Cobolt Constructions Pty Ltd v Duke Ventures Wellington Street Pty Ltd
[2025] VSC 609
•18 September 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST
S ECI 2025 04808
| COBOLT CONSTRUCTIONS PTY LTD | Plaintiff |
| v | |
| DUKE VENTURES WELLINGTON STREET PTY LTD | Defendant |
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JUDGE: | Craig J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 September 2025 |
DATE OF RULING: | 18 September 2025 |
DATE OF WRITTEN REASONS: | 24 September 2025 |
CASE MAY BE CITED AS: | Cobolt Constructions Pty Ltd v Duke Ventures Wellington Street Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2025] VSC 609 |
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PRACTICE AND PROCEDURE – Injunctive relief – Building contract – Application to restrain principal from call on bank guarantees – Serious issue to be tried – Plaintiff has strong arguable case that entitlement to call on bank guarantees does not arise or has not accrued – Balance of convenience – reputational damage – Application for injunction granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Liam Connolly with Declan Peacock | Macpherson Kelley |
| For the Defendant | Ben Reid | Thomson Geer |
HIS HONOUR:
Upon the usual undertaking as to damages, the plaintiff, Cobolt, has applied for urgent interlocutory relief restraining the defendant, Duke, from having recourse to two bank guarantees (the Security) that Cobolt had provided to Duke pursuant to the terms of a building contract for the construction of the ‘Duke apartments’ project at Wellington Street, Collingwood (the Contract).
The matter was listed before me for oral argument on 16 September 2025. In the course of exchanges with counsel during reply submissions, it became apparent that there was a risk that Cobolt may later contend that on and from Monday 22 September 2025, Duke was under an obligation to return one of the bank guarantees. That risk arose because of instructions provided to Duke’s counsel during the conclusion of oral argument. The question, therefore, of whether or not Duke ought to be restrained from having recourse to those two bank guarantees has required urgent determination.
On 18 September 2025, I delivered my oral ruling granting Cobolt an interlocutory injunction in the terms set out at the conclusion of these reasons. I now provide my written reasons for doing so.
The relevant facts, necessary to dispose of the application in this urgent context are as follows:
(a) on or about 19 January 2021, Cobolt and Duke entered the Contract for the construction of the Duke apartments project at Wellington Street, Collingwood for a contract sum of $7,826,265.27;
(b) Cobolt commenced the works on or about 18 January 2021;
(c) on or about 15 September 2023, Duke issued a show cause notice;
(d) on 26 September 2023, Duke issued a notice taking the entirety of the works out of Cobolt’s hands pursuant to clause 44.4(a) of the Contract;
(e) on or about 27 September 2023, Cobolt issued a notice terminating the Contract by reason of Duke’s alleged substantial breaches and repudiation of the Contract;
(f) on or about 24 July 2025, Duke notified Cobolt that it had appointed a replacement superintendent under the contract, Mr Michael James of Case Meallin (Vic) Pty Ltd, to act as the replacement superintendent (Replacement Superintendent);
(g) on 30 July 2025, the Replacement Superintendent issued payment certificate 22 certifying that Cobolt owed an amount of $877,800 of liquidated damages under the Contract (Payment Certificate 22);
(h) on or about 15 August 2025, Duke issued to Cobolt a notice of intention to have recourse to the Security on the basis of Payment Certificate 22. That notice read as follows:
On 30 July 2025, the Superintendent issued Payment Certificate 22 certifying that the sum of $965,580 was due and payable by the Contractor to the Principal (PC22).
Pursuant to clause 42.1 of the Contract the due date for the payment of PC22 was 13 August 2025, being 14 days from the date of the Payment Certificate (Due Date).
The Contractor has failed to pay the amount due and payable to the Principal in respect of PC22 by the Due Date or at all.
In the premises the Principal is entitled to have recourse to the whole of the security pursuant to clauses 42.11 and 5.5.
An issue on this application is therefore whether Duke has a present entitlement to exercise a right under the Contract in respect of the Security.
Whether that right exists depends upon whether clause 42.11 of the Contract is engaged. Clause 42.11 provides:
Where, within the time provided by the Contract, a party fails to pay the other party an amount due and payable under the Contract, the other party may, subject to Clause 5.5, have recourse to retention monies, if any, and, if those monies are insufficient, then to security under the Contract and any deficiency remaining may be recovered by the other party as a debt due and payable.
Counsel for Duke submitted that clause 42.11 was enlivened because 14 days had passed following the issue by the Replacement Superintendent of Payment Certificate 22, without payment of the sum certified in that payment certificate. Counsel for Duke submitted that the right to issue the payment certificate on the part of the Replacement Superintendent and the obligation to pay the sum so certified within 14 days of issue, arose under clause 42.1 of the Contract.
