Case note: Kaloriziko Pty Ltd as trustee for Ryde Combined Unit Trust v Calibre Construction Group Pty Ltd (No 2) [2025] NSWCA 259
Executive Summary
This case provides an example of where ‘approved’ variations were unwound. On the basis of the contractual interpretation determining that all payments other than the final payment were ‘on account’ only; the Court was able to reassess the ‘approved’ variations.
Introduction
This appeal concerned issues arising under an AS 4902-2000 design and construct contract for a large residential development in Ryde. Central questions included the proper characterisation of “variations”, the inclusion of consultancy fees within the contract sum, liability for liquidated damages, and the consequences of a deed releasing parties that were jointly and severally liable under mortgages securing the judgment amount.
The Court of Appeal allowed the appeal in substantial part, overturning key aspects of the primary judge’s reasoning, and ultimately entering judgment for the developer, with a total reduction of $3,243,175 applied to the builder’s claim.
Facts
Kaloriziko Pty Ltd as trustee for Ryde Combined Unit Trust (the Developer) engaged Calibre Construction Group Pty Ltd (the Builder) under an AS 4902-2000 contract to construct a multi-tower apartment complex.
The Builder claimed unpaid variations, return of retention, and damages. The Developer counterclaimed credits for amounts wrongly paid as variations, liquidated damages for delay, and reductions reflecting benefits received by the builder under a settlement deed.
During the proceedings, freezing orders were replaced with mortgages over properties owned by entities associated with the Developer’s principals.
The Builder later entered into a deed of settlement with certain mortgagors (related parties), resulting in the transfer of three Arncliffe properties to a company associated with the Builder for $5 million, allegedly below market value.
The Supreme Court awarded the builder over $2.1 million plus interest. The developer appealed.
Issues
On appeal, the Court considered five broad issues:
- Whether the developer could recover payments made for purported variations later found not to be variations.
- Whether consultancy fees fell within the contract sum or were payable as a variation.
- Whether the date for practical completion had been varied from 20 April 2020 to 23 May 2020.
- Whether the deed releasing co-mortgagors reduced the developer’s liability by reason of the equitable principles of contribution and the prohibition on double recovery.
- The true market value of the Arncliffe properties and the degree of undervalue.
Decision
The Court of Appeal allowed the appeal and held that no amount was owing from the developer to the builder, after applying reductions totalling $3,243,175.
Court of Appeal Reasoning
The contract Substation works, included a specific clause stating that “excluded items” do not form part of the contract sum and must be paid separately. Sydney Water upgrades and street lighting upgrades all fell within “excluded items” under the contract. These items were previously and mistakenly ‘approved’ as variations agreed between the parties. Nonetheless, the Court held that they were payable in any event as they were excluded items from the contract, meaning the builder had a substantive entitlement to payment irrespective of how the claims were processed.
Consultancy fees formed part of the Works Under the Contract (WUC), were not excluded items, and therefore were included in the contract sum. Approval of a purported variation cannot override the contract. Pre-contract discussions were irrelevant due to the entire agreement clause. Additionally, the builder failed to respond with any evidence supporting the existence of an oral agreement. Therefore, the Developer was entitled to a credit of $133,175.
No valid variation of the practical completion date occurred. A change required a written instrument executed by both parties, which was not made out. In the absence of evidence supporting a change for the date of practical completion, the Court held that the Developer was entitled to $210,000 in liquidated damages.
The mortgagors had provided security to the builder for the same debt as the developer, meaning they were responsible for the same potential judgment. When the builder later agreed, under the deed, to release Ninth Campsie and Ms Tran from that liability, it received value in exchange for giving up claims against parties who were liable for the same obligation as the developer. The law does not permit the builder to recover the same loss twice. If the builder wished to argue that any part of the benefit it received related to something other than the release of that shared liability, it bore the burden of proving this. As it failed to do so, the developer was entitled to a reduction reflecting the benefit the builder obtained.
The primary judge erred in declining to determine market value despite extensive evidence the Developer’s valuer was preferred. The Builder’s valuer wrongly disregarded earlier sale prices and suggested an unexplained 28% market decline. Therefore, the properties were valued at $7.9 million and an undervalue of $2.9 million was credited to the Developer.
Takeaways
Developer clients are reminded that if there are express contractual provisions allowing payments ‘on account’, it is possible for variations to be reassessed until it is a ‘final payment’ in accordance with the contract. For the avoidance of doubt, if the contract provides that the payments are final, there would not have been recourse.
For developers, practical completion cannot be varied informally. Moreover, approval during a live project is not determinative. Payments remain provisional unless and until final entitlements are established under the contract.
Builders are reminded that if third parties provide mortgages or other security backing the builder’s claim, any later settlement releasing those parties can operate to reduce your liability. Track these arrangements carefully, they may become valuable credits.
More information
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