The certification process

“… I accept the importance of ‘cash flow’ in the building industry. It is the very lifeblood of the enterprise…”

Lord Denning MR


Originally, under English law, when a contractor contracted with an employer for a fixed price, the contractor was not due any payment until the whole of the Works had been completed, at which time the contractor was due full payment of that fixed price. In earlier times this may have worked, and still does on very small projects but when one is dealing with large infrastructure projects, or commercial building projects that can last many months and even years, cash flow becomes the issue. In order to provide cash flow to the contractor, the original concept of no payment until completion was modified by agreement between the parties to allow for interim payments to be made as the work progressed and culminating in a final payment at completion.

Interim payments can take many forms, with some of the most common ones being payments of predetermined amounts to the contractor at regular intervals, or payments of amounts at regular intervals calculated by detailed valuations as the work proceeds, or stage payments, which are payments of predetermined amounts when the work reaches predetermined stages of completion.

Most construction contracts provide a mechanism for the payment of the contractor and this usually involves the certification of work done by a third party, i.e. not the employer. This third party, however, is usually either the architect who drew the plans, or the engineer who was involved in the engineering design portion of the project. Indeed, on most international infrastructure projects, it is the engineer who has the responsibility to give its “independent” opinion as to the quality of the work completed or on other related issues. The certificates issued may be interim certificates or final certificates or a combination, depending upon what the contract between the parties sets out. In either case the certificate’s function is to record the factual situation existing at a point in time during the progress of the Works and for the certifier to give, in effect, its opinion on the item being certified, i.e. the value of work performed to a certain point in time.

As to what a certificate should contain, in Minster Trust Ltd v Traps Tractors Ltd,1 the court wrote that it should have some regard “to the factors of ‘form’, ‘substance’, and ‘intent’”. This was amplified by the court in Token Construction Co Ltd v Charlton Estates Ltd.2 In this case, the contract provided a date for completion of 31 October 1967. Under the terms of the contract Clause 2(e) the architect could, at the request of the contractor, grant an extension of time for any one of eight reasons. Clause 16 provided that in the event the contractor failed to complete by the date specified, and the architect certified in writing that in his opinion the work ought reasonably to have been completed, the employer could deduct liquidated damages of £800 per week. Under the contract Clause 21(a) the architect was authorised to issue certificates of payment and the employer was required to pay to the contractor the value thereof within 14 days after issue. The architect sent a letter to the employer on 9 January 1970, which enclosed an interim certificate for £16,347 which stated that the difference between the contract completion date plus an agreed extension and the agreed practical completion dates was 24 weeks. The employer sought to set off against the £16,347 certificate the sum of £19,200, being the amount of liquidated damages for 24 weeks’ delay. After a review of this situation the court held that the architect’s letter did not constitute the grant of an extension of time within the meaning of Clause 2(e), as it was neither unambiguous nor an expression of the architect’s opinion that delay had been caused by one of eight specified reasons. The court further held that the letter did not purport to be a certificate under Clause 16 and did not contain the expression of the architect’s opinion that the Works ought reasonably to have been completed by a certain date, and so it did not constitute such a certificate.

It can be seen that a certificate’s effect is limited to what the parties have previously agreed it should be, and can be conclusive if that is the intent of the parties. Most construction contracts provide for two types of certificate: “interim” and “final”.

As an example, a typical certification provision in the FIDIC Red Book provides in Sub-Clause 14.6 – Issue of Interim Payment Certificates:

“No amount will be certified or paid until the Employer has received and approved the Performance Security. Thereafter, the Engineer shall, within 28 days after receiving a Statement and supporting documents, issue to the Employer an Interim Payment Certificate which shall state the amount which the Engineer fairly determines to be due, with supporting particulars.

However, prior to issuing the Taking-Over Certificate for the Works, the Engineer shall not be bound to issue an Interim Payment Certificate in an amount which would (after retention and other deductions) be less than the minimum amount of Interim Payment Certificates (if any) stated in the Appendix to Tender. In this event, the Engineer shall give notice to the Contractor accordingly.

