Plaintiff v Defendant

2 The subcontractor Adcon Vic Pty Ltd (plaintiff) seeks to restrain the proprietor Icon Co (Vic) Pty Ltd (defendant) from having recourse to security[1] (Bank Guarantees) provided under a Subcontract. Icon opposes the application.

3 By Originating Motion dated 6 February 2020, as amended with leave of the Court by Amended Originating Motion dated 20 February 2020, the plaintiff seeks the following:

1. Pursuant to Rule 45.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules), the Court dispense with the requirements of Rules 5.03(1) and 8.02, and authorise the plaintiff to commence a proceeding by originating motion in Form 5C.
2. A declaration that the defendant is not entitled to:

(a) calling on, or otherwise requesting payment under, the whole or any part of:

(b) unconditional bank guarantee no. DG762643418 issued by Australia and New Zealand Banking Group Limited, in favour of the defendant, in the sum of AUD$396,250; and/or

(c) unconditional bank guarantee no. DG762653418 issued by Australia and New Zealand Banking Group Limited, in favour of the defendant, in the sum of AUD$396,250;

(d) have recourse to any funds obtained from the whole or any part of the aforesaid bank guarantees (or either of them),

(e) in respect of liquidated damages referred to in line item VO43 of the purported payment schedule dated 24 January 2020.

1. Further or alternatively to order 2, injunctions (interlocutory and permanent) to restrain the defendant (whether via its employees, agents or otherwise) from:

(a) calling on, or otherwise requesting payment under, the whole or any part of the aforesaid unconditional guarantees (or either of them):

(b) having recourse to any funds obtained from the whole or any part of the aforesaid unconditional guarantees (or either of them),

(c) in respect of liquidated damages referred to in line item VO43 of the purported payment schedule dated 24 January 2020.

4 By Summons dated 6 February 2020, as amended with leave of the Court by Amended Summons dated 20 February 2020, the plaintiff seeks the following:

1. Pursuant to Rule 45.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Rules), the Court dispense with the requirements of Rules 5.03(1) and 8.02, and authorise the plaintiff to commence a proceeding by originating motion in Form 5C.
2. An interlocutory injunction to restrain the defendant (whether via its employees, agents or otherwise), until further order or written consent of the parties, from:

(a) calling on, or otherwise requesting payment under, the whole or any part of:

(b) unconditional bank guarantee no. DG762643418 issued by Australia and New Zealand Banking Group, in favour of the defendant, in the sum of AUD$396,250; and/or

(c) unconditional bank guarantee no. DG762653418 issued by Australia and New Zealand Banking Group Limited, in favour of the defendant, in the sum of AUD$396,250; and/or

(d) having recourse to any funds obtained from the whole or any part of the aforesaid unconditional guarantees (or either of them).

(e) in respect of liquidated damages referred to in line item VO43 of the purported payment schedule dated 24 January 2020.

5 The plaintiff's submissions identify two serious issues to be tried, either one of which have the potential to enliven the Court's discretion to grant an interlocutory injunction:

(a) whether qualifications or conditions on the defendant's right to have recourse to security under cl 5.2 of the Subcontract have been satisfied (and hence whether the defendant's threatened call on the bank guarantee would breach express or implied negative stipulations in cl 5.2); and

(b) whether by seeking recourse in the circumstances the defendant would be acting unconscionably in contravention of the Competition and Consumer Act 2010 (Cth) (CCA).

6 Further, the plaintiff submits that the balance of convenience favours the grant of an interlocutory injunction, and also submits that damages at trial would be an inadequate remedy because the plaintiff will suffer significant reputational and commercial harm in the meantime if the subject guarantee is accessed.

7 This application to restrain access to an unconditional bank guarantee provided under a construction contract by the plaintiff to the defendant, arises in the context of an active project being constructed in Coventry Street, South Melbourne, in the State of Victoria (Botanic Melbourne). The scope of the contract works for the Botanic Melbourne are substantial, including 228 apartments built over 21 levels with three basement carparks and common areas with a construction cost of approximately $75 million.

8 The plaintiff as a subcontractor, has performed and is performing form work and concreting on the Botanic Melbourne project pursuant to a subcontract with the defendant, Main Contractor, for a contract sum in excess of $15 million.

9 By the standard terms of a Major Works Subcontract Agreement in the form of AS4901-1998 (As Amended) entered into on or about 17 August 2018[2] the parties agreed, pursuant to cl 20 thereof, that the defendant, as the Main Contractor, would ensure that at all times a Subcontract Superintendent was appointed under the Subcontract to fulfil, in all respects, the role and functions of the Subcontract Superintendent under the terms of the Subcontract.

10 The plaintiff provided two bank guarantees, each for $396,250, as Security pursuant to the terms of the Subcontract, including cl 5.2 thereof.

11 There is dispute between the parties as to the applicable Subcontract terms agreed in respect to the Botanic Melbourne Project. The resolution of the parties' dispute about the applicable agreed terms of the Subcontract may inform the question of whether or not the applicable Subcontract, properly construed, contains any relevant fetter to recourse by the defendant to the Security provided by the plaintiff by way of Bank Guarantees in relation to its obligations.

12 The plaintiff's present un-pleaded position is that a Subcontract[3] in the form of AS4901-1998 (As Amended), executed by the plaintiff in about mid-August 2018, is the contract which binds the parties.[4]

13 The defendant contends that the Subcontract which binds the parties in relation to the Botanic Melbourne Project is an amended version of the AS4901-1998 Subcontract Conditions agreed on about 16 August 2018.[5]

14 The plaintiff and the defendant acknowledge that at some time in the future a claim may be made to have one of the two asserted versions of the applicable Subcontract declared the version which binds the parties, further or alternatively seeking rectification.

15 However, critically for the purposes of this application, the plaintiff notes that the defendant in its Submissions dated 18 February 2020 resisting the injunction, states that it does not matter for the purposes of this application whether the Unamended (the plaintiff's asserted subcontract, Exhibit 'AQ-1') or Amended Form of subcontract (the defendant's asserted subcontract, Exhibit 'DW-1') applies and also submits that the defendant is entitled to call on the Bank Guarantees regardless.[6]

16 Further, in this critical respect the plaintiff and the defendant both accept that the relevant terms of the subcontract for which the plaintiff may ultimately contend, contains in cl 5.2 thereof, an implied negative stipulation which if not satisfied prevents recourse to the Security by way of Bank Guarantees, whereas the relevant terms of the subcontract for which the defendant may ultimately contend contains an amended version of cl 5.2 which does not appear to reflect an express or implied negative stipulation giving rise to a fetter on the Main Contractor's recourse to the Bank Guarantees in issue.

17 The plaintiff also in its submissions relies upon the version of the Subcontract which contains an unamended version of cl 5.2.[7]

18 The consequence of the matters referred to in the preceding paragraphs is that the parties have argued this application on the basis of the terms of the Subcontract exhibited to the First Quinn Affidavit[8] (the Subcontract) and the parties have also accepted that if the plaintiff does not succeed in obtaining an injunction to restrain recourse in this application based on the Subcontract terms upon which it seeks to rely, it is much more unlikely to succeed in restraining the defendant's access to the remaining Bank Guarantee under subcontract terms which the defendant asserts constitute the Subcontract between the parties.[9]

Defendant's threatened call on the second guarantee

19 Pursuant to the terms of the Subcontract, the plaintiff provided two bank guarantees by way of security.[10] The first of the guarantees provided by the plaintiff was to be returned upon achievement of Practical Completion and the second of the guarantees was to be returned after the expiration of the Defects Liability Period, subject to any contractually permissible recourse.

20 This application by the plaintiff Subcontractor was triggered by the defendant on 4 February 2020, threatening to have recourse to the second of the said bank guarantees in the sum of $396,250.[11]

21 The context in which on 4 February 2020 the defendant notified an intention to have recourse to the second bank guarantee includes that the parties are in dispute in relation to the plaintiff Subcontractor's entitlement to Subcontract extensions of time and concomitantly also in dispute as to both the Date for Practical Completion and the Date of Practical Completion under the Subcontract.

22 The defendant contends that the amended subcontract, which it will claim bound the parties, does not give rise to a fetter to access to the bank guarantees under amended cl 5.2.

23 The defendant, by its Counsel, explained in submissions that although it did not abandon reliance upon the amended subcontract in this application[12] it submitted:

The way I propose it be dealt with is that we meet the application under two hypotheses. So under the hypothesis that the amended form applies, I can address Your Honour as to the unconditional nature of clause 5.2. Under the hypothesis that the unamended form applies, we would concede that there are conditions attached to clause 5.2 and the claim to recourse of the guarantees, but we can meet that argument as well.

So we meet the argument under both hypotheses, in which case there's no need for the court to find and determine the question of rectification in this application. If the court's against us on our construction of the unamended form and the effect it has on this application, then there's a divergence between both hypotheses. I'd submit that that would then go to the questions of serious questions to be tried, and that might then inform the balance of convenience.

