Having recently arrived in Ireland from Australia, I have been going through a learning curve when it comes to assimilating the things you know as a construction lawyer in Australia and how those same things work in Ireland.

Though many of the key concepts appear to be the same, there are numerous nuances that differentiate some of the principles of construction law here in Ireland. Before I left Australia, the decision in V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd was being widely discussed, and I was curious to understand how the role of the contract administrator fits into Irish construction contracts.

In construction contracts, the contract administrator plays a pivotal role. The contract administrator may be referred to as the Architect (under RIAI contract forms), the Employer’s Representative (under PWC contract forms), or sometimes the Project Manager or Contract Administrator under bespoke forms of contract. Regardless of the title, the principles underpinning the role are the same. This article will explore these principles, considering some of the challenges which can be presented by the often ‘dual’ nature of the role occupied by contract administrators, as well as considering lessons to be learned from recent court decisions, and notably the recent decision from Australia referred to above.

Contract Administrator as ‘certifier’

The duties of the contract administrator as certifier are defined by the contract and may vary according to the type and form of contract employed. When certifying issues under the contract, such as interim payments or whether or not practical completion has been achieved, the contract administrator is required to do so in accordance with the terms of the contract and must act fairly and impartially as between the parties. Similarly, where the contract administrator is determining claims, s/he must do so based on the respective rights and obligations of each of the contractor and the employer.

Two Hats – Dual Roles

The role of the contract administrator can be complicated however by the fact that often, he or she is also discharging a second role. So, what ‘hats’ does the Architect typically wear under the RIAI contract, say? If you look at the RIAI contract, for example, you see the Architect being responsible for issuing instructions and variations, and for certifying payments and practical completion as well as determining claims made, for example, by the contractor for an extension of time. In issuing instructions and seeking variations, the Architect is acting as agent of the employer and is entitled, as such and indeed bound to act in the employer’s best interests. This is not the case when the Architect is certifying practical completion, say. This dual role requires a delicate equilibrium to be struck between impartial assessment (when acting as a certifier) and the loyal representation of the employer’s interests (when acting as the employer’s agent).

And this is where challenges can arise. The contract administrator in the first instance, needs to understand the potential dual roles that s/he occupies and the distinction between where s/he acts as the employer’s agent (and in the best interests of the employer) and where s/he is required to act independently as between the parties. The challenges presented by this dual role can be exacerbated by the fact that it is quite usual for the contract administrator to be employed (and paid for) by the employer and may find her or himself coming under pressure from the employer to decide things a certain way.  Indeed, many of the challenges faced by the contract administrator derive from the fact that it is often employers who do not always understand the dual nature of the role taken on by their ‘architect’ or employer’s representative and seem to think they are entitled to tell the contract administrator not to certify practical completion, say, until certain matters have occurred, regardless of what the contract says.

Lessons from Down Under…

The Australian decision of V601 Developments Pty Ltd v Probuild Constructions (Aust) Pty Ltd¹, commonly referred to as the “V601 Case” was a landmark decision which underscored the potential risks for contract administrators who perform concurrent roles in assessment, certification, and contract management. The implications of this decision offer a cautionary tale for professionals in the field, emphasising the necessity for clear demarcations of responsibility to avoid conflicts of interest and ensure the integrity of the certification process.

The V601 Case involved the development of five buildings, encompassing both commercial spaces and residential units. V601, the employer, engaged Probuild, the contractor, to oversee the design and construction of these structures. The contract administrator (or superintendent, as this role is referred to in Australia) as the certifier, was tasked with dual responsibilities: managing the contract and evaluating the work for certification.

The issues which arose concerned time-related disputes. The employer sought liquidated damages, while the contractor pursued claims for various damages, including bonuses, loss and expense, acceleration, and variations. The crux of the contractor’s argument in the court case was that the certifier had failed to impartially assess the contractor’s requests for an extension of time (“EOT”).

According to the contract, the certifier was obliged to independently determine the contractor’s entitlement to time extensions, exercising discretion to either grant or deny these based on their professional judgment. However, in this case, the certifier took part in meetings with the employer and their legal team, discussing tactics and strategies in respect of the contractor’s claims. They even provided the employer with preliminary assessments of the contractor’s EOT claims and helped devise strategies to reduce the contractor’s entitlements.

Ultimately, the court held that both the employer and the certifier had breached their obligations under the contract. The employer had interfered with the certifier’s duties and colluded with the certifier’s in assessing the contractor’s EOT claims. The certifier was found to have not exercised the requisite level of independence. Consequently, the assessments made by the certifier were deemed void. The employer’s claim for liquidated damages was subsequently dismissed, and the court ruled in favour of the contractor, awarding them $13m.

Irish courts are not obliged to follow international decisions, but where these come from other common law jurisdictions, such as Australia, they can be referred to and are often persuasive, particularly in the absence of Irish decisions on this issue. The V601 Case, therefore, may be of assistance in understanding how this common issue might be addressed in Ireland. The insights gleaned from the V601 Case offer valuable guidance for the construction industry and there are three main takeaways from the V601 Case which reflect principles that are equally applicable in Ireland:

   1. The contract administrator must act independently and impartially:

In the UK case of Sutcliffe v Thackrah [1974] AC 727, the House of Lords decided that a professional consultant, such as an architect acting as a contract administrator, has an implied duty to act impartially when deciding questions between its client and the contractor. This implies acting independently, fairly, and without bias. This principle also applies in Ireland and Australia and in some instances, such as in the V601 Case, is reflected in express contractual provisions².

       2. The employer must not interfere in the duties of the certifier:

The V601 Case establishes that the certifier’s duties of independence, impartiality, and fairness typically take precedence over any obligations owed to the employer. As a result, the employer is not in a position to dictate the actions of the certifier in their roles as assessor and certifier. The same principle applies here in the context of the independence of the contract administrator. One often hears the requirement that third parties should not “fetter the discretion” of the certifier. This Australian case highlights various scenarios where the certifier’s judgment may be compromised for example, if influenced by external parties, if their actions devalue the certification, if they favour the interests of one party under direction, if they mistakenly act as a mediator, if they lack the resolve to make decisions based on their opinion, if their judgment and actions are directed by the employer, or if they seek the employer’s approval thereby relinquishing their autonomy and failing to disclose all communications with the employer. Any of these circumstances would indicate that the certifier has abandoned their role as an independent agent, thereby undermining the integrity of the certification process.

  3. Ensuring inclusive communication among relevant parties in project process

In situations where a certifier assumes a dual role, it is imperative that their duties as an agent to the employer are clearly defined. In this context, it is important to recognise that certain communications must be shared with and considered by the certifier in their capacity as an assessor. The V601 Case underscores the importance of determining whether the certifier has been exposed to representations that could potentially influence their decision-making process. If such is the case, it is then incumbent upon the certifier to provide the contractor with an opportunity to respond to these communications.

In conclusion, whether in Ireland or Australia, the position is the same: certifiers and contract administrators in construction contracts must adhere unwaveringly to principles of independence and impartiality. The principles in the V601 decision would appear to be as relevant here as back home!

1.  [2021] VSC 849.

2.  FIDIC 2017 also includes express provisions clarifying the obligations of the Employer’s Representative.

Author: Faviola Martinez Figueroa, Associate www.arthurcox.com

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