Kaloriziko Pty Ltd v Calibre Construction Group Pty Ltd (No 2) [2025] NSWCA 259

What the court decided

Kaloriziko Pty Ltd, as trustee of a unit trust (the developer), and Calibre Construction Group Pty Ltd (the builder) were parties to a design and construct contract for an apartment development in Ryde [3]. They made the contract in November 2017, for a mixed use development of four towers and a hundred units [11]. It incorporated general conditions in the AS 4902-2000 form [11]. The contract sum fixed by the formal instrument of agreement was $31 million [29]. The builder sued the developer for breaches of the contract, and the case was heard by Stevenson J [3]. The primary judge awarded the builder $2,137,430.86 plus interest [4]. The developer and one of its directors, Mr Chanine, appealed [3]. Adamson JA gave the only reasons, with which Mitchelmore JA and Kirk JA agreed [1], [2], [3].

The developer had approved and paid five claims for "variations", including a substation and street lighting upgrade and Sydney Water works [26]. The primary judge found that this work fell within the work under the contract and so was not a variation, but held that the developer could not treat its payments as made on account because it had directed, priced and paid for the work [90], [97]. The general conditions provided that "Payment other than final payment shall be payment on account only" [39]. Adamson JA held that the developer's approval and payment did not override that provision, and that the primary judge's contrary finding was wrong [107].

The builder nevertheless kept those payments, on its notice of contention [100], [113]. The defined "excluded items" included work or costs relating to "services or infrastructure upgrades" [33]. The formal instrument of agreement provided that excluded items did not form part of the contract sum [29]. Adamson JA accepted that each of the five claims was an excluded item [108]. Because the definition could bear more than one meaning, the development consent and plans, which pre-dated the contract, could be used as surrounding circumstances [109]. Read in that light, the contract required such work to be done as part of the contract works but paid for separately [110], [112]. The error alleged was established, but no credit was due to the developer for those claims [113].

A sixth claim, variation 44, was for consultants' fees of $133,175.50, which the developer had approved but not paid [27]. The primary judge allowed it on the basis that it had been approved, without deciding whether a disputed conversation before the contract about those fees had taken place [90], [114]. The builder accepted that the fees fell within the work under the contract and were not excluded items [116]. It argued that, under the variation clause, the developer's approval entitled it to the amount even if the work was not a variation [116], [117]. Adamson JA rejected that argument, holding that approval could not "transform a non-variation into a variation" [118]. Even if the approval was an implied admission that the work was a variation, it was only evidence, which other evidence could displace [118]. The pricing mechanism in clause 36.4 assumed an actual variation, and treating an approved payment as final would conflict with clause 37.2 [118]. The developer was entitled to a credit of $133,175 [120].

On delay, the contract fixed the period for practical completion at 20 months from the issue of the construction certificate [40]. The certificate was issued on 20 August 2018, so the original date was 20 April 2020 [13]. The builder's extension of time claims and project control group reports gave the original completion date as 23 May 2020 [16], [19]. It was not disputed that extensions of 102 days had been approved and that practical completion occurred on 15 September 2020 [121]. If the original date was 20 April 2020, the developer was entitled to liquidated damages of $210,000 [121]. The primary judge inferred that the developer's representative had agreed to 23 May 2020, relying in part on an email from Ms Rizk, a project assistant, calling a report "acceptable" [92].

The contract could be varied "only by written instrument executed by both parties" [32]. Adamson JA reasoned that, because 23 May 2020 first appeared in a claim dated 13 September 2018, any agreement to change the date must have been made on or before then, so an email of 1 May 2019 could not have changed it [124]. Of three hypotheses, a written variation and an oral agreement were possible but not probable for want of evidence [125], [126]. An oral agreement would in any event not have been effective to vary the date, absent a promissory estoppel, because the contract required a written instrument [127]. The third hypothesis was a miscalculation repeated in later documents [125]. That might be the most likely explanation, but it too was unsupported by evidence, and the choice between the hypotheses was "conjectural and speculative", so no positive inference of a variation could be drawn [127]. The finding that the date had been varied was erroneous, and the judgment sum was to be reduced by $210,000 [130].

