The superintendent – independent certifier or principal’s agent?

Everett Insight

The superintendent – independent certifier or principal’s agent?

The most misunderstood role in construction.

The superintendent – independent certifier or principal’s agent?

In a perfect world, construction projects would run smoothly.
Principals would have perfect drawings and perfect specifications which set out exactly what to build and even, notes on how to build it. With this perfect information, builders would know exactly what difficulties to expect when building, plan accordingly, and deliver each project perfectly on time and for the originally agreed price.

Unfortunately, we don’t live in a perfect world.

Principal’s drawings/specifications are often grossly incomplete, don’t make sense, or they simply change their mind about what they want.

Builders also don’t really have any way to perfectly plan out the works.

To deal with these uncertainties, construction contracts are flexible and allow:

Payments to be made progressively, depending on how much of the work has been completed up to that point;
The price to increase or decrease, depending on whether the principal wants more work or less work carried out than originally agreed; and
The amount of time to complete the work to increase or decrease, depending on if there are any issues which caused the work to be delayed.

Of course, each contract has tens (or sometimes, hundreds) of other clauses, terms, and conditions – but at their core, construction contracts deal with changes to the price and timing for construction work.

Given this ability to change, who should decide:

how much payment should be made from one party to another?
how much the price of the works should increase or decrease?
how much the date for the completion of the works should change?

Role of the Superintendent

Traditionally, the role of the superintendent was created to allow an independent third party to handle minor disputes regarding the valuation of claims under contracts such as progress claims, variations, and extensions of time.

A superintendent is not a party to the contract. He or she is an independent third party that usually agrees through its arrangement with the principal to be bound by any obligations stated under the construction contract.

Usually, the parties will define the obligations of the superintendent under the contract, which ordinarily includes:

Assessing and certifying the value of payment claims;
Assessing and certifying the value of variations claimed by the contractor;
Assessing and certifying the duration of extensions of time claimed by the contractor;
Inspecting the quality of materials and workmanship and issuing directions to rectify any defective work;
Assessing and certifying the value of other claims for extra payment (such as claims following the discovery of a latent condition or requirement to comply with a legislative change);
Determining whether the works have achieved completion.

When the superintendent carries out one of these functions, it must do so fairly, reasonably, and impartially. These obligations are implied by law and arguably, cannot be contracted out of: Pacific Associates Inc v Baxter [1990] 1 QB 993 at 1029.

It used to be quite common for architects or engineers to fulfill the role of superintendent, and the above common law obligations were incorporated into their codes of ethics.

For example, clause 18 of the Board of Architects of Queensland Code of Practice provides that:
“18. An architect: (a) must act with fairness and impartiality in administering building contracts.”

A similar requirement used to exist for engineers. In the Institution of Engineers Australia Code of Ethics, clause 5(b) provides:
“…in our capacity as superintendent administering a contract, we must be impartial in our interpretation of the contract…”

Because professionals such as architects and engineers are bound by a code of ethics and subject to disciplinary proceedings for breaching them, they should carefully consider whether they are sufficiently impartial to take on the role of a superintendent – so as to avoid personal liability for any wrongful certifications under the contract.

In Walton v Illawarra [2011] NSWSC 1188 at [74], McDougall J discussed whether an architect was biased in acting as a superintendent under the contract:
“In my view, both the dual roles that Ms Indyk held and the demands made of her by Illawarra in her capacity as architect placed her in a position where the possibility of conflict was real, and the appearance of bias was likely to result.”

No doubt, the above comment from the Court would have been enough for disciplinary proceedings by the Australian Institute of Architects.

Superintendents are usually also engaged to be the principal’s representative

(i.e., the person who does everything on behalf of the principal – which is usually a company). When carrying out this role, the superintendent does not have to be fair, reasonable, or impartial. This is because it is acting essentially as an agent of the principal and should therefore be seen as an extension of the principal.

