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- York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd[2025] QCA 39
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York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd[2025] QCA 39
York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd[2025] QCA 39
SUPREME COURT OF QUEENSLAND
CITATION: | York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QCA 39 |
PARTIES: | YORK PROPERTY HOLDINGS PTY LTD AS TRUSTEE FOR YORK PROPERTY TRUST ABN 94 831 587 168 (applicant) v TOMKINS COMMERCIAL & INDUSTRIAL BUILDERS PTY LTD ABN 98 061 732 778 (first respondent) CHRIS LENZ (ADJUDICATOR NO. J622914) (second respondent/not a party to the application) HWL EBSWORTH LAWYERS ABN 37 246 549 189 (third respondent/not a party to the application) |
FILE NO/S: | Appeal No 1112 of 2025 SC No 630 of 2025 |
DIVISION: | Court of Appeal |
PROCEEDING: | Miscellaneous Application – Civil |
ORIGINATING COURT: | Supreme Court at Brisbane – [2025] QSC 44 (Treston J) |
DELIVERED EX TEMPORE ON: | 25 March 2025 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 25 March 2025 |
JUDGES: | Flanagan JA |
ORDER: | The parties are directed to forward a draft order consistent with these Reasons to my associate by close of business today. |
CATCHWORDS: | Building Industry Fairness (Security of Payment) Act 2017 (Qld) Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2015] 1 Qd R 463; [2014] QSC 80, cited Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWSC 208, cited Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWCA 172, cited Stirling Harbour Services Pty Ltd v Bunbury Port Authority (No 2) [2000] FCA 87, cited |
COUNSEL: | G B Beacham KC, with T W Ambrose, for the applicant D S Piggott KC, with J E Menzies, for the first respondent |
SOLICITORS: | Holding Redlich for the applicant Thompson Geer for the first respondent |
- [1]The appellant and first respondent are parties to a building Contract. That Contract was entered into on 12 August 2021 whereby the first respondent undertook to carry out works for the development of a 40 storey residential apartment building at Main Beach, Queensland. These works were performed between 12 August 2021 and 29 August 2024. Since late 2024, the parties have been in dispute about the project.
- [2]A payment claim in respect of the Contract in the sum of $43,063,649.46 was served by the first respondent on 29 August 2024. In response, the appellant served a payment schedule for nil dollars.
- [3]The claim was both a progress claim under clause 37.1 of the general conditions of the Contract and a payment claim under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the Act).
- [4]On 11 February 2025, the adjudicator gave a decision and ordered an amount of $17,318,865.88 which was subsequently amended on 14 February 2025 to an amount of $16,825,279.17. The adjudicator’s decision was that the appellant was required to pay the first respondent that amount.
- [5]The appellant, before Treston J, challenged the adjudicator’s decision asserting two jurisdictional errors. The first jurisdictional error concerns the interaction between the Act and clause 39 of the Contract. Clause 39 is set out in paragraph 25 of her Honour’s reasons.[1] Clause 39 dealt with the parties’ rights and obligations in circumstances where the first respondent committed a substantial breach of Contract. By clause 39.3 the appellant was able to give a notice to show cause and under clause 39.4 if the first respondent failed to show reasonable cause by the stated date and time, the appellant could give written notice to the first respondent to take out of the first respondent’s hands the whole or part of the work remaining to be completed and suspend payment until it became due and payable pursuant to clause 39.6. By clause 39.5, the appellant was able to complete the work taken out of the first respondent’s hands and an adjustment on completion of work taken out was to be made pursuant to clause 39.6. The first asserted jurisdictional error was that the adjudicator accepted the first respondent’s contention that the Contract could not suspend its statutory right to a progress payment for work already carried out up to the reference date for the payment claim and that clause 39.4 was void for “Contracting out” of the Act to the extent it was taken to postpone that right until after completion of the process for which clause 39.6 provided (s 200 of the Act).
- [6]Her Honour dealt with the first asserted jurisdictional error in two ways. First, her Honour considered that the error identified was not a jurisdictional error in that it only concerned the identification of the terms or the interpretation of the terms of the Contract.[2] This finding is challenged by the appellant in ground 2 of the notice of appeal.
