Australia: The enforceability of "no injunctions clauses" against the party holding performance security


Where a contractor is required to provide performance security to a principal in connection with a construction contract, regardless of the form of that security, many principals also seek the inclusion of a term that the contractor must not injunct or restrain the principal from having recourse to the security, or the funds resulting from the conversion of the security to cash ("no injunction clause").

The law in Australia is unsettled as to whether such a provision amounts to an ouster of the Courts' jurisdiction (and is therefore void for public policy) or is enforceable. This article includes a discussion of the most significant decisions on this issue and includes recommendations to enhance enforceability.


There are two key cases which consider whether a no injunctions clause will be enforceable. In the first case, Anaconda Operations Pty Ltd v Fluor Daniel Pty Ltd [1999] VSCA 214 ("Anaconda"), the Victorian Supreme Court of Appeal left open the possibility that a no injunctions clause may be invalid, but did not determine the issue. In the later case of Bateman Project Engineering Pty Ltd v Resolute Ltd (2000) 23 WAR 493 ("Bateman"), the Western Australian Supreme Court did find that a no injunctions clause was invalid on the basis that it ousted the jurisdiction of the Court and severed it from the contract.

While these decisions support the view that a no injunctions clause may be invalid, arguments can be made for why no injunctions clauses should be binding and enforceable, including the commercial nature of construction projects and the public interest being advanced by upholding the parties' bargain.

General prohibition on ouster clauses

Clauses ousting the Courts' jurisdiction are usually found to be void on the basis of being against public policy. In Dobbs v National Bank of Australia Ltd1, the High Court held:

No contractual provision which attempts to disable a party from resorting to the Courts of law [is] recognised as valid. It is not possible for a contract to create rights and at the same time to deny to the party in whom they vest the right to invoke the jurisdiction of the Courts to enforce them2.

However, as noted above, the law in this area with respect to no injunction clauses is unsettled.

Why is this issue relevant?

In the recent decision of the Queensland Supreme Court in Ceresola TLS AG v Thiess Pty Ltd and John Holland Pty Ltd3, Daubney J refused to grant Cerasola (the Applicant) an interim injunction to restrain TJH from having recourse to a bank guarantee which the Applicant had provided. This case reinforces the 'general rule' from Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd4 that absent fraud, unconscionable conduct or a clear contractual condition precedent to recourse which has not been satisfied, a Court is unlikely to restrain a bearer of an unconditional bank guarantee from having recourse to that security. Although the contract in this case did not contain a no injunctions clause (precluding Ceresola from applying for an injunction), the case highlights that the presence of such a clause would be central to the general issue of when a bearer of security can have recourse to that security, and the continued willingness of parties to seek injunctions against calls in draw downs from performance security.

The Anaconda case

The Anaconda case addressed performance security of $45.15 million procured by the contractor pursuant to a design and construction contract in excess of $900 million for a nickel and cobalt extraction plant in the Murrin Murrin area of Western Australia. The principal had asserted defective work by the contractor in what Brooking JA described as "one of the more notable features of the plant", and had made a call under the performance bonds. The call had been met by the issuer, and as a result of earlier Court orders was frozen so that the principal was restrained from applying the proceeds of the call (pending further trial).

The Anaconda contract included a no injunction clause (clause 4.3(c)) in the following terms:

The Contractor accepts that the [Principal] may call upon the Approved Security at any time and the Contractor shall not seek an injunction against either the [Principal] or the issuer of the Approved Security preventing a demand on payment under such security.

The contract did not contain an enabling stipulation which could have been "put forward as having a negative effect by prohibiting conversion in all circumstances other than those specified,"5 such as prior notice of recourse. The Court also stated that there was "no express prohibition or restriction on the calling up of the security."6 After referring to the difficulties of establishing an implied restriction on the calling up of any security, the Court went on to find that:

[t]he present case is entirely clear. For cl4.3(c) is an express provision negativing any prohibition or restriction: the contractor accepts that the [principal] may call upon the security at any time and agrees not to seek an injunction to prevent a demand for payment. It matters not that it may be argued that the latter part of this provision is bad as ousting the jurisdiction of the courts. The important thing is that both parts of it show an intention that the [principal] is to be at liberty to call on the security at any time. It is difficult to imagine a more clearly expressed intention. And so the present contract not only fails to displace, but clearly reinforces what might be called the prima facie position.7

The terms of the Anaconda contract (which was not based on a standard form) were unique, and it is principally as a result of this that the above conclusion can be reached. Most construction and engineering contracts include preconditions on the principal's right of recourse to performance security such as the requirement to give a number of days prior notice, or only where there has been material non-compliance by the contractor of any of its obligations under the Contract.

As noted above, the Court held there was "no express prohibition or restriction on the calling up of the security."8

Some commentary has concluded that this case is authority for the position that where the parties expressly agree to include a no injunctions clause then a party will be prevented from seeking an injunction.9 However the relevant section of the judgment could equally be interpreted as referring solely to whether there is any further implied term prohibiting or restricting recourse to security or dealing with the proceeds of such recourse.

On this reading, the statement "[i]t matters not that it may be argued that the latter part of this provision is bad as ousting the jurisdiction of the Courts"10 is not indicating that in all cases, the agreement of the parties to include a no injunction clause is paramount to its possible exclusion on grounds of public policy. Instead, its interpretation may be that the inclusion of a no injunctions clause shows an intention of the parties to permit the principal unfettered access to the performance security, without the need to imply any prohibition or restrictions into the mechanism for recourse and dealing with performance security.

The Anaconda case was heard in urgent circumstances on extremely short notice just prior to the end of the Court's term. Brooking JA highlights in his judgement that the reasons may therefore be either too diffuse or brief.11 In that context, it is not surprising that the above particular comment is now the subject of further discussion.

