My book, Extra-Contractual Recoveries For Construction & Engineering Work, was published in May 2022 and endeavours to state the relevant law as at 17 March 2021.
Inevitably, as time goes by, further cases are decided, sometimes providing further authority for propositions in the book, and sometimes leaning the other way. This page seeks to identify some such authority and, following the pattern of the book itself, includes some relevant extracts.
CHAPTER 2
IMPLIED TERMS
PREVENTION AND IMPLIED TERMS AS TO CO-OPERATION ETC
Implied Term to Ensure Certification
Paragraph 2.80
For a recent application, see V601 v Probuild[1]. In that case, the contract expressly required that in certifying, the project manager must act independently, reasonably, having regard to the express terms of the contract and not in the commercial interests of either party. Digby J found that those same four terms would ordinarily be imposed at law.
[1] [2021] VSC 849 at [267]
CHAPTER 3 – INTERMEDIATE AGREEMENTS, CERTIFICATION ETC
UNDERCERTIFICATION
Disqualification
Lack Of Independence
Paragraph 3.52
For a modern example of a certifier seeking, but spectacularly failing, to establish the necessary independence, see V601 v Probuild[1]. The court found that he had, inter alia:
- sought advice from the owner’s lawyers in relation to assertions regarding his independence [109];
- attended many critical meetings with the owner and its lawyers, including to discuss the owner’s tactics and strategy dealing with the contractor’s claims [110];
- provided the owner with drafts of his determinations in respect of expansion of time claims [115];
- was involved with the owner in devising a strategy to delay and minimise the contractor’s contractual entitlements [120].
The result was that the certified project managers purported assessments, determinations and certifications were a nullity, and should be set aside [793].
[1] [2021] VSC 849.
CHAPTER 4 CIRCUMVENTION OF CONTRACTUAL PROVISIONS
CIRCUMVENTION OF NOTICE PROVISIONS
The Arsenal of Circumventions
Paragraph 4.138
For a further example of the 10th bullet point in this checklist; see V601 v Probuild[1]. The court found that the owner, by its project manager, had prevented the contractor from claiming by reference to an approved contractor’s programme by failing to approve such programmes.
[1] [2021] VSC 849 at [449].
CHAPTER 5 – DAMAGES
GENERAL PRINCIPLES
MITIGATION
Paragraph 5.19
An example of the application of this last rule is to be found in V601 v Probuild[1], in which Digby J found that the contractor was entitled to its acceleration costs as reasonable costs incurred in mitigation of delays or likely delay is, this being in the alternative to the builder’s entitlement to recover those same costs by way of damages for the owner’s breach in failing to award and compensate the builder for extensions of time. See below.
[1] [2021] VSC 849 at [1301].
CHAPTER 8 – NEGLIGENCE AND OTHER TORTS
NEGLIGENT MISSTATEMENT AND NEGLIGENT MISREPRESENTATION
Claims By Owners Against Professionals For Negligent Overcertification
Paragraph 8.66
In an Australian context, this tortious duty of a certifier to the owner was noted recently, albeit obiter, as running “alongside contractual duties” in V601 v Probuild[1].
[1] [2021] VSC 849 at [247], citing Dymocks Book Arcade Pty Ltd v Capral Ltd [2013] NSWSC 343, [213].
CHAPTER 12 – CONTRACTING OUT OF EXTRACONTRACTUAL LIABILITY
PARTICULAR EXCLUSIONS OF COMMON LAW PRINCIPLES
Time At Large
Paragraph 12.16
In Bensons Property Group Pty Ltd v Key Infrastructure Australia Pty Ltd[1], the Court of Appeal of Victoria considered the prevention principle and concluded, without any reference to the ample authority to the contrary, that the prevention principle is only engaged where the act of prevention was in breach of contract. As such, the decision must be treated with hesitation as being per incuriam. The court also found that the prevention principle is not a principle of law, but merely a matter of implied term; that approach is contrary to prevailing authority, but less novel. In the event, however, it held as a matter of fact that there had been no prevention (regardless of the breach of contract point) and so the decision is in any event obiter dictum on these points. It was essentially on the latter point that the High Court refused special leave to appeal, on the basis that it was accordingly not a suitable vehicle for consideration by the High Court.[2]
[1] [2021] VSCA 69 (24 March 2021)
[2] Key Infrastructure Australia Pty Ltd & Ors v Bensons Property Group Pty Ltd [2021] HCATrans 185 (5 November 2021)
Extracts from Cases
V601 v Probuild [2021] VSC 849
…
247 Further, ordinarily, a superintendent exercising the powers of an assessor and certifier continues to owe both contractual and tortious duties to the principal. In Dymocks Book Arcade Pty Ltd v Capral Ltd,[1] McDougall J saw nothing in recent decisions ‘to subvert the proposition that a common law duty of care may exist alongside contractual duties’.
[1] [2013] NSWSC 343, [213].
…
…
266 Expressly, cl 20.2 of the Contract requires that, when performing the four functions of assessing and certifying the Contractor’s:
(a) time extension entitlements;
(b) achievement of Practical Completion;
(c) entitlement to delay damages pursuant to cl 34.9 of the Contract;
(d) variation payment in accordance with cl 36.4 of the Contract,
the Project Manager must:
(e) act independently of the parties and not be the subject of any direction from a party;
(f) act reasonably;
(g) have regard to the express requirements of the Contract; and
(h) not act in the commercial interests of either party.