The issue so framed, raised the question of whether under either the scenario where the work was taken out of the hands of Cobolt lawfully (i.e. Duke’s position) or the scenario where Cobolt had lawfully terminated the Contract (i.e. Cobolt’s position), Duke had the benefit of a validly issued payment certificate under clause 42.1 which gave rise to an accrued right to recover payment from Cobolt.
Legal principles
Applicable principles
The applicable principles on an application such as this are well settled.
I refer to and rely upon the principles as summarised and set out by Nichols J in Uber Builders and Developers Pty Ltd v MIFA Pty Ltd[1] and recently by the South Australian Supreme Court of Appeal in Synergy Construct Australia Pty Ltd v GSA North Terrace Pty Limited Atf GSA North Terrace Unit Trust.[2]
[1][2020] VSC 596 at [26].
[2][2025] SASCA 72 at [77]-[103] (Synergy) (Livesey ACJ, S Doyle and B Doyle JJ) .
As the South Australian Court of Appeal identified in Synergy, by reference to well settled authority, where an injunction is sought in respect of recourse to a bank guarantee that does not mean that the injunction is to be determined according to some different body of principles. The ordinary principles apply.
As the court in Synergy identified, those ordinary principles are as follows:[3]
[3]Ibid at [88]-[90], omitting citations.
Where an interlocutory injunction is sought on the basis of an assertion that the respondent would be acting in contravention of an express or implied negative promise not to present a bank guarantee in the circumstances that have occurred, the applicant for relief must demonstrate:
(1)a serious question to be tried with respect to the availability of final relief of a kind which may be rendered nugatory if interlocutory injunctive relief is not granted. In a case such as the present, that requires demonstrating a serious question to be tried that GSA will ultimately be permanently restrained from having recourse to the bank guarantees on the basis that GSA would be in breach of contract by doing so. Such an injunction invokes equity’s auxiliary jurisdiction, with the result that the applicant must demonstrate a serious question to be tried that damages would be an inadequate remedy for the breach of contract sought to be restrained; and
(2)that the balance of convenience favours the grant of an injunction. This involves weighing the prejudice to the applicant if the status quo is not preserved, and the prejudice to the respondent if the injunction is granted. Relevant to the latter will be the proffering of an undertaking as to damages and its worth.
The inquiry whether there is a serious question to be tried in this context involves considering whether there is a prima facie case in the sense that the applicant has demonstrated a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.
The required strength of the probability of ultimate success may depend on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought. The extent to which it is necessary or appropriate to examine the legal merits of an applicant’s claim for final relief, when determining whether to grant an interlocutory injunction, will depend on the circumstances of the case; there is no inflexible rule. Where the grant of an interlocutory injunction will be effectively dispositive of a material part of the claim, the applicant confronts a heavy onus.
In a case in which there is a serious question to be tried that to have recourse to the guarantee would contravene a negative stipulation, the Court must weigh the competing risks of injustice.[4] In a case like the present, the risk of injustice to Cobolt is that although there is a serious arguable case that Duke is not entitled to have recourse to the guarantees, the refusal of the injunction will leave Duke at liberty to do so with adverse financial and reputational consequences for Cobolt.
[4]Ibid at [100].
The risk of injustice to Duke, if the injunction is refused is that it may be deprived of a ‘pay now, argue later’ benefit to which it might ultimately be found to have been entitled.[5] Subject to the caveat I identified at the outset, it will not necessarily, however, lose the security benefit of the guarantees if an injunction is granted.
[5]Ibid at [101].
Importantly, the applicable principles are not separate and independent of each other but must be examined together.[6] Thus, a strong claim which easily satisfies the serious question to be tried threshold may still attract interlocutory relief if the balance of convenience is fairly even.[7]
[6]See Nicholas John Holdings Pty Ltd v Australia & New Zealand Banking Group Ltd [1992] 2 VR 715 at 723.
[7]Bullock v Federated Furnishing Trades Society of Australasia (1985) 5 FCR 464 at 472.
In this proceeding it was common ground and I have myself determined that clause 5.5 is a ‘risk allocation device’. Upon its proper construction, clause 5.5 contains a contract promising not to call upon the bond in certain circumstances. Breach of the contractual promise may be enjoined on normal principles relating to the enforcement by injunction of negative stipulations in contracts. Put more simply, Duke by the terms of clause 5.5 of the Contract, promised by negative stipulation not to call upon the bank guarantees unless, within the time provided by the Contract, Cobolt had failed to pay an amount due and payable under the Contract.