An Interim Payment Certificate shall not be withheld for any other reason, although:

  1. if any thing supplied or work done by the Contractor is not in accordance with the Contract, the cost of rectification or replacement may be withheld until rectification or replacement has been completed; and/or

  2. if the Contractor was or is failing to perform any work or obligation in accordance with the Contract, and had been so notified by the Engineer, the value of this work or obligation may be withheld until the work or obligation has been performed.

The Engineer may in any Payment Certificate make any correction or modification that should properly be made to any previous Payment Certificate. A Payment Certificate shall not be deemed to indicate the Engineer’s acceptance, approval, consent or satisfaction.”

Certificate requirements

A certificate must clearly express the opinion of the certifier whether that be the architect, engineer or other professional. It must also be in a form that shows that the opinion given by the professional is what is required by the terms of the contract and further that it addresses only the matters called for. Importantly, it must also be, on its face, clear and unambiguous. These three things are often referred to as the “form, substance, and intent” test of certificates. In situations where this test is not met, or worse, where the certificate is not clear and unambiguous, resort will be made to other contemporaneous documents which were either produced with, or provided during, the certifying process to show the certifier’s intent so long as that additional document is properly to be regarded as being issued as part of the certificate.3

The trouble is that if the certificate was not the product of the engineer or professional certifier it will not then be considered as an expression of the engineer’s own intent. Thus, for example, if the necessary measurements and valuations needed by the certifier to make its certification are wholly delegated to a subordinate or subcontracted to a quantity surveyor, who had no authority under the contract to undertake an independent role in valuations, the resulting certificate will not be an “expression of opinion” of the certifier but rather that of someone entirely different. If such a delegation had occurred, the resulting final certificate would not be, in intent, that required by the contract.


A question can arise as to a certificate’s validity if it contains an obvious error or departs from the contractual requirements. In P&M Kaye Ltd v Hosier & Dickinson Ltd,4 the final certificate was initially issued with the employer named as Transloyd Ltd because of an erroneous belief that that company was to be treated as the successor of the employer. That certificate was invalid and a subsequently issued certificate in the name of Kaye was treated as the final certificate. Then, in Emson Contractors Ltd v Protea Estates Ltd,5 the certificate referred to the contractors as Emson Construction Ltd, whereas the contract was, in fact, with Emson Contractors Ltd. Moreover, the certificate recited that the date of the contract was 16 October 1984, whereas it had, in fact, been 23 October 1984. The court found that these errors were immaterial and did not mislead, nor would reasonably have misled, anyone. The validity of that final certificate was, in consequence, upheld.

Based on this, an error or a departure from the contractual requirements in a certificate will invalidate the certificate only if its nature or effect is such that it is no longer clearly and unambiguously the required certificate in form, substance or intent or if, applying an objective standard, the error does not mislead, or does not have the potential of misleading, the parties to whom it is addressed as to its form, substance or intent.

The construction of any certificate, as well as any other document that needs to be read with it for completion, is subject to the same rules of construction as any commercial contract. Accordingly, the construction exercise is to be undertaken against the factual background surrounding its issue as is known to both parties. This is because both parties have agreed to be bound by, and abide by, the terms of the final certificate issued by a third party, namely the architect or engineer. This construction exercise is to be undertaken as part of a consideration of the meaning and effect of the certificate as a whole, of any parts of it, and of any potential error or omission that it might contain.6

However, if after issuance of the certificate there are any disputes as to the content of the (interim or) final certificate or the makeup of the adjusted contract sum, particularly with regard to any valuation, to any allowance for defects, to any decision it records as to the quality of workmanship or to extensions of time, most standard contracts provide for a specific period of time immediately following the issuance of the final certificate in which either party may take the matter to a dispute board or adjudicator and/or commence arbitration or other proceedings and, if this is not done, the final certificate is conclusive.

