England and Wales High Court (Technology and Construction Court) Decisions

And in the matter of an Arbitration

Between:

VP Developments Limited

Claimant

And

Penwith District Council

(in Corporate Voluntary Arrangement)

Respondent

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Case Numbers: 1998 TCC 502, 508 & 509

Date of Judgment: 21 May 1999

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1. The plaintiff made three contracts with the defendant for housing repair and maintenance work. The contracts incorporated the JCT standard form of building contract, 1980 edition (local authorities) as amended. A final certificate was issued on each contract. The defendant did not however give notice of arbitration until about three years later. The arbitrator decided in each arbitration that the final certificate did not have conclusive effect pursuant to clause 30. On appeal with leave it was decided in each case that the certificate did have the effect contended for by the claimant.

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1. The plaintiff, Penwith, appeals against three awards made in September 1998 by His Honour James Fox-Andrews QC in each of which he answered a question of law in favour of the defendant. The three appeals are brought by leave of His Honour Judge John Hicks QC given on 19 February 1999 pursuant to section 1(3)(b) and (4) of the Arbitration Act 1979. The questions of law concern the meaning of two versions of clause 30 of the JCT standard form of building contract, 1980 edition. I shall deal with the appeals in the order in which they were argued so I shall begin with the two appeals where the contracts incorporated the JCT form with amendments 1, 2, 4 and 5, ie the Penbeagle and Bodriggy contracts. However the award and appeal in relation to the third contract for work at Lanuthnoe raises at least one more general point of law.

2. Penbeagle and Bodriggy

2. Penwith made a contract under seal dated 28 November 1988 with VP for planned maintenance works to 91 houses at the Bodriggy Estate in Hayle. The Penbeagle contract was also under seal but dated 4 July 1990. It was for planned maintenance works to 45 houses at the Penbeagle Estate in St Ives. In each case the works were described in Bills of Approximate Quantities so that that variant of the JCT form was used, as prepared for local authorities. Mr F.H. Murton FRICS, Penwith's Director of Housing and Public Services, was named in articles 3B and 4 of each agreement as the Contract Administrator (CA) and as the Quantity Surveyor (QS). The Tender Sum for Bodriggy was £885,095 and that for Penbeagle was £326,832. The amount ultimately payable was described in article 2 of the agreement as "the Ascertained Final Sum" (AFS).

3. The chronology of the Penbeagle contract is clear. The arbitrator recorded or found that on 21 September 1990 the Penbeagle works were certified by the CA to be practically complete and that on 28 September interim certificate 7 was issued whereby the total paid to VP came to £295,869. On 14 January 1991 VP submitted to the CA a draft final account for £362,467. The certificate of making good defects was issued on 30 October 1991. The second instalment of retention was released by interim certificate 8 on 25 November 1991. A further interim certificate (10) for £20,000 was issued on 10 July 1992. On 8 April 1993 the CA issued a final certificate for a balance of £11,301.62 payable to VP accompanied by a document summarising how the adjusted contract sum of £334,756.42 that was then certified had been arrived at. By agreement of the parties that certificate and the accompanying document were included in the appeal documents (which were otherwise correctly confined to the award and the relevant contract documents). The document read:

4. On the Bodriggy contract the arbitrator's award recorded or found that practical completion took place on 22 December 1989, that an interim certificate (12) was issued about 23 March 1990 for £679,573, that the certificate of making defects was issued about 30 December 1990, that interim certificates (13 and 14) were issued on 16 January 1991 (releasing retention) and on 10 July 1992, respectively, and that the Final Certificate with a summary of the final account was issued on 8 April 1993. The total paid came to £746,560. The document accompanying the final certificate was in the same form as that used for the Penbeagle works and showed how the AFS of £746,546 was arrived at.

5. On both contracts nothing at all then happened after the issue of the final certificate until some three years later when on 20 March 1996 VP gave notice of arbitration on each contract. This was the first and only notice. (The Arbitration Act 1996 thus does not apply.) After the arbitrator was appointed pleadings were served in 1996 and early 1997. It is common ground that the essential aspects of the Bodriggy contract, its events and the arbitration in relation to them are indistinguishable from those of the Penbeagle contract so I shall not refer to them further. The arbitrator decided that in each arbitration Penwith's case required that a preliminary point should be determined which in the case of the Penbeagle contract was:

3. The arbitrator heard arguments from Mr Cliff Cowen, a quantity surveyor representing VP, and from Mr Howells, counsel for Penwith. In his awards dated 8 September 1990 (both erroneously stated to be final but this slip was later corrected) he decided that each certificate was not conclusive evidence and that the costs of the preliminary points should be paid by Penwith. Reasons were given for the arbitrator's decisions.

6. In addition to clause 30 of the JCT conditions clause 17 is also relevant to these two appeals:

8. The relevant parts of clause 30 are as follows:

"The last temptation is the greatest treason:

To do the right thing for the wrong reason".

