Evins not to pay to Diano any moneys hereunder and irrespective of the performance or non-performance by Evins or Diano of the terms of the said Contract or agreement." 4. The moneys when called up by the principal must be held as security for the contractor's proper performance of his work. As spelled out in Clause 5.1 security is - "... given for the purpose of ensuring the due and proper performance of the contract and of satisfying the obligations of the Contractor under the contract." 5. As to the unconditional nature of Bank guarantees in building contracts see Wood Hall Ltd v The Pipeline Authority [1979] HCA 21; (1979) 141 CLR 443 at p 451 per Gibbs J, and at pp 457 and 459 per Stephen J. 6. At p 459 of Wood Hall (supra) Stephen J noted the following qualification to the general rule that the guarantee is unconditional, viz:- "Had the construction contract itself contained some qualification upon the Authority's power to make a demand under a performance guarantee, the position might well have been different." 7. Mr Wyvill of Counsel for Evins relied upon such a "qualification" here, in Clause 5.5 of the contract. In Pearson Bridge NSW Pty Ltd v The State Rail Authority of NSW (unreported, Supreme Court of New South Wales, 28 June 1982) Yeldham J held that Clause 5.5 of contract NPWC3 constituted a contractual stipulation between principal and contractor, and in the circumstances of that case the contractor was entitled to an injunction restraining the principal from calling on the bank to pay under its guarantee. Clause 5.5, which had no counterpart in the Wood Hall case (supra), provides:- "If the Principal becomes entitled to exercise all or any of his rights under the Contract in respect of the security the Principal may convert into money the security that does not consist of money..." (emphasis mine) 8. His Honour considered that the words emphasised defined and limited the circumstances in which, as a matter of contract between the principal and contractor, the former could call up the guarantee; it could do so "only if it becomes entitled to exercise any of its other contractual rights concerning security", that being the only circumstance "in which resort to the security may be had". In substance, Clause 5.5 was a negative stipulation as regards the calling up of the guarantee, a threatened breach of which by the principal entitled the contractor to an injunction. Yeldham J considered that the plaintiff-contractor in Pearson Bridge (supra) would suffer considerable detriment if the Bank were required to pay under the guarantee, while the defendant-principal would not suffer any detriment if precluded from calling up the guarantee. The detriment to the contractor appeared to be that for the purposes of pre-qualifying as a tenderer and of negotiating contracts, the contractor had to assure other parties that it had a reputation as a reliable and competent contractor; it did so by showing that it had never had a Bank guarantee or security cashed or called upon. 9. I respectfully agree with Yeldham J's opinion as to the proper construction of Clause 5.5. The basic question then was: had Diano become entitled to exercise all or any of its rights under contract NPWC3 in respect of the security constituted by the Bank Guarantee? Mr Wyvill submitted that any such entitlement of Diano could have its source only in Clause 46 which provided:- "Without limiting the Principal's rights under any other provision in the Contract, any debt due from the Contractor to the Principal under or by virtue of any provision of the contract may be deducted by the Principal from any moneys which may be or thereafter become payable to the Contractor by the Principal, including any retention moneys then held by the Principal, and, if such moneys are insufficient for this purpose, then from the Contractor's security under the Contract..." (emphasis mine) 10. That is to say, in his submission, before Diano could call up the guarantee it had to establish first that a debt arising under or by virtue of the contract of 17 September 1985 was due to it from Evins, and second that moneys payable then or later to Evins by Diano under the contract, including existing retention moneys held by Diano, were insufficient to satisfy that debt. Only in those circumstances could Diano call up the guarantee, that is, "convert into money the security", in terms of Clause 5.5. I note that Clause 46 is directed to the circumstances in which the principal may deduct debts from the security, and expressly does not limit "the Principal's rights under any other provision in the Contract". Although there is a clear distinction between calling up a security constituted by a guarantee, and deducting moneys from that security once it has been called up, the entitlement "to exercise ... rights ... in respect of the security", required by clause 5.5, appears to