1) This is a claim by Alpha Ltd (Contractors) against Beta Ltd (Employers) for the sum of £50,000 in respect of costs of variations of a fixed priced contract for the construction of an old people’s home. The total of the contract was £250,000 and the period of the contract was one year commencing on 1 January 2000.

2) During the course of the contract some 18 instructions were issued which, Alpha claim, were variations for which they were entitled to be paid. The form of contract was JCT IFC 1984 edition. The contract over-ran by some 12 weeks and Beta are claiming the sum of £20,000 in respect of liquidated damages. They are also claiming an additional sum of £15,000 relating to damage that they allege has been caused to their property on the adjoining site. This is subsiding, owing, so they claim, to the ground-works carried out by Alpha on the construction site.

3) In May 2001 the dispute was referred to arbitration in which Alpha made a claim for £50,000 in respect of the costs of its variations. Beta made a Counterclaim for liquidated damages and for recovery of the costs of making good the damage caused by the underpinning to its adjoining premises totaling some £20,000

4) Throughout the hearing, the Respondents have been obstructive. In February 2002 the Arbitrator became concerned about costs and put a cap of £10,000 in respect of the parties’ costs incurred in connection with the Respondents’ Counterclaim.

5) A Final Award was issued by the Arbitrator in June 2002 under which he awarded the Claimants £30,000 in respect of their Claim. He also awarded to the Respondents the sum of £15,000 in respect of their Counterclaim made up as to £5,000 in respect of their liquidated damages and the balance in respect of the damage caused by the ground-works to the adjoining site.

6) The questions of costs and interest now fall to be determined. Both parties have claimed interest: the Claimants claiming:

a) Interest on the amount of any award @ 15% which they had to pay their Bank

b) Interest on the sum of £50,000 which was paid by Beta just before the Arbitration commenced but which was at least six months overdue

c) Interest from the date of the Award until payment.

7) Beta, the Respondents, have also claimed interest:

a) on any liquidated damages recovered from the date of contractual completion until payment and

b) on the value of the damage done to their adjoining land although no rectification works have yet commenced.

8) Both parties have agreed to make no representations on costs and interest but leave it entirely to you. There has been no agreement between them as to costs.

Contributor : Peter Horne

Proposed answer by John Sims

From the reference to clause 41.1 in the third paragraph I assume that the contract is JCT98.  Clauses 30.9.1 and 30.9.3 together only say that the Final Certificate is 'conclusive evidence' as to certain matters unless arbitration relating to them is commenced within 28 days after it has been issued. The clauses do not prevent arbitration being commenced after 28 days; they only say that the Claimant cannot adduce any evidence to contest any of the matters which are listed in clause 30.9.1. This may well render an arbitration ineffective, but it does not prevent it being commenced. The 28 days is not a time limit which can be extended by the court under AA96 s12 - see Russell on Arbitration 21st Edition para 7-031 and Crown Estate Commissioners v John Mowlem & Co Ltd [1994] 70 BLR 1 (overruling McLaughlin & Harvey plc v P&O Developments Ltd) relating to similar provisions in the 1950 Act and JCT 80.

I would therefore regard the appointment as valid and would accept it. I would write to the parties in the usual way telling them that I have done so and setting out my terms. I would also say that I am aware that the Respondent has raised an issue as to the validity of my appointment and invite him to apply to me to determine the matter under AA96 s30. The issue of whether the arbitration was commenced after the expiry of the time limit and whether the Final Certificate has therefore become conclusive evidence as to issues raised in the arbitration is likely to arise during consideration of the respondent's application.

A slightly riskier alternative would be to tell the parties my view as to the effect of clauses 30.9.1. and 30.9.3 and the validity of my appointment, citing the authorities given above but still inviting the Respondent to make an application if he wished to contest that view. I would suggest that the question of whether the arbitration was commenced before or after the Final Certificate had become conclusive evidence as to issues raised in the arbitration be determined as a preliminary issue.

My own view is that the Claimant is right and that the letter of 20 April does effectively invite the Respondent to agree to the appointment of an arbitrator - but I would still consider any arguments to the contrary put forward by the Respondent which may convince me that I am wrong.