TCC Confirms: Stopping An On-demand Bond Call Is (Still) Nearly Impossible

The Technology and Construction Court (TCC) has refused to grant an injunction against the issuing bank under an on-demand performance bond in CR Construction (UK) Company Ltd v Barclays Bank PLC [2026].

In this article, we summarise how the judgment reaffirms the autonomy of bank guarantees, the narrow fraud exception, and why the existence of a dispute between the contractor and the employer will not prevent a call on a bond. Instead, any such dispute should be resolved in accordance with the terms of the underlying construction contract.

Background to the bond call and injunction application

• The employer (Northern Gateway (FEC) No. 7 Limited) and the contractor (CR Construction (UK) Company Limited) had entered into an amended JCT Design and Build 2016 contract relating to a large residential project in Manchester.
• Following termination of the contract, the employer made a call on the bond issued by Barclays in respect of its claim for liquidated damages (LDs).
• The contractor applied for an injunction against Barclays, seeking to restrain it from making any payment to the employer under the bond. The contractor's application was not brought against the employer.
• The contractor contended that:
  1. The demand did not comply with the formal requirements set out in the bond;
  2. The bond had already been discharged by its acceptance of the employer's repudiatory breach of the underlying contract; and
  3. Nothing was due under the bond because LDs were disputed, and retention monies withheld by the employer should be set off.
• Barclays argued the case could not succeed because the only basis on which an injunction could be granted against it as surety would be a case of fraud of which it had notice – which was not alleged.

The TCC's decision

The Court rejected the application on every ground, reaffirming the autonomy of "on demand" performance bonds and the exceptionally narrow basis for injunctive relief.

1. Very limited grounds to restrain a surety from paying out on a bond call

The Court reiterated the well‑established principles that:

• a bank must honour an on-demand bond unless there is clear evidence of fraud; and
• disputes about the underlying construction contract are of no relevance to a call on the bond.

The contractor made no allegations of fraud; therefore its application as formulated was bound to fail.

The contractor had sought to rely on authorities concerning injunctions against beneficiaries of bonds, where injunctions may be granted on a wider basis, not limited to fraud. However, the contractor's application was not brought against the employer, who was not itself a party to the claim – therefore these authorities did not apply. However, the Court decided to consider the application on its merits – which had been fully argued and responded to – in order to avoid any difficulty which might arise if the application was refused but the contractor then applied for an injunction against the employer on the same grounds.

2. The demand under the bond was valid

Although the demand letter was imperfectly formatted (on parent company letterhead from "Far East Consortium"), the Court held that:

• The body of the demand made it plain that it was a demand from the correct employer company; and
• It complied with the bond's requirements.

Clause 5.3 of the bond required any demand to be accompanied by either a court judgment, arbitral or adjudication award, or a certificate from the employer purported to be signed by the Employer's Agent to "confirm the Contractor's breach".

The Court held that the employer had submitted a compliant certificate, on which Barclays was entitled to rely.

3. The bond was not discharged

The contractor argued that the bond was discharged by its acceptance of the Employer's alleged repudiatory breach of contract.

The Court disagreed. The bond expressly stated that "No termination of the Construction Contract, and no termination of the Contractor's employment under the Construction Contract, shall reduce the liability of the Surety under this Deed".

The Court was not persuaded that a distinction could legitimately be drawn between a termination under the terms of the construction contract and a repudiatory breach. Instead, the Court held that termination included a termination arising from a repudiatory breach. This was on the basis that termination is an "ordinary word which is just as apt to cover the discharge of a contract by one party accepting the repudiatory breach of the other as it is to cover the exercise of a contractual right of termination".

As such, it would have been surprising if the bond should survive a contractual termination, but not the acceptance of a repudiatory termination.

4. Disputes about LDs and set‑off did not assist the Contractor

Even if the employer were wrong about its LDs claim, the Court held that the bond required Barclays to pay on the strength of the Employer's certificate.

Those disputes must be resolved between contractor and employer in accordance with the terms of the underlying construction contract, in this case via an adjudication. If successful, this would require the employer to reimburse the LDs which were the subject of the demand made against the bond.

5. Balance of convenience strongly favoured refusing injunctive relief

The Court concluded that the balance of convenience favoured refusing an injunction.

It cited the risk of wider reputational damage to the performance bond market, especially in the construction sector and the UK, as a very significant reason in itself to justify the refusal of the injunction.

Why this matters – and some practical takeaways

The TCC decision underscores the importance of timely use of the dispute resolution provisions in the underlying contract to challenge entitlement, rather than seeking to restrain sureties from paying out on bond calls. It also highlights that arguments about set‑off and retention should be for the contractor‑employer account and cannot be used as a basis to restrain a call on an on-demand bond.

Practical takeaways for contractors:

• Stopping a bank paying under an on-demand bond is exceptionally difficult. Only clear evidence of fraud justifies an injunction against a bank — errors, disputes, unfairness, or the alleged repudiation of the contract are not enough.
• If a call is imminent, you should assume the bank will pay. You may wish to focus strategic efforts on direct claims against the employer, not the bank.
• If you disagree with a certificate (e.g., LDs, EOT, termination), you should challenge it immediately through the dispute mechanism contained within the underlying contract.

Read the original article on GowlingWLG.com

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.