Cantrell & Anor v Wright & Fuller Ltd

Factual and Procedural Background

This appeal arises under section 69(1) of the Arbitration Act 1996 from an award made by an Arbitrator concerning preliminary issues arising from a contract between the Claimants, as employers, and the Respondent, as contractors. The contract, based on the JCT Standard Conditions of Contract 1980 edition, related to the construction of a new extension (an Elderly Mental Institution unit) for the Claimants' nursing home located in Suffolk. Practical Completion was certified on 23 February 1998 and the Defects Liability Period ended on 23 August 1998. A Final Certificate was purportedly issued on 29 March 1999, and a notice of arbitration was served by the Respondent on 1 May 2002. The Arbitrator was appointed by the RIBA, the nominating body named in the contract.

The disputes referred to arbitration concerned claims by the Respondent for unpaid certified sums and counterclaims by the Claimants alleging errors in the Adjusted Contract Sum, overpayments, defects in the works, and liquidated damages for delayed completion. A major dispute centered on whether the Final Certificate was validly issued under clause 30.8 and whether it triggered the conclusive effects under clause 30.9. The Respondent argued the certificate was valid, thus barring the Claimants' claims.

Without pleadings or agreed factual background, the Arbitrator, with the parties' consent, determined certain preliminary issues, focusing on whether the certificate issued on 29 March 1999 was validly issued under clause 30.8 and whether it was the Final Certificate for the purpose of clause 30.9. The parties agreed on the issues but disagreed on the factual assumptions and scope. An agreed bundle of documents and chronology were provided to the Arbitrator for reference.

The appeal challenges the Arbitrator's award on these issues, brought without leave due to a contractual provision exempting the requirement for leave to appeal.

Legal Issues Presented

1. Whether the certificate issued by the Architect on 29 March 1999 was validly issued in accordance with clause 30.8 of the contract conditions.
2. Whether the certificate issued by the Architect on 29 March 1999 is the Final Certificate for the purpose of clause 30.9 of the contract conditions.

Arguments of the Parties

Claimants' Arguments

• The Final Certificate was invalid because it was issued after the contractual time limit (two months after the end of the Defects Liability Period) had expired.
• If a statement of adjustments under clause 30.6.1.2.2 was issued, it was served late, rendering the Final Certificate invalid.
• No valid Final Certificate could be issued without prior issuance of a Certificate of Making Good Defects and the statement of adjustments; these were conditions precedent.
• The Architect could not unilaterally ignore contractual time limits for issuing the Final Certificate; any agreement to delay was conditional on consultation which did not occur.
• The certificate was invalid in form as it did not explicitly state it was the "Final Certificate" and incorrectly specified a 14-day payment period instead of the 28-day period required for Final Certificates.
• The certificate was based on the opinion of a quantity surveyor not authorised under the contract, thus not constituting the Architect's own opinion.
• The arbitrator adopted an erroneous and unduly narrow test focusing only on the statement of adjustments rather than the broader contractual requirements and timing.

Respondent's Arguments

• Neither the statement of adjustments nor the Certificate of Making Good Defects were conditions precedent to issuing a valid Final Certificate.
• The time limits in clause 30.8 were directory, not mandatory, so delay in issuing the Final Certificate did not invalidate it.
• The certificate's minor errors, such as payment terms and omission of the phrase "Final Certificate," were immaterial and did not nullify it.
• The covering letter accompanying the certificate clarified its status as the Final Certificate and could be considered in its construction.
• The arbitrator correctly focused on the agreed narrow issue relating to timing and construction of clause 30.8, and his award should be upheld.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed construction of the relevant contract clauses, particularly clauses 30.8 and 30.9 concerning the Final Certificate. It identified that the Final Certificate must be issued within two months after the last of three events: the end of the Defects Liability Period, the issue of the Certificate of Making Good Defects, or the issue of the statement of adjustments under clause 30.6.1.2.2. However, the court emphasised that many steps preceding the Final Certificate are conditions precedent to its valid issue, including the fixing of the Completion Date, issuance of delay certificates, and certification of nominated sub-contractors’ adjusted contract sums.

The court found that the Arbitrator erred by treating the time limits in clause 30.8 as wholly directory, failing to recognise that while there is an implied power to issue certificates late, this power is limited by reasonableness and must be exercised with due notice and consultation. The Arbitrator also incorrectly narrowed the issues, focusing unduly on the statement of adjustments rather than considering all conditions precedent and the full contractual context.

Regarding the form of the certificate, the court held that the certificate issued on 29 March 1999 was ambiguous and did not clearly identify itself as the Final Certificate in form, substance, or intent. The certificate’s wording, the 14-day payment term (instead of 28 days), and the absence of reference to the covering letter to the Respondent indicated it was not the Final Certificate. The court distinguished the London Borough of Merton case, noting the covering letter in the present case was not addressed to or sent to the Respondent and thus could not be used to clarify the certificate.

The court further noted that the certificate appeared to be based on the opinion of an unauthorised quantity surveyor rather than the Architect himself, undermining its validity as a Final Certificate. The Architect had not made final decisions on disputed variations or defects, and had not responded to the Claimants’ objections, indicating the certificate lacked the requisite intent.

In sum, the court concluded that the certificate was neither validly issued under clause 30.8 nor the Final Certificate contemplated by clause 30.9, and thus did not have conclusive effect.

Holding and Implications

The court ALLOWED THE APPEAL and varied the Arbitrator's award by answering both issues in the negative. It held that the certificate dated 29 March 1999 was not validly issued as the Final Certificate under clause 30.8 and did not have the conclusive effect provided by clause 30.9.

The direct effect of this decision is that the Claimants’ claims and defences related to the contract sum adjustments, defects, and liquidated damages are not barred by the purported Final Certificate. The certificate cannot be relied upon as conclusive evidence in arbitration or other proceedings. The court did not set a new precedent beyond the facts of this case but clarified the application of JCT 1980 contract provisions concerning final certificates, emphasizing the necessity of compliance with conditions precedent, reasonableness in timing, and clarity of form and intent.