L.U. Simon Builders Pty Ltd v Cardigan Commercial Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TECHNOLOGY, ENGINEERING AND CONSTRUCTION LIST
DUTY JUDGE

S ECI 2025 05276

L.U. SIMON BUILDERS PTY LTD (ACN 006 137 220)	Plaintiff
v
CARDIGAN COMMERCIAL PTY LTD (ACN 634 598 520)	Defendant

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JUDGE:	Sloss J
WHERE HELD:	Melbourne
DATE OF HEARING:	17 September 2025
DATE OF JUDGMENT:	17 October 2025
CASE MAY BE CITED AS:	L.U. Simon Builders Pty Ltd v Cardigan Commercial Pty Ltd
MEDIUM NEUTRAL CITATION:	[2025] VSC 655

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BUILDING CONTRACTS – Recourse to unconditional bank guarantees – Security for the purpose of ensuring the due and proper performance of the contract – Interlocutory application by contractor seeking injunctive relief pursuant to ss 232 and 234 of the ACL to restrain principal from taking steps (or further steps) to have recourse to security – Where contractor alleges that principal engaged in misleading and deceptive conduct in contravention of s 18 and (statutory) unconscionable conduct in contravention of s 21 of the ACL – Construction of security clause, recourse clause and restraint clause in building contract – Where terms of the contract provides that principal may convert all or part of the security into cash at any time subject to providing 3 days’ prior written notice of its intention to have recourse to the security (recourse clause) – Where contractor restrained by terms of the contract from taking steps to injunct or otherwise restrain the principal from having recourse to the security (restraint clause) – Whether plaintiff has properly articulated a serious question to be tried in this application – Whether plaintiff has articulated the discrimen alleged to render the conduct of defendant unconscionable conduct in the relevant contravening sense – Whether balance of convenience favours granting of injunctive relief – Plaintiff’s claim for injunctive relief not granted; ss 21, 22 Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (Cth).

BUILDING CONTRACTS – Recourse to unconditional bank guarantees – Security for the purpose of ensuring the due and proper performance of the contract – Interlocutory application by contractor seeking orders to require principal to return 50% of the security it held – Where contract provides for reduction and release of security subject to principal’s rights under recourse clause – Where the ‘reduction and release’ clause pertaining to 50% of the security is expressly subject to the principal’s rights in relation to the security, including rights to convert all or part of the security into cash at any time subject to providing 3 days’ prior written notice of its intention to have recourse to the security – On proper construction of cl 5.4 (reduction and release clause) and 5.2 (recourse clause), where notice of intention to have recourse to the security having been given, principal’s entitlement has vested (subject to any order of the Court to the contrary) – Plaintiff’s claims for return of 50% of the security dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Andrew KC and Mr LJ Hogan	Melbourne Construction Lawyers
For the Defendant	Mr G Harris KC	Norton Rose Fulbright

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

The gist of the dispute between the parties............................................................................... 2
Material relied on by the parties on the hearing of the summons......................................... 4
L.U. Simon............................................................................................................................ 5
Cardigan................................................................................................................................ 6

Relevant factual background........................................................................................................... 6

The Contract................................................................................................................................... 9
Formal Instrument of Agreement................................................................................... 10
AS 4902-2000 General Conditions of Contract.............................................................. 11
Notice to Proceed............................................................................................................... 14

L.U. Simon encounters difficulties with receiving payment of progress claims from Cardigan on a timely basis...................................................................................................................... 15
Cardigan gave notice of its intention to have recourse to the Security based on its contractual right to liquidated damages....................................................................................................... 25

L.U. Simon’s case for injunctive relief......................................................................................... 28

Relevant legal principles............................................................................................................ 28
The alleged contravening conduct........................................................................................... 35
The misleading or deceptive conduct............................................................................. 35
The (statutory) unconscionable conduct........................................................................ 39

As a Certificate of Practical Completion has issued for ‘SP 2’, L.U. Simon now seeks to have 50% of the Security returned to it............................................................................................ 44
L.U. Simon contends cl 5.2 is an ‘ouster’ clause and cannot be relied on by Cardigan to prevent it obtaining ‘meaningful [injunctive] relief’ under the ACL........................................... 45
L.U. Simon says if Cardigan has recourse to the Security this will cause prejudice to L.U. Simon.............................................................................................................................................. 45

Cardigan contends that L.U. Simon has failed to make out any proper basis to restrain Cardigan’s recourse to the Security............................................................................................................. 46

Contractual status quo as to certified liabilities...................................................................... 46
No relevant conduct by Cardigan............................................................................................ 47
Proper construction of cl 5.2...................................................................................................... 48
Court’s jurisdiction to grant an interim injunction under the ACL is subject to the same principles that govern the grant of interlocutory injunctions generally...................................... 50

L.U. Simon’s Reply submissions.................................................................................................. 52

Consideration and disposition...................................................................................................... 54

Construction of the contractual provisions re Contractor’s provision of ‘Security’ and Principal’s right to ‘Recourse’.............................................................................................................. 58
Whether there are grounds for the grant of an injunction restraining recourse to the security.............................................................................................................................................. 63
The serious question to be tried...................................................................................... 64
The balance of convenience.............................................................................................. 72

Ground 2 of the Summons − As a Certificate of Practical Completion has issued for ‘SP 2’, L.U. Simon now seeks to have 50% of the Security returned to it............................................ 75

Consideration and disposition.................................................................................................. 77

Summary of conclusions................................................................................................................ 79

HER HONOUR:

Introduction

On 22 August 2025, the plaintiff, L.U. Simon Builders Pty Ltd, commenced a proceeding by Writ in the Building Cases List of the Commercial Division of the County Court against the defendant, Cardigan Commercial Pty Ltd. In that proceeding L.U. Simon seeks relief in relation to a contract entered into between Cardigan (as ‘Principal’) and L.U. Simon (as ‘Contractor’) dated 20 May 2022 for the construction and development of a mixed commercial and residential building on land at 121-131 Cardigan Street, Carlton, Victoria known as the ‘Argyle Square’ development (Project), in consideration of payment of the sum of $51,707,571.20 (excluding GST) (Contract Sum) (Contract). When commencing the proceeding, L.U. Simon also filed a summons seeking (inter alia) an injunction to restrain Cardigan, its servants or agents, until further order, from having, or attempting to have recourse to the security L.U. Simon had provided to it pursuant to the Contract, in the form of two bank guarantees issued by the Australia and New Zealand Banking Group Limited (ANZ Bank) (each in the amount of $[redacted])[1] (Security), together with an order requiring Cardigan to return one of the bank guarantees to LU Simon.
[1]Here, the relevant bank guarantees, issued by the ANZ Bank, together represented [redacted]% of the Contract Sum: Annexure Part A to the General Conditions of Contract, Item 14.

The County Court proceeding was subsequently transferred to the Supreme Court pursuant to s 21 of the Courts (Case Transfer) Act 1991 (Vic) and L.U. Simon’s application for injunctive relief was listed for an urgent hearing before the Commercial Court Duty Judge on 17 September 2025.

Prior to the transfer, whilst the proceeding was in the County Court, Cardigan had given an undertaking to facilitate the urgent hearing on the basis that the parties would co-operate in having the summons listed before the Commercial Court Duty Judge in the Supreme Court as soon as possible, and preferably in the week commencing 15 September 2025. The undertaking was framed in terms that Cardigan would not have recourse to the Security until the day of final hearing of L.U. Simon’s summons or 19 September 2025 at 5.00pm, whichever is earlier.

When the proceeding came on for hearing in this Court on 17 September 2025, the Cardigan undertaking remained in place and the Security had not been called on. At the close of oral reply submissions, senior counsel for L.U. Simon noted that time was running and informed the Court that he has ‘instructions to pay the money’[2] – a reference to the Security (being the sum of $[redacted] x 2 = $[redacted]) – into Court at the conclusion of the hearing that day, in essence as a pro tem way of effectively holding the status quo pending delivery of the Court’s decision, and thereby avoiding any reputational risk to L.U. Simon arising from the guarantee being called on. However, senior counsel for Cardigan responded, stating that the course L.U. Simon proposed was not necessary as he had instructions ‘to extend the undertaking’ to the Court, to the effect that Cardigan will not take steps (or further steps) to have recourse to the security the subject of this proceeding before midnight on the day in which this Court delivers its judgment.[3] Accordingly, that undertaking has remained in place.
[2]Transcript 17.09.2025 at 91-92 (Mr Andrew KC).
[3]Transcript 17.09.2025 at 96 (Mr Harris KC).

The gist of the dispute between the parties

In its Writ, L.U. Simon pleads claims against Cardigan for alleged breaches of the Australian Consumer Law (ACL),[4] in addition to its contract claims for extension(s) of time, delay damages and other payments. Relevantly, for present purposes, L.U. Simon’s claim for injunctive relief is founded on:

(a) an alleged breach of s 18 of the ACL – that Cardigan engaged in conduct which was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18, by representing to L.U. Simon that it had sufficient funds to pay L.U. Simon the Contract Sum progressively as required by the Contract − for which an injunction is sought under s 232 of the ACL to prevent Cardigan from having recourse to the Security and thereby causing further loss and damage to L.U. Simon; and

(b) a claim for alleged (statutory) unconscionable conduct in contravention of s 21 of the ACL – contending that Cardigan has acted or proposes to act ‘unconscionably’, by inducing L.U. Simon by its misleading and deceptive conduct to enter into the Contract in circumstances where Cardigan lacked funds sufficient to pay the costs of the Project, and by Cardigan’s other conduct under the Contract including its failure to make progress payments in full and on time, its threatening to have recourse to the Security at a time late in the day before a long weekend when it is difficult for an applicant to approach a court for a hearing, and in circumstances where having recourse to the Security would cause a substantial prejudice to L.U. Simon − for which an injunction is sought under s 232 of the ACL to restrain Cardigan from having recourse to the Security.

[4]Schedule 2 to the Competition and Consumer Act 2010 (Cth).

In bringing its application for interlocutory relief, L.U. Simon expressly ‘accepts that the terms of the Contract in this case provide Cardigan with a right to have recourse to the Security at any time, in relation to a debt or claim, or an asserted debt or claim, provided that such claim is bona fide and not specious, and subject to providing L.U. Simon with 3 days’ prior written notice of such intention.[5]’[6]
[5]Contract, clause 5.2(a).
[6]L.U. Simon outline (25.08.2025), [8].

When opening the case, counsel for L.U. Simon reiterated that position and said ‘[t]hat means there should be no argument in this case about the construction of Clause 5.2’, and he confirmed that this is not a case where L.U. Simon is arguing that Cardigan has failed to satisfy the pre-condition for the right to have recourse.[7] Rather, he submitted:[8]

…this case is concerned with Cardigan's breaches of the Australian Consumer Law and this, we say, distinguishes the case from most of the authorities including the case of Fletcher Constructions, upon which Cardigan has placed much emphasis in its written submissions.
Cardigan's written submissions seek to establish that the contractual regime [in] Clause 5 alters the status quo and it is asserted that LU Simon has agreed to bear the financial risk pending the final determination, for example, of disputes about EOT's [[9]] or variation claims. Cardigan's submission then concludes that because of that construction of the clause, the application should be dismissed. That's at paragraphs 18 and 19.
We submit, with respect, Your Honour, that this misses the point. The point is this, that whatever LU Simon agreed to in the contract must come second to the ACL claims because it never contracted to permit itself to be misled or treated in the manner that we contend, which I will deal with in a moment.

[7]Transcript 17.09.2025 at 3 (Mr Andrew KC).

[8]Transcript 17.09.2025 at 3−4 (Mr Andrew KC) (emphasis in bold italics added).

[9][Acronym for ‘Extensions of Time’. See e.g. Contract, clauses 1.1 and 34.3.]

In that regard, L.U. Simon submits that the courts have consistently recognised cases where an injunction may be granted to restrain a beneficiary from having recourse to security, and it contends that the principle enunciated by Austin J in Reed Construction Services v Kheng Seng (Aust)[10] − to the effect that ‘the party in whose favour the performance bank guarantee has been given may be enjoined from acting unconscionably in contravention of s 51AA of the TPA’ – is relevant to the present application. It submits that this principle ‘also applies to a case where the injunction is to prevent loss and damage, or further loss and damage, being incurred as a result of misleading and deceptive conduct contrary to s 18 of the ‘Australian Consumer Law’.[11]
[10](1999) 15 BCL 158 at 164-165.
[11]L.U. Simon outline (25.08.2025), [10].

Cardigan refers to this acceptance by L.U. Simon as correctly acknowledging that cl 5.2 of the Contract establishes what is known as a ‘pay now, argue later’ regime,[12] and Cardigan contends that ‘[i]t is well settled that under such a regime, recourse to security will not be restrained on an interlocutory basis absent proof of fraud or unconscionability.’[13] Cardigan submits that as neither fraud nor unconscionability has been established, L.U. Simon’s application for injunctive relief should be dismissed with costs.
[12]Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318 (Siemens) at [14].
[13]Cardigan outline (29.08.2025), [1].

Material relied on by the parties on the hearing of the summons

A substantial body of material was filed by each the parties on the hearing of the summons.

I remind myself that this is an interlocutory application, where there has been no cross-examination of any witnesses and ‘my present function is to identify the areas of dispute, not to resolve them.’[14]
[14]Adopting the approach of Byrne J in Rejan Constructions (referred to below), at [5].

L.U. Simon

The facts relied on by L.U. Simon in this application are set out in:

(a) the affidavit of Jim Moschoyiannis, former director of L.U. Simon,[15] sworn 22 August 2025 (Moschoyiannis Affidavit);
[15]Mr Moschoyiannis was a director of L.U. Simon until 25 October 2024, but he continued to be employed by L.U. Simon on a full-time basis until 21 January 2025.

(b) the affidavit of Scott Reid, construction manager in the employ of L.U. Simon, sworn 22 August 2025 (Reid Affidavit);

(c) the affidavit of Jim Moschoyiannis in reply sworn 3 September 2025 (Moschoyiannis Reply Affidavit);

(d) the affidavit of Peter Devitt in reply sworn 4 September 2025 (Devitt Reply Affidavit);

(e) the first affidavit of Scott Reid in reply sworn 4 September 2025 (Reid First Reply Affidavit);

(f) the second affidavit of Scott Reid in reply sworn 17 September 2025 (Reid Second Reply Affidavit); and

(g) the expert report on delays of Andy Chew dated 24 July 2025 contained in the statement of expert evidence dated 25 August 2025 (TBH report).

L.U. Simon also relied on its written submissions dated 25 August 2025 (L.U. Simon outline (25.08.2025)), and its reply submissions dated 4 September 2025 (L.U. Simon reply submissions (4.09.2025)) in support of its application.

Cardigan

The facts relied on by Cardigan in this application are set out in:

(a) the first affidavit of Graham Duncan Fraser, sole director of Cardigan, sworn 29 August 2025 (First Fraser Affidavit);

(b) the second affidavit of Graham Duncan Fraser sworn 16 September 2025 (Second Fraser Affidavit); and

(c) the affidavit of Luke Mathew van Grieken, partner of Norton Rose Fulbright Australia, sworn 24 August 2025 (van Grieken Affidavit).

Cardigan also relied on its written submissions dated 29 August 2025 (Cardigan outline (29.08.2025)) in opposing the grant of the relief sought in the summons.

Relevant factual background

The business known as ‘L.U. Simon Builders’ was founded in 1955. Subsequently, L.U. Simon was incorporated under the name ‘L.U. Simon Builders Pty Ltd’ ACN 006 137 220 on or about 31 March 1983.

L.U. Simon carries on business as a building contractor and it is regularly engaged to perform building works under contracts of substantial value. In particular, Mr Moschoyiannis deposes that during his time at L.U. Simon, from 1983 until 2024, he has ‘worked on over 150 projects with a combined initial contract value of over 3 billion dollars’ including many Federal, State and local government-funded and private sector projects.[16]
[16]Moschoyiannis Affidavit, at [5].

Cardigan (being ‘Cardigan Commercial Pty Ltd’ ACN 634 598 520) was incorporated on 2 July 2019, under its former name of ‘Totara Holdings Pty Ltd’. According to the ASIC Current and Historical Company Search, the shareholders of Cardigan are predominantly companies and individuals based in Singapore.

Cardigan is described by L.U. Simon as being a ‘project specific’ property developer,[17] that was established for the purposes of developing a mixed commercial/residential building on the land in Carlton, and it carries on business principally in connection with the Project development on the land.
[17]L.U. Simon outline (25.08.2025), [12].

During 2021, Cardigan requested L.U. Simon to tender for the Project. In his First Affidavit, Mr Fraser, the director of Cardigan outlined Cardigan’s tender process for the Project,[18] and Cardigan’s funding and financing for the Project,[19] deposing as follows:
[18]First Fraser Affidavit, at [26]-[32] (emphasis in bold italics added).
[19]First Fraser Affidavit, at [33]-[41] (emphasis in bold italics added).

Cardigan’s tender process for the Project
26In response to changed market conditions driven by the Covid-19 pandemic, Cardigan re-designed the project to a residential development with minimal ground floor commercial space, consisting of 79 apartments (later amended to 80 apartments) over 9 levels, and planning permission for this development was agreed in mid-2021, with a final permit issued in December 2021.
27In August 2021, I commenced discussions with Mr Moschoyiannis of LU Simon about LU Simon’s capability to undertake the works, and on 17 August 2021 I emailed Mr Moschoyiannis a bundle of material described as a “tender package” although no formal tender was undertaken with contractors beyond LU Simon. A copy of this email (excluding attachments) is at page [132] of exhibit bundle GF-1.
28On about 13 September 2021, Mr Moschoyiannis sent me LU Simon’s tender response, copying his solicitor Mr Toumazou. A copy of LU Simon’s tender response dated 13 September 2021 is at page [134] of exhibit bundle GF-1.
29Armed with confidence about the cost and duration for the works to enable Cardigan to complete negotiations with its financiers, by 24 December 2021, Cardigan had entered the final tranche of financing facilities with its senior lender PAG totaling $[redacted] (plus other fees which were to be capitalised), of which the construction sub-limit was to be initially set at $[redacted] which exceeded the expected construction costs for the project plus novated consultants, authority costs and contingencies (having had regard to the written pricing provided by LU Simon in its tender submissions above).
30On 20 May 2022, Cardigan entered into the Contract with LU Simon. A copy of the Contract is in the SR Affidavit bundle at page 139.
31Since 26 June 2020 to the present, being the duration of my involvement as director of Cardigan, Cardigan has not been subject to any action by ASIC relating to its solvency, in external administration, in liquidation, under receivership or subject to any statutory demand.
32Until April 2025, LU Simon had not formally raised with me any issues regarding Cardigan’s financial position.
Cardigan's Funding and Financing for the Project
33The debt structure for Cardigan was secured for the Project in 2021, well before LU Simon became involved.
34Cardigan has both a senior lender and a junior lender for the Project as follows:
(a)The senior lender is PAG. PAG is a global investment fund based in Hong Kong. PAG has over USD $55 billion under management and is one of the leading non-bank lenders/ investors in the Asia Pacific region. Its Australian real estate debt book is circa A$2 billion. PAG’s lender vehicle for the project is Brighten Lead Opportunity Limited. A copy of the PAG’s website documents is at page [182] of exhibit bundle

GF-1.
(b)The junior lender is 121 Cardigan Pte Ltd, which is a syndicate of investors via a fund controlled by Havenport Investments Pte Ltd, a company incorporated in Singapore, also a current shareholder of Cardigan.

35Under the financing arrangements, the funds could be used as follows:
(a)to refinance existing indebtedness secured against the Property;
(b)to fund construction, civil, infrastructure and development costs in respect of the Project; and
(c)for the capitalisation of interest and other fees payable in respect of the financing facilities.

36Critically, the financing available to Cardigan for the Project was always greater than the Contract Sum payable to LU Simon. In particular, the PAG financing facilities in place since 24 December 2021 provided funding for construction of at least $[redacted] million, well in excess of the Contract Sum under the Contract, which was circa $[redacted] million excluding GST on execution. I explain this further below.
37 On or around 1 June 2021, Cardigan executed a Loan Note Subscription Agreement (LNSA) with its senior lender, PAG, for an initial two facilities A & B totaling $[redacted] (plus other fees which were to be capitalised). PAG entered the LNSA via its lending vehicles Brighten Lead Opportunity Limited ARBN 649 651 034 (as Security Trustee and Agent) and Brighten Lead Opportunity VIII Limited (company number 2057784).
38On 24 December 2021, Cardigan and the PAG parties amended the LNSA with PAG including three facilities A, B and C totaling $[redacted] (plus other fees which were to be capitalised). Importantly, the amended LNSA now expressly allowed for the facility funds to be used for construction and development costs in respect of the Project up to the Construction Sub-Limit (initially $[redacted]).
39The LNSA was amended over the course of the project to increase the facility limits and Construction Sub-Limits to accommodate the changes made during the project, including agreed variations or additional costs validly claimed by LU Simon, as set out below:

Date Document Facilities

1 June 2021 Loan Note Subscription Agreement (LNSA) Facility A: $[redacted]

Facility B: $[redacted]

Facility C: NIA

Total: $[redacted]

24 December

2021
First Amendment Deed to incorporate construction sub- limit amount Facility A: $[redacted]

Facility B: $[redacted]

Facility C: $[redacted]

Total: $[redacted]

(including Construction Sub-Limit:

$[redacted])

21 December 2023 Second Amendment Deed Facility A: $[redacted]

Facility B: $[redacted]

Facility C: $[redacted]

Total: $[redacted]

(including Construction Sub-Limit

$[redacted])

15 May 2025 LNSA - Upsize Letter Facility A: $[redacted]

Facility B: $[redacted]

Facility C: $[redacted]

Total: $[redacted]

(including Construction Sub-Limit:

$[redacted])

40The first page of the LNSA - Upsize Letter is at page [183] of exhibit bundle GF-1.
41The above table illustrates that at all relevant times Cardigan had sufficient funding for the Project, well exceeding the Contract Sum plus novated consultants plus authority fees and charges plus variations, and a prudent project contingency.

The Contract

As noted above, on 20 May 2022, L.U. Simon entered into a design and construct contract with Cardigan for the Project.[20]
[20]The following documents, contained within the Reid Affidavit, 139–470 are the Contract Documents:

Formal Instrument of Agreement

The contract sum, provided for in cl 4 of the Formal Instrument of Agreement, was $51,707,571.20, comprised as follows:[21]

4.1The Contract Sum is the lump sum amount of $51,707,571.20 (excluding GST) including Provisional Sums but excluding any additions or deductions which may be required to be made under the Contract Documents.
4.2The contract sum comprises $50,132,659.20 for the domestic building work and $1,574,912.00 for the commercial building works.

[21]Reid Affidavit, Exhibit SRR-1, at 149.

The provisions concerning the ‘Commencement of the Contract’ are set out in cls 7.1–7.8 of the Formal Instrument of Agreement. Relevantly, cls 7.3, 7.5 and 7.6 provide for conditions precedent, that must be satisfied or waived, concerning whether financial accommodation has been obtained and whether a ‘Builder’s Side Deed’ has been executed (Builder’s Side Deed), as follows:

7 Commencement Date
. . .
7.3It is a condition precedent to the Commencement Date that the following conditions have been satisfied or waived:
(1)financial accommodation being the senior debt funding has been obtained by the Principal; and
(2)the Builder's Side Deed between the Principal, the Principal's Financier, the Security Trustee, the Agent and the Contractor has been executed.

…
7.5 The Principal will notify the Contractor:
(1)that the conditions precedent in clause 7.3 of this Formal Instrument of Agreement have been met or waived, as the case may be; and
(2)of the Commencement Date,

by issuing a Notice to Proceed.
7.6 The conditions precedent referred to in clauses 7.3(1) and 7.3(2) of this Formal Instrument of Agreement are for the benefit of both the Principal and the Contractor and may only be waived by agreement in writing by the Principal and the Contractor.

Mr Moschoyiannis, who was a director of L.U. Simon at the time the Contract was negotiated and executed, deposed that L.U. Simon took care to negotiate suitable terms of the Builder’s Side Deed in order to protect L.U. Simon’s commercial interests.[22] In this regard, by way of example of the care taken, Mr Moschoyiannis exhibited an email from L.U. Simon’s solicitors, Giannakopoulos Solicitors, to the Financier’s solicitors (Clayton Utz) requesting amendments to three clauses in the Builder’s Side Deed, in which L.U. Simon’s solicitors stated in relation to the revised draft Builder’s Side Deed:[23]
[22]Moschoyiannis Affidavit, at [12].
[23]Moschoyiannis Affidavit, Exhibit JDM-1, at 8 (emphasis in bold italics added).

3.Clause 4.10 - the proposed new Clause 4.10 is not acceptable. LU Simon considers that it is in the best interests of both the Financiers and LU Simon for all funds that have been advanced by the Financiers to the Company for the purpose of payment of monies which are owed by the Company to LU Simon under the Building Contract to be paid directly from the Financier to LU Simon. Clause 4.10 presently provides for direct payment to LU Simon at the absolute discretion of the Company which defeats the purpose of the entire clause. An irrevocable authority and direction from the Company to the Security Trustee and Agent is a fundamental requirement of LU Simon.

Accordingly, LU Simon requests that Clause 4.10 be deleted and replaced with the following:
The Company irrevocably authorises and directs the Security Trustee and Agent to make payment direct to the Counterparty of all progress payments due to the Counterparty under the Contract out of funds which would otherwise be available to the Company under the Loan Note Subscription Agreement.

Please confirm whether the amendments requested by LU Simon to Clause 4.7 and Clause 4.10 are acceptable to your clients.

AS 4902-2000 General Conditions of Contract

Clause 5 of the AS 4902-2000 General Conditions of Contract addresses the ‘security’ for the Contract. Under cl 1, the expression ‘Security’ is defined to mean ‘an unconditional undertaking in a form approved by the Principal (the form in Annexure Part B is approved) given by [(inter alia) named Australian banks]’.

Clause 5.1 provides for the security to be given by the Contractor, as follows:[24]
[24]Reid Affidavit, Exhibit SRR-1, at 182 (emphasis in bold italics added).

5 Security
5.1 Provision

Security and performance undertakings are for the purpose of ensuring the due and proper performance of the Contract.
The Contractor shall deliver the Security in the amount stated in Annexure Part A to the Principal no later than the Date of the Contract, and maintain the Security in accordance with this clause 5. The Contractor is not entitled to claim or to be paid any moneys until the Security has been delivered to the Principal.

Annexure Part A to the AS 4902-2000 General Conditions provided that [redacted]% of the Contract Sum be provided as Contractor’s Security.[25] Pursuant to this cl 5, LU Simon provided Cardigan with the Security in the form of two ANZ bank guarantees totalling $[redacted], being:

(a) ANZ guarantee No GOP52252413418 in the amount of $[redacted]; and

(b) ANZ guarantee No GOP52252033418 in the amount of $[redacted].

[25]Reid Affidavit, Exhibit SRR-1, at 266.

Clause 5.2 of the AS 4902-2000 General Conditions establishes what is colloquially described as a ‘pay now, argue later’ regime.[26] It provides Cardigan with a right to have recourse to the Security at any time, in relation to a debt or claim, or an asserted debt or claim, provided that such claim is bona fide and not specious, and subject to providing LU Simon with 3 days’ prior written notice of such intention.
[26]Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318, [14].

Clause 5.2 is framed as follows:[27]
[27]Reid Affidavit, Exhibit SRR-1, at 182 (emphasis in bold italics added).

5.2 Recourse
(a)Subject to providing the Contractor with 3 days’ prior written notice of its intention to have recourse to the Security, the Principal may convert all or part of the Security into cash at any time and use the proceeds of the Security:
(i)in relation to any debt or money due or claimed to be due from the Contractor to the Principal under the Contract (including liquidated damages under subclause 34.7) or any cost, expense, loss or damage of any kind which the Principal has incurred or claims that it has incurred or might in the future incur in connection with what the Principal contends constitutes any act, default or omission of the Contractor; or
(ii)whenever the Principal is otherwise permitted to do so in accordance with the terms of the Contract, or if an event described in subclause 39.11 occurs in respect of the Contractor.

(b)The Contractor must not take any steps to injunct or otherwise restrain:
(i)      any issuer of any Security provided under subclause 5.1 from paying the Principal under that Security;
(ii)     the Principal from taking any steps for the purposes of making a demand under any Security or receiving payment under any Security; or
(iii)     the Principal using the money received under any Security;
even where the Contractor disputes the Principal’s right to payment (including where dispute resolution proceedings have been commenced under this Contract).

Clause 5.4 of the AS 4902-2000 General Conditions, which governs the conditions for release of the Security under cl 5.2, provides as follows:[28]
[28]Reid Affidavit, Exhibit SRR-1, at 183 (emphasis in bold italics added).

5.4      Reduction and release
(a)Subject to the Principal's rights in relation to the Security under subclause 5.2, upon the last to occur of the following:
(i)      issue of the Certificate of Practical Completion (or where there are multiple Separable Portions, issue of the Certificate of Practical Completion for the last Separable Portion to achieve Practical Completion);
(ii)     the Contractor has given the Principal an executed Deed of Release - Practical Completion (or where there are multiple Separable Portions, the Contractor has given the Principal Deeds of Release - Practical Completion in respect of all of the Separable Portions);
(iii)     the Contractor has given the Project Manager the Subcontractor warranties required under subclause 9.6 and all other warranties and certificates required under the Contract;
(iv)     the Contractor has given the Project Manager all final versions of shop drawings and as-built drawings for the Works and operation and maintenance manuals for all plant and equipment forming part of the Works; and
(v)     the Contractor has provided copies of each Moral Rights Consent to the Project Manager in accordance with subclause 10.3(b),
the Principal's entitlement to the Security shall be reduced to the percentage of the Security stated in Annexure Part A[29] or, if no percentage is stated, 50%.
(b)If the Contractor has given the Principal:
(i)      a Deed of Release - Final Completion executed by the Contractor; and
(ii)     Final Completion Certificates in the form of Annexure Part O from relevant Consultants for the benefit of the Principal;
then within 10 Business Days after the issue of a Final Payment Schedule, the Principal shall release to the Contractor any Security then held by the Principal (subject to any claim of the Principal on the Security).
(c)The Principal's entitlement to Security for any item of unfixed plant and materials under subclause 37.3 shall cease 10 Business Days after the later of:
(i)      receipt of a claim by the Contractor; and
(ii)     the incorporation into the Works of the plant and materials for which that Security was provided.
(d)The Principal shall release Security in excess of the entitlement within 10 Business Days of the entitlement being so reduced.
[29]Item 14(f) of Annexure Part A (Reid Affidavit, Exhibit SRR-1, at 267) states:

Notice to Proceed

On 21 June 2022, the Project Manager under the Contract, being the firm of Gallagher Jeffs, issued Superintendent's Direction–0001, titled ‘Notice to Proceed’.[30] This ‘Notice to Proceed’ Direction stated relevantly, as follows:[31]

Pursuant to clause 7.5 the Superintendent hereby provides a notice to proceed on behalf of the Principal (Cardigan Commercial). This notice confirms that the conditions precedent of clause 7.3 of the FIA [Formal Instrument of Agreement] have been met and the date of commencement is 7th June 2022.

[30]Reid Affidavit, at [9].

[31]Reid Affidavit, Exhibit SRR-1, at 474.

Mr Moschoyiannis deposes that after receiving the Notice to Proceed, L.U. Simon mobilised to site and started its work under the Contract.[32]

L.U. Simon encounters difficulties with receiving payment of progress claims from Cardigan on a timely basis

[32]Moschoyiannis Affidavit, at [18].

L.U. Simon submits that in late 2024 and early 2025, Cardigan experienced difficulties in making payments under the Contract in full and on time. Mr Scott Reid, who is a Construction Manager employed by L.U. Simon, deposed that:[33]
[33]Reid Affidavit, at [21]-[24], [26].

21.. . . As is usual in contracts of this type, the Contract Sum was to be paid to LU Simon progressively, in monthly progress payments, assessed and certified by the Project Manager, acting reasonably. . . .
22.The Project Manager assessed and certified LU Simon’s monthly progress claims, and LU Simon issued Tax Invoices to Cardigan for those certified amounts, but almost from the beginning of the Project, Cardigan had difficulty paying the invoices by LU Simon within 8 business days, which is the timeframe for payment under the Contract.

23.As a result of Cardigan’s continuous late payments, LU Simon’s cash flow under the Contract was not what it should have been. I set out in Annexure A,[[34]] a table of the dates of the certificates, the partial payments and the late payments, and the interest which LU Simon is entitled to under the Contract.
24.As this table in Annexure A demonstrates, Cardigan was unable to make payments as and when required under the Contract.
…
26.The amounts certified by the Project Manager were not only payable under the Contract, they were also scheduled amounts owing under the Building and Construction Industry Security of Payment Act 2002.

[34]Annexure A, headed ‘SCHEDULE OF PROGRESS CLAIMS, PAYMENT SCHEDULES, PAYMENTS AND INTEREST ON LATE PAYMENTS’ appears at pp13-15 of the Reid Affidavit.

Mr Reid’s evidence was that he had numerous discussions with Mr Fraser about these payment issues and defaults over the course of the Project. He deposed:[35]
[35]Reid Affidavit, at [25], [27]-[31], [33] (emphasis in bold italics added).

25.At around the time when these issues of lack of finance or funds began, in or about late 2024 or early 2025, I spoke to Mr Fraser, and he informed me, words to the effect that Cardigan did not have funding to pay for purchaser variations and other adjustments required to be paid by Cardigan under the Contract. At a later point in time, he advised me that “some of the investors will need to take a hair cut” by which I understood he meant that the Project was unprofitable and the investors would have to make up for shortfalls.
. . .
27.I had numerous discussions with Mr Fraser about these payments issues and defaults, over the course of the Project. Mr Fraser said that he was endeavouring to arrange funding to pay the outstanding payments.
28.Despite Mr Fraser’s assurances and promises, payment of the outstanding amounts was random and sporadic.
29.In March 2025, the situation of shortfalls in payment was causing concern to LU Simon because the work was nearing completion and there were substantial sums unpaid for progress claims between September to December 2024 exceeding $800,000. Accordingly, on or about 25 and 27 March 2025, I caused LU Simon to serve two Notices of Intention to Suspend the Works under the Building and Construction Industry Security of Payment Act 2002, to try and force Cardigan to pay.
30.I understand from the discussions that I had with Mr Fraser that upon receipt of these Notices of Intention to Suspend, that he arranged for the financier, PAG, to provide funds to make the payment required, in order to avoid a suspension of the work.
31.These issues with payment were a serious concern to LU Simon throughout the Project, but they were not the only concerns. Other concerns included delays caused by issues which I refer to below.
. . .
33.. . . I reiterate that if LU Simon had known that Cardigan was having these financial issues, then it would have never entered into the Contract.

Mr Moschoyiannis gave similar evidence to that of Mr Reid about the importance of cash flow and L.U. Simon’s practice not to sign up for a contract without knowing there was sufficient money to pay for the work. He deposed:[36]

10.LU Simon does not enter into contracts worth tens of millions of dollars with unknown project specific property developers, or indeed any developer, without knowing that there are sufficient funds to pay for the work in accordance with the contract, which is always on the basis of monthly progress payments certified usually by an independent superintendent or project manager. Regular monthly progress payments is critical to LU Simon, because in such projects LU Simon has to mobilise to site and start the process of ordering and procuring materials and equipment for the works. Mobilisation itself causes LU Simon to incur considerable costs. LU Simon also has to engage subcontractors and suppliers and order materials and fabrication off site, including paying deposits for some of the key items. All of these third parties require cash flow. In order to keep the process flowing, LU Simon has to pay its suppliers, subcontractors and its staff. Cash flow is critical to this process.
11. Accordingly, I would never sign LU Simon up for a contract without first knowing that there was sufficient money to pay for the work, usually from finance. In residential developments like this, as opposed to government contracts, finance is the usual source of funds. It is also very common, if not always the case, that the financier will require a tripartite deed, in this case called Builder’s Side Deed, to protect the financier’s interests. Signing the Builder’s Side Deed also provides protection to LU Simon, because it means the financier will make payments.

[36]Moschoyiannis Affidavit, at [10]-[11].

As was noted earlier, L.U. Simon’s solicitors had requested amendments to cl 4.10 of the Builder’s Side Deed to ensure that funds which are owed by Cardigan to L.U. Simon under the Building Contract are paid directly from the Financier to L.U. Simon. The solicitors stated that ‘[a]n irrevocable authority and direction from the Company to the Security Trustee and Agent is a fundamental requirement of L.U. Simon.’[37] Mr Moschoyiannis explained this practice, deposing:[38]
[37]Moschoyiannis Affidavit, at [12].
[38]Moschoyiannis Affidavit, at [12]-[18].

13.This requirement of LU Simon was fundamental, because otherwise LU Simon might not receive payment if the Principal for any reason wanted to withhold payment. In saying this was a fundamental requirement, this meant that LU Simon would not sign the Builder’s Side Deed, or the Contract, unless this was changed as requested, because LU Simon would not take the commercial risk of not being paid. Cardigan and the Financier [PAG] agreed to change clause 4.10 of the Builder’s Side Deed to accommodate LU Simon’s requirement.
14.On 6 June 2022, I signed the Builder’s Side Deed in my capacity as a Director of LU Simon. A copy is at [10-33] of the Bundle.
15.On 20 June 2022, I received an email from Mr Fraser in which he asked me to procure an insurance certificate which listed Cardigan and Brighten Lead Opportunity Ltd as interested parties. He stated, among other things, that this was a condition precedent to Cardigan’s funding that he was keen to resolve so that money could be paid by the Financier prior to 30 June 2022. A copy of the email from Mr Fraser is at [34-35] of the Bundle.
16.On the basis that the Builder’s Side Deed had been signed by the Financier and on the basis of the email I had received from Mr Fraser on 20 June 2022, I believed that Cardigan would make progress payments in full and on time as certified by the Project Manager.
17.Further, Mr Fraser never informed me that Cardigan would not have sufficient funds to pay LU Simon monies due and payable under the Contract progressively as required by the Contract. If I had known that Cardigan would not be able to make payment of certified progress payments in full and on time, I would never have signed LU Simon up to the Contract.
18.Based on these discussions with Mr Fraser, I believed that Cardigan had the financial capacity to pay LU Simon any monies due under the Contract, as required under the Contract. It was on this basis that LU Simon signed the Contract. After the parties signed the Builder’s Side Deed and LU Simon received the Notice to Proceed on 21 June 2022, LU Simon mobilised to site and started its work under the Contract.

Mr Reid also gave evidence to the effect that until 20 August 2025 when he was informed by L.U. Simon’s solicitor, Mr Paul Toumazou, that Cardigan had earlier been placed into external administration on or about 11 May 2020, and that the external administration ended on or about 5 November 2020, he was unaware of that information.[39] Further, he said ‘Mr Fraser never informed me or anyone else at LU Simon that Cardigan had experienced financial problems and had previously been placed into external administration.’[40]
[39]Reid Affidavit, at [17].
[40]Reid Affidavit, at [20].

Mr Fraser, who became the sole director of Cardigan at or after the time of the external administration, and manages the company on behalf of the Singaporean investors, responded to Mr Reid’s evidence of ‘lack of knowledge’ with incredulity. He deposed:[41]
[41]First Fraser Affidavit, at [50]-[51] (emphasis in bold italics added).

50.I refer to paragraph 20 of the Reid Affidavit. It is inconceivable to me that Mr Reid, Mr Moschoyiannis or Mr Toumazou did not know about Cardigan’s previous external administration, if it was a concern to them as Mr Reid now deposes. A rudimentary search of public information would disclose the historical matters deposed by Mr Reid. This seems particularly inconceivable given Mr Moschoyiannis deposing (at paragraphs 10 to 13 of the Moschoyiannis Affidavit) as to the care LU Simon takes when entering substantial contracts with “...unknown project specific property developers, or indeed any developer . . .”
51.I refer to paragraphs 7 to 15 of the Moschoyiannis Affidavit. Based on my own recollection of the events and my review of the contemporaneous documents referred to in this affidavit, I recall that Mr Moschoyiannis from LU Simon was aware of Cardigan’s financing arrangements prior to entering into the Contract. This is based on my own recollection and the following facts:
(a)On 30 July 2021 the financing adviser to the project, Mr Geroge Giovas of Axius partners sent me and Mr Moschoyiannis. a director of LU Simon at that time, an email introducing the project to LU Simon. Mr Giovas was able to give comfort to Mr Moschoyiannis that the project was bankable, and had funding in place (as it was being arranged by Mr Giovas, and the initial facilities were in place as of 1 June 2021).
(b)Subsequently on 17 August 2021,1 emailed Mr Moschoyiannis of LU Simon a tender package of documents for the Project.
(c)Between about August 2021 and February 2022, l met with Mr Moschoyiannis and Mr Terry Lewis (who was a co-director of LU Simon) on several occasions. I recall those meetings were typically in the office of MetierS Architects. I also recall having a several phone calls with Mr Moschoyiannis during this period, and exchanged emails on commercial matters related to the Project.
(d)On 10 March 2022 Project Control Group (PCG) Meetings for the project formally commenced, approximately 3 months prior to LU Simon executing the Contract. On this day, Mr Moschoyiannis. Mr Lewis and Mr Reid of LU Simon joined a Teams call with myself, the project manager and executives from both the senior and junior financiers. The financiers said words to the effect that their role in the project was to provide funding and gave an update on the status of the project. I do not recall any question directed to either set of financiers regarding Cardigan from Messrs Moschoyiannis, Reid or Lewis.
. . .

Mr Fraser also disagreed with the evidence given by Mr Reid about late payments, and to the effect that Cardigan was experiencing ‘financial difficulties’. He deposed:[42]
[42]First Fraser Affidavit, at [55]-[59] (emphasis in bold italics added).

Late Payments
55I refer to paragraphs 21 to 33 of Reid’s Affidavit about Cardigan’s “financial difficulties”, or LU Simon’s receipt of payments as being “random and sporadic". I disagree with these statements. They are not supported by the facts, which I explain below.
56Since May 2022, when the Contract was executed, until Practical Completion on or around April 2025 and May 2025, Cardigan has not experienced any lack of finance or funds or difficulties making payments to LU Simon. I, on behalf of Cardigan, requested its senior financier make payments as required under the LNSA and Builder’s Side Deed directly to LU Simon in cleared funds consistent with the certified amounts calculated by the Quantity Surveyor for the Project on a monthly basis.
57As shown in the table at page [265] of the exhibit bundle GF-1 between February 2023 and October 2024, Cardigan made payments to LU Simon that were on average 1 day after the date for payment as shown on the tax invoice.
58There was no lack of funds or financing, no misrepresentation or unconscionability. Instead, there were minor and infrequent delays to payment, as is common in construction projects. Indeed, the Contract expressly provides LU Simon remedies for late payment: interest (which Cardigan/PAG has already paid to the sum of $61,282.72), a show cause regime, suspension of works or ultimately termination.
59In that context, in glaring omissions, the Reid Affidavit and the Moschoyiannis Affidavit fail to provide the full context, including:
(a)from June 2022 to June 2025, Cardigan has paid LU Simon the amount of $58,398 million (plus GST), which represents the full portion of the Contract Sum payable under the Contract to date;
(b)the usual process for the payment of monthly progress claims in project financed project;
(c)the agreement between Cardigan and LU Simon regarding purchaser change variations;
(d)the contractual remedies LU Simon had agreed in the Contractor would apply for late payment; and
(e) the fact that Cardigan has already paid $61,282.72 in interest.

Mr Fraser continued, to outline the ‘Payment process’ adopted between the parties pursuant to paragraph [37.1] of the Contract and then observed:[43]
[43]First Fraser Affidavit, at [62]-[67] (emphasis in bold italics added).

62With the time difference, and the time it took for the funds transfer to occur, there was occasionally a short delay between LU Simon sending the invoice to the Project Manager and PAG transferring funds to LU Simon. This was purely an administrative and processing delay and not in any way due to a lack of funds or financing.
63The first five payment claims from LU Simon were paid to LU Simon within 11 days of the due date. In mid-December 2022, I held a telephone discussion with Mr Moschoyiannis about the state of construction works on the Project which had started slowly and I was keen to ensure construction progress improved. Mr Moschoyiannis said to me words to the effect that he was confident progress would improve. In that same conversation I said to Mr Moschoyiannis words to the effect that the payment processing time would be shortened to ensure prompt payment to the best extent possible. Mr Moschoyiannis then said to me words to the effect that he was aware of processing requirements for funding of projects.
64The next payment claims between February 2023 to October 2024 were all paid to LU Simon in full in accordance with the scheduled payments certified as described above within a few days of the due date for payment, with some of these payments being made a few days prior to the due date for payment, depending on progress of the payment certifications described above.
65Other than my discussions with Mr Moschoyiannis in December 2022 referred to in paragraph 63 above, until March 2025, LU Simon did not raise any concerns with the ability to satisfy future claims, the payment process or the date it received full payment, nor did it make any demand for interest for late or delayed payments, nor did it seek to invoke any other provision of the contract in respect of payments to be made under the Contract.
66The table referred to at paragraph 57 illustrates the relevant events in the payment process for each payment claim.
67The first time LU Simon raised concerns with Cardigan about the payment process was in March 2025. By this time, Mr Moschoyiannis was no longer a director or employee of LU Simon.

Mr Moschoyiannis also gave evidence in his reply affidavit responding to the allegations made by Mr Fraser in paragraph [50] of his affidavit (reproduced above). Mr Moschoyiannis responded to the effect that he ‘was not aware of Cardigan’s previous external administration prior to the execution of the Contract by LU Simon and Cardigan’ and he confirmed that Mr Fraser did not inform him that Cardigan had previously been under external administration.[44] Further he deposed:[45]

(d)I have recently been informed by Mr Toumazou and believe that prior to LU Simon executing the Contract he undertook a title search to verify that Cardigan was the registered proprietor of the Property but that he did not undertake a company search of Cardigan;

(e) I did not at any time undertake my own company search of Cardigan.

[44]Moschoyiannis Reply Affidavit, at [6].

[45]Moschoyiannis Reply Affidavit, at [6].

In his Reply Affidavit, Mr Moschoyiannis also took issue with Mr Fraser’s assertion that he had failed to mention that there was a verbal agreement reached between L.U. Simon and Cardigan, as negotiated with the Project Manager, in or around early 2024, regarding purchaser change variations. In his First Affidavit, Mr Fraser had outlined the background to the agreement[46] and deposed that it was to the effect that ‘L.U. Simon would not claim amounts for purchaser variations until the works reached Practical Completion (Agreement).’[47]
[46]First Fraser Affidavit, at [71 (a)–(k)].
[47]First Fraser Affidavit, at [71].

Mr Moschoyiannis refuted the existence of any such ‘Agreement’, deposing:[48]

8.In relation to the allegations contained in paragraph 71 of the Fraser Affidavit, to the best of my knowledge and belief, neither I nor anyone else on behalf of LU Simon ever notified either Cardigan, the Project Manager or Mr Fraser that LU Simon would agree to forgo LU Simon’s entitlement to receive payment for the Purchaser Change Variations as has been alleged by Mr Fraser.
9.I recall that in or about early 2024, Cardigan had enquired as to whether LU Simon would be prepared to fund the payment of the Purchaser Change Variations on the Project. I informed Mr Fraser that LU Simon did not agree to fund the Purchaser Change Variations.
10.Whilst LU Simon had on some previous projects entered into agreements to defer its entitlement to receive payment of progress payments (for example, the Evermore Project) which is referred to in paragraph 46 of the Fraser Affidavit. These arrangements were formally documented in the form of a Loan Agreement and secured by way of a registered mortgage against the property. . . . If LU Simon had agreed to payment deferral arrangements with Cardigan (which it did not), I would have insisted upon execution of formal Loan and Security documents by Cardigan, in order to protect LU Simon’s commercial interests.

[48]Moschoyiannis Reply Affidavit, at [8]-[10] (emphasis in bold italics added).

Mr Peter Devitt, a director of L.U. Simon who assumed director responsibilities for the Project after Mr Moschoyiannis resigned, also refuted Mr Fraser’s evidence that there was of any such ‘Agreement’, deposing:[49]

5.I was at all relevant times during the project a director of LU Simon. Whilst Jim Moschoyiannis was the director of LU Simon that had the primary responsibility for the Argyle Square project (Project), I was provided with regular updates in relation to the project by Mr Moschoyiannis. After Mr Moschoyiannis resigned from LU Simon in early 2025, I assumed director responsibilities for the Project.
6.In relation to the allegations contained in paragraph 71 of the Fraser Affidavit, to the best of my knowledge and belief, neither Mr Moschoyiannis nor anyone else on behalf of LU Simon agreed to forgo LU Simon’s entitlement to receive payment for the Purchaser Change Variations as alleged by Mr Fraser.

7.I recall that in or about early 2024, Mr Moschoyiannis mentioned to me that the Defendant (Cardigan) had enquired as to whether LU Simon would be prepared to fund the payment of the Purchaser Change Variations on the Project. I informed Mr Moschoyiannis that LU Simon was unable and did not agree to fund the payment of the Purchaser Change Variations. I was informed by Mr Moschoyiannis and believe that Mr Moschoyiannis informed Mr Fraser that LU Simon did not agree to fund the Purchaser Change Variations.

[49]Devitt Reply Affidavit, at [5]-[7] (emphasis in bold italics added).

Mr Devitt then continued to set out his recollection of the events which took place from February 2025 concerning the Purchaser Change Variations, L.U. Simon’s EOT Claims and Cardigan giving notice of its intention to cash the bank guarantees. He deposed as follows:[50]
[50]Devitt Reply Affidavit, at [8]-[13].

8.In February 2025, I became increasingly concerned about the amount and duration of outstanding progress claims which, at that time, exceeded $800,000. I asked Mr Scott Reid of LU Simon to arrange a face-to-face meeting with Mr Fraser to discuss my concerns.
9.On or about 6 February 2025, I attended a meeting at Woodside Green Cafe at 87 Cardigan Street Carlton, with Mr Fraser and Mr Scott to discuss the Project. Mr Fraser told me during the meeting that the financial structure of the Project was as follows:
(a) the first mortgagee was financially safe;
(b) the second mortgagee was financially safe; and
(c) the Singaporean equity partners will be taking a haircut (which I understood to mean taking a loss) but to what extent was unknown at that stage.

10.Mr Fraser also told me that the financier was not funding the Purchaser Change Variations of approximately $1.2million. I restated to Mr Fraser the message that I had asked Mr Moschoyiannis to convey months earlier that LU Simon would not provide funding for the Project and that we required all progress certificates to be paid in full.
11.On 4 March 2025, I attended a meeting at Gallagher Jeffs’ office with Mr Fraser, Mr Scott Reid, Mr Andrew Minty of Gallagher Jeffs and Mr Chris Burton of Gallagher Jeffs to discuss my concerns with the Project, including outstanding payment claims and unresolved claims for extensions of time. At that meeting, I told Mr Fraser that LU Simon would be providing further information in relation to its EOT Claims for review and consideration by Gallagher Jeffs. Mr Fraser stated that he would rely on Gallagher Jeffs with respect to the review of LU Simon’s EOT Claims and variations and that he would not be trying to influence them for the review of the resubmitted EOT claims. Mr Fraser stated that on the basis of Gallagher Jeffs’ assessment of the Date for Practical Completion and the current estimated Date of Practical Completion, he believed that the liquidated damages were in the order of approximately $6.2 million and he expected to use the liquidated damages payment to reduce the Singaporean Equity Investors’ losses. At that meeting, I told Mr Fraser words to the effect that LU Simon required all unpaid progress certificates to be paid in full.
12.After my meetings with Mr Fraser on 6 February 2025 and 4 March 2025, it became apparent that Cardigan was either unable or unwilling to make payment in full of all of the outstanding progress certificates. I instructed LU Simon’s solicitor, Mr Dimi Toumazou, to issue formal letters of demand to Cardigan pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic). I gave this instruction as I was concerned that the Project was due to be completed and that LU Simon would have large sums unpaid. A copy of the letters of demand issued by Mr Toumazou on 25 March 2025 and 27 March 2025 are contained at [6-12] of the Bundle.
13.After making these demands for payment of the outstanding progress certificates Cardigan gave notice of its intention to cash the bank guarantees.

Mr Reid also gave evidence (in his First Reply Affidavit) about the ‘Purchaser Change Variations’, in similar terms to that given by Mr Moschoyiannis and Mr Devitt, as follows:[51]
[51]Reid First Reply Affidavit, at [24]-[26].

Purchaser Change Variations
24.I refer to paragraphs 70 to 72 of the Fraser Affidavit where Mr Fraser deposes that LU Simon and Cardigan agreed for LU Simon to forgo its entitlement to claim payment in respect of the purchaser change variations on the Project (Purchaser Change Variations). In response to the allegations contained in paragraph 71 of the Fraser Affidavit, to the best of my knowledge and belief, neither Mr Moschoyiannis of LU Simon nor anyone else on behalf of LU Simon agreed to forgo LU Simon’s entitlement to receive payment for the Purchaser Change Variations as alleged by Mr Fraser.
25. While I recall being informed in or about early 2024 that Cardigan had asked whether LU Simon would agree to fund the payment of the Purchaser Change Variations on the Project, Mr Moschoyiannis told me that LU Simon did not agree to fund the Purchaser Change Variations.
26. I confirm that I attended a meeting with Mr Fraser and Mr Devitt in or about 4 March 2025. To the best of my knowledge and belief, I recall that during this meeting, Mr Devitt advised Mr Fraser words to the effect that LU Simon required all unpaid progress certificates to be paid in full.
. . .

While Mr Fraser of Cardigan filed a second affidavit sworn on 16 September 2025, shortly before the hearing, in which he stated that he had read Mr Reid’s First Reply Affidavit, he did not respond to Mr Reid’s evidence about the ‘Purchaser Change Variations’ set out above. Nor did Mr Fraser’s second affidavit make any reference to him having read Mr Devitt’s Affidavit in Reply, and he did not give any further evidence about what transpired at the meetings he had with Mr Devitt and others on or about 6 February 2025 and 4 March 2025. In his first affidavit, however, Mr Fraser had deposed about what took place at the 4 March 2025 meeting, as part of the ‘background’ to the (asserted) agreement regarding the ‘Purchaser Change Variations’:[52]

(k)On 4 March 2025,1 attended a meeting with Mr Devitt and Mr Reid of LU Simon in the offices of the Project Manager. At the conclusion of the meeting Mr Devitt formally asked me to arrange that Cardigan’s financier pay the purchaser change claims made at the end of 2024. I agreed to do so. This was the first time such a request was made to me. Following this meeting, Cardigan's financier PAG paid for the outstanding purchaser changes in full.

[52]First Fraser Affidavit, at [71(k)].

An affidavit of Cardigan’s solicitor, Mr Luke van Grieken, a partner of Norton Rose Fulbright, was also filed on behalf of Cardigan. In his affidavit, Mr van Grieken outlines the factual background to the proceeding; the limited undertakings that were given by Cardigan, as amended and extended from time to time between late April 2025 and late August 2025; the status of (alleged) defects at the Project; the number of apartments currently owned by Cardigan, and information pertaining to the current application.

Cardigan gave notice of its intention to have recourse to the Security based on its contractual right to liquidated damages

On 24 April 2025, Mr Fraser of Cardigan sent a letter to Mr Devitt, director of L.U. Simon, in relation to L.U. Simon’s (alleged) debt to Cardigan for liquidated damages under the Contract, and gave notice of Cardigan’s intention to have recourse to the Security in accordance with cl 5.2 of the Contract. Relevantly, in the letter, Cardigan stated:[53]
[53]Reid Affidavit, Exhibit SRR-1, at 471-472.

Liquidated Damages
Under clause 34.1 of the Contract, the Contractor shall ensure that the WUC reaches Practical Completion by the Date for Practical Completion. The Date for Practical Completion was 13 September 2024. As at the date of this letter, the Works have not reached Practical Completion.
In accordance with clause 34.7 of the Contract, if the WUC does not reach Practical Completion by the Date for Practical Completion, the Contractor is indebted to the Principal for liquidated damages at the rate stated in Annexure Part A for every day after the Date for Practical Completion to and including the earliest of the Date of Practical Completion or the termination of the Contract or the Principal taking the whole of the remaining WUC out of the hands of the Contractor. Annexure Part A states that the rate of liquidated damages is $32,000 per day.
As at the date of this letter, the Contractor is indebted to the Principal for liquidated damages as follows:

No. of days late

No less than 212 days

Liquidated damages rate

$32,000 per day

Liquidated damages payable

$6,784,000.00

The Principal notes additional liquidated damages may be payable in respect of further delays to achieving Practical Completion.
Notice of Intention to have Recourse to Security
In accordance with clause 5.2 of the Contract, the Principal gives the Contractor written notice of its intention to have recourse to the Security.
All of the Principal’s rights are reserved.

At the hearing, counsel for Cardigan referred to Mr van Grieken’s affidavit to demonstrate the two relevant dates of practical completion, the development having split into two severable portions, ‘SP 1’ and ‘SP 2’. Counsel pointed to the ‘SP 1’ certificate (dated 1 May 2025)[54], certifying that ‘the Works’ for Separable Portion 1 ‘have reached the stage of Practical Completion at 4pm on Tuesday 29^th April 2025’, but noting ‘the following [list of] incomplete works and minor defect items.’
[54]van Grieken Affidavit, Exhibit LVG-1, at 21.

Counsel for Cardigan submitted that 29 April 2025 was an ‘important date’ because that date ‘comes after the notice of recourse to the security was issued’, which was served on L.U. Simon on Thursday 24 April 2025 (being the day before the ANZAC Day public holiday). Counsel for Cardigan explained the ‘importance’ of the date, stating:[55]

Now, that's an important date, Your Honour, because it comes after the notice of recourse to the security was issued and so that this is the project manager saying, well I'm satisfied that you have sufficiently completed the works to certify these are being practically complete subject to the following defects, and you'll see that in the middle of the page there, Your Honour.
See ‘This certificate is issued noting the following incomplete and minor defect items’, and then you'll see, Your Honour, what follows in the hundred and – next 148 pages is more than 550 defects. Now, I don't need to take you through them all, Your Honour, but you can see there is a very large number of defects – and this is six or seven months after the original date for practical completion or the date at which the works should have been completed, they're completed very, very late and with many, many defects.

[55]Transcript 17.09.2025, at 35 (Mr Harris KC).

The certificate for ‘SP 2’[56] was issued on 16 May 2025, certifying completion on 9 May 2025. Counsel for Cardigan explained that this certificate ‘crystalises … entitlements to liquidated damages’ – that is to say, ‘the certificate for practical completion under the contract, that's the machinery by which the liquidated damages is crystalised.’[57]
[56]van Grieken Affidavit, Exhibit LVG-1, at 172.
[57]Transcript 17.09.2025, at 36 (Mr Harris KC).

The Superintendent’s Direction − ‘Notice – Certification of Liquidated Damages’ − was issued by the Project Manager on 16 June 2025. Relevantly, the Superintendent’s Direction stated:[58]
[58]van Grieken Affidavit, Exhibit LVG-1, at 20 (emphasis in bold italics added).

Pursuant to Clause 34.7 of the Design and Construct Contract between Cardigan Commercial Pty Ltd (The Principal) and L.U. Simon Builders Pty Ltd (The Contractor) we hereby provide notice of the certification of liquidated damages of $7,221,619.20, with respect to the time period set out below, which is now due and payable to the Principal by the Contractor:
Separable Portion 1:
Adjusted Contract date for Practical Completion: 13th September 2024
Practical Completion Certified: 29th April 2025
Total number of calendar days: 228
Liquidated Damages payable per calendar day as per Annexure A Item 29 minus SP2 LD rate: $31,500.80
SP1 Liquidated Damages Total = $7,182,182.40
Separable Portion 2:
Adjusted Contract date for Practical Completion: 19th February 2025
Practical Completion Certified: 9th May 2025
Total number of calendar days: 79
Liquidated Damages payable per calendar day as per SD No.96: $499.20
SP2 Liquidated Damages Total = $39,436.80
Final overall Liquidated Damages Total = $7,221,619.20

In his affidavit, Mr van Grieken referred to the Superintendent’s Direction certifying the liquidated damages for SP 1 and SP 2 as being $7,221,619.20, and deposed that:[59]

As at the date of this affidavit,[[60]] the Plaintiff [L.U. Simon] has failed to pay the liquidated damages which it is indebted to the Defendant [Cardigan].

[59]van Grieken Affidavit, [9(d)].

[60]24 August 2025.

Mr Reid deposed that on 24 April 2025, the parties agreed to a ‘stand still’ arrangement pending a mediation of the parties’ disputes under clause 42, however, at the mediation held on 20 August 2025 the matter did not settle.[61]
[61]Reid Affidavit, at [66]-[68].

As mentioned earlier, in the period since then, Cardigan has given (and refreshed) an undertaking not to have recourse to the Security pending determination of L.U. Simon’s summons seeking injunctive relief.

L.U. Simon’s case for injunctive relief

In the present case, L.U. Simon seeks injunctive relief against Cardigan to prevent it from having recourse to the Security (in the form of the two ANZ bank guarantees, each being for the sum of $[redacted]) L.U. Simon provided under the Contract.

Relevant legal principles

Counsel for L.U. Simon opened its case by outlining the applicable legal principles. He commenced by referring to Byrne J’s ‘classic statement of principles’ in Rejan Constructions Pty Ltd v Manningham Medical Centre Pty Ltd,[62] that ‘have been referred to and relied on in a number of important cases and remain good law’.[63]
[62][2002] VSC 579 (Rejan Constructions)
[63]Transcript 17.09.2025, at 4 (Mr Andrew KC).

Counsel noted that in Rejan Constructions, his Honour refers to the 1992 version of the standard form contract produced by Standards Australia, which is a precursor to the AS 4902-2000 General Conditions that apply in this case, under which the stated ‘purpose of the provision of security is to ensure the due and proper performance by the Contractor of the building contract’.[64] Counsel then focussed on Byrne J’s observations on the ‘notice’ requirement in cl 5.6 of the parties’ contract, being the right to recourse which was the equivalent of cl 5.5. of the 1992 version, where his Honour stated, as follows:[65]

33Second, cl. 5.5 of the 1992 version [which was cl 5.6 in the parties building contract] creates for the first time a procedure whereby the Principal must give notice before converting the non-cash security into money or having recourse to it. As the Standards Australia commentary on the AS2124-1992 form points out, this is evidently directed to giving to the grantor the right to approach the court for relief where it disputes the beneficiary’s right to act under cl. 5.5. Such a right would be illusory if the grantor could obtain relief only where the entitlement to exercise the right in respect of the security were construed to depend only upon a claim for the payment of money, and one which is bona fide and not specious or fanciful.
. . .
40The drafters of the 1992 version of the Standards Australia contract and of the building contract presently under consideration have demonstrated a great care that the grantor of the security, the Contractor, should not be disadvantaged by inappropriate action against the security by a party in dispute. The evident reason for this is that the maintenance of the security is in effect no disadvantage to either disputant; it simply means that there is a secure fund available to satisfy the Principal’s claim when, in due course, it is shown to be well-founded. The exercise by the Principal of rights under cl. 5.6 in the case where no money is later found to be owed to it risks imposing a grave disadvantage upon the Contractor. In the circumstances, I construe the present building contract to oblige the Principal, which wishes to exercise rights under cl. 5.6 as a consequence of an ex-contract liability, to demonstrate that this liability in fact exists. This it may do by agreement or by some authoritative determination whether by judicial order or arbitral award. Until this has been achieved the purpose for the granting of the security expressed in cl. 5.1 is sufficiently achieved by requiring that the security remain in place.

[64]Under the AS 4902-2000 General Conditions that apply in this case, cl 5.1 states: ‘Security and performance undertakings are for the purpose of ensuring the due and proper performance of the Contract. …’

[65][2002] VSC 579, at [33], [40]] (emphasis in bold italics added).

Counsel for L.U. Simon then referred to the decision of Judge Ginnane (as his Honour then was) in Mackie Pty Ltd v Republic of Turkey.[66] where the building contract was in the form of AS 2124-1992 but the parties had inserted into cl 5.5 (which dealt with ‘Recourse to Retention Moneys and Conversion of Security’) the following additional wording which is similar to that found in cl 5.2 in the present case. The additional wording added into cl 5.5 was framed as follows:[67]

“A party is not entitled to commence any proceeding, seeking relief by way of injunction or any other relief, which has as its objective the obtaining of an order preventing the other party from having recourse to retention moneys and/or security even though the party contemplating the commencement of proceedings may assert that there is no right to have recourse to retention moneys and/or security.”

[66][2013] VCC 430.

[67][2013] VCC 430, [5].

His Honour observed that the additional wording raises an ‘ouster of jurisdiction’ issue, stating:[68]

7The last paragraph added to clause 5.5 raises an ouster of jurisdiction issue. Counsel for the plaintiff argued that because clause 5.5 purported to disentitle the plaintiff from commencing the proceeding, it was on its face a clause intended to oust the jurisdiction of a Court and void for public policy in accordance with the decision in Dobbs v National Bank of Australasia.[69] The decision of Owen J in Bateman Project Engineering Pty Ltd v Resolute Ltd[70] also provides some support for that proposition. For the purposes of considering whether to continue the grant of the interlocutory injunction, I consider that there is a serious question to be tried about whether the clause is invalid as contrary to public policy on the basis stated in Dobbs case.

[68][2013] VCC 430, [7].

[69](1935) 53 CLR 643 at 652.

[70][2000] WASC 284.

Counsel for L.U. Simon pointed to the similarity between the language added to cl 5.5 in Mackie, and the wording in cl 5.2 in the present case, which he submitted is likewise an ‘ouster of jurisdiction’.[71] In Mackie, his Honour found that the plaintiff had established a serious question to be tried, being ‘whether the defendant is entitled to have recourse to the security and whether the pre-conditions for having access to that security have been established.’[72] Counsel for L.U. Simon observed that:[73]

Of course, that's different from this case because LU Simon says the serious question here relates to the ACL claims and not the satisfaction of any pre-conditions.

In a case such as the present one, where the Contract in question is found to have embodied a risk allocation mechanism agreed between the parties that establishes a ‘pay now, argue later’ regime, it is difficult to understand how the Principal’s exercise of the right to call upon the performance guarantee or bond can be regarded or characterised as ‘unconscionable conduct’ in the relevant sense, save for e.g. in an extreme case involving a bad faith exercise of the power. This is particularly so in circumstances where the relevant contract is one that embodies Australian Standards General Conditions that are in daily use in the industry.

For the foregoing reasons, I am not satisfied that L.U. Simon has demonstrated that there is a serious question to be tried. Further, given the lack of clarity in the formulation of its case, and the absence of any articulation of the discrimen that is said to render Cardigan’s conduct ‘unconscionable conduct’ in the relevant contravening sense, the Court is not in a position to be satisfied that L.U. Simon has made out a prima facie case in the sense of demonstrating that there is a sufficient likelihood of success at trial to justify the preservation of the status quo pending the determination of the parties’ rights at trial.

The balance of convenience

The two matters that were raised by L.U Simon as going to the balance of convenience were first, the risk of reputational damage that it will suffer if the ANZ bank guarantees are called on/cashed by Cardigan, and secondly, a concern that because Cardigan is an offshore project specific developer, that had been placed in external administration in 2020, ‘it is almost certain that should it later be found that Cardigan is liable to repay the amount of Security, LU Simon will have little prospect of recovering same.’[230] In that regard, L.U. Simon relied on the view expressed by Byrne J in Rejan Constructions to the effect that the exercise by a Principal where it is later found that no money is owing to Cardigan, risks imposing a ‘grave disadvantage’ on L.U. Simon.[231] But that view falls to be weighed against the cautionary note expressed by Osborn and Ferguson JJA in Sugar Australia, by reference to Bradto, that ‘[i]f the commercial purpose of a contractual provision is defeated’ – as it would be in the present case if the injunctive relief sought were obtained – ‘that must bear squarely on the ultimate risk of injustice inherent in the grant of an injunction.’[232]
[230]L.U. Simon outline (25.08.2025), [63].
[231]L.U. Simon outline (25.08.2025), [62].
[232][2015] VSCA 98, [34].

As to the first matter, it will be recalled that evidence was given by Mr Reid as to the reputational damage that L.U. Simon will suffer with its financiers, and that it may also lose government work as those tenders ‘require L.U. Simon to state whether it has ever had any of its security cashed.’ [233] If that be correct, those risks are risks that L.U. Simon was, or should have been aware of, when it entered into the Contract, in circumstances where the Security was a significant feature of the parties’ contractual arrangements.
[233]Reid Affidavit, at [70].

In the CPB Contractors case in the High Court, Nettle J was somewhat sceptical about the asserted risk of ‘reputational damage’ but acknowledged that each case turns on its facts. In dismissing CPB’s application for an interim injunction his Honour said:[234]

In the affidavit of Jason Zeb sworn 10 July 2017 in support of the application, it was deposed that a call by JKC on the bank guarantees could “potentially have an adverse effect on the financial position of CPB” because “[i]f a financial institution assesses CPB or other members of the CIMIC group [of which CPB is a member] as having a high or higher degree of financial risk, this can affect the price of CIMIC obtaining capital generally”. Similarly, it was stated that “CPB may also suffer adverse consequences to its lending arrangements as the price of CPB’s existing financing will increase”. Since that evidence was not challenged, I accept it. But it is to be observed that it is expressed in markedly tentative terms and, although Mr Zeb also stated in the affidavit that it could prove difficult to quantify the amount of loss which CPB might thereby suffer, it was not suggested that the amount of any such loss could not be assessed and recovered in the international arbitration if found to be due.
Mr Zeb further deposed that, if JKC makes a call on the bank guarantees, CPB’s “reputation in the industry will be adversely affected” the result of the liability to the bank thus incurred needing to be brought to account in CPB’s and CIMIC’s books of account, and thus would be perceived negatively by CPB’s customers and financiers. Once again, that evidence was not challenged and, therefore, I accept it. But I observe that, although a call on the bank guarantees would need to be reflected in CPB’s books of account, so too would need to be recorded the contingent asset constituted of CPB’s claim for repayment of the moneys which it says were not payable. The true and fair view of the company’s financial position thus stated would represent a true reflex of the facts, namely, that there is a dispute as to CPB’s liability for liquidated damages which remains to be determined by international arbitration.
Mr Zeb stated as well that a call on the bank guarantees would be an indication to “the market” that CPB cannot uphold its obligations in delivering projects. Perhaps; but I take leave to doubt it. Granted, as CPB contends, the prospect of reputational harm has been accepted as a relevant consideration by several experienced construction law judges.[235] But each case depends on its facts. Here, it is clear from Le Miere J’s and the Court of Appeal’s reasons for judgment that there has not yet been a determination of CPB’s alleged substantive liability for liquidated damages – that remains to be determined in the international arbitration – and it is clear from the Court of Appeal’s reasons for judgment that their Honours’ conclusion as to the proper construction of the sub contract is that JKC should “be in the money, to the extent of the Bank Guarantees, pending resolution of any dispute”.[236] If that be correct, and until and unless there is a successful appeal it must be accepted that it is correct, the fact that JKC is permitted to draw down under relevantly unconditional bank guarantees pending determination of the issue of substantive liability can hardly be seen as reflecting on CPB’s performance or, therefore, reputation as a contractor.

[234][2017] HCATrans 147, at 23-24.

[235]Austrak Pty Ltd v John Holland Pty Ltd [2006] QSC 103 at [29]‑[34]; Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd, Supreme Court of New South Wales, unreported, 2 December 1999; Barclay Mowlem Construction Ltd v Simon Engineering (Australia) Pty Ltd (1991) 23 NSWLR 451 at 461; Reed Construction Services Pty Ltd v Kheng Seng (Australia) Pty Ltd (1999) 15 BCL 158 at 167 per Austin J.

[236]CPB Contractors [2017] WASCA 123 at [112].

Similar comments might be made in response to the ‘high level’ statements made by Mr Reid. To the extent that there is any real prospect of reputational damage being suffered by L.U. Simon, it is open to it, as Nettle J observed in the CPB Contractors case ‘to avoid risk of reputational damage by tendering a sum equal to the amount of the claim, on account, in substitution for the amount payable under the bank guarantees.’[237] It will be recalled that counsel for L.U. Simon expressly raised this prospect at the conclusion of the hearing on 17 September 2025, but it became unnecessary to pursue it as counsel for Cardigan informed the Court that he had instructions to refresh the undertaking that had been given.
[237][2017] HCATrans 147, at 24.

As to the second matter, Mr Reid deposes to the effect that ‘Cardigan lacks financial resources‘[238] and, ‘if it receives the money from the Security, then that money will likely be disbursed offshore to either its financiers or investors or to pay off debts’,[239] rendering it unlikely that Cardigan will be able to repay that money. Counsel for Cardigan responded to this evidence at the hearing by referring the Court to evidence given by Mr Fraser and Mr van Grieken about Cardigan’s assets within the jurisdiction.
[238]Reid Affidavit, at [72].
[239]Reid Affidavit, at [71].

Mr Fraser deposed:[240]
[240]First Fraser Affidavit, at [73]-[74].

