Engineering Law – Final Certification & Defences thereto

The issuing of a final certificate in terms of a building contract carries with it certain legal consequences for Employers and Principle Agents (normally Architects, Quantity Surveyors or Engineers). In the case of Ocean Diners (Pty) Ltd V Golden Hill Construction the Court clarified the legal position.

These consequences depend in the first instance on the proper interpretation of the applicable contractual terms. Where a building agreement provides that a final certificate shall constitute conclusive evidence as to the sufficiency of the works and materials, as well as of the value thereof, it is determinative of the respective rights and obligations of the parties in relation to matters covered by the certificate. The certificate therefore constitutes (in the absence of a valid defence) conclusive evidence of the value of the works and the amount due to the contractor.

STATUS OF THE FINAL CERTIFICATE

The Court found that the certificate embodies a binding obligation on the part of the employer to pay that amount and gives rise to a new cause of action (subject to the terms of the contract). The failure of the employer to make payment as contractually stipulated entitles the contractor to sue on the certificate.

If the effect of a building contract is to confer finality upon a certificate validly issued, it cannot be withdrawn or cancelled by an architect in order to correct mistakes of fact or value in it, unless the contract provides for it, alternatively such an arrangement is agreed to by the parties.

Therefore, once the architect has issued the final certificate, he is functus officio insofar as the certificate and matters pertaining thereto are concerned. That being so, the architect cannot withdraw or cancel the final certificate.

A final certificate is not even open to attack because it was produced on erroneous reports of the agent of the employer or the negligence of the employer’s architect. The failure of the employer’s professional team to properly scrutinise the claims put forward by the contractor and to rectify any errors, or their possible negligence in failing to satisfy themselves as to the correctness of the claims and valuations before issuing the certificate, will accordingly not provide a defence to an action on the certificate. It can also not provide a basis for the cancellation or withdrawal of the certificate by the architect.

PUBLIC POLICY

An undertaking by an employer in a building contract that a final certificate shall be conclusive evidence of the employer’s indebtedness is not in the least offensive to public policy. A party may also contractually agree to abandon his ordinary right to prove that an admission was wrongly made (on his behalf by his principle agent). Such a contractual term is not in itself against public policy.

The purpose of such a clause is to bring about finality in the respective rights and obligations of the parties. It also obviates the need for litigation over what are likely to be minor issues. To ensure this, the parties contractually bind themselves to accept as final and conclusive the certificate of a professional person they are entitled to expect will act fairly and impartially. Its provisions cannot therefore be said to be contrary to public considerations.

POSSIBLE DEFENCES TO THE CERTIFICATE

The certificate is, however, not indefensible. It is subject to all defences that may be raised in an action based on a final certificate. Any defence available to the employer, or on which the employer seeks to rely, ought to be pleaded.

All authorities indicate that negligent or innocent misrepresentation (relating to an architect’s certificate) would not be a valid defence to a claim on a final certificate. Possible defences to the certificate would be limited to considerations offensive to public policy, such as fraud.

EMPLOYER’S RIGHTS

When it is known that the final certificate is not entirely accurate in relation to either the valuation reflected therein or the amount due to the contractor, it would not be contrary to public policy to enforce it. Public policy is largely concerned with the potential for manifest unfairness or injustice within a given situation.

Where the employer has suffered damage through a negligent failure on the part of either his quantity surveyor or architect to act in his best interests, he would (subject to prescription) have an action for damages against the specific member of the professional team. The situation where the certificate is known to be inaccurate is therefore not one inherently fraught with unfairness or injustice as far as the employer is concerned.

Engineering Law – Should an Engineer’s duties be extended beyond its contractual obligations?

The question of what the extent of an engineer’s duties are, usually come into play whenever an engineered structure fails.  One prominent element to this question is whether an engineer’s duties extend beyond a contractual obligation with its employer.    

In Strijdom Park Extension 6 (Pty) Ltd v Abcon (Pty) Ltd this issue was raised and clarified by the Supreme Court of Appeal.

