CPB Contractors Pty Ltd v JKC Australia LNG Pty Ltd

CPB Contractors Pty Ltd (CPB) sought an interim injunction from the High Court of Australia to prevent JKC Australia LNG Pty Ltd (JKC) from calling upon performance bonds totalling approximately $26 million. This application was made pending CPB's application for special leave to appeal a decision of the Court of Appeal, which had refused to grant an injunction preventing JKC from calling upon the bonds.

The primary legal issue before the High Court was whether CPB had substantial prospects of success in its application for special leave to appeal. This, in turn, depended on the proper construction of performance bonds and the contractual rights of recourse available to a party. CPB argued that the Court of Appeal had erred in inferring a subjective element into the right of recourse, suggesting that the commercial purpose of such bonds was primarily to provide security for properly payable damages, rather than to allocate risk during the pendency of a dispute. CPB contended that the wording of the bonds in this case did not expressly include a subjective belief requirement, and that inferring such a requirement would be an overstraining of the contractual language.

CPB's counsel submitted that the Court of Appeal's reasoning, which placed emphasis on the potential expiry of the bonds before a dispute could be resolved, did not inevitably lead to the conclusion that the bonds could be called upon regardless of the underlying dispute. CPB highlighted reservations expressed by the New South Wales and Queensland Courts of Appeal regarding similar reasoning in previous cases, suggesting a divergence of judicial opinion on the construction of such provisions. CPB also argued that the balance of convenience favoured granting the injunction, citing potential reputational damage and the destruction of the subject matter of the litigation if the bonds were called.