Cobolt Constructions Pty Ltd v Duke Ventures Wellington Street Pty Ltd [2025] VSC 609

Chris Hey  |  Michael Lo | Isabella Nicolaci

Key takeouts

The Supreme Court of Victoria has granted an injunction restraining a principal from having recourse to a bank guarantee to recover liquidated damages purportedly certified by the superintendent almost two years after the works were taken out of the contractor’s hands or terminated for repudiation. The injunction was granted despite the court accepting that the purpose of the bank guarantee was to operate as a risk allocation device.  

Facts

Background

The principal, Duke Ventures Wellington Street Pty Ltd (principal) engaged the contractor, Cobolt Constructions Pty Ltd (contractor) to construct the Duke Apartments in Collingwood, Victoria.  

In September 2023, the principal issued a show cause notice and subsequently took the entirety of the works out of the contractor’s hands pursuant to clause 44.4(a) of the contract. The contractor responded by issuing a notice of termination, alleging that the principal had repudiated the contract.

Almost two years later, on 30 July 2025 the superintendent issued a payment certificate under clause 42.1 certifying $877,800 in liquidated damages payable by the contractor. Relying on this certificate, the principal issued a notice of intention to have recourse to the security under clauses 5.5 and 42.11.

The contractor applied for interlocutory injunctive relief to restrain the principal from calling on the bank guarantees.

Issue

The key issue before the court was whether the principal had a contractual entitlement to have recourse to the contractor’s bank guarantees based on a payment certificate issued by the superintendent under clause 42.1.  The court considered whether clause 42.11 was enlivened depended on whether the superintendent had authority to issue a payment certificate under clause 42.1 certifying liquidated damages after the works had been taken out of the contractor’s hands or following termination of the contract.

Decision

The court granted an interlocutory injunction restraining the principal from having recourse to the bank guarantees.

Craig J accepted that it was strongly arguable the superintendent lacked authority to issue a payment certificate under clause 42.1 certifying liquidated damages after the principal had purported to take the entirety of the remaining works out of the contractor’s hands. His Honour found that the contractor had no right to make a payment claim until the taken-out works were completed, and therefore there was no failure to make a claim that could trigger the superintendent’s default certification power under clause 42.1.

His Honour also considered there was a strong prima facie case that no right to issue a payment certificate survived termination, based on the drafting of clause 42.1.

In assessing the balance of convenience, Craig J accepted that it favoured the grant of an injunction, noting that a call on the bank guarantees would likely cause commercial and reputational harm to the contractor, for which damages would not be an adequate remedy.  While granting the injunction would deprive the principal of the benefit of the risk allocation mechanism under clause 5.5, his Honour considered that the unexplained delay in seeking certification of liquidated damages, and the absence of evidence regarding the principal’s financial position marginally weighed in favour of granting the injunction.