But under our argument, it doesn't matter which fork in the road one takes. We're entitled to claim on these bank guarantees.[13]

24 Ultimately, the defendant was warned in relation to the present application that in light of the position it adopted, in particular that the defendant neither sought to adjourn the present application nor place the Court in a position where it could decide the issue as to the applicable subcontract terms, the Court would, in moving to decide the plaintiff's injunction application, not address the possible effect of the asserted form of the subcontract between the parties which the defendant intended at some future time, as presently advised, to argue was the subcontract which bound the parties.[14]

25 Because the plaintiff sought to rely on a contract the terms of which both parties submitted contained a relevant negative stipulation which gave rise to a lower potential hurdle to the plaintiff on its application for an injunction, and because the defendant also submitted that it does not matter for the purposes of this application, which form of subcontract applies, I have proceeded to determine the plaintiff's application. I have also done so because of the plaintiff and the defendant's positions referred to above in this paragraph and because both parties seek an expeditious determination of the plaintiff's application. Further, to deal with the trial of the question of which subcontract should be declared binding and/or issues of rectification of a version of the subcontract in issue, would I consider, involve significantly more cost to the parties and would also considerably delay the determination of the present application by the plaintiff.

Plaintiff's application to restrain access to the subcontractor's second bank guarantee

The plaintiff's submissions as to the existence of a serious issue to be tried

26 In support of the injunction it seeks, the plaintiff argues that it is able to establish the existence of a serious issue to be tried and that the balance of convenience favours it.

27 Further, the plaintiff acknowledges in its submissions that the general approach of the Court is not to restrain calls on guarantees provided as security under engineering and construction contracts, although the plaintiff noted that there are exceptions to this position, including where there was a relevant non-compliance with conditions or qualifications imposed on the contractual right to recourse and also where it can be established that it would be unconscionable in the circumstances to access such a security.[15]

28 The plaintiff also submits that the meaning of cl 5.2 in the amended standard form Subcontract is well settled by Authority.[16] However the plaintiff relies upon the Victorian Court of Appeal decision in Dedert Corporation v United Dalby Bio-Refinery Pty Ltd[17] (Dedert) and also on the Queensland Supreme Court decision in RCR O'Donnell Griffin Pty Ltd v Forge Group Power Pty Ltd[18] (RCR O'Donnell Griffin) to argue that there is a serious question to be tried in the circumstances of the present case as to whether the defendant 'remains unpaid after the time for payment', pursuant to cl 5.2 of the Subcontract.

29 The plaintiff points out that its application arises in circumstances where it seeks to restrain the defendant as Main Contractor from calling on the second security provided under the Subcontract, so as to satisfy a claim being made by the defendant for liquidated damages, which liquidated damages are in turn referred to in 'a line item in a payment schedule' issued by the Subcontract Superintendent on 24 January 2020.[19]

30 In addition to identifying the two serious issues identified at paragraph [5] above, the plaintiff submits that in this matter the balance of convenience favours the grant of an interlocutory injunction because damages at trial will be an inadequate remedy in that they would not address or compensate the plaintiff for the significant reputational and commercial harm it would suffer if the second bank guarantee was accessed.

31 The plaintiff primarily relies upon what it submits is an implied negative stipulation in cl 5.2 of the Subcontract. That clause provides:

5.2 Recourse

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 that party notified the other party of intention to have recourse.[20]

32 The plaintiff submits that the key operative words giving rise to the negative stipulation in cl 5.2 of the Subcontract it relies upon are 'remains unpaid after the time for payment', which the plaintiff also submits have the effect of qualifying or conditioning the defendant's right to call upon the security under the Subcontract. As a result the plaintiff submits that recourse to the Subcontract Security cannot be exercised unless the relevant express or implied negative stipulation has been satisfied, that is it must be the case that the defendant 'remains unpaid after the time for payment' in respect of a sum justifying recourse to the Bank Guarantee provided as Subcontract Security.

33 Further, the plaintiff submits that the said negative qualification or condition prompts an enquiry and analysis as to whether the Subcontract terms and conditions give rise to amounts which remain relevantly unpaid after the time for payment by the plaintiff to the defendant.

34 The plaintiff concedes that one such sub-contractual mechanism is constituted by the liquidated damage regime under the Subcontract. That regime the plaintiff recognises, amongst other things, provides that if practical completion is not reached by the Date for Practical Completion the Subcontract Superintendent is empowered to certify, as due and payable to the defendant, liquidated damages of $22,000/day for every day after the Date for Practical Completion to and including the Date of Practical Completion, pursuant to cl 34.7 of the Subcontract term.

35 The plaintiff however argues that it had lodged 120 Extension of Time Claims (EOT Claims), totalling 100 days of extensions to the Date for Practical Completion. The plaintiff also contends that the majority of its EOT Claims were not assessed, as the Subcontract required them to be under cl 34.5, within the period of 35 days, and that as a consequence those claims are deemed to have given rise to extensions of time pursuant to cl 34.5 of the Subcontract Conditions.[21]

36 On this basis the plaintiff contends that it is entitled to an extension of time to the Date for Practical Completion to 28 October 2019.

37 The plaintiff acknowledges that the Subcontract Superintendent purported to assess each of the plaintiff's EOT Claims, although the plaintiff contends that those assessments were not undertaken in a timely way as required by the terms of the Subcontract. The plaintiff also notes that the Subcontract Superintendent has in the past twice granted extensions of time to the plaintiff which have resulted in the Date for Practical Completion being extended to 20 August 2019.

38 Further, the plaintiff points out that on or about 12 November 2019, the Subcontract Superintendent 'stated' that 'Actual PC date' was 21 October 2019[22] and yet rejected four plaintiff EOT Claims because the claimed day of extension fell 'after PC', and was therefore, the Subcontract Superintendent considered, irrelevant.[23]

39 The plaintiff submits that the Subcontract Superintendent's communication[24] (Superintendent's email 12 November 2019 at 9:48am) amounted to certification by the Subcontract Superintendent that the Date of Practical Completion was 21 October 2019. The plaintiff points out that 21 October 2019 is a date which predates the Date for Practical Completion, as calculated on the basis of the plaintiff's claim that it was entitled to 'deemed assessments' extending the Date for Practical Completion to 28 October 2019.

40 The plaintiff asserts that because the date of 21 October 2019 predates the Date for Practical Completion of 28 October 2019, the defendant has no entitlement to liquidated damages under the Subcontract, and in any event the plaintiff contends that it has in fact reached Practical Completion.[25]

41 The plaintiff submits that contrary to the position adopted by the Subcontract Superintendent on 12 November 2019, the Subcontract Superintendent is now asserting that Practical Completion of the Works has not been reached.[26]

42 Further, the plaintiff points out that the Subcontract Superintendent purported to issue a Payment Schedule dated 24 January 2020[27] certifying two alternative sums as being due and payable by the plaintiff. The plaintiff explains that those sums were calculated by reference to the defendant's asserted unsigned version of the Subcontract and alternatively by reference to the plaintiff's asserted signed version of the Subcontract, in the amounts of $2,389,500.75 and $2,106,239.38, respectively.

43 Further, on 24 January 2020 the defendant demanded payment of the sum of $2,106,239.38 as due and owing pursuant to the unamended and signed Subcontract.[28]

44 The plaintiff also points out that one of the items making up the calculation of the sums included in the Payment Schedule, namely the sum of $2,106,239.38, asserted by the Subcontract Superintendent to be due and payable, is Item 'VO43' relating to a negative variation in respect of Liquidated Damages in the amount of $1,364,000. The plaintiff notes[29] that Payment Schedule No 16 summarises the basis for negative variation 'VO43' as follows:

Icon is entitled to LD's from the 20th of August 2019 up until the date of this payment schedule, being 6th of December 2019, amounting to 109 calendar days x $22 000 = $ 2,398,000.00. However, without prejudice to Icon's position and with an express reservation of all rights including the right to claim the full amount of LD to which Icon is entitled, for the purpose of this payment schedule only, the total LD's included in this payment schedule are calculated from the 20th August 2019 to the 21 October 2019 (being the last pour), amounting to 62 calendar days x $ 22 000.00 = $ 1,364,000.00.

45 On the above facts and circumstances the plaintiff primarily submits that there is a serious issue to be tried in this matter as to whether the defendant 'remains unpaid after the time for payment' in accordance with that phrase in cl 5.2 of the Subcontract.

46 The plaintiff's submissions also in passing raise that there are serious issues to be tried as to:

(a) whether given the defendant's position that Practical Completion has not yet been reached in relation to the Works, there is a serious issue to be tried as to whether the purported payment schedule of 24 January 2020 constituted a valid certification of liquidated damages under cl 34.7 of the Subcontract;

(b) the date for Practical Completion;

(c) the Subcontract Superintendent validly certified the Date for Practical Completion as 21 October 2019; and

(d) whether, as asserted by the defendant, the 24 January 2020 Payment Schedule constituted both a Progress Certificate under cl 37.2(a) and also a certificate under cl 37.2(b) of the Subcontract; and

(e) whether it was unconscionable for the defendant to take the benefit of the rejection of the Subcontract Superintendent of the last four EOT Claims submitted by the plaintiff, on the basis that they related to dates 'after PC' (after practical completion and yet also levy liquidated damages on the basis 'PC' (practical completion) has not been achieved.

