Bank not enjoined from paying under performance bond (CR Construction v Barclays)
Banking & Finance analysis: This case involved an application for an interim injunction by a contractor to restrain a bank from paying an employer under a performance bond, which secured the contractor’s payment obligations in relation to a construction contract. The employer terminated the contract based on the contractor’s alleged breaches and, although the contractor disputed this allegation, it notified the employer of its view that the termination was repudiatory and accepted as such. The High Court refused the contractor’s application, reaffirming the position that an injunction against a paying bank will only be granted on clear evidence of fraud, which was not alleged here. The court did not accept the contractor’s contention that employer’s repudiatory breach of the underlying contract discharged the bond, ruling that the bond’s standard savings clause was wide enough to include repudiatory termination. Applying the American Cyanamid test, the court ruled that damages were an adequate remedy and that the balance of convenience firmly favoured refusal of the injunction, including the avoidance of wider reputational harm to the performance bond market. Written by Robert Aulsebrook, Senior Counsel at Akin Gump LLP.