LAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD -v- SAMSUNG C&T CORPORATION [2016] WASC 49 (17 February 2016)

5 On 10 February 2015 Samsung C&T Corporation terminated the Subcontract for convenience.

6 On 21 February 2015 LORAC and Samsung C&T Corporation entered into a deed (the Interim Deed). The Interim Deed imposed a number of rights and obligations on the parties following, and consequent upon, the termination of the Subcontract. Clause 7 of the Interim Deed provided that if certain conditions were satisfied, the Performance Securities would be returned and a single security in substantially the same form as the Performance Securities in the amount of $7.5 million (the Replacement Security) would be provided.

7 HSBC issued the Replacement Security on 27 February 2015. It will expire at 4.00 pm (WST) on 20 February 2016.

8 On 1 September 2015 Samsung C&T Corporation merged with Cheil Industries Inc (Cheil). Cheil is a company registered in accordance with the laws of the Republic of Korea with registration number 110111-0015762. The company formerly known as 'Samsung C&T Corporation' was dissolved on 2 September 2015. Cheil was renamed 'Samsung C&T Corporation' and its Korean registration number remained 110111-0015762. It is the defendant in these proceedings. It maintains that it has assumed 'the rights and obligations of both a private and public nature, assets, liabilities, contracts, employment agreements, etc' of the company formerly known as 'Samsung C&T Corporation'.

9 Unless it is necessary to distinguish between the 'dissolved Samsung' and the 'merged' entity, I will refer to each simply as Samsung on the basis that references to Samsung in the context of events prior to 2 September 2015 are to the dissolved entity and references to Samsung in the context of events after that date are to the merged entity. Where the context requires a distinction to be drawn between entities, I will use the terms 'Old Samsung' and 'New Samsung'.

10 LORAC claims that Samsung owes it over $90 million. Samsung claims that LORAC owes it approximately $55 million. The claims and counterclaims arise out of the Subcontract. The parties have exchanged extensive correspondence in which they have set out their respective positions. Some aspects of the dispute have given rise to proceedings in this court. In addition the parties have taken the first steps towards arbitral proceedings.

11 Against that background, on 22 January 2016 Samsung gave notice of its intention to call upon the Replacement Security.

12 On 8 February 2016 LORAC wrote to Samsung and accepted what it alleged were repudiatory breaches by Samsung of its obligations under the Subcontract and the Interim Deed. LORAC stated that it terminated the residual obligations under the Subcontract and the Interim Deed.

13 LORAC has made an open offer to cause the life of the Replacement Security to be extended to 31 December 2016.

14 On 25 January 2016 LORAC commenced the action numbered CIV 1127 of 2016. By a chamber summons issued on the same day LORAC applied for an interlocutory injunction restraining Samsung from demanding or receiving payment from HSBC pursuant to the Replacement Security. After the commencement of proceedings Samsung gave an undertaking not to call upon the Replacement Security without providing a further 48 hours notice to LORAC. The parties agreed to directions for the filing and service of affidavits and submissions to enable the application to be heard before the Replacement Security expires on 20 February 2016.

15 The relief claimed in the writ of summons is an injunction in terms of the interlocutory injunction sought and a declaration that Samsung is not the beneficiary entitled to payment under the Replacement Security. An interlocutory injunction in those terms will have the practical effect of granting LORAC the final relief it seeks.

16 On 10 February 2016 LORAC commenced the action numbered CIV 1198 of 2016 in which it seeks the same injunctive relief sought in the action numbered CIV 1127 of 2016 along with declaratory relief to the effect that it was entitled to terminate the Subcontract and the Interim Deed on the grounds of Samsung's repudiatory conduct. A new action was commenced because LORAC's acceptance of the alleged repudiatory breaches occurred after the commencement of the action numbered CIV 1127 of 2016. There was no objection by Samsung to the application for an interlocutory injunction in CIV 1198 of 2016 being heard together with the application in CIV 1127 of 2016. It is contemplated that the actions will be consolidated. I will approach these reasons as if the actions had been consolidated albeit this is yet to happen.

1. Has LORAC established a serious question to be tried that:

(a) New Samsung is not the beneficiary of the Replacement Security;

(b) the conditions of the Replacement Security that must be met before it can be realised have not been satisfied;

(c) New Samsung has breached various provisions of the Corporations Act 2001 (Cth) and as a consequence is not entitled to call upon the Replacement Security;

(d) the conditions of the Subcontract and the Interim Deed which govern the right to realise the Replacement Security have not been satisfied;

(e) the Replacement Security must be returned to HSBC as a consequence of the termination by LORAC of the Subcontract and the Interim Deed on the grounds that LORAC accepted Samsung's repudiatory breaches.

1. Does the balance of convenience favour the granting of an injunction restraining the realisation of the Replacement Security?

18 LORAC's case must be evaluated in the context of the principles applicable to the grant of injunctive relief to which I refer in more detail below.

19 LORAC read and relied on the following affidavits:

(i) an affidavit sworn by Marcus Alan Carne on 5 February 2016;

(ii) an affidavit sworn by Peter Leonard Plasto on 22 January 2016;

(iii) affidavits sworn by Peter Thomas Pether on 28 January 2016, 5 February 2016 and 9 February 2016;

(iv) an affidavit sworn by David James Reid on 28 January 2016; and

(v) an affidavit affirmed by Philip Peter Hawthorne on 28 January 2016.

(i) an affidavit sworn by Danilo Dragovic on 4 February 2016;

(ii) an affidavit sworn by Sae Youn Kim on 4 February 2016;

(iii) an affidavit affirmed by Jungmook Jo on 4 February 2016; and,

(v) an affidavit affirmed by Minhwan Jeong on 9 February 2016.

Principles applicable to the grant of interlocutory injunctions

21 The guiding principles are well-known. First, an applicant must demonstrate that there is a serious question to be tried as to its entitlement to relief at trial. The requisite strength of the probability of ultimate success depends on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory relief sought (per Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [71]). Secondly, an applicant must demonstrate that damages would not be an adequate remedy and thirdly it must demonstrate that the balance of convenience favours the grant of an interlocutory injunction.

22 The adequacy of damages is not independent of the balance of convenience. The question of whether damages are an adequate remedy is not an essential precondition that an applicant must satisfy, it is treated as an aspect of the balance of convenience: Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [11] (Beech J).

23 In the context of cases such as the present, where the grant of an injunction will have the practical effect of granting final relief, the following observations of McLelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533, 536 are of particular relevance:

[A]lthough normally the Court 'does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case' (Beecham Group v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 at 622), there are some kinds of case in which for the purpose of seeing where lies the balance of convenience (or more specifically 'the balance of the risk of doing an injustice' - see per May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237, cf per Brennan J in Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 at 292; 46 ALJR 279 at 285), it is desirable for the Court to evaluate the strength of the plaintiff's case for final relief: see, eg, Brayson Motors Pty Ltd v Federal Commissioner of Taxation (at 292; 285); Castlemaine-Tooheys v South Australia at 682; 559. One class of case to which this applies is where the decision to grant or refuse an interlocutory injunction will in a practical sense determine the substance of the matter in issue: see, eg, NWL Ltd v Woods [1979] 1 WLR 1294 at 1306 - 1307; [1979] 3 All ER 614 at 625 - 626 per Lord Diplock; Cayne v Global Natural Resources plc.

24 If a performance bond is intended to operate as a device for allocating the risk of being out of pocket pending the final determination of a dispute between the parties, such intention informs the task the Court must undertake in resolving whether or not to grant an injunction restraining the beneficiary of the bond from converting it into money: Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 [25] (Osborn and Ferguson JJA). In Sugar Australia at [31] Osborn and Ferguson JJA made the following observation about the significance of such risk allocation provisions in the context of applications for injunctive relief such as the present one:

[I]f it be the case that the commercial purpose of the performance bond was to allocate risk pending final determination of the dispute. Such a contractual provision fundamentally alters the context in which the Court must exercise its discretion by changing the complexion of the status quo and raising the prospect of substantial injustice if the purpose of the provision is defeated. That is, the status quo in such circumstances becomes what the parties have agreed as to which of them should bear the financial risk pending the final determination, not the continuation of where that risk would naturally fall in the absence of a performance bond to call upon.

25 The general rule is that an injunction restraining the conversion of a performance bond will not be granted. The exceptions to the general rule were summarised by Austin J in Reed Construction Services Pty Ltd v Kheng Seng (Aust) Pty Ltd (1999) 15 BCL 158, 164 - 165. Those exceptions are: first, the court will enjoin the party in whose favour the bond has been given from acting fraudulently; secondly, the party in whose favour the bond has been given may be enjoined from acting unconscionably in contravention of applicable statutory prohibitions against such conduct; thirdly, if the party in whose favour the bond has been given has made a contract promising not to call upon the bond, breach of that contractual promise may be enjoined on normal principles relating to the enforcement by injunction of negative stipulations in contracts. This summary was approved by the Full Federal Court (French, Jacobson and Graham JJ) in Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd [2008] FCAFC 136; (2008) 249 ALR 458, 478.

Is New Samsung the beneficiary of the Replacement Security?

26 LORAC submits that the beneficiary named in the Replacement Security was Old Samsung which was identified in the Replacement Security as follows: 'Samsung C&T Corporation ABN 49 160 079 470'. As Old Samsung no longer exists, it cannot make a demand on the Replacement Security. New Samsung is not identified as the beneficiary of the Replacement Security and, thus, it is contended that it is not entitled to call upon it and HSBC is not entitled to pay the bond amount to New Samsung.

27 In response to this submission Samsung relied upon the evidence of Ms Sae Youn Kim about the nature and consequences of a merger of corporate entities under the law of the Republic of Korea. Ms Kim is qualified to practise law in the Republic of Korea and has some 22 years experience including seven years as a judge.