Balance of Convenience - plaintiff's submissions

47 The plaintiff submits that having regard to the strength of the plaintiff's case on the above identified serious issues to be tried, it should not be necessary to consider questions of balance of convenience, however if that position is not accepted by the Court, the plaintiff argues that the balance of convenience here favours it because if an interlocutory injunction were refused and the defendant called upon the second Bank Guarantee there would be an appreciable risk that the plaintiff would suffer significant reputational damage and significant commercial damage.

Plaintiff's asserted serious issues to be tried - defendant's submissions

48 The defendant submits that the provisions of the Subcontract at cl 37.2 and the provisions of the amended form of Subcontract in cls 37.2 and 37.2A provide that if the plaintiff fails to make a progress claim, the Subcontract Superintendent may unilaterally issue a progress certificate setting out details, including details of moneys due by the plaintiff to the defendant pursuant to the Subcontract.

49 The defendant also submits that if it elects to set off amounts due under the Subcontract against amounts due to the plaintiff, such that the balance of payments is in the defendant's favour, then the plaintiff must make payment of any such amount within seven days of written notice under both the Subcontract, or within five days of the written notice under the amended Subcontract.

50 The defendant also observes that both forms of the Subcontract expressly state that payments, other than the final payment under the Subcontract are on account only.

51 The defendant points out in its submissions that the plaintiff subcontractor did not submit a progress claim for December 2019.

52 The defendant submits that on 24 January 2020 (as he was entitled to do notwithstanding that the subcontractor had not submitted a progress claim for December 2019) the Subcontract Superintendent issued a certificate certifying payment from the plaintiff to the defendant in excess of $2 million including a component of liquidated damages due from the plaintiff to the defendant in the sum of $1,364,000,[30] and on the same date the defendant served a notice pursuant to cl 37.2 of the Subcontract, demanding payment of the sum certified in its favour.[31]

53 The defendant submits that as a result of the above, the plaintiff became liable to pay the amount certified by the Subcontract Superintendent on 24 January 2020 including the said sum of liquidated damages.[32]

54 Further, the defendant submits that pursuant to cl 5.2 of the Subcontract it is entitled to recourse to the said certified sum remaining unpaid five days after notification of the defendant's intention to have recourse to the security provided under the Subcontract.

55 The defendant notes that on 4 February 2020 it notified its intention to have recourse to the second Bank Guarantee provided by way of Security under the Subcontract, in the sum of $396,250.00, in partial satisfaction of the plaintiff's outstanding liability to pay liquidated damages.[33]

56 The defendant submits that under the Subcontract, all preconditions to it having recourse to the security sum have been satisfied and observes that if the version of subcontract exhibited as 'DW-1' to the Wood Affidavit applied, the defendant's entitlement to have recourse to the security under cl 5.2 thereof would be unconditional and irresistible.

57 Further, the defendant submits that the plaintiff's reliance upon Dedert[34] and also on RCR O'Donnell Griffin[35] to argue that there was a serious question to be tried as to whether the defendant 'remains unpaid after the time for payment' pursuant to cl 5.2 of the Subcontract, does not assist the plaintiff because in Dedert the basis for recourse which was unsuccessfully pursued was one in respect of an unliquidated claim for damages for defective work. Furthermore, the defendant points out in Dedert at [109]-[110] the Court of Appeal referred expressly to a Superintendent certified sum in respect of liquidated damages as an example of a debt which would satisfy cl 5.2 of the Subcontract.

58 Similarly, the plaintiff submits that in RCR O'Donnell Griffin the appointment of the Superintendent was impugned and for that distinguishable reason 'his purported certification for liquidated damages was held to be of no effect'.

59 Further, the defendant also points out that the plaintiff's claims for extension of time are in dispute and refutes that the plaintiff's EOT Claims, in respect of which the plaintiff asserts deemed entitlement to extensions of time to the Date for Practical Completion, were 'claims' which were compliant with cl 34.3 of the Subcontract.

60 The defendant also refers to the plaintiff's claims that a 12 November 2019 communication from the Subcontract Superintendent is to be interpreted as confirming that Practical Completion was achieved on 21 October 2019.[36] The defendant refutes that the plaintiff applied for Practical Completion as required by cl 34.6 of the Subcontract and also refutes that Practical Completion has in fact been achieved. The defendant also disputes that the Subcontract Superintendent's communication of 12 November 2019 is capable of being relied upon as evidence of the achievement of Practical Completion.

61 Further, the defendant submits that the above disputes in relation to subcontract performance including in relation to the plaintiff's extension of time entitlements and the dates for, and of, Practical Completion and related issues, are matters for trial which should not affect the defendant's entitlement to call upon the Bank Guarantees.

62 The defendant also submits that the Subcontract does not require that Practical Completion be reached before Liquidated Damages can be levied.

Balance of Convenience - defendant's submissions

63 The defendant points out that pursuant to cl 5.2 of the applicable Subcontract the parties have expressly allocated the financial risk of a call on the Bank Guarantees, and thereby agreed which party should bear the risk of being out of pocket pending resolution of any relevant dispute.

64 Further, the defendant points out that if as the plaintiff's balance of convenience argument is based on reputational harm truly concerns the plaintiff, then it has the option to simply tender on account a sum equal to the amount of the security in issue, and thereby obviate the potential harm it identifies in that regard.[37]

65 The plaintiff submits that whether the Subcontract Superintendent's Payment Schedule of 24 January 2020 constituted a valid certification pursuant to clause 34.7 gives rise to the primary issue to be tried together with the plaintiff's argument that the defendant has acted unconscionably by approbating and reprobating as to the Date for Practical Completion, which the plaintiff contends itself provides a potential stand-alone basis upon which the Court could grant the injunction sought.

66 The plaintiff submits that on the facts of this matter the defendant cannot establish the circumstances required to come within cl 34.7 of the Subcontract because:

(a) cl 34.7 applies only if one of three dates referred to therein has been reached, namely 'the Date of Practical Completion or termination of the Subcontract or the Name Contractor taking the WUS out of the hands of the Subcontractor';

(b) on the defendant's case none of the required dates have been reached, although the plaintiff acknowledges that the Subcontract Superintendent has communicated positions as to the Date of Practical Completion being achieved on 21 October 2019;

(c) the Subcontract Superintendent has not certified or purported to certify under cl 34.7 of the applicable Subcontract, but rather has certified 'negative variation' in a payment schedule;

(d) in the result there is no valid certification of liquidated damages under cl 34.7 and therefore no basis for the defendant to assert that it is 'unpaid after the time for payment' in respect of liquidated damages.

67 The plaintiff submits that it follows from the above that the defendant would be acting in breach of implied of negative stipulations in cl 5.2 of the Subcontract if it were to call on the second bank guarantee in the circumstances.

68 Further, the plaintiff clarifies its position by submitting that it does not contend that the Subcontract contains an express prohibition on levying liquidated damages before Practical Completion has been reached. The plaintiff's submission is that cl 34.7 of the applicable Subcontract defines the circumstances in which liquidated damages can be levied and gives rise to an implied negative stipulation to the effect that liquidated damages may not be levied unless the circumstances in cl 34.7 apply.[38]

69 Further the plaintiff puts these propositions in another way by submitting that unless the defendant falls within the circumstances set out in cl 34.7 of the applicable Subcontract, the Subcontract Superintendent acted invalidly in levying liquidated damages when he did and, accordingly, no valid certification for liquidated damages has been made.

5.2 Recourse

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 that party notified the other party of intention to have recourse.[39]

34.6 Practical completion

The Subcontractor shall give the Subcontract Superintendent at least 14 days written notice of the date upon which the Subcontractor anticipates that practical completion will be reached.

When the Subcontractor is of the opinion that practical completion has been reached, the Subcontractor shall in writing request the Subcontract Superintendent to issue a certificate of practical completion. Within 14 days after receiving the request, the Subcontract Superintendent shall give the Subcontractor and the Main Contractor either a certificate of practical completion evidencing the date of practical completion or written reasons for not doing so.

If the Subcontract Superintendent is of the opinion that practical completion has been reached, the Subcontract Superintendent may issue a certificate of practical completion even though no request has been made.

34.7 Liquidated Damages

If WUS does not reach practical completion by the date for practical completion, the Subcontract Superintendent shall certify, as due and payable to the Main Contractor, liquidated damages in Item 27(a) for every day after the date for practical completion to and including the earliest of the date of practical completion or termination of the Subcontract or the Main Contractor taking WUS out of the hands of the Subcontractor.

If an EOT is directed after the Subcontractor has paid or the Main Contractor has set off liquidated damages, the Main Contractor shall forthwith repay to the Subcontractor such of those liquidated damages as represent the days the subject of the EOT.

37.1 Progress claims

The Subcontractor shall claim payment progressively in accordance with Item 31.

An early progress claim shall be deemed to have been made on the date for making that claim.

(a) Each progress claim shall be given in writing to the Subcontract Superintendent and shall include details of the value of WUS done and may include details of other moneys then due to the Subcontractor pursuant to provisions of the Subcontract.

