With the second half of 2025 well underway, we reflect on five construction cases that have caught our attention so far this year.
In this article, we delve into cases on:
- the validity of deeming clauses under the security of payment legislation
- whether variations can be approved and paid 'on account'
- whether the right to certify liquidated damages automatically equals a right to set off liquidated damages and have recourse to security
- the high bar a party has to clear to set aside an adjudication decision for jurisdictional error
- the cost of wrongfully terminating a contract.
Bad weekend for deeming clauses: Payment schedule late because deeming clause void under the security of payment legislation
In Roberts Co (NSW) Pty Ltd v Sharvain Facades Pty Ltd (Administrators Appointed) [2025] NSWCA 161, the NSW Court of Appeal held that contractual clauses cannot extend statutory timeframes for service of a payment schedule under the Building and Construction Industry Security of Payment Act 1999(NSW) (SOP Act).
At issue was the effect of a deeming clause which stipulated that notices sent after 5pm on a business day were to be treated as being given and received at 9am on the next business day. At or about 7:18pm on Friday, 28 February 2025, Sharvain Facades Pty Ltd (Sharvain) issued a payment claim to Roberts Co (NSW) Pty Ltd (Roberts Co) via an online payment system known as Payapps. An automated Payapps email was also sent to the nominated Roberts Co Representative's email address attaching the payment claim.
Relying on the deeming clause, Roberts Co treated the payment claim as being served on Monday, 3 March 2025 and served its payment schedule on Monday, 17 March 2025 – more than 10 business days after 28 February 2025 but within 10 business days of 3 March 2025. The primary judge determined that the deeming clause purported to modify the operation of the SOP Act by changing the meaning of "business day" and was therefore void. As a result, the primary judge found Roberts Co's payment schedule was a day late and Sharvain was entitled to judgment for the full amount of the payment claim.
Roberts Co appealed. The NSW Court of Appeal unanimously dismissed the appeal.
Section 14 of the SOP Act provides that a payment schedule must be given within 10 business days after the payment claim is served, or if the contract provides a shorter period, within that shorter period. The Court of Appeal held that the deeming clause purported to lengthen the period of 10 business days from receipt of the payment claim for the provision of a payment schedule. The overall effect of section 14, consistent with the SOP Act's policy of quick resolution, is that the period for providing a payment schedule can be contractually shortened but not lengthened.
The decision is an important reminder of the need to adopt a conservative approach when calculating time for the purposes of the SOP Act. Recipients of payment claims should treat payment claims as being served on the day they are received, even if they are received outside business hours or on a non-business day.
No going back: Court finds 'on account' assessments of variations a no-go
While construction contracts often provide for 'on account' payments (being provisional payments that are not evidence of the value or quality of the work performed), a recent NSW Supreme Court decision demonstrates that variations cannot be paid or assessed 'on account', unless the contract expressly provides for variations to be approved and paid on a provisional basis.
In Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd atf Ryde Combined Unit Trust; Kaloriziko Pty Ltd atf Ryde Combined Unit Trust v Calibre Construction Group Pty Ltd (No 2) [2025] NSWSC 593, Kaloriziko disputed its obligation to pay nine claimed variations, for which it had already paid Calibre $689,922. It sought to recover that amount from Calibre in its cross-claim on the basis that the payment or approval of those variations was 'on account' only. Kaloriziko argued that, on the proper construction of the contract, such payment or approval did not mean Calibre was entitled to payment for those variations.
Clause 36.4 required Kaloriziko's Representative to price each variation and either add or deduct that amount from the contract sum. Clause 37.2 permitted progress payments, excluding the final progress payment, to be made 'on account' only.
Justice Stevenson held that clause 37.2 had no effect on the proper construction of clause 36.4. His Honour found no suggestion that the pricing was provisional; once priced, the amount was not open to reconsideration. Since Kaloriziko had not only approved the disputed variations but also paid many of them, it could not later contend that its approval was 'on account' only.
No right to set off liquidated damages or to have recourse to security for liquidated damages under clumsily amended AS49202
In Pacific Diamond 88 v Tomkins Builders [2025] QCA 50, the dispute centred on the deletion of a sub-paragraph within a significantly amended AS4902-2000 standard form contract. The sub-paragraph in question, being clause 37.2(b), required the Superintendent to, at the same time as issuing a progress certificate, issue a certificate evidencing the Superintendent's assessment of retention moneys and moneys due from Tomkins (the Contractor) to Pacific (the Principal) pursuant to the contract.
Despite the deletion of subparagraph 37.2(b), the subparagraph was still referenced throughout the balance of clause 37.2, creating an ambiguity as to Pacific's right to set-off amounts owed by Tomkins under the interim contractual payment process.
This ambiguity was exposed when Pacific gave notice of its intention to access the security under the contract for what was, in Pacific's view, a debt due and owing by Tomkins. Pacific contended that:
- prior to Practical Completion, the Superintendent issued both a payment certificate (for $694,343 owed from Pacific to Tomkins) and a liquidated damages (LDs) certificate (certifying $2.6 million for delay); and
- therefore, as Pacific had set off the LDs against the payment certificate, an amount of $1.9 million was owed to Pacific from Tomkins.
