Can a Superintendent certify liquidated damages after the principal takes works out of the contractor’s hands or following termination?

In Cobolt Constructions Pty Ltd v Duke Ventures Wellington Street Pty Ltd [2025] VSC 609, the plaintiff contractor (“Cobolt”) sought an interlocutory injunction to restrain recourse by the defendant principal (“Duke”) to bank guarantees provided by way of security under a standard AS4300-1995 contract.

The basis raised by Cobolt for the injunction was that no amount was ‘due and payable’ to Duke as required by cl 5.5 of the contract governing recourse to security. Cobolt argued that a purported payment certificate, issued by the Superintendent after Duke had sought to take the whole of the remaining work out of Cobolt’s hands, was invalid as the right to certify any final amounts due and payable did not arise until after completion of the works. Alternatively, Cobolt argued that it had terminated the contract for default by Duke and the right to certify did not survive termination.

Craig J accepted (granting the injunction on an interlocutory basis) that it was strongly arguable that the Superintendent did not have power to issue a payment certificate certifying liquidated damages payable in favour of Duke after Duke had purported to take the whole of the remaining works out of Cobolt’s hands.

The key clauses were:

• clause 42.1, which provided for Cobolt to issue payment claims at the times stated in the Annexure and upon the issue of a Certificate of Practical Completion; for the Superintendent to assess those claims and issue a payment certificate within 14 days, stating any amounts due from Duke to Cobolt and vice versa; and for the Superintendent to nevertheless issue a payment certificate if Cobolt “fails to make a claim for payment under Clause 42.1”; and
• clause 44.6, which provided for the Superintendent to issue a certificate following the completion of work taken out of the hands of Cobolt.

His Honour found that it was strongly arguable that Cobolt had no right to make a payment claim until the work taken out was completed, and thus there could be no contractual failure to make a payment claim in the intervening period and no power of the Superintendent to issue a payment certificate in default of a claim being submitted (at [28]).

Similarly, on Cobolt’s alternative claim, his Honour found that there was a strong prima facie case that no right to issue a payment claim survived termination on the terms of clause 42.1 of the contract. Arguably, Duke’s only remaining rights were to general law damages if the contract had indeed been terminated (at [33]-[34], [44]).

In considering the balance of convenience, Craig J accepted the proposition that Duke calling on the guarantees was very likely to cause reputational damage to Cobolt which was not capable of adequate compensation by an award of damages (at [47]). Notwithstanding that the contractual risk allocation of the security provision was in favour of a ‘pay now, argue later’ benefit to Duke (at [14]), his Honour found that the balance of convenience was neutral or marginally in favour of the grant of injunctive relief (at [51]).

Fiona Cameron and Nicolas Dour

Liability limited by a scheme approved under professional standards legislation