Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd - [2022] FCA 1280 - FCA 2022 case summary — Zoe

CTHFCA

Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd

[2022] FCA 1280

Federal Court of Australia|2022-11-02|Before: Middleton J

View original source

At a glance

Source facts

Court

Federal Court of Australia

Decision date

2022-11-02

Before

Middleton J

Source

Original judgment source is linked above.

Judgment (51 paragraphs)

[1]

INTRODUCTION 1 These two proceedings concern the liquidation of the Hastie Group of companies, which comprises the First Applicant and a number of its wholly owned subsidiaries. The Hastie Group, which was headquartered in Australia, ran a business of providing mechanical, electrical and plumbing services in a number of countries. 2 On 28 May 2012 (the 'Appointment Date'), voluntary administrators were appointed in respect of the Hastie Group companies party to the main proceeding (VID1277 of 2017) (the 'Hastie Entities', being the First and Fifth to Twenty-Second Applicants), and by 31 January 2013, the creditors of the Hastie Entities resolved to voluntarily wind up those companies. The Applicants (the Hastie Entities and their liquidators) commenced the main proceeding in this Court in November 2017 seeking its assistance to recover property and to assert rights held by the Hastie Entities as against a number of construction companies (being the Respondents in the main proceeding) who had separately entered into agreements with various Hastie Entities in respect of various construction projects (the 'subcontracts'). 3 I will return separately to the other proceeding (VID237 of 2022, the 'winding up proceeding') later in these reasons, which was only commenced in April 2022. Until I deal separately with that winding up proceeding, my reasons only concern the main proceeding. 4 The Applicants allege that the Respondents failed to pay to the Hastie Entities the cumulative sum of $60 million in "receivables" owing as at 28 May 2012 (the 'Receivables Case'). The Applicants further allege that after the Appointment Date, the Respondents impermissibly drew the cumulative sum of $63.5 million on performance guarantees (also referred to as "bank guarantees" or "performance bonds") which were purchased by the Hastie Entities and provided to each of the Respondents as an alternative to the retention of monies from progress payments under their respective subcontracts (the 'Bank Guarantee Case'). The Applicants assert that the monies owed in receivables and the monies drawn down by the Respondents on the bank guarantees are each property of the Hastie Entity which performed the work under the subcontract and purchased and provided the bank guarantee. The now sole Liquidator of the Hastie Entities (the Second Applicant) seeks to recover those monies in order to apply them in satisfaction of the liabilities of each of the Hastie Entities in accordance with Chapter 5 of the Corporations Act 2001 (Cth) (the 'Corporations Act' or the 'Act'), that is, to priority creditors such as Hastie Entity former employees first, and then on a pari passu basis among remaining unsecured creditors. 5 In total, the Applicants seek to recover approximately $120 million for the benefit of its creditors, but this judgment is not concerned with the quantum of that sum. The trial in the main proceeding throughout March to May 2022 (the "liability trial") was only concerned with the liability issue of whether the Applicants are entitled in principle to the recovery of the property in question in this case and to the rights they assert as against the Respondents. The matters of principle as between the Applicants and each Respondent are broadly the same. Although there are differences in their respective contractual arrangements, those differences do not produce a relevantly different result on the principal common issues. 6 The Respondents' respective positions against the Applicants' Receivables Case and Bank Guarantee Case are broadly aligned. In respect of the Receivables Case, the Respondents assert first, that no valid receivables were ever owing under the relevant subcontract. Second, if a receivable is owing, they are entitled to set-off that amount (pursuant to s 553C of the Act) against monies owed by the Hastie Entity to the respective Respondent under the relevant subcontract by reason of the loss and damage it has suffered by the Hastie Entity being unable to complete the works under the subcontract. Third, some of the Respondents also contend that the limitation period for the relevant Hastie Entity's claim to recover the receivables has expired. 7 Each of the Respondents contends that the value of their claims against the relevant Hastie Entity is greater than the amount of the unpaid receivables alleged by the Applicants and the amount of the guarantee proceeds held by them. 8 In respect of the Bank Guarantee Case, the Respondents deny the Applicants have any proprietary rights in the proceeds of the respective guarantees. Accordingly, their position is that the Applicants' recourse to various provisions of Chapter 5 of the Act is not applicable. In addition, some of the Respondents also contend that the limitation period for the relevant Hastie Entity's claim to recover the proceeds of the guarantees has expired.

[2]

FACTUAL BACKGROUND AND PROCEDURAL HISTORY 9 Before the Appointment Date, Hastie Group Limited (the First Applicant) was a public company listed on the Australian Securities Exchanges, and was the parent company of a number of wholly owned subsidiaries (43 subsidiaries, as at the Appointment Date). 10 The Hastie Group carried on the business of providing mechanical, electrical and plumbing services in countries including Australia, and through its various subsidiaries, was engaged in performing works on a number of building projects or had performed works on completed projects. The Hastie Entities in these proceedings entered into major long-term building subcontracts with head builders, being the Respondents, on large-scale multimillion dollar projects around Australia. 11 Pursuant to those subcontracts, the Hastie Entities undertook services and rendered progress payment claims or invoices to the respective Respondents, the amounts in relation to which were owing to the Hastie Entities as at the Appointment Date. 12 As part of each subcontract, the Hastie Entities were required to secure their performance, and in respect of each Respondent, this was done by way of bank guarantee issued to the Respondent. As is normal commercial practice, each Hastie Entity held a "bank guarantee facility" with the issuing bank for the purpose of its issuing bank guarantees to beneficiaries, and the bank guarantee itself was entered into by way of a separate agreement between the issuing bank and the respective Respondent beneficiary. 13 It is also relevant to note that the Hastie Group had in place a Deed of Cross-Guarantee dated 30 June 2005, under which each 'Group Entity' defined under the deed would guarantee to a 'Creditor' (as defined) the payment in full of any debt payable by another Group Entity 14 On 28 May 2012, Messrs Crosbie, Carson and McEvoy were appointed as voluntary administrators of the companies in the Hastie Group, including the Hastie Entities. 15 After the Appointment Date, the Respondents each failed or refused to pay the amounts owing as at the Appointment Date. Instead, each Respondent: (a) elected to terminate or suspend performance of their respective subcontracts; (b) stated that they had or would incur costs and expenses to have other providers perform the services the Hastie Entities now could not perform, and asserted an entitlement to set-off against the amount sought by the relevant Hastie Entity; and (c) either retained the bank guarantee provided by the relevant Hastie Entity despite a request for its return, or 'called' on the bank guarantee, resulting in the issuing bank drawing down on the guarantee and providing the proceeds to the Respondent. 16 On 30 and 31 January 2013, the creditors of the Hastie Entities resolved that each of those companies be wound up and the administrators were appointed as liquidators of each company. 17 On 14 November 2017, the Applicants commenced proceedings in this Court as against twenty-nine respondents. The claims as against some of those respondents have since been discontinued. 18 It is unnecessary to detail comprehensively the procedural history of these proceedings. It is sufficient to refer briefly to two previous judgments which I delivered in the case management of the main proceeding. 19 First, in my reasons for judgment on 22 December 2020, I granted leave to the Applicants to file an amended originating process and pleading, and found on an interlocutory basis for the purposes of allowing the main proceeding to continue to trial that the receivable debt and bank guarantee claims as amended were covered sufficiently in the initial originating process and pleading such that they were not "new claims": Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd (Formerly Brookfield Multiplex Constructions Pty Ltd) [2020] FCA 1824 (Hastie Interlocutory Decision) at [18], [22]. 20 Second, on 27 October 2021, as the Twelfth and Thirteenth Respondents (together, 'Grocon') had by that time entered external administration and were subject to a deed of company arrangement, I granted leave under s 444E(3) of the Act for the Applicants to proceed against them in respect of specific issues. 21 I will now turn to the Applicants' claims in the main proceeding.

[3]

Points of Claim 22 The Applicants' claims as against all of the Respondents were initially contained in the Concise Statement filed on 14 November 2017 and the Points of Claim filed on 13 July 2018. I will detail the procedural history of the pleadings later in these reasons when I come to the issue of limitation of actions. The Applicants now rely on their Second Further Amended Originating Process filed on 3 March 2021 and the following Points of Claim filed as against each individual group of Respondents (I note that the various "Further Amended Points of Claim" referred to below are not referred to in the Second Further Amended Originating Process, but I granted leave to file those during the trial and they were relied upon by the Applicants in their submissions): (1) the Further Amended Points of Claim filed 22 March 2022 as against the First and Second Respondents ('Multiplex'); (2) the Amended Points of Claim filed 26 February 2021 as against the Third Respondent, the Amended Points of Claim filed 26 February 2021 as against the Fourth and Thirtieth Respondents, and the Amended Points of Claim filed 26 February 2021 as against the Fifth Respondent (those respondents together, 'Lendlease'); (3) the Amended Points of Claim filed 26 February 2021 as against the Seventh and Eighth Respondents ('Badge'); (4) the Further Amended Points of Claim filed 6 April 2022 as against the Tenth Respondent ('CPB'); (5) the Further Amended Concise Statement filed 26 February 2021 as against the Twelfth and Thirteenth Respondents (Grocon); (6) the Further Amended Points of Claim filed 29 March 2022 as against the Fourteenth Respondent ('Hansen Yuncken'); (7) the Amended Points of Claim filed 10 March 2021 as against the Fifteenth Respondent ('John Holland'); (8) the Amended Points of Claim filed 26 February 2021 as against the Sixteenth Respondent ('Laing O'Rourke'); (9) the Amended Points of Claim filed 26 February 2021 as against the Nineteenth Respondent ('Thiess'); (10) the Further Amended Concise Statement filed 26 February 2021 as against the Twenty-First to Twenty-Third Respondents ('Watpac'); and (11) the Amended Points of Claim filed 26 February 2021 as against the Twenty-Fifth Respondent ('Scentre'). 23 I shall briefly outline the Concise Statement filed 14 November 2017 as against the Respondents for the purpose of indicating the claims made against the Respondent as at that date. Although the Applicants no longer rely on the Concise Statement or initial Points of Claim, those pleadings are relevant to the limitation period issues raised by certain Respondents. 24 The Concise Statement summarised the Receivables Case and the Bank Guarantee Case as follows, noting however that the Receivables Case and the Bank Guarantee Case are not completely separate, as they share elements and the two cases are not separated in the Applicants' pleadings. It is convenient to refer to these as separate cases, as the issues for determination were framed in that way. 4 The assets of the Hastie Group of companies include invoices or progress payment claims issued prior to or in respect of work completed prior to 28 May 2012 by the Hastie Group of companies to each of the Respondents identified in Annexure 1 in the amount set out therein. 5 Each of the Respondents has refused to make payment and asserted an entitlement to set-off against the amount sought, an alleged indebtedness. 6 Further or alternatively, several of the Respondents have on or after 28 May 2012 called upon or failed to return bank guarantees issued in favour of those Respondents by various banks at the request of members of the Hastie Group of companies prior to 28 May 2012 (refer Annexure 1). 7 In consequence of the said Respondents having called upon the various Bank Guarantees as alleged, the liabilities of the Hastie Group of companies have been increased after 28 May 2012 by at least $69,279,263.43. 8 The liquidators contend that in consequence of the operation of the Personal Property Securities Act 2009 (Cth) (PPSA) none of the Respondents are entitled to set-off under s 553C of the Corporations Act 2001 (Cth) (Corporations Act) (the no mutuality proposition). 9 Further or alternatively, the liquidators contend that the bank guarantee creditors are not, and were not, entitled to call upon the bank guarantees until such time as their claims have been admitted in the liquidations, alternatively at all. 25 The Applicants no longer press the "no mutuality proposition" referred to at [8] above, which was based on a Supreme Court of Western Australia decision at that time before it was overturned on appeal: Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) [2017] WASC 152; (2017) 52 WAR 90 (Forge First Instance). 26 I shall now outline the structure of the various Points of Claim filed against each group of Respondents so as to indicate the commonality of the issues as between the various Respondents. I will note any significant individual issues that arise as against only one or some of the Respondents separately later in this section. 27 Each Points of Claim filed is divided into sections pertaining to particular project subcontracts between the relevant Hastie Entity and Respondent. In respect of each project subcontract, the Applicants set out the following matters: (a) the terms of the subcontract; (b) the relevant bank guarantee provided to the Respondent; (c) the relevant Hastie Entity's payment claims under that subcontract, and therefore the total receivables claim for work performed under the subcontract; (d) the subsisting legal position under the Act at the time of the Hastie Entity's entering into voluntary administration; (e) the Respondent's termination or suspension of performance under the subcontract, and the Respondent's calling on and drawing down of the bank guarantee (or alternatively, failure to return the bank guarantee); (f) the effect and application of the Act in relation to the Respondent's calling on and drawing down of the bank guarantee, pursuant to the Act's regime in relation to voluntary administration and winding up; (g) the relevant Hastie Entity's total claimed debt as against the Respondent and its demand for payment made to the Respondent; (h) the Respondent's failure to pay the amount demanded and failure to provide evidence to establish its claim for which it asserts an entitlement to set-off; and (i) on the premises of the above, the Respondent's liability to the Hastie Entity or Liquidator. 28 The relief sought under the Applicants' Second Further Amended Originating Process filed on 3 March 2021 consisted of orders that each Respondent pay to the Applicants certain amounts claimed in the respective Points of Claim. However, the trial of the main proceeding was split between liability and quantum by orders made on 1 October 2021, so that the trial commencing on 15 March 2022 only concerned the liability issues. 29 Given this bifurcation of the proceeding, the relief sought by the Applicants at this liability trial differed from the orders sought in the Second Further Amended Originating Process, and instead the relief sought was in the form of orders and directions to the Liquidator as to the winding up of the Hastie Entities. I will discuss these later in this section. However, it is important not to lose sight of the ultimate aim of the Liquidator in commencing and continuing these proceedings: namely, to recover money so as to be distributed in accordance with the Act. 30 To some extent, during the course of the trial, the Applicants also raised arguments and issues that were not canvassed in their pleadings, the agreed common issues in the liability trial or their opening written submissions. Each Respondent complained about the impermissible and unfair departure by the Applicants from the agreed common issues, the pleadings and the relief originally sought in the Applicants' Second Further Amended Originating Process. 31 For the reasons which will become apparent, I do not need to delve into these complaints. There is no doubt there has been a re-casting of issues, some arising from concessions or an appreciation by the Applicants of some difficulties with their case. The main proceeding has changed over the years in its focus, particularly after the Hastie Interlocutory Decision in 2020 when the preliminary question regarding the "no mutuality proposition" in reliance on Forge First Instance fell away. However, each Respondent has been able to deal with the re-casting, which was primarily focussed on the appropriate relief. The underlying legal analysis by the parties, refined and expanded on from time to time by the Applicants, has remained constant in the reliance by the Applicants on their view of the overriding operation of the Corporations Act (which view I have rejected in these reasons). 32 I shall now set out the Applicants' claims against the Respondents as contained in their Points of Claim in greater detail.

[4]

Terms of the subcontracts 33 Although the subcontracts are different for each Respondent, and the subcontracts for each project for each Respondent are also not always the same, the subcontracts are relevantly similar as between each Respondent. At this point, it is convenient to summarise the basic content of relevant terms of the subcontracts as set out in the Points of Claim as against each group of Respondents. The relevant terms of each subcontract are comprehensively set out by the Applicants in Schedule A to their closing written submissions dated 6 May 2022, which subject to some minor matters were agreed with by the Respondents for the purposes of the liability phase of the main proceeding. I have proceeded on the basis of this agreement for the purposes of the liability trial. 34 First, the fundamental obligations under each of the subcontracts were that the relevant Hastie Entity was to perform the works under the subcontract, and the Respondent was to pay the contract sum. 35 Second, each subcontract required some form of performance security to be provided by the Hastie Entity to the Respondent. Generally, each subcontract included the option of the Hastie Entity providing a "retention amount" to the Respondent (a cash amount to be held by the Respondent) or an "unconditional undertaking" or guarantee provided by a bank or financial institution in the same amount (ie a bank guarantee). Generally, under each of the subcontracts, the Respondents elected or received a bank guarantee. Each subcontract included terms in relation to the release of the security and other terms concerning the legal rights and interests arising in relation to the security. 36 Third, each subcontract provided for a mechanism by which the Hastie Entity would submit payment claims to the Respondent for work performed. Under most subcontracts, the Respondent would then assess the claims and issue a payment schedule. Generally, each subcontract also provided for a mechanism by which the Respondent could set-off any amounts due to the Hastie Entity or have recourse to the security provided as described above against amounts which the Hastie Entity were liable to pay to the Respondent. 37 Fourth, generally each subcontract provided for a right of termination upon appointment of an administrator to the Hastie Entity or a right to take relevant work out of the hands of the Hastie Entity, and permitted the Respondent to employ other persons to carry out and complete the works.

[5]

The bank guarantees provided to the Respondents 38 As stated earlier, the bank guarantees provided to the Respondents were issued by an issuing bank. The issuing bank in each case had entered into a facility agreement with the relevant Hastie Entity to provide the bank guarantee facility to the Hastie Entity. This arrangement is separate to the bank guarantee itself. 39 The bank guarantees in this proceeding were issued pursuant to one of the following bank guarantee facility agreements with an issuing bank: (a) a Multi-Option Facility Agreement between Hastie Group Limited and ANZ Bank on or about 1 April 2008; (b) a Facility Agreement between Hastie Group Limited and NAB on or about 1 April 2008; (c) a Facility Agreement between Hastie Group Limited and Westpac on or about 1 April 2008, as varied and restated on or about 29 June 2010; (d) a Standstill Facilities Agreement between Hastie Group Limited and the ANZ Bank on or about 11 April 2011, as varied and restated on or about 11 May 2011; and (e) a Syndicated Facility Agreement (or 'SFA') between Hastie Group Limited and various banks, including the ANZ Bank and Westpac, on or about 7 June 2011, as varied and restated on or about 10 April 2012. 40 In each Points of Claim, the Applicants referred to the following features of the relevant bank guarantee facility agreement applicable to each respondent: (a) the issuing bank agreed to make available to the relevant Hastie Entity financial accommodation by way of bank guarantees in the form provided in the facility agreement; (b) upon issue of a bank guarantee by the issuing bank, the Hastie Entity became liable to pay to the issuing bank an issuance fee (commonly being a percentage of the face value of the bank guarantee); and (c) upon demand for payment under a bank guarantee by the recipient, the Hastie Entity became liable to pay (immediately or within a certain period of time) all amounts paid out by the issuing bank, together with any costs, liability or loss incurred by the issuing bank in paying out the financial accommodation. 41 The Applicants' submissions made particular reference to the terms of the SFA, which will be set out in detail later in these reasons. 42 Again, although the bank guarantees issued to each Respondent were not substantively identical, and the bank guarantees in respect of each project for each Respondent were also not always substantively identical, the bank guarantees were relevantly similar as between each Respondent. 43 The Points of Claim as against each Respondent sets out each bank guarantee issued and provided to each Respondent, and asserts that upon issue of the bank guarantees, the relevant Hastie Entity became liable to repay to the issuing bank as loans any amounts paid out upon the guarantees (plus interest and other costs). 44 The Applicants then contend that at all material times from the date of issue of the bank guarantee, each bank guarantee was an asset of the relevant Hastie Entity or the Hastie Group, being financial accommodation which had been purchased from the issuing bank, and was property of the relevant Hastie Entity within s 9 of the Act.

[7]

The effect and application of the Corporations Act 48 The Appointment Date on which each Hastie Entity entered voluntary administration under s 436A of the Act - being 28 May 2012 for each of the Hastie Entities - brought certain consequences under the Act. For example, as at the Appointment Date, s 440D of the Act immediately denied each Respondent any entitlement to begin or continue a proceeding in a Court against a Hastie Entity or in relation to any of its property except with the administrators' written consent or the leave of the Court. 49 None of the Respondents was a "secured creditor" of any Hastie Entity at the Appointment Date within the meaning of s 9 of the Act. Each Respondent was therefore an unsecured creditor. 50 It is then contended that each Respondent who presented and drew down on their bank guarantee, without the consent of the administrators and without notifying the administrators of its intent to do so, did not obtain any proprietary interest in nor any immediate entitlement to the amount drawn down and received from the issuing bank, which remained at all times and remains the property or money of the relevant Hastie Entity. 51 In particular, it is contended that, by the Respondent engaging (or rather, as finally submitted by the end of the trial by the Applicants, by the issuing bank engaging) in a transaction or dealing affecting property of the Hastie Entity under administration, the call or draw down on the bank guarantee was void by virtue of s 437D. 52 It is then contended that the winding up of the Hastie Entities by creditors' resolution pursuant to s 439C(c) of the Act - on 30 or 31 January 2013 - also brought certain consequences under the Act, being that: (a) each Respondent is prohibited by s 500(2) of the Act from bringing proceedings against a Hastie Entity to secure an order transferring to the Respondent proprietorship over the amount drawn down on the bank guarantees; (b) having regard to s 553 of the Act (and Chapter 5 of the Act generally), each Respondent is required to seek to be admitted to proof in the external administration of the Hastie Entity in respect of any claims against the Hastie Entity arising from or connected with the relevant subcontract; (c) pursuant to s 474 of the Act, the Liquidator must take into his custody or control the amount drawn down by each Respondent under the bank guarantee, and each Respondent must immediately return that amount to the Liquidator; (d) pursuant to s 506 of the Act, the Liquidator is entitled to exercise any of the powers the Act confers on a Liquidator in a winding up in insolvency; (e) each Respondent is subject to ss 555, 556 and 560 of the Act, which give effect to the pari passu principle and the priority payments regime, and because of which each Respondent is prohibited from using the proceeds of the bank guarantee to satisfy its claims against the Hastie Entity; and (f) as elaborated in the Applicants' submissions (but not specifically referred to in any of the Points of Claim), s 468 of the Act has the effect of voiding any disposition of property of the Hastie Entity made after the Appointment Date, including each Respondent's draw down of the bank guarantees. 53 On the above premises, the Applicants contend that the Liquidator is entitled to an order that the Respondents return to the Liquidator the debt owed to the Hastie Entities (being receivables owed and the proceeds of the bank guarantees which were drawn down). 54 Each Points of Claim refers to the Liquidator's demand for payment on each Respondent in relation to each debt owed in respect of each relevant project subcontract. 55 In response to the Liquidators' demand for payment, each Respondent refused to pay the amount demanded and asserted its own rights and entitlements under the subcontract. The Applicants contend that each Respondent has failed to provide evidence to the Liquidators that: (a) it has paid amounts to third parties to complete the works to be performed by the Hastie Entity under the relevant subcontract that are more than what the Respondent owes to the Hastie Entity; (b) such amounts or costs paid to third parties are or could be a claim against the Hastie Entity within the meaning of ss 553(1) and 553C(1) of the Act; and (c) such amounts or costs are or could be amounts for which the Hastie Entity is liable to the Respondent under or in connection with the relevant subcontract. 56 Accordingly, the Applicants assert that each Respondent remains liable to pay its outstanding debts to the Hastie Entities.

[8]

Common Issues 57 As part of the case management of the main proceeding, the parties were asked to agree and file a List of Issues in respect of each group of Respondents. From the Court's point of view, this was to focus the collective minds of all those participating in the liability trial on the main issues really in dispute. However, at all times it was made clear that the ultimate determination of the issues in dispute ought to be resolved by the "pleadings" (I use quotations here because of the quasi-pleading status of concise statements and points of claim in this Court). Nevertheless, when the trial of the main proceeding was split between liability and quantum by orders made on 1 October 2021, those orders referred to the various Lists of Issues filed in respect of each group of Respondents. Whilst there are some issues which pertain only to particular Respondents, the common issues for the liability trial in the main proceeding were as follows (as summarised in the Applicants' closing submissions, and which I will refer to in these reasons as the 'Common Issues'). Because of those orders made on 1 October 2021, a number of the issues in the various Lists of Issues were not to be determined at the liability trial, including issues as to the amount of any alleged set-offs or as to the final quantum of each claim. A. Receivables (a) Issue 1: The subcontracts between the Hastie Entity and each respondent and the terms of same. (the" subcontract issue") The framing of this issue does not identify any question to be resolved. However, to the extent that the identification of the relevant subcontracts is in dispute, whether any particular subcontracts ought to be treated as "representative", and whether particular contractual provisions are required to be interpreted as a matter of general understanding prior to the determination of the issues that follow, I consider them as falling under this issue 1. (b) Issue 3: Whether the liquidator is statute-barred from getting in the receivables. (the receivables limitation defence) (c) Issue 4: Are each of the allegations of set-off "claims" within the meaning of s 553 of the Act? (the "claims issue"). (d) Issue 5: Have there been mutual dealings between each Hastie Entity and a Respondent who wants to have a claim admitted against that Hastie Entity to come within s 553C of the Act? (the "mutuality issue"). By the end of the trial of the main proceeding, it was accepted by the Applicants that mutuality was satisfied, but mutuality still remained in dispute in relation to the Respondents' claims under the Deed of Cross-Guarantee. (e) Issue 7: Whether as and from 28 May 2012, s 553C of the Act applied exclusively to any "claim" founding a "set-off" alleged against a Hastie Entity? (the "s 553C exclusivity issue"). This question is framed as one of statutory exclusivity, but the Applicants' submissions on this issue went also to whether s 553C requires that the set-off accounting be exclusively determined by the Liquidator. (f) Issue 7a: A further issue which was included in only some of the Lists of Issues but implicit where not included, and which related to an additional aspect of the s 553C exclusivity issue mentioned above, was: whether each respondent is entitled to deduct or set-off monies which it owed to each Hastie Entity as at 28 May 2012 any "loss and damage" that is a "claim" within s 553? (which I shall call the "automatic set-off issue") B. Proceeds of the bank guarantees (g) Issue 8: Did the terms of each subcontract confer any proprietary interest in the monies drawn or any entitlement to treat those monies as the Respondent's own funds? (the "property in proceeds question"). (h) Issues 9 & 10: Whether the purchase of each bank guarantee by the Hastie Entity amounted to "financial accommodation" and created a chose in action between the Hastie Entity and the bank? (the "chose in action question"). (i) Issue 11: Whether the credit (to the Respondent's bank account) and debit (to the Hastie Entity's loan account with the issuing bank) which happened in consequence of the guarantee being drawn by the Respondent were causally and transactionally linked? (the "causal and transactional link question"). (j) Issues 12 & 13: Was the drawdown on the bank guarantees void by reason of s 437D of the Act? (the "void transaction/disposition question"). It is to be noted that the Applicants' submissions also include s 468 of the Act within the scope of this issue, which is resisted by the Respondents. (k) Issues 14 & 15: Can the Respondents retain the guarantee proceeds and can those proceeds be used to pay their "claims" in the face of s 555 and 556 of the Act? (the "retainer of the guarantee proceeds question"). (l) Issue 16: Did the Liquidator bring an action to recover the guarantee proceeds by filing this proceeding on 14 November 2017? (the "guarantee proceeds limitation defence"). 58 I note that the various Lists of Issues were formulated by the Applicants and were not agreed to in their entirety by the Respondents, some of whom made submissions regarding the precise scope and formulation of the particular issues. However, recalling my earlier comments about the purpose of the listing of issues for the liability trial, for the purposes of my reasons, it is convenient to deal with the Common Issues as framed above. 59 Other issues specific to particular Respondents shall be dealt with as they arise in my substantive reasons as to each of the issues.

[9]

Applicants' application for leave to file amended reply to John Holland 60 It is convenient to deal here with one outstanding "pleading issue" raised during the course of the hearing of the liability trial. The Applicants sought leave to rely on an Amended Reply served on 12 May 2022. The proposed Amended Reply primarily sought to raise a claim based on an estoppel or election defence. 61 The new reply claims raised in the Amended Reply concern only the Airport Link Project ('Project E'). The claims respond to John Holland's defence that the contractual claims of the relevant Hastie Entity on this Project (Heyday) are defeated by clauses 10.7 and 10.8 of the relevant contract ('Airport Link Agreement'). 62 In my view, as formulated the proposed Amended Reply (other than paragraph 10) fails to disclose an arguable claim. For that reason, leave to amend the reply other than paragraph 10 will be refused. John Holland does not oppose paragraph 10 being pleaded by way of reply. 63 Before explaining the reasons for my view in relation to the other paragraphs of the proposed Amended Reply, it is useful to set out some relevant background. 64 On 8 March 2022, John Holland served its written submissions in relation to the hearing commencing on 15 March 2022. Schedule 2 to the submissions raised various contractual defences to the Applicants' claims (including in relation to Project E). 65 On 29 April 2022, John Holland served on the Applicants a proposed Amended Defence. The proposed amendments included reliance on clauses 10.7 and 10.8 of the Airport Link Agreement. 66 On 11 May 2022, John Holland was granted leave, without opposition, to file in Court its Amended Defence. 67 On 12 May 2022, the Applicants served on John Holland a proposed Amended Reply which asserted that by election and estoppel John Holland was prevented from seeking to rely on clauses 10.7 or 10.8 of the Airport Link Agreement to deny a liability to pay the Liquidator the unpaid invoice sum of $567,773.24, and that these provisions were unenforceable. 68 John Holland contends that both the proposed election and estoppel defence and the proposed "penalty" defence are "so untenable that it cannot possibly succeed" (see King v Patrick Projects Pty Ltd [2016] FCA 1110 at [15]) and so that the amendments should not be allowed. 69 Putting aside the procedural matters, apart from paragraph 10, the other pleas in the proposed Amended Reply are without sufficient particularity to be permitted. 70 As to the waiver or election plea, the only basis of this plea seems to be that the original Defence of John Holland to the Applicants' Points of Claim did not raise the newly relied upon clauses of the Airport Link Agreement in its original reply. As Deane J said in the Commonwealth v Verwayen (1990) 170 CLR 394 (Verwayen) at 447 (and see also 408-409 and 414 per Mason CJ; 426-427 per Brennan J; 456-457 per Dawson J; 464-465 per Toohey J; 485-486 per Gaudron J; 498-499 per McHugh J): In the ordinary case where a party to litigation amends a pleading to raise a new defence or to assert a new claim, questions of estoppel do not arise. The effect of earlier pleadings will be merely to reflect the particular party's then intentions in relation to the conduct of the action and the other party will not be justified in assuming that subsequent amendment will not be made. Nor, in such a case, will amendment of the pleadings and subsequent conduct of the proceedings on the basis of the amendment give rise to any suggestion of unconscionable conduct on the part of the amending party. It will involve no more than the exercise of the right to seek to raise additional matters of claim or defence in accordance with the procedures laid down for that purpose. 71 Therefore, without more, the plea of the Applicants in their proposed Amended Reply would fail. 72 As to the allegation that John Holland would obtain a gain by the operation of clauses 10.7 and 10.8 that is "extravagant and unconscionable and out of all proportion to John Holland's legitimate interest", this has not been particularised at all, and on its face does not arise on the face of the Airport Link Agreement. Again, without more, the plea of a "penalty" (if that is the essence of the allegation) would fail. 73 At this stage of the proceedings, I will not allow such un-particularised pleas to be introduced by way of Amended Reply. 74 I will grant leave to the Applicants to file the Amended Reply other than the pleas in paragraphs 5 to 9 and 11.

[10]

Orders sought 75 As I have alluded to previously, the approach of the Applicants altered during the course of the liability trial. I will return to this issue at the end of these reasons. 76 The orders now sought by the Applicants at this liability trial are annexed to these reasons as an Appendix. I shall summarise the orders as sought below. It is appropriate to focus on these orders now sought as to determining the future conduct of the main proceeding. However, in determining whether there is any liability to the Hastie Entities, and as I have stressed already, the basis of analysis must be upon the pleadings, assisted by the various Lists of Issues and the submissions finally adopted by the Applicants. 77 The orders sought were under three headings for the purposes of the future conduct of the proceedings, being: (1) Advice as to admission of claims in each winding up; (2) Advice as to future conduct of the winding up; and (3) Directions to Liquidator for further conduct of the windings up. 78 First, the orders sought under proposed order 1 were that, pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations), being Sch 2 to the Act, the Liquidator is justified and acting reasonably in the winding up of each Hastie Entity by admitting the claims made by the Respondents in their respective pleadings as claims that as at the Appointment Date did not bear a certain value (that is, they are of uncertain value: see s 554A of the Act). 79 Second, the orders sought under proposed order 2 were that the Liquidator is justified and acting reasonably in the winding up of each Hastie Entity: (a) in estimating the value of the Respondents' claims as at the Appointment Date in accordance with the Australian common law on contract damages; (b) in treating the "debts" recorded in the debtor's ledger of each of the Hastie Entities as being recoverable by the relevant company and not statute barred; (c) in admitting to proof in the winding up of the Hastie Entity, or seeking payment to that Hastie Entity of the "balance of the account" ascertained by the Liquidator applying s 553C of the Act in accordance with the principles in Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (Receivers and Managers appointed) [2018] WASCA 163; (2018) 53 WAR 325 (Forge). (d) on the basis that the draw on the bank guarantee made by each Respondent was void; (e) in seeking to take into his custody or under his control, the moneys drawn by each Respondent (excluding Baulderstone Qld) on bank guarantees (the "guarantee proceeds"); (f) in treating the guarantee proceeds drawn by each Respondent as a credit from the Hastie Entity which provided the bank guarantee drawn upon; (g) in treating each Respondent as having had notice as and from the Appointment Date, that the Hastie Entities were insolvent; (h) in treating as not allowed by ss 555 and 556 of the Act, the payment by a Respondent of the claims by that Respondent paying to itself guarantee proceeds. 80 Third, the orders sought under proposed orders 3 and 4 were that the Liquidator is directed to admit the order 1 claims as claims not bearing a certain value and then follow a prescribed mechanism by which, among other things: (a) each Respondent could provide particulars as to their admitted claims; (b) the Liquidator would estimate the value of the Respondents' claims; (c) the Liquidator could receive advice from a King's Counsel as to any questions which arise as to how to perform the directions; (d) the Liquidator would determine to admit or not admit the Respondents' claims; and (e) the Liquidator would be entitled to file and serve any court application in respect of a Respondent's indebtedness to a Hastie Entity. 81 In summary therefore, the Applicants sought orders that would confirm their interpretation of the application of the Act, require the Respondents to participate in the proof of debt process for each Hastie Entity and allow the Liquidator to commence new proceedings against any Respondent in respect of any indebtedness determined following the proof of debt process. 82 Finally, I note that no injunction or restraining order (final or interlocutory) is specifically sought in these proceedings to prevent any Respondent from "calling on" any bank guarantee not already called on.

