Executive Summary
Parkview Constructions Pty Ltd v Futuroscop Enterprises Pty Ltd [2023] NSWSC 178 concerns an AS4902-2000 based design and construct contract where the date for practical completion was disputed in respect of a hotel and carpark.
This case serves as an important reminder that:
- unless a contract explicitly separates the work under the contract into separable portions, a superintendent will lack authority to grant a certificate of practical completion for part of the works; and
- there is no ability to issue a ‘conditional’ certificate of practical completion absent an express contractual power.
Separable or staged – there is a difference!
Summary
Futuroscop Enterprises Pty Ltd engaged Parkview Constructions Pty Ltd under an amended AS902-2000 contract to design and construct two buildings, being a hotel (Building A) and a car park (Building B). The definition of practical completion under the contract provided for the completion of the works, except for minor defects.
The contract did not establish Building A and Building B as separable portions.
In its unamended form, AS4902 provides the superintendent with the power to direct separable portions. The superintendent did not issue such a direction here.
The superintendent issued two ‘conditional’ notices of practical completion and certified Building A having retrospectively achieved ‘conditional’ practical completion on 12 September 2017, and Building B on 25 September 2017. The contract was not amended to provide for a ‘conditional’ notice of practical completion.
Disputes arose in respect of liquidated damages and the release of security.
What did the Court find?
Rees J held that:
- Building A and Building B were never established or directed as separable portions under the Contract meaning there could only be one certificate of practical completion under the Contract;
- a conditional certificate of practical completion had no contractual effect;
- the superintendent was not empowered to issue a conditional certificate of practical completion for one building at a time; and
- the Court was able to determine the date of actual practical completion, which would allow the calculation of the liquidated damages.
Ultimately the Court determined an alternative date of practical completion under the contract and as a result, overturned the superintendent’s assessment of liquidated damages.
Why is it important?
This case highlights the need to ensure contracts are administered in accordance with its terms, and care should be taken establishing informal stages. Where disputes arise, the Court may intervene to determine the date of practical completion, but this option can be costly and time-consuming.
What can you do?
Where a building contract involves stages or portions, ensure that the separable portions are clearly set out in the contract, or formally directed.
Secondly, although a conditional certificate of practical completion may be commercially attractive in some instances, Rees J confirms that it has no effect under the contract.
This article was written by Colin Harris, Partner and Ramya Putta, Solicitor.