Construction of the critical provisions
I have determined that Cobolt has a strongly arguable case as to whether Duke is presently entitled to have recourse to the Security based upon the non-payment of Payment Certificate 22. I have reached that conclusion on the basis of the following interlocutory assessment of the critical provisions of the Contract.
The critical provisions are clauses 23, 42.1, 44.4, 44.6, 44.9, 44.10 and 47. The text of those provisions is annexed to these reasons.
Clause 42.1 has the following relevant features.
First, as the opening paragraph of clause 42.1 makes plain, there are specific contractually authorised times for lodgement of a payment claim.
Second, the entitlement to lodge at those specified times is conferred upon the Contractor.
Third, if the Contractor ‘fails to make a claim’ for payment under clause 42.1, the Superintendent may nevertheless issue a payment certificate. The contractual language ‘fails to make a claim’, when read in conjunction with the specifically authorised circumstances in which a Contractor can make a payment claim in the opening paragraph, means that the contractually bestowed ability of the Superintendent to issue a Payment Certificate, absent a payment claim, arises when the Contractor does not exercise a presently available contractual right to issue such a claim.
Fourth, clause 42.1 identifies three different types of payment certificate: a payment certificate issued pursuant to clause 42.1; a Final Certificate issued pursuant to clause 42.8; or, a certificate issued pursuant to clause 44.6.
Fifth, the liability created by the issuing of a payment certificate under clause 42.1 is an interim one, subject to the right to contest whether it is ultimately ‘properly due and payable’ pursuant to clause 47.
With these key features in mind, I turn first to the construction of the Contract relevant to the assessment of whether there is a serious question as to whether Payment Certificate 22 creates an entitlement to payment in the event that Duke validly took the work out of Cobolt’s hands prior to the issuing of Payment Certificate 22.
If the Principal exercises the right under clause 44.4(a), to take works out of the hands of a Contractor, the Contractor shall not be entitled to any future payment in respect of the work taken out of their hands, unless a payment becomes due under clause 44.6. The consequence of this appears to be that, if the entirety of the work has been taken out of the hands of the Contractor (as is alleged to be the case here), then the Contractor has no right to make a payment claim under clause 42.1. Insofar as any claim may be said to arise, that right would only exist when the precondition in clause 44.6 is satisfied, namely the completion of the works taken out of the hands of the Contractor.
Clause 42.1 does not on its face empower a Contractor to make a payment claim with respect to work taken out of its hands following the occurrence of that event. That is so because:
(a) First, the first paragraph of clause 42.1, conferring the entitlement to make a payment claim does not make express reference to such a circumstance.
(b) Second, the obligation in clause 44.6 is cast on the Superintendent in absolute terms. It is not conditioned by a prerequisite that the Contractor deliver a payment claim. Rather, the Superintendent is mandated by the use of the word ‘shall’ to ascertain the ‘cost incurred by the Principal in completing the work’ and to ‘issue a certificate to the Principal and the Contractor certifying the amount of that cost’.
(c) Third, it is objectively reasonable that the obligation to undertake this assessment rests upon the Superintendent. A Contractor that has had the work taken out of its hands is in no position to deliver the information required by clause 42.1 to value the claim as it has not performed the work.
Thus, in a circumstance such as here, where all of the work has been taken out of the hands of the Contractor, the Contractor appears to have no right to make a payment claim until the work is completed. There is therefore no contractual failure to make a claim by the Contractor during the intervening period. Thus, the entitlement of the Superintendent to issue a payment certificate under clause 42.1 does not appear to be enlivened. Upon the work being completed, the Superintendent is required to issue a payment certificate which assesses the cost incurred and amounts otherwise due and payable between the Principal and the Contractor.
In those circumstances, on the assumption that the work has validly been taken out of the hands of the Contractor, there is a strong prima facie case that there was no contractual authority for the Replacement Superintendent to issue a payment certificate until the preconditions in clause 44.6 had been satisfied.
The foregoing analysis is reinforced by the conclusion of the New South Wales Court of Appeal in FPM Constructions v Council of the City of Blue Mountains[8] in the context of an AS4300-1995 contract. In that case clause 44.4 was relevantly identical to clause 44.4 in the present Contract. Basten JA (with whom Beazley JA agreed) identified that where work is to be taken out of the hands of the Contractor (emphasis added):[9]
In that event, as the final sentence in clause 44.4 states, the suspension is, in effect, continued until the final position between the parties is established, pursuant to clause 44.6, depending on whether the principal in fact is required to pay more for the work taken out of the hands of the contractor than it would have had to pay if the contractor had completed the work. Whatever the ultimate right to payment, it arises under clause 44.6 and is not a revived entitlement under clause 42.
