The recent Supreme Court of New South Wales decision of Walton v Illawarra sends a clear warning to Superintendents acting in dual roles.
In this case, the Superintendent had dual roles: firstly, as project architect to the Principal; and secondly, as Superintendent. McDougall J warned that the Superintendent’s dual roles “put her in a position where the possibility of conflict was real, and the appearance of bias was likely to result” and as a result, the Principal was found to be in breach of contract. This meant that damages were payable in an amount equal to the difference between the Superintendent’s valuation of the work and the amount which the court concluded should have been paid or allowed for the work under the contract.
The Superintendent was accused of “aligning herself entirely with the interests” of the Principal. She was ultimately held to have “abandoned the neutral or indifferent position required of her as Superintendent”.
This is a clear warning from the Supreme Court - Superintendents acting in dual roles face a very real threat of conflict and bias. This is significant considering that the law imposes an obligation on Superintendents to act honestly, fairly and reasonably. As McDougall J warned, holding dual roles puts Superintendents in a “very difficult situation”. The situation is precarious and fraught with danger, from a legal perspective.
But this is not the only lesson to be learnt from this case. The parties had amended their AS 2124 contract and had failed to adequately incorporate the agreed rates for liquidated damages. The consequence was that liquidated damages did not apply. The Principal was forced to resort to general damages and was required to prove the actual losses it had incurred.
The parties had also failed to include a "conclusive evidence" provision for any certificate of the Superintendent. As a result, the Superintendent’s findings were not considered to be conclusive of the matters decided. The Court was therefore able to revisit the Superintendent’s assessments and make a fresh determination and substitute its own determination for that of the Superintendent. The Principal was forced to pay the difference (which was significant) plus interest.
There are important lessons to be learnt from this case:
- always ensure that your contract includes a “conclusive evidence” clause;
- consider whether your contract needs to preserve your right to general damages (as well as liquidated damages); and
- if you are appointed as, or have appointed a, Superintendent acting in dual roles, beware – there may be an apprehension of bias.
If you would like further information please contact us.
Troy Lewis, Partner
T: +61 7 3135 0614
Chris Edquist, Partner
T: +61 3 9321 9919
Anne Davis, Partner
T: +61 2 8083 0436
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