Lanskey Constructions Pty Ltd v Westrac Pty Ltd - [2022] WASC 90

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   LANSKEY CONSTRUCTIONS PTY LTD -v- WESTRAC PTY LTD [2022] WASC 90
CORAM:   HILL J
HEARD:   28 FEBRUARY 2022
DELIVERED          :   2 MARCH 2022
PUBLISHED           :   14 MARCH 2022
FILE NO/S:   CIV 1160 of 2022
BETWEEN:   LANSKEY CONSTRUCTIONS PTY LTD
Plaintiff

AND

WESTRAC PTY LTD
Defendant

Catchwords:

Building and construction - Interlocutory injunction to restrain recourse to security - Whether party should be prevented from having recourse to security for claim for liquidated damages when other party contends there was an oral agreement that liquidated damages would not apply to contract - Insufficient prima facie case - Balance of convenience - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	T J Porter
Defendant	:	T J Palmer SC

Solicitors:

Plaintiff	:	Corrs Chambers Westgarth
Defendant	:	HWL Ebsworth

Cases referred to in decision:

Austal Ships Pty Ltd v National Australia Bank Ltd (Unreported, WASC, Library No 97003713, February 1997)
Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Clough Engineering Ltd v Oil & Natural Gas Corp Ltd [2008] FCAFC 136; (2008) 249 ALR 458
CPB Contractors Pty Ltd v JKC [No 3] [2017] WASCA 132
Duro Felguera v Samsung C&T Corporation [2016] WASC 119
FMT Aircraft Gate Support Systems v Sydney Ports Corporation [2010] NSWSC 1108
Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 210
Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990
Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98
United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] AC 16
Wood Hall Ltd v Pipeline Authority (1979) 141 CLR 443

HILL J:

(This judgment was delivered extemporaneously and has been edited from the transcript.)

On 25 February 2022, the plaintiff, Lanskey Constructions Pty Ltd (Lanskey), commenced these proceedings by way of originating motion seeking urgent injunctive relief against Westrac in relation to three bank guarantees issued by the National Australia Bank Ltd totalling $168,993.04.
The plaintiff seeks an order that Westrac Pty Ltd (Westrac) and its officers, employees, agents or otherwise be restrained until further order from presenting for payment to National Australia Bank Ltd three bank guarantees being:
(a)Bank Guarantee 972173985 dated 17 July 2020 for $84,281.70 (for Separable Portion 2);
(b)Bank Guarantee 972104680 dated 17 July 2020 for $16,944.08 (for Separable Portion 3);
(c)Bank Guarantee 399677370 dated 17 July 2020 for $67,767.26 (retention for final completion).
In support of its application, the plaintiff relies on two affidavits: an affidavit of Steve Garces dated 24 February 2022 and an affidavit of its solicitor, Spencer Flay dated 27 February 2022, together with an outline of submissions.
Despite the originating motion suggesting the application was brought on an ex parte basis, the application and supporting materials were served on the defendant who was represented by senior counsel at the hearing before me on 28 February 2022. The defendant opposed the grant of any injunctive relief. In opposition to the application, the defendant filed an affidavit of its solicitor, Christopher Hood dated 28 February 2022, as well as an outline of submissions.