[11]

Evidence in the main proceeding 83 During the trial of the main proceeding, I decided that various aspects of the pleadings would effectively be treated as fact for the purposes of the liability trial. In particular, the Court proceeded on the basis that the facts pleaded by the Applicants formed the basis of their claims concerning the operation of the Corporations Act, and the questions relating to the limitation defences. 84 There were a number of objections to evidence by the parties, but in the end, the parties either came to an agreement to allow certain evidence to be tendered for the purposes of the liability trial or the Court admitted the evidence subject to relevance. It is unnecessary for me to specifically refer to each of these items of evidence as I have in the course of these reasons referred to the evidence that is relevant and determinative of the issues that are required to be considered in this liability trial. 85 Further, the Court received the following evidence: (a) the contracts between each Respondent and each Hastie Entity (including, where no formal contract was entered into, correspondence said to constitute a contract), as summarised at Schedule A to the Applicants' Closing Submissions dated 7 May 2022; (b) various other contracts relevant to the main proceeding, such as certain facilities agreements entered into between the Hastie Group and various banks, and the Deed of Cross-Guarantee; (c) the bank guarantees relevant to the main proceeding which were issued to each Respondent; (d) the date of recourse and amount drawn by each Respondent on the bank guarantees provided by each Hastie Entity, set out at Schedule B to the Applicants' Closing Submissions dated 7 May 2022; (e) the status of each project subcontract, including whether the subcontract was terminated (and date thereof), or taken out of the hands of the Hastie Entity (and date thereof), or treated as having been terminated, set out at Schedule C to the Applicants' Closing Submissions dated 7 May 2022; and (f) further documents tendered by agreement between the Applicants and each Respondent, such as relevant contractual notices pursuant to the abovementioned contracts, correspondence between the parties and limited affidavit evidence in relation to certain contracts. 86 Where a contract sought to be relied upon by the Applicants is not available and not put in evidence before the Court, I cannot and do not infer that such an alleged contract existed, or that its terms were identical to or similar to the other contracts before the Court. The Applicants may still be able to rely on s 1305 of the Act as prima facie evidence of their claims, even if a contract is not available. I refer later in these reasons to s 1305 and its operation. 87 Further, there is an issue concerning the contracts entered into between Multiplex and the Hastie Entities in relation to "Project K - Sydney Water HQ" and the so-called "Global Bonds" (being certain bank guarantees issued by ANZ to Multiplex in relation to Hastie Australia). 88 Evidence was tendered concerning the terms of the contract relating to the Sydney Water HQ project: see the affidavit of David Kenneth Cooksley sworn 1 February 2022 on behalf of Multiplex. There can be no doubt that an agreement was reached as to the Sydney Water HQ project via email correspondence (for example, as to price), but no formal contract was in evidence. I make no findings for the purposes of this main proceeding as to any specific terms as to payment, other than accepting the Applicants' pleaded date when the receivables claimed were due and payable. 89 As to the "Global Bonds", I proceed to accept the written bank guarantees at annexures DKC-41 and DKC-42 of the said affidavit of Mr Cooksley. Otherwise, there is no sufficient evidence produced to the Court to prove that Multiplex and Hastie Australia entered into an agreement in which Hastie Australia agreed to provide unconditional bank guarantees on behalf of and to secure performance by Hastie Australia and each subsidiary of the Hastie Group for works subcontracted to them by Multiplex regarding projects located in New South Wales, as pleaded by Multiplex: see [584] of Multiplex's Amended Points of Defence.

[12]

PRINCIPAL CONCLUSIONS TO THE COMMON ISSUES 90 I shall now set out my principal conclusions as to the issues that require determination following the liability trial of the main proceeding, by reference to the Common Issues detailed earlier in these reasons. Issue 1: The subcontracts between the Hastie Entities and each respondent 91 The relevant subcontracts were identified by the parties and were not in dispute, with the exception of certain contracts in relation to Multiplex which were not in formal written form and so were partly-written and partly-oral, and certain contracts that were not available to the parties and so the terms of which the Applicants sought to infer, each of which I referred to in the previous section of these reasons. To the extent necessary for the determination of the Common Issues, each of the relevant subcontracts has been considered for the purposes of these reasons and the effect of their operation demonstrated mainly by reference to an example subcontract involving Multiplex (the First Respondent). Where any of the relevant subcontracts are substantively different or produce a substantively different outcome for the purposes of these proceedings, this is discussed in my reasons. Issue 3: Whether Hastie Entities' Receivables Case statute-barred 92 The Hastie Entities' claims, as detailed in the Annexure 1 to the Concise Statement and the Originating Process filed on 14 November 2017, were relevantly made on 14 November 2017. To the extent each such claim was made within the six-year limitation period applicable to each of those claims, the claims are not statute-barred. To the extent that any other claims of the Hastie Entities were not made on 14 November 2017 but were made after that date (for example, by the filing of the Applicants' Points of Claim on 13 July 2018), the claims are statute-barred unless those claims were made within the six-year limitation period applicable to each claim. Issue 4: Whether respondents have "claims" pursuant to s 553C of the Act 93 The Respondents' contractual claims against the Hastie Entities pursuant to their respective subcontracts - asserted after the Appointment Date but the circumstances giving rise to which existed before the Appointment Date - are "claims" within the meaning of s 553 and therefore s 553C of the Act which may be set-off in accordance with s 553C. 94 However, the Respondents' assertions of their entitlement to set-off pursuant to s 553C are not in themselves "claims" within the meaning of s 553. Issue 5: Whether mutuality pursuant to s 553C of the Act 95 By the end of the trial, it was not in dispute that mutuality was satisfied for the purposes of s 553C in respect of the Respondents' claims against the Hastie Entities pursuant to the respective subcontracts. I accept that such claims were mutual within the meaning of s 553C. 96 In addition, the Respondents' claims against the Hastie Entities insofar as they are made pursuant to the Deed of Cross-Guarantee also satisfy the mutuality requirement imposed by s 553C. Issue 7: Whether s 553C of the Act applies exclusively to the parties' claims 97 It is not necessary to resolve the question as to whether set-off pursuant to s 553C of the Act applies exclusively to each of the Respondents' claims in the main proceeding, and in particular, to the exclusion of any entitlement to contractual set-off that may have been asserted by a Respondent prior to the winding up of the Hastie Entities. Issue 7a: Whether s 553C of the Act applies automatically with respect to the parties' claims 98 The Respondents are each entitled to the benefit of the application of set-off pursuant to the principles set out in s 553C in the winding up of the Hastie Entities, and such entitlement is not dependent on any precondition of lodging a proof of debt in the winding up, or on the determination of the liquidator as to the application of s 553C set-off in respect of the relevant claims. Issue 8: Whether respondents have proprietary interest in bank guarantee proceeds 99 By virtue of the various contractual instruments in relation to the bank guarantees, the Respondents were conferred proprietary interests in not only the physical bank guarantee instruments, but more importantly, the proceeds of the bank guarantees drawn down (once those proceeds were received by the Respondents). Issues 9-10: Whether Hastie Entities had proprietary interests in relation to bank guarantees 100 Having regard to the various contractual instruments in relation to the bank guarantees, the Hastie Entities did not possess proprietary interests in relation to the bank guarantees that relevantly affect the proprietary interests of the Respondents in the proceeds of the bank guarantees drawn down. Any proprietary interests or rights of action that the Hastie Entities possess or once possessed as "choses in action" or "things in action" are of no consequence or utility for the purposes of the Hastie Entities' claims against the Respondents. Issue 11: Whether causal and transactional link between respondents' credit of the bank guarantee proceeds and Hastie Entities' debits 101 The Hastie Entities do not possess any proprietary interest in the bank guarantee proceeds by virtue of any "causal and transactional link" between the respondents' credit of the bank guarantee proceeds drawn down and the corresponding "debit" arising from the Hastie Entities' crystallised liabilities to the issuing banks pursuant to the facility agreements between the Hastie Entities and the banks. Issues 12-13: Whether drawdown of bank guarantees voided by ss 437D or 468 of the Act 102 The Respondents' drawdowns of the bank guarantees are not voided by either of ss 437D or 468 of the Act. Issues 14-15: Whether respondents are entitled to retain the guarantee proceeds 103 The Respondents are not otherwise restrained from retaining the bank guarantee proceeds by virtue of ss 555 and 556 of the Act, or Chapter 5 of the Act generally, and so they are entitled to retain the bank guarantee proceeds subject to the final accounting of the respective claims of the Hastie Entities and the Respondents, following which it can be determined whether there are any surplus proceeds which the Respondents must account for and repay to the Hastie Entities. Issue 16: Whether Hastie Entities' Bank Guarantee Case statute-barred 104 The Hastie Entities' claim against Baulderstone Qld Pty Ltd (the Thirtieth Respondent), as contained in the Amended Points of Claim against the Fourth and Thirtieth Respondents filed 26 February 2021, was made on that date and is pleaded pursuant to a deed of release. To the extent that this claim was made within the twelve-year limitation period applicable to a claim upon a deed or specialty, it is not statute-barred. To the extent that the other Hastie Entities' claims were relevantly made on 14 November 2017 by way of Annexure 1 to the Concise Statement and the Originating Process filed on 14 November 2017, the claims are not statute-barred if those claims were made within the six-year limitation period applicable to each claim. To the extent that any other claims of the Hastie Entities were not made on 14 November 2017 but were made after that date (for example, by the filing of the Applicants' Points of Claim on 13 July 2018), the claims are statute-barred unless those claims were made within the six-year limitation period applicable to each claim.

[13]

CONSIDERATION OF ISSUES CONCERNING LIMITATION OF ACTIONS 105 Before turning to the substantive issues in the proceeding, I will address the Respondents' contentions that the Hastie Entities' claims are statute-barred by reasons of various statutes of limitations (Issues 3 and 16 of the Common Issues). 106 The Applicants set out the relevant Receivables Case claim dates in their pleadings. These dates are the dates that I adopt for the purposes the determining the limitation issue in relation to the Receivables Case. 107 The Applicants also produced a schedule to their written closing submissions setting out the relevant Bank Guarantee Case claim dates. Some of these Bank Guarantee Case claim dates were in contention, but not relevantly for the purposes of the limitation issue raised by the Respondents. I proceed to determine the limitation of actions defences in relation to the Bank Guarantee Case by reference to this schedule. However, where there are dates in contention and recorded by each of the Respondents in their written submissions, having considered the underlying documents, I accept the Respondents' dates. Therefore, if any issues arise as to the application of these reasons to the relevant guarantee claim dates, then the correct dates are those submitted by each Respondent. However, as I say, in my view and in light of my approach, whether any competing date is chosen, there is no difference in the application of the principles to apply. 108 The following principles apply to the determination of the limitation of actions defences raised by the Respondents. The relevant State Limitations Acts referred to by the parties and agreed are applicable by operation of ss 79 and 80 of the Judiciary Act 1903 (Cth). I interpolate also that whilst there was some mention by Counsel for the Applicants that there may well be a running account and so the limitation of actions defences could not be dealt with at this stage, there is no evidence (either admitted into evidence or sought to be admitted into evidence) or any suggestion in any of the material before me that there was any running account in relation to any of the relevant subcontracts. This is certainly not the way in which the Applicants have presented their case in the main proceeding or sought to prove the relevant debts. 109 As to the Bank Guarantee Case, the position is straight forward. The relevant accrual of the cause of action is the drawdown date or failure to return date pleaded by the Applicants, as the case may be. Even if the guarantee is a deed, as the Hastie Entities' claims are not made pursuant to the guarantee, the limitation period is six years from the date of draw down or breach of the failure to return obligation. 110 Now, turning to the Receivables Case, the general principles are as follows. For breach of contract, which will include failure to abide by a contractual term or obligation to pay or perform, time accrues once that failure occurs. The same limitation period of six years applies unless any specific contract is a deed (where a limitation period of twelve or fifteen years applies, depending on the State jurisdiction). Generally, in an action for repayment of a debt, the action accrues on failure to comply with the valid demand for repayment, being at the relevant date for repayment. In the case of breach of multiple promises in one contract (eg periodical payments) a new cause of action arises every time a payment becomes payable and is not paid. In most cases this will not be difficult to determine. The difficulties encountered in a different context (like in Verwayen) do not arise in this main proceeding. 111 As to the receivables, the Applicants plead relevant dates on the basis that these can be proved, primarily by reference to books of accounts and reliance on s 1305 of the Act. For the purpose of determining the operation of the limitation of actions defences, the issue of whether or not the pre-conditions that may arise in relation to the obligation to pay need not arise for determination having regard to the basis of the Applicants' own case. Where the claims are not statute barred, and will proceed to quantification, then it will may be necessary to determine whether these pre-conditions were satisfied. If the Applicants continue to rely on the books of accounts and s 1305, the onus will be on the Respondents to demonstrate the amounts are not owing and the prima facie position is displaced. The important point for this part of the main proceeding is that the parties have proceeded (largely by agreement) to treat the relevant dates pleaded by the Applicants as maintainable and the basis upon which they seek payment and relief. 112 The real issue of some debate is whether sufficient material facts were pleaded at the commencement of the main proceeding in relation to the various claims now pressed against each Respondent. This involves in the main proceeding a question of the ambit of the Originating Process filed on 14 November 2017. I interpolate that to the extent that claims are not made in the latest Points of Claim against each Respondent, and were made previously, they are treated as abandoned. 113 By order of the Court dated 29 January 2021, the Respondents had reserved to them the position to argue the relevant date for the operation of the relevant limitation period. Each Respondent took the opportunity to make submissions on this issue, essentially re-arguing the matters raised at an earlier interlocutory stage. I now confirm the approach and conclusions I reached in the interlocutory application relevant to these issues: see Hastie Interlocutory Decision especially at [20]-[22] and [41]-[57]. 114 I stress that the claims made are limited to those referred to in Annexure 1 to the Concise Statement referred to in the Originating Process filed on 14 November 2017 by reference to the relevant Respondent and Hastie Entity. In my view, Annexure 1 to the Concise Statement does bring to the attention of each Respondent referred to therein the relevant key issues and key facts for determination, and the essential relief sought. However, this is limited to the various builder groups, project names and the reference to the particular debts and bank guarantees referred to in Annexure 1 to the Concise Statement. Therefore, if any claim is subsequently sought to be brought outside those referred to in Annexure 1 to the Concise Statement and is otherwise not within the six-year period from which the claim arises, the Applicants cannot rely upon the date of 14 November 2017 as the date of the commencement of that claim. For example, if a Hastie Entity's debt claim arose as at 14 July 2012 (because a payment was asserted to be due and payable as at 14 July 2012), then if that claim was contained in the Applicants' Points of Claim filed on 13 July 2018 but not in Annexure 1 to the Concise Statement, it would not be statute-barred. 115 On this basis, as long as the Applicants' claim is within the scope of Annexure 1 to the Concise Statement, the limitation period only operates to prevent the Hastie Entities from pursuing the receivables and guarantee claims where the claim sought to be raised arose earlier than six years from 14 November 2017. The schedule relied upon by the Applicants and their pleading will indicate the relevant date for each claim for the parties to apply those principles. (I again note that the different dates raised by the Respondents make no difference to the application of the principles). 116 It will be apparent I do not accept the detailed arguments of the Respondents as to when the claims were later made by the Hastie Entities by way of amended concise statements or points of claim, as once it is concluded that they were sufficiently raised on 14 November 2017, the other various dates raised by the Respondents are of no consequence. 117 I need make mention of Baulderstone Qld Pty Ltd, who was only joined on 29 January 2021 pursuant to the following order: 1. Pursuant to rule 9.05 of the Federal Court Rules 2011 (Cth) (Federal Court Rules), Baulderstone Qld Pty Ltd (Baulderstone Qld) be joined as a Respondent to these proceedings, noting that, pursuant to r 9.05(3) of the Federal Court Rules, the proceedings against Baulderstone Qld is taken to have started on the date of these orders. 118 Even in light of this order, the Hastie Entities' pleaded claim against Baulderstone Qld Pty Ltd would not be statute barred to the extent that the claim (as pleaded) is an action upon a deed of release. This is because the relevant limitation period for an action upon a deed or specialty under the applicable State Limitation Act is twelve years. 119 I also note that an issue arose as to the applicable limitation period in relation to the Applicants' claims against Grocon in relation to the subcontract referred to as the "Project A - Hastie Australia 161-163 Castlereagh Street" Deed. This is the only subcontract brought to the Court's attention that was on its face made as a deed. There was some argument as to whether the claims made against Grocon in this main proceeding were made under the deed (in which case they may be subject to the twelve-year limitation period under the applicable State Limitation Act) or were merely property or debt claims (in which case the six-year limitation period would apply). In light of my reasons as to the Bank Guarantee Case which disposes of the issues relevant to Grocon in this liability trial, it is not necessary for me to determine this issue as to the applicable limitation period.

[16]

Voluntary administration under the Act 123 First, s 435A sets out the objects of Part 5.3A: The object of this Part, and Schedule 2 to the extent that it relates to this Part, is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or (b) if it is not possible for the company or its business to continue in existence -- results in a better return for the company's creditors and members than would result from an immediate winding up of the company. 124 Section 435C provides that the administration of the company begins when an administrator is appointed. 125 Section 437D makes void dealings or transactions affecting the property of the company without the administrator's consent or leave of the court. This section is central to the Bank Guarantee Case, so I set it out in full: 437D Only administrator can deal with company's property (1) This section applies where: (a) a company under administration purports to enter into; or (b) a person purports to enter into, on behalf of a company under administration; a transaction or dealing affecting property of the company. (2) The transaction or dealing is void unless: (a) the administrator entered into it on the company's behalf; or (b) the administrator consented to it in writing before it was entered into; or (c) it was entered into under an order of the Court. (3) Subsection (2) does not apply to a payment made: (a) by an Australian ADI out of an account kept by the company with the ADI; and (b) in good faith and in the ordinary course of the ADI's banking business; and (c) after the administration began and on or before the day on which: (i) the administrator gives to the ADI (under subsection 450A(3) or otherwise) written notice of the appointment that began the administration; or (ii) the administrator complies with paragraph 450A(1)(b) in relation to that appointment; whichever happens first. (4) Subsection (2) has effect subject to an order that the Court makes after the purported transaction or dealing. … 126 Section 440B prevents the holders of various rights in relation to property of the company from exercising such rights without the administrator's consent or leave of the court, relevantly providing: 440B Restrictions on exercise of third party property rights General rule (1) During the administration of a company, the restrictions set out in the table at the end of this section apply in relation to the exercise of the rights of a person (the third party) in property of the company, or other property used or occupied by, or in the possession of, the company, as set out in the table. Note: The property of the company includes any PPSA retention of title property of the company (see section 435B). … Restrictions on exercise of third party rights Item If the third party is … then … 1 a secured party in relation to property of the company, and is not otherwise covered by this table the third party cannot enforce the security interest. 2 a secured party in relation to a possessory security interest in the property of the company the third party cannot sell the property, or otherwise enforce the security interest. 3 a lessor of property used or occupied by, or in the possession of, the company, including a secured party (a PPSA secured party) in relation to a PPSA security interest in goods arising out of a lease of the goods the following restrictions apply: (a) distress for rent must not be carried out against the property; (b) the third party cannot take possession of the property or otherwise recover it; (c) if the third party is a PPSA secured party - the third party cannot otherwise enforce the security interest. 4 an owner (other than a lessor) of property used or occupied by, or in the possession of, the company, including a secured party (a PPSA secured party) in relation to a PPSA security interest in the property the following restrictions apply: (a) the third party cannot take possession of the property or otherwise recover it; (b) if the third party is a PPSA secured party - the third party cannot otherwise enforce the security interest.

[18]

Winding up under the Act 132 Chapter 5 provides for various forms of winding up of a company. Relevantly to these proceedings: (a) Pt 5.4 relates to 'Winding up in insolvency'. (b) Pt 5.4B relates to 'Winding up in insolvency or by the Court'. It contains various provisions relevant to those forms of winding up. (c) Pt 5.5 relates to 'Voluntary winding up'. Each of the liquidations of the Hastie Entities occurred by reason of a creditors' voluntary winding up. It is to be noted that a company may be insolvent, yet enter liquidation by way of a voluntary winding up, rather than an order of the Court that the company be wound up in insolvency. (d) Pt 5.6 relates to 'Winding up generally'. 133 Although the Hastie Entities have been voluntarily wound up, certain provisions in Pt 5.4 and Pt 5.4B apply to a voluntary winding up by reason of s 506(1)(b), which states that a liquidator in a voluntary winding up may "exercise any of the powers that this Act confers on a liquidator in a winding up in insolvency or by the Court". 134 It is not necessary to set the provisions out in full, but the effect of s 513A to 513C is that where a voluntary administration is in effect prior to a winding up ordered by the Court or a voluntary winding up, the winding up is taken to have commenced on the day on which the voluntary administration began. 135 Section 474 of the Act concerns the custody and vesting of a company's property, providing: (1) If a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company has been appointed: (a) in a case in which a liquidator or provisional liquidator has been appointed - the liquidator or provisional liquidator must take into his or her custody, or under his or her control, all the property which is, or which appears to be, property of the company; or … Note: Section 465 extends the meaning of the property of the company to include PPSA retention of title property, if the security interest in the property has vested in the company in certain situations. (2) The Court may, on the application of the liquidator, by order direct that all or any part of the property of the company vests in the liquidator and thereupon the property to which the order relates vests accordingly and the liquidator may, after giving such indemnity (if any) as the Court directs, bring, or may defend, any action or other legal proceeding that relates to that property or that it is necessary to bring or defend for the purpose of effectually winding up the company and recovering its property. 136 It has not been said that any relevant vesting order under s 474(2) has been made in respect of any property of a Hastie Entity. 137 Section 478 deals with the liquidators duty to collect and apply the company's property in discharging the company's liabilities or debts, providing: (1) As soon as practicable after the Court orders that a company be wound up, the liquidator must: (a) cause the company's property to be collected and applied in discharging the company's liabilities… 138 Section 506 sets out the central powers and obligations of a liquidator in a voluntary winding up, relevantly providing: (1) The liquidator may: … (b) exercise any of the powers that this Act confers on a liquidator in a winding up in insolvency or by the Court; or (e) exercise the power of the Court of fixing a time within which debts and claims must be proved; … (3) The liquidator must pay the debts of the company and adjust the rights of the contributories among themselves. 139 Pursuant to s 506(1)(b) therefore, a liquidator in a voluntary winding up may exercise the powers of a liquidator under s 477, including the following (emphasis added in relation to the property of the company): (1) Subject to this section, a liquidator of a company may: (a) carry on the business of the company so far as is, in the opinion of the liquidator, required for the beneficial disposal or winding up of that business; and (b) subject to the provisions of section 556, pay any class of creditors in full; and (c) make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging that they have any claim (present or future, certain or contingent, ascertained or sounding only in damages) against the company or whereby the company may be rendered liable; and (d) compromise any calls, liabilities to calls, debts, liabilities capable of resulting in debts and any claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the company and a contributory or other debtor or person apprehending liability to the company, and all questions in any way relating to or affecting the property or the winding up of the company, on such terms as are agreed, and take any security for the discharge of, and give a complete discharge in respect of, any such call, debt, liability or claim. (2) Subject to this section, a liquidator of a company may: (a) bring or defend any legal proceeding in the name and on behalf of the company; and … (c) sell or otherwise dispose of, in any manner, all or any part of the property of the company; and … (m) do all such other things as are necessary for winding up the affairs of the company and distributing its property. … (6) Subject to this Part, the liquidator must use his or her own discretion in the management of affairs and property of the company and the distribution of its property. 140 Section 500 deals with limitations upon proceedings or enforcement against a company in voluntary liquidation, providing: 500 Execution and civil proceedings (1) Any attachment, sequestration, distress or execution put in force against the property of the company after the passing of the resolution for voluntary winding up is void. (2) After the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. (3) The Court may require any contributory, trustee, receiver, banker, agent, officer or employee of the company to pay, deliver, convey, surrender or transfer forthwith or within such time as the Court directs to the liquidator any money, property of the company or books in his, her or its hands to which the company is prima facie entitled. 141 Section 501 gives effect to the principle of equal distribution between creditors, providing: 501 Distribution of property of company Subject to the provisions of this Act as to preferential payments, the property of a company must, on its winding up, be applied in satisfaction of its liabilities equally and, subject to that application, must, unless the company's constitution otherwise provides, be distributed among the members according to their rights and interests in the company. 142 Section 553(1) provides for the debts and claims that may be admitted to proof against a company in liquidation: Subject to this Division and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company. 143 Section 553C provides for mutual credit and set-off in respect of companies in liquidation: (1) Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: (a) an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and (b) the sum due from the one party is to be set off against any sum due from the other party; and (c) only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may be. (2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent. 144 Section 555 sets out the pari passu principle, providing: Except as otherwise provided by this Act, all debts and claims proved in a winding up rank equally and, if the property of the company is insufficient to meet them in full, they must be paid proportionately. 145 Of similar effect to s 437D applying to voluntary administrations, s 468 relates to the voiding of dispositions during a winding up in insolvency or by the Court. Like s 437D, s 468 is most relevant to the Bank Guarantee Case, and also informed the Applicants' commencement of the winding up proceeding. I therefore set out the relevant parts of s 468 as at the time of these reasons: 468 Avoidance of dispositions of property, attachments etc. (1) Any disposition of property of the company, other than an exempt disposition, made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void. (2) In subsection (1), exempt disposition, in relation to a company that has commenced to be wound up by the Court, means: (a) a disposition made by the liquidator, or by a provisional liquidator, of the company pursuant to a power conferred on him or her by: (i) this Act; or (ii) rules of the Court that appointed him or her; or (iii) an order of the Court; or (aa) a disposition made in good faith by, or with the consent of, an administrator of the company; or … (b) a payment of money by an Australian ADI out of an account maintained by the company with the Australian ADI, being a payment made by the Australian ADI: (i) on or before the day on which the Court makes the order for the winding up of the company; and (ii) in good faith and in the ordinary course of the banking business of the Australian ADI. (3) Notwithstanding subsection (1), the Court may, where an application for winding up has been filed but a winding up order has not been made, by order: (a) validate the making, after the filing of the application, of a disposition of property of the company; or (b) permit the business of the company or a portion of the business of the company to be carried on, and such acts as are incidental to the carrying on of the business or portion of the business to be done, during the period before a winding up order (if any) is made; on such terms as it thinks fit. (4) Any attachment, sequestration, distress or execution put in force against the property of the company after the commencement of the winding up by the Court is void. 146 I also refer to Division 2 of Part 5.7B of the Act concerning voidable transactions, such as unfair preferences. These provisions were not relied upon by the Applicants and in fact were referred to by the Respondents as a matter of context. Some of the Respondents assert that the proper part of Chapter 5 of the Act to be applied by the Applicants ought to have been this division, and that it is relevant that no application has been made by the Liquidator in respect of a voidable transaction pursuant to s 588FE, which would be out of time if made now. I note the voidable transaction regime merely as statutory context, as it is not necessary for me to make any determinations in respect of that regime.

[19]

