If you spend enough time as a contractor in the construction industry you will inevitably come across a difficult Superintendent/Contract Administrator. This type of Superintendent can be overly pedantic on quality and documentation issues, refuses to recognise any scope changes as variations and won’t grant extensions of time for legitimate delays. So how do you deal with this type of character?
The first thing to realise is that this type of behaviour can put the Principal into hot water, especially if using one of the standard form contracts such as AS2124, AS4000 or AS4902. The reason is contained within the relevant superintendent clause, lets look at AS4000/4902:
The Principal shall ensure that at all times there is a Superintendent, and that the Superintendent fulfils all aspects of the role and functions reasonably and in good faith.
So how far does the obligation to act reasonably and in good faith go? One case which is worth discussing the 2002 NSW Court of Appeal case of Peninsula Balmain v Abigroup Contractors.
Peninsula Balmain v Abigroup Contractors
Pensinsula Balmain (the Principal) engaged Abigroup (the Contractor) for a development that consisted of the renovation of two factory buildings into residential apartments and the construction of two new townhouses. Works started in March 1998 and after substantial delays, show cause notices and variation claims Peninsula terminated the contract in December 1999, claiming significant liquidated damages. The conditions of contract were AS2124 with the Superintendent clause as follows:
The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent –
(a) acts honestly and fairly;
(b) acts within the time prescribed under the Contract or where no time is prescribed, within a reasonable time; and
(c) arrives at a reasonable measure or value of work, quantities or time.
There was also a term in the extension of time clause that read:
Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.
Abigroup contractors failed to claim four extensions of time that were caused by acts of prevention by the Principal and one that was from a neutral delay. The Court of Appeal found that the Superintendent should have granted extensions of time for the former and also for the latter as it was reasonable to do so, even when the contractor failed to make claims in accordance with the contract procedures. This is a huge statement for the court to make. It swings in the face of what most contractors would understand to be the norm in contracting – that they must make their case very strongly and accurately for any Superintendents decision to be in their favour.
The Court had the following to say on the Superintendents power to extend time:
In my opinion, this power is one capable of being exercised in the interests both of the owner and the builder, and in my opinion the Superintendent is obliged to act honestly and impartially in deciding whether to exercise this power.
This is a significant statement and reinforces the true neutrality of the superintendent under this form of contract.
Regardless of what the case law says, 99% of project issues do not end up in front of a judge to decide and nor should they. For Superintendents it can be difficult to make controversial decisions in favour of the contractor as they are often paid by the Principal or work for the Principals organisation. There is often pressure from the Principal to keep costs down and the contractor on a tight leash. And even if there isn’t, there may be a subconscious pressure that makes the Superintendent slightly favour the hand that feeds them, lest they are overlooked for the next contract. But it is important for Superintendents to remember that acting fairly and impartially is in the best interests of the Principal, that there is an obligation for the Principal also to ensure this happens.
For contractors it is sometimes cold comfort to know that, in the eyes of the law, the Superintendent must act fairly. Perhaps the approach would be to ask the Superintendent what in their eyes is a fair way to proceed or a fair outcome on a contentious issue? This may be the litmus test as to what the superintendent considers fair and whether there is room to negotiate. Finally the Principal can be reminded of their obligation to ensure Superintendent fairness – contracts are after all a two way street.
As always it would be great to hear any personal experience on the topic of superintendent fairness in the comments below.