Leda Constructions v 22 Upton Rd & Ors

1. In its proposed amended statement of claim (PAmSoC), the plaintiff, Leda Constructions Pty Ltd (the Contractor) is seeking mandatory permanent injunctions restraining the first defendant (the Principal) from calling on three bank guarantees, or orders requiring those bank guarantees to be delivered up to the Contractor. Each of the guarantees was provided as performance security under a design and construct contract (the Contract).
2. The plaintiff sought interim injunctions relating to the guarantees, which were granted on 22 November 2024, with the plaintiff's Summons then adjourned for further hearing. The question before me, at the return of the Summons, was whether the interim injunctions should continue until trial and determination of the issues at trial.
3. I will refer to the bank guarantees in question as:

(a) Guarantee 1 and Guarantee 2. These were issued on 27 March 2018. Each was for $101,553, representing 2.5% of the Contract price.

(b) Guarantee 3. This was issued on 9 April 2018, for $20,570. It was provided in order to secure unfixed plant and materials (in particular, a lift which was to be installed onsite).

1. This proceeding commenced on 21 November 2024, with the filing of an originating motion and summons by which the Contractor sought (relevantly) to restrain the Principal from calling on any securities under the Contract. On 22 November, his Honour Judge Wise granted the injunction sought, on an interim basis, with a timetable allowing for further materials to be filed in relation to the application.
2. The return of that summons came on before me on 15 July and 23 July 2025.
3. The Contractor previously gave an undertaking as to damages and extended that undertaking.
4. The second defendant to this proceeding is the Superintendent under the Contract, and the third defendant is the National Australia Bank, which holds the three bank guarantees. The Contractor has discontinued as against the Superintendent. At the outset of the hearing on 15 July 2025, counsel appeared briefly for the National Australia Bank, to consent to the Contractor being given leave to discontinue as against it; counsel for the National Australia Bank was then excused from further attendance, and an order giving that leave was made.
5. Only the Contractor and the Principal made submissions, relating to the summons, at the hearing before me.
6. At the hearing, the Contractor relied on affidavits of David Hanvey dated 22 November 2024 (but affirmed 7 March 2025), 7 March 2025 and 1 July 2025, and affidavits of Lyle Hanvey affirmed 7 March 2025 and 1 July 2025. 5 pages exhibited to Hanvey's first affidavit were not read into evidence (pages 1207-1212 of the electronic copy of that affidavit). Its written submissions were dated 10 July 2025.
7. The Principal relied on an affidavit of the sole director of the Superintendent, Paul Rieniets, sworn 26 May 2025, and an affidavit of the sole director of the Principal, Paul Rowe, sworn 22 May 2025. Its written submissions were dated 10 July 2025.
8. The Contractor had filed a statement of claim on 20 January 2025. At the hearing before me, the Contractor sought to rely on a proposed amended statement of claim (the PAmSoC).
9. The Principal filed a defence on 14 May 2025, and further and better particulars of its defence on 30 May 2025.
10. Oral submissions were made at the hearing, which began on 15 July 2025 and continued on 23 July 2025. It had initially been listed on a three-hour estimate but in fact took closer to six.
11. The Contractor's oral submissions as to its claims, at the hearing, went beyond the matters set out in the PAmSoC. It sought leave to file (later) a further version of the statement of claim dealing with all points it relied on, in the event the injunctions were continued.
12. The Principal objected to the Contractor pursuing submissions related to claims that were not set out in either the statement of claim, or the PAmSoC. (This included a submission by the Contractor that the Principal is not entitled to call on the guarantees.) However, I have considered all the claims raised by the Contractor, including those raised only in submissions. In deciding whether to grant the continuation of the injunctions sought, I find it is appropriate to consider if the Contractor actually has raised a serious issue to be tried, not whether it has pleaded such a case properly yet. Counsel for the Principal was able to, and did, respond to all the points raised by counsel for the Contractor at the hearing in any event, and did not request an adjournment.
13. On 25 July 2025, the solicitors for the Principal emailed my chambers, with the agreement of the Contractor, attaching the decision of the Supreme Court of South Australia in Synergy Construct Australia Pty Ltd v GSA North Terrace Pty Ltd [2025] SASCA 72. This decision is relevant to the status of a bank guarantee as a risk allocation device, where there is a serious question to be tried as to whether the guarantee is required to be returned. The parties sought leave to file written submissions about it, as they had been unaware of it during the hearing. I gave that leave, and each filed submissions relating to Synergy on 31 July 2025.

