shall pay to the Contractor (after deducting any previous payments on account)
(a) the amount which in the opinion of the Engineer on the basis of the monthly statement is due to the Contractor on account of sub-clauses (1) (a) and (1) (d) of this Clause less a retention as provided in sub-clause (5) of this Clause and
(b) such amounts (if any) as the Engineer may consider proper (but in no case exceeding the percentage of the value stated in the Appendix to the Form of Tender) in respect of sub-clauses (1) (b) and (1) (c) of this Clause.
The amounts certified in respect of Nominated Sub-contracts shall be shown separately in the certificate.
Minimum amount of certificate
(3) Until the whole of the Works has been certified as substantially complete in accordance with Clause 48 the Engineer shall not be bound to issue an interim certificate for a sum less than that stated in the Appendix to the Form of Tender but thereafter he shall be bound to do so and the certification and payment of amounts due to the Contractor shall be in accordance with the time limits contained in this Clause [the sum stated in the Appendix was £100,000]..
(4) Not later than 3 months after the date of the Defects Correction Certificate the Contractor shall submit to the Engineer a statement of final account and supporting documentation showing in detail the value in accordance with the Contract of the Works executed together with all further sums which the Contractor considers to be due to him under the Contract up to the date of the Defects Correction Certificate.
Within 3 months after receipt of this final account and of all information reasonably required for its verification the Engineer shall issue a certificate stating the amount which in his opinion is finally due under the Contract from the Employer to the Contractor or from the Contractor to the Employer as the case may be up to the date of the Defects Correction Certificate and after giving credit to the Employer for all amounts previously paid by the Employer and for all sums to which the Employer is entitled under the Contract.
Such amount shall subject to Clause 47 be paid to or by the Contractor as the case may require within 60 days of the date of the certificate.
Interest on overdue payments
(7) In the event of
(a) failure by the Engineer to certify or the Employer to make payment in accordance with sub-clauses (2) (4) or (6) of this Clause or
(b) any finding of an arbitrator to such effect
the Employer shall pay to the Contractor interest compounded monthly for each day on which any payment is overdue or which should have been certified and paid at a rate equivalent to 2% per annum above the base lending rate of the bank specified in the Appendix to the Form of Tender. If in an arbitration pursuant to Clause 66 the arbitrator holds that any sum or additional sum should have been certified by a particular date in accordance with the aforementioned sub-clauses but was not so certified this shall be regarded for the purposes of this sub-clause as a failure to certify such sum or additional sum. Such sum or additional sum shall be regarded as overdue for payment 60 days after the date by which the arbitrator holds that the Engineer should have certified the sum or if no such date is identified by the arbitrator shall be regarded as overdue for payment from the date of the Certificate of Substantial Completion for the whole of the Works.
Correction and withholding of certificates
(8) The Engineer shall have power to omit from any certificate the value of any work done goods or materials supplied or services rendered with which he may for the time being be dissatisfied and for that purpose or for any other reason which to him may seem proper may by any certificate delete correct or modify any sum previously certified by him. Provided that
(a) the Engineer shall not in any interim certificate delete or reduce any sum previously certified in respect of work done goods or materials supplied or services rendered by a Nominated Sub-contractor if the Contractor shall have already paid or be bound to pay that sum to the Nominated Sub-contractor and
(b) if the Engineer in the final certificate shall delete or reduce any sum previously certified in respect of work done goods or materials supplied or services rendered by a Nominated Sub-contractor which sum shall have been already paid by the Contractor to the Nominated Sub-contractor the Employer shall reimburse to the Contractor the amount of any sum overpaid by the Contractor to the Sub-contractor in accordance with the certificates issued under sub-clause (2) of this Clause which the Contractor shall be unable to recover from the Nominated Sub-contractor together with interest thereon at the rate stated in sub-clause (7) of this Clause from 60 days after the date of the final certificate issued under sub-clause (4) of this Clause until the date of such reimbursement.
(10) Where a payment made in accordance with sub-clause (2) of this Clause differs in any respect from the amount certified by the Engineer the Employer shall notify the Contractor forthwith with full details showing how the amount being paid has been calculated."
"(f) The Contractor shall be entitled to have included in any interim payment certified by the Engineer pursuant to Clause 60 such amount in respect of any claim as the Engineer may consider due to the Contractor provided that the Contractor shall have supplied sufficient particulars to enable the Engineer to determine the amount due. If such particulars are insufficient to substantiate the whole of the claim the Contractor shall be entitled to payment in respect of such part of the claim as the particulars may substantiate to the satisfaction of the Engineer."
