A major wrinkle for "on account only" assessments in construction contracts

"Approved in the amount of $###, on account only" is a common assessment response to variation or other claims made under a construction contract.  

For decades, the industry has more-or-less accepted that a principal or head contractor is entitled to revisit previously-made certifications because payments under construction contracts are universally "on account only".  

A recent decision delivered by the Supreme Court of New South Wales may see the end of that approach so favoured by superintendents.

In 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, Justice Stevenson held that once a principal gives a direction for a variation, and that variation is assessed and valued, it is not open to later dispute the existence or valuation of that variation, despite any language suggesting interim or provisional payments.

This case sends a clear message to developers, superintendents and contract administrators. Attempts to undo or walk back approved variations by relying on standard progress payment provisions will not succeed where the contractual framework does not expressly reserve such a right.

The dispute

The dispute arose out of a mixed-use development project in Ryde, Sydney. The builder, Calibre Construction Group, claimed approximately $270,000 for variations that had been directed, approved and valued under clause 36 of the contract. The developer, Kaloriziko Pty Ltd, sought to deny liability for these amounts on the basis that the pricing of the variations was “on account” and not binding.

Kaloriziko relied on wording in clause 37.2 of the contract, which dealt with progress payments. That clause included a standard provision stating that “payment other than final payment shall be payment on account only”. Kaloriziko argued that this wording meant any pricing of variations by the Developer’s Representative under clause 36.4 was similarly provisional and capable of later dispute.

The Court’s decision

Justice Stevenson firmly rejected Kaloriziko’s argument, holding that clause 37.2 did not apply to the variation regime under clause 36. The Court held that clause 37.2 was limited in scope to the payment of progress claims and did not give Kaloriziko a general right to treat variation approvals as provisional or non-binding. His Honour reasoned that reasonable parties would not interpret the contract to allow a developer to:

1. direct a variation under clause 36.1;
2. price that variation under clause 36.4; and
3. then later argue that the work was not a variation at all, or that the valuation should be revisited.

Lessons for contract drafting and administration

The decision provides critical guidance on the limits of “on account” language in standard construction contracts. While such language is commonly used in the context of progress payments to prevent interim certificates from being treated as conclusive evidence of completed work, it does not extend to the variation process unless expressly drafted into the contract.

Construction contracts will inevitably be amended to catch up with this judgment, but in the meantime, contractors will welcome "on account" variation approvals.

For more information or assistance, please contact our Construction and Infrastructure team.

Authors

Andrew Kelly | Partner | +61 7 3338 7550 | akelly@tglaw.com.au

Thomas McKillop | Special Counsel | +61 7 3338 7530 | tmckillop@tglaw.com.au

Ricky Bithar | Law Graduate