(a) Bank Guarantee No DG1078963418 with a value of $2,500,000; and

(b) Bank Guarantee No DG1067763418 with a value of $1,319,999.

Mr R Harris of senior counsel with Mr D Peacock of counsel

1. In or around 5 April 2022, the applicant ('Crema') was retained by the respondents ('the Principal') to design and construct a mixed use (residential and commercial) building complex described as the Malvern Collective project ('the Works'). The Works were to be undertaken pursuant to an amended form of an AS4902-2000 design and construct contract dated 5 April 2022 ('the Contract') and annexures to that Contract.
2. The Works were divided into six separable portions, with each separable portion having a date for practical completion of the works specific to that separable portion.[1] Under the Contract, the Principal was entitled to liquidated damages if a separable portion of the Works did not reach practical completion by the date for practical completion. The specified date(s) for practical completion were, however, subject to the superintendent responsible for administering the Contract ('the Superintendent') extending the date(s) for practical completion.
3. On 24 November 2025, the Superintendent issued a Conditional Certificate of Practical Completion in respect of the last separable portion of the Works.
4. During the building project, Crema submitted 56 extension of time claims to the Superintendent ('the EOT Claims'). Of the 56 EOT Claims, the Principal contends that only nine of the EOT Claims were determined by the Superintendent as entitling Crema to an extension of time, resulting in the following Adjusted Date(s) for Practical Completion:

1. As can be seen in the above table, the difference between the Adjusted Date for Practical Completion and the Date of Practical Completion reveals that each of the separable portions are said to be late in reaching Practical Completion.
2. Consequently, the Principal claims that Crema is liable to pay liquidated damages to it for failing to bring the Works to Practical Completion by the Date(s) for Practical Completion. The total amount claimed (applying the daily cap) is $8,706,700,[2] which exceeds the amount of the performance security given by Crema pursuant to clause 5.1 of the Contract ('the Performance Security').
3. Within the context of this proceeding, the Performance Security is in the form of two bank guarantees and one performance bond. The aggregate value of the Performance Security is $6,100,630.50. The Principal contends that it may have recourse to the Performance Security in partial satisfaction of its 'entitlement' to liquidated damages. To that end, the Principal served Crema with numerous notices stating its intention to have recourse to the Performance Security. The first of such notices is dated 17 February 2025. That notice was updated each following month culminating in the most recent notice titled Notice of Liquidated Damages and Recourse to Security dated 21 November 2025 ('the Recourse Notice'). The Recourse Notice refers to the earlier recourse notices and indicates how the quantum of liquidated damages claimed therein was adjusted from each preceding month.
4. The Recourse Notice states, in part:

The Contractor failed to achieve Practical Completion of Separable Portions 1, 2, 3, 4 and 5a and 5b by the relevant Adjusted Dates for Practical Completion, as set out in the table below.

Pursuant to clause 34.7 of the Contract, if the Contractor fails to bring the Works to Practical Completion by the Date for Practical Completion, the Contractor will be immediately liable to pay (as a debt due) to the Principal liquidated damages in the amount identified in Item 29 for every day after the Date for Practical Completion up to the earlier of the Date of Practical Completion or the date of termination of the Contract. Any liquidated damages payable under clause 34.7 will be due and immediately payable by the Contractor regardless of whether or not:

• Practical Completion has been reached or the Date for Practical Completion has occurred; and
• the Date for Practical Completion as determined under clause 34.5 is provisional or final.

To date the Contractor has failed to pay the liquidated damages demanded in the First, Second, Third, Fourth, Fifth, Sixth, Seventh or Eighth LD Demands.

1. The Recourse Notice includes a table which details the Adjusted Date for Practical Completion, the date of practical completion (which is stated as LD Liability end date), the amount of delay days, the daily liquidated damages rate and the aggregate amount of liquidated damages in respect of each separable portion. The column within the table which details the Adjusted Date for Practical Completion refers to the Superintendent's Extension of Time Certificate 06 dated 24 April 2025.
2. Crema disputes that the Principal is entitled to liquidated damages pursuant to the Recourse Notice or at all. It raises several grounds to impugn the validity of the Recourse Notice.
3. First, it contends that there were outstanding EOT Claims made by it which had not been assessed by the Superintendent. Consequently, Crema contends that the Recourse Notice is, effectively, premature and cannot be relied upon to now entitle the Principal to have recourse to the Performance Security. In that sense, Crema contends that there must be a temporal connection between the notice required under clause 5.2 of the Contract (the Recourse Notice) and the exercise of any right to have recourse to the Performance Security. Therefore, Crema argues that having regard to the EOT claims that have not determined by the Superintendent, it would be unreasonable or unconscionable to rely upon the Recourse Notice as crystallising a right to have recourse to the Performance Security.
4. Second, Crema contends that many of the EOT Claims were not assessed or determined by the Superintendent within 28 days, which Crema argues results in those EOT Claims being contractually deemed as having been approved. Therefore, Crema contends that the dates for practical completion certified by the Superintendent are manifestly wrong. Consequently, it would be unreasonable or unconscionable for the Principal to rely upon the Recourse Notice in those circumstances.
5. Third, Crema contends that even if the Contract did not deem the EOT Claims as accepted, they were undervalued or incorrectly assessed, which constitutes a breach of the Contract on the part of the Principal. Therefore, it would be unreasonable or unconscionable to call on the Performance Security in those circumstances.
6. Currently, Crema disputes 1,757 days (cumulative) of the EOT Claims. Crema contends that even accounting for concurrency, it is entitled to an additional 400 days, which it argues would effectively extinguish any entitlement to liquidated damages.
7. Consequently, Crema has issued several notices of dispute, which fall to be determined in the substantive hearing of this proceeding, unless otherwise resolved between the parties. Those disputes are encapsulated within Crema's Points of Claim filed in this proceeding.
8. At the time when Crema filed its originating application, in which it seeks final orders concerning the substantive issues in dispute, Crema also filed an interlocutory application. By that interlocutory application, Crema seeks injunctive relief to restrain the Principal from having or attempting to have recourse to the Performance Security. Crema also seeks a further order, in the form of a mandatory injunction, compelling the Principal to return two bank guarantees to Crema, which were provided as security for unfixed plant and materials, pending those unfixed plant and materials being incorporated into the Works ('the Materials Security').
9. The Principal has given an undertaking that it will not have recourse to the Performance Security until the interlocutory injunction application is determined.[3] In addition, the Principal has given a further undertaking that it will not have recourse to the Materials Security until this proceeding has been finally determined (irrespective of the outcome of the interlocutory injunction application), although it resists Crema's application for the return of the Materials Security.
10. On 3 December 2025, I heard the interlocutory application. Mr Reid of counsel appeared on behalf of Crema, while Mr Harris of senior counsel with Mr Peacock of counsel appeared on behalf of the Principal.
11. Both parties filed comprehensive written submissions, several affidavits and numerous exhibits, together with a collection of authorities in support of their respective positions. The affidavits and exhibits alone total more than 9,000 pages. As I indicated to the parties at the conclusion of the hearing on 3 December 2025, I do not propose to read every page of every document filed but rather, will rely upon the documents or pages of documents which the parties have referred me to, either during oral or written submissions and where the affidavit material specifically references a part of a document.

1. As indicated above, the Contract is in the form of an amended General Conditions of Contract A.S.4902 - 2000, with several annexures and what has been described as a Side Deed. For ease of reference, I set out the relevant contractual terms as follows:

The Contractor shall provide Security to the Principal in the amount stated in Item 14(a) on or before the date of the Contract.

(a) for the security to be held until practical completion, an approved unconditional bank guarantee without an expiry date given by the authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth) with branches in the State or Territory in which the site is located; or

(b) for the security to be held after practical completion, an unconditional undertaking in the form of an insurance bond, approved by the Principal and the Financier.

Security is provided to ensure the due and proper performance of the Contract by the Contractor.

The Principal may, at any time and on 2 days prior notice to the Contractor, have immediate recourse to or convert a security that does not consist of money, into money where:

(a) the Contractor is in breach of any of its obligations under the Contract or the Principal has become entitled to exercise a right under the Contract in respect of the security;

(b) the Principal has become entitled to be indemnified by the Contractor under the Contract;

(c) there is any amount or debt due, or due and payable by the Contractor to the Principal under the Contract; or

(d) the Principal asserts acting reasonably a bona fide entitlement to payment of money (including by way of set off) by the Contractor under or in connection with the Contract;

If it is established that the Principal was not entitled to call on the security at the date of conversion into money, the Principal shall pay interest on the amount converted at a rate appearing in Item 14(b) from the date of conversion until the first to occur of the date of repayment or the date that the Contractor defaults in the due and proper performance of the Contract.

(d) the Principal has a right to convert security which does not consist of money into money at any time;

(e) in the event of such conversion, the amounts payable by the Principal under clause 5.2 are an adequate remedy for the Contractor; and

(f) the Contractor has no entitlement to obtain an injunction or otherwise restrain:

(i) the Principal from converting any security;

(ii) any issuer of any security provided under this clause 5 from paying the Principal pursuant to that security;

(iii) the Principal from taking any steps for the purposes of making a demand under such security or receiving payment under any security;

(iv) using any retention money held by the Principal; or

(v) the Principal using the money received under any such security.

