Ser Kim Koi v GTMS Construction Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 04 March 2016
• Date: 04 March 2016
• Docket Number: Civil Appeal No 163 of 2014
• Court: Court of Appeal (Singapore)

Ser Kim Koi

and

GTMS Construction Pte Ltd

[2016] SGCA 7

Chao Hick Tin JA, Andrew Phang Boon Leong JA and Quentin Loh J

Civil Appeal No 163 of 2014

Court of Appeal

Building and Construction Law — Building and construction contracts — Standard form contracts — Singapore Institute of Architects standard form contracts — Temporary finality — Completion certificate not issued properly — Whether interim payment certificates tainted by fraud such that temporary finality no longer applied — Whether interim payment certificates not issued strictly in accordance with contract such that temporary finality no longer applied

The appellant decided to build three two-storey detached houses (“the Buildings”) on the land he owned. The appellant engaged an architect (“the Architect”) for the construction of the Buildings. The respondent contractor won the tender to build the Buildings, and entered into a contract with the appellant on the Singapore Institute of Architects’ Articles and Conditions of Building Contract (Lump Sum Contract) (9th Ed, September 2010) (“the SIA Conditions”). The contract completion date was 21 February 2013 but this date was subsequently extended to 17 April 2013.

Item 72 of the preliminaries of the bills of quantities stated that a completion certificate (“Completion Certificate”) would not be issued until (a) all parts of the works were in the Architect’s opinion ready for occupation and for use, (b) all services were tested, commissioned and operating satisfactorily as specified in the contract or the relevant subcontract, including handing over all test certificates, operating instructions and warranties and (c) all works included in the contract were performed including such rectification as might be required to bring the work to the completion and standards acceptable to the Architect.

The Architect issued the Completion Certificate dated 15 May 2013 under cl 24 of the SIA Conditions, which certified contract completion on 17 April 2013. But some two weeks before the issue of the Completion Certificate, the Buildings had failed the first inspection by the Building and Construction Authority (“the BCA”) for the issue of the Temporary Occupation Permit (“the TOP”). This first inspection was carried out on 30 April 2013. The Completion Certificate certified, inter alia, that the works appeared to have been completed and complied with the contract in all respects, “save and except for the minor outstanding works listed in Part 1 of the Schedule to this Certificate”. A second TOP inspection was carried out by the BCA on 18 June 2013 and the Buildings again failed the TOP inspection. TOP was eventually obtained on 16 September 2013.

In the course of the construction of the Buildings, the Architect issued a total of 26 interim payment certificates. The appellant made payment for the first 24 interim payment certificates, but not for Interim Certificates Nos 25 and 26 (“the Disputed Certificates”).

Interim Certificate No 25 was dated 3 September 2013 and certified interim payment of $390,951.96, ($418,318.60 if GST is included) of which $328,250 comprised the release of the first moiety of the retention sum under cl 31(9) of the SIA Conditions. Interim Certificate No 26 was dated 6 November 2013 and was for the sum of $189,250.21 ($202,497.72 with GST).

The respondent, relying on the Disputed Certificates, issued two invoices (bearing invoice numbers LP Nos 25 and 26) dated 3 September 2013 and 6 November 2013 for $418,318.60 and $202,497.72 (both inclusive of GST) respectively, claiming a total of $620,816.32.

When payment was not forthcoming, the respondent commenced a suit on 13 January 2014. The appellant filed his defence and counterclaim against the Architect and respondent for the alleged numerous defects, delays and conspiracy. The appellant also added the Architect and his firm as third parties. Subsequently, the respondent applied for summary judgment under O 14 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) on the basis of Interim Certificates Nos 25 and 26. The assistant registrar granted summary judgment, and this was upheld on appeal before the High Court. The appellant then appealed the High Court’s decision, this time relying solely on the argument that the Disputed Certificates were tainted by fraud.

Held, allowing the appeal:

(1) The role played by the architect in certifying payments under the SIA Conditions was crucial because it was the integrity of his certification process and proper certification that conferred temporary finality on his certificates and therefore enforceability by summary judgment: at [28].

