TAMESIDE METROPOLITAN BOROUGH COUNCIL v. BARLOW SECURITIES GROUP SERVICES LIMITED [2001] EWCA Civ 1

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE QUEEN'S BENCH DIVISION

[2001] EWCA Civ 1

Venue SALFORD DISTRICT REGISTRY, TECHNOLOGY & CONSTRUCTION COURT, (His Honour Judge Gilliland QC), Royal Courts of Justice, Strand, London, WC2A 2LL

Between

TAMESIDE METROPOLITAN BOROUGH COUNCIL

BARLOW SECURITIES GROUP SERVICES LIMITED

Before

Lord Justice Henry

Lord Justice Potter

Mr Justice Wall

Date 15 January 2001

[1]This is the judgment of the Court. This is an appeal by Tameside Metropolitan Borough Council (Tameside), brought pursuant to permission to appeal granted by Laws LJ on 20 December 1999, against the determination by HH Judge Gilliland QC, sitting in the Salford District Registry of the Technology and Construction Court on 24 September 1999, of preliminary issues arising out of its action against Barlow Securities Group Services Limited, formerly Rowlinson Securities (Group Services) Limited, (Barlows). Tameside also appeals against the judge's order that it should pay the costs of the hearing, although it was agreed at the bar that the question of costs should be deferred until this court's judgment on the appeal had been delivered.

[2]The proceedings between Tameside and Barlows arise from the construction by Barlows for Tameside of 106 houses at a site at Fairfield Road, Droylsden in Greater Manchester at a fluctuating price of £2,231,074.58. The contract was in the Joint Contracts Tribunal for the Standard Form of Building Contract for use with quantities, local authorities edition 1963, July 1997 revision (the JCT contract), and it incorporated the standard conditions with certain variations.

[3]Barlows (then Rowlinson Construction Limited) first tendered for the work on 21 July 1982. Its revised tender, dated 21 September 1982 was authorised for acceptance by Tameside's Housing Services Committee on 28 September 1982. The relevant paragraph of the revised tender, which was for "106 Dwellings, Together with all Ancillary Works, Fairfield Road Droylsden" was addressed to Tameside's Housing Services Committee. The relevant part reads as follow: - "I/We, the undersigned, do hereby undertake and agree to execute and complete the whole of the work required at the above in accordance with the Drawings, Specification and Bills of Quantities, and Conditions of Contract, prepared by you, for the following sum (£2,231,074.58)"

[4]On the following day Tameside's Chief Architect wrote to Barlows stating: - "Your fluctuating price tender in the sum of £2,231,074.58, together with this written letter of acceptance, shall constitute a binding contract between the parties until a formal agreement is prepared."

[5]It was common ground between Tameside and Barlows that the effect of the Chief Architect's letter was to give rise to an immediate, and legally binding contract between them. The judge called this contact "the Agreement", a designation which we will adopt.

[6]Pursuant to the Agreement, Barlows took possession of the site on 5 October 1982, and work began. It was not, however, until 9 February 1984 that the JCT Contract was executed under seal, by which time, as the judge found, some 80% of the building work had been completed and, of particular relevance to this appeal, seven of the 106 houses had been certified as practically complete.

[7]It was common ground between the parties, and accepted by the judge, that the Agreement was in the same terms as the JCT Contact, and the only significance of the JCT Contract was that, since it was executed under seal, the period of limitation for an action for its breach is 12 years. Since Tameside's writ in the action is dated 8 February 1996, it follows that any cause of action which arose prior to 9 February 1984 is time-barred.

[8]That is significant because two Certificates of Practical Completion were issued by Tameside's Chief Architect before the execution of the JCT contract. They were issued respectively on 7 December 1983 (CPC 1) and 1 February 1984 (CPC 2). CPC1 certified that practical completion of four houses (numbers 1-4 Hus Street) was achieved on 7 December 1993; and CPC2 certified that practical completion of three further houses (numbers 20-22 Fairbottom Walk) was achieved on 20 January 1984.

[9]As the work progressed, a series of interim Certificates of Practical Completion were issued by the Chief Architect, and on 17 October 1984 the last of the series of houses was certified as practically complete. This simply left adopted works, including roads and footpaths, outstanding. On 8 August 1985, Practical Completion Certificate number 32 certified that practical completion of the last of the works had been achieved on 12 July 1985, with the result that the Defects Liability Period under the JCT Contract expired on 8 August 1986. The last certificate of Making Good Defects under the JCT Contract is dated 3 November 1987. While the certificate of 8th August 1985 was the last in the series, it was not a certificate that all the works had been completed, and no such Certificate of Practical Completion was ever issued under Condition 15(1). Mr Stewart for Tameside submitted (and the judge accepted) that where there had been a series of Certificates of Practical Completion, the totality of the works should not be regarded as practically complete until the date of the last of them (see Issue 4).

