Crowley Australia Pty Limited v Latitude 63 LLC & Anor [2025] NTSC 43

Wood Hall Limited v The Pipeline Authority [1979] HCA 21; [1979] 141 CLR 443 at 445, referred to

Crowley Australia Pty Limited v Latitude 63 LLC & Anor [2025] NTSC 43

• [1] On 5 June 2024, I made orders by consent which included Order 2 in the following terms:

Upon the Plaintiff and Crowley Holdings Inc undertaking by their counsel:

2.1 to provide to the Registry unconditional bank guarantees from an Australian Bank in favour of the First Defendant which may be called upon in Australia in the sums of AUD $12,600,000 and USD $6,300,000 within 10 business days of the date of this order, such guarantees to be held by the Registry until further order; and

2.2 in terms of the usual undertaking as to damages;

until further order the First Defendant is restrained from seeking to enforce the Determination of the Second Defendant referred to in Part 2 paragraph 2 of the Originating Motion.

• [2] By summons dated 20 June 2025, the first defendant is seeking the following orders.
  1. Upon the failure of the Plaintiff and Crowley Holdings Inc to satisfy the undertaking in paragraph 2.1 of the order of 5 June 2025, the order in paragraph 2 restraining the First Defendant from seeking to enforce the Determination of the Second Defendant referred to in Part 2 paragraph 2 of the Originating Motion is set aside.
  2. The First Defendant has liberty to make such applications as it sees fit:
     1. from the failure of the Plaintiff and Crowley Holdings Inc to satisfy the undertaking in paragraph 2.1 of the order of 5 June 2025; and
     2. to enforce the undertaking in paragraph 2.2 of the order of 5 June 2025.
• [3] On 16 June 2025, in purported compliance with the undertaking in paragraph 2.1 of the order of 5 June 2025, the plaintiff's solicitors lodged with the Court documents said to be Bank Guarantees from Citibank N.A. and sent copies to the first defendant's solicitors.
• [4] The first defendant contends that the bank guarantees lodged with the Court do not comply with the order of 5 June 2025 in two respects:

(a) they are not from an "Australian Bank"; and

(b) they are not unconditional.

• [5] Each guarantee is addressed to Latitude 63 LLC ("the Beneficiary").
• [6] Each guarantee is the same except for the amount specified as the maximum amount. Each provides (relevantly):

WHEREAS THE BENEFICIARY AND CROWLEY AUSTRALIA PTY LIMITED (ACN 654 468 836 ("THE APPLICANT") HAVE BY AGREEMENT IN WRITING DATED 5 JUNE 2025, SIGNED BY MR BADDELEY SC (FOR THE APPLICANT) AND BY MR WYVILL SC (FOR THE BENEFICIARY) ("THE AGREEMENT") AGREED TO THE ISSUE OF A BANK GUARANTEE, IN RELATION TO CONSENT ORDERS MADE BY THE SUPREME COURT OF THE NORTHERN TERRITORY IN FILE NO. 2025 - 01510 - SC.

IN CONSIDERATION OF THE BENEFICIARY ACCEPTING THIS BANK GUARANTEE IN SATISFACTION OF ABOVEMENTIONED CONTRACT REQUIREMENT AND AT THE APPLICANT'S REQUEST, CITIBANK N.A., SYDNEY BRANCH (ABN 34 072 814 058) ("THE BANK") SITUATED AT LEVEL 22, 2 PARK STREET, SYDNEY NSW 2000, HEREBY ISSUES IT'S (sic) BANK GUARANTEE NO 5031901391 AND IRREVOCABLY AND UNCONDITIONALLY UNDERTAKES TO PAY WITHIN 5 BUSINESS DAYS TO THE BEBEFICIARY ANY SUM OR SUMS WHICH MAY FROM TIME TO TIME BE DEMANDED BY THE BENEFICIARY UP TO AN AMOUNT NOT EXCEEDING AUD12,600,000 ("THE MAXIMUM AMOUNT") WHERE SUCH A DEMAND IS RECEIVED BY THE BANK ON OR BEFORE 4.00 PM ON THE JUNE 12, 2026 (sic) ("THE EXPIRY DATE").

(1) BE IN WRITING AND SENT OR PRESENTED TO THE BANK AT, LEVEL 22, 2 PARK STREET, SYDNEY NSW 2000, STATING IT IS SENT UNDER CITIBANK BANK GUARANTEE NO 5031901391,

(2) STATE THE APPLICANT HAS DEFAULTED UNDER THE CONTRACT AND SPECIFY THE AMOUNT DEMANDED,

(3) BE PURPORTEDLY SIGNED BY ONE OR MORE SIGNATORIES OF THE BENEFICIARY, AND

(4) STATE THE BENEFICIARY'S BANK ACCOUNTS TO WHICH THE FUNDS WILL BE PAID.

