VARIATIONS DON’T VOID

Merkon Constructions Pty Ltd v Residence Company Pty Ltd [2025] VSC 151

FACTS

Merkon Constructions Pty Ltd (the Builder) contracted with Residence Company Pty Ltd (the Developer) to construct a multi-level residential apartment building for a lump sum of $28.826 million. The parties executed two deeds of variation, the second of which (8 October 2021) increased the contract sum to $37.088 million (exclusive of GST), amended the date for practical completion, and set out a mechanism for payment of outstanding amounts from the proceeds of apartment sales.

The Developer failed to pay the Builder $2.44 million claimed under the contract. The Developer resisted payment on three grounds:

The second deed of variation limited its liability to amounts payable from apartment sale proceeds;

The second deed was unenforceable as it breached a prior “builder’s side deed” with the project lender; and

The Builder was estopped from claiming further amounts because it had signed the superintendent’s final certificate.

ISSUE

Was the Builder entitled to recover the unpaid balance under the construction contract despite the alleged limitations in the second deed of variation, its breach of the builder’s side deed, and the signing of the final certificate?

FINDING…