Subject to clauses 5.2 and 5.7, upon the issue of the certificate of practical completion the Principal's entitlement to security shall be reduced by the percentage or amount in Item 14(c), and the reduction shall be released and returned within 14 days to the Contractor.

The Principal shall ensure that at all times there is a Superintendent. The Superintendent will give directions and carry out all its functions under the Contract (including the receipt of payment claims and the issue of payment certificates) as agent of the Principal (and not as an independent certifier, assessor or valuer).

(a) when exercising the role of certifier, assessor or valuer in assessing the price under clause 29.4 for a variation, granting extensions of time under clause 34.5, assessing delay costs under clause 34.9, valuing variations under clause 36.4, certifying progress claims under clause 37.2, certifying practical completion under clause 34.6, certifying the final certificate under clause 37.4, and certifying costs under clause 39.6 when work is taken out of the hands of the Contractor, the Superintendent:

(i) acts honestly;

(ii) arrived at a reasonable measure or value of work, quantities or time,

but this shall not prevent or place any restriction upon the Superintendent discussing with or receiving submissions or representations from either the Principal or the Contractor about any certification, assessment of valuation before or after it is made, nor place the Superintendent under any obligation to seek any response from a party to, or otherwise raise with that party, any such discussion with or submission or representation received from the other party; and

(b) acts within the time prescribed under the Contract, or where no time is prescribed, within a reasonable time.

(a) Within 28 days after receiving the Contractor's claim for an EOT in respect of which the Contractor has an entitlement under clause 34.3, the Superintendent shall give to the Contractor and the Principal a written direction evidencing the Superintendent's assessment of the provisional EOT to which the Contractor is entitled.

(c) Notwithstanding anything to the contrary in the Contract, the parties acknowledge and agree that:

(i) where the Superintendent directs an EOT in accordance with this clause 34.5, such an EOT is on a provisional basis only; and

(a) Notwithstanding clause 34.5, if the Contractor fails to bring the Works to practical completion by the date for practical completion, the Contractor will be immediately liable to pay (as a debt due) to the Principal liquidated damages in the amount identified in Item 29 for every day after the date for practical completion up to and including the earlier of:

(i) the date of practical completion; or

(ii) the date of termination of the Contract under clause 39.9 or 39A.

Any liquidated damages payable under this clause 34.7 will be immediately payable by the Contractor regardless of whether or not:

(i) practical completion has been reached or the date for practical completion has occurred; and

(ii) the date for practical completion as determined under clause 34.5 is provisional or final.

(b) For the avoidance of doubt, liquidated damages (at the rate identified in Item 29) will accrue and be payable separately and cumulatively for each separable portion, but the cumulative amount of liquidated damages per day will be limited to and will not exceed the amount identified at Item 29.

The Principal shall not be liable to pay for unfixed plant and materials unless they are listed in Item 34 and the Contractor:

(a) provides the additional security in accordance with clause 5 in an amount equal to the payment claimed for the subject plant and materials; and

(b) satisfies the Superintendent that the subject plant and materials have been paid for, properly stored and protected, and labelled the property of the Principal.

Upon payment to the Contractor and the release of any additional security in clause 37.3(a), the subject plant and materials shall be the unencumbered property of the Principal. Any additional security provided for any item of unfixed plant and materials will be released in accordance with clause 5.4.

1. The reference to additional security essentially relates to the Materials Security, which is in the form of two bank guarantees, and which was given to ensure that the unfixed plant and materials were installed or incorporated into the Works. Details of the Materials Security are as follows:

(a) bank guarantee identified as DG 1078963418 issued by the Australia and New Zealand Bank (ANZ) dated 13 July 2023 in the amount of $1,319,999 in respect of precast and joinery materials; and

(b) bank guarantee identified as DG 1078963418 issued by the ANZ dated 8 September 2023 in the amount of $2,500,000 in respect of glazing/façade materials.

1. As noted above, clause 5.4 of the Contract provides that the Materials Security shall be released within 14 days of the incorporation into the Works of the unfixed plant or materials in respect of which the Materials Security was provided. Crema submitted that it is not in dispute that the works which comprise the precast and joinery materials and the glazing/façade materials have been incorporated into the Works. Therefore, Crema contends that those two bank guarantees should be returned to it.

1. The principles governing the grant of interlocutory relief to restrain a beneficiary from calling on a guarantee under a contract are well-established. In Uber Builders and Developers Pty Ltd v MIFA Pty Ltd ('Uber Builders'),[4] Nichols J summarised those general principles as follows:

1. The principles governing applications of this kind - where interlocutory relief is sought to restrain the beneficiary from calling on a performance bond given under a contract - are well established, and are as follows:

(a) In order to establish an entitlement to interlocutory relief an applicant must show that there is a serious question to be tried. The applicant must make out a prima facie case of success at trial to justify the preservation of the status quo pending the determination of the parties' rights at trial, in the circumstances. How strong the probability needs to be depends upon the nature of the rights asserted and the practical consequences likely to flow from the relief sought. > > (b) The applicant must also establish that the balance of convenience favours the granting of an injunction. The court should take whatever course appears to carry the lowest risk of injustice, should it turn out to have been wrong in the sense of granting an injunction to a party who fails to establish its right at trial or failing to grant an injunction to a party who succeeds at trial. > > (c) Incorporated within the consideration of "balance of convenience" or sometimes considered as a separate matter, is the question whether damages would be an inadequate remedy, meaning that unless the injunction is granted the applicant will suffer irreparable injury for which damages will not be adequate compensation. > > (d) Those questions are not to be considered in isolation from one another, but must be considered together. In considering where the lower risk of injustice lies all relevant factors are to be weighed in the balance. The strength of the applicant's case and their chances of success may be a relevant matter when assessing the balance of convenience. > > (e) In cases of this kind these principles are applied in a particular way. > > (f) As Callaway JA explained in Fletcher Construction Australia Ltd v Varnsdorf Door Pty Ltd (Fletcher Construction), a beneficiary may, broadly speaking, stipulate for a guarantee for two reasons. One is to provide security against the risk from the defaulting party. The second is, "to allocate the risk as to who shall be out of pocket pending resolution of the dispute. The beneficiary is then able to call upon the guarantee even if it turns out, in the end, that the other party was not in default." The intended purpose is determined by construing the underlying contract. > > (g) Performance bonds such as unconditional bank guarantee are regarded as "a type of currency" and as being, "as good as cash"'. A contract stipulating or incorporating an unconditional guarantee may, depending on its terms, create a "pay now, argue later" regime. > > (h) Where a performance bond is intended to allocate risk in this way, the grant of an interlocutory injunction might frustrate the parties agreed commercial purpose by preventing the use of the agreed mechanism.

(i) The frustration of risk allocation regime agreed between the parties is a prospect about which courts considering applications to restrain reliance on performance bonds must be vigilant.

(j) The first requirement then, is to construe the Contract to determine whether the parties intended by stipulating for security, to create an interim risk allocation mechanism. It is permissible to have regard to the terms of the performance guarantee where they are stipulated by the contract or where the guarantee is itself contained in the contract. Indeed, the terms of the guarantee may be important in discerning contractual intent.

(k) That question of construction should be decided on an as-if final basis if the factual matrix before the court permits...

(l) If the security was intended to allocate risk pending a final determination of rights there is a further question, namely, whether there is any relevant qualification or prohibition affecting the beneficiary's ability to call on the security - that is, a contractual promise not to call on the security unless certain conditions are satisfied...

(m) That question too, is one of construction... Where the contract does impose a condition on the right to access the security, the party seeking to restrain recourse must establish the existence of a serious question to [be] tried as to whether the beneficiary has in fact met the contractual requirements.

(n) Even when there is no contractual condition or fetter on the beneficiary's right to call on security, courts will enjoin a party in whose favour the performance guarantee has been given from acting fraudulently or unconscionably in calling on the security. Some principles relevant to unconscionability are discussed below.

