GLNG Operations Pty Ltd (respondent) entered into a contract with Saipem Australia Pty Ltd (applicant) for the construction of a gas transmission pipeline.

During construction of the pipeline, the applicant ran into financial difficulty and the contract was amended to allow for advance payments to be made to the applicant. In return, the applicant had to provide bank guarantees equal to the value of the advance payments.

If the applicant achieved specified completion dates, the advance payments would be partly or wholly converted into bonus payments. Any advance payment that was not converted to a bonus payment could be recovered by the respondent, including by recourse to the bank guarantees.

The applicant did not achieve the target completion dates. The respondent sought to have recourse to the bank guarantees.

The applicant brought an application for an interlocutory injunction to restrain the respondent from drawing on the securities. The applicant contended that there was a serious question to be tried regarding the respondent's contractual entitlement to draw on the securities because the target completion dates were the subject of dispute. The applicant also submitted that the balance of convenience was in its favour due to the risk of damage to its reputation if the respondent was allowed to call on the securities.

Martin J refused the application

Even though there was a serious question to be tried, on the basis that the balance of convenience favoured the respondent.

In regard to the respondent's contractual entitlement to draw on the securities, His Honour found that the applicant demonstrated a prima facie case that the target completion dates were different than those contended for by the respondent that justified the preservation of the status quo pending trial.

However, His Honour found that the applicant had contractually accepted the risk of damage to its reputation which might result from a call and that this outweighed the risk of damage to the applicant's reputation.