28 The following points emerge from Ms Kim's evidence:

(i) Under the Korean Commercial Code (KCC), a merger is a transaction between two or more companies after which only one company will survive. The other entities will cease to exist and their rights and obligations will be assumed by the surviving company by operation of law.

(ii) Article 235 of the KCC provides (in relation to partnership companies): 'a surviving company or a company newly incorporated in consequence of a merger shall succeed to the rights and obligations of the company which disappeared'. By Article 530, the same provision applies mutatis mutandis to stock companies, which is what Old Samsung and Cheil were. Ms Kim states that these provisions provide for 'a comprehensive succession by operation of law' and that 'under Korean law, no separate assignments or other contractual or legal steps are needed for such successions to take effect.'

(iii) There are exceptions to the above principles: the Korean Supreme Court has held that a surviving company may not succeed to particular rights or obligations of a dissolved company if the right or obligation is so unique or exclusive to the dissolved company that it ought not to be transferred. Ms Kim gives the example of criminal liability. However, Ms Kim states that such exceptions are rare, and LORAC has not submitted that any exception applies here.

29 LORAC's submissions raise a choice of law question: is the issue of who is the beneficiary of the Replacement Security to be determined by reference to the proper law of the contact, in this case the law of Western Australia, or, by the law of the place of incorporation of the relevant entity, in this case Korean law. The issue is one of characterisation. Is the issue a contract issue involving the assignment of the benefit of a contract as LORAC contends or an issue concerning the status of a foreign corporation, as Samsung contends?

30 In National Bank of Greece and Athens v Metliss [1958] AC 509, the House of Lords was called upon to consider a very similar issue. The National Bank of Greece was created under the law of Greece. By a Greek decree it was dissolved and, by the same decree, it and another bank were amalgamated into a new banking corporation under the name of the National Bank of Greece and Athens. It was further provided by the decree that the new bank should be the 'universal successor' to the rights and obligations of the former banks. The dissolved National Bank of Greece had been liable as a guarantor on certain bonds the proper law of which was English. The question before the House of Lords was whether the new bank was liable to make payments under the bonds even though it had neither issued nor guaranteed them. The only source of potential liability was the amalgamation. The House of Lords held that the new bank could be sued for the obligations of the old bank because under the law of incorporation the new bank stood as the universal successor to the old bank. At 529, Lord Tucker said:

English law will look at the Greek decree to determine the status of this new entity. It is contended, however, that the transfer of liabilities from the old bank to the new is no part of its status. It is said that 'status' is confined to the existence, powers and dissolution of the new corporation.

My Lords, I think that the result of this appeal really turns upon this short point...

The identity of the old bank has become merged in the amalgamation by a process which is by no means alien to English legal conceptions. It is of the very essence of the transaction that the liabilities and assets of the former should attach to the latter, and to recognise the existence of the new entity but to ignore an essential incident of its creation would appear to me to be illogical ... In my view, the fact that this liability was attached to it at birth by its creator can properly be regarded as a matter pertaining to the status of the appellant company and accordingly governed by the law of its domicile.

31 See also Viscount Simonds at 525, Lord Somervell agreeing, and Lord Keith at 531.

32 The approach taken by the House of Lords in Metliss has been followed in Australia in Preussag Immobilien GmbH v Harriss (Unreported, NSWSC, Hunter J, 17 December 1998) 57 - 59 and Sipad Holding ddpo v Popovic (1995) 61 FCR 205, 213.

33 More recently Le Miere J was called upon to consider the same issue concerning New Samsung's succession to the rights and liabilities of Old Samsung under a bond given in respect of another subcontractor on the Project: Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2015] WASC 484. Le Miere J applied the reasoning in Metliss. His Honour summed up the position regarding the merger of Old and New Samsung, at [82], as follows:

The authors of Nygh's Conflict of Laws in Australia, (9th Ed), at [9.10] recognise that a contractual obligation may effectively be transferred by replacing the legal personality of one company with that of another. In other words, it may be provided by the law of the place of incorporation that on one company ceasing to exist as a legal person, another company shall become the universal successor to the totality of the first company's rights and obligations. The authors say that the Greek bond cases are authority for the proposition that while the question of continuance of the contractual obligation is a matter for the proper law of the contract, the question of the continued existence of an artificial person is a question for the law that created it. If that law destroys the debtor, it becomes irrelevant to speak of the continued existence of the debt. If, in addition to destruction, the law of incorporation of the old entity creates a new entity for the purpose of investing it with all the rights and liabilities of the former, the forum will recognise that new entity as standing in the shoes of the old.

34 I agree, respectfully, with the approach taken by Le Miere J.

35 In my judgment, the reasoning of the House of Lords in Metliss applies to the merger of Old Samsung and New Samsung. The succession by New Samsung to the rights of Old Samsung was intimately connected with the merger from which New Samsung emerged. To use Lord Tucker's language, the succession was 'the very essence' of the merger transaction, and an 'essential incident' of the creation of New Samsung. Both the existence and the rights and liabilities of the merged entity are therefore issues as to its 'status', which must be determined by reference to the law of New Samsung's domicile, the law of the Republic of Korea.

36 In my view, New Samsung is the beneficiary of the Replacement Security.

Have the conditions of the Replacement Security that must be met before it can be realised been satisfied?

37 LORAC submits that New Samsung is not entitled to payment under the Replacement Security because it has not complied with the terms of the Replacement Security. It contends that the terms of a performance bond must be complied with strictly, and that the terms of the Replacement Security make HSBC's obligation to pay contingent on the receipt of a written demand from Old Samsung, not New Samsung.

38 The relevant part of the Replacement Security is headed 'PAYMENT TO THE CONTRACTOR' and provides:

(A) THE BANK MUST MAKE PAYMENT OF THE AMOUNT OR ANY PART OR PARTS OF THE AMOUNT TO THE CONTRACTOR:

(1) IMMEDIATELY UPON THE BANK RECEIVING A WRITTEN DEMAND PURPORTING TO BE SIGNED BY OR FOR AND ON BEHALF OF THE CONTRACTOR ...

39 LORAC submits that the Replacement Security defines the 'Contractor' as 'Samsung C&T Corporation, ABN 49 160 079 470, 2 Bagot Road, Subiaco, Western Australia 6008'. LORAC says that ABN corresponds to a company with the Korean registration number 110111-0002975: Old Samsung. LORAC submits that New Samsung is not entitled to use Old Samsung's ABN because it has a different Korean registration number, and, as LORAC contends that New Samsung is not entitled to use Old Samsung's ABN, it does not meet the definition of the Contractor under the terms of the Replacement Security.

40 At this juncture, LORAC's written submissions present two closely related arguments. LORAC contends that a party is not entitled to payment under a performance bond unless:

(i) it matches precisely the description of the beneficiary contained in the bond itself; and

(ii) it presents the documents required by the bond.

41 LORAC argues that New Samsung does not meet the description of the Contractor found in the Replacement Security, for the reasons I have already outlined. Additionally, LORAC argues that since New Samsung does not meet the description of the Contractor, any demand issued by it will not comply with subparagraph (A)(1) of the Replacement Security. Both ways of putting the argument proceed from a single underlying premise: that New Samsung is not the Contractor because the definition of that term in the Replacement Security can only refer to Old Samsung.

42 Whether this contention presents a serious question to be tried turns on a question of construction, the relevant question being: should the definition of the Contractor in the Replacement Security be construed so as to refer only to Old Samsung, or is the proper construction broad enough to capture New Samsung.

43 LORAC relies on two English authorities for the proposition that the terms of performance bonds must be strictly construed: IE Contractors Ltd v Lloyd's Bank Plc [1990] 2 Lloyd's Rep 496 and Maridive & Oil Services (SAE) v CNA Insurance Co (Europe) Ltd [2002] EWCA Civ 369; [2002] 1 All ER (Comm) 653.

44 The New South Wales Court of Appeal (Bathurst CJ, Ward JA and Emmett AJA) recently considered the doctrine of strict compliance in its application to performance bonds in Simic v New South Wales Land and Housing Corporation [2015] NSWCA 413. The facts of that case were as follows. ANZ gave two bank guarantees (the Court later found that they were, in reality, performance bonds) to a counterparty described in the bonds as 'New South Wales Land & Housing Department trading as Housing NSW ABN 45 754 121 940' (emphasis added). A demand was made by the respondent, the New South Wales Land and Housing Corporation ABN 24 960 729 253 (my emphasis), and the bank refused to pay on the basis that the demand was not made by the 'Principal' as defined in the performance bonds. The reason for the discrepancy was that the respondent was misdescribed in the performance bonds as 'New South Wales Land and Housing Department', rather than 'Corporation', and its ABN was omitted, while the ABN for Housing NSW, the name under which it traded at the time, was included.

45 The primary judge held that a literal reading of the undertaking would lead to an 'absurd' result because the beneficiary would be a nonexistent entity: [51]. His Honour granted a declaration that, properly construed, the undertakings referred to the respondent. The Court of Appeal dismissed an appeal. The Court of Appeal identified 'the principle of strict compliance' as a central consideration in construing the performance bonds. The principle of strict compliance was explained in the following terms by Emmett AJA, with whose reasons Bathurst CJ and Ward JA agreed:

[The principle] is to the effect that an issuer (such as a bank) should only accept documents (such as a letter of demand) that comply strictly with the terms of the instrument involved ...

The principle of strict compliance is a fundamental aspect of the efficacy and dependability of instruments of the kind in question. There is no room for documents that are almost the same or which will do just as well. Business could not proceed securely on any other lines [69] - [70].

46 Emmett AJA observed that 'strict compliance does not require rigid, meticulous fulfilment of precise wording in all cases', and that 'the question of compliance should be considered intelligently rather than mechanically' [71]. These qualifications to the principle reflect the tension between the certainty secured by strict compliance, and 'considerations of commercial common sense': [73].