A question now arises, how do we tell when the superintendent is acting in the role of a certifier or the role of the principal’s representative?

A ‘dual hat’ role

Some of the roles of the superintendent relate to the assessment of claims (as set out above), while others relate to doing certain things on behalf of the principal as its agent. These include:

Issuing directions to the contractor on behalf of the principal;
Resolving contract document ambiguities;
Approving programs regarding the timing and sequencing of the work;
Examining and testing materials;
Directing variations.

These two streams of responsibilities often lead the superintendent to being described as having a ‘dual-hat’ role.

This requirement, however, appears to have been expressly removed from the Engineers Australia current code of ethics and replaced with a requirement to “act impartially and objectively” generally.

When exercising its role as an agent of the principal, it is under no obligation to act fairly or impartially. This is why contracts are often amended to state that when a superintendent is deciding whether to unilaterally extend time under the contract, it does so as an agent of the principal without any obligation to do so in favor of the contractor (discussed below).

It’s important to be aware of which role the superintendent is fulfilling and at which time. Often, contractors will mistakenly think the superintendent is helping them, only to later receive a hefty claim from the principal!

Perhaps the best explanation of the dual-hat role is described by Judge Thayne Forbes QC in Davy Offshore Ltd v Emerald Field Contracting Ltd (1991) 55 BLR 1. In that case, His Honour (using the older term of architect/engineer instead of superintendent) said at [61]:

“… it is clear that the obligation to act fairly is concerned with those duties of the architect/engineer which require him to use his professional judgment in holding the balance between his client and the contractor. Such duties are those where the architect/engineer is obliged to make a decision or form an opinion which affects the rights of the parties to the contract, eg. Valuations of work, ascertaining direct loss and expense, granting extensions of time, etc. When making such decisions pursuant to his duties under the contract, the architect/engineer is obliged to act fairly.”

An interesting question arises as to whether an employee of the principal can be a superintendent under the contract. It seems difficult to imagine how an employee could remain impartial and fulfill its roles to act fairly and impartially as a superintendent when it has a distinct interest in obtaining the best result possible for its employer.

In Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530, the Director of Works for the Commonwealth could be appointed as the superintendent under a contract. When the superintendent made a number of decisions based on policies held by the government, the contractor alleged that the superintendent had breached its obligations to act fairly and reasonably.

Ultimately, the Supreme Court of New South Wales found that the director was entitled to act as a superintendent, but that his duties to act fairly and impartially overrode its duties as an employee to the Commonwealth.

So, as the law presently stands, there is no impediment to an employee of the principal fulfilling the role of the superintendent.

What you need to look out for in clauses that affect the role of the superintendent?

Now that we understand what the superintendent is all about, let’s consider common issues to look out for in contracts regarding the role of the superintendent.

Common Issue no. 1 – Sole discretion to extend time in the absence of an EOT

Most contracts contain a fallback clause which allows the superintendent to issue the contractor an extension of time, even if it hasn’t claimed an extension of time.

This clause is usually included to avoid the time for completion being set at large in the event that the principal delays the contractor, but the contractor has no entitlement to claim an EOT.

If one of these clauses exists, an adjudicator or court can ‘step into the shoes’ of the superintendent and provide a unilateral extension of time to the contractor.

In Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211, Hodgson JA held that, even though the contractor had not applied for the extension of time, “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.”

To stop this from occurring, it is common practice for savvy lawyers to limit this ability to extend time unilaterally to the “sole and absolute discretion of the superintendent.” In Hervey Bay, it was held that the inclusion of these few words was sufficient to take away the ability of an adjudicator and the Court to award an extension of time to the contractor.

Next time you review a contract, have a look to see whether the contract limits the ability to unilaterally extend time to the “sole and absolute discretion of the superintendent.” Contractors should look to negotiate this clause out of the agreement, while principals should insist that it is included.

Common Issue no. 2 – To what extent is the superintendent an agent of the principal?