Factual background

The dispute between the parties concerns the Westrac Capacity Expansion Project at 30 Adams Drive Welshpool (Welshpool Project). On 14 April 2020, the parties entered into a contract for the plaintiff to perform early works on the Welshpool Project under an amended AS 4902‑200 form of contract (Contract).[1]
[1] Affidavit of Steve Garces filed 25 February 2022 [7].
Clause 5 of the Contract required Lanskey to provide Westrac with security in accordance with Item 14 of Annexure Part A. Item 14 required Lanskey to provide to Westrac unconditional irrevocable bank guarantees, capable of conversion into cash at any time by Westrac to the value of 2.5% of the Contract Sum.
Pursuant to cl 5.2, Westrac could have recourse to the security in four circumstances. First, where they were entitled to exercise a right under the Contract in relation to the security. Second, where Lanskey failed to comply with a material obligation under the Contract. Third, where there is a debt payable by Lanskey to Westrac and fourth, subject to cl 37.4, to meet any bona fide claims that Westrac has against Lanskey arising out of, or in connection with, the Contract. Clause 37.4 provides that any debt due or bona fide claim to moneys could be deducted by Westrac from any security held by Westrac.
Clause 34.7 of the Contract set out the parties' agreement in relation to liquidated damages. Under this clause, if Lanskey did not reach practical completion by the required date, it was indebted to Westrac for liquidated damages at the rate stated in Item 29 for every day after the date for practical completion, up to and including the earliest of the date of practical completion or termination of the Contract. This was subject to the cap set out in Item 29A. The Annexure Part A of the Contract provided that the rate of liquidated damages was $3,155 per day (ex GST) to a maximum of $300,000 (ex GST).
The works to be performed by Lanskey under the Contract were divided into separable portions. Originally there were six separable portions but ultimately, separable portion 4 was incorporated into separable portion 1.[2] Each of the separable portions had different dates for practical completion. It is not in dispute between the parties that:
(a)separable portion 2 had a date for practical completion of 16 March 2021 and practical completion was achieved on 7 April 2021;
(b)separable portion 3 had a date for practical completion of 16 March 2021 and practical completion was achieved on 7 April 2021;
(c)separable portion 5 had a date for practical completion of 25 February 2021 and practical completion was achieved on 12 May 2021; and
(d)separable portion 6 had a date for practical completion of 25 May 2021 and practical completion was achieved on 25 June 2021. In respect of this portion, on its award on 24 March 2021, the parties agreed that liquidated damages would be $1,000 per day with a cap of $30,000.[3]
[2] Affidavit of Steve Garces filed 25 February 2022 [8].
[3] Affidavit of Steve Garces filed 25 February 2022 'SG-4'.
Under the Contract, Lanskey provided Westrac with six bank guarantees; three of which have been returned.[4] The remaining bank guarantees are required to be retained by Westrac for the duration of the defects liability period and until issue of the final certificate under cl 37.5 of the Contract.
[4] Affidavit of Steve Garces filed 25 February 2022 [10] – [11].
The bank guarantees are in identical terms.[5] Under the terms of the bank guarantee, payment of the amount or any amount of the guarantee is required to be made to Westrac upon the Bank receiving an unconditional written demand from Westrac accompanied by the guarantee, irrespective of the performance or non-performance by Lanskey or Westrac of the agreement and without reference to Lanskey. Under the terms of the guarantees, the bank is under no obligation to enquire about the performance or non‑performance of the Contract or to enquire about the validity of any demand.
[5] Affidavit of Steve Garces filed 25 February 2022 'SG-5', 'SG-6', 'SG-7'.
At the time Lanskey was performing the Contract, Lanskey submitted a proposal for Westrac's Capacity Expansion Project at 128 ‑ 136 Great Eastern Highway, South Guildford (Guildford Project). Ultimately, on 18 February 2021, the parties entered into a contract for the Guildford Project (Guildford Contract).[6]
[6] Affidavit of Steve Garces filed 25 February 2022 [15] – [16].
Mr Garces, the State Manager of the plaintiff, contends that in or about January 2021, he had discussions with Adam Cook, who was then Westrac's Executive General Manager Product Support Metro/Operations about the Guildford Contract. Mr Garces' evidence is that he told Mr Cook the plaintiff was considering withdrawing its tender for the Guildford Contract because extensions of time had not been given for separable portions 2, 3 and 5 for the Contract. He said that Lanskey did not want to enter into the Guildford Contract if it was to be administered by someone who did not award legitimate extension of time claims.[7]
[7] Affidavit of Steve Garces filed 25 February 2022 [20] – [22].
On 11 January 2021, Mr Garces met with Mr Cook. Mr Garces' evidence is that during this meeting, he 'proposed to Mr Cook that Westrac not impose liquidated damages on the Contract if Lanskey did not claim delay damages arising from its entitlements to extensions of time'. He deposes that: 'On the basis that Lanskey did not withdraw its tender for the Guildford Contract, Mr Cook accepted [his] proposal'.[8]
[8] Affidavit of Steve Garces filed 25 February 2022 [25] – [26].
In August 2021, Mr Cook left Westrac's employ.[9]
[9] Affidavit of Steve Garces filed 25 February 2022 [27].
On 8 February 2022, Westrac demanded payment of liquidated damages of $408,600 under the Contract and reserved its rights to have recourse to the bank guarantees within 28 days if its demand was not met.[10] The basis for the calculation of liquidated damages was set out in a schedule to the letter which relevantly provided that:
[10] Affidavit of Steve Garces filed 25 February 2022 'SG-20'.