[10]By an interim certificate issued on 3 February 1986 (No 30), the gross value of the works was certified at £2,487,186.71, and a payment of £12,430 was made to Barlows under it, leaving only the sum of £1,884.71 as a retention. The last of the disputes as to outstanding matters was resolved in favour of the contractors, and by a further certificate, No 31, issued on 1 October 1987, this retention was also released. It is common ground, and found by the judge, that no further payments were made by Tameside and none was sought by Barlows. Nor was anything further done towards the issue of a final certificate. So no final certificate was issued. That was as a result of the 1988 meeting, which is crucial to Issue 7 and must be examined in detail later.

[11]There matters would have rested, but for the fact that, in about 1995, defects began manifesting themselves in the various houses, and Tameside issued proceedings on 8 February 1996 claiming damages for breach of the JCT contract under seal and negligence. In the Re-amended Statement of Claim the defects are summarised under four headings:(1) structural distress in bin store walls demonstrated by detachment from the front gables of houses and vertical cracking;

(2) ingress of water occurring along a line corresponding with the junction between the three storey wall and the two-storey roof;

(3) deterioration with a breakdown of the mortar forming bed joints; and

(4) cracking to external brickwork and internal partitions.

[12]By its Amended Defence and Counterclaim, Barlows denied being in breach of either the Agreement or the JCT Contract and, whilst admitting the execution of the JCT Contract under seal, alleged that all the work, alternatively the work carried out prior to 9 February 1994, had been undertaken under the earlier Agreement, with the consequence that Tameside's case was Statute barred under the Limitation Act 1980. Alternatively, Barlows pleaded that under Condition 30(7) of the JCT Contract, Certificate No 31 dated 1 October 1987 was a final certificate which provided conclusive evidence that the houses had been built in accordance with the JCT Contract. Since the Certificate in question was headed "Interim", Barlows counterclaimed rectification of the Certificate. However, Barlows abandoned that claim before the judge, so that it was and is not in issue that no final certificate has ever been issued. As an alternative to their counterclaim for rectification, however, Barlows pleaded that:

"... the Plaintiff is estopped from denying that the document dated 1st October 1987 is or has the effect of, a Final Certificate."

[13]Finally, by way of further alternative, Barlows pleaded that if the Certificate dated 1 October 1987 was not a final certificate, Tameside was in breach of its duty under clause 30(A)(6) of the JCT Contract to issue such a certificate, so that any liability of Barlows to Tameside for defective work or materials was in turn recoverable from Tameside as damages for breach of contract: see Crown Estates -v- J Mowlem (below). By its Amended Reply, Tameside pleaded deliberate concealment under section 32 of the Limitation Act 1980.

[14]The parties identified issues raised by Barlows which, if decided in their favour by preliminary point, could provide a defence to the whole or a substantial part of Tameside's claims without the need for investigation of the defects complained of and their cause. In relation to the appeal of Tameside we are concerned with Issue 7 (Estoppel) and Issue 4 (Limitation). Questions also arise under Issues 9 and 10 (Breach by Tameside/Circularity of Action) pursuant to Barlows' respondent's notice. In addition, we have been invited by Tameside in the course of the appeal to express our views in relation to Issue 8, an invitation which we have declined for reasons set out paragraph 46 below.

[15]Before turning to those issues, it is necessary to set out the relevant parts of Clause 30 of the JCT Contract:

"(5) (a) The measurement and valuation of the Works shall be completed within the Period of Final Measurement and Valuation stated in the Appendix to these Conditions, and the Contractor shall be supplied with a copy of the priced Bills of Variation not later than the end of the said Period and before the issue of the Final Certificate under sub-clause (6) of this Condition. (b) Either before or within a reasonable time after Practical Completion of the Works the Contractor shall send to the Architect/Supervising Officer all documents necessary for the purposes of the computations required by these Conditions including all documents relating to the accounts of nominated sub-contractors and nominated suppliers. ... (6) So soon as is practicable but before the expiration of the period the length of which is stated in the Appendix to these Conditions from the end of the Defects Liability Period also stated in the said Appendix or from completion of making good defects under clause 15 of these Conditions or from receipt by the Architect/Supervising Officer of the documents referred to in paragraph (b) of sub-clause (5) of this Condition, whichever is the latest, the Architect/Supervising Officer shall issue the Final Certificate. The Final Certificate shall state:- (a) The sum of the amounts already paid to the Contractor under Interim Certificates and Certificates issued under sub-clauses (4)(b) and (4) (c) of this Condition; and (b) The Contract Sum adjusted as necessary in accordance with the terms of these Conditions, and the difference (if any) between the two sums shall be expressed in the said certificate as a balance due to the Contractor from the Employer or to the Employer from the Contractor as the case may be, and subject to any deductions authorised by these Conditions, the said balance shall as from the fourteenth day after the issue of the said certificate be a debt payable as the case may be by the Employer to the Contractor or by the Contractor to the Employer. (7) (a) Except as provided in paragraphs (b) and (c) of this sub-clause (and save in respect of fraud) the Final Certificate shall have effect in any proceedings arising out of or in connection with this Contract (whether by arbitration under clause 35 of these Conditions or otherwise) as (i) conclusive evidence that where the quality of materials or the standards of workmanship are to be to the reasonable satisfaction of the Architect/Supervising Officer the same are to such satisfaction; and (ii) conclusive evidence that any necessary effect has been given to all the terms of this Contract which require an adjustment to be made of the Contract Sum save where there has been any accidental inclusion or exclusion of any work, materials, goods or figure in any computation or any arithmetical error in any computation, in which event the Final Certificate shall have effect as conclusive evidence as to all other computations."

