Important Question of Law

Progress, Volume XII, Issue 3, 1 November 1916, Page 772

Important Question of Law

Concerning Architect's Certificates A case bearing on the question of the finality of Architect's Certificate for payment, was heard in the Auckland Supreme Court on August 24th and 25th last by his Hon. Judge Cooper who delivered the following judgment on August 28th. This is an action in which the plaintiffs claim from the defendants the sum of £448 7s. Od. balance alleged to be due to them by the defendants upon a final certificate issued by the architect for the defendants of the new Grand Theatre, Auckland. The plaintiffs signed on the Bth February, 1914, a contract for the erection of the Theatre, the contract price being the sum of £9945. A subsequent contract for nearly £3OOO for extra work for the erection of a basement billiard room, etc., was signed by the plaintiffs some time afterwards. Certain general extras were also ordered by the architect and some variations and deviations from the specifications were also made by the architect. Progress payments to the amount of £12,350 had been made by the defendants on certificates issued by their architect, and the final certificate was for the balance certified by the architect to be due to the plaintiffs after allowing for extras and after deducting for work not done in consequence of the variations from time to time of the specifications. The certificate is in the following terms — CERTIFICATE FOR PAYMENT. Phoenix Chambers, Queen Street, October 14th, 1915 Picture Theatre and Basement Contract for Webster & Tonks. We hereby certify that Messrs. Johns & Son, Contractors, Auckland are entitled to the sum of four hundred and forty-eight pounds seven shillings (£448 7s. od.) for work done, material supplied on site in the above. Amount of contract .. .. .. £12,9(>9 0 0 Deductions 170 13 0 £12,798 7 0 Amount of previous certificates .. £12,350 0 0 Amount of this certificate .. .. 448 7 0 £12,798 7 0 Balance £448 7 0

B. C. GHILWELL, Architect. The contract was not signed by the defendants or by anyone on their behalf and the form of appointment of the architect provided at the foot of the contract does not contain the architect's name, the blank in the form not having been filled in. The statement of defence, inter alia, contains a denial that the contract set up by the plaintiffs was the contract between the parties, and in order to ascertain what was the real contract between the parties evidence was taken on Thursday and Friday last. At the conclusion of this evidence Mr. Ostler admitted on behalf of the defendants that the defendants, although they had not signed the contract, were bound by it and its terms, and that the architect was their architect. ' The contract is a short standard form settled between the Institute of Architects and the Builders' Association in 1910 and incorporates the "General Conditions" similarly settled.

The contract having been established and admitted, a very important question of law has risen, namely, whether the defendants can, in the face of the architect’s final certificate, dispute the validity of the plaintiffs’ claim, unless they can prove that the certificate was given by the fraud and collusion of and between the architect and the contractors, and this is not alleged.

Where under a contract for the performance of work the decision of the architect or engineer on matters within the contract is made final and conclusive, and the certificate of the architect or engineer of the architect is made final and conclusive, both parties are bound by the decision or certificate of such architect or engineer, unless fraud and collusion between the parties claiming under the decision or certificate of the architect or ' engineer is established, or unless upon a construction of the contract between the parties it appears that the decision or certificate was not intended to be final and conclusive. There is ample authority for this proposition. I need only cite three decisions of the Supreme Court of New Zealand in support of it, namely, Forrest v. Ohinemuri County 299 N.Z.L.R. 401, 12 G.L.R. 342, Burns and Kenealy v. Furby 4 N.Z.L.R. 110, and Fraser v. Mayor of Hamilton 32 N.Z.L.R. 205, 15 G.L.R. 156.

Some years ago the Royal Institute of British Architects sanctioned a form of contract which has been from that time in general use in the building trade in Great Britain, and it has been held by the English Court of Appeal in Robins v. Goddard 1905 1 K.B. 294, that because in that form of contract there is an Arbitration clause to which a dissatisfied party to the contract could resort, and which gave the Arbitration power to open up, review, and revise any certificate or decision of the architect, save in regard to matters expressly excepted from the Arbitration clause, the certificate or decision of the architect having been made subject to the decision of an arbitrator, the certificate or decision was not final. It was further held in that case that the builder having sued the employer, and the employer not having elected to go to Arbitration, the employer could in the action dispute the validity and finality of the architect's certificate. Mr. Justice Farwell had held that the certificate was final (Robins v. Goddard 1904 2 Ch 261) and his judgment was reversed. The general facts in that case were practically similar to those in the present case, and if the contract in this case was not materially different from the contract in Robins v. Goddard, this Court ought to follow the judgment of the English Court of Appeal. It is clear that the arbitration clauses in the '' Conditions" which are incorporated in the present contract have been founded upon the British contract. Clause 32 of the British contract is as follows: Provided always that in any case any dispute or difference shall arise between the employer or the architect on his behalf and the contractor, either during the progress of the works or after the determination, abandonment, or breach of the contract, as to the construction of the contract, or as to any matter or thing arising thereunder (except as to matters left to the sole discretion of

the architect under clauses 4, 16 and 19 and the exercise by him under clause 18 of the right to have any work opened up) or as to the withholding by the architect of any certificate to which the contractor may claim to be entitled, then either party shall forthwith give notice of such dispute or difference, and such dispute or difference shall be and is hereby, referred to the arbitration and

