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A Superintendent’s judgement call.

06/08/2013

The Victorian Court of Appeal has explained how a Superintendent may arrive at a determination.

HBL engaged Dura under a standard form building contract.  HBL took the remaining works out of Dura’s hands and engaged another builder to complete the works, to carry out rectifications and do extra work beyond the scope of the contract. The contract allowed the Superintendent to “ascertain” the cost to complete the works and to certify the difference between that cost and the contract price.  The Superintendent provided a certificate based on a quantity surveyor’s report.  He used  his professional judgement to allocate costs between rectification, completion and enhancement.  It was common cause that he made a discretionary judgment in a reasoned way,  using recognised methods and credible sources.

Dura argued that the word ‘ascertain’  allowed no room for estimation or subjective opinion.  The cost of completing the works was a uniquely correct value, capable of precise calculation as a matter of fact.   It submitted the method of ascertainment should not be left up to the Superintendent’s experience and professional judgment.

However, the Court of Appeal observed that commercial contracts commonly provide for a determination  of  cost, value or quantity either by  ‘mechanical’ computation (using fixed and objective criteria) or, on the other hand, discretionary judgment.  The latter case permits alternate methods, each involving logic but leading to different results.

In this case, the parties intended by the use of the word ‘ascertain’ to authorise a process involving professional judgment, estimation and approximation.

The Superintendent’s certificate was arrived at by that process , so the parties were bound to it, even though it might contain an error.  If the method of determination did not conform with the terms of the contract, then it would have no effect and either party could require it to be done again.

The result will not be different just because the determination was reached in accordance with the contract by one of the parties to the contract or its representative, rather than by an independent arbitrator or expert.

Here are the reasons for judgement in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd.

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