News on 18 Dec 2020

Dear customers, friends and business associates,

As this challenging year draws to a close, we trust that some of the difficulties of the last 12 months are now behind all of us.  We would like to express our sincerest appreciation for your support throughout 2020.

We hope we were able to assist you. This year end means the beginning of a new one with new possibilities and we are dedicated to continuing to help you reach your goals in 2021.

From all of us at Grandwide Consultants, we want to say a big thank you for being an invaluable part of our business and wish you a Merry Christmas and a bigger and better year ahead.

Our office will close on Friday, 18 December 2020 and return on Monday, 4 January 2021. 

Regards,

Donny Tsui

News on 15 Dec 2020

What is the Role of the Superintendent?

You will most likely come across the term ‘superintendent‘ in a construction contract. We know that the principal is the owner of the construction project and that the contractors are those engaged to carry out various elements of the building work. Below, we set out the superintendent’s role.

The Role of the Superintendent

The superintendent primarily administers the contract, including: 

• Overseeing day-to-day operations; 
• Attending meetings to ensure project aims are being met; and 
• Making decisions on variables that arise under the contract.  

The superintendent’s role under a construction contract, therefore, is two-fold. The principal appoints he or she as its agent and to also act as a certifier.

The Superintendent’s Functions

As an agent of the principal, the superintendent may be tasked with the following responsibilities:

• Assessing the quality of materials and workmanship to ensure they meet contract specifications;
• Reviewing and approving project programs;
• Directing the contractors and employees on behalf of the principal;
• Ordering a postponement or suspension of work; and
• Issuing variation orders.

As a certifier, the superintendent may be required to fulfil some tasks including:

• Assessing progress claims;
• Assessing claims for extensions of time;
• Assessing claims for extra payment either under the contract or as a result of variations to the contract including conducting valuations; and
• Issuing progress certificates.

The Superintendent’s Obligations: Balancing Competing Interests

The superintendent’s obligations will vary depending on the type of contract used. Some of the Australian Standards contracts require the superintendent to act honestly and fairly, and others require good faith and reasonableness. Not every contract will require the superintendent to be both the agent and independent certifier – but when they do, the importance of these obligations dramatically increases. We turn our attention below to several court cases which illustrate the importance of these duties and how they affect the decisions a superintendent can make. 

Peninsula Balmain Pty Limited v Abigroup Contractors Pty Limited [2002] NSWCA 211

In this case, Peninsula Balmain (Peninsula) engaged Abigroup Contractors (Abigroup) on a townhouse and apartment residential construction project. Separately, Peninsula entered into a project management contract with a superintendent to act as their agent in the design and construction of the project.

The agreement was based on the standards of AS2124 and provided that Peninsula was to ensure a superintendent was appointed at all times. Clause 23 also required, among other things, that the superintendent acted honestly and fairly.

Clause 35.5 outlined Abigroup’s obligations regarding an extension of time. It also provided that the superintendent could unilaterally extend the time for practical completion (the time by which Abigroup must substantially complete the works, except for minor defects). Abigroup was late in completing the works, and Peninsula terminated the contract.

The key issue here was the superintendent’s unilateral power to grant extensions of time. The Court concluded that the superintendent must exercise this power in the interests of both parties, and could do so irrespective of the time limits the contract provided. Regarding the superintendent’s certifying functions, Judge Hodgson said that the superintendent must act honestly and impartially and not as the owner’s agent.Certifying functions includes assessment of variations, delay and progress certificates.

Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530

In this matter, Perini Corporation (Perini) entered into a building contract with the Commonwealth which appointed the Director of Works as the certifier. The Director of Works could, among other things, grant extensions of time for completion.

Perini made numerous requests for extensions of time, most of which the Director of Works refused due to the Department’s policy with some requests partially granted. Perini argued that this was a breach of the Director’s role as certifier for the following reasons:

• The Director was obliged to act impartially; and
• It was an implied term that the Commonwealth was obliged to ensure the Director acted impartially.

