Certificates

Certificates – timing

Don't issue a certificate before it is due

There may be occasions when both the owner and the contractor ask the architect to issue a certificate when the architect should not do so, such as where the issue of a certificate binds a third party.

Such a case could occur where the owner is selling or leasing the completed building and the sale or lease is dependent upon the issue of a notice of practical completion or final certificate. As such, both the client and the contractor have a vested interest in early settlement.

If you issue a final certificate or notice of practical completion when it is not due you might be liable for claims by a third party for an incomplete building which is not yet suitable for its purpose.

It should be kept in mind that neither the owner nor the contractor is entitled to influence the architect as to the contents of a certificate or its time of issue.

The responsibilities of an architect (as contract administrator) are set out in the ABIC 2018 contracts as follows:

1. The architect is appointed to administer this contract on behalf of the owner. The architect is the owner's agent for giving instructions to the contractor. However, in acting as assessor, valuer or certifier, the architect acts independently, not as the agent of the owner.
2. The owner must ensure that the architect, in acting as assessor, valuer or certifier, complies with the contract and acts fairly and impartially, having regard to the interests of both the owner and the contractor. The owner must not compromise the architect's independence in acting as assessor, valuer or certifier.

Under the contract the architect has a duty to act independently and the owner has a duty to see that the architect acts fairly and impartially.

Why an architect should always issue a certificate

The following case emphasises the importance of a certificate, and the need for the architect to issue a certificate strictly within the time limits set out in the particular contract being used, whenever the contractor lodges a progress claim.

Clause 42.1 of AS 4300–1995 (along with related Standards Australia contracts, such as AS2124–1992) (AS 4000, although drafted differently, is to similar effect) provides that:

…the Principal shall pay to the Contractor...if no payment certificate has been issued...the amount of the Contractor's claim.

In Daysea Pty Ltd v Watpac Australia Pty Ltd [2001] QCA 49, the contractor submitted a progress claim on 22 February 2000 in the sum of $617,528. No payment certificate was issued within the 14 days required in clause 42.1, but a payment certificate was issued some six days late, certifying that an amount of only $27,193 was due to the contractor.

The Queensland Court of Appeal decided that an earlier decision of the Queensland Building Tribunal, ruling that the contractor was entitled to receive the amount originally claimed (not the amount of the payment certificate), was correct.

The Daysea case had an interesting twist, however, which meant ultimately that the Court of Appeal decision held little joy for the contractor. Between the time of the initial decision of the Queensland Building Tribunal and the decision of the Court of Appeal, a final certificate had been issued stating that no money was payable by the owner and, in fact, certifying that liquidated damages were payable by the contractor to the owner.

Accordingly, the contractor was only entitled to interest on the amount of its claim, from the time that it should have been paid, up until the date of issue of the final certificate.

The Daysea decision confirms two very important lessons under Standards Australia contracts, such as AS 4300–1995:

1. The architect must issue a certification strictly within the time required by clause 42.1 or expose the principal to a liability to pay the full amount claimed 
2. Payment certificates (or progress claims if payable because no certificate has been issued), although they have to be paid, can be revised by a properly issued final certificate.

Beware the client who tries to obstruct the issue of a certificate

Clients sometimes try to prevent architects from issuing progress or final certificates. This is most likely to happen where there is some dispute between the client and the contractor, thus the situation is dangerous. If you bow to the pressure exerted by your client you are failing to fulfil the duty of a certifier of absolute even-handedness. If you go ahead and certify against your client's wishes, your commission might be terminated and the client might take a close look at what you have done to see if you are liable.

It is important that you listen to what the client has to say, but make up your own mind about the issuing and contents of the certificate. You should point out to your client that interference with the issuing of a certificate is a breach of contract under most building contracts.

If your client remains obdurate it is time to get your own legal advice and consider the possibility of resigning your commission.

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Certifier's independence

When administering a contract under ABIC, the architect is identified as the owner's agent for the giving of instructions to the contractor. However when acting as an assessor, valuer or certifier, a position that occurs when the architect is required to give a progress certificate or an extension of time, the architect is required to act independently and not as the agent of the owner.

The owner is also required to ensure that the architect is acting fairly and impartially and not to compromise the architect's independence when acting as an assessor, valuer or certifier.

Some clients do not understand these obligations and the architect can be put in a difficult position when the client tries to influence the architect while acting as certifier under the building contract.

Types of certificates

Other than payment certificates, there are a number of certificates that may also be included in a construction contract:

• Interim certificate;
• Practical completion certificate;
• Certificate of non-completion; or
• Final certificate or substantial completion certificate.

ABIC contracts make reference to 'certificate' when an assessment of payment is made, which creates an obligation for one party to pay another. For example, a certificate may be provided by the architect in relation to an amount payable to the contractor or owner. Architects should also note that where reference is made to a 'final certificate', this is the last certification of a payment that is required to be made to the contractor.

Contractual obligations

This position under ABIC 2018 should be overlaid with the architect's contract with the owner. The position of an architect as an agent of the client under the client-architect agreement sets out the services to be provided by the architect for the benefit of the client. If an architect is engaged to carry out contract administration, part of the architect's duties will include the assessment and determination of various claims for variations and to obtain the client's approvals where required, to assess the building contractor's progress claims and to issue progress certificates and to assess the building contractor's claims for extension of time.

The agreement does not require the architect to act under instructions or to receive directions from the client as to the issuing of progress certificates or assessing claims for extensions of time. With variations, the architect is required to obtain approval from the client when such approval is required, however this approval may not contravene the architect's independence under the contract.

Implications for the architect

Difficulties may arise for the architect when acting as an independent administrator:

• Can the architect act independently when he or she has been involved in the design process and has a commitment to ensuring the design quality? Does the overlap between the design and the administration of construction affect the architect's objectivity?
• The architect is paid by the owner. Would there be reluctance by the architect to affect this relationship by making an assessment prejudicial to the owner's well-being?
• Can an administrator act independently when employed by the owner?
• Can an administrator act independently if an administrator's payment is tied to the financial success of the development?

The singular requirement is that the architect under ABIC, or the superintendent under AS 2124, must act in accordance with the contractual conditions.

If ABIC requires that the administrator is to act independently of the owner, then that is what is required of the administrator. It is also a requirement of ABIC that the owner must ensure that the architect is acting fairly and impartially and has a regard for the interests not only of the owner but also to the contractor. This requirement may create difficulties in the complexity of construction. But if guidance is required on the independence of the architect then the contract should be referred to for that guidance.

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Obligations at law

Statutory obligations

Architects have statutory duties to comply with whenever they are involved in the design and planning or certification of a building. The key pieces of legislation relating to certification is each state’s Environmental and Planning Act, and associated regulations.

Each state and territory’s Environmental and Planning Act gives effect to the National Construction Code (NCC).

The NCC sets out the minimum guidelines for the whole of the construction industry. This means that architects will need to be very familiar with the NCC with regard to their own design and planning obligations.

Case law

Notwithstanding what is written into contract, architects, as certifiers have general duties, which have been raised in case law. The English case of Cheldebouw BV v St James Homes (Grosvenor Dock) Limited BLR 113 TCC at [34] raises two propositions which are relevant:

1. Generally the decision-maker is not, and cannot be regarded as, independent of the employer; and
2. When performing his decision-making function, the decision-maker is required to act in a manner which has variously been described as independent, impartial, fair and honest. These concepts are overlapping but not synonymous. They connote that the decision-maker must use his professional skills and his best endeavours to reach the right decision, as opposed to a decision which favours the interests of the employer.

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