The Bateman case

In the Bateman case, the principal entered into a design, engineering and construction management contract with the contractor to develop a laterite nickel and cobalt mine approximately 30 kilometres from Kalgoorlie in Western Australia.

The security the subject of the dispute was a bank guarantee of $5 million. Under the contract, the parties were to share the risk or rewards of cost overruns or underruns. The principal claimed against the contractor the amount of $5 million for cost overruns, advising the contractor that if the claim was not resolved within the time provided for under the contract, the principal would proceed to convert the security for the amount claimed. In response, the contractor applied to the Western Australia Supreme Court for an interlocutory injunction restraining the principal from calling on the security.

The Bateman contract included a no injunctions clause in the following terms:

the [principal] shall be entitled to proceed with the conversion of the security for the amount claimed and the [contractor] shall not hinder, obstruct, restrain or injunct the Principal from so doing and the [contractor] will not exercise [their] rights under Clause 32 [Disputes Settlement] prior to the [principal] drawing down the securities.

The Court had to determine, among other things, whether the no injunctions clause "ousts the jurisdiction of the Court and is therefore invalid and unenforceable."12 The Court reviewed the legal principles regarding ouster of jurisdiction13 and held that the no injunctions clause "is an ouster of the jurisdiction of the Court and is void as being against public policy."14

Reasoning in the Bateman case

His Honour Justice Owen noted the distinction between clauses which affect the existence of a right and those which merely affect the enforcement of a right.15 Clauses which affect the existence of a right have the potential to be characterised as an ouster of the Courts' jurisdiction and therefore invalid. By contrast, clauses which affect the enforcement of a right, for example clauses which delay but do not defeat access to the Courts, will not typically operate as an ouster of jurisdiction.16 As the no injunctions clause in Bateman defeated the contractor's right to ensure that the principal could only have recourse to the guarantee "in strict accord with the relevant terms of the Contract," it was held to be invalid.

Justice Owen considered the no injunctions clause "in the context of the whole Contract" and by reference to "the overall relationships between the parties".18 He explicitly acknowledged that this case "depends on its own circumstances". His Honour observed that the contractual clauses dealing with security were important to the contract as a whole and that the no injunctions clause placed a "substantial fetter" on the contractor's rights.20 This reasoning indicates that clauses ousting the Courts' jurisdiction to adjudicate on important legal rights, as viewed in the overall context of the contract, are likely to be invalid.

Effect of finding that a clause is an ouster of jurisdiction

A finding that a clause is invalid as against "public policy does not mean that the entire clause falls away".21 In Bateman, specific parts of the no injunctions clause remained valid. Specifically, the requirement that the contractor not 'hinder' or 'obstruct' the owner's recourse to the security remained valid. This was because these parts of the clause were "not, in substance, so connected with the other parts of the clause that to remove...[them] would alter the nature of what remains."22


The law on whether no injunctions clauses are invalid as an ouster of the Courts' jurisdiction is unsettled. Especially for so long as Bateman is not overruled (noting that it is a decision of a single judge), principals should be aware that they may not be able to rely on such clauses to restrain contractors from applying to the Court for an injunction to restrain the principal's recourse to the security. Importantly for principals, parts of the no injunctions clause may remain valid. For example, an obligation imposed on contractors not to hinder or obstruct a principal's right to have recourse to the security continued to apply in the Bateman case.

As arguments can be made in favour of no injunctions clauses being valid, a Court in the future may expressly uphold the validity of a no injunctions clause. Given this, any party promising not to seek to injunct calls against performance security cannot presume that such a clause would be invalid, and must consider the implications of agreeing to be bound by a no injunctions clause, including funding the call on performance security pending the resolution of any dispute between the parties and suffering the possible reputational damage of such a call on performance security.

The result in any particular situation will depend upon the circumstances of the case, however generally the authors consider that a Court is more likely to enforce a no injunctions clause where:

  • the no injunctions clause uses clear language;
  • the commercial purposes and importance of the performance security to the parties is identified in the contract, including in the context of the overall terms and conditions of the contract;
  • there are minimal restrictions on the principal's recourse to performance security;
  • any restrictions that are included are expressed in clear language and carefully observed by the principal; and
  • to the extent permitted by law, there is an exclusion of implied terms.

In summary, this is an area in which the law will likely continue to develop and one which parties should not overlook in negotiating construction contracts.


1(1935) 53 CLR 643.
2Dobbs v National Bank of Australia (1935) 53 CLR 643 at 652, as cited in Trevor Thomas, 'Expert Determination in Major Construction Disputes: Public Policy, Uncertainty and Misclassification' (2009) 25 Const. L.J. No. 7, 483, p. 485.
3[2011] QSC 115.
4[2008] FCAFC 136 at [77].
5Anaconda Operations Pty Ltd v Fluor Daniel Pty Ltd [1999] VSCA 214 at [8].
6Anaconda at [15].
7Anaconda at [15].
8Anaconda at [15].
9John B Dorter & John JA Sharkey AM, Lawbook Co, Building and Construction Contracts in Australia: Law and Practice (at January 2012) [10.390].
10Anaconda at [15].
11Anaconda at [5].
12Bateman Project Engineering Pty Ltd v Resolute Ltd (2000) 23 WAR 493 at [19].
13Bateman at [21]-[22].
14Bateman at [23].
15Bateman at [22].
16Bateman at [24].
17Bateman at [23].
18Bateman at [24].
19Bateman at [24].
20Bateman at [24].
21Bateman at [26].
22Bateman at [26].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Samuel Tyrer
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.