44. Mindful of that shot across the bows and of the difficulty in transposing the dictum in Ipswich v Fisons to a substantive appeal I nevertheless believe that I may avoid this trap since neither party relied on grounds which had not been presented to the arbitrator or which were not subsumed in the arguments presented to him or were not natural extensions of them.

8. The arbitrator's reasons as set out in the Penbeagle award read in part:

56. The reasons given in the Bodriggy award were in virtually the same terms and to the same effect.

9. Mr Blackburn submitted that the contract had to be read as a whole and that the intention of the parties had to be found by giving its language its ordinary and natural meaning. Mr Stimpson did not dissent from this basic proposition (which he said, correctly, was in part at least expressly enshrined in clause 1.2 of the JCT conditions). He also argued that the JCT form should be construed sensibly and in a practical, commercial not over-clinical manner, a proposition which also formed part of Penwith's case. By the conclusion of counsel's submissions it was clear that the central question was whether the issue by the CA to the contractor of a statement of the AFS under clause 30.6.1.2.2 was a condition precedent to the issue of a final certificate. Having regard to the restrictive effect of the final certificate Mr Stimpson also maintained that the contract should be strictly construed, although in the event I do not think that it is necessary to do so.

10. Mr Blackburn argued that the arbitrator was wrong in his conclusion that "VP should have a minimum of 3 months (and in practice substantially longer) in which to consider the AFS probably with professional advice before the Final Certificate was issued." He suggested that the source of this period might be the three months provided in clause 30.6.1.2 between the receipt of the documents necessary for the purposes of the computations required by the conditions and the Quantity Surveyor's ascertainment of loss or expense and his preparation of the statement of the AFS. The only reason why the arbitrator could have said that "in practice" the contractor would have had "substantially longer" to consider the AFS is that the certificate of making good defects (also listed in clause 30.8) is on occasion issued some time after the end of the defects liability period. Mr Blackburn maintained that no such period prior to the issue of the final certificate could be derived from the conditions as it was inconsistent with the express terms of the contract. Clause 30.6.1.2 began by stating "Not later than 3 months.." and clause 30.8 also stated that the final certificate had to be issued "not later than 2 months after" the latest of one of three events: the end of the Defects Liability Period (DLP), the certificate of completion of making good defects or the dispatch of the ascertainment and statement of the AFS, as set out in clause 30.6.1.2.2. The final certificate might therefore be issued at any time after the AFS was established and the statement sent. If anything the contractual periods were minima and not maxima. The time provided before the final certificate was issued was no more than two months and was given to the CA and not to the contractor. It was also clear that the production of the AFS could and probably would be the last of the three events. Although it was not necessary to justify the policy which led to the choice of these three events it was probable that in practice the statement of the AFS would be the last of the events since both clause 17.2 and clause 17.3 permitted deductions from the AFS where the contractor had not made good defects as instructed so that it would be normal to wait until all defects had been made good and a certificate of making good defects had been issued before the AFS could be finalised in case a further adjustment was needed, for which express provision was made in clause 30.6.2.4. The contract therefore contemplated that the process leading to the AFS might be an event after the end of the DLP or after the certificate of making good defects. Equally once the Quantity Surveyor's statement of the AFS had been sent to the Contractor the CA was free to issue the final certificate. Clause 30.8 contained no temporal restriction of the kind suggested by the arbitrator. If the CA could issue the certificate within a week of the date when the AFS was sent to the contractor the CA could do so within days and even the very next day. The words "not later than 2 months" did not mean "not less than 3 months but not later than 2 months" as the arbitrator had held. His reason that it was "crucial" there had to be some distinct gap was wrong. Such a gap was contrary to the policy to be inferred from the contract, namely that there should be finality as soon as reasonably practicable, bearing in mind that both the employer and the contractor had the protection given by clause 30.9 in case either were dissatisfied with the content or effect of the certificate. The arbitrator's reference to clause 30.9 did not assist. That condition provided a clear mechanism to avoid the conclusive effect of the final certificate which could be operated easily.

11. Mr Blackburn submitted that the arbitrator was also wrong when he came to consider the position if the contractor had submitted the documents required by clause 30.6.1.1 but had failed to do so within the time required. Such a failure could never constitute a repudiation such that it could be described in terms of "fundamental breach". If the contractor failed to comply with its obligations the QS and CA would still have to arrive at an AFS and to issue a final certificate as best they could. The employer had an interest in having a final certificate which the CA and QS had to protect. It was completely wrong to say "If, however, VP failed completely to provide the necessary documentation .... the CA would have been entitled to refuse to issue a Final Certificate at all". If the documents were supplied late by the contractor it would be open to the employer to waive the breach and to authorise the CA and QS to take the information into account. However Mr Blackburn submitted that such circumstances, ie breach by a contractor, could not require the CA not to issue the final certificate "until approximately 28 days after the AFS was sent". The language used by the arbitrator in this part of his award was regrettably loose.

