Case Summary – 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

Background

This case concerns a design and construct contract for a mixed-use development entered into by Calibre Construction Group Pty Ltd (the builder) and Kaloriziko Pty Ltd (the developer). The builder commenced proceedings for unpaid retention as well as claims for unpaid variations and the balance of the contract sum.

The developer disputed these claims and by its cross-claim list statement, sought to recover amounts paid for previously approved variations as well as claiming damages for delay and defective work.

The “on account” Variations

The developer disputed 15 of the claimed variations, and instead sought to recover funds from 9 variations it already approved and paid for.

The developer contended that the payment or approval for the variations were on account and that, on the proper construction of the contract, the payment or approval did not bespeak the developer’s agreement that there was in fact a variation for which the builder was entitled to payment beyond the contract sum. The developer relied on a sentence within clause 37.2 of the contract which stated that ‘payment other than final payment shall be payment on account only’.

The Court did not accept this argument and held that a reasonable person in this position would not understand that the effect of those words in the provision would allow the developer to give a direction to the builder to vary the contract and then price the variation, but leave it open to the developer later to contend that there has been no variation.

Moreover, having given the direction to the builder to vary the work, and then having priced the work, the Court held that it was not open to the developer to argue that the work did not constitute a variation, and thus had to provide the builder with the outstanding amounts for the variations.

Key Takeaways

Clauses allowing payments “on account” are common in the building and construction industry. The purpose of such clause is to facilitate cash flow throughout a project whilst enabling the party to re-adjust the amounts payable later on or at conclusion of the project.

However, payment “on account” does not entitle a party to later dispute approved variations. If a party gives a direction to vary the contract and then price the variation, it is not later open for that party to contend that there has been no variation.