37.2 Certificates

The Subcontract Superintendent shall, within 21 days after receiving such a progress claim, issue to the Main Contractor and the Subcontractor:

(a) a progress certificate evidencing the Subcontract Superintendent's opinion of the moneys due from the Main Contractor to the Subcontractor pursuant to the progress claim and reasons for any difference ('progress certificate'); and

(b) a certificate evidencing the Subcontract Superintendent's assessment of retention moneys and moneys due from the Subcontractor to the Main Contractor pursuant to the Subcontract.

If the Subcontractor does not make a progress claim in accordance with Item 31, the Subcontract Superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in paragraph (b).

If the Subcontract Superintendent does not issue the progress certificate within 21 days of receiving a progress claim in accordance with subclause 37.1, that progress claim shall be deemed to be the relevant progress certificate.

The Main Contractor shall within 7 days after receiving both such certificates, or within 28 days after the Subcontract Superintendent receives the progress claim, pay to the Subcontractor the balance of the progress certificate after deducting retention moneys and setting off such of the certificate in paragraph (b) as the Main Contractor elects to set off. If that setting off produces a negative balance, the Subcontractor shall pay that balance to the Main Contractor within 7 days of receiving written notice hereof.

(c) Nether a progress certificate nor a payment of moneys shall be evidence that h subject WUS has been carried out satisfactorily. Payment other than final payment shall be payment on account only.

Clauses providing for the resolution of disputes under the Subcontract by arbitral determination.

Authority as to the proper construction of clause 5.2

71 In Dedert[40] the Court of Appeal of Victoria, per Kaye and Priest JJA considered issues concerning recourse to certain security provided by way of Bank Guarantee under an engineering and construction contract which included a provision, also numbered cl 5.2, which was in identical terms to cl 5.2 of the Subcontract in issue in this application.

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. In my view, it is plain that the contract does contain such a qualification. 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, it 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'.

1. Ordinarily, according to the plain usage of language, monies would not be understood to remain 'unpaid after the time for payment', unless those monies have already become due and payable. Such a conclusion is axiomatic. That meaning, of the critical phrase in cl 5.2, is supported by the contractual context to which I have just referred, by which the contract, in specific terms, has identified the circumstances in which amounts are 'due and payable' by one party to the other under the contract.

1. That contention cannot be sustained. To say the least, it is highly artificial to postulate that a claim for unliquidated damages, which has not been adjudicated, of its own force has the effect that those damages constituted money which 'remains unpaid after the time for payment'. As I have stated, according to ordinary usage, monies may be understood to remain 'unpaid after the time for payment', where such monies have been due and payable, but have not been paid. An assertion, by the respondent, that the applicant is liable for unliquidated damages for losses sustained as a result of a breach of contract, could not, in any sense, be characterised as having the effect that monies (in respect of that unadjudicated claim) remain unpaid after the time for payment.

1. For those reasons, applying ordinary principles of contractual interpretation, I have reached the conclusion that, on its correct construction, the contract contained a qualification to the right of the respondent to have recourse to the security, which qualification has not been satisfied on the facts of this case.

1. It follows, from the foregoing analysis, that the decisions in Fletcher Construction, Bachmann and Clough Engineering are not inconsistent with the conclusion that I have reached that, on the correct construction of the terms of the contract, cl 5.2 precludes the respondent from recourse to the security in respect of an asserted claim by it for unliquidated damages for breach of contract.

73 His Honour also observed that the Queensland Court of Appeal in RCR O'Donnell Griffin[41] provided persuasive support for the construction of cl 5.2 contended for by the applicant before the Court of Appeal in Dedert and the construction of that clause upheld by his Honour, as part of the majority in Dedert.

74 Further, in Dedert Priest JA, who formed part of the majority, stated:

1. On a plain - and unstrained - reading, cl 5.2 permits a party to the contract to have recourse to the security - where that party remains unpaid after the time for payment - so long as at least five days have elapsed since that party notified the other of its intention to have recourse to the security. Before there may be recourse to the relevant security, cl 5.2 requires a party to remain unpaid in circumstances where the time for payment has expired. As Philip McMurdo JA (with whom Applegarth J agreed) put it in RCR O'Donnell Griffin Pty Ltd, in relation to a clause in the same terms as the present cl 5.2:

By cl 5.2 of the Subcontract in this case, the security was subject to recourse 'where [the Principal] remains unpaid after the time for payment'. On the ordinary meaning of those words, the precondition to recourse to the security was the fact of money being unpaid to the Principal. Clause 5.2 was not in terms which referred to a belief, or grounds for a belief, that money remained unpaid. Because recourse to the security was permitted only where in fact money remained unpaid, in my view it was necessarily implied that recourse was not permitted, and that the Principal should not attempt to have recourse to the security, where there was not money which remained unpaid to it. There was thereby a negative stipulation which could be the basis for an injunction restraining Forge from making demand on the bank guarantees. In my view, the unambiguous terms of cl 5.2 should not be construed as they were by the primary judge.[42]

Authority in relation to the approach usually in relation to applications to restrain access to security provided under engineering and construction contracts

75 In Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd & Anor,[43] at first instance, an aspect of the usual approach to applications such as the one made by the plaintiff in this matter was described as follows:

1. In the setting of construction and engineering contracts, save for circumstances sufficiently raising the spectre of fraudulent or relevantly unconscionable conduct, courts will not ordinarily restrain the beneficiary of a performance guarantee from recourse thereto unless the contract expressly or impliedly constrains the entitlement of the beneficiary to access the performance guarantee. Such a constrain, where it exists, is often referred to a fetter on access to the security concerned.
2. Contract construction questions concerning the existence of an express or implied constraint usually subsume the further question(s) as to whether or not the contract in issue requires the beneficiary to establish the existence of some entitling event or circumstance before accessing the performance guarantee, for example whether it is adequate for the beneficiary to assert the existence of such events or circumstances proving that assertion to be bona fide, and also often the related question as to whether on the proper construction of the subject agreement between the parties, the performance guarantee related terms and conditions were intended by the parties to provide a security fund accessible to the beneficiary in the event of a relevant dispute as to rights and entitlements being declared, or provide for a security guarantee fund which was immediately accessible to the beneficiary of the performance guarantee pending resolution of any relevant dispute, as a risk allocation mechanism under the contract.

Interlocutory resolution on a final basis of certain pivotal contract construction issue(s)

76 In Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd,[44] the Victorian Court of Appeal (Osborn and Ferguson JA, as her Honour then was) stated (citations omitted):

1. The practice adopted in the reported cases relating to performance bonds to which the primary judge was referred in argument also supports the view that it is ordinarily appropriate to resolve construction issues which are capable of resolution at the interlocutory stage and which bear squarely on the justice of preventing reliance upon a performance bond pending trial.
2. It was submitted to the primary judge on behalf of the appellant that a central issue in the proceeding was the construction of the relevant contract and that because this did not depend upon the assessment of evidence but was confined to an examination of the four corners of the document, the Court was obliged to finally determine the construction question at this stage of the proceeding.
3. That submission placed reliance upon the dissenting decision of Young JA in Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd. In that case, the majority overturned the grant of an interlocutory injunction because the primary judge misconstrued a contractual condition governing recourse to a performance bond. Further, it was in this context that Young JA made the following statement:

The first is that when there is an application for an interlocutory injunction which depends on the construction of a contract, it is for the judge to determine whether he or she has sufficient material to be able to construe the contract on a final basis. The urgency with which the case has to be heard, or the lack of factual investigation to that point, may mean that the judge deals with the question of whether there is an arguable case on flimsy material. However, where the question of construction can be dealt with, then the decision on that matter is a final determination, and ordinarily, if no other remedy is given, a declaration should be made as to the construction of the contract.

1. Whilst the primary judge was correct to conclude first that this statement was obiter, and secondly, that it cannot be understood as stating an inflexible rule, the approach of all three judges in the case demonstrates the centrality of the construction of the contract in disputes over breach of negative conditions qualifying performance bonds and the necessity, in the ordinary course, to resolve construction issues of the type here in issue.

1. The ordinary course adopted in the authorities referred to also conforms with the overarching purpose stated in s 7 of the Civil Procedure Act 2010, namely, to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute between the parties.
2. Nevertheless, it must of course be accepted that the particular circumstances of a case may dictate a departure from the ordinary practice. We turn now to the circumstances which the judge found determinative of the issue.

1. The primary judge did not decide whether GC 5.2 was intended to allocate risk pending the resolution of a dispute. In our view it was so intended and this in turn constitutes a consideration of fundamental importance in assessing whether the grant of an injunction carries with it the lower risk of injustice.
2. The parties made a commercial agreement as to when and how the performance bonds might be called upon. In doing so, they effectively determined which of them would bear the financial risk (up to approximately $4.2 million) without the need for the appellant to prove an entitlement to be paid. The safeguard negotiated and agreed by the parties was that the appellant must act reasonably when claiming an entitlement to payment and calling on the bonds. One important commercial effect of this was that the appellant did not have to wait until trial for payment of some amount by the respondent. This evident commercial purpose of GC 5.2, when viewed in the context of the accepted principles governing the grant of interlocutory injunctions and the ordinary practice adopted in performance bond cases, required the primary judge to resolve the construction issues raised in order to properly determine whether an injunction should be granted. If this were not done, in effect, the parties would be deprived of the commercial bargain that they made.

