London Borough Of Barking & Dagenham v Terrapin Construction Ltd

A conclusive-evidence clause in a design-and-build contract operates according to the contract as a whole. Where the contract requires the works to be carried out to the employer’s satisfaction, the clause may conclusively establish compliance with contractual requirements concerning materials and workmanship, including latent defects, unless fraud or another express exception applies.

The clause does not extend to defects in the contractor’s design where the wording refers only to materials and workmanship and the contract contains a separate design warranty. Contractual obligations to comply with statutory requirements may be covered as matters of workmanship, but contractual conclusiveness cannot remove either party’s statutory liability.

The local authority employer brought claims for breach of contract, breach of statutory duty and negligence concerning defects in school construction and refurbishment works carried out under the JCT 1981 form with contractor’s design.

The parties agreed that the Final Account and Final Statement were conclusive as to the balance due. On a preliminary issue, the judge held that clause 30.8.1 provided a conclusive-evidence defence to all claims except claims based on statutory requirements for which the contractor was responsible.

The contractor appealed against that exception. The employer cross-appealed, contending that the clause applied to none of the claims. The central issues were whether the clause covered the contract’s requirements as a whole, design defects, latent defects, and contractual obligations concerning statutory requirements.

The court allowed the appeal and cross-appeal in part. The declaration was varied so that the claims were subject to the conclusive-evidence defence except claims based on failure of design.

1. Contractual scope. The deleted recitals in the JCT form did not make the expression “Employer’s Requirements” meaningless. The agreement substituted for the deleted Articles, and the contract had to be read as a whole. Clause 1 required the works to be executed, completed and maintained in all respects to the employer’s satisfaction. Those overriding requirements, together with the Tender and Specification, supplied the relevant Employer’s Requirements.
2. Materials and workmanship. The reasoning in Crown Estate Commissioners v John Mowlem & Co Ltd (1994) 70 BLR 1 supported the wider construction of the conclusive-evidence provision. The absence of an architect under the 1981 form did not prevent the employer from exercising the relevant supervisory and satisfaction functions.
3. Design defects. Clause 30.8.1.1 referred expressly to the quality of materials and standards of workmanship, whereas clause 30.9 separately referred to design. That distinction was deliberate. The contractor’s separate design warranty, under which it assumed the responsibility analogous to that of an independent architect, reinforced the conclusion that design allegations were outside clause 30.8.1.1.
4. Latent defects. The clause made no distinction between patent and latent defects in materials or workmanship. In the absence of an express exclusion, latent defects were included, subject to fraud.
5. Statutory requirements. Clause 6 formed part of the contractual obligations concerning the works. Clause 30.8.1.1 therefore made compliance with those contractual obligations conclusive as between the parties after agreement of the Final Account and Final Statement. That contractual result did not affect the employer’s or contractor’s statutory liability.

There was no order as to the costs of the appeal. Costs arising from the preliminary issues were reserved to the trial judge.

• Court of Appeal (Civil Division): appeal and cross-appeal allowed in part, varying the preliminary-issue declaration.
• County Court decision of HH Judge Cyril Newman QC: clause 30.8.1 applied to all claims except claims based on statutory requirements for which the contractor was responsible.