12. Mr Stimpson made it clear at the outset of his submissions that he would not argue that all the arbitrator's reasoning could be justified. He did not support the arbitrator's period of a minimum of three months. He argued that clause 30.8 clearly provided that the final certificate was to be issued after the last of the events listed, all of which had dates. It therefore contemplated that there should be a gap before the final certificate was issued. Mr Stimpson maintained that clause 30.7 required an interim certificate to be issued and that clause 30.7 made it clear that a period of 28 days had to elapse before a final certificate could thereafter be issued so that the CA could not issue such a final certificate until clause 30.7 had been observed. In any event if the contract were to be read and capable of operation in a sensible and commercial manner some gap had both to be maintained and to be of reasonable length (for Mr Stimpson acknowledged that it was hard to justify a period of the length suggested by the arbitrator). Its purpose was to give the contractor an adequate opportunity to pick up errors in the calculation of the AFS. The contracts were with Bills of approximate quantities so there was an additional possibility of error in measuring and valuing the work. The CA and the QS had the responsibility of calculating adjustments such as loss and expense recoverable under clause 26 so the contractor needed to have the statement to see what had been done. It was unrealistic to suggest that the contractor suffered no prejudice if it did not have the statement in good time before the final certificate since although notice of arbitration could be given no one wanted to start an arbitration over matters that could and should be resolved by agreement before the certificate was issued. Initiating an arbitration was not a step to be taken lightly; it had consequences, not least in terms of costs if the proceedings were unnecessary. Accordingly if the general thrust of the contract was respected and effect given to its spirit a period of 28 days, although not one which could be explicitly supported, was both reasonable and sensible. Although the contract did not specifically so state, the issue of a statement of the AFS was a condition precedent to the issue of the final certificate. Mr Stimpson was however unable to refer to any commentary on or discussion of the JCT forms which suggested that such an approach was recognised in practice.

13. It was common ground that there were no nominated sub-contractors so Mr Blackburn submitted that any reliance on clause 30.7 was irrelevant for present purposes. The AFS did not have to deal with them and the timing of the statement of the AFS could not thus be affected. Clause 30.7 was included primarily for the benefit of the contractor and nominated sub-contractors to enable them to have advance notice of what was going to be certified so that if necessary steps could be taken to avoid the effect of the final certificate and to establish a multi-party arbitration but also for the benefit of the employer and subcontractor so that if the amount included in such a certificate was not paid by the contractor to a sub-contractor the opportunity of paying direct was not lost as the amount, if paid direct, might be deducted from any balance due on the final certificate. It was irrelevant to the relationship of the AFS to the issue of the final certificate. Accordingly the arbitrator's answer could not be justified by reference to clause 30.7.

14. Mr Stimpson relied on Crestar Ltd v Carr (1987) 37 BLR 113 which the arbitrator had found helpful. The contract was in the pre-1980 JCT Minor Works form. The Court of Appeal (Fox LJ and Sheldon J) had held that failure to observe the stages prior to the issue of a final certificate did not entitle the architect to issue a final certificate (see per Fox LJ at page 123). Mr Stimpson argued that the decision showed that a final certificate could be subject to a condition precedent even if it were not spelled out and could not be inferred from the contractual timetable.

15. In addition the arbitrator had found that there was no statement of the AFS so Mr Stimpson submitted that on that finding no valid final certificate could have been issued and the arbitrator's conclusion was correct. The document which purported to be an AFS was not capable in law of being one as it did not list all the elements of an AFS required by clause 30.6.2. He suggested that the document should have had the detail of the document which accompanied the Lanuthnoe final certificate (although it was not accepted that that document was a sufficient computation of the AFS). That was a 38 page document based on the contract Bills which the arbitrator there found to be "a satisfactory AFS" (see below).

57. Decision on Penbeagle and Bodriggy appeals

17. Clearly a certifier or any other decision-maker must have the necessary contractual authority to act for otherwise the certificate or decision will be invalid. If the person has gone outside the limits of the decision-making authority conferred by the contract, ie the person does not have the power or jurisdiction to make the decision or to issue the certificate, the certificate or decision will be unenforceable and will be liable to be set aside. The parties may of course agree to accept the act and in effect to ratify it and if only one party is affected that party may elect to waive its rights not to be bound by it and, by waiver or otherwise, accept the certificate or decision as valid so that it is not always useful to describe it as a "nullity". Thus in my view the central issue is whether the stages set out in this version of the JCT form are ones which must be taken before the CA is authorised to issue the final certificate.