1. In my view, the authorities to which the primary judge was referred, and which I shall shortly discuss, support the proposition that, ordinarily, on an application for an interlocutory injunction to restrain recourse to a security provided under a building contract, a court should determine a controversial issue of law, if the determination of that issue is a necessary step to a conclusion whether an applicant is entitled to the injunction, unless, in the particular circumstances of the case, it is not practicable or appropriate to do so.
2. Those principles were stated by Young J in Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd. In that case, the applicant sought an interlocutory injunction to restrain its bank from paying monies to the beneficiary of a bank performance bond. In refusing that application, Young J rejected the construction of the bank guarantee relied on by the applicant. In doing so, his Honour expressed the applicable principles as follows:

On an application for interlocutory injunction which raises questions of law, the approach of this Court has been, I believe, to decide questions of law which arise unless in the opinion of the judge, those questions should be better left until later ... I think that the only exceptions to that general rule are where time does not permit proper consideration of the questions of law at the interlocutory stage ... or where the determination of the points of law requires a factual matrix which is not available until the facts in the entire proceedings have been proved.

1. That passage, from the judgment of Young J in Hortico, was cited, with approval, by Charles JA in Fletcher Construction Australia Limited v Varnsdorf Pty Ltd.

1. In addition to the cases that I have just mentioned, there are a number of other instances in which the courts have undertaken a final construction of a security clause in a building contract, for the purposes of determining an application for an interlocutory injunction to restrain a building proprietor from having recourse to the security provided by that clause. Those cases include Clough Engineering Ltd v Oil & Natural Gas Corporation Ltd, FMT Aircraft Gate Support Systems v Sydney Ports Corporation, and Redline Contracting Pty Ltd v MCC Mining (Western Australia) Pty Ltd.

78 In this application, both the plaintiff and the defendant accept that I am bound by the construction of cl 5.2 of the Subcontract in issue determined in relation to an identical clause in the engineering and construction contract considered by the Court of Appeal in Dedert.[45] The defendant however argues that the facts of Dedert are quite distinguishable. The plaintiff also accepts the facts in that case are materially different to those here.[46]

79 In Dedert the majority construed cl 5.2 as giving rise to an implied negative stipulation in relation to the Main Contractor defendant's right to have recourse to the Security, by way of Bank Guarantee, provided in relation to that Subcontract. More specifically their Honours concluded that the implied negative stipulation clause arose from the language of cl 5.2 which provided that 'Security shall be subject to recourse by a party who remains unpaid after the time for payment ...'. However, in the circumstance considered by the Court in that matter it was also held that cl 5.2 was not enlivened by a party claiming the right to recourse in respect of a claim for unliquidated damages asserted as payable and remaining unpaid.[47]

80 Neither the plaintiff nor the defendant contend here that the precondition to recourse to the security arising as a result of the implied, negative stipulation, in cl 5.2 of the Subcontract, would be satisfied by a claim for uncrystallised unliquidated damages asserted as payable and unpaid by the party seeking recourse under cl 5.2.

81 What is principally contested on this application is the Main Contractor defendant's assertion that in the circumstances it is entitled to recourse to the Security because it is the beneficiary of a certification by the Superintendent's pursuant to cl 34.7 (Liquidated Damages) and, or alternatively, pursuant to cl 37.2 (Certificates) of the Subcontract, and as a result is entitled to a crystallised liquidated amount in the sum of $1,364,000.00 on account of liquidated damages, payable by the defendant, which amount remains unpaid. The defendant refutes the validity and effect of such certification and certificate, as outlined above.

82 The key issue on this application therefore is whether the defendant's construction of the operation and effect of cls 34.7 and 37.2 of the Subcontract, establish the existence of the defendant's entitlement to be paid a sum on account of liquidated damages pursuant to the terms of the Subcontract, which remained unpaid, prior to the date of the defendant's foreshadowed demand on 4 February 2020 for recourse to the Security by way of the second Bank Guarantee provided under the Subcontract.[48]

83 There is no contest between the parties that for the plaintiff to establish its asserted entitlement to an injunction in these circumstances it needs to demonstrate the existence of a serious issue to be tried and also that the balance of convenience is in its favour, in the circumstances which exist, in respect of the particular relief which it seeks**.**[49]

84 There is also no controversy between the parties that in the setting of this matter concerning an application for an injunction to restrain access to security provided under an engineering and construction contract or subcontract where the meaning and effect of certain terms of that contract must, in practical terms, be determined as part of the process of determining whether the plaintiff is entitled to the injunctive relief it seeks, the Court should, subject to some unusual contradictory fact or circumstance, finally determine the operation of the central contract term(s) in issue and thereby move to decide the application for injunction.[50]

85 Further, the parties agree that for the plaintiff to be entitled to recourse in this case, the defendant must establish more than a basis for asserting a claim that it has an immediate entitlement to be paid, and remains unpaid in respect of that entitlement. Here the defendant has to establish a present entitlement to be paid liquidated damages under the subcontract agreement, and that the defendant's entitlement remains unpaid.[51]

86 The plaintiff also accepts that the issue of a valid Subcontract Superintendent Certificate under the Subcontract would establish the necessary entitlement referred to in the preceding paragraph and trigger an entitlement to recourse pursuant to cl 5.2 of the subcontract.[52]

87 There is also, as I have earlier outlined and emphasised, in substance here the usual insistence by both parties that the Court determine the present application and do so by reference to the Subcontract even though it is acknowledged and accepted by the parties that hereafter it may be that one or other of the parties pursues declaratory relief, and or rectification as to the terms of the relevant subcontract, to reflect what is asserted to be the final agreed terms of the parties' subcontract agreement in relation to the Botanic Melbourne Project. The practicalities of being in a position to determine the plaintiff's present application, including issues relating to which version of subcontract is applicable, would likely give rise to substantial delay and increase in legal costs. These considerations, combined with the parties' desire for expedition, in the circumstances in my view justifies adopting the above aligned approach sought by the parties. Furthermore, it was not argued before me that a different course should be adopted on this application.

88 Accordingly, I have proceeded to decide contract construction questions of central significance, because that determination must necessarily be made as part of the broader determination whether the plaintiff is entitled to the injunction which it presently seeks.

Clause 34.7 (Liquidated Damages) and Clause 37.2 (Certificates)

89 In construing the clauses of the Subcontract, including cls 34.7 and 37.2, particular regard must be had to the language employed in those clauses, taking into account the relevant context and the overall Subcontract terms. Regard must also be had to the commercial purpose of the material provisions of the Subcontract including those concerning certification of entitlements and related matters by the Subcontract Superintendent, and the Security provided under the Subcontract.

The scheme of the payment provisions of the Subcontract - clause 37

90 Clause 37 of the Subcontract deals with the Subcontractor's payment claims, the certification of those claims, the certification of any payments due to the Subcontractor in relation to retention moneys and moneys due from the Subcontractor to the Main Contractor under the Subcontract.

91 More specifically, pursuant to cl 37.2 the Subcontract Superintendent is to issue to both the Main Contractor and the Subcontractor progress certificates evincing the Subcontract Superintendent's opinion in relation to moneys due from the Main Contractor to the Subcontractor in relation to the Subcontractor's progress claims and the Subcontract Superintendent is also empowered to issue a certificate evidencing the Subcontract Superintendent's assessment of retention money and moneys due from the Subcontractor to the Main Contractor under the Subcontract.

92 Clause 37.2(a) in terms contemplates the issue of 'a progress certificate' in relation to moneys due from the Main Contractor to the Subcontractor pursuant to the Subcontractor's progress claim, and cl 37.2(b) in terms contemplates 'a certificate' evidencing the Subcontract Superintendent's assessment of retention moneys and other moneys due from the Subcontractor to the Main Contractor pursuant to the Subcontract.

93 The Subcontract reference to the subject matters in cls 37.2(a) and 37.2(b) is distinct; the former being the subject of 'a progress certificate' concerning a progress claim in relation to the value of work done and other moneys due to the Subcontractor and the latter being the subject of 'a certificate' assessing retention moneys and other moneys due from the Subcontractor to the Main Contractor. The language and structure of cls 37.2(a) and 37.2(b) reflects that the Subcontract Superintendent is required under cl 37.2 to address those distinct types of entitlement and under cl 37.2(a) potential entitlements of the Subcontractor and under cl 37.2(b) potential entitlements to the Main Contractor.

94 It is to be noted that the second paragraph of cl 37.2 provides that if the Subcontractor does not make a progress claim within the time contemplated by Item 31 of the Annexure to the Subcontract (25th day of each month for WUS completed to the last day of that month until the date of practical completion) the Subcontract Superintendent may issue the progress certificate with details of the calculations and shall issue the certificate in (b) of clause 37.2.

95 Clause 37.2 also reflects the intention of the parties that the Subcontract Superintendent certifies contemporaneously under cl 37.2(a) and 37.2(b). The conjunction 'and' between cl 37.2(a) and 37.2(b) makes this evident. However it is also clear that a progress certificate issued by the Subcontract Superintendent under cl 37.2(a), is predicated on the Subcontractor making a progress claim under cl 37.1, which may not occur from time to time. This is also clear from the terms of paragraph two of cl 37.2 which provides 'if the Subcontractor does not make a progress claim in accordance with Item 31, the Subcontract Superintendent may issue the Progress Certificate with details of the calculations and shall issue the certificate in paragraph (b)'.