DISCUSSION OF THE APPLICANTS' OVERARCHING SUBMISSIONS REGARDING CHAPTER 5 OF THE CORPORATIONS ACT 147 The Applicants' Receivables Case and Bank Guarantee Case are each underpinned by the Applicants' characterisation of the statutory scheme implemented by Chapter 5 of the Act, and in particular the statutory scheme in relation to the winding up of a company. In this section, I set out the Applicants' overarching submissions regarding Chapter 5 of the Act, pausing to make comments where appropriate. 148 I set out the Applicants' arguments in some detail because a number of different themes to the operation of Chapter 5 of the Act were called in aid by Counsel for the Applicants, all said to combine in support of the various contentions underlying the Applicants' ultimate claim for recovery of monies into the hands of the Liquidator to be distributed according to the Act. 149 It is useful first to set out the Applicants' submissions regarding Chapter 5 of the Act presented in summary form in its opening submissions (although as I have alluded to, the submissions were refined over the course of the trial): (a) The scope, structure, and provisions of Chapter 5 of the Act evince an intention to create a comprehensive regime for dealing with corporate insolvency. Central to the statutory scheme are core principles which have important ramifications for the administration and winding up of the Hastie Entities. (b) Persons asserting debts payable by, or claims against, the company as at the date administrators are appointed, are creditors. Creditors may prove in a DOCA or in the liquidation, but not otherwise. When a creditors' voluntary winding up commences, each creditor is denied the right that the creditor would otherwise have had to sue the company to recover the relevant debt. The creditor obtains instead a right to participate in a distribution in the winding up. (c) There are only secured and unsecured creditors. There is no third category of unsecured creditors with special or additional rights of set-off because they happen to be holding assets or potential assets of a company in winding up. (d) All debts payable by and all claims against the company are admissible to proof against the company in accordance with s 553 of the Act. The section speaks of "all debts or claims the circumstances giving rise to which occurred before the relevant date". This reflects a policy that the affairs of the insolvent company are to be resolved once and for all. (e) The liquidator has a duty to bring in the property of the company. If such property is insufficient to meet the debts and claims in full, the available funds must be paid to creditors proportionately: this is the pari passu principle. This is intended to achieve justice between all creditors, subject to any statutory priorities. (f) The position of creditors is protected by the requirement that the liquidator is to act quasi-judicially in admitting to proof debts and claims alleged by its creditors to be owed by the company. 150 As to Part 5.3A of the Act in relation to the voluntary administration of a company, the Applicants refer to the following provisions, which it is submitted evince an intention to deal comprehensively with corporate insolvency: (a) "Secured creditor" is defined by s 51E (see also s 9) to mean "a creditor of the corporation, if the debt owing to the creditor is secured by a security interest". In turn, under s 51A, "security interest" means "(a) a PPSA security interest; or (b) a charge, lien or pledge". "Unsecured creditor" is not defined. (b) Section 435A sets out the objects of Part 5.3A. (c) Section 435C provides that the administration of the company begins when an administrator is appointed. (d) Section 437D makes void dealings or transactions affecting the property of the company without the administrator's consent or leave of the court. This provision is considered in more detail as part of the Bank Guarantee Case. (e) Section 440B prevents the holders of various rights in relation to property of the company from exercising such rights without the administrator's consent or leave of the court. (f) Section 440D stays proceedings against the company or in relation to any of its property without the administrator's consent or leave of the court. (g) Section 440F prevents enforcement processes against property of the company except with the leave of the court. (h) Division 7 of Part 5.3A sets out various provisions relevant to the rights of parties holding security interests to enforce or take action against property of the company. (i) Section 447B grants power to the court to make orders to protect the interests of a company's creditors while the company is under administration. 151 From the time of the appointment of the administrators, all claims for damages or claims for retention of security, being claims within s 553, were subject to Pt 5.3A: Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24, 31-32. The Applicants submit that where administrators have been appointed, the "claim" of a builder who is holding back payment of monies due (receivables) to a subcontractor in administration on the basis of alleged contractual damages cannot proceed to a court. That "claim" will merge in either a DOCA or in the proof of debt contemplated and provided for in s 553. 152 It is submitted that Pt 5.3A is concerned with the protection of creditors, who may be secured or unsecured, and there is no "third way". A secured creditor has the ability to appoint a receiver and gains priority. An unsecured creditor must prove in the winding up (or a DOCA). There is no third category of those with self-proclaimed contractual rights to self-help. There are no contractual rights to self-help accommodated by Pt 5.3A, save for those enshrined in a PPSA security interest (as defined under the Act). In dealing with the respective positions of secured and unsecured creditors, Parliament intended to cover the field in relation to those persons having rights against the company during the period of voluntary administration. This can also be seen in the broad approach in relation to "claims" in the context of a winding up. 153 I interpolate at this stage to note that the Applicants' references to "self-help" are to the Respondents' call and draw downs on the bank guarantees in their possession, and to the Respondents' application of set-off principles as against their debts to the Hastie Entities. As will be explained later in my reasons, the Respondents' exercise of their rights as against third party banks by way of bank guarantees entered into with those banks should not be mischaracterised as an illegitimate form of "self-help" or enforcement against the Hastie Entities. While it is true that the Respondents' exercise of their rights has an ultimate effect on the financial position of the Hastie Entities because of the financial arrangements they have separately entered into with those banks, it is important to recognise that, as a matter of both form and substance, the Respondents' rights enforced under the bank guarantees are as against the issuing banks. In that sense, the Respondents have no need to access the statutory regime of insolvency in relation to the Hastie Entities. They do not seek to be recognised as "secured creditors" or "unsecured creditors' of the Hastie Entities, to enforce any security interests or contractual rights against the Hastie Entities, or to make any "claims" against the Hastie Entities in their liquidations. To that extent, reliance on a bank guarantee (so called) is similar to a creditor's reliance on any other third party guarantee to satisfy its claims. Like with any third party guarantee, part of the point of the mechanism of entering into the bank guarantee arrangements with the banks is to avoid entirely the situation of being a creditor of an insolvent company. Instead, the beneficiary is a contingent creditor of the bank, which in turn enters into separate but correlative arrangements with the Hastie Entity, and so the bank is a contingent creditor of the Hastie Entity. The other benefit of an unconditional bank guarantee is to allow the beneficiary to receive its claimed proceeds in the first instance, so that the onus is then on the person in respect of which the bank guarantee is issued (here, the relevant Hastie Entity) to bring any claim against the beneficiary to account for any money that is alleged the beneficiary rightfully owes to it. These matters will be dealt with more fully later in these reasons as to the Bank Guarantee Case. 154 The Applicants make the following more detailed submissions on the statutory scheme established by Chapter 5 of the Act in relation to the winding up of a company. In summary, Chapter 5 provides a detailed and comprehensive statutory regime dealing with all aspects of corporate insolvency. Significantly, other than admission to proof under Pt 5.6, no other options for dealing with "debts" and "claims" of unsecured creditors are specified or even contemplated. The central role of the liquidator in holding the assets of an insolvent company and applying them against the liabilities of the company was explained by Dixon J in Hiley v The Peoples Prudential Insurance Company (in liq) (1938) 60 CLR 468 at 496: …the assets of the Company, including the choses in action or claims of the Company, become a fund in the hands of a liquidator, and the liabilities of the Company are converted into claims upon that fund. Consistent with the property of the company being a fund available for creditors in the hands of the liquidator, no proceedings or enforcement action can be taken against the company once it is in winding up, pursuant to s 500 of the Act. The effect of s 500 of the Act is summarised by Barrett J in Arnold World Trading Pty Ltd v ACN 133 427 335 Pty Ltd [2010] NSWSC 1369; (2010) 80 ACSR 670 at [35]: When a creditors voluntary winding up commences, each creditor is denied the right that the creditor would otherwise have had to sue the company to recover the relevant debt. This is the effect of s 500(2) noted above. The creditor obtains instead a right to participate in a distribution in the winding up… The fundamental tenet of winding up is that the company's insolvency is dealt with on a collective basis, and so s 501 of the Act relevantly provides: Subject to the provisions of this Act as to preferential payments, the property of a company must, on its winding up, be applied in satisfaction of its liabilities equally… [Applicants' emphasis] The Applicants say that the Respondents are subject to this collective approach to all unsecured creditors, which came into effect on the Appointment Date (the appointment date of the voluntary administrators being the "section 513C day" on which the winding up is taken to have commenced, pursuant to s 513C(b) of the Act). Sections 513A to 513C reflect an intention to preserve the position of the company from the date of the voluntary administration, in the event that the company is wound up. Far from being an easy or obvious legislative choice, the concept of the "section 513C day" reflects a deliberate policy choice to extend the consequences of winding up to companies in voluntary administration in order to protect the property of the company that may be realised for the benefit of creditors. Returning to the role of the liquidator in the statutory scheme, the liquidator is responsible for getting in the fund to be made available to the creditors of the company, as per s 474 of the Act. Plainly, the section envisages that the liquidator will get in all the property of the company (including funds to which the company is or may be entitled). To the extent that a party disputes that such property is in fact property of the company, it is a matter to be assessed by the liquidator, subject to the rights of action and review provided for under the Act. This power is necessarily qualified by the corresponding obligation of the liquidator to act quasi-judicially in admitting to proof debts and claims owed by the company. Moreover, any interests that third parties may have in the property of the company are retained. Relatedly, s 530A of the Act requires officers of the company to help the liquidator and to deliver to the liquidator the company's books and records. The centrality of the liquidator to the getting in of the assets is also informed by its obligation under s 506(3) of the Act to pay the debts of the company (which is similar to the obligation in s 478(1)(a)). This centrality informs the mechanisms under Div 6 of Pt 5.6 relating to "Proof and ranking of claims". The effect of s 553 is that all possible claims which could be made against the company in consequence of its dealings prior to the commencement of the winding up would be admissible to proof in that winding up. This is because s 553 reflects a statutory intention to capture all extant claims against the company as at the relevant date, and the "relevant date" in s 553 is intended to give the section retroactive effect. The Applicants rely on the following dicta of Hayne J in Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 (Sons of Gwalia) at [172] (Applicant's emphasis): In construing the temporal limit that is imposed by s 553, it is important to recognise the generality of other expressions used in s 553 in defining what debts and claims are to be admissible to proof. The section speaks of "all debts payable by, and all claims against, the company". It amplifies those expressions by the parenthetical reference: "present or future, certain or contingent, ascertained or sounding only in damages". If the words of the section were not wholly sufficient (as they are) to indicate an intention to define provable claims very widely, the Report of the Australian Law Reform Commission on the General Insolvency Inquiry (the Harmer Report), read with the Explanatory Memorandum for the Bill that became the 1992 Act, puts the point beyond any doubt. The Harmer Report identified a basic aim of insolvency laws as being "to deal comprehensively with all of the debts and liabilities of the insolvent" and said that, "[i]n the case of a company, the aim is to deal with all the claims against a company so that its affairs can be fully wound up or so that it can resume trading" (emphasis added). The Harmer Report concluded that "[t]he categories of claims which are admissible should be as wide as possible so that the financial affairs of the insolvent are dealt with comprehensively". Otherwise, as the Harmer Report pointed out, "if the creditors are unable to make their claims in the insolvency, they are unable to recover at all (unless they have a basis for action against either directors of the company or a guarantor of the company's debts or unless the winding up is stayed)". The Explanatory Memorandum for the Bill that became the 1992 Act said that the reforms embodied in the new provisions of ss 553-553E "reflect[ed] the recommendations of the Harmer Report". The Applicants assert that the second bolded passage expresses the logic of collective enforcement: if creditors are free to claim outside the insolvency (for example, by withholding property of the company), why would anyone elect to recover pari passu? Although s 553 speaks of claims being "admissible" to proof, the context is only voluntary insofar as a creditor is not compelled to bring a claim. An unsecured creditor who seeks to claim against the company can only claim through the procedure in Chapter 5. 155 I again interpolate to emphasise that the debts payable by the company and claims against the company being "admissible to proof against the company" does not imply a mandatory mechanism compelling a creditor to prove in the company's winding up. Justice Hayne's analysis speaks to why a wide reading of provable claims is beneficial for creditors, but as the words of the Harmer Report quoted by Hayne J above and bolded suggest, a creditor may choose not to make any claim in insolvency, as they may have a basis for action against a third party. 156 Further, the Applicants refer to the following passage of Campbell J in Re Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818; (2004) 50 ACSR 565 at [89] (Applicants' emphasis): Construction of s 553 needs to be carried out bearing in mind its purpose, as a means of achieving a pari passu distribution of available assets among those who are really creditors of the company. In Wight v Eckhardt Marine GmbH [2004] 1 AC 147 at 155-6, [26]-[29]; Lord Hoffmann said: [26] It is first necessary to remember that a winding up order is not the equivalent of a judgment against the company which converts the creditor's claim into something juridically different, like a judgment debt. Winding up is, as Brightman LJ said in In re Lines Bros Ltd [1983] Ch 1, 20, "a process of collective enforcement of debts". The creditor who petitions for a winding up is "not engaged in proceedings to establish the company's liability or the quantum of the liability (although liability and quantum may be put in issue) but to enforce the liability". [27] The winding up leaves the debts of the creditors untouched. It only affects the way in which they can be enforced. When the order is made, ordinary proceedings against the company are stayed (although the stay can be enforced only against creditors subject to the personal jurisdiction of the court). The creditors are confined to a collective enforcement procedure that results in pari passu distribution of the company's assets. The winding up does not either create new substantive rights in the creditors or destroy the old ones. Their debts, if they are owing, remain debts throughout. They are discharged by the winding up only to the extent that they are paid out of dividends. But when the process of distribution is complete, there are no further assets against which they can be enforced. There is no equivalent of the discharge of a personal bankrupt which extinguishes his debts. When the company is dissolved, there is no longer an entity which the creditor can sue. But even then, discovery of an asset can result in the company being restored for the process to continue. [28] Secondly, as Oliver J explained in the Dynamics Corpn case [1976] 1 WLR 757, 764, the purpose of the rule that debts are valued at the date of winding up is to give effect to the principle of pari passu distribution. It is a principle of fairness between creditors: "It is only in this way that a rateable, or pari passu, distribution of the available property can be achieved, and it is, as I see it, axiomatic that the claims of creditors amongst whom the division is to be effected must all be crystallised at the same date ... for otherwise one is not comparing like with like ..." 157 Again, the reference to creditors being "confined to a collective enforcement procedure" is in the context of creditors who wish to make claims against the company. There is no basis to suggest that a creditor is not permitted to have its claims satisfied by having recourse to a third party. 158 The Applicants then say that as and from the Appointment Date, each Hastie Entity held "the property of the company" on trust for the creditors of that Hastie Entity in accordance with the Act: Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167, 176-177 (Lord Diplock); Cambridge Gas Transportation Corp v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 at [14] (Lord Hoffman). 159 This submission rests on an old fallacy, which Gummow J exposed in Sons of Gwalia at [37] by reference to earlier authority in the High Court: Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 (Linter) at 611 [48]-[49] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, which approved Franklin's Selfserve Pty Ltd v Federal Commissioner of Taxation (1970) 125 CLR 52 at 69-70 per Menzies J (emphasis added): Excessive significance should not be attributed to statements in nineteenth century British cases, decided at a time of endeavours to "flesh out" the developing body of statute law [on companies] by use of principles derived from a range of sources in the general law. These sources included the law of agency, partnership, bankruptcy, and trusts. It later was recognised that some of those endeavours miscarried. One was the attribution to directors of the character of trustees of the assets of the company, and another the treatment of a company in liquidation as trustee of its assets for distribution among creditors. 160 As the High Court said in Linter, the British cases cited by the Applicants must be understood in context. Lord Diplock at 180 in fact clarifies that the references in the jurisprudence to a company in liquidation or a liquidator as "trustee" was an analogy to describe the effect of the insolvency statute in operation: All that was intended to be conveyed by the use of the expression "trust property" and "trust" in these and subsequent cases … was that the effect of the statute was to give to the property of a company in liquidation that essential characteristic which distinguished trust property from other property, viz., that it could not be used or disposed of by the legal owner for his own benefit, but must be used or disposed of for the benefit of other persons. 161 On settled principles of law in Australia, the Hastie Entities are not trustees of property for creditors, and nor is the Liquidator. The correct position is as set out by the High Court in Linter at [54] (quoting Ford and Austin's Principles of Corporations Law). That textbook has since been updated to incorporate the reasons in Linter, stating as follows (R Austin et al, Ford, Austin and Ramsay's Principles of Corporations Law, 17th ed, 2018 at [27.120.15]): Whether the company is insolvent or solvent, the company holds its property beneficially but subject to the statutory scheme of liquidation under which the liquidator is to pay creditors and dispose of any surplus as directed by the company's constitution. The change in control of the affairs of the company has no impact upon its beneficial ownership of its assets: Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq), above, at [54]. Unsecured creditors and contributories have the benefit of the liquidator's administration of the company's estate. Their special interest is to some extent like that of objects of a discretionary trust; they have a right to have a fund of assets protected and properly administered… 162 The Applicants' submissions continue in relation to the pari passu principle as follows: The collective approach to the distribution amongst unsecured creditors of the assets of the company is emphasised by s 555: Except as otherwise provided by this Act, all debts and claims proved in a winding up rank equally and, if the property of the company is insufficient to meet them in full, they must be paid proportionately. The Respondents do not assert that they are entitled to priority payments under s 556 of the Act ahead of other unsecured creditors, including employees. The pari passu principle legislated in ss 501 and 555 of the Act and the freezing at the commencement date of the winding up of the claims against the company (ss 553 and 554) are central to the statutory scheme directed to ensuring that the company's assets are distributed equally amongst the unsecured creditors. The Act prevents creditors who "get in first" being able to have their claims being met in full whilst leaving others with nothing. In Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited [2021] FCAFC 228; (2021) 402 ALR 387 (Morton), Allsop CJ referred to the purposes of the pari passu principle: The primary objective is the securing of equality of distribution amongst creditors of the same class; with the consequential purpose of deterring the "race to the courthouse" (put by the Supreme Court: "to dismember the debtor during his slide into bankruptcy") and thereby enhancing the prospect of debtors trading out of difficulty. [Applicant's emphasis] 163 At this stage of the discussion, it is worth recalling the historical basis in equity of the pari passu principle. Chief Justice Allsop referred to this historical basis in Morton at [28]-[30] and [53] (with Middleton and Derrington JJ agreeing), and to the fact that it is subject to other principles of equity (such as mutual set-off) and supported by the statutory regime in respect of voidable transactions. It is in this context that the above quote relied upon by the Applicants fits: [28] Thirdly, the conceptions of mutual set-off and pari passu distribution are both founded in equity. The former is often expressed as an exception to the latter (see Goode RM Principles of Corporate Insolvency Law (2nd ed, Sweet & Maxwell, 1997) at 153-154 and 172-173). At the foundation of each is equity's concern with justice and fairness. In relation to the former, the injustice to the creditor of not recognising genuine mutual debts and credits and mutual dealings between the creditor and the debtor in ascertaining the respective rights and obligations of the insolvent debtor and the creditor. In relation to the latter, equity is concerned with equality of distribution, as a reflection of the equitable maxim "Equity is equality": see Akers as a joint foreign representative of Saad Investments Company Limited (in Official Liquidation) v Deputy Commissioner of Taxation [2014] FCAFC 57; 223 FCR 57 at 41 [135]. The two manifestations of equity's concern with fairness are directed to two different, but related, aspects of the insolvent administration: fairness in the ascertainment of the assets of and claims upon the estate; and fairness in the equal access to that estate amongst ranking unsecured creditors for their ascertained or accepted claims. [29] Fourthly, the statutory purpose of the avoidance or conclusion of voidableness of preferences, and of the preference action is the just remedying of dislocation of the equality of creditors reflected in pari passu distribution. The purpose was expressed by Gleeson CJ, Gaudron, Gummow, Hayne and Callinan JJ in G & M Aldridge Pty Ltd v Walsh [2001] HCA 27; 203 CLR 662 at 674-675 [29] and [30] in a two-fold form, drawn in part by adoption of what had been said by the United States Supreme Court in Union Bank v Wolas 502 US 151 (1991) at 161: The primary objective is the securing of equality of distribution amongst creditors of the same class; with the consequential purpose of deterring the "race to the courthouse" (put by the Supreme Court: "to dismember the debtor during his slide into bankruptcy") and thereby enhancing the prospect of debtors trading out of difficulty. [30] Fifthly, the object of the statutory set-off was expressed by Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ in Gye v McIntyre [1991] HCA 60; 171 CLR 609 at 618-619, being to prevent injustice and to do substantial justice where "a debt is really due from the bankrupt to the debtor to his estate". Provisions such as s 553C (s 86 of the 1966 Act) are to be given "the widest possible scope": Day & Dent Constructions v North Australian Properties Pty Ltd (Provisional Liquidator Appointed) [1982] HCA 20; 150 CLR 85 at 108 and Gye v McIntyre at 619, as long as it be recognised that that width and the "substantial justice" is confined within the limits of genuine mutuality as a matter of substance: Day & Dent Constructions at 95 and Gye v McIntyre at 619. The construction and application of set-off provisions such as s 553C is to be approached in the context of these underlying values that is reflected in the binding legal principles of the authorities. … [53] The relevant right or equity and the relevant obligation which later grow into a claim or debt must be in existence as at the relevant date. The right or equity or obligation may be absolute or contingent. The call by Dixon J to have regard to the equitable or beneficial interest reflects the equitable character of the conception of the set-off embodied in the statutory provision. Equity long had a role in the administration and operation of bankruptcy and in aid and furtherance of the equitable conceptions and values that underpinned insolvency and bankruptcy: Holdsworth W, A History of English Law (2nd ed, Methuen and Co Sweet and Maxwell, 1971) volume 1 at 470-473, volume 8 at 241-244, and volume 12 at 281-283 and 541-542; May HW and Edwards WD (ed), The Law of Fraudulent and Voluntary Conveyances (3rd ed, Steven and Haynes, 1908) at 306-307; In re Mouat; Kingston Cotton Mills Co v Mouat [1899] 1 Ch 831. 164 In addition to the principles referred to above, it is also relevant to note other aspects of the statutory regime that may be regarded as relating to, affecting, furthering or limiting the pari passu principle. For example, the pari passu principle is subject to the statutory priority payment regime under s 556 of the Act. I also note the so-called "ipso facto regime" under the Act (which renders unenforceable certain "ipso facto" clauses which purport to trigger termination rights upon an insolvency event, regardless of continuing performance by the insolvent counterparty). That regime does not apply to the subcontracts in this proceeding, which were entered into prior to 1 July 2018 (the relevant commencement date under the Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 (Cth)). Although it was not relied upon by the Applicants, it was referred to by Multiplex as relevant context. To the extent that such a regime relates to the prevention of the "race to the courthouse" and the "dismemberment of the debtor" by strict reliance on contractual rights upon insolvency, it may be regarded as another aspect of the statutory regime relating to the pari passu principle. The fact that it does not apply to the relevant subcontracts does not necessarily support the Applicants' invocation of an expansionary pari passu principle to restrain the Respondents' reliance on their contractual rights after the Appointment Date in this proceeding. It in fact may indicate that such a policy concern is now internalised within the Act, and there is no need for the pari passu principle to play any type of "gap-filling" role in this respect. 165 I will return later to consideration of the pari passu principle in circumstances where unsecured creditors rely on third party guarantees. 166 The Applicants submit that the collective enforcement procedure and the pari passu principle implemented by Chapter 5 of the Act is of statutory force and cannot be contracted out of by the parties in this proceeding. In particular, the Applicants rely on British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 1 WLR 758 (British Eagle) at 780-781 in the House of Lords, where Lord Cross in the majority concluded as follows in respect of certain "clearing house arrangements" said to be inconsistent with the liquidation mechanism established by the insolvency statute: The respondents argue that the position which, according to them, the clearing house creditors have achieved, though it may be anomalous and unfair to the general body of unsecured creditors, is not forbidden by any provision in the Companies Act, and that the power of the court to go behind agreements, the results of which are repugnant to our insolvency legislation, is confined to cases in which the parties' dominant purpose was to evade its operation. I cannot accept this argument… [W]hat the respondents are saying here is that the parties to the "clearing house" arrangements by agreeing that simple contract debts are to be satisfied in a particular way have succeeded in "contracting out" of the provisions contained in section 302 for the payment of unsecured debts "pari passu." In such a context it is to my mind irrelevant that the parties to the "clearing house" arrangements had good business reasons for entering into them and did not direct their minds to the question how the arrangements might be affected by the insolvency of one or more of the parties. Such a "contracting out" must, to my mind, be contrary to public policy. The question is, in essence, whether what was called in argument the "mini liquidation" flowing from the clearing house arrangements is to yield to or to prevail over the general liquidation. I cannot doubt, that on principle the rules of the general liquidation should prevail. 167 The Applicants also rely on Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 340 per Brennan and Dawson JJ, citing In re Exchange Securities Ltd (in liq) [1988] Ch 46 at 59-60 in support of the submission that an estoppel against a company in liquidation which would defeat the distribution of assets among the true creditors of the company is similarly unenforceable against the liquidator of the company. 168 The major premise of these submissions is establishing that there has been a relevant inconsistency with the statutory scheme of Chapter 5 of the Act, and in particular, a specific provision of that Act. As a majority of the High Court stated in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 (IATA) at [76] the critical point in British Eagle was that there was "property" of the company to which the relevant English pari passu provision applied, and "a contractual provision negating that outcome could not prevail against the terms of the statute". 169 It is accepted that if the Act establishes that particular property of the company is to be dealt with in a certain way, then a contrary contractual right against the company or an estoppel similarly of contrary effect would be unenforceable. However, the burden is on the Applicants to show that the Act indeed operates in a certain way that is contrary to the contracts entered into by the Hastie Entities in this proceeding. 170 The Applicants then turn to the Respondents' claims against the Hastie Entities: Section 554A of the Act confers power on the liquidator to admit the claims of each of the Respondents as claims that did not bear a certain value as at the Appointment Date (that is, the value of the claims is uncertain). The liquidator is the proper party tasked by the Act to determine the value of each Respondent's claim and to make the calculation directed by s 553C as to mutual credits and set-off rights. The liquidator's role in the proof process is elaborated in the Corporations Regulations 2001 (Cth) ('Regulations') at regs 5.6.47 to 5.6.54. The Respondents are unsecured creditors of the Hastie Entities and each holds one or more of the following property that is or appears to be property of a Hastie Entity recoverable for the benefit of creditors of that company: (a) book debts recorded in the debtor's ledger for each Hastie Entity (ie, the receivables); (b) proceeds of bank guarantees drawn down in the weeks following the Appointment Date and, in some cases, much later, after the commencement of the winding up; (c) held bank guarantees which, if called upon, will increase the liabilities of the Hastie Entities. 171 I note at this point that the characterisation of the rights of the Hastie Entities in regards to its receivables and in relation to the bank guarantees as "property of the company" are significant for the Applicants' case in two main ways: first, to establish the case within the scope of the statutory scheme and the provisions of the Act relating to the "property of the company" (eg ss 437D, 440B, 440D, 468, 474 and 500), and second, to argue that the Hastie Entities' proprietary rights should be favoured in priority to any proprietary rights of the Respondents in this case. 172 The Applicants' submissions then turn to the procedural moratoria under the Act: Prior to winding up, the Act provides mechanisms to reinforce the requirements of collective enforcement, including the prohibition on the taking of legal action against a company in administration without leave of the Court (s 440D) and restrictions upon the enforcement of a charge against property of the company (s 440B). There is no reason to suppose Parliament intended that unsecured creditors should have an advantage not afforded even to secured creditors. Upon winding up, s 500 effectively establishes a moratorium upon proceedings or enforcement against a company in winding up. Section 500(1) voids any "attachment, sequestration, distress or execution put in force against the property of the company". Distress is usually associated with a landlord's right to enforce payments of arrears of rent by seizing and selling the goods of the tenant. It appears then that "distress" is a reference to self-help against personal property, usually undertaken by a landlord. Given that s 500 precludes the exercising of enforcement against all forms of property, even in circumstances where a creditor has the benefit of a judgment regularly entered, the use of the term "distress" in this context evidences an intention to preclude self-help against the property of a company. Further, s 500(2) suspended each Respondent's right to bring proceedings for damages or otherwise seek a declaration that a Hastie Entity was liable in damages for non-performance of the contract. Absent establishment of such a liability owing from the Hastie Entity, no Respondent obtained a legally valid right to refuse to pay the amount shown in the debtor's ledger as owing to that Hastie Entity, on the basis that the Respondent was owed damages by the Hastie Entity. The course prescribed by the Act is that each Respondent submit a proof of debt and, in the event of a dispute about the proof, appeal from any decision of the liquidator. 173 I again note here that the course prescribed by the Act for the lodging of proofs of debt is a voluntary mechanism for creditors to satisfy their claims in lieu of the ability to bring proceedings barred by s 500 against a company in liquidation. The Respondents do not need to bring a proceeding or lodge a proof of debt in order to assert a right to refuse to pay an amount claimed by the Hastie Entities. As the Hastie Entities are the parties seeking to be paid debts due to them, it is ultimately contingent on them (or their Liquidator) to bring a proceeding against any Respondents in a court of law to compel payment of those debts. The Act does not preclude this, and in fact s 477(2)(a) explicitly empowers liquidators to bring any legal proceeding in the name and on behalf of the company (which power has been utilised by the Liquidator in these very proceedings). 174 The Applicants' submissions as to the procedural moratoria under the Act continue as follows: The Applicants refer to the dicta of Lord Sumption in Re Lehman Brothers International (Europe) (in administration) (No 4) [2018] AC 465 at [197]: The purpose of the procedural moratorium was to allow the insolvent's assets to be realised and distributed to his creditors in proportion to their justified claims. [Applicant's emphasis] Likewise, they say, winding up denied the Respondents a proper legal basis to assert "ownership" of the proceeds drawn on the guarantees, as the proceeds were for a dedicated purpose (being payment of damages) which was proscribed: see ss 440D, 471B and 500(2) in respect of the staying of proceedings following voluntary administrations, winding up in insolvency or by the court, and voluntary winding up respectively. The Respondents have since the Appointment Date asserted an entitlement to have recourse to funds of the Hastie Entities which is contrary to the principle of collective enforcement in the interests of all creditors. The Respondents claim to be able to set off their contractual claims as unsecured creditors by having recourse to property under their control in the form of bank guarantees and receivables. To the extent that the Respondents rely upon having drawn the guarantee proceeds after the Appointment Date, they are in the same position as a debtor of a bankrupt who after the bankruptcy buys up liabilities of the bankrupt for the purpose of setting them off against his own indebtedness: see Day & Dent Constructions Pty Ltd (in liq) v North Australian Properties Pty Ltd (1982) 150 CLR 85 (Day & Dent) at 95 per Gibbs CJ. 175 The Applicants' reliance on the procedural moratorium under s 500 as a predicate for its overarching proposition - that the Act prohibits creditors from asserting legal or proprietary rights that are otherwise for the purpose of satisfying its damages claims against an insolvent company - is misguided. The Act certainly bars proceedings being brought against the company or in respect of the company's property, but it does not prohibit the exercise of other rights whose substantive purpose may be to satisfy the creditor's claims against an insolvent company. While it is true that the Respondents drew down on the bank guarantees after the Appointment Date, that exercise of rights was as against the issuing bank party to the bank guarantee, not the insolvent company. The Respondents' drawdown on the bank guarantees is therefore not analogous to buying up the liabilities of a bankrupt in order to set them off against the Respondents' own indebtedness. First, it is the issuing banks to whom the Hastie Entities have had their liabilities increased by virtue of the bank guarantee facilities they agreed to enter into. Secondly, as will be explained in more detail in my consideration of the Receivables Case, the Respondents' claims against the Hastie Entities that they assert are able to be set-off automatically against the Hastie Entities' debt claims were not purchased from any other party and existed in the hands of the Respondents as contingent claims under the relevant subcontracts prior to the Appointment Date. 176 Strictly speaking, if the Applicants are concerned that the increase of their liabilities are voidable because they occurred after the Appointment Date, their suit should be as against the issuing banks that in fact made claims against the Hastie Entities after the Appointment Date following the Respondents' bank guarantee drawdowns. The issuing banks are not parties to these proceedings and the Applicants have made no claims as against them. This may be because the banks are secured creditors and because their claims as against the Hastie Entities after the Appointment Date, properly understood, would be contingent claims (the circumstances giving rise to which occurred before the Appointment Date) that crystallised after the Appointment Date following the Respondents' drawdowns on the bank guarantees. On that basis, their claims would be within s 553 of the Act so that they would be admissible to proof in the winding up of the relevant Hastie Entity. However, it is not necessary or appropriate for me to make any findings in this regard in these proceedings. 177 The Applicants' submissions continued as follows, now in relation to Part 5.6 of the Act as a whole. Part 5.6 provides for the accounting in respect of creditors' claims to be undertaken by the liquidator of the company in winding up, not a creditor: see, eg ss 506(1)(e), 553C, 553D, 554, 554A, 555, 556. Section 554 refers to the computing of the amount of a debt or claim. In particular, ss 555 and 556 state that debts and claims to creditors "must be paid". The reference to the act of payment as an obligation plainly contemplates that the liquidator will be paying the creditors, rather than the creditors paying themselves. To read Div 6 of Part 5.6 of the Act in this way is consistent with the sections of the Act that direct the liquidator take control of the property, even though it may ultimately be found to belong to other persons: see s 474(1) of the Act, which directs the liquidator to take control of "all the property which is, or which appears to be, property of the company". In turn, the ability of a liquidator to distribute the property of the company by paying claims and debts in accordance with ss 501 and 555 depends upon an accurate accounting of the property of the company, including its assets and liabilities. It should not be supposed that the Act envisages that the liquidator could perform his or her duty by getting in and distributing only some of the property. A common feature of the claims made by the Respondents in these proceedings is the assertion of an entitlement to have recourse to certain funds of the Hastie Entities (in the form of trade receivables and bank guarantees) entirely outside of the Act's provisions. That is, they claim to be able to set off their contractual claims as unsecured creditors by engaging in self-help in relation to property under their control in the form of bank guarantees and receivables. The Respondents' self-help is prohibited by the Act and is unfair to other creditors in that the Respondents as unsecured creditors: (a) avoid having to prove in the winding up, notwithstanding that their claims are purely contractual and no different in type or priority to the claims of other unsecured creditors; (b) recover the full value of their claims, thereby avoiding the operation of the pari passu principle to which other creditors are subject; and (c) avoid the requirements of the Act in relation to set-off, in particular s 553C and its requirement of mutuality. There is no principled basis for distinguishing between the Respondents as unsecured creditors asserting contractual entitlements against the Hastie Entities and other unsecured creditors. These assertions by the Respondents do not as a matter of law legitimise the self-help which has enabled them to hold the funds that constitute the receivables and bank guarantees. 178 I have already addressed the Applicants' characterisation of the Respondents' exercise of its rights as "self-help". In answer to the supposed lack of any principled basis to distinguish between the Respondents and other unsecured creditors: (a) first, the Respondents do not seek to claim against the Hastie Entities as unsecured creditors at all, and strictly speaking, there is no provision of the Act that falls for consideration that requires the rights of the Respondents to be determined according to the binary definitions of "secured creditor" and "unsecured creditor"; and (b) secondly, as I will explain later in my consideration of the Bank Guarantee Case, the practical effect of the bank guarantee arrangements - whereby the Respondents' claims against the Hastie Entities are satisfied by the banks, whose resultant claims against the Hastie Entities in turn are then to be satisfied by the Hastie Entities - is brought about by the arms-length agreements of the Hastie Entities themselves with the Respondents and with the banks. It should be added that the Respondents' call on and drawdown of the bank guarantees against the banks are not in the nature of an unfair preference or other voidable transaction with the Hastie Entities (and such allegations have not been made against the Respondents); (c) thirdly, it is true that the practical effect of the arrangements are that the Respondents are relieved of the necessity to bring their claims as unsecured creditors against the insolvent Hastie Entities, and in the eyes of the Hastie Entities, their claims appear to have been "converted" to claims in the hands of the banks as secured creditors. However, it is important to recognise that the banks' rights to repayment are rights held in their own capacities pursuant to their facility agreements with the Hastie Entities, and not based on any principle of subrogation to the Respondents' rights; (d) fourthly, the facility agreements provided to the Hastie Entities the benefit of being able to contract with counterparties who, without the security provided by a bank guarantee (or a retention amount), may have been otherwise unwilling to enter into business concerning large-scale projects with them. The Hastie Entities entered into these facility agreements on the basis that the banks were secured creditors and would be able to satisfy their claims out of secured property in priority to all other unsecured creditors. 179 These considerations ought to be kept in mind when considering the Applicants' invocation of the pari passu principle, and they are relevant to the question of whether, if the Respondents were entitled to retain the proceeds of the bank guarantees, the Act would be truly giving effect to the equitable substance of the pari passu principle. Nevertheless, as I will discuss later in my reasons as to the Bank Guarantee Case, it is important to begin with the statutory text rather than a public policy or general principle, however central a tenet it is in insolvency law. 180 Overall, the combined effect of the Applicants' characterisation of the statutory scheme implemented by Chapter 5 of the Act - which underpins both its Receivables Case and Bank Guarantee Case - is that in the situation of an insolvency, the Act requires creditors' claims against the company to be determined, calculated or dealt with by the liquidator once appointed. For a creditor to decide for itself its rights and entitlements as to the receivables owed to the company or the application of set-off (the Receivables Case) or to pursue a form of "self-help" by drawing down on funds available to it under a bank guarantee (the Bank Guarantee Case), and then to decline to submit to the liquidators' power to determine the value of debts owed by or claims against the insolvent company, is, the Applicants say, to circumvent and contravene the statutory scheme under the Act. 181 Apart from the fact that they are both underpinned by the Applicants' interpretation of the overall statutory scheme implemented by Chapter 5 of the Act, it is worth noting briefly how the Applicants' Receivables Case and Bank Guarantee Case interact. The Receivables Case is based on the Hastie Entities' contractual claims against the Respondents and the "receivables" they claim to be debts owed to them under the contract. The Respondents' defence to those claims is to assert their own contractual claims against the Hastie Entities which when set-off against the Hastie Entities' claims are said to result in a debt owed to each of the Respondents. It was in anticipation of this debt arising that the Respondents called on the bank guarantees and drew down the proceeds. Having done so, each of the Respondents were then in a position where any claims they had against the Hastie Entities could be satisfied out of the bank guarantee proceeds, with any surplus to be returned to those Hastie Entities. Accordingly, because of the bank guarantee draw downs, the Respondents were in a position where they did not seek to claim money directly from the insolvent Hastie Entities or to prove in their liquidations once they were wound up. In possession of the bank guarantee proceeds, each Respondent sought to determine themselves the proper value of their claims and the Hastie Entities' claims and to determine themselves the application of any set-off. 182 In this way, the Respondents' claims against the Hastie Entities (which are said to set-off fully against the Hastie Entities' receivable claims that are the premise of the Receivables Case) gave rise to the Respondents' drawdown of the bank guarantees (the legality of which is impugned in the Bank Guarantee Case), which in turn, created the conditions for the Respondents to decline to prove in the liquidations of the Hastie Entities and to determine for themselves the proper application of set-off between their claims and the Hastie Entities' claims (the legality of which is impugned in the Receivables Case). It can be seen therefore that the Receivables Case and the Bank Guarantee Case affect the other, and the events giving rise to each are part of a singular dispute as between the respective Applicants and Respondents taking place in the context of the statutory scheme for insolvent companies implemented by the Act. While for convenience these reasons set out and consider the Receivables Case and Bank Guarantee Case separately, it is important to consider the interaction of the issues raised by the separate "cases" in the context of a cohesive dispute between the parties in the litigation that is to be determined in the context of the statutory scheme referred to. 183 The Applicants' submissions as to the statutory scheme as to set-off in insolvency are further set out in the next section regarding the Receivables Case. Their submissions as to the application of the statutory scheme where a creditor seeks to draw down on a bank guarantee in relation to the insolvent company are set out in the section regarding the Bank Guarantee Case.