Cardigan’s Assets
73The Project consists of 80 apartments, which range in size from

1-bedroom apartments to 3-bedroom apartments and townhouses, with a price range between $[redacted] and $[redacted].
74Of the 80 apartments, 67 apartments have been sold, and Cardigan owns the remaining 13 apartments and commercial lots, valued at over $[redacted] million. These apartments and commercial spaces are currently unable to be sold due to the number of outstanding defects to be rectified by LU Simon, and the fact that LU Simon remain in occupancy of the commercial spaces to enable them to use the facilities and site amenities as they rectify the defective works.

Mr van Grieken deposed to similar effect, as follows:[241]
[241]van Grieken Affidavit, at [25]-[27].

The Plaintiff’s current ownership of Apartments
25I am informed by Mr Fraser, as at the date of this affidavit, the Defendant owns 13 apartments and commercial lots at the project to the value of over $[redacted] million. These apartments are not currently being marketed due to the state of the defective works affecting those apartments. The Plaintiff also currently occupies the commercial lots of the development notwithstanding vacating those spaces was an element of reaching Practical Completion in late April 2025.
26I am informed by Mr Fraser that as recently as 23 August 2025, Mr Fraser received a telephone call from an employee of the Plaintiff in respect to the defects present in an unsold apartment wherein the Plaintiff was provided with a list of defective works in March 2025 and until the telephone call on 23 August 2025 the Plaintiff had not taken any steps to rectify those defective works in the preceding five months.
27I am informed by Mr Fraser that it is likely that these apartments and commercial spaces may take at least 6 months to market, sell and dispose of given the number of outstanding defects to be rectified by the Plaintiff.

In circumstances where it is clear that Cardigan has significant assets within the jurisdiction, I am not satisfied that there is a risk of dissipation of assets. In the event it transpires that L.U. Simon is ultimately successful in its claims against Cardigan, the indications are that Cardigan would be able to satisfy an award of damages.

Having considered all of the material before the Court, and the submissions made by counsel for the respective parties I am not satisfied that the balance of convenience favours the grant of the injunctive relief sought by L.U. Simon.

Ground 2 of the Summons − As a Certificate of Practical Completion has issued for ‘SP 2’, L.U. Simon now seeks to have 50% of the Security returned to it

The second limb of the relief sought in the summons issued by L.U. Simons is framed as follows:[242]

2.An order requiring the Defendant to return one of the bank guarantees to the Plaintiff.

[242]Summons filed in the County Court, dated 22 August 2025.

The relief sought relates to cl 5.4 of the AS 4902-2000 General Conditions, which provides for the ‘Reduction and release’ of the Security. Clause 5.4 has been reproduced in its entirety earlier in these Reasons (at paragraph 30 above), but, in essence, the relevant part of the clause, which is contained in cl 5.4(a), provides that ‘[s]ubject to the Principal’s rights in relation to the Security under subclause 5.2, upon the last to occur of the following [five specified events or matters], the Principal’s entitlement to the Security shall be reduced to [50%].’

As noted earlier, with the Project Manager having, on or about 9 May 2025, issued a Certificate of Practical Completion under the Contract in respect of ‘SP 2’, L.U. Simon now claims that Cardigan is no longer is entitled to retain 50% of the Security held by it pursuant to the Contract and is required to release that Security to LU Simon.[243]
[243]L.U. Simon outline (25.08.2025), [57].

Cardigan disputes that each of the five specified events or matters have been satisfied, but it says in any event that ‘the reality is the clause is disengaged by the fact that the claim was made before the date for practical completion was certified.’[244]
[244]Transcript 17.09.2025, at 44 (Mr Harris KC).

Further, Cardigan says that following the issue of its notification to L.U. Simon on 24 April 2025 of its intention to have recourse to the Security, Cardigan gave an undertaking to L.U. Simon not to have recourse to either of the ANZ bank guarantees, in terms that would permit L.U. Simon to seek injunctive relief. But the correspondence passing between the solicitors for the respective parties expressly records that in so doing, ‘Cardigan reserves all its rights.’[245]
[245]van Grieken Affidavit, Exhibit LVG-1, at 183.

Counsel for Cardigan submitted that that reservation has continued as each of the further indulgences have been granted over the past few months whilst L.U. Simon has continued to press for injunctive relief. Meanwhile, he said ‘our [Cardigan’s] vested entitlement to $7.2m of liquidated damages is there, it's still there, it's accumulating interest, we haven't been paid.’[246]
[246]Transcript 17.09.2025, at 49-50 (Mr Harris KC).

L.U. Simon refers to a later exchange of email correspondence between the solicitors for the parties on 8 May 2025,[247] whilst arrangements for a mediation were being discussed, whereby they agreed inter alia that Cardigan’s entitlement to Security would not be reduced under cl 5.4 until the last to occur of:

(a) the conditions in cl 5.4(a)(i) to (v) have been fully satisfied; and

(b) 10:00am on Friday 11 July 2025.

[247]van Grieken Affidavit, Exhibit LVG-1, at 191-193.

L.U. Simon submits that as it ‘has satisfied the conditions for the return and release of its security pursuant to clause 5.4 and Friday, 11 July 2025 has now passed,’ Cardigan is no longer is entitled to retain 50% of the Security held by it pursuant to the Contract and is required to release that Security to LU Simon.[248]
[248]L.U. Simon outline (25.08.2025), [57].

Each of Mr Fraser (on behalf of Cardigan) and Mr Reid (on behalf of L.U. Simon) has given evidence respectively about the non-satisfaction and satisfaction of the conditions in cl 5.4(a) of the Contract.

Consideration and disposition

L.U. Simon relies on the decision of the Court of Appeal of South Australia in Synergy Construct Australia Pty Ltd v GSA North Terrace Pty Limited ATF GSA North Terrace Unit Trust[249] as authority supporting its claim that Cardigan must return one of the two bank guarantees that together constitute the Security. In my view, however, it does not assist to resolve the issue in the present case.
[249][2025] SASCA 72 (Livesey ACJ, S Doyle and B Doyle JJ).

In Synergy Construct Australia, the contractual arrangements under consideration were expressed in different terms, and the factual scenario was markedly different to the present one. The Court of Appeal described the ‘essential question’ in the case as being:[250]

5… whether, having concluded that there was a serious question that GSA had come under an obligation to return the bank guarantees before it had made or foreshadowed a demand on them, the judge erred by treating their character as risk allocation devices as effectively controlling the availability of interlocutory injunctive relief and as neutralising the prejudice Synergy would suffer if the injunction were refused.

[250][2025] SASCA 72, at [5] (emphasis in bold italics added).

The Court then addressed the proper construction of the contractual arrangements in place between the parties under cl 5.2 (Conversion and Recourse) and cl 5.4 (Reduction and release), which were framed in different terms to those in the Contract in the present case, stating:[251]

6In our view, on the proper construction of the arrangements, it can be accepted that during the period in which GSA was entitled to hold the guarantees, they performed a risk allocation function. That is to say, the guarantees were intended to operate not merely as security for the recovery of any proved claims or entitlements GSA had against Synergy. They also entitled GSA to make demand upon the guarantees to satisfy any bona fide claim it had against Synergy, even though the demand might have been contested, and ultimately require determination by an arbitrator. In this sense, Synergy was required (by the medium of the guarantees) to ‘pay now, argue later’.
7However, on the proper construction of the contractual arrangements, once GSA was required to return or release the guarantees, it followed that it was thereafter precluded from making a demand upon them. GSA could scarcely be entitled to make a demand upon a guarantee that it was obliged to return and release. They were not intended to perform a risk allocation function once they were required to be returned.

[251][2025] SASCA 72, at [6]-[7] (emphasis in bold italics added).

In my view, in the present case, the resolution of this issue about the return of 50% of the Security turns on the proper construction of the contractual arrangements made between the parties, as set out in cl 5.2 and cl 5.4. The ‘reduction and release’ of 50% of the Security that takes place under cl 5.4 is expressly subject to ‘the Principal’s rights in relation to the Security under subclause 5.2’. In the present case, those rights of the Principal under subclause 5.2 were exercised by Cardigan when it gave notice to L.U. Simon on 24 April 2025 of its intention to have recourse to the Security.[252] Accordingly, I agree with the submission advanced by Cardigan, to the effect that Cardigan having exercised its right under cl 5.2, and the period of three days’ notice having passed, its entitlement has vested, subject to any order of the Court to the contrary.
[252]van Grieken Affidavit, [9], Exhibit LVG-1, at 18-19.

In the circumstances, I do not propose making an order of the kind sought in paragraph 2 of the summons.

Summary of conclusions

For the reasons set out above, I have reached the following conclusions:

(a) I am not satisfied that L.U. Simon has demonstrated that there is a serious question to be tried. Further, given the lack of clarity in the formulation of its case, and the absence of any articulation of the discrimen that is said to render Cardigan’s conduct ‘unconscionable conduct’ in the relevant contravening sense, the Court is not in a position to be satisfied that L.U. Simon has made out a prima facie case in the sense of demonstrating that there is a sufficient likelihood of success at trial to justify the preservation of the status quo pending the determination of the parties’ rights at trial.

(b) I am not satisfied that the balance of convenience favours the grant of the injunctive relief sought by L.U. Simon.

(c) I do not propose making an order of the kind sought in paragraph 2 of the summons (seeking that 50% of the Security should be returned).

(d) Accordingly, the summons should be dismissed.

I will hear from the parties on the appropriate form of orders, including as to costs.

(a) the Formal Instrument of Agreement (148–153);
(b) the Contractor’s Clarifications and Exclusions Schedule (405–406);

(c)the General Conditions of Contract, being the attached AS 4902-2000 General Conditions of Contract (as amended) including any schedule or annexure to it (154-470); and

(d) those additional documents attached or referred to at Annexure Part P (315–385).

Date	Document	Facilities
1 June 2021	Loan Note Subscription Agreement (LNSA)	Facility A: $[redacted]
		Facility B: $[redacted]
		Facility C: NIA
		Total: $[redacted]
24 December 2021	First Amendment Deed to incorporate construction sub- limit amount	Facility A: $[redacted]
		Facility B: $[redacted]
		Facility C: $[redacted]
		Total: $[redacted] (including Construction Sub-Limit: $[redacted])
21 December 2023	Second Amendment Deed	Facility A: $[redacted]
		Facility B: $[redacted]
		Facility C: $[redacted]
		Total: $[redacted] (including Construction Sub-Limit $[redacted])
15 May 2025	LNSA - Upsize Letter	Facility A: $[redacted]
		Facility B: $[redacted]
		Facility C: $[redacted]
		Total: $[redacted] (including Construction Sub-Limit: $[redacted])

No. of days late	No less than 212 days
Liquidated damages rate	$32,000 per day
Liquidated damages payable	$6,784,000.00

[2025] VSC 655

17 October 2025