Best practice approach to communications between principals and superintendents

Careful management is critical 14 min read

Superintendents generally perform dual roles under construction contracts, acting variously as agent for the principal or project certifier, depending on the relevant context.

This creates an inherent tension in the role. Discussions between principal and superintendent – often a principal employee – are subject to particular scrutiny by the contractor, in situations where the superintendent is under an obligation to act with independence in their certification or assessment roles.

Careful management of all communication between a principal and superintendent is critical to ensure the superintendent's independence stands up to scrutiny, their assessments and decisions are not left open to challenge, and the principal is not exposed to potential liability.

This Insight sets out practical tips on achieving best practice communications between principals and superintendents in order to avoid any perception of interference or bias, and summarises recent case law on the consequences of failing to heed this guidance.

Who in your organisation needs to know about this?

• All staff at a principal/owner organisation who are responsible for directing the superintendent in their agency capacity, and/or for preparing submissions to the superintendent in their certification capacity.
• Principal employees taking on the role of superintendent.

Key takeaways

• Principals should take care when communicating with superintendents and clearly delineate between communications directed to the superintendent in an agency role, as opposed to a certification role.
• Failure by a principal to properly and appropriately manage superintendent communications may result in:
  • them having to disclose to the contractor communications between the principal and superintendent that were intended to be private and are adverse to the principal, or commercially sensitive;
  • disclosure of communications to a contractor, such as legal advice on a contractor's claim, following inadvertent waiver of legal professional privilege; and
  • a perceived risk of interference with the superintendent's independence in exercising their certification function.
• If communications from the principal are found to have improperly influenced the superintendent, a court can uphold a breach of contract, or misleading or deceptive conduct claim. This can attract various remedies, including the setting aside of the superintendent's determinations and damages awarded against the principal.¹
• This notwithstanding:
  • a failure by the superintendent to independently exercise their certification role in relation to a claim does not mean that the contractor will be successful in that claim. For example, where a contractor's claim is without merit, a superintendent's failure to determine that claim independently, honestly and fairly does not mean the contractor is automatically entitled to the remedies they seek; and
  • private communications between the principal and superintendent will not automatically result in an actionable breach or the award of remedies sought by a contractor.
• Furthermore, and to avoid uncertainty, the contract can be drafted to expressly provide that:
  • the superintendent is not under a duty to act independently in the discharge of their certification role; and
  • the principal may communicate privately with the superintendent.

The role of the superintendent

The superintendent to a construction contract generally performs a dual role: 

• as agent for the principal to assist them in administering the contract; and
• as a project certifier performing assessing and certification functions under the contract.

When acting as agent for the principal, the superintendent must prioritise their interests and act in accordance with general agency principles.

Where the superintendent performs functions in their certification or assessment capacity, a requirement for them to act independently and in the interests of both parties may be implied.²

This depends upon:

• the specific terms of the relevant contract. Many standard contracts include a clause expressly imposing a duty on the superintendent to act 'fairly' or in good faith. While the precise wording in each contract differs, this generally involves a duty to act reasonably, independently, honestly, impartially, carefully, justly or with skill.
• where a contract does not expressly state that the superintendent is under one or more of these duties, Australian courts have been inclined to imply a duty of independence unless there is an express clause to the contrary.³

Best practice communications between principals and superintendents

Communication guidelines

At the outset of the project delivery phase, it is advisable for principals to adopt formal protocols to govern superintendent communications. In particular:

• Identify that the communication relates to the superintendent's role as agent for the principal, or to a role that may require the exercise of independence.
• Ask whether the communication could be interpreted as at attempt to interfere with the superintendent's exercise of that independence.
• Written communications between the principal and the superintendent, when exercising a certification or assessment role, should be:
  • made in formal correspondence;
  • made as submissions (and not directions);
  • drafted to include acknowledgment of the superintendent's obligation to act in accordance with the contract (including any requirement of independence); and
  • expressed to represent the principal's view, but not to seek to undermine the superintendent's obligations to perform their functions.
• Consider establishing separate conventions for communications with the superintendent in their certification and representative roles. This may include communications from different employees for the different functions, or the use of different letterhead by the superintendent in their certification role.
• If the superintendent relies on document templates prepared by others in the organisation, communicate this to the contractor. Otherwise, ensure the superintendent creates their own templates.
• Consider, on a case-by-case basis, whether it is prudent to copy the contractor (and any other relevant parties) into submissions or other correspondence between the principal and superintendent.
• The principal should invite the superintendent to obtain their own independent legal/specialist advice if the superintendent considers it necessary to do so, in order to determine an issue.
• The superintendent ought not be copied into, or provided with, legal advice to the principal regarding a matter on which the superintendent is required to make an assessment or certification. Where any legal advice is provided to the superintendent by the principal in their agency function, the relevant covering correspondence should specify this.

Pitfalls to avoid in communication with superintendents

Principals should avoid:

• communicating privately with superintendents in the discharge of a certification or assessment function requiring independence;
• involving superintendents in matters that may later require the use of their impartial judgment (in the discharge of their certification or assessment function, including involving the superintendent in a dispute);
• permitting others in the organisation to draft the superintendent's responses in their certification role; and
• providing the superintendent with legal advice the principal receives regarding a matter concerning or involving the superintendent's exercise of their certification role.

Principals should not pressure or attempt to influence the superintendent on the merits of the relevant matter (but may make submissions as to the principal's position).

Communicating with superintendents: case law guidance

Kane Constructions Pty Ltd v Sopov

This case sets the scene for much of the more recent case law. Sopov (as principal) engaged Kane Constructions (as contractor) to renovate and extend a disused boiler house in Melbourne. The contract obliged the principal to 'ensure' that the superintendent acted 'fairly and honestly' in the discharge of various certification functions. The contractor alleged that this clause had been breached as a result of the superintendent 'rubberstamping' the principal's position, constituting a fundamental breach of the contract.

The contractor alleged that the superintendent's conduct reflected his misconception around the independence of the role. The contractor placed emphasis on discussions and investigations conducted between the principal and superintendent as to the sums that could be deducted from the builder’s contract price. These discussions and investigations were not communicated to the contractor. The contractor described these discussions as 'bipartisan', and submitted that they were not the act of an independent superintendent, who ought to ensure that both the principal and the builder had an opportunity to make representations in relation to relevant items.

The court found that the superintendent had not acted competently or independently. The relationship between Sopov and the superintendent was considered 'undesirably close'. The superintendent had failed to understand his obligations – which required not only the perception of independence, but the requirement to actually be independent.

Vestas – Australian Wind Technology Pty Ltd v Lal Lal Wind Farm Nom Co Pty Ltd

Lal Lal (as principal) entered into an engineer, procure and construct contract with Vestas (as contractor) to construct the Lal Lal Wind Farm. All 27 of the contractor's extension of time (EOT) claims were rejected by the superintendent. The contractor suspected interference by the principal with the superintendent's certification role. The contractor became concerned when it discovered comments, in three documents issued by the superintendent when performing its certification role, referencing the principal's lawyers.

The contractor alleged that 'any comments provided by [the principal's lawyers] to the Principal’s Representative in the exercise of the Certification Role which are not simultaneously communicated to the Contractor constitute interference'.

The court stated that previous case law provided 'support for the proposition that any private communication is sufficient to undermine the independence of the Principal's Representative when acting in the Certification Role so as to amount to an actionable breach' (our emphasis).

As it stands, there is no basis for private communications to result automatically in an actionable breach and this approach is yet to be followed in subsequent case law. If adopted, however, the approach would have significant consequences for the way in which principals must manage superintendent correspondence, with any private communications giving rise to liability for breach.

V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd

V601 (as principal) engaged Probuild (as contractor). The contract required V601 to ensure that the superintendent exercised independence when assessing extension of time (EOT) claims.

The principal commenced proceedings to recover liquidated damages for late completion. The contractor counterclaimed and alleged a failure on the part of the superintendent to approve entitlements to EOT claims.