[21]

The relevant terms of the subcontracts 187 Having assessed each of the subcontracts, I am of the view that the specific terms of the subcontracts involving the Respondents are generally similar, but where they are relevantly different so as to affect the determination of the issues of principle in dispute in the Receivables Case, I refer to such differences in my following reasons. It is convenient therefore generally to refer to the terms of the subcontracts involving the First Respondent, Multiplex. 188 Because the purpose of this liability trial is not to determine the validity of all receivables claims or to quantify any of those claims, it is not necessary to set out every contractual detail. It is sufficient to set out the terms only to the extent necessary to understand the nature and context of the Applicants' receivables claims, and to comment on the validity of a particular receivables claim and to understand the Respondents' claims for contractual damages in relation to which they assert set-off. 189 Although the Applicants and Multiplex did not agree on a representative subcontract for the purposes of their dispute, it is not in dispute that the terms of each subcontract were consistent in relation to payment claims and in relation to termination and default. In addition, each subcontract was based on an industry standard form contract and so the numbering of the clauses as between projects is generally consistent. For the sake of identifying a particular subcontract, I shall refer to the representative subcontract identified by the Applicants in their closing submissions, being the design and construct contract for "Project B - Stockland Shellharbour" ('Stockland Shellharbour Subcontract') entered into on 14 January 2011 between Multiplex and the 'Subcontractor' (being the relevant Hastie Entity in respect of that subcontract). 190 Clause 42 is entitled "Payments", and clause 42.1 is entitled "Payment Claims, Payment Schedules, Calculations and Time for Payment". Under that subclause, a progress payment regime is established whereby the Subcontractor makes "payment claims" at a certain time after completing works, to which the Respondent (in this case, Multiplex) responds with a "payment schedule" assessing each claim and stating the amounts payable in its opinion, by which schedule such amounts are accepted by Multiplex as debts due and payable. It relevantly provides as follows: 42.1 Payment Claims, Payment Schedules, Calculations and Time for Payment At the times for payment claims or upon completion of the stages of the work under the Subcontract stated in Annexure Part A and within the time prescribed by Clause 42.6, the Subcontractor shall deliver to Multiplex claims for payment in the form at Annexure Part Q supported by evidence of the amount due to the Subcontractor and such information as Multiplex may reasonably require, including all of the information in Clause 42.1A. Claims for payment shall be for the value of work carried out, or to be carried out, by the Subcontractor in the performance of the Subcontract to the last day of the relevant month… Within 14 days of receipt of a claim for payment (including all required supporting evidence and information) that complies with this Clause 42.1, Multiplex: (a) shall acting reasonably, assess the claim; and (b) may issue to the Subcontractor a payment schedule staling the amount of the payment which, in Multiplex's opinion, is lo be made by Multiplex to the Subcontractor or by the Subcontractor to Multiplex. Multiplex shall set out in any payment schedule issued pursuant to this Clause 42 the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Subcontractor, the reasons for the difference and for withholding any payment. Multiplex shall also set out, as applicable, in any payment schedule issued pursuant to Clause 42, the allowances made for - (c) the value of work carried out by the Subcontractor in the performance of the Subcontract to last day of the relevant month; (d) amounts due (or which may become due) from the Subcontractor to Multiplex; (e) amounts paid previously under the Subcontract; (f) amounts previously deducted for retention moneys pursuant to Annexure Part A; and (g) retention moneys to be deducted pursuant to Annexure Part A, arising out of the Subcontract resulting in the balance to the Subcontractor or Multiplex, as the case may be. Where an amount is shown as being due for payment to the Subcontractor by Multiplex in a payment schedule or otherwise assessed by Multiplex as being due for payment to the Subcontractor by Multiplex, Multiplex shall pay the Subcontractor the relevant amount by the latest of: (h) the date provided in Item 35A of Annexure Part A; (i) 28 days after receipt by Multiplex of all required evidence and information supporting the relevant payment claim; and (j) the date on which the Subcontractor provides security in accordance with Clause 5.2. If a payment schedule states that payment shall be made by the Subcontractor to Multiplex, that amount shall be a debt due from the Subcontractor to Multiplex and the Subcontractor shall pay to Multiplex an amount not less than the amount shown in such certificate within 5 days of Multiplex's issue of the certificate. A payment made pursuant to this Clause 42.1 shall not prejudice the right of either party to dispute under Clause 47 whether the amount so paid is the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, Multiplex or the Subcontractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable. If the Subcontractor fails to make a claim for payment under this Clause 42.1, Multiplex may nevertheless issue a payment schedule and Multiplex or the Subcontractor, as the case may be, shall pay the amount shown in that payment schedule. Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only. 191 I also set out clause 42.1A, which is referred to above: 42.1A Requirements for Payment Claims The Subcontractor must include all of the following information in its payment claims under Clause 42.1: (a) such information as Multiplex reasonably requires in respect of the work the subject of the progress claim; (b) a certificate, in the appropriate form set out in Annexure Part F, from each of the Subcontractor's Consultants and the Subcontractor; (c) a statutory declaration in the form al Annexure Part R; (d) if the claim for payment includes goods, product, plant or materials, the warranties or guarantees required under Clause 30. 7 in respect of those goods, product, plant or materials; and (e) evidence, in a form reasonably acceptable to Multiplex, that the Subcontractor has effected and maintained the policies of insurance referred to in Clause 18. 192 Clause 42.5 sets out the regime for the final account of all payment claims, as follows: 42.5 Deed of Release Notwithstanding Clauses 42. 1 and 42.6, the Subcontractor shall submit a final account of all Claims for payment in respect of the Subcontract Works: (a) when the value of the Subcontract Works reaches 95% of the Subcontract Sum; (b) upon request by Multiplex; and/or (c) prior to the last progress claim, as directed by Multiplex. On agreement by Multiplex of the amount payable to the Subcontractor, Multiplex shall deliver to the Subcontractor a Deed of Release in the form at Annexure Part T completed with the appropriate details. Upon receipt of the Deed of Release, the Subcontractor shall duly execute it and promptly return it to Multiplex. If, within 7 days of Multiplex providing the Deed of Release to the Subcontractor, the Subcontractor fails to duly execute and return the Deed of Release to Multiplex, then: (d) the details contained in the Deed of Release shall be final and binding on the Subcontractor; and (e) the Subcontractor shall not be entitled to make, and waives its right lo, any Claim against Multiplex and Multiplex shall be fully discharged and released from all Claims which the Subcontractor has or might have had or might assert in relation to the work under the Subcontract. Within 35 days of receipt of a written request from the Subcontractor, which request may only be made with a payment claim under Clause 42.1 following the later of: (f) receipt by Multiplex of the executed Deed of Release; and (g) the date which is 7 days after Multiplex provided the Deed of Release to the Subcontractor, Multiplex shall pay the Subcontractor the amount to which it is entitled in full and final settlement of any Claims which the Subcontractor may have against Multiplex. 193 Clause 42.8 provides for a contractual set-off regime for the benefit of Multiplex: 42.8 Set Offs by Multiplex (a) Multiplex may set-off or deduct from: (i) any amounts due to the Subcontractor, including any amounts in any payment schedule issued by Multiplex; or (ii) the amount available to Multiplex if it exercises its rights under security, any moneys due, or which may become due, from the Subcontractor to Multiplex (whether under this Subcontract or otherwise). (b) Even if an amount owed by the Subcontractor to Multiplex under the Subcontract has not been included in a payment schedule by Multiplex under this Subcontract, Multiplex may separately recover the debt from the Subcontractor. 194 Clause 42.9 is titled 'Security of Payment Act'. None of the parties relied on this clause, which concerns secondary subcontractors retained by the Subcontractor, so it is not necessary to set out or consider here. 195 I shall now set out parts of clause 47, entitled "Dispute Resolution", also referred to above within the progress payment regime at clause 42.1, which establishes a dispute resolution mechanism for disputes generally (including disputes in relation to clause 42.1): 47.1 Notice of Dispute If a dispute or difference (hereafter called a 'dispute') between Multiplex and the Subcontractor arises in connection with the Subcontract or the subject matter thereof, including a dispute concerning - (a) a direction given by Multiplex; or (b) a Claim, then either party shall deliver by hand or send by certified mail to the other party a notice of dispute in writing adequately identifying and providing details of the dispute. Notwithstanding the existence of a dispute, Multiplex and the Subcontractor shall continue to perform the Subcontract and, subject to Clause 44, the Subcontractor shall continue with the work under the Subcontract and Multiplex and the Subcontractor shall continue to comply with Clause 42.1. … 47.6 Summary Relief Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Subcontract or to seek interlocutory injunctive in respect of a dispute under Clause 47 or any matter arising under the Subcontract. 196 Finally, I shall set out Clause 44, which is entitled "Default or Insolvency". Clauses 44.2 to 44.6 deal with the procedure where there is a default by the Subcontractor (the Hastie Entity). Those clauses relevantly provide as follows: 44.2 Default by the Subcontractor If the Subcontractor commits a breach of this Subcontract, Multiplex may give the Subcontractor a written notice to show cause. … 44.4 Rights of Multiplex If by the lime specified in a notice given under Clause 44.2, the Subcontractor fails to show cause why Multiplex should not exercise a right referred to in this Clause 44.4, Multiplex may by notice in writing to the Subcontractor - (a) take out of the hands of the Subcontractor the whole or part of the work under the Subcontract remaining to be completed; or (b) terminate the Subcontract. Upon giving a notice under Clause 44.2, Multiplex may suspend payments to the Subcontractor until the earlier of - (i) the date upon which the Subcontractor shows cause; (ii) the date upon which Multiplex takes action under Clause 44.4(a) or (b); or (iii) the date which is 7 days after the last day for showing cause in the notice under Clause 44.2. If Multiplex exercises the right under Clause 44.4(a), the Subcontractor shall not be entitled to any further payment in respect of the work taken out of the hands of the Subcontractor unless a payment becomes due to the Subcontractor under Clause 44.6. … 44.6 Adjustment on Completion of the Work Taken Out of the Hands of the Subcontractor When work taken out of the hands of the Subcontractor under Clause 44.4(a) is completed, Multiplex shall ascertain the Losses suffered or incurred by it in completing the work and shall issue a certificate pursuant to this Clause 44.6 t0 the Subcontractor certifying - (a) the amount of those Losses, and setting out the calculations employed to arrive at those Losses; (b) the amount which would otherwise have been paid to the Subcontractor if the work had been completed by the Subcontractor; and (c) the difference. If the Losses incurred or suffered by Multiplex arc greater than the amount which would have been paid to the Subcontractor if the work had been completed by the Subcontractor, the difference shall be a debt due from the Subcontractor to Multiplex. If the Losses incurred or suffered by Multiplex are less than the amount that would have been paid to the Subcontractor if the work had been completed by the Subcontractor, the difference shall be a debt due to the Subcontractor from Multiplex. If the Subcontractor is indebted to Multiplex, Multiplex may retain Constructional Plant or other things taken under Clause 44.5 until the debt is satisfied. If after reasonable notice, the Subcontractor fails to pay the debt, Multiplex may sell the Constructional Plant or other things and apply the proceeds to the satisfaction of the debt and the costs of sale and if those moneys are insufficient, Multiplex may have recourse to retention moneys and, if they are insufficient, then to security under the Subcontract. Any excess shall be paid to the Subcontractor. 197 "Losses" is defined broadly, as follows: 'Losses' means liabilities, losses, damages, expenses and costs (including legal costs on a full indemnity basis and whether incurred or awarded) of any kind or nature including: (a) loss of profits, loss of revenue, loss of anticipated savings, loss of opportunity, pure economic loss and financial losses associated with loss of data; and (b) any other special or indirect loss; 198 Clauses 44.7 to 44.9 deal with the procedure where there is non-payment by Multiplex: 44.7 Non payment by Multiplex If Multiplex fails to make a payment due under the Subcontract, the Subcontractor may give Multiplex a written notice to show cause. … 44.9 Rights of the Subcontractor (a) If Multiplex responds to the notice given under Clause 44.7 and states that Multiplex is not liable for the alleged required payment because of bona fide reasons, the parties arc deemed to be in dispute and the procedure in Clause 47 applies. (b) If by the time specified in the notice given under Clause 44.7, Multiplex fails to make the payment, respond under Clause 44.9(a) or otherwise show reasonable cause why the Subcontractor should not exercise a right referred to in this Clause 44.9, the Subcontractor may by notice in writing to Multiplex suspend the whole or any part of the work under the Subcontract. (c) The Subcontractor shall lift the suspension if Multiplex remedies the breach but if within 60 days of the date of suspension under this Clause 44.9, Multiplex fails to remedy the breach or, if the breach is not capable of remedy, fails to make other arrangements to the reasonable satisfaction of the Subcontractor, the Subcontractor may by notice in writing to Multiplex terminate the Subcontract. 199 Clauses 44.1, 44.10 and 44.11 relevantly provide as to the rights of Multiplex upon termination or upon insolvency as follows: 44.1 Preservation of Other Rights If the Subcontractor breaches or repudiates the Subcontract, nothing in Clause 44 shall prejudice the right of Multiplex to recover damages or exercise any other right (including, for the avoidance of doubt, the right to terminate the Subcontract). … 44.10 Rights of the Parties on Termination If the Subcontract is terminated pursuant to Clause 44.4(b) or 44.9, the rights and liabilities of the parties shall be the same as they would be at common law had the defaulting party repudiated the Subcontract and the other party had elected to treat the Subcontract as at an end and recover damages. … If Multiplex repudiates this Subcontract and the Subcontractor has terminated this Subcontract, the Subcontractor shall only be entitled to claim general damages and will not be entitled to claim on a quantum meruit basis, which election the Subcontractor hereby irrevocably makes. 44.11 Insolvency If- … (c) in relation to a party being a corporation - … (viii) a receiver or receiver and manager, a controller, a voluntary administrator, a provisional liquidator or a liquidator is appointed to a party or over the property of a party; … then, where the other party is - (A) Multiplex, Multiplex may, without giving a notice to show cause, exercise the right under Clause 44.4(a) or 44.4(b); … The rights given by this Clause 44.11 are in addition to any other rights and may be exercised notwithstanding that there has been no breach of Contract. 200 These clauses indicate Multiplex's right to claim damages for loss (which is defined broadly) arising from its retaining replacement subcontractors to complete the works that were taken out of the hands of the relevant Hastie Entity or unable to be completed because of Multiplex's termination of the contract in accordance with clause 44.11 after the Appointment Date. 201 It is to be noted that clause 44 of the Stockland Shellharbour Subcontract does not refer to progress payment claims made under clause 42.1. That is, upon Multiplex's exercise of any right of termination under clause 44. it is not explicit what the rights and obligations of the parties are as to work that has been performed by the Subcontractor prior to termination, whether or not the Subcontractor has lodged a payment claim in respect of such work, and whether or not Multiplex has issued a payment schedule in respect of such work. There is a provision for the final accounting of all claims via a Deed of Release pursuant to cl 42.5, but it is not clear how this provision is to operate following termination of the subcontract. 202 However, some of the subcontracts in the main proceeding do refer to how progress payment claims are to be treated upon exercise of a contractual right of termination, or otherwise provide for a compulsory final accounting mechanism. For example, clause 14.4 of the subcontract referred to in the court book as the "Project B - Westfield 85 Castlereagh - Heyday" Agreement ('Castlereagh Agreement') involving Scentre (referred to as "Westfield" in the Castlereagh Agreement) provides as follows (emphasis added): 14.4 Westfield's Entitlements after Termination After termination Westfield will: (a) be entitled to take over and use or have removed from the Site any plant, equipment, temporary works or other things used in the Contractor's Activities; (b) not be obliged to make any further payments to the Contractor, including any money the subject of a progress valuation request or a recipient created tax invoice; (c) be absolutely entitled to any security held under clause 4.1; and (d) be entitled to recover from the Contractor any damages incurred by it as a result of such termination. 203 Such a clause makes it very difficult for the Hastie Entity to claim that it is entitled to a receivable or progress payment claim following Westfield/Scentre's termination of the subcontract. 204 Similarly, during the trial I was brought to the subcontract in this proceeding referred to in the court book as the "Project B - 123 Albert Street - Hastie Air Conditioning" Agreement involving Laing O'Rourke (referred to as the Subcontractor). Clause 18.4 is relevant to the non-payment of the Hastie Entity's payment claims following termination upon insolvency pursuant to clause 18.6, providing (emphasis added): 18.4 Right to Recover If the Contractor exercises a right in clause 18.2 or 18.6 then: (a) the Subcontractor shall not be entitled to any payment under the Subcontract or otherwise; and (b) the Contractor may deduct from moneys due or to become due to the Subcontractor under the Subcontract or otherwise, and otherwise recover from the Subcontractor the costs of completing the Works estimated by the Contractor less the amount which would have been paid to the Subcontractor if it had completed the Works. All rights vested in the Contractor by this clause are without prejudice to any other rights and remedies the Contractor may have. 205 An alternative mechanism to resolve pending or potential progress payment claims that might be made following termination is as per clauses 10.7 and 10.8 of John Holland's Airport Link Agreement for Project E, which provide for a compulsory final accounting mechanism as follows (John Holland is referred to as 'TJH' and the Hastie Entity as the 'Service Provider', emphasis added): 10.7 The Service Provider shall submit a final payment claim to TJH's Representative within 60 days following the earlier of the completion of the Services or termination of this Agreement. This payment claim shall be endorsed "Final Payment Claim" and shall include all monies that the Service Provider considers are outstanding whether under this Agreement or otherwise in respect of any fact, matter or thing arising out of or in connection with the Services or this Agreement. No claim other than a claim which is included in the Final Payment Claim may thereafter be made by the Service Provider against TJH and the Service Provider releases TJH from all such claims on any account whatsoever under or in relation to this Agreement. Subject to Clause 10.8, TJH will pay any amount TJH's Representative determines as being due to the Service Provider in respect of the Final Payment Claim within the period detailed in Schedule 1. If the Service Provider fails to submit a Final Payment Claim within 60 days of the earlier of the completion of the Services or termination of this Agreement it will be deemed to have submitted a Final Payment Claim of $Nil value at 5.00pm on the 60th day after the earlier of the completion of the Services or the termination of this Agreement and will be deemed to have released TJH from any further claims, the Service Provider may have against TJH under or in connection with this Agreement or otherwise at Law or in equity. 10.8 The Service Provider acknowledges that TJH may plead Clause 10.7 as a bar to any claim or action to enforce any claim, other than a claim which is included in the Final Payment Claim or for the release of security. 206 Another clause to similar effect is as contained in the subcontract involving Lendlease referred to in the court book as "Project A - Hastie Air Conditioning (Clinical Services Building) - Gold Coast University Hospital" ('Gold Coast University Hospital Subcontract'). Clause 22.5(b) of that subcontract relevantly provides: If the Subcontract is terminated for any reason then the Subcontractor: … (ii) may only make one payment claim after the termination of the Subcontract, which claim must be submitted to BLL within 20 days of the date of termination of the Subcontract. 207 Again, such clauses makes it very difficult for the Hastie Entity to claim that it is entitled to a receivable or progress payment claim following the Respondent's termination of the subcontract in the absence of a final payment claim. 208 The full implications of the relevant terms of the subcontracts are dealt with in my Consideration section for the Receivables Case, but first, I shall set out the Applicants' Submissions on the Common Issues involved in the Receivables Case.

[22]

Applicants' Submissions on Common Issues in Receivables Case 209 Certain of the Common Issues in dispute at the beginning of the trial are no longer in dispute. There remains some differences between the parties in relation to particular aspects of the "claims issue" and the "mutuality issue", and also as against particular Respondents regarding the construction of the relevant subcontracts as they relate to the Receivables Case. The terms of the subcontracts are relevant in particular to the issue of whether the Applicants' receivables claims are valid. 210 I should mention that by the end of the trial, the Applicants accepted that the contract damages claims of all the Respondents were claims within s 553 of the Act, irrespective of whether the relevant contracts were terminated. Therefore, a related issue as to the different consequences that flow from a termination of a contract and the taking work out of the hands of a Hastie Entity is no longer one that needs to be determined. 211 The other remaining common issues to be dealt with are the "s 553C exclusivity issue" and the "automatic set-off issue". 212 In short, the Applicants' final position as to the Receivables Case and against the Respondents' set-off claims is as follows. (a) Each Respondent's set-off claims were not asserted until after the date of administration and, from that time, could not be determined other than in accordance with Chapter 5. (b) Such claims, being claims within the meaning of s 553, were subject to Pt 5.3A during the period of administration. (c) As none of the claims were judicially determined prior to the administration or winding up of the Hastie Entities, they are now subject to Pt 5.6 of the Act, including s 553. (d) In accordance with Pt 5.6 of the Act, the Respondents are not entitled to self-assess their set-off claims, which are properly to be determined by the Liquidator of the Hastie Entities. 213 The Applicants make the following submissions regarding the remaining common issues in the Receivables Case referred to above, first linking the concept of a s 553 claim with s 553C set-off: For the most part, the Respondents do not deny that they received the services the subject of the debts recorded in the Hastie Entities' debtor's ledgers, although some Respondents seek to impugn the validity of the receivables by operation of the contract. The defence common to all the Respondents is set-off. The ability to set off requires something to set off against. In the present context, set-off is a claim to withhold funds that would otherwise be property of the company. It follows that the starting point for set-off is the existence of property of the Hastie Entities, being either a right to payment for services (described as "receivables") or funds drawn down under a bank guarantee. It is that very property that is protected by the Act, so as to prevent the "dismemberment of the debtor" by those who are the fastest to strike. The Respondents' set-off defence is predicated upon the allegation of them possessing "claims" within s 553 of the Act. Each of the Respondents contends that the value of those "claims" is greater than the amount of the unpaid receivables and the amount of the guarantee proceeds held by them. It is acknowledged that the Respondents do not have to seek to prove in the winding up of any Hastie Entity. But this failure to participate cannot be relied upon to obstruct the Liquidator, acting in accordance with the Act, taking "into his… custody, or under his… control, all the property which is, or which appears to be, property of" the Hastie Entities: s 474(1)(a). The Respondents cannot point to any provision of the Act which supports their contention that they can make their own assessment of any s 553C claims and insist the Liquidator accept their application of s 553C, and the conclusion that their claims exceed the sum of the receivables they have not paid and the guarantee proceeds, such that they have nothing to pay. The Respondents' set-off claims were asserted unilaterally after the Appointment Date in respect of the voluntary administration. These claims were never determined as against the Hastie Entities and the Respondents took no steps to have them determined. From the date of liquidation (31 January 2013), such claims became subject to the winding up provisions, including by reason of the meaning of "relevant date" in s 553 (which refers back to 28 May 2012, the Appointment Date). Each such claim to set-off is a contractual claim. Each falls within the description in s 553(1) of the Act: a claim against "the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date". That each such claim made by a Respondent is within the scope of s 553 is also confirmed by the fact that each Respondent claims to be able to set off alleged losses or damage under s 553C. The latter section is concerned with a subset of claims and debts within s 553, namely those which are mutual with claims or debts asserted by the company in liquidation. 214 The Applicants then turn to s 553C and the statutory scheme for set-off in insolvency. Again, I consider it useful to set out in full the submissions of the Applicants so the reader of these reasons can appreciate the approach of the Applicants. The following submissions were made by the Applicants: The fundamental principle underpinning statutory set-off in s 553C is "to prevent the injustice of a man who has had mutual dealings with a bankrupt from having to pay in full what he owes in respect of such dealings while only receiving a dividend on what the bankrupt owed him in respect of them": Day & Dent at 95 per Gibbs CJ; Gye v McIntyre (1991) 171 CLR 609 (Gye) at 618-620 (the Court); Forge at [139]-[177]; Morton at [30], [31], [109] and [155]. Within s 553C all that is subject to the statutory equation are claims between the insolvent Hastie Entity and the Respondent with a claim in its winding up; and they must be held in the same capacity, right, or interest: Forge at [67]. Some Respondents contend that the statutory equation encompasses monies which those Respondents owe to one Hastie Entity and claims which that Respondent makes against a different Hastie Entity or different Hastie Entities. The contention is sometimes supported by the terms of the relevant subcontract and in addition by the end of the trial, all of the Respondents were seeking to invoke the Deed of Cross-Guarantee. However, the Respondents putting this contention put it at a level of generality and really as a hypothesis, without pointing to any particular claim. That is consistent with the position of those Respondents that they do not have to participate in the winding up and thus have not sought to prove. It is difficult to assist the Court in dealing with this contention in circumstances where the only facts which might be found cannot allow a finding about a particular claim nor what claims any of those Respondents actually seek to set off against a receivable. It is difficult to assist the Court because the absence of facts allows no occasion for the application of the relevant law, and consequently no occasion for the exercise of judicial power: Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, 359 at [56] (Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ). In any event, the prima facie response to the Respondents' contentions must be that the type of set-off contended for is not allowed by s 553C. In Forge, the Court of Appeal of Western Australia said at [150]: In our view, both principle and authority indicate that where the (insolvency) statutory set-off applies to the circumstances, any contractual or other general law rights which purport, directly or indirectly, to preclude the mandated set-off, or give it a more extensive or less extensive operation than that required by the statute, would be contrary to the intended operation of the provision. This Court in Morton at [30] explained why s 553C cannot operate as the Respondents would contend (citations omitted): Provisions such as s 553C … are to be given "the widest possible scope" as long as it be recognised that that width and the "substantial justice" is confined within the limits of genuine mutuality as a matter of substance. The construction and application of set-off provisions such as s 553C is to be approached in the context of these underlying values that is reflected in the binding legal principles of the authorities. The explanation of s 553C in Morton not only proceeds upon the words of the Act, but recognises that under the Act, a company in liquidation has its own debtors and creditors. The amounts owed to, and owing by, the company in liquidation must be ascertained in accordance with Part 5.6 of the Act. This is plain from the terms of ss 553 ("are admissible to proof against the company") and 553C of the Act. That is, an individual company in liquidation. The Respondents' refusal both to pay any s 553C balance owing and to disgorge the guarantee proceeds is not at all contemplated by the Act. It is properly analysed as an act of self-help just as a landlord who changes the locks would be considered to have engaged in self-help. It is to be borne in mind that inconsistency between reliance upon contractual provisions and the words of a statute is not confined to literal conflicts. In Forge at [143], the Court quoted the following passage in Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516 at 522-523 per Mason CJ, Gaudron and McHugh JJ [Court of Appeal's emphasis]: An express statutory prohibition against contracting out renders void or inoperative contractual provisions which are inconsistent with the statute. Inconsistency between contract and statute is not confined to literal conflicts or collisions between the contractual provisions and the statutory provisions. Inconsistency in this context arises whenever there is a conflict between a contractual provision or the operation of such a provision and the purpose or policy of the statute. So, if the operation of a contractual provision defeats or circumvents the statutory purpose or policy, then the provision is inconsistent in the relevant sense and falls within the injunction against contracting out. The principle that it is not permissible to do indirectly what is prohibited directly … is a more traditional general statement of the same proposition. The critical question then is whether the Act, on its true construction, manifests a purpose or policy which is at odds with the [relevant contractual] right [asserted]. The predicate of each Respondent's position as stated in its pleading is that as an unsecured creditor it has in the winding up of the Hastie Entities: (a) refused to pay the invoices unpaid as at the Appointment Date; (b) drawn on bank guarantees provided to it by the Hastie Entities; (c) determined that it had "claims" within s 553, which that Respondent considered had a monetary value in excess of the sum of the unpaid invoices and drawn monies (on a project-by-project basis and, in some instances, across different projects); (d) used the unpaid invoices and drawn funds to give effect to the set-off in (c) above thereby achieving for itself 100 cents in the dollar on all of its "claims"; and (e) not sought to prove its "claims" in the winding up of the relevant Hastie company, thereby avoiding any assessment of those "claims" by the liquidator. By self-assessing its "claims" in the winding up of the relevant Hastie Entity and denying that it is required to pay the unpaid invoices, each Respondent has deprived the creditors of the Hastie Entities which the liquidator would otherwise have had available for rateable distribution to all unsecured creditors. Each Respondent's engagement in a disorderly and distracting grab for the assets of each Hastie Entity is both inconsistent with the Act and unfair and prejudicial to other creditors, as the Respondents: (a) avoid having to prove in the winding up, notwithstanding that their claims are purely contractual and no different in type or priority to the claims of other unsecured creditors; (b) recover the full value of their claims, thereby avoiding the operation of the pari passu principle to which other creditors are subject; and (c) avoid the requirements of the Act in relation to set-off, in particular s 553C and its requirement of mutuality. The Respondents refute any suggestion that their conduct is disorderly or a grab for assets. They rely on the following passage of Gleeson J in Re Force Corp Pty Ltd (in liq) [2020] NSWSC 1842; (2020) 149 ACSR 451 (Force Corp), 471 at [81]. [I]nsolvency set-off is self-executing in the sense that it operates automatically upon the occurrence of the winding up so as to bring about an extinguishment of the claims at that date to the extent of the set-off. The Respondents emphasise his Honour's use of the word "automatic" and extrapolate that use to found their contention that, as long as they have a "claim" as at the Appointment Date, they can themselves assess that claim. The Respondents emphasise "automatic" to merge their claim in the action of set-off as if the set-off was without the predicate of a "claim". The Respondents assert that their assessment of the value of their claims cannot be reviewed or refuted by the Liquidator, and once that assessment is made, s 553C is "self-executing" to deny any liability to pay the receivables. However, the High Court in Gye, also referring to the "automatic" operation of statutory set-off, did not use "automatic" in the sense implied by the Respondents. The Court in Gye considered that the statute prevailed over any antecedent contract, even if the creditor chose not to participate in the insolvency, stating at 622 that "the section is self-executing in the sense that its operation is automatic and not dependent upon 'the option of either party'." In the context of Gye, Gleeson J's reasons in Force Corp read as a whole make it clear that his Honour did not contemplate that his use of the word "automatic" could facilitate unilateral assessment by the respondents of the value of their "claims" to found their denial of any liability to the Hastie companies. Indeed, Gleeson J at [83] went on to say that 'the "account" in accordance with s 553C(1) must be taken whenever it is necessary for any purpose to ascertain the effect which the section had.' The Respondents continue to deny that they have any obligation to the Liquidator to account for the value which they have placed on their claim. This conduct cannot bring the Respondents within the "self-executing" reach of s 553C. It is to seek to place a construction on s 553C which the Courts have not adopted. The Court in Forge at [89] explained that the statutory scheme does not encompass self-help: The chapeau to s 553C of the Corporations Act refers to 'a person who wants to have a debt or claim admitted against the company'. Hamersley, through its counsel, acknowledges that there is no pleading, evidence, submission or finding that it wishes to prove in the liquidation of Forge. However, it has been held that reference to such a person includes a person who, but for any statutory set-off, would be entitled to prove in the winding up. That reflects the approach which has been taken in relation to similar language in bankruptcy legislation. Therefore, the fact that Hamersley has not sought to prove in the liquidation is not itself an impediment to the application of s 553C. [Applicants' emphasis] Where a court finds, as a matter of fact, that a s 553C set-off exists, the Court will apply the set-off to a corresponding liability, irrespective of whether the party has sought to prove in the winding up. That is what is meant by "self-executing". It simply means that the section has effect regardless of whether a person or party wishes to prove in the liquidation. It does not mean that the making of a unilateral assessment of value of a claim by a creditor should be permitted to prevent a proper accounting to the other unsecured creditors (including unsecured creditors with statutory priority under s 556). The Respondents' contention that their assessment of the value of their claims outside the winding up is sufficient for the self-execution contemplated by s 553C to apply cannot be reconciled with the words of s 553C itself. In s 553C(1)(a), the liquidator is directed to take an account ("an account is to be taken of what is due from one party to the other"). The suggestion that the Parliament was providing that directive to anyone but the liquidator cannot be accepted. It can be accepted that those words do not impose a requirement on the Respondents that they participate in the winding up, but if they do not, they cannot take the benefit of s 553C.

[23]

The Hastie Entities' contractual receivables claims 215 It is to be recalled that issue 1 of the Common Issues concerns the relevant subcontracts between the Hastie Entities and the Respondents. 216 The Applicants and some of the Respondents sought that the Court answer the specific issue as to whether the Hastie Entities' contractual receivables claims against the Respondents were valid under the subcontracts. To the extent that this is a contractual interpretation issue, it is within Issue 1, but to the extent it ventures into what was Issue 2 - that is, whether the Respondents were indebted to the relevant Hastie Entities in a certain amount, which is an issue outside the scope of the liability trial - it is not to be determined in these reasons. I am wary of the dangers of determining so-called pure contractual construction issues in the absence of admitted evidence as to the actions taken under the subcontracts and submissions as to their proper operation in their full factual context. Issues of contractual construction should not be finally determined in a vacuum or as a hypothetical exercise. However, given my familiarity with the general factual context of the subcontracts, it is appropriate in the circumstances for me to make certain general findings on the construction of the subcontracts as matters of principle. 217 Rather than making any final determinations as to particular subcontracts or receivables claim, I shall therefore deal on a general basis with the issue of whether the Hastie Entities' receivables claims are contractually valid and can therefore be recovered by the Applicants, or give rise to a set-off pursuant to s 553C of the Act. 218 As a preliminary matter, as I said in the section regarding the evidence in this proceeding, where a contract sought to be relied upon by the Applicants is not available and not put in evidence before the Court, I cannot and do not infer that such an alleged contract existed, or that its terms were identical to or similar to the other contracts before the Court. The consequence of this though is not that the Applicants therefore cannot assert their receivables claims in respect of these projects. Rather, the consequence is that during the envisaged "quantification trial", the Applicants may still be able to rely on their debtors' ledgers as prima facie evidence of their receivables claims. 219 It is important to recall that I ruled that no evidence relating to quantum only would be considered during the course of the liability trial in the main proceeding. This effectively limited the amount of evidence being admitted as to compliance with the relevant contractual terms. 220 From the Applicants' point of view, they seek to rely in the main proceeding on records which could be prima facie evidence of the Applicants' receivables and bank guarantee claims relying on s 1305 of the Corporations Act. 221 It is to be recalled that s 1305 of the Corporations Act is an evidentiary provision that the Applicants may seek to rely upon at trial. However, s 1305 does not provide conclusive evidence of the debts the Applicants allege. In Hayes (Liquidator) v 5G Developments Pty Ltd, in the matter of 5G Developments Pty Ltd [2019] FCA 1541, Stewart J stated (at [88]): For completeness I should mention that 5GCI sought to rely on s 1305 of the Corporations Act which provides that a book kept by a company is admissible as evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book. It submitted that the general ledger loan accounts and balance sheets of DC and DW, which do not reflect the debt now claimed by the plaintiffs, should be taken as evidence that there is no such debt. It is, however, clear that that provision does not make the company's books of account conclusive evidence of what is stated in them. If the court is satisfied, as I am in this case in particular on account of inconsistent and conflicting entries in the books of account, that what is reflected in the books of account is not correct then the court can make contrary findings: Australian Securities and Investments Commission v Rich [2009] NSWSC 1229; 75 ACSR 1 at [396]-[400] per Austin J. 222 His Honour's summary of the approach to be followed in the application of s 1305 is clearly right. I accept that some Respondents take issue with the reliability of the Hastie Entities' books and records. However, the Hastie Entities are entitled to simply claim a debt (as they do) as distinct from damages. The Hastie Entities claim a right to payment of a sum accrued, where there is an obligation to pay a certain or ascertainable sum of money. Where the Hastie Entities are able to produce books and records evidencing their claim, it is on the Respondents to show that the records relied upon by the Applicants are unreliable, or to demonstrate any circumstances that may give rise to the debt claims not being validly claimed in the main proceeding (by reference to the terms of the subcontracts). 223 Nevertheless, the claims by the Hastie Entities to "receivables" as pleaded are relatively straightforward. For each project, the Applicants seek to plead the terms of the applicable subcontract, which broadly require the relevant Hastie Entity to make regular payment claims, which a Respondent is to assess before issuing a payment schedule for the amount certified, which is then to be paid. However, it is alleged that at various times the Hastie Entity submitted payment claims or issued invoices for amounts due and that the total sum of the outstanding claims or invoices was payable "no later than" certain dates. 224 Not all the Respondents submit I should venture into or determine the issues concerning the operation of the contractual terms at this stage of the main proceeding. However, for the sake of assisting with the further conduct of the main proceeding, I shall comment on two issues raised by the Respondents in relation to the validity of the Hastie Entities' receivables claims. 225 First, I am of the view that if the relevant Hastie Entity did not comply with the contractual preconditions for the making of a payment claim (such as the requirements set out at clause 42.1A of the Stockland Shellharbour Subcontract set out earlier in these reasons), then a claim for payment cannot arise under the subcontract. If the contractual preconditions are not satisfied and there is no valid progress payment claim, then the Hastie Entities will have no valid claim for the receivables in the main proceeding. This is because no debt will have arisen under the subcontract. Only a debt claim, as distinct from a claim in damages or quantum meruit, has been pleaded and pressed by the Applicants at this liability trial. Comprehensive evidence as to invoices and other matters of contractual compliance was not admitted in the main proceeding, and so I cannot finally determine the issue as a matter of fact on a project-by-project basis, but as a matter of principle, the effect of having contractual preconditions (that is, preconditions which are true conditions precedent to the making of a valid payment claim) is clear. 226 Second, where there is a making of a payment claim by the Hastie Entities under the subcontracts, if the agreed contractual mechanism for the determination of the debt due and payable by the Respondents is not satisfied (for example, via the Respondent lodging a payment schedule including a particular claim) then no debt arises under the subcontract. It cannot be properly contended that the contractual provisions as to payment in each subcontract, carefully drafted and of obvious importance, were other than conditions to be fulfilled prior to the claimant being entitled to receive interim or progress payment of amounts in advance of final accounting. 227 For example, clause 42.1 of the Stockland Shellharbour Subcontract (set out earlier in these reasons) requires the Subcontractor to deliver progress payment claims for work up to the end of the relevant month on the 28th day of each month and Multiplex, acting reasonably, is to assess the claim and issue to the Subcontractor a payment schedule stating the amount Multiplex accepts to be owing. 228 The subcontract then says: "Where an amount is shown as being due for payment to the Subcontractor by Multiplex in a payment schedule or otherwise assessed by Multiplex as being due for payment to the Subcontractor by Multiplex, Multiplex shall pay the Subcontractor the relevant amount…", and the date by which payment is due is then set out. 229 Clause 42.1 does not include any independent certifier to determine the reasonableness of the progress payment claims. Rather, Multiplex must act reasonably in assessing the claims and issuing payment schedules. The Subcontractor may dispute Multiplex's assessment and refer the issue to mediation pursuant to clause 47 (which no party suggests has occurred). In addition, no party relied upon any 'Security of Payment Act' provisions, as for instance at clause 42.9 of the Stockland Shellharbour Subcontract. 230 Finally, clause 44 as to default or insolvency must be considered. The parties' rights at common law upon the Subcontractor's breach or insolvency are preserved. Clause 44 does not otherwise refer to the treatment of pending or potential progress payment claims at or after termination of the contract. In the absence of express or implied terms, the resolution of pending or potential progress payment claims is to be according to the common law and consistent with the terms of the subcontract as a whole. 231 Multiplex (and various other Respondents with respect to the subcontracts applicable to them) put in issue the effect of the contractual mechanism for progress payment claims and payment schedules on the question as to whether and when any obligation to pay the Hastie Entities arose under the subcontract which has not been paid, as alleged by the Applicants. Multiplex asserted that this issue arises prior to any question of set-off, and submits that on a proper contractual analysis, in fact no payable debt owing to the Hastie Entities arose where Multiplex did not issue a payment schedule in response to the Hastie Entity's payment claim, 232 Again, it is to be recalled that the Applicants' case is on the basis of a debt claim, not a damages or quantum meruit claim. Therefore, if the contractual mechanism under the subcontract giving rise to any debt payable by the Respondent has not been satisfied, then the Hastie Entities are unable to recover the money in debt which they seek in these proceedings. 233 The Applicants rely upon various payment claims and invoices (although these were not all admitted into evidence for the purposes of the liability trial) and rely on s 1305 of the Act in relation to the debtors' ledgers as detailed earlier in these reasons. Without all the factual circumstances concerning the issue of the payment claims and payment schedules on a project-by-project basis, it is not possible to finally determine the operation of the subcontracts. However, considering the construction issue on its face without recourse to factual circumstances or any other evidence, it is my view that payment was not required by Multiplex until it had the opportunity to prepare and issue a payment schedule, at which point the amount is due and payable on a specified date in accordance with the subcontract. Until that point, no "receivable claim" or debt owed to the Hastie Entity arises, or put another away, any such right to progress payment has not been "unconditionally acquired" at the time of termination and so is not an accrued right at that time on the basis of which the Hastie Entity may recover payments under the subcontract: see McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 ('Dennys Lascelles') at 476-477 (Dixon J). As I have said though, this conclusion is subject to whether there is a displacement of the prima facie position relied upon by the Applicants by reference to the invoices and by virtue of s 1305 of the Act, and whether there is any other evidence which may bear upon the issue, 234 I would add one further comment about the operation of any clause in the nature of clause 42.5 of the Stockland Shellharbour Subcontract. If pursuant to clause 42.5 of that contract, the Hastie Entity submits a final account of all its claims (including all progress payment claims) and a deed of release is executed in compliance with that clause, then the deed of release fully and finally settles any claims which the Hastie Entity may have against Multiplex pursuant to the subcontract. Such a deed of release is pleaded by Multiplex in respect of the "Project P - Neuroscience Agreement". However, the deed is not in evidence before the Court, and so I cannot make any final determination as to the operation of clause 42.5 of the Neuroscience Agreement or the deed of release pleaded. 235 Now, it is to be recalled that some of the subcontracts in the main proceeding did contain default or termination clauses that refer to the treatment of pending or future progress payment claims at or after termination of the contract, or which otherwise create a mechanism dealing with pending or potential progress payment claims at the time of termination of the subcontract. As I remarked earlier in these reasons, such clauses make it very difficult for the Hastie Entity to claim that it is entitled to a receivable or progress payment claim following termination of the subcontract. 236 By way of example, having regard to clause 14.4(b) of the Castlereagh Agreement involving Scentre extracted earlier in these reasons, any receivable claim by the Hastie Entity against Scentre in the nature of a progress payment claim pursuant to the subcontract does not operate to oblige Scentre to make any payment after it has exercised its right of termination. As a matter of construction on its face, this means that the receivables claim of the Hastie Entity does not arise under the subcontract. However, in the absence of specific pleaded facts or comprehensive admitted evidence in addition to the invoices tendered by the Applicants and objected to by Scentre, the Court is not able to finally determine the operation of clause 14.4(b). 237 I now turn to another example, being clauses 10.7 and 10.8 of the Airport Link Agreement involving John Holland referred to earlier in these reasons. It is clear as a matter of construction that in the absence of a Final Payment Claim having been made by the Hastie Entity, those clauses operate as a bar to the recovery of any unpaid progress payment claim pursuant to the subcontract. This seems to be accepted by the Applicants in [10] of their proposed Amended Reply, which earlier in these reasons I gave leave to be filed. In any event, accepting the pleadings of the Applicants, it was not alleged that any such progress payment claim was included in a Final Payment Claim pursuant to clause 10.7 of the Airport Link Agreement. In these circumstances, it would normally be appropriate to make a final determination in relation to the operation of clauses 10.7 and 10.8 and moreover, whether a receivables claim can be said to have arisen. However, having regard to the approach of the Court to the final determination of issues at this liability trial (because of the confined nature of common issue 1 and the exclusion of issue 2), it would not be appropriate do so in these reasons. 238 So, overall regarding the issue of the validity of the Hastie Entities' receivables claims although I have provided my view as to the construction of the subcontracts in these proceedings, a final view as to the construction and operation of the particular contractual terms and the factual circumstances underlying what occurred in each project - including whether there was in fact compliance or otherwise with the various contractual preconditions or contractual mechanisms - will need to be determined later.

