York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2026] QSC 156

Sian Keast | Matt Hammond | Sarah Nichols

Key takeout

• A principal that takes work out of a contractor’s hands may not be able to certify and recover its costs on an interim basis before that work is complete.
• The right to recover costs, and to have recourse to security, depends on the proper construction of the contract. A claim that is untenable or misconceived is not a claim ‘under the Contract’ capable of supporting recourse.
• Where the contract expressly preserves a party’s right to seek injunctive relief, the principal cannot argue that the security clause allocates the risk of who is out of pocket pending final determination.

Facts

On or about 12 August 2021, Tomkins Commercial & Industrial Builders Pty Ltd (Tomkins) entered into a contract with York Property Holdings Pty Ltd (York) to construct a residential tower (the Contract). The Contract incorporated an amended form of the AS 4000-1997 general conditions. Pursuant to clause 5.1 of the Contract, Tomkins provided two unconditional bonds in the form of security.

On 10 September 2024, Tomkins purported to terminate the Contract. The validity of this termination was disputed by York, with York purporting to affirm the Contract.

On 12 September 2024, York issued a notice under clause 39.4(a) of the Contract, exercising an asserted right to take the remaining work out of Tomkins’ hands. In or about January 2025, York engaged another company to perform the remaining work. However, at the time of this decision the work had yet to be completed.

The effect of taking the work out of Tomkins’ hands was to suspend Tomkins’ entitlement to payment until it became due under clause 39.6 of the Contract.

On or about 11 May 2026, York issued a letter to Tomkins advising that it had ‘expended considerable resources… since the takeout notice’ and there was ‘still significant work to do’. The letter suggested it was an ‘appropriate time to make a claim… in relation to the work done as of 31 March 2026 in respect of the takeout notice’.

On 29 May 2026, York provided the superintendent with an assessment of the costs it had incurred up to 31 March 2026. On 10 June 2026, the superintendent purported to certify $17,522,623.56 as payable from Tomkins to York under the Contract. The superintendent’s certificate was stated to be ‘pursuant to clause 39.6 of the Contract’. It carried a note recording that completion of the work under the contract was still being undertaken by the Principal and that ‘This certificate is not a final certificate’.

On 11 June 2026, York requested that Tomkins pay the certified amount ‘within a reasonable time and, in any case, by no later than 9am on Thursday, 18 June 2026’. Tomkins subsequently requested an undertaking that York not take any steps to enforce the alleged debt (including by calling on the securities). York provided this undertaking until 4:00pm on 24 June 2026.

On 16 June 2026, Tomkins applied for an interlocutory injunction to restrain York from calling on the securities. Tomkins argued that it validly terminated the Contract and, as a result, clause 39.4 could not be engaged. It also submitted that, on the proper construction of the Contract, the superintendent could only certify an amount under clause 39.6 when the work taken out of the Contractor’s hands had been completed.  Tomkins also sought a declaration as to the proper construction of clause 39.6 but did not press that part of its application at the hearing. The construction submission itself was pressed and was decided.

Decision

The Court ordered an interlocutory injunction. Specifically, the Court ordered that upon Tomkins giving the usual undertaking as to damages (and an undertaking not to demand the return of the bonds until the determination of the issues in the proceeding or ‘earlier order’), York was to be restrained from having recourse to the bonds in respect of any certification under clause 39.6.

In reaching this decision, the Court considered:

• whether Tomkins made out a prima facie case (i.e. if the evidence remained as is, there was a probability that, at the trial, Tomkins would be held entitled to relief); and

• whether the inconvenience or injury which Tomkins would be likely to suffer if an injunction were refused outweighed or was outweighed by the injury York would suffer if the injunction were granted.

Could Tomkins establish a prima facie case?

The Court was satisfied to a high degree of certainty, on the evidence as it presently stood, that Tomkins would establish at trial that York had no accrued right or entitlement to have recourse to the security.

Given the nature of the application, the Court required a ‘strong prima facie case’ to justify its interference. Kelly J noted that the need to establish a strong prima facie case has often led courts to construe contractual provisions on the interlocutory application. As a result, the Court considered whether clause 5.2 of the Contract (Recourse to security) was intended to allocate risk pending the final determination of the parties’ rights. The Court was not satisfied that it was. Clause 5.2 permitted recourse in respect of a claim ‘under the Contract’, which his Honour treated as words of limitation. The Contract contained no covenant by Tomkins not to seek injunctive relief. To the contrary, clause 42.4 expressly preserved each party’s right to institute proceedings to enforce payment or to seek injunctive or urgent declaratory relief. The parties were therefore to be taken to have contemplated that York could be restrained. A ‘claim’ under clause 5.2 was not to be equated with an entitlement or an established liability, but it must be genuine and arguable. A claim that is untenable, irrational or misconceived cannot justify recourse to security.

The Court noted that the validity of the Contract’s termination was relevant to the establishment of a prima facie case. However, the evidence before the Court was not directed to this issue, and the parties made no related submissions. Accordingly, Kelly J was not satisfied that Tomkins could establish that it was entitled to terminate.

Ultimately, the Court was satisfied that, at the trial, Tomkins could establish that York’s claim was ‘misconceived, untenable and not properly regarded as a claim to payment made under the Contract’. This was because:

• clause 39.4 of the Contract allowed the Principal to take ‘the whole or part of the work remaining’ out of the Contractor’s hands;

• the opening words of clause 39.6, ‘when work taken out of the Contractor’s hands has been completed’, were inconsistent with certification at a time when that work had not been completed; and

• the Contract contained ‘contextual considerations’ which strongly mitigated against clause 39.6 permitting interim certification. For instance, clause 39.6 did not mention interim certifications, nor did the Contract contain a provision specifying the timing of interim certifications. Further, the commercial purpose of clause 39.6 seemed to recognise only one reconciliation. Clause 39.6 also allowed the Principal to sell ‘construction plant or other things’ to discharge a debt. Kelly J suggested it would be odd if this type of lien attached to property in respect of a debt arising from an interim certification.

Did the balance of convenience favour the grant of interlocutory relief?

The Court found that the balance of convenience favoured the grant of the interlocutory injunction.

The Court noted that the strength of Tomkins case was a relevant factor when considering where the ‘lower risk of injustice’ lay. Specifically, Tomkins’ submission that its strong prima facie case was a ‘significant matter in its favour’ was accepted by the Court. Kelly J also observed that calling on the security may create adverse consequences for Tomkins’ existing financial facilities and may lead to reputational damage. However, his Honour noted that consequences may be difficult to quantify or prove as a matter of causation.