This Update considers the law relating to Superintendents. It raises an interesting question as to whether the conduct of a party who fails to follow the contract can have the flow on effect of varying their rights under the contract.
Many commercial construction contracts provide for the Principal to appoint a Superintendent. The Superintendent has duties akin to those of an umpire who is to ensure the Contractor and the Principal play fair when constructing the project. The role of the Superintendent has been considered by the Courts and there exists a substantial body of law setting out the rights and responsibilities of the Superintendent. However, these rights and responsibilities are only implied by the law and may be amended by the express terms of the contract.
One of the typical roles of the Superintendent is to assess the value of progress payments. Usually, once the Superintendent has made that assessment, they issue a certificate, certifying that the Principal must pay the Contractor the amount stated.
Given the central role occupied by the Superintendent, it is imperative that all parties know their identity.
In a project involving the refurbishment of an Adelaide CBD building, the Superintendent issued a certificate for a progress payment in the amount of $595,069.56 (“the First Certificate”). The Contractor immediately issued an invoice seeking payment. Payment was due to be made within 10 business days. No amount was paid.
Subsequently, due to a reconsideration of various matters, which are set out below, a Delegate of the Superintendent issued an amended certificate for the same progress payment in the amount of $349,104.70 (“the Second Certificate”).
The Contract between the parties included the general terms and conditions known as AS4902-2000, a widely used design and construct contract.
The Contractor goes to Court
The Contractor refused to acknowledge the authenticity of the Second Certificate on the basis it had not been issued by the Superintendent. It applied to the Supreme Court of South Australia for summary judgment on the First Certificate. Previously, Courts have been prepared to grant summary judgment on AS4000 series contracts on a certified progress claim that has not been paid by the Principal.
A Master of the Supreme Court dismissed the application for summary judgment. The Contractor appealed against the Master’s decision. This Update reports on the recent decision of Justice Doyle in relation to the appeal.
The Contract, under clause 37, provided for progress claims to be made by the Contractor to the Superintendent and set out the process by which the Superintendent was to certify those claims. Clause 37.2.5 required the Principal to pay to the Contractor, within 10 business days, the amount shown in the certificate. Clause 37.2.8 provided that “the Superintendent may (by issuing a further certificate) correct any error which has been discovered in any previous Progress Certificate”.
Clause 21 of the Contract provided for the Superintendent to appoint a Delegate to exercise their functions. The clause required that the Contractor be provided with notice of the appointment in writing, and an opportunity to object.
The identity of the Superintendent
The Superintendent for the project was identified. Both parties agreed this was the case. However, the Superintendent gave evidence that they and their nominated Delegate had shared the responsibility for undertaking the tasks of the Superintendent.
There was no evidence that the Contractor had been informed in writing about the appointment of the nominated Delegate.
The disputed issues on the appeal
When the Second Certificate was issued, the Contractor did not follow with an amended tax invoice. For that reason, the Principal did not initially pay the amount stated in the Second Certificate. However, it had paid the amount by the time of the appeal, and so the appeal only related to the difference between the value stated on the First Certificate and the value stated on the Second Certificate.
The Principal defended the application for summary judgment on the basis that the Superintendent had identified errors in the First Certificate and had, through their Delegate, exercised the right under clause 37.2.8 of the Contract to withdraw the First Certificate and issue the Second Certificate.
In answer to this defence, the Contractor said that there had not been a proper delegation of the functions of the Superintendent as envisaged by clause 21 because no written notice had been provided appointing the Delegate.
The conduct of the parties
The evidence put forward by the Contractor did not show that any written delegation had occurred. Rather, the evidence showed that the Delegate had, since commencing their employment, assisted the Superintendent in sending and receiving correspondence, coordinating construction activities, assessing and certifying payment claims and variations submitted by the plaintiff, and issuing site instructions and directions to the plaintiff. The Delegate explained that during their time on the project, the Contractor had never questioned their authority to issue directions, instructions or certifications. To the contrary, the Contractor had always acted in accordance with the directions, instructions and certifications they had issued. The Delegate produced various examples of this, including an earlier progress certificate they had signed in May 2016.
The Superintendent gave evidence to similar effect. They said that since commencing with their firm in January 2016, the Delegate had shared with them the responsibility for undertaking the Superintendent’s tasks for the project, including coordination of the building activities, assessing payment claims and variations, issuing payment certificates, issuing site instructions and directions to the plaintiff, and sending and receiving correspondence.
The Superintendent said that no representative from the Contractor had raised any issue regarding the Delegate’s authority to carry out any aspect of the Superintendent’s role on the project.
The appeal had to be assessed against the rules applicable to summary judgment, rather than a final determination. The Court only had to consider whether the Principal had a reasonable basis to defend the Contractor’s claim.
Justice Doyle said that the evidence established a reasonable basis for the Principal to contend that by reason of the Delegate’s conduct in carrying out a variety of the Superintendent’s functions, and the Contractor’s lack of resistance to that occurring without written notice of the delegation of those functions, the Contractor could not now insist upon compliance with the contractual obligation to give notice in respect of the replacement certificate. In legal terms, the Contractor was estopped from, or had waived its right to, insisting on that compliance.
Justice Doyle acknowledged that the other tasks the Delegate had handled were uncontroversial. They could be distinguished from the argument about delegation with respect to the replacement certificate, but it would be necessary for all the evidence to be evaluated fully at a proper trial, and therefore the summary judgment application should be refused.
Estoppel and waiver are doctrines of the law of equity, sometimes called fairness. The general rule is that parties should behave consistently and fairly. It might be regarded as unfair to suddenly revert to the strict terms of the contract when it suits a party’s end. In those circumstances, the law might stop a party from subsequently insisting on its strict contractual rights after it has failed to do so for some time.
It should be remembered that the appeal was decided on the principles applicable to summary judgment. It may be that the Court, when all the evidence is heard, would take a different view.