(o) Absent those considerations, the beneficiary of a performance guarantee intended to operate as a risk allocation device will be entitled to call on the guarantee even if it turns out, ultimately, that the other party was not in default and notwithstanding the existence of a genuine dispute and a serious issue to be tried as to its underlying entitlement.[5]

1. The above extract of her Honour's judgment illustrates that there is limited scope for challenging a beneficiary's right to have recourse to a bank guarantee or a performance bond in circumstances where the purpose of the performance security was to allocate risk as to who was to be out of pocket pending the resolution of the broader dispute.
2. In Sugar Australia Pty Ltd Lend Lease Services Pty Ltd ('S_ugar Australia_'),[6] the Victorian Court of Appeal also considered the general approach to be adopted when determining whether a party should be enjoined from accessing security prior to a final determination of the parties' rights. Critically, in their joint judgment, Osborne and Ferguson JJA emphasised the need to fully consider the relevant clause which entitles recourse to the security. In other words, it was not sufficient to merely accept that there was an underlying, albeit genuine dispute, as to a party's entitlement to liquidated damages. A court or tribunal must look at the relevant clause entitling recourse to the security to determine whether the factors which underpinned that 'general dispute' enjoined the beneficiary of the security from accessing that security. Moreover, their Honours considered that this analysis was required even within the context of an interlocutory application. Their Honours stated:

[18] Although it cannot be said that it is always the duty of a court on an interlocutory application to decide a question of law upon which the decision of the case depends, more often than not performance bonds stand in a separate category, his Honour's reasoning demonstrates that he did not give adequate weight to the essential character and evident commercial purpose of GC 5.2 as agreed by the parties. Conversely, on examination, the circumstances identified by his Honour are of insufficient weight to justify postponement of the question of construction. Furthermore, it was necessary to construe GC 5.2 in order to identify the criteria by reference to which to access the respondent's submission that on the facts the appellant had no entitlement under the contract to seek recourse to the bank guarantees.

1. In Sugar Australia, clause 5.2 of the relevant contract governed the right to have recourse to the security. It was expressed as follows:

Any security provided by the Contractor in accordance with the Contract shall be available to the Principal whenever the Principal may claim (acting reasonably) to be entitled to:

(i) the payment of monies by the Contractor under or in consequence of or in connection with the Contract;

(ii) reimbursement of any monies paid to others under or in connection with the Contract; or

(iii) other monies payable by the Contractor to the Principal (whether by way of set off or otherwise).

1. Their Honours considered several earlier authorities where the courts emphasised the need to have regard to the commercial purpose of the contractual provision that entitled the beneficiary to have recourse to the security:

[19] In Fletcher Construction Australia Ltd v Vansdorf Pty Ltd, Charles and Callaway JJA addressed the commercial purpose of contractual provisions of the type in issue.

[20] Callaway JA observed:

There are broadly two reasons why the beneficiary may have stipulated for a guarantee. One is to provide security. If it has a valid claim and there are difficulties about recovering from the party in default, it has recourse against the bank. The second reason, which is additional to the first, is to allocate the risk as to who shall be out of pocket pending resolution of a dispute. The beneficiary is then able to call upon the guarantee even if it turns out, in the end, that the other party was not in default. It is a question of construction of the underlying contract whether the guarantee is provided solely by way of security or also as a risk allocation device. Remembering that we are speaking of guarantees in the sense of standby letters of credit, performance bonds, guarantees in lieu of retention monies and the like, the latter purpose is often present and commercial practice plays a large part in construing the contract.

1. In essence, the observations made by Callaway JA in Fletcher Construction Australia Ltd cited above reflect the submission made by Mr Harris; namely, that the fact that there is an underlying dispute as to whether the Principal is ultimately entitled to liquidated damages does not necessarily enjoin the Principal from having recourse to the Performance Security.
2. In Sugar Australia, the joint judgment of Osborne and Ferguson JJA further observed:
   1. 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.

1. The fact that a performance bond is intended to operate as a risk allocation device is not, of course, necessarily determinative of the right of a party to have recourse to it. It may be subject to a contractual qualification or limitation upon the circumstances in which recourse may be had. Nevertheless, the fundamental characteristic of a risk allocation device informs the task which the Court must undertake in resolving whether or not to grant an injunction.
2. Critically, the above principles apply with equal force where the application is made on an interlocutory basis. Their Honours went on to say:
   1. If the commercial purpose of a contractual provision is defeated that must be squarely on the ultimate risk of injustice inherent in the grant of an injunction. In Bradto Pty Ltd v State of Victoria, the Court of Appeal constituted by Maxwell P and Charles JA applied the following statement of fundamental principle by Hofmann J in Films Rover International Ltd v Canon Films Sales Ltd:

"... The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is there is by definition a risk that the court may make the 'wrong' decision, in the sense of granting of an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whatever course appears to carry the lower risk of injustice if it should turn out to have been 'wrong' in the sense I have described..."

1. When each of the above statements of underlying principle is applied to the facts of the present case it supports the conclusion that the question of whether GC 5.2 was intended in part to effect risk allocation pending resolution of a dispute must necessarily bear upon the justice or injustice of the injunction sought. The interlocutory relief sought had the capacity to amount to final relief in the sense of completely defeating the commercial purpose of risk allocation prior to the final determination of the matter.
2. It follows that both basic principle and the specific authority of the decision in Fletcher supported the conclusion that the judge at first instance and this Court on appeal must consider whether GC 5.2 was intended to affect an allocation of risk pending resolution of the dispute between the parties.
3. The qualification imposed by GC 5.2 upon recourse to the performance bonds relevantly required only that a claim be made by the appellant acting reasonably, not that it ultimately be judged objectively valid.
4. In turn, the condition allocated to the respondent the risk that such a claim might not ultimately be sustained against the respondent. If the evident commercial purpose of the provision was to be given effect, the judge was bound to construe it at least on a provisional basis. If he did not, then the risk allocation purpose of the clause was potentially defeated.

Does clause 5.2 of the Contract also operate as a risk allocation device?

1. It is not entirely clear whether Crema disputes that clause 5.2 of the Contract operates both as providing security for performance and, critically, also as a risk allocation device. The written submissions prepared by Mr Reid obliquely suggest that the clause does not operate as a risk allocation device.[7] However, that submission was not seriously pressed during oral submissions. Nevertheless, I am of the view that clause 5.2 of the Contract, properly construed, also operates as a risk allocation device.
2. The express words of clause 5.2 indicate that the right to have recourse to the Performance Security crystallises when the Principal asserts, acting reasonably, a bona fide entitlement to payment of money ... by the Contractor under or in connection with the Contract. The sub-paragraphs to clause 5.2 are separated by 'or' and operate disjunctively - they provide different scenarios which may operate either independently or in combination with each other to crystallise the Principal's right to have recourse to the Performance Security. In my view, clause 5.2(d) does not require the Principal to prove that there is an amount or debt due by Crema under the Contract. It is sufficient for the Principal, acting reasonably, to assert a bona fide entitlement to payment of money. Obviously, a mere assertion would not satisfy the precondition that the Principal must act reasonably or that what is asserted is a bona fide entitlement to the payment of money. However, that does not mean that the Principal must establish an absolute entitlement to liquidated damages.
3. That interpretation is consistent with clause 5.2(f) of the Contract, which expressly limits Crema's right to seek injunctive relief to restrain recourse to the Performance Security and critically, clause 5.2 itself, which requires the Principal to pay interest to Crema if it is ultimately found that the Principal should not have had recourse to the Performance Security.
4. It is also useful to consider how other similar clauses have been interpreted by the courts. For example, in Bachmann Pty Ltd v Power New Zealand Limited,[8] the relevant clause was:

A party shall not convert into money security that does not consist of money until the party becomes entitled to exercise a right under the contract in respect of the security...

1. Brooking JA considered that clause was a clause that entitled recourse to the security and observed:
   1. In the present case the matters of conversion of and recourse to the security are dealt with by two general conditions, which should if possible be construed so as to work in harmony. Clause 5.5 prohibits conversion into money until the purchaser becomes entitled to exercise a right under the contract in respect of the security. Clause 22.4 entitles the purchaser to deduct from monies otherwise due to the supplier any monies due from the supplier to the purchaser and, if those monies are insufficient, entitles the purchaser to have recourse to the security...

It would, as Charles JA said in Fletcher, be strange if the clauses construed in that case and this - Clause 3.13 (b) and Clause 22.4 - conferred the practical right of recourse only where monies were "due" from the supplier to the purchaser in some such sense as actually or indisputably due. I would treat Clauses 5.5 and 22.4 of the present contract, read in conjunction, as entitling the purchaser, as between itself and the supplier, to have recourse to the security where according to a bona fide claim made by the purchaser monies are due to it from the supplier which exceed any monies due from it to the supplier.[9]

1. In my view, the relevant clause considered in Bachmann Pty Ltd cited above is more restrictive than clause 5.2 of the Contract. Here, the entitlement to have recourse to the Performance Security crystallises upon the Principal reasonably asserting a bona fide entitlement to the payment of money.
2. In Rejan Constructions Pty Ltd v Manning and Medical Centre,[10] Byrne J distinguished the case before him from Bachmann Pty Ltd on the basis that the relevant clause which crystallised the right to have recourse to the security was not a right of payment but rather, a right under the contract in respect of the security.
3. In Clow Engineering Ltd v Oil and Natural Gas Corporation ('Clow Engineering Ltd'),[11] the relevant clause was expressed as follows:

The Company shall have the right under this guarantee to invoke the Banker's guarantee and claim the amount thereunder [sic] in the event of the Contractor failing to honour any of the commitments entered into under this Contract. [464]

1. French, Jacobson and Graham JJ found that the right of recourse to the security was not contingent on the party in whose favour the security was given proving a breach of the relevant contract. Their Honours stated:

[92] The essential question then is whether, cl 3.3.3 of the contract, when read with cl 2 of the performance guarantee, imports an express or implied negative stipulation in the contract that ONGC would not invoke the security absent actual breach. More particularly, was there an express or implied negative stipulation precluding ONGC from calling upon the guarantee in the event that Clough was able to establish a genuine dispute as to whether it was in breach of the contract? See Reed at 165.

