News & Insights

Earlier this year, Standards Australia released its draft update to AS4000-1997 (currently known as AS4000-2024).[1]

A notable change in the update involves clause 34.6 (Practical Completion), which would allow superintendents to backdate the date of practical completion when issuing the certificate.

While this amendment aims to formalise a common practice, the question remains: is it a good idea? In this article, we explore whether the proposed change may create more issues than it solves, and whether removing the ability to backdate might be a better option for standard contracting purposes.

AS4000-1997 and backdating practical completion

Reading clause 34.6 of AS4000-1997, it is easy to see why parties and superintendents currently assume backdating is possible, given that:

• the contractor must first form an opinion that practical completion ‘has been reached’ before making its written request of the superintendent to issue the certificate of practical completion; and
• the superintendent subsequently has 14 days within which to communicate its decision on the matter (either by giving the certificate or written reasons for not doing so).

Since practical completion must have occurred before this process commences, it seems logical that the superintendent can  acknowledge this in its certificate.

In practice, backdating also often arises when delays in certification occur, with parties assuming that the superintendent can cure that delay when certifying.

However, the New South Wales Court of Appeal’s ruling in Abergeldie Contractors Pty Ltd v Fairfield City Council [2] highlights significant risks associated with this practice.

Risks of backdating – Abergeldie revisited

Although the Court in Abergeldie was required to consider the terms of the specific contract in issue, the Court examined provisions in substantively the same terms as AS4000-1997.

The Court observed that there can be multiple risks and uncertainties that flow from backdating the date of practical completion, including:

• Security of payment: The date of practical completion usually sets the commencement of the period in which contractors are permitted to make further statutory payment claims for practical and final completion.  Backdating may inadvertently serve to deny contractors a statutory entitlement.
• Defects liability period and final claims: Backdating can introduce uncertainty for the timing of the commencement and expiry of the defects liability period and consequently the timing for the submission of final claims.
• Release of security: Most contracts provide for the release of security (such as bank guarantees or retention) when practical completion is reached, or within a few days after it.  Backdating can complicate these obligations and also interfere with contractor’s cash flow.
• Liquidated damages: Backdating can extend or shorten the period for which liquidated damages apply, affecting both the principal and the contractor financially.
• Responsibility and care for the works: Risk in the works usually passes from the contractor to the principal at practical completion.  Backdating can unexpectedly shift this risk earlier than intended, meaning parties were not aware of this change in their obligations when the change occurred, which can introduce insurance coverage uncertainty or disputes.

The weight of these various risks and uncertainties was significant enough for the Court to find that, unless otherwise specifically provided for by amended terms of the Contract, the date of practical completion is the date the superintendent issues the certificate of practical completion, not any earlier date that might be specified in the certificate.

As mentioned above, a key factor in the Court’s reasoning was the potential impact of backdating (in this case, backdating around 2 months) upon parties’ rights and obligations under the security of payment legislation.  The Court held that the parties must be taken to have contracted with an awareness of the security of payment legislation (including its ‘no contracting out’ provisions).

Other uncertainties introduced by backdating

In our view, backdating also introduces uncertainty in respect of:

• Extension of time claims: Backdating could impact the validity and assessment of extension of time claims (and by extension, delay damages claims), potentially disadvantaging contractors.
• Statutory warranties: The commencement of statutory warranty periods might be affected, meaning there can be a period during which the principal does not know it has warranty claims.
• Subcontractor relationships: Backdating at the head contract level could create discrepancies with subcontract completion dates, leading to complex contractual issues down the supply chain.  This is especially if timelines under the subcontract are tight.
• Compliance with project requirements: If practical completion triggers any statutory or third-party notifications (e.g. to funders or authorities), backdating could put the project in breach of these obligations.

What then to make of the proposed changes to clause 36.4?

While backdating might seem convenient, it introduces a host of risks and uncertainties, as Abergeldie demonstrates. It’s therefore surprising that the proposed update endorses backdating, rather than using this opportunity to clarify obligations – especially where they intersect with security of payment legislation.

An alternative approach for AS4000-2024

As always, parties are free to agree between themselves their own procedures and protocols for certification of practical completion – including to permit the backdating of practical completion if they wish.

However, assuming that an objective of the update to AS4000-2024 is to provide industry with a standard form contract which promotes certainty, a better approach might have been to take heed of the guidance in Abergeldie and remove from the standard form the prospect of backdating.

This approach will obviously require contractors to factor the certification process timeframe into their construction programs and proposed dates for practical completion (i.e. to avoid assuming liability for liquidated damages).  Beyond this, any superintendent delay in certification can be dealt with in the usual manner (i.e. by EOT and corresponding delay damages claims).

If you would like to discuss these matters further, including how to give effect to these suggestions when contracting, our Infrastructure, Construction and Energy team are happy to assist.

[1] More information about AS4000-2024 can be found here.

[2] [2017] NSWCA 113.  See also J Hutchinson Pty Ltd v Transcend Plumbing and Gasfitting Pty Ltd [2023] VSC 39.