47 The primary contention for the appellant in Simic was that the primary judge by failing to apply the principle of strict compliance when construing the performance bonds: [75] - [76]. Emmett AJA rejected that submission. The following propositions may be drawn from his Honour's judgment, from [98] onwards:

(a) The starting point is that letters of credit and performance bonds are contracts and so ordinary principles of contractual construction apply. However, the authorities shed little light on the interrelationship between those ordinary principles and the principle of strict compliance.

(b) The better view is that strict compliance is a principle of performance. That is, one must first construe the letter of credit (or performance bond), before asking whether a document tendered falls within the terms of the contract so construed. In the latter inquiry, strict compliance will be required. In the former inquiry, the court should simply apply ordinary principles of contractual construction.

(c) On the other hand, the principle of autonomy (which holds that a letter of credit or performance bond, unlike a guarantee, is independent of the primary obligation owed to the beneficiary of the letter or bond) is a principle of construction and operates to prevent a court from having regard to the contract imposing the primary obligation when construing the letter or bond.

(d) The discrepancy in naming in Simic itself could be dealt with as a matter of construction, so the principle of strict compliance was irrelevant. On the point of construction, the Court of Appeal adopted similar reasoning to the primary judge - absurdity should be avoided where possible, and a performance bond in favour of a non-existent entity is absurd: [113].

(e) There is some suggestion, without reaching a conclusion, that stricter compliance may be required where the discrepancy between performance and the terms of the bond relates to the identity of the beneficiary than in the case of other discrepancies. It was suggested that it is more serious to pay the wrong entity than to pay the right entity in the wrong circumstances.

48 Applying the approach in Simic, I will construe the Replacement Security in accordance with ordinary principles of construction. Ordinary principles require me to look to the objective intentions of the parties and to the commercial sense of the competing constructions: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]. I should avoid a literal reading if it would lead to an absurd outcome: Australian Broadcasting Corporation v Australasian Performing Rights Association [1973] HCA 36; (1973) 129 CLR 99, 109.

49 In accordance with those principles, I am required to give a commercial contract a sensible commercial interpretation. This leads me to reject LORAC's submissions. New Samsung has the same name and business address as Old Samsung. The sole dispute is whether it has the same ABN or no ABN at all. Australian law, deferring to Korean law on this point, regards New Samsung as the universal successor of Old Samsung. To use Le Miere J's expression in the passage of his judgment in Duro I have cited above, New Samsung has, for all intents and purposes, stepped into Old Samsung's shoes. The definition of 'Contractor' in the Replacement Security should be construed as including Old Samsung's successor, New Samsung.

Was there a requirement on Old Samsung to give notice to HSBC that New Samsung was entitled to call on Replacement Security?

50 LORAC submits that it was a term of the Replacement Security that if a person other than the original 'Contractor' is to receive payment of the Replacement Security amount, notice had to be given to HSBC by the original Contractor. It contended that the contractor was initially Old Samsung, that payment was now sought by New Samsung, and that no notice had been given by the original Contractor nor can it now be given.

51 In advancing these contentions, LORAC relies on subparagraph E of the Replacement Security, which reads as follows:

THE CONTRACTOR MAY ASSIGN THIS UNDERTAKING TO ANY PERSON AND UPON RECEIPT OF NOTIFICATION TO THE BANK IN WRITING, THE BANK UNDERTAKES TO MAKE PAYMENT CLAIMED UNDER THIS UNDERTAKING TO THE PERSON SPECIFIED IN THE NOTICE WHICH WILL CONSTITUTE A FULL AND VALID DISCHARGE TO THE BANK IN RELATION TO THE PAYMENT.

52 To the extent that LORAC's argument rests on the submission that there has been an assignment of the rights to call upon the Replacement Security of which notice had to be given to HSBC by Old Samsung, I reject it. An assignment of rights and a transfer of rights by operation of law are distinct. For the reasons given by Le Miere J in Duro, with which I agree, there was no assignment: see at [83].

53 In its written submissions LORAC developed a submission that appeared to be designed to overcome Le Miere J's reasoning in Duro by uncoupling the notice requirement found in subparagraph E from the first nine words of the paragraph, which refer to an assignment. LORAC submitted that subparagraph E contains two parts which may operate independently. The first part confers a right to assign on the beneficiary of the Replacement Security. LORAC does not rely on that part. The second part requires that, if the original beneficiary wants HSBC to pay the amount of the Replacement Security to some other entity, the original beneficiary must give written notice to HSBC, on receipt of which HSBC will be obliged to make payment to that entity and that payment will constitute a good discharge of HSBC's obligations under the Replacement Security. LORAC says the second part of the clause was engaged here and was not complied with.

54 LORAC's submission requires me to construe subparagraph E. The difficulty with LORAC's approach is the conjunction 'and', appearing between what LORAC has identified as the two 'parts' of the clause. The conjunction suggests that the notice requirement only operates where the beneficiary has exercised the power of assignment. The second 'part' of subparagraph E is difficult to understand without the first nine words. The requirement of notification, otherwise than in the context of assignment, is hard to construe, as is the identity of the party who is supposed to provide notice. I have formed the conclusion that the requirement to give notice arises in the event of an assignment and that the reference to 'assignment' and the notice requirement cannot be uncoupled in the manner contended for by LORAC. Thus I do not accept LORAC's contention that Old Samsung was required to give notice that HSBC should pay New Samsung.

Has New Samsung breached provsions of the Corporations Act 2001 (Cth) and, if so, is it not entitled to call upon the Replacement Security?

55 LORAC contends that Samsung has contravened several sections (s 601CD, s 601DD and s 601DE) of the Corporations Act 2001 (Cth), which relate to foreign corporations doing business in Australia. The contravention of those provisions results in criminal liability: see s 1311(1) of the Act. LORAC did not develop its written submissions beyond the assertion that New Samsung has breached the sections I have mentioned. Given the limited time available for oral argument, LORAC's counsel was prevented from developing the submission orally.

56 I will proceed on the basis that LORAC contends that the alleged contraventions by New Samsung lead to the conclusion that the Replacement Security is void and invalid. I do not accept this contention. Establishing the consequences flowing from a breach of these sections involves construing them in the context of the Corporations Act as a whole. In Maronis Holdings Ltd v Nippon Credit Australia Ltd (1990) 2 ACSR 138 Rogers CJ in Comm Div was called upon to consider whether a breach of s 512(1) of Companies (NSW) Code prohibiting a foreign company from commencing or carrying on business unless registered, had the effect of making a mortgage granted to the foreign company illegal and unenforceable. His Honour reviewed the authorities and held that it was not the legislature's intention that a transaction entered into by an unregistered foreign corporation should be void or unenforceable: at 140 - 142. I consider that his Honour's reasoning in construing the relevant provision of the Companies (NSW) Code applies with equal force to the sections of the Corporations Act alleged to have been breached by New Samsung. I do not consider that the alleged breaches of the Corporations Act affect the validity of the Replacement Security or prevent New Samsung from calling on it.

Is the right to realise the Replacement Security subject to a condition that Samsung must consider acting bona fide, that it is, or will be, entitled to recover that amount it seeks to realise from LORAC; and, if so, has Samsung satisfied that condition? The terms of the Subcontract and Interim Deed

57 The Subcontract comprised a Formal Instrument of Agreement dated 21 February 2014, General Conditions of Subcontract (AS 49022000 (amended version) (the General Conditions), General Conditions of Subcontract Annexure Part A, documents described as Contractor's Project Requirements and General Conditions of Subcontract Annexure Parts B to S.

58 The Subcontract provisions which governed the calculation of amounts to be paid to LORAC distinguished between payments for 'Direct Work' - the 'Direct Price' and payments for 'Indirect Work' - the 'Indirect Price'. The provisions also included a 'Procurement Progress Calculation' which applied to the procurement of certain bulk materials to be provided (steel structures and piping and the like) and equipment. The Procurement Progress Calculation was structured to enable LORAC to claim payment for significant proportions of the cost of the certain materials on the attainment of milestones. The milestones occurred were well before the materials were delivered to site. The payment provisions also included an 'Indirect Progress Calculation' which provided for the progress payments in respect of the Indirect Price to reflect the proportion of the Direct Price paid. It was submitted by Samsung that these payment mechanisms resulted in the aggregate payments received by LORAC, as a result of progress payments, exceeding the value of the Subcontract Works 'actually performed'. The Procurement Progress Calculation and the Indirect Progress Calculation are reproduced in appendix 2 to these reasons. Appendix 2 also contains a short extract of the 'Procurement Progress Calculation' table setting out the milestones and percentages of the price of various materials payable on the attainment of those milestones.

59 To provide context for the parties' submissions it is necessary to outline in greater detail the development of the dispute. In doing so, I will touch upon specific issues featured in the parties' evidence and submissions.

60 Between May and August 2014 correspondence was exchanged between Samsung and LORAC in relation to the specification for replaceable metal liners that were to line the inside of hoppers, bins and spillage chutes to extend the life of those components. This correspondence forms the background to one of Samsung's claims, 'the Liners Claim'. LORAC submits that the correspondence demonstrates that Samsung instructed LORAC to use 'Duaplate' liners rather than 'MC3 D80' liners. LORAC relies upon a letter from Samsung to LORAC dated 13 August 2014 (attachment PPH14 to Mr Hawthorne's affidavit) in which it is stated:

The contractor hereby gives direction in accordance with clause 36.1 of the Subcontract to procure and install the liner material as per the latest drawings attached to this letter. The Subcontractor's price for the proposed variation will be reviewed and communicated in due course.

61 (The 'latest drawings' referred to in the letter of 13 August 2014 specify Duaplate D80 17/10).

62 I will return to the Liners Claim later in this narrative of events.

63 On 22 December 2014 LORAC submitted its December 2014 Progress Claim in respect of the following amounts:

(i) Direct Price: $14,427,597 (cumulative $44,872,362)

(ii) Indirect Price: $9,240,230 (cumulative $28,821,364)

(iv) Advance Payment - $4,612,500 (cumulative - $27,675,000)

64 According to LORAC's calculation the total claimed was $34,598,249 and the cumulative amount claimed to that date was $92,616,434.