PAYMENT OF THE MAXIMUM AMOUNT OR ANY PART OR PARTS THEREOF WILL BE MADE BY THE BANK TO THE BENEFICIARY WITHOUT REFERENCE TO ANY OBJECTION OF THE APPLICANT OR NOTICE FROM THE APPLICANT NOT TO PAY.

• [7] The guarantees do not specifically state (as, for example, do bank guarantees issued by ANZ), that the bank will pay the sum demanded "without regard for the performance or non-performance" of the Applicant or Beneficiary under the terms of their contract.
• [8] The first defendant contends that the bank guarantees are not unconditional because they are subject to the condition that any demand must state that "the applicant has defaulted under the contract". I agree. The guarantee is subject to a condition as to the content of the demand and moreover, a condition which would be impossible to satisfy.
• [9] The term "contract" is not defined in the guarantees. There is reference to an agreement between the Beneficiary and the Applicant signed by their respective counsel and in the next paragraph this is referred to as "the abovementioned contract requirement". That is to say, the "contract" would seem to be a reference to the agreement between the parties for the Applicant to provide bank guarantees. As the bank guarantees provided were intended to fulfil that obligation, there could never be a default under that "contract".
• [10] Counsel for the plaintiff placed emphasis on the words "IRREVOCABLY AND UNCONDITIONALLY UNDERTAKES TO PAY" and suggested that was sufficient to render the guarantee unconditional. However, that undertaking to pay is specifically dependent upon a demand being made and the following paragraphs specify conditions which any demand must satisfy.
• [11] Counsel for the plaintiff also suggested that it didn't matter that there could never be a default under the "contract" - ie the agreement to provide a bank guarantee - that was just a form of words which needed to be set out in a demand. I do not accept that contention. If there can never be a default under the "contract", then it would be highly inappropriate to require the Beneficiary of the guarantee to falsely state that there has been a default. That is equivalent to saying that the guarantees are conditional upon the Beneficiary making a false statement in any demand it makes.
• [12] It is the usual practice of this Court (and other courts in relation to equivalent legislation) that if an applicant seeking judicial review of a determination by an adjudicator under the Construction Contracts (Security of Payments) Act 2004 (NT) wishes to restrain enforcement of a determination pending a decision in the judicial review proceedings, the applicant is required to pay the amount of the determination into court or to provide a bank guarantee for the equivalent amount. A bank guarantee is an acceptable alternative to payment into court of a cash amount because a bank guarantee is as good as cash.
• [13] In Wood Hall Limited v The Pipeline Authority[1] Barwick CJ made the following remarks about the nature of a bank guarantee:

I wish to add an observation on my own account. The description "guarantee" commercially applied to the bank documents in this case is, in my opinion, a complete misnomer. The relationship of the bank to the owner or to the contractor has, in my opinion, none of the elements of suretyship. The circumstance that the purpose of the cash deposit or its documentary substitute is as a security for the due performance of the contract or the contract work does not, in.my opinion, involve either the Bank or the owner in any of the obligations or rights of suretyship. The presence of cl. 3, for example, in the deed of 11th June 1976, sensibly included as a precaution, does not, in my opinion, import any of those rights or obligations. The bank documents are really in the nature of an unconditional bond to pay money on demand up to a stated maximum amount, the resolutive condition of the bond, other than payment, being expressed, for example, in cl. 2 of the said deed.

In my opinion, there is no basis whatever upon which the unconditional nature of the Bank's promise to pay on demand can be qualified by reference to the terms of the contract between the contractor and the owner. Equally, there is no basis on which the owner's unqualified right at any time to demand payment by the Bank can be qualified by reference to the terms or purpose of that contract. The alternative provided the builder by condition G4.2 of that contract to the immediate deposit of cash is intended to place the owner in a position at any time to obtain such a deposit, i.e. a cash deposit of the stated amount, by a payment of that amount by a bank under a document which binds the bank unconditionally to make such a payment on demand.