1. On 21 December 2017, the Contract was entered into. It related to the construction of a 16-unit apartment complex in Windsor for a fixed price of $4,062,069, ex-GST. It was a heavily modified AS 4300-1995 Design and Construct Contract. It nominated Paul Rieniets of R2 Constructions Pty Ltd as the Superintendent.
2. It provided for the Contractor to provide security of 5% of the Contract Sum in the form of two unconditional guarantees, each being 2.5% of the Contract Sum ($101,553 each). Clause 5 of the Contract, relevantly provided:

5.1 Purpose > > Security, retention moneys and performance undertakings are for the purpose of ensuring the due and proper performance of the Contract. > > 5.2 Provision of Security > > The Contractor shall provide security in the amount stated in Annexure Part A and in accordance with Clause 5. > > 5.3 Form of Security > > The security shall be in the form of cash or an approved unconditional undertaking given by an approved financial institution or other form approved by the Principal. > > The Principal shall have a discretion to approve or disapprove of the form of an unconditional undertaking and the financial institution or insurance company giving it or other form of security offered. The unconditional undertaking in the form of Annexure Part A is approved. > > ...

3. On 17 January 2018, the Contractor commenced work.
4. On 27 March 2018, Guarantee 1 and Guarantee 2 were provided, for $101,553 each.
5. On 9 April 2018, Guarantee 3 was provided, for $20,570 (relating to installation of a lift).
6. Between October 2018 to May 2019, the Contractor says there was cumulative delay by the Superintendent, which caused the Contractor to be unable to reach Practical Completion (PC) by the required date.
7. The original date for PC under the Contract was 28 February 2019. It was extended to 19 April 2019. (Later, on 15 July 2020, a backdated extension for PC was given by the Superintendent, to 3 May 2019).
8. On 5 April 2019, the lift was installed onsite.
9. The Contractor submits that, as the lift had been installed, Guarantee 3 was required to be released by the Principal 14 days later, on 19 April 2019, pursuant to clause 5.9 of the Contract. It was not released.
10. On 5 December 2019, the Superintendent certified PC.
11. The Defects Liability Period (DLP) runs for 12 months after the date when PC is certified. Under the Contract, the Contractor was required to rectify defects notified to it by the Superintendent in that period.
12. On 8 April 2020, the Contractor issued Payment Claim #27, claiming the Principal owed $93,886 to it. (The Contractor says this was 'effectively' its final claim. It says it was early, as it was not submitted within 28 days of the expiry of the DLP, as contemplated by clause 42.5. However, it submits it was treated as a final claim by the Superintendent because it claimed for 100% completion of all the Contractor's works. There were no further claims by the Contractor, and the Superintendent was empowered under clause 42.1 to assess an early payment claim, which the Contractor says the Superintendent did on 7 May 2020.
13. However, the Principal pleads, in its further and better particulars, that Payment Claim #27 was not a final payment claim, as, under Clause 42.5, the Contractor was only entitled to make a final payment claim within 28 days of the expiry of the DLP, that is, it says, on 5 December 2020.)
14. On 7 May 2020, the Superintendent assessed Payment Claim #27, and issued a Payment Certificate (the May Payment Certificate) certifying that the Contractor owed $252,924.40 to the Principal. This amount included liquidated damages of $286,250.00 claimed for delays in completing the work in time, pursuant to clause 35.6 of the Contract. It is claimed for the period 20 April 2019 - 5 December 2019, being 229 calendar days: PAmSoC [20].
15. The Contractor pleads that the May Payment Certificate was invalid, or in breach of contract, for various reasons (PAmSoC [20]), including that liquidated damages should not have been certified in circumstances where it claims the Contractor was prevented from reaching PC by the adjusted date for PC. It pleads (at PAmSoC [21]) that the May Payment Certificate is void and/or should be set aside pursuant to section 53 of the D_omestic Building Contracts Act_ 1995.
16. However, (somewhat confusingly) it also says that the May Payment Certificate was the final certificate under the Contract, because clause 42.6, which deals with the issuing of final certificates, was the only clause which permitted the Superintendent to assess any amounts which, in its opinion, were owing from the Contractor to the Principal for breach of contract.
17. On 5 June 2020, the Contractor sent a lengthy notice of dispute, disputing the Superintendent's negative assessment of Payment Claim #27.
18. On 5 December 2020, the DLP concluded.
19. On 15 December 2020, the Superintendent notified the Contractor of further defects (10 days after conclusion of the DLP). The Contractor complains of this because the notification included defect lists that the Superintendent had in its possession prior to the DLP, but which it had not notified the Contractor of, thereby depriving the Contractor of the ability to return and rectify defects at its cost.
20. From 17 December 2020 to 1 December 2021, the Contractor continued to correspond with the Superintendent and the Principal about defects, and returned to site to carry out rectification works.
21. Nearly four years passed.
22. On 15 November 2024, out of the blue so far as the Contractor was concerned, the Superintendent issued a document titled 'Final Payment Schedule' (the 2024 Certificate). The Principal relies on this as being the final certificate under the Contract.
23. In the 2024 Certificate, the Superintendent certifies that the Contractor owed the Principal $358,061.60.
24. The Contractor submits that the 2024 Certificate was invalid, being a second, or reissued, final certificate. In the PAmSoC, the Contractor pleads that it was void, and/or ought to be set aside pursuant to section 53 of the Domestic Building Contracts Act 1995. Amongst other allegations, it pleads that the Superintendent had no contractual power to issue a second final certificate; that it was a contrivance to increase the amount due under the bank guarantees; and that deductions were included which the Superintendent could not reasonably have considered were due to the Principal by the Contractor, and which the Superintendent 'did not arrive at a reasonable measure of value for'. The amounts deducted included:

(a) amounts claimed for defective work: $37,995;

(b) damages for loss of rent: $2,000;

(c) amounts paid to apartment owners for water ingress: $72,618; and

(d) liquidated damages of $268,750 ($1,250 per day for 215 days).

1. The defective work costs included costs for rectifying defects that the Contractor said it had not been notified of during the DLP, or at all.
2. Five days after issuing the 2024 Certificate, on 20 November 2024, the Principal attempted to cash all three bank guarantees.
3. The Contractor issued these proceedings, and two days later, on 22 November 2024 the Court issued an interim injunction restraining the Principal and the National Australia Bank from calling on, or cashing, all three bank guarantees, pending further order of the court.
4. The question before me is whether that interim injunction should continue.
5. I turn now to my analysis of the issues.

1. The Contractor has the onus of establishing there is a serious question to be tried as to its entitlement for the final relief it seeks.
2. As discussed below, I am satisfied that it has done that in relation to Guarantee 3, but not in relation to Guarantees 1 and 2.

1. An initial issue is whether the first defendant is a party to the Contract at all, and whether it needs to make a rectification claim to establish that it is.
2. The Contract refers to the 'Principal' as being 22 Upton Road Pty Ltd, rather than 22 Upton Rd Pty Ltd. (My italics.)
3. The Contractor submits that, as a result, the first defendant was not actually the 'Principal' under the Contract (although it still refers to the first defendant as 'the Principal' throughout its submissions.) It claims the first defendant cannot claim under the guarantees unless and until a rectification claim is made to change the name under the Contract to 22 Upton Rd Pty Ltd.
4. However, I am satisfied that the first defendant was the 'Principal' under the Contract, and that the reference to 'Road' rather than 'Rd' makes no difference in the circumstances. No rectification claim is required.
5. The Contractor claims that because the bank guarantees refer to 22 Upton Rd Pty Ltd, the first defendant does not have a contractual right to call upon the bank guarantees because the first defendant is not a party to the Contract.
6. Each of the bank guarantees refers to 22 Upton Rd Pty Ltd as the beneficiary of the bank guarantee. At clause 1 of each bank guarantee, the following is stated:

In consideration of the Beneficiary agreeing at the request of the Customer and the Bank to accept this guarantee in connection with the Agreement the Bank undertakes to pay the Beneficiary an amount or amounts not exceeding the Amount in title.

7. The Contractor claims that because the bank guarantees refer to 22 Upton Rd Pty Ltd, the first defendant does not have a contractual right to call upon the bank guarantees because the first defendant is, in fact, not a party to the Contract because the Contract describes the 'Principal' under the Contract as '22 Upton Road Pty Ltd', and the first defendant is called 22 Upton Rd Pty Ltd.
8. It says that if the Principal considers it has a valid claim for rectification of the Contract or the bank guarantee, it would need to articulate that by way of a pleaded claim.
9. I disagree that any rectification is required in order for the Principal to rely on the bank guarantees as having been provided pursuant to the Contract. It is clear that the Contract was between the Contractor, and the first defendant, as Principal.
10. As French CJ said in Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85 at [10], referring to errors in the name of a beneficiary:

[10] ... In the ordinary case, saving minor slips and misdescriptions, the designation of a person or entity as a beneficiary cannot simply, as a matter of construction, be transmuted into the designation of a different person or entity. Nor can a reference to a non-existent entity be construed as a reference to an existing entity with quite a different name.

