Key Takeaway Points
- An adjudicator is strictly bound to consider the matters outlined in s 88(2) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) in deciding an adjudication application.
- A failure to consider the matters in s 88(2) can lead to a finding that the adjudicated decision (or at least the designated part of it) was affected by jurisdictional error and thus void.
- What it means for the adjudicator to have “considered” the matters in s 88(2) is subject to wide judicial discretion and interpretation.
Introduction
The recent judgment delivered by the Queensland Supreme Court in York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QSC 44, delivered on 18 March 2025, emphasises the prescriptive nature of the list of matters which must be considered in an adjudication, enshrined in s 88(2) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (‘BIF Act’). A material failure to consider any of these matters (as was found in this case) will cause the adjudicated decision to be vitiated by jurisdictional error.
Background Facts
York Property Holdings Pty Ltd (‘York’) and Tomkins Commercial & Industrial Builders Pty Ltd (‘Tomkins’) executed a contract on 12 August 2021 for the construction of a residential high-rise building in Main Beach, Queensland (‘the Contract’) (York as principal, Tomkins as contractor). From that date until 29 August 2024, Tomkins undertook the work under contract and York simultaneously attended to payment claims issued by Tomkins – until a dispute arose.
On 29 August 2024, Tomkins issued a payment claim for the sum of $43,063,649.46 (inclusive of GST) to York. However, the corresponding payment schedule issued by York effectively disputed that anything was payable by York to Tomkins. Subsequently, on 10 September, Tomkins served York with a notice of termination of the Contract due to breach. York disputed the validity of this notice. Further, on 12 September, the Superintendent issued a payment schedule in response to Tomkins’ payment claim, certifying -$957,401.70 (inclusive of GST) as payable, while York issued a notice under clause 39.4 of the Contract to take the work out of Tomkins’ hands.
Then, on 25 October, Tomkins lodged an adjudication application, to which York lodged a response on 12 December. On 11 February 2025 the adjudication concluded with the official order made on 14 February that $16,825,279.17 (inclusive of GST) was payable by York to Tomkins. It was this adjudication decision which formed the genesis of these proceedings, as York had not yet paid the adjudicated amount to Tomkins. On 18 February, an interlocutory injunction was granted in favour of York to prevent Tomkins from enforcing the decision and an escrow agent from disbursing the funds.
Contentions
York’s overarching contention was that the adjudication decision was vitiated by jurisdictional error, rendering it void. York also sought consequential injunctive relief. Tomkins however opposed the grant of relief.
Key Issues
York relied on two alleged jurisdictional errors in the adjudicator’s decision, being:
- improper construction of the Contract – with regard to clause 39.6, where the adjudicator held this clause was void as it was deemed as an attempt to contract out of the BIF Act (prohibited under s 200); and
- failure to consider the parties’ submissions in accordance with s 88(2) of the BIF Act – which allegedly arose in two respects, being:
- the adjudicator omitted to consider a concession from Tomkins in its submissions that reduced a claim for work on the façade from $11.8 million to $8.1 million; and
- the adjudicator failed to consider submissions by York with regard to the value of a deduction for defective façade work increasing from $4 million to $11 million.
Legal Principles
There are no provisions within the BIF Act which allow for the appeal of an adjudicator’s decision. The decision may only be reviewed in light of jurisdictional error, in accordance with the principles outlined by Bond J in Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410 (‘Acciona’).
Decision
The Court ultimately found that the second of York’s submissions with respect to jurisdictional error was made out.
Reasoning
The alleged jurisdictional errors were referred to as:
- the alleged construction error; and
- the alleged consideration error.
The reasoning for both will be considered in turn.
The alleged construction error
Preliminarily, Treston J was required to consider whether the error in construction of the Contract could be regarded as a jurisdictional error. Her Honour referred to the Court’s observation in Acciona, that an error in the interpretation of a contract’s terms will not be a jurisdictional error. However, a fine line of distinction was drawn where the adjudicator can be said to have misunderstood the scope and jurisdiction of the adjudication (applying the reasoning of McMurdo J in Northbuild Constructions Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2015] 1 Qd R 463). Treston J rationalised that the adjudicator had in fact considered the submissions, considered the authorities to which the submissions referred and reached a conclusion as to the construction of subclauses 39.4 and 39.6 of the Contract (to determine what was payable in the circumstances). Incidentally, the adjudicated decision had been reached through the correct process, considering the matters stipulated in s 88(2) of the BIF Act. Therefore, her Honour held that this was a valid exercise of the adjudicator’s jurisdiction, and there was no jurisdictional error on this ground.
His Honour, though not required, considered the correctness of the adjudicator’s decision having regard to the interpretation of the contentious provisions of the Contract. It was undisputed that Tomkins was able to make a progress claim on 29 August 2024 under subclause 37.1 of the Contract and that this constituted a payment claim under the BIF Act, with a reference date of 28 August 2024. Clause 39 stated that if Tomkins committed a substantial breach of the Contract, York may require Tomkins to show cause (subclause 39.2). Accordingly, if Tomkins did not show cause within the stipulated time, York could give written notice to take the work out of Tomkins hands and to suspend payment. York’s contention relied on the construction of subclause 39.4(a) that all rights to payment were suspended until work subject to the take-out was complete (in this case, it was to be the remainder of the works). This included payment in respect of a payment claim which was the subject of an adjudication. York relied on the decision of Southern Han (2016) 260 CLR 340 which contained an equivalent provision to clause 39 of the Contract. However, Treston J cautioned against the application of the reasoning relied upon by York – as the circumstances of that decision concerned an invalid payment claim (due to there being no reference date). It was therefore distinguishable from the circumstances of York and Tomkins, as Tomkins had issued a valid payment claim prior to the take-out clause being enlivened. Her Honour found no error as to the adjudicator’s construction, and accepted Tomkins’ submission that while rights to payment may be contractually suspended upon valid service of a take-out notice, it is impossible in these circumstances to abrogate the right of a contractor to make a payment claim, as created by statute.