envisage an entitlement to draw on the security; and so Clause 5.5 contemplates the existence of a right in Diano to draw on the security, as a prerequisite to its right to call up the guarantee. Accordingly, if the matters referred to in Clause 46 are established - a debt due by Evins to Diano by virtue of a provision of the contract and an insufficiency in the non-security moneys then or later payable by Diano to Evins - Diano's entitlement in terms of Clause 5.5 is established, and it may call up the guarantee. But not until then. 11. Mr Wyvill's submissions were as follows. The application of Clauses 46 and 5.5 to the facts meant that there was a triable issue between the parties as to whether Diano was presently entitled to call up the guarantee. That was in issue because until the arbitration had finally concluded, it could not be known who owed whom what moneys; accordingly, until then, Diano could not call up the guarantee. In other words, until the arbitrator's final decision on the claims before him was given, it could not be known whether there was "any debt due from the Contractor to the principal" in terms of Clause 46, let alone whether the amount of any such debt could not be met from "moneys ... payable to the contractor by the Principal". If Diano was allowed now to call up the guarantee any subsequent award of damages to Evins, should it be later shown that Diano had had no entitlement to do so, would not be an adequate remedy for Evins because a receiver and manager had been appointed to Diano - this later proved to be correct, the date being 13 April 1988 - and if the guarantee moneys were paid out to Diano by the Bank, Evins might not later be able to recover them from the receiver. Further, Evins would suffer loss to its business reputation if the guarantee were called up, this being the factor stressed by Yeldham J in Pearson Bridge (supra). The balance of convenience therefore favoured the granting of the injunctions sought by Evins. On the other hand, Evins' undertaking as to damages in the usual form imposed as a condition of granting the injunctions sought, would properly secure Diano against any loss. 12. On this ex parte application I granted interim relief, on the usual undertaking by Evins as to damages, restraining Diano from calling up the guarantee and restraining the Bank from paying out the guarantee in response to any such demand. Diano was given leave to apply. 13. On 3 October 1988 Diano applied to have the interim injunctions dissolved; it also sought an order that the Bank pay out the guarantee to Diano's solicitors. In the alternative, if Evins were to be granted injunctions, Diano sought an order that Evins pay a sum of money into Court "by way of security", in respect of its undertaking as to damages, and in respect of costs. Mr Reeves of counsel for Diano submitted that on 28 September Evins had not made the full disclosure of all material facts within its knowledge which tended in favour of Diano, which is required of an applicant for an injunction proceeding ex parte; and that in any event, on the facts, Diano was presently entitled under Clause 5.5 to call up the guarantee, on the basis that Evins was indebted to Diano for expenses incurred by Diano under Clause 37 of NWPC3, and for the costs of the Arbitration to date. 14. From the materials then placed before me it appeared that on 29 May 1986 Diano's Superintendent for the purposes of the Contract, Mr Whitford, had extended the contract completion date to 18 April 1986. A Notice of Practical Completion had issued on 10 December 1986. On 3 June 1987 the architect certified that $47,770.62 was due and payable by Diano to Evins; this was apparently the final progress payment due to Evins. The architect also noted that at that time the "Amount retained L and D" by Diano (this was a reference to "liquidated damages") was $127,676.00; this appeared to be based on the sum of $541.00 per calendar day fixed by the Annexure to the contract as liquidated damages for delay in completion under clause 35.5, multiplied by the 236 days between the extended contract completion date (18 April 1986) and the date of practical completion (10 December 1986). 15. It initially appeared that what had been referred to arbitration by Evins, about 10 July 1986, were questions solely concerning the airconditioning plant platform at the building in question. However, it appeared from annexures DAK 5 and 6 to Mr Kelsey's affidavit of 3 October 1988, that many matters in dispute had been referred to arbitration. The arbitrator's Minute of proceedings at his preliminary conference of 9 June 1987 showed that the general nature of the claims before him comprised extension of time with costs, extension of time denied, dispute concerning the airconditioning support platform, and damages from prolongation. The approximate amount of Evins' claim was $519,000, while Diano's counter-claim was $900,000. I should add here that before me it remained throughout very much in issue between the parties as to what had been referred to arbitration, Diano contending that what had properly been referred was only the dispute as to the air-conditioning platform. 