It should be noted, however, that the persons doing the certification are similar to arbitrators in that they are entitled to exercise the function of certifier only once per certificate and, thereafter, are functus officio and have no further duty as to that certificate. In England the courts have treated certificates as effective even though they were patently wrong. However, if the certifier makes an error on any particular certificate, this may be corrected in a subsequent certificate by one of the parties requesting the certifier to make an appropriate adjustment or, if the certifier declines to do so, by taking the dispute to adjudication, arbitration or the courts, depending upon the dispute resolution language of the underlying contract. Despite being like an arbitrator in regard to functus officio the certifier is plainly not acting in an arbitral role and, consequently, is not obliged to give reasons for the content of any certificate or to follow the rules of natural justice in allowing both parties to state their case.7

Interim certificates

During the course of the project “interim certificates” are issued periodically to identify the quantities of work carried out and to ascertain the amount of money owing to the contractor. 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.8

Impartiality of the certifier

Usually the certifying party is the architect or engineer on the project who has been retained by the employer. Thus, the architect or engineer has a dual role, one as the agent of the employer and the other as an “independent” certifier. 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 Thackrah9 wrote that:

“The employer and the contractor make their contract on the understanding that in all matters where the architect has to apply his professional skill he will act in a fair and unbiased manner in applying the terms of the contract.”

Further to this, the court in Cantrell v Wright and Fuller Ltd10 wrote:

“In undertaking these functions, the architect 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 to him by the conditions. 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. The architect’s powers in relation to these administrative steps are derived exclusively from the conditions of contract, he has no power to act in any other way than as defined by the conditions and once the last step, the issuing of the final certificate, has been taken, his authority to act and his role under the contract cease. 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 engineer’s powers in relation to these administrative steps are derived exclusively from the conditions of contract; it has no power to act in any other way than as defined by the conditions. It is now well established that if the employer exerts pressure on the engineer, which results in the engineer’s judgment being influenced, then its decision is subject to being held invalid and being set aside.

In Hickman & Co v Roberts,11 the contract contained provisions that the decision of the architect as to payment was to be final and that payment was to be made to the contractor on the basis of the architect’s certificates. The contractor claimed that he was owed certain sums but the architect had failed to issue a certificate in his favour. When challenged by the contractor, the architect stated that his clients, the owners, would not allow it: “in the face of their instructions to me I cannot issue a certificate whatever my own private opinion in the matter”. 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.

In the recent case of Imperial Chemical Industries v Merit Merrell Technology Limited,12 the employer tried to substitute its own employee as the project manager, after the original project manager quit following the employer’s decision to limit some of its powers. Mr Justice Fraser rejected the contention that an employee of the employer could be used to fulfil the project manager’s role, holding that “It is contrary to the whole way in which the contractual mechanism is structured, and intended to work, to have the employer seek to appoint itself (or one of its employees, or an employee of its parent) as the decision maker … Such a situation is so unusual that an express term is required.”

Certifier liability


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.13 However, in 1974, the House of Lords in Sutcliffe v Thackrah14 established that an architect owes a duty of care towards his client in the performance of all duties, including contract administration, and specifically certification, and could be liable for negligence in the performances of those duties.

The question becomes whether the certifier has any liability to the contractor for either improperly disallowing a claim or for failing to certify. In Pacific Associates v Baxter,15 it was alleged that the certifier engineers had improperly rejected the contractor’s claims and refused to certify in their favour, and the issue arose of whether the certifier owed a duty of care. 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.

Following on this line of thought, the Hong Kong Court followed Pacific Associates in Leon Engineering and Construction Co Ltd v Ka Duk Investment Co16 when it refused an application to join architects as defendants in an action brought by a contractor who alleged that the architects’ failure to certify promptly and impartially was a breach of its duty of care. The court disagreed and held that no such duty of care was owed.

In another example of this situation, the Australian Court in John Holland Construction v Majorca Projects17 also followed Pacific Associates. There, the contractor alleged that it had been substantially underpaid and commenced proceedings against the employer and architect, claiming that the architect owed it a duty of care to act fairly and impartially as certifier and that this duty was breached when the architect received representations from the employer without the contractor’s being given a chance to answer them and consequently with his suffering economic loss. The court held that the architect owed no duty to avoid the contractor’s suffering economic loss. There was no reliance by the contractor or assumption of responsibility by the architect that would justify “grafting an obligation” on the certifier in tort. 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 certifier in that case was the employer’s architect who believed that the main contractor had funds for payment and, based upon this, he persuaded the subcontractor to recommence work, assuring the subcontractor that it would be paid. 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. Then, as to the second defendant architects (Strutt & Parker (S&P)) the judge found that they owed the claimants a duty of care for negligent misstatements contained in certificates they issued and decided these certificates also amounted to collateral warranties.