65 The reference to the Advance Payment is a reference to an advance payment made by Samsung to LORAC of $30,750,000 at the commencement of the Subcontract. The advance payment was repaid by deduction from the amounts paid to LORAC in respect of monthly progress claims. By December 2014 the balance owing by LORAC to Samsung in respect of the advance payment was approximately $3.075 million.

66 At the end of December 2014 LORAC had accumulated claims against Samsung which it valued at approximately $55 million. These claims were additional to the December 2014 Progress Claim.

67 On 9 January 2015 the 'Contractor's Representative' issued Progress Certificate 11 in respect of the December 2014 Progress Claim. This certified the value of the measured works claimed in the December 2014 Progress Claim as $24,510,497. The Contractor's Representative recorded in Progress Certificate 11 that the accumulated value of the measured works was $79,957,543.

68 On 24 January 2015 LORAC submitted its January 2015 Progress Claim.

69 On 1 February 2015 Samsung responded to the January 2015 Progress Claim with a draft assessment. In the following table I set out the claims made in the January Progress Claim and the draft assessment by Samsung at the beginning of February together with each party's assessment of the cumulative value of the Subcontract Works.

Cumulative value assessed by LORAC on 24 January 2015

Cumulative value assessed by Samsung on 2 February 2015

70 Taken at face value, the figures in the table suggest that by the beginning of February 2015 Samsung accepted, on an informal basis at least, that LORAC had completed work to the value of $93,717,035.

71 On 25 February 2015 LORAC submitted a claim as follows:

Pursuant to clause 39A.2(a)(i), the Subcontractor encloses a claim for payment in respect of Subcontract Works carried out prior to the date of the purported termination (being 10 February 2015) which would have been payable if the Contractor had not purported to terminate the Subcontract and the Subcontractor had submitted a Payment Claim for Subcontract Works carried out to the date of the purported termination.

72 LORAC stated that the claim constituted part of the amounts to which it was entitled under cl 39A.2(a) and gave notice that further claims under cl 39A.2(a) would be made.

73 The amounts claimed in the 'part claim cl 39A.2(a) claim' were as follows:

(i) Direct Price: $18,819,195 (cumulative $75,820,964)

(ii) Indirect Price: $12,047,029 (cumulative $48,669,546)

74 In late February 2015 Samsung paid LORAC $45 million in accordance with the terms of the Interim Deed.

75 Following the termination of the Subcontract LORAC took steps to prevent Samsung (and its (new) subcontractors in whose favour former subsubcontracts with LORAC had been novated in accordance with cl 5 of the Interim Deed) from using materials which Samsung contended were necessary to enable work to continue without delay. Those materials comprised structural steel modules that were shipped to site in what were termed 'Shipment 4' and 'Shipment 5' and the liners required to line hopper bins and spillage chutes.

76 On 9 March 2015 Edelman J granted injunctive relief which included an injunction requiring LORAC to deliver up the structural steel modules and the liners: see Samsung C&T Corporation v Laing O'Rourke Australia Construction Pty Ltd [2015] WASC 83. LORAC's conduct in relation to these materials has given rise to a claim against it by Samsung described as the 'Withholding Claim'.

77 In February 2015 Samsung instructed FTI Consulting (FTI) to carry out an assessment of the Subcontact Sum.

78 On 3 July 2015 Mitchell J set aside two adjudication determinations which had been made in LORAC's favour in an aggregate amount of $44,140,518 in Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2015] WASC 237.

79 On 17 July 2015 Samsung wrote to LORAC referring to the obligation on the Contractor's Representative to determine LORAC's entitlement to amounts due to it, including those amounts set out in cl 39A.2(a)(i) to (iv) of the Subcontract. In the letter Samsung requested LORAC to provide the Contractor's Representative with evidence of all amounts to which LORAC asserted an entitlement under cl 39A.2(a) and any further costs to which the subcontractor asserted an entitlement under the Interim Deed. The letter requested LORAC to provide any evidence on which it wished to rely as to the amount of the 'Subcontract Sum (as adjusted in accordance with the Terminated Subcontract)' that ought to be applied for the purpose of calculating any entitlement under cl 39A.2. The letter stated that Samsung required this evidence by no later than 5.00 pm on 24 July 2015.

80 Under cover of a letter dated 24 July 2015 LORAC provided Samsung with a draft of its 'final claim'. The letter recorded that the final claim showed Samsung as owing LORAC in excess of $100 million. The letter pointed out that the draft claim was in a provisional form for discussion purposes. The letter was accompanied by a USB drive containing native Excel files of financial summaries upon which LORAC relied and 15 boxes of paper documents.

81 On 12 August 2015 Samsung sent a letter to LORAC setting out its preliminary views as to LORAC's entitlement under cl 39A.2 of the Subcontract and its entitlement in respect of unacknowledged variation claims and other claims. The subject line of the letter read 'Negotiations pursuant to clause 4.1 of the Interim Deed'. In this letter Samsung stressed the views expressed in the letter were preliminary only. The letter summarised Samsung's preliminary assessment of LORAC's entitlements as follows:

(i) cl 39A.2(a)(i) - Subcontract works $34,559,225 (excluding GST).

(ii) cl 39A.2(a)(ii) - Plant or materials $34,091,164.

(iii) cl 39A.2(a)(iii) - Demobilisation costs $5,205,564.

82 (The figures in (i) and (ii) reflect Samsung's assessment of the value of the work done and plant and materials supplied from the commencement of the Subcontract as distinct from the last Progress Certificate.)

83 Thus Samsung's assessment of the total due to LORAC pursuant to cl 39A.2 was $73,855,954.28.

84 Samsung's letter of 12 August 2015 went on to refer to the proviso to cl 39A.2(a), (the cl 39A.2(a) proviso), to the effect that the amount payable under the subclause when added to the amounts already paid and payable to LORAC should not exceed the Subcontract Sum as adjusted in accordance with the Subcontract. Samsung contended the cl 39A.2(a) proviso constituted a cap on what might be paid to LORAC under cl 39A.2(a). The letter recorded that Samsung was presently calculating the amount of the Subcontract Sum and would provide details of that amount to LORAC in due course. The letter also recorded Samsung's view that $73,855,954 was the maximum LORAC could receive pursuant to cl 39A.2(a).

85 In the letter of 12 August 2015 Samsung gave notice that it considered LORAC had been overpaid by an amount of at least $48,887,828. The overpayment was the difference between the total amount paid to LORAC, $123,703,750, and the amount to which Samsung considered LORAC was entitled, $74,815,922.

86 In addition, the letter of 12 August 2015 outlined the facts Samsung relied upon as the basis of the Withholding Claim and the Liners Claim and quantified those claims at $4,601,213 and $4,881,565 respectively.

87 Samsung concluded the letter of 12 August 2015 by expressing its preliminary view that LORAC was liable to it in the sum of $58,370,607.25.

88 Following the letter of 12 August 2015 a meeting was held between representatives of LORAC and Samsung on 13 August 2015. Several other 'without prejudice' meetings took place.

89 On 5 November 2015 Mr Jinhyung Chun was appointed by Samsung to be the Contractor's Representative in place of Mr Sung Rae Cho. Although Mr Chun was appointed to the role of Contractor's Representative on 5 November 2015, he had been involved with the Project for months before the Subcontract was entered into. He was a senior member of Samsung's project team with substantial construction experience who had been involved in the management of LORAC's claims both before and after termination of the Subcontract.

90 On 12 November 2015 LORAC submitted its final claim under general condition 39A.2. The final claim comprised a large volume of materials. In electronic form the materials extended to 12.2 gigabytes of data comprising 4,116 electronic data files, (the equivalent of 100 lever arch folders of paper records). It was prepared by a team of three of LORAC's staff over a period of nine months. LORAC gave an estimate that allowing 20 seconds to open each data file, it would take some 23 hours to open all of the electronic data files. LORAC estimated that Samsung owed it in excess of $90 million pursuant to the final claim. In its evidence and in submissions LORAC emphasised that the final claim involved complex factual, technical and legal issues and was supported by information that was being provided to Samsung for the first time. It was said to be more than a mere revision of the draft final claim sent in July 2015. Mr Peter Pether, a partner in King & Wood Mallesons, LORAC's solicitors, and a lawyer with extensive experience in the management of complex construction and engineering claims, deposed that he did not believe that having regard to the volume, complexity and substance of the claim, a reasonable and accurate assessment of it could be made within 7 days.

91 On 18 November 2015 FTI delivered its draft assessment of the Subcontract Sum.

92 On 19 November 2015 Samsung sent two letters to LORAC.

93 The first letter set out what was described as the Contractor's Representative's 'reasonable determination' of the amounts payable to LORAC pursuant to cl 39A.2 - this was a negative amount of $2,667,106. In the course of estimating the value of the Subcontract Works, the Contractor's Representative decreased the figure for the Indirect Price component by $19,312,391 from $28,818,953 (the amount allowed by it in the December certificate) to $9,506,561.

94 In its second letter of 19 November 2015 Samsung gave LORAC notice of counterclaims amounting to $55,248,952. These counterclaims comprised the overpayment claim of $45,961,281, the Withholding Claim of $4,601,213 and the Liners Claim of $4,881,565. In the letter Samsung also recorded its contention the Subcontract Sum as defined in cl 1.1 of the Subcontract was $77,742,469.

95 I pause in this narrative to highlight variances between the draft assessment of the cumulative value of the Subcontract Works made by Samsung in February 2015 and those made by FTI and by the Contractor's Representative in November 2015. These are best shown in tabular form:

Cumulative value at 24/01/15 assessed by Samsung at 2/02/15

Cumulative value of works at 10/02/15 as assessed by FTI at 18/11/15

Cumulative value of works at 10/02/15 as assessed by Contractor's Representatives on 19/11/15

96 The table highlights the substantial downward revision of the value of the Subcontract Works made by FTI and the Contractor's Representative in November 2015. It is to be noted that both the FTI and Contractor's Representative's November 2015 assessments take into account the value of a the 17 days of work completed between 24 January and 10 February 2015 that were not taken into account in the 2 February 2015 assessment. The figures also highlight a significant difference between FTI's assessment of the Indirect Price and that made by the Contractor's Representative. LORAC submitted that these matters constituted evidence that taken with other evidence gave rise to an inference of a lack of bona fides on the part of Samsung.

97 By letter dated 19 November 2015 Samsung demanded payment of $55,248,952 from LORAC by 5.00 pm on Wednesday, 2 December 2015.

98 By letter dated 2 December 2015 from its solicitors, King & Wood Mallesons, to Samsung's solicitors, Herbert Smith Freehills, LORAC took issue with the Contractor's Representative's determination and Samsung's claim for $55,248,952 and contended in forceful terms that the determination was unreasonable and that there was no substance in Samsung's claims. In relation to the issue of whether any claim under cl 39A.2(a) was capped at the 'Subcontract Sum as adjusted in accordance with the Subcontract', the following point was made:

The [19 November] letter says that the Subcontract Sum is capped at $77,742,469.33. The reason the adjusted Subcontract Sum is at that number is because of a failure by Samsung to ensure that the Subcontract Sum is properly adjusted in terms of the Subcontract. There is no reasonable basis on which LORAC's claim for $90,594,145 could be assessed at nil.

99 The parties exchanged further correspondence in December 2015 and January 2016. On 24 December 2015 Samsung served LORAC with a notice of dispute pursuant to cl 42.1 of the general conditions. A separate sequence of correspondence then ensued in relation to the validity of that notice of dispute.

100 On 5 January 2016 Samsung served a further notice of dispute on LORAC.

101 On 25 January 2016 LORAC served its own notice of dispute under cl 42.1 of the General Conditions.

Resolution of questions of construction of Subcontract and Interim Deed

102 Before considering the parties' contentions in relation to the facts I will address questions of construction about various terms of the Subcontract and the Interim Deed which arose in the course of the submissions.

103 The first question of construction is whether, on a proper construction of the Interim Deed, the Replacement Security can only be realised if Samsung considers, acting bona fide, that it is or will be entitled to recover from LORAC under or in respect of the Subcontract the amount it seeks to realise by calling on the Replacement Security.

104 In addressing this question of construction I adopt the objective approach to the determination of the rights and liabilities of contracting parties described by their Honours, French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd [35] in the following terms:

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. That approach is not unfamiliar. As reaffirmed, it 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, 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'. (footnotes omitted)

105 Clause 5.2 of the General Conditions reads as follows:

5.2 Conversion and use

(a) Without limiting any of the Contractor's rights, the Contractor may, at any time, convert into money any Security that does not consist of money where:

(i) the Contractor considers, acting bona fide, that it is or will be entitled to recover the relevant amount from the Subcontractor under or in respect of the Subcontract; and

(ii) except where the Subcontract has been terminated, the Contractor has given the Subcontractor 5 days' notice of its intention to have recourse to the Security (in order to enable the Subcontractor to make alternative payment arrangements) and 5 days have elapsed since that notice was given.

4.1 In considering the Subcontractors entitlement under 39A.2 the Contractor and Subcontractor agree to negotiate in good faith using best endeavours to resolve all differences, disputes and Claims and achieve a negotiated outcome.

4.2 Nothing herein shall prejudice the right of a party to institute proceedings to enforce obligations due under this Deed, to preserve any statutory entitlements or to seek injunctive or urgent declaratory relief.

...

7.1 Contemporaneous with execution of the Deed, the Contractor shall return the Advance Payment Guarantee held by the Contractor.

7.2 Upon completion of novation to the Contractor of all Critical Novation Agreements under clause 5.1(a) of this Deed the Contractor shall return the Performance Securities. In exchange for the return of the Performance Securities, the Subcontractor shall procure in favour of the Contractor a single Security, in substantially the same form as the Performance Security (unless otherwise agreed by the Contractor) in the amount of $7.5 million (Replacement Security), which expires 12 months after the Effective Date.

7.3 Unless 48 hours' notice is provided in advance of any call on the Replacement Security or the Performance Securities, the Contractor will not call on the Replacement Security or the Performance Security from the Effective Date until its release under clause 7.2.

108 In my judgment, the right to realise the Replacement Security is conditioned by the requirement that Samsung considers, acting bona fide, that it is or will be entitled to recover the amount sought to be realised from LORAC, in this instance, $7.5 million. There are two strands to my reasoning. First, looked at objectively, in my view, the evident commercial purpose of cl 7 was to provide Samsung with the benefit of the bargain conferred by cl 5.2 of the General Conditions but in a reduced amount. This is what I consider a reasonable business person would understand was the purpose of cl 7. I do not think that the reasonable business person would conclude that Samsung's right to call upon the Performance Securities, in the event that there was a failure to novate 'all Critical Novation Agreements', or its right to call on the Replacement Security, would be unfettered.

109 The second strand to my reasoning is that the text of cl 7 supports the conclusion that the right to call on the Replacement Security is subject to the same condition as appears in cl 5.2 of the General Conditions. It is clear from cl 7 that cl 5.2 survived termination of the Subcontract. Clause 7.2 imposed an obligation on LORAC to procure a single 'Security'. Clause 1.1 of the Interim Deed provides that words used in the Interim Deed have the same meaning as set out in the Subcontract. 'Security' is defined in the General Conditions to mean, in essence, an undertaking in an approved form from an approved financial institution. Clause 5 of the General Conditions governs 'Security' and conditions the right to call on it. There is nothing in the Interim Deed indicative of an intention to depart from the approach to Security set out in the General Conditions - that is, there is no textual warrant for permitting Samsung to call upon the Replacement Security irrespective of whether it considers, acting bona fide, that it is or will be entitled to the amount it seeks to realise from calling on the Replacement Security.

110 For those reasons, LORAC has established that there is a serious question to be tried that Samsung cannot realise the Replacement Security without considering, acting bona fide, that it is or will be entitled to recover from LORAC the amount it seeks to realise.

111 The second question of construction is whether cl 7.2 of the Interim Deed is a provision intended to allocate the risk as to who shall be out of pocket between the parties pending the resolution of the claims and counterclaims. In my view, the purpose of cl 5.2 of the General Conditions was to allocate the risk of being out of pocket to LORAC by providing Samsung with the Performance Securities. The right to call on those securities was not conditioned by reference to Samsung succeeding in any claim. The absence of such a condition points to the conclusion that the clause is intended to achieve more than merely the conferring of security. I am fortified in reaching this conclusion as to the proper construction of cl 5.2 of the General Conditions by the fact that all members of the Court of Appeal in Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd concluded that a clause of substantially the same nature as cl 5.2 was an allocation of risk clause.

112 The question then arises whether, construed against the background of the terms of the General Conditions of the Subcontract, and in the light of the provisions of the Interim Deed, cl 7.2 is an allocation of risk provision. It was submitted on LORAC's behalf that it was not. It was argued that it would make no sense for Samsung to make a payment on account of $45 million and to have a right to recoup $7.5 million by realising the Replacement Security. Samsung relied on three matters to support the conclusion that cl 7.2 was an allocation of risk provision: first, the fact that cl 7.3 enabled the Replacement Security to be called on 48 hours notice; secondly, that the Replacement Security would expire in 12 months, a factor which was not consistent with it being security for Samsung's claims; and, thirdly, the fact that cl 7 did not link the Replacement Security to the determination of any claim by Samsung. I agree with Samsung's submissions and accept that the obligation to provide the Replacement Security was an obligation designed to allocate to LORAC the risk of being out of pocket pending the determination of claims.

113 The third question of construction is whether the reference to Subcontract Sum in the cl 39A.2(a) proviso is a reference to the Subcontract Sum of $205,398,786 specified in item 6A of the General Conditions, as LORAC contends, or whether it is a reference to the 'Subcontract Sum' as defined in cl 1.1 of the General Conditions, as Samsung contends.

39A.2 Costs

If the Contractor terminates the Subcontract under clause 39A.l, the Subcontractor:

(a) subject to clause 37.8 and the limitations (if any) set out in clause 6 of the Formal Instrument of Agreement, shall be entitled to payment of the following amounts as reasonably determined by the Contractor's Representative:

(i) for Subcontract Works carried out prior to the date of termination the amount which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a Payment Claim for Subcontract Works carried out to the date of termination;

(ii) the cost of plant or materials reasonably ordered by the Subcontractor for the Subcontract Works for which the Subcontractor is legally bound to pay provided that:

(A) the value of the plant or materials is not included in the amount payable under clause 39A.2(a)(i); and

(B) title in the plant and materials shall vest in the Contractor upon payment;

(iii) the reasonable cost of removing from the Site all labour, Constructional Plant and other things used in connection with WUSC,

(iv) the cancellation charge for the Sub-subcontracts and Subcontractor's Consultants.

but in no case shall the total amount payable to the Subcontractor under this clause 39A.2(a), when added to other amounts already paid and payable to the Subcontractor, be more than the Subcontract Sum as adjusted in accordance with the Subcontract; and

(b) shall:

(i) take all steps possible to mitigate the costs referred to in clauses 39A.2(a)(ii), (iii) and (iv);

(ii) immediately hand over to the Contractor all copies of any documents provided by the Contractor under this Subcontract; and

(iii) cause to be delivered to the Contractor any plant and materials referred to in clause 39A.2(a)(ii) or any unfixed plant and materials for which the Contractor has paid pursuant to clause 37 .2.

