Conclusivity of the final account process following the TCC's decision in CC Construction v Raffaele Mincione


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A recent TCC judgment in CC Construction Ltd v Mincione highlights the importance for parties to remain aware of contractual provisions impacting upon the conclusivity of the final account process.

What does the JCT Design and Build (2011 edition) say?

Clause 4.12.1 of the JCT D&B (2011) requires the Contractor to submit its Final Statement following practical completion of the works. Clause 1.8 sets out the effect of a Final Statement. In accordance with clause 1.8.1, the Final Statement will be conclusive evidence that (a) any particular qualities of materials or goods, the standard of workmanship, and/or with respect to instructions issued, were to the reasonable satisfaction of the Employer; and (b) any EOT due has been given; and (c) any loss and expense recoverable has been reimbursed. Clause 4.12.6 further provides that the Final Statement shall be conclusive as to the adjustments to the Contract Sum set out therein. However, clause 1.8.2 provides that if any proceedings (including litigation, adjudication and arbitration) are commenced before the due date for payment of the Final Statement, the statement will not become conclusive until (1) the conclusion of the proceedings or (2) 12 months have passed since the submission of the Final Statement and no party has taken any step in the proceedings. 

Clause 4.12 deals with the due date for payment of the Final Statement. Clause 4.12.6 provides that except to the extent that an Employer gives notice to the Contractor disputing any part of the Contractor's Final Statement (or the Contractor gives notice to the Employer disputing any part of the Employer's Final Statement) and subject to clause 1.8.2, the relevant statement shall upon the due date become conclusive. It is therefore a matter of contention as to whether the party wishing to challenge the Final Statement is required to issue both notice and proceedings within the relevant time period in order to prevent the Final Statement from becoming conclusive.

(For completeness we note that in the 2016 edition of the JCT contract, clause 1.8.2 is worded differently and clause 4.12.6 can found at 4.24.6.)

What was the issue in CC Construction Ltd v Mincione?

The Contractor and the Employer entered into an amended JCT D&B (2011) contract. The Contractor submitted its Final Statement to the Employer, and the Employer responded by way of a letter to the Contractor disputing the application. The Contractor claimed payment of unpaid sums set out in its Final Statement, contending that the letter did not prevent the conclusivity of the Final Statement as proceedings had not been commenced before the due date, which the Contractor contended was a requirement of clause 1.8.2. The Employer maintained that the Final Statement was not conclusive owing to his letter which was sent before the due date for payment in accordance with clause 4.12.6. 

What does the Judgment say?

The Court held that the letter was effectively a notice of dispute preventing conclusivity of the Final Statement in accordance with clause 4.12.6. A pivotal issue for the Judge was the construction of the words "subject to" in clause 4.12.6, which he considered related to the words that followed in that clause, rather than those preceding it. Consequently, the requirement in clause 4.12.6 to give notice to prevent conclusivity was not "subject to clause 1.8.2" i.e., the commencement of proceedings preventing conclusivity. Rather, the Court found that clause 4.12.6 provided for alternative means of preventing conclusivity, i.e. the Employer could either issue a notice of dispute or commence formal proceedings before the due date. It was not necessary for the Employer to do both. 

What are the implications for parties?

Parties might be advised to proceed with caution, given that Mincione is a decision at first instance which, while binding on an adjudicator, is not binding on other Courts. There remains a possibility that the decision may not be followed, particularly by a higher court, given that is very much dependent on HHJ Eyre QC's construction of the wording "subject to clause 1.8.2". 

Nevertheless, the judgement provides a timely reminder of the importance of understanding the intricate details of the contractual final account mechanisms.  Not all contracts have alternative routes through which the parties might challenge the conclusivity of the Final Statement.  In either case, it is essential that parties understand the options available and the steps that should be followed in order to prevent the Final Statement (or similar) from becoming conclusive, for example in circumstances where the Employer has reached a lower valuation of the final account and intends to pay less, or where the Contractor disputes the Employer's assessment. 

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