The defendants appealed against the first instance decision of Mr Justice Akenhead asserting that he erred in his findings that S&P were liable to the claimants for negligent misstatement, in his findings of a duty of care arising from their inspections and that the architect’s certificates amounted to contractual warranties.

The Court of Appeal held they were correct and as a result that:

  1. 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;

  2. There was no separate duty of care in tort to the claimants for negligent inspection by S&P.

  3. S&P’s certificates did not amount to contractual warranties as they did not contain the essential elements of a contract, contrary to the findings of the first instance judge. The court referred to the Council of Mortgage Lenders’ Handbook, which stated that if collateral warranties were required from any professional adviser, it would be stated specifically in the mortgage instruction.

The court also pointed out that Mr Egford, who was the architect acting on behalf of S&P, could not have assumed a responsibility to the claimants as to the accuracy of statements made in the draft certificates which were not yet signed or issued and could have been amended or withdrawn by him. There was, therefore, no assumption of responsibility by the defendant or reliance on the unsigned draft certificates.

Here, the fact that the final certificates were issued after completion of the majority of the flats was the basis for the court’s determination that reliance was absent. “In order to succeed in a claim for negligent misstatement a claimant must demonstrate reliance on the negligent statement and that it had suffered a loss as a result of that reliance. The claimants in this case could not have relied on S&P’s certificates because they did not exist at the date of purchase.” LJ Clarke wrote: “… reliance must follow representation and cannot be retrospective. 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 main point here is that, although S&P owed Optima a contractual duty to undertake inspections of the properties in order to produce certificates, it did not similarly owe such a duty in tort to third parties – thus, the only cause of action open to the claimants was in negligent misstatement, which failed.

The question, however, continues as to whether the employer is liable for the certifier’s errors such as when the certifier fails to grant a proper extension of time or even certifies less money than the contractor is entitled to receive. Generally, the answer is “No”, so long as the certifier is performing independently and impartially. This can change if the employer is aware of the certifier’s error and does nothing to correct it or just ignores it.

In the House of Lords case of Panamena Europea Navigacion Compania Limitada v Frederick Leyland & Co Ltd,21 Leyland was under an obligation to repair Panamena’s ship and payments for this were to be made upon certification by Panamena’s surveyor. Here, the surveyor had to determine, in its certificate, “that the work has been satisfactorily carried out”. 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. However, the other question was whether Panamena was in breach of its contract because of its surveyor’s incorrect certification. Scott LJ wrote as follows:22

“It seems to me plain that if the shipowners had known that he was departing from his proper function under the contract, it would have been their duty to stop him and tell him what the function was for which the contract provided. 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.”

This position was further amplified in the Australian case of Perini Corporation v Commonwealth of Australia,23 where the contract contained a provision that the certifier could extend the time for completion “if he thinks the cause sufficient … for such period as he shall think adequate”. 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.g. that the employer would not interfere with the director’s duties as certifier and that the employer would ensure that the director did his duty as certifier. The court adopted the approach of the Court of Appeal in Panamena but was faced with the situation where a governmental department’s employee was acting as the “independent certifier” on a construction contract. Here, the difficulty was the certifier; rather than using his own opinion, he had used the “Departmental Policy” of the employer as the reason for not granting an extension of time. The court wrote:

“… The argument was principally founded upon Hickman & Co v Roberts (1913), and Panamena Europea Navigacion Compania Limitada v Frederick Leyland & Co Ltd (1947). 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 (1923). 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:

  1. ‘What is the scope of the function assigned to the certifying third party by the agreement of both the contracting parties?