11. I am satisfied that the reference in the Contract to the Principal as 22 Upton Road Pty Ltd falls within the categorisation of a minor slip or misdescription.
12. Patently, when the three bank guarantees were provided in the name of 22 Upton Rd Pty Ltd, all concerned considered them to be provided pursuant to the Contract, that Contract being specifically referenced in the guarantees themselves (as 'the Agreement').
13. The first defendant's ABN is contained in Annexure A to the Contract, below the name 22 Upton Road Pty Ltd.
14. The ordinary person understands 'Rd' and 'Road' to mean the same thing. The first defendant has the registered company name, '22 Upton Rd Pty Ltd'. I consider that a company called '22 Upton Road Pty Ltd', would not be able to be registered as it would have been considered too confusing, where 22 Upton Rd Pty Ltd has already been registered. And of course there is no suggestion that a company of that name exists.
15. I do not consider this point gives rise to a serious question to be tried.

(2) Principal Entitled To Call On Guarantees As It Has A 'Claim For Money'

1. Clause 5.6 of the Contract provides, relevantly:

The Principal may have recourse to security, retention moneys or both and may convert into money security that does not consist of money for- > > (a) ...

(b) any claim to money which the Principal may have against the Contractor whether for damages (including liquidated damages whether certified or not), under an indemnity or otherwise relating to the Works or the work under the Contract; ...

If the Contractor fails to reach Practical Completion by the Date for Practical Completion, the Contractor shall be indebted to the Principal for liquidated damages at the rate stated in Annexure Part A, for every day after the Date for Practical Completion to and including the Date of Practical Completion or the date that the Contract is terminated pursuant to Clause 44, whichever first occurs.

2. The Principal is entitled to call on the bank guarantees under clause 5.6 of the Contract. It has a 'claim for money' against the Contractor, under clause 35.6, for liquidated damages, on the basis that the Contractor did not achieve Practical Completion by the date required under the Contract. It is a bona fide claim.
3. It claims liquidated damages of a daily amount until Practical Completion occurs. The amount it claims for liquidated damages exceeds the total amount of the bank guarantees.
4. In the light of that, I am not satisfied that any of the matters the Contractor argues raise a serious question to be tried as to the entitlement of the Principal to call on the bank guarantees (save as regards Guarantee 3, as discussed below).
5. Those matters the Contractor raises include the following.
6. The Contractor says there is a serious question to be tried that the Principal is not entitled to call on the bank guarantees because the Principal's entitlement to do so rests on the enforceability of the Superintendent's determinations, and these determinations are attended by significant doubt. It argues that the Court can reopen a determination if it is not made in accordance with contract: Dura (Australia) Constructions Pty Ltd. v Hue Boutique Living Pty Ltd [2013 ] VSCA 179 at [18].
7. It also raises issues as to the Principal's claims for defects and entitlement to rent included in the Second Final Certificate, submitting the amounts claimed are not due.
8. However, all of these are matters for trial and do not prevent the Principal now calling on the bank guarantees to satisfy its claim for liquidated damages for failure to reach Practical Completion. That amount exceeds the value of the bank guarantees.