Issue 7: Is the plaintiff estopped from denying that the certificate is a Final Certificate?

[16]Barlows wished to have the protection of a Final Certificate, to enable them to rely on Condition 30(7)(a)(i). In Crown Estates -v- Mowlem [1994] 10 Const LJ 311 this Court held that a similarly worded provision in the 1980 JCT contract (Private with Quantities) applied to quality of material and workmanship generally. Subject to either distinguishing that decision on the facts or reserving the right to challenge that decision in their Lordships' House, Mr Stewart QC for Tameside accepted that if a final certificate had been issued in the present case, the plaintiff's claims would be barred evidentially by the operation of that condition. However, Barlows, having failed in their arguments that the certificate of 1st October should be construed as a final certificate, alternatively should be rectified to read as a final certificate, have not appealed those findings. That left the pleaded (but completely unparticularised) estoppel.

The judge said of the pleaded estoppel:

"No particulars were sought or given as to the alleged estoppel or as to the facts relied on. It is clear from the evidence which I have heard that no representation was ever actually made by or on behalf of the plaintiff that the Certificate was a final certificate."

He then went on to deal with the estoppel which Mr Black QC for Barlows had in fact argued and which

the judge characterised as follows:

"The estoppel which Mr Black has sought to establish is not a common law estoppel based on actual representation of fact but an equitable or promissory estoppel based upon an agreement or understanding between Mr Roberts and Mr Slater at a meeting in 1988."

[17]The evidence as to what happened at that meeting was of a vague and exiguous nature, depending as it did upon the ten years old recollection of those involved who had made no note of the matter and had been principally concerned with matters other than the Fairfield Road contact. Nonetheless, having heard and analysed the evidence

the judge felt able to find that:

"[Tameside] is estopped from relying on the absence of a final certificate [in relation to the Fairfield Road contract] and the rights of the parties are to be determined as if a final certificate had been issued to [Barlows] in 1988."

[18]The crucial meeting was held some time in 1988 between the two chief quantity surveyors ultimately responsible for agreeing valuations and certifications: Mr Philip Slater for Tameside and Mr David Roberts for Barlows. While each was the chief quantity surveyor for his respective employer, the day-by-day handling of the job was done for Tameside by Mr Jones, who dealt with Mr Paul Keech for Barlows until he left and his brother Stuart took over, ineffectually.

[19]The reason for the meeting was to discuss a new and quite separate contract between the parties. As no-one had been asked to recall what happened at that meeting until some ten or eleven years later, no more accurate date could be put on the meeting save that it was sometime in 1988. At some point in that meeting, Mr Roberts raised another matter: he wanted to know about the progress of the Fairfield Road contract final account. The day-to-day dealings with the measurement and certification of that account had been handled by Mr Philip Jones for Tameside, and (until the turn of the year 1986/87) by Mr Paul Keech for Barlows, succeeded by his brother, Mr Stuart Keech.

The judge summarised the situation at the end of 1987:

"I accept the evidence of Mr Jones that he had not by October 1987 prepared any final account, and that further works still required to be done before he could arrive at the final value of the works. There were over 20 variations which still had not been finally valued. These are referred to in paragraphs 52 to 127 of his witness statement and further documentation would have been required from the defendant before the final account figure could be finalised. It is correct that a great deal of the work which was necessary to prepare a final account had actually been done and work on the major variations had actually been fed into the previous interim valuations but it is clear from Mr Jones's evidence that he was not in a position to produce or complete a final measurement and valuation of the works and that he did not actually do so. Mr Jones was in my judgment a reliable witness and his recollection of events was better than that of Mr Roberts who gave evidence on behalf of the defendant. It is clear in my judgment that the essential reason why a final account or to be more accurate the measurement and valuation referred to in Condition (30)(5)(a), had not been completed by October 1987 although the 12 months allowed for practical completion of the last of the works had expired in, at the latest August 1987, was because Mr Paul Keech, who had been dealing with the matter on behalf of the defendant in the agreeing of valuations with Mr Jones, had left the defendants' employ in December 1986 or January 1987 and neither his successor, Mr Stuart Keech, nor Mr Jones had pursued the matter of agreeing a final valuation. Mr Jones did not do so because he had other work to carry out which was more pressing. It is unclear why Mr Stuart Keech did not pursue the matter."

