Adcon v Icon - [2020] VSC 165

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY, CONSTRUCTION AND ENGINEERING LIST

Not Restricted

S ECI 2020 0577

ADCON VIC PTY LTD (ACN 606 820 375)	Plaintiff
v
ICON CO (VIC) PTY LTD (ACN 604 790 132)	Defendant

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JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 February 2020
DATE OF JUDGMENT:	9 April 2020
CASE MAY BE CITED AS:	Adcon v Icon
MEDIUM NEUTRAL CITATION:	[2020] VSC 165

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PRACTICE AND PROCEDURE – Injunctive relief – Building subcontract – Application to restrain proprietor from calling on bank guarantees – Serious issue to be tried – Consideration of whether appropriate to decide contract interpretation question as if on a final basis – Proper approach – Balance of convenience – Application for injunction dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Whelen	Maddocks
For the Defendant	Mr A Morrison	Holding Redlich

HIS HONOUR:

This application

This is an application by a subcontractor for an interlocutory injunction pending a trial for final declaratory and injunctive relief, to restrain a head contractor from calling on security given under a building subcontract (in the form of a bank guarantee issued by the Australia and New Zealand Banking Group Limited (ANZ) for $396,250) to satisfy a claim for liquidated damages arising from a line item in a payment schedule issued by the Subcontract Superintendent on 24 January 2020.

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.
[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].

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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Adcon v Icon

Details

AGLC: Adcon v Icon [2020] VSC 165
Case: [2020] VSC 165
Decision Date: 9 April 2020

CaseChat Overview and Summary

Adcon Construction Pty Ltd brought an application against Icon Constructions Pty Ltd, seeking an injunction to prevent the latter from calling on bank guarantees under a building subcontract. The application was brought in the Supreme Court of Victoria. The dispute arose from the execution of a subcontract, where Adcon was the subcontractor, and Icon was the principal contractor. Icon sought to call on the bank guarantees due to alleged breaches of the subcontract by Adcon, while Adcon contended that it had not breached the subcontract and that the calling on the bank guarantees was premature.

The court had to determine whether it should grant the injunction to prevent Icon from calling on the bank guarantees. This involved considering whether there was a serious issue to be tried and whether it was appropriate to decide the contract interpretation question on a final basis. The court had to balance the seriousness of the issue against the balance of convenience, which favoured Icon, given the financial implications of the bank guarantees. The court also had to consider whether it was appropriate to decide the contract interpretation question as if on a final basis, given the interlocutory nature of the application.

The court held that there was a serious issue to be tried, as the interpretation of the contract was a matter of genuine dispute. However, the balance of convenience favoured Icon, as the calling on the bank guarantees would result in significant financial consequences for Icon if the court were to later find in Icon's favour. The court also found that it was not appropriate to decide the contract interpretation question as if on a final basis, given the interlocutory nature of the application. Consequently, the application for injunction was dismissed.

The court did not make any final orders regarding the bank guarantees or the contract interpretation, as the matter was interlocutory in nature. The decision emphasised the need to carefully consider the balance of convenience and the appropriateness of deciding a contract interpretation question on a final basis in interlocutory injunction applications.

Orders