The amount to which the Subcontractor is entitled under this clause 39A.2 shall be a limitation upon the Contractor's liability to the Subcontractor arising out of, or in any way in connection with, the termination of the Subcontract and the Subcontractor shall not make any Claim against the Contractor arising out of, or in any way in connection with, the termination of the Subcontract other than for the amount payable under this clause 39A.2 (as may be limited by clause 6 of the Formal Instrument of Agreement).

After the Subcontractor has satisfied its obligations under this clause 39A.2, the Contractor shall release all Securities to the Subcontractor then held by the Contractor.

This clause 39A.2 shall survive termination of the Subcontract by the Contractor under clause 39A.l.

115 The definition of Subcontract Sum in cl 1.1 reads as follows:

Subcontract sum means the value of the Subcontract Works actually performed, calculated on the basis of:

(a) Rates and Prices multiplied by actual quantities performed; plus.

(b) any lump sum items performed;

as set out in the Bill of Quantities and adjusted by any additions or deductions which may be required to be made under the Subcontract;

116 LORAC contends that Samsung, acting bona fide, could not reach the conclusion that the reference to Subcontract Sum in cl 39A.2(a) should be construed by reference to the definition of Subcontract Sum as it appears in cl 1.1. LORAC characterised Samsung's construction as capricious and relied on it as evidence of bad faith.

117 LORAC contended that Samsung's construction would result in the Subcontract Sum constantly fluctuating. It was contended that this would lead to unworkable consequences in relation to the amount of Security to be provided and in relation to liquidated damages. It was also contended that, on the construction advanced by Samsung, LORAC could never recover more under cl 39A.2(a) than its entitlement under cl 39A.2(a)(i) as that amount would equate to the 'Subcontract Sum as adjusted', that is the 'cap', so that amounts to which LORAC would otherwise be entitled under cl 39A.2(a)(ii) to (iv) would always fall outside the cap.

118 I do not accept LORAC's submissions. I consider that the construction advanced by Samsung is reasonable. In order for me to determine this application it is not necessary for me to express a final view on this question of construction, and I will not do so. I will state briefly my reasons for concluding that Samsung's construction is reasonable.

119 First, I do not accept that Samsung's construction creates uncertainty in relation to the amount of Security to be provided and the amount of liquidated damages that may be recovered. The items specified in annexure Part A to the General Conditions provide the particulars required to tailor the generic definitions and provisions of the General Conditions to the precise circumstances of the Subcontract. Thus, item 6A refers to the cl 1.1 definition in the General Conditions and specifies the Subcontract Sum as $205,398,786. The Security (item 14(b)) is specified to be 10% of the Subcontract Sum. Liquidated damages are specified as a percentage of the Subcontract Sum per day, meaning, in my view, a percentage of $205,398,786. The cap on liquidated damages is, however, expressed to be a percentage of the 'Subcontract Sum (as adjusted in accordance with the Subcontract)'. The Aggregate liability limit is also expressed to be a percentage of 'Subcontract Sum (as adjusted in accordance with the Subcontract)'. 'Subcontract Sum (as adjusted in accordance with the Subcontract)' is the phrase used in cl 39A.2(a). Assessed objectively, these provisions in annexure Part A demonstrate an approach on the part of those responsible for drafting the Subcontract to use the term 'Subcontract Sum' where, before the Subcontract Works had started, a specific amount ($205,398,786) was required to give operative effect to the relevant General Condition and to use the phrase 'Subcontract Sum (as adjusted in accordance with the Subcontract)' when an assessment of Subcontract Sum was required after the Subcontract Works had started. If the relevant provisions of the General Conditions and annexure Part A are viewed in this way, the difficulties identified in LORAC's submissions do not arise.

120 Secondly, I do not accept that the construction of the cl 39A.2(a) proviso contended for by Samsung prevents LORAC from recovering amounts due under cl 39A.2(a)(ii) to (iv). The definition of Subcontract Sum in cl 1.1 does not limit the Subcontract Sum to the value of the Subcontract Works actually performed but includes provision for 'any additions or deductions which may be required to be made under the Subcontract'. In my view, the entitlements under cl 39A.2(a)(ii) to (iv) fall in the category of additions required to be made under the Subcontract.

121 Thirdly, I agree with Samsung's submission that in the event that there is an inconsistency between the definition of Subcontract Sum in item 6A of Annexure Part A and the definition in cl 1.1 of the General Conditions, the definition in the General Conditions should be accorded precedence by reason of the 'Precedence' provisions in cl 3 of the Formal Instrument of Agreement.

122 Finally, I note that although LORAC contends on this application that Samsung's construction of the cl 39A.2(a) proviso is capricious, this argument was not raised by its solicitors in their letter of 2 December 2014 responding to Samsung's letter of 19 November 2014 which had applied the proviso. As noted in my overview of the development of the dispute, in that letter it was not contended that Samsung was adopting a capricious construction of the cl 39A.2(a) proviso rather its argument was that Samsung had failed to ensure that the Subcontract Sum was properly adjusted. This was quite a different point.

Has the condition on the right to call on the Replacement Security that Samsung consider, acting bona fide, that it is or will be entitled to recover more than $7.5 million from LORAC been satisfied?

123 LORAC's case is that Samsung has not acted bona fide. It submits that an inference of a lack of bona fides can be drawn from ten matters considered together. Those matters are:

(i) Samsung's determination of LORAC's claim under cl 39A.2(a) of the Subcontract places no value on the work completed between 22 December 2014 and 10 February 2015.

(ii) No cogent explanation has been provided by Samsung of the variance between its January and February 2015 assessments of the cumulative value of the Subcontract Works made in January and February 2015 and its November 2015 assessment.

(iii) Mr Jungmook Jo, Samsung's Commercial Director and Project Control Director for the Project, made the decision to call upon the Replacement Security in reliance on the FTI report notwithstanding that FTI had valued the Indirect Price component of the value of the Subcontract Works at $23,190,013 and the Contractor's Representative had valued the Indirect Price component at $9,506,561. It was submitted that this variance should have caused Mr Jo to reconsider the Contractor's Determination under cl 39A.2(a).

(iv) Samsung has refused to provide information to LORAC that might provide an understanding of its approach to the valuation of LORAC's claims, in particular the approach to the cl 39A.2(a) claim.

(v) Given the quantum of LORAC's claim, over $90 million, it is inconceivable that Samsung, acting bona fide, could value the claim at nil. LORAC point to the peremptory tenor adopted in Samsung's second letter of 19 November 2015 in rejecting LORAC's claims and submit that the language is indicative of a lack of bona fides in Samsung's approach to the claims. By way of example, under the heading 'Rejected Claims', Samsung recorded that:

certain of the Subcontractor's outstanding unacknowledged variation claims have no contractual basis, and have been rejected for (without limitation) the reasons set out below:

but failed to state its conclusions in respect of the 'unacknowledged variation claims' that did have a contractual basis.

(vi) Samsung's willingness to pay $45 million in accordance with the terms of the Interim Deed made it plain that it considered that it was the 'paying party'. It was submitted, in effect, that the willingness to make this payment was an implicit acknowledgement that Samsung owed LORAC significant amounts of money pursuant to the terms of the Subcontract.

(vii) The scope and complexity of LORAC's Final Claim submitted on 12 November 2015 was such that it could not have been considered and determined on a bona fide basis by 19 November 2015.

(viii) In considering LORAC's entitlements under the cl 39A.2(a) claim Samsung has failed to negotiate in good faith using best endeavours to resolve all disputes and claims and thereby achieve a negotiated outcome as LORAC says it was obliged to do by cl 4.1 of the Interim Deed.

(ix) Samsung's construction of the cl 39A.2(a) proviso is capricious.

(x) Samsung's reliance on the Withholding Claim and the Liners Claim, which claims each lack merit, coupled with the failure to negotiate with LORAC in respect of those claims.

124 In support of its submission that an inference of a lack of bona fides can be drawn from these ten matters, LORAC submitted that Mr Jo's evidence about his interactions with members of Samsung's team working on the Project and the process that resulted in him reaching the conclusion that Samsung was entitled to recover more than $7.5 million from LORAC was vague and conclusionary. It was also submitted that bona fides on Samsung's part could not be established by the evidence of Mr Jo alone. It was submitted that a Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference arose from the failure of Mr Chun to give evidence to the effect that the 'Contractor's Determination' of the cl 39A.2(a) claim was made bona fide.

125 It is necessary to refer to the evidence in Mr Jo's affidavit of 4 February 2016 in some detail. Mr Jo deposes that he is employed as Samsung's Commercial Director and Project Control Director for the Project. Aside from a Mr Suk Lee, to whom Mr Jo reports, he is the most senior Samsung employee involved with the Project. Mr Jo has 27 years' experience in project management and cost control in the field of marine works, general civil works and mining and infrastructure projects. Mr Jo deposed that every working day video conferences were held with each of Samsung's teams working on the Project 'packages' (the Subcontract being one such package). There was a commercial manager for each package in Samsung's Perth office and a commercial manager at each package's site office. Mr Chun was the commercial manager for the Subcontract. In addition, there was a separate 'contracts team' located in Samsung's Perth office headed by Mr Minhwan Jeong. Mr Tony McDonnell was the contract manager in relation to the Subcontract. Mr Jo deposed that he supervised a separate cost control team which was in charge of reviewing progress claims, issuing progress certificates and recording payments to subcontractors.

126 Mr Jo deposed that he was briefed by Mr Chun and Mr Jeong on the topic of LORAC's part cl 39A.2(a) claim. He deposed that he authorised FTI to be engaged to assess the Subcontract Sum because he believed that the commercial team required additional resources.