18. The basic framework of this section of the 1980 JCT forms is relatively clear and reflects long-standing practice. Once the works are completed the scene is set out for the last act at the end of which the final certificate should appear. The final certificate has a dual role: it ostensibly deals only with the final accounting and, as such, it is intended to arrive at the AFS; it is also deemed to express the CA's satisfaction with the quality of the works and with their apparent compliance with the contract. The two strands are linked in as much as the certified value of the works is intended also to reflect their contractual worth for if they have been properly executed or completed what might otherwise have been their full contractual value will presumably not be certified, either because the CA cannot conscientiously do so or because the process of arriving at an AFS requires an adjustment or abatement (a topic to which I shall return). Although the policy of making the final certificate conclusive evidence in proceedings has been long been criticised by some (and indeed the JCT has been concerned with judicial decisions on the meaning of the clause 30 as it has evolved) it is clear that the contract represents a consensus within the building industry that, if the JCT forms are used, there should, with certain exceptions, be finality on all financial matters and on all issues relating to the contractor's apparent compliance with the contract and such finality should be achieved as soon as reasonably possible after practical completion so that the parties can go their separate ways. The contractor should be reasonably confident that it will not be called back to attend to further defects; both should be confident that the accounts have been settled so that the financial outturn is clear and no provision is required for contingent liabilities. The last is an objective which most employers are keen to attain. In addition the final certificate does more than repeat the contents of the AFS. It states the balance due and, as the Lanuthnoe contract demonstrates (see below), that may be in favour of the employer who may therefore sometimes have as much commercial interest in having a final certificate as the contractor. In accepting Mr Stimpson's submission that the contract should be approached on a commercial basis and not in a clinical manner I do so with these considerations in mind. I was puzzled by the arbitrator's reference to the need for a contractor to obtain professional advice and to have to have a minimum of three months to consider the AFS as this does not accord with my understanding of common practice, especially on contracts for the repair and renovation of council houses, and in any event I do not consider it to be a relevant surrounding circumstance.

19. The JCT form contains elaborate provisions for the measurement and valuation of the works and the establishment of the AFS. The amounts in the interim certificates, particularly the later ones, will generally have been arrived at after some discussion. An extensive procedure for the valuations of variations is set out in clause 14. Clause 14.6 gives the contractor the right to be present at measurements. Clause 26 provides a seemingly comprehensive mechanism for picking up expenditure and loss that is not reimbursable by a payment under any other provision of the contract. It cannot however be operated without the contractor providing the QS with information and details to enable a proper ascertainment to be made since the QS has to be sure that the loss or expense has in fact been incurred as estimates are not permitted by the condition. These strands come together after practical completion since clause 30.6.1.1 obliges the contractor to submit "all documents necessary for the purposes of the computations required by the Conditions...", ie the documents which will enable the CA or the QS to complete the valuation of the works, including variations, and to prepare a statement of the Final Measurement and Valuation, as well as all the other elements of the AFS (as defined in clause 30.6.2), to which clause 30.6.1.2 is specifically directed. If all has gone well these documents will already have been provided as the work proceeded and soon after practical completion agreement will have been reached on much (if not all) of the contents of what used conveniently to be called the final account.

20. Clause 30.6.1.1 should therefore be a fallback and the operation of clause 30.6.1.2 should also be a formality since, for example, if clause 26 has been properly observed by the contractor and if the architect or CA has decided that the contractor is entitled to recover under that condition the QS should have ascertained the amount due which should have been included in an interim certificate. Clause 30.6.1.1 is included to promote the process of finality by giving the contractor a last opportunity to put its house in order and to ensure that the employer's representatives know of the full extent of the entitlement to which the contractor considers itself entitled and of the evidence to justify the amount of that entitlement. If the contractor does not take advantage of this opportunity and fails to submit the documents needed to establish the amount then the CA and QS will have to do the best they can using such information as was provided by the contractor and their own knowledge. In my judgment they cannot however decline to act under clause 30.6.1.2 and the CA cannot refuse to issue a final certificate under clause 30.8 which is otherwise due for that would be to permit the contractor to control its issue. In such circumstance the contractor would effectively be gaining an advantage from its own default and breach of the contract and on well-established principles of law it would not be allowed to do so: in Roberts v Bury Commissioners (1870) LR 5 CP 310 Blackburn J said at page 326: ".. no person can take advantage of the non-fulfilment of a condition the performance of which has been hindered by himself". There is nothing in the contract which justifies it being read to sanction such a course of conduct. It would indeed require clear words. The CA does not cease to have authority to issue a final certificate because of the contractor's failure to comply with clause 30.6.1.1 and compliance with clause 30.6.1.1 is not a necessary prerequisite to the creation of that authority nor it is a condition precedent to its exercise. The contractor is not (or should not be prejudiced) if the CA and QS proceed under clause 30.6.1.2 or under clause 30.8 since it can commence arbitration proceedings to avoid the conclusive effect of the final certificate as provided by clause 30.9.1.2 and .4 (provided that it does so within the time limit set out in clause 30.9.3).

