York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2026] QCA 63

David Pearce | Allie Flack | Max Rylance

Key takeouts

An adjudicator must find that work is defective before deducting rectification costs under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act). A finding that work may be defective is insufficient.

The deduction amount must be a genuine estimate of the cost of rectifying an identified defect, and not simply the value of the work carried out to date, used as a mechanism to withhold payment.

Where defects are relied upon to reduce a progress payment, respondents must establish both the existence of a defect and the cost of rectifying it. Adjudicators are not permitted to ‘fill the gaps’.

Facts

In August 2021, York Property Holdings Pty Ltd (York) engaged Tomkins Commercial & Industrial Builders Pty Ltd (Tomkins) as head contractor for the construction of an apartment building on the Gold Coast. Tomkins later issued a progress payment claim exceeding $22.4 million, which included a substantial claim for façade works comprising the curtain wall system, aluminium doors and windows.

York responded with a payment schedule disputing several items and deducting approximately $4.76 million in respect of the façade works. The deduction was not based on any quantified scope or assessment of rectification works. Instead, York contended that Tomkins had not provided a Form 15 compliance certificate for the façade system and that, without that certificate, York could not be satisfied the works complied with the contract. On that basis, York asserted that the façade may be defective and may require removal and replacement.

The amount deducted reflected York’s assessment of the value of façade works completed to date. It did not represent an estimate of the cost of rectifying any identified defects. The dispute was referred to adjudication under the BIF Act.

The adjudicator’s decision

The adjudicator accepted Tomkins’ valuation of the façade works for progress payment purposes, finding that York had not substantiated its assessment of the percentage of work completed. However, having concluded that Tomkins was required to provide a Form 15 and had not done so, the adjudicator accepted York’s contention that the façade may require removal and replacement. On that basis, the adjudicator valued the ‘estimated cost of rectifying the defect’ by adopting the amount York had deducted, being the value of the façade works previously completed.

The first instance decision

The primary judge found that the adjudicator’s deduction for façade rectification was affected by jurisdictional error and therefore void. The adjudicator had failed to make a finding that the work was defective and had no evidentiary foundation for treating the value of completed work as an estimate of rectification cost.

For broader context, see our earlier case update: Two decisions, one project: ‘Midwater’ in deepwater.

Decision

The Court of Appeal dismissed York’s appeal and upheld the primary judge’s decision.

Failure to perform the statutory task

The Court’s reasoning turned on the proper operation of sections 71, 72 and 88 of the BIF Act and the limited but mandatory task imposed on adjudicators when valuing construction work. That task requires an adjudicator to determine the value of the work carried out and, where defects are alleged, to first determine whether the work is defective and, if so, to have regard to the estimated cost of rectifying that defect.

The adjudicator did not find that the façade works were defective. At its highest, the adjudicator accepted that, in the absence of a Form 15, the façade may require removal and replacement. The Court held that this amounted to no more than recognition of risk or uncertainty. It did not constitute a finding that the work was defective for the purposes of section 72 of the BIF Act.

Even if a defect had been established, the adjudicator was required to consider the estimated cost of rectifying that defect. There was no evidence before the adjudicator addressing rectification costs. York’s case was expressly put on the basis that payment should be withheld pending confirmation of compliance and that the appropriate deduction was the value of the work completed. Treating that figure as an estimate of rectification cost involved a fundamental misapplication of the BIF Act.

The Court also noted the internal inconsistency in the adjudicator’s reasoning. The adjudicator accepted Tomkins’ higher valuation of completed façade work for progress payment purposes but relied on York’s lower valuation as the supposed cost of rectification. While illogicality alone does not establish jurisdictional error, in this case it reinforced the conclusion that the adjudicator had not performed the statutory valuation task required by section 88 of the BIF Act.

Jurisdictional error

The Court reaffirmed that adjudication determinations are not subject to appeal and that courts will not engage in merits review. However, where an adjudicator fails to perform the function conferred by the statute (namely, to value construction work having regard to the matters prescribed in section 72 of the BIF Act), the determination is made outside jurisdiction and has no legal effect to that extent. In this case, the absence of a finding of defect and the absence of any assessment of rectification cost meant the adjudicator did not carry out the task required by the BIF Act.