Interim Certificate No. 14: The Employer's Withholding Instruction
On a 32-storey Grade A office refurbishment in Quarry Bay, Interim Certificate No. 14 is due. The architect's valuation of work done is HK$48.5 million, less 5% retention. The employer has just inspected the site and found honeycombing in three columns and water damage to two lift lobbies. The employer writes to the architect: 'Deduct HK$6 million for the column repairs and HK$1.2 million for the lobby damage, and do not certify more than HK$41.3 million.' The architect's own engineer estimates the reasonable cost of the column repairs at HK$800,000; the lobby damage is still being investigated and may be caused by the contractor's failure to protect the works. The contract allows the employer to deduct sums 'due from the contractor' but says nothing about the architect acting as the employer's debt collector. The contractor has threatened to suspend work if the certificate is under-issued.
1. What is the architect's duty when certifying Interim Certificate No. 14, and can the architect comply with the employer's instruction?
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The architect is not the employer's agent for debt collection. Under the contract, the architect certifies the value of work executed and materials on site, less retention and other contractually permitted deductions. The architect must act independently and honestly, using professional judgement. The employer's instruction to deduct HK$7.2 million is not a contractual valuation; it is a demand to withhold. The architect cannot simply comply, because that would misstate the value of the works and could amount to a breach of the appointment and of the HKIA Code. If the contract allows the employer to set off 'sums due', the architect may need to recognise a deduction only where the sum is established or agreed. Otherwise the architect should certify the proper amount and explain the deductions in the certificate. If the employer wants to withhold more, it must use its contractual or legal rights, not the architect's certificate.
2. How should the architect treat the HK$800,000 repair estimate and the HK$1.2 million lobby claim?
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The HK$800,000 repair estimate is a known defect cost. The architect should ask: has the employer actually incurred it, or is it an estimate? Does the contract permit the employer to deduct it from the certificate, or must it be dealt with as a set-off or a claim? If the contract permits deduction of 'costs incurred by the employer', the architect may deduct only the properly evidenced amount, not the employer's inflated figure. The HK$1.2 million lobby claim is not yet established: causation is uncertain and the contractor may have a defence. The architect should not deduct an unproven claim. The architect should certify the HK$48.5 million valuation less retention and any established deduction, and write a clear note that the employer's further claims are not accepted in the certificate. The architect should also instruct the contractor to remedy the honeycombing and protect the lobbies, and keep contemporaneous records.
3. What should the architect do if the employer insists on withholding HK$7.2 million as commercial leverage?
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If the employer insists on withholding HK$7.2 million as leverage, the architect should refuse to falsify the certificate. The architect should explain in writing the difference between a certified value and an employer's commercial hold, and warn that an under-certificate may entitle the contractor to suspend or terminate and may expose the employer to interest and costs. The architect should also consider whether the employer's instruction is a breach of the appointment and whether the architect should seek an indemnity or decline to act. If the employer persists, the architect may need to take legal advice and, in an extreme case, resign rather than certify a false amount. The architect should document the advice and keep the client informed. The professional duty is to the certification, not to the client's cash-flow tactics.