CURRENT ISSUES IN CONSTRUCTION CONTRACT CLAIMS IN SINGAPORE AND THE TROPICON’S CASE

• Citation: (1991) 3 SAcLJ 210
• Date: 01 December 1991
• Published date: 01 December 1991

The construction industry in Singapore, following construction practices elsewhere, has always relied on the use of standard form contracts. The Singapore government, through its various departments or the various statutory boards, has its own set of standard forms. In the private sector, the use or the adoption of any particular standard form is usually initiated by the Singapore Institute of Architects (“SIA”). The SIA had in the past based its standard forms on adaptations of the British RIBA1 or JCT2 standard forms.

This cosy reliance on British models ended abruptly in 1980 when the SIA introduced a new standard form contract as the first edition of their Articles and Conditions of Building Contract (“SIA Contract”) which was effectively a substantial departure from the RIB A-JCT orthodoxy. There were several subsequent minor alterations made in 1982, 1987 and 1988.

For better or worse, its introduction has also injected some confusion and uncertainty into the construction practice and law in Singapore. Any decision of the local courts would have been readily welcomed not only by legal practitioners but also by construction professionals, contractors and almost everyone else involved in the construction industry who unlike lawyers, have to deal with or administer the SIA contract on a daily basis. Much of this confusion or uncertainty is due to the difficulty of having to interpret and apply the provisions of a standard form contract without being able to rely on any existing authorities or practices that are directly relevant since most of them were decided on or evolved from standard form contracts based on the RIBA-JCT model. The timely arrival of the decision of the High Court in Tropicon Contractors Pte Ltd v Lojan Properties Pte Ltd3, and the subsequent decision of the Court of Appeal in the appeal from the High Court’s decision4 in the construction scene in the midst of such circumstances therefore brought some light to a subject that was becoming increasingly abstruse and arcane.

Before this decision is examined for any enduring principles, it would be useful to look at the facts. The action was brought by the plaintiffs, who are building contractors, against the defendants, the building owners. The contract between them was in the form of the SIA Contract. Under the

contract, the completion date was 14 May 1984. The contractors, not being able to complete on time, applied for an extension of time to 15 April 1985 pursuant to c1 23 (1). This was not acceded to and the architects on 6 March 1985 gave the contractors “final extensions to the contract” to 31 December 1984 for completing the main building works, and to 18 February 1985 for completing the swimming pool and external works. On 1 July 1985, the architects issued the Certificate of Practical Completion and possession was taken on 2 July 1985, and further stated that the defects liability period would end on 1 July 1986. The architects had issued altogether 28 interim certificates, numbered 1 to 28, since the commencement of the works up to January 1987, and the owner had paid the first 16 interim certificates leaving the remaining 12 certificates, Nos. 17 to 28 unpaid. Legal action was taken by the contractors for the sum of $1,785,294.32 based on these certificates.

The defendants took out an application for a stay of further proceedings under section 7 of the Arbitration Act whilst the contractors applied for summary judgment for the amount claimed. Thus far, nothing unusual took place and both applications could be described as fairly typical and expected in actions of this kind.

What happened thereafter was unusual. The facts which would have been otherwise fairly clear and simple became complicated when the architects through their unilateral efforts, tried to re-write the history of the dispute some two and a half years later after completion. It may therefore be clearer, though with some over-simplification, to set out the events from this point in the following manner:

24.11.87	The employers wrote to the architects expressing doubts as regards the interim certificates and extension of time certificates and asked the architects to take action under c1 31 (4).
2.12.87	The architects wrote to the contractors ‘extending’ time by 17 days to 31.5.84 and informed them that earlier extensions were ‘null and void’ on the ground of the contractors’ non-compliance with c1 23 (2).
2.12.87	At the same time, the architects issued a Delay Certificate under c1 24 (1).
15.12.87	The architects issued interim certificates Nos. 12A to 28A intending to replace the original certificates and 1 additional certificate, no. 29.
16.12.87	The architects issued a certificate under c1 1 (7) stating that the contractors had failed to comply with the architects’

	notices of 24.7.85 and 14.7.86, that the employers had engaged others to do work and that the employers might deduct the extra costs of doing this work from monies due to the contractors.
16.12.87	The architects issued a certificate under cl 30 (2) stating that the contractors had failed to make payment to sub-contractors as required under clause 30 (1) and that the employers were entitled to make payment to the sub-contractors and thereafter to deduct the sum paid from monies due to the contractors.

