Crowley v Latitude: Can Contractors Recover Bank Guarantees Through Adjudication?

Overview

The NSW Supreme Court in Crowley Australia Pty Ltd v Latitude 63 LLC [2026] NSWSC 130 has confirmed that disputes concerning recourse to bank guarantees can fall within the security of payment regime, including after termination.

The decision reinforces the broad reach of adjudication and limits the scope for jurisdictional and procedural challenges.

The decision makes clear that bias / procedural fairness challenges are difficult. Criticism of an adjudicator (even in parallel proceedings) won't easily establish apprehended bias, and courts will be reluctant to interfere.

Key Issues

Can a contractor use adjudication to recover the proceeds of bank guarantees called by a principal, particularly after termination of the contract?

And separately, does the fact that an adjudicator has been criticised in prior proceedings between the same parties (including being named in judicial review proceedings) give rise to apprehended bias requiring recusal?

The Supreme Court's Answer

Yes on the first issue. No on the bias issue.

The Supreme Court of NSW held that:

• A claim for repayment of bank guarantee proceeds can constitute a "payment claim"
• A dispute about those proceeds can constitute a "payment dispute"
• Whether the contractor actually has an entitlement is a matter for the adjudicator to determine (not a jurisdictional barrier)
• Prior criticism of an adjudicator, including in related judicial review proceedings between the same parties, does not of itself give rise to apprehended bias or require recusal

Key Legal Principles

1. Broad concept of "payment dispute"
   The Court confirmed that the statutory concept of a payment dispute should be given a wide and practical interpretation, consistent with the purpose of rapid dispute resolution.
2. Accrued rights can be determined in adjudication
   Even after termination, contractors may assert accrued rights under the contract, and the adjudicator is entitled to determine whether those rights exist.
3. Security as recoverable subject matter
   The proceeds of bank guarantees can be treated as security or amounts in dispute and therefore fall within the adjudication framework.
4. Errors of law are not enough
   Even if the adjudicator is wrong on contractual interpretation, that is not a basis to quash the determination.
5. Bias challenges require something more
   Criticism of an adjudicator in parallel proceedings does not, without more, establish apprehended bias.

Practical Implications

For principals (developers / head contractors):

• Calling on bank guarantees is not risk-free
• There is a real risk of repayment orders via adjudication
• Security strategies must be aligned with SOP exposure
• Challenging adjudicators on bias grounds will be difficult, even here there are parallel proceedings or prior criticisms

For contractors:

• There is a clear pathway to recover security quickly
• Adjudication can be used strategically post-termination
• Claims should be carefully framed as accrued rights or payment claims
• Attempts by principals to disrupt adjudications via bias allegations are unlikely to succeed without clear evidence

For both parties:

• Contract drafting around security and recourse is critical
• The distinction between jurisdiction vs merits is key
• Early dispute strategy can materially impact outcomes
• Parties should assume adjudications will proceed notwithstanding parallel court challenges or criticism of the adjudicator

Key Takeaway

This decision reinforces two important themes in construction disputes.

First, security of payment legislation has a wide reach—extending beyond progress payments to disputes over bank guarantees and security, even after termination.

Second, courts will be slow to interfere with adjudications, including on bias grounds. Criticism of an adjudicator, or even involvement in related proceedings, will not readily disqualify them or undermine a determination.

How PCL Lawyers Can Assist in Construction Disputes

Our building & construction legal team advises developers, contractors and insolvency practitioners on:

• Security of payment (SOPA)strategy and adjudications
• Bank guarantee disputes and recovery
• Contract drafting and risk allocation
• Construction litigation and arbitration
• Strategic management of adjudicator challenges (including bias and jurisdiction issues)

If you would like to understand how this decision impacts your projects or contracts, please contact our construction lawyers.

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.