Conclusion on the question of construction without reference to previous authority
"It is also important to have regard to the course of earlier judicial authority and practice on the construction of similar contracts. The evolution of standard forms is often the result of interaction between the draftsmen and the courts and the efforts of the draftsman cannot be properly understood without reference to the meaning which the judges have given to the language used by his predecessors.
"…until the architect has given a certificate, the builder has no right to receive any sum of money from his employer by what I may call a drawing on account. He must get a certificate from the architect….until the contractor can produce to the building owner a certificate he cannot receive anything."
"Whatever be the cause of the under-valuation, the proper remedy available to the contractor is, in our opinion, to request the architect to make the appropriate adjustment in another certificate, or if he declines to do so, to take the dispute to arbitration under clause 35. In default of arbitration or a new certificate the conditions themselves give the contractor no right to sue for a higher sum. In other words, we think that under this form of contract the issue of a certificate is always a condition precedent to the right of the contractor to be paid."
"….If one considers the practicalities of the construction of a building or other works, it seems to me that parties could reasonably have intended that they should have what might be called a provisional validity. Construction contracts may involve substantial work and expenditure over a lengthy period. It is important to have machinery by which the rights and duties of the parties at any given moment can be at least provisionally determined with some precision. This machinery is provided by architect's certificates. If they are not challenged as inconsistent with the contractual terms which the parties have agreed, they will determine such matters as when interim payments are due or completion must take place. This is something which the parties need to know. No doubt in most cases there will be no challenge."
"entitled to examine the facts and to form its own opinion upon them in the light of the evidence. The fact that the architect has formed an opinion on the matter will be part of the evidence. But, as it will not be conclusive evidence, the court can disregard his opinion if it does not agree with it."
"Where an arbitrator having jurisdiction has to decide that something ought to have been done by the architect or engineer which was not done, if the terms of reference are wide enough to enable him to deal with the matter, he may by that decision himself supply the deficiency, and do that which ought to have been done, and produce the result which ought to have been produced…"
"I cannot read either Brodie v Cardiff Corpn or Neale v Richardson except as expressing the view that, in the opinion of the House of Lords in Brodie's case, and in the opinion of this court in Neale v Richardson, an arbitrator to whom a matter is remitted in the form in which it was in this case has the power to dispense with the conditions precedent, and to order that, notwithstanding the non-performance of those conditions precedent, a liability may be established on which money may be ordered to be paid."
The claim under clause 46
"(3) If the Contractor is requested by the Employer or the Engineer to complete the Works or any Section within a revised time being less than the time or extended time for completion prescribed by Clauses 43 and 44 as appropriate then the Contractor shall submit written proposals to the Engineer stating:-
(a) The lump sum based on an estimate of the reasonable extra costs which the Contractor would require to be added to the Contract Price in order substantially to complete and test the Works or any Section by such earlier date as the Employer or the Engineer may have specified, together with details showing the manner of calculation of the lump sum and proposals for the terms of payment thereof.
(b) Where applicable, the extent to which any extension of time to which the Contractor has become entitled at the date of the request may be cancelled or reduced such that the date for substantial completion then resulting would become the substantial completion date for the Works or any Section.
Notwithstanding that the Employer and the Contractor may not have agreed the amount by which the Contract Price is increased, the Contractor shall nevertheless be obliged to proceed with the Works or Section thereof in order to achieve the earlier date aforesaid, and the Employer shall make a reasonable payment on account to the Contractor pending agreement on the lump sum increase to the Contract Price. The cost of preparing the proposals referred to in this sub-clause shall be borne by the Contractor."
"Clause 60(1)(d) requires the contractor to include in its monthly applications "the estimated amounts to which the Contractor considers himself entitled in connection with all other matters for which provision is made under the Contract." Clause 46 makes such provision."
Conclusion on the first issue
The second issue
"It is a general rule that where there has once been a complete cause of action arising out of contract or tort, the statute [of Limitations] begins to run, and that subsequent circumstances which would but for the prior wrongful act or default have constituted a cause of action are disregarded."
"…the cause of action arises at the time when the debt could first have been recovered by action. The right to bring an action may arise on various events; but it has always been held that the statute runs from the earliest time at which an action could be brought."