[20]It will be seen that the parties were no closer to a final certificate at the time of the 1988 meeting, and nothing happened in relation to the issue of a final certificate after that meeting.

[21]Mr Jones described the certification and valuation process for this job in his evidence. He was the "Job" quantity surveyor dealing with this contract on a daily basis for the employers. He carried out the interim valuations and would have been responsible for the production of the Final Certificate had there ever been one. He dealt with Mr Paul Keech for the contractors; he was the only "real contact" there. After he left (at the turn of the year 1986/87), the job "started to die a death". He was contacted by his brother, Mr Stuart Keech, who said he would be taking over "... the pursuing of these matters and the completion of the account ..." but that "... never really got off the ground."

[22]Mr Jones gave evidence that nothing had happened on the account since the payment of the Interim Certificate of 1st October 1987. There was no reason why the parties should not proceed to the taking of the final account (under Condition 30(5)(a) and (b)), to be followed by a final certificate (under Condition 30(6)). But the ball lay in Barlows' court to initiate the process by submitting their documentation supporting a final account, so that the appropriate balance due either way between the parties could be expressed in the Final Certificate under Condition 30(6)(b).

[23]An indication of the extent of the work that had to be done by Barlows can be seen in paragraph 19. This explains why there clearly was no sense of urgency about obtaining a final certificate, in that all of the retention monies had been credited to Barlows, and though there was still an amount due to Barlows before the final account could be settled, it was only a small amount. The effort required of Barlows exceeded the reward that the final account would bring them. We do not find their delay surprising. But, for whatever reason, Mr Roberts raised that question, and Mr Philip Jones was asked to join the meeting to deal with it. He was to say in his evidence that he was there for only one question and answer, namely where he had got with the Fairfield Road account.

The judge's summary of the evidence was:

"The evidence of Mr Jones was that he had been called into the meeting by Mr Slater and had been asked by Mr Slater in Mr Roberts' presence to provide an indication of where he was up to with the Fairfield Road final account. Mr Jones then said that he had not finished the final account but he estimated that Tameside owed Barlows a little more money and that Mr Slater had then said something to the effect of Mr Jones being `... too honest for his own good ...' or `... honest to a fault ...'. Mr Jones had no doubt that he remembered this clearly and I accept his evidence. I also accept Mr Jones's evidence that by the time he left the meeting he had the impression that there was, as he put it in his witness statement, an `... agreement to draw a line under the matter.' When he was asked further about this in cross-examination, he said that he understood that he was `... not going to have to do any more work on the job ...' and when pressed whether he was saying something different from what he had meant when he had spoken about drawing a line under the matter, he said that he stood by the use of the words drawing a line and that he was not trying to say anything different. In response to questions from me after re-examination when I asked if his understanding was that Mr Slater and Mr Roberts had reached an agreement that no further payment would be sought and that that would be the end of the matter, his reply was `Certainly I had the impression that there would be no further payment and I am sure I came out with the impression - I cannot recall exactly what words were used - that I would have to do no further work on the account. I am pretty sure Mr Roberts said he was not looking for any money, and I understood that that would be the end of it.' He then went on to say that whatever had been agreed between Mr Roberts and Mr Slater had probably been agreed after he left the meeting and that there had not been any absolute statement that he was to do nothing more. He then said that he had gleaned the beginnings of that impression at the meeting, and he might have been told later by his line manager not to bother any further. He also said that he was the only person who would have done any work on preparing a final account."

[25]The judge rightly found that after, and as a result of, the meeting nothing was done by either party to proceed further towards a final account or issue of a final certificate, and that the reason for this was that Mr Roberts was not seeking any further payment for Barlows' work on the Fairfield Road contract. He also made quite clear that the question of the issue of the Final Certificate was never mentioned. In that respect he found the following facts: a) "Mr Roberts on his own evidence did not draw any distinction between a final account and a final certificate and that was because in 1988 he did not appreciate that there might be any difference between the legal effect of a final valuation or final account on one hand, and on the other hand a final certificate." (p60) b) There was no evidence of the state of Mr Slater's legal knowledge. (p60) c) There was no actual mention of a final certificate at the 1988 meeting and all the discussion was "... in terms of a final account." (p60) d) There was no evidence as to the words used to agree that nothing further needed to be done to complete or finish the Fairfield Road contracts:

"... the best evidence is that of Mr Jones ... `... a line was to be drawn under the matter.'"

