Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd

An architect’s interim certificate under a building contract has provisional effect unless clear contractual words make it conclusive. If the certificate is not conclusive, a court may examine the facts, reject the architect’s opinion and award the ordinary contractual remedies.

An arbitration clause giving the arbitrator power to open up, review and revise certificates defines the arbitrator’s contract-derived jurisdiction. It does not, by implication, remove the court’s ordinary jurisdiction or give the certificate conclusive force. Clear and unequivocal words are required before a party is treated as abandoning ordinary remedies or agreeing that an architect’s decision is the sole means of establishing the facts.

Where a discretionary stay would divide closely connected claims between arbitration and litigation, creating a real risk of inconsistent findings, avoidance of multiple proceedings may justify refusing the stay.

Beaufort Developments employed Gilbert-Ash under the JCT Standard Form of Building Contract 1980 to construct an office block in Belfast. After delay and disputes about workmanship, materials and architectural information, the contractor claimed sums due under six interim certificates. The employer brought proceedings against both the contractor and the architects for negligence and breach of contract.

The contractor obtained a stay under section 4 of the Arbitration Act (Northern Ireland) 1937. Master Wilson, Pringle J and the Court of Appeal in Northern Ireland considered themselves constrained by Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] Q.B. 644, despite the risk that arbitration against the contractor and litigation against the architects would produce conflicting decisions.

The central issue was whether clause 41.4 gave the arbitrator an exclusive power to open up, review and revise the architect’s certificates which the court lacked.

1. Disposition. The House unanimously allowed the employer’s appeal and refused the contractor’s application for a stay. Lord Hoffmann delivered the leading speech. Lord Goff agreed completely with his reasoning, Lord Lloyd agreed with Lord Hoffmann and Lord Hope, and Lord Nolan also agreed that the appeal should be allowed.

2. Effect of the certificates. Per Lord Hoffmann and Lord Hope, an architect’s certificate or opinion used in administering a building contract has provisional validity unless the contract clearly makes it conclusive. Clause 30.9 expressly gave specified conclusive effect to the final certificate. Clause 30.10 did not give that effect to interim certificates, and no final certificate had been issued. The court could therefore examine the facts, determine the parties’ contractual rights and decide what sums were due, including any set-off, without formally issuing or revising a certificate.

3. Powers of the arbitrator and court. Per Lord Hoffmann, Lord Lloyd and Lord Hope, clause 41.4 defined the powers of an arbitrator whose jurisdiction arose from contract. Its express power to open up, review and revise certificates did not impliedly restrict the court’s ordinary jurisdiction. The power enabled the arbitrator to determine the parties’ contractual rights; it did not confer a power to modify their contract. Clear words would be required before an architect’s decision could become the exclusive or conclusive means of determining the facts.

4. Earlier authority. The approach in Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] Q.B. 644 treated the architect’s non-final certificates as binding in litigation and the arbitrator’s powers as exceptional. Per Lord Hoffmann and Lord Hope, that reasoning was obiter and wrong. The decision was overruled. The answers given in Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd (1996) 78 B.L.R. 42, which similarly subordinated the court to an employer’s judgment without express words of conclusiveness, were disapproved.

5. Stay. Per Lord Hoffmann and Lord Hope, section 4 of the Arbitration Act (Northern Ireland) 1937 conferred a discretion. Since the court possessed the necessary powers, refusing a stay caused no injustice to the contractor. Granting one would divide the connected allegations against the contractor and architects between separate tribunals and create a real risk of conflicting decisions. The stay was therefore refused.

• House of Lords: Unanimously allowed the employer’s appeal and refused the contractor’s application for a stay.
• Court of Appeal in Northern Ireland: Affirmed the stay, with reservations, because it considered that it should follow Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] Q.B. 644.
• High Court in Northern Ireland: Pringle J reluctantly affirmed Master Wilson’s order granting the stay. He considered himself bound by Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] Q.B. 644, although separate arbitration and litigation risked conflicting decisions.
• Master: Master Wilson granted the contractor a stay under section 4 of the Arbitration Act (Northern Ireland) 1937.