Mr Raffaele Mincione (“the Employer”) had engaged CC Construction Limited (“the Contractor”) to design and build the shell and core of a new house in London under a JCT Design and Build Contract (2011 Edition) with amendments. In October 2018, the Employer issued a non-completion notice and gave notice of its intention to levy LADs. Between February 2020 and February 2021, the parties exchanged correspondence in relation to the final account and the making good of defects. On 5 October 2020, and again on 1 December 2020, the Contractor issued a copy of its Final Statement, which stated that the Contractor was entitled to a final payment of just under £480,000. Clause 4.12.5 of the contract provided that the due date for the final payment was one month after the latest of the end of the Rectification Period, the date stated in the Notice of Completion of Making Good (“NCMG”), or the date of submission of the Final Statement. 

The following issues were argued at adjudication:

1)     The Due Date – With reference to clause 4.12.5, the Contractor argued that the due date was 4 January 2021 (being one month after the Employer received the Contractor’s Final Statement sent 1 December 2020). The Employer argued that the due date was 13 February 2021 (being one month from a NCMG issued on 13 January 2021). The Contractor contended that the NCMG of 13 January 2021 had no effect on the due date, because it did not relate to defects to be made good.

2)     Conclusivity of the Final Statement – Under clause 4.12.6, the sum in the Final Statement would become conclusive upon the due date, unless disputed by the Employer. The Employer argued that the Final Statement had not become conclusive, because he had served a letter on 18 December 2020 disputing it. The Contractor argued that the Employer’s letter would not prevent conclusivity, because it referred to the letter sent by the Contractor on 5 October 2020, not the one sent on 1 December 2020. 

3)     LADs claim – The Employer argued in the alternative that he was entitled to set off around £340,000 in respect of LADs from the sum due under the Final Statement. The Contractor contended that the LADs claim was not part of the dispute referred to adjudication, and therefore it was beyond the adjudicator’s jurisdiction.

The adjudicator decided that the due date was 4 January 2021 and the Employer’s letter of 18 December 2020 was ineffective to prevent the Final Statement from becoming conclusive. The adjudicator agreed that they had no jurisdiction to consider the LADs claim and, accordingly, the Contractor was entitled to payment of the sum in its Final Statement.

The parties both subsequently raised court claims, which were heard together. The Employer sought declarations as to the due date, whether the Final Statement was conclusive, and the enforceability of the adjudicator’s decision. The Employer also argued that the adjudicator had deliberately declined to consider his claim to LADs as a set off, and by doing so had committed a material breach of the rules of natural justice. The Contractor argued that the letter dated 18 December 2020 was not to be read as disputing the Final Statement, and in any event was ineffective to prevent conclusivity in the absence of proceedings having been commenced before the due date. 

The Due Date

The judge held that the correct interpretation of clause 4.12.5.2 is that where there is scope for a NCMG to be issued under clause 2.36 then the due date will be one month from the issue of that NCMG, provided that date is or could be later than one month from the expiry of the Rectification Period or the date of submission of the Final Statement. However, where there is no scope for the issue of a NCMG, clause 4.12.5.2 cannot come into operation. This will be the case where the Employer has not issued a schedule of defects or instructions for making good defects within the timescales required (i.e. within 14 days after the expiry of the Rectification Period). This was the case in this matter. As a result, the purported NCMG issued on 13 January 2021 was not a NCMG under clause 2.36 and was irrelevant for the purposes of determining the due date. The judge said that the due date appeared to be 4 January 2021, being one month from when the Employer received the Contractor’s most recent letter enclosing the Final Statement. 

Conclusivity of the Final Statement 

The judge held that the Employer’s letter of 18 December 2018 was effective and operated for the purposes of clause 4.12.6 to prevent the Final Statement from becoming conclusive. A reasonable recipient of the 18 December 2018 letter would be in no doubt that the Employer was disputing the Final Statement, which the Contractor had re-sent on 1 December 2020.

Jurisdiction and LADs claim

The judge considered whether the adjudicator had had jurisdiction to determine the conclusivity of the Final Statement. The judge was satisfied that on a realistic analysis of the parties’ exchanges it was clear that there wasa dispute as to its conclusivity, and the adjudicator had been right to proceed on the basis that he had jurisdiction.

The judge also considered whether there had been a material breach of the rules of natural justice in the adjudicator not addressing the Employer’s LADs claim. The judge held that there had been, as the adjudicator had deliberately declined to consider the set off defence when they decided it was not part of the dispute before them. 

This case gives guidance on the calculation of the due date for the final payment following issue of the Final Statement (in particular, the due date set out in the Final Statement is not calculated from the date of the issue of a NCMG if there are no defects to be made good), and what is required to prevent the Final Statement becoming conclusive under the JCT Design and Build Contract (2011 Edition).