A six-year stretch

The power station at Connah’s Quay, North Wales was built by Henry Boot Construction for Alstom Combined Cycles. It has generated much heat, mostly between Boot and Alstom. The contract price was £24m. The engineer has already certified a value of £45m. The final account is for a cool £102m.

The first dispute went to arbitration, then the High Court, then the Court of Appeal. That was all about how to value variations under the ICE Standard Form. The second dispute has also landed up in the Court of Appeal. This time, Boot is claiming £60m balance of account and £15m interest. It doesn’t take long to rack up £15m, interest if the gap in the account is upwards of £60m – especially when the job was all finished 11 years ago.

And just to add a pinch of spice to all this, the two days that Boot spent in the Court of Appeal created legal costs of £350,000.

But the case is worth your time because it really shows that when builder and employer enter into a contract, it is in fact a ménage à trois. The provisions of the ICE contract document, like the NEC and JCT, introduce a third partner: the engineer certifier. This character is supposed to facilitate the relationship between the happy couple. In fact, the third man dresses up. One day he wears a bright blue top hat: that’s when he’s issuing certificates and the like. Next day, he wears a bright red top hat: that’s when he is acting on the instructions of the employer.

In the Boot final account, the certifier had his independent hat on when he valued the final account at £44.43m. That was, by the way, six years after substantial completion. Alstom, the employer, didn’t agree and issued a notice of dispute. The engineer then put on his bright green top hat because he now became the dispute decider – and decided the dispute by reducing his valuation to £44.38m. Meanwhile, Alstom also said that Boot couldn’t claim more than that because six years had passed since Boot completed the works, and therefore any rights to claim another £60m-odd was “statute barred”. Alstom was so confident that it took Henry Boot before a judge arbitrator. And, yes, he decided that almost all claims were statute barred because the six-year deadline for signed contracts runs, he said, from when the works were done, or when events on which the claims were based had occurred. And lo! the arbitration was begun more than six years from when Boot did the works or had a claim about the work.

And just to add a pinch of spice to all this, the two days that Henry Boot spent in the Court of Appeal created legal costs of £350,000

But the Court of Appeal saw it all quite differently. Boot is not at all out of time, as it is all to do with the date when the ringmaster certifier issues a “certificate of payment”.

Now be careful. This case is all about the ICE standard form but it really does contain general principles about certifiers and their role, which will most likely apply in all the standard forms. Architects and quantity surveyors under JCT should pause and pay attention. And, while I am at it, will you go and buy a blue and red hat to signal when you are acting impartially as distinct from negotiating or even wheeler-dealing?

Where was I? Ah yes, the certificate. The rules on issuing certificates are divided into two. The first covers the “interim certificate”. Boot and Alstom reminds us that an interim certificate is only intended to be provisional and approximate, and need not be dead accurate. Boot and Alstom then say that this interim certificate is the trigger for a right to payment. Moreover, if the certifier is idle and fails to issue a certificate at all, an arbitrator (or adjudicator) can declare a foul. He cannot only indicate what should have been certified, but the interest applicable too.

The “final account certificate” is different. It is precision engineering by the certifier. And if he issues the certificate many moons after substantial completion, then the six-year limitation period doesn’t run until then. So, the Court of Appeal has decided the six years do not run from the time bricks were laid on bricks, but from when the certifier ought to have certified. And if there is £60m or even a tad less at stake, then spending £350,000 on two days in the Court of Appeal is a sound investment, because the claim is not out of time after all.