The primary judge in the Queensland Supreme Court declared that Pacific was not entitled to set off in the purported manner in which it had done so and did not have a right of recourse to the security.
Pacific appealed the primary judge's decision.
On appeal, the Queensland Court of Appeal examined the contract as a whole and found that by making the relevant deletions, the parties had removed the only contractual mechanism by which the Superintendent's assessment of moneys due by Tomkins (including any certified LDs) was to be brought to account in the interim contractual payment mechanism.
Whilst the Court of Appeal ultimately determined that the deletions did not impact Pacific's ability to set off amounts due in the final payment claim, no such mechanism was available in the assessment of interim progress claims.
In coming to this decision, the Court of Appeal took into account the deleted words from the standard form contract for the purpose of construing ambiguous language and considered extrinsic material including pre-contractual communications in which Pacific responded positively to Tomkins' request that Pacific not have the ability to recover LDs on demand or deduct LDs from certified payments or security.
The case serves as an important reminder of the need to take care when amending standard form contracts and, in particular, the need to carefully consider the interaction between the liquidated damages, payment, set-off and security clauses in the contract. The right to certify liquidated damages does not, by itself, confer a right to set off liquidated damages or to have recourse to security for unpaid liquidated damages.
High bar to clear: Parties seeking to set aside adjudication decisions for jurisdictional error have their work cut out for them
Builtcom Constructions Pty Ltd v VSD Investments Pty Ltd as trustee for The VSD Investments Trust (No 2) [2025] NSWCA 134 is the latest case out of the NSW Court of Appeal demonstrating the difficulties parties face in having adjudication decisions set aside for jurisdictional error.
Builtcom Constructions Pty Ltd (Builtcom) and VSD Investments Pty Ltd as trustee for The VSD Investments Trust (VSD) were parties to a construction contract for a 30-storey mixed residential-commercial development in Burwood.
The adjudication concerned Builtcom's final payment claim for $30.6 million, in respect of which VSD scheduled a negative amount.
Whilst Builtcom was ultimately awarded approximately $8.5 million at adjudication, the adjudicator declined to consider several of Builtcom's claims, finding they were not "duly made" because they relied on documentation which was not included in the payment claim.
In reaching that conclusion, the adjudicator relied upon his understanding of the test in John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258 (Cardno Test). In short, the adjudicator considered the Cardno Test limited the material he was permitted to consider to that included in the original payment claim.
Builtcom sought to have the adjudication decision set aside as a consequence of jurisdictional error Whilst the primary judge acknowledged that the adjudicator's failure to consider the claims was an error of law, it did not amount to jurisdictional error. Her Honour further held that an adjudicator's determination as to whether a submission was "duly made" was not subject to judicial review.
On appeal, the NSW Court of Appeal disagreed with the primary judge's conclusion that an adjudicator's opinion as to whether a submission was duly made was immune from judicial review. However, whether such an opinion was amenable to judicial review required an analysis of how that opinion was formed and whether it was a result of jurisdictional error.
The Court of Appeal held the application of the Cardno Test by the adjudicator was inconsistent with the SOP Act, and that there was, in fact, no rule which prohibited the adjudicator from considering material not supplied with a payment claim merely because that material would have affected the payment schedule. However, the majority held that this error of law was not a jurisdictional error. The appeal was dismissed.
Developer stung for wrongfully terminating off-the-plan contract under sunset clause
In JYP Jiang Pty Ltd v CAV Gasworks Pty Ltd [2025] QSC 134, the court found that the developer had wrongfully terminated an off-the-plan contract under a sunset clause and was therefore liable to compensate the buyer $6.1 million, being the difference between the contract price and the market value of the apartments at the time the contract should have settled.
In 2017, the buyer, JYP Jiang Pty Ltd (JYP), entered into an off-the-plan contract with the developer, CAV Gasworks Pty Ltd (CAV), for the purchase of two proposed sub-penthouse apartments in the Luminare development in Newstead for $4.2 million. Clause 8.3 of the contract was a sunset clause which permitted either party to terminate the contract if CAV could not give notice of issue of title within 5.5 years of the contract date.
Clause 8.1 of the contract required CAV to give notice of issue of title once it became aware that the title conditions had been satisfied. Under that clause, CAV could delay providing this notice until it was satisfied it could comply with all of its contractual obligations before settlement.
Titles were issued in November 2022, when the apartments were still less than 50% complete and no certificate of occupancy had been issued.
CAV did not give notice of issue of title and instead relied upon the sunset clause to terminate the contract with JYP in April 2023. CAV later sold the apartments to new buyers for more than double the original sale price.
Chief Justice Bowskill of the Queensland Supreme Court held that the CAV did not have the right to terminate the contract under the sunset clause. After finding that CAV could have given the notice of issue of title but had chosen not to, Her Honour said:
The case is the latest example of how terminating a contract can be a legal minefield and the cost of getting it wrong is significant.
CAV has appealed the decision but the appeal is yet to be heard.
If you have any questions or would like to learn more about recent developments in the construction space, please get in touch with our national Construction, Infrastructure & Projects team here.