16. Under the Arbitrator's interim award of 26 July, which focussed on issues arising out of the dispute concerning the air-conditioning platform, Evins was ordered to pay the costs of the arbitration to that date, the costs to be taxed; Mr Masters, Diano's solicitor, estimated those costs at $54,566.90. 17. Mr Reeves submitted that these costs constituted in terms of Clause 46 a "debt due from the Contractor to the Principal ... by virtue of any provision of the Contract", in that the arbitration took place pursuant to Clause 45 of the Contract relating to the "Settlement of Disputes". Clause 45 provides that in the event of disputes or differences, and after certain steps have been taken, the Contractor may require "that the matter at issue be referred to arbitration". Clause 45 goes on to provide:- "A reference to arbitration under this clause shall be deemed to be a reference to arbitration within the meaning of the laws relating to arbitration in force in the ... Territory ...and the arbitration proceedings shall be conducted in that ... Territory. The arbitrator shall have all the powers conferred by

those laws and it shall be competent for him to enter upon the reference without any further or more formal submission than is contained in this clause." 18. In the Territory law "relating to arbitration" the relevant Act is the Commercial Arbitration Act, s.34 of which provides that the arbitrator may award costs. 19. Invoices to Diano totalling some $58,577.62 were said by Mr Reeves to constitute debts due and owing by Evins to Diano, under Clause 37.2 of the Contract, the relevant part of which is as follows:-

"If any omission or defect is not rectified within the time stipulated in the direction given by the Superintendent the Principal may rectify the omission or defect at the contractor's expense but without prejudice to any other rights that the Principal may have against the contractor in respect of that omission or defect and the cost incurred by the Principal in so rectifying the omission or defect shall be a debt due from the contractor to the Principal which may be deducted or recovered by the

Principal pursuant to clause 46." (emphasis mine) 20. Mr Reeves submitted that the sum of $127,676.00 which had been retained by Diano represented liquidated damages due to Diano for delay by Evins in completing the contract, at the rate of $541 per day, as provided for in Clause 35.5, and the Annexure to the Contract. It followed in his submission that in terms of Clause 46 no retention moneys were "held" by Diano from which could "be deducted" a sum to meet Evins' debts to Diano of $58,577.62 (Clause 37 expenses) and $54,566.90 (estimated arbitration costs). 21. He submitted that even if the Court was not prepared to accept Diano's solicitor's assessment of the arbitration costs at $54,566.90, the guarantee should nevertheless be permitted to be called up to the extent of $58,577.62, the amount due to Diano under the invoices, being a "debt due" from Evins to Diano in terms of Clause 37.2. As to this, Mr Wyvill submitted that the sum of $58,577.62 constituted part of Diano's counter-claim before the Arbitrator, which the Arbitrator had not yet heard; as to the costs ordered to be paid by the Arbitrator, he submitted that if they had not been taxed they could not constitute a "debt due", in terms of Clause 46. Mr Reeves submitted that the balance of the guarantee of $93,050.00 after deducting the Clause 37.2 debt, namely $34,472.38, should be ordered to be paid into Court, as security for the arbitration costs, pending their taxation by an officer of the court as ordered by the Arbitrator. 22. After hearing argument on 3 and 4 October, I ordered on 6 October, for reasons then published, that the interim injunctions of 28 September be dissolved, on the basis that in the history of the particular circumstances of the case Diano's solicitors, who had been told by Evins' solicitors late on 27 September that an application for an injunction would be made on 28 September, should have been notified of the time the actual application was to be made, prior to the hearing of that application. 23. On 6 October Evins applied for interlocutory injunctions in the same terms as those it had sought on 28 September. Subsequently, on 13 and 14 October, this application was sought to be varied so as to exclude relief against the Bank, and to further seek a mandatory injunction against Diano, requiring it to withdraw the demand it had already made against the Bank; although it was objected to, I allow the variation. Pending the resolution of this new application, interim injunctions were granted. Evins' application was argued on 7, 11, 13 and 14 October. I rule on it today. 