All the documents and purported certificates issued by the architects were produced by the defendants at the hearing before the senior assistant registrar, undoubtedly with a view to defeat the contractors’ application for summary judgment and in support of their own application for a stay of proceedings for reference to arbitration. The contractors failed in their application for summary judgment whilst the owners succeeded in their application for a stay. The contractors appealed and the hearing of the appeal came before L.P. Thean J who considered that the main issue was whether the amount of $1,785,294.32 or any part thereof was indisputably due. Several matters were considered by the learned judge in arriving at a decision to allow the appeal by giving judgment to the contractors in the sum of $1,266,010.32 with interest at 8% with costs and ordering a stay of proceedings for a balance sum of $519,284 only which the employers might refer to arbitration.

Although the defendants had appealed to the Court of Appeal against the learned judge’s decision and the plaintiffs had filed a respondents’ notice, the appeal only proceeded on the respondents’ notice as the defendants had shortly before the hearing of the appeal filed a notice of withdrawal of their appeal. The Court of Appeal upheld most of what the learned judge had decided and varied his decision only partially. It is therefore submitted that the main part of the decision of the learned judge remains good law, supplemented by the decision of the Court of Appeal on those parts that were varied.

The interpretation the learned judge and the Court of Appeal gave to several of the provisions of the SIA Contract in considering the issues raised is particularly helpful and may be indicative of the manner in which the courts will deal with the interpretation and application of the SIA Contract provisions in future.

Issues Arising

Although this case dealt with certain specific provisions in a particular standard form contract the issues that arose are, to a large extent, of the usual kind commonly raised by building owners who are minded to defend claims brought by their contractors under interim certificates. Usually, as in this case, such issues are raised at the point where the contractors make an application to court for summary judgment, with a view of defeating the contractors’ application by convincing the court that there are triable issues.

It is submitted that the issues that arose, although not necessarily those that were actually canvassed, in this case related to the following:

1. 1. The nature of an interim certificate in this form of contract.

2. 2. The power of the architects to revise earlier interim certificates.

3. 3. Payment due on interim certificates and c11 31 (1) and (11).

4. 4. The validity of a Certificate under cl 1 (7) of the contract issued by the architect.

5. 5. Payments to sub-contractors by employers.

6. 6. Issues relating to extension of time.

7. 7. Issues relating to liquidated damages.

8. 8. Interest under cl 37 (6).

Not all the issues that arose were dealt with by L.P. Thean J or where they were dealt with, examined in detail. Indeed, several concessions made by the plaintiff and the omission by the parties to canvass certain points render it unnecessary for him to examine some of these issues. The Court of Appeal, nevertheless, gave its own views on them.

Interim Certificates

Most modern standard form contracts should contain provisions enabling the contractors to obtain interim payments on account during the course of the work. Payment is made usually on the presentation of a certificate indicating the amount due to the contractors on account. Such an amount is merely the certifier’s approximate estimate of the value of the work done5 and should not generally be conclusive or binding on either party as an expression of satisfaction with the quality of the work or its quantity or

price.6 It has been the conventional view that an interim certificate is therefore usually subject to adjustment in the final certificate or even in subsequent interim certificates.7 An interim certificate is also, in the absence of any provision to the contrary, a condition precedent to an action by the contractors for payment during the course of the work.8

Because of the somewhat tentative nature of an interim certificate, it is always possible for a contractor making any claim on an interim certificate to be confronted with the following:

1. 1. the issuance by the architects of a subsequent interim certificate purporting...