Facts

  • York (principal/developer) engaged Tomkins (builder) to construct two residential apartment projects.
  • A payment dispute arose under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act), proceeding to adjudication.
  • The dispute centred on façade works, including issues of:
    • extent of completion, and
    • alleged defects / non-compliant work.
  • Tomkins’ payment claim:
    • Valued façade works at approximately 46% complete;
    • Applied a deduction of ~$4.76 million for “defective work”, said to reflect the estimated cost of rectification.
  • York’s position:
    • The façade works were only about 29% complete;
    • The claimed deduction was not properly characterised as “defective work”, but rather an attempt to value incomplete works;
    • The builder had not established actual defects or a proper basis for rectification costs.
  • The adjudicator:
    • Rejected that the works were proven to be defective in the strict sense;
    • Accepted that the builder had raised legitimate concerns about compliance (including absence of a Form 15 certification);
    • Found York had not adequately responded to those concerns;
    • Allowed a deduction equal to the estimated rectification cost (~$4.76m) as a proxy for valuing work not in accordance with contract under s 72(1)(b)(iv).
  • At first instance, the primary judge found aspects of the adjudicator’s reasoning to be problematic but ultimately upheld the decision, finding no jurisdictional error.

 

Decision (Court of Appeal)

  • The Court of Appeal dismissed York’s appeal with costs.
  • Key findings:
    • The central statutory task for the adjudicator is to decide the amount of the progress payment under s 88 of the BIF Act.
    • While parts of the adjudicator’s reasoning were described as “illogical” or internally inconsistent, that alone does not establish jurisdictional error.
    • The adjudicator:
      • Considered the contract, submissions, and payment materials;
      • Grappled with the façade issue (completion vs defects);
      • Ultimately valued the work by reference to rectification cost, which is expressly permitted under s 72 where work is not in accordance with the contract.
    • Even if the adjudicator:
      • conflated defect and valuation concepts, or
      • failed to make a clear finding of “defect”,
        this did not mean he failed to perform the statutory task.
  • The Court emphasised that judicial review is limited—errors in reasoning will only invalidate a decision if they demonstrate a failure to exercise jurisdiction (not merely a flawed exercise of it).

 

Key Takeaways for Industry

1. Very limited scope to challenge adjudication decisions

  • This decision reinforces that Security of Payment adjudications are highly resistant to judicial review.
  • Even:
    • logical inconsistencies, or
    • imperfect reasoning
      will not suffice unless they show the adjudicator did not actually perform the statutory task.

 

2. “Illogical” reasoning ≠ jurisdictional error

  • The Court accepted the adjudicator’s reasoning was, in parts, difficult to reconcile.
  • However, provided the adjudicator:
    • addresses the dispute, and
    • reaches a conclusion on valuation,
      the courts will not intervene.

Practical implication:
Parties should not expect to “fix” an unfavourable adjudication outcome via judicial review.

 

3. Rectification cost remains a powerful valuation tool

  • The case confirms that adjudicators can:
    • value work by reference to the cost of rectification,
      even where:
    • defect findings are not clearly made, or
    • the issue overlaps with incomplete work.
  • This reflects the flexibility under s 72(1)(b)(iv) of the BIF Act.

Practical implication:
Respondents can deploy rectification cost arguments strategically, even where defect evidence is contested or incomplete.

 

4. Failure to respond to defect allegations is risky

  • York’s failure to:
    • engage substantively with defect concerns, and
    • provide contractual certification (Form 15),
      was influential in the adjudicator’s reasoning.

Practical implication:
Claimants must:

  • directly address alleged defects in payment schedules and adjudication responses;
  • ensure contractual certification requirements are strictly complied with.

 

5. Distinction between “defects” and “valuation” may blur

  • The case shows that, in practice:
    • arguments about defective work,
    • non-compliant work, and
    • extent of completion
      may be treated interchangeably in adjudication.

Practical implication:
Submissions should be framed holistically, addressing:

  • completion percentages,
  • compliance with contract, and
  • rectification cost—rather than treating them as siloed issues.

 

6. “Quick and dirty” regime reaffirmed

  • The Court reaffirmed that the BIF Act operates as a rapid, interim payment regime, not a forum for perfect reasoning.

 

Bottom line:
Adjudication outcomes will stand unless there is a clear failure to exercise jurisdiction—not merely a flawed decision.