- [7]Her Honour, while considering that it was unnecessary to decide whether the adjudicator was correct or not in the interpretation of clause 39, nonetheless decided that the adjudicator’s construction was correct. Her Honour noted that as between the parties it was uncontroversial that 28 August 2024 was a date on and from which the first respondent was entitled to make a progress claim under clause 37.1 of the Contract. On 29 August 2024, the first respondent did in fact make a progress claim under clause 37.1 of the Contract. 28 August 2024 was a “reference date” under the Act. Accordingly, from 28 August 2024 the first respondent was entitled to a progress payment under the Act for the reference date of 28 August 2024. A payment claim was made by the first respondent on 29 August 2024 under the Act for the reference date of 28 August 2024.
- [8]Her Honour accepted the first respondent’s submission that the adjudicator was correct to refer to the approach both at first instance and on appeal in Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd,[3] that although it is settled that after the valid service of a take out notice the Contractor’s rights are suspended, including the right to claim progress payments, nothing in the Contract, and no exercise of powers under the Contract, could alter or modify, let alone extinguish the rights already created by statute. This included the statutory right to make a payment claim based on a reference date in circumstances where that right could not be taken away by clause 39.6.[4]
- [9]This finding by her Honour is challenged by the appellant in ground 1 of the notice of appeal which states that her Honour erred in holding that the adjudicator correctly refused to give effect to clause 39 of the Contract on the basis that the statutory right to make a payment claim based on a reference date that had already arisen could not be taken away by clause 39.6. The ground further asserts that the relevant effect of clauses 39.4 and 39.6 was not to remove the right of the first respondent to make a payment claim, but rather to require the amount of any progress payment to be assessed on the basis that the first respondent’s right to payment under the Contract was wholly suspended. Accordingly, the first respondent was not entitled to any payment under the Contract at the time that the amount of the progress payment was assessed, such that the amount of the progress payment should be “nil”. This did not have the effect of Contracting out of the Act, contrary to s 200.
- [10]The second asserted jurisdictional error concerned a failure by the adjudicator to consider or properly consider the submissions and the evidence in relation to the value of a claim concerning the façade of the building. The first respondent had originally claimed $11,800,000 but later had reduced the amount to $8,100,000. The adjudicator however, allowed $11,800,000. Her Honour accepted that this mistake supported a finding that the adjudicator had in fact failed to consider the evidence and relevant submissions. This led to the adjudication amount being reduced by the difference between $11,800,000 and $8,100,000, resulting in an adjusted adjudicated amount of $12,736,532.22.
- [11]As already observed, the parties entered into the Contract as well as the Escrow Deed on 12 August 2021. Under the terms of the Escrow Deed, the escrow agent is the third respondent, HWL Ebsworth Lawyers, who did not appear or participate in the present application. The second respondent is the adjudicator who likewise did not appear or participate in the application. Both the second and third respondents indicated by correspondence that they would abide any orders made by the Court.
- [12]The escrow amount is $25,000,000. The escrow agent is required to disperse payment from the escrow amount to the first respondent within 10 business days of the first respondent making a written request for payment together with (relevantly):
“An adjudication decision in favour of (the first respondent) under the (Act) stating that (the appellant) property is liable to pay an adjudicated amount to (the first respondent) notwithstanding any application to overturn the adjudicated amount”.
- [13]Further, within 5 business days of a disbursement of the escrow amount, the appellant is required to pay an amount equivalent to such disbursement (the top up amount) to the escrow agent to deposit into the escrow account.
- [14]The first respondent has not yet made a written request to the escrow agent for the adjusted adjudicated amount. When the first respondent does make such a request then:
- within 10 business days, the escrow agent will be required to disburse the adjusted adjudicated amount to the first respondent from the escrow amount; and
- within 5 business days of the disbursement the appellant will be required to pay a top up amount equivalent to the adjusted adjudicated amount to the escrow agent.
- [15]On 18 February 2025, Treston J made interim orders restraining the first and third respondents from disbursing any payment from the escrow amount in relation to the request for payment made by CDI Lawyers on behalf of the first respondent dated 11 February 2025 or any other request based on the adjudication decision of the second respondent dated 10 February 2025 as corrected on 14 February 2025. Her Honour made further interim orders restraining the first respondent from filing any adjudication certificate as a judgment or making any further request for payment under the Escrow Deed in relation to the adjusted adjudication amount or requesting a charge over property the subject of the adjudication decision under s 100B of the Act.
