A conditional certificate is not evidence of Practical Completion
October 24, 2023
In the New South Wales Supreme Court decision of H & M Constructions (NSW) Pty Ltd v Golden Rain Development Pty Ltd (No 4) [2023] NSWSC 925, the court considered the effect and impact of a conditional Certificate of Practical Completion issued by the Superintendent.
H & M Construction (H&M) entered into a D&C contract with Golden Rain Development (Golden Rain) to design and construct apartments, terraces and various public domain roads on a former industrial site. Disputes arose between the parties in relation to Practical Completion, including Golden Rain seeking to enforce its right to access security and levy liquidated damages in the amount of $22 million. Relevantly, H&M had failed to receive occupation approvals and certificates from the council, which were conditions precedent to achieving Practical Completion.
Under the contract, when H&M considered the requirements for Practical Completion were met, it could request the Superintendent to certify the works had been finished and issue a Certificate of Practical Completion. Having previously informed H&M that it could not certify Practical Completion without the approvals from council, the Superintendent proceeded to issue H&M a conditional Certificate of Practical Completion. That certificate identified ten conditions which were to be completed by H&M, seven of which were already contractual requirements to achieve Practical Completion. H&M sought to rely on the Superintendent’s certificate to assert that Practical Completion had been achieved, thereby invalidating Golden Rain’s right to access security and levy liquidated damages.
Justice Stevenson found the Superintendent’s conditional Certificate of Practical Completion was invalid for two reasons. First, the Superintendent was not contractually entitled to issue a conditional Certificate of Practical Completion. Under the contact, on receipt of a request for a Certificate of Practical Completion, the Superintendent could either:
- issue a Certificate of Practical Completion evidencing the date of Practical Completion; or
- give written reasons why it considered Practical Completion had not been achieved.
As the Superintendent’s conditional Certificate of Practical Completion did neither of these things it had no effect under the contract.
Secondly, even if the court had found that the Superintendent was entitled to issue a conditional Certificate of Practical Completion, the date of Practical Completion remained uncertain as a number of the conditional items, such as receipt of an occupation certificate, remained outstanding at the time of the judgment. The court determined that as Practical Completion had not been achieved, Golden Rain could have recourse to H&M’s security and levy liquidated damages.
The full decision can be found here.
