23 May 2014 #Construction
A number of construction contracts contain what are known as “conclusive evidence” clauses.
To show you what I’m talking about, let’s take clause 1.9 of the JCT Intermediate Building Contract as an example:
Clause 1.9.1 provides that the Final Certificate (issued by the Architect/Contract Administrator) is to be considered conclusive evidence that:
In other words, the Final Certificate settles the Final Account an, if either party disagrees with the Final Certificate, they must “commence” adjudication, arbitration or other proceedings before or not later than 28 days after the issue of the Final Certificate, otherwise they will lose the right to challenge that certificate. Failure to “commence” proceedings will leave the disgruntled party with no entitlement to dispute the Final Account.
‘That doesn’t seem very fair’, you shout, ‘our project QS takes 28 days to reply to an email, let alone prepare and commence a final account claim!’ Well, the courts think it is fair – if you sign up to a contract with a conclusive evidence clause, then on your head be it. As such, the courts have taken a very consistent and robust approach to enforcing these contractual limitation periods... they are enforced, and this is very unlikely to change.
However, a recent case has shown that the courts do have some sympathy for those who have put their rights at the mercy of such a tight deadline.
In University of Brighton v Dovehouse Interiors Ltd, the parties had signed up to the JCT Intermediate Building Contract and were in dispute over the value of the final account. The Contract Administrator took the initiative and issued the Final Certificate, thus starting the 28-day countdown described above.
On day 27, Dovehouse (the Contractor) “commenced” adjudication by serving a Notice of Intention to Refer a Dispute to Adjudication (the first formal step in adjudication). ‘Phew’, they thought, ‘just in the nick of time!’ However, Dovehouse’s notice was not sent to the address specified in the contract and it named the wrong Adjudicator Nominating Body. ‘Ha’ thought Brighton, ‘that notice is not valid, so incapable of “commencing” adjudication’ and off it went to get the Technology and Construction Court (TCC) to confirm that Dovehouse was out of time.
However, the TCC decided that, although the Notice was invalid (and had to be corrected and re-issued for the adjudication to be valid), adjudication had been “commenced” for the purpose of the conclusive evidence clause in the Building Contract. The “commencement” had kept alive Dovehouses right to challenge the final certificate. Even though the adjudication had been prevented by errors in the Notice it had still been “commenced”, meaning that the Notice did not need to be correct, it just needed to be served. The adjudication had been “commenced” even if it could go no further than the service of the Notice!
Although this is an unusual case, the lessons learned are building contract classics: