Nikki Miller | Isobel Carmody | Xavier Vale
Where a contract provides for a party to make monthly payment claims ‘prior to practical completion‘ and the contract defines the ‘date of practical completion’ by reference to the issue of a certificate of practical completion, that party may submit monthly payment claims until the required certificate of practical completion is issued.
Reference dates under the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) will continue to arise on a monthly basis until a certificate of practical completion is issued.
Transcend Plumbing and Gasfitting Pty Ltd (claimant) entered into two amended AS4902 subcontracts with J Hutchinson Pty Ltd (respondent) for two projects. Those subcontracts provided for reference dates for payment claims on a monthly basis ‘prior to practical completion‘, ‘at practical completion‘ and at the expiry of the last defects liability period.
The claimant negotiated early release of 50% of retention monies for each project and sought confirmation of the date of practical completion under each subcontract. In March 2022, the respondent emailed the claimant stating for the first project, ‘PC was granted for the buildings on 22nd December and external works on 15th February’ and for the second project ‘see dates for Practical Completion. Stage 1 SP3 – 21/12/21 Stage 1a 5c – 14/1/22‘. This was the only evidence relied upon to establish the date of practical completion.
In April 2022, the claimant made payment claims under the subcontracts which it then referred to adjudication under the Act. The key issue between the parties was whether the payment claims were supported by a valid reference date, which turned on whether or not those payment claims were made ‘prior to practical completion‘.
The court held that the payment claims were valid and that the adjudicator had jurisdiction to make the adjudication determinations. In doing so, the court interpreted the phrase ‘prior to practical completion‘ as used in the subcontracts as meaning ‘prior to the date of practical completion’ – that is, prior to the date of issue of a certificate of practical completion.
In the subcontracts, ‘date of practical completion’ was defined as the date evidenced in a certificate of practical completion, and ‘practical completion’ was defined to require the works reaching a certain physical state, as well as the provision of certain documents, manuals and evidence of testing. The mere fact that works had reached a physical state of completion (without certification) was insufficient to establish that practical completion had been achieved.
Therefore, the claimant’s entitlement to make monthly progress claims under the subcontracts continued until a certificate of practical completion was issued. No certificates of practical completion had been issued at the time the relevant payment claims were made and those payment claims were supported by a valid reference date.
The court dismissed an argument by the respondent that the March 2022 emails constituted certificates of practical completion for each project, holding that due to their purpose, certificates of practical completion should be clear, unambiguous and have some degree of formality. Those emails were informal, unclear and ambiguous. They did not reference that practical completion was achieved under the subcontracts (as opposed to the head contract for the projects) and the first email did not identify the separable portions said to have achieved practical completion.
The court also dismissed an argument by the respondent that, by its conduct, the claimant had elected to treat practical completion as having occurred, or that it abandoned or waived any right to insist on the issue of a certificate of practical completion. The conduct relied upon was that the claimant had negotiated for the release of retention monies, alleged that the works were ‘finished’, requested confirmation of the dates of practical completion and informed the respondent and the superintendent of their maintenance obligations during the defects liability period (which commenced after practical completion). The court held that this conduct was merely seeking to negotiate early release of retention monies and otherwise acting within the contractual regime.