  2. What, if any is the contractual undertaking, express or implied, of the party whose servant, or agent, or nominee such third party expert is?’…

… I will now consider the affirmative aspect of the term which … the plaintiff argued must be implied in this agreement. 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. As such a servant of the [government] the Director of Works was obliged by law to obey all lawful orders of [his employer] … If, for example, the [government] were to say to the Director: ‘You are ordered to act in a particular manner’, and if that order constituted a breach of the contractual mandate conferred on him by clause 35, the Director would none the less be still obliged to act in compliance with the [government] order. Against this background I will assume that the certifier, with the knowledge of both parties to the agreement, acted in breach of his obligation. Could the [government] in those circumstances say: T will not do anything to insure that he carries out these duties’? In my opinion an application of the test stated in The Moorcock (1889), would require the answer that the [government] was contractually bound to order him to carry out his duties. In my opinion the plaintiff and the defendant, being the parties bound by his agreement, are bound to do all co-operative acts necessary to bring about the contractual result. In the case of the defendant this is an obligation to require the Director to act in accordance with his mandate if the defendant is aware that he is proposing to act beyond it. In Mackay v Dick (1881) Lord Blackburn said:

‘I think I may safely say as a general rule that where in a written contract it appears that both parties have agreed that something shall be done which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.’

I am accordingly of the opinion that a term must be implied in the present agreement binding the defendant to insure that the Director of Works, its servant, performs his duties under clause 35 in accordance with this mandate.”

Thus, the rule from this case is that, when considering extensions of time, the employer has a duty not to interfere with the proper performance of the certifier’s duties and a further specific duty to make sure that the certifier is exercising its duty properly if it becomes aware that the certifier was going to act improperly. Thus, as the court stated, the employer has “an obligation to require the Director to act in accordance with his mandate if [it] is aware that he is proposing to act beyond it”.

Further, the employer may also have liability for any delay by the certifier in issuing interim certificates. In Hong Huat Development Co (Pte) Ltd v Hiap Hong & Co Pte Ltd,24 the Singapore Court of Appeal was faced with a situation involving whether an employer was liable for the late certification by the architect. Here, the court found that there was no reason for such a term to be implied owing to the independent nature of the certification function of the architect under a building contract and that it was not the duty of an owner/employer to oversee the architect in the discharge of that function. The court wrote:

“…We entirely agree with the learned judge that the employer could be liable for the default of the architect in issuing the interim certificates but only if the employer was aware of such default. This proposition of law is amply supported by authorities: Frederick Leyland & Co Ltd v Cia Panamena Europea Navigacion Ltda (1943) 76 LI L Rep 113 and Perini Corp v Commonwealth of Australia (1969) 12 BLR 82. The prerequisite of knowledge is essential before an employer is required to act to ensure that his architect complies with the terms of the building agreement between the employer and the contractor …

The rationale for this rule is obviously to take into account the special position of the architect in a building contract, even though he is employed and paid by the employer. When an architect acts as a certifier under a building contract for interim payments, he is to act fairly and impartially between the parties, and the employer is not to interfere with the architect’s exercise of this function. The arbitrator, in fact, recognised this point in his award. Such functions of the architect, among others, must be exercised by him independently as an expert. It would be unreasonable to expect a lay employer to warrant the performance of the architect in respect of such functions without establishing that the employer knew the architect had gone wrong: see Lubenham Fidelities and Investment Co v South Pembrokeshire DC (1986) 6 ConLR 85 at 99.

From the reasoning of the arbitrator (the underlying case in this matter) which we have cited above, it is clear that the arbitrator has laid down the duties of an employer in too wide a term when he said that ‘the employer is thus liable for any breach of this (certifying) duty on the part of the architect’. The issue is not simply whether there could be implied a term under which the appellants as employers could conceivably be liable for the architect’s default, but more specifically, what is the nature and/or extent of that implied obligation.

The respondents do not in substance dispute the foregoing, for they accept that the implied duty was premised on knowledge. However, they submitted that the appellants had failed in their duty, as they knew that no interim certificates had been issued and they did nothing to ensure that the architect issued the certificates on time. The arbitrator must have taken this into account, as had the learned judge (who referred specifically to the need for knowledge on the part of the employer in para 14 of his grounds of judgment).

With respect, we think this argument ignores the clear basis on which the arbitrator made his findings. The implied term as formulated by the arbitrator would render the employer liable for any of the architect’s breaches. Thus, the sentences in the award read:

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