UK: Certifiers’ High Wire Balancing Act

It was an architect who was at the centre of the House of Lords case that, over 30 years ago, laid down the fine line that must be walked by anyone who certifies building work.

In the words of one of the judges, Lord Reid, the certifier "must act independently and [is] in quite a different position from one acting as an agent or employee. At an earlier stage an architect’s primary duty is to the employer but, being a professional man, he must act fairly towards the contractor. If one employed two different people, one to supervise and the other to certify, it would be at once apparent that the latter would be in the position of a true arbitrator."

Since then, the reality has been that the certifier will often have to balance the two roles. Indeed, among certain matters the employer and the contractor are deemed to be aware of when entering into a building contract is the fact that the certifier is paid by the employer, must heed the employer’s instructions and interests when acting as a member of the professional team, and is liable to the employer for breach of contract.

However, while subsequent case law has established that the certifier does not have to attain the level of impartiality that is required of, say, a judge or arbitrator in complying with natural justice, he or she must still act fairly, honestly and independently. Any failure to do so could result in the same situation as that of the engineer in Nash Dredging (UK) Limited v. Kestrel Marine Limited, where his final certificate was found to be tainted by the instructions and pressure placed on him by the employer.

This sort of pressure and potentially compromising behaviour is not uncommon, even though it is in no party’s interest. Both employer and contractor can expect to suffer if the certifier’s position is compromised – all the certificates issued from the point where he or she is believed to have lost independence will be invalid, opening the door to potentially long disputes. However, it is the certifier who may bear the brunt in terms of being disqualified and other consequences for his or her actions.

Of course, he or she runs a real risk of being liable in damages to the employer for breach of contract. The certifier could also be found liable to the contractor where he or she has conspired or otherwise helped the employer to breach its contract with that party.

This can be the case even when the certifier has no contract with that party. In a Scottish case last year, McLaughlan v. Edwards, the pursuers had a contract with a developer to buy a piece of land on which it was also to build a house. The developer hired an architect to design the house and to certify the work. The pursuers were to pay the developer following the issue of such certificates.

After the house was finished various defects came to light. The pursuers obtained a decree against the developer for £145,000. However, no payment could be obtained from the developer so they sued the architect. The Sheriff Principal determined that it was clear that the pursuers were relying on the architect to exercise reasonable skill and care in designing the house. In addition, it was clear that the architect’s certificates would be shown to the pursuers prior to them paying the developer, so he held the architect owed them a duty of care to ensure that the statements he made in the certificates were accurate.

It can be seen, therefore, that a certifier may owe duties to a wider class than his own client. All the more reason why, like good tightrope walkers, architects who take on that role should look neither left nor right, but focus unwaveringly ahead on following their own independent line.

As the architect on a project, I find myself caught in the middle of a growing row between the employer and the contactor on whether it is now "practically complete". Is there a clear legal definition of what this means?

The short answer to this question is "no". The situation envisaged in the question is in practice an incredibly common one. A contractor will be keen to obtain practical completion as soon as possible in order to restrict its potential liability for liquidate and ascertained damages. At the same time, the employer will wish to ensure that it gets all that it contracted for, before the works are certified as being practically complete.

The date of practical completion is important because it normally has a number of consequences, including: -

- Occupation of the building by the employer
- The start of the defects liability period
- The release of retention monies
- The end of the period for which the employer is entitled to deduct liquidate and ascertained damages

Invariably the contract between the employer and contractor will provide that practical completion is achieved "when in the opinion of the Architect practical completion of the works is achieved." However, this provides little assistance for the architect faced with the present dispute between the employer and contractor. It has been said that it is easier to recognise practical completion than it is to define it.

Nevertheless, the courts have given some general guidance:

- The works can only be practically complete if ALL of the contracted work is complete;
- The works can be practically complete even if there are latent defects - If there are patent defects then the work cannot be practically complete
- The architect does have a discretion to certify practical completion where there are very minor items of work left incomplete on the basis that these elements of work are de minimis.

Clearly, works should only be certified as practically complete once fully completed, subject to trifling items. However, a practice has developed where a certificate of Practical Completion is issued with a list of items appended that require completion/rectification. The contract does not normally allow this and accordingly if this practice is to be adopted then the employer should be made fully aware of the consequences of practical completion being certified in the circumstances, and both parties should formally agree to that course of action. Other issues that need to be considered are ensuring that the outstanding works will be completed and the disruption that this may have on the employer’s business.