Allegations of defects and backcharges

CLIENT
Structural Steel Contractor (“Subcontractor”)

OTHER PARTY
Head contractor (“Head Contractor”)

CONTRACT
Construction of an extension to a high school in Melbourne

PAYMENT CLAIM
$173,922.63 including GST

CONCLUSION
1. Variations are claimable if the contract provisions for variations are followed. If an instruction to complete a variation is given, the head contractor is liable for the cost.

2. Backcharges are based on the contract sum and it is important to engage an independent quantity surveyor to confirm costs. Actual costs cannot be relied upon when applying backcharges.

BACKGROUND
The Subcontractor issued a payment claim for $173,922.63 including GST. The Head Contractor issued a payment schedule for $98,482.09 including GST.

After the Adjudication proceedings commenced, $53,905.50 including GST was paid by the Head Contractor. This left $120,017.13 outstanding before the adjudication determination.

The adjudication determination ordered that the Head Contractor pay $104,188.90 to the Subcontractor and penalty interest was also awarded.

Cost to complete remaining works (the Head Contractor had taken works out of the hands of the Subcontractor and completed it with other contractors).

1.1 VARIOUS VARIATIONS WERE IN DISPUTE
One variation in dispute involved the Head Contractor instructing the Subcoontractor to change from holding down bolts to chemset connections. The Head Contractor refused the variation request and the Subcontractor supplied the chemsets for the Head Contractor to install.

Subsequently, a land surveyor confirmed that the chemsets were incorrectly installed. The Head Contractor instructed the Subcontractor to rectify these defects and incurred a variation of $3,205.00. Despite refusing the costs of the variation, the Head Contractor instructed that the Subcontractor proceed with any required rectification of chemset studs. The adjudicator determined that the Head Contractor provided clear instructions to carry out the variation works and therefore is liable for the cost.

1.2 VARIOUS BACKCHARGES WERE IN DISPUTE
The erection of a bus shelter was added to the Contract. The agreed price for the erection of the bus shelter was the difference between the quote and the Contract, being $8,500+GST. In a previous adjudication application, an independent quantity surveyor was engaged and valued the re-erection of the bus shed at $6,100 + GST. The Head Contractor claimed that its actual costs were $16,166.24 +GST. The adjudicator limited the backcharge to $6,100+GST.