1. The Contractor also pleads (at PAmSoC [36]) that the Principal's attempt to have recourse to the bank guarantees was not made in good faith or was unconscionable, for various reasons.
2. The Principal calls on the guarantees to meet its liquidated damages claim because the Contractor did not meet the date for Practical Completion. However, the Contractor submits that because the Principal prevented it from achieving Practical Completion in time, the time for Practical Completion was extended so that it was required to achieve Practical Completion in a reasonable time, being 5 December 2019 and so it does not owe any liquidated damages.
3. It also submits that the Contractor submits the Principal failed to provide the Contractor with necessary directions and so breached clause 23.1 of the Contract and prevented the Contractor from reaching completion by the Date for Completion (PAmSoC [31]). It pleads that, as a result of these 'Acts of Prevention', the Date for Completion was extended to time at large, and the Contractor was required to achieve PC within a reasonable time, which it says was 5 December 2019.
4. As a result, it claims that it does not owe liquidated damages for failing to reach Practical Completion in time.
5. The Contractor submits:
   1. The prevention principle is that a party to a contract cannot take advantage of the existence of a state of things that it has produced itself, and that a consequence of the act of prevention is that the relevant term which required one party to perform the contract by a specific time (i.e. completion by the date for practical completion) transforms to one which requires performance within a reasonable time: Hera Project Pty Ltd v Bisognin (No 3) [2017] VSC 268 at [105]- [106]. In other words, time for completion becomes time 'at large'.
   2. Parties to a contract may avoid time becoming at large by the inclusion of an extension of time clause, but those clauses will be strictly construed against the principal such that any ambiguity in an extension clause will be interpreted in favour of the contractor: Peak Construction (Liverpool) v McKinney Foundations Ltd (1970) 1 BLR 114 at 121.
   3. Once time is set at large and a contractor is required to complete its works within a reasonable time and it fails to do so, the principal's remedy will be in general damages to the extent they can be proven, not liquidated damages: North Midland Building Ltd v Cyden Homes Ltd [2017] EWHC 2414 at [11], Cartwright Pond Ltd v Wild [2021] EWHC 1600 (TCC) at [26]. In other words, the liquidated damages clause becomes inoperable.
6. The Contractor submits there were many short delays which cumulatively made it impossible to reach PC, and that it would have been oppressive to comply with clause 35.5 which required the Contractor to submit a written Extension of Time (EOT) request in accordance with the Contract.
   1. The EOT mechanism in clause 35.5 of the Contract required the Builder to submit a written EOT request supported by "all necessary supporting documentation, setting out the facts on which the claim is based and the steps the Contractor has taken to preclude the occurrence of the cause the delay and minimise the consequences of delay".
   2. Having regard to the sheer number of directions which the Contractor was required to seek and changes which the Principal directed to previous selections, it would have been oppressive for the Contractor to have to go through the cumbersome and detailed EOT process each time there
7. However, I am not satisfied that this gives rise to a serious question to be tried that the bank guarantees should not be called on. As discussed below, the Contractor took no action under the extension of time clauses under the Contract, and the prevention principle is not engaged. The Contractor could have taken steps pursuant to clause 35.5 when it was aware, as it must have been, that it would be delayed in reaching PC. It did not take that action.
8. The Principal makes a (bona fide) claim for liquidated damages claim under clause 35.6, on the basis the Contractor failed to reach Practical Completion by the date for Practical Completion (as well as other claims).
9. It is entitled to call on Guarantee 1 and Guarantee 2 in relation to that claim.
10. Whether the time for Practical Completion became at large is a question for trial, not something which prevent the guarantees being called on now.
11. In any event, Clause 35.5 sets out the agreed procedure for the Contractor to seek extensions of time, and, at least twice in this Contract, the Contractor had availed itself of it to seek extensions of time. It did not do so here.
12. The Contractor submits that it was a condition precedent to the operation of the extensions of time mechanism in clause 35.5 that it become 'evident to the [Contractor] that anything, including an act or omission of the Principal or Superintendent...may delay the work under the Contract'. It says it did not become evident to the Contractor due to the many small delays, and relies on Mr David Hanvey's evidence about this.
13. I do not accept this would give rise to a serious question to be tried, as clearly the Contractor must have been well aware it was being delayed, even if Mr Hanvey did not turn his attention to what specific items were delaying it. The Contractor took no action under the extension of time clauses under the Contract, and the prevention principle is not engaged.
14. I agree with the Principal's submissions:

1. The second reason is that the Contractor's position that time was "at large" because of various "acts of prevention" misunderstands the prevention principle. A contractor cannot rely upon another party's preventing conduct where it has failed to exercise a contractual right that would have negated the effect of that preventing conduct. In other words, the prevention principle is not engaged where, as here, the Contractor was entitled to claim an extension of time under the Contract, but failed to do so. 2. In this case, the Contractor did not seek any extensions of time to the date for practical completion in accordance with cl 35.5 of the Contract, which required the Contractor:

(a) to submit a written claim for an extension of time within 10 working days after a cause of delay commenced, including any delay caused by the Principal; and > > (b) otherwise to notify the Superintendent of possible causes of delay promptly and, in any event, no later than 14 days after becoming aware of any such causes.

15. The third reason is that cl 46.1 of the Contract required the Contractor to give notice of any claim in connection with the Contract as soon as practicable and, in any event, within 14 days of becoming reasonably aware of such a claim. If the Contractor failed to do so, it was absolutely barred from any such claim under cl 46.2.
16. The Contractor did not give any notices of claim in accordance with cl 46.1. It must have been aware of any such claim from at least 30 October 2018. This is fatal to any claim it may have had by operation of cl 46.2.
17. The Contractor also pleads (PAmSoC [36]) that the Principal's attempt to have recourse to the bank guarantees was not made in good faith, including because it had permitted the Superintendent to arrive at unreasonable valuations and unreasonable certifications of the Contractor's claims for variations.
18. However, the Principal did not have an obligation under Clause 23 regarding the valuations and certifications the Superintendent provided.
19. The Contractor further submits:.

