2. Overview of Chapter
1. Introduction
2. Nature of Certificate
3. Certification Process
4. Operation of Interim Certificate
5. Operation of Final Certificate
6. Certifier’s Position
7. Challenge the Certificate
3. Introduction
Small contracts are normally paid in a single sum on completion
of the works which is known as an entire contract
Bigger and complex contract, the common practice of payment is
through interim payments according to progressively valuation of
work completed or stage payment where payments are made at
pre-determined stage of the progress of work.
In Hoenig v Isaacs (1952), Lord Denning stated the following
position, 'Where a contract provides for a specified sum to be
paid on completion of specified work, the Courts lean against a
construction of contract which would deprive the contractor of any
payment at all simply because there are some defects or
omission'.
4. Nature of Certificate
Issued on a regular period, usually monthly
At the interim stage, it cannot always be a wholly exact
exercise. It must be include an element of assessment and
judgment.
Secretary of State for Transport v Brise-Farr Joint Venture
(1993)
Generally, acceptable that the amount certified in an
interim certificate is to treat them as estimates of the value
of the work done up to the date shown on the certificate.
Beaufort Developments v Gilbert-Ash (1999)
5. Certification Process
PAM 2006 Clause 30.1 requires Contractor to submit a payment application
at the Interim Claim Interval ....complete details and particulars as required
by the Architect.
Under the same clause, the submission of a payment statement is a
condition precedent to the issue of the certificate by the architect.
Therefore if the contractor does not submit his payment application, the
architect is not obliged to issue any payment certificate and it is deemed that
the contractor has waived his right to that particular payment certificate.
The effect of this is that the contractor may still retain his common law right
to payment for work done and contractually he is not entitled to that
particular payment.
Tuck Sin Engineering & Construction Sdn Bhd v Yee Heng Manufacturing
(M) Sdn Bhd (2007).
6. Some contracts provide a minimum value of works
completed before the certifier is obliged to issue the first
Interim Certificate, e.g. JKR Design and Build form. The
intention of such a requirement is to encourage contractor
to mobilize and commence work expeditiously.
After receiving the payment application, the Quantity
Surveyor will carry out the valuation of works and materials
delivered to site jointly with the contractor's representative.
When the valuation is completed, the quantity surveyor will
issue a recommendation to the Architect for the sum to be
certified. Architect will then decide to follow the
recommendation or to depart if he wants to adjust for
defects or incomplete work.
7. Operation of Interim
Certificate
Legally, a properly issued interim certificate creates a debt
which is enforceable like any other debt. A contractor can
seek summary judgment for the amount certified subject to
the employer's right of set-off.
Most construction contract provides that contractor's
entitlement to payment is conditioned on the issuance of a
condition precedent and the employer cannot refuse to pay
an interim certificate of payment nor seek to reduce the
amount to be paid by way of set-off not provided for in the
contract. This is to protect the right to receive interim
payments from allegation of defects and cross-claim by the
employer.
8. In the case of Mae Engineering Ltd v Dragages Singapore Pte Ltd
(2002), it was held that the presentation of an interim certificate
crystallized an employer's obligation to pay and the employer cannot
allege rights of set-offs for purpose of varying this contractual
obligations.
The above decision is in line with Supreme Court's decision in
Pembenaan Leow Tuck Chui & Sons SdnBhd v Dr Leela's Medical
Centre Sdn Bhd (1995) where it is held that:
the employer was obliged to honour the certified sum in the
interim certificate despite the employer's cross-claim for
defective work;
the certificate conferred 'temporary finality' thereon;
therefore the contractor had a right to immediate payment in full
in the absence of an express contractual provision permitting
any deduction by the employer; and
notwithstanding the 'temporary finality' of the interim certificates,
the employer's cross- claims against the contractor could still be
litigated or arbitrated even after the payments of the interim
certificates had been made.
9. Operation of Final
Certificate
“Final certificate shall
state; Final account
less total sum certified
in previous payment
certificate ,whether
paid or unpaid, to the
contractor. The
difference, if any shall
be balance due to
contractor/employer.
Said balance shall be
payable by either
contractor/employer.”
-Paraphrased from
clause 30.15 of PAM
contract
10. Understanding Final
Certificate
Certificate is intended to be a final statement that
which certifies the final amount due to the contractor
or vice versa on employer’s side for outstanding
matter under contract.
Also intended that the work would conform to the
requirement of the contract
In example…
11. Binding of Certificate
Clause 30.9 of JCT stipulates that the Final Certificate
shall have effect in any proceedings arising from the
contract as conclusive evidence ... that the particular
quality or standard of materials or goods ... was to the
reasonable satisfaction of the Architect
PAM Contract clause 30.16 rectifies the issue of
certificate being conclusive stating that it is only
conclusive in its final value of the works.
12. Retention Money
Retention money is to allow employer to hold the
money for setting off as express by the contract
(Clause 30.4 and Clause 30.5)
The intention of the retention money is to act as a
relationship of trust between the employer and
contractor. (Clause 30.6)
Employer have the fiduciary duty to that the employer
do not use that money. (Lee Kam Chun v Syarikat
Kukuh Maju Sdn Bhd)
13. Certifier’s Position
Certifier needs to take account to meet employer’s demand
while at the same time discharge his/her duty impartially
and fairly
Purpose that the certifier must be fair (Kuala Ibai
Development Sdn Bhd v Kumpulan Perunding) because
“even though he is usually appointed by the employer, the
object of the provisions for temporary finality could be
defeated. It would be no comfort to the contractor that he could
ventilate his dissatisfaction before an arbitrator, with all the
time, trouble and expense that this entails”
Says that one Singapore judge in Aoki Corp v Lippoland
(Singapore) Pte Ltd (1995)
14. Liability of Employer and
Certifier
If employer is liable for duty of architect as an agent,
employer is liable under implied obligation to
contractor to ensure the architect exercise his duty
properly as a certifier
Employer are not liable for default of the architect and
state that it is settled law that an architect has to act
fairly. Contractor may sue architect if he act
negligently in certifying duty. (Hiap Hong & Co Pe Ltd
v Hong Huat Development Co & Pe Ltd 2001)
15. Challenging the
Certificate
1. When there is any doubt as to their rights and liabilities
due to ambiguity and uncertainty with respect to the subject
matter being certified. See Token Construction v Charlton
Estates (1973).
