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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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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