Recognition of valid acceptance certificates of completed works under the construction contract

The delivery of the results of the work by the contractor and their acceptance by the customer are formalized by an act signed by both parties and, in cases provided for by legislative acts, also by representatives of government agencies. LLP "B" filed a lawsuit against IP "N" for the recognition of valid certificates of acceptance of completed works for December 2011 and January 2012 under the construction contract dated May 19, 2011. As a third party who does not make independent claims on the subject of the dispute, M-S LLP is involved on the plaintiff's side. The claim was denied by the decision of the specialized inter-district Economic Court of Astana dated October 09, 2012. By the decision of the appellate instance of the Astana City Court dated June 10, 2013, the decision of the court of first instance remained unchanged. By the decision of the Cassation Judicial Board of the Astana City Court dated August 08, 2013, the decision of the Court of appeal was left unchanged. In the petition for the initiation of supervisory proceedings, LLP "B", referring to the violation by local courts of substantive and procedural law, requested the annulment of judicial acts with a new decision on the satisfaction of the claim. In the response to the petition, IP "N" asked to leave the contested judicial acts unchanged, pointing out the groundlessness of the arguments of LLP "V".

           The Supervisory Judicial Board of the Supreme Court overturned the decision of the specialized inter-district Economic Court of Astana, the decisions of the appellate and cassation judicial boards of the Astana Court and sent the case for a new hearing to the court of appeal in a different composition on the following grounds. It follows from the case file that the construction company "B" LLP and IP "N" concluded a construction contract dated May 19, 2011. "B" LLP has undertaken to carry out construction and installation works from its materials, referred to as "Reconstruction of an administrative building, a car dealership, a car service center, a cafe, a billiard room, a hotel and a sauna complex with an extension for parking with a hotel complex", for an object located in Astana, in accordance with the estimated documentation, the SNiP and the terms of the contract. In turn, IP "N" undertook to accept the work performed at the facility and pay the stipulated price for it. The cost of work under the contract was initially set at 250 million tenge, and subsequently increased by additional agreements No. 1 dated August 01, 2011, No. 2 dated September 23, 2011, No. 3 dated 2011 (without date) to 300, 350 and 600 million tenge, respectively. The start date of the work is set on the day the contract is signed.

Clause 2.2 of the contract stipulates that the completion date and delivery of the facility to the customer is determined by the schedule of completed works. However, there is no such schedule in the case, representatives of the parties of the supervisory judicial board of the Supreme Court stated that the schedule of work had not been drawn up and had not been signed. On July 01, 2011, the customer concluded an agreement with A-O LLP for the technical supervision of the work on the facility, which corresponds to clause 5.2.5 of the agreement dated May 19, 2011. On January 18 and February 09, 2012, the technical supervision specialist drew up reports on identified defects in finishing works, signed by the head of the construction site of contractor B. In a letter from IP "N" dated February 09, 2012, addressed to LLP "B", it is indicated that from November 21, 2011 to February 09, 2012, construction and installation work was not carried out at the facility, its employees left the construction site, there are defects that need to be fixed.

In this regard, IP "N" requested to continue construction work under the contract by February 11, 2012, otherwise the letter should be considered a notice of termination of the contract from February 11, 2012. B LLP, in a reply letter dated February 10, 2012, claims that its employees did not leave the construction site, construction work is underway, and measures are being taken to eliminate defects. In the act of acceptance and transfer of unfinished construction and installation works dated February 11, 2012, signed by the customer, A-O LLP and C-C LLP, it is recorded that due to the termination of the contractor's obligations under the contract dated May 19, 2011, the customer is forced to involve C-C LLP to complete the following construction works: - finishing works – 100 percent; - roof completion – 67 percent; - special works – 100 percent.

On the same day, February 11, 2012, an agreement was signed between the customer and S-S LLP, the subject of which is the performance of construction and repair work and the elimination of defects in the facility. The cost of this contract is 170 million tenge, the start date is on the day of signing the contract, completion and delivery of the facility to the customer by February 19, 2012. In addition, the customer signed a contract dated February 13, 2012 in the amount of KZT 17,851,230 with M-S LLP, which undertook to eliminate defects and complete construction and installation work at the facility, which was not completed by B LLP. IP "N" refused to sign the certificates of completed works for December 2011 and January 2012, issued by LLP "B", referring to the abandonment of the construction site and the completion of work by LLP "S-S" and LLP "M-S". The local courts, rejecting the claim, recognized the refusal of IP "N" from signing the acts of completed works as justified, since the fact that the construction company failed to perform work on the acts submitted for recognition as valid was confirmed in court proceedings.

In particular, the appeals board appointed a forensic construction examination, according to the conclusion that the work on the object under investigation was carried out by other organizations and the object is currently modified. The expert confirmed the presence of defects and defects in the contractor's acts. The types of work indicated by him in the acts of completed works for December 2011 and January 2012 coincide with the works indicated in the acts of LLP "M-S" and LLP "S-S" for February, April and May 2012. The Supervisory Judicial Board of the Supreme Court considered that the cited conclusions of the local courts did not comply with the requirements of the law and the circumstances relevant to the case. By virtue of paragraphs 4, 6 of Article 663 of the Civil Code, the delivery of the results of work by the contractor and their acceptance by the customer are executed by an act signed by both parties, and in cases provided for by legislative acts, also by representatives of government agencies. IP "N" has the right to refuse to accept the results of work in case of detection of deficiencies that exclude the possibility of using the results of work, if other deficiencies are found during acceptance, they must be indicated in the act.The facility was commissioned by the state acceptance commission according to the act dated February 20, 2012, which indicated the estimated cost of 583 million tenge, the general contractor is the construction company "V" LLP. The commissioned facility was redeveloped without changing its functional purpose, which follows from the act of the acceptance commission appointed by IP "N" dated May 28, 2012. The estimated cost of the redevelopment of the facility is also 583 million tenge.  In the expert opinion dated January 29, 2013, with reference to the decision on the redevelopment of non-residential premises without changing their functional purpose dated May 04, 2012 and the acceptance certificate dated May 28, 2012, it is indicated that the facility has been redeveloped by other organizations and is currently being modified. The above-mentioned redevelopment decision is missing in the case, and the question of what types of work were performed by local courts has not been investigated, although this circumstance is significant, since the redevelopment was completed after the signing of the act of the State acceptance Commission and went beyond the scope of the contract dated May 19, 2011. However, according to the act dated May 28, 2012, the estimated cost of the redevelopment facility was 583 million tenge, as well as according to the act of the State Acceptance Commission dated February 20, 2012.

The ability of S-S LLP to perform 100 percent of the finishing and special work under the contract dated February 11, 2012, and 67 percent of the roof completion in nine days (from February 11 to February 19, 2012) by local courts has also not been verified. According to the acts of technical supervision dated January 08 and February 09, 2012, the finishing works were carried out by the construction company, as they were drawn up on the fact of inadequate quality of the specified works. The repeated statements of the director of M-S LLP that the contract dated February 13, 2012 was fictitious and signed by her at the request of IP "Z" – L., in fact, M-S LLP did not perform work for the construction company and did not eliminate defects, remained out of sight of the local courts. Based on the above, the judicial acts that took place in the case are subject to cancellation with the referral of the case for a new trial to the court of appeal. When reviewing a case again, it is necessary to fully, comprehensively, objectively examine the evidence, evaluate it in its entirety and resolve the case on its merits by correctly applying the norms of legislation. 

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