Perini based their argument on the notion that the Director’s obligations to make decisions in line with Department’s policy impeded their ability to act fairly and impartially.

The Court held that there was a duty for the Director to act fairly and to use his or her discretion in consideration of the rights of the respective parties. That duty included considering but not allowing the Commonwealth’s policy to control their decisions. This case indicates that typically if the contract does not expressly provide, Courts will imply a term importing an obligation of fairness and impartiality on the superintendent.

Walton v Illawarra [2011] NSWSC 1188

Here, the superintendent was engaged firstly as the project architect reporting to the Principal (Illawarra) and secondly, as the superintendent. Walton, the contractor, requested an extension of time and the superintendent assessed and awarded. A dispute arose regarding the superintendent’s decisions.

Again, under the contract the superintendent was required to act honestly and fairly and determine within reason when to grant an extension of time. If she did not arrive at a reasonable decision, then Illawarra would be in breach of the contract. In this case, the issue was that the superintendent was employed in dual roles on a project. This places the Principal at risk of being in breach of the contract if the superintendent fails to act honestly and fairly.

McDougall J stated that the superintendent’s employment as the project architect “put her in a position where the possibility of conflict was real, and the appearance of bias was likely to result“.

Walton successfully argued that the superintendent’s decisions did not meet this requirement. In concluding that Illawarra was therefore in breach of the contract, the court stated that the superintendent was guilty of aligning herself entirely with the interests of the Principal.

Key Takeaways

The superintendent’s role with its dual character is inevitably conflicting. It imports an obligation to act fairly or with reasonableness in consideration of the parties’ interests, which will not necessarily align. Although loyal to the Principal, especially given the Principal provides the superintendent with an income, she or he must be capable of making unbiased decisions when it comes to assessing, valuing and certifying the project variables.

Ultimately, the role of the superintendent is demanding, requiring an understanding of contract law, the scope of their responsibilities, the specific outcomes of the project, and the skill of identifying and managing conflicts. If you have any questions about your obligations under a construction contract, get in touch with our building and construction lawyers on 1300 544 755. 

Source from Legal Vision: https://legalvision.com.au/what-is-the-role-of-the-superintendent/

 

News on Jun 2020

NSW Building & Construction Industry Reforms – The Design and Building Practitioners Act 2020

The Design and Building Practitioners Act 2020 (the DBP), of which sections of the legislation, Statutory duty of care, has commenced on 11 June 2020. Registration of building designers, builders and engineers; declaration of building design to be compliant with the Building Code of Australia and insurance requirements of the design practitioners will commence from 1 July 2021.

The objective of the Reforms is to ensure NSW’s building industry is constructing trustworthy buildings and delivering quality projects to consumers. The Reforms seek to increase the standard of current works, ensuring all work and materials used onsite are compliant with the Building Code of Australia (BCA) and Australian standards.

Under the DBP, any person who performs construction work has a duty to exercise reasonable care to avoid economic loss caused by defects arising from their construction work on a building. The types of building practitioners who will owe the duty of care will include builders, subcontractors, engineers, architects, building product/material suppliers and manufacturers, project managers and possibly owner-builders.

That duty of care is owed to each owner of the land where the construction work is carried out and to each subsequent owner of the land, including owners corporations and owners of individual lots.

The statutory duty of care in the DBP is retrospective for a period of 10 years prior to the commencement of the act (i.e. back to 11 June 2010). The act specifies that any economic loss caused by a breach of the duty of care applies if the loss first became apparent within the 10 years immediately prior to the commencement of the act.

There is an insurance requirement in the legislation for design practitioners to be indemnified and adequately insured. The new provisions that will come online with the DBP from 1 July 2021. Economic loss can be calculated based on money spent or an assessment done by a quantity surveyor, and includes consequential loss (like alternative accommodation).

