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The key take away of this brief is that while the use of “on account” is typically used in construction contracts in respect of progress payments to try to prevent payment certificates from being considered as evidence of completed works, that does not extend to the variations process (unless of course it is expressly drafted into the contract).
In June 2025, the New South Wales Supreme Court handed down the decision of 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.
In this case, Calibre Construction Group ("Builder") claimed that certain variations had been directed, approved and valued under clause 36 of the relevant contract. Kaloriziko Pty Ltd ("Developer") denied that the Builder was entitled to the amounts for such variations on the basis that pricing of the variations was not binding as it was “on account” only.
The Developer’s argument was rejected by Justice Stevenson and his Honour ultimately held that clause 37.2 was only in respect of payment of progress claims and did not give the Developer a right to treat variation approvals as “on account” and not binding. His Honour stated at [109], in summary, that reasonable persons in the position of the parties would not understand that the effect of the words used in these provisions to be that the Developer could, first give a direction to the Builder under clause 26.1 to vary the works under contract and then price the variation on the basis stated in clause 36.4(a) but leave it open to the Developer later to contend there had been no “variation”.
His Honour then noted that the disputed variations were approved by the Developer and many were paid and “[i]t is now not open to the Developer to challenge these matters by contending that its approval was “on account” only.”
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