96 Accordingly, I accept the defendant's submissions that cl 37.2(a) deals with money flowing from the Main Contractor to the Subcontractor and cl 37.2(b) deals with money flowing from the Subcontractor to the Main Contractor. On this aspect the defendant's position is that there is nothing evident in the Subcontract which precludes the two certificates referred to in cl 37.2 being dealt with in a single combined certificate.[53] The plaintiff submitted to the contrary.[54]

97 The Subcontract does not in cl 37, or elsewhere, otherwise prescribe the form of a progress certificate or certificate of moneys due from the Subcontractor to be issued by the Subcontract Superintendent under cl 37.2(b). In my view the validity and effect of the Subcontract Superintendent's certifications under cl 37.2 will therefore depend to a significant degree on the terms of a particular certificate or certificates which the Subcontract Superintendent purports to issue thereunder. It is to be noted however that under the overall scheme of the Subcontract cl 37.2 is the principal contract mechanism under which the Subcontract Superintendent is to certify the money related entitlements and obligations of Subcontractor and the Main Contractor.[55]

98 Accordingly, cl 37.2 is intended to fulfil the purpose of facilitating the certification of all financial rights and entitlements of the parties,[56] prior to final certification under cl 37.4 or the need for certification under cl 39.6.

99 In this instance, for reasons I have outlined below, I consider that the Subcontract Superintendent's Payment Schedule dated 24 January 2020, constitutes a compliant, valid and effective certification pursuant to both cls 37.2(a) and 37.2(b) and that the Payment Schedule of 24 January 2020 also validly and effectively certifies the sum of $1,364,000.00 as liquidated damages due and payable by the Subcontractor to the Main Contractor under cl 34.7, at the date of that Payment Schedule.

100 Clause 37.2 (paragraph four) also provides that the Main Contractor within seven days of receipt of the certificates referred to in cl 37.2(a) and (b), or within 28 days after the Subcontract Superintendent receives the progress claim, is to pay the Subcontractor the balance of the Progress Certificate after deducting retention moneys and setting off the sum certified under cl 37.2(b) of the Subcontract (dealing with retention moneys and other moneys due from the Subcontractor to the Main Contractor) to the extent that the Main Contractor elects to do so.

101 Further, cl 37.2 (paragraph four) also provides that if the process of 'setting off' by the Main Contractor produces a negative balance, the Subcontractor shall pay that balance to the Main Contractor within seven days of receiving written notice thereof.

102 Clause 34.7 provides in essence that if the WUS does not reach practical completion by the date for practical completion the Subcontract Superintendent shall certify as due and payable to the Main Contractor liquidated damages in Item 27(a) for every day after the date for practical completion to and including the earliest date of practical completion or termination of the Subcontract or the Main Contractor taking WUS out of the hands of the Subcontractor.

103 The evidence of the Subcontract Superintendent affirms that:

(a) at no stage has the defendant applied for Practical Completion as required by cl 34.6 of the Subcontract and the Subcontract Superintendent has not to date issued a Certificate of Practical Completion pursuant to cl 34.6 of the Subcontract.[57] At [26] and [29] of his Affidavit, the Subcontract Superintendent provides reasons for his opinion that Practical Completion under the Subcontract has not been achieved;

(b) the Subcontract Superintendent did not in his email of 12 November 2019[58] issue, or intend to issue a Certificate of Practical Completion but recorded and intended to record with the words 'Actual PC' that the plaintiff had completed a final major concrete pour;[59]

(c) At [30] explains why under the Subcontract, in the Subcontract Superintendent's view the plaintiff's asserted 120 separate claims for extension of time, which in turn the plaintiff claims entitled it to deemed extensions of time, were not compliant claims for extension of time under the Subcontract;

(d) the Subcontract Superintendent does not consider that practical completion of the Subcontract Works has been achieved and observes that even if it was found that the date of practical completion was 21 October 2019, and found that the Date for Practical Completion was 20 August 2019, the plaintiff was still 62 calendar days late in achieving practical completion;

(e) the Subcontract Superintendent considers that on the basis of his opinion that practical completion has still not been achieved, that the plaintiff is now more than 6 months late in achieving that contract milestone of Practical Completion.[60]

104 On 24 January 2020 the Subcontract Superintendent sent the plaintiff a 'Payment Schedule' for December 2019.[61] The Payment Schedule is set out at Exhibit 'DW-18' to the Wood Affidavit. The first two pages of that Payment Schedule, are as follows:

including GST, alternatively -$2,106,239.38 including GST

If it is determined that the subcontract between the Main Contractor and the Subcontractor is based on the unamended form of AS4901-1998 subcontract conditions, then:

1. pursuant to the Subcontract, the Subcontractor may submit a progress claim on the 25th day of each month until the date for practical completion and if the Subcontractor does not make a progress claim, a progress certificate and a certificate in paragraph (b) of clause 37.2 may be issued;

2. the Subcontractor did not make a progress claim on the 25th day of December 2019; and

3. accordingly, this document and the attachments hereto constitute both:

a) the progress certificate evidencing the moneys due from the main Contractor to the Subcontractor in accordance with clause 37.2(a) of the Subcontract; and

b) the certificate evidencing the assessment of moneys due from the Subcontractor to the Main Contractor pursuant to the Subcontract in accordance with clause 37.2(b) of the Subcontract,

For the avoidance of doubt, this document is not in response to any claims for payment submitted by the Subcontractor in January 2020. A separate payment schedule will be issued in response to those claims submitted in January 2020.

Signature:_________________________________

Name:__________DAVE WOOD_____________

Date:_____________14/01/20________________

105 That Payment Schedule also included in the Items which it certifies, 'Item V043' which is noted as relating to 'subcontract liquidated damages' payable by the defendant in the sum of $1,364,000. Further, as extracted at paragraph [44] above, the plaintiff's submissions acknowledged part of the plaintiff's understanding of how Item V043 was arrived at and certified. I also note that the plaintiff's submissions do not take issue with the Subcontract Superintendent structuring the Payment Schedule of 24 January 2020 to include "Alternative" calculations, as extracted above.

106 The defendant's Payment Schedule dated 24 January 2020 explains expressly and precisely what was being communicated to the Subcontractor pursuant to the Subcontract. In my view that explanation was set out in clear express terms on the first page of that Payment Schedule dated 24 January 2020. The explanation set out in the Payment Schedule included that the Payment Schedule and its attachments constituted both:

(a) a progress certificate evincing money due from the Main Contractor to the Subcontractor in accordance with cl 37.2(a) of the Subcontract, and

(b) the certificate evincing the assessment of moneys due from the Subcontractor to the Main Contractor pursuant to the Subcontract in accordance with cl 37.2(b) of the Subcontract in respect of the month of December 2019.

107 The Payment Schedule recorded that it was not issued in response to any claims for payment submitted by the Subcontractor in January 2020.

108 The Payment Schedule set out the calculations which made up and explained the sums certificated and thereby detailed the relevant amounts certified pursuant under the Subcontract.

109 That Payment Schedule, fairly read and in particular read by the Subcontractor familiar with the administration of the Subcontract, made its Subcontract bases abundantly clear by the explanation earlier referred to, which in effect extracted cls 37.2(a) and 37.2(b) and expressly indicated that the Payment Schedule constituted a progress certificate pursuant to cl 37.2(a) and a certificate of moneys due by the Subcontractor to the Main Contractor in accordance with cl 37.2(b).

110 Further, the Payment Schedule dated 24 January 2020, in Appendix 2 Variations, which formed part of the calculation of the relevant certifications, referred to 'Item V043'. Item V043 was detailed and explained in the attachments to the Payment Schedule as 'V043 Subcontract Liquidated Damages $1,364,000.00', and included a note that the said sum was an amount assessed pursuant to the Subcontract in Alternative 1 of the Payment Schedule and further expressly referred the Subcontractor to Payment Schedule No 16.

111 In the manner detailed above and in particular in the last preceding paragraph, I consider that the Subcontract Superintendent certified a deduction on account of Liquidated Damages, due and payable by the Subcontractor to the Main Contractor, the sum of $1,364,000.00. Further, I consider in this manner the Subcontract Superintendent, validly and effectively certified the said sum of Liquidated Damages pursuant to cl 34.7 of the Subcontract.

112 Clause 34.7 of the Subcontract does not prescribe the issue of a particular form of certificate nor any particular formal requirements in relation to certification thereunder. This is clear both on the terms of cl 34.7 and is also to be inferred from and supported by the scheme of the Subcontract and the certification context outlined above, of which cl 34.7 forms part. Further by contrast cls 34.6 (Practical Completion) and 37.2 (Certificates) and 37.4 (Final Payment Claim and Certificate) each specify that the Subcontract Superintendent is to 'issue' a certain specific type of certificate.

113 Subcontract cl 34.7 simply entitles the Subcontract Superintendent to certify liquidated damages as due and payable for every day after the date for practical completion to and including the earliest of certain end dates which are specified. Those end dates to which the Subcontract Superintendent is empowered to certify liquidated damages as due and payable for every relevant day after the date for practical completion, are the earliest of the date of practical completion or termination of the Subcontract or the Main Contractor taking the WUS out of the hands of the Subcontractor.