- [16]On 18 March 2025, Treston J extended the operation of these orders until 4.00 pm on today’s date, 25 March 2025.
- [17]On 20 March 2025, the appellant filed a notice of appeal challenging her Honour’s determination in relation to the first asserted jurisdictional error on the grounds identified above. The notice of appeal also seeks to permanently restrain the third respondent from disbursing any payment from the escrow account in relation to the adjudication decision as well as permanently restraining the first respondent from filing any adjudication certificate, making any further requests for payment under the Escrow Deed in relation to the adjudication decision or requesting a charge over the relevant property.
- [18]As the orders of Treston J expire today, the appellant by application filed 20 March 2025, seeks interim orders restraining the first and third respondents in terms similar to those made in the orders of Treston J. The restraint is sought until the determination of the appeal or further order.
- [19]The decision whether to grant an injunction pending appeal will be informed by the general principles governing the grant of interlocutory injunctions, namely the demonstration of a serious question to be tried and the balance of convenience.[5]
- [20]It is conceded by the first respondent that the Court should proceed on the basis that the appellant’s appeal is arguable and that on this hearing the Court is not in a position to form a conclusion about the strength or otherwise of the appellant’s appeal. This concession is properly made as, in my view, the two grounds of appeal are arguable. In relation to ground 2 which concerns her Honour’s finding that no jurisdictional error had been committed as the adjudicator was acting within jurisdiction in considering the proper construction of the Contract, as is apparent from the reasoning of the adjudicator as set out at Reasons, [45] part of the adjudicator’s consideration of the operation of clause 39 was informed by his finding that any attempt to invoke clause 39.6, for example, “falls foul of s 200” of the Act because “it is an attempt to Contract out of the Act”. These considerations involve not the mere interpretation and construction of clauses of the Contract but rather concern a determination of the clauses’ operation by reference to the intersection between those clauses and the Act. This is at least a matter that arguably goes to jurisdiction and any error made in relation to this interaction between the Act and clause 39 may constitute jurisdictional error.
- [21]As submitted by the appellant, the error was a jurisdictional error because the adjudicator determined that there was a limit on his function or power, through s 200, when on a proper analysis there was no such limit. As a result, according to the appellant, the adjudicator ignored the effect of a take out notice under clause 39 of the Contract when that was a matter that the adjudicator was obliged to consider pursuant to s 88(2)(d) of the Act and where there was no power or entitlement to do so. Where an adjudicator therefore incorrectly applies s 200 so as to misapprehend the nature or limits of his functions or powers, this may constitute a jurisdictional error.
- [22]As to the first ground of appeal, the appellant seeks to argue that the primary judge erred in holding that the adjudicator correctly refused to give effect to clause 39 of the Contract on the basis that the statutory right to make a payment claim based on a reference date that had already arisen could not be taken away by clause 39.6. The appellant submits that the relevant effect of clauses 39.4 and 39.6 was not to remove the right to make a payment claim, but rather to require the amount of any progress payment to be assessed on the basis that the first respondent’s right to payment under the Contract was wholly suspended, with the effect that the amount of any progress payment ascertained by the procedure under the Act, would be an amount to which the first respondent was finally entitled under the Contract, namely nil. The appellant seeks to argue that the effect of the take out notice was not limited to progress payments; it was a suspension of the totality of the rights to payment under the Contract, including the right to a final payment. Therefore the take out notice, even when served after the reference date, or the payment claim, was relevant to determining the amount of the progress payment to which the first respondent was entitled. These matters raised by the appellant are, at the very least, arguable.
- [23]The first respondent having conceded that these grounds of appeal are arguable, submits that the balance of convenience favours the refusal of the interim relief.
