Aurum Building Services (Pte) Ltd v Greatearth Construction Pte Ltd

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 18 June 1994
• Neutral Citation: [1994] SGHC 166
• Docket Number: Suit No 1381 of 1993
• Date: 18 June 1994
• Year: 1994
• Published date: 24 December 2003
• Plaintiff Counsel: Anne Loke (Lee Lam & Pnrs)
• Citation: [1994] SGHC 166
• Defendant Counsel: M Sivakumar (Arthur Loke & Pnrs)
• Court: High Court (Singapore)
• Subject Matter: Main contractor's right of set-off,Building and Construction Law,Main contractor purporting to set off its claim against amounts certified by architect to be payable to sub-contractor,Set-off and abatement,Whether main contractor had a right to set-off under the terms of the sub-contract,Whether main contractor entitled to stay of proceedings pending arbitration of its claims under the terms of the sub-contract,Grounds,Arbitration,Stay of court proceedings,Whether sub-contractor entitled to summary judgment on amount certified,Application for summary judgment on architect's interim certificate by sub-contractor,Architect's interim certificate requiring payment to sub-contractor not taking into account set-off claimed

[Please note that this case has not been edited in accordance with current Singapore Law Reports house style.]

Kan Ting Chiu J:

1 This case called for an examination of a sub-contractor’s right to certified progress payments and the main contractor’s right to make set-offs against the certified sums under the Singapore Institute of Architects’ forms of main contract and sub-contract.

2 The plaintiffs were the nominated sub-contractor for sanitary and plumbing works for the Leonie Gardens Condominium. The defendants were the main contractor for the project. The plaintiffs’ claim against the defendants fell mainly under two heads, firstly for $225,392.60 being the total amount certified by payment by the project architect in four interim certificates, and, secondly, for $597,609.33 for accelerated work carried out by them. The parties agreed that the architect had certified $225,392.60 for payment. This was stated in the affidavits filed by them and confirmed by their counsel in the course of argument, although the four certificates exhibited by the plaintiffs were actually issued by the quantity surveyors.

3 The defendants refused to make payment under the certificates on the ground that they have two claims against the plaintiffs in the sum of $368,129.70 which they purported to set off against the certified amount.

4 Against this background, the plaintiffs took out this action against the defendants and applied for summary judgment for the certified amount and the defendants responded by applying to stay the action pending arbitration.

5 At this point it is useful to refer to the contractual provisions the parties relied on in support of their applications. The plaintiffs relied on cl 30(1)(a) and (b) of the main contract, which provide that:

(a) Interim certificates of the architect in favour of the contractor under cl 31 of these conditions shall state separately the amounts in each certificate due to each individual nominated sub-contractor or supplier (or to designated sub-contractors or suppliers whose work or materials or goods are the subject of a PC item) as the value of their work, goods or materials carried out or delivered at the relevant date under that clause, which amounts shall be paid by the contractor to such nominated or designated sub-contractors or suppliers, less retention moneys or any set-off or counterclaim to which the contractor may be entitled, within 14 days of receipt by the contractor from the employer of the amounts so due under the certificate of the architect.

(b) In issuing such an interim certificate the architect, after receiving representations and enquiring into the matter, may (but shall not be obliged to) take into account in any such valuation any dispute, claim, set-off, defence or counterclaim as between the contractor of the one part and the designated or nominated sub-contractor or supplier of the other part arising out of their sub-contract. If so, the certificate shall separately state any sum so deducted or taken into account or allowed (or, if it be the case, disallowed) by the architect when giving his certificate, in which event the contractor and designated or nominated sub-contractor or supplier shall be bound by such deduction or taking into account or allowance or disallowance until final judgement or award in any dispute between them and, if relevant, the employer and contractor shall likewise be bound in any dispute between them, as the case may be. Provided that in issuing such certificates the architect shall disregard and not take account of any sum arising out of any disputes, claims, set-offs, defences or counterclaims as between the sub-contractor or supplier and the contractor unless any such sum shall be in principle recoverable by the contractor from the employer or by the employer from the contractor under or by virtue of any provision of this contract, and so require to be certified or taken into account as between the contractor and the employer under cl 31 of these conditions …

and cll 13.1 and 13.2 of the sub-contract, which read:

13.1 The sub-contractor will (unless the schedule hereto provides to the contrary) be paid within 14 days after payment or deemed payment of the main contractor by the employer following certification by the architect of the amounts paid or deemed to be paid to the main contractor and accordingly due to the sub-contractor in all respects in accordance with cll 30(1) and (2) and 31 of the main contract conditions.

13.2 In so far as the architect may decide the amounts due to the sub-contractor and any matter of defence, set-off or counterclaim as between the parties to this sub-contract for the purposes of determining the amounts to be certified for payment by him in the main contract pursuant to cl 30(1) of the main contract conditions, or any matters of extension of time and delay under cl 11(2) of this sub-contract, such decisions and certificates shall be binding until final judgment or award in any dispute between the parties to this sub-contract.

6 The defendants based their application for a stay on cl 14.1 of the sub-contract, which says that:

Any dispute between the parties hereto as to any matter arising under or out of or in connection with this sub-contract or under or out of or in connection with the sub-contract works or as to any certificate decision direction or instruction of the architect, shall be referred to the arbitration … .

7 If the defendants have a claim against the plaintiffs, there is nothing in the main contract or the sub-contract that would prevent them from prosecuting it. The question to be determined in these proceedings is whether they can set off their claim against the certified payments before the claim is proved.

8 Clause 30(1)(b) of the main contract states clearly that the architect “may (but shall not be obliged to)” take into account any dispute, claim, set-off, defence or counterclaim of the contractor when issuing an interim certificate under cl 30(1)(a). If he takes it into account, the certificate he issues shall state any sum deducted, taken into account, allowed or disallowed. However, the architect’s discretion is not unfettered. He is not allowed to take into account any claim by the contractor unless it “shall also be in principle recoverable by the contractor from the employer or by the employer for the contractor under or by virtue of any provision of this contract”. The architect’s power is explained in the “Guidance Notes on Singapore Institute of architects Articles and Conditions of Building Contract and Conditions of Sub-Contract”, in para 8, where it says:

In his certificates for payment to the main contractor, the architect is also empowered to take account of matters of claim and cross-claim between main contractor and sub-contract in carefully defined cases (cl 30(1)), wherever these will affect the amount to be certified under the main contract. In this area, again, the architect’s certificates will carry ‘temporary finality’ not only as between the employer and main contractor, but also, if the new short form of standard sub-contract is used, as between the main contractor and sub-contractor, until final judgment or award in any dispute between them. The only exception to this will be in the case of ‘purely private’ quarrels between the main contractor and sub-contractor, not affecting the sums to be certified under the main contract, as to...