[93] In our view there was no such stipulation. We reject Clough's submission that the words "on breach of contract" in the performance guarantee indicate that the intention of the parties was that there must be actual breach before the guarantee could be invoked. To so confine the terms of the contract would be to ignore the words "notwithstanding any dispute(s) pending" in cl 2 of the performance guarantee.

[94] It seems to us to be plain that upon proper construction of cl 3.3.3 of the contract, when read together with cl 2 of the performance guarantee, ONGC was entitled to invoke the guarantee notwithstanding the existence of a dispute between Clough and ONGC as to whether Clough had failed to honour any of its commitments under the contract.

[95] The whole tenor of the performance guarantee is that it was payable on demand by ONGC on breach by Clough but without reference to Clough and without any "demur, reservation, contest or protest" by that company. In our view this emphasises the proposition that the intention of the parties to the contract was that Clough was not entitled to raise the existence of a dispute as to whether it was in actual breach as an answer to the invocation of the guarantee and a claim under it.[12]

1. In this case, clause 5.2 expressly prohibits Crema from obtaining an injunction or restraining the Principal from having recourse to the Performance Security. In my view, that sub-clause reinforces the proposition that the intention of the parties, as set out in clause 5.2, was to permit recourse to the Performance Security, notwithstanding that there may be an existing and genuine dispute between them.
2. Notwithstanding the above, it is not contested that there are some limitations placed upon a party in seeking to exercise a right to have recourse to a performance security. Indeed, in Clow Engineering Ltd French, Jacobson and Graham JJ set out the exceptions to the general rule that a performance security which operates as a risk allocation device cannot be challenged in an interlocutory application. Their Honours stated:

[77] Nevertheless, the authorities have recognised three principal exceptions to the rule that a court will not enjoin the issuer of a performance guarantee, or bond, from performing its unconditional obligation to make payment. The exceptions were succinctly stated, with references to relevant authorities, by Austin J in Reed Construction Services Pty Ltd v Kheng Seng (Aust) Pty Ltd 15 BCL 158 at 164-5 (Reed):

First - the court will enjoin the party in whose favour the performance guarantee has been given from acting fraudulently...

Second - the party in whose favour of the performance bank guarantee has been given may be enjoined from acting unconscionably in contravention of s 51AA of the TPA...

Third - the most important exception for present purposes, is that, while the court will not restrain the issuer of a performance guarantee from acting from an unqualified promise to pay (Reed Construction Services at 164 per Austin J):

... if the party in whose favour the bond has been given has made a contract promising not to call upon the bond, breach of that contractual promise may be enjoined on normal principles relating to the enforcement by injunction of negative stipulations in contracts.

1. I return to Sugar Australia, and to the judgment of Kaye AJ. In that case, the relevant clause, although not identical to clause 5.2 of the Contract, was, however, similar. It stated:

Any security provided by the Contractor in accordance with the Contract shall be available to the Principal whenever the Principal may claim (acting reasonably) to be entitled to:

(i) the payment of monies or an indemnity by the Contractor under or in consequence of or in connection with the Contract;

1. Kaye AJ emphasised the need to construe the relevant clause, it being a necessary prerequisite to determine whether there is any qualification to the right to have recourse to the performance security. His Honour stated:

[139] In the present case, clause 5.2 contains three preconditions to the exercise by the appellant of its right to access a security specified in clause 5.1. First, the appellant must be "acting reasonably" in making the claim to the entitlement to payment or reimbursement. Secondly, the claim by the appellant must be in relation to an entitlement to one of three categories of payment, reimbursement or indemnity specified in sub- clauses (i), (ii) and (iii) of clause 5.2. Thirdly, the appellant must first give the respondent five days' notice of its intention to have recourse to the security.

[141] In construing clause 5.2, it is important to bear in mind, first, that that provision does not require the appellant to establish or demonstrate an entitlement to the payment, indemnity or reimbursement referred to in the clause. Rather, it is sufficient that the appellant has a "claim" to such an entitlement. In that respect, it is relevant that the clause only requires the appellant to provide five days' notice to the respondent of its intention to have recourse to the security. In that way, it is clear that the security, provided under clause 5.2, was intended to serve both purposes described by Callaway JA in Fletcher Construction, namely, to provide security to the appellant, and also to allocate the risk to the respondent as the party which should be out of pocket pending resolution of any dispute between the parties.

[142] On the other hand, the requirement, that the appellant be "acting reasonably" in making the claim, is an express qualification to the appellant's right to access the security provided in clause 5.1. The qualification is expressed to require that the appellant be "acting reasonably" in making the claim. Thus, it does not, in express terms, require that the claim itself be reasonable. In particular, the clause does not make it necessary that the claim, ultimately, be proven to be a reasonable claim by the appellant. Rather, what must be established is at the appellant, in making the claim, was then "acting reasonably". In that way, the phrase "acting reasonably" has an important temporal aspect. It focuses attention on the conduct of the appellant at the time at which the appellant made the claim stated in the recourse notice.

[143] It was argued on behalf of the appellant that the phrase "acting reasonably" required the appellant to do no more than act bona fide in a subjective sense. That submission does not give adequate weight to the requirement that the appellant be acting "reasonably". Ordinarily, concepts of reasonableness are construed as importing an objective standard of conduct...

[144] Thus, in my view, clause 5.2 required the appellant, at the time it made the claim, then be acting reasonably, in an objective sense, based on the information and facts. Or which reasonably ought to have been known, to the appellant at the time. However, as I stated, at the same time, clause 5.2 did not require the appellant to have such knowledge that would decisively establish its entitlement to payment, indemnity or reimbursement of the monies claimed in the recourse notice. Rather, the clause required no more than that the appellant had acted reasonably in making the claim, based on the facts and circumstances, which it knew, or ought to have known, concerning the validity of that claim.

1. Having considered the authorities cited above, the affidavit material filed and the submissions made by the parties, I find that he parties intended clause 5.2 of the Contract to also act as a risk allocation device. I now turn to consider whether there is a serious question to be tried to justify the preservation of the status quo pending the determination of the parties' rights at trial.

1. Having regard to my finding that clause 5.2 of the Contract also operates as a risk allocation device, a dispute as to the Superintendent's assessment or valuation of time is unlikely to be a factor, of itself, which would enjoin the Principal from having recourse to the Performance Security. However, Mr Reid submitted that there were preconditions upon exercising such a right and that those preconditions had not been met.
2. As noted above, Mr Reid submitted that the issues raised by Crema which underpin the substantive dispute between the parties; and which are set out in its Points of Claim, mean that the precondition to entitlement to have recourse to the security has not been satisfied. Mr Reid referred to Dedert Corporation v United Dalby Bio-Refinery Pty Ltd ('Dedert Corporation')[13] in support of that proposition. In that case, the relevant clause stated:

Security shall be subject to recourse by a party who remains unpaid after the time for payment where at least 5 days have elapsed since the party notified the other party of intention to have recourse.

1. In that case, Kaye JA stated:
   1. The first question, then, is whether the contract contained a relevant qualification or restriction on the right of the respondent to have recourse to the guarantee. Apart from cl 39.7 and cl 39.9, which do not apply in this case, the only other provision, contained in the contract, entitling the respondent to have recourse to the security, is cl 5.2. That clause contained the express prescription that recourse is permitted where a party 'remains unpaid after the time of payment'. That requirement constituted a contractual qualification on the respondent's powers in relation to the exercise of the security. In terms of the authorities, was an implied negative stipulation in the contract that the respondent would not invoke recourse to the security in the absence of there being an account 'unpaid' by the applicant to the respondent 'after the time for payment'.
2. Mr Reid submitted that the Principal's assertion that it was entitled to payment of money from Crema (liquidated damages) had no contractual basis because:

1. No contractual entitlement exists as the Recourse Notices (and any payment schedule under clause 37.2) are void and ineffective because:

(a) The superintendent has failed to follow the procedure in clause 34.5 as the Superintendent was required to, inter alia, assess any claim for an extension of time within 28 days, whether or not the claim was accepted; > > (b) The Applicant has submitted various EOT claims numbered 4, 6-9, 11-15, 19-23, 25-26 and 29-52 that had not been determined as at the date of the various Recourse Notices or are the subject of a formal notice of dispute. The unassessed EOT claims had not been assessed within the 28 day period mandated by the building contract; > > (c) On a proper construction of clause 34.7 read in conjunction with clause 34.5 (c), it is a precondition to the issuing of a certificate for liquidated damages that the Superintendent assess the EOT claim submitted by the applicant under clause 34.5. Axiomatically, the Superintendent is required to carry out such an assessment in order to conclude that 'the Contractor has failed to reach Practical Completion by the Date for Practical Completion'. It would render the EOT regime in clause 34 inutile if the Superintendent was empowered to certify liquidated damages as owing under clause 34.7 regardless of whether certain EOT claims had been assessed and/or that claims the subject of a notice of dispute had not been resolved under the contractual process. > > (d) Recourse Notices issued in breach of clause 34.5 and 34.7 are invalid and of no effect; > > (e) The purported Recourse Notices issued by the Superintendent are infected with the Respondent's breach of clause 20 of the building contract; > > (f) Pursuant to clause 20 of the Contract, the Respondents were required to ensure that the Superintendent (amongst other things) acted honestly and within the time prescribed (or within a reasonable time) and arrived at a reasonable measure or value of work, quantities or time. The Respondents are in breach of this clause; > > (g) Further the Respondents did not provide to the Applicants any adequate opportunity to make submissions to the Superintendent regarding the EOT claims; > > (h) The Respondents' conduct in attempting to have recourse to either the Performance Certificate [sic] or the Materials Security in the context of the above conduct constitutes unconscionable conduct within the meaning of ss 20 to 22 of the ACL: see, for example, Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2020]; Clough Engineering Ltd v Oil and Natural Gas Corporation Limited (2008); Olex Focas Pty Ltd & Anor v Skodaexport Co Ltd [1998].[14]

3. Consequently, Mr Reid submitted that:
   1. Rather than release the Performance Security, the Respondents have, via their Superintendent sought to assert a right to liquidated damages on various dates including 17 February and 28 March 2025 of $5,439,200 (or $4,761,206 applying the applicable daily cap on liquidated damages set out in Item 29 of Annexure Part A of the building contract) and $6,297,200 (or $5,619,200 applying the applicable daily cap on liquidated damages set out in Item 29 of Annexure Part A of the building contract) respectively by issuing notices asserting an entitlement to liquidated damages. These 'assessments' asserting an entitlement to liquidated damages were undertaken without the Superintendent assessing numerous extension of time (EOT) claims that had been submitted by the Applicant during its performance of the works under the building contract and which were yet to be assessed by the Superintendent and/or were deemed to be accepted given that the Superintendent's failure to assess these claims within time.

1. As revealed in Annexure D, the Superintendent failed to assess any of the Applicant's EOT claims within the contractual 28-day time limit and the Applicant asserts that these claims are deemed accepted.
2. Further, the majority of the extension of time claims have been and are the subject of the notice of disputes issued by the Applicant. For example EOT claims number 20, 24, 27 and 28 are the subject of a notice of dispute issued by the Applicant. The delays claimed by these EOT claims are EOT 20 - 35 days and for EOT 24, 27, 28, the claim is for 255 days. These EOT claims were the subject of an email from the Superintendent November 2024 which provided written confirmation that the Applicant was entitled to an EOT in respect of EOT claims no. 24, 27 and 28. Despite this assessment and acknowledgement by the Superintendent of such an entitlement, these EOT claims was subsequently rejected by the Superintendent following direction from the Principal.
3. Specifically, Mr Reid submitted that there exists a serious question for trial whether it can be said that the Principal asserts, acting reasonably, a bona fides entitlement to payment of money.
4. As observed by Kaye JA in Dedert Corporation cited above, any contractual qualification on a beneficiary's right to have recourse to a performance security provided under a contract must be considered when determining whether the beneficiary should be enjoined from exercising its right to recourse. In cases like Dedert Corporation, the relevant clause required there to be an account unpaid. That is materially different to clause 5.2 of the Contract which expressly provides that the Principal can have recourse to the security where the Principal asserts, acting reasonably, a bona fide entitlement to payment of money by the Contractor under or in connection with the Contract. There does not have to be an account unpaid for that entitlement to crystallise.
5. Therefore, the issue of critical question is whether, objectively, it can be said that the Principal could assert, acting reasonably, that it had a bona fide entitlement to the payment of money. In terms of the Performance Security, the Principal did not have to demonstrate an absolute entitlement to liquidated damages.
6. In his written submissions, Mr Reid argued:
   1. The phrases 'acting reasonably' and a 'bona fide entitlement to a payment of money' clearly imply an objective assessment of both the reasonableness of the entitlement and the bona fide nature of it. The ordinary meaning of 'bona fide' is that it is an authentic, true, real or genuine claim. The precondition for entitlement (the negative stipulation) to recourse is, first, the principal must act reasonably, the second, is that there is a bona fide entitlement to payment of money under the Contract. It has a temporal aspect, focusing attention on the conduct of the Principal at the time it issued its Recourse Notices. The Applicant says that at each of these time[s], a principal acting reasonably would not be able to assert any entitlement to any payment of money under the Contract.
7. The Principal disputes that it is not entitled to liquidated damages for the amounts claimed. In that respect, Mr D'Annibale, construction director, set out in Annexure A to his affidavit dated 29 November 2025, a summary of each of the 56 EOT Claims by reference to the delay event, date of claim, date of assessment and determination by the Superintendent, together with a brief commentary as to the reasons underpinning the determination of the Superintendent.
8. Having regard to that evidence, Mr Harris submitted that the reasons given for rejecting the EOT claims are entirely of the kind expected for a building dispute about EOT's, and relate to issues of contractual interpretation and programming/critical path delay. They are appropriately determined at a final hearing and must not shackle the operation of clause 5.2 at an interlocutory stage.
9. Determining whether the Superintendent correctly assessed each of the EOT claims is complex and will require substantially more evidence than what is set out in the affidavit material filed to date, including expert programming evidence. Put simply, it is beyond the scope of this interlocutory application. Importantly, however, I am of the view that disputes which are confined to the Superintendent's valuation or assessment of an EOT claim, especially where the valuation or assessment is provisional, do not, of themselves, mean that the Principal has not acted reasonably in asserting a bona fide entitlement to liquidated damages.
10. Nevertheless, Mr Reid submitted that the matters raised by Crema go beyond a dispute concerning the Superintendent's assessment or valuation of time. As indicated in the extract of his written submissions set out above, Mr Reid submitted that there is a serious question for trial whether the Principal was acting reasonably when it asserted a bona fide entitlement to the payment of money. Critically, Mr Reid pointed to the Superintendent's failure to assess EOT claims within 28 days, thereby deeming those EOT claims as accepted, and to the allegation that numerous EOT claims were not assessed at the time the various recourse notices were served on Crema.
11. Therefore, Mr Reid submitted that all outstanding disputed EOT claims constituted a requested antecedent step that had to be assessed prior to the Principal issuing the Recourse Notice or asserting any entitlement to liquidated damages. Consequently, to do so is contrary to the Principal's assertion that, acting reasonably, it has a bona fide entitlement to the payment of money.
12. Mr Reid relied upon the decision of this Tribunal in Orange Building Solutions Pty Ltd v Incumbent Property Group Pty Ltd,[15] where Senior Member Walker helpfully reviewed numerous authorities before ultimately finding that the relevant clause under consideration required the principal to establish an entitlement to payment under the terms of the contract before it was able to have recourse to the performance security. Senior Member Walker found that because of the disputes between the parties, the determination of the Superintendent might [ultimately] not stand and a different date might become the Date for Practical Completion.
13. Mr Harris submitted, and I accept, that it is difficult to draw an analogy with Orange Building Solutions v Incumbent Property Group Pty Ltd, given that the contractual clause is materially different to what is currently before me. In this case, I accept that clause 5.2 of the Contract does not require the Principal to establish an entitlement to payment under the terms of the Contract. Here, I need only be satisfied that the Principal asserts, acting reasonably, a bona fide entitlement to the payment of money.
14. In my view, the submissions raised by Mr Reid fall into two broad categories; namely, whether it was reasonable for the Principal to issue the recourse notices and specifically, the Recourse Notice in circumstances where:

(a) the EOT claims that were not assessed within 28 days were deemed to be approved (and therefore not taken into account); and

(b) numerous EOT claims were extant and unassessed at the time when the recourse notices and specifically, the Recourse Notice was served.

Are the EOT claims deemed to be approved if not determined assessed within 28 days?

Within 28 days after receiving the Contractor's claim for an EOT in respect of which the Contractor has an entitlement under clause 34.3, the Superintendent shall give to the Contractor and the Principal a written direction evidencing the Superintendent's assessment of the provisional EOT to which the Contractor is entitled.

