The question as to whether or not the final account that has been submitted is a draft or not is, perhaps not unsurprisingly, one which can only be answered by the specific facts of a case. Even so, the decision here of Judge Acton Davis KC provides some helpful insight regarding a court’s likely approach.
Oakland engaged Stepnell to carry out the design and construction of a care home based on a JCT D&B 2016 Contract with bespoke amendments. The works were certified as practically complete on 26 April 2021, which triggered a 12-month rectification period.
There were negotiations in early 2022, during which Stepnell’s final account was discussed. By email dated 17 February 2022, Stepnell sent the Employer’s Agent a message with an attached statement dated 15 February 2022. The EA responded on 7 March 2022 disputing Stepnell’s entitlement to the sums claimed. Nothing further happened until 9 February 2024, when Stepnell sent the EA a further statement.
On 25 March 2024, Stepnell began an adjudication seeking payment of the sum set out in the February 2024 Statement as a sum due in the absence of a final payment notice or pay less notice, or alternatively payment on a “true value” basis. The adjudicator held that the relevant statement for the purposes of clause 4.24.6 was the February 2024 Statement and that, given that there had not been any final payment notice or pay less notice, the sum set out in that statement was due and owing.
Oakland brought Part 8 proceedings, saying that the “relevant statement” for the purposes of clause 4.24 of the contract was the February 2022 Statement and that it had given notice disputing the sums claimed in the March 2022 Response. Alternatively, if the true final statement was the 2024 version, then this had been challenged by, amongst other documents, the March 2022 Response. Either way, the “relevant statement” was not conclusive as to the sum due under clause 4.24.2, and Oakland could bring proceedings in relation to the true value of the final account.
Clause 4.24.6 of the contract provided:
“Except to the extent prior to the due date for the final payment, the Employer gives notice to the Contractor disputing anything in the Final Statement or the Contractor gives notice to the Employer disputing anything in the Employer’s Final Statement, and subject to clause 1.8.2 the relevant statement shall upon the due date become conclusive as to the sum due under clause 4.24.2 …”.
Clause 1.8 provided that, unless notice had been given under clause 4.24.2, the final statement would provide “conclusive evidence” that, amongst other things, the quality of the works was as described in the Employer’s Requirements, all extensions of time as were due had been given, and payments of loss and/or expense had been made.
The judge noted that Carr J, in Brighton University v Dovehouse Interiors Ltd [2014] EWHC 490 (TCC), provided guidance on conclusivity clauses:
“‘Conclusive evidence’ clauses have a clear commercial purpose. They are intended to provide contractually agreed limits to the scope of disputes and to provide clarity as the parties’ obligations once a project is complete. They allow the parties to dictate if and to what extent a final certificate is and is not to be treated as conclusive between them”.
Oakland said that the question for the court was how the February 2022 Statement would have been understood, in the particular circumstances, by a reasonable recipient aware of the surrounding facts. Those facts included that Stepnell and the EA had been in discussion regarding the final account since July 2021, around three months after practical completion. Further, the covering email attaching the February 2022 Statement specifically referred to “the final account” and the “key supporting information demonstrating the changes”, as well as Stepnell’s “intention to settle the final account”.
Stepnell suggested that the decision of the adjudicator, who was described as an “experienced quantity surveyor”, was a useful touchstone as to how a document might be understood by the objective reasonable recipient. The judge disagreed. An adjudicator, however experienced, was “not necessarily the objective reasonable recipient”.
That said, the judge held that it was not “plain” that a reasonable recipient would have regarded the February 2022 Statement as Stepnell’s final statement. The document itself was headed “Draft” and contained forecast information. It included figures which, at that stage, were draft, budget or estimate figures, and promised further information. It followed that the February 2024 Statement was the relevant statement under clause 4.24 of the contract.
Oakland said that if the February 2024 Statement was the relevant statement under clause 4.24, then that was not conclusive because there were sums in that statement that had been disputed prior to the due date. As long as there was a notice “disputing anything” in the statement prior to that date, the conclusivity provision would not take effect. Clause 4.24.6 did not expressly preclude prior notice being given, nor did it require Oakland to give notice that the final statement itself was disputed.
Stepnell was clearly on notice of the matters in the statement being disputed, as demonstrated by the discussions between the parties in 2022, including the March 2022 Response and the contents of the February 2024 Statement itself, which particularised the areas of dispute between the parties.
The judge went back to the wording of clause 4.24.6. To avoid conclusivity, an employer is required to give notice disputing anything “in” the final statement. A notice of dispute was required in relation to anything in the final statement. It was therefore a pre-condition to that notice that the final statement had actually been given. It followed that correspondence prior to the issue of the final statement could never be notice for the purposes of clause 4.24.6.
As a result, the February 2024 document was conclusive and could not be challenged further by Oakland.