Separable portion Days' delay Rate Total

2 22 $3,155 (ex GST) $69,410

3 22 $3,155 (ex GST) $69,410

5 76 $3,155 (ex GST) $239,780

6 31 $1,000 (ex GST) $30,000 (cap)

On 10 February 2022, the plaintiff responded to Westrac's letter of demand and disputed Westrac was entitled to make any claim for liquidated damages.[11] In his response, Mr Garces enclosed an email exchange between him and Mr Cook in February 2021.[12] Relevantly, in his email of 18 February 2021, Mr Garces enclosed an email Lanskey had received from the Superintendent of the Contract. The email referred to the inability to assess Lanskey's outstanding EOT claims due to an outstanding request for an updated program and that the claims were not approved. The email foreshadowed a claim for liquidated damages as the then current dates for practical completion for separable portions 2 and 3 had not been met. Mr Garces forwarded this email to Mr Cook and wrote 'I was of the understanding that no LDs would apply whilst trying to finalise the works at Welshpool, and conversely, Lanskey would not seek any delay costs?'. Mr Cook acknowledged receipt of the email on the same day and responded 'please let me look into background on 'why' this was sent and revert.' The following week, on 25 February 2021, Mr Cook responded that 'The Superintendent is administering the contract 'day to day' and is not aware of our agreement, but if he presents a recommendation with this intent, he will be informed on our agreement around the application of LD's on this contract'.
[11] Affidavit of Steve Garces filed 25 February 2022 'SG-21'.
[12] Affidavit of Steve Garces filed 25 February 2022 'SG-22', 'SG-23'.
On 18 February 2022, Westrac responded to Lanskey's letter of 10 February 2022.[13] Westrac denied it had waived its entitlement to liquidated damages. Westrac contended, based on its construction of the email exchange, that the agreement was a limited moratorium on disputes until the works under the Contract were complete. Westrac said that, as this had now occurred, any moratorium no longer applied. In any event, Westrac denied that any agreement could apply to separable portion 6, which was only directed on 24 March 2021.
[13] Affidavit of Steve Garces filed 25 February 2022 'SG-24'.
Lanskey responded to this letter on 22 February 2022.[14] It contended, amongst other things, that any assertion that the agreement was for only a limited period of time was incorrect and noted that practical completion of the separable portions had only been only achieved between April and June 2021.
[14] Affidavit of Steve Garces filed 25 February 2022 'SG-25'.
On 25 February 2022, Westrac responded to this further letter and again denied it was not entitled to claim liquidated damages.[15] In addition to the previous matters it had raised, it contended that any waiver of rights could only apply to the delays which were known at the time, comprising 19 days in respect of separable portion 2, and 8 days on each of separable portions 3 and 5. Westrac maintained it had a bona fide claim against Lanskey and reserved its rights in relation to recourse to the bank guarantees.
[15] Affidavit of Spencer Edward Flay filed 27 February 2022 'SF-1'.
Since that date, and prior to the hearing on 28 February 2022, the parties and their solicitors have exchanged further correspondence in respect of the matter.[16]
[16] Affidavit of Spencer Edward Flay filed 27 February 2022.