[26]The judge made clear that he preferred the evidence of Mr Jones to that of Mr Roberts. He disbelieved Mr Roberts when he said that he had heard Mr Paul Keech ask Mr Jones for a final certificate. He did not believe Mr Roberts when he said that Mr Jones had said that the final certificate was "... agreed ... all but there". He did not accept Mr Roberts' account that he left the meeting "... believing the final account had been agreed". The judge did not believe that either Mr Roberts or Mr Slater had in mind Condition 30 (with the protection Condition 30(7)(i) gives to final certificate holders). "I am satisfied and find that they mutually agreed that nothing further needed to be done to complete or finish the contract and that the matter was to be regarded as closed. It is not known what words they used to express that intention and agreement. The best evidence is that of Mr Jones who said that the impression he had drawn was that `... a line was to be drawn under the matter.'"

[27]The judge found that it "... simply did not occur to either man that there might be anything further which remained outstanding."

[28]Just two people were present during most of the meeting where it was said the agreement or representation founding the estoppel arose: Mr Slater for Tameside and Mr Roberts for Barlows. Mr Slater did not give evidence. Mr Roberts was not believed on any contentious issue. Therefore whatever was said, the Court had to fall back on the evidence of Mr Jones, the only credible witness, who was only temporarily present to answer questions, and could speak as to his "impression" only. He could say no more of his understanding, based on what he heard at the meeting, and doubtless drawing on the fact that nothing further happened nor was expected to happen, (in the Fairfield Road context) than that "... a line was to be drawn under the matter." He could recall no representation or conversation on which it was based. Nevertheless, both Mr Black for Barlows and the judge proceeded to build on those words under the banner of objective construction, to achieve the estoppel for which Barlows contended.

[29]The structure of the judge's reasoning was as follows:

"When parties agree, as Mr Roberts and Mr Slater must have agreed, that no further monies are payable on either side, they are in substance in my judgment in the context of Condition 30 actually agreeing that the balance in any final certificate is to be treated as a nil balance. If the question is asked how consistently with the terms of the contract is that agreement to be given effect to, the answer must, it seems to me, be that the parties have agreed the final certificate and not just the amount of the final measurement and valuation. Mr Stewart's submission that what was agreed at this meeting was restricted to the final account and to whether any further monies were payable does not in my judgment give sufficient effect to the evidence of Mr Jones that he had the impression that a line was being drawn under the matter. Nor does it explain why the Architect did not attempt to fulfil an otherwise outstanding obligation to issue a final certificate when the amount of the balance had been agreed. The circumstance that the defendant had not submitted the documents to enable Mr Jones to arrive at a final valuation cannot affect that aspect because for all practical purposes the figures had been agreed at the existing amounts as a result of the conversations at the meeting. The drawing of a line indicates in my judgment an intention that there should be finality in relation to the whole of the contract so far as there were remaining obligations to be performed on either side. The use of the term final account in the context of Condition 30 also points in the same direction and to more than a simple ascertainment of the value of the works. A final account suggests that the whole contract was being treated as having been finalised and that all outstanding matters were to be regarded as settled."

[30]Later on, in relation to "... agreeing to draw a line under the matter"

the judge said as follows:

"In my judgment the plaintiff by agreeing to draw a line under the matter by implication represented that it was not necessary for the defendant to proceed any further with the process of obtaining a final certificate. By `the matter' what was being referred to was the whole contract, including the final certificate not just the value of the works as ascertained by measurement or valuation pursuant to Condition 30(5). Mr Stuart also submitted that there had not been any sufficiently clear or unambiguous representation giving rise to an enforceable estoppel. In my judgment, the intention was clear that all outstanding matters under the contract were to be regarded as having been performed and that nothing further remained to be done on either side. Effect should in my judgment be given to that unequivocal intention. In the present case the plaintiff impliedly represented that it was not necessary for the defendant to proceed further with the process of obtaining a final certificate and must be taken to have also represented that it would not enforce any right it might have to rely on in the absence of an actual final certificate . The truth was that the parties had agreed that matters had been concluded and the plaintiff cannot in my judgment now be heard to say that matters had not been concluded and that no final certificate had been issued."

(emphasis added)

[31]We have underlined the passage which in our view represents the crucial error in the judge's reasoning. However, before turning to that reasoning in more detail, we would make two preliminary observations. First, it seems to us that much of the difficulty arising in this case stems from the fact that Mr Black submitted, and the judge accepted, that this was a case of promissory estoppel without sufficiently analysing the way in which it was put. Second, the judge appears to have paid insufficient regard to the dual but essentially separate functions of the Final Certificate, on the one hand as certifying the final balance due as between the parties under the terms of the contract (Condition 30(6)(b)) and, on the other hand, as evidence that the quality of the materials and standards of workmanship are to the reasonable satisfaction of the architect (Condition 30(7)(i)). That is of considerable importance in this case because of the judge's finding that the question of the issue of a Final Certificate was never mentioned and its dual significance was never present to the minds of the parties.