24. Mr Wyvill submitted that the costs ordered to be paid by the arbitrator were payable by virtue of the Commercial Arbitration Act or by the parties' arbitration agreement, and were not payable pursuant to the Contract; accordingly, in his submission, those costs could not constitute a "debt due from the Contractor to the Principal under or by virtue of any provision of the Contract", in terms of Clause 46, and therefore could not in any event be deducted from the security. As noted earlier, Mr Reeves submitted that the arbitration took place pursuant to Clause 45 of the Contract which provides for the "Settlement of Disputes". The power of the arbitrator to award costs arises by virtue of s.34 of Commercial Arbitration Act, which enables an award of costs "unless a contrary intention is expressed in the arbitration agreement". It is common ground that no such contrary intention was expressed in the parties' arbitration agreement. It was against this background that Mr Reeves had submitted that the costs awarded by the arbitrator constituted, in terms of Clause 46, a "debt due from the Contractor to the Principal ... by virtue of Clause 45, a provision of the Contract". I consider that Mr Reeves' submission is correct; Clause 45 is the foundation of the recourse to arbitration, and an order for payment of costs which flows from that process when resorted to, is properly characterised as arising "by virtue of" Clause 45 for the purposes of Clause 46. 25. Mr Reeves pointed out that there were several provisions of the Contract under which sums became debts "due from the Contractor to the Principal", and could be deducted under Clause 46. For example, Clause 10.6 provides:- "If the Contractor does not furnish proof satisfactory to the Superintendent in accordance with the first paragraph of the last preceding sub-clause, the Principal may pay to the Nominated Sub-contractor the whole or any part of such amount as is required to be so paid by the contractor under sub-clause 10.4 and any moneys so paid shall be a debt due from the Contractor to the Principal which may be deducted or recovered by the Principal pursuant to clause 46." (emphasis mine) 26. Similar provisions are found in Clauses 15, 25, 30.3, 31.7, 35.5, 36, 37, 39, 43 and 44.4. I do not consider, however, that these provisions exclusively delimit the debts due for the purposes of Clause 46, so as to exclude therefrom costs awarded by the Arbitrator. 27. At this point I note that on 3 October Evins instituted proceedings No. 734 of 1988 in this Court in which it sought declarations that the arbitration had been conducted in breach of the terms of the arbitration agreement and of the rules of natural justice, and that the interim award of 26 July was accordingly void. On 10 October in those proceedings Diano applied for Evins to be ordered to pay moneys into Court by way of security. Mr Wyvill submitted that even if Evins' contention that various matters other than the air-conditioning platform had been referred to arbitration, was incorrect, its claim arising from the air-conditioning platform remained on foot, because it had not been validly determined. Mr Wyvill submitted that in making his interim award the Arbitrator had not heard evidence and had not addressed the real question in issue in relation to the air-conditioning platform, namely, whether the consultant was responsible for mistakes as alleged by Evins and, if so, whether the consultant was acting on behalf of the principal and not Evins. 28. To the amount of $58,577.62 claimed by Diano under Clause 37.2, Mr Wyvill submitted that the major sum claimed, $47,921, and the accounts from John Connell and Associates totalling some $4,500 could not be said to relate to the rectification of an "omission or defect", in terms of Clause 37.2. As to other invoices totalling some $1,000 he submitted that no details have been given of any direction given by the Superintendent to Evins to rectify the omissions to which those invoices related; this was a requirement of Clause 37.2. In his submission these matters showed that Diano had failed to establish indebtedness for the purposes of Clause 46. 29. Further, in Mr Wyvill's submission, these amounts were all included in Diano's counter-claim before the Arbitrator, which had not yet been determined, and hence could not be claimed as a "debt due". 30. Mr Reeves submitted that mere claims by Evins for damages due to delays, did not fall within the words "any moneys which may be or thereafter become payable to the Contractor by the Principal", in Clause 46. That expression contemplated moneys which had been proved to be payable, an enforceable debt. Mr Wyvill submitted that the words "thereafter become payable" explicitly indicated that Clause 46 contemplated prospective payments and accordingly the security could not be resorted to by Diano until moneys prospectively payable to Evins had been ascertained, a matter which could only occur when accounts were finally settled between Evins and Diano. 