"Certification may be a complex exercise involving an exercise of judgment and an investigation and assessment of potentially complex and voluminous material. An assessment by an engineer of the appropriate interim payment may have a margin of error either way. It may be subsequently established that it was too generous to the contractor just as it may subsequently be established that the contractor was entitled to more. Further the sum certified may be made up from a large number of constituent figures, some of which may likewise be assessed favourably to one party or the other. It may be that a contractor can say under a certain heading he did not have certified as high a figure as can later be seen to be appropriate but that under another heading he has to accept that the figure certified can be shown to have been an over-certification. At the interim stage it cannot always be a wholly exact exercise. It must include an element of assessment or judgment. Its purpose is not to produce a final determination of the remuneration to which the contractor is entitled but is to provide a fair system of monthly progress payments to be made to the contractor. The strict twenty-eight day period in sub-clause (2) can be contrasted with the three months allowed in sub-clause (3) "after receipt of this final account and of all further information reasonably required for its verification"
" The question which underlies the submissions advanced on behalf of the appellants is nevertheless perhaps this: if the claimants could have challenged earlier certificates, more than five years before they eventually initiated the arbitration, and moreover could have done so on the same basis as formed the basis of that eventual challenge, may it not be said that they really should have made that challenge at those earlier dates, and that having failed to do so their rights have prescribed? There is a certain attraction in that broad approach (although it is not perhaps quite the same as the argument presented by the appellants). But it is important to appreciate that the prescription of one right cannot prevent a claimant from continuing to assert another right. Since each interim certificate supersedes its predecessor, and effectively constitutes a revaluation of the whole work carried out, any failure in relation to one interim certificate (in terms of prescription or otherwise) will apparently leave unaffected the right of a claimant (and indeed a building owner) to challenge the valuation of the whole works executed, in the next or any subsequent certificate. Moreover, cl 41 provides not only a right, in arbitration proceedings, to challenge previous certificates in ways which were not available when those certificates were issued. A previous certificate can apparently be challenged in the arbitration, notwithstanding that the challenge might have been, and was not, advanced when that earlier certificate was issued. In our opinion, a challenge at the earlier stage, and a challenge at the stage of arbitration, can be distinguished. Even if the challenge is upon the same basis, a challenge when a certificate is issued would relate to the amount which ought to be paid at that stage and could properly be seen as part of the enforcement of a different contractual right. A subsequent challenge in arbitration, even upon the same factual basis, may be very different, relating either to the content of a much later interim certificate, or to a final certificate. The whole structure of the contract appears to us to allow such subsequent challenges, notwithstanding that a challenge on the same basis could have been made much earlier, for more limited or different purposes. The availability of arbitration or even litigation for those earlier purposes, even if regarded as the assertion of an enforceable right, does not result, by the elapse of a prescriptive period, in the loss of a separate right to challenge any subsequent certificate."
"(e) If the Contractor fails to comply with any of the provisions of this Clause in respect of any claim which he shall seek to make then the Contractor shall be entitled to payment in respect thereof only to the extent that the Engineer has not been prevented from or substantially prejudiced by such failure in investigating the said claim or the Employer has not been prevented from or prejudiced in pursuing his own claim as a result of such failure."
The third issue
The fourth issue
Leave to appeal to the House of Lords
"Leave is granted to petitions which raise an arguable point of law of general importance which ought to be considered by the House at that time, bearing in mind that the case will have already been the subject of judicial decision."
The words "which ought to be considered by the House" are important. They give the House a broad discretion. I would refuse leave to appeal in this case. The principal question that arises on this appeal is whether the cause of action in respect of the Engineer's failure to include a sum in an interim certificate is the same as the cause of action in respect of the failure to include a sum in the final certificate (the second issue). In my judgment, the answer to this question is plain, although I would not go so far as to characterise Mr ter Haar's submissions on this issue as unarguable. It is sufficiently plain that I would hold on that account alone that the point is not one which ought to be considered by the House of Lords. In my view, the clause 60(7) issue (on which Alstom has achieved a large measure of success) does not raise an issue of general importance sufficient to justify giving leave to appeal. In reaching my conclusion, I also bear in mind that this is an appeal from an arbitrator's award. In the Malmaison case at page 396D, Waller LJ said:
"I also reject Mr Black's submissions that once matters are in court the philosophy applicable to arbitrations somehow has no further application. Parties who have agreed to have their disputes arbitrated should have finality as speedily as possible and with as little expense as possible: see generally section 1(a) of the Arbitration Act 1996. Limitation on the rights of appeal is consistent with that philosophy and one tribunal dealing with the question is also consistent with that philosophy."
Lord Justice Thomas: