V601 v Probuild – What happens when a Superintendent fails to assess claims independently?
How should a Principal and Superintendent ensure that a contractor’s claims are assessed fairly? What happens when the Superintendent fails to act independently? Can a contractor recover acceleration costs where an extension of time (EOT) claim is unfairly rejected?
These were some of the questions considered in V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd, a decision by Justice Digby of the Supreme Court of Victoria.
[Maddocks acted for Probuild in the litigation. At the time of publication, V601 has sought leave to appeal. This article may be updated.]
V601 Developments (V601) carried out a mixed use development at a large site in Abbotsford, Melbourne. It engaged Probuild to prepare the site under an early works contract, and then to complete design and construction under a head contract (Contract).
The Contract required V601 to ensure that the Superintendent acted as an independent certifier when assessing EOT claims.
Probuild was delayed in completing the project. Its EOT claim during the project had largely been rejected by the Superintendent. V601 commenced proceeding claiming liquidated damages (LDs) for late completion. Probuild counterclaimed for EOTs, delay damages, acceleration costs, an early completion bonus and payment for a variation.
The Court dismissed V601’s claims and awarded Probuild the EOTs claimed, together with delay damages and other amounts totalling $13.8 million.
Independence of the Superintendent
Digby J found that V601 had breached the Contract by failing to ensure that the Superintendent acted independently when assessing EOT claims. There was:
- evidence of widespread ‘collusion’ between V601 and the Superintendent
- a collective effort "to develop and implement a strategy and tactics to defeat and / or delay, and to minimise…" Probuild’s entitlements
- undue influence on the Superintendent.
The Superintendent’s LDs certificates were set aside. V601’s LDs claim failed.
Probuild’s EOT claims
Completion of the early works had been delayed. Probuild had claimed and been given an EOT under the Contract up to the end of January 2012. However, in the proceeding, Probuild claimed a longer EOT on the basis that early works completion was not achieved until July 2012. It relied on clause 9A of the Contract, which contained a stand-alone EOT entitlement relating to the early works:
"Notwithstanding clause 34, the Dates for Practical Completion under the Contract shall be extended for each day after the 7th October 2011 that Early Works Completion has not been achieved."
V601 argued that Probuild’s claim under clause 9A should be rejected because it was inconsistent with its earlier EOT claim.
It was found that early works completion had been delayed until July 2012 and held that Probuild should not be barred from recovering a full EOT under clause 9A.
Probuild also succeeded on its other EOT claims.
Delay analysis methodology
The parties relied on different delay methodologies for measuring the delays. Digby J held that:
- the EOT provision contemplated a retrospective form of delay analysis, given the inclusion of the words "the delay has affected", and the requirement to measure delay at the time it occurred
- due to the Superintendent’s failure to assess Probuild’s EOT claims properly, a proper assessment of delay had to be undertaken well after Practical Completion
- a retrospective analysis was a more practical, accurate and common sense method of delay
- a prospective assessment is a ‘theoretical forecast’ and is ‘inferior’ to a retrospective method undertaken when the facts are known and actual delay can be assessed.
Probuild claimed that it had accelerated the works in an effort to overcome delay because of the failure by the Superintendent to grant EOTs when it should have. Probuild claimed its costs of additional labour, new site coordinators and additional plant. Probuild advanced the claim on a number of bases as:
- damages flowing from V601’s breaches of the contract relating to the Superintendent’s independence and failures
- the cost of mitigating its loss flowing from V601’s breaches
- costs payable under the acceleration clause, on the basis that the Superintendent’s failure to grant EOT’s amounted to a ‘Direction’ to accelerate.
This type of claim is often described as a ‘constructive acceleration’ claim, a concept not generally recognised by Australian courts. Digby J was not satisfied that there had been any relevant ‘Direction’. But after considering the relevant authorities, His Honour allowed Probuild’s claim as damages for V601’s breaches, and alternatively as mitigation costs.
This is a significant decision. The observations about undue influence on, and collusion with, the Superintendent are important for parties procuring or delivering works, and for lawyers who draft and advise on the administration of contracts. The success of Probuild’s claim for acceleration costs will likely be relied upon by claimant contractors in the future.
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