[8][2005] NSWCA 340 (FPM).
[9]Ibid at [182].
By reason of the foregoing analysis, if, as Duke contends, it has validly taken the works out of the hands of Cobolt, it appears strongly arguable that there was no contractual authority on the part of the Replacement Superintendent to issue a payment certificate under clause 42.1. There had been no relevant ‘failure’ of the Contractor to make a payment claim because it was contractually prohibited from doing so. Moreover, the time for the assessment of the parties’ respective entitlements by the Replacement Superintendent had not arisen because, as was common ground, the work that had been taken out of the hands of Cobolt had not been completed.
It follows, that on Duke’s own case, there is a strongly arguable case that on the terms of the Contract, Duke had not become entitled to exercise a right under clause 42.11 to have recourse to the Security because Cobolt had not failed to pay Duke an amount due and payable under the Contract.
Turning then to the status of Duke’s rights to call upon the bank guarantees in the event that the termination by Cobolt was valid, Duke properly conceded that there is a serious question to be tried as to the validity of that termination. Further, as counsel for Duke properly conceded, the ability of Duke to have recourse to the Security was dependent upon a conclusion that clause 42.1 of the Contract survived termination. Put more precisely, Duke’s contention in the termination scenario requires a conclusion that a Superintendent has a right to issue a payment certificate under clause 42.1 if a Contractor fails to make a claim for payment under clause 42.1 following termination.
In my view, Cobolt has a strong prima facie case that no such right arises.
First, there is no language in clause 42 which supports the proposition that the entitlement of a Contractor to make a payment claim, or failing that the entitlement of a Superintendent to issue a payment certificate, survives termination. Such a contention appears to be inconsistent with clause 44.10, which reads as follows:
If the Contract is terminated under clause 44.4(b) or clause 44.9 the rights and liabilities of the parties shall be the same as they would have been at common law had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages.[10]
[10]See further, FPM at [179] (Basten JA, with whom Beazley JA agreed).
Second, as Basten JA identified in FPM:[11]
[11]FPM at [181].
(a) clause 42.1 provides a ‘speedy means for determining progress claims on an interim basis’;
(b) clause 42.1 is premised upon the continued operation of clause 47, which provides that the continued operation of clause 42.1 is subject to clause 44;
(c) as the continued operation of clause 42.1 is subject to clause 44, it is tolerably clear that if a termination has validly occurred, pursuant to clause 44.9, the governing clause of the contract is clause 44.10.
Third, an apparent textual problem for Duke’s claim in the termination scenario is that clause 42.1 confers the right upon a Superintendent to issue a payment certificate upon a Contractor’s failure to make a claim. However, upon a termination, there is no contractual warrant or power within the terms of clause 42.1 for the Contractor to have made such a claim. It therefore follows that there can be no relevant failure by the Contractor (which itself is the necessary foundation for the Superintendent to issue a payment certificate).
Fourth, the right to payment on the part of Duke, assuming a valid termination, depends on the continued existence of the power of the Superintendent to certify, after termination. In the context of certification following termination, such a contention appears to be tenuous having regard to the judgment of Basten JA in FPM:[12]
[T]he limits on the power of the superintendent under clause 42.1 are expressly identified in terms which assume the continuation of the contract. Absent some clear expression of intention that the superintendent have powers which survive termination, an inference to that effect should not be drawn. That is because clause 23, which confers powers on the superintendent, is in terms an obligation imposed on the principal. It is the principal’s duty to ensure that “there is a Superintendent” and that the superintendent acts in the manner prescribed. There is nothing in clause 23 itself which suggests that the contractual obligation thus imposed on the principal continues to operate after the termination of the contract pursuant to clause 44.4. Nor, in my view, can questions of “obvious good sense” prevail over the clear intention of the specific clauses identified above. The only question for the Court is whether the parties have reached agreement to that effect or not.
[12]Ibid at [185].
As Basten JA identified, such a conclusion does not require application of, or departure from, the authority of the New South Wales Court of Appeal in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd[13] because the decision in that case ‘does not directly transpose to certification of payment under the Contract’[14] and ‘because each contractual power must be identified by reference to the specific terms in which it is granted’.[15] The correctness of the statement by Hodgson JA in Peninsula Balmain at [80] does not directly arise on this occasion.
[13][2002] NSWCA 211 (Peninsula Balmain).
