Approving in-scope work as a variation does not make it one

Variations are among the most contested heads of claim on Australian projects, and no area relies more heavily on assumptions that the case law keeps disturbing. The latest disturbance came in December 2025. In Kaloriziko Pty Ltd as trustee for Ryde Combined Unit Trust v Calibre Construction Group Pty Ltd (No 2) [2025] NSWCA 259, the Court of Appeal held that items a developer had approved as variations were not variations, because the work was already within the contract scope. Approval could not turn in-scope work into a variation (at [118]). If your register shows “approved” next to an item, that word proves less than you think.

Under the standard machinery (AS 4000's clause 36 is the archetype), the superintendent directs variations (additions, omissions, changes in character or quality), and the contractor must not vary the work without a written direction. Three recurrent entitlement problems sit around that simple structure: oral directions, scope and notice.

Work directed orally and performed sits outside the formal machinery, but it is not unrecoverable. The High Court's Liebe v Molloy (1906) 4 CLR 347 line holds that where the owner knows extra work is being performed, knows it is outside the contract, and knows the builder expects payment, a promise to pay can be implied despite a writing clause. Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 suggested that recovery of the Liebe kind may now rest on restitution rather than implied contract, but only for work truly outside the contract. Its actual result turned on estoppel: an owner whose agent led the builder to proceed without the contractual notices could not rely on them.

These are rescue doctrines, though: expensive, uncertain and fact-hungry. The operational answer is the contract's own tool. Under AS 4000, a contractor can require written confirmation of an oral direction (cl 20); the standing site rule should be confirmation of every oral instruction within 24 hours.

Whether work is “extra” at all is a construction question the records must answer: drawings, specification, the contractual design obligations (acute on design and construct contracts, where design development is usually the contractor's risk). And the variations power has outer limits in both directions: it is not a power to transform the project into something manifestly different (Wegan Constructions Pty Ltd v Wodonga Sewerage Authority [1978] VR 67), nor a power to omit work in order to hand it to another contractor (Commissioner for Main Roads v Reed & Stuart Pty Ltd (1974) 131 CLR 378).

Variation entitlement increasingly arrives wrapped in time bars: claims to be notified under the general claims clause within fixed periods. Everything we have written about notice discipline applies here with full force.

AS 4000 cl 36.4 prices variations in a fixed order: prior agreement; applicable contract rates; rates in a priced bill or schedule to the extent reasonable; and finally reasonable rates and prices including a reasonable amount for profit and overheads. The discipline the order implies (agree the price before the work where possible) remains the single most valuable variation habit on either side of the contract.

At first instance (Calibre Construction Group Pty Ltd v Kaloriziko Pty Ltd (No 2)[2025] NSWSC 593), the builder kept the amounts, because the developer had priced and paid them under cl 36.4 (at [97]). The contract was an amended AS 4902-2000 form, but its cl 36.4 and cl 37.2 work the same way as AS 4000's. The Court of Appeal disagreed on the principle. Approving or pricing a non-variation does not make it a variation, and cl 36.4 is a pricing mechanism that assumes a real variation (at [118]). Because payments before final payment were “on account” (cl 37.2), the developer was entitled to a $133,175 credit for a consultancy-fee item that had been approved, though not yet paid (at [114], [118] to [120]). The builder kept the paid items (variations 1, 7, 11, 13 and 21) only because the contract made services and infrastructure work separately payable (at [108] to [113]). Where cl 36 is followed and a real variation is priced, the builder's right to payment stands (at [119]).

1. 01

   Treating “approved” as entitlement. If your register shows “approved” next to an item, that word proves less than you think. Approval could not turn in-scope work into a variation (Kaloriziko (No 2) at [118]).

2. 02

   Relying on the rescue doctrines by choice. Recovery without a written direction depends on rescue doctrines: expensive, uncertain and fact-hungry. The operational answer is the contract's own tool.

3. 03

   Folding time-related costs into the variation price. State time-related components separately in each variation build-up to avoid prolongation double-recovery.

• Run the variation register as an entitlement document. Every direction (written and oral-confirmed), its scope basis, pricing status under the cl 36.4 hierarchy, approval status, and now a scope column: why is this item outside the contract scope, and was cl 36 followed? After Kaloriziko, that column is real money.
• Price before performance, and seek finality wording.Pre-agreement under cl 36.4(a) avoids the valuation fight; an express term that agreed variation values are final and binding (not “on account”) and a scope analysis on file avoid the Kaloriziko fight. Negotiate it into the amendments, or at least into individual variation agreements for significant items.
• Confirm every oral direction in writing within 24 hours. Liebe v Molloy and Update Constructions exist for the breakdown cases. The 24-hour written-confirmation habit, the cl 20 confirmation demand, and the notice register make them unnecessary, and they are the difference between contractual entitlement and a claim for work outside the contract, or an estoppel argument.
• Substantiate like it's a claim, because it is. Each variation file: the direction, the scope analysis (why this is extra), the build-up (quantities, rates, time-related components stated separately to avoid prolongation double-recovery), and contemporaneous cost capture for daywork-style items.
• Watch the omissions. A principal omitting work to give it elsewhere is in Reed & Stuart territory; a contractor watching scope migrate to others should say so in writing immediately: the breach is in the redirection, and silence reads as acquiescence.

Get advice when work has been done on an oral direction that was never confirmed, when an approved or paid item may sit within the contract scope, when work you priced is omitted or moved to another contractor, and before the final account on any contract whose progress payments are on account. The answer turns on the wording of your contract and how it has been administered.