[32]The judge began with the statement of general principle by Lord Cairns in Hughes -v- Metropolitan Railway

(1887) 2 App Cas 439

at 448 where he said: "It is the first principle upon which all Courts of Equity proceed that if parties who have entered into definite and distinct terms involving certain legal results ... afterwards by their own act with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict legal rights arising out of the contract will not be enforced or will be kept in suspense or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have taken place between the parties".

[33]In the light of that principle, however the estoppel is phrased, the question at issue in this case is whether Tameside, who assert the legal right to sue in respect of defects in work and materials subsequently becoming manifest did, as a result of what took place at the meeting, lead Barlows to suppose that they would not seek to rely on such right, alternatively that they would treat such right as subject to the terms of a Final Certificate which had not been issued. Put in that way, the answer appears to us to be a plain "No". However, even if there were doubt in the matter, it must be remembered that it is an essential ingredient of promissory estoppel that the express or implied promise or representation made by one party that he will not enforce his legal rights is clear and unequivocal. It is not the function of the court to resolve ambiguities and, unless it can find a reasonably clear and definite meaning, then it is not entitled to make the finding that the representation was indeed clear and unequivocal: see Woodhouse Limited -v- Nigerian Produce Limited

[1972] AC 741

at 756A-F per Lord Hailsham and at 768F per Lord Cross; see also The "Kanchenjuna" [1990] 1 Lloyds LR 391 per Lord Goff at 399.

[34]Accepting that to be so, it seems to us that the nature and quality of Mr Jones' evidence, of necessity limited to the period in which he was in the meeting, and stated in terms of "impression" rather than direct recollection, together with the ambiguity in their context of the words `a line would be drawn under the matter', are a poor basis on which to arrive at any clear and unequivocal promise or representation so far as Tameside's subsequent rights were concerned.

[35]However, whether or not that is so, it seems to us that, in the context of the meeting, `the matter' referred to was, and could reasonably be, no more than the matter under discussion at the time, namely the question whether or not there were monies due either way and whether any further work of accounting or documentation would be required in that regard. Assuming in Barlows' favour that Tameside, by agreeing to draw a line under `the matter', by implication represented that it was not necessary for Barlows to proceed any further with the process of obtaining a Final Certificate so far as the final accounting was concerned, it seems to us an impermissible leap in reasoning to go on to infer that Tameside were agreeing that, if one were not issued, the parties would in all respects act as if it had been. We do not accept that Tameside, by impliedly representing (if it did) that it was not necessary for Barlows to proceed further with the process of obtaining a Final Certificate for the purposes of the final accounting between the parties, `must be taken to have also represented that it would not enforce any right it might have to rely on in the absence of an actual final certificate' in relation to faulty materials and workmanship (see paragraph 30 above). That would be to erect a conversation which in context was no more than one about settlement of the monies owing between the parties into an agreement to waive all claims arising from use of defective materials or workmanship. Nor do we accept that "drawing a line under the contract ... so far as there were remaining obligations to be performed on either side" (see paragraph 29 above) was apt to cover the future right of Tameside to complain in respect of defects in work or materials which might subsequently become manifest but were unknown to the parties at the time. So far as the parties' subjective understanding or agreement were concerned, it is plain that it could not have been so. They did not address their minds to the question. Nor in our view do principles of objective construction dictate a different result.

[36]The judge, on the basis of the parties' submissions, principally treated the estoppel pleaded as requiring a representation (clear and unequivocal) by Tameside and reliance by Barlows. Elsewhere, however, he dealt with it by applying a contractual test. In a passage which is by no means easy to follow he said:

"There is no evidence that Mr Roberts ever intended or contemplated on behalf of the defendant giving up anything beyond the small sum of money which Mr Jones said he estimated would be due to the defendant when the accounts were finalised. It is not necessary to imply any such term into what was agreed in order to give business efficacy to the transaction nor is the matter so obvious that if a bystander had asked was it intended that the protection afforded by a Final Certificate was to be given up, both Mr Slater and Mr Roberts would have answered `Yes'. Indeed if the question of what the parties had intended is to be approached by asking what they would have said if a bystander had asked what was to be the position in relation to the protection which a Final Certificate would afford to the defendant, I have no doubt that both Mr Roberts and Mr Slater would have said that the position was to be the same as if a Final Certificate had been issued"

. We entirely agree with the first sentence, but emphatically disagree with the last. In our view if that matter had been brought to the attention of the parties by the officious bystander, whatever Barlows might have said, Tameside would almost certainly have demurred on the basis that all they were doing was settling the accounts at a nil balance, and that, if Barlows wanted the protection of a Final Certificate, they should apply for it in that sum on the basis of the agreement that had just been reached.

[37]Thus, reverting to the reasoning of the judge set out in paragraph 30 above, we criticise(a) the forced meaning which he attached to "drawing a line", which in our view was limited to the question of the monies owing as between the parties and

(b) his finding that, by so agreeing, Tameside was representing, or must be taken as representing, that it would not seek to enforce to the fullest extent any right to sue in respect of any damage later found to have been suffered as a result of faulty materials or workmanship, alternatively would treat or accept such rights as subject to the terms of a Final Certificate.

