Henry Boot Construction Ltd. v Alstom Combined Cycles Ltd.

Under a construction contract, whether certification is a condition precedent to payment depends on the contract’s construction. Where the payment machinery requires periodic statements and certification, the contractor’s right to payment arises when the certificate is issued or ought to have been issued, not when the underlying work is performed. A certificate may be reviewable, but that does not make it merely evidential.

An omission from an interim certificate and an omission from the final certificate can found distinct causes of action. Interim certificates are provisional payments on account, whereas a final certificate follows a detailed final-account exercise. However, interest for a sum first overdue because of a failure to certify accrues at that first default. Repeating or capitalising that interest claim does not create a new cause of action.

Henry Boot Construction Ltd, the contractor for power-station works, appealed from part of an arbitral award made by HH Judge Humphrey Lloyd QC under section 93 of the Arbitration Act 1996. The arbitrator had held that almost all of the contractor’s claims were statute-barred because the relevant causes of action arose when work was done or the underlying events occurred.

The contract incorporated the ICE Standard Form (6th edition). It required monthly interim certificates and a final certificate. The principal question was whether a failure to include a sum in a final certificate gave a fresh cause of action where the same sum could have been claimed in an earlier interim certificate. The appeal also concerned the accrual of interest under clause 60(7).

1. Appeal allowed in substantial part. Dyson LJ, with whom Thomas LJ and the Vice-Chancellor agreed, held that the contract made a certificate a condition precedent to the contractor’s right to payment. The right arose when a certificate was issued or ought to have been issued. It did not arise when the work was done.

2. That conclusion did not make the Engineer’s certificate conclusive. An arbitrator or court could review the certification decision and, where a certificate ought to have been issued or included a larger sum, award payment as if it had been issued. The reviewability of certificates was compatible with their being an essential part of the contractual payment machinery.

3. The failure to include a sum in an interim certificate and the failure to include it in the final certificate were distinct causes of action. Interim certification involved provisional estimates and a running account. The final-account procedure required detailed supporting material and verification to ascertain the amount finally due. Thus, an earlier limitation bar did not prevent a claim based on omission from the final certificate.

4. Clause 46 acceleration costs also fell within the broad language of clause 60(1)(d) and were subject to the certification machinery.

5. Alstom succeeded on interest. The cause of action for interest on a sum first overdue because it should have been certified accrued when that payment first became overdue. Repeating the claim in later applications, or capitalising and recalculating interest, did not create a fresh cause of action. Interest was barred six years after accrual. The court therefore did not need to decide whether the Engineer had to certify claims regarded as time-barred.

The court refused leave to appeal to the House of Lords and ordered Alstom to pay £150,000 on account of Boot’s costs, subject to no order for the additional costs attributable to the late-raised interest issue.

• Court of Appeal (Civil Division): appeal allowed in substantial part: [2005] EWCA Civ 814.

• Judge arbitrator: HH Judge Humphrey Lloyd QC held, in an award dated 21 April 2004, that all or almost all claims were statute-barred. That conclusion was substantially overturned, except as to the limitation analysis for the clause 60(7) interest claim.