Are PC1 security regimes and contracts which adopt those regimes, really unconditional?

Introduction

Developed by the Property Council of Australia, PC-1(1998) (PC1) contracts are still used by commercial principals in Australia, and as a basis for particular Department of Defence Contracts. The current Australian Department of Defence - Head Contract and Managing Contractor Contract contain almost identical terms in relation to security as PC1.

The recent decision of Master Mossop of the Supreme Court of the Australian Capital Territory in Walton Construction Pty Ltd v Pines Living Pty Ltd [2013] ACTSC 237 (Walton Construction), calls into question the generally accepted PC1 security regime.

Implications

The Walton Construction decision could have a significant impact for those in the industry using PC1 or contracts with security regimes based on it, as the ability to call on bank guarantees appears to be significantly more restricted.