V601 v Probuild [2021] VSC 849

Nikki Miller  |  Tom Kearney  |  Alice Tyson

Key takeouts

• If a superintendent fails to perform its assessment, determination and certification functions in accordance with the degree of independence required by the contract, those assessments, determinations and certifications will be void.
  
• A retrospective analysis of delay may be more practical and more accurate, depending on the particular circumstances.

Facts

On or about 23 May 2011, Probuild Constructions (Aust) Pty Ltd (contractor) entered into a contract with V601 Developments Pty Ltd (principal) for the design and construction of The Precinct and associated works in Victoria Street, Abbotsford, Victoria (contract).

The principal commenced proceedings seeking liquidated damages from the contractor.  The contractor counterclaimed, seeking extensions of time, delay damages, bonus payments and costs of acceleration. 

The principal relied upon certificates issued by the project manager, First Urban Pty Ltd (superintendent) as evidence that it was entitled to liquidated damages.  The contractor disputed the validity of those certificates including because the superintendent had failed to act independently.  The contractor pointed to evidence that the superintendent had been actively involved in strategy meetings with the principal, its lawyers and experts and had allowed the principal to provide to the contractor draft superintendent determinations which did not reflect the superintendent’s actual opinion.

Also in dispute was the correct way to analyse whether delay had occurred.  The contract provided that the contractor would be entitled to an extension of time if it ‘is or will be delayed’.  The principal submitted that the contract therefore required a prospective analysis of any delay.  The contractor submitted that a retrospective analysis of delay was permitted and appropriate.

Decision

Superintendent’s independence

The court found that the superintendent had acted in concert with the principal and failed to maintain independence or impartiality in undertaking its assessment and certification of the contractor’s claims.  As a consequence, Digby J held that the superintendent’s determinations were void.

Digby J noted (which was conceded by the principal) that the court had the power to determine the contractor’s entitlements under the contract on the merits, regardless of whether or not the superintendent had determined claims in accordance with the contract.

Retrospective and prospective delay assessment

The terms of the contract permitted a retrospective analysis of delay and that in the circumstances that was the appropriate method of analysis.  Although whether any contract requires prospective or retrospective analysis of delay will be dependent upon the terms of the particular contract, Digby J considered the relevant cases and made a number of comments strongly in favour of retrospective analysis which are worth noting.

Digby J held that a retrospective analysis was more practical and more accurate, determining that it was sensible to analyse delay and the effect of delay retrospectively, with the benefit of hindsight.  Prospective assessment was described as being inferior and theoretical.

It was noted that the Society of Construction Law Delay and Disruption Protocol supported using a retrospective delay analysis in circumstances where the analysis is time distant from the event.