Contract administrators are in the sometimes awkward position of having to act for the client one minute and being impartial the next. Here’s what happened when one got the balance wrong
I recently wrote about the dual role of contract administrators (2 February). When an architect or other professional is engaged to administer a contract, they usually have two functions. They act as the employer’s agent when, for example, ordering variations. However, when they have to value and certify what is owed to the contractor, or to decide extensions of time, they have to act as an impartial middleman, favouring neither employer nor contractor. If they fail to do this, their decisions may be held invalid and ignored.
In the most recent edition of the Construction Law Journal, an Australian case is reported that highlights the difficulties of this middleman role. Kane Construction vs Sopov concerned a development in Melbourne. An Australian standard form was used, which required the administrator, called the superintendent, to act “fairly and honestly … within a reasonable time” and to arrive at “a reasonable measure or value of work quantities or time”.
By the time the dispute with the contractor arose, Mr Sopov had fallen out with his original superintendent who had resigned. The new superintendent stepped into what would prove to be a fraught project. The row with the contractor erupted when it submitted a claim for AUS$1.2m (£499,000), including about $871,000 for variations. The superintendent certified only $340,000, leaving out virtually all the variations. The employer then deducted liquidated damages for delay, leaving a balance of about $132,000. A breakdown in the relationship followed, and the contractor downed tools.
A criticism made by the contractor was that the new superintendent had failed to act as an independent certifier. It was said that he appeared to regard his role as being the employer’s quantity surveyor and saw no distinction between that and the role of superintendent. Complaint was made that
he and Mr Sopov together investigated and discussed what sums could be deducted from the sums claimed by the builder and that no mention of these discussions was made to the contractor. It was alleged that this was not the behaviour of an honest, fair, reasonable and independent superintendent whose job it was to ensure that both the employer and the builder could put their position forward.
An administrator’s job is never simple but with an active employer it is particularly tricky – it’s the employer who pays his fees
The contractor also alleged that Mr Sopov had exerted undue influence on the superintendent, but the judge was not prepared to make this finding. However, he did find that the superintendent fell below the necessary standard of impartiality. He said his approach had been one of avoiding making decisions while endeavouring to keep discussions alive between the employer and the contractor in the hope they would reach agreement. The decisions he made were late.
The judge said he had an undesirably close relationship with Mr Sopov. He concluded that his performance was neither competent nor independent.
He had failed to understand the need both to be independent and to be seen to be independent. He was not dishonest and he had the best intentions to resolve disputes. However, that was not his role.
One has to feel some sympathy for the superintendent. An administrator’s job is never simple but with an active employer it can be particularly tricky. It is the employer who engages the administrator and pays his fees. Not always easy in those circumstances for the administrator to remain impartial when making his middleman decisions.
Tim Elliott QC is a barrister and arbitrator specialising in construction at Keating Chambers