1. In this case, there are serious reasons to doubt the independence of the Superintendent:

(a) when the proceeding was listed for its first return before Judge Wise, the Superintendent attended court with the Principal, and was conferring with the Principal's solicitors in private conference with the Principal; > > (b) the Principal has, through its solicitors, refused to provide any correspondence between the Principal and the Superintendent to which the Builder was not copied, with the Principal's solicitors stating "[o]ur client will obviously not be making any voluntary discovery in order to assist your client to prepare a statement of claim"; > > (c) the Superintendent has sworn an affidavit advocating and in support of the Principal's defence of the injunction application.

1. The Builder is constrained from being able to fully particularise the Superintendent's lack of independence where the Principal is deliberately refusing to provide the private communications between it and the Superintendent prior to discovery. But there is enough there to raise a serious question to be tried as to the Superintendent's independence.
2. I do not consider any of the points raised on this question raise a serious question to be tried as to the Superintendent's independence. In any event, this does not affect the Principal's present entitlement to call on the bank guarantees under clause 5.6 of the Contract given its claim for liquidated damages.
3. The Contractor further pleads that the Principal has engaged in unconscionable conduct in seeking to have recourse to Guarantee 1. In PAmSoC [42](b)], in particulars, it pleads as follows about Guarantee 1:

Under clause 5.8 of the Contract, the security given under clause 5.3 of the Contract was to be reduced by 50% upon the latter of Practical Completion being certified, the Builder having complied with clause 52 and the Builder having provided the Deed of Release at Annexure Part J of the Contract (the Deed.)

Practical Completion was certified by the Superintendent on 5 December 2019.

The Builder had substantially complied with clause 52, which required it to provide the Principal with certain documentation, and to the extent that it had not the Principal had any missing documentation (i.e. as-built drawings) in its possession as a result of its commercial relationship with the project architect.

The Superintendent did not request that the Builder sign the Deed and the Builder could not have because that Deed required the Builder to agree to what it was owed under the Contract up to Practical Completion in circumstances where the Builder and the Principal were not agreed as to what the Builder was owed.

To the extent that the Principal did not release this bank guarantee because of non-compliance with clause 52 and the non-provision of the Deed, then strict compliance with those requirements was immaterial, de minimis and amounted to an insistence upon rights by the Principal in circumstances which makes that insistence harsh or oppressive.

5.8 Reduction of Security and Retention Moneys > > Upon the latter of:

(a) issue of the Certificate of Practical Completion;

(b) compliance with clause 52; and

(c) provision of the executed Deed of Release - Practical Completion,

the Principal's entitlement to security and retention moneys shall be reduced to the percentage thereof stated in Annexure Part A or, if no percentage is stated, to 50 per cent thereof.

The Principal shall release security and retention moneys in excess of the entitlement within 14 days of the entitlement being so reduced.

1. Clause 5.8 required clause 52 to be complied with before Guarantee 1 was returned. It was not.
2. The Contractor submitted that substantial, not strict, compliance was enough, and that its failure to comply with the conditions in clause 5.3 were not material, or de minimis. I do not accept that this gives rise to a serious question to be tried in the circumstances. It did not provide contractually required documents to the Principal in compliance with clause 52, and significantly, did not provide an executed Deed of Release - Practical Completion. There was no reason it could not have executed that Deed. These were material omissions.

1. As the Principal submits, the purpose for the issue of these bank guarantees was for both security and risk allocation purposes, and this weighs heavily against the granting of the injunctions. It submits that even if, following trial, it was found that the Contractor was not in default under the Contract, unless there is something very significant to shift the dial, the parties agreed that the guarantees could be called upon before the issue of whether the Contractor was in default had been determined.
2. This puts a heavy onus on the Contractor to show why the risk allocation purpose should not be able to operate.
3. The fact there is a 'no injunction clause' (cl 5.6) is not determinative of whether injunctions should be continued. A no injunction clause is rarely enforceable to restrain a bank guarantee being called on, as it seeks to oust jurisdiction of the courts and is void for public policy: Anaconda Operations Pty Ltd v Fluor Daniel Pty Ltd [1999] VSCA 214 at [15] per Brooking JA, CPB Contractors v JKC Australia LNG Pty Ltd (No 2) [2017] WASCA 123 at [97] and G&S Engineering Services Pty Ltd v MACH Energy Australia Pty Ltd [2019] NSWSC 407 at [90].
4. However, as the Principal submits, a clause like this show the parties' intentions, as to the risk allocation purpose, and it is something that I take into account.
5. The ordinary principles governing an application for an interlocutory injunction apply to matters involving bank guarantees (that is, in an unusual form of contract).
6. I take into account that the undertaking given was an unconditional undertaking.
7. In weighing the balance of convenience, the risk allocation role that the guarantees performed is a factor to be taken into account in assessing the prejudice the Principal would suffer if it were restrained from calling upon the guarantees. That is because the agreed status quo (under the Contract) is that the Contractor bears the financial risk of being out of pocket pending determination of any dispute: see Synergy (referred to above); Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98; F_letcher Construction Australia Ltd v Varnsdorf Pty Ltd_ [1998] 3 VR 812.

