Lian Soon Construction Pte Ltd v Guan Qian Realty Pte Ltd (No 2)

• Jurisdiction: Singapore
• Judgment Date: 02 October 1999
• Date: 02 October 1999
• Docket Number: Suit No 1432 of 1998
• Court: High Court (Singapore)

Lian Soon Construction Pte Ltd

Plaintiff

and

Guan Qian Realty Pte Ltd

Defendant

[1999] SGHC 259

Warren L H Khoo J

Suit No 1432 of 1998

High Court

Building and Construction Law–Architects, engineers and surveyors–Duties and liabilities–Power and duty of architect to decide on extension of time–Failure of architect to properly discharge duty–Delay in completion–Delay certificates and liquidated damages–Building and Construction Law–Standard form contracts–Singapore Institute of Architects standard form contracts–Interim certificates–Default in payment of interim certificates by employers–Whether contractors entitled to summary judgment on interim certificates

The plaintiff, the main contractor of a building project, sued the defendant, the employer, on outstanding amounts under interim certificates issued by the architect. The contract was for the building of a block of apartments and the construction of an electrical substation. In the letter of award, the completion date for the substation was the same as that for the main building. The award further provided for liquidated damages at the rate of $1,000 a day for delay in completing the substation and $10,000 a day for delay in the completion of the main building works. The articles and conditions of the contract, however, provided only for one completion date and one set of liquidated damages, at $10,000 a day for the “whole works”. The contract between the parties incorporated the Singapore Institute of Architects standard form of articles and conditions of contract (4th Ed) (“the SIA general conditions of contract”).

The conditions of contract provided for the issue by the architect of interim certificates for payment at monthly intervals and for the honouring of interim certificates within 21 days from the date of receipt by the employer. Between August 1996 and June 1998, the architect issued 17 interim certificates for payment. Most, if not all, of the certificates were issued late and were paid late. Certificate Nos 11 to 17 were not paid at all.

The main contractor took out the present writ claiming for sums due under the unpaid interim certificates. Later, it filed an application for summary judgment. Three days before the summary proceedings were scheduled to be heard on, the architect purported to issue two delay certificates, one for the main building and the other for the substation. The delay certificates stated the main contractor to be in default for not completing the works by the respective completion dates and that computed liquidated damages were allegedly due from the main contractor to the employer for such delay. The employer sought to rely on these purported delay certificates and computations as set-offs in the summary proceedings. The issue was to what extent the delay certificates should be taken in account.

The assistant registrar rejected the cross-claims made by the employer for set-off. Consequently, summary judgment was awarded in favour of the main contractor with interest and costs. The employer appealed.

Held, dismissing the appeal:

(1) The general scheme of the SIA general conditions was that interim certificates for payment were to be honoured; that they were to be given “temporary finality” in that summary judgment may be obtained on them; and that no deductions may be made on account of matters like liquidated damages except on the certification of the architect. A decision on extension of time was the foundation for a delay certificate, on the basis of which liquidated damages were deductible from moneys owed to the main contractor. As the decision of an architect on extension of time may seriously affect the cashflow position of the main contractor, the court will therefore scrutinise the manner in which this power was exercised more closely than it would, for instance, the exercise of the power to issue payment certificates: at [19] and [20].

(2) Co-extensive with the architect's power to decide on matters of extension of time was his duty to make such decisions. The architect must perform his duty, or exercise his power with reasonable diligence and in accordance with the contract. His decision must be clear and unequivocal, so that the parties know where they stand in terms of their rights and obligations under the contract. As the architect's decision on extension of time had such significant financial implications on the parties, once a decision was made, he would not be permitted without exceptionally good reason to change it: [23] and [24].

(3) On the facts, the architect failed to act upon the main contractor's application for time extension when he left the matter ambiguous and uncertain for a whole year and no explanation was offered for such failure. The architect had not properly exercised his power on extension of time and delay certificates. The purported decision on the extension and the delay certificates was therefore a nullity for the purpose of the summary proceedings. Accordingly, the interim certificates enjoyed temporary finality and must be given effect by summary judgment: at [26] and [37].

[Observation: The court did not reach a final view on the merits of the need for a critical path programme in the matter of extensions of time. It was noted, however, that the submission of a critical path programme was not required under the SIA general conditions of contract and that an architect should generally not require a critical path programme for the purpose of deciding applications for time extensions. An architect was required to make a fair estimate and assessment, and not a precise arithmetic calculation: at [29].]

Aoki Corp v Lippoland (Singapore) Pte Ltd [1995] 1 SLR (R) 314; [1995] 2 SLR 609 (distd)

Token Construction Co Ltd v Charlton Estates Ltd [1973] 1 BLR 48 (folld)

Tropicon Contractors Pte Ltd v Lojan Properties Pte Ltd [1989] 1 SLR (R) 591; [1989] SLR 610 (refd)

Christopher Chuah and Lee Chau Ee (Drew & Napier) for the plaintiff

Giam Chin Toon and Peter Chow (Wee Swee Teow & Co) for the defendant.

Judgment reserved.

Warren L H Khoo J

1 By this action, the plaintiffs, the main contractors of a building project, claim against the defendants, the employers, outstanding amounts under interim certificates issued by the architect. On an application by the plaintiffs, the learned assistant registrar Ms Hoo Sheau Peng gave summary judgment in favour of the plaintiffs in the sum of $2,212,435.63 with interest and costs. This is an appeal against that decision.

2 The contract between the parties incorporated the Singapore Institute of Architects standard form of articles and conditions of contract (4th Ed). The contract was for the building of a ten-storey block of residential apartments and communal facilities at Kim Yam Road at a lump sum of some $6.8m. It included the construction of an electrical substation. The contract period was 16 months from 26 April 1996. In the letter of award, the completion date for the substation was shown as 26 January 1997 and that for the main building was shown as 25 August 1997. The letter of award also provided for liquidated damages at the rate of $1,000 a day for delay in completing the substation and $10,000 a day for delay in completing the main building works. The articles and conditions of contract, however, provided for one completion date (25 August 1997) and one set of liquidated damages, at $10,000 a day for the “whole works”.

3 The conditions of contract provided for the issue by the architect of interim certificates for payment at monthly intervals. They also provided for the honouring of interim certificates within 21 days from the date of receipt by the employer. On various dates between August 1996 and June 1998, the architect issued a total of 17 interim certificates for payment. Most, if not all, of these were issued late, and most, if not all, of those that were issued were paid late, if paid at all. Of the 17 that were issued, only ten were paid. Certificates Nos 11 to 17, which were issued on various dates between November 1997 and June 1998, were not paid at all.

4 On 24 August 1998, the plaintiffs took out the writ in this action claiming the sums due under the unpaid certificates. On 7 September 1998, they filed the application for summary judgment. On the next day, 8 September, their solicitors wrote to the defendants. They referred to the defendants' long outstanding default in honouring these certificates; they said that this amounted to a repudiatory breach of the contract; they told the defendants that the plaintiffs accepted the repudiatory breach and that the contract had thus been terminated.

5 The application for summary judgment was scheduled to be heard on 16 October 1998. Three days before that, on 13 October, the architect purported to issue two delay certificates, one in respect of the main building, and one in respect of...