[24]

Section 553 claims 239 It is to be recalled that the two main outstanding common issues are the "s 553C exclusivity" issue and the "automatic set-off" issue. However, before I turn to those issues, I will briefly discuss the "s 553 claim" issue, and the general position that was seemingly not in dispute between the parties on that issue. 240 The dispute about the concept of a "claim" within the meaning of s 553 seems to be relevant to two different aspects of the Receivables Case. 241 First, the Applicants argue that any of the Respondents' claims which are s 553 "claims" are to be determined by the Liquidator according to the mechanism prescribed by Chapter 5 of the Act and so the Respondents determining the operation of s 553C set-off themselves is prohibited. Here, the Applicants submit that the concept of a "claim" in s 553 is of wide scope so as to capture the Respondents' contractual claims existing as at the Appointment Date and set-off "claims", and the orders they seek providing for the Liquidator to determine those claims are supported by their overarching submissions as to the operation of Chapter 5 of the Act (which in many respects I do not accept, as discussed earlier in these reasons). 242 In relation to this aspect, I accept that the meaning of "claims" against the company is wide and would include the Respondents' contractual claims against the Hastie Entities, which would be admissible to proof against the company. That does not mean that the Respondents are compelled to lodge a proof of debt against the Hastie Entities (which is accepted by the Applicants), and that does not mean that the Respondents are not entitled to apply s 553C set-off themselves without recourse to the Liquidator (as to which, see the next section of these reasons regarding the automatic set-off issue). Rather, the concept of a s 553 "claim" is effectively a threshold requirement for s 553C set-off to be able to apply to it. 243 However, I do not accept the Applicants' argument that the Respondents' reliance on set-off are themselves "claims" that must therefore be considered and determined by the Liquidator. The Respondents submitted that the Applicants had failed to appreciate the distinction between a claim and a defence, and that the Respondents' pleas of set-off (and their application of set-off principles under the subcontracts or s 553C of the Act) are not "claims against" the Hastie Entities but rather are defences to claims by the Hastie Entities: see, eg Derham, R, Derham on the Law of Set-off (4th ed, Oxford University Press, 2010) ('Derham on Set-off') 261 at [6.03] and the cases cited therein. They are therefore not claims that could themselves be admitted to proof. This is because a "claim" under s 553 means "a basis, founded on an existing legal right, for asserting a right to participate in the division of the assets of the company": Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63; (2015) 231 FCR 17 at [63]-[64] per Gilmour J (Besanko and Rangiah JJ agreeing). A defence of set-off is not a basis to participate in the division of assets of the insolvent company; it is an answer to an assertion of liability to the insolvent company. 244 Secondly, the Applicants only accept that contract damages claims are "claims" within s 553 of the Act insofar as those "claims" were possessed by each of the Respondents as at the Appointment Date. The Applicants submit that the Respondents' contractual claims, asserted after the Appointment Date, can only be valid if they arose from circumstances existing prior to the Appointment Date (in accordance with the language of s 553), for example, incomplete or defective works performed by a Hastie Entity prior to the Appointment Date. At times, the Applicants appeared to submit that the Respondents' contractual claim did not arise from circumstances existing prior to the Appointment Date. However, in its closing submissions, the Applicants seem to concede that Lendlease's assertions of set-off based on loss or damage under the subcontracts arose from the contractual relationship between the parties that existed as at the Appointment Date, but it is unclear if the concession is universally made with respect to each of the Respondents' claims. 245 In any event, on an orthodox contractual analysis, it is clear that the Respondents' contractual claims, even though first asserted after the Appointment Date, are properly claims the circumstances giving rise to which (being the contractual provision itself giving the Respondents' a right to claim for losses) existed before the Appointment Date. As a matter of principle, each of the Respondents' contractual claims for losses are valid claims under each subcontract in these proceedings, and there is no basis to suggest that they are not relevantly "claims" under s 553 that may be the subject of the operation of s 553C set-off. 246 For example, the Applicants argue that where a Respondent issues a payment schedule after giving notice of termination of the subcontract, that payment schedule is without legal foundation or effect. The Applicants in particular refer to the subcontracts relating to Projects D and H involving Multiplex. Having regard to those projects, that contention is addressed by cl 42.8 of the relevant subcontracts as to set-off by Multiplex. Clause 42.8 states that "[e]ven if an amount owed by the Subcontractor to Multiplex under the Subcontract has not been included in a payment schedule by Multiplex under this Subcontract, Multiplex may separately recover the debt from the Subcontractor". As a result, it is clear that Multiplex's right to recover any losses or amounts not included in a payment schedule but otherwise arising under the contract (for example, losses arising from non-performance of the subcontract by the Hastie Entity by reason of their insolvency and the consequential termination of the subcontract) is an accrued right under the subcontract and therefore is a right the circumstances giving rise to which existed before the Appointment Date: see Dennys Lascelles at 476-477.

[25]

The automatic operation of s 553C 247 The Receivables Case essentially boiled down to the following issue: whether each Respondent is itself autonomously entitled to set-off its contractual claims for loss and damage against the monies it owed to the Hastie Entities (assuming the Hastie Entities had valid contractual claims for their receivables), or whether the Respondents ought to have allowed the Liquidator of the Hastie Entities to determine the application of s 553C set-off. 248 The Respondents submit that s 553C set-off applies automatically, is self-executing and operates as at the Appointment Date, relying on Forge at [91] below, which applied the reasoning of the High Court in Gye at 622 as to the equivalent set-off regime in the bankruptcy legislation: It is not necessary, however, for the parties to take any steps towards the taking of an account, as the statutory set-off in insolvency is treated as self-executing. In Gye v McIntyre, the High Court said: Section 86 is a statutory directive ("shall be set off") which operates as at the time the bankruptcy takes effect. It produces a balance upon the basis of which the bankruptcy administration can proceed. Only that balance can be claimed in the bankruptcy or recovered by the trustee. If its operation is to produce a nil balance, its effect will be that there is nothing at all which can be claimed in the bankruptcy or recovered in proceedings by the trustee. The section is self-executing in the sense that its operation is automatic and not dependent upon "the option of either party". … [I]t would be wrong to attribute to the legislature the illogical intent that a directive which was intended to be otherwise automatic in its operation and to apply in circumstances where set-off produced a nil balance should not operate at all unless and until either the bankrupt's creditor saw fit to exercise the option of lodging a formal proof of debt or the trustee in bankruptcy instituted proceedings for recovery of a debt due to the bankrupt. 249 In my view, the reasoning in Gye, applied to the s 553C set-off regime in insolvency, settles this issue in favour of the Respondents. Section 553C set-off provides a substantive right in relation to a creditor's claims against a company in a winding up: see Gye at 621 and MS Fashions Ltd v Bank of Credit & Commerce International SA (in liq) (No 2) [1993] Ch 425 at 432-433, as approved by the Court of Appeal in Forge at [90]-[92]. Further, the application of that right is automatic and does not require the creditor to prove in the winding up (the latter point the Applicants accept at [78] of their written closing submissions). The reasoning in Gye also supports the notion that if the set-off balance is in the insolvent company's favour, the liquidator ought to bring proceedings for recovery of a debt. The Applicants' reliance on Forge at [89] does not assist their submission that s 553C must be applied by the Liquidator and that the Respondents cannot take the benefit of s 553C otherwise; in fact, that paragraph supports the opposite argument, by reinforcing the point made in Gye that set-off is not dependent on the creditor lodging a formal proof, despite the reference in s 553C to "a person who wants to have a debt or claim admitted against the company". 250 I should note that the Applicants have never made clear the mechanism by which, if their submission as to s 553C is correct, the Respondents ought to have had s 553C applied by the Liquidator before this proceeding was commenced. If the Respondents are not required to lodge a formal proof of debt, it is unclear on what basis they are required to assert their set-off as a defence to the Liquidator's receivables claims. While a liquidator has a duty under s 474 of the Act to get in the property of the company, under s 478 of the Act to collect the property of the company, and a power under s 506(1)(e) to set the deadline for proofs of debts to be lodged, no statutory provision has been identified which compels or allows a liquidator to compel the Respondents as either alleged debtors of the company or assumed creditors of the company to respond to the Liquidator's claims against them, to assert any claim or defence of set-off to the liquidator via any statutory procedure, to particularise any such claim or defence, or to submit to the (non-existent) authority of the Liquidator to determine the validity of their claims and defence for which they do not seek to prove. 251 In fact what occurred is that the Liquidator demanded its alleged debt from the Respondents by correspondence, to which the Respondents answered by denying the debt because of the application of set-off. It is implied that the Respondents have not sufficiently evidenced their claims to the satisfaction of the Liquidator in their answers to the Liquidator's correspondence to them. As a matter of fact, each of the Respondents deny that they have not sufficiently evidenced their claims. As previously explained earlier in these reasons, the practical reason why the Respondents are in a position where they do not seek to prove for their claims and are content to assert their defence of set-off without taking any further action is because they retain the proceeds of the bank guarantees on which they drew down following the Appointment Date. If the Respondents had not drawn down on the bank guarantees and received the proceeds thereof to practically satisfy their contractual claims (whether wholly or partially), it is assumed that they would have each lodged a proof of debt instead in respect of their contractual claims. This question regarding who would apply s 553C set off would not arise, as the Respondents would then be the contractual parties out-of-pocket and would seek to lodge their proofs of debt in the liquidations (including their set-off claims) and so it would have been the liquidators who were applying s 553C in this context. 252 But returning to the issue on the basis on what in fact occurred, following the drawdowns on the bank guarantees, each Respondent has indicated that it will not submit a proof of debt, presumably satisfied with the amount of the proceeds received. The Applicants conceded that the Respondents do not have to seek to prove in the winding up of any Hastie Entity and that they are entitled to ignore a liquidator's formal call for proofs of debt, but submitted that if that choice was made, they could not then make their own assessment of set-off under s 553C and insist the liquidator accept that assessment. Accordingly, the Applicants seek directions that effectively involve the liquidator of the Hastie Entities determining the application of s 553C set-off on the basis the drawdowns on the bank guarantees were void and which entitle the Liquidator to then lodge an application for payment of any debts owed to the Hastie Entities as determined by the Liquidator following the process set out in the proposed directions. 253 The Applicants' submissions in this regard and proposed orders must be rejected. The Respondents are correct that they are entitled to apply s 553C themselves without recourse to the Liquidator. Section 553C provides for substantive rights for creditors in relation to set-off, which operate "automatically", so to speak, without having to be determined via a procedure conducted by the liquidator in a winding up. Of course, if a claim is made against the company in liquidation and a proof of debt lodged, the liquidator will be required to consider the operation of s 553C and apply that provision. However, in these circumstances where the Respondents do not seek to lodge a proof of debt and have determined themselves that they do not owe any monies to the Hastie Entities by reason of the application of s 553C set-off, the Liquidator does not have power to compel the Respondents to provide particulars as to their set-off claims. If the Respondents' resist the Liquidator's requests for information in respect of the claims or if in the opinion of the Liquidator they have not sufficiently evidenced their claims, the onus is on the Liquidator to bring proceedings against them on behalf of the Hastie Entities in respect of any debt they assert. In these circumstances, the Liquidator should not be directed to conduct a proof of debt process in respect of the Respondents' claims and they would not be justified and acting reasonably in following that course. 254 The proper course is for the Liquidator to bring proceedings (for example, a debt claim) against the Respondents, which they initially did in this main proceeding by seeking orders for payment. Following the bifurcation of the liability issues from the quantification issues, and in light of the orders that the Liquidator now seeks following trial, it appears that the Applicants no longer seek quantification by the Court by way of the current proceeding in the first instance, instead seeking a proof of debt and quantification process conducted by the Liquidator. I have determined that that course is not appropriate. As to the future conduct of the main proceeding, I will address this later in these reasons.

[26]

Mutuality and the Deed of Cross-Guarantee 255 As noted earlier, by the time of the trial, the Applicants had to some extent conceded the issue of mutuality, their position being described in the following way in their closing submissions: The mutuality issue (Issue 5) can be answered to the extent that it is accepted between the liquidator and the respondents that the relevant Hastie company and the respondent were in a contractual relationship up until 28 May 2012, when the contract was either terminated by the respondent or, the respondent "stepped-in" to perform the work under that contract. That relationship will give rise to a mutual dealing for the purposes of s 553C. To the extent that a respondent seeks to prove for a damages claim for breach of the relevant contracts, the liquidator accepts that such a "claim" would be mutual within s 553C for the purposes of being set off against any receivable owing by the respondent to the Hastie company in whose winding up the claim is made 256 However, the Applicants concession was qualified as, in other parts of its submission, they asserted certain propositions conflicting with or qualifying their concession. For example, the Applicants' asserted that each Hastie company held "the property of the company" on trust for the creditors of that Hastie company in accordance with the Act (which I have addressed earlier in these reasons), and implicitly suggested that the requirement of mutuality was not satisfied, as the relevant claims were therefore not "held in the same capacity, right or interest". As explained earlier, that submission should not be accepted. 257 Further, the Applicants asserted that the Respondents were only able to set-off their contractual claims against the particular Hastie Entity to whom they owed receivables, and that the Respondents were not able to invoke the Deed of Cross-Guarantee to that end. Put simply, they say that any claims a Respondent might bring against Hastie Group Limited (the First Applicant) by virtue of that company being a guarantor of all Hastie Entities under the Deed of Cross-Guarantee, cannot be set-off against a Hastie Entity's receivables claim against a Respondent. Therefore, the Applicants only conceded that the Respondents' claims were mutual under s 553 insofar as they were claims against the individual Hastie Entity party to the relevant subcontract. That qualified position is also consistent with the Applicants' "suggested answers and admissions" to each of the issues handed up during trial in respect of each Respondent. 258 I do not accept the Applicants' submissions. 259 The relevant principles regarding mutuality for the purposes of s 553C were discussed in Forge at [67]-[71], and can be distilled into the following propositions: (1) First, the credits, debts or claims arising from any dealings must be between the same persons. (2) Second, the benefit or burden of the credits, debts or claims must lie in the same interests, that is, the equitable or beneficial interests of the parties may need to be considered. (3) Third, the credits, debts or claims must be commensurable, meaning they must sound in money. (4) The relevant time for the assessment of mutuality is the commencement of the winding up, which for the purposes of a liquidation that follows voluntary administration is the date of appointment of the administrators (the "relevant date" within the meaning of Chapter 5 of the Act). (5) The credits, debts or claims need not be vested, liquidated, or enforceable at the relevant date. Instead, they can exist as contingent as at the relevant date, and provided they will ultimately mature into pecuniary demands susceptible of set-off they will satisfy the requirements of s 553C. (6) The credits, debts or claims must be genuinely mutual as a matter of substance. This principle is not an additional requirement that requires correspondence in the subject matter of the dealings. Mutuality conveys only the notion of reciprocity of the claims arising from dealings, which is reflected in the three core propositions of mutuality at the top of this list: see Gye at 623. The principle is directed at ensuring that those three core propositions are analysed as a matter of legal and equitable substance, rather than dry legal form: Hiley at 497; Morton at [77] and [153]. 260 It is not disputed that a claim for damages by any one of the Respondents against one of the Applicants under a subcontract between those parties would be mutual with, and able to be set off against, a claim for receivables by that Applicant against that Respondent under that subcontract. Consistent with point (5) above, there is no distinction drawn between damages suffered before and after liquidation: see Old Style Confections Pty Ltd v Microbyte Investments Pty Ltd (in liq) [1995] 2 VR 457 at 464 per Hayne J. So clearly, a claim by a Respondent for damages for losses arising from termination of the subcontract may be set off against the Applicant's claim to a progress payment (or "receivable"). 261 Similarly, a damages claim by one Respondent under one subcontract may be set off against a receivables claim against that Respondent under another subcontract. As mutuality does not require a connection between the claims in terms of subject matter, the fact that claims arise from separate transactions does not deny set-off under the insolvency provisions: see McIntyre v Gye (1990) 22 FCR 260 at 263 per Pincus J, and Gye at 630-634, where a trustee in bankruptcy's deceit claim could be set-off against a creditor's contractual claim. Consistent with this principle, the Applicants themselves recognise that mutuality "does not require that such claims should arise at the same time, nor that there should be any connection between them", and that "the claims may be of a different nature": see Derham on Set-off, 471-472 (at [11.01]). 262 It is now necessary to turn to the provisions of the Deed of Cross-Guarantee: (a) The Hastie Entities were parties to the deed, either as original parties or by assumption deed, each being a "Group Entity" under the deed. (b) Each of the Respondents is a "Creditor" under the deed, defined as "a person (whether now ascertained or ascertainable or not) who is not a Group Entity and to whom now or at any future time a Debt (whether now existing or not) is or may at any future time be or become payable". (c) "Debt" is defined as "any debt or claim which is now or at any future time admissible to proof in the winding up of a Group Entity and no other claim". (d) The cross-guarantee at clause 3.1 relevantly provides that "each Group Entity covenants with the Trustee [being Hastie Group Limited] for the benefit of each Creditor that the Group Entity guarantees to each Creditor payment in full of any Debt in accordance with this Deed of Cross Guarantee." (e) Clause 3.2(a) relevantly provides: "Each Group Entity agrees with the Trustee that this Deed of Cross Guarantee becomes enforceable in respect of the Debt of a Group Entity … upon the winding up of the Group Entity … as a creditors' voluntary winding up under Part 5.5 Division 3 of the Act." (f) Clause 3.3 relevantly provides: "the Trustee and each Group Entity acknowledge that the Trustee holds the benefit of the covenants and commitments of each Group Entity made pursuant to this Deed upon trust for each Creditor." (g) Clause 6.1 provides: "As a separate covenant by way of Deed Poll each Group Entity agrees with each Creditor that the Group Entity will guarantee to each Creditor payment of any Debt due to the Creditor from any other Group Entity in accordance with this Deed of Cross Guarantee." 263 The obligation of each Group Entity to cross-guarantee the others was a contingent obligation as at the time of the Appointment Date, that matured into pecuniary claims under the Deed of Cross-Guarantee upon winding up. . Upon the winding up of the Hastie Group in January 2013, the obligation by each Group Entity under the Deed of Cross Guarantee crystallised. For example, Hastie Australia Pty Ltd (the Eleventh Applicant) was liable as guarantor for the amounts owing to any Respondent by other Hastie Entities in relation to loss and damage suffered by that Respondent admissible to proof in the winding up of that Hastie Entity. 264 In my view, as a matter of principle (noting that the final determination as to particular claims on their facts is outside the scope of the Common Issues dealt with in these reasons), a Respondent's pecuniary claims against a Hastie Entity under the Deed of Cross-Guarantee in respect of loss and damage against any other Hastie Entity would satisfy the requirement of mutuality and be capable of set-off against that first-mentioned Hastie Entity's receivables claim. The three core components of mutuality are satisfied: (1) The credits and debits are between the same persons. For example, a Respondent's claim under the Deed of Guarantee against Hastie Australia guaranteeing any other Hastie Entity's debt to the Respondent can be set-off against any of Hastie Australia's claims against the Respondent. (2) The credits and debts lie in the same interests. By virtue of either of clauses 3.3 or 6.1 set out above, the Respondents' claims are in their own beneficial interest, not as assignees or trustees. (3) Each of the credits and debits are claims sounding in money. 265 This outcome is consistent with the very purpose of deeds of cross-guarantee, and with its function as a requirement for relief from reporting obligations on group entities under ASIC Corporations (Wholly-owned Corporations) Instrument 2016/785 (Cth), "the rationale being that such a deed protects creditors and other stakeholders from any disadvantage that may arise from an inability to access a company's financial reports": Car Buyers Australia Pty Ltd v Australian Securities and Investments Commission [2020] FCA 599 at [24] per Gleeson J. If a creditor could not rely on debts owed to it by one entity in an insolvent group by way of set-off against its debts to another entity in that group, it would be relegated to proving for the former in the liquidation and be worse off to the extent of any shortfall in funds. The creditor would thus be exposed to disadvantage from being unable to know the assets and liabilities of each entity in the group from individual financial reports. Such a result would ill-accord with the purpose of s 553C of the Act to do "substantial justice": Morton at [30].

[28]

An explanation of performance bonds in the form of bank guarantees 269 To decide the Bank Guarantee Case, it is necessary to consider the precise terms of the subcontracts in this proceeding, the facility agreements between the Hastie Entities and the issuing banks, and the terms of bank guarantees themselves. However, before I set out those terms and Applicants' submissions, as relevant commercial context it is necessary to explain "bank guarantees" generally, which are in their nature a form of undertaking provided by a bank or other financial institution (the "issuing bank" or "guarantor"), for the benefit of the "beneficiary" who, pursuant to the terms of the undertaking, may demand and receive the funds provided for under the bank guarantee (the "face value"). In this way, it is form of security against the risk of non-performance or non-payment of another party with whom it has contracted (the "contractor"). Once the beneficiary has "called" on the bank guarantee and the money or proceeds are "drawn down", the beneficiary is generally entitled to those proceeds pending adjudication and resolution of its claim against the contractor. 270 In fact, the term "bank guarantee" has itself been described as "a complete misnomer" with respect to this type of instrument: Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443 ('Wood Hall') at 445 (per Barwick CJ); Simic v NSW Land and Housing Corporation (2016) 260 CLR 85 ('Simic') at [2] (per French CJ). This is because, unlike a true contract of guarantee or suretyship, under an unconditional bank guarantee or undertaking, the bank assumes a primary obligation to make payment pursuant to its own terms, rather than a secondary or collateral obligation to answer for the debt or to perform the obligation of another on their default. 271 Indeed, the form of "bank guarantees" in this proceeding is more accurately described as an unconditional performance bond - that is, a covenant by the bank to pay money on demand up to a stated maximum amount, unqualified by the terms of the underlying contract between the party obliged to arrange the bank guarantee and the party entitled to call on it: Wood Hall at 445 (per Barwick CJ), 451 (per Gibbs J); Simic at [2] (per French CJ). Nevertheless, for simplicity and in conformity with the parties' submissions, I shall continue to refer to "bank guarantees" in these reasons. 272 Bank guarantees have been described as "as good as cash" or "providing an equivalent to cash", awaiting only a demand before materialising as cash: Wood Hall at 457 (per Stephen J); Simic at [6] (per French CJ). Further, it has been said "such securities 'create a type of currency' and are … essential to international commerce and, in the absence of fraud, should be allowed to be honoured free from interference by the courts": Simic at [88] (per Gageler, Nettle and Gordon JJ). 273 Bank guarantees are of particular significance in the construction industry as "a means of guaranteeing the performance of the head contractor to the proprietor or, alternatively, the performance of a sub-contractor to the head-contractor": O'Donovan J & Phillips J, Modern Contract of Guarantee (Lawbook Co., subscription service) at [15.100] - the latter being the context of these proceedings. By way of further context, the aforementioned learned authors state: "Performance bonds are seen as a preferable alternative to insurance since the charges are generally less than the relevant insurance premium, and the bank issuing the bond will normally not be able to resist a claim for payment, especially in the case of unconditional bonds." As Murphy J in Wood Hall stated at 461 in relation to the unconditional undertaking or bank guarantee in that case: If undertakings in this form were construed so that a Bank must or might have regard to rights and liabilities arising from the performance of a contract between an owner and a contractor before it was required or entitled to pay an owner, then the commercial effectiveness of such undertakings would be destroyed: all the legal and factual complexities of a building dispute would be injected into an otherwise straightforward unconditional undertaking. 274 It is useful to set out the High Court of Australia's relatively recent summary of the principles governing performance bonds or bank guarantees as a financial instrument, per French CJ in Simic at [5]-[6] (citations omitted): [5] The principles governing the legal effect and operation of performance bonds are similar to those applicable to letters of credit. A letter of credit represents payment for the performance of an obligation. A performance bond represents payment on default or in lieu of performance. The commercial purpose of performance bonds, as described in Wood Hall Ltd v Pipeline Authority, is to provide an equivalent to cash. [6] Two complementary principles apply to letters of credit and performance bonds alike - the principle of strict compliance and the principle of autonomy or independence. According to the principle of strict compliance, a bank paying on a letter of credit or performance bond only has an obligation to do so and only has an entitlement to claim indemnity for the performance of that obligation if the conditions on which it is authorised and required to make payment are strictly observed. A demand for payment cannot be accepted on the basis that near enough is good enough. The principle of autonomy requires that the letter of credit or performance bond be treated as independent of the underlying commercial contract. The principles of strict compliance and autonomy serve the immediate commercial purpose of such instruments of providing an equivalent to cash and the further purpose of performance bonds of allocating risk between the parties to the underlying contract until their dispute, if there be one, is resolved. 275 The learned authors of The Law Relating to Banker and Customer in Australia (Burton G et al, Lawbook Co., subscription service) at [15.190]) explain the relation between the autonomy principle in respect of documentary credits and the doctrine of privity of contract as follows: On one view, the autonomy principle is little more than an application of the doctrine of privity of contract. There are three related but separate contracts associated with the issue of a documentary credit: the contract between the applicant and the banker, the credit itself which is a contract between the bank and the beneficiary and the contract between the applicant and the beneficiary that gives rise to the credit. Privity of contract prevents the parties from relying upon or taking advantage of the other contracts. 276 While the bank's obligation to pay on demand may be unqualified by the underlying contract to which the beneficiary is a party, the terms of the underlying contract may impose contractual limits on the beneficiary's entitlement to call on the guarantee. As French CJ stated in Simic at [8]: [The autonomy principle] does not prevent a party to a contract who procures the issue of a performance bond claiming as against the beneficiary that the beneficiary's action in calling upon the bond is fraudulent or unconscionable or in breach of a contractual promise not to do so unless certain conditions are satisfied. 277 It is of course necessary for each subcontract (and any other contractual instrument) in these proceedings to be construed on its own terms and in its own context according to the ordinary principles of contractual construction. That is, the terms of the contract are to be determined objectively by reference to its text, context and purpose in accordance with the approach set out in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656-657 [35]: [T]he objective approach [is] to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean … [I]t will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd [[2009] EWCA Civ 636 at [28]], unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'. 278 The Respondents emphasise that long-standing authority (as noted above) indicates that terms such as those entered into between the Hastie Entities and the Respondents have the result that the provision of the bank guarantees to each Respondent was "as good as cash" and that the bank guarantees were able to be called upon by each Respondent notwithstanding that a dispute may exist as between the parties regarding that Respondent's underlying entitlement to the proceeds. 279 These principles established by such long-standing authorities have mostly been developed in the context of building contracts providing for the builder to procure bank guarantees to be issued to the counterparty as beneficiary, and where the builder seeks to restrain the beneficiary being paid the moneys under the bank guarantee, either prior to the beneficiary's call on the bank guarantee or immediately after. In those cases, the Court has focussed on the terms of the bank guarantee in question and of the separate underlying building contract in order to determine an injunction application. The context of this proceeding is similar, but the Applicant's enjoining of Chapter 5 of the Corporations Act as a whole is more unusual. Nevertheless, it is useful to consider what those previous authorities have said about the rationale for bank guarantees and, in any given case, the requirement to construe the contractual instruments before the Court. 280 As recently summarised by Nichols J in Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2020] VSC 596 at [26], citing Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812 (Fletcher Constructions) at 826-827 per Callaway JA: [A] beneficiary may, broadly speaking, stipulate for a guarantee for two reasons. One is to provide security against the risk that the beneficiary will not recover from the defaulting party. The second is, "to allocate the risk as to who shall be out of pocket pending resolution of a dispute. The beneficiary is then able to call upon the guarantee even if it turns out, in the end, that the other party was not in default." The intended purpose is determined by construing the underlying contract. 281 Either or both of these rationales may apply to any given contractual agreement in relation to the provision of bank guarantees. 282 Although not explicitly said above, the first rationale - providing security against the risk that the beneficiary will not recover from the defaulting party - adverts to the defaulting party's risk of insolvency, and therefore the desirability of having a third party bank interpose in the relationship between the contracting parties so that if the defaulting party becomes insolvent, the beneficiary of the bank guarantee will be able to claim against the bank, rather than against the insolvent company under external administration by way of the mechanisms imposed under the Chapter 5 of the Act. 283 Indeed, specific protection against the potential insolvency of the contractor has been explicitly recognised in some of the authorities (for example, Lucas Stuart v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 at [40] per Macfarlan JA), so that the bank guarantee constitutes an "unquestionably solvent source from which to claim compensation for a breach by the [contractor]": Cargill International SA v Bangladesh Sugar and Food Industries Corp [1998] 1 WLR 461 ('Cargill') at 468-469 per Potter LJ. 284 That fundamental rationale may therefore appear to be inconsistent with, or an evasion of, Chapter 5 of the Act. Indeed, an otherwise unsecured creditor of an insolvent company having recourse to a third party in order to satisfy its claims, and that third party then claiming against the insolvent company as a secured creditor, might be characterised as an unsecured creditor "piggybacking" off the security of another creditor and so circumventing the system of pari passu distribution for unsecured creditors under the Act. However, such an arrangement in reliance on a third party as a form of financial security is common to all guarantees. Although, the "bank guarantee" or "performance bonds" entered into in this proceeding are not truly guarantees, like guarantees, they are not strictly "security interests" within the meaning of s 51A of the Act, yet they are nevertheless intended to secure the performance of contractual obligations, including potentially in the circumstance of contractor insolvency. Whether the subcontracts in this proceeding are so intended is a matter of ordinary contractual interpretation. 285 In relation to the second rationale - being the "risk-allocation mechanism" establishing a "pay now, argue later" regime: Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Windfarm Pty Ltd [2019] VSCA 318 at [14] per Hargrave JA - again, whether such a purpose or effect is in fact provided by the subcontracts in this proceeding is a matter of contractual construction. However, the general commercial function of bank guarantees ought to be taken into account. As Callaway JA said in Fletcher Constructions at 827: Remembering that we are speaking of guarantees in the sense of standby letters of credit, performance bonds, guarantees in lieu of retention moneys and the like, the latter purpose [of risk allocation] is often present and commercial practice plays a large part in construing the contract. No implication may be made that is inconsistent with an agreed allocation of risk as to who shall be out of pocket pending resolution of a dispute and clauses in the contract that do not expressly inhibit the beneficiary from calling upon the security should not be too readily construed to have that effect. As I have already indicated, they may simply refer to the kind of default which, if it is alleged in good faith, enables the beneficiary to have recourse to the security or its proceeds. 286 Although having these common commercial rationales in mind, it is the particular terms, context and purpose of the underlying subcontracts that must be construed. Some useful principles were recently set out in Daewoo Shipbuilding & Marine Engineering Co Ltd v INPEX Operations Australia Pty Ltd [2022] NSWSC 1125 at [10] (per Rees J, citations omitted): As to whether a bank guarantee is intended to provide security or a risk allocation device, or both, the usual rules for construing commercial contracts apply. The Court should construe the terms of an instrument read as a whole. Likewise, the question whether the underlying contract contains a qualification on the right to call upon the bank guarantee should be determined in light of the contract and the form of the bank guarantee. While the authorities provide guiding principles, the primary focus must be on the terms of the contract itself… [R]esolution of the case lies in the proper construction of the provisions of the contract "rather than in attempting to state general principles of broad application or in reconsidering the questions of construction of the different contractual provisions in other decisions". 287 While the Applicants submit that the subcontracts in these proceedings construed correctly do not give effect to the abovementioned purposes or effects relied upon by the Respondents, they also argue more generally that the outcomes sought by the Respondents would be contrary to the Corporations Act, including its purpose and policy, and also certain specific provisions which they submit ought to be construed widely. (The Applicants' submissions are set out more fully later in this "Bank Guarantee Case" section.) 288 In answer to the Applicants' submissions in that regard, it is important to recognise two things. First, the best indication of the purpose and policy of the Act is the text of the statute and the regime established by that text. In this case, the mechanisms for creditors to make claims against insolvent companies are provided in quite comprehensive detail under the Act (including the Insolvency Practice Schedule, being Sch 2 to the Act), the Regulations, and the Insolvency Practice Rules (Corporations) 2016 (Cth). Although the Applicants do rely on the application of specific provisions of the Act in support of the relief they seek (for example, s 437D of the Act), their more general argument that the overall policy or purpose of Chapter 5 of the Act is such that its provisions are to be interpreted widely or broadly so as to prohibit the impugned conduct in this case is an argument to be wary of. As the Full Court of this Court in Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCAFC 86; (2021) 286 FCR 437 said generally at [29]: In using purpose to resolve ambiguity, the Court must not conjure a purpose that is more specific than the context discloses and then use that purpose to construe the legislation: Certain Lloyd's Underwriters v Cross (2012) 248 CLR 378 at [26]; and Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd (2005) 222 CLR 194 at [21]. Further, the purpose must be one that "resides" in the "text and structure" of the legislation: Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at [44]. Ultimately, "the fundamental duty of the Court is to give meaning to the legislative command according to the terms in which it has been expressed": Northern Territory v Collins (2008) 235 CLR 619 at [16]. 289 Further, specifically in relation to Chapter 5 of the Act, the Court of Appeal in Forge, citing International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 (IATA) at [78]-[79], said at [144]: It is essential to begin with the elementary proposition that insolvency law is statutory and primacy must be given to the relevant statutory text. It is impermissible to assert that the public policy achieves what the statute otherwise itself does not achieve. 290 Indeed, in response to an assertion (similar to the Applicants' in these proceedings) of a general rule requiring equal treatment of creditors within the same class and an argument that Australian courts should therefore refuse to give effect to contractual provisions which purport to circumvent or dislocate the order of priorities set out in a deed of company arrangement and given statutory force and effect by Pt 5.3A of the Act, the majority of the High Court in IATA said at [93] (per Gummow, Hayne, Heydon, Crennan and Kiefel JJ): The asserted rule of public policy finds no footing in the relevant provisions of the Corporations Act. Those provisions take effect according to their terms and are not to be supplemented or varied by the superimposition of a rule of the kind alleged. 291 Second, bank guarantees are relied upon in commercial practice across multiple industries - not just in Australia but internationally - for the very purpose of protecting against insolvency risk outlined above. In those circumstances, a contention that the mechanism of bank guarantees is in fact a large and significant loophole in a statutory regime in place since at least the Corporate Law Reform Act 1993 (Cth) that should now be closed, in order to succeed, ought to be supported by a very clear and persuasive argument. This is because the legal validity of bank guarantees and its function as a security and risk allocation device is a long-standing fact of commercial law in Australia, which forms part of the context of the Act. 292 Recognition of this context is consistent with the regard had by the Courts in Wood Hall (at 457-458), Simic (at [11] and [88]) and Fletcher Constructions (at 827) to the realities of commercial practice and international commerce in relation to bank guarantees. 293 Having said the above, if the implementation of the relevant contractual instruments constituting the bank guarantee arrangements in these proceedings read fairly are prohibited by the provisions of Chapter 5 of the Act properly understood, then no matter the otherwise comprehensiveness of the statutory regime or any commercial inconvenience, this Court must determine the matter according to law. 294 The starting point of the exercise must be the text of the relevant contractual instruments, and so it is to these I now turn.