[14]FPM at [30] (Gyles JA), referred to with approval at [188] (Basten JA with whom Beazley JA agreed).
[15]FPM at [188] (Basten JA with whom Beazley JA agreed).
Fifth, and in any event, it also appears to be strongly arguable that the survival of clause 42.1 in the circumstances would not yield an outcome in which Duke was able to have recourse to the Security at this stage. That is because at the time of termination, it appears that Duke had no accrued right. In reaching this conclusion, it is necessary to refer to the common law principles invoked by clause 44.10 of the Contract.
In McDonald v Dennys Lascelles Ltd,[16] Dixon J said that when a contract was terminated by one party for the breach of the other:[17]
[T]he contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired.
[16](1933) 48 CLR 457 (McDonald).
[17]Ibid at 476-477.
In Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd,[18] Dixon and Evatt JJ said:[19]
In general the termination of an executory agreement out of the performance of which pecuniary demands may arise imports that, just as on the one side no further acts of performance can be required, so, on the other side, no liability can be brought into existence if it depends upon a further act of performance. If the title to rights consists of vestitive facts which would result from the further execution of the contract but which have not been brought about before the agreement terminates, the rights cannot arise. But if all the facts have occurred which entitle one party to such a right as a debt, a distinct chose in action which for many purposes is conceived as possessing proprietary characteristics, the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation.
[18](1936) 54 CLR 361 (Westralian Farmers).
[19]Ibid at 379-380.
Referring to both of those cases in FPM, Basten JA said:[20]
[Those cases] make clear a distinction between a right to payment in the future which is contingent upon an event which does not involve further performance of a contract and one which does. It is only in the former case that an accrued right can be said to have arisen. That distinction returns one to the terms of the contract in order to determine whether a future contingency depends upon the further performance of the contract. To the extent that the contingency in the present case requires the continued exercise of power by the superintendent, pursuant to clause 23, it requires the further performance of the contract by the principal whose obligation it is to see that there is a superintendent and the superintendent discharges its functions in the prescribed manner.
[20]FPM at [192].
Applying the common law as just explained at the time of termination, it is presently difficult to identify an ‘unconditional’ right to a payment which vested in the Principal as at the date of termination in the sense identified in McDonald and Westralian Farmers. It seems strongly arguable that such a right would have only crystalised where the Principal continued to ensure that the Superintendent exercised his power – here on its case, by issuing a certificate following the failure of a Contractor to make a payment claim. That power, if it outlived termination, would have required continued performance by the Principal. As further performance of the Contract was required, there was no relevantly accrued right to a payment for liquidated damages on the part of the Principal at the time of the termination of the Contract.
I have determined that that there is a strongly arguable case that there is no entitlement on the part of Duke to exercise a right under the Contract in respect of the Security. Such a conclusion arises irrespective of whether or not Duke is ultimately successful in contending that it validly took the works out of Cobolt’s hands or if Cobolt is ultimately successful in establishing that it validly terminated the Contract.
Balance of convenience
Turning then to the balance of convenience, Mr Munn of Cobolt deposed in his first affidavit dated 20 August 2025 that:
Based on my experience, in the event that Duke has recourse to the Security, it will have a major detrimental impact on Cobolt’s commercial position, because:
(a)Cobolt will be required to reimburse the NAB for the amount of the Security, which is a significant interruption to Cobolt’s cashflow, which will affect its ability to resource, undertake and complete the current projects on its books;
(b)NAB may reconsider their willingness to provide similar, unconditional bank guarantees to Cobolt on future projects. It will also likely negatively [words missing] upon other financiers’ willingness to provide similar financial instruments or funding to Cobolt in the future; and
(c)when tendering for future work, Cobolt will be required to disclose that Duke had recourse to the Security, which will cause reputational harm to Cobot, who prior to this have never had a party have recourse to its bank guarantees on any other project. In my experience, this will have an adverse impact upon Cobolt’s ability to win further work.
Like Judd J in Thiess Pty Ltd v Pacific National (Victoria) Pty Ltd,[21] I was initially concerned that the evidence appeared to overstate the risk of reputational damage. However, like Judd J, I am persuaded by the reasons in Austrak Pty Ltd v John Holland,[22] that notwithstanding my reservations, which are similar to those of Chesterman J in Austrak,[23] that the authorities are firmly in favour of recognising the importance of the reputational damage that might be caused by calling upon the Security. I refer to and also adopt the decisions referred to by Judd J in Thiess[24] as giving considerable weight to the proposition that calling upon guarantees is very likely to cause reputational damage which is not capable of adequate compensation by an award of damages. Mr Munn’s evidence as to reputational damage was not tested by cross-examination or contradicted by Duke’s evidence. It is not inherently implausible that the evidence should be given some weight. There are many judgments in which similar evidence has been held to be persuasive.[25]
[21][2009] VSC 670 at [20] (Thiess).
