EXECUTIVE SUMMARY
Strict compliance with procedural requirements has long been recognised in the construction industry as essential to establishing a party’s contractual rights.
Colormode Pty Ltd v Civic Construction Group Pty Ltd [2024] QDC 148 reinforces the requirement for strict contract compliance to establish a party’s entitlements.
BACKGROUND
Civic Construction Group Pty Ltd (Civic) and Colormode Pty Ltd (Colormode) entered a series of subcontracts for painting works to a residential apartment project. Each was an amended AS 4901-1998 subcontract concerning a different building in the project – ‘Ferry Road‘, ‘Habitat‘ and ‘Soko‘ – the Subcontracts.
In the proceeding (commenced after the works had been completed) Colormode claimed payment for variations of $552,018.23 including $95,919.27 in security retention moneys.
In response Civic:
- denied that the alleged variations had been sought and approved in accordance with the Subcontracts;
- contended that Colormode released Civic from further claims as it failed to submit a final payment claim in the time provided under the Subcontracts; and
- claimed $1,674,500 in liquidated damages for late completion.
THE JUDGMENT
Clause 37, amongst other things, provided for a time period to deliver a final claim following the defects liability period and the subsequent method to make payment. Judge Barlow KC held that compliance with the giving of the final payment claim within time and the issue of the final certificate were strict conditions of entitlement to payment.
Judge Barlow KC determined that although there were amounts owing for variations under the Ferry Road and Soko Subcontracts (approximately $51,000 combined), Colormode was not entitled to payment for any of the amounts as it had failed to comply with clause 37 of the Subcontracts relating to final payment claims.
His Honour also determined that nothing was due under the Habitat Subcontract as the subject matter of the claims was completed prior to commencement of the defects liability period. Accordingly, the strict time bar of the contract in clause 37.4 was fatal to the claim.
As to retention, Colormode had failed to give notices in time in relation to the Ferry Road and Soko subcontracts, and lost its entitlement to recover the retention moneys. Colormode had complied with the Habitat Subcontract and successfully claimed its retention moneys with additional interest.
His Honour reinforced that where a contract provides clear procedural time periods, there were good commercial reasons to uphold compliance with the clause.
Finally, the Court rejected Civic’s claim regarding liquidated damages. It found that even if Civic was entitled to liquidated damages, the failure to include liquidated damages claims in the final certificate, or in the time allowed before the issue of a final certificate, barred Civic from a right to claim liquidated damages.
The final certificate was held to be conclusive evidence of the amounts owing under the Subcontracts to either party and discharged each party’s obligations under the subject matter of the Subcontracts.
In short, the Court held that neither party could make claims against the other where there was a failure to comply with the strict terms of the Subcontracts.
KEY TAKEAWAYS
This decision emphasises the importance of strict adherence to contract requirements.
Compliance with the procedural requirements of a contract may seem harsh, however, they are a regular feature of construction contracts. Non-compliance is harsh: it can result in a party losing a substantial entitlement.
This article was written by Theo Kalyvas, Partner, and Nick Jarrett, Solicitor.