21. The timing of the final certificate may be affected by the operation of clause 17. This contains two provisions whereby, as an alternative to the remedy granted by clause 4.1.2 for non-compliance with an instruction, if the contractor does not make good a defect or if an instruction is issued dispensing with the need to do so, a deduction may be made from the contract sum, for which provision is made in the calculation of the AFS by clause 30.6.2.4. The amount otherwise payable to the contractor is thus to be abated. The amount of the deduction or abatement may be the cost or estimated cost to the employer of having the defect put right by others (where an assessment by way of diminution in value is not appropriate). However that cost will probably not be known until after the remedial work has been done and the certificate of making good defects issued (which under clause 17 is not a certificate that the defects have been made good by the contractor) so that the deduction and the adjustment to the AFS will not be made until after that certificate. Whatever the state of completion of the AFS it is therefore probable that its final calculation may be deferred. Even if a statement of the AFS were sent to the contractor before the end of the DLP or the issue of the certificate of making good defects it would still be the duty of the CA and the QS to make a deduction and to make a further adjustment to the AFS should the need arise under clause 17. In such circumstances it makes little sense to delay the issue of the final certificate still further simply to give the contractor a significant period of the kind suggested by VP and the arbitrator. In my judgment this is an additional reason why the provision of a statement of the AFS is not a condition precedent to the issue of the final certificate.

22. If the contractor complies with clause 30.6.1.1 then there will be no doubt as to what it considers to be due to it. Does it have to have a specific period or a reasonable time to consider what the CA or QS thinks is due before a final certificate is issued? The contract does not say so. The CA must issue the final certificate "not later than 2 months" after the date of the ascertainment and statement of the AFS (as provided by clause 30.6.1.2) but it does not state that some minimum period must elapse before the certificate is issued. Mr Blackburn was plainly right in his submission that the certificate could be issued on the very next day after the date of the dispatch of the statement and ascertainment. There is therefore no reason to conclude that the contract contemplated (or that the parties to it are presumed to have intended) either that the contractor had to know and digest the contents of the ascertainment or the statement of the AFS before the final certificate was issued or that some significant period had to elapse because the CA could issue a final certificate. If there is to be no such period then there is no point in making the issue of the final certificate conditional on the transmission of the AFS to the contractor and it cannot be a condition precedent. Furthermore there could be wrangles about whether or not the document complied with the contract. It cannot be right that the CA should not have authority to issue the certificate until such arguments had been resolved.

23. I do not accept Mr Stimpson's submission that the requirements of clause 30.7 are relevant to the question before me, still less to the facts of this case. There were no nominated sub-contractors. Clause 30.7 only applies if there are nominated sub-contractors. Furthermore clause 30.7 may well be satisfied much earlier. Mr Blackburn adopted in argument the illustration of a piling sub-contractor whose work and its measurement and valuation will almost invariably be finished and completed well before practical completion so in such an instance effect would be given to clause 30.7 by an interim certificate issued much earlier than 28 days prior to the issue of the final certificate. In any event the purposes of clause 30.7 are those given by Mr Blackburn (and accepted by Mr Stimpson), namely to enable the contractor and nominated sub-contractors to have advance notice of what was going to be certified so that, if necessary, steps can be taken to avoid the effect of the final certificate and to establish a multi-party arbitration and to enable the employer to pay a sub-contractor direct and to recover the amount from the balance due on the final certificate (where there was a sufficient sum available). It is not a condition precedent to the issue of the final certificate.

24. The 1980 JCT form is a long and complex document and was plainly intended to provide for most conceivable circumstances and to block the many attempts to find gaps in its structures, despite repeated assaults by the barrack room lawyers that permeate the building industry. It is in my judgment impossible either to construe the contract as providing that the contractor must have the AFS before the CA is authorised to issue the final certificate or to conclude that the contract is in some way deficient and cannot be made to work without the implication of a term to that effect, as suggested by Mr Stimpson. The express terms of the contract are clear and preclude any such interpretation or implication. There is in my judgment no commercial necessity for either since the contractor can decide from looking at the final certificate and the contents whether the result is acceptable to it. The contractor knows better than anyone else what loss or expense has been incurred and is in at least as good a position as the CA and QS to form a view about every other element of the AFS and the final measurement and valuation. Under this contract a contractor such as VP is not treated as the same as the employer under the JCT Minor Works form which was considered in Crestar v Carr, and in my judgment its position is therefore so far removed from such an employer as to make a comparison of no value. Furthermore if the contractor is dissatisfied it can avoid the conclusive effect of the certificate by commencing arbitration proceedings which can be done very simply and without any significant cost. If it only did so in order to persuade the CA or QS to form a different opinion it would make its intention plain and would invite the employer to agree to defer the appointment of the arbitrator to see if discussions resolved the matter. If the employer declined to do so and if it later appeared to the arbitrator that the refusal was unreasonable the arbitrator would no doubt exercise his discretion on costs in an appropriate manner. However this scenario is untypical of the situations for which the JCT form and this contract is presumably intended, namely those, where in accordance with good practice and custom, issues over measurement, valuation and the AFS are raised, discussed and resolved so that clause 30.6.1.1 describes what is formally required so that there is a record of and no doubt about the final figures. In my judgment the provision of a copy of the ascertainment and of a statement of the AFS is not a condition precedent to the issue of the final certificate so that a failure to provide them before the final certificate does not affect the CA's authority to issue a final certificate.