[22][2006] QSC 103 (Austrak).
[23]Ibid at [34].
[24]Ibid at [21].
[25]Saipem Australia Pty Ltd v GLNG Operations Pty Ltd (No 2) [2016] 1 Qd R 254 at [45] and the cases cited therein.
I am also conscious of and have taken into account the evidence in Mr Munn’s third affidavit. Specifically, Mr Munn deposes to the fact that Cobolt is in the process of preparing submissions of tenders or has submitted tenders for five projects with the Victorian School Building Authority (VSBA). Mr Munn deposes that:
It is a condition of submitting a tender with the VSBA that prospective contractors disclose their ability to obtain security for each project, by disclosing evidence from financiers that they are able to provide security on behalf of contractors, and that each contractor holds the required credit rating.
Were Duke to have recourse to the Security, there is a significant risk that Cobolt may not be able to comply with VSBA tendering requirements for some of the projects it is tendering for, and would miss out on that work.
It is a condition of Cobolt’s financing arrangement with NAB that Cobolt is required to reimburse NAB in full for any call on its Security. Were this to happen, Cobolt’s cash flow and balance sheet would be temporarily affected, which would in turn be likely to affect Cobolt’s capacity to obtain bank guarantees on new projects to the same value as if recourse is not had to the Security.
I am conscious that in the exercise of the balance of convenience, granting the injunction would deprive Duke of the risk allocation mechanism that it had contracted for. However, that is the only prejudice to which Duke has referred. Moreover, I am conscious of and take into account the submission made by Duke’s counsel at the conclusion of the hearing that there may be a risk that Duke has to return half of the Security, upon completion of the works. Whether or not that obligation exists upon a proper construction of the Contract remains to be determined, based on proper argument. However, I do observe at this juncture that insofar as that risk has eventuated for Duke on its own case, it appears to be a consequence of the unexplained delay in seeking the certification of the sum between 27 September 2023 and 23 July 2025. That entitlement to liquidated damages has existed on its face on Duke’s case for over two years and the delay in taking steps to crystalise the entitlement is a factor which reduces, to some degree, the concern over the effect of this conclusion on Duke.
Finally, I note that Duke adduced no evidence as to the prejudice that would arise by restraining it from calling on the Security and did not adduce evidence of its financial position in response to the evidence of Mr Munn to the effect that Duke’s financial position gave rise to a cause for serious concern. In those circumstances, I infer that any such evidence would not have assisted Duke in dispelling Cobolt’s concern over its financial position[26] and thus the possible prejudice to Cobolt if the Security was wrongly called upon now.
[26]See Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 (Handley JA).
In the circumstances, I consider that the balance of convenience is neutral or marginally in favour of the grant of injunctive relief, even when giving maximum weight to the existence of clause 5.5 as a risk allocation device.
Conclusion and Disposition
The foregoing analysis gives rise to the following conclusions.
There are clear pathways to a conclusion that Duke was precluded from having recourse to the Security in reliance on Payment Certificate 22. Importantly, those pathways arise on both the defendant’s case (the work was validly taken out of Cobolt’s hands) and on the plaintiff’s case (the alleged termination was valid).
In each case there is a serious question to be tried that Duke is not entitled to have recourse to the Security. The prospects of success are sufficient to justify what will amount to a denial of Duke to the benefit of a risk allocation device in the event that those serious questions ultimately fail.
I also accept that there is a serious question to be tried with respect to the availability of permanent injunctive relief on the footing that damages for breach of a negative stipulation are not likely to be adequate to compensate for the reputational harm that might be caused by recourse to the Security.[27]
[27]Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 at [9] (Campbell JA) and [45] (Macfarlan JA). See also Synergy at [112] (per curiam).
In the circumstances, I will order that upon the usual undertaking as to damages:
The defendant, by its servants or agents or otherwise, is restrained from seeking to cash or otherwise have recourse to the bank guarantees provided to it by the plaintiff pursuant to the Contract, being:
(a) Bank Guarantee No.749717767, Ref 888135668-747618546;
(b) Bank Guarantee No.749546734, Ref 888135668-747618546;
in reliance upon a failure of the plaintiff to pay Payment Certificate 22, until the determination of the proceeding or further order.
Both parties submitted that they should have their costs of the application in the event that they were successful. Whilst the plaintiff has succeeded on the application in restraining the defendant’s recourse to the Security in reliance upon Payment Certificate 22, that success is on an interlocutory basis pending the hearing and determination of the proceeding. Whether or not that position ultimately proves to be vindicated at trial awaits to be seen. In the circumstances, I consider the just result is to order that the costs of and incidental to the summons dated 20 August 2025 be reserved.
Annexure – Clauses of the Contract
23 SUPERINTENDENT
The Principal shall ensure that at all times there is a Superintendent and that in the exercise of the functions of the Superintendent under the Contract, the Superintendent—
(a) acts honestly and fairly;
(b) acts within the time prescribed under the Contract or where no time is prescribed, within a reasonable time; and
(c) arrives at a reasonable measure or value of work, quantities or time.
If, pursuant to a provision of the Contract enabling the Superintendent to give directions, the Superintendent gives a direction, the Contractor shall comply with the direction.
In Clause 23 ‘direction’ includes agreement, approval, authorization, certificate, decision, demand, determination, explanation, instruction, notice, order, permission, rejection, request or requirement.
Except where the Contract otherwise provides, a direction may be given orally but the Superintendent shall as soon as practicable confirm it in writing.
If the Contractor in writing requests the Superintendent to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Superintendent confirm it in writing.
42 CERTFICATES AND PAYMENTS
42.1 Payment Claims, Certificates, Calculations and Time for Payment
At the times for payment claims stated in the Annexure and upon the issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require. Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time together with all amounts then due to the Contractor arising out of or in connection with the Contract or for any alleged breach thereof.
Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the Principal and to the Contractor a payment certificate stating the amount of the payment which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal. The Superintendent shall set out in the certificate the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference. The Superintendent shall allow in any payment certificate issued pursuant to this Clause 42.1 or any Final Certificate issued pursuant to Clause 42.8 or a Certificate issued pursuant to Clause 44.6, amounts paid under the Contract and amounts otherwise due from the Principal to the Contractor and/or due from the Contractor to the Principal arising out of or in connection with the Contract including but not limited to any amount due or to be credited under any provision of the Contract.
If the Contractor fails to make a claim for payment under Clause 42.1, the Superintendent may nevertheless issue a payment certificate.
Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be, or if no payment certificate has been issued, the Principal shall pay the amount of the Contractor's claim. A payment made pursuant to this Clause shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable.
Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8.
Notwithstanding Clause 42.4, the Principal shall be obliged to pay for any item of unfixed plant and materials where that item is—
(a)to be imported into Australia, provided the Contractor has given the Principal a clean on board bill of lading or its equivalent, drawn or endorsed to the order of the Principal and, where appropriate, a custom’s invoice for the item; or
(b) listed in the Annexure and which is not an item to be imported into Australia, provided the Contractor establishes to the satisfaction of the Superintendent that the Contractor has paid for the item, and the item is properly stored, labelled the property of the Principal and adequately protected.
Upon payment to the Contractor of the amount which includes the value of the item, the item shall be the property of the Principal free of any lien or charge.
Except as provided in the Contract, the Principal shall not be obliged to pay for any item of unfixed plant and materials which is not incorporated in the Works.
44 DEFAULT OR INSOLVENCY
44.4 Rights of the Principal
If by the time specified in a notice under Clause 44.2 the Contractor fails to show reasonable cause why the Principal should not exercise a right referred to in Clause 44.4, the Principal may by notice in writing to the Contractor—
(a) take out of the hands of the Contractor the whole or part of the work remaining to be completed; or
(b) terminate the Contract.
Upon giving a notice under Clause 44.2, the Principal may suspend payments to the Contractor until the earlier of—
(i) the date upon which the Contractor shows reasonable cause;
(ii) the date upon which the Principal takes action under Clause 44.4(a) or (b); or
(iii) the date which is 7 days after the last day for showing cause in the notice under Clause 44.2.
If the Principal exercises the right under Clause 44.4(a), the Contractor shall not be entitled to any further payment in respect of the work taken out of the hands of the Contractor unless a payment becomes due to the Contractor under Clause 44.6.
44.6 Adjustment on Completion of the Work Taken Out of the Hands of the Contractor
When work taken out of the hands of the Contractor under Clause 44.4(a) is completed the Superintendent shall ascertain the cost incurred by the Principal in completing the work and shall issue a certificate to the Principal and the Contractor certifying the amount of that cost.
If the cost incurred by the Principal is greater than the amount which would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due from the Contractor to the Principal. If the cost incurred by the Principal is less than the amount that would have been paid to the Contractor if the work had been completed by the Contractor, the difference shall be a debt due to the Contractor from the Principal. The Principal shall keep records of the cost in a similar manner to that prescribed in Clause 41.
