The Ivy owner, Justin Hemmes, was allowed to convert a performance bond in order to pay for numerous defects in his $66 million investment in Sydney.

New South Wales Supreme Court Associate Justice Macready executed an order for Hemmes to have access to the $1.6 million performance bond he has with QBE Insurance Group Limited. The building firm contracted for the Ivy, Lucas Stuart, is insured with QBE.

Hemmes claims that the multi-storey bar and restaurant complex has 1324 general defects and 197 items of water leaks that needed to be repaired. Under the original contract, the bar owner had an unconditional performance bond that could be converted to cash to fix any defects that may occur.

The bond is a standard in the construction sector to protect property investors against defects that may occur after the building has been completed. Hemmes and Stuart have been in legal battle for close to a year over disputes concerning delays and defects during and after construction of the Ivy.

In May, Stuart sued Hemmes Hermitage for $4.6 million over an unpaid bill. Hemmes lodged a $11 million counter-claim for alleged defects and delays at the George Street complex. The builder has been trying to prevent Hemmes from converting the bond.

In his decision, Associate Justice Macready said “it must be observed that, from a practical point of view, the use of defects liability provisions in contracts is usually to provide an additional period of further protection in case defects emerge after the building has been completed and occupied. Experience suggests that this is a wise provision.”