A performance bond had been provided which expired on the issue of a taking over certificate for boilers constructed by the contractor. The employer had made demands for payments under the bonds which were in “on demand” form, but the contractor maintained that it was entitled to the taking over certificates since the boilers had been taken into use. The employer maintained that such use was temporary.

The court concluded that the contractor had established a strong case to the effect that the use of the boilers was not temporary and the matter was one of urgency since the employer was about to make a demand on the bonds. It concluded that to permit the employer to make a demand would be to allow it to take advantage of its own breach of contract so the balance of convenience was in favour of granting an injunction since the call on the bonds was likely to damage the commercial and financial reputation of the contractor; hence, damages would not be an adequate remedy.

The case indicates that, although it would usually be necessary to demonstrate fraud in English law to justify an injunction being granted against a call on a bond, there are circumstances where an injunction will be available, absent fraud: for example (as in this case) where there is a strong case to the effect that the bond is no longer valid under the terms of the underlying contract.