If an architect’s interim certificate is to be regarded in the same way as a cheque, to what extent can an employer exercise his right of set-off against the certified amount? asks Barrett Chapman

“An interim certificate is to be regarded virtually as cash, like a bill of exchange. It must be honoured. Payment must not be withheld on account of cross claims, whether good or bad – except so far as the contract specifically provides.” 1

There have been a number of court decisions in Ireland on the conclusiveness of an architect’s certificate. The leading Irish decision on this matter is that of the High Court in John Sisk & Son v. Lawter Products BV.

In this case, Sisk contracted under the 1966 RIAI form of contract, to construct a factory for the defendant. Sisk sought to enter judgment for the sum of IR£168,537 on foot of three interim architect’s certificates.

The defendant sought to resist judgment on the basis that it was entitled to set-off, against that amount, certain losses which were quantified but not yet proved, which it claimed it suffered as a result of Sisk’s alleged failure to complete the contract by the agreed date.

The High Court specifically stated that it disagreed with Lord Denning’s “dogmatic proposition”, referred to above, that an interim certificate should be equated to a bill of exchange.

The High Court held that the true test was whether the terms of a particular building contract are inconsistent with the exercise of a right of set-off for the employer. The Court held that the terms of the 1966 RIAI Contract were inconsistent with a common law right of set-off against the certified amount insofar as :

(a) it contained a specific obligation on
the employer to make payment on an
interim certificate other than in two
specified circumstances (neither of which
was relevant to the alleged right to set-off
claimed by the employer);

(b) the contractor had an entitlement to
suspend the works on mere non-payment
of an interim certificate;

(c) the contract included a specific right
of each party to refer disputes to
arbitration which was not to be opened
until after practical completion of the
works, therefore to allow set-off would
mean that an employer could effectively
deprive the contractor of its entitlement
to refer a dispute to arbitration.

Accordingly, the Court held that Sisk was entitled to enter summary judgment for the amount claimed.

Although a different view was taken in an intervening case, the Sisk case was followed in Rohan Construction Limited v Antigen Limited. This case, which can be taken as stating the current law on the issue in Ireland, followed the reasoning of the High Court in the Sisk case and held that a right of set-off was clearly inconsistent with the terms of the 1977 RIAI Contract.

The Court also held that judgment for payment of an interim certificate should be given even if the parties intended to go to arbitration subsequently i.e. that the certificate must be paid and if there are other disputes under the contract they could be dealt with in a subsequent arbitration.

Whilst the extreme approach suggested by Lord Denning MR has not been adopted by the Irish Courts, the Courts have, when interpreting standard forms of RIAI building contracts refused an employer an entitlement to set-off claims which it may have against amounts due to a contractor pursuant to interim certificates.

There is no reason to believe a different approach from that taken in relation to the 1966 or 1977 RIAI Contract would be taken when interpreting the 1996 or 2002 editions of the RIAI contract.

The net effect of this position may not be all that different to Lord Denning’s approach insofar as a contractor is entitled to be paid on foot of an interim certificate even if the employer alleges it has claims against the contractor.

However, a contractor should be careful to ensure that the words contained within its contract do not alter this position. When such entitlement arises, the contractor is entitled to commence proceedings to obtain judgment in the Courts.

The steps involved in such proceedings and the means of enforcing any judgment obtained, will be considered in a future article.

This article was written by Barrett Chapman at McCann FitzGerald Solicitors

1. Per Lord Denning MR in the case of Dawnays Limited –v- F.G. Minter Limited[1971]


This article appears in the November 2008 edition of Irish Construction Industry Magazine