- [24]Before considering the first respondent’s submissions in relation to the balance of convenience, there are three matters that should be noted. First, the Court is able to accommodate an early hearing of the appeal on 21 May 2025. It is estimated that the appeal will take in the order of two to three hours. Secondly, the appellant is willing to give the usual undertaking as to damages. Thirdly, the appellant is willing to pay the adjusted adjudicated amount of $12,736,532.22 into Court. The form of such payment to be to the satisfaction of the Registrar. I note that the appellant will require approximately one week to make such arrangements for the payment into Court. The willingness of the appellant to make such a payment into Court is relevant in considering one of the factors raised by the first respondent in relation to the balance of convenience.
- [25]As to the balance of convenience, the appellant submits that there is no evidence that the first respondent will suffer any harm from being held out of the adjusted adjudicated amount other than the loss of the use of the money. This is in the context that the whole of the adjusted adjudicated amount, including any interest payable to date, is secured pursuant to the Escrow Deed which holds $25,000,000.
- [26]The appellant sought to establish by evidence that there is a risk of non-repayment by the first respondent should the adjusted adjudicated amount be paid over to it. In my view, the evidence is insufficient for the purposes of establishing this proposition and I do not take this factor into account in determining where the balance of convenience lies.
- [27]As to the balance of convenience, the first respondent relies on clause 3.6(a)(i)(C) of the Escrow Deed which provides that the first respondent is entitled to be paid from the escrow amount on presentation of an adjudication decision “notwithstanding any application to overturn the adjudicated amount”. The appellant concedes that the phrase “notwithstanding any application to overturn the adjudicated amount” would include the present proceedings.
- [28]The first respondent submits that by this clause the parties have allocated to the appellant the risk of being out of pocket pending the resolution of any dispute about an adjudication decision, including a proceeding challenging the validity of the adjudication. According to the first respondent this is consistent with the obvious commercial benefits of provisions in building Contracts which provide for progress payments to be made to Contractors so as to ensure cashflow. It therefore constitutes a strong factor against the grant of the interim relief. In Saipem Australia Pty Ltd v GLNG Operations Pty Ltd,[6] Philip McMurdo J considered a clause in the following terms:
“The Contract of convenance with the company that the Contractor will not institute any proceedings, exercise any right or take any steps to injunct or otherwise restrain:
- The financial institution that issued the performance security from paying the company pursuant to the performance security.
- The company from taking any steps for the purpose of making a demand under any performance security or receiving a payment under any performance security or otherwise exercising its rights under any performance security; or
- The company using the money received under any performance security.
Even where the Contract disputes the company’s right to payment (including where dispute resolution proceedings have been commenced under this Contract).”
- [29]Philip McMurdo J at [48]–[49] considered that by this clause it could be said that the bank guarantees are a “risk allocation device” in the sense that they are given “to allocate the risk as to who should be out of pocket pending resolution of a dispute”. His Honour considered the second purpose of the performance guarantee is risk allocation in this sense, that as an impact, often a decisive impact, upon the balance of convenience if the Court is asked to restrain by interlocutory injunction the use of the guarantee. His Honour referred to the decision of the Victorian Court of Appeal in Sugar Australia Pty Ltd v Lendlease Services Pty Ltd [2015] VSCA 98, where Osbourne and Ferguson JJA stated:
“If a provision in a building Contract requiring a performance bond is intended to operate as a risk allocation device pending the final determination of the dispute between the parties, then that intention must be fundamental to a consideration of the justice of an application made to restrain recourse to such a bond pending final determination of the dispute.”
- [30]The appellant submits that a distinction should be drawn between the clause considered by Philip McMurdo J and clause 3.6(a)(i)(C) of the Escrow Deed here. The clause considered by Philip McMurdo J expressly referred to the parties agreeing not to seek injunctive relief, whereas the clause in the Escrow Deed merely states the continuing liability of the appellant to pay an adjudicated amount to the first respondent notwithstanding any application to overturn the adjudicated amount. The first respondent however, submits that the clause is to similar effect to that considered in Saipem.