127 Mr Jo deposed that he was briefed by Mr Chun and Mr Koo in relation to the draft final claim. He said that he discussed the content of Samsung's letter to LORAC of 12 August 2015 in a face to face meeting with Mr Chun. He said that Mr Chun and he talked through each part of the letter. He said that the letter was sent to inform LORAC of Samsung's thinking at the time. Mr Jo deposed that at that time (August 2015) he had formed the view that it was likely that LORAC would be liable to Samsung for around $58 million. On the basis of his meetings with Mr Chun, he believed that the $58 million included approximately $48.9 million in respect of the overpayment claim and $4.6 million for the Withholding claim and $4.9 million in respect of the Liners claim.

128 By way of background to the overpayment claim, Mr Jo explained his understanding of the method by which the amounts paid to LORAC had been calculated. At [52] of his affidavit he deposed:

Laing O'Rourke had been paid according to achieving certain milestones (such as placing orders) and therefore, the progress payments did not reflect the work actually completed under the Terminated Subcontract. That is, I believed that it was likely, in the context of a terminated subcontract, that Samsung had overpaid Laing O'Rourke. The milestone payments did not reflect the work completed, as they were not calculated with reference to an assessment of work actually undertaken. As a result, Laing O'Rourke received payments in excess of the works actually completed by Laing O'Rourke. It was my belief that the final account between Samsung and Laing O'Rourke would be settled at the end of the contract, on the basis of matters such as actual quantities and drawings.

129 Mr Jo deposed that he had an understanding of the nature of LORAC's claims for unacknowledged variations, extensions of time and delay costs. He was 'not across' the precise detail of such claims but relied upon Mr Chun's consideration and assessment of such claims.

130 Mr Jo deposed that he read the FTI report. In relation to the second letter of 19 November 2015, Mr Jo deposed that he was aware of many different claims advanced by LORAC against Samsung, although not familiar with the detail, he was aware from his interaction with Mr Chun, Mr Koo and Mr McDonnell that they had assessed and considered LORAC's claims and that the second letter of 19 November 2015 reflected their assessment of those claims.

131 Mr Jo deposed that by 19 November 2015 he had a firm belief that LORAC owed Samsung significant amounts of money. At [73] - [75] of his affidavit he said this:

1. By this stage, my belief firmed that Laing O'Rourke owed Samsung significant amounts of money.
2. The main reason why I believed that Samsung had overpaid Laing O'Rourke was because of the Subcontract Sum cap contained at the end of clause 39A.2(a) of the Terminated Subcontract. Samsung's overpayment claim for the amount of $45,961,281.61 is the difference between the amount of $123,703,750.94 paid to Laing O'Rourke to date and the Subcontract Sum of $77,742,469.33.
3. Together with Samsung's claim for Laing O'Rourke's withholding of liners and structural steelwork, and the claim arising out of Laing O'Rourke's failure to comply with Samsung's direction for MCC3 D80 liners, I believed that Laing O'Rourke woed Samsung at least $55,444,060.05.

132 Mr Jo deposed that the amounts owed by LORAC to Samsung included $3.075 million in respect of the unpaid balance of the Advance Payment.

133 I am not persuaded LORAC has established to the requisite standard that Samsung has not acted bona fide in considering it is entitled to recover $7.5 million from LORAC.

134 I make two general observations. First, although an application for an interlocutory injunction requires a provisional assessment by reference to the criterion of a 'serious question to be tried', a provisional conclusion as to a lack of bona fides can only be made on the basis of persuasive evidence. A party that tries to establish, within the context of, and subject to the procedural limitations of, an interlocutory application, that its opponent acted without bona fides faces significant forensic difficulties. In assessing the allegation of a breach of bona fides, a court will look for undisputed facts and facts not surrounded by controversy from which to draw inferences. In this case, many of the matters relied upon by LORAC are so bound up in the controversies involved in the underlying dispute that it is difficult to draw the inference of a lack of bona fides for which LORAC contends.

135 The second general observation is this: the effect of granting the relief sought by LORAC will be to deprive Samsung of the benefit of the bargain for which it contracted, being the right to realise cash for its cash flow purposes by calling on the Replacement Security. This would be so even if LORAC extended the life of the Replacement Security to 31 December 2015 because Samsung would still be deprived of its right to obtain $7.5 million in cash on 48 hours notice. The injunction will not preserve the status quo but will change it. In those circumstances, LORAC must demonstrate a prima facie case of sufficient strength to engender confidence that it would succeed if the matter went to trial. LORAC has raised a serious question but its prima facie case is not sufficiently strong to justify the grant of an injunction. Put another way, LORAC's case is not sufficiently strong to tilt the balance of the risk of an injustice in its favour.

136 I will now set out the particular reasons for my conclusion that LORAC has not established that Samsung lacked bona fides.

137 First, I considered that LORAC's strongest point was the variance between Samsung's January and February assessments of the cumulative value of the Subcontract Works and the November 2015 FTI and Samsung assessments. If left unexplained, this variance could give rise to an inference of a lack of good faith.

138 Parenthetically, I should stress I accept that in February 2015 Samsung did not make a formal assessment of LORAC's January progress claim, there was only a draft assessment, but as it was not out of kilter with the assessment of the December 2014 progress claim, it provides some indication of Samsung's thinking at the time.

139 The explanation provided by Mr Jo of how the amount paid to, and payable to, LORAC as progress payments could exceed the value of the Subcontract Works actually performed was consistent with the contractual provisions for the calculation of the Subcontract, in particular the Procurement Progress Calculation provisions. Whilst Samsung may ultimately be found to owe more to LORAC in respect of the value of the Subcontract Works than it presently considers LORAC is entitled to, Mr Jo's explanation of the variance between the assessments of the value of the Subcontract Works at the times to which I have referred reflects an approach to the issues by Samsung which is consistent with it acting bona fide.

140 Secondly, Mr Jo's evidence provides an explanation of the processes followed by Samsung to evaluate LORAC's claims as the Subcontract progressed and the steps taken to evaluate LORAC's cl 39A.2(a) claim. He explained the sources of the information on which he relied to form the belief that Samsung was entitled to recover more than $7.5 million from LORAC and why he was content to rely on those sources. Mr Jo was the person who decided that Samsung should call on the Replacement Security. Having explained the basis upon which he made the decision, I do not consider that it was necessary for Samsung to adduce evidence from Mr Chun or any of the other executives involved in the evaluation of LORAC's claims.

141 Thirdly, in its submissions, LORAC placed much reliance on the proposition that it was impossible for Samsung to have given reasonable consideration to its 'final claim' between the date on which that claim was provided, 12 November 2015, and 19 November 2015 when Samsung gave notice of the Contractor's Representative's determination and its claims against LORAC. I consider this proposition involves a distorted view of the development of LORAC's cl 39A.2(a) claim. The major component of that claim, quantified at $61,541,257, was first made on 25 February 2015 and related to:

Subcontract Works carried out prior to the date of termination the amount which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a Payment Claim for Subcontract Works carried out to the date of termination.

142 The part cl 39A.2(a) claim was supplemented by the information provided with the draft final claim provided on July 2017. Nearly 10 months elapsed between LORAC's part claim of 25 February 2015 and the Contractor's Determination of the cl 39A.2(a) claim on 19 November 2015. Mr Jo's evidence was to the effect the evaluation of the claim began shortly after it was received. The fact that Samsung wrote to inform LORAC of its preliminary view of the claim on 12 August 2015 and that the letter was followed by meeting between the parties are facts that tend to negate an inference that there may have been a lack of bona fides on the part of Samsung.

143 Fourthly, at least provisionally, I think that Samsung's submission that cl 39A.2(a) was intended to provide an opportunity for LORAC to claim akin to a final progress claim of the kind that could have been made the subject of a progress claim if the Subcontract had not been terminated (together with other specified costs) as distinct from a final claim encompassing previously disputed variation, extension of time and delay costs is correct. Thus, no inference adverse to Samsung arises from a failure to deal with all LORAC's claims in its letters of 19 November 2015, though it does appear that Samsung has gone further than it needed to do so in dealing with LORAC's claims for 'unacknowledged variations'.

144 Fifthly, for the reasons I have given above, I do not agree with LORAC's submission that Samsung's construction of the cl 39.2(a) proviso is capricious or untenable. It follows that, in my opinion, no adverse inference arises from Samsung's construction.

145 Sixthly, it is difficult to assess the extent to which Samsung may have breached its obligations to negotiate in good faith or failed to use its best endeavours to reach a negotiated outcome of all claims on an application of this nature. The evidence makes it clear that meetings took place and that some of those meetings were on a 'without prejudice' basis. In my view, there is no adequate basis from which I could infer a lack of bona fides on Samsung's part in its approach to negotiations.

146 Seventhly, it is impossible for me to conclude that the Withholding claim and the Liners claim are not made on a bona fide basis. I have given careful consideration to the affidavits of Mr Read and Mr Hawthorne which set out the evidence relied upon by LORAC to demonstrate that the Withholding claim and the Liners claim respectively lack merit. I accept LORAC's evidence establishes that there is a genuine basis for disputing these claims. The problem from LORAC's perspective, however, is that the affidavit evidence only tells one side of the story. As senior counsel for LORAC acknowledged in oral submissions, both claims depend on the resolution of disputed factual issues. Those issues are clearly in dispute. It is impossible for me to draw an adverse inference from the fact that Samsung has advanced these claims when the claims are unresolved and a reliable provisional assessment of the merits cannot be made on the basis of affidavit evidence on an urgent interlocutory injunction.

147 Eighthly, it appears to be common ground that LORAC is presently indebted to Samsung in respect of the outstanding balance of the Advance Payment of $3.075 million. This point is not decisive, but it does make LORAC's task of demonstrating that Samsung has not acted bona fide in considering that it is entitled to recover $7.5 million from it more difficult.

148 Ninthly, I accept that Samsung's correspondence, in particular its letters of 19 November 2015, are economical with the provision of information which formed the basis of the conclusions that are recorded in the correspondence. The letters are not, however, to be equated with 'reasons for decision' and, taken in the context of the overall disputes between the parties, I do not consider that an inference of bad faith arises from the limited provision of supporting information.