267 In my view, absent the above express terms, when performing a relevant assessment and certification, the above requirements referred to in cl 20.2 of the subject Contract at (e) to (h) above are imposed. I also observe that, in substance, the same four terms would ordinarily be imposed at law.[1]
[1] Perini [1969] 2 NSWR 530, 545; Hickman & Co v Roberts [1913] AC 229; Kell & Rigby Holdings Pty Ltd v Lindsay Bennelong Developments Pty Ltd [2010] NSWSC 777, [56].
…
249 Further, a principal may be in breach of the contract with the contractor in circumstances where the principal has failed to discharge its contractual obligation to ensure that the superintendent has properly discharged its functions under the construction contract. The principal may also be liable in relation to the negligence of the superintendent, in certain circumstances.[1]
250 It is also trite that an assessor and certifier in the nature of a superintendent may also lose independence without actually intending to do so, or even without an understanding of having done so.[2]
251 Absent some contrary contractual provision,[3] ordinarily the certifier appointed under a construction or engineering contract, in making a determination in relation to a claimant party’s entitlements is not acting as an arbitrator, or as agent for the parties, notwithstanding that the function of a certifier has sometimes been described as that of a quasi-arbitrator or even as that of an arbitrator.[4] However, such a determination must be made fairly,[5] impartially,[6] and independently.[7]
252 A certificate is normally in writing, but this is not an essential requirement at law unless the building contract specifies otherwise.[8] Whether a certificate is formally effective will depend upon its proper construction in light of any contractual obligations as to its issue and its form.[9] The function of the subject certificate in the administration of the project may also depend on the adroitness of the certifier.
253 If the certifier is not independent, the certifier may be disqualified from providing the certificate, and certificates already issued may be set aside.[10] A certificate which is produced by fraud,[11] or by improper collusion between the certifier and a party,[12] is vitiated and of no effect.[13]
254 In John Holland Construction & Engineering Pty Ltd v Majorca Projects Pty Ltd & Anor (Majorca),[14] Byrne J held, in summary, that duty of care can exist between a superintendent and a contractor, if it can be established that the contractor relied and depended upon the careful and impartial performance of the superintendent’s obligations. However, given the facts and circumstances of that case, no relevant duty of care arose.
255 Further, ordinarily, the duties of the certifier in relation to independence, impartiality, and fairness override any agency obligations that the superintendent owes the principal. Accordingly, the principal cannot direct the superintendent as to how to act as assessor and certifier. In the instant Contract, this position is expressly confirmed by the term of cl 20.2, including cl 20.2(b)(i).
[1] Multiplex Constructions Pty Ltd v SOR Pty Ltd (2001) 17 BCL 174.
[2] (2006) 22 BCL 92, [623].
[3] Shaw v Melbourne Board of Works (1898) 24 VLR 70.
[4] Hickman & Co v Roberts [1913] AC 229.
[5] Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530, 536 (Perini); see also, Aviation Pty Ltd v Commonwealth (1990) 22 FCR 527.
[6] Majorca (1996) 13 BCL 235; (1997) 13(1) BCL 28; see also, Jackson v Barry Railways Cmr [1893] 1 Ch 238, 247.
[7] Hickman & Co v Roberts [1913] AC 229, 239; Dixon v South Australian Railways Cmr (1923) 34 CLR 71, 94–95.
[8] Northampton Gas-Light Co v Parnell (1855) 15 FCB 630; 139 ER 572; see also, Coker v Young (1860) 2 F & F 98, 101.
[9] Kirsch v HP Brady Pty Ltd (1937) 58 CLR 36; see also, Shaw v Melbourne & Metropolitan Board of Works (1898) 24 VLR 70.
[10] Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd (2002) 18 BCL 322.
[11] Attorney-General v McLeod (1893) 14 LR (NSW) 246.
[12] Perini [1969] 2 NSWR 530
[13] Redmond v Wynne (1892) 13 LR (NSW) L 39; 8 WN (NSW) 103.
[14] (1996) 13 BCL 235; see also, Northbuild Construction Pty Ltd v Napier Blakely Pty Ltd [2006] QSC 133.
…
449 Accordingly, I reject V601’s above contentions. I find, for reasons elsewhere outlined, that in breach of the Contract, V601, by its Project Manager, prevented Probuild from relying, under cl 34 of the Contract, on an Approved Contractor’s Program by failing and neglecting, and refusing to approve Probuild’s Contractor’s Programs and updates of Probuild’s Contractor’s Program, from time to time, pursuant to cl 32.3 of the Contract.
…
1300 I consider that Probuild is entitled to recover the additional costs it has expended in its efforts to overcome and minimise delay to the works, in order that the works achieved Practical Completion by the dates required by the Contract, as damages flowing from V601’s breach, by its Project Manager, in not awarding and compensating Probuild in relation to the extensions of time to which it was entitled during the course of the performance of the WUC.[1]
1301 I am also of the view that Probuild’s acceleration costs were necessary and reasonable costs incurred in mitigation in respect of delays, or likely delays, which, through breach of the Contract by V601, by its Project Manager, were not compensated for in time or cost as required by cl 34 of the Contract.[2]
[1] Perini [1969] 2 NSWR 530; Multiplex Constructions Pty Ltd v Abigroup Contractors Pty Ltd [2005] QCA 61; Amec Process and Energy Ltd v Stork Engineers & Contractors BV [1999] 68 Con LR 17.
[2] Great Eastern Hotel Company v John Laing Construction Ltd [2005] EWHC 181, [321]; BG Checo International Ltd v British Columbia Hydro and Power Authority [1993] 1 SCR 12; Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603.