If the Contractor is indebted to the Principal, the Principal may retain Constructional Plant or other things taken under Clause 44.5 until the debt is satisfied. If after reasonable notice, the Contractor fails to pay the debt, the Principal may sell the Constructional Plant or other things and apply the proceeds to the satisfaction of the debt and the costs of sale. Any excess shall be paid to the Contractor.
44.9 Rights of the Contractor
If by the time specified in a notice under Clause 44.7 the Principal fails to show reasonable cause why the Contractor should not exercise a right referred to in Clause 44.9, the Contractor may by notice in writing to the Principal suspend the whole or any part of the work under the Contract.
The Contractor shall lift the suspension if the Principal remedies the breach but if within 28 days after the date of suspension under Clause 44.9, the Principal fails to remedy the breach or, if the breach is not capable of remedy, fails to make other arrangements to the reasonable satisfaction of the Contractor, the Contractor may by notice in writing to the Principal terminate the Contract.
The Contractor shall be entitled to recover from the Principal any damages incurred by the Contractor by reason of the suspension.
44.10 Rights of the Parties on Termination
If the Contract is terminated under Clause 44.4(b) or Clause 44.9 the rights and liabilities of the parties shall be the same as they would have been at common law had the defaulting party repudiated the Contract and the other party elected to treat the Contract as at an end and recover damages.
47 DISPUTE RESOLUTION
47.1 Notice of Dispute
If a dispute between the Contractor and the Principal arises out of or in connection with the Contract, including a dispute concerning a direction given by the Superintendent, then either party shall deliver by hand or send by certified mail to the other party and to the Superintendent a notice of dispute in writing adequately identifying and providing details of the dispute.
Notwithstanding the existence of a dispute, the Principal and the Contractor shall continue to perform the Contract, and subject to Clause 44, the Contractor shall continue with the work under the Contract and the Principal and the Contractor shall continue to comply with Clause 42.1.
A claim in tort, under statute or for restitution based on unjust enrichment or for rectification or frustration, may be included in an arbitration.
47.2 Further Steps Required Before Proceedings
Alternative 1
Within 14 days after service of a notice of dispute, the parties shall confer at least once, and at the option of either party and provided the Superintendent so agrees, in the presence of the Superintendent, to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may by notice in writing delivered by hand or sent by certified mail to the other party refer such dispute to arbitration or litigation.
Alternative 2
A party served with a notice of dispute may give a written response to the notice to the other party and the Superintendent within 28 days of the receipt of the notice.
Within 42 days of the service on the Superintendent of a notice of dispute or within 14 days of the receipt by the Superintendent of the written response, whichever is the earlier, the Superintendent shall give to each party the Superintendent's written decision on the dispute, together with reasons for the decision.
If either party is dissatisfied with the decision of the Superintendent, or if the Superintendent fails to give a written decision on the dispute within the time required under Clause 47.2 the parties shall, within 14 days of the date of receipt of the decision, or within 14 days of the date upon which the decision should have been given by the Superintendent confer at least once to attempt to resolve the dispute and failing resolution of the dispute to explore and if possible agree on methods of resolving the dispute by other means. At any such conference, each party shall be represented by a person having authority to agree to a resolution of the dispute.
In the event that the dispute cannot be so resolved or if at any time after the Superintendent has given a decision either party considers that the other party is not making reasonable efforts to resolve the dispute, either party may, by notice in writing delivered by hand or sent by certified mail to the other party, refer such dispute to arbitration or litigation.
47.3 Arbitration
Arbitration shall be effected by a single arbitrator who shall be nominated by the person named in the Annexure, or if no person is named, by the Chairperson for the time being of the Chapter of the Institute of Arbitrators Australia in the State or Territory named in the Annexure. Such arbitration shall be held in the State or Territory stated in the Annexure.
Unless the parties agree in writing, any person agreed upon by the parties to resolve the dispute pursuant to Clause 47.2 shall not be appointed as an arbitrator, nor may that person be called as a witness by either party in any proceedings.
Notwithstanding Clause 42.9, the arbitrator may award whatever interest the arbitrator considers reasonable.
If one party has overpaid the other, whether pursuant to a Superintendent's certificate or not and whether under a mistake of law or fact, the arbitrator may order repayment together with interest.
47.4 Summary or Urgent Relief
Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under Clause 42 or to seek urgent injunctive or declaratory relief in respect of a dispute under Clause 47 or any matter arising under the Contract.
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