114 Clause 34.7 does not state expressly, nor in my view by implication, that the Subcontract Superintendent must await either the earliest of the Date of Practical Completion, or the termination of the Subcontract, or the taking of the WUS Works out of the hands of the Subcontractor, before the Subcontract Superintendent is contractually empowered to certify liquidated damages as due and payable to the Main Contractor. Such a construction would largely emasculate the clear intent of cl 34.7 and, for example, prevent liquidated damages being certified, notwithstanding the Date for Practical Completion of the Works had passed. Furthermore, such emasculation would be complete if there was delay well beyond the Date for Practical Completion in respect of which Liquidated Damages were applicable, but none of the three end dates referred to in clause 32.7 occurred.

115 Because at the point in time after the Date for Practical Completion when, from time to time, the Subcontract Superintendent is empowered under cl 34.7 to certify liquidated damages it may be that none of the dates which define the end of the period of applicable liquidated damages has occurred, and indeed may never occur, it is most unlikely that the intent of the Subcontract is that the Subcontract Superintendent is constrained only to certify liquidated damages when the earliest of the end dates occurs.

116 Further, in my view it is clear that the power of the Subcontract Superintendent to certify under cl 34.7 of the Subcontract is a power provided solely for the benefit of the Main Contractor and on the proper construction of cl 34.7 encompasses a power in the Subcontract Superintendent to certify a lesser sum of liquidated damages than may equate to the liquidated damages due and payable for every day after the Date for Practical Completion to any point in time when the earliest of the three dates referred to in cl 34.7 had occurred. Clause 34.7, for the reasons outlined above, provides a power to the Subcontract Superintendent to certify liquidated damages, calculated as cl 34.7 expressly provides, if practical completion has not been achieved by the date for practical completion and from the date of the Subcontractor's failure to achieve the milestone for practical completion, and to include the certified sum of liquidated damages due and payable by the Subcontractor pursuant to cl 34.7, as part of a Superintendent's certificate issued in relation to the Subcontractors certified debt on account of liquidated damages, under cl 37.2(b) of the Subcontract.

117 In my view there is no express language or implication, in or arising from, the terms of the Subcontract which renders invalid or ineffective the communication of certifications pursuant to cls 37.2(a) and 37.2(b) together with express notification of a sum due and payable as certified under cl 34.7, in relation to Liquidated Damages, in the one document communication as the Subcontract Superintendent explained and detailed in the Payment Schedule of 24 January 2020. Further, for the reasons I have outlined above the terms, scheme and purpose of these provisions of the Subcontract dealing with certification are intended to empower and facilitate such certifications.

118 Similarly, neither the express language in cl 37.2 nor any implication arising in relation to this clause, invalidates or renders ineffective a Subcontract Superintendent's certifications which has the effect of 'setting off' moneys certified as due from the Main Contractor to the Subcontractor. Clause 37.2 (paragraph four) expressly contemplates such a set-off, as also does the overall schedule of cl 37.2 as outlined above.

119 Further, cl 37.2 (paragraph four), separately and additionally identifies a debt due by the Subcontractor to the Main Contractor which is due and payable upon the Subcontract Superintendent issuing negative payment certificates pursuant to cl 37.2.

120 Exhibit 'DW-19' of the Wood Affidavit is a letter from the defendant to the plaintiff referring to the Payment Schedule issued by the Subcontract Superintendent on 24 January 2020 and noting that the Payment Schedule in total certified the sum of $2,389,500.75 or alternatively (taking into account amounts determined pursuant to an Adjudication Determination dated 26 January 2020) the sum of $2,106,239.38 and expressly giving notice that pursuant to cl 37.2 (paragraph four) of the Subcontract the defendant required payment of $2,106.239.38 within seven days of the plaintiff receiving that letter.

121 Further, nothing in the Subcontract precludes the defendant from seeking recourse to the second Bank Guarantee in respect only of the specific sum certified in respect of liquidated damages, rather than the whole of the any sum owing from the plaintiff to the defendant pursuant to the Subcontract Superintendent's certifications in the Payment Schedule, in the total sum of $2,106,239.38. Clause 37.2 (fourth paragraph) of the Subcontract expressly provides that the Main Contractor may elect to set off so much as may be certified by the Subcontract Superintendent, as due from the Subcontractor as the Main Contractor elects to set off.

122 Accordingly, for the above reasons the defendant in this case has a presently accrued immediate entitlement to be paid the certified sum of $ 1,363,000.00 due on account of liquidated damages,[62] and a corresponding right to recourse to the second Bank Guarantee provided as part Security under the Subcontract.

123 In the circumstances outlined above, the defendant is not in any way restrained or fettered from having recourse to the Security by way of the remaining Bank Guarantee provided by the plaintiff under the Subcontract. Differently expressed, I do not consider that the implied negative stipulation arising under cl 5.2 of the Subcontract is of present application to the defendant.

124 I also reject the plaintiff's argument that there is no 'start date' in relation to the operation of cl 34.7 because no Date for Practical Completion was fixed under the Subcontract. The evidence in this interlocutory application establishes that, although it may be the subject of dispute by the plaintiff, the Subcontract Superintendent has fixed the revised Date for Practical Completion as 20 August 2019.[63]

Subsisting contract performance related disputes between the parties

125 The plaintiff identifies a number of disputes which have crystallised between it and the defendant in relation to Subcontract performance issues, including as to the determination of the Date for Practical Completion; the plaintiff's entitlements, if any, to extensions of time (EOTs) to the Date for Practical Completion; whether the Date of Practical Completion has been achieved by the plaintiff and whether that contractual date has been evidenced by a written direction received from the Subcontract Superintendent, and other subcontract performance related contractual disputes.

126 By cl 42 of the Subcontract the parties have agreed that if a difference or dispute arises in connection with the subject matter of the Subcontract, including a dispute in relation to a Subcontract Superintendent's direction or a claim in relation to the Subcontract, then subject to certain procedural requirements including the parties attempting to resolve any such dispute by means of an alternative dispute resolution process, such dispute is to be referred to arbitration and determined by arbitral award (cl 42.1-42.3).

127 Further, the parties have agreed pursuant to cl 42.6 that the requirement that any dispute under the Subcontract be referred to arbitration is subject to a carve-out, in relation to, amongst other things, a parties right to seek injunctive or urgent declaratory relief.

128 Accordingly, the scheme of the Subcontract as obvious from cls 5 and 42, is one pursuant to which the parties have considered and provided for a risk allocation in accord with which the Subcontract allows recourse to the Security for performance under the Subcontract, assured by way of Bank Guarantees, subject to the party seeking recourse being able to satisfy the subject precondition for recourse under cl 5.2 of the Subcontract, and notwithstanding that the parties are in dispute in relation to issues which when finally resolved or determined may require an accounting in respect of any sum accessed by recourse to such Security.[64]

129 For these reasons, as I have alluded to above when identifying the plaintiff's Subcontract performance related claims and disputes, under the Subcontract, Subcontract Performance related disputes are agreed by the parties to be separately resolved or determined on their merits and brought into account, if necessary, at after resolution or determination, but the existence of such contract performance related disputes cannot be deployed by the plaintiff to prevent recourse by the defendant to the Subcontract Security pursuant to cl 5 of the Subcontract, if the requirements of that clause permitting recourse are satisfied. I add that any such recourse is at all events, for the reasons I have explained, interim in nature and subject to financial adjustment at the time the parties relevant rights and entitlements are finally determined or otherwise resolved.

Plaintiff's asserted serious issue arising in relation to Clause 5.2 of the subcontract

130 For the above reasons the plaintiff has failed to satisfy me that there is a serious issue to be tried in relation to the qualifications or conditions under the Subcontract bearing on the defendant's right to have recourse to security under cl 5.2 of the Subcontract.[65]

Plaintiff's asserted serious issue arising in relation to Unconscionable conduct by the defendant in contravention of the CCA

131 The plaintiff's second initial asserted serious issue to be tried concerned the claim raised in its written submissions that, if in the circumstances the defendant were to have recourse to the Security under cl 5.2 of the Subcontract, the defendant will have acted unconscionably in contravention of the CCA, in relation to its reliance on a claim for liquidated damages based on the defendants asserted Date for Practical Completion and the Subcontract Superintendent's unjustified rejections of certain plaintiff EOT claims and the Subcontract Superintendent's alleged approbation and reprobation as to the Date of Practical Completion.

132 The plaintiff's written submissions also asserted that it would be unconscionable for the defendant to take the benefit of the Subcontract Superintendent's rejection of the last four plaintiff EOT claims, on the basis they were 'after PC' and yet also levy liquidated damages on the basis that 'PC' had not been achieved.