1. The express words of the clause do not state that an EOT claim will be deemed accepted if not assessed within 28 days. The clause merely states that within 28 days after receiving an EOT claim for which the Contractor has an entitlement under clause 34.3, the Superintendent shall provide a provisional assessment of that claim. Reading into that clause the words that the EOT will be deemed accepted would be inserting words which simply are not there. I am not persuaded that clause 34.5 of the Contract operates in that manner.
2. In my view, to construe clause 34.5 of the Contract in the manner suggested by Crema would lead to significant difficulties, especially in circumstances where there was insufficient information provided to properly assess the EOT claim. For example, if there was insufficient information to determine how the delay event affected the critical path of the Works. There are no specific provisions within the Contract that would allow the Superintendent more time to assess an EOT claim in circumstances where insufficient information was provided in support of the EOT claim. Construing clause 34.5 as a 'deeming' provision would lead to a situation where the Superintendent would need to summarily refuse the EOT claims so as to avoid those claims being deemed as accepted, which may then lead to further disputation between the parties. I doubt whether such a regime was intended.
3. Indeed, Mr D'Annibale alludes to this in his affidavit dated 29 November 2025, where he states:

1. Having regard to the table at Annexure A of my affidavit, and the EOT claims which I reviewed in preparing my affidavit, I note the following points:

(a) In many cases, Crema advised that the delaying event that was the subject of an EOT claim to be "ongoing". In many instances, the Superintendent reserved its determination until after Crema notified the Superintendent that the delay had ceased. Columns C and D of the table at Annexure A to my affidavit shows when Crema first submitted its, and then final EOT claims. > > (b) Many of Crema's EOT claims required further information or documents in order for the Superintendent, and I have been copied to a number of Aconex exchanges to this effect. I understand that the delay in Crema providing this information, or the fact that the information was not made available initially may have delayed the Superintendent's ability to determine the EOT claims quicker; > > (c) Since my involvement on the Project, I have been copied to numerous requests from the Superintendent to Crema to provide a program that accurately reflects the progress of the works. Such program information was necessary for the Superintendent to determine the EOT claims... > > (d) In some cases, Crema withdrew the EOT Claims prior to the Superintendent determining the claim, or they acknowledged that the delay was not experienced on-site...

4. Ultimately, however, the question arises whether the argument raised by Crema - that EOT claims not assessed within 28 days are deemed accepted - results in a finding that the Principal was not acting reasonably in claiming liquidated damages for delay or that the claim for liquidated damages was not bona fide.
5. In my view, the argument that EOT claims that were not assessed within 28 days were deemed accepted is not of sufficient substance to then conclude that a principal was acting unreasonably if it asserted a right to liquidated damages based upon a superintendent's assessment of time where the assessment was made 28 days after receiving the relevant EOT claim. Similarly, I do not accept that the Superintendent's certification of the date of practical completion for each of the separable portions - and the resultant liability for liquidated damages - is not bona fide simply because the assessment of EOT claims was not made within 28 days after receiving the EOT claim.
6. Consequently, I do not find that this factor gives rise to a serious question for trial.

Do all EOT claims need to be assessed before the Principal is entitled to assert an entitlement to the payment of money?

1. As a general proposition, I accept that it would be unreasonable for a principal to assert an entitlement to liquidated damages, and by extension, seek to draw on a performance guarantee in satisfaction of its claim for liquidated damages, in circumstances where there were unassessed EOT claims which, if approved, would extinguish any entitlement to liquidated damages. Similarly, I accept, as a general proposition, that a claim for liquidated damages in circumstances where the superintendent had not assessed extension of time claims would not be a bona fide claim for liquidated damages.
2. However, that fact scenario differs from what is currently before me. Here, at the time the Recourse Notice was served, the Superintendent had assessed all outstanding EOT claims. The assessment of all outstanding EOT claims did not alter the Superintendent's certification of the dates for practical completion for all separable portions. In other words, the calculation of liquidated damages for each separable portion did not change after the Superintendent assessed the final EOT claim on 14 November 2025.
3. The fact that there is disputation over the rejected EOT Claims does not necessarily mean that the Principal was acting unreasonably in asserting a right to be paid liquidated damages or that the right to be paid liquidated damages was not bona fide. Indeed, Appendix A to the affidavit of Frank D'Annibale dated 29 November 2025, refers to each of the EOT claims made by Crema. In Column J to that table, Mr D'Annibale provides a short summary of the Superintendent's reasons for rejecting the disputed EOT claims. Those reasons include non-compliance with a requirement to provide a construction program, insufficient evidence to establish that the critical path had been delayed or that the works which caused the delay was not work under the Contract which entitled Crema to an EOT, to name a few.
4. In my view, it was entirely open for the Principal to rely upon the Superintendent's assessment of time under the Contract, even if the assessment of EOT claims was provisional.[16] In those circumstances, the Contract reflected the parties' intention that assessments of EOT claims were open to be challenged. Critically, however, that did not mean that the Superintendent's certification for the date of practical completion could not be reasonably relied upon to ground a bona fide claim for liquidated damages, albeit that given the provisional assessment of the EOT Claims and the resultant certification of the date of practical completion might ultimately change following the determination of the substantive issues in dispute, the subject of this proceeding.
5. As I have already indicated, clause 5.2 of the Contract operates as a 'pay now, dispute later' clause. The fact that there is disputation concerning the assessment of any EOT claim does not enjoin the Principal from having recourse to the Performance Security.
6. Therefore, I am not satisfied that the assessments made by the Superintendent were so obviously wrong or specious, that reliance upon those assessments by the Principal was unreasonable or that it did not have right to assert a bona fide entitlement to be paid.
7. Further, I do not accept that the Principal was acting unconscionably in asserting a bona fide right to be paid liquidated damages. In L.U. Simon Builders Pty Ltd v Cardigan Commercial Pty Ltd ('LU Simon Builders'),[17] Sloss J considered an application to restrain the calling on a bank guarantee on the ground that allegations were made against the principal that it had engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law. In that case, it was accepted that the principal did have a right to have recourse to the performance security at any time, in relation to a debt or claim or an asserted debt or claim, provided that such claim was bona fides and not specious, and subject to providing the requisite notice. The relevant clause stated:

(a) Subject to providing the Contractor with 3 days prior written notice of its intention to have recourse to the Security, the Principal may convert all or part of the Security into cash at any time and use the proceeds of the security:

(i) in relation to any debt or money due or claimed to be due from the Contractor to the Principal under the contract (including liquidated damages under subclause 34.7) or any cost, expense, loss or damage of any kind which the Principal has incurred or claims that it has incurred or might in the future incur in connection with what the Principal contends constitutes any act, default or omission of the contractor.

1. In LU Simon Builders, it was argued that the principal had engaged in misleading and deceptive conduct prior to entering into the contract or shortly thereafter and that this meant that the principal was acting unconscionably in purporting to call on the security.
2. In considering the question of whether the conduct was unconscionable, her Honour referred to the decision of the High Court in Stubbings v Jams 2 Pty Ltd,[18] where Gordon J discussed the operation of ss 12CB and 12CC of the Australian Securities and Investments Commission Act 2001) (Cth), which are the counterpart provisions to ss 21 and 22 of the Australian Consumer Law. Gordon J stated:
   1. Section 12CB of the ASIC Act, like equity, requires a focus on all the circumstances. The court must take into account each of the considerations identified in s 12CC if and to the extent that they apply in the circumstances. The considerations listed in s 12CC are non-exhaustive, but they provide "express guidance as to the norms and values that are relevant to inform the meaning of unconscionability and its practical application". They assist in "setting a framework for the values that lie behind the notion of conscience identified in s 12CB. "The assessment of whether conduct is unconscionable within the meaning of s 12CB involves the evaluation of facts by reference to the values and norms recognised by the statute, and thus, as it has been said, a normative standard of conscience which is permeated with accepted and acceptable community standards and community values that each matter must be judged".
   2. Put in different terms, the s 12CC considerations assist in evaluating whether the conduct in question is societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience". A court should take this serious step only when it is satisfied that the conduct is "offensive to a conscience informed by a sense of what is right and proper according to values which can be recognised by the court to prevail within contemporary Australian society".
3. What then is the conduct which is offensive to conscience? Here, there is a dispute as to assessments made by the Superintendent and the reliance on those assessments and resultant dates of practical completion, adopted by the Principal in purporting to call on the Performance Security. In my view, that does not constitute unconscionable conduct.
4. I also note that allegations are made against the Principal which relate to pre and post contractual negotiations or discussions. Those pre and post contractual negotiations are primarily referenced in the affidavits of Adam Keenan-Dunn and answered by Mr D'Annibale in his affidavit dated 29 November 2025.[19] However, Mr Reid's submissions did not materially focus on those negotiations and discussions. In my view, those allegations do little if anything to substantiate the allegation that the Principal has acted unconscionably in purporting to have recourse to the Performance Security.
5. Similarly, Crema raises allegations that the Superintendent altered its position or failed to act independently by adopting directions from the Principal. In my view, the material relied upon is insufficient to elevate those allegations to a point where it can be said that the Principal was not acting reasonably in asserting a bona fide entitlement to be paid liquidated damages based upon the certified dates for practical completion. Moreover, I note that clause 20 of the Contract expressly states that in acting honestly or arriving at a reasonable measure of or value of work, quantities or time, there is no:

... restriction upon the Superintendent discussing with or receiving submissions or representations from either the Principal or the Contractor about any certification, assessment or valuation before or after it is made, nor place the Superintendent under any obligation to seek any response from a party to, or otherwise raise with that party, any such discussion with or submission or representation received from the other party...