(2) The conditions set out in cl 31(13) of the SIA Conditions for the granting of temporary finality to an architect’s certificate had been authoritatively set out by this court in Chin Ivan v H P Construction & Engineering Pte Ltd [2015] 3 SLR 124 at [18]—[21], viz, that (a) the certificate had to be issued in the absence of fraud or improper pressure or interference by either party, (b) it had to be issued strictly in accordance with the terms of the contract; and (c) as could be seen from the need for the architect to clarify, upon either party’s request in any case of doubt, what was or was not taken into account in his certificate, the architect ought to have considered the matters which were said to have been dealt with in his certificate. A properly issued architect’s certificate functioned as the condition precedent to the contractor’s right to receive payment and the employer’s right to deduct claims, if any: at [26] and [27].

(3) The fraud exception in cl 31(13) included recklessness in certification, ie, certificates issued by an architect which were, to the knowledge of the architect, false, or issued by the architect without any belief in its truth, or recklessly, without caring whether the certificate was true or false. Such fraud might be made out on a prima facie basis when an architect, not acting on the initiative of either party, issued a certificate to cover up his own mistakes: at [38] to [40].

(4) The Architect and his firm were brought in as third parties to these proceedings. Despite knowing the allegations against his certification, he failed to provide a proper explanation: at [48], [49], [70], [74], [76], [77], [82], [83] and [89].

(5) Item 72 in the preliminaries of the bills of quantities unambiguously set out the requirements for certifying completion andItem 72(a) clearly provided that the employer could go into occupation and use the premises upon the issue of the Completion Certificate. It was difficult to understand how the Architect could have certified completion when just two weeks before that the Buildings had failed the first TOP inspection. The requirements in Item 72(b) for the issueof the completion certificate were also not fulfilled as by the Architect’s own Completion Certificate; there were some basic works and services that had yet to be tested, commissioned or checked if they were operating satisfactorily: at [43] to [47].

(6) There were serious safety non–compliances that caused the Buildings to fail the first and second TOP inspections and the more important of these items, like the non–standard and non–uniform treads and risers in staircases, had been missed or ignored by the Architect: at [51] to [55].

(7) The Completion Certificate was an important milestone certificate under the SIA Conditions and its issue triggered other certificates and milestones at the end-phase of the construction contract. The Architect’s issuance of the Completion Certificate in this case was without belief in its truth and/or recklessly without caring whether it was true or false as there were serious irregularities in the Completion Certificate: at [67] and [69].

(8) Interim Certificate No 25 of which $328,250 comprised the release of the first moiety of the retention sum under cl 31(9) of the SIA Conditions did not have temporary finality as it did not comply with the stricture of cl 31(13) of the SIA Conditions. It was not issued strictly in accordance with the terms of the contract as the Architect failed to release one moiety of the retention sum upon the issue of the Completion Certificate as required under cl 31(9) of the SIA Conditions. The amount certified on Interim Certificate No 25 was also questionable as it did not relate to work done after the issue of the Completion Certificate and the Architect had failed to furnish an explanation for the payment certified under Interim Certificate No 25. The explanation provided by the respondent that the payment certified under Interim Certificate No 25 was due to prime cost adjustments could not be correct on the evidence before the court: at [70] and [73] to [80].

(9) Interim Certificate No 26 did not have temporary finality as the amount certified and its immediate underlying documents contained serious irregularities and unexplained discrepancies. There was also no explanation from the Architect on why these sums were not included in the appropriate earlier interim payment certificates. The explanation provided by the respondent that the payment certified under Interim Certificate No 26 was due to prime cost adjustments and mechanical and electrical (“M&E”) works could not be correct on the evidence before the court: at [82], [84], [85] and [88] to [92].

(10) The Disputed Certificates lost the temporary finality that would otherwise have been conferred on them by the SIA Conditions because they had not been issued strictly in accordance with the terms of the contract or the Architect’s issuances of the Disputed Certificates had been without any belief in their truth or recklessly, without caring whether they were true or false: at [98].

[Observation: The alleged defects in the Buildings did not remove the temporary finality from the Disputed Certificates because, at the enforcement stage, the court was not concerned with the content and merits of an architect’s certificates...