25. I do not consider that the arbitrator decided in the award that the document accompanying the final certificate was not a sufficient statement of the AFS for the purposes of clause 30.6.1.2. and clause 30.6.2. In my view the arbitrator was dealing only with its timing. Mr Stimpson however contended that the arbitrator had reached such a conclusion and that it was right since the contract required a document which set out amounts against each of the heads in clause 30.6.2. The relevant documents did not do so. If the arbitrator did reach that conclusion then I have to consider it as a part of the answer to the question that he had to determine (the subject of this appeal) and in so far as it is a question of law. What does the contract require of a statement of the AFS and was the document accompanying the final certificate capable in law of being such a statement? First, in my judgment, reading the contract in the manner suggested by Mr Stimpson, clause 30.6 does not require anything to be done which is not necessary having regard to what has taken place. It would be futile, for example, formally to state "nil" against an item for clause 30.6.2.7 if there had been no application to ascertain loss or expense under clause 26.1 or clause 34.3. Secondly, the document prepared by the CA is in my judgment perfectly capable of being a statement of the AFS. It explicitly purports to be such a document and on its face appears to satisfy all that is needed on this contract. It may be that, as a matter of fact, it contains material omissions but none is apparent on its face. No doubt the CA could have sent a copy of the Bills with the final measurements and valuations as was done on the Lanuthnoe contract but clause 30.6.1.2 requires no more than a "statement of the computation of the [AFS]" and not the computations themselves so that a summary is sufficient. For example, the contract does not require the measurement notes or rate build-ups to be sent, no doubt because in the vast majority of cases they will have been agreed long since. Here the statement provided a summary of each of the relevant elements of the Bills. Thirdly, as I have already indicated, the fact that the document may not comply with clause 30.6 does not mean that the CA had no authority to issue a final certificate since it is not necessary that such a document should exist for the final certificate to be valid and enforceable as conclusive evidence.

26. For these reasons in the case of each award the answer to the question of law raised by the award and the appeal is: Yes. The appeal will be allowed and the arbitrator's awards varied so as to reverse in each the declaration and order as to costs. If required either award will be remitted so that any matters which survive may be determined by the arbitrator.

Lanuthnoe

27. The Lanuthnoe contract was earlier than the other two contracts. It too was for planned maintenance work at the Lanuthnoe Estate at St Erth which was the subject of Bills of Approximate Quantities, the total of which came to about £122,094. The contract was dated 27 June 1988 and incorporated the 1980 JCT conditions. Clause 30 in the other two contracts had been the subject of amendments by the JCT. In the Lanuthnoe contract the relevant parts were as follows:

85. The period of final measurement and valuation (see eg clause 30.6.1.2) was 12 months and the period referred to in clause 30.8 was 3 months. The other conditions material to this appeal did not differ from those later used on the other two contracts. Mr Murton was the Supervising Officer (SO) and QS.

28. The arbitrator recorded or found that by 17 November 1988 the works were certified by the SO to be practically complete and that the certificate of making good defects was issued on 15 November 1989. By 16 April 1990 VP had provided a "final account" totalling £82,654.09, and on 24 May 1991 VP was sent a corrected copy which came to £71,108. This valuation of the AFS was subsequently increased but the final amount of £73,583.35 which was stated in the final certificate dated on 9 February 1993 was greater than the amounts paid on account on interim certificates (£74,108) so its effect was to state a debt of £524.65 due from VP to Penwith. The certificate was not sent until 16 February 1993. As with the other two contracts nothing happened for the next three years until 22 March 1996 when notice of arbitration was given by VP. The pleadings were served in 1997. The preliminary point which the arbitrator ordered to be determined by him was in essentially the same terms as the two arbitrations and was answered in the same way in an award of 10 September 1998. He said:

29. Since the award on the Lanuthnoe contract included a number of grounds which either did not form part of the reasons given for the other awards or were not articulated as part of those reasons this appeal raised additional points. First, the arbitrator decided that Penwith had been in "undoubted" breach of contract in three respects: in not issuing an interim certificate under clause 30.7; in not serving a copy of the statement of the AFS within a reasonable time before the issue of the final certificate; and in giving VP seven rather than fourteen days to give notice of arbitration before the final certificate took effect as conclusive evidence. The arbitrator did however state that the second breach would not have deprived the final certificate of its effect. Interestingly, and in contrast to the reasons given in the other two awards, he took the view that "the inter-relation of conditions of 30.6.1.2 and 30.8 was such as not to make the giving of a copy before the issue of the final certificate a crucial matter". I shall first consider whether the contract was not observed before returning to the decision that Penwith was in breach of contract.