The court dismissed V601’s claims and awarded Probuild the EOTs claimed, together with delay damages and other amounts.

The court found evidence of widespread collusion between V601 and the superintendent, with the principal applying influence and pressure to have the superintendent determine the contractor's EOT claims as slowly as possible.

It found that the superintendent, without informing or involving Probuild, received materials directed to defeating and minimising Probuild's claims, and discussed these with the V601's 'partisan consultants and its lawyers in a process that was generally intended to defeat, or diminish, Probuild’s contractual claims.'[2] The superintendent did not inform Probuild of these activities or provide it with the related materials.

Additionally, the superintendent sent draft determinations to V601 for review and comment, following which the draft determinations would be sent to Probuild. V601 implemented this process in collaboration with the superintendent, to provide an opportunity for V601 to negotiate a favourable final outcome. The superintendent was unable to give a satisfactory explanation as to why it was appropriate to send draft EOT determinations to V601 for its consideration, instead of determining and communicating a clear, unequivocal decision on the claims to Probuild. The superintendent also did not challenge any of V601's approach.

The court was 'satisfied that … the [superintendent] was part of a contractual claims response team assembled by V601 to develop and implement a strategy and apply tactics to delay, defeat, or minimise Probuild’s entitlements to extensions of time and delay damages. This strategy involved enlisting the [superintendent] to assist with developing and implementing the strategy, as well as applying pressure to the [superintendent] to deal with Probuild’s claims in a way that assisted V601 and its commercial interests.'

Built Environs WA Pty Ltd v Perth Airport Ltd [No 5]

Perth Airport (as principal), engaged Built Environs (as contractor) for the partial design and construction of the T1 Domestic Pier and International Departures Expansion at Perth Airport. Perth Airport appointed APP Corporation Pty Ltd (APP) to act as superintendent as both agent to the principal and as certifier exercising independence.

This interlocutory hearing concerned redactions made by Perth Airport to documents sought by Built Environs. These documents were provided to the superintendent, and the redactions had been applied on the basis of legal professional privilege.  Built Environs alleged that any privilege had been waived, on the basis of the communication having been provided to the superintendent. Perth Airport submitted that the redactions were proper, as communications were provided exclusively to the superintendent exercising its agency function.

The judgment confirmed the following. The function being performed by the superintendent in receiving legally privileged communications from a principal is relevant to determining whether or not such action amounts to a waiver of privilege. If the superintendent is exercising their 'broad-based general agency role', privilege is not waived (provided the advice is kept confidential). If the superintendent is performing their certification function, privilege is waived.

The case is a useful reminder to principals to carefully consider the relevant function the superintendent is performing before sharing legal advice or material prepared for legal proceedings. In those circumstances, it may be useful to specify in covering correspondence the purpose for which it is provided. While this not be determinative, if made in good faith, the statement may help evidence the true nature of the communication and the superintendent's role in receiving it.

Downer v Alinta Energy Transmissions

Alinta Energy (as principal) and Downer (as contractor) executed two engineer, procure and construct contracts, under which the superintendent was required to act honestly, fairly and reasonably when performing their certification functions. The principal was required to appoint a superintendent and appointed an employee to that position.

The contractor alleged that the superintendent, in performing their certification functions, had been improperly influenced by the principal. The contractor's concern arose from certain documentation that suggested:

• there were discussions between the superintendent and the principal concerning the contractor's rights, to which the contractor was not privy; and
• metadata suggested that certain important letters issued by the superintendent appeared to have been prepared by persons whose interests were aligned with the principal.

The contractor sought pre-action discovery from the principal, to determine whether to commence proceedings. The court granted the application, and determined that it was 'reasonably necessary' that the contractor see correspondence showing whether the metadata authors contributed to the substance of the letters issued by the superintendent, to know whether there were private communications between the superintendent and the principal, and to know whether these private communications were innocuous.

Next steps

Given the potential consequences of improper communications between principals and superintendents, clear and deliberate communication strategies between the two is imperative. If you would like to discuss how these strategies can work for you, please contact one of our experts below.