Final Certificates – are they the last word?

In standard form building contracts, a Final Certificate is issued by the contract administrator to certify that the contract has been completed fully. In our experience, the conclusive nature of these Certificates are often misunderstood by clients, which can potentially lead to problems at a later date.

A Final Certificate is issued after the making good of any defects and the agreement of the final contract sum. It closes the door on any further disputes as to performance between the parties, other than in respect of latent defects which subsequently appear.

This briefing summarises the effect of the issue of Final Certificates and how the right to dispute may be preserved for parties to JCT and SBCC forms of building contract.

Conclusive evidence – what is covered?

The Final Certificate is stated to be conclusive evidence for any future proceedings between the parties as follows:

• Where the quality or standard of works or materials were stated to be to the reasonable satisfaction of an Architect or Contract Administrator then by issue of the Final Certificate the Architect/Contract Administrator is confirming this to be the case.
• It shall be deemed that all necessary adjustments to the Contract Sum and reimbursement of loss and expense to the Contractor for Relevant Matters have been included in the Final Certificate.
• The Final Certificate is conclusive evidence that all extensions of time as are due to the Contractor under the terms of the Contract have been given.

Conclusive evidence – what is not covered?

The Final Certificate is not conclusive evidence that any workmanship or materials not specifically to be approved by the Architect/Contract Administrator comply with the requirements of the Contract.

Accordingly, if defects are subsequently found to exist the Contractor will remain responsible for these save where the Architect/Contract Administrator had specific responsibility.

Avoiding conclusivity

Parties who do not want a Final Certificate to be conclusive on any of the matters above can only avoid this by:

• Commencing adjudication, arbitration or other proceedings prior to the issue of the Final Certificate

If this is done the Final Certificate shall only become conclusive from the earlier of (a) date of conclusion of any such proceedings and shall be subject to the decision in such proceedings and (b) the expiry of any period of 12 months after the issue of the Final Certificate where neither party takes steps to progress such proceedings.

• Commencing adjudication, arbitration of other proceedings within 60 days of the issue of the Final Certificate

If this is done the Final Certificate shall be conclusive but not in respect of matters to which such proceedings relate.

In a recent case (University of Brighton v Dovehouse Interiors [2014] EWHC 940 (TCC)) a notice of intention to adjudicate was issued within the time limit but subsequently an Adjudicator was not validly appointed within the statutory timescales. A fresh notice required to be issued to progress by way of adjudication.

It was held that the first notice to adjudicate was sufficient to meet the contractual requirements to commence proceedings to avoid conclusivity of a Final Certificate. However the case highlighted the real importance of ensuring that any procedural step is properly and timeously taken to ensure the contractual terms do not operate to close the door on any dispute of the terms of a Final Certificate.

• Where the decision of an Adjudicator is issued after the date of issue of the Final Certificate, commencing any further arbitration or legal proceedings on the matter within 28 days of the date of the Adjudicator’s decision

It is clearly critical that necessary procedures are actioned to preserve the right to dispute. Whilst it may be a fairly simple matter to commence such procedures, parties should be aware of the requirement to be in a position to progress any such procedures.

We regularly advise clients in relation to final account/certificate disputes. Awareness of the contractual provisions restricting the ability to dispute is fundamental. If you are unsure or are concerned that you may miss an opportunity to dispute please feel free to contact Michael Conroy to discuss.