Presented by:Chian Chee Yong Fu Yih Shyang

LECTURE 1: CONSTRUCTION DISPUTES WITH

INTERIM CERTIFICATE

Are issued periodically during the contract.Certifying the sum that in Architect’s opinion which

the works have been properly carried/done.An approximate estimate to ensure the employer is

safe in making a payment in advance of the contract sum or to avoid over paid.

The sum are subjected to adjustment on completion.

WHAT IS INTERIM PAYMENT CERTIFICATES

PAM 2006 Form Of Building Contract Clause 30 - Interim Payment Process

Dispute arising in the event architect withhold issuance of interim certificate.

The issuance of an interim certificate shall be within 21 days after the contractor has submitted an application

If the contractor fails to submit an application shall be deemed to mean that he has waived his entitlement for the payment of that month.

The employer has an obligation to pay the contractor within the period of honouring certificate, usually within 21 days after the issuance of the certificate.

If the architect fails to issue an interim certificate, without reasonable cause, he may be liable to be sued for breach of duty under general law.

PROBLEMS WITH INTERIM CERTIFICATES

Dispute arising from an ‘incorrect’ sum certified in the interim certificate.

Having monthly joint valuation on site between the consulting QS, contractor and clerk of works to agree on the certified sum in the interim certificate. However, sometimes this sum may not be the sum expected by the contractor although the certified sum is a matter to be determined by the architect and quantity surveyor.

Architects and quantity surveyors may made errors. Even if the interim certificate is issued not in accordance with the Conditions , and it is not subject to immediate arbitration.

PROBLEMS WITH INTERIM CERTIFICATES

1. The act of its issuance2. Under – Valuation3. Under – Certification4. Non – Payment5. Errors in Interim Certificate

COMMON PROBLEMS IN INTERIM CERTIFICATES

According to Clause 30.1, the architect is obliged to issue an interim certificate within 21 days of receipt of the contractor’s application if: The architect have received the contractor’s application for

interim payment at the specific time with suffi cient details (the breakdowns of each element).

The architect have received the interim payment valuation carried out and recommended by the QS.

Failure to issue, may lead to breach of duty by the architect.

1. THE ACT OF ITS ISSUANCE

To make an Interim Certificate to have CONTRACTUAL and LEGAL EFFECT, it must be signed and delivered offi cially to register offi ce of the contractor, in order to compliance with Condition of Contract in the CONTRACT DOCUMENT.

Case:London Borough of Camden v Thomas Mclnerny (1986)Architect signed the certificate but it was never

send out.Court Decision:The interim certificate has no contractual and legal

eff ect.There is a breach of duty by the architect.The interim certificate must be offi cially delivered to

the registered address of the contractor for his entitlement to payment.

After the Architect had signed and delivered the interim certificate to the contractor, the contractor is entitled to full payment stated in the certificate.

The employer cannot deduct any “Contra-Payment”. He may have against the contractor which are not in accordance with Clause 30.4

The Contractor can sue employer to recover the debt or charge interest until the debt is settle when Employer fails to pay in full.

2. UNDER - VALUATION

Case: Leow Tuck Chui v Dr. Leela Medical Centre (1995) The medical centre delayed payment and deduct

‘cross-claim’ for alleged defective works. the appellant (Contractor) sued the respondent

(Employer) and sought summary judgment under Order 14 of the Rules of the High Court (RHC)

Court Decision: Employer has to honour certified amount. Contractor has right to full payment in absence of

provision for deductable. Employer’s ‘cross-claim’ could still go arbitration or

to litigation even after payment.

According to Clause 34.0, the Employer and the contractor have access to Adjudication or Arbitration for review of set-off disputes in interim certificate.

Contractor alleged that the architect has under – certificated his interim certificates by failing to pay the sum for the works carried out.

3. UNDER - CERTIFICATION

The contractor may have a direct remedy against the Employer if the certification process has broken down entirely: When the architect has died or retired

Where the architect refused to act and the employer fails to replace him

When there is evidence that the employer was interfering or influencing the certification process.

Case:Croudace v London Borough of Lambeth (1986) Architect had retired. The employer failed to nominate a replacement for

the architect.It was held that: The failure to take such steps as were necessary to

enable the contractor's claim for loss and expense to be ascertained caused the contractor loss in the sum which would have been ascertained.

Whilst therefore the contractor did not have a claim for payment under the contract, it had a claim for loss and damage for breach of it.

Failure to pay the interim certificate within the period of honouring certificates by the employer, without reasonable cause.

Remedies available to contractor are: the suspension of work, claiming for interest, apply for summary judgment, apply for the winding up of Employer’s company or determining the contract with the Employer.

4. NON - PAYMENT

Case:Kah Seng Construction Sdn.Bhd. v Selsin Development Sdn.Bhd In this case, the plaintiff contended that it was entitled to

suspend works because of non payment of one certifi cate and partial non payment of another.

The defendant argued that even if the Defendant was not entitled to set off sums of monies for delay and defective works against sums due to the Plaintiff in the interim certifi cates, there was no provision in the rudimentary contract between the parties for non payment of certifi ed sums and that the Plaintiff ’s admitted suspension was wrongful.

The judge held that: ‘There is no intermediate right in a building contract to

suspend works. If the Contractor insists on the continued performance of the contract, i.e. he affi rms the contract, he must himself continue to perform his primary obligations under the contract i.e. continue performing the contract works. That is why suspension of the works by the contract, i.e. not continuing with his primary obligations, becomes itself a repudiatory breach by the Contractor’

According to Clause 30.3, architects have the power to revise or correct any payment certificates only if there are: Clerical error Computational error Typographical error Errors of similar nature

Besides the above errors, architect is not entitled to revise or correct any payment certificate issued by him.

5. ERRORS IN INTERIM CERTIFICATE

Case:Lojan Properties v Tropicon Contractors (1991)Which was a contract under SIA Form of Contract,

the contractor brought court proceedings against the employer for summary judgment after the employer had failed to honour twelve interim payment certificates.

Whilst the application for summary judgment was pending, the architect issued modification to the twelve certificates, which resulted in the contractor owing money to the employer.

Court decision:The court rejected the new certificates, which were

intended to revise the certificate issued two year earlier and decided that these certificates were flawed and invalid and further took a suspicious view of the conduct of the architect in the discharge of his duties as a certifier under the contract.

Question

Why does Quantity Surveyor /Architect should act independently as a certifier?

Answer

To avoid the client/employer from interfering the amount to be certified.

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