Cases - Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire District Council & Anor

Record details

Name
Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire District Council & Anor
Date
(1986)
Citation
33 BLR 39
Keywords
Construction contracts - certification - interim certificate - notice of termination - deductions for defective work - liquidated damages - whether contract properly determined - whether issue of certificate condition precedent to right of contractor to be paid - JCT Standard Form Contract (1963 ed)
Summary

The employer defendant paid the amount stated in an interim certificate, issued pursuant to the JCT Standard Form of Contract (1963 edition). The claimant (who was a bondsman having elected to complete construction works in place of the contractors) contended that they were incorrect in making certain deductions for defective work and in deducting liquidated damages. The claimant withdrew from site, and the defendant served a notice of termination.

It was held that the contract had been properly determined. The only obligation upon the employer was to pay the amount certified. If the contractor was unhappy with a perceived under-valuation, it could request that an appropriate adjustment be made in any subsequent certificate, or commence arbitration.

Under the JCT conditions, the issue of a certificate is always a condition precedent to the right of the contractor to be paid.

In considering the phrase 'unreasonably or vexatiously' within termination clauses, the Court considered that construction contracts often extended over long periods of time and involved the use of considerable resources in land and materials, and that if they are not completed the financial and other consequences can be very serious.

The inclusion of provisos in standard forms of contract were intended, in the judgment of HHJ Newey QC, to prevent parties from standing on their legal rights when the effect of their doing so will be quite disproportionate to their grounds of complaint. 'Unreasonably' in a proviso relates principally to lack of proportion. The Court also considered that 'vexatiously' must mean something different from 'unreasonably', and imports an intention to harass or distress.

This case demonstrates that where there are wide rights of arbitration, a contractor will rarely have any significant reason subsequently to complain that certificates were not issued in accordance with the contract.

Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire District Council & Anor

CA (Civ Div) (May LJ, Slade LJ, Neill LJ) 4/3/86

Appeal on an issue of fact from the Official Referee : Architect's certificate-binding notwithstanding patent errors.

Appeal from decision by Official Referee on dispute arising from 2 Standard Form of Building Contract 1963 (revised July 1975) Local Authorities Edition (with quantities) between contractors and the employer and the architect. Contractors claimed more than the amount certified which depended on deductions which all agreed should not have been made.

It was held that:

  • under RSC O.58 r.4 an appeal did lie on an issue of fact;
  • the contractor was not entitled to suspend work for non-payment of an amount which the architect had not certified as due;
  • the issue of a certificate was a condition precedent to a contractor's right to recover. There was no difference between certificates containing patent or latent errors. A contractor was only entitled to be paid what appeared in the certificate. The remedy under the contracts was arbitration on a certificate which was disputed;
  • an architect could only expose himself to liability in tort for interference with the contractor's contractual rights if he deliberately misapplied clause 30 provisions with the intention of depriving the contractor. This was not proved.

The appeal was dismissed.