31. I reserved the question of the meaning of Clause 46 and meanwhile heard matters which Evins wished to put in support of its application. It appeared, as noted earlier, that there was a serious dispute between the parties as to exactly what matters had been referred to arbitration. In the result that factual dispute was not capable of being resolved before me on this application. I note also that the Arbitrator's interim award is challenged in proceedings instituted by Evins No. 734 of 1988. It appears to me that the factual matters in issue between the parties, which are incapable of resolution at this stage, affect the application of Clause 46, even if Mr Reeves' submissions as to its meaning are correct. Further, those factual disputes affect Mr Reeves' arguments as to the delay in which, he submitted, Evins had indulged in performing the Contract, in the course of the arbitration, in instituting proceedings No. 734 of 1988, and instituting these proceedings. 32. I consider that the factual matters in issue between the parties indicate that there is a triable issue between them; that is to say, there is ultimately a serious question to be tried as to whether Diano is presently entitled to call up the guarantee. 33. I turn to the question of where the balance of convenience lies, on the grant of interlocutory relief. Mr Kelsey gave evidence of the effect on Evins of calling up the guarantee, and of the financial situation of Evins at that time (October 1988). It appeared that Evins had tendered for some 30 contracts in the preceding 21 months and had managed to win one of them. On 25 November I was informed that Evins had instituted proceedings No. 850 of 1988 on 21 November to be wound up on the basis of insolvency; the Court file relating to those proceedings shows that a Provisional Liquidator was appointed on 30 November 1988, and that is where the matter stands. I was also informed that the arrangements whereby a receiver and manager had been appointed to Diano would cease to operate as from the end of November 1988. I take these matters into account on the question of the balance of convenience. 34. I consider that the balance of convenience favours Diano. Insofar as the strength of Evins' case is a factor, I do not consider on the materials placed before me that it has a strong case. I am not satisfied that Evins will suffer irreparable damage unless the injunctions it seeks are granted. To the contrary, I consider that damages would be an adequate remedy for Evins, in the event that it ultimately establishes that Diano was not entitled to call up the guarantee. There is nothing now to suggest that Diano would not have the capacity to pay any such award of damages. In the light of the disclosed facts, this cannot be said to be a case where any loss of reputation by Evins due to the calling up of the guarantee should count for much in the balance. 35. Mr Reeves seeks that Evins be ordered to pay various sums into Court in these proceedings by way of security for damages and for costs of the application for the interlocutory injunction and the action. He also seeks orders for security for costs with respect to proceedings No. 734 of 1988 (including security for the costs awarded by the Arbitrator) and in proceedings No. 696 of 1987 (being proceedings in which Evins claims $50,815.06 against Diano as amounts said to be due and payable by Diano under Progress Certificates No. 10 ($3,044.44) and 12 ($47,770.62)). I accept that these two sets of proceedings were intermeshed with the application by Diano in these proceedings. The question of security is a matter of discretion under s.533 of the Companies Code, turning on the facts of the case. Those applications by Diano are refused, except as to the application in proceedings No. 734 of 1988 with respect to security for the costs awarded by the Arbitrator, without prejudice to Diano's right to apply at some later time. In proceedings No. 734 of 1988 I order pursuant to s.42(3) of the Commercial Arbitration Act that when the costs awarded by the Arbitrator are taxed, as was directed by the Arbitrator, Evins pay that sum into Court in proceedings No. 734 of 1988, or give security for that sum by way of Bank Guarantee, within one month of the date of taxation. 36. Evins' application for interlocutory injunctive relief in proceedings No. 728 of 1988 is refused and the interim injunctions are dissolved. Diano may proceed to call up the Bank guarantee of 25 October 1985. Evins must pay Diano's costs of the application for interlocutory relief, as well as those of the Bank which appeared briefly to interplead.