Parties' submissions

The plaintiff contended that an interim injunction should be granted for three primary reasons. First, if an order is not made, the plaintiff's rights may be lost on a final basis. In contrast, the plaintiff contended there was no prejudice to Westrac if an interim order were made. Second, the plaintiff submitted it had a 'very strong application' that Westrac did not have a bona fide claim against Lanskey as a result of the oral agreement of 11 January 2021. Counsel for the plaintiff submitted that a claim made with 'reckless indifference to the truth' was not a bona fide claim. Third, given the contest between the parties, the plaintiff submitted that the defendant should be given an opportunity to file evidence in relation to the asserted claim.
The defendant disputed each of these matters. Notably, the defendant did not seek an opportunity to file answering affidavits. Senior counsel for the defendant submitted that this was, at least in part, because of the relatively low value of the bank guarantees of less than $170,000 which is significantly less than the usual jurisdiction of this court. Senior counsel submitted the application should be dismissed for three primary reasons. First, senior counsel for the defendant submitted the plaintiff had not established a prima facie claim of bad faith. Westrac submitted that cl 5.2(d) of the Contract set a low threshold for Westrac to have recourse to the bank guarantees. It only required Westrac to have a 'bona fide claim' against Lanskey. In Westrac's submission, this only required the claim to have been made in good faith. Given that Westrac denied it had waived any entitlement to liquidated damages, it could not be said its claim had not been made in good faith. The correspondence between the parties evidenced there was a dispute between the parties; it did not establish that Westrac would be acting in bad faith if it were to call on the bank guarantees.
Second, the defendant denied the plaintiff had established a prima facie case that it would be unconscionable for Westrac to call on the bank guarantees. In its submission, the ability of Westrac to call on the bank guarantees was conditioned only on an assertion by Westrac of a right, notwithstanding any dispute between the parties. There was no evidence before the court of fraud or unconscionability on the part of Westrac and, as such, Lanskey had not established a prima facie case of bad faith.
Finally, the defendant disputed that the balance of convenience favours the grant of the injunction and submitted that damages are an adequate remedy. Westrac noted that Lansky could avoid the risk of the call on the bank guarantee by paying Westrac a sum equal to the amount of the bank guarantees and that the grant of any relief would deprive Westrac of its contractual rights.

Legal principles governing the grant of an interlocutory injunction

The principles to be applied on an application for an interlocutory injunction are well-known and are not in dispute. The court must consider whether there is a serious question to be tried and whether the balance of convenience favours the grant of the injunction.[17]
[17] Australian Broadcasting Corp v O'Neill [2006] HCA 46; (2006) 227 CLR 57.
Where an application is to restrain a call on a bank guarantee, the general position is that a court will not restrain payment under an unconditional obligation in a bank guarantee.[18]
[18] Wood Hall Ltd v Pipeline Authority (1979) 141 CLR 443.
There are three exceptions to this general rule, namely:[19]
(a)fraud;
(b)unconscionability in contravention of the Australian Consumer Law; and
(c)breach of a contractual promise not to call upon the bond.
[19] Clough Engineering Ltd v Oil & Natural Gas Corp Ltd [2008] FCAFC 136; (2008) 249 ALR 458.
As has been previously noted by the courts, bank guarantees have an important part to play in trade and commerce, particularly in the construction industry. For this reason, certainty as to the construction and operation of the common forms in which these contractual provisions are drafted and the circumstances in which the obligations will be triggered is important.[20]
[20] FMT Aircraft Gate Support Systems v Sydney Ports Corporation [2010] NSWSC 1108 [1] citing Wood Hall Ltd v Pipeline Authority.
In this case, the plaintiff did not contend there was fraud or a breach of a contractual promise not to call on the bank guarantees. The plaintiff submitted the defendant's conduct in making a claim for liquidated damages, given the oral agreement between the parties, was unconscionable, alternatively that the contractual precondition for the call had not been met.
In considering the terms of the contract which set out the call on the bank guarantee, as was noted by Le Miere J in Duro Felguera v Samsung C&T Corporation,[21] there are two questions that arise. First, the court must ask whether the security is to provide security for a valid claim against the contractor or to allocate risk pending the final determination of the parties' rights. Second, the court must determine the condition on which the principal may convert the security into money.
[21] Duro Felguera v Samsung C&T Corporation [2016] WASC 119.
In proceedings which concern the issue of whether a principal is entitled to call on the bank guarantee, it is generally inappropriate to determinate the validity or quantification of the principal's claim. This should be determined at a later stage.
If the clause is considered to be a risk allocation measure, this alters the context in which the court must consider any application for an injunction. In considering the status quo, the court must take account of the agreement between the parties as to who should bear the financial risk of any dispute pending final determination.[22]
[22] Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 [31] (Osborn & Ferguson JJA).

Disposition

Serious question to be tried

In this case, in determining whether the plaintiff is entitled to the interim relief it seeks, the court is required to construe cl 5.2(d) of the Contract and in particular the meaning of the phrase 'bona fide claims'. There is nothing in the circumstances of this case that would mean it is inappropriate for the court to determine the proper construction of this clause on a final basis.
This requires the court to consider what a reasonable businessperson would have understood the phrase to mean, having regard to the text, context and commercial purpose of the provision.[23]
[23] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990 [47] (French CJ, Nettle & Gordon JJ).

The plaintiff did not dispute, quite properly in my view, that cl 5.2(d) was a risk allocation measure. That is, cl 5.2(d) allocates the risk between the parties pending final resolution of any dispute between them. I accept that it is clear from the wording of cl 5.2(d) that the parties agreed that where Westrac has a bona fide claim against Lanskey, it is Lanskey and not Westrac who is 'out of pocket' pending final resolution of any dispute between them.
Turning then to the circumstances in which Westrac can convert the bank guarantees, the Contract provides that Westrac may have recourse to the bank guarantees in four different scenarios. These include where Lanskey has breached a material term of the contract, where there is a debt owing by Lanskey, and relevantly for these proceedings to meet any 'bona fide claims' it may have against Lanskey. The structure of the clause makes plain that there does not need to be a breach of the contract or for a debt to be due and owing in order for a call on the bank guarantees to be made.
It is also important to note that the clause uses the phrase 'bona fide claims' and not 'entitlement'. The ordinary and natural meaning of the word claim is 'a demand for something as due; an assertion of a right or alleged right',[24] or 'a demand for something as due; an assertion of a right to something'.[25] 'Bona fide' is a Latin phrase which means 'to do something in good faith or with an honest intention'.[26]
[24] Macquarie Dictionary.
[25] Oxford Dictionary.
[26] Encyclopaedic Australian Legal Dictionary.
On this basis, I consider the phrase 'bona fide claim' to mean a demand that is made in good faith in relation to an amount due under the Contract. This requires Westrac to honestly and genuinely believe it is entitled to recover the amount claimed under the Contract and that it is a genuine claim which is not fraudulent or untenable.
In my view, the language of cl 5.2(d) confers on the defendant a wide discretion which is constrained only by the need that it act honestly. In this regard, it is important to note that the parties have not included a contractual requirement that the defendant also act reasonably.
However, this does not mean that objective considerations are irrelevant. In my view, the phrase 'bona fide claim' requires more than a subjective belief as to the claim (which could be irrational or misconceived). Consideration of the circumstances in which any call on the bank guarantee is made will be relevant to determining whether the defendant has made a demand in good faith. This requires the defendant to have an arguable claim which is not 'specious, fanciful or untenable'.[27] Put another way, Westrac will not have a 'bona fide claim' if there is no proper or real foundation for the belief that it is or will be entitled to recover the relevant amount from Lanskey.
[27] FMT Aircraft Gate Support Systems v Sydney Ports Corporation [14] citing Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 210, 216.
Counsel for the plaintiff submitted that a claim made with reckless indifference to the truth is not a bona fide claim. In support of this submission, the plaintiff relied on the Court of Appeal decision in Ideas Plus Investments Ltd v National Australia Bank Ltd[28] at [93] where Steytler P stated:
In my opinion the authorities stand firmly in the path of the contention that the reference to fraud in the cases dealing with payments made under letters of credit means anything other than the lack of an honest belief in entitlement to demand payment. Consequently, there would only relevantly be fraud on the power given to the beneficiary by the letter of credit if it gave a certificate to the effect that payment was due with no belief in the truth of the certificate or, perhaps, with reckless indifference as to its truth. (citations omitted)
[28] Ideas Plus Investments Ltd v National Australia Bank Ltd [2006] WASCA 215.
The reference to reckless indifference was to a decision of Templeman J in Austal Ships,[29] where his Honour stated at [12] of the decision that:
Mr McCusker submits, and I accept, that there is no evidence to suggest that the ING Bank acted fraudulently when it made its claim under the letter of credit, in the sense that it knew no monies remained unpaid to Fast Ferries One or was recklessly indifferent to that. And that is the test, as set out in the extract from Lord Diplock's judgement which I have quoted above.
[29] Austal Ships Pty Ltd v National Australia Bank Ltd (Unreported, WASC, Library No 97003713, February 1997).
The reference to Lord Diplock's judgment is the judgment in United City Merchants (Investments) Ltd v Royal Bank of Canada[30] where Lord Diplock stated at 183:
The whole commercial purpose for which the system of confirmed irrevocable documentary credits has been developed in international trade is to give to the seller an assured right to be paid before he parts with the control of the goods that does not permit of any dispute with the buyer as to the performance of the contract of sale being used as a ground for non-payment or reduction or deferment of payment.
To this general statement of principle as to the contractual obligations of the confirming bank to the seller, there is one established exception: that is, where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of fact that to his knowledge are untrue.
[30] United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] AC 16.