BACKGROUND
In this matter the engineer was employed by Strijdom Park Extension 6 (Pty) Ltd (“the employer”) to design a steel reinforced concrete slab separating the ground floor from the basement of a warehouse which was erected by Abcon (Pty) Ltd (“the contractor”).  The concrete slab failed two years after occupation of the warehouse was taken.

The employer instituted a claim for damages against the contractor and the engineer, alleging that they had breached their respective agreements with the employer.  The claim against the engineer was settled, but the claim against the contractor was heard on appeal.  
The parties were in agreement that the collapse must have occurred during the casting of the slab when the concrete was poured over and into the network of the reinforcing steel.   
The question that had to be decided on appeal was, firstly, whether the failure of the slab was at least partly attributable to a defective engineering design and, secondly, whether the engineer had a duty to the contractor.  

The Court considered the following undisputed evidence:
•    the failure was due to the collapse of the upper of two criss-cross mats of steel bars that had been encased in the concrete to reinforce it;
•    the collapse was a consequence thereof that many of the stools (which kept the two mats apart) were found to have been bent out of shape;
•    the contact between the upper mat and the stools was limited to one bar of the mat resting on the centre of the horizontal piece of each of such stools;
•    the stools were not fastened; and
•    the stool collapse occurred during the casting of the slab.

THE CONTRACTOR’S ARGUMENT
The contractor, firstly, took the stance that it was not liable for the damages as it had constructed the concrete slab in accordance with the engineer’s design, which was allegedly defective.

Secondly, the contractor relied on the fact that the engineer had approved the way in which the reinforcement was installed.  

Lastly, the contractor pointed out that the engineer’s design did not indicate that there had to be two bars of the top mat per stool, nor that the stools had to be fastened.

The contractor claimed that it did not notice the collapse of the upper mat, nor did it realise that the stools had not been tied.  It is clear from the contractor’s evidence that he left every relevant decision pertaining to the assembly of the reinforcement to the engineer and the steel contractor.  

THE EMPLOYER’S ARGUMENT
The employer contended that:
•    It was the duty of the contractor to assemble the reinforcement mats and to maintain same in the correct position.

•    Proper construction practice demanded that, wherever possible, two bars of the upper mat should be placed on each stool and that the feet of the stools be tied.  There is no reason for an engineer to indicate these practices on his drawings as these requirements are part and parcel of proper construction practice and solely the contractor’s duty.

•    The contractor should have noticed the collapse during the pouring process and should have stopped the work in order to consult the engineer.

•    If the contractor had observed its duties as set out above, the failure would not have occurred.

THE COURT’S APPROACH
The Court agreed with the employer’s stance.  

There was no evidence supporting the allegation that the engineer’s design was defective.
Although the engineer had approved the steel structure on site, he did not carry a duty to supervise the work of the contractor.  It was the contractor’s decision how it carried out the construction work and it cannot shift the blame to the engineer in the circumstance where it did not perform its work in a proper and workmanlike manner.  It was also the contractor’s obligation to ensure that the construction of a design is free of defects.

In the Court’s view, it was reasonable of the engineer to expect that the contractor would ensure proper assembly of the reinforcement mat by noticing any displacement and taking appropriate action if it occurred.  

The Court further clarified that the engineer had only a contractual duty to its client and not to the contractor.  The engineer did not even have a duty to intervene if the contractor appeared to be going wrong (unless it was apparent to the engineer that the contractor did not know his business and was going to go wrong).  Such a duty to intervene would only arise if the contractor appeared set on an incredible act of recklessness.  

The Court therefore held that the slab had failed because the contractor failed to carry out the construction in a proper and workmanlike manner.

CONCLUSION
•    An engineer’s duties are not extended beyond what is set out in his agreement with his employer.  

•    An engineer will therefore not have the duty to supervise the work of a contractor, unless he is contractually required to do so and he cannot be held liable for another party’s contractual breach.