[38]Before leaving the question, we turn to deal with Barlows' preferred formulation which, as recorded by the judge, was that:

"... the parties agreed to draw a line under the matter, that the matter was to be regarded as closed, and that nothing further was required to be done on either side in order to complete and finalise the contract."

Even accepting that formulation, there are two possible interpretations of such an agreement. One is that the parties simply require nothing further of each other in fulfilment of their outstanding contractual obligations (and hence will not complain if the other is in breach of any obligation under the contract by doing nothing further). The other is that the parties will for all future purposes act as if the Architect/Supervising Officer had issued a final certificate. It is the latter for which Barlows contend and in favour of which the judge found, whereas it is the former which in our view the evidence, context and presumed intention of the parties dictate.

[39]In his lengthy judgment, the judge puts the representation in a number of other ways, but the objection remains the same: We do not consider that there was ever a clear and unequivocal representation by Tameside foregoing their legal right to rely in this litigation on the fact that Barlows do not have a Final Certificate in relation to the Fairfield Road contract.

[40]That being so, we can deal shortly with the question of reliance. We have made the point that the judge's "representation" or "agreement" was an entirely artificial construct: it arose only from the judgment's over-creative "objective" construction in the face of imprecise evidence and a shared ignorance of the significance of a final certificate. There could have been no reliance by Barlows in relation to the particular estoppel asserted because Mr Roberts did not appreciate the significance of a final certificate, and indeed there had been no mention of a final certificate. In these circumstances it is unreal (and circular) to rely as the judge does on the fact that Barlows did nothing further as reliance upon some kind of agreement by Tameside as to their assertion of their future rights. Doing nothing is always equivocal, and here doing nothing showed nothing more than that Barlows regarded the paper work required of them before a final account could be struck as uneconomic because of the small sum outstanding (as Mr Roberts' concession and the Keech brothers' lack of interest showed) and were prepared to forego any amount which might be due to them under a future final account or Final Certificate issued pursuant to Clause 30. It goes no further than that. Accordingly, in our judgment, no estoppel is here made out. On Issue 7 therefore, Tameside's appeal is allowed. Issue 4: Are all or any of the Plaintiff's claims statute-barred (subject to the issue of deliberate concealment)

[41]We come next to deal with the question of limitation, which is the subject of Issues 1 to 4. Only Issue 4 is now controversial.

[42]The contractual obligation in this contract for the building of 106 houses with the appropriate services was to "... carry out and complete ..." the works. The writ was issued on 8th February 1996. The work was done in pursuance of an agreement under seal, which was intended to and did operate retrospectively; therefore any breaches of contract should be regarded as occurring at the date of breach, rather than time starting to run only on execution of the deed (see Megaw LJ in City of Westminster -v- Clifford Culpin & Partners [1986] 12 Con LR 116 at 138-139).

[43]Because the agreement was under seal, the limitation period was one of twelve years. Accordingly, all causes of action arising before 8th February 1984 would be statute-barred. Although roughly 80% of the building work had been done by then, Tameside were not in a position to show precisely what work was done more than 12 years before. Mr Stewart for Tameside sought to avoid this evidential problem by submitting that no cause of action arose until practical completion of the whole of the works in August 1985. On that basis, no single claim would be statute-barred.

[44]The judge held below that, subject to the question of deliberate concealment, the only claims of the plaintiff which are barred by limitation are the claims in respect of the houses comprised in the first two in the series of certificates of practical completion, namely the certificates issued on 8th December 1993 (Nos 1, 2, 3 & 4 Hus Street) and on 1st February 1984 (Nos 20, 21 and 22 Fairbottom Walk). He gave as his reason:

"... even though this was not a sectional contract, the factual position is that the houses [referred to in the above two certificates] had been completed and possession had been given to the plaintiff. Significantly, separate certificates of practical completion had been issued. It these circumstances, it seems to me that it should be inferred that the parties had treated those parts of the work as being practically complete for all purposes, and I consider it would have been open to the plaintiff, if it had discovered defects in the houses which had been released to it, to have brought an action for failing to complete the houses properly and it would not have had to wait until the last of the works had been completed before suing. Time will have begun to run in respect of any of the defects ...from the dates of practical completion. The defects will have been suable on from that time"

[45]With that conclusion and analysis we agree. The crucial factor is delivery of possession. Once they had possession, Tameside could claim. Tameside's appeal on Issue 4 is therefore dismissed. Issue 8: Are all or any of the Plaintiff's claims barred by issue of a Final Certificate within the meaning of the Agreement under Seal?

