Catchwords

Construction of deed of settlement – entitlement to final payment following issue of certificate of practical completion – validity of certificate of practical completion – duty of a superintendent

Significance

The case sets out the principles applicable to the construction of commercial agreements.  In addition, the case clarifies the role that the superintendent plays in administering a contract and considers the effect of a certificate of practical completion issued by a superintendent.

Facts

Metier3 Pty Ltd (plaintiff) was engaged by the defendant to perform architectural services under a consultancy agreement. The quantum of fees payable to the plaintiff was the subject of a dispute between the parties, which was resolved by the parties entering into a deed of settlement (Deed).

The Deed required the defendant to pay $1.3 million to the plaintiff by way of instalments. The final instalment of $300,000 was payable on 'Practical Completion' of the works. 'Practical Completion' was defined under the Deed to mean the 'issue of a certificate of Practical Completion (CPC) in accordance with the contractual arrangements for the performance of the works'.  On 1 March 2013, the superintendent issued a CPC; however, the defendant refused to pay the final instalment as it contended that the CPC was issued prematurely by the superintendent.

Decision

Vickery J was required to consider whether the Deed entitled the plaintiff to be paid the final instalment on the issue of a CPC.  His Honour held that in construing a commercial agreement, consideration must be given to the language used by the parties, the surrounding circumstances known to the parties and the commercial purpose of the transaction.  This includes considering the reasonableness of the positions advanced by each party.

His Honour considered the role of the superintendent who must not do anything to interfere with the proper functioning of the agreement and is required to promote the contractual aim of the parties.

Ultimately, his Honour held that the plaintiff would be entitled to payment of the final instalment on the issuance of the CPC unless:

  • the CPC was not a document of the necessary character or was not issued by the superintendent;
  • the superintendent did not exercise his contractual power bona fide;
  • the decision to issue the CPC was so unreasonable that no reasonable superintendent would have issued it; or
  • the issuance of the CPC was otherwise shown to be beyond the powers of the superintendent.

Accordingly, the plaintiff was entitled to be paid the final instalment under the Deed unless the defendant could prove that the CPC should be set aside on the grounds outlined above.