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21
Aug 2017

When is “practical completion” actually achieved?

In the recent NSW Court of Appeal decision of Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113 the Court of Appeal determined that, under an amended AS4000 construction contract, the date of “practical completion” was the date the certificate of practical completion was issued by the superintendent to the contractor, as opposed to the date specified in the certificate as being the actual date of practical completion.

The Court of Appeal determined that in order for practical completion to occur, the superintendent needed to certify that it had occurred and communicate this to the contractor by issuing a certificate of practical completion. Abergeldie (the Contractor) could not otherwise know whether practical completion had yet been reached until it received the certificate. In allowing the appeal and finding that the Contractor was entitled to payment, the Court of Appeal determined that the certificate, which must be dated, provides the “evidence” of the date of practical completion, but its issue is the conclusive event which ends the process.

Background

The matter came before the NSW Court of Appeal as an appeal from the decision of Ball J of the NSW Supreme Court in Fairfield City Council v Abergeldie Contractors Pty Ltd [2017] NSWSC 166. Fairfield City Council (the Council) entered into a contract with Abergeldie Contractors Pty Ltd (the Contractor) to undertake major roadworks on sections of Wetherill Street in Wetherill Park. The contract provided that the Contractor may submit a payment claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) on relevant Reference Dates, the first of which was the 28th day of the month immediately after practical completion. The Contractor advised the Council on 16 September 2016 that it was of the view that practical completion had been achieved.

On 25 November 2016, the Council issued a certificate of practical completion noting the “date of practical completion” was 16 September 2016.  The Contractor then submitted a payment claim, by that time however the date contended by the Council as the “28th day of the month immediately after practical completion” (i.e. 28 September 2016) had passed.

In the decision at first instance, Justice Ball quashed an adjudication determination which had found that the Contractor was entitled to payment.  The Contractor then appealed.

The issues

The Council argued that, because practical completion occurred on 16 September 2016, the correct Reference Date for submission of the payment claim was 28 September 2016 (being the 28th day of the month immediately after practical completion). The Council therefore argued that the payment claim was not a valid payment claim under the Act.

The Contractor argued that it was the issuing of the certificate which effected practical completion for the purpose of submitting a payment claim, rather than the date specified within the certificate. The Contractor argued that it could not have known that practical completion had occurred, and thus submitted a payment claim, unless and until the Superintendent issued the certificate.

The decision

The Court looked to the language of the contract itself.  The relevant clause provided that “…. the Superintendent shall give the Contractor and the Principal either a certificate of practical completion evidencing the date of practical completion….” [emphasis added].   The Court found that the structure and language of the contract was entirely consistent with the proposition that the issuing of the certificate, which is issued at the discretion of the Superintendent, was the conclusive event to effecting practical completion. The Court stated that the Contractor could not have known that practical completion was reached until it received that certificate.

The decision has numerous implications for building and construction contracts, in particular having regard to the requirements to refer back to a “reference date” in order to submit a payment claim. The reference date is also the date which commonly governs the commencement of the defects liability period.

In circumstances where there is a delay by a superintendent or other supervising body/individual in issuing the certificate of practical completion, the time-frame in relation to various obligations that continue to run under contracts will be affected.

For more information, please contact ERA Legal.