When reviewing a contract, it is crucial to examine the roles that the superintendent is tasked with fulfilling. If the superintendent has the authority to give directions on behalf of the principal, then it is acting as the principal’s representative when not performing functions as a superintendent.

This is important in cases where the principal issues a direction to carry out variation works, but the contract specifies that only the superintendent has the authority to do so. In such a scenario, the contractor may not have to comply with the principal’s direction because the principal did not have the contractual power to issue it.

Contractors should be cautious: if a contractor receives a direction from the principal, and the principal isn’t entitled to issue that direction, the contractor should request that the superintendent confirm it.

Common Issue no. 3 – What if there is no superintendent?

Most contracts expressly require the principal to provide that a superintendent is appointed. For example, AS 4000 series contracts require:
“The Principal shall confirm 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.”

If the superintendent is removed from the contract (due to resignation, a falling out, or other reasons), and no substitute is appointed, who then fulfills the superintendent’s role?

The answer: no one. This issue was highlighted in Niclin v SHA, where the payment certificate was issued by the principal’s in-house legal counsel instead of the superintendent. The court found the certificate invalid because it wasn’t issued by the superintendent, leading to the claimant’s only option being to terminate the contract and sue for damages.

To avoid this issue, contracts can include clauses such as:

Deeming the progress claim as certified if not responded to within a certain timeframe:
“If the Superintendent does not issue the progress certificate within 14 days of receiving a progress claim in accordance with subclause [insert], that progress claim shall be deemed to be the relevant progress certificate.”
Deeming the principal as the superintendent if no superintendent is appointed:
“If at any time there is no Superintendent appointed under the Contract, the Principal shall be deemed to be the Superintendent until a new Superintendent has been appointed and shall be authorized to fulfill all aspects of the Superintendent’s role under the Contract.”

Common Issue no. 4 – Impartiality of the superintendent

In traditional contracts, the architect or engineer who documented the project usually assumes the role of the superintendent. By the time the contract is executed, the architect/engineer likely has a close, ongoing relationship with the principal, which may lead to biases favoring the principal.

In a design and construct contract, the same architect/engineer who prepared the preliminary design may later be engaged by the contractor to finalize the design, meaning the superintendent may act on behalf of the contractor.

In both scenarios, maintaining impartiality can be challenging because the superintendent may also be an agent for either the principal or the contractor. Superintendents must confirm that they remain impartial when acting as certifiers.

In Vestas – Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd [2020] VSC 554, a contractor sought an injunction for all correspondence between the superintendent and principal to be made available. While the application was dismissed, Justice Delaney emphasized that private communications could undermine the independence of the superintendent, potentially rendering the decision void and breaching the contract.

Most contracts require the principal to confirm that the superintendent carries out its functions fairly and reasonably. If the principal unduly influences the superintendent’s decision, the resulting certificate may be invalid, and the contractor’s progress claim could be deemed valid and entitled to the full claimed amount.

Concluding Thoughts

The role of the superintendent is indeed fraught with challenges. On one hand, they are typically paid by the principal and expected to align with the principal’s interests, like most consultants. On the other hand, they have a responsibility to act impartially, balancing the needs of both the principal and the contractor. Ironically, if the superintendent blindly follows the principal’s instructions, they may end up causing more harm than good, even to the principal, by compromising their impartiality.

Over the past decade, it became common for employees, consultants, or directors of the principal to fulfill the superintendent’s role. This practice often led to disputes and litigation due to the absence of an objective certifier on projects.

Recently, there has been a trend toward appointing third-party providers as superintendents—proficiency with a deep understanding of contract administration, design management, and procurement. This shift aims to restore the impartiality that was central to the original role of the superintendent.

The hope is that the return of the “impartial superintendent” will reduce the frequency of disputes in construction projects, ultimately improving the industry’s efficiency and fairness.

— Alex Tuhtan – Shand Taylor Lawyers
— Dan Everett – EVERETT Management
Property Development Manager & Superintendent