As is apparent from these excerpts, each of these cases concerned a claim made on a letter of credit and whether the preconditions for that claim were satisfied. I do not consider that these cases, which concern a different instrument to that under consideration in these proceedings, assist the plaintiff in the proper construction of the Contract and the meaning of 'bona fide claims' in cl 5.2(d). I am not persuaded that reckless indifference, even if this existed, would be sufficient to establish that the claim made by Westrac was not 'bona fide'.
The plaintiff disputes that Westrac has a bona fide claim for liquidated damages. This was on the basis that there is no evidence before the court that Mr Williams of Westrac made his own enquiries in relation to the oral agreement of 11 January 2021, what its terms were or how this impacts on any claim for liquidated damages. Counsel for the plaintiff submitted that Mr Williams had impermissibly referred to the post-contractual email exchange to determine what the terms of any agreement were. The plaintiff submitted that by reason of the oral agreement, the existence of which is evidenced by the email exchange, the defendant does not have a bona fide claim against the plaintiff for liquidated damages and that Westrac's demand is, in all the circumstances, unconscionable. In particular, counsel for the plaintiff relied on the fact there was no evidence adduced by the defendant from Mr Williams and accordingly there was no evidence that the defendant has a bona fide claim for liquidated damages.
I do not accept this submission. While I accept that it is common for a defendant to adduce evidence in opposition to an application for an interlocutory injunction, I do not consider that it is a requirement that they do so. In my view, it is open to a defendant to contest whether the plaintiff has established a prima facie case that the defendant is acting in bad faith in making a claim against the security, in defending an application for interlocutory relief, by relying on the documents filed by the plaintiff.
In this case, in order to be satisfied the plaintiff had a prima facie case that the defendant did not have a bona fide claim in respect of liquidated damages, I would need to be satisfied that the parties had entered into an oral agreement on 11 January 2021, that the agreement prevented the defendant from making any claim for liquidated damages on any of the separable portions of the Contract, and there was no serious argument in respect of either of these matters. In my view, for the following reasons, the evidence adduced by the plaintiff does not go this far.
First, in determining the terms of an oral agreement in the absence of a contemporaneous record or other corroboration, the court must be alive to the reality that words that are spoken are capable of bearing different and potentially opposed meanings depending on the nuance and emphasis that is given to particular words. A person's appreciation of the significance of these matters must necessarily be considerably diminished if there is a significant delay between the date when the conversation took place and when evidence of the conversation is given. As Hammerschlag J stated in John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd:[31]
Where a party seeks to rely upon spoken words as a foundation for a cause of action, including a cause of action based on a contract, the conversation must be proved to the reasonable satisfaction of the court which means that the court must feel an actual persuasion of its occurrence or its existence. Moreover, in the case of contract, the court must be persuaded that any consensus reached was capable of forming a binding contract and was intended by the parties to be legally binding. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved.
[31] John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 [94].
In this case, the evidence of Mr Garces of the oral agreement is in very general terms. He does not give evidence of the words that he said or what Mr Cook said in response. For this reason, I consider it is not clear on the evidence before me what the precise terms of the alleged oral agreement are. This cannot be resolved on an interlocutory application without the relevant witnesses giving evidence and being cross-examined.
Second, at the time of the conversation between Mr Garces and Mr Cook:
(a)the dates for practical completion were still in the future. For that reason, as at 11 January 2021, Westrac had no existing right to liquidated damages;
(b)there is no evidence before the court as to what extensions of time or damages for delay had been, or could be, sought by Lanskey at that date, if any; and
(c)separable portion 6 had not been issued.
Each of these matters provide important context to the oral agreement on which the plaintiff relies.
Third, while I accept the evidence before the court supports a finding that there is a dispute between Lanskey and Westrac as to whether, ultimately, Westrac will be entitled to succeed in its claim for liquated damages, this, of itself, does not mean that Westrac's claim for liquidated damages is not a 'bona fide claim'. In my view, it cannot be said on the evidence before the court that Westrac's claim for liquidated damages is unarguable, specious or not made in good faith, or that it can be said that in making its claim for liquidated damages, the defendant has not acted bona fide.
For these reasons, in my view it is not unarguable that Westrac has a right to the liquidated damages it has claimed and cannot be said that it is not acting bona fide in claiming it is or will be entitled to recover liquidated damages from Lanskey. Lanskey has not established that it has a strong prima facie case that Westrac is acting in bad faith in making this claim.
In any event, even if I am wrong in this conclusion, for the same reasons, I do not consider that Lanskey's case is sufficiently strong to warrant the grant of an injunction which will not preserve the status quo but will have the effect of altering the risk allocation the parties agreed to in the Contract.