- [31]It must be noted that both the Escrow Deed and the Contract were entered into on the same day. The Contract included clause 39, the effect and operation of which was effectively negated by the reasoning of the adjudicator, which was upheld by Treston J. Clause 39 may be construed as also containing an agreement as to risk allocation. This clause was considered by the High Court in Southern Han Breakfast Point Pty Ltd v Lewence Constructions Pty Ltd,[7] where the Court held that the commercial purpose of the clause was to provide a form of security for the principal, in the event that the cost of completion was greater than the amount it would have had to pay to the Contractor if it had completed the work, and that this purpose would be undermined if it suspended payment only for the work taken out of the Contractor’s hands. The Court held that the suspension of payment imposed by the clause “was a suspension of the totality of the rights conferred and obligations imposed in relation to payment by clause 37” which “included the right to make a progress claim for work carried out up to the time of the work being taken out of the Contractor’s hand.” While the effect of clause 3.6(a)(i)(C) of the Escrow Deed is a relevant consideration in assessing the balance of convenience, it is not such a consideration as to overwhelm other relevant considerations.
- [32]The respondent, by reference to RJ Neller Building Pty Ltd v Ainsworth[8] relies on the policy behind the Act which seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the monies. Justice Keane considered that the risk that a builder might not be able to refund monies ultimately found to be due should be regarded as one which, as a matter of policy in the commercial context in which the BCIP Act applies, should be assigned to the owner rather than to the builder. It may be accepted that this consideration applies with equal force to the Act.
- [33]Again, while this is a relevant consideration in determining the balance of convenience, it is not an overwhelming consideration. As observed by Bond J in BRB Modular Pty Ltd v AXW Constructions Pty Ltd & Ors:[9]
“It seems to me that the appropriate analytical significance of the Acts policy and cases such as the present is that the policy characterises the nature of the right that is in question in the interlocutory injunction application. So if, on an interlocutory injunction application of this nature, the applicant has established a prima facie case that the adjudication decision is void for jurisdictional error, in considering the question which arises on the balance of convenience, in considering whether the lower risk lies, it is appropriate to consider the fact that granting an injunction would deny to someone a right, the nature of which is that described by Keane J in R v Neller. The way in which this plays out in the exercise of the discretion is in the balancing process described by Hanson J in Kellogg Brown & Root Pty Ltd.”
- [34]To similar effect is the observation of Brown J in Karam Pty Ltd v Earthmoving Contractors Pty Ltd:[10]
“In my view the proper approach to the policy of the BIFA in this context is as outlined by Bond J in R v Modular. In R v Modular the prima facie case had been conceded unlike the present case. The strength of the prima facie case must be considered in the context of the balance of convenience, and the fact that granting an injunction would deny the first respondent the right as described by Keane JA in R v Neller.”
Here, the first respondent has conceded that the appeal is arguable.
- [35]While the first respondent is prima facie entitled to the fruits of the judgment at first instance, its financial position, apart from not having immediate use of the adjusted adjudicated amount, is protected by two mechanisms. First, the fact that $25,000,000 is held in the escrow account and is earning interest. Secondly, the indication by the appellant that it is willing to pay the amount of the adjusted adjudicated amount into Court.
- [36]The first respondent at paragraphs 21 to 23 of its submissions suggest that the escrow amount of $25,000,000 may be itself insufficient to secure the total of the amounts in dispute. There are two answers to this proposition. The first is that any monies that are taken out of the escrow account have an accompanying obligation on the part of the appellant to top up those amounts. Further, there is no evidence before the Court as to when other amounts may be required to be paid from the escrow account. In any event, the willingness of the appellant to make a payment into Court overcomes any such concerns.
- [37]In those circumstances, I am of the view that the balance of convenience favours the granting of the interim injunctive relief sought. I direct the parties to forward a draft order consistent with these Reasons to my associate by close of business today.
Footnotes
[1] York Property Holdings Pty Ltd v Tomkins Commercial & Industrial Builders Pty Ltd [2025] QSC 44.
[2] North Build Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2015] 1 Qd R 463 at [29] per McMurdo J.
[3] [2020] NSWSC 208 and [2020] NSWCA 172.
[4] Reasons, [61].
[5] Stirling Harbour Services Pty Ltd v Bunbury Port Authority (No 2) [2000] FCA 87 at [13]–[15] French J.
[6] (2016) 1 QR 254.
[7] (2016) 260 CLR 340.
[8] [2009] 1 Qd R 390 at [39]–[42].
[9] [2015] QSC 222.
[10] [2021] 7 QR 164 at [72].