"By any responsible standards, the 'wider construction' of the post-1976 wording (of the final certificate clause) represents a policy disaster for private and public owners' reasonable interests in a vitally important area of construction," (Ian Duncan Wallace QC, 1995 Construction Law Journal, page 184.)
To compare an opera with a judgment of the House of Lords may not make immediate sense, but I defy anyone to master the subtleties of, say, the Panatown judgment (1 September, page 64) in less time than it takes to listen to the whole of Tristan und Isolde.
What a pleasure, then, to turn to the crystal clear judgment of Lord Justice Otton in London Borough of Barking vs Terrapin [31 July 2000, New Law Online Case 20008 14402]. His judgment was the "decision of the court" on a serious question arising under JCT81 With Contractor's Design.
That question was similar to the one faced by the Court of Appeal in the Crown Estates case six years ago: Did the issue of a final certificate prevent a client from suing a contractor for latent defects? As is well known, the Court of Appeal in that case decided that the final certificate under the traditional form (JCT80) had exactly that effect. The result was that the Joint Contracts Tribunal, suitably horrified, introduced an amendment to the contract to limit the "conclusiveness" of the final certificate to very narrow grounds – which was what most of the industry thought the clause had meant in the first place.
In the Barking case the borough was claiming against its contractor for alleged defects in new build and refurbishment works at a comprehensive school. The contractor's defence was that the final account and statement had been agreed under the JCT81 contract and that this was "conclusive evidence" that the works were in accordance with the contract.
It can hardly be a surprise that Lord Otton followed the same approach as the Court of Appeal in Crown Estates: the wording was near identical, the logic inexorable. No claim could succeed even if materials or workmanship were defective.
Either there should be a clear cut-off point for liability with regard to design, materials and workmanship or there should not The halfway house applied by JCT98 will not do
The difference in Barking, however, related to design defects. The court held that the express design warranty given by the contractor in JCT81, coupled with the omission of any references to "design" in the final certificate clause, meant that agreement of the final account and final statement did not prevent the client from complaining about design defects thereafter.
There remained an ingenious argument available to the local authority in seeking redress for materials and workmanship. This is based on the contractor's statutory obligations. The argument was that no expression of satisfaction by the employer could relieve the contractor of these. Before the judge at first instance this argument had been successful. He reasoned that statutory obligations were not specifically considered in the Crown Estates case and, in his view, fell outside the scope of the wider construction of the final certificate clause. So claims based on breaches of those obligations could be pursued by the claimant.
The Court of Appeal would not accept this line of reasoning. The statutory liabilities of employer and contractor were one thing, their contractual arrangements quite another. The relevant clause referred to materials and workmanship without any exclusion of statutory requirements, and agreement of the final account and final statement had the effect of discharging those obligations too.
So, once again we have a situation where users of the industry's services have to make an expensive trip to the Court of Appeal in order to find out the meaning of a standard form contract on a matter of crucial importance to both parties.
The Court of Appeal's interpretation must for the time being be the last word on the subject. What remains confusing is the policy behind the clause. Although the court was dealing with a version of the contract before the JCT produced its 1995 amendment (which made clear its intention that the final certificate should have a much narrower conclusive effect), the end result is not likely to please anybody.
If, for example, the contractor remains liable for defects of design (but not workmanship or materials), the employer may feel some comfort, but this comfort is likely to evaporate as soon as he appreciates that most defects have attributes of workmanship as well as design, and what his experts believe to be design deficiencies are strongly argued by the contractor to be defects of workmanship.
Tony Blackler is a partner in solicitor MacFarlanes.