2. Where the certificate has not been issued in accordance
with the terms of contract. See Trade Indemnity Co v
Workington Harbour and Dock Board (1937).
3. Where a certificate process has been tainted by
elements of fraud, collusion or dishonesty. See Hickman v
Roberts (1913).
4. Where the certifier has an interest in the matter certified.
See Kimberly v Dick (1871).
5. Where the employer or his agents prevents the certifier
from issuing a certificate. (Roberts v Bury Commissioners
16. Remedies of Wrongful
Certification
Hiap Hong & Co Pte Ltd v Hong Huat Development
Co (Pte) (2001), an architect refused to issue a
certificate with the knowledge of the owner.
The Court of Appeal took the view that the recourse
for the aggrieved contractor is to invoke the arbitration
clause or to proceed to court against the employer
The Contractor’s contractual remedy in such
situations is by way of reference to arbitration, as
provided for under Clause 34.0 of the PAM 2006
Form.
17. . Recourse outside the
Terms of Contract
If the architect’s failure to issue the certificate is due to the
architect’s own incapacity and it’s not due to employer, an
action in arbitration against the employer will only injures
the relationship and goodwill between the employer and
contractor.
RSP Architect Planners and Engineers v Ocean Front Pte
Ltd (1996) is that an architect in a building contract owes a
duty of care to the contractor not to cause the contractor
economic loss
Sutcliff v Thackrah (1974) AC 727 deemed that the
Architect is liable in damages if he causes loss to his
Employer by failure to take due care or to exercise
reasonable professional skill in carrying out his duties
18. Question
Q1. Can the employer refuse to pay after the certifier
had signed and delivered the interim certificate to the
contractor?
19. Answer
Answer: Cannot, this is because employer has to
honour certified amount despite employer’s ‘cross-
claim’ for defective works. Contractor has right to full
payme in absence of provision for deductable and the
certificate conferred 'temporary finality' thereon.
21. Answer
Answer: The contractor can sue the employer to
recover his debt or charge interest until the debt is
settled.
Contractor can also stop work
At worst case scenario determine his employment
23. Answer
1. If there is a penultimate certificate issued under
clause 30.13, then the final certificate shall be issued
within 21 days after the period of honouring certificate
of payment for the penultimate certificate.
2. If there is no penultimate certificate issued under
clause 30.13, then the final certificate shall be issued
within 28 days after the CMGD has been issued under
clause 15.6
25. 34.5a) any matter of whatsoever nature arising or in
connection with the Contract
34.5b) any matter left by the contract ot the discretion
of the Architect
34.5c) withholding by the Architect of any certificate to
which the Contractor may be entitled to
34.5d) the rights and liabilities of the parties under
Clause 25.0, 26.0, 31.0 or 32.0
Unreasonable withholding of consent or agreement by
the Employer or the Contractor.
26. Feel free to ask any
questions~!
Wilson Translator: Please don’t
27. Appendix
Token Construction Co Ltd v Charlton Estates Ltd.
In this case, the contractors entered into a contract with the
building owners on a modified prime cost contract for the erection
of four blocks of flats in Regents’ Park Road.
However, the contractor was in delay and the employer deducted
liquidates damages, and refuse to pay the interim certificate
issued by the architect which amounts to £ 16,347. Eventually
the employer contended that the liquidated damage was larger
than the amount in the interim certificate.
Eventually, Lawson J held that: 'If there is a provision in the
contract which on its proper construction entitles a building owner
to deduct damages for delay from amounts shown to be due on
certificates, there is nothing in the authorities which would
preclude such a deduction being made from an interim
certificate'.
28. TRADE INDEMNITY CO LTD V WORKINGTON HARBOUR AND
DOCK BOARD (NO 2): HL 1938
The plaintiffs’ action was derived from a bond given by the
defendants guaranteeing a contractor’s performance in building a
dock for the plaintiffs.
The bond provided that a certificate which complied with certain
criteria would prove the amount due. In the action on the bond
the plaintiffs relied upon a certificate which they said complied
with the criteria and was thus conclusive evidence of the
defendants’ liability under the bond.
The action failed because the certificate did not specify a relevant
act or default as required by the bond. The plaintiffs brought a
second action relying, not upon the certificate, but upon the
underlying facts, which they said amounted to breaches of the
contract and thus triggered liability under the bond.
29. Hickman & Co. v Roberts (1913) AC 229
The contract provided that the decision of the architect as to
payment due to the contractor was to be final and that payment was
to be made to the contractor on the basis of the architect’s
certificates.
The contractor claimed that he was owed certain sums but the
architect had failed to issue a certificate in his favour.
When challenged by the contractor the architect’s reply was that his
clients, the owners, would not allow it: "in the face of their
instructions to me I cannot issue a certificate whatever my own
private opinion in the matter".
The House of Lords held that he had improperly allowed the owners
to influence him: the owners could not rely on the absence of a
certificate as a reason not to pay the contractor
30. Kimberly v Dick (1871)
where the architect who issued the final certificate had
promised the employer that the works would not
exceed a certain figure and allowed this promise to
influence his certification.
