Thus, interim certificates act as a condition precedent to payment from the employer. Accordingly, the contractor will have no entitlement to payment in the absence of such a certificate, save for some limited exceptions, such as where the certifier acted improperly in withholding the same due to collusion with the employer.
In these circumstances the certifier would be disqualified and the contractor would be entitled to recover payment in the absence of a certificate. Usually the certifying party is the architect or engineer on the project who has been retained by the employer. When acting as the certifier the architect or engineer will be expected to act in an impartial, fair and unbiased fashion. In this regard the court in Sutcliffe v Thackrah 9 wrote that:. Further to this, the court in Cantrell v Wright and Fuller Ltd 10 wrote:.
The employer may not interfere in the timing of the issue of any certificate but is not himself in breach of contract if a particular certificate is not issued or is erroneous unless he is directly responsible for that failure. However, if and when it comes to his notice that the architect has failed to comply with his administrative obligations, by for example failing to issue a certificate required by the contract, the employer has an implied duty to instruct the architect to perform that function in so far as it remains within the power of the architect to perform it and the employer is in breach of the contract with the contractor to the extent that he does not intervene to arrange for the correct or a correcting step to be taken by the architect.
He then becomes, in traditional language, functus officio. It should be clear that, in acting as the certifier, the architect or engineer or other professional does not act as the agent of the employer but, since he is engaged by the employer, he has a contractual obligation to act fairly, impartially and in accordance with the powers given by the conditions.
It should be noted that the employer may not interfere in the timing of the issue of any certificate and further, if any particular certificate is not issued or is erroneous, the employer has no liability unless the employer is directly responsible for the failure to issue the certificate. However, if and when it comes to his attention that the engineer has failed to comply with its administrative obligations, by, for example, failing to issue a certificate required by the contract, the employer has an implied duty to instruct the engineer to perform that function insofar as it remains within the power of the architect to perform it.
The employer is in breach of the contract with the contractor to the extent that he does not intervene to arrange for the correct or a correcting step to be taken by the engineer. The contractor claimed that he was owed certain sums but the architect had failed to issue a certificate in his favour. The House of Lords held that he had improperly allowed the owners to influence him and that the owners could not rely on the absence of a certificate as a reason not to pay the contractor. One question that can arise, in this context, is whether the employer can substitute himself, or an employee, into a certifying role if he dismisses the certifier or the certifier becomes unavailable.
Historically, it was an established principle in England that the certifier was acting in an arbitral role and was thus protected against civil proceedings based upon a form of quasi-judicial immunity.
The question becomes whether the certifier has any liability to the contractor for either improperly disallowing a claim or for failing to certify. The Court of Appeal refused to impose on the engineer a duty of care to avoid economic loss being suffered by the contractor, holding that in order to succeed in such a claim a duty would have to be imposed on the contract administrator to take care to prevent the contractor suffering economic loss and it rejected the imposition of any such obligation.
Here, the employer engaged the engineer and the contractor could arbitrate against the employer to recover the sums, which should or should not have been certified. The court disagreed and held that no such duty of care was owed. Chambers v Goldthorpe [] 1 KB Thus, assuming the standard contractual relationships between contractor, employer and certifier, the certifier does not owe a duty of care to the contractor with regard to certification.
However, there may be circumstances in which the certifier may become liable to the contractor in tort. An example of this arose in the New Zealand Court of Appeal case of Day v Ost , 18 where, after the main contractor was unable to pay the subcontractor, the subcontractor stopped work. The subcontractor went back to work but, unfortunately, the main contractor went into liquidation leaving the subcontractor underpaid.
The court held that the architect was liable for negligent misstatement under the rule in Hedley Byrne v Heller , 19 particularly as the architect was in a position to know that the main contractor had financial problems and by giving gratuitous advice to recommence work the architect had assumed a responsibility to the subcontractor.