The remaining issues concerned a settlement. Mr Chanine and Mr Tran were both directors of the developer, and Ninth Campsie Pty Ltd was associated with Mr Tran's daughter, Ms Tran [15]. In 2023 freezing orders against the developer were replaced by mortgages to the builder over properties owned by Ninth Campsie, by Ms Tran and by two companies of which Mr Chanine was sole director [45], [46], [47]. The mortgages secured the amount claimed or any judgment [139].

In February 2024 the builder entered into a deed with Mr Tran, Ninth Campsie, Apolo Apartments Pty Ltd as vendor and Aerial Holdings Pty Ltd as purchaser [49]. The deed recited that the vendor was related to Mr Tran and Ninth Campsie, and the purchaser to the builder [49], [56]. Adamson JA described the effect of the deed as releasing the mortgagors Ninth Campsie and Ms Tran from their liabilities under the mortgages in exchange for Apolo's transfer of three properties at Arncliffe to a party related to the builder for $5 million [58]. The primary judge accepted that the mortgagors' liability was coordinate with the developer's, but found that he could not assess to what extent, if any, the deed discharged it [90], [94].

Adamson JA held that, because the deed discharged a liability coordinate with the developer's liability to the builder, the developer's liability had to be reduced to prevent double recovery [140]. The builder argued that, as the properties were not transferred to it, it could not be shown to have obtained a benefit [141]. Adamson JA rejected that argument, applying the equitable preference for substance over form [142], [143]. In substance Ninth Campsie and Ms Tran were released from a coordinate liability, and otherwise the builder could obtain double recovery by nominating a related company to buy property at an undervalue [143]. Adamson JA added that the coordinate liability must still be established with precision [143].

On the amount, Adamson JA applied the principle that a plaintiff who has received a benefit from a party with coordinate liability bears the onus of proving any part of that benefit which does not relate to that liability [134], [155]. The builder had done nothing to discharge that onus, so the reduction was the full undervalue, with no allowance for the value of the releases [144], [156].

The primary judge had found the properties worth more than $5 million but could not say by how much [96], [158]. Adamson JA held that this was erroneous, rejecting the builder's argument that error of the House v The King kind had to be shown [159], [160], [161]. In Adamson JA's view there was ample evidence from which value could be determined [161]. The 2020 purchase prices were prima facie evidence of the properties' market value at that time [164]. Rather than remit the question, the court decided it, noting among other reasons that no issue of credibility arose and that its powers under section 75A of the Supreme Court Act 1970 (NSW) were ample [166]. The developer's valuer, Mr Garnsey, valued the properties at $7.9 million as at the date of the deed [69]. Adamson JA found the evidence of the builder's valuer unsatisfactory and accepted Mr Garnsey's opinion that the properties were worth in the order of $7.9 million when sold for $5 million [167]. Adamson JA found an undervalue of $2.9 million [168].

All grounds except grounds 1 to 3 succeeded, and the reductions totalled $3,243,175 [169]. The court allowed the appeal, set aside orders 1 to 3 made at trial on 19 June 2025, entered judgment for the developer and declared that the amount otherwise owing by the developer to the builder was nil [171]. The builder was ordered to pay the developer's and Mr Chanine's costs of the proceedings below and the appellants' costs of the appeal, subject to submissions for a different order [171]. Because the other reductions already brought the amount to nil, the court gave the developer an opportunity, by directions made with the judgment, to say whether it sought judgment on its cross-claim for the $210,000 in liquidated damages [170], [171].

Why it matters

On this contract, the developer's approval of claims for work that was not a variation did not displace the clause treating payments other than the final payment as payments on account, and it obtained a credit for an approved claim for consultants' fees. The builder nevertheless kept the payments for work that was an excluded item, to be paid for outside the contract sum. The decision also shows the court looking at the substance of a settlement made through related companies: the builder's release of parties with coordinate liability, in return for a sale to its related company at an undervalue, reduced the developer's liability by the whole undervalue, because the builder did not prove that any part of that benefit related to something else.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.