England and Wales Court of Appeal (Civil Division) Decisions

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.