Has Samsung repudiated its obligations under the Subcontract and Interim Deed entitling LORAC to terminate and seek a return of the Replacement Security?

149 Senior Counsel for LORAC described the critical allegations upon which LORAC's repudiation case rested as follows:

(i) an allegation that Samsung was required to determine the cl 39A.2(a) claim reasonably and it failed to do so;

(ii) an allegation that in considering LORAC's cl 39A.2(a) claim Samsung was required to negotiate in good faith using its best endeavours to resolve all differences and it failed to do so.

150 I accept that LORAC has shown that there is a serious question to be tried in these respects but I am not persuaded that its case is sufficiently strong to warrant the grant of the injunctive relief it seeks. I accept that whilst the repudiation case raises different questions to those involved in the failure to act bona fide part of this case, there are factual overlaps and the assessment I have made on the 'bona fides' issue has been influential in the conclusion that I have reached.

151 I have, however, further and in some ways more fundamental concerns with this part of LORAC's case.

152 LORAC submits that where an owner has repudiated the contract, which repudiation the contractor has accepted and thereby terminated the contract, the security should be returned. LORAC relied upon the judgment of Barrett J in Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 [94] - [97] as authority for that proposition. Eddy Lau was a case which turned on its own facts and did not establish any principle of contract law of general application. Indeed, Barrett J's reasoning for ordering a return of the security in that case involved drawing analogy with the equitable right of redemption, which arose because the guarantee in that case could not be called upon.

153 In the present case, Samsung called upon the Replacement Security before the Subcontract and Interim Deed were purportedly terminated. On Samsung's case, it had an accrued right to realise the Replacement Security prior to termination.

154 I cannot see how equitable principles could assist LORAC in those circumstances. Alternatively, if equitable principles could be invoked, I think it would be difficult to persuade a court to exercise its discretion to grant an interlocutory injunction where, as here, the only reason why the security had not been realised before the contract was terminated was because the beneficiary had given an undertaking not to do so pending the hearing of an interlocutory injunction application, which application relied on grounds other than the termination of the contract. I do not, however, have to express any final view on this issue for the purpose of determining this application.

155 LORAC relied upon a number of matters in support of its claim that the balance of convenience favoured the grant of an injunction.

156 First, LORAC contended that it would suffer reputational damage if it became known that Samsung had called upon the Replacement Security. LORAC supported this contention by evidence as to the competitive nature of the market in which it operated and the fact that it was frequently required to disclose in tenders for new work whether any performance bonds provided by it had been called upon. LORAC gave evidence that its Australian business operations were on the market for sale and that the fact that the Replacement Security had been called upon might tarnish the reputation and, thus, value of the business. The evidence disclosed that the sale price of LORAC's Australian operations was expected to exceed $1 billion. I do not underestimate the potential for reputational damage to LORAC, but that reputational damage must be assessed in the context of the damage to LORAC's reputation that might have been caused by the very fact of the dispute between it and Samsung which has been publicised by the decisions in this Court of Edelman J and Mitchell J to which I have referred earlier. As to the potential for reputational damage in the context of the sale of LORAC's business, I am satisfied that LORAC's business will attract interest from potential purchasers with a level of sophistication which enables them to put the calling of the Replacement Security in its proper context, namely, that it is a risk of doing business in the commercially aggressive world of international construction contracting.

157 Secondly, LORAC relied upon its willingness to extend the life of the Replacement Security to 31 December 2016 to enable a final hearing of its action to take place in the intervening period as a basis for lessening the significance of the fact that granting an injunction is the equivalent of final relief in the context of the balance of convenience. For the reasons I have outlined above, I consider that any delay in Samsung's right to call upon the Replacement Security erodes the benefit of the bargain it struck with LORAC. For that reason, I do not think that LORAC's willingness to extend the life of the Replacement Security assists it in the assessment of where the balance of convenience lies. I add that I have reservations about whether a trial of the issues in this action could reasonably be expected to be concluded and judgment delivered by 31 December 2016. My reservations arise out of the potential complexity of the factual issues in this case and the number of different proceedings already on foot between the parties.

158 Thirdly, LORAC submitted that Samsung had little or no real estate in any Australian jurisdiction, and that LORAC might not be able to enforce any judgment or arbitral award for the return of the $7.5 million. In response to this submission, Samsung relied on the affidavit of Mr Jeong. In his affidavit Mr Jeong set out details of Samsung's net asset position as disclosed in interim accounts for the six months ending in June 2015 (over US$14 billion) and gave details of the cash resources available to its Australian operations (presently $13 million in cash with a further $65 million to be received on 25 February 2016. Mr Jeong also deposed to the fact that Samsung had recently been awarded a $2.7 billion design and construction contract for a major motorway in New South Wales. I am satisfied that Samsung is an international corporation with a long history of profitable operations, and that it is most unlikely that it will not satisfy any judgment or award for the return of $7.5 million should it be required to do so.

159 Accordingly, I am not satisfied that the balance of convenience favours LORAC.

160 For the reasons set out above, I dismiss the application and will hear the parties as to costs.

THE UNDERTAKING

AT THE REQUEST OF THE SUBCONTRACTOR AND IN CONSIDERATION OF THE CONTRACTOR ACCEPTING THIS UNDERTAKING BY WAY OF SECURITY TO THE CONTRACTOR FOR THE PERFORMANCE BY THE SUBCONTRACTOR OF ITS OBLIGATIONS UNDER THE AGREEMENT, THE BANK UNDERTAKES UNCONDITIONALLY AND IRREVOCABLY TO PAY THE CONTRACTOR ON DEMAND ANY SUM OR SUMS WHICH MAY FROM TIME TO TIME BE DEMANDED IN WRITING BY THE CONTRACTOR TO A MAXIMUM AGGREGATE OF THE AMOUNT.

DURATION OF UNDERTAKING

THIS UNDERTAKING IS TO CONTINUE UNTIL THE FIRST TO OCCUR OF THE FOLLOWING:

(A) A WRITTEN NOTIFICATION HAS BEEN RECEIVED BY THE BANK FROM THE CONTRACTOR THAT SUCH SUM IS NO LONGER REQUIRED BY THE CONTRACTOR;

(B) THIS UNDERTAKING IS RETURNED TO THE OFFICE OF THE BANK AT 188 - 190 ST GEORGE'S TERRACE, PERTH WA 6000 ('THE OFFICE'); OR

(C) PAYMENT TO THE CONTRACTOR BY THE BANK OF THE WHOLE OF THE AMOUNT; OR

(D) 4PM (LOCAL TIME- IN THE PLACE OF THE OFFICE ON THE 20 FEBRUARY 2016 (THE EXPIRY DATE).

PAYMENT TO THE CONTRACTOR

(A) THE BANK MUST MAKE PAYMENT OF THE AMOUNT OR ANY PART OR PARTS OF THE AMOUNT TO THE CONTRACTOR;

(I) IMMEDIATELY UPON THE BANK RECEIVING A WRITTEN DEMAND PURPORTING TO BE SIGNED BY OR FOR AND ON BEHALF OF THE CONTRACTOR;

(II) SO THAT IT IS IMMEDIATELY AVAILABLE AND FREELY TRANSFERABLE IN AUSTRALIAN DOLLARS CLEAR OF AND WITHOUT ANY DEDUCTIONS;

(III) WITHOUT REFERENCE BY THE BANK TO THE SUBCONTRACTOR;

(IV) DESPITE ANY NOTICE GIVEN TO THE BANK BY THE SUBCONTRACTORS NOT TO PAY THE CONTRACTOR ANY PART OF THE AMOUNT; AND

(V) IRRESPECTIVE OF THE PERFORMANCE OR NON-PERFORMANCE BY THE SUBCONTRACTOR OT THE CONTRACTOR OF THE AGREEMENT IN ANY RESPECT.

(B) THE BANK ACKNOWLEDGES ITS OBLIGATIONS UNDER THIS UNDERTAKING CONSTITUTE DIRECT PRIMARY, IRREVOCABLE AND UNCONDITIONAL OBLIGATIONS. THE BANK FURTHER ACKNOWLEDGES ITS OBLIGATIONS UNDER THIS UNDERTAKING WILL NOT BE ABATED, SUSPENDED, ABROGATED, VARIED, DISCHARGED OR OTHERWISE PREJUDICED OR AFFECTED BY ANY MATTER OR THING WHICH, IN THE ABSENCE OF THIS PROVISION, WOULD OR MIGHT HAVE THAT EFFECT, EXCEPT FOR A DISCHARGE OR AMENDMENT EXPRESSLY MADE OR AGREED TO IN WRITING BY THE CONTRACTOR.

(C) THE BANK MAY AT ANY TIME, WITHOUT BEING REQUIRED TO DO SO, PAY TO THE CONTRACTOR THE AMOUNT LESS ANY AMOUNT OR AMOUNTS IT HAS PREVIOUSLY PAID UNDER THIS UNDERTAKING AND WHEN IT HAS DONE SO THE LIABILITY OF THE BANK UNDER THIS UNDERTAKING WILL IMMEDIATELY CEASE AND DETERMINE.

(D) IF TWO OR MORE PERSONS ARE NAMED AS THE CONTRACTOR, THIS UNDERTAKING TAKES EFFECT FOR THE BENEFIT OF THEM JOINTLY AND A DEMAND UNDER THIS UNDERTAKING BY ANY ONE OR MORE OF THEM IS DEEMED TO BE A DEMAND BY BOTH OR ALL OF THEM JOINTLY.

(E) THE CONTRACTOR MAY ASSIGN THIS UNDERTAKING TO ANY PERSON [AND UPON RECEIPT OF NOTIFICATION TO THE BANK IN WRITING, THE BANK UNDERTAKES TO MAKE PAYMENT CLAIMED UNDER THIS UNDERTAKING TO THE PERSON SPECIFIED IN THE NOTICE WHICH WILL CONSTITