INTERIM CERTIFICATE UNDER THE SIA CONTRACT: CHINA CONSTRUCTION (SOUTH PACIFIC) DEVELOPMENT CO. PTE LTD v LEISURE PARK (SINGAPORE) PTE LTD

INTRODUCTION

1. The courts had in earlier cases confirmed the intention of the Post-1980 Articles and Conditions of Building Contract published by the Singapore Institute of Architects ("SIA Contract") of providing a system of "temporary finality" regulated by the architect's certificates over a wide range of matters, which could be enforced immediately by summary judgment pending subsequent arbitration or litigation, if any.

2. In China Construction, the defendants/employers contended that the architect has not certified an interim payment certificate in accordance with the provisions of the contract and hence, it should not be given the "temporary finality". This case illustrates the typical problems faced by contractors arising from the late and under-certification of architects.

Brief Facts

3. The plaintiffs were the main contractors engaged by the defendant owners under a
contract in the SIA standard form of contract for the building of a theme park on Sentosa Island at a lump sum of S$8.146m. The provisions for the issue of interim certificates were contained in clause 31 as modified by the parties. By an addendum to the contract, a new clause 31(13) was added which provides " the issuance of each and every Interim Certificate by the Architect is conditional upon the Contractor having sent to the Quantity Surveyor a detailed statement and breakdown of the approximate value of the work executed and of unfixed materials on site, at least ten days before the date of each relevant certificate".

4. The practical completion of the Works was certified on 15 January 1995. On 7 October 1995, the plaintiffs submitted progress claim no. 20, described as the "penultimate" claim, for the (cumulative) sum of $6,568,910.27. The architect would, in the normal course, have issued one interim certificate in respect of the claim. However, he did not do so. Instead, he issued one interim certificate (no. 20) on 27 June 1996 for the cumulative sum interim of $4,621,575.75 and a net sum of $43,690.00. He issued another interim certificate (no. 21) on 13 January 1997 for a cumulative sum of $4,815,928.50 and a net sum of $194,352.75.

Then, nearly two years later, on 10 December 1998, he issued interim certificate no. 22 for the cumulative sum of $5,136,664.29 and a net sum of $320,735.79. The last certification was based on the project quantity surveyor's valuation made on 31 July 1997. The plaintiffs commenced legal proceedings and applied for summary judgment in respect of the net sum of $320,735.79. The plaintiffs succeeded before the learned assistant registrar. The defendants appealed.

DEFENDANTS' CONTENTIONS

5. The defendants' main contentions are summarised as follows:

Firstly, contrary to clause 31(2), the interim certificate no. 22 does not show the valuation date. The defendants refer to the Tropicon case in which interim certificates were struck down on the ground, inter alia, that they did not show the valuation date.

Secondly, only one interim certificate can be issued on one progress claim. There was no progress claim in respect of interim certificate no. 22. The defendants relied on clauses 31(2) and 31(13).

Thirdly, interim certificates are intended to be issued during the progress of the work, and not after the contract has been completed. Thus the defendants said interim certificate no. 22 was contrary to the scheme and provisions of the contract. The defendants again referred to the Tropicon case in which interim certificates were held to be invalid on account of having been issued more than 2 years after completion.

Fourthly, the interim certificate no. 22 was not in form or in content a correction certificate under clause 31(4).

DECISIONS

6. Warren Khoo J gave summary judgment for the plaintiffs. He pointed out,
inter alia that:

(a) When considering the question of validity of interim certificate no. 22, it is
appropriate to take into account the conduct of the parties and the architect in the
matter of certifications and payments. He added that "it is quite apparent that it is
not in regard to interim certificate no. 22 alone that the architect and the parties
have not followed the provisions of the contract. ... Indeed they have been
habitually ignored". On the evidence, the learned judge held that "it seems to me
that in view of these apparently habitual departures from the contract, all in
relation to certifications of payments to the contractor, the defendants' criticisms
about the form and timing of the certificates cannot be taken seriously. There has
been a general waiver of the strict requirements of the contract, and it is
inequitable for the employer to go back on it when it suits them".

(b) A correction certificate (under clause 31(4)) may be issued at any time. It can be issued before completion of the contract; between two interim certificates;
notwithstanding that an interim certificate has already been issued on the same
progress claim.

(c) After analysing the Tropicon case and clause 31(4), the learned judge said "that
there is nothing in that case to support the view that a correction certificate, in the absence of vitiating factors such as those present in that case, should be
invalidated merely on the ground that it was issued long after the completion
date".

(d) The delay in this case was probably consistent with a pattern of grudging and
belated certifications, as manifested in the manner in which the previous two
certificates referred to were issued. It seemed evident that what happened was
that the architect having certified certain sums, did not consider that he had
certified enough and proceeded to issue a further certificate or certificates on the
basis of the same progress claim made on 7 October 1995.

(e) "An interim certificate for payment issued by the architect under the SIA contract, like other certificates issued by him, is prima facie to be honoured. It enjoys "temporary finality"; i.e. finality pending resolution of any underlying disputes between the parties by review in arbitration or court proceedings. Summary
judgment is to be given in the meantime on the certificate unless it can be shown
in a summary way that the certificate has not been issued in the proper exercise of
the architect's certification powers under the contract. All this is provided in
clause 31(11) of the general conditions. The burden of showing that the power has
not been properly exercised in respect of any certificate is on the party challenging
its validity. On the facts of this case, I am not prepared to find that the architect
has not acted properly in the exercise of his power under clause 31(4). The interim
certificate in question must be honoured".

COMMENTS

It is submitted that this case illustrated the following important aspects of the SIA contract:

(a) The architect must exercise his certification powers in accordance with the
provisions of the contract.

(b) The Tropicon case is no authority for the proposition that an interim payment
certificate is in all cases to be invalidated merely on the ground that the
requirements of the contract are not met. Further, in considering the question of
validity of interim certificates, the courts take into consideration the conduct of the parties and the architect.

(c) Clause 31(4) allows the architect to issue further interim certificates to correct earlier interim certificates at any time (but it of course must be before the Final Certificate).

(d) In the absence of vitiating factors, the court will give "temporary finality" to an interim certificate by way of summary judgment.

Sumber: http://www.drewnapier.com/publications/Dnpub10.pdf