QUALITY

OF WORK
Avenues for Redress

Statutory

o Domestic Buildings Act 1995 (Vic) S 8

Implied Warranties concerning all domestic Building Work

a) the builder warrants that the work will be carried out in a proper and
workmanlike manner and in accordance with the plans and
specifications set out in the contract

b) the builder warrants that all materials to be supplied by the builder for use
in the work will be good and suitable for the purpose for which they are
used and that, unless otherwise stated in the contract, those materials will be
new

c) the builder warrants that the work will be carried out in accordance with,
and will comply with, all laws and legal requirements including, without
limiting the generality of this warranty, the Building Act 1993 and the
regulations made under that Act

d) the builder warrants that the work will be carried out with reasonable care
and skill and will be completed by the date (or within the period) specified
by the contract

e) the builder warrants that if the work consists of the erection or construction of
a home, or is work intended to renovate, alter, extend, improve or repair a
home to a stage suitable for occupation, the home will be suitable for
occupation at the time the work is completed

f) if the contract states the particular purpose for which the work is required, or
the result which the building owner wishes the work to achieve, so as to show
that the building owner relies on the builder's skill and judgement, the builder
warrants that the work and any material used in carrying out the work
will be reasonably fit for that purpose or will be of such a nature and
quality that they might reasonably be expected to achieve that result.

o Domestic Building Contracts Act s 10

Person cannot sign away a right to take advantage of warranty

A provision of an agreement or instrument that purports to restrict or remove

the right of a person to take proceedings for a breach of any of the warranties
listed in section 8 is void to the extent that it applies to a breach other than a
breach that was known, or ought reasonably to have been known, to the
person to exist at the time the agreement or instrument was executed.
 Contract

o EXTENT OF CONTRACTORS LIABILITY

Express Warranty

AS4000 cl 29.1 Suitable new materials & proper and tradesmanlike

workmanship
o See k for more details

Scope
o Extends to SubCs/Other Cs (Houlahan)
After falling from balcony when balustrade gives,
accuses not proper and workman-like manner.
The express warranty (in this case that the work
would be done in a proper and workmanlike
manner) extended to work done by other
contractors on site: overarching responsibility for
work performed on site while in charge
Even though P (and other Cs) specifically went and
found materials separately!
However, note that the parties agreed that the
payment arrangement would be the same as for a
subC C paid dodgy guy P found, then P paid C.

Implied Warranty

Where K is silent, CL may imply certain warranties into the K,

provided the circumstances of the K arent such as to exclude that
type of warranty (GH Myers)

1. Materials Warranty (Helicopter Sales)

o Good quality & Reasonably fit for intended purpose
o When will it be implied?
GH Myers + C actually has discretion in what
materials it supplies and uses in its work (helicopter
case = no discretion, follow Dept of Aviation service
manual).
Stronger case if the provision of materials is not just
an incidental feature (as it was in helicopter case
contract was for service, materials replaced now &
then)

2. Completed works will be reasonably fit for their intended purpose

(Barton v Stiff)
o P must make purpose known to C
o Must be reasonable for P to rely on C (Reg Glass)
E.g. within the usual course of business for Cs
business to perform such contracts
o P actually did rely on Cs skill and judgement
 o Reasonably fit = fit under circumstances reasonably
foreseeable by competent contractor (e.g. Barton, where
would have been fit but for salt water not foreseeable)

o REMEDIES FOR BREACH OF WARRANTY UNDER AS4000

Construction Phase Cl. 29

If the works are defective during construction, cant go to court b/c no

loss until in possession of work (Brewarrina Council)
However, if P feels that works are in breach of contractual warranty
during construction, it can:
o Give direction to remedy (whether that means fixing it, or
removing from site or demolishing the work) (cl 29.3)
o If C fails to comply with direction, and continues to fail to
comply 8 days after they were given written notice from SI
that P intends to have work rectified by others, then P may
have work rectified, and SI will certify cost incurred as money
due from C to P (cl 29.3)
o May also simply accept work as deemed variation (with
associated cost reckoning under cl 36) (cl. 29.4)

Defects Liability Period Cl. 35

C has BOTH a right and obligation to remedy defective work

(Conwell)
See Cl. 35 for more details

Post Final Certificate Phase Cl. 37.4

After Final Certificate has been issued, C only liable for latent defects

o Defects not apparent at the end of the defects liability period;

Defect may be held not to have been apparent,
despite signs of defect discovered (Nitregin)
E.g. Cracks fixed but underlying problem that caused
cracks persisted, causing an explosion Held:
defects not apparent to P

o OR Would not have been discovered upon reasonable

inspection at the time final certificate is issued
Reasonable = depends on circumstances
If K stipulates, then requirements of K
If not, then good practice E.g.
o Scientific Analysis (Pinnock)
o Known/customary Tests (Parente)
If not reasonable to conduct inspection, the fact that
it would have been discovered is irrelevant
(Pearson)
 CL Remedies
o Damages
Assessed as the cost of making the work complaint with the plans and specifications
(Bell)
However, right to damages is NOT unqualified if remedying the work is not
reasonable and necessary, damages might not be awarded in the quantum necessary
to remedy the defect, but only to compensate for loss of amenity (Ruxley)
o Specific Performance
Downer Construction Ltd v Silverfield Developments

o DEFENCES

Res Judicata

Judgment in one proceedings will be a bar to second proceedings to

recover damages with respect to defects NOT the subject of the first
proceedings, even where the defects were not apparent to the
plaintiff at the time of the first proceedings.
Onerati; Honeywood

Acceptance

Ordinarily no waiver by payment OR/AND taking possession

o Need to show that (Morgan v Allen):
P knew of defects
P accepted defective work
P waived condition as to performance in accordance
with the contract
o See e.g. Cl. 29.4 accept defective work as deemed
variation, P get $ back

Implied acceptance
o A contractor who is in breach of contract in carrying out
defective works is not to be relieved of liability for those
defective works by any implied approval derived from the
Contract Administrators failure to draw the Contractors
attention to defective works which should have been
apparent when the Contract Administrator attended the site.
o Mayhaven Healthcare v Bothma
SUPERINTENDENTS & SUBCONTRACTORS

SUPERINTENDENTS

1. What are superintendents and what do they do?

a. Basic functions: Cl 20 (AS4000)

i. To tell the contractor what to do
ii. To make decisions about payment, variations, extensions of time, etc.

b. Many parties may fill the role

i. Building a house: no one? The owner? The architect?
ii. Building a small commercial building: the architect?
iii. Building a toll road: independently engaged third party?
iv. Usually a consultant to or even employee of the principal

c. Superintendents go by many names

i. Superintendent, project manager, contract administrator, architect, engineer

2. Where does the superintendent fit in?

a. Traditional contractual arrangement

b. Tripartite independent reviewer deeds
i. Tripartite because principal, contractor and superintendent are all party to the
same contract
ii. Mostly used on PPPs

3. What is the superintendents role?

a. Agent of the principal

i. When acting as an intermediary, such as when giving instructions to the
contractor
ii. Passing on instructions/receiving notices, etc. (dont need discretion of SI)

b. Independent certifier
i. When carrying out certification, assessment and valuation independent of both
parties in this case, not acting as agent of P (Peninsula Balmain)
Decision can be challenged by both P and C
ii. These roles obviously lead to tension
iii. Need to consider both

c. Should not:
i. Give instructions in which method specifications are not found in the contract
documents themselves, since they thereby take responsibility for the
effectiveness of the method Should let C proceed with his own so C himself
will be responsible if anything goes wrong
 d. What is the superintendents role at CL?
i. The superintendent becomes vested with duties which oblige him to act fairly
and justly and with skill to both parties to the [construction] contract. The essence
of such a relationship in my opinion is that the parties by the contract have
agreed that this officer shall hold these dual functions and they have agreed to
accept his opinion or certificate on the matters which he is required to decide.
Perini Corporation v Cth [1969] 2 NSWR 530 at 536 (MacFarlan J)
ii. Not acting as an arbitrator, but query whether an arbitrator can open up
discretionary decisions
Probably not: Dura (Aus) Constructions Pty Ltd v Hue Boutique Living
Pty Ltd [2013] VSCA 179 (Maxwell P, Ashley and Redlich JJA)
The question, first and last, is one of contract. (at [15])
Typically extensively dealt with in express terms

e. What is the superintendents role under AS4000?

Cl. 20 Superintendent

The P shall ensure that at all times there is a SI, and that the SI fulfils all aspects of the role and
functions reasonable and in GF.

Except where the Contract provides otherwise, the SI may give a direction orally but shall as soon as
practicable confirm in writing.

If the C in writing requests the SI to confirm an oral direction, C shall NOT be bound to comply with the
direction until the SI does so.
Note that directions should be issued to the contractor, not to subcontractors or workers. The chain
of contractual authority should be observed at all times since, otherwise, confusion may well reign.