Guarantee 3 - risk allocation purpose has expired

1. Unlike Guarantees 1 and 2, which were provided at the outset of the Contract, Guarantee 3 was provided later. It was provided for a specific purpose: to secure the value of a lift until it was installed.
2. The Contract provides that where additional security is provided for an item of unfixed plant and materials, the Principal shall release that additional security within 14 days of the incorporation into the Works of the unfixed plant and materials.
3. The relevant clauses are:

5.9 Release of Security and Retention Moneys > > If the Contractor has provided security, retention moneys or both, then the Principal shall release them when required by Clause 42.6. If the Contractor has provided additional security for any item of unfixed plant and materials pursuant to Clause 42.2, the Principal shall release that additional security within 14 days of the incorporation into the Works of the unfixed plant or materials. > > 42.2 Unfixed Plant and Material > > The Principal shall be obliged to pay for any item of unfixed plant and materials (notwithstanding that the item has not been incorporated into the Works) where that item is listed in Annexure Part A, if the Contractor-

(a) provides the amount of additional security stated in Annexure Part A, separately approved by the Principal under Clause 5.3; and

(b) establishes to the satisfaction of the Superintendent that the Contractor has paid for the item, the item is properly stored, labelled the property of the Principal and is adequately protected, title to and ownership of the materials will pass or has passed to the Contractor free from any encumbrance.

Upon payment to the Contractor of the amount which includes the value of the item, and upon the release of any security, the item shall be the property of the Principal free of any lien or charge.

Any additional security provided for any item of unfixed plant and materials shall be released in accordance with Clause 5.9.

Except as provided in the Contract, the Principal shall not be obliged to pay for any item of unfixed plant and materials which is not incorporated in the Works.

1. Guarantee 3 was not provided as security for the Contract as a whole, and the parties did not agree to it as risk allocation on that basis. There is a serious question to be tried that its purpose has expired, as the lift was installed 6 years ago.
2. In Synergy, the Court of Appeal of South Australia allowed an appeal against a refusal to grant an interlocutory injunction to a contractor to restrain a principal calling on bank guarantees provided as security under a building contract.
3. As the Contractor submits:
   1. Synergy concerned the appeal of a judge's refusal to grant an injunction of three separate bank guarantees. The trial judge found, and the Court of Appeal agreed, that the bank guarantees were explicitly made risk allocation devices. The contract permitted the principal to have recourse to the bank guarantees at any time to (amongst other things) "satisfy any bona fide claim the principal may have against the contractor".
   2. Similarly to the present case, the contract in Synergy also contained milestones which provided when bank guarantees were to be released: upon practical completion and then upon the issuing of the final certificate (in respect of the main bank guarantees), or upon the incorporation into the works of any plant and materials (for any additional security given). Whilst not identical to the clause in the present case, the regime is similar.
   3. The Court of Appeal noted that the contractual requirement to release bank guarantees upon those milestones was in the nature of a 'negative stipulation', i.e. an implied promise by the Principal not to have recourse to the security because to do so would fundamentally undermine the obligation to release and return the security. The principal in Synergy conceded that there was a serious question to be tried as to whether it was required to release the bank guarantee back to the contractor because the relevant milestones had been met.
   4. Having referred to the cases of Fletcher Construction, Clough Engineering and Sugar Australia, the Court of Appeal noted that just because an injunction is sought in respect of a bank guarantee that may operate as a risk allocation device did not mean that the injunction was to be determined on anything other than ordinary principles. It said at [103]:

The risk allocation function of the guarantees cannot control or dictate the outcome of the Court's consideration of the balance of convenience, nor can it conclusively determine the status quo in some limiting way, when the very issue about which a serious question arises is whether that function had come to an end"

1. The Court of Appeal ultimately found that during the period in which the principal was entitled to hold the bank guarantees, they performed a risk allocation function and the contractor was required to 'pay now, argue later' in respect of any call on the bank guarantees. However the Court found that once the trigger was met which required the principal to return the bank guarantees, the principal was precluded from making a demand on the bank guarantees, and the bank guarantees were not intended to perform a risk allocation function after they were required to be returned.

