In mid-March 2025, Troy Legal published comments on the QLD Supreme Court decision in Pacific Diamond 88 rejecting the developer’s rights of set-off under an Amended AS4902 in respect of LD’s certified by the superintendent and awarding payment to the contractor.
The developer subsequently appealed that decision in Pacific Diamond 88 [2025] QCA 50 and on 11 April 2025, the QLD Court of Appeal rejected the appeal and unanimously agreed with the decision of the primary judge.
The developer argued on appeal that the deletions to the key clauses in AS4902 had no effect, and that it retained interim set-off rights for LD’s under clauses 34.7 and 37.2, as if unamended. The developer argued certification of LD’s, of itself, created a debt payable by the contractor and equitable set-off rights remained available to the developer (at any time) as they had not been removed by express words.
The Court of Appeal decision closely examined the pre-contractual amendments to AS4902 adopted by the parties leading up to the final execution version, and in particular, deletions to payment clause 37.2 and liquidated damages clause 34.7.
The Court of Appeal unanimously held, applying contract interpretation principles from Codelfa Constructions, that the agreed deletions to those clauses had a clear effect (different from the earlier unamended clauses), namely mutual acceptance by the parties that the developer’s set-off rights for LD’s against amounts payable to the contractor were removed, at least until practical completion, when thereafter certified LD’s could be set-off against amounts due to the contractor in a final certificate.
Further, because there was no interim mechanism available in the Amended AS4902 by which LD’s could be paid by the contractor in advance of the final certificate, neither legal nor equitable rights of set off for LD's remained available to the developer prior to that time.
Troy Legal repeats the recommendations in our earlier comments on the original decision above, such that higher contracting parties ensure set-off rights are preserved by a general set-off clause in the contract and amend LD's clauses to allow set-off rights to be exercised at any time where works are delayed.
Julian Troy is founder and director at Troy Legal. With over 23 years experience in construction law he cuts to the real issues and provides simple and effective solutions to complex problems.
In mid-March 2025, Troy Legal published comments on the QLD Supreme Court decision in Pacific Diamond 88 rejecting the developer’s rights of set-off under an Amended AS4902 in respect of LD’s certified by the superintendent and awarding payment to the contractor.
The developer subsequently appealed that decision in Pacific Diamond 88 [2025] QCA 50 and on 11 April 2025, the QLD Court of Appeal rejected the appeal and unanimously agreed with the decision of the primary judge.
The developer argued on appeal that the deletions to the key clauses in AS4902 had no effect, and that it retained interim set-off rights for LD’s under clauses 34.7 and 37.2, as if unamended. The developer argued certification of LD’s, of itself, created a debt payable by the contractor and equitable set-off rights remained available to the developer (at any time) as they had not been removed by express words.
The Court of Appeal decision closely examined the pre-contractual amendments to AS4902 adopted by the parties leading up to the final execution version, and in particular, deletions to payment clause 37.2 and liquidated damages clause 34.7.
The Court of Appeal unanimously held, applying contract interpretation principles from Codelfa Constructions, that the agreed deletions to those clauses had a clear effect (different from the earlier unamended clauses), namely mutual acceptance by the parties that the developer’s set-off rights for LD’s against amounts payable to the contractor were removed, at least until practical completion, when thereafter certified LD’s could be set-off against amounts due to the contractor in a final certificate.
Further, because there was no interim mechanism available in the Amended AS4902 by which LD’s could be paid by the contractor in advance of the final certificate, neither legal nor equitable rights of set off for LD's remained available to the developer prior to that time.
Troy Legal repeats the recommendations in our earlier comments on the original decision above, such that higher contracting parties ensure set-off rights are preserved by a general set-off clause in the contract and amend LD's clauses to allow set-off rights to be exercised at any time where works are delayed.
Julian Troy is founder and director at Troy Legal. With over 23 years experience in construction law he cuts to the real issues and provides simple and effective solutions to complex problems.