1. Here, the material question, as identified by Mr Reid, is whether the precondition to the right to have recourse to the Performance Security has been met. In other words, has the Principal acted reasonably in asserting a bona fide entitlement to the payment of money by Crema under or in connection with the Contract.
2. In my view, there is nothing in the material provided which raises a serious question for trial that the Principal was acting unconscionably in asserting a bona fide right for the payment of liquidated damages. As I have already observed, the Principal calculated liquidated damages based upon the Superintendent's certification of the dates for practical completion for each of the separable portions of the Works. This is not a case where the Principal asserted a right to liquidated damages which was unfounded, notwithstanding the disputation that exists between the parties.
3. Mr Reid further submitted that the question as to whether the Principal, acting reasonably, has asserted a bona fide entitlement to be paid includes a temporal element. In other words, he contended that many of the recourse notices fail to take into consideration unassessed (or resubmitted) or deemed approved EOT claims. In his written submissions, Mr Reid contended that a call on the Performance Security:
   1. ... has a temporal aspect, focusing attention on the conduct of the Principal at the time it issued its Recourse Notices. The Applicant says that each of these time[s], a principal acting reasonably would not be able to assert any entitlement to any payment of money under the Contract.
4. It appears that many of the recourse notices served by the Principal predate the assessment of later EOT claims. Even the Recourse Notice, being the current recourse notice served by the Principal, expressly refers to the Superintendent's EOT Certificate 06 which is dated 24 April 2025. It states, in part:

• the Superintendent's EOT Certificate 06 determining EOTs 39 and 41 dated 24 April 2025;

1. However, there are EOT claims which were made after 24 April 2025, the last of which was assessed and determined by the Superintendent on 14 November 2025.[20] The Recourse Notice, which is dated 21 November 2025, does not expressly refer to that assessment.
2. That raises the question whether, at the time the Principal issued the Recourse Notice, it took into consideration unassessed EOT claims and by extension, whether it was reasonable for the Principal to rely upon a Recourse Notice that may not have considered the Superintendent's assessment of EOT claims determined after April 2025.
3. Although I consider this raises a question for trial (as to whether the Principal was acting reasonably in asserting that it had a bona fide entitlement to be paid), the net effect of enjoining the Principal from having recourse to the Performance Security in reliance upon the Recourse Notice would, in all likelihood, simply result in a fresh recourse notice being served on Crema which expressly refers to the most recent assessment made by the Superintendent. Given that the Superintendent's final assessment of all EOT Claims, including EOT claims submitted after April 2025, would have little or no impact on the dates of practical completion for each of the separable portions, the quantum of liquidated damages claimed would not change.
4. Further, given that the Contract only requires two days prior notice of recourse, restraining the Principal from relying upon the Recourse Notice would provide little relief to Crema.

1. I have found that there is a question for trial, that being whether the Principal can rely upon the Recourse Notice in circumstances where it is unclear whether that notice had regard to all Superintendent assessments of EOT claims. However, as I have already indicated, as at the date of this hearing, the Superintendent has assessed all outstanding EOT claims. According to the affidavit of Mr D' Annibale, all EOT claims that postdate April 2025 have resulted in no extension of time being granted. In other words, the net effect of not taking into consideration unassessed claims submitted after April 2025 is that the quantum of liquidated damages claimed would not change.
2. There are several other factors raised by both parties going to the question whether the balance of convenience favours the granting of interlocutory injunction enjoining the Principal from having recourse to the Performance Security.
3. Crema submits that it would significantly damage its reputation, ability to tender and win new work and adversely affect its relationship with its lender and ultimately jeopardise its reputation if the Performance Security was called on.[21] Mr Reid referred me to Australian Winch and Haulage Company Pty Ltd (Administrator Appointed) v Walter Construction Group Limited,[22] where the Court made the following observations regarding potential damage to a business's reputation:

That type of evidence could be, in any given case, very powerful where there is the slightest doubt that the performance bond is being called other than rightfully. The consequences of its call might be catastrophic to the business reputation of a company that has never had a call made on it and whose position would be repairable a damaged or harmed.[23]

1. Mr Reid further submitted that the evidence establishes a real and significant risk that Crema may not be able to recover damages from the Principal if it has recourse to the Performance Security, where it is ultimately found that there was no entitlement to do so. Moreover, Mr Reid submitted that reputational damage is well recognised by the courts as not being capable of adequate compensation by an award of damages.[24].
2. Mr Harris submitted that the evidence presented as to reputational or relationship damage 'is doubtful'. He pointed to the fact that there is no evidence of how Crema's reputational relationship with its bank could be affected. In contrast, he referred to the matters disposed to by Mr D'Annibale, who stated that the Principal has suffered losses totalling millions of dollars because of the delay in the Works reaching practical completion, which is said to adversely impact funding arrangements.[25]
3. In my view, the evidence and arguments presented by both parties demonstrate that the balance of convenience is fairly even. In LU Simon Builders, Sloss J considered similar arguments raised by the contractor concerning reputational or relationship damage caused by calling on a bank guarantee. Her Honour stated:
   1. As to the first matter, it will be recalled that evidence was given by Mr Reid as to the reputational damage that L.U. Simon will suffer with its financiers, and that it may also lose government work as those tenders 'require L.U. Simon to state whether it has ever had any of its security cashed'. If that be correct, those risks are risks that L.U. Simon was, or should have been aware of, when it entered into the Contract, in circumstances where the Security was a significant feature of the parties' contractual arrangements.

1. ... To the extent that there is any real prospect of reputational damage being suffered by L.U. Simon, it is open to it, as Nettle J observed in the CPB Contractors case 'to avoid risk of reputational damage by tendering a sum equal to the amount of the claim, on account, in substitution for the amount payable under the bank guarantees'.
2. In my view, enjoining the Principal from calling on the Performance Security in circumstances where I have found that the serious question for trial is not strong, unjustifiably impinges upon and conflicts with what the parties contracted to do. This point was emphasised by Nichols J in Uber Builders referred to above, where her Honour stated:

... The strength of the applicant's case and their chances of success may be a relevant factor when assessing the balance of convenience.[26]

1. The observations of Osborne and Ferguson JJA in Sugar Australia are also apt:
   1. 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.[27]

1. In this case, the Contract concerns a multi-million dollar building project and one can reasonably infer that both parties are commercially astute and were well-informed before entering into the Contract. Consequently, I adopt the observations of Sloss J in L.U. Simon Builders that the risks associated with the performance Security being cashed must have been considered by Crema when it first entered into the Contract.
2. Consequently, I find that the balance of convenience does not favour the granting of an injunction to restrain the Principal from having recourse to the Performance Security.

1. As noted above, the Contract provided a regime for providing additional security for a specified list of unfixed plant and materials identified in Item 34 of Annexure Part A. Item 34 lists the unfixed plant materials as:

Unfixed plant and materials for which payment claims may be made

Lifts, Façade, Joinery, Precast concrete subject to the quantity surveyor and Financier's written approval

Subject to clauses 5.2 and 5.7, upon the issue of the certificate of practical completion, the Principal's entitlement to security shall be reduced by the percentage or the amount in Item 14(c), and the reduction should be released and returned within 14 days to the Contractor.

If the Contractor has provided additional security pursuant to clause 37.3, the Principal shall release that additional security within 14 days of the incorporation into the Works of the unfixed plant or materials in respect of which the additional security was provided.

1. As noted above, clause 5.2 of the Contract describes the regime which permits the Principal having recourse to security provided under the Contract.
2. Clause 5.7 of the Contract states:

Even if the Principal is otherwise required to release security, the Principal has a right to retain from the security an amount sufficient to cover the reasonable expected cost of rectifying defective work.