Balance of convenience

Given my conclusion that the plaintiff has not established there is a serious question to be tried, it is strictly unnecessary for me to consider the balance of convenience. However, for the sake of completeness, I will briefly address the matters raised by the plaintiff.
The evidence before me is that, if the bank guarantees are presented for payment, the plaintiff will be required to immediately repay or reimburse the National Australia Bank Ltd. Mr Garces' evidence is that a call on bank guarantees will be viewed negatively by credit providers and that this may, when the plaintiff's credit facilities are being reviewed, lead to an increased cost of borrowing. In addition, he deposes that if the plaintiff is unable to obtain facilities, this may affect the plaintiff's operations and its ability to tender for and enter into contracts for the construction of projects. He also deposed to the reputation of the plaintiff and the potential impact that any call on a guarantee would have on the plaintiff.[32]
[32] Affidavit of Steve Garces filed 25 February 2022 [38] – [43].
While I accept that the plaintiff may suffer a risk of reputational damage or increased costs in the event the bank guarantees are called upon, I am not satisfied that, by reason of any or all of these matters, the balance of convenience favours an injunction being granted. These risks are risks that necessarily arise in the event that a bank guarantee is presented for payment. As such, each is a risk the plaintiff assumed when it agreed to provide the bank guarantees on the terms of the Contract.
In addition, if an injunction is granted, it will prevent Westrac from having recourse to the bank guarantees which would defeat the purpose of cl 5.2(d) of the Contract. This clause allocated the cash flow risk to Lanskey and not Westrac pending resolution of any disputes between them.
In any event, senior counsel for the defendant referred me to the decision of the Court of Appeal in CPB Contractors Pty Ltd v JKC [No 3],[33] where the court considered a similar submission on the balance of convenience. In that case, the court noted, as is the case here, that it is always open to the plaintiff to avoid the risk to its reputation and increased costs by tendering a sum that is equal to the amount of the bank guarantees. The evidence before the court is that if an amount equal to the total of the bank guarantees was tendered to Westrac, it would be accepted on terms set out in the letter from Westrac's solicitors which is annexed to Mr Hood's affidavit. The plaintiff has not adduced any evidence to suggest it is unable to pay this amount. In addition, there is no evidence before the court to suggest the defendant would be unable to repay the amount of the bank guarantees in the event the plaintiff was ultimately successful in its contention that the defendant was not entitled to liquidated damages.
[33] CPB Contractors Pty Ltd v JKC [No 3] [2017] WASCA 132.
For these reasons, I do not consider that the balance of convenience favours the grant of an injunction.

Conclusion

For the reasons set out above, I consider that the plaintiff's application should be dismissed. I will hear from the parties as to the costs of the application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
FD
Associate to the Honourable Justice Hill
14 MARCH 2022

Separable portion	Days' delay	Rate	Total
2	22	$3,155 (ex GST)	$69,410
3	22	$3,155 (ex GST)	$69,410
5	76	$3,155 (ex GST)	$239,780
6	31	$1,000 (ex GST)	$30,000 (cap)