 

NSW Building & Construction Industry Reforms – The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020

The Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 (the RAB) commenced on 1 September 2020. It provides

1. for monitoring works to prevent issues prior to the issuance of an Occupation Certificate through monitoring the quality of works. It represents a targeted proactive compliance regime.
2. for proactive investigation and rectification of serious defects in residential apartment buildings by the Secretary of the Department of Customer Services.

The residential apartment sector of the construction industry is reformed as follows:

1. Developers are required to give the Department of Customer Service at least six months’ notice prior to applying for an Occupation Certificate.
2. The Building Commissioner, through the Department of Customer Service, will be monitoring developments prior to the issuance of an Occupation Certificate and has developed a risk matrix assessment tool to identify high risk developers and certifiers that he considers should be monitored.
3. Occupation Certificates may be refused and registration of a strata plan may be prohibited if:

1. Six months’ notice isn’t provided.
2. There is a serious defect (defined below) in the building.
3. A building bond required by the Strata Schemes Management Act 2015 has not been given.
4. The Building Commissioner has sweeping powers to investigate works including the powers to examine construction plans, specifications and details and order destructive testing of works where deemed necessary.

Reforms effective from 1 September 2020:-

1. Starting from 1 September 2020, the OC Audit inspections formally commenced.
2. The RAB commenced from 1 September 2020. There is a six-month transitional period beginning from 1 September 2020 and during the transitional period developers wishing to apply for an Occupation Certificate must notify the Secretary of the Department of Customer Services within 14 days (15 September 2020) after the commencement of the RAB.

News on Aug 2019

Mascot Towers Defects in NSW

The 10-year-old building with 132 apartments, next to the underground Mascot railway station, was completely evacuated in June 2019 after cracks were found in one of the major supporting beams. It is thought that the construction of a neighbouring building, completed in 2019, compromised the foundations of Mascot Towers. The new construction was approved by the local council.

Initial estimates put the repair bill at $7 million but that’s blown out to $32 million plus. An extra $21.5 million in interest on a 15-year loan will bring the final bill to $53.5 million.

 “The design and construction of the shoring system and waterproofing utilised in the excavation of the basement levels of the neighbouring Peak Towers development … has likely caused the erosion of fine particles and the destabilisation of land supporting Mascot Towers,” the update states. Preliminary soil testing also indicates there has been a “significant loss of soil bearing capacity” through the creation of voids or zones of very loose sand substrata compared to tests done before construction.

60 Minutes can reveal new evidence that ALAND was not required to meet its obligation to fix any damage its construction site might have caused next door at Mascot Towers. The owners of Mascot Towers claimed when development company ALAND excavated its building site next door, it ended up causing a hole underneath Mascot Towers which literally made the building sink.

Incredibly, the occupation certificate was signed off on just 11 days before the structural damage at Mascot Towers was discovered and the residents were evacuated. 60 Minutes can reveal ALAND’s occupation certificate for its apartment block excluded an important condition which the company was obliged to fulfil: a “make good clause” that would force the company to fix any damage its own construction might have caused to Mascot Towers. In the construction industry, an occupation certificate is signed off by a private certifier hired by the developer. It gives the developer the green light to sell the apartments and make a profit. Conflict of interest is the issue that has to be investigated.

David Chandler, who oversaw construction of Parliament House in Canberra, has been assigned by the NSW government to reform the whole building and construction industry in NSW.

A series of newsletters regarding the NSW Building Reforms will be released.

News on Jan 2018

Opal Tower Defects in NSW

Opal Tower is a 30-storey high residential tower located in the suburb of Sydney Olympic Park in the Australian state of New South Wales. It was completed in August 2018. The high-rise residential tower was built by Icon, developed by Ecove and designed by Bates Smart Architects. The building has 392 apartments, with 34 above ground levels and three levels underground. On 24 December 2018 residents had reported loud banging noises, exposed panelling and cracks which mainly affected levels four and 10. All residents were evacuated from the building and relocated to Airbnb and hotel accommodation over the Christmas and New Year holiday period.

