Insights Blog

In another adjudication first in Ireland, the High Court was required to decide in Construgomes & Carlos Gomes SA v Dragados Ireland Limited, BAM Civil Engineering & Banco BPI SA whether it should restrain payment to a contractor under an on demand bond. The bond had been provided by a sub-contractor as security in relation to its obligations under a construction sub-contract. The sub-contractor argued that the issues in dispute between the two parties (the basis for the call on the bond) had already been dealt with in an adjudication process under the Construction Contracts Act 2013, and so the call on the bond amounted to an act of fraud.

The only ground on which an interlocutory injunction may be granted to restrain payment under an on demand bond was identified as fraud. This was a high threshold for the sub-contractor to meet: “the case law indicates that the fraud relied on must be clear, obvious or established”. It transpired that the sub-contractor was unable to demonstrate fraud and the Court did not grant the injunction. However, the judgment provides useful guidance on the nature of both adjudication – parties are entitled to pursue their contractual rights independently of the adjudication process – and on demand bonds – which are autonomous from the underlying contract in accordance with which they are issued. Read more on our key takeaways from the judgment here.