1. Crema seeks an order compelling the Principal to return the Materials Security. In essence, Crema contends that the Materials Security has provided the security that was required under the Contract and now has no further work to do.
2. In contrast, Mr Harris submitted that the Materials Security still has work to do. In his written submissions, he states:
   1. The Materials Security forms part of the security as that term is defined in clause 1 of the Contract. Clause 5.7 provides that "Even if MPD is otherwise required to release security, it has a right to retain from the security an amount sufficient to cover the reasonable expected cost of rectifying defective work". Clause 5.7 therefore entitles MPD to retain the Material Security, notwithstanding the requirement in clause 5.4 to release that security within 14 days of incorporation into the Works. In addition to the Defects identified in the Defects Report attached to the Conditional Certificate of Practical Completion, the identification of defects in the Works has commenced but has not yet concluded.
3. I find, prima facie, that the Materials Security is distinguishable from the Performance Security. In essence, it has a different function. Its function is to provide security for payments made by the Principal to Crema for the Unfixed Plant and Materials, until that plant and materials becomes incorporated into the Works.
4. If that were not the case, then there would be no utility in providing security for a specified purpose, as the Performance Security would otherwise provide security to protect the Principal's interests - in the event that Crema either failed to supply or failed to properly install all of the Unfixed Plant and Materials that was required to be supplied and installed under the Contract. Therefore, I accept the submissions made by Mr Reid that:
   1. It is an additional requirement under the building contract to provide a security for unfixed plant and material. A specific purpose material Security is separate and distinct from the performance security provided under clause 5.1 of the building contract. Clause 5.2 provides that the security provided by the Contractor pursuant to that provision is "for the purpose of ensuring the due and proper performance of the Contract". Having regard to the provisions of the building contract as a whole and the terms of the Material Security the parties clearly contemplated these differing forms of security applying different commercial contexts. Had it been the intention of the parties and any additional security provided under clause 5.1A of the building contract could have been used by the Principal for a 'general purpose' and to secure the performance of the Contractors obligations (being a reference to the entirety of the Contractor's obligations under the Building Contract), then clause 5.1, 5.2 and clause 5.1A.2 would have stated so and the amount of security that the Contractor would have been required to provide under Item 14(a) of Annexure Part A of the building contract would have stipulated a higher amount to 5% of the Contract Sum.
5. Further, I accept, prima facie, Mr Reid's submission that it is difficult to categorise the Materials Security in the same way as the Performance Security, namely, as also incorporating a risk allocation mechanism pending the resolution of a dispute. Specifically, the Materials Security identifies the Unfixed Plant and Materials to which it relates. Whether the Unfixed Plant and Materials has been incorporated into the Works is a question of fact. In other words, it have either been supplied and installed or not. If, for example, the Principal has paid Crema for the supply and installation of the Unfixed Plant and Materials but fails to supply or install that plant and equipment, it is open for the Principal to have recourse to the Materials Security.
6. However, in this case it is common ground that Unfixed Plant and Materials have been incorporated into the Works. Indeed, the Superintendent has certified that the joinery and façade works are 100% complete as of June 2025.
7. Mr Harris submitted that a full and final review of the façade and joinery works is yet to be completed and it may be that defects in that work are identified. Hypothetically, those defects might require aspects of the joinery or façade works to be removed and reinstated. Therefore, it is conceivable that the primary purpose of the Material Security cannot be definitively concluded until that process is complete.
8. I do not accept that submission. There is no evidence before me that there are defects in the façade and joinery works which are so significant as to require removal and reinstatement. Moreover, there is no evidence before me that there are significant defects in the joinery or façade works which would justify retaining the Materials Security.
9. I note that Mr D'Annibale deposes to the parties having agreed to certify that the façade works were 100% complete in order to assist Crema's cashflow and that the security would be retained until such time that the façade unfixed plant and materials have been incorporated into the Works.[28] However Mr D'Annibale further states, by reference to the Principal's lawyers' correspondence dated 24 November 2025, that the Materials Security is held to cover the reasonable expected cost of rectifying defective work.[29] That correspondence does not, however, suggest that the Unfixed Plant and Materials were not incorporated into the Works.
10. In my view, there is a strong case to argue that the Materials Security should be returned to Crema. Specifically, I accept, prima facie, that the provision of the Materials Security was for the sole purpose of providing security to ensure that the Unfixed Plant and Materials would be purchased, supplied and installed into the Works. That has occurred. The only question that remains is whether the Materials Security can also be used to supplement the Performance Security, presumably limited to defects only in the façade and joinery works. Although I make no definitive finding for the purpose of this interlocutory injunction application, I consider this to be unlikely.
11. Therefore, I am satisfied that there is a serious question for trial that the Materials Security should be returned to Crema.

1. As I have already indicated, I accept, prima facie, that the Materials Security is distinguishable from the Performance Security, in that it is not security that was provided to allocate the risk as to who should be out of pocket pending resolution of a dispute. Indeed, there is limited if any evidence before me of disputation concerning the supply and installation of the joinery and façade works. On the other hand, it seems to be common ground that the Superintendent has certified that the joinery and façade works are 100% complete.
2. In those circumstances, I fail to see what prejudice might be suffered by the Principal if an order was made to return the Materials Security. It is not suggested that the Materials Security can be used to supplement the Performance Security, insofar as the Principal, acting reasonably, asserts a bona fide right to be paid liquidated damages by Crema under the Contract.
3. The only basis raised by the Principal for retaining the Materials Security is to provide security if Crema fails to make good defects in the joinery and façade works (if any). However, absent any material evidence that there are defects in the joinery or façade works, I find that the balance of convenience favours the granting of injunctive relief.
4. The submission that the Principal is yet to conduct a comprehensive report which may reveal defects in the joinery and façade works is largely based on speculation and in my view, does not constitute a proper basis to resist injunctive relief.
5. In contrast, Crema highlights reputational loss and damage insofar as the Principal continues to hold the Materials Security. In his affidavit dated 20 November 2025, Mr Keenan-Dunn explains how that loss might unfold:
   1. It is my understanding that the fees payable in relation to bank guarantees obtained by the Applicant in the course of its business directly referable to the contingent risk that the issuer of the guarantee assesses of the likelihood of a guarantee being called upon.
   2. Up to this point, the Applicant has been able to demonstrate that the risk of a guarantee being called upon was extremely low as it has not happened before. I understand, given the position of the Respondents, that it is possible that this risk may have altered which may cause the Applicant to incur higher fees for all future issued guarantees. This is not a small impact given the Applicant provides approximately $50 million and $60 million worth of guarantees each year, which the total fees for issuing these guarantees being approximately $1.2 million per year.
   3. I am concerned that the calling upon either the Materials Security and or the Performance Security will erode the confidence of financiers and/or banks being the issuers of guarantees when we had previously had a long-standing history of low risk. The pricing of the Applicant's guarantee facility compared to its competitors is very competitive, due to the long-standing relationship between the Applicant and it bond providers based on trust between the representatives of the parties and respect for the Applicant's business competence.
6. Although the prejudice or loss said to be suffered by Crema focuses on the calling on bank guarantees, rather than a situation where the Principal refuses to return a bank guarantee. Nevertheless, I accept, prima facie, that it may be some time before the substantive dispute is heard and determined by the Tribunal and that preventing Crema from being able to discharge the Materials Security facility could impact on its ability to obtain bank guarantees in relation to other projects which it undertakes. In other words, it is conceivable that some reputational damage may result from the Materials Security, remaining in the hands of the Principal.
7. Further, I note that clause 37.3 of the Contract provides that the Unfixed Plant and Material becomes the unencumbered property of the Principal upon payment to Crema and the release of any additional security. In my view, releasing the additional security benefits the Principal and goes some way to mitigate against any prejudice that might be suffered by the Principal in having to release the Materials Security (rather than that security being held without either party having recourse until the final determination of the substantive proceeding). This factor further reinforces a finding that the balance of convenience favours the release of the Materials Security.
8. In Sudjamlim Pty Ltd v Homle Pty Ltd.[30] Almond J succinctly set out the legal principles applicable to interlocutory injunction applications and more specifically, how the courts approach such applications where the balance of convenience is fairly even. His Honour stated:

... An apparently strong claim may lead a court more readily to grant an injunction where the balance of convenience is fairly even. A more doubtful claim, which nevertheless raises a serious question to be tried, may still attract interlocutory relief if there is a marked balance of convenience in favour of it.[31]

1. In circumstances where Crema has satisfied me that there is a strong case for the return of the Materials Security, I find that the balance of convenience favours the granting of an injunction to compel the Principal to return the Materials Security.
2. Further, I note that Crema has given the usual undertaking as to damages.[32] The Principal does not join issue with the nature of that undertaking.

[1] Separable Portion 5 was subsequently split into 5(a) and 5(b), effectively making six separable portions.

[2] Clause 37.4 (b) of the Contract provides that liquidated damages will accrue and be payable separately and cumulatively for each Separable Portion but the cumulative amount of liquidated damages per day will be limited and will not exceed the amount identified at Item 29, which is $22,000 per day.

[3] The Principal has also indicated that it has no immediate intention to have recourse to the additional security provided (referred to as the materials security).

[4] [2020] VSC 596.

[6] (2015) 31 BCL 407; [2015] VSCA 98.

[7] Applicant's Submissions, dated 1 December 2025, [32]-[33].

[8] [1998] VSCA 40.

[10] [2002] VSC 579.

[13] [2017] VSCA 368, (2017) 59 VR 607.

[14] Applicant's Submissions, 1 December 2025, [26] (footnotes omitted).

[15] (Building and Property) [2018] VCAT 696.

[16] Clause 34.5(c)(i) of the Contract.

[17] [2025] VSC 655.

[18] [2022] HCA 6; (2022) 276 CLR 1.

[19] Affidavit of Frank William D'Annibale dated 29 November 2025, [85]-[103].

[20] Affidavit of Frank William D'Annibale dated 29 November 2025, [52]-54] and Appendix A.

[21] Affidavit of Adam Keenan-Dunn; Applicant Submissions dated 1 December 2025, [46].

[22] [2002] FCA 1181.

[24] Thiess Py Ltd v Pacific National (Victoria) Pty Ltd [2009] VSC 670, [17]-[23].

[25] Affidavit of D'Annibale dated 29 November 2025 at [114]. The matters raised by Mr D'Annibale in paragraph 114 of his affidavit dated 29 November 2025 are largely disputed by Mr Keenan-Dunn in his affidavit dated 1 December 2025, at paragraph 27.

[26] [2020] VSC 596 [26(d)].

[27] [2015] VSCA 98, [21].

[28] Affidavit of Frank William D'Annibale dated 29 November 2025, [83].

[30] [2020] VSC 838.

[32] Affidavit of Adam Keenan-Dunn dated 20 November 2025, [76].