The building was approved in June 2015 by the Australian Liberal Party‘s former Planning Minister Robert Stokes as a major building project. Inconsistencies with the buildings structure have largely been related to under-design and lower quality materials. Development weakness is of increased concern, particularly during Sydney’s construction boom to compensate for Sydney’s increasing population density.

The evacuation, which totalled over 3,000 people, led to a report by university deans, with recommendations to create a directory of engineers who work on buildings.

In February 2019, New South Wales announced it would change building laws after the evacuation. The new regulations require the registration of designers, engineers, and architects, with building commissioners appointed to audit their work.

News on Jan 2015

John Holland Purchase Brings First Large Chinese Construction Company To Oz

Laura Close  – Jan 12, 2015

China Communications Construction Company will be the first Chinese company of its size to come operate in Australia. The state-owned company, which ranks as the fourth largest construction group in the world and has a market capitalization of $23.5 billion, bought John Holland, a subsidiary of Leighton Holdings, for $1.15 billion. CCCC specializes in large transport projects, with focuses on bridges, ports and high-speed rail networks.

Lu Jianzhong, president of CCCI, cites significant growth opportunities in the Australian market, including for billions of dollars to be invested in new road and rail projects as one of the main reasons for the acquisition.

“From our perspective, ownership of John Holland is the optimal way for CCCC to participate in this dynamic market as part of our aim to be a global transportation infrastructure business,” shared Lu.

Leighton Holdings’ new chief executive, Marcelino Fernandez Verdes, decided to sell John Holland to strengthen the company’s balance sheet and help restructure the company to focus more on public private infrastructure projects and contract mining.

“The divestment of John Holland supports our focus on further reducing gearing and strengthening our balance sheet so we can be sustainably competitive,” Fernandez Verdes said. “Proceeds will be used to finance future growth, particularly in PPPs.”

Leighton has recently been doing some rearranging—the company acquired Spanish construction group ACS, which is another of the world’s largest construction companies, earlier this year. The sale of John Holland follows the free trade agreement which Australia reached with China in November after the G20 Conference in Brisbane. Around 4,000 employees at John Holland will become employees of CCCC International Holding Limited, a subsidiary of CCCC.

Information sourced from Sunday Morning Herald.

News on Mar 2014

Combustible Cladding at Lacrosse Building in Melbourne

Following the tragic fire at the Grenfell Tower in London in 2017 and the fire at the Lacrosse Building in Melbourne in 2014, new laws have been made for buildings with combustible cladding. The laws are part of a whole-of-government response to the fire safety risks posed by external combustible cladding.

These laws are :-

1. The Environmental Planning and Assessment Amendment (Identification of Buildings with Combustible Cladding) Regulation 2018 (PDF); and
2. State Environmental Planning Policy Amendment (Exempt Development – Cladding and Decorative Work) 2018 (PDF). They commence on 22 October 2018.

Under the Regulation, owners of certain buildings with external combustible cladding are required to register their building with the NSW Government through the simple, user friendly NSW Cladding Registration portal.

For buildings occupied before 22 October 2018, the deadline for registration is 22 February 2019. Owners of new buildings will be required to register their building within four months of the building first being occupied.

Despite the final report to the NSW Government making a range of recommendations for flammable cladding including:

1. The need to disclose to potential buyers or renters when a building contains flammable cladding.
2. That the NSW Government provide substantial funding for the rectification of buildings containing aluminium composite panels, and that these products be banned from the Australian market.
3. That the funding the NSW Government provide for flammable cladding be proportionate to that of the Victorian Government’s $600 million.
4. In circumstances where insurance has not provided a suitable solution to the flammable cladding issue, the NSW Government should take it upon itself to pay for the rectification of flammable cladding.