H & M Constructions (NSW) Pty Ltd v Golden Rain Development Pty Ltd (No 4) [2023] NSWSC 925

Andrew Hales |  Maciej Getta  |  Ersen Ahmet

Key takeout

Issuing a practical competition certificate under a design and construct contract is a significant step that generally determines the date from which construction work is taken to have been completed except for minor defects.  

Providing any practical competition certificate which is conditional on completion of outstanding work is likely to be legally invalid and hold no contractual effect where the contract itself makes no provision for ‘conditional completion’.  This case illustrates the importance of discharging a contract in accordance with its terms.

Facts

Golden Rain Development Pty Ltd (developer) engaged H&M Constructions (NSW) Pty Ltd (builder) to design and construct residential apartments, terraces and public domain roads on a contaminated former industrial site.

The contamination of the site was known to both parties and the City of Sydney Council granted development approval for the project subject to remediation conditions.  The builder’s scope of work included remediating the site contamination and all risks related to remediation were contractually allocated to the builder.

In July 2018, the builder contended it had completed the works and achieved practical competition.  The date for practical competition of the apartments and terraces had already passed.

Around this time, the site auditor reported that there were still unacceptable levels of contamination at the site, whilst the Council also confirmed that the works failed to comply with the development consent.  The superintendent declined to issue a certificate of practical completion on these grounds.

In September 2018, following significant lobbying and pressure from the builder, the superintendent issued a conditional certificate of practical competition (conditional certificate).  The conditional certificate was subject to the builder completing the work and obtaining an occupation certificate from the Council.

Subsequently, the builder ceased work maintaining it had no obligation to complete the outstanding work the subject of the conditional certificate. The builder claimed that the granting of the conditional certificate demonstrated practical competition had been achieved and therefore it had no obligation to complete the work without a variation direction.  Notably, the builder also stopped claiming extensions of time and delay costs after the issue of the conditional certificate and instead sought a return of its performance security.

The developer asserted practical completion had not been achieved and would only be achieved when the conditions and requirements of the conditional certificate had been satisfied.

Key issue

Whether the effect of the conditional certificate was that practical completion of the work under the contract was validly certified as having being achieved in September 2018, and whether this date determines respective entitlements to liquidated damages.

Decision

The Supreme Court concluded that the conditional certificate had no legal effect. Interpreting the terms of the design and construct contract, Stevenson J found that once the superintendent received a request to issue a certificate of practical completion, the superintendent had only two contractual decision-making avenues:

• either to issue a certificate of practical completion evidencing date of completion;
• or provide reasons as to why practical completion had not been achieved.
  
  There was no scope to issue any conditional certificate.