30. It was again common ground that there were no nominated sub-contractors so, again, was clause 30.7 relevant? Penwith's case was that the AFS did not have to deal with them and so the timing of the final certificate could not thus be affected by the operation of clause 30.7. For the reasons that I have already recited Mr Blackburn submitted that the arbitrator in this award did not appear to have understood the rationale of the condition (and had appeared to have been influenced by the marginal note which should have been ignored, as Mr Stimpson rightly accepted). Clause 30.7 was irrelevant to the issue of the final certificate. Clause 30.6.2.2 required the AFS to include amounts due to nominated sub-contractors as finally adjusted or ascertained so if the arbitrator were right in requiring the AFS to be with the contractor not less than three months before the final certificate then clause 30.7 was unnecessary as the contractor would have been informed of this element two months earlier. Mr Stimpson however maintained that clause 30.7 required an interim certificate to be issued and that clause 30.7 made it clear that a period of 28 days had to elapse before a final certificate could thereafter be issued so that the SO could not issue such a final certificate until clause 30.7 had been observed.

31. As on the other two appeals, the requirements of clause 30.7 are in my view irrelevant both to the question before me and to the facts of this case. Clause 30.7 only applies if there are nominated sub-contractors and there were none. I have already set out what I consider to be the purposes of clause 30.7 so that it falls out of the picture. Clause 30.7 could not have been observed so there could be no breach of it. It is an aunt sally or quixotic windmill.

32. Next, the arbitrator decided that "implicitly the contract provided that a copy of the computation of the AFS should be sent to VP a reasonable time before the final certificate was issued". Mr Blackburn again submitted that although it was unclear whether this conclusion was derived from the interpretation of the contract or some implied term it was wrong since it conflicted with the express terms. Mr Stimpson maintained that the conclusion was justified for reasons that I have already set out. For essentially the same reasons as I have given in relation to the other contracts, this contract cannot be read in this way nor can any term be implied to that effect. Penwith's criticisms of the reasoning are entirely correct. Clause 30.6.1.2 expressly stipulates that the computation of the AFS is to be completed within the period of final measurement and valuation, ie within 12 months from practical completion, and on completion is to be sent to the contractor. Clause 30.8 and the appendix are equally clear: the final certificate must be issued before the expiration of three months from the last of the listed events. There is, as the arbitrator rightly observed, no relationship between the provision of the statement under clause 30.6.1.2 and the time when the final certificate is to be issued. The three events include the provision by the contractor of documents under clause 30.6.1.1. I do not follow why the arbitrator regarded this as strange since, as I have already stated, without such documents the CA and QS would have to do the best they could to arrive at the AFS and the amount finally to be certified and the increased risk that the contractor would challenge the certificate on the grounds that the calculation of the AFS was wrong. Perhaps the arbitrator had in mind the later amendments but they did not of course exist when this contract was made and cannot be used to construe it. VP had in any event provided its "final account" in 1990 which evidently met the requirements of clause 30.6.1.1. In summary the terms of this JCT form are extensive and clear and do not admit of room for the implication of terms which in any event would not satisfy the criteria for the conclusion that they represented the presumed intention of the parties and was necessary to make the contract workable since the contractor knew of his own position and could still prevent the final certificate becoming conclusive evidence. As a matter of construction clause 30.8 plainly states the events the occurrence of which regulates the latest date by which the final certificate is to be issued and it cannot be read as subject to the qualification "but in any event not unless the contractor has had a reasonable time to consider the documents referred to in clause 30.6.1.1".

33. The third "undoubted breach" occurred because the final certificate was dated 9 February 1993 but was not sent to VP until 16 February 1993. Condition 5.8 of the JCT form states:

118. Mr Blackburn argued that a certificate is not issued until it is sent and for the purposes of the JCT form the duplicate copy must also be sent at the same time in such a manner it will arrive on the next day (or working day) and that the arbitrator's view that issue takes place when the certificate is signed was wrong. Here the arbitrator recorded that it was not disputed that the certificate was not sent until 16 February. That day was therefore the date of issue so that there was no reduction of the period. In any event if a party could show that a certificate did not reach it when it should have done, the other party could not take advantage of any resulting prejudice. Mr Stimpson did not argue that the arbitrator's conclusion was supportable.

