Recent case comments on when communications between a developer and a superintendent (or project manager) are unfair and a breach of contract

Superintendent to act fairly and in good faith

In most construction contracts, the parties agree that the superintendent will act fairly and impartially when acting as a certifier and assessor

For instance, clause 20 of the AS 4000-1997 provides:

“…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.”

The NSW Court of Appeal in Peninsula Balmain Pty Ltd v Abigroup Contractors said that what this means is:

“The Superintendent is the owner’s agent in all matters only in a very loose sense. When exercising certifying functions in respect of which the superintendent must act honestly and impartially, the superintendent is not acting as the owner’s agent in the strict legal sense”

Principal cannot influence superintendent

The Court of Appeal in Victoria in Kane Constructions v Sopov went even further and said that:

“The principal may be in breach of a contract if it exerts influence on superintendent, so that the superintendent:

    • allows their judgment to be influenced by the acts of the principal;
    • allows their conduct to be controlled by the principal; and
    • is not sufficiently firm in order to decide questions based on his opinion;…”

In Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited, the Federal Court said that:

“Persons in the position of a superintendent, have an implied duty (quite apart from the contract) to act honestly and impartially when assessing claims for extensions of time and it is at least arguable that this includes an obligation to act reasonably.”

More recently in Walton v Illawarra, McDougall J of the Supreme Court of New South Wales discussed the role of the project architect (superintendent) and said that:

“her dual roles as project architect and superintendent put her in a very difficult situation…. she had abandoned a neutral position and the possibility of bias was real…”

Communications with Superintendent

In the recent case of Vetas-Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd, the Victorian Supreme Court said:

“…where the superintendent considers the assent of the principal to be necessary, they have ceased to be a free agent if they do not give full disclosure of every communication between the superintendent and the principal. The superintendent may lose independence without actually intending to do so and even without knowledge they have done so.”

The Court also said:

“…interference will arise where there is an attempt to lead the superintendent astray in the interests if the principal; and where there is correspondence and communication of an improper character between the principal and the superintendent. In relation to the contractor, interference will arise where the contractor has no knowledge of the interfering conduct so as to prevent the builder raising the point.”

So, according to the Victorian Supreme Court, there is good argument that any private communication between principal and superintendent in relation to a certifying function may undermine the independence of the superintendent so as to amount to actionable breach.

Key takeaway

When a superintendent / project manager is assessing, valuing or certifying then any communication from the principal should be copied to the contractor and a response requested before certification is made.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed. 

Key contacts:

Stephen Pyman – Principal & Director


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