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Prevailing in a “Battle of the Forms”

Late last year Bradbury Legal was successful in representing its client in the case of Samios Plumbing Pty Ltd v John R Keith (QLD) Pty Ltd [2019] QDC 237 (29 November 2019). The case related to a “Battle of the Forms” where the Court found that our client’s terms and conditions governed the relationship between the parties for the supply of goods, rather than the purported terms and conditions of the other party.

The Facts

Samios Plumbing Pty Ltd (Samios) sent John R Keith (QLD) Pty Ltd (JRK) their standard credit application form used to establish a credit facility. This was not an offer capable of acceptance but an invitation to treat. In February 2010, JRK sent a facsimile to Samios enclosing a cover letter, Samios’ completed credit application form as amended by JRK’s financial controller and JRK’s standard terms and conditions.

Samios’ credit application included the sentence “All goods shall be sold in accordance with the “STANDARD TERMS AND CONDITIONS” as outlined on the purchase Invoice”. This sentence was struck out and initialled by JRK’s financial controller.

Later that month, JRK received a letter from Samios stating that its credit application had been approved and JRK subsequently placed orders.

JRK contended that the credit application (accompanied by JRK’s standard terms and conditions) was an offer to enter into an agreement for the future supply of goods on credit. The amendment to Samios’ credit application meant that JRK’s offer excluded Samios’ standard terms and conditions and substituted them with JRK’s standard terms and conditions. As such, JRK argued that Samios’ letter accepted that offer and all goods supplied by Samios were subject to JRK’s standard terms and conditions.

Samios denied that the credit application was an offer to enter into such an agreement. It contended that the credit application was a request that Samios extend credit to JRK for future orders and that each purchase order from JRK was a separate offer to purchase goods. For this reason, Samios contended that all goods were supplied with a delivery docket that referred to its standard terms and conditions available on its website and that JRK accepted each offer by taking delivery of the goods.

Decision

Barlow QC of the District Court of Queensland found that:

  • it was clear from JRK sending the credit application to Samios with its standard terms and conditions that it was an offer by JRK to enter into a contract for the provision of credit for the purchase of goods in the future;
  • by striking out Samios’ term that all purchases be made on Samios’ terms and conditions and including a copy of JRK’s own terms and conditions, JRK was offering to enter into a credit agreement on its own terms and conditions;
  • Samios’ letter approving JRK’s credit application, clearly conveyed to any reasonable business person, that Samios was accepting JRK’s offer to contract on the terms stated (i.e. JRK’s standard terms and conditions); and
  • thus, the credit agreement between JRK and Samios governed the terms of all subsequent orders and supplies of goods between the parties.

His Honour also considered Samios’ submission that the provision of a delivery docket with each order which made reference to Samios’ terms and conditions constituted an offer to supply goods on those terms. His Honour determined that the delivery dockets were not an offer to enter into a contract on Samios’ terms and conditions. Rather, as JRK’s orders were made using its own purchase order form and included a copy of JRK’s standard terms and conditions, by Samios’ conduct in delivering the goods in accordance with the purchase orders, Samios’ accepted JRK’s standard terms and conditions as governing the purchase order.

Key Takeaways

The scenario described above is not uncommon. Another example of where a ‘Battle of the Forms’ can arise is where a party provides a quotation that is subject to its standard terms and conditions and then the other party provides a purchase order stating that its own standard terms and conditions apply.

To avoid the ambiguity that these scenarios create and to minimise the chances of being involved in a costly dispute, it is important that it is clear which terms and conditions govern the relationship between the parties. The case law demonstrates that if parties proceed without agreeing on which terms and conditions apply, usually it will be determined that the last terms and conditions to be exchanged govern the relationship. While in these circumstances there is no express acceptance by a party of the offer of the terms provided by the other party, the court can find that there has been acceptance by conduct.

A worthwhile consideration if you are entering into an ongoing relationship that will involve multiple transactions is an “umbrella” or “master” agreement that sets out the terms and conditions that will apply to the future orders and supplies.

If you or someone you know wants more information or needs help or advice about avoiding a “Battle of the Forms”, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

A copy of the case can be found here:

http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/qld/QDC/2019/237.html?context=1;query=john%20r%20keith;mask_path=

 

 

The Parties’ Minds over Matter: terminated contract versus quantum meruit

The High Court of Australia has recently handed down a rare and significant judgment in the area of building and construction law.
A story that began with the construction of two townhouses in Victoria has led to the shaking of the foundations of the law around contract, repudiation and claiming a quantum meruit.
This decision affects the common situation in which a builder and a developer have a torn-up contract, and the builder is claiming payment for the work they started but were not able to finish.
We explore Mann v Paterson Constructions Pty Ltd [2019] HCA 32 below and provide an overview of the key takeaways from this ruling in relation to quantum meruit.
The High Court also considered some interpretation issues in relation to the Victorian Domestic Building Contract Act 1995. These are not considered here.

Quantum meruit

Before analysing the case, it is useful to outline what is a claim for quantum meruit.
A claim for quantum meruit, is a claim for a fair and reasonable sum for services rendered, where a developer requests and receives a benefit from a builder.
This is not a claim in contract, which is a claim by Party A to be given that which Party B promised or agreed to give.

Where a contract is still alive between the parties, a claim for quantum meruit is not permitted. Some of the situations in which a claim in quantum meruit may be brought include:
(a) a contract never existed between the parties;
(b) statute prevents a claim in contract, because for example the agreement was for residential building work but it was not in writing; or
(c) a contract was in existence but was void or unenforceable.

Case (c) above was the subject of Mann v Paterson Constructions. In this case, the contract was terminated, so it no longer applied between the parties.
An issue that has been plaguing courts for some time is the following: in a claim for quantum meruit, what if a “fair and reasonable sum” for services performed is greater than what the parties agreed to under the contract? Should the claim be limited to what was agreed to by the parties, even if that agreement was ripped up?
It was an inevitable prize fight between contract and quantum meruit, with a purse of several hundred thousand dollars at stake.

The facts

On 4 March 2014, Peter and Angela Mann (the Manns) entered into a Masters Builders Association domestic building contract (Contract) with Paterson Constructions Pty Ltd (Paterson). Under the Contract, Paterson was to build two double-storey townhouses in Blackburn, Victoria. The Manns were to pay Paterson the amount of $970,000 (incl. GST). During the performance of the Contract, the Manns requested 42 variations without giving the required written notice. Paterson performed these variations.
On 16 April 2015, a little over one year into the project, the relationship between the parties had deteriorated, primarily over claims that variations had been completed and had to be paid.
The Manns through their solicitors wrote to Paterson, stating that they considered the contract to have been repudiated by Paterson. Repudiation occurs where a party demonstrates that it is unwilling or unable to perform important parts of the contract. The Manns “accepted” this repudiation and said that they terminated the Contract.
Paterson denied that its conduct had been repudiatory. After some correspondence, Paterson claimed that the Manns’ purported termination was in fact repudiation by the Manns. Paterson said that as a result, it terminated the Contract.

The case history: from VCAT to the High Court
Paterson commenced proceedings in the Victorian Civil and Administrative Tribunal, seeking damages.
Senior Member Walker of VCAT found that the Manns had wrongfully repudiated the contract. Paterson was awarded damages on a quantum meruit. Once rectification of defects was considered, damages were $660,526.41.
The remarkable aspect of the ruling was that the damages awarded to Patterson for quantum meruit were much higher than the contract price that Paterson would have been entitled to had the Contract remained alive. Senior Member Walker was acutely aware of this, but considered the damages to be a fair and reasonable sum.
The Manns appealed first to the Supreme Court of Victoria, however Cavanough J dismissed the appeal. The Manns then appealed to the Court of Appeal.
The Manns argued that the decision-makers had made an error. They argued that the error was that the decision-makers had decided that where a contract is terminated, it is as though it never existed and, as a result, they did not have to consider the costs actually incurred by the builder carrying out the work or the discrepancy between the amount awarded and the contract price.
The Court of Appeal also dismissed this appeal, ruling that only the High Court could overturn a principle that was said to be well-established. Not to be swayed, the Manns embarked on this challenged and took their case to the High Court.

The High Court judgment

All seven judges allowed the appeal. After two unsuccessful appeals, the third and last appeal by the Manns was a success.
The seven judges accepted that the law as currently interpreted had to be corrected.
Three judges refused to allow a claim on a quantum meruit where a contract between the parties had been terminated.
The four other judges accepted that a claim for quantum meruit could be made in limited circumstances: where work was commenced but not completed at the time of termination. However, any claim for quantum meruit was limited by the contract price that was agreed to by the parties.
Where the contract required the principal to pay only once for the “entire” work and labour performed by the contractor, and the contract is terminated before completion, then the contractor will be able to claim for all of the work it completed on a quantum meruit. This is because at the time of termination, the contractor had not yet accrued the contractual “right” to be paid – it had not completed all of the work.
However, the situation was different for the case of the Manns. Under their Contract, the principal was required to pay separate sums upon completion of certain stages of the work and labour. Paterson had fully completed some of these stages, while there was at least one stage which remained incomplete at the time of termination.
The majority decided that for completed stages, these could only be claimed under the contract, and damages would be assessed by reference to the contract price. It was only the incomplete stage that could be claimed on a quantum meruit.
The other important finding by the majority was that the amount to be claimed on a quantum meruit should not in the ordinary case exceed a fair value calculated in accordance with the contract price. This judgment left open the possibility of exceptions, including for example where constant breaches by a principal resulted in a huge cost overrun by the builder.
The Court was at pains to point out that, where a contract is still alive between the parties, parties cannot claim on a quantum meruit for a reasonable sum for the services rendered. The parties made an agreement that is still enforceable. That is all that courts will enforce.
What the decision did not resolve was the common case where a contract provides for progress payments, which are made on account only and are not final entitlements. This issue might be before the superior courts before long.
Conclusion

In some very complicated and differing judgments, the High Court has given a lot of clarity to an issue that has clouded the minds of lawyers, tribunal members and judges alike.
Builders and developers should be aware that even if there is no contract, where work is requested by developer and completed by a contractor, there will be a good case for a claim for damages.
Where a contract existed between parties at some point, this will be a significant factor in calculating the amount of damages, even where it is terminated.
If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

Expertly building evidence: Lessons learned from White Constructions

Case note: White Constructions Pty Ltd v PBS Holdings Pty Ltd [2019] NSWSC 1166

In White Constructions, Hammerschlag J considered the issue of delay damages. White Constructions was the property developer of a site in Kiama NSW. The development involved the development and subdivision of 100 lots and required design and installation of sewer infrastructure. These works required a s 73 Certificate issued by Sydney Water before subdivision could occur. White Constructions appointed the Defendants to assist with the design and approval works needed as part of the development and resulting subdivision. A substantial part of the judgment was devoted to the preparing and designing of the sewer designs and the approval of Sydney Water, including the different types of sewage systems, Sydney Water’s preference in relation to these systems, preparation of option reports and correspondence between the Superintendent, the Defendants and Sydney Water.

The discussions between Sydney Water, the Superintendent and the Defendants took considerable time. As a result, White Constructions alleged that the delay in coming to the approved sewage design caused White Constructions to be liable to their building contractor for delay damages. In arguing the substance of the dispute, the parties tendered complex expert evidence. As a result, the Court appointed an expert to assist in interpreting and assessing the expert evidence presented.

With the expert’s assistance, Hammerschlag J criticised the experts’ approach to determining the delays attributable to the sewage works. Both experts used methods derived from the United Kingdom Society of Construction Law, the Delay and Disruption Protocol (the Protocol) in analysing the delay. The Protocol identifies six different methods of delay analysis, but Hammerschlag J held that the inclusion of a delay analysis method in the Protocol does not necessarily mean it should be used. While the Protocol methods have been endorsed in other cases, the analysis of delay must pay close attention to the actual evidence of what was happening on the ground of the project. The delay analysis must show and prove that, on the balance of probabilities, the delay:
• played a role in delaying the project;
• how it delayed the project; and
• how much it delayed the project.

This approach is in line with the common law common-sense approach to causation which the High Court referred to in March v E&MH Stramare Pty Ltd (1991) 171 CLR 506.

A lot of value in White Constructions comes from Hammerschlag J’s analysis of what evidence is needed in cases where delay is alleged in construction matters. Firstly, the Court stated that close attention must be paid to the facts of the matter, rather than the opinion of experts. This evidence should not be general in nature, but specific in that it is able to precisely identify delays in the project. This evidence should be a contemporaneous record of the project. A classic example of this kind of evidence is a site diary which records the day to day of the project, as well as specific cause and effect of each delay.
• what works were undertaken/completed;
• the instructions received from the client;
• the delays/any complaints of delays and how they have affected other activities;
• which personnel were onsite; and
• any other relevant details

The Court found that it was important that the contemporaneous record identified which activities were adversely affected by the delays. For example, if the works of one contractor were delayed and, as a result, caused delay for another contractor, the site diary should record these details. Failing to record these details means that it is harder, if not near impossible, for parties to establish that there was in fact a causal link and adverse effect.

How does White Constructions impact a project?

White Constructions shows the importance of proper project documentation. Most importantly, the site diary, or similar contemporaneous document, should be the primary record of the specific of what is happening on site and how specific events affect different contractors. Proper record keeping, while it may be administratively burdensome, allows the Court to analyse and determine the proper entitlements of the parties if the project ever comes into dispute. While other evidence can be adduced in pursuit of proving delay, it runs the risk of being generalist in nature and not enough to prove the causal link of the delays.

The lessons learned in White Constructions may also have some application in respect of other delay related mechanisms under construction contracts. For example, a comprehensive site diary would also be useful in determining any claim for an EOT claim. However, it is important to note that these types of claims are largely determined by the contract and its processes for determining what is in fact an EOT. Nevertheless, contemporaneous records of what has happened and how this has affected the project is useful in establishing a claim by a party as to their entitlements.
Another important point that comes from White Constructions is ensuring experts are given the proper lay evidence to ensure that they can properly opine on the project. While it does not displace the role of lay evidence such as site diaries, it can assist in assisting the Court in considering and making appropriate decisions on what the parties are entitled to.

If you or someone you know wants more information or needs help or advice, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au.

What’s in a name?: The Supreme Court Reviews ambiguity in SoPA Payment Claims

Those who are familiar with the Building and Construction Industry Security of Payment Act 1999 (‘the Act’) will likely be aware that the provisions it contains are quite strict, and can leave parties out in the cold when they fail to comply with what are seemingly administrative oversights.

However, the overarching purpose of the Act is ultimately to keep money flowing through the construction system, aimed at ensuring those who perform building and construction works, or supply goods and services to construction projects are able to be paid.

The Supreme Court of New South Wales, in the recent decision of decision Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd [2019] NSWSC 1743 reminded parties of this fact when asked to turn its mind to issues of ambiguity in payment claims and whether a party could be allowed to have an adjudication determination quashed on the basis of technicalities.

The Facts

The facts of the case were reasonably clear and did not form a substantial component of the dispute between the parties. In September 2016, Modog Pty Ltd (‘Modog’) entered into a design and construct head contract with Wyndora 36 Pty Ltd (‘Wyndora’) for the development of senior living apartments at a property located along Wyndora Avenue in Freshwater. Modog then entered a sub-contract with ZS Constructions (Queenscliff) Pty Limited (ZS Queenscliff) for the demolition of the existing structure and the construction of the new seniors living complex, including apartments, basement parking and associated site works (‘the Sub-Contract’).

In March 2018, the Sub-contract was varied to engage ZS Queenscliff to provide Construction Management and procurement services, for which ZS Queenscliff would receive a project manager’s allowance, a contract administrator’s allowance and payments for subcontractors and suppliers to be made at the end of each month.

ZS Queenscliff was part of a wider group of entities, which also included ZS Constructions (Australia) Pty Ltd (‘ZS Australia’) and Zaarour Investments Pty Ltd had been engaged as the project manager for the project. Mr Christopher Zaarour was employed by ZS Queenscliff, was the director of ZS Constructions Pty Ltd and was the primary contact with Modog for the duration of the project.

The further sub-contracts on the project were administered by ZS Queenscliff, however invoices from sub-contractors had historically been issued to a mixture of Modog, Wyndora and ZS Australia, as opposed to ZS Queenscliff. During the course of the project, ZS Queenscliff and Modog adopted a progress payments process in which Mr Zaarour would, on behalf of ZS Queenscliff, prepare and email a payment summary sheet listing all amounts due for procurement and management services, as well as materials acquired, and work completed by trade contractors.

On 29 August 2019, Modog issued a Show Cause Notice to ZS Queenscliff and terminated the Sub-contract on 13 September 2019.

The Payment Claim and Adjudication

On 11 September 2019, ZS Queenscliff served a payment claim on Modog which was comprised of seven emails, from Mr Zaarour using an email signature from Zaarour Sleiman and containing a reference to ZS Australia in fine print at the bottom of the email.

The emails attached supporting invoices from suppliers, and followed the process adopted in earlier progress payments, where sub-contractors and suppliers had addressed their invoices to a mixture of the entities involved with the project, and not to ZS Queenscliff, who were issuing the payment claim.

The payment claim served on Modog was, as highlighted by the Court, unclear in the following respects:

  • It did not specifically assert that it was a progress payment claim under the Act;
  • It did not specify the reference date or refer to the clause within the contract upon which the progress payment was based;
  • It failed to ask Modog to pay ZS Queenscliff;
  • It did not include a total for the sum claimed, only determinable by a thorough review of the claims

Modog, in turn responded to the payment claim with payment schedules which certified the amount payable in respect of the Claim was nil.

The matter proceeded to an adjudication, where, on 23 October 2019, the adjudicator found in favour of ZS Queenscliff in the sum of $89,111.89 (GST incl.).

Modog challenged the decision of the adjudicator before the Supreme Court of Sydney, seeking orders that the Adjudication Determination of be deemed void, that the determination be quashed, and ancillary relief.

The Disputed Issues

At the hearing, Modog challenged the decision of the adjudicator on 3 primary grounds:

  • Whether the 11 September 2019 emails constituted a payment claim within the meaning of s13(1) of the Act;
  • If the emails did constitute a payment claim, whether the claim was sent by ZS Queenscliff as a person who was entitled to seek a determination for the purposes of s17 of the Act; and
  • Whether the Adjudicator has committed a jurisdictional error by allowing multiple payment claims in respect of a single reference date?

The Arguments, Decision and Reasoning

Issue 1: Was there a Payment Claim:

The argument advanced by Modog was effectively, ZS Queenscliff had not submitted a valid payment claim as they did not specifically demand payment from Modog (i.e.: did not say, Modog must pay ZS Queenscliff the sum of $X.). Modog relied on the fact that the invoices provided in support of the payment claim, were addressed to various entities, not ZS Queenscliff, and that ZS Queenscliff could not establish they were actually entitled to the money claimed for.

Modog argued that ZS Queenscliff had indicated invoices would be sent at a later time, which Modog was to pay as directed and that, pursuant to the Court’s decision in Quickway Constructions Pty Ltd v Electrical Energy Pty Ltd, ZS Queenscliff had not served a payment claim pursuant to clause 13(1) of the Act.

The counter argument raised by ZS Queenscliff relied upon the case of Icon Co NSW Pty Ltd v Australia Avenue Developments Pty Ltd [2018] to support their position that Modog had simply misunderstood the payment claim, and that this could not be a basis for quashing the adjudicator’s decision. ZS Queenscliff argued the fact that the invoices were addressed to other parties did not invalidate the payment claim as they were simply disbursements to be paid to suppliers.

Ultimately, the Court favoured the position raised by ZS Queenscliff, noting there is nothing within the Act that requires a payment claim to state the total of the sum claimed. The Court stated and that even if the invoices in support of the payment did require Modog to direct payment elsewhere, as long as ZS Queenscliff had an entitlement to the sum under the contract, this did not invalidate the payment claim itself.

Issue 2: Was the Payment Claim Sent by ZS Queenscliff?

Modog then raised the issue that, as the 11 September 2019 email enclosing the payment claim was sent by Mr. Zaarour, using an email signature that did not belong to ZS Queenscliff, and the only legal entity named in the email was ZS Australia, the payment claim had not been served by the appropriate entity for the purposes of s17 of the Act.

The counter argument raised by ZS Queenscliff was that these errors were irrelevant in light of the fact that the previous correspondence between the parties had been exchanged in much the same way, including when detailing the terms of the caries contract agreements, and the point was not taken at the contract negotiation stage.

The Court ultimately agreed again with ZS Queenscliff, making the point that not was not actually disputed that ZS Queenscliff was entitled to make the payment claim and made the determination that the email payment claim had simply been sent by Mr Zaarrour in his capacity as the project manager, on behalf of ZS Queenscliff.

Issue 3: Was there an issue with multiple emails being used to comprise the payment claim?

Finally, Modog sought to raise the point that multiple invoices had been served on them in the emails from ZS Queenscliff and that it was not open for ZS Queenscliff to seek to have all invoices adjudicated.

Relying on the decision of the court in Rail Corporations of NSW v Nebax Constructions [2012] NSWSC6, this point ultimately failed as well, on the basis that, when viewed in the context of the previous conduct between the parties, and the nature of the invoices supplied, Modog had been more accurately provided with one payment claim, and a number of invoices in support of the claim.

What does this decision mean?

This decision serves as a timely reminder to parties that the Building and Construction Industry Security of Payment Act 1999 (‘the Act’) is intended to allow money to flow through to sub-contractors. Parties should be mindful of this purpose when considering whether to attempt to argue a payment claim on the basis of a minor technicality or ambiguity.

If you or someone you know wants more information or needs help or advice in relation to NSW’s security of payment legislation (or any other state’s or territory’s equivalent), please contact us on (02) 9248 3450 or email info@bradburylegal.com.au.

See more! The superintendent and the principal

To those working at building sites, the term “superintendent” may seem as familiar and self-explanatory as “extension of time” or “practical completion”.

However, when disputes arise fine distinctions become important. Even experienced builders, just like experienced judges, have trouble working out what the superintendent is required to do in contentious times.

This is because the superintendent has multiple duties to different parties. They have the difficult job of navigating conflicting interests, and this becomes much harder when the relationship between the principal and contractor has deteriorated.

Although the precise duties of a superintendent will always depend on the terms of the contract, we will describe in general terms some obligations that participants in a building project must be aware of. We will also take a real-life case study to illustrate some of these points.

The role

Sometimes called “contract administrator” or “architect”, the superintendent’s precise role will vary as it is largely determined by the terms of the contract between the principal and the contractor. The parties may agree by contract to restrict or widen the superintendent’s functions, and courts will generally allow this.

However, there are a number of general commonalities to this role across different projects. In most cases, the superintendent has a dual role or function:

  1. On the one hand, the superintendent will often be the agent of the principal, and will perform functions on behalf of the principal such as issuing directions to the contractor, varying the scope, of works, making approvals, or receiving notices;
  2. On the other hand, the superintendent will often be responsible for certifying, assessing and valuing items under the contract, including progress claims, extension of time claims, liquidated damages, and practical completion.

The principal is required to ensure that for the second set of functions above, the superintendent act “honestly and fairly” (or otherwise, “reasonably and in good faith”).

Often this is an obligation to exercise impartial and independent judgment, and to reach a decision without taking improper considerations into account. They should afford procedural fairness to both parties, giving notice of the issues it is considering and allowing both parties to communicate to them their submissions.

In general, for these second set of functions, the interests of not only the Principal, but also those of the Contractor, must be considered. All too often, superintendents fail to understand their obligations of independence and this triggers court proceedings.

In practice, this dual role can be complicated. Superintendents are generally appointed by the principal. They are very often either a part of a firm consulting to the principal, or they are an employee of the principal. Even if there is no pressure exerted by the principal, they are paid by the principal. Exercising their judgment impartially in this context can be very challenging.

A superintendent is not a party to the contract. It is unlikely that they will themselves be the subject of court proceedings. However, their decisions may give rise to disputes as between the principal and contractor.

Case Study

The New South Wales Court of Appeal has given some guidance for what is considered appropriate action by a superintendent under a construction contract, in the case Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211.

Peninsula and Abigroup entered into an AS2124 building contract. Abigroup sought payment of a progress claim. The following month, Peninsula issued a notice to Abigroup requiring Abigroup to show cause that a contractual right to terminate should not be exercised, and cross-claimed for liquidated damages under the contract.

In response, Abigroup moved to terminate the contract, claiming that Peninsula had breached the then Trade Practices Act (which has since integrated into the broader Australian Consumer Law), for failing to disclose an agency agreement for design and construction projects between Peninsula and the superintendent.

The Court considered the whether Peninsula contravened the Trade Practices Act for failing to disclose to Abigroup the agency agreement with the superintendent?

On appeal, Hodgson JA held:

“the superintendent is the owner’s agent in all matters only in a very loose sense, and that, 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.”

The Court concluded that the superintendent is to exercise their power in the interests of both parties and, is to act honestly and impartially and not as an agent of the owner in undertaking certifying functions such as assessments of variations, delays and progress claims.

There was also an argument that the superintendent should have but failed to exercise its power to award an extension of time. It was common ground that Peninsula Balmain had caused delay, but that Abigroup had not applied for the extension of time or followed the proper procedure. However, the extension of time clause included a paragraph that read: “Notwithstanding that the Contractor is not entitled to an extension of time the Superintendent may at any time and from time to time before the issue of the Final Certificate by notice in writing to the Contractor extend the time for Practical Completion for any reason.”

Hodgson JA found that, even though Abigroup 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”. In the facts of the case, the finding was that if the superintendent had acted fairly and impartially, they would have awarded the extension of time. The date for practical completion was extended, and liquidated damages were reduced.

This ruling was dependent on the particular extension of time clause of the case, and the facts of the dispute. However, it powerfully reinforces the point that even though the superintendent is the agent of the principal, they are obliged to act honestly and fairly in discharging certain functions, unless the contract says otherwise.

Conclusion:

In conclusion, the role of a superintendent is very demanding and requires a high level of understanding of contract law, the responsibilities, the specifics of the project, and a high skill of identifying and managing conflicts. If you have any queries about your obligations under a construction contract, please contact us on +61 2 9248 3450 or email info@bradburylegal.com.au

 

 

The benefits of mediation in a commercial dispute

The popular image of a lawyer is a person keen on prolonging an expensive court action.

More often the opposite is true. Lawyers know that court cases are expensive and that clients are fearful that legal costs could escalate to an intolerable level. They are also all too aware of how long and unpredictable litigation can end up becoming. Lawyers interested in preserving long-standing relationships with their clients will often recommend alternative dispute resolution options – mediation being one.

Mediation allows parties to remain in control of their own disputes and outcome while facilitating parties to tell their side of the story to the other party and the mediator.

What exactly is mediation?

Mediation is one form of alternative dispute resolution with others including Early Neutral Evaluation, expert determination and arbitration.