4. Superintendents Liability

a. P sue SI breach of contract.

b. C sue SI:
i. Contract?
1. Where are the contractual links?
ii. Australian Consumer Law
iii. Negligence

c. DOC in negligence?
i. Potentially, to both contractor and principal
ii. However, the relevant claims are likely to concern pure economic loss
1. But note: SI no duty to prevent C from suffering Economic Loss
2. Question whether theres vulnerability (John Holland Construction &
Engineering Pty Ltd)
3. E.g. C did not rely on SI and SI did not assume responsibility
SUBCONTRACTS

1. Types of subcontract

a. There are several types of subcontract

i. Standard form subcontracts
ii. In-house forms
iii. Custom back-to-back subcontracts
iv. Informal contracts

b. All aim to minimise the contractors risk under the head contracts
i. We will focus on back-to-back drafting (see next point)

2. Back-to-back subcontracts

a. Typical changes:
i. Project-specific changes (eg, scope)
ii. Party-specific changes (eg, for supervision)
iii. Cooperation (eg, interface deed or provisions)
1. Lawyers often ignore coordination
2. Think about building a house
a. Can a painter and a carpet layer work at the same time?
b. What happens if the bricklayer delays the carpenter?
c. Is the head contractor responsible if a tiler falls off the roof?
3. In complex projects, interface or coordination deeds are common
4. Need to consider OHS laws
a. This is an area for specialists
b. Critical to identify the principal contractor and to ensure they are
up to the task
iv. Names
1. Conceptually easy
a. Contractor becomes subcontractor
b. Principal becomes subcontractor
2. How do we do this? Global change? Find and replace one by one?
Manually?
3. What about other parties?

v. Dates
1. May shift forward or back
2. 80/120 rule

Head contract Subcontract

(b) The Contract Administrator must, within 14
days of receipt of a notice under paragraph (a),
instruct the Contractor
The Contractor must, within 14 days of the
commencement of the Contractor's Activities
on Site, provide and erect on the Site, where
(b) The Contract Administrator must, within 12
days of receipt of a notice under paragraph (a),
instruct the SUBContractor
The SUBContractor must, within 14 days of the
commencement of the SUBContractor's Activities
on Site, provide and erect on the Site, where
 directed by the Contract Administrator, the directed by the Contract Administrator, the
temporary office temporary office

i. Amounts
ii. Additional Protections
1. Acknowledgments
a. Of head contract
b. Of particular risks
2. Indemnities
3. Rights to order acceleration
4. Rights of replacement
5. Termination for convenience

b. Quick reminders

i. The subcontractor may not be able to bear risks the head contractor can
1. Consider subcontractors whose work is on the critical path
2. Also consider small but vital work, eg, structural engineering
3. Affects liability caps, security, LDs, insurance ..
ii. Subcontractor may acknowledge part or all of the head contract
1. May even provide an indemnity why?
iii. The subcontract forms part of a chain
1. Linked claim clauses are common
a. Interface risk is critical
2. Need to avoid SoP prohibition on pay when paid clauses

3. Nominated subcontractors

a. Generally, the contractor is responsible to the principal for its subcontractors work
b. Contracts often reinforce this single point of responsibility
i. eg, ABIC MW-2008 cl G4.2:The contractor must take responsibility for any acts
and omissions of its suppliers and subcontractors.
c. BUT what if the P directs the C to use a particular subcontractor?
i. eg, Foundations must be laid by ACME Pty Ltd
ii. Why might a principal do that?
d. If a nominated subcontractor defaults (assume theres defective work), is the HC
responsible to the P?
i. eg, do head contractors warranties apply to that work?
ii. Basic position: HC will be responsible
iii. Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274
e. Ultimately depends on the drafting and the facts
i. Clash of concept of single-point responsibility v inability to control
ii. May be relevant that head contractor objects to nominated subcontractor
iii. Principal and head contractors degree of control may be relevant
f. Usually dealt with in detail in contracts
 4. Direct contractual links

a. Whether there is a contractual link is critical in determining parties legal rights

b. Principals and subcontractors usually do not want to have to deal with each other directly
i. That is the head contractors role
ii. Sometimes, though, they will want to, especially if theres a possibility of the head
contractor disappearing (eg, becoming insolvent)
c. Direct links could be useful where:
i. (from principals point of view) subcontractor puts roof on building; head
contractor will only warrant for 2 years, but principal wants direct warranty from
subcontractor for 10 years
ii. (from subcontractors point of view) work done but head contractor goes bust or
refuses to pay: will principal pay directly?
d. Potential relief under some security of payment legislation, or for unjust enrichment
e. Mechanisms commonly employed
i. Collateral warranties
ii. Novation of subcontractors during maintenance period
iii. Subcontractor rights of direct payment

ASIDE: Principals must take care

Contractual links may enliven proportionate liability legislation