• [14] In the same case, Stephen J remarked (at p 257):

Once a document of this character [ie a performance bond or bank guarantee] ceases to be the equivalent of a cash payment, being instantly and unconditionally convertible to cash, it necessarily loses acceptability. Only so long as it is "as good as cash" can it fulfil its useful purpose of affording to those to whom it is issued the advantages of cash while involving for those who procure its issue neither the loss of use of an equivalent money sum nor the interest charges which would be incurred if such a sum were to be borrowed for the purpose. Being "as good as cash" in the eyes of those to whom it is issued is essential to its function.

• [15] The guarantees provided by the plaintiff seem to lack this quality. By specifying that the demand must state that the Applicant is in breach of the contract, they seem to be making the promise to pay on demand qualified by reference to the terms of the contract between the parties. That is despite the subsequent words in the guarantees "PAYMENT OF THE MAXIMUM AMOUNT OR ANY PART OR PARTS THEREOF WILL BE MADE BY THE BANK TO THE BENEFICIARY WITHOUT REFERENCE TO ANY OBJECTION OF THE APPLICANT OR NOTICE FROM THE APPLICANT NOT TO PAY".
• [16] At best the guarantees are ambiguous as to whether the promise to pay is conditional upon there being a breach of "the contract" by the Applicant. In my view they do not comply with the requirement to provide unconditional bank guarantees.

• [17] The first defendant also contends that the guarantees do not comply with the requirement that they be provided by an "Australian Bank" because Citibank N.A. is not an Australian bank.
• [18] The first defendant submits that the "obvious" meaning of Australian Bank is a company registered in Australia which is authorised to conduct banking business in Australia which includes the provision of financial products like guarantees.
• [19] The evidence of Mr Tuhtan, in his affidavit dated 20 June 2025 is that the Australian Prudential Regulation Authority ("APRA") maintains a register of institutions which are registered with and regulated by APRA under the Banking Act 1959 (Cth). The categories of institution on the register are: "Australian-owned authorised deposit taking institutions", "Foreign subsidiary banks" and "branches of foreign banks". Citibank N.A. is listed as a "branch of a foreign bank".
• [20] Counsel for the plaintiff submitted that the term "Australian bank" may be construed in any number of ways: it could mean a bank that is incorporated in Australia, a bank that is Australian owned, a bank that is authorised to carry on business in Australia or even a bank that merely has a branch in Australia. Counsel for the plaintiff submitted that to construe the term "Australian bank" as limited to banks that are registered or incorporated in Australia would be to add words to order 2.1 that are not present. I agree.
• [21] Citibank is a bank authorised to carry on the business of banking in Australia. It is on the Register of authorised deposit-taking institutions maintained by APRA, and the APRA website states: "The institutions listed below [ie those on the Register of authorised deposit-taking institutions] are regulated by APRA in accordance with the Banking Act. I see no reason to limit the term "Australian bank" to those institutions listed under the section "Australian-owned authorised deposit-taking institutions" or to introduce a requirement that the bank be incorporated in Australia to qualify as an Australian bank. The bank guarantees provided by the plaintiff are from "an Australian bank" within the meaning of order 2.1.
• [22] Mr Wyvill SC for the first defendant submitted that there was a practical reason for so limiting the term "Australian bank" and that is that, should the bank providing the bank guarantees default in payment under the guarantees, then, in the case of an American registered company such as Citibank N.A., it may become necessary to institute proceedings in an American court in order to enforce any judgment the Beneficiary may obtain against Citibank N.A. in an Australian court, there being no reciprocal enforcement of judgments treaty between the United States and Australia.
• [23] I consider such a concern illusory. First a properly worded bank guarantee by a reputable bank regulated by APRA is "as good as cash". It is an unconditional promise to pay on demand without reference to the Applicant, and notwithstanding any objection by the Applicant, and without reference to any contractual obligations of the parties. Mr Wyvill specifically disclaimed any suggestion that Citibank N.A. may not have the capacity to meet any demands under the guarantees.
• [24] Second, should Citibank N.A. default and should it become necessary to institute proceedings to enforce the guarantees, that can be done in an Australian court as with any other Australian bank. And should the first defendant obtain a judgment against Citibank N.A. and should that judgment remain unpaid, it would have available all of the enforcement options available within the jurisdiction including seizure of assets or appointment of a receiver.
• [25] The plaintiff has leave to provide unconditional bank guarantees that comply with order 2.1 of the orders of 5 June 2025 or pay the amounts specified in that order into Court, failing which order 2 will be set aside and the first defendant will be at liberty to enforce the determination of the adjudicator. I will hear the parties as to the appropriate time frame.

[1] [1979] HCA 21; [1979] 141 CLR 443 at 445