1. The Principal submitted that:
   1. ... with respect to the lift bank guarantee (issued on 9 April 2018 in the amount of $20,570), the Court must still consider where the balance of convenience lies even if it forms the view that there is a prima facie case it should be returned. In particular, the Contractor has not shown that it would suffer real prejudice were a demand to be made upon the guarantee - noting the small value of the lift bank guarantee, there is little reason to suppose the Principal could not repay it in due course if ordered to do so.
2. I consider that the balance of convenience lies in restraining the Principal from calling on Guarantee 3, given the strength of the prima facie case that it should be returned and the fact that the purpose for which it was provided as risk allocation has now been met. This is the approach taken in Synergy. The fact that the Principal might be able to repay it is not to the point in the circumstances.
3. Guarantees 1 and 2, on the other hand, continue to perform a risk allocation role.

1. I am satisfied that there is a real risk the Contractor will not be able to recover any money paid pursuant to the bank guarantees once the money is disbursed to the Principal.
2. The Contractor has provided a company search regarding the Principal, and title and mortgage searches. These show that the Principal does not own any property. It was incorporated shortly before the Contract was signed, on 22 June 2017, and it has issued 121 $1 shares, all of which are held by its director, Paul Rowe.
3. As the Contractor submits:

[95] The inability of a principal to repay liquidated damages recovered by cashing a bank guarantee was a relevant factor to be taken into account in assessing where the balance of convenience lay in Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318. > > [96] In Maxcon Constructions Pty Ltd v The Mercer Development Pty Ltd [2021] VCAT 299 Member Edquist found that the potential inability of the principal to repay liquidated damages after the dispute had run its course was a factor weighing in the contractor's favour in assessing the balance of convenience.

4. The facts raised by the Contractor make it clear on a prima facie basis that the Principal does not have assets. The Principal has not provided any evidence to the contrary (such as of other assets, its turnover and so forth), nor offered to give an undertaking to repay via a parent company, for example, as occurred in Sugar at [94]-95]],
5. However, although I draw the inference the money once paid might not be available to be repaid, the fact that the parties agreed to the provision of the bank guarantees both as security and risk allocation means that I give it little weight in the circumstances.

[84] Mr Hanvey deposes that, if the bank guarantee were to be called by the Principal, it would damage the [Contractor's] good reputation and relationship with NAB and could jeopardize the company's ability to obtain approval from NAB to be the builder on future development projects in Melbourne. > > [85] In Australian Winch and Haulage Company Pty Limited (Administrator Appointed) v Walter Construction Group Limited [2002] FCA 1181, Allsop J (as His Honour then was) commented on the powerful nature of evidence that a bank guarantee might harm an unimpeachable company's reputation, noting at [79]: > > > > "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 irreparably damaged or harmed." > > [86] Further, the Court can take judicial notice of the likely effect the calling in of bank guarantees worth $223,676.00 will have on a relationship between a builder and its bank, and that the reluctance with which the bank might approach future bank guarantees or finance with the [Contractor] if these bank guarantees are called upon. > > [Footnotes omitted]

2. However, the context in which those statements were made in Winch (cited in the extract above) is different: to here. In the case before me, there is no direct evidence that the Contractor's good reputation with the National Australia Bank would be damaged by having the bank guarantees called on, nor that it would jeopardise its ability to obtain approval for bank guarantees from the National Australia Bank in the future. David Harvey's evidence is only on the basis of 'instructions', and is hearsay. So far as Hanvey refers to a related entity, the timing with he was concerned has now passed in any event.

1. In all of the circumstances, weighing up the various factors discussed, I make the following orders:

1. Upon the plaintiff giving the above undertaking as to damages: > > (a) The injunction ordered on 22 November 2024, restraining the first defendant calling on Guarantee 1 and Guarantee 2 is lifted; > > (b) the injunction, ordered on 22 November 2024, restraining the third defendant from accepting and converting Guarantee 1 and Guarantee 2 into money is lifted. > > 2. Costs of the summons dated 21 November 2024 are reserved. > > 3. The parties confer with a view to agreeing on further orders, including regarding costs. If the parties cannot agree, then they must file: > > (a) Submissions as to the orders they seek, and any affidavit on which they rely, by 4.00pm on 30 January 2026; > > (b) any reply material and submissions by 4.00pm on 6 February 2026. > > 4. The submissions are limited to 4 A4 pages, and the reply submissions are limited to 3 A4 pages.

2. Unless the Court considers a hearing to be required, further orders including regarding costs will be determined on the papers.

I certify that these 26 pages are a true copy of the reasons for ruling of Her Honour Judge Marks, delivered on 19 December 2025.