final decision of and the award of such arbitrator shall be final and binding on the parties. Such reference, except on the question of certificate, shall not be opened until after the completion, or alleged completion of the works unless with the written consent of the employer or architect and the contractor. The arbitrator shall have power to open up, review, and revise any certificate, opinion, decision, requisition, or notice, save in regard to the said matters expressly excepted above, and to determine all matters in dispute which shall be submitted to him and of which notice shall have been given as aforesaid, in the same manner as if no such certificate, opinion, decision, requisition, or notice had been given. I cite in full clauses 25 and 26 of the present contract:— 25. In case any question, dispute, or difference shall arise between the employer or the architect on the one hand and the contractor on the other touching the construction of this contract or as to the payment for extra works for which the architect shall have given or shall have refused to give an order in writing, or as to any allowance or compensation to be paid to the contractor, or as to the refusal of the. architect to measure or appraise or to issue any certificate, or touching the appointment of any substitute for the architect, or as to any other matter or thing arising out of these conditions, or relating thereto, such dispute, shall, if not otherwise distinctly provided for by any of the foregoing clauses, be settled and determined by the award of one referee if the parties can agree on one reference, and the award of such referee shall be made within 30 days after the matter shall have been referred to him or within such further time, not being more than 30 days additional, as the referee shall by any writingsigned by him from time to time appoint, or withiu such further time as the Supreme Court or a Judge shall order, and the said award when so made shall be final and binding upon all parties.

26. The said referee shall have power to examine witnesses, including the parties, on oath, and to call for all documents and papers relating to the matters referred, and the costs and expenses attending and incidental to the said reference and award shall be borne and paid by the owner or contractor as the said referee shall direct. The referee shall have power to open, review, and revise any certificate, opinion, decision, or requisition, or notice, save in regard to the said matters expressly excepted as above, and to determine all matters in dispute which shall be submitted to him, and of which notice shall have been given as aforesaid in the same manner as if no certificate, opinion, decision, or requisition or notice had been given.

Upon every or any such reference the costs of and incidental to the reference and award respectively shall be in the discretion of the referee who may determine the amount thereof or direct the same to be taxed as between Solicitor and Client or as between party and party, and shall direct by whom and to whom and in what manner the same shall

be borne and paid. First it is clear that the question, dispute, or difference, which is to be referred to arbitration is one which may be between the employer and the contractor, or between the architect and the contractor. In Robins v. Goddard where the words used were substantially the same it was held that an employer when sued by the contractor was entitled, because of clause 32, to dispute the finality of the architect’s certificate. Secondly under clause 26 of the present contract, the arbitrator is given power to open, review, and revise any certificate,opinion,decision,requisition or notice, save as expressly excepted by clause 25 as if no certificate etc. have been given. In this contract as well as in the British contract, this power of the arbitrator has a limitation. In the British contract the limitation was ‘ ‘ except as to matters left to the sole discretion of the architect” under certain clauses in the contract. In the present case the arbitration clause extends to all matters or things arising out of the conditions or relating thereto “not otherwise distinctly provided for by any of the foregoing clauses of the conditions.” Clauses 25 and 26 are, therefore, fully as nude as Clause 32 of the British conditions.

In the British contract there is an express provision that no certificate of the architect shall be considered conclusive evidence as to the sufficiency of any work or materials to which it relates, or should relieve the contractor from the liability to make good all defects as provided by the agreement.

There is no similar clause in the present conditions but there is no provision in any of the clauses of these conditions which makes the certificates issued by the architect final. Mr. Haddow has submitted that certain of the clauses produce this result and he cites in particular clauses 19 and 20. Clause 19 gives to the contractor a right to sue for the amount of an overdue certificate and entitles him to charge interest on the amount, but it does not state that the certificate is final and conclusive. Clause 20 provides for a certificate of completion, but in neither of these clauses nor in any of the other conditions '’elating to certificates to be given by the architect, is there any “distinct provision” taking a dispute in reference to such certificates out of the ambit of the arbitration clauses.

The specifications annexed to the conditions in the present case provide that the works are to be executed to the “entire” satisfaction of the architect. These specifications are expressly subject to the conditions of the contract. There is no statement in the specifications which makes a certificate that the work is done to the satisfaction of the architect conclusive. In the British conditions the works had to be executed to the reasonable satisfaction of the architect. Under both the British conditions and the present conditions the employer is, no doubt, bound by many acts of his architect, for instance, when the contract contains,

as the present contract does, power to the architect, as agent of the employer, to authorise extra works, or deviations from, or variations of the contract, the employer cannot dispute the agency of the architect, but as regards the price to be paid for extra works or to be allowed for deviations or variations, these matters are within the arbitration clause. The arbitration clauses apply equally to a dispute by the employer where a certificate has been given, and to a dispute by the contractor when a certificate is refused. In my opinion the object and meaning of clauses 25 and 26 is to enable either party to go to arbitration upon any matter which is not otherwise distinctly provided for in the conditions. lam of opinion, therefore, that Robins v. Goddard applies to the present case. There the contractor sued the employer for the money due on the architect’s certificates including the final certificate. The employer was held to be entitled to dispute his liability upon the certificates and to counterclaim in respect of defective work and materials and for the cost of re-executing work which was thus defective. The substantial ground upon which Mr. Justice Farwell’s judgment was reversed, was, as appears from the judgments of the Master of the Rolls, and of Lord Justice Stirling, that the arbitration clause entitled the arbitrator to revise, review, and reopen the matter as if no certificate had been given. The same power is given to the arbitrator here, and I adopt the words of the Master of the Rolls “if something which purports to be conclusive is made subject to revision, it loses its quality of finality, that is the case here, where the decision of the architect is made subject to the decision of an arbitrator. ’ ’