[46]Issue 8 concerns the case of Crown Estates -v- John Mowlem & Co Limited

[1997] 70 BLR 1

. We are asked by Tameside to express our view on that case. That authority has been the subject of some criticism from commentators. It is also, we believe, binding on us. We do not have the benefit of the trial judge's views on it, though of course it was binding on him also. Tameside now seek to distinguish it (for the first time here in the Court of Appeal) and Barlows object on the basis that the issue (whether the defects were "inherent" and/or detectable) requires evidence. Further, given our decision on Issue 7, we are not clear as to the relevance of final certificates on the rest of this litigation. We therefore decline to consider Issue 8. That leaves for our consideration Issues 9 and 10, to which we now turn. Issue 9: If the Certificate was not a Final Certificate, was the Plaintiff in breach of contract in failing to issue a Final Certificate?

[47]Issue 9 asks whether Tameside was in breach of contract in failing to issue a final certificate and Issue 10 proceeds upon the basis of an affirmative answer to Issue 9. Barlows' argument as to breach is as follows.

[48]Mr Black submits that if no estoppel is operative to prevent Tameside from relying on the absence of a Final Certificate, the Architect/Supervising Officer under the JCT Contract was in breach of his obligation to issue a Final Certificate within six months from the end of the Defect Liability Period or from completion of making good defects or from receipt of the documents referred to in Clause 30(5)(b) whichever was the latest. He submits that, since the last Certificate issued under the contract was the Certificate of Making Good Defects on 3rd November 1987, the expiry of the period for issue of the Final Certificate was 3rd May 1988. He further submits that since, for the purposes of the issue of the Final Certificate, the Architect/Supervising Officer was the agent of Tameside, his failure to issue a Final Certificate by 3rd May 1988 was a breach of contract by Tameside which has enabled Tameside to make a claim in the action which would otherwise have failed: see Crown Estates -v- John Mowlem . Consequently, recovery by Tameside in respect of its claim for defective work and materials would offend the principle that no person may profit from his own wrong and/or should fail for circuity of action.

[49]The judge held that, in the light of his decision in respect of Issues 7 and 8, Issues 9 and 10 did not arise.

[50]In the course of argument before us, counsel for the parties disputed and explored the question whether, in performing the act of issuing a Final Certificate, the Architect/Supervising Officer under a JCT contract is to be regarded as the agent of the employer, thereby rendering the employer liable for any error or default on his part in performing or failing or refusing to perform the duty imposed on him in that respect. In this regard, Mr Black prayed in aid the general statement of Lord Hoffman in Beaufort Developments (N.I.) Limited -v- Gilbert-Ash (N.I) Limited

[1999] 1 AC 266

at 276C. He also submitted that the fact that the Architect/Supervising Officer in this case was the Chief Architect of the Employer (ie an employee of Tameside) meant that he was, in any event, not an independent professional. Mr Stewart, on the other hand, submitted that Lord Hoffman's statement was no more than one of generality directed to the different context of enquiry in the Beaufort case. The true position being that, albeit employed by Tameside, in respect of the administrative act of issuing the Final Certificate, the Architect/Supervising Officer was under a duty to act independently of the influence and control of Tameside, such action not being one which Tameside (as employer) promises will be performed: see Chitty on Contracts: Specific Contracts 28th Edition paragraph 37-179. In the event, it seems to us quite unnecessary to explore the question of "agency" for the purposes of this case.

[51]That is because we do not consider that, upon the facts as found by the judge, any question of breach on the part of the Architect arises. If one first treats his position as that of an individual operating independently of Tameside in discharging his functions under the JCT Contract, it is plain that he could not be regarded as in breach of his duty to issue the Final Certificate under Clause 30(6) until receipt of the documents referred to in Clause 30(5)(b) for the purposes of computing the final balance due. These he never received; nor, because of the agreement between the parties to draw a line under the final account, did either request him, as either could have done, to proceed to issue a Final Certificate in a nil balance on the basis of the agreement reached. Had Barlows had in mind their desire or need for protection against future claims for defective work which issue of the Final Certificate would afford, they would no doubt have applied for, and been entitled to, its issue on that basis. However, unless or until Barlows did so, the Architect would not be in breach of his duty to issue such certificate.

[52]Nor do we consider that the agency argument improves matters from Barlows' point of view. Insofar as it depends simply upon an assertion of vicarious liability for the failure of the Architect to comply with the provisions of Clause 30(6), that argument must fail (see above). If, however, it involves treating the Architect as an employee of Tameside endowed with knowledge of the parties' 1988 discussions, Barlows would themselves be estopped from alleging or relying on breach by the Architect unless or until they had requested him to issue a Final Certificate in a nil balance because, on the basis of those discussions, Barlows were acknowledging that they required nothing further to be done under the contract. Accordingly, Tameside was never in breach of contract in failing to issue a Final Certificate and Barlow's appeal on Issue 9 is dismissed. Issue 10: Is the plaintiff bound by such breach of contract from bringing all or any claims in this action?

[53]In the light of our decision under Issue 9, the question posed under this Issue is answered in the negative.