Building and Construction Law

• Citation: (2000) 1 SAL Ann Rev 35
• Published date: 01 December 2000
• Date: 01 December 2000

Introduction

A number of significant decisions were made in the year 2000. In particular, we saw the development and firmer grounding of the concept of “unconscionability” as a separate basis for restraining calls on performance guarantees. Other decisions dealt with the intricacies of the provisions of an indigenous standard form building contract covering both familiar areas as well as touching new ground. For example, a number of cases dealt with the concept of “temporary finality” of interim certificates of payment under the standard form Articles and Conditions of Building Contract issued by the Singapore Institute of Architects (‘SIA Conditions’).

The duties of the architect to design and supervise construction and their relationship with the contractor”s duty to deliver good workmanship were examined by the Court of Appeal. Some judicial guidance was also given as to how damages ought to be apportioned between two parties who were found to be in default of their contractual duties.

The scope of operation of the Land Titles (Strata) Act (Cap 158, 1999 Ed), s 116(1) also came before the Court of Appeal which decided that management corporations are entitled to represent those subsidiary proprietors who have contractual rights against the developer, and seek proportionately abated damages on their behalf.

A feature of the developing jurisprudence in this area has been the attempt to shape the common law so as to fit Singapore”s circumstances. The intensive nature of land use in Singapore prompted the Court of Appeal to depart from a century old decision of its predecessor court. It has imposed on landowners a strict and non-delegable duty not to cause damage to a neighbour”s land by excavating or otherwise removing land without first securing alternative means of support.

Payment certificates

Interim certificates and “temporary finality”

A recurring feature of construction litigation is the claim based on an interim certificate of payment issued by the contract supervisor, who is usually the architect or engineer in most standard form contracts. An important characteristic of the SIA Conditions, used mainly for private

sector projects, is that such interim certificates of payment carry “temporary finality.” To anyone unfamiliar with this standard form contract, the phrase can appear to be a contradiction in terms. It can be difficult to envisage the circumstances in which the use of the word “temporary” can co-exist with “finality”. Moreover, cl 31(11), in which this concept of “temporary finality” is embodied, is not a clause for casual reading owing to what has been called its “convoluted” drafting (as described by LP Thean J, as he then was, in Tropicon Contractors Pte Ltd v Lojan Properties Pte Ltd[1989] SLR 610 at 617). However, the practical effect of the provision, particularly, after some illumination from a series of court decisions, is not difficult to appreciate. Essentially, an interim certificate should not be emasculated by any set-off or cross-claim, in an application for summary judgment, unless the set-off or cross-claim raised is supported by an appropriate architect”s certificate. Thus, in the Tropicon Contractors case, the court did not accept the “cancellation” made by the architect of some interim certificates originally issued. It struck down the “revised” interim certificates and a fresh interim certificate that were issued in replacement which purported to reduce the amounts payable to the contractor by the employer. The learned judge found that “most of the certificates had been issued more than two years before the issue of the revised certificates” and expressed his disapproval at the belated challenge. The additional certificate issued, moreover, did not show any date at which valuation of the works carried out under the contract was made. Summary judgment was then given, substantially based on the original interim certificates.

Challenging the validity of certificates

An interim certificate was challenged, this time by the employer, in China Construction (South Pacific) Development Co Pte Ltd v Leisure Park (Singapore) Pte Ltd[2000] 1 SLR 622 relying on arguments that appear to have been fashioned from fragments harvested from various parts of the judgment in the Tropicon Contractors case. It was contended, inter alia, that (a) contrary to a provision of the contract, the interim certificate did not show the valuation date and was issued long after the date of valuation and (b) if (as the contractor had contended) it ought to be treated as a correction certificate, then the certificate in question was not in form or in content a correction certificate properly issued under cl 31(4).

Warren Khoo J, in examining the arguments, first, reaffirmed the general principle established in Tropicon Contractors that an interim certificate for payment issued by the architect is “prima facie to be honoured” enjoying “temporary finality” pending resolution of any underlying disputes between the parties by review in arbitration or court proceedings. Summary judgment ought to be given in the meantime “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.”

Second, the learned judge held that the burden of showing that the power has not been properly exercised in respect of any certificate is on the party challenging its validity. He was “not prepared to find that the architect has not acted properly in the exercise of his power under cl 31(4)” (at 631). Third, the merits of the respective arguments were examined in the context of habitual departures from and mutual waivers of the strict contractual requirements on the form and timing of the certificates by both parties. In the circumstances, the court held (ibid) that although strict compliance of certification provisions should be the “general norm,” it should not apply the rule in a way to enable the employer to “take advantage of lapses in form and timing on the part of the architect”.

The court also held that the architect has the power under cl 31(4) to correct, at any time, an error made in a previous interim certificate. This could be done even after completion and notwithstanding that an interim certificate had already been issued on the same progress claim.

A comparison of the China Construction case with the Tropicon Contractors cases (both the decision at first instance at [1989] SLR 610 at 617 and the Court of Appeal”s decision at sub nom Lojan Properties Pte Ltd v Tropicon Contractors Pte Ltd[1991] SLR 80) reveals an inclination to place a heavier burden on the employer seeking to impugn or uphold an interim certificate if the result would lead to an avoidance or reduction of amounts to be paid by the employer to the contractor. There is also, on the other hand, a reluctance to uphold an interim certificate that was subsequently issued to nullify earlier certificates or reduce amounts previously certified as payable. It is submitted that there is merit to this approach. It has been recognised, as a “unique feature” of the SIA Conditions, that the contractor “is assured of regular periodic payments during the period the contract works are in progress” (per Karthigesu J, (as he then was) in Tropicon Contractors, at 84). The contractor should be paid the amounts expressed to be payable in the interim certificates. He should be able to obtain quick summary judgment for the amounts certified. Only the amounts expressly deductible under the contract may be set off against the amount due under the interim certificate ([1991] SLR 80 at 85 affirming what the lower court said at [1989] SLR 610 at 617). In short, the SIA Conditions have a structural predisposition towards ensuring the regularity and certainty of payments due under interim certificates. Procedures or documents generated (including subsequent interim certificates) to undermine the legitimacy of any interim certificates ought to be scrutinised with considerable care. There is therefore a significant difference between challenging certificates in order to recover payment and challenging them to avoid payment. This aside, it. moreover, appears disingenuous for an employer to argue that he was not required to pay anything because an interim certificate was invalid owing to the long delay of the architect in issuing it when the only party that was in any position to enjoy or benefit from the deferment

of payment was the employer. In any case, it is certainly justifiable in circumstances where there is a “pattern of grudging and belated certifications” as the court had observed in China Construction (at 631).

Liability of employer for architect”s default of certification duties

The position may be different where the contractor seeks to contend that a term may be implied into the contract that the employer has an obligation to ensure the proper discharge by the architect (appointed by the employer) of his duties as prescribed under the SIA Conditions. In cases of late certification of interim certificates of payment, the contractor would often seek to recover alleged losses suffered by him as a result of the late certification by the architect. The Court of Appeal, in granting leave to appeal against an arbitrator”s award, in Hong Huat Development Co (Pte) Ltd v Hiap Hong & Co Pte Ltd[2000] 2 SLR 609 agreed with the court below which held that the employer could be liable for the default of the architect in issuing the interim certificates, but only if the employer was aware of such default. As Chao Hick Tin JA, who delivered the Court of Appeal”s judgment, pointed out, this rule is justified by the need to take into account the special position of the architect in a building contract. Although an architect is employed and paid by the employer, he is supposed to be an independent and impartial certifier for interim payments, free from any...