The NSW Supreme Court in Alstef Aust. Pty Ltd v Brisbane Airport Corporation [2026] NSWSC 74 recently considered a contractor’s (Alstef) application for interim injunction restraining Brisbane Airport owner (BAC), from having recourse to 5 x bank guarantees provided by the contractor under the building contract, two for the performance of the works (performance bonds) and three to secure payment of unfixed goods and materials (payment security bonds).
The project concerned the contractor’s design and construction of baggage handling system for the domestic terminal at Brisbane Airport and a dispute arose between the parties over the contractor’s security bonds. This dispute was against a background of defective work claims by the owner, allegations of repudiation and unlawful termination of both parties and a refusal by the owner to release the security bonds to the contractor.
In relation to the 2 x performance bonds, the central issue considered by the Court was whether, on a proper construction of the contract, the bonds were risk allocation devices granting the owner an unconditional right to call on the bonds, without first being required to prove its defective work claims or satisfy any other contractual obligation.
The Court held the performance bonds were risk allocation devices (described in Kawasaki [2017] NSWCA 291 [60]- [67] and the cited authorities) and the balance of convenience favoured refusal of an injunction (preventing the owner from calling on the bonds) before the dispute regarding defective works and termination was resolved. The contrctor's injunction was denied.
In relation to the 3 x payment security bonds, the contractor argued that clause 12.7(a)(ii)(A) of the building contract requiring the payment security bonds before the contractor’s entitlement to payment for unfixed goods and materials arose, was void by reason of s200 BIF Act. The contractor argued the clause operated to effectively exclude its right to progress payments for unfixed goods and materials under the Act in the absence of the bonds. The Court agreed, finding that clause 12.7(a)(ii)(A) of the building contract was void under s200 BIF Act.
Further, the Court held that the payment security bonds were not necessary to protect the legitimate interests of the owner and clause 12.7(a)(ii)(A) of the building contract was unconscionable and void under s21 of the Australian Consumer Law.
Accordingly, an interim injunction was granted by the Court in favour of the contractor preventing the owner from calling on the payment security bonds.
The same outcome is expected if the NSW SOP Act equivalent of s200 BIF Act, (s34 NSW SOP Act) is considered for NSW Projects. This may have significant consequences where similar Australian Standard form contracts and security clauses are used on NSW & QLD projects.
These security clauses and other preconditions to payment appear in many standard form (and amended) contracts, including older AS 2124, AS 4000, AS 4300 and the newer AS4000 2025.
Although these clauses may appear in existing contracts, principals and higher contractors need to be aware that relying on these clauses to withhold payment will ultimately be ineffective, and legal advice should be obtained before finalising payment schedules.
Troy Legal provides specialist advice to owners, developers, head contractors and subcontractors in NSW & QLD in respect of construction contracts and payment rights, including in respect of the preparation of payment schedules under the NSW SOP Act & QLD BIF Act.
The NSW Supreme Court in Alstef Aust. Pty Ltd v Brisbane Airport Corporation [2026] NSWSC 74 recently considered a contractor’s (Alstef) application for interim injunction restraining Brisbane Airport owner (BAC), from having recourse to 5 x bank guarantees provided by the contractor under the building contract, two for the performance of the works (performance bonds) and three to secure payment of unfixed goods and materials (payment security bonds).
The project concerned the contractor’s design and construction of baggage handling system for the domestic terminal at Brisbane Airport and a dispute arose between the parties over the contractor’s security bonds. This dispute was against a background of defective work claims by the owner, allegations of repudiation and unlawful termination of both parties and a refusal by the owner to release the security bonds to the contractor.
In relation to the 2 x performance bonds, the central issue considered by the Court was whether, on a proper construction of the contract, the bonds were risk allocation devices granting the owner an unconditional right to call on the bonds, without first being required to prove its defective work claims or satisfy any other contractual obligation.
The Court held the performance bonds were risk allocation devices (described in Kawasaki [2017] NSWCA 291 [60]- [67] and the cited authorities) and the balance of convenience favoured refusal of an injunction (preventing the owner from calling on the bonds) before the dispute regarding defective works and termination was resolved. The contrctor's injunction was denied.
In relation to the 3 x payment security bonds, the contractor argued that clause 12.7(a)(ii)(A) of the building contract requiring the payment security bonds before the contractor’s entitlement to payment for unfixed goods and materials arose, was void by reason of s200 BIF Act. The contractor argued the clause operated to effectively exclude its right to progress payments for unfixed goods and materials under the Act in the absence of the bonds. The Court agreed, finding that clause 12.7(a)(ii)(A) of the building contract was void under s200 BIF Act.
Further, the Court held that the payment security bonds were not necessary to protect the legitimate interests of the owner and clause 12.7(a)(ii)(A) of the building contract was unconscionable and void under s21 of the Australian Consumer Law.
Accordingly, an interim injunction was granted by the Court in favour of the contractor preventing the owner from calling on the payment security bonds.
The same outcome is expected if the NSW SOP Act equivalent of s200 BIF Act, (s34 NSW SOP Act) is considered for NSW Projects. This may have significant consequences where similar Australian Standard form contracts and security clauses are used on NSW & QLD projects.
These security clauses and other preconditions to payment appear in many standard form (and amended) contracts, including older AS 2124, AS 4000, AS 4300 and the newer AS4000 2025.
Although these clauses may appear in existing contracts, principals and higher contractors need to be aware that relying on these clauses to withhold payment will ultimately be ineffective, and legal advice should be obtained before finalising payment schedules.
Troy Legal provides specialist advice to owners, developers, head contractors and subcontractors in NSW & QLD in respect of construction contracts and payment rights, including in respect of the preparation of payment schedules under the NSW SOP Act & QLD BIF Act.
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