[29]

The provision of security under the subcontracts 295 I have considered the specific terms of each of the subcontracts between the Hastie Entities and the Respondents in this proceeding, including the particular subcontracts involving John Holland and Laing O'Rourke respectively which I will discuss specifically later in this section. I have come to the view that none of them are relevantly different so as to affect the determination of the issues in dispute in the Bank Guarantee Case. It is convenient therefore to refer to the terms of the subcontracts involving the First Respondent, Multiplex. 296 Like I did with the Receivables Case, I will refer to the relevant clauses of the Stockland Shellharbour Subcontract. 297 Clause 5 is entitled "Security, Retention Monies and Performance Undertakings", and commences with the following subclauses: 5.2 Provision of Security The Subcontractor shall provide security in accordance with Item 16 of Annexure Part A and in accordance with this Clause 5. 5.3 Form of security At Multiplex's absolute discretion, the security shall be in the form of cash or an approved unconditional undertaking given by an approved financial institution or insurance company approved by Multiplex. Multiplex shall, in its absolute discretion, approve or disapprove of the form of an unconditional undertaking and the financial institution or insurance company giving it. The unconditional undertaking in the form of Annexure Part M is approved. If the security is not transferable by delivery, it shall be accompanied by an executed transfer or such other documentation as is necessary to effect a transfer of the security. The costs (including all stamp duty or other taxes) of and incidental to the transfer and retransfer, shall be borne by the Subcontractor. 5.4 Time for Provision of Security Security shall be provided by the Subcontractor within 7 days of the date of the Subcontract. 5.5 Retention Moneys Any retention shall be in accordance with Clause 42.I and Item 7 of Annexure Part A. 298 So, the contract provides that the security securing the Hastie Entity's performance was to be in the form of cash (ie, retention moneys) or an approved unconditional undertaking given by an approved financial institution (ie a bank guarantee). I will refer to the approved form of Annexure Part M later. 299 Item 16 of Annexure Part A for some of the subcontracts, including the Stockland Shellharbour Subcontract, states "N/A" or "Not Required". Some of the other subcontracts provide as follows (or otherwise in substantially the same terms): The Subcontractor shall provide 2 unconditional undertakings, each for 2.5% of the Subcontract Sum. 300 For these subcontracts, it is not controversial that the bank guarantees ultimately provided to Multiplex for each project were provided pursuant to cl 5 of those subcontracts. 301 For those of the subcontracts where Annexure Part A does not specify the form of bank guarantees to be provided, Item 17 of Annexure Part A specifies the form of retention moneys to be provided. For example, the "Project D - Queen Elizabeth II Central Energy Plant" subcontract provides as follows: Retention moneys shall be deducted progressively from moneys otherwise due to the Subcontractor, as follows: (Causes 5.5 and 42.1) 10% of the value of work incorporated into the Subcontract Works until the value of retention moneys reaches [5]% of the Subcontract Sum, Half shall be released upon Practical Completion of the Project or the Issue of the Final Certificate by the Client (whichever is the latter) and the balance upon completion of the Defects Liability Period

[30]

302 Nevertheless, for each of these projects, bank guarantees were in fact provided to Multiplex. In those circumstances, Multiplex pleads that, although the subcontract may require security in the form of cash retention rather than bank guarantees, notwithstanding that, the Hastie Entity provided and Multiplex accepted bank guarantees in satisfaction of the Hastie Entity's obligation to provide security to Multiplex under the subcontract. 303 For example, the "Approval of Bank Guarantee" form for the "Project D - Queen Elizabeth II Central Energy Plant" is for two unconditional bank guarantees. Each is for 2.5% of the subcontract sum, one of which is noted as being for "performance" and the other for "defects", and according to the cover letter enclosing the guarantees, being issued "as required in connection with this project". Moreover, the bank guarantee itself states the following: Australia and New Zealand Banking Group Limited ('ANZ') asks the Beneficiary [Multiplex] to accept this bank guarantee ('Undertaking') in connection with a contract or agreement between the Beneficiary and Applicant for: Security for the performance by Desair [the Hastie Entity] of its obligations as Mechanical Works Contractor under Desair Project (DC012470) relating to the QEII Central Energy Plant Block G Steam Generation Plant - Mechanical Services. 304 I accept Multiplex's submission that, on the facts in relation to these particular subcontracts, the approval and acceptance of the bank guarantees in these circumstances constitutes the provision of security in the form of the "unconditional undertakings" pursuant to cl 5.3 of the relevant subcontract, despite any election in Annexure Part A for retention moneys to be provided. 305 Certain provisions of cl 5 of the Stockland Shellharbour Subcontract relate to Multiplex's enforcement of or demand under the security provided, as follows: 5.6 No injunction (a) The Subcontractor must not take any steps whatever to restrain; (i) Multiplex from making any demand under security; or (ii) the issuer of security from complying with any such demand. (b) The Subcontractor agrees that damages will be an adequate remedy if Multiplex makes any demand under security which it is not entitled to make. … 5.10 Holding of and Interest on Cash Security If Multiplex makes a demand under security. Multiplex: (a) does not hold the amount received on trust for the Subcontractor; and (b) is entitled to any interest earned on that amount. 306 Clause 5.6 and cl 5.10 are significant, affirming the usual consequences of entering into an unconditional undertaking with a third party bank. 307 Other provisions of cl 5 of the Stockland Shellharbour Subcontract relate to Multiplex's obligation to release part or all of the security provided, as follows: 5.8 Reduction of Security and Retention Moneys Multiplex shall release any security and retention moneys in accordance with Item 18 of Annexure Part A within 35 days after receipt of a written request from the Subcontractor, which request may only be made with a payment claim under Clause 42.1 following the later of: (a) the issue of the Certificate of Main Contract Practical Completion; and (b) receipt by Multiplex of the items referred to in Item 18A of Annexure Part A. 5.9 Release of Security and Retention Moneys Subject to Multiplex's right to access the security and retention moneys under this Subcontract, Multiplex shall: (a) within 35 days of receipt of a written request from the Subcontractor, which request may only be made with the Security Release Notice under Clause 42.6, release the security and retention moneys; and (b) if the Subcontractor has provided additional security for any item of unfixed plant and materials pursuant to Clause 42.2, release that additional security within 21 days of the incorporation into the Subcontract Works of the unfixed plant or materials. 308 Item 18 of Annexure Part A, referred to at cl 5.8 above, states the following: Brookfield Multiplex shall release to the Subcontractor 50% of the retention or unconditional undertakings then held by Brookfield Multiplex with final payment / CVA. The balance of retention or unconditional undertakings shall be released 12 months after the Head Contract practical completion. 309 Clauses 5.8 and 5.9 above also refer to cl 42. Clause 42 is entitled 'Payments'. Clause 42.1 provides for the regime by which the Hastie Entity submits payment claims to Multiplex for work completed. Clause 42.2 in relation to unfixed plant and materials is not relevant to these proceedings. Clause 42.6 provides as follows: 42.6 Security Release Notice Within 21 days of the later of: (a) the expiry of the Defects Liability Period, or where there is more than one, the last to expire; and (b) the rectification by the Subcontractor of all Defects which have arisen or otherwise become apparent prior to the expiry of the last Defects Liability Period, the Subcontractor shall provide Multiplex with a security release notice and endorse it 'Security Release Notice'. In addition to claims for payment required to be included in a payment claim under Clause 42.1 and Clause 42.5, the Subcontractor shall include in the Security Release Notice all of its remaining Claims. Any of the Subcontractor's Claims not included in the Security Release Notice which have not already been barred, shall be barred after the expiration of the period for lodging a Security Release Notice. Nothing in this Clause affects any Claim barred or released under any other provisions of this Contract. 310 In summary, the regime for release of Multiplex's security is that 50% of the security (that is, one of the two bank guarantees) is released upon practical completion of the project, and the remaining 50% is released twelve months afterwards (that is, following completion of a "defects liability period"). 311 Finally, clause 44 is entitled "Default or Insolvency". It is not necessary to set out comprehensively here the rights and procedures provided under the subcontract (some of which having already been set out in the Receivables Case section earlier in these reasons), but I shall set out some subclauses relevant to the Respondent's (in this case, Multiplex's) rights in relation to the bank guarantee in the event of default or insolvency. 312 Clause 44.1 is as follows: 44.1 Preservation of Other Rights If the Subcontractor breaches or repudiates the Subcontract, nothing in Clause 44 shall prejudice the right of Multiplex to recover damages or exercise any other right (including, for the avoidance of doubt, the right to terminate the Subcontract). 313 Clauses 44.2 to 44.9 deal with the procedure where there is a default by the Subcontractor (the Hastie Entity) or non-payment by the Respondent. Focussing on the situation of default by the Subcontractor, the Respondent is entitled to give the Subcontractor a written notice to show case, and if the Subcontractor fails to show cause as to its default, the Respondent is entitled to terminate the subcontract or to take out of the hands of the Subcontractor the whole or part of the work under the subcontract remaining to be completed. 314 It is worth setting out in full once again clause 44.6, which specifically refers to the ability of Multiplex to satisfy its unpaid debts out of security under the subcontract (emphasis added): 44.6 Adjustment on Completion of the Work Taken Out of the Hands of the Subcontractor When work taken out of the hands of the Subcontractor under Clause 44.4(a) is completed, Multiplex shall ascertain the Losses suffered or incurred by it in completing the work and shall issue a certificate pursuant to this Clause 44.6 t0 the Subcontractor certifying - (a) the amount of those Losses, and setting out the calculations employed to arrive at those Losses; (b) the amount which would otherwise have been paid to the Subcontractor if the work had been completed by the Subcontractor; and (c) the difference. If the Losses incurred or suffered by Multiplex arc greater than the amount which would have been paid to the Subcontractor if the work had been completed by the Subcontractor, the difference shall be a debt due from the Subcontractor to Multiplex. If the Losses incurred or suffered by Multiplex are less than the amount that would have been paid to the Subcontractor if the work had been completed by the Subcontractor, the difference shall be a debt due to the Subcontractor from Multiplex. If the Subcontractor is indebted to Multiplex, Multiplex may retain Constructional Plant or other things taken under Clause 44.5 until the debt is satisfied. If after reasonable notice, the Subcontractor fails to pay the debt, Multiplex may sell the Constructional Plant or other things and apply the proceeds to the satisfaction of the debt and the costs of sale and if those moneys are insufficient, Multiplex may have recourse to retention moneys and, if they are insufficient, then to security under the Subcontract. Any excess shall be paid to the Subcontractor. 315 I shall set out clauses 44.10 and 44.11 again (set out earlier in the context of the Receivables Case), which relevantly provide as to the rights of Multiplex upon termination or upon insolvency as follows: 44.10 Rights of the Parties on Termination If tile Subcontract is terminated pursuant to Clause 44.4(b) or 44.9, the rights and liabilities of the parties shall be the same as they would be at common law had the defaulting party repudiated the Subcontract and the other party had elected to treat the Subcontract as at an end and recover damages. … 44.11 Insolvency If- … (c) in relation to a party being a corporation - … (viii) a receiver or receiver and manager, a controller, a voluntary administrator, a provisional liquidator or a liquidator is appointed to a party or over the property of a party; … then, where the other party is - (A) Multiplex, Multiplex may, without giving a notice to show cause, exercise the right under Clause 44.4(a) or 44.4(b); … The rights given by this Clause 44.11 are in addition to any other rights and may be exercised notwithstanding that there has been no breach of Contract. 316 None of these provisions refer to or prohibit exercise of the Respondent's rights under its bank guarantee, and so, even if clause 44.1 were not present, there is no basis to argue that the subcontract explicitly or implicitly prohibits the Respondent's ability to call on its bank guarantee. To use the vernacular of the jurisprudence in this area, the subcontract cannot be invoked as a "collateral contract" qualifying the Respondent's rights under its bank guarantee. 317 I referred earlier to certain subcontracts involving John Holland and Laing O'Rourke that were substantively different to the other subcontracts in these proceedings. I shall turn to those subcontracts now.

[31]

John Holland "Project F: Sydney Desalination Plant" Agreement 318 The subcontract in this proceeding involving John Holland and referred to in the court book as the "Project F - Sydney Desalination Plant Agreement" contained specific terms which differ from the subcontract detailed in the previous section in respect of the holding of cash security by John Holland (as part of a joint venture party referred to in the relevant clauses as BWJV, but for convenience I shall simply refer to John Holland in my analysis). 319 Like other subcontracts, the relevant clauses in relation to security provides for the provision of an unconditional undertaking. I shall set out subclauses 4.5 and 4.6, noting that the Subcontract Sum indeed exceeds AUD$10 million. 4.5 This clause 4.5 applies if the Subcontract Sum exceeds AUD$10 million. (a) If BWJV receives or retains security in cash or converts security to cash, BWJV must hold that security in trust from the time it receives, retains or converts it; (b) If BWJV receives payment under the Head Contract for, or on account of, work done or materials, plant, equipment or other goods supplied by the Subcontractor, and does not pay that Subcontractor the whole amount to which the Subcontractor is entitled under this Subcontract, BWJV must hold the difference in trust for payment for the Works performed; and (c) BWJV must deposit all money it receives in trust under the terms of this Subcontract into a trust account in a bank selected by BWJV no later than the next Business Day, and: (i) the money must be held in trust for whichever party is entitled to receive it until it is paid in favour of that party (subject to BWJV's rights under this Subcontract to make demands against that money); (ii) BWJV must maintain proper records to account for that money and make them available to the Subcontractor on request; and (iii) any interest earned by the trust account is owned by BWJV. 4.6 Recourse BWJV may, following acceptance of security, (at its absolute discretion), make demand on and utilise the security to pay for any costs, expenses or damages (including rectification of defects in the Works which the Subcontractor fails to rectify) which BWJV claims it has incurred as a consequence of any act or omission of the Subcontractor, which BWJV asserts constitutes a breach of the Subcontract by the Subcontractor, or to satisfy any amount which it asserts is payable by the Subcontractor pursuant to the Subcontract. 320 The effect of these clauses is simply that the proceeds of the bank guarantee drawn down are held on trust by John Holland at first for the party who becomes entitled under the subcontract to the monies held in trust. Relevantly here, under subclause 4.6, this would initially be for John Holland to pay for any "costs, expenses or damages" that John Holland claims it has incurred within the meaning of that subclause. 321 In any event, there is no claim that there has been any breach of trust by John Holland. To the extent that there is surplus remaining and which ought to be held on trust for the Hastie Entity under subclause 4.5, the Hastie Entity still has a potential to claim those monies. On the facts before me, it cannot be said that John Holland has by its actions impacted on this right under the subcontract. Therefore, nothing referred to in this particular subcontract impacts upon my consideration of the determination of the Bank Guarantee Case in its application to this particular project (or any other projects).

[32]

Specific clauses concerning the Respondent's recourse to the bank guarantees 322 Some of the subcontracts in this main proceeding, unlike the Stockland Shellharbour Subcontract, contained specific provisions relating to the relevant Respondent's permitted recourse to the bank guarantees or their obligation to release or return surplus proceeds of the bank guarantee or surplus retention amounts (that is, those in excess of any claims they have against the Hastie Entities). 323 For example, the subcontract in this proceeding involving Laing O'Rourke and referred to in the court book as the "Project B - 123 Albert Street - Hastie Air Conditioning" Agreement contained relevant clauses which provide as follows: 6.2 Recourse to Bank Guarantees and Retention The Contractor may have recourse to the Bank Guarantees or any sum retained pursuant to the preceding clause whenever the Contractor claims to be entitled to claim the payment of monies by the Subcontractor. 6.3 Release of Bank Guarantees Subject to clause 6.5, within 14 days after the later of the Date of Substantial Completion and the date of Practical Completion under the Head Contract for the whole of the Head Contract Works the Contractor will release the percentage stated in Schedule 1 of the Bank Guarantees then held. The Contractor will release the balance promptly once the Subcontractor's obligations are complete and the Defects Liability Period has expired. … 6.5 Unsatisfied Claims If, at any time when the Contractor is required to release Bank Guarantees or retention money to the Subcontractor, the Contractor considers it has any unpaid moneys due or unsatisfied claims against the Subcontractor, the Contractor shall only be obliged to release the security or retention moneys to the extent that the aggregate of the Bank Guarantee and the retention moneys exceeds the aggregate of: (a) the amount the Contractor is otherwise still entitled to retain under the Subcontract; and (b) the amount of the Contractor's unpaid moneys due and unsatisfied claims, but the Contractor shall release the excess amount of security and/or retention moneys held under this clause (if any), within fourteen (14) days of the unpaid moneys due and unsatisfied claim being paid or satisfied. 6.6 No Trust The Contractor shall not hold on trust the Bank Guarantees or the proceeds of converted Bank Guarantees or any sum retained under clause 6.1. 324 Clause 6.2 provides for Laing O'Rourke's power to have recourse to the bank guarantee, and so, to the extent that it limits Laing O'Rourke's power to have recourse to the bank guarantee pursuant to the terms of the bank guarantee itself, this is a "collateral obligation" on Laing O'Rourke. The Applicants submitted that clause 6.2 was significant in circumstances where Laing O'Rourke in fact did not call on its bank guarantees until not only after termination of the subcontract (arguing therefore that Laing O'Rourke did not have an accrued right to have recourse to the bank guarantee at termination), but also after it voted in the resolution to wind up the Hastie Entities (so that Laing O'Rourke's drawdowns attracted certain consequences under Chapter 5 of the Act, as characterised by the Applicants). Laing O'Rourke and the Fourth Respondent (formerly Baulderstone Pty Ltd), were the only Respondents whose first drawdown of the bank guarantees was after the winding up of the Hastie Entities. 325 In my view, clause 6.2 does not assist the Applicants. It does not matter whether at the time of termination Laing O'Rourke was expressly claiming that it had unsatisfied claims or whether it truly considered that it had unsatisfied claims within the meaning of clause 6.5. Since Laing O'Rourke has now called on the bank guarantee, and now that it is clear that Laing O'Rourke sought the proceeds of the bank guarantee to meet its unsatisfied claims against the Hastie Entities under their subcontracts, clause 6.2 is no longer of any relevance to the Applicants' claims against Laing O'Rourke in the main proceeding. The Applicants did not seek an injunction to restrain Laing O'Rourke from calling on the bank guarantee. 326 In addition, it is not alleged that the requirements under clause 6.3 are satisfied such that Laing O'Rourke ought to have released their bank guarantees. Further, clause 6.5 does nothing more than expressly provide for Laing O'Rourke obligation to account for surplus proceeds which, as I will discuss later in these reasons, is an obligation Laing O'Rourke would have in any case. Significantly, clause 6.6 has the effect that any moneys drawn down by Laing O'Rourke are not held on trust. 327 It is to be noted that some of the other subcontracts also have clauses in the nature of "collateral obligations" as to the Respondent's recourse to or power to call on the bank guarantees. However, each such clause in the relevant subcontracts is of wide remit and on the facts, do not relevantly restrain the Respondent's drawdown on the bank guarantee. For example, clauses 5.4 to 5.6 of the subcontract referred to in the court book as the "Project A: New Royal Adelaide Hospital" Agreement involving Hansen Yuncken (referred to as the "Builder") provides as follows: Conversion of security 5.4 The Builder may convert all or part of the security into cash at any time. 5.5 The Builder may use the proceeds of the security in connection with any costs, expenses, losses or damages of any kind which the Builder has incurred or claims that it has incurred or might in the future incur in connection with what the Builder contends constitutes any act, default or omission of the Subcontractor. 5.6 The Subcontractor must not take any steps to injunct or otherwise restrain: (a) any issuer of any unconditional undertaking provided under Clause 5.2 from paying the Builder pursuant to that undertaking; (b) the Builder from taking any steps for the purposes of making a demand under any such undertaking or receiving payment under any such undertaking: or (c) the Builder using the money received under any such undertaking. 328 The collateral obligation provided by clause 5.5 as to Hansen Yuncken's power to have recourse to the bank guarantee proceeds is clearly very broad and does not assist the Applicants' Bank Guarantee Case. 329 Finally, another relevant variation to consider is that contained in the Gold Coast University Hospital Subcontract involving Lendlease, which at cl 4.2(d) provides: Whilst any Claim or dispute remains unresolved between [Lendlease] and the Subcontractor, [Lendlease] will not be obliged to return, nor the Subcontractor entitled to request the return, of any undertaking or money retained under Clause 21.6(a)(i). 330 This clause is a collateral term or obligation as to the exercise of the parties' rights relating to the bank guarantee that is framed in terms of an obligation on the Subcontractor, the effect of which is to clarify the circumstances in which Lendlease remains permitted to have recourse to the proceeds of the bank guarantees. Again, the scope of the Respondent's power here to have such recourse is quite wide, there being only a requirement that "any Claim or dispute remains unresolved between Lendlease and the Subcontractor". 331 Overall, nothing referred to in the particular subcontracts discussed in this section impacts upon my consideration of the determination of the Bank Guarantee Case in its application to these particular projects (or any other projects).

[34]

335 Schedule 3 also sets out the details of the facility limit for each facility and the fees payable by Hastie Group Limited in relation to the bank guarantees. 336 A few definitions are relevant to the LC Facility regime: (a) The provision of financial accommodation in relation to a particular facility is known as a "Draw", so that the issue of an LC Instrument constitutes a Draw, which is requested by way of a "Draw Notice" in a form scheduled to the SFA, and completed and signed by an Obligor. (b) A participating bank in relation to the LC Facility is known as an "LC Financier"; (c) the guarantee to be issued is known as an "LC Instrument"; (d) the beneficiary of the guarantee (for example, each Respondent in this proceeding) is known as the "LC Beneficiary"; and (e) the subcontract secured by the guarantee is known as the "LC Secured Contract" 337 Part D of the SFA concerns the LC Facilities. It is convenient to summarise the relevant provisions as follows: (a) Each Financier participating in an LC Facility agreed to pay on demand from the "Relevant Issuing Bank" its proportion under the facility of any amount demanded under each issued "LC Instrument": cl 17.1. (b) An Issuing Bank would prepare and issue on behalf of the LC Financiers an LC Instrument requested under a "Draw Notice": cl 17.2. (c) Each Issuing Bank agrees to notify the Company and each relevant LC Financier of any demand for payment under an LC Instrument it has issued promptly after the Issuing Bank receives it: cl 17.3 (d) the Obligor (the Hastie Entity) must reimburse the Issuing Bank for the drawdown amount and interest, pursuant to cl 17.4: 17.4 Reimbursement Each Obligor must pay to each Issuing Bank on demand from time to time: (a) amounts equal to each payment made or required to be made by that Issuing Bank under an LC Instrument; and (b) interest on such amounts calculated in accordance with clause 38. (e) In short, interest is payable on the drawdown amounts at a rate of 2% p.a. plus an additional base rate: cl 38. (f) Clause 17.5 provides for the Issuing Bank's authority to pay the LC Beneficiary in the following terms (emphasis added): Each Obligor irrevocably authorises each Issuing Bank … to pay any amounts demanded or requested at any time under an LC Instrument issued by that Issuing Bank … under this document without reference to, or authority from, any Obligor. The Issuing Bank … and each relevant LC Financier need not investigate or enquire whether a claim or demand under an LC Instrument has been properly made, and the Issuing Bank … may meet any such claim or demand despite the Company or any other person disputing the validity of the claim or demand. (g) Upon default or termination of the LC Facility, the Issuing Bank can pay to the LC Beneficiary any "Outstanding Amounts", which in relation to LC Facilities, is essentially defined as "the aggregate maximum face value or amount payable (however described) under all LC Instruments issued under this document less any amounts paid by the Company in accordance with clause 17.4(a)": cl 17.6. (h) Relatedly, on the "Termination Date" (defined as the Maturity Date for the relevant LC Facility) or any earlier date on which the facility is terminated, the Obligor (the Hastie Entity) must pay to the Relevant Issuing Bank all of the "Outstanding Amounts" (less amounts where there is cash cover or replacement bank guarantees have been provided): cl 20.2. (i) No Issuing Bank nor any LC Financier is obliged at any time to commence, pursue or defend any legal proceedings or other process in connection with any claim, demand or right arising under an LC Instrument issued under the SFA: cl 17.8. (j) Each Obligor indemnifies each Issuing Bank and LC Financier against any Loss arising as a result of the issue or variation of an LC Instrument, any payment or claim under an LC Instrument, or anything done by an LC Beneficiary in relation to an LC Instrument: cl 19.2. 338 Although the underlying subcontract for the bank guarantee (the 'LC Secured Contract', as referred to earlier) is defined under the SFA, the provisions under Part D of the SFA are not relevantly limited by the terms of the LC Secured Contract. The main reference to an LC Secured Contract under the SFA is at cl 9.1(h), by which a Financier's participation in any Draw under a LC Facility (that is, the issue of a bank guarantee) is conditioned on the Agent's (ANZ Bank's) approval of the LC Secured Contract. The operation of the SFA is not otherwise conditioned on the substantive terms of any LC Secured Contract, and so the terms of the SFA do not condition payment by any issuing bank under a bank guarantee on any Hastie Entity subcontract. That is, the SFA is consistent with the bank guarantees being a truly "unconditional" undertaking. 339 It is necessary to set out part of clause 18 in relation to cash cover, by which the Agent (ANZ Bank) itself effectively held retention moneys ostensibly to secure itself against a Hastie Entity's failure to reimburse it: 18.1 Cash Cover Accounts (a) The Company must open and maintain with the Agent ( or another bank approved by the Agent) one or more non-cheque issuing bank accounts ( each a Cash Cover Account) in the Company's name and designated as a 'Cash Cover Account' as may be required by the Agent, in each currency in which unexpired LC Instruments are denominated. (b) The Company agrees that despite anything to the contrary in any account opening authority the Agent will have exclusive control of each Cash Cover Account, and at least one of the Agent's Authorised Representatives will be an account signatory, including for all withdrawals and transfers. The Company irrevocably authorises the Agent to do anything necessary for this purpose. (c) The Company acknowledges and agrees that no Finance Party will be responsible for the performance by the Company of its obligations in relation to any Cash Cover Account, nor is any Finance Party obliged to take any action in relation to a Cash Cover Account which may be contrary to any law or official directive, and that the Agent has no duties in relation to a Cash Cover Account, and will not be liable for any error of judgment or any mistake in fact or law except to the extent of its own gross negligence, fraud or wilful default. (d) The Company must ensure that all cash cover provided pursuant to this document will be credited to a Cash Cover Account. 18.2 Provision of cash cover The Borrower must ensure that all cash cover to be provided pursuant to this document is provided to the Agent (on behalf of the relevant LC Financiers) by payment to an account and on terms acceptable to the Agent and each LC Financier. 18.3 Cash cover if Default subsists If a Default subsists, immediately after receiving a request from the Agent under clause 29.2(c), the Company must provide cash cover for the Outstanding Amount under each LC Facility in the currencies in which unexpired LC Instruments are denominated, and for amounts at least equal to the aggregate Outstanding Amount for those LC Instruments. 18.4 Application of cash cover The Agent may, without demand or any notice, appropriate and apply any cash cover held by it pursuant to this document against any obligations of the Company under this document in respect of any LC Instrument. The Company irrevocably authorises the Agent to do anything necessary for that purpose. … 340 It is clear that the cash cover account is for the purpose of ensuring payment from the relevant Hastie Entity to the ANZ Bank in relation to the bank guarantees, and does not involve the direct payment of any amounts from a Hastie Entity to any LC Beneficiary (that is, a Respondent). The SFA does not provide for any account or payment mechanism by which the ANZ Bank holds certain funds out of which payments to LC Beneficiaries are made upon demand. It will be seen in my reasons in consideration that the nature of the payment mechanism for demands on bank guarantees under the SFA is relevant to the "causal and transactional link" issue. 341 Further, the terms of the SFA do not give rise to an agency relationship as between ANZ Bank (or any of the financiers) and Hastie Group Limited (or the other Hastie Entities). Clause 31 concerns ANZ Bank's role as Agent under the SFA, relevantly providing at cl 31.1(a): Except as expressly set out in a Finance Document, the appointment of the Agent does not constitute the Agent as trustee for, or partner of, any other Finance Party, an Obligor or any other person, and the Agent has no fiduciary duty to, or other fiduciary relationship with, any other Finance Party, an Obligor or any other person. [emphasis added] 342 There were no other contrary indications referred to by any party to impact upon the effect of cl 31.1(a). 343 Finally, it is necessary to briefly refer to some of the provisions of the SFA relevant to the ANZ's banks ultimate actions upon the insolvency of the Hastie Entities. 344 Schedule 15 refers to the existing securities held by the ANZ Fiduciary Services Pty Limited (the Security Trustee under the SFA) against Hastie Group Limited and the Obligors (including the Hastie Entities). 345 Under clauses 24 to 25, the Hastie Entities are guarantors of each other's financial and performance obligations to the financiers. 346 Under clause 29, an Insolvency Event (which includes the appointment of an administrator) in relation to an Obligor is a Default. 347 The LC Financiers' rights upon a default by the Hastie Entities are set out in clause 29.2, which I set out in full: 29.2 Effect of Default If a Default subsists, the Agent may (acting on the Majority Financiers' instructions, and will, if they direct the Agent to do so) by Notice to the Company do one or more of the following: (a) declare that the Secured Money is immediately due and payable, in which case the Company must immediately pay to the Agent the Secured Money; and (b) declare that all or part of the Outstanding Amount for all or any Facilities is payable on demand, in which case the Company must pay those amounts to the Agent on demand; and (c) declare that full cash cover in respect of each LC Instrument is immediately due and payable, in which case the Company must immediately pay to the Financier cash cover meeting the requirements set out in clause 18.2; and (d) terminate the Financiers' obligations specified in the notice with immediate effect; (e) cancel all or any part of the Facility Limit for all or any Facilities with immediate effect; and (f) direct the Security Trustee to enforce any Security given by an Obligor in favour of the Security Trustee. The Agent may do any of the above even though LC Instruments issued under this document remain outstanding on that date… 348 On 28 May 2012 (the same day as the Appointment Date), the Security Trustee gave "acceleration notices" to Hastie Group Limited and each relevant Hastie Entity, pursuant to cl 29.2, that it had determined that (a) Secured Moneys owing at the date of the notice were immediately due for payment; and (b) any part of the Secured Moneys "contingently owing" was also immediately due for payment. 349 By reason of the acceleration notices, the maximum liabilities contingently owing under various bank guarantees were made immediately due and payable. As a matter of fact, it is understood that no such payment was made by Hastie Group Limited or the Hastie Group entities. 350 Having set out the terms of the facility agreement above, I will summarise the practical and legal effect of the facility agreements in the Consideration section later in these reasons.

