When a Photocopy Isn't Good Enough: Court Orders Return of Misdelivered Bank Guarantees

The NSW Supreme Court has ordered Worrells' Graeme Beattie and Aaron Lucan, deed administrators of Novati Constructions, to deliver $625,000 in bank guarantees to the builder's client, Hulak Coonanbarra, rejecting a bid to send the documents to the company's director instead.

Novati Constructions, a family-run Sydney builder founded by Peter Novati in 1971, collapsed into voluntary administration in February 2026. Worrells has said rising material and labour costs, along with interest rate pressure, made the company's operations unsustainable. According to a creditors' report, claims lodged by 52 creditors totalled $34 million, with administrators estimating total debts could reach as much as $50 million.

Why it matters: A DOCA freezes creditor claims against a company, but that freeze has limits. This DOCA's moratorium didn't reach Hulak's rights over the misdirected documents, since these were proprietary claims rather than a claim for money owed. It's a reminder not to assume a deed of company arrangement covers everything just because a general freeze is in place.

The mix-up. Novati Constructions (NCPL) was building a 10-unit apartment block in Wahroonga for its client, Hulak Coonanbarra, under a $12.5 million construction contract. Hulak was withholding a slice of each payment as security, in case something went wrong. The contract let NCPL replace that cash security with two ANZ bank guarantees, worth $312,500 each; letters from the bank promising to pay Hulak that amount on demand, once presented with the original documents and a written demand.

In February 2025, NCPL told Hulak it was handing over the guarantees and needed the cash security back. But by mistake, NCPL delivered colour copies of the guarantee documents rather than the originals. Hulak never actually held the originals, it just didn't know that at the time. Believing the handover had gone through properly, Hulak released the cash it had been holding.

The mistake surfaced about a year later, after NCPL went into voluntary administration. Its administrators found that the original documents had never left the company. They turned up with a related party, Mr Alberto Novati. Around the same time, Hulak tried to call on the guarantees with ANZ and was told its paperwork was only copies, which the bank wouldn't act on.

The fight. That left competing claims over who should get the originals. The administrators initially told Hulak in March 2026 that the originals remained NCPL's property and that they intended to return them to ANZ for cancellation. Hulak demanded delivery instead. Novati Pty Ltd, the company that had proposed NCPL's DOCA, argued the documents belonged to NCPL and should go to NCPL's director, who'd taken back day-to-day control of the company once the DOCA was signed.

Facing three possible outcomes, deliver to Hulak, deliver to the director, or cancel the guarantees through ANZ, the administrators' counsel ultimately took a neutral position and asked the Court to decide.

The ruling. Justice Black ruled for Hulak on two grounds. First, detinue: Hulak had an immediate right to possession, because it had relied on NCPL's mistake when releasing the retention funds. Second, constructive trust: once NCPL became aware of its own error, the law treated it as holding the documents on Hulak's behalf, since keeping them would be unconscionable.

Novati Pty Ltd argued the DOCA's moratorium should bar Hulak's claim entirely. The Court disagreed, holding these were proprietary claims that the moratorium didn't reach. A separate argument also failed: that Hulak's interest was an unperfected security interest that would have automatically vested in NCPL once administrators were appointed. The judge found Hulak's rights didn't arise from a transaction securing payment or performance at all, so the security interest rules never applied to begin with, and in any case, rights of this kind arising under general law are excluded from the relevant registration requirements.

One question stayed open: whether later decisions have overturned or substantially qualified earlier authority protecting rights enforceable by specific performance from being wiped out by a DOCA. Justice Black said the issue hadn't been fully argued and left it unresolved.

Chamberlains acted for the deed administrators. BCP Lawyers & Consultants acted for Hulak Coonanbarra. Vincent Young acted for Novati Pty Ltd.

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