In essence mediation is an informal conflict resolution process brought before an independent, neutral third party. Mediation gives the parties the opportunity to discuss their issues, clear up misunderstandings, and find areas of agreement in a way that would never be possible in a court case.

Mediation is often voluntary. Typically the mediator has no authority to make a binding decision unless both parties agree to give the mediator that power which is dealt with in advance of the mediation commencing.

When parties should consider mediation

In practical terms mediation is likely to be quicker and more cost-effective than the more formal processes of arbitration or litigation (in court). Mediation should be considered as early as possible after a dispute has arisen. It is particularly appropriate where a dispute involves complex issues and/or multiple parties.

In addition, mediation can be implemented prior to, or in conjunction with, other forms of dispute resolution such as arbitration or court proceedings.

In circumstances where privacy and confidentiality are important, mediation enables parties to preserve these rights without public disclosure. This often leads to more satisfactory outcomes for both parties.

Advantages of mediation

Some of the many advantages to mediation are as follows:

You get to decide: The responsibility and authority for coming to an agreement remain with the people who have the conflict. The dispute is viewed as a problem to be solved. The mediator doesn’t make the decisions, and you don’t need to “take your chances” in the courtroom. In doing this however, naturally you need to understand your legal rights so that you can make decisions that are in your own best interests.

The focus is on needs and interests: Mediation examines the underlying causes of the problem and looks at what solutions best suit your unique needs and to satisfy your interests.

For a continuing relationship: Colleagues, business partners, and family members have to continue to deal with each other co-operatively. Going to court can divide people and increase hostility. Mediation looks to the future. It helps end the problem, not the relationship.

Mediation deals with feelings: Each person is encouraged to tell their own story in their own way. Discussing both legal and personal issues can help you develop a new understanding of yourself and the other person. You are encouraged to see things from the other person’s perspective.

Higher satisfaction: Participants in mediation report higher satisfaction rates than people who go to court. Because of their active involvement, they have a higher commitment to upholding the settlement than people who have a judge decide for them. Mediations end in agreement about 80 percent of the time and have high rates of compliance.

Informality: Mediation can be a less intimidating process than going to court. Since there are no strict rules of procedure, this flexibility allows the people involved to find the best path to agreement.  Although it is normal for any dispute resolution to be taxing emotionally, mediation is a process that is much less confronting and is conducted in a much more comfortable environment than litigation.

Faster than going to court: Years may pass before a case comes to trial, while a mediated agreement may be obtained in a couple of hours or in sessions over a few weeks.

Lower cost: The court process is expensive, and costs can exceed benefits. It may be more important to apply that money to solving the problem, to repairing damages, or to paying someone back. Mediation services are available at low cost for some types of cases. If you can’t agree, other legal options are still possible. Even a partial settlement can lessen later litigation fees.

Privacy: Unlike most court cases, which are matters of public record, most mediations are confidential.

Where mediation is not the solution

With mediation a resolution is not guaranteed. There is the potential that parties may invest time and money in trying to resolve a dispute out of court, and still end up having to go to court. Ultimately it is a call that should be made in consultation with an experienced lawyer.

Mediation should not be a solution in circumstances where it is not appropriate. Where a court remedy is necessary such as an injunction or specific and urgent court orders, mediation is not helpful.

It must also be remembered that the mediator has no power to impose a binding decision on the parties. Therefore, even after the mediation the matter may be unresolved and you may still need to go to court. This is where the selection of the mediator requires careful consideration by all parties.

Fundamentally, mediation rarely produces a satisfactory resolution unless both parties to a dispute are committed to a resolution by this way. If one party does not cooperate or engage with the processes, mediation will be fruitless.

Conclusion

Mediation is an alternative to financially and emotionally costly and time-consuming processes such as using the court system. It is suitable for people who are willing to communicate with the other party and attempt to better understand and settle their dispute with the help of a trained third party.

To find out more call us on +612 9248 3450 or email info@bradburylegal.com.au.