[35]

The terms of the bank guarantees 351 The Applicants did not contend that the specific terms of any of the Respondents' bank guarantees with any of the issuing banks were relevantly different so as to affect the determination of the issues in dispute, and having assessed the bank guarantees in this proceeding, I am of that view. It is convenient therefore to refer to the terms of the bank guarantees held by Multiplex. 352 It is to be recalled that the Multiplex subcontracts, including the Stockland Shellharbour Subcontract, referred to an approved form of unconditional undertaking. That approved form at Annexure Part M relevantly provides (emphasis added): At the request of [the Subcontractor, being the Hastie Entity] and in consideration of [Multiplex] Accepting this undertaking in respect of the subcontract for Stockland Shellharbour ("the Project") …………. [the Bank] unconditionally undertakes to pay on demand any sum or sums which may from time to time be demanded by Multiplex to a maximum aggregate sum of $ ( ) ("the Security Sum"). The undertaking is to continue until notification has been received from Multiplex that the undertaking is no longer required by Multiplex or until this undertaking is returned to the Bank or until payment to Multiplex by the Bank of the whole of the Security Sum or the balance of it remaining after any part payment or payments. Should the Bank be notified in writing, purporting to be signed by a director of Multiplex that Multiplex desires payment to be made of the whole or any part or parts of the Security Sum, it is unconditionally agreed that the Bank will make the payment or payments to Multiplex forthwith without reference to the Subcontractor and notwithstanding any notice given by the Subcontractor not to pay same and without regard to the performance or non-performance by the Subcontractor or Multiplex of the subcontract, any variation of it or any contract substituted for it. Provided always that the Bank may at any time without being required so to do pay to Multiplex the Security Sum less any amount or amounts it may previously have paid under this undertaking and thereupon the liability of the Bank hereunder shall immediately cease. 353 It is not contended that any of the bank guarantees in fact issued to the Respondents were inconsistent with the above approved form. By way of example, I set out the relevant terms of one of the bank guarantees issued in relation to the Stockland Shellharbour Subcontract (emphasis added): Description of Contract/ Agreement: Australia and New Zealand Banking Group Limited ('ANZ') asks the Beneficiary to accept this bank guarantee ('Undertaking') in connection with a contract or agreement between the Beneficiary and Applicant for: Security for the performance by Optimus Pty Ltd of its obligations as mechanical works subcontractor for retention until practical completion of the contract Stockland Shell harbour, contract reference 12409007, dated 1 5 December 2010. Guarantee Amount In consideration of the Beneficiary accepting this Undertaking and its terms, ANZ undertakes unconditionally to pay the Beneficiary on written demand from time to time any sum or sums up to an aggregate amount not exceeding: Australian Dollars Four Hundred Fifty Seven Thousand Five Hundred and Nil Cents Only (AUD457,500.00) ('Amount'). Undertaking: ANZ will pay the Amount or any part of it to the Beneficiary upon presentation of this original Undertaking (accompanied by a written demand) at any ANZ branch located within Australia without reference to the Applicant and even if the Applicant has given ANZ notice not to pay the money, and without regard to the performance or non-performance of the Applicant or Beneficiary under the terms of the contract or agreement. By accepting this Undertaking, the Beneficiary acknowledges and agrees that ANZ may rely entirely on any demand or notice as presented to it and has no responsibility or obligation to investigate the authenticity or correctness of the matters stated in a demand or notice, the signatures on the same, the positions of such signatories or the capacity or entitlement of the Beneficiary to give and execute the demand or notice. Any alterations to the terms of the contract or agreement or any extensions of time or any other forbearance by the Beneficiary or Applicant will not impair or discharge ANZ's liability under the Undertaking. This Undertaking remains in force until the first to occur of:  The Beneficiary notifies ANZ in writing that the Undertaking is no longer required.  This original Undertaking is returned to ANZ.  ANZ has paid to the Beneficiary the Amount or the balance outstanding of the Amount. On expiry or when no longer required this Original Undertaking must be returned for cancellation to the above address or to the Manager of any ANZ branch located within Australia. Notwithstanding anything stated in this Undertaking, ANZ has the right to terminate it at any time by paying the Beneficiary the Amount or the balance outstanding of the Amount, or any lesser amount that the Beneficiary may require. 354 It is clear that the bank guarantees in these proceedings were conventional unconditional undertakings granted by the relevant bank in favour of each Respondent. The dispute in the Bank Guarantee Case is as to the legal and proprietary effect of the bank guarantees in the context of the subcontracts and Hastie Entities' voluntary administration and then winding up, having regard to Chapter 5 of the Act.

[36]

Applicants' Submissions on Common Issues in Bank Guarantee Case 355 It is to be recalled that the Applicants' Bank Guarantee Case alleges that the Respondents' drawing down on the bank guarantees following the Appointment Date is impermissible. This allegation arises not only from the Applicants' general characterisation of the statutory scheme set out earlier, but also, as a starting point, as a result of specific contentions put forward by the Applicants concerning the proprietary rights and interests of the parties in relation to the bank guarantee. The Applicants assert that the bank guarantees, or the proceeds thereof, are the property of the relevant Hastie Entities. Relatedly, the Applicants assert that by drawing down on the bank guarantees, the Respondents did not obtain any proprietary interest in, nor any immediate entitlement to, the proceeds. These issues comprise Issues 8 to 10 of the Common Issues set out earlier in these reasons (the "property in proceeds" question and the "chose in action" question). 356 The Applicants make the following submissions concerning the proprietary interests of the Hastie Entities in relation to the bank guarantees. 357 First, the Applicants refer to the bank guarantee facilities entered into by the Hastie Entities and various issuing banks. They refer to the rights obtained by the Hastie Entities under the bank guarantee facilities as "financial accommodation" and ultimately a form of property, and relying predominantly on the terms of the SFA, their argument is as follows: (a) There is no dispute that the parent company of the Hastie Group (Hastie Group Limited) paid fees and related charges to purchase for each of the Hastie Entities the performance guarantees issued. Nor is there any dispute that the drawdown of each performance guarantee created an immediate obligation in each Hastie Entity to repay the loan funds to the bank plus interest when the issuing bank demanded it do so. (b) The financial accommodation purchased by the Hastie Group was the right to purchase performance guarantees for specified Respondents and the making of a loan to a Hastie Entity if and when the guarantee was called upon. If the issuing bank elected not to pay out on the performance guarantee, the Hastie Entity could compel it to do so. Where the issuing bank paid on the performance guarantee, a loan was made to the Hastie Entity which loan was repayable when the issuing bank made demand. The Hastie Entity became liable to pay interest, a liability which it did not have until the loan was occasioned by the payment out on the guarantee. (c) The issuing bank's payment on the performance guarantee issued to the Hastie company which purchased that guarantee effectively provided a pool of funds available to that Hastie Entity to meet any costs of rectification of defects that the Hastie Entity might agree with a Respondent, or otherwise, if agreement could not be reached, to meet an award of damages. There is no qualitative difference between the monies drawn on the performance guarantee, and retention monies withheld from progress payments. Both pools are to mutually benefit the Hastie Entity and each respective Respondent. Simultaneously, at the time of the draw down, the current liabilities of the relevant Hastie Entity increased by the amount of the "loan" (the face value of the guarantee). The draw down on the performance guarantee was, in reality, satisfied from the current liability (ie the loan made to the Hastie Entity), with the issuing bank acting as the paying agent. 358 The Applicants also contend that they have proprietary rights in the bank guarantees themselves (that is, the bank guarantee documents that are presented by the beneficiary to the issuing bank in order for the bank guarantee to be called upon). This is because they submit the subcontracts recognised that the Hastie Entities had a right to compel return of the bank guarantees where the contracts were completed (which includes the expiration of any defects period), and the right to their return is an interest in property within the meaning of s 9 of the Act. 359 The Applicants referred to the following in relation to the concept of "property": (a) Under s 9 of the Act, "property" is defined to mean "any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action". This definition encompasses "property" being "a protean concept, the content of which is informed by the statutory context" being applied: Commissioner of State Revenue (WA) v Placer Dome Inc (2018) 265 CLR 585 at [163]-[165] per Gageler J. (b) In Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592, 603 at [35]-[36], French CJ, Hayne and Kiefel JJ explained the broad meaning of "property of the company" in the context of s 568 of the Act (citations omitted, emphasis added): Care must always be exercised in understanding how the word "property" is used in legal discourse. The word may be used in different senses and the very concept of "property" may be elusive. The Act's conferral of a power to "disclaim property" can be given legally sensible operation only by reading the reference in the chapeau to s 568(1) to "property of the company" as not confined to the object in respect of which the property rights exist. Rather, the reference to "property of the company" must be read as directing attention to the legal relationship which exists between the company and the object (whether that object is land, shares, a contract or some other object of property). That reading of the chapeau is consistent with the Act's definition of "property" as "any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includ[ing] a thing in action". The breadth of the kinds of "property" with which s 568(1) deals both demonstrates and requires that no narrow meaning can be given to the legal relationships which are embraced by the word "property" whenever it is used in the provision. The word "property" should be understood as referring to the company's possession of any of a wide variety of legal rights against others in respect of some tangible or intangible object of property. (c) In Hocking v Director-General of National Archives of Australia (2020) 379 ALR 395; [2020] HCA 19 at [89]-[91], Kiefel CJ, Bell, Gageler and Keane JJ referred to relative nature of proprietary rights in respect of tangible things, stating that 'lawful physical possession is as good as absolute title against every person except someone "who can show a better right to possession."' The Applicants submit that this statement is equally applicable to an intangible thing. 360 The Applicants then explained the causal and transaction link (see Issue 11 of the Common Issues) between each Hastie Entity's indebtedness to the issuing bank and the credit to the respective Respondent's bank account following the draw down on the guarantee, referring to the following statements of the High Court regarding modern banking in Lordianto v Commissioner of the Australian Federal Police (2019) 266 CLR 273 (Lordianto), 305 at [74]-[76] per Kiefel CJ, Bell, Keane and Gordon JJ: [74] … In a typical transaction for the payment of a debt or the transfer of money, there is no delivery of a physical asset in the form of notes and coins but a transfer through the electronic clearing and settlement systems used by the banking industry. [75] … The originator's title to "money" is not transferred. The transfer operates by adjusting the total amount of the debts owed by the participants, the banks, to each other by a process which the banks commercially describe as "netting"… [76] There are a number of consequences. First, when an originator instructs a bank to make a transfer from their account, the chose in action representing that credit balance is extinguished or reduced by the amount of the transfer. Second, a fresh chose in action is created, or the value of an existing chose in action is increased, for the beneficiary which entitles them to withdraw an equivalent amount from their bank, subject always to the terms of their contract with their bank. Third, the property the beneficiary acquires is wholly distinct from the property which the originator had before the transfer. Indeed, the POCA [the Proceeds of Crime Act 2002 (Cth)] recognises the change in the nature of property held by a bank by providing that "property" remains proceeds, or an instrument, of an offence even if credited to an account. 361 On this basis, they make the following submissions: (a) That there is a change in the nature of the property acquired by reason of a banking transaction, including by reason of calling upon a bank guarantee, does not alter the understanding that the credit being acquired involves a transfer of property from the account debited. In light of what was said in Lordianto, and other leading English authorities, that connection is beyond controversy: it is the product of "a series of debits and credits which are causally and transactionally linked", which credit "can properly be regarded as representing [the Hastie Entity's] property": Foskett v McKeown [2001] 1 AC 102 (Foskett) at 128A -128D (Lord Millett); see also Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 573E-G (Lord Goff). (b) That causal and transactional link is found in the bank guarantee issued pursuant to the SFA, the debit entry pursuant to cl 17.4 in each Hastie Entity's loan account under the SFA, and the increase in each Hastie Entity's current assets by the face value of the bank guarantee less any damages award in favour of the Respondent (that is, the surplus proceeds). (c) There is a direct causal relationship. Each drawdown affected the property of each Hastie Entity. But for the Hastie Entity incurring the liability to reimburse the issuing bank, there would be no credit in the face value of the bank guarantee in the Respondent's bank account. In asserting a right to draw down and retain bank guarantee funds by reason of a claim to contractual set-off, the Respondents necessarily affected the proprietary rights and interests of the Hastie Entities identified above, including the right to have loan funds advanced or drawn down and their interest in the return of the guarantees. The drawdown necessarily adds to the sum of actual liabilities owed by the company to the bank, which liabilities are able to be enforced by the bank pursuant to its security. 362 Next, the Applicants characterise their right to the return of the bank guarantees and of the balance of funds drawn down which were not required or used to pay damages awarded by a court, as an equitable right of the Hastie Entities. They make the following submissions in this regard: (a) Implicit in the nature of a performance bond there is an obligation to account for the use of the proceeds and return any of the proceeds not used for the purpose agreed in the underlying contract: Cargill at 465, 469 per Potter LJ and 471 per Staughton LJ; Australasian Conference Assoc Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 (Mainline) at 352-353 per Gibbs ACJ; and Clough v Oil & Natural Gas Corporation Ltd (No 3) [2007] FCA 8082 (Clough) at [53]. (b) At least some of the Respondents have expressly acknowledged that they would have to account. (c) The above is consonant with the party providing the guarantee being entitled to its return where the party holding the guarantee could not establish a contractual entitlement to call upon it. The contractual right of return acknowledges a proprietary right to the return of the instrument that subsists unless there is a call authorised by the terms of the underlying contract to the funds inherent in the guarantee. 363 The Applicants then refer to the relevant subcontracts to support their characterisation of the bank guarantees as the property of the Hastie Entities, submitting the following: (a) The right of the Respondents to have recourse must be accepted to be anything but unconditional within the terms of the subcontracts. When the conditional right of recourse is understood, combined with the fact that the proceeds were always for a purpose under the underlying subcontracts, the better analysis is that the bank guarantees were the property of the relevant Hastie Entities, that is: (i) first, as financial accommodation entered into by the Hastie company with the issuing bank, being a valuable right to receive loan funds from the bank upon drawdown of each guarantee. The property in the financial accommodation is made plain by the consideration paid for that asset in the issuance and fronting fees paid by the Hastie companies. (ii) second, the physical instrument (ie personal property) which was subject to a contractual right of return. That contingent right to return of the instrument was necessarily affected by drawdown, following which there could only be a return of funds; and (iii) third, the loan funds advanced by the issuing bank upon drawdown of each guarantee and credited to the Respondents was the product of the funds debited against the Hastie Entities, which resulted in an actual liability to repay the funds plus interest. That the Hastie Entities had an interest in relation to the funds drawn down (a proprietary interest) is apparent from the Respondents' concession of an obligation to account, which is a chose in action of the Hastie Entities arising by reason of the Respondents' receipt of the bank guarantee and giving rise to obligations in respect of any funds drawn down. (b) As at the Appointment Date, each of these rights being a chose in action in its own right (or collected as one chose in action) was "property" within s 9 of the Act. The Respondents' mere assertion that possession is ownership without regard to the Hastie Entity's "right" or "power" that may exist in the same property, is unhelpful and want to lead to error. (c) Until such time as the relevant Hastie Entity agrees that the Respondent can keep the money, or the Respondent obtains an award of damages, each Hastie Company "can show a better right to possession" of the money drawn down. (d) The Respondents did not contract to achieve a pool of funds which they could access in insolvency, as if they were a secured creditor. It is relevant to note in this context that an unregistered security interest would have vested in each of the Hastie Entities immediately before the Appointment Date: see s 267 of the Personal Property Securities Act 2009 (Cth) and s 588FL of the Act. (e) Further, in order to establish an entitlement under the subcontracts to draw down on the bank guarantees, the Respondents would need to establish the existence of a reasonable factual basis for concluding, as at the date of drawdown, that they had a claim for losses or damages that would require recourse to a bank guarantee. In circumstances where the contracts were at different stages of completion, it would not be reasonable to call upon all of the funds for each guarantee without having formed any view as to the quantum of the expected losses or damages (if any) and irrespective of the contracted works still to be performed. That could not be a proper exercise of a contractual power having regard to the purpose for which the bank guarantees were provided. 364 Therefore, the Applicants submit that, in the circumstances, the choses in action held by the Hastie Entities at the time of the drawdowns, were relevantly property of each Hastie Entity within the terms of s 437D of the Act. Section 437D voids transactions "affecting the property of the company". Each of the relevant payments made by the issuing banks to the Respondents affected each Hastie Entity's property in that: (a) it extinguished the financial accommodation entered into by the Hastie Entity with the issuing bank and increased the current liabilities of the Hastie company; (b) it extinguished the Hastie Entity's entitlement to the return of the bank guarantee under the contract, such an entitlement being an equitable interest in personal property (a chose in action). Absent payout, the Hastie Entity was entitled to the return of the guarantee to the issuing bank, and to enforce that right by action; (c) it took the "loan" monies, which were paid by the issuing bank to the Respondent. The funds "loaned" were immediately the property of the Hastie Entity provided by the bank to the Respondent. So much is the consequence of cl 17.4 of the SFA which immediately increased each Hastie Entity's current liabilities by the face value of the bank guarantee and the interest payable thereon. 365 Accordingly, the Applicants submit that s 437D rendered void the Respondents' drawdowns on the bank guarantees on and after the Appointment Date. Similarly, following winding up of the Hastie Entities, s 468 applies by reason of s 513. 366 Further, in what is apparently an alternative argument should the draw down on the bank guarantees not be void pursuant to s 437D or s 468, the Applicants submit that the proceeds of the bank guarantee cannot be taken into account for the purposes of s 553C set-off, as s 553C(2) applies since the Respondent had notice of the insolvency of the Hastie Entities at the time they drew on the guarantees. In effect, by drawing down on the bank guarantees, the Respondents have impermissibly made the s 553C equation more favourable to each of them, and effectively seek to benefit themselves by removing from the unsecured creditors the guarantee proceeds and using those proceeds to "pay" their claims in full. 367 Finally, presenting another apparently alternative argument, it was submitted that each draw on a bank guarantee was a new transaction which stood alone and separate from the subcontract. It was not the crystallisation of a contingent claim which arose prior to the winding up. Indeed, the provision of the bank guarantees to the Respondents created no contingent liability as between the Hastie companies and the respondents: it was only a fund. Any such liability would instead depend upon a failure to perform the contracted works or pay damages.

[38]

Summary of contractual instruments and relevant actions taken after the Appointment Date 369 The relevant contractual materials in relation to the bank guarantee arrangements entered into by each of the Respondents, and their practical effect, can be summarised as follows: (a) The Hastie Entities and third party financiers and banks had entered into facility agreements requiring the relevant issuing banks to provide facilities for bank guarantees to the Hastie Entities and to issue bank guarantees to beneficiaries as requested by the Hastie Entities, and were authorised (but not obliged) to make payments under the bank guarantees upon demand without reference to the Hastie Entity. (b) The subcontracts between the Hastie Entities and each of the Respondents required security for the Hastie Entities' performance of the obligations under the subcontract and for rectification costs that may arise from building defects. (c) That security was to be in the form of cash to be retained by the Respondent (retention monies) or an approved unconditional undertaking by a third party bank (a bank guarantee). (d) Under the subcontracts, the Respondent was to be entitled to make a demand for payment under the bank guarantee and the bank comply with that demand notwithstanding any objections by the Hastie Entity. This was reflected in the approved form of undertaking annexed to the subcontract. (e) The Respondents' demand for moneys could not be restrained by an injunction sought by a Hastie Entities, and the monies received by the Respondent upon demand were not held on trust for the Hastie Entity (other than the John Holland subcontract I have previously detailed). (f) Each of the Respondents in fact entered into bank guarantees with third party banks consistent with (a) and (d) above. (g) Following the appointment of voluntary administrators to the Hastie Entities, certain of the issuing banks sent notices to the Hastie Entities demanding, pursuant to the facility agreements, immediate payment of all current and contingent liabilities, therefore including amounts outstanding under the bank guarantees. (h) Following the appointment of voluntary administrators to the Hastie Entities, certain of the Respondents made demands for payment to the relevant issuing bank under the bank guarantees for anticipated losses arising out of the Hastie Entities' insolvency and non-performance of the remaining obligations under the subcontracts. (i) Following the Respondents' demands for payment, the issuing banks made payment to the Respondents without reference to the position of the Hastie Entities, in compliance with the bank guarantees with the Respondents and the facilities agreements with the Hastie Entities. (j) Generally following the appointment of liquidators, the Hastie Entities demanded payment of the debt alleged to be owing by each of the Respondents, as contained in the various Points of Claim.

[39]

Did the subcontracts confer on the Respondents any proprietary interest in the bank guarantees or its proceeds? 370 This question is a restatement of Issue 8 of the Common Issues, being the so-called "property in proceeds" question in respect of the Respondents. 371 First, I will address their property interests in the bank guarantees as physical instruments. The Hastie Entity is obliged under the subcontract to provide security to the Respondent, relevantly in form of an "unconditional undertaking" (ie a bank guarantee), but that undertaking as a physical document is in fact given by a bank. The subcontract provides for release of the security in whole or in part, but the Multiplex subcontract, for example, does not refer to "returning" the bank guarantee as a physical document to the Hastie Entity. Rather, the bank guarantee implies that the undertaking is released when the beneficiary notifies the bank it is not required and it must be returned to the bank. Accordingly, it is the bank guarantee, not the subcontract, that deals with proprietary rights in the bank guarantee document itself. The terms of the bank guarantee provide for the physical instrument to be in the possession of the beneficiary until it expires, is called upon, or is paid out by the bank, at which point, it is to be returned to the bank. The SFA does not provide for any obligation on the bank to return a bank guarantee to a Hastie Entity. The Respondents clearly have proprietary rights in relation to the physical instrument of the bank guarantee. I will deal in the next section with any competing rights the Hastie Entities may otherwise have in relation to the physical instrument. 372 Second, and in relation to the proceeds of the bank guarantee, it is the bank guarantee and not the subcontract that deals with payment under the bank guarantee. The subcontract refers to the provision of security, but does not positively provide for the rights and interests in relation to payment. It is the bank guarantee that provides that the bank will unconditionally pay the amount demanded to the beneficiary. The transfer of proprietary interests in those proceeds occurs pursuant to the bank guarantee, not the subcontract. In relation to the proceeds paid upon drawdown of the bank guarantee, the subcontract in fact only provides that the proceeds are not held by the Respondent on trust for the Hastie Entity (with the exception of the particular John Holland subcontract I have previously referred to). 373 The Respondent's right under the bank guarantee to call on the bank guarantee and, once the funds are drawn down and received by the Respondent, its proprietary right to those proceeds are beneficially held in its own right, unless a trust is found to exist. Putting aside the aforementioned John Holland subcontract, an express trust clearly cannot rise given the terms of the subcontract and the Applicants do not assert that a purpose trust of the Quistclose variety exists. The result is congruent with that in Mainline, where the High Court of Australia denied that the proceeds of the bank guarantee were to be kept in a separate fund and concluded that the intention was "that the money was to form part of the general assets of the [beneficiary], to be used as it wished, subject only to an obligation to account (to [the contractor]) for any surplus": at 353 per Gibbs A-CJ. As I will discuss later, the contractual obligation to account is a personal right of the Hastie Entity only, and not in the nature of a trust. In Mainline, the Quistclose trust argument was raised by the issuing bank rather than the contractor, but the conclusion is equally applicable to the extent that any trust may be asserted by a contractor. 374 It is useful to consider the actual mechanism by which the proprietary interest in the proceeds is transferred to the Respondent. If these proceeds had been paid to the Respondent in physical money, the delivery of notes and coins upon good consideration (being the exercise of the rights under the bank guarantee) would transfer ownership in the money to the Respondent: Miller v Race (1758) 1 Burr 452 at 457; 97 ER 398 at 401 per Lord Mansfield. In today's reality, payment would take the form of a credit to the Respondent's bank account, which is a distinct chose in action held at law by the Respondent as a banking customer: Foley v Hill (1848) 2 HL Cas 28 at 36; 9 ER 1002 at 1005 per Lord Cottenham LC. 375 Overall, it is clear that the contractual instruments do confer on each relevant Respondent a proprietary interest in the bank guarantees and, more importantly, its proceeds. In the absence of a Hastie Entity having any other proprietary interest, the Respondent's proprietary interest is absolute. I therefore now turn to consideration of the Hastie Entities' possible proprietary rights here.

[40]

Do the Hastie Entities have any proprietary interest in the bank guarantees or its proceeds arising from the contractual arrangements or otherwise in relation to the bank guarantees? 376 This question is a more general restatement of Issues 9-10 of the Common Issues, being the so-called "chose in action" question which in its initial formulation focussed on the Hastie Entities' proprietary interests arising from their facilities with the issuing banks being "financial accommodation" giving rise to a chose or "thing in action", and therefore explicitly within the meaning of "property" under s 9 of the Act. 377 However, it is convenient here to address more broadly whether the Hastie Entities have a relevant proprietary interest in relation to the bank guarantees or their proceeds arising from other circumstances or sources. Aside from the property arising from their "financial accommodation", the Applicants' case also canvassed certain rights under the subcontracts in relation to the physical instrument of the bank guarantee - namely, that the Hastie Entities' possessed rights to the return of the bank guarantee documents from the Respondents pursuant to the subcontracts and further pursuant to an equitable right ancillary to their right to an account of the bank guarantee proceeds (that is, the right to have the Respondents pay back any surplus proceeds). 378 The establishment of a proprietary right in the bank guarantee or its proceeds is significant for the Applicants not just as a premise for arguing that their proprietary rights should be preferred to the Respondents' proprietary rights (if any) and therefore enforced, but also in order to attract the application of the "voiding" provisions of the Corporations Act (ss 437D and 468, discussed later in this Consideration section), which only apply to the "property" of the company under external administration. 379 The Applicants submit that, at the Appointment Date, they possessed a chose in action in relation to the "financial accommodation" they purchased from the issuing banks. 380 The Syndicated Facility Agreement on which the Applicants rely refers throughout to the provision of "financial accommodation" to the Obligors (including the Hastie Entities) by way of the facilities referred to in the agreement. The term is not defined in the SFA, but it is clear that it is a wide term used to refer to any type of financial facility (for example, a loan or advance) to be provided to the Hastie Entities under the agreement. 381 In respect of the bank guarantees, the Applicants say that the "financial accommodation purchased by the Hastie Group was the right to purchase performance guarantees for specified respondents and the making of a loan to the Hastie company if and when the guarantee was called upon". The putative proprietary right arising from the financial accommodation is apparently strengthened by the fact that it was "purchased" by way of issuance and fronting fees paid by the Hastie Entities to the issuing banks. The Applicants' submission therefore is that the issuing bank "provided the bank guarantee on behalf of, and for the benefit of, its customer" (being a Hastie Entity) who "purchased from the issuing bank an unconditional irrevocable promise to pay the face value to the beneficiary of the performance bond". 382 In answer to the relevance of the fees paid, the real issue here seems to be whether the fact that the Applicants paid fees for the bank guarantee facilities and incurred liabilities contingent on the exercise of the bank guarantees means that the bank guarantees are their property. The answer is no: a bank guarantee is one of many forms of financial instrument which is "paid for" by one party but "the property" of another. 383 Indeed, the bank guarantees were "purchased" by the Hastie Entities paying fees to the banks, and they were provided to the Respondents partly to benefit the Hastie Entities, who thereby avoided any deduction of retention money as security. The critical point, however, is that the Hastie Entities did not purchase the bank guarantees for themselves, and the bank guarantees could only benefit them indirectly by conferring a direct benefit on the Respondents, as a substitute form of security for non-performance under the subcontracts. 384 The proper analysis is that the facility agreement between the Hastie Entity and the issuing bank, and the bank guarantee held by the Respondent, gave rise to separate choses in action. (a) First, the facility agreement gave rise to a relevant chose in action in the hands of the Hastie Entity enforceable against the issuing bank for the bank to issue the bank guarantee to the Respondent as beneficiary upon the Hastie Entity's request. The facility agreement does not give rise to a chose in action in the hands of the Hastie Entity to compel that the issuing bank pay out on the guarantee, as the SFA authorises but does not oblige the bank to pay out on a guarantee. (b) Second, the bank guarantee issued to the Respondent gave rise to a chose in action in the hands of the Respondent also enforceable against the issuing bank to pay the Respondent upon demand made pursuant to the bank guarantee. 385 The Hastie Entities did not have any interest in the second chose in action. This is simply a matter of the regular application of the doctrine of privity. 386 Now it is true that, upon the Respondent's demand on the bank guarantee and reception of the proceeds, the Respondent has an obligation to account to the Hastie Entity in respect of any surplus proceeds, that is, an obligation to return funds not required to meet its claims against the Hastie Entity: see, eg, Clough at [52]; Mainline at 353-354 and Cargill at 465 (per Potter LJ) and 471 (per Staughton LJ). Accordingly, the Hastie Entity has a corresponding right to return of such amounts (for the purposes of this section, a third chose in action to consider). This arises as a matter of necessary contractual implication of the subcontracts. The Hastie Entity's contractual claim is a personal, not a proprietary claim. Moreover, it is a separate chose in action in the hands of the Hastie Entity enforceable against the Respondent. It does not represent a legal or equitable interest in the Respondent's chose in action to enforce the bank guarantee against the bank (the second chose in action). 387 The Applicants sought to support their submission that it had a proprietary interest in the Respondent's right to call upon the bank guarantee by referring to the Australian Accounting Standards Board standard AASB 132 and its definition of a "financial asset" at [11(c)] as including a contractual right to "receive cash or another financial asset from another entity" or to "exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity". It is not clear whether the issuing bank's promise to pay the beneficiary under the bank guarantee is relevantly a "financial asset" under AASB 132, but in any case, the accounting standards made by the Australian Accounting Standards Board under the Corporations Act (whilst of statutory force) are not relevant to the concept of "property". 388 An important point is that the Hastie Entity's claim against any bank pursuant to its facility agreements or its claim against the Respondents to account for surplus proceeds are merely contractual or personal claims - they are not proprietary in nature and cannot be enforced against third parties. To the extent those claims are possessed by the Hastie Entity, they are "choses in action" and "property of the company" - that is, the right to the claims or actions may be assigned and so that right is "their property". However, the underlying claims or actions are not proprietary: they are personal contractual claims enforceable only against the relevant contractual counterparty. 389 Finally, I shall address the Applicants' assertion of proprietary rights in respect of the bank guarantee documents as a physical instrument. 390 The representative subcontract set out at the beginning of this section does not provide for the physical return of the unconditional undertaking. The Applicants refer to the Hastie Entities having a "contractual right" to the return of the physical instrument in the event of insolvency, but there simply is no explicit contractual right of the sought contended. It is true that the subcontracts provide for the Respondents to "release" their security upon the occurrence of certain steps of completion. This may be considered as a fourth relevant chose in action for the purposes of this section. Although retention moneys are properly to be "released" to the Hastie Entity (for example, see the wording of Item 18 of Annexure Part A), it is not clear that the subcontract requires physical release of the bank guarantee document to the Hastie Entity in the same way, as opposed to the legal release of the security as an operative undertaking. Rather, the approved form of bank guarantee at Annexure Part M refers to the undertaking being released by way of returning it to the bank, not the Hastie Entity. This conforms to the actual terms of each of the bank guarantee documents as well. 391 In any event, if such a right to release were equivalent to a right to return of the physical instrument, the Hastie Entity's right to release of the security would be conditional on certain steps of completion, which conditions are not contended to have been satisfied. The subcontracts do not provide for a right to return at large or a right to return upon default or termination of the contract, nor upon the insolvency of a Hastie Entity. On the contrary, certain subcontracts (such as the Gold Coast University Hospital Subcontract involving Lendlease referred to earlier in these reasons) explicitly provide to the effect of the following: Whilst any Claim or dispute remains unresolved between [Respondent] and the Subcontractor, [the Respondent] will not be obliged to return, nor the Subcontractor entitled to request the return, of any undertaking or money retained under Clause 21.6(a)(i). 392 Even without such an explicit clause, I do not consider that any of the subcontracts confer on the Hastie Entities a right to return of the bank guarantees upon insolvency. Accordingly, for those Respondents who have retained their bank guarantees, it is clear that the Hastie Entities do not have any personal or proprietary right to enforce their return (whether back to the Hastie Entities or back to the banks). 393 While any right to return of the bank guarantees themselves would appear only to be relevant to subcontracts or projects with respect to which a Respondent had not already drawn down on their bank guarantee, it is to be recalled that the Applicants assert that the bank guarantee drawdowns were transactions "affecting the property" of the Hastie Entities within the meaning of s 437D (to be addressed in a later section). Further, the Applicants asserted that a Hastie Entity's proprietary right to the return of the bank guarantee documents in fact supported or indicated their overarching right to the proceeds as against the Respondents that I dismissed above. However, in my view, on the basis of the contractual arrangements as a whole, a Hastie Entity's contingent right in respect of the physical instrument upon partial or whole completion could not possibly affect the Respondents' right to retain the proceeds of a bank guarantee already drawn down.

[41]

Do the Respondents' reception of the bank guarantee proceeds and the Hastie Entities' liability to the issuing banks have a relevant "causal and transactional link"? 394 This question is a restatement of issue 11 of the Common Issues (the "causal and transactional link" question). To some extent, the Applicants' attempted elaboration of the technical mechanisms behind the bank guarantee arrangements and their practical effect are possibly aimed at augmenting their submissions addressed above that the Hastie Entities had proprietary rights in the bank guarantee instruments or their proceeds, and that those proceeds can be "traced", within the meaning of that term in property law. However, this question also may relate to the operation of s 437D, which voids transactions "affecting" the property of the company. To the extent that it impacts that s 437D question, I shall address that in the next section. 395 The Applicants refer to the series of transactions that take place upon the Respondent's presentation or call on the bank guarantee to the issuing bank, as follows: (a) the Respondent presents the guarantee to the issuing bank (say, ANZ); (b) ANZ transfers (using netting between banks) credit to the Respondent's bank (BG credit); (c) the Respondent has an increase in current assets by the face value of the BG credit; (d) the Hastie Entity has an increase in current liabilities by the face value of BG credit plus interest payable to ANZ; (e) the Hastie Entity has a decrease in current assets by face value of BG credit being the extinguishment of financial accommodation (by that particular bank guarantee); (f) the Hastie Entity has an increase in current assets, by the face value of BG credit less any damages award to the Respondent; (g) the Respondent has an increase in current liabilities, being the face value of BG credit less damages awarded in its favour; (h) ANZ has an increase in current assets, being the face value of BG credit plus interest. 396 On the basis of the above series, the Applicants conclude that the call on the bank guarantee and the credit of proceeds in the Respondent's bank account is "causally and transactionally linked" to the change in the property of the relevant Hastie Entity. 397 The Applicants say it is no answer to say that the bank's payment under the bank guarantee was "unconditional" when it was in fact a direct result of the facility agreement entered into with the Hastie Entity and creates an immediate liability in the Hastie Entity to repay the amount drawn down. Further, the Applicants say that fixating on the payment being from the "bank's own funds" is illusory, because money is fungible and ultimately the credit paid to the Respondent equalled the Hastie Entity's liability to repay. 398 As I noted in the previous section, the accounting treatment of these transactions is not to be treated as determinative of the legal questions of property in issue here. In any case, step (e) of the series above assumes the existence of an asset in relation to the financial accommodation given to the Hastie Entity by its facility agreement with the bank. On the material before me, I am not able to make any finding as to whether that would be the correct accounting treatment of the financial accommodation. The series of transactions set out above is otherwise an accurate representation of what occurred. 399 In any event, the series of transactions, and the identification of the links between those transactions, simply does not lead to the legal or proprietary outcome sought by the Applicants for the reasons I explained in the section above. Though the transactions involving the Hastie Entity and the bank, and involving the bank and the Respondents, can be regarded on one level as "linking" the Hastie Entity and the Respondents, this is the result of the parties having entered into co-ordinated but separate arrangements in order to effectuate the desired outcome contracted into and agreed between all the parties. The effect of these interlocking arrangements does not relevantly alter the legal or proprietary position. I will briefly turn to the true legal effect of the transactions set out above. 400 In short, the Applicants' reliance on the description of "netting" in Lordianto is misplaced. The account in Lordianto summarises the position of a bank facilitating the simple payment of money from a payer to a payee, as revealed by the following statement of context at [75] omitted from the Applicants' submissions: The essential initiating event is an instruction by a payer (or the originator of a payment) to their bank to reduce the value of their bank balance in an account and to increase, correspondingly, the bank balance of an account held by a named recipient (also known as the beneficiary). 401 That is not the situation in these proceedings. The issuing bank is making a payment under a bank guarantee upon demand of the Respondent, without reference to any instruction of the Hastie Entity. The Respondents say that the bank deposited the funds then standing to the credit of the bank's own account into each Respondent's account, and so the Hastie Entity was a stranger to that transaction. The credit of the Respondent's account is a separate transaction to which the Hastie Entity was a stranger. In any case, the analysis in Lordianto at [76] refers to the payer's initial chose in action being extinguished and a fresh chose in action being created, and in that case, the Court was applying a proceeds of crime regime to trace the proceeds of the overall transactions in issue there in a manner not provided by the Corporations Act here. Ultimately though, the Hastie Entity's chose in action against the bank to have the bank guarantee issued was already extinguished by its performance once the bank issued the guarantee. It was not relevantly "converted" into any other chose in action by way of the series of transactions relied upon by the Applicants. 402 In addition, some of the Respondents note that the bank acceleration notices were sent to the Hastie Entity before the relevant Respondent's call on the bank guarantee, and so to that extent, the Respondent's call did not cause the Hastie Entity's liability to the bank. In those circumstances, the Hastie Entity's liability to the bank arose on the provision of the acceleration notice following the Hastie Entity's insolvency pursuant to the SFA, not upon the Respondent's call on the bank guarantee. 403 Although no evidence has been led on the issuing banks' payment mechanisms utilised in the circumstances of these proceedings, some of the Respondents rely on the analysis of McDonald J in Thompson Land Limited v Lend Lease Shopping Centre Development Pty Ltd [2000] VSC 108 (Thompson Land) at [57] and [81]. In short, his Honour there considered the use of a bank cheque to pay the beneficiary of the bank guarantee (in that case, Lend Lease) and found on the evidence that the payment was made by the bank (ANZ in that case) pursuant to its facility agreement with the obligor (Thompson Land), and was not a payment on behalf of the obligor to the beneficiary. His Honour there said: [57] [I]t is necessary to analyse the relationship existing in the circumstances, not only between Thompson Land and ANZ, but also ANZ and Lend Lease in order to determine the true nature and character of the bank cheque and whether it was the property of Thompson Land as "purchased" by it from its moneys as provided by ANZ and that by ANZ delivering it to Lend Lease and honouring it, there was constituted a disposition by ANZ of the property of Thompson Land to Lend Lease. … [81] Each cheque was honoured or paid out of the moneys of ANZ. Thompson Land had no moneys to support such cheque whether by a loan made to it by ANZ by way of a further overdraft facility or otherwise. I am satisfied that each of the four accounting entries made by ANZ in the account of Thompson Land with it which debited that account with an amount equal to the bank cheque was a debit entry which ANZ was entitled to make under its agreement with Thompson Land and pursuant to which it provided Lend Lease with the bank guarantee. The four accounting entries debited the account with an amount that ANZ was entitled to recover against Thompson Land, by way of indemnity against its payment made to Lend Lease pursuant to the guarantee. I am satisfied that this was the basis of such accounting entries being made in the account of Thompson Land on each occasion. …" 404 First, with the onus being on the Applicants to show that it has proprietary rights in the bank guarantee proceeds; second, having regard to the contractual arrangements in these proceedings; and third, in the absence of evidence indicating any payments directly from the Hastie Entities to the Respondents via a mechanism contrary to the contractual arrangements, I conclude that the Hastie Entities have no proprietary interest in the bank guarantee proceeds by virtue of the supposed "causal and transaction link" relied upon. 405 One of the outcomes of the series of transactions relied upon by the Applicants - step (g), being the increase in the Hastie Entity's liability to the bank - is not in itself effecting any change in any property of the Hastie Entity. The Hastie Entity's liability is the bank's asset and the bank chose in action is against it, not the other way around. The Hastie Entity does not have proprietary rights in relation to its liability to the bank, which is the bank's chose in action. 406 The concept of "causal and transactional link" referred to by Lord Millett in Foskett at 128, as relied upon by the Applicants, is relevant to the jurisprudence of tracing. The principles of tracing may be applied in the situation of identifying the assets that may be the subject of a proprietary claim, even where the asset in relation to which the proprietary right was initially held has changed hands or changed forms (for example, a physical asset being sold and being "converted" into money). Tracing does not give rise to a proprietary interest itself - that is, it does not assist the Applicants in asserting that it has proprietary interests in the bank guarantees or the whole of its proceeds in the first place. To that extent, the Applicants' reference to "causal and transactional link" and to Foskett is completely misguided. It recalls Chief Justice Allsop's remark in Morton at [150] that "it is productive of error to fix upon characterisation or to give a description of equitable interests for one purpose and use the characterisation or description as if it were a thing available for use, almost mechanically, for another distinct purpose or other distinct purposes." 407 The proper overarching analysis as to the Hastie Entity's property rights remains as I discussed earlier: the Hastie Entity does not have any interest in the Respondent's chose in action against the bank to demand the bank guarantee proceeds. It does have a separate chose in action against the Respondents, but only to the extent of surplus proceeds following resolution of its dispute with the Respondents. Whether the transactions that occurred "affected" the Hastie Entity's chose in action against the bank or its chose in action against the Respondent in relation to the surplus proceeds (each of which are proprietary rights) is a different question addressed in the next section.

[42]

Does the Act relevantly void any transactions or dispositions in these proceedings? 408 The earlier questions concerning the Hastie Entities' proprietary rights and interests in the bank guarantees and the "causal and transactional link" between its initial rights and the ultimate outcome of its liability to the issuing banks culminate in the Applicants' submissions regarding the application of the voiding provision under s 437D of the Act. It is useful to set out subsection (1) once again: (1) This section applies where: (a) a company under administration purports to enter into; or (b) a person purports to enter into, on behalf of a company under administration; a transaction or dealing affecting property of the company. 409 The Applicants' submissions focused on the final part of the subsection concerning whether there was a "transaction or dealing affecting property of the company". The "transaction or dealing" relied upon by the Applicants is the payment by the issuing bank to the Respondent under the bank guarantee. 410 Despite the fact that I have not been persuaded by the Applicants' submissions on the expansive proprietary interests in relation to the bank guarantees and their increased liabilities to the bank they assert, I have found that the Hastie Entities may have certain proprietary rights arising from the contractual arrangements relating to the bank guarantees, but at the time it entered voluntary administration, not all were extant proprietary rights. Those rights are: (1) the chose in action of each Hastie Entity against the issuing bank to issue a bank guarantee pursuant to the SFA (that is, a contractual personal right); (2) the chose in action of each Hastie Entity against each Respondent to return the bank guarantees upon partial or whole completion of the contracted works under the subcontracts (that is, the proprietary right of return of the bank guarantee instruments which I considered did not relevantly exist earlier in these reasons, but for the purposes of this section, I shall assume in the Applicants' favour that such a right existed); and (3) the chose in action of each Hastie Entity against any Respondent who drew down on a bank guarantee to the extent of any surplus proceeds after resolution of its dispute (that is, the implied contractual and personal right to an account). 411 Given the generality of the term "affecting" and the limited jurisprudence on the application of s 437D in this regard, to determine whether the transactions in these proceedings were relevantly "affecting" the property of the Hastie Entities may be a question of some legal nuance. My analysis in respect of each of the three above choses in action respectively are as follows: (1) This chose in action was only extant at the Appointment Date in relation to subcontracts or projects for which no bank guarantees had yet been issued. For the subcontracts or projects for which bank guarantees had already been issued to the Respondents, these choses in action were no longer extant at the Appointment Date, because they were extinguished upon the banks performing their obligation under the SFA, namely, issuing the bank guarantees to the Respondents. The extant rights therefore were only to the extent that more bank guarantees could be issued pursuant to the SFA. Such rights are not relevant to the existing bank guarantees draw down by the Respondents in this proceeding. (2) This chose in action is in respect of a proprietary right which is contingent on certain certificates being provided to the Respondents showing partial or whole completion. Drawing down on the bank guarantees before such points of completion consistently with the subcontracts does not affect, alter or extinguish that proprietary right. Rather, it is the termination of the subcontract or taking out of the hands of the Hastie Entity the contracted works (in accordance with the subcontract) that prevents the conditions of partial or whole completion from being able to be practically satisfied. The transaction of the draw down on the bank guarantee is not the action "affecting" the underlying proprietary right or the chose in action in respect of it. (3) This chose in action in relation to the surplus proceeds still exists and has not been relevantly affected or altered by the bank guarantee drawdowns. 412 I am therefore of the view that there is no relevant transaction "affecting the property of the company". However, it is strictly unnecessary for me to answer the "affecting property" question, because it is clear that the requisite conditions prescribed by paragraphs (1)(a) and (b) of s 437D are not satisfied in these proceedings, to which I now turn. 413 It is important to focus on the "transaction or dealing" being impugned - that is, the issuing banks' payment to the Respondents under the bank guarantees. It was conceded by the Applicants during trial that this was the relevant transaction or dealing to be analysed - rather than any Respondent's call on the bank guarantee, as was pleaded. 414 First, it is clear that such payments do not fall within the meaning of para (1)(a). Such transactions were not entered into or purported to be entered into by a company under administration. That is, each payment was not purported to be entered into by a Hastie Entity, and in fact each payment was clearly a transaction entered into and made by the issuing bank. 415 Second, in my view, it is clear that such payments do not fall within the meaning of para (1)(b). Such transactions entered into by the bank were not purported to be entered into on behalf of a Hastie Entity. This conclusion is not simply the result of the banks' payments being said to be out of "their own funds". Rather, it is an issue of substance best answered by consideration of the contractual arrangements as a whole involving the banks, the Hastie Entities and the Respondents. However, the key detail in my view is that each of the approved form of bank guarantee in the subcontracts, the terms of the bank guarantees actually entered into, and the facility agreements, assert and have the effect that payments made by the bank upon the demand of the Respondents are to be made without reference to the Hastie Entity or to any notice or instruction by the Hastie Entity not to pay. In those circumstances, it cannot be said that any payment by the banks was purporting to be "on behalf of" the Hastie Entity. Rather, the issuing bank is making a payment in its own right and in so doing is performing the core function of the coordinated bank guarantee arrangements of making an unconditional arms-length payment to the beneficiary. In different contexts, but considering the same issue of "on behalf of" within s 437D, see Cinema Plus Ltd (admins apptd) v Australia and New Zealand Banking Group Ltd (2000) 35 ACSR 1; [2000] NSWCA 195; Osborne Computer Corp Pty Ltd (admin apptd) v Airroad Distribution Pty Ltd (1995) 37 NSWLR 382. 416 Any alternative attempt by the Applicants to aggregate the concepts of granting the guarantee, calling upon the guarantee and paying out or drawing down on the guarantee as a composite transaction or dealing - with the view of submitting that the entire structure underlying the Hastie Group's facilities with the issuing bank and therefore the transactions or dealings implementing such a structure were "on behalf of" the relevant Hastie Entities - must be rejected. 417 Accordingly, s 437D does not apply to the transactions impugned by the Applicants. Even if it were to apply, some of the Respondents submit that the result of the voiding of the transaction would be that the moneys paid to the Respondents would be repaid to the relevant banks, and that s 437D does not provide any power to compel the Respondents to disgorge the proceeds of the bank guarantees to the Applicants. Given my conclusions above, it is not necessary for me to decide the precise voiding effect of s 437D were it to apply here. 418 The answer to the Applicants seeking to invoke s 468 is simpler. Section 468(1) provides as follows: Any disposition of property of the company, other than an exempt disposition, made after the commencement of the winding up by the Court is, unless the Court otherwise orders, void. 419 Leaving aside for now the issue as to whether s 468 is applicable at all to a voluntary winding up here (which was why the Applicants commenced the winding up proceeding) or whether it was relevantly pleaded by the Applicants in the main proceeding, the transactions of the bank making payment to the Respondents under the bank guarantees are not "dispositions of the property of the company": see, eg Thompson Land at [82]-[83]; United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd (In Liquidation) [2017] VSC 185 (United Petroleum) at [394]. The three choses in action referred to earlier in this section were not "disposed of" or transferred by the banks to the Respondents.

[43]

Are the Respondents otherwise restrained from retaining the guarantee proceeds by reason of Chapter 5 of the Act? 420 For the reasons earlier discussed in the "Discussion of the Applicants' overarching submissions regarding Chapter 5 of the Corporations Act" section, it is clear that the Respondents should not be otherwise restrained from retaining the bank guarantee proceeds by reasons of Chapter 5 of the Act. I turn now to some of the specific provisions of Chapter 5 raised by the Applicants in this regard. 421 In their closing submissions, the Applicants relied on s 553C(2) in relation to notice of insolvency as a matter restraining the Respondents from applying statutory set-off pursuant to s 553C. First, reliance on s 553C(2) was not pleaded by the Applicants at all, whether to deny the operation of set-off as part of its Receivables Case, or for the purposes of restraining the Respondents' drawdowns of the bank guarantees. Second, the onus is on the Liquidator to establish notice of insolvency for the purposes of s 553C(2): see Force Corp at [105]-[106]. I do not see any proper basis on the materials before me to treat any Respondent as relatively having notice as and from 28 May 2012 that the Hastie Entities were insolvent so as to deny the operation of s 553C. The fact of a company entering voluntary administration does not necessarily mean that the company is insolvent. Third, and most significantly, the Liquidator only sought to rely on s 553C(2) to deny the Respondents' ability to retain custody of the guarantee proceeds, not as part of its submissions as to set-off. The Respondents' ability to retain custody of the guarantee proceeds is not affected by s 553C(2). By drawing down on the bank guarantees, they are not "receiving credit from the company" within the meaning of s 553C(2), for the reasons expressed throughout my consideration of the Bank Guarantee Case. 422 Sections 555 and 556, which are also referred to in particular by the Applicants, do not fall to be considered where the Respondents do not seek to prove for any debts or claims in the winding up of any Hastie Entity. For the reasons set out in my consideration of the Receivables Case, Chapter 5 of the Act does not impose a mandatory proof of debt process on the Respondents nor does it require them to comply with any other procedure in relation to the calculation of set-off that could restrain them from retaining the guarantee proceeds. 423 The Applicants do not rely on the voidable transaction regime under Chapter 5 of the Act, and so it is clearly inapplicable. 424 Fundamentally, the Respondents are not relevantly restrained by any implication or operation of Chapter 5 of the Act as whole in lieu of the specific provisions of the Act that the Applicants raise.

[44]

SUMMARY JUDGMENT APPLICATION 425 An application for summary judgment was brought by Lendlease (filed on 7 June 2021) and was adjourned to the beginning of the trial, and was thereafter further adjourned to be dealt with in conjunction with the consideration and determination of the substantive hearing of the main proceeding. 426 I do not propose to summarily dismiss the application of the Hastie Entities as sought by Lendlease. 427 The principles to be applied for entry of summary judgment under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) were not in contention and are well established: see Spencer v Commonwealth of Australia (2010) 241 CLR 118. I appreciate that even under the earlier and more stringent test in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, at 130 Barwick CJ commented that legal "argument, perhaps even of an extensive kind", was permitted to demonstrate that a party's case was "so clearly untenable that it cannot possibly succeed". However, I was at the time of adjourning the summary judgment application, and am still satisfied, that the summary judgment procedure was inappropriate in the main proceeding, even focussing individually as I do, on the claim brought against Lendlease. 428 The approach taken by the Court in adjourning the application for summary judgement was in accordance with the principles enunciated in s 37M of the Federal Court of Australia Act 1976 (Cth), including the efficient use of the judicial and administrative resources available for the purposes of the Court, and the more effective and final determination of the main proceeding other than on an interlocutory basis. 429 Further, the arguments of Lendlease did not just depend on a proposition of law which could be easily determined, such as one contradicting a binding decision of the High Court of Australia and the Full Federal Court. Whilst the arguments were acknowledged to be "new" by the Applicants, the approach of the Applicants was to argue that the Corporations Act and the pari passu principle impacted on the authorities relied upon by Lendlease in support of the summary judgment application. 430 Then it is to be recalled that the summary judgment application by Lendlease only related to the parts of the Amended Points of Claim relating to the Bank Guarantee Case, and only then to some of the projects pleaded by the Applicants. 431 In these circumstances, dealing with the summary judgment would not lead to significant efficiencies, narrow the main issues for determination in the proceeding, or reduce the alleged indebtedness of Lendlease (or other Respondents) to a nominal amount. 432 Therefore the application for summary judgement by Lendlease will be dismissed.

[45]

WINDING UP PROCEEDING 433 In the winding up proceeding commenced on 29 April 2022, the Liquidator applies under s 467B and, to the extent otherwise necessary, s 459A of the Act, for an order that the Hastie Entities be wound up in insolvency (the 'Application'). 434 The winding up proceeding is relevant to the Bank Guarantee Case. The Applicants' Bank Guarantee Case was made primarily on the basis of s 437D of the Act, which provides for the voiding of dispositions of company property where the company is under voluntary administration. During the trial of the main proceeding, the Applicants further developed an alternative position on the basis of s 468 of the Act, which provides for the voiding of dispositions of company property where the company has been wound up by the Court. So as to put beyond doubt the applicability of s 468 to the Hastie Entities, who each entered liquidation by reason of a creditors' voluntary winding up rather than a winding up by the Court, the Applicants commenced the winding up proceeding seeking an order of the Court that the Hastie Entities be wound up in insolvency. 435 The Respondents objected to the orders sought, and although they are not parties to that proceeding, I gave them leave to file submissions in the winding up proceeding as to whether it was appropriate for me to make the orders sought. As the orders sought in that proceeding were not urgent and are related to the issues in the main proceeding, I reserved judgment in the winding up proceeding and expressed my intention to deal with that proceeding together with judgment in the main proceeding. The parties were also given the opportunity to file additional submissions in the main proceeding concerning the effect of any winding up order. 436 As I have said, the Liquidator contends that the purpose of the Application is to "put beyond argument the availability of s 468 of the Act to the liquidator to assist him in seeking to bring into his custody… proceeds drawn on performance guarantees after the winding up of the Hastie companies commenced". It is clear that s 468 of the Act does not apply in a creditors' voluntary winding up: see Re Carter (as liquidator of New Tel Ltd (in liq)) (2003) 44 ACSR 66; [2003] NSWSC 128 (Carter) at [16]-[17] per Austin J; and United Petroleum at [393]-[398] per Kennedy J. 437 The power that the Liquidator seeks to have the Court exercise under s 459A of the Act is discretionary. Section 467B provided that the Court may make an order under s 459A even if the company is already being wound up voluntarily. In my view, the significant factor in the exercise of that discretion is whether or not the proposed order will have any utility, in particular utility to the creditors of the Hastie Entities. 438 As set out in Commissioner of Taxation v Tull Reinforcing Pty Ltd (2006) 153 FCR 394 per Besanko J at [17]: A court will not make an order winding up a company in insolvency in circumstances in which the company is already the subject of creditors' voluntary winding up unless there is good reason to do so… The reason for this is that, in the ordinary case, there is little practical difference between a creditors' voluntary winding up and a form of winding up imposed by order of the court. See also Carter at [5]; and Re Green (as liq of Australian Resources Ltd (in liq)) (2004) 52 ACSR 452; [2004] NSWSC 1095 at [5] per Barrett J. 439 The intent of the Application is to introduce an un-pleaded ground upon which the Liquidator would seek relief in the main proceeding, namely an order under s 468 of the Act voiding calls on the bank guarantees the subject of the main proceeding as a "disposition of property of [the Hastie Entities]". 440 As the above reasons demonstrate, there is no case supporting the Applicants' position that the bank guarantees, the funds realised by their call, or any relevant chose in action relating to that call might constitute "property" of the Hastie Entities. Therefore there is no utility in the making of a winding up order as sought in this Application. 441 There is no indication otherwise how the Application would serve the interests of the Hastie Entities' creditors, whether in the main proceeding or otherwise. 442 This is not an appropriate case to make the winding up order sought by the Liquidator, and the Application should be dismissed, with costs in favour of each of the Respondents to the main proceeding who had leave to file submissions. 443 Such costs orders in favour of the Respondents can either be made in the winding up proceeding or in the main proceeding, as the issue in dispute relating to the appropriateness of making a winding up order related to both proceedings. If there are issues as to whether the Court can make a costs order in relation to the Respondents in the winding up proceeding (to which they are not parties), then the appropriate costs orders can be made in the main proceeding.

[46]

The relief sought by the Applicants 444 The relief the Liquidator now seeks is at the Appendix to these reasons. 445 Despite the protestations of the Respondents, this proceeding has always been about seeking to recover a debt (the "receivables") and recover the proceeds of the guarantees drawn down. The Liquidator seeks the relief for these sums in the name of the Hastie Entities. Subject to any quantification or other issues that remain, the main proceeding was the vehicle chosen by the Liquidator. 446 Then as a separate claim, the Liquidator himself relies upon a number of statutory provisions seeking various directions, guidance or advice. As a general proposition, I accept that there is a wide jurisdiction and power in the Court to make orders and give directions to assist liquidators. 447 It may be that the Liquidator finds it convenient to take 'control' of the determination of the conflicting claims, to obtain his own advice from a legal expert in insolvency, and to avoid determining these claims in the first instance in this Court (with the ancillary benefit of freeing up the resources of the Court), whilst allowing any Respondent aggrieved by the Liquidator's decision to appeal that decision (although this would ultimately again involve a court of law). 448 I do not need to enter the debate as to whether the relief now sought was included in the various pleadings of the Applicants. 449 It is appropriate for many reasons that this proceeding continue in this Court as originally commenced by the Applicants and responded to by the Respondents, for example: (a) there are still issues that may need to be determined in a contested and adversarial environment; (b) large sums of money are involved; (c) there may still be some degree of complexity with some of the factual issues on quantification; (d) if the Liquidator's position is adopted there may be an appeal to this Court from the various decisions of the Liquidator (on the same issues to be decided in this proceeding); and (e) there is a risk of even further delay. 450 I address briefly each proposed order. 451 Proposed order 1 is inappropriate where no Respondent indicates that it will lodge any proof of debt. The Hastie Entities brought their claims to this Court, various matters of principle have been determined, and the proceeding will proceed accordingly. 452 As to proposed order 2, the matter raised for advice pursuant to s 90-15 of Sch 2 of the Corporations Act have been considered and determined in these reasons. Proposed order 2 is not appropriate. 453 Proposed orders 3 and 4 are inappropriate. The Court is seized of the proceeding and will make appropriate directions as to the future conduct of this proceeding. It is not appropriate to refer the matter to the Liquidator to assess, now that the parties have reached this stage of the main proceeding, and to effectively coerce each Respondent to deal with the Liquidator to resolve its dispute, rather than to have the relevant issues determined by this Court.

[47]

The future conduct of the main proceeding 454 The parties will need to confer to consider the further conduct of the main proceeding, keeping in mind that a new docket judge will be allocated to further consider and determine outstanding issues. 455 In view of my determinations in answer to the main questions sought to be resolved by the Applicants and the Respondents concerning the Receivables Case and the Bank Guarantee Case, I will consider sending the parties to mediation to attempt a resolution of outstanding matters. I would ask the parties to confer on this issue, and advise the Court accordingly. It may be that the stage has now been reached where each Respondent individually mediates with the Applicants, where each claim can be individually considered in light of my reasons. 456 I make this observation as to the future role of the Liquidator now the reasons of the Court have been published. The Liquidator has a duty not to protract needlessly the liquidations. The Liquidator also has responsibilities to the Court to consider properly and reassess the claims made by him and the Hastie Entities in light of the conclusion of the Court in these reasons. For instance, the Liquidator will need to reassess in light of the Court's construction of the identified subcontracts whether that does in fact finally resolve the issue of the validity of all or some of the receivables claims. I am mindful that the Court did not proceed to admit into evidence all of the material sought to be adduced by the Applicants in the main proceeding. However, now the subcontracts admitted in this liability trial have been considered, if no further evidence will impact on the construction and operation of the subcontracts in the main proceeding, then it is difficult to conclude that the Liquidator would be justified and acting reasonably to continue to pursue the receivables claims. 457 The Liquidator now has the advantage of knowing the evidence that was sought to be relied upon by each Respondent at least as to liability, and a proper assessment should be able to be made as to whether the evidence sought to be led by all the parties (but which was not admitted into evidence) would in any way relevantly impact on the Court's construction and operation of the subcontracts. These matters are to be addressed keeping in mind the pleadings and the final approach of the Applicants where certain matters were not pressed. 458 In any event, and as always contemplated, in my final orders disposing of the issues in this liability trial I will refer any remaining issues relating to the operation of the contractual terms and quantification to an appropriately qualified referee or referees. I would anticipate (depending on the magnitude of the task) that it may be desirable to have a number of referees which could deal with one or more of the disputes against a particular Respondent. The parties should carefully consider the appropriate orders facilitating such a referral, including the terms of reference to be determined by the referee or referees. 459 The issue of costs will need to be considered, including when that issue should be determined. The approach to costs may differ in respect of each Respondent, as may the future conduct of the main proceeding. Whilst not wanting to unduly burden the new docket judge with the task of cost allocation, where security has been provided by the Liquidator and remaining factual issues may arise, it may be appropriate to defer any cost question to when quantification and any remaining factual matters are finalised. Of course, if the claims are either discontinued or finalised as against one Respondent then the question of costs can be determined at that time.

[50]

Applicants Fifth Applicant: ACN 008 700 178 PTY LTD (IN LIQUIDATION) FORMERLY DIRECT ENGINEERING SERVICES PTY LTD) Sixth Applicant: ACN 121 276 168 PTY LTD (IN LIQUIDATION) (FORMERLY HEYDAY GROUP LTY LTD) Seventh Applicant: ACN 129 953 733 PTY LIMITED (IN LIQUIDATION) (FORMERLY BEAVIS & BARTELS PTY LTD) Eighth Applicant: AFA AIR CONDITIONING PTY LTD (IN LIQUIDATION) Ninth Applicant: HASTIE AIR CONDITIONING (ACT) PTY LTD (IN LIQUIDATION) Tenth Applicant: HASTIE AIR CONDITIONING PTY LTD (IN LIQUIDATION) Eleventh Applicant: HASTIE AUSTRALIA PTY LTD (IN LIQUIDATION) Twelfth Applicant: M&H AIR CONDITIONING PTY LTD (IN LIQUIDATION) Thirteenth Applicant: MEDICAL GASES PTY LTD (IN LIQUIDATION) Fourteenth Applicant: NISBET & DURNEY PTY LTD (IN LIQUIDATION) Sixteenth Applicant: OPTIMUS PTY LTD (IN LIQUIDATION) Seventeenth Applicant: SHARP & PENDREY PTY LTD (IN LIQUIDATION) Eighteenth Applicant: WATTERS ELECTRICAL (AUST) PTY LTD (IN LIQUIDATION) Twentieth Applicant: ACN 112 124 919 PTY LTD (IN LIQUIDATION) (FORMERLY D&E AIR CONDITIONING PTY LTD) Twenty Second Applicant: COOKE & CARRICK PTY LIMITED (IN LIQUIDATION) Respondents Fourth Respondent: LENDLEASE BUILDING CONTRACTORS PTY LIMITED (FORMERLY BAULDERSTONE HORNIBROOK PTY LTD AND BAULDERSTONE PTY LTD) Fifth Respondent: LENDLEASE ENGINEERING PTY LIMITED (FORMERLY ABIGROUP CONTRACTORS PTY LTD) Seventh Respondent: BADGE CONSTRUCTIONS (WA) PTY LTD Eighth Respondent: BADGE CONSTRUCTIONS (QLD) PTY LTD Tenth Respondent: CPB CONTRACTORS PTY LIMITED (FORMERLY LEIGHTON CONTRACTORS PTY LIMITED) Twelfth Respondent: GROCON CONSTRUCTORS (NSW) PTY LTD Thirteenth Respondent: GROCON CONSTRUCTORS PTY LTD Fourteenth Respondent: HANSEN YUNCKEN PTY LTD Fifteenth Respondent: JOHN HOLLAND PTY LTD Sixteenth Respondent: LAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD Nineteenth Respondent: THIESS PTY LTD Twentieth Respondent: WATPAC CONSTRUCTION PTY LTD (FORMERLY WATPAC AUSTRALIA PTY LTD AND WATPAC CONSTRUCTION (QLD) PTY LTD) Twenty First Respondent: WATPAC CONSTRUCTION (NSW) PTY LTD Twenty Second Respondent: WATPAC CONSTRUCTION (SA) PTY LTD Twenty Third Respondent: WATPAC CONSTRUCTION (VIC) PTY LTD Twenty Fifth Respondent: SCENTRE DESIGN & CONSTRUCTION PTY LTD Thirtieth Respondent: BAULDERSTONE QLD PTY LTD

Parties

Applicant/Plaintiff:

Hastie Group Limited (in liq)

Respondent/Defendant:

Multiplex Constructions Pty Ltd

Legislation Cited (9)

Corporate Law Reform Act 1993(Cth)

Enterprise Incentives No 2) Act 2017(Cth)

Corporations Act 2001(Cth)

Corporations Regulations 2001(Cth)

Federal Court of Australia Act 1976(Cth)

Judiciary Act 1903(Cth)

Personal Property Securities Act 2009(Cth)

Federal Court Rules 2011(Cth)

Proceeds of Crime Act 2002(Cth)

Cases Cited (63)

ACSR 670 Australasian Conference Assoc Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 Brash Holdings Ltd (administrator appointed) v Katile Pty Ltd [1996] 1 VR 24 British Eagle International Airlines Ltd v Compagnie Nationale Air France [1975] 1 WLR 758 Caltex Oil (Australia) Pty Ltd v Best (1990) 170 CLR 516 Cambridge Gas Transportation Corp v Official Committee of Unsecured Creditors of Navigator Holdings plc [2007] 1 AC 508 Car Buyers Australia Pty Ltd v Australian Securities and Investments Commission [2020] FCA 599 Cargill International SA v Bangladesh Sugar and Food Industries Corp [1998] 1 WLR 461 Central Queensland Development Corporation Pty Ltd v Sunstruct Pty Ltd [2015] FCAFC 63; (2015) 231 FCR 17 Cinema Plus Ltd (admins apptd) v Australia and New Zealand Banking Group Ltd (2000) 35 ACSR 1; [2000] NSWCA 195 Clough v Oil & Natural Gas Corporation Ltd (No 3) [2007] FCA 8082 Commissioner of State Revenue (WA) v Placer Dome Inc (2018) 265 CLR 585 Commissioner of Taxation v Tull Reinforcing Pty Ltd (2006) 153 FCR 394 Commonwealth v Verwayen (1990) 170 CLR 394 Daewoo Shipbuilding & Marine Engineering Co Ltd v INPEX Operations Australia Pty Ltd [2022] NSWSC 1125 Day & Dent Constructions Pty Ltd (in liq) v North Australian Properties Pty Ltd (1982) 150 CLR 85 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd [1998] 3 VR 812 Foley v Hill (1848) 2 HL Cas 28 Forge, citing International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 Foskett v McKeown [2001] 1 AC 102 Franklin's Selfserve Pty Ltd v Federal Commissioner of Taxation (1970) 125 CLR 52 Freedom Foods Pty Ltd v Blue Diamond Growers [2021] FCAFC 86; (2021) 286 FCR 437 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Gye v McIntyre (1991) 171 CLR 609 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (receivers and managers appointed) [2017] WASC 152; (2017) 52 WAR 90 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (Receivers and Managers appointed) [2018] WASCA 163; (2018) 53 WAR 325 Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd (Formerly Brookfield Multiplex Constructions Pty Ltd) [2020] FCA 1824 Hayes (Liquidator) v 5G Developments Pty Ltd, in the matter of 5G Developments Pty Ltd [2019] FCA 1541 Hiley v The Peoples Prudential Insurance Company (in liq) (1938) 60 CLR 468 Hocking v Director-General of National Archives of Australia (2020) 379 ALR 395; [2020] HCA 19 In re Exchange Securities Ltd (in liq) [1988] Ch 46 International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 King v Patrick Projects Pty Ltd [2016] FCA 1110 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 Lordianto v Commissioner of the Australian Federal Police (2019) 266 CLR 273 Lucas Stuart v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 McIntyre v Gye (1990) 22 FCR 260 Miller v Race (1758) 1 Burr 452 Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Limited [2021] FCAFC 228; (2021) 402 ALR 387 MS Fashions Ltd v Bank of Credit & Commerce International SA (in liq) (No 2) [1993] Ch 425 Old Style Confections Pty Ltd v Microbyte Investments Pty Ltd (in liq) [1995] 2 VR 457 Osborne Computer Corp Pty Ltd (admin apptd) v Airroad Distribution Pty Ltd (1995) 37 NSWLR 382 Re Carter (as liquidator of New Tel Ltd (in liq)) (2003) 44 ACSR 661; [2003] NSWSC 128 Re Force Corp Pty Ltd (in liq) [2020] NSWSC 1842; (2020) 149 ACSR 451 Re Green (as liq of Australian Resources Ltd (in liq)) (2004) 52 ACSR 452; [2004] NSWSC 1095 Re Jay-O-Bees Pty Ltd (in liq) [2004] NSWSC 818; (2004) 50 ACSR 565 Re Lehman Brothers International (Europe) (in administration) (No 4) [2018] AC 465 Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Windfarm Pty Ltd [2019] VSCA 318 Simic v NSW Land and Housing Corporation (2016) 260 CLR 85 Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 Spencer v Commonwealth of Australia (2010) 241 CLR 118 Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Thompson Land Limited v Lend Lease Shopping Centre Development Pty Ltd [2000] VSC 108 Uber Builders and Developers Pty Ltd v MIFA Pty Ltd [2020] VSC 596 United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd (In Liquidation) [2017] VSC 185 Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers appointed) (in liq) (2013) 251 CLR 592 Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443

Cited By (8)

Allianz Australia Insurance Ltd v Probuild Constructions

East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd

Hastie Group Limited (in liq) v Multiplex Constructions Pty Ltd

LCM Operations Pty Ltd v Rabah Enterprises Pty Ltd

ThoughtWare Australia Pty Limited v IonMy Pty Ltd