34. In my judgment under clause 5.8 it is not enough for the architect or SO or CA to sign and date the certificate. A certificate is not issued until the certifier sends it to those to whom it is required to be sent. As Mr Blackburn said, it is absurd to think that a certificate is issued even to a local authority if it simply sits on the certifier's desk or in a drawer or out-tray. The certificate must forthwith be dispatched to the chief officer or other competent official of the local authority (in case of the basic JCT form to the employer itself). A copy must immediately, ie at the same time, be dispatched to the contractor and, since the consequences of a certificate may be extremely important to a party the clear intention is that each party should have the certificate as soon as practicable so that, unless the contract specifies the means of transmission, the certificate or duplicate must be sent by a method whereby it arrives not later than the next working day. In the case of a local authority or employer, whose employee may be the architect, SO or CA, the original may obviously arrive earlier than the duplicate but that is plainly part of the JCT regime and it does not affect the date which is that of issue. If however it can be shown, first, that the certificate or duplicate did not arrive when it should have done and as a result a party did not have the time contemplated by the contract within which it might act and secondly, that it would have acted in time then the other party cannot take advantage of the resulting prejudice. Normally this situation will be established by the party acting within the time that it should have had. Accordingly in my judgment the final certificate was not issued until 16 February 1993 when it was sent and, even if it had been issued on 9 February, Penwith could not rely on that date had VP served a notice of arbitration sometime after 23 February but within 14 days of 16 February 1993 (when the certificate was issued). Since VP did not serve notice of arbitration until 1996 that situation is not material.

35. The events which the arbitrator decided were "undoubted breaches" were not therefore defaults in complying with the terms of the contract. Even if any of them had been an instance of non-compliance with the terms of the contract Mr Blackburn submitted that they could not be breaches of contract by Penwith. He referred to Panamena Europea Navigacion v Leyland (1943) 76 Lloyd's Rep 113 (CA) and [1947] AC 428 (HL) as applied by Macfarlan J in Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 350. In the former case in the Court of Appeal Scott LJ said (at page 124);

120. Goddard LJ agreed with Scott LJ and in dismissing the appeal the House of Lords endorsed in general terms the judgment of Goddard LJ. In Perini Macfarlan J had to consider the position of a certifier, the Director of Works, who was employed by the Commonwealth. He followed Panamena and held (at page 515) that there was "an obligation to require the Director to act in accordance with his mandate if the defendant is aware that he is proposing to act beyond it".

36. In my judgment these decisions are correct. Mr Murton, although employed by Penwith, was given authority by the parties to the contract to form and express the opinions and to issue the certificates as and when required by its terms. He was not the agent of Penwith in so acting so that Penwith was liable as principal to VP for what he did or did not do in his capacity as certifier. On the other hand Penwith was the party who could control him if he failed to do what the contract required. Since the contract is not commercially workable unless the certifier does what is required of him, Penwith, as part of the ordinary implied obligation of co-operation, was under a duty to call Mr Murton to book (to use Scott LJ's phrase) if it knew that he was not acting in accordance with the contract. Both Scott LJ and Macfarlan J make it clear that the duty does not arise until the employer is aware of the need to remind the certifier of his obligations. I am also of that opinion for the same reasons. A mere failure by the certifier to act in accordance with the contractual time table is not a failure on the part of the employer to discharge an implied obligation positively to co-operate and cannot be a breach of contract by the party whose employee is the certifier. On the facts set out in the award Penwith could not therefore have been in breach of contract. In arriving at this conclusion I bear in mind the argument that the existence of an arbitration clause which confers on the arbitrator wide powers to open up etc means that a failure to issue a final certificate can be put right and thus there is no need for an implied obligation of the kind found in Panamena and Perini since the necessity there arose as there was no such arbitration clause. It is not however necessary to express any view about such an argument.

37. Mr Blackburn also submitted that the arbitrator erred in describing the effect of the breaches as rendering the certificate "void" or "voidable" as it was wrong in principle to introduce public law concepts which were confusing in a private law context. However it is not unusual for there to be cross-fertilisation between the language of public and private. It is sometimes helpful and leads to a better understanding of the question that has to be decided so that, giving the award a liberal interpretation as suggested by Mr Stimpson, I do not think that in using the words "void" and "voidable" the arbitrator was doing more than saying in other words and in shortened way that the certificate was invalid but that its invalidity might be disregarded and avoided if either or both of the parties chose to do so (as I have set out above when considering the other two appeals). Otherwise Mr Blackburn's submission is correct for, as I have stated, the question is whether the certifier had authority to issue the final certificate which is a matter of contract and private law. If the certifier, like any other person with contractual authority make a decision or form an opinion, did not have the authority conferred by the contract to issue a certificate (or to make an decision or to form an opinion) the certificate (or other document) is not worth the paper that it is written on as it will not be effective in law and will not enforced by the competent tribunal (although if the tribunal has power to act as if no certificate had been given the practical consequences may be the same as if the certificate had been formally valid but the opinion or fact expressed by it were shown to be erroneous).

38. In summary my conclusions on this appeal are the same as those for the other two appeals, although there are differences in my reasons stemming from the differences in the contracts. The question will be answered: Yes. The appeal will be allowed and the arbitrator's award varied so as to reverse the declaration and order as to costs. If necessary the award will be remitted to enable the arbitrator to determine any outstanding matters.

39. I am grateful to counsel for both parties for their careful and lucid submissions. Although I have capitulated to Penwith I have the sense of relief expressed in the lines preceding those quoted by Mr Stimpson:

"Now is my way clear, now is the meaning plain:

Temptation shall not come in this kind again."