Agent or Referee? The Double Scope of an Architect’s Role in Building Contract Administration
By Justin Cotton, Partner, Construction and Practitioner Advocacy, Lovegrove Smith & Cotton, Construction and Commercial Lawyers
As construction lawyers it is not uncommon that we may act for builders or indeed owners involved in high end residential construction. Many of these building contracts will be “Architect administered”, meaning that the Architect who designed the construction will also be assessing tenders and then acting as contract administrator once the chosen Builder commences works.
This can be akin to walking something of a tightrope for an Architect, because the retainer agreement he has with the Owner/Developer will state that he/she must act only in the Owner’s best interests, whilst the building contract itself says that the Architect must be fair and impartial when assessing the Builder’s claims regarding payment and time.
The author does not go so far as to call this a paradox, or contradictory, but it can lead to tensions because this is a case of ‘wearing two hats’, at least as far as the building contract is concerned.
Typically the Architect’s role will commence with the schematic phase and then traverse through the more detailed design, the obtaining of permits (planning permit approval and then the later building permit), the tender process (calling of tenders, assessing requests for further information, and then recommendation on a builder), then contract administration through to eventual completion of works and the ‘final certificate’ on payment owing between the contracting parties.
Some building disputes we have seen involving Architects comprise design defect claims over such matters as faulty air-conditioning, failure to adhere to Council planning requirements and even the design of floor slabs to ensure adequate sound proofing. It is also common though that the Architect is accused by one party or the other of failing to properly administer the building contract, thereby prejudicing a party’s economic rights, or failing to properly corral a builder into satisfactorily carrying out defect free works.
In one building case the writer was involved in nearly 10 years ago, a woefully inadequate construction of 3 townhouses saw the Architect joined to the proceedings as the third respondent behind the building company and the registered builder director. There was compelling evidence of a failure to properly advise on the best candidate for Builder, the subsequent selection of a Builder that was not up to the task, the approval of various progress payment claims in the Builder’s favour when the works had not been properly progressed to that stage, and the failure to send directions to the Builder to rectify faults in a timely way.
A regular building contract that is Architect administered is the ABIC Major Works and Simple Works (eg, the SW-2008H Vic) Contracts. If we take the SW-2008H form of agreement, clause A6 specifies the general scope of the Architect’s function in administering the contract.
Subclause A6.3 says that the Architect is “the owner’s agent for giving instructions” to the Builder. Such instructions could include what works to carry out by way of a variation or to rectify defects. Notably though, the subclause goes on to read: “However, in acting as assessor, valuer or certifier, the architect acts independently and not as the agent of the owner.”
So what does this role of being an assessor, valuer or certifier involve? It refers to the assessment of progress claims by the Builder, and the valuation of the same, and also the assessment and valuation of claims for variations and requests for extensions of time due to delay. However, it must be said that in other aspects of contract administration, such as the direction of the Builder on interpretation of plans and other contract documents, the chairing of site meetings, requesting updated construction programs and directing the Builder to either vary an aspect of works or to rectify work items, the Builder is acting as agent for the Owner and must act in that Owner’s best interests. This is what is meant by the dual role of referee on the one hand, and agent on the other.
A positive duty is put on the Owner (who appointed the Architect) to not compromise the impartial ‘referee’ aspect of the Architect’s assessment function. In subclause A6.4 it is specified: “The owner must ensure that the architect, in acting as assessor, valuer or certifier, complies with this contract and acts fairly and impartially, having regard to the interests of both the owner and the contractor. The owner must not compromise the architect’s independence in acting as assessor, valuer or certifier.”
The responsibilities of an Architect are often consumer focused and given some definition (in Victoria) in the Architects Regulations 2004. The requirements include to act in a competent manner and to a professional standard. Duties include to ‘act in the interest of his or her client or prospective client’ and to ‘not favour his or her own interest over that of his or her client or prospective client’.
Interestingly though, clause 10 of those Regulations (Administering contract conditions) says that “An architect who is commissioned to administer conditions of contract must do so impartially between the parties of that contract.”
Therefore the dual function seen in the common ABIC architect administered building contract, is also apparent in the Regulations governing Architects.
Whilst, once again, it is not argued that this is an unworkable contradiction, it can prove to be a ‘fine line’ for a contract administrator. An agent for a party at law can be seen to have a fiduciary duty to that party (eg an owner), which is a legal concept giving rise to legal rights should an owner feel aggrieved. Conversely, there can be a legal duty under contract for an owner to not improperly sway the supposed impartiality of the Architect.
In practice we see as building lawyers, that there are many occasions where it can be said an Architect has either failed in his/her duty to an Owner or has failed to be fair and impartial in the assessment/valuation role. It is not always the case that the Architect is too close to an Owner (due to the retainer arrangement and agency implied into the building contract). Sometimes we see situations where an Architect ensures that their chosen Builder ‘gets the gig’ and then there is a failure to properly corral or administer that Builder when problems later arise.
I look forward to providing more commentary in relation to the legal rights and responsibilities of Architects and topical interests concerning Architects, as this year progresses.
For more information and assistance, please contact Lovegrove Smith & Cotton