133 Ultimately I note that the plaintiff did not press this second earlier asserted potential serious issue to be tried based on unconscionable conduct.[66]

134 Further, the Subcontract Superintendent affirms in his affidavit of 12 February 2020 that for reasons which he details therein, the Works under the Subcontract have not yet reached Practical Completion.[67]

135 In addition, the Subcontract Superintendent states that at no stage has the plaintiff applied for Practical Completion as required by cl 34.6 of the Subcontract. In his affidavit of 12 February 2020, the Subcontract Superintendent explains that the plaintiff had not submitted EOT claims as required by the Subcontract.[68] The Subcontract Superintendent also refutes that Practical Completion has been achieved and explains that his referencing in his communication to the plaintiff of 12 November 2019 to 'actual PC' was not intended to be and was not by way of certification of Practical Completion.[69]

136 Further, to the Subcontract Superintendent's statements referred to in the last above paragraph, in my view the Subcontract Superintendent's email communication of 12 November 2019[70] is not in terms which purport to be or which are likely to constitute a 'Certificate of Practical Completion' pursuant to cl 34.6 of the Subcontract.

137 I consider that the above communications from the Subcontract Superintendent in relation to the plaintiff's EOT claims and the plaintiff's asserted extension of time entitlements relied on in this application, reflect no more than a dispute between the parties as to the plaintiff's asserted time extension entitlements and its claims as to what should be the Date of Practical Completion under the Subcontract and the Subcontract Superintendent's communications as to those claims and related disputes.

138 I am therefore not satisfied there is any basis for a serious issue to be tried in this matter in respect of the plaintiff's unprosecuted unconscionable conduct issues concerning conduct of the defendant or on the part of the Subcontract Superintendent. In my view, for the above reasons, the plaintiff has not disclosed any arguable case in relation to any breach of the CCA.

139 Given that I am not persuaded that the plaintiff has identified any serious issue to be tried in relation to its application for an injunction restraining access to the Security provided by way of second Bank Guarantee under the relevant Subcontract, it is not necessary to proceed further to address matters put by the parties in relation to potentially relevant balance of convenience considerations.

140 I add however that had the balance of convenience considerations remained relevant, the plaintiff arguments on this aspect of its application would in my view not have weighed in the balance in favour of the plaintiff obtaining the injunction is seeks because:

(a) the plaintiff's asserted appreciable risk of significant reputational and commercial damage would in my view be readily obviated by the plaintiff tendering an amount equal to the sum of the Security in issue, as the defendant has confirmed would be acceptable to it;[71]

(b) the plaintiff's potential detriment referred to in (a) above should, in any event, be ascribed little weight given that the plaintiff was willing to subcontract on terms including the Security regime provided for under the form of Subcontract which is at Exhibit 'AQ-1', and accordingly, agreed to a Subcontract regime providing for recourse to the subject security, subject to the terms of clause 5.2 of the Subcontract. Agreement to that regime as part of the overall Subcontract terms was, at contract, as a bargain acceptable to the plaintiff, and the plaintiff does not seek to complain of either any pre-contract vitiating circumstance or matter nor does the plaintiff seek to complain of any post-contract material change of circumstances. In these circumstances little weight should be given to the plaintiff now seeking to avoid the potential detriment which at contract if accepted and which formed part of the parties' agreed risk allocation under the Subcontract.

141 In my view, were balance of convenience issues to remain relevant, the factors above should be taken into account against that balance favouring the plaintiff.

142 For the above reasons I dismiss the plaintiff's Amended Originating Motion and Amended Summons dated 20 February 2020.

(a) the plaintiff's Amended Originating Motion and Amended Summons dated 20 February 2020 be dismissed.

(b) the defendant's undertakings given on 10 February 2020, and varied on 17 February 2020, are discharged.

144 I shall afford the parties the opportunity to make short written submission, confined to no more than one page, in relation to the costs associated with the determination of the plaintiff's application by Amended Originating Motion and Amended Summons dated 20 February 2020, if necessary.

145 For the potential assistance of the parties I indicate that, as a preliminary position and subject to receiving any submissions as to costs the parties may wish to file by 2:15pm on Wednesday 15 April 2020, I am presently disposed to order that the plaintiff pay the defendant's costs of and associated with its application brought by way of Amended Originating Motion and Amended Summons dated 20 February 2020 together with any reserve costs, on a standard basis.

[1] Plaintiff's Originating Motion wrongly labelled the security as 'unconditional performance bond No. 2019011310 issued by AAI Limited t/as Vero Insurance' and 'unconditional maintenance bond No. 2019011311 issued by AAI Limited t/as Vero Insurance'. The relevant security is bank guarantees DG762643418 and DG762653418 issued by Australia and New Zealand Banking Group Ltd; see Affidavit of David Wood, 12 February 2020 (Wood Affidavit), Exhibit 'DW-24' and Affidavit of Anthony Quinn, 14 February 2020 (Second Quinn Affidavit), [3].

[2] Wood Affidavit, [9] and [10]; Exhibit 'DW-1'.

[3] Plaintiff's Submissions, 17 February 2020, [7]; Affidavit of Anthony Quinn, 6 February 2020 (First Quinn Affidavit), [3] Exhibit 'AQ-1'.

[5] Wood Affidavit, [4], [10], [15] and [16]; Exhibit 'DW-1'.

[6] Defendant Submissions, 18 February 2020, [4]. The defendant's position was submitted to be that ultimately the Subcontract will need to be rectified. However the defendant does not suggest that questions of rectification can be dealt with on the present application for an injunction.

[7] Plaintiff's Submissions, 17 February 2020, [7] and [9] (see cl 5.2); footnote [3], relying on First Quinn Affidavit, Exhibit 'AQ-1'.

[8] First Quinn Affidavit, [3]; Exhibit 'AO-1'.

[9] Wood Affidavit, [10] and [15], Exhibit 'DW-5'.

[11] First Quinn Affidavit, Exhibit 'AQ-19'.

[12] T6.10-23; Further Counsel for the defendant stated that he did not have instructions at this stage to abandon reliance upon the defendant's claim that there should be rectification to declare the amended subcontract the applicable subcontract between the parties.

[16] Dedert Corporation v United Dalby Bio-Refinery Pty Ltd [2017] VSCA 368.

[17] [2017] VSCA 368.

[18] [2016] QCA 214.

[19] First Quinn Affidavit, [26] and Exhibit 'AQ-19'.

[20] First Quinn Affidavit, Exhibit 'AQ-1' at page 12.

[22] First Quinn Affidavit, [12], Exhibit 'AQ-5'.

[23] First Quinn Affidavit, [12], Exhibit 'AQ-6'.

[24] First Quinn Affidavit, Exhibit 'AQ-5'.

[25] First Quinn Affidavit, [24], Exhibit 'AQ-17 and [25], Exhibit 'AQ-18'.

[26] First Quinn Affidavit, [15], Exhibit 'AQ-8' (communication 20 December 2019 at Exhibit 'AQ-15' communication dated 31 January 2020).

[28] First Quinn Affidavit, Exhibit 'AQ-1' (Unamended, signed Subcontract) and Exhibit 'AQ-13' (letter of demand).

[29] Plaintiff's Submissions, 17 February 2020, [23].

[32] The defendant submits that the certified amount, including liquidated damages, was payable from 31 January 2020 pursuant to the Subcontract and from 3 February 2020 under those terms are applicable, Defendant's Submission, 18 February 2020, [7].

[34] [2017] VSCA 368.

[35] [2016] QCA 214.

[37] Having regard to the strength of the plaintiff's case on the serious issues to be tried, it should not be necessary to consider questions of balance of convenience.

[38] Plaintiff's Submissions, 19 February 2020, [7] and [8].

[39] First Quinn Affidavit, Exhibit 'AQ-1' at page 12.

[40] [2017] VSCA 368.

[41] [2016] QCA 214.

[42] [2017] VSCA 368, [56].

[43] [2019] VSC 771; on appeal (Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318) the decision at first instance in this matter was overturned but on grounds unrelated to the matters referred to in paragraph [75] above.

[44] [2015] VSCA 98.

[45] Plaintiff at T29-31; T55.1-2: Defendant's Submissions, 18 February 2020, [12]-[14].

[47] [2017] VSCA 368, [107], [119] and [121].

[49] Plaintiff's Submissions, 17 February 2020, [3] acknowledge the relevance of the balance of convenience but also submit at [27] that here the balance need not be addressed.

[50] Fletcher Construction Australia Limited v Varnsdorf Pty Ltd [1998] 3 VR 812, 821; Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98, [36], [68] and [111].

[54] Plaintiff's Submissions, 17 February 2020, [25(d)].

[55] The only other money related certifications are in respect of the final certificate (cl 37.4) and works taken out of the Subcontractor's hands (cl 39.6).

[56] Main Roads Construction Pty Ltd v Samary Enterprises Pty Ltd [ 2005] VSC 388 at [41] and [42].

[62] The sum of $1,364 million relates to the 62 days between 20 August and 21 October 2019; see Wood Affidavit, [32 ].

[63] Wood Affidavit, [31[ and [32]; Exhibit DW-13.

[64] Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98, [43]-[46], [55]-[56], [67]-[68], [111]-113] and [116]; and Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd & Anor [2019] VSC 771, [60]-[61].

[65] Plaintiff's Submissions, 17 February 2020, [2(a)].

[67] Wood Affidavit, [24], [25], [26] and [29].

[68] Wood Affidavit, [7], [20]-[23], [30], Exhibit "DW-9'.

[71] Defendant's letter to plaintiff dated 12 February 2020, Wood Affidavit Exhibit 'DW-23'.