Despite the ruling in this case, the general rule is that between the contractor, employer and certifier, the certifier will not owe a duty of care to the contractor with regard to certification. Further along this line is the recent case of Hunt v Optima , 20 a first instance decision of Mr Justice Akenhead in the Technology and Construction Court TCC where the defendant developers, Optima, were found liable for breach of contract to the claimant purchasers for various defects in their flats located in Peterborough.
No liability for negligent misstatement was established by six of the eight claimants as the certificates containing the negligent statements were despatched to the claimants after they completed the purchase of their flats and therefore could not be relied upon;.
There was, therefore, no assumption of responsibility by the defendant or reliance on the unsigned draft certificates.
If the representation is the signed Certificate it cannot be relied on before it comes into existence…. Further, while reviewing the facts the court found that the certificates did not amount to contractual warranties. The certificates were representations as to the matters contained within them; they were not promises, warranties or guarantees.
The surveyor took the incorrect position that he was able to investigate and certify not just the quality of the Works done, but also the amount and value of the materials and labour actually used in the repair and, consequently, he refused to issue certificates unless he was supplied with this further information.
The Court of Appeal found that the surveyor misunderstood his duties and, as a result, the certificate issued by him was invalid. Scott LJ wrote as follows: In those circumstances I think that the court ought to imply an undertaking by the owners that in the event of its becoming known to them that their surveyor was departing from the function which both parties had agreed he was to perform, they would call him to book, and tell him what his real function was.
The contractors applied to the certifier for extensions of time, some of which were refused as being against department policy. Here, the certifier was the director of works who, while being entitled to rely on information presented to him by others, also had certain duties imposed on him under the contract. One of these duties was the discretion to grant or deny an extension of time within a reasonable time and he was not entitled to defer this duty.
Further, he was allowed to take departmental policy into account, but this consideration was not to control his decisions. It should also be noted that here certain terms were implied into the contract, e. The court wrote:. It was argued that these authorities decided that if there had been a wrongful, in the sense of unauthorized, exercise of the powers by a certifier with the knowledge of the employer of the certifier, the employer being the other party to the contract pursuant to which the certifier was appointed, the only right of the contractor was that he was entitled to disregard the provisions of the agreement with respect to time and either to sue for the price or resist a claim for liquidated damages by way of penalty: Dixon v South Australian Railways Commissioner While it is, in my opinion, the law that a contractor is entitled to disregard the provisions of the agreement with respect to time … it does not follow, nor has it been decided that if the contractor has otherwise suffered damage he is not entitled to sue upon an implied term … I was referred to the decision of the Court of Appeal in Panamena … In that case the certifier adopted a wrong understanding of his functions and his employer, which was the other contracting party, adopted and encouraged the understanding of the certifier.
In the result the certifier did not issue his certificate and the claim of the plaintiff was for the contracted price, or in the alternative, for damages in the same amount. The claim of the plaintiff was based in the alternative upon the implication of a term in the agreement that the defendant, building owner, would not encourage or influence the certifier wrongly to withhold the issue of his certificate.
The defence was that a certificate had not been issued and that in its absence and in accordance with the provisions of the agreement the plaintiff was not entitled to recover … Scott LJ, said that the problem for decision called for answers to two questions which he stated as follows:.
What, if any is the contractual undertaking, express or implied, of the party whose servant, or agent, or nominee such third party expert is? Fundamentally he argued it is essential to consider this aspect against the background that the Director of Works was at all times a servant of the [government]; that the position he occupied as certifier was part of the machinery set up by the agreement of the [government] and the plaintiff for certifying applications for extension of time.
Termination and suspension. Sign-in Help. Interim payments in construction contracts Interim payments in construction contracts Practice notes. The following Construction practice note provides comprehensive and up to date legal information covering: Interim payments in construction contracts What is an interim payment? Types of interim payment What is included in an interim payment? What is the mechanism for making interim payments? What is an interim payment? Access this content for free with a trial of LexisPSL and benefit from: Instant clarification on points of law Smart search Workflow tools 36 practice areas.
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