The alleged consideration error
Justice Treston then went on to address the alleged consideration error – which broadly pertained to the failure of the adjudicator to properly consider the evidence and submissions with respect to the value of the claim for the façade work. Notably, a failure of an adjudicator to consider a submission will constitute a jurisdictional error, if deemed a material failure. This is a question of fact as to what the particular failure involved. The evidence put before the adjudicator for the matter between York and Tomkins was substantial, comprising over 26,000 pages – including approximately 11 affidavits and 12 expert reports.
The payment claim the subject of this dispute largely consisted of payment regarding the building façade, making up $11,832,295.38 of the circa $43 million claim. However, in its adjudication submissions, Tomkins led evidence via statutory declaration which outlined a reduced amount for the façade claim, being $8,115,252.69). These submissions further referred to the statutory declaration which included a concession that Tomkins was not pursuing the full $11.8 million of the claim (due to exclusion of unfixed materials), leading to the reduced amount. York in response did not acknowledge the $8.1 million figure. Rather, York’s submissions focused on the value of the initial claim ($11.8 million) and the value of the façade work ($nil as reflected in the payment schedule) due to the work being entirely defective. The decision of the adjudicator did summarise the submissions of the parties, but it did not refer to the reduced value of Tomkins’ claim ($8.1 million). York contended as a result that the adjudicator must not have considered all submissions and evidence as required by s 88(2) of the BIF Act. In turn, Treston J identified that the content of what is required to be performed by an adjudicator is not easily characterised, with reference to the duty in s 88(2). Her Honour acknowledged the peculiarity and difficulty of the issue at hand, as the error of the adjudicator was partly the result of misleading material before him. While Tomkins made the concession via statutory declaration, York’s submissions together with the adjudicator’s findings focused on the defective façade which validated the $nil payment schedule. York’s submission on this point made no contemplation of any amount being payable for the façade. The adjudicator clearly engaged with this submission, whilst not demonstrating an understanding of the Tomkins concession.
Due to a variety of factors, including, inter alia:
- the repetitious references by the adjudicator to the incorrect claimed amount (i.e. referring to $11.8 million as opposed to $8.1 million actually submitted by Tomkins in the adjudication proceedings); and
- the treatment by the adjudicator of the whole amount of the payment claim as in contest, though only the façade portion was in contest;
her Honour concluded that the adjudicator did not consider the submissions and material in accordance with s 88(2) of the BIF Act. The Court outlined that while the adjudicator may have been led into error by York’s failure to acknowledge the Tomkin’s concession in its own submissions, this would not relieve his requirement to discharge the duty in s 88(2). Thus, the failure to consider a party’s submission as to the quantum of a claim, largely due to the significant difference between the sums claimed (i.e. $3.7 million) was held to constitute a jurisdictional error impacting the decision.
This jurisdictional error was thus sufficient to grant relief in York’s favour for that designated part of the adjudication.
There was a final ancillary issue for Treston J to consider regarding the deduction in value for the façade work. A previous adjudicator had decided the deduction was valued at $4.7 million. The present adjudicator was required to honour this decision, unless satisfied by either of the parties that the work had changed value (s 87(2) BIF Act). The adjudicator outlined that nothing had been submitted in respect of a change in value, but Treston J found this to be incorrect, as York had made submissions that the deduction should be increased to $11.8 million (reflecting the defective nature of that façade work). While the reasoning outlined no change in value, the adjudicator had recorded the value of the increased deduction. Due to this record, it was submitted by Tomkins that the adjudicator did properly consider the submissions in relation to this issue. The Court accepted this submission, reasoning that there are a variety of possible explanations as to why a particular submission may not have been examined in greater detail. Justice Treston could not be satisfied that the adjudicator failed to consider the submissions in relation to the deduction. This contrasted with the consideration error, in which the relevant submission was ignored and thus not considered at all.
Conclusion
Ultimately, one of York’s grounds of jurisdictional error was held to be made out. Justice Treston noted this as “in relation to a discrete component of the adjudication”, which was capable of severance from the original decision by authority of s 101(4) of the BIF Act, or remittance to the adjudicator for further consideration. In anticipation of such a conclusion, the parties sought to make further submissions with respect to the final outcome which are not detailed in this judgment.
As at the date of writing this Insight, the decision is currently the subject of an appeal.
Implications
This decision demonstrates that an adjudicator’s failure to evince, in their reasoning, sufficient consideration of all submissions, can result in the adjudication (or the relevant part of it) being void. This may be the case even where the failure to consider a party’s submission may have been partially caused or contributed to by the counter-submission of the other party later claiming jurisdictional error (as York did in this case, after having itself remained silent, in its counter-submission, on the reduced claim of Tomkins).
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