The decision in V601 v Probuild [2021] VSC 849 serves to remind project participants of superintendence pitfalls and their potential consequences.
The role of a superintendent under a construction contract is defined by the relevant contract terms and the common law.
Under the contract in this case, the superintendent wore “two hats” – that is, to act as agent for the principal, V601, in expressly stated circumstances and to act as independent assessor and certifier in other expressly stated circumstances. Interestingly, the agency function was qualified by a requirement that the principal ensure the superintendent act honestly and within time, whereas the independent assessor function required the superintendent to act reasonably and independently.
Extension of time claims were to be independently assessed by the superintendent.
The potential contest between an agency role and an independent assessor role has attracted comment in the relevant caselaw. In this judgment, Digby J put the juxtaposition of the two roles in this way: “The faithful performance of these two roles may give rise to tension”. This somewhat understates the extent of the superintendence issues revealed on the evidence in this case.
Background
V601 had engaged Probuild to design and construct a mixed-use development in Abbotsford, Victoria comprising eight separable portions. Probuild made various claims for extension of time to the project manager (the superintendent). The superintendent largely rejected the extension of time claims.
V601 commenced proceedings seeking recovery of liquidated damages certified by the superintendent as payable for delayed completion of various separable portions. Probuild counterclaimed, alleging the principal breached the contract by virtue of the superintendent’s failure to assess and certify extensions of time claims in accordance with the contract. Probuild sought extensions of time, delay damages, costs of acceleration and an early completion bonus.
Findings
Digby J found that there had been collusion between the superintendent and V601, including:
- collaboration on strategy regarding the extension of time claims, including the superintendent sharing draft determinations with V601 for review and comment;
- the superintendent’s participation in meetings with V601’s representatives, including a meeting concerning the engagement of an independent programmer to assist with developing counter-arguments to Probuild’s claims and a directive from V601’s representatives to the superintendent to be more aggressive in its communications to Probuild seeking documents and evidence; and
- the absence of objections by the superintendent to, or attempts to distance itself from, V601’s strategy.
The Court found that the superintendent had failed to meet the requisite level of independence whilst wearing the hat of assessor and certifier. The Court further found that the Principal set out to control the superintendent, and inappropriately and unduly influenced the superintendent; and the superintendent was receptive to and amenable to such influence. They colluded to defeat or diminish Probuild’s contractual entitlements, in breach of contract.
Superintendent’s independent certifier hat
The proper delineation of a superintendent’s administrative role from their independent certifier role has been well traversed in past cases. In Perini Corporation v Commonwealth1, the Court found the employee superintendent’s independent role as certifier could not be fettered by the departmental policy of the Commonwealth Director of Works – his employer. In Peninsula Balmain v Abigroup2, an apparent clash between the superintendent’s role as set out in a project management agreement with the superintendent’s certification role under the construction contract was resolved on appeal due to the characterisation of the agency role under the project management agreement by the Court of Appeal as being an agency “only in a very loose sense”. In Kane v Sopov3, the Victorian Supreme Court rejected an argument that the superintendent was unduly influenced by the Principal, but did find the superintendent had fundamentally misconceived his role (as being a mediator between the parties) and failed to act competently and independently.
Factually, V601 sits at the more extreme end of the spectrum of superintendent (and principal) misconduct in the exercise of an independent certification role. The superintendent’s lack of independence, impartiality and reasonableness and V601’s procurement or encouragement of that conduct led the Court to set aside all the superintendent’s assessments and certificates that were in issue in the case, consistent with established law. The Court substituted its determinations, resulting in entitlements of approximately $8m (before interest) for Probuild, substantially overcoming the superintendent’s earlier purported certification of liquidated damages.
Legally, the case is a stark reminder of the importance of:
- agreements engaging superintendents not setting up a potential conflict with the superintendence requirements set out in the construction contracts to be administered by those superintendents; and
- superintendents understanding the requirements of their role as expressed in construction contracts and adhering to the requirements of independence and reasonableness (or other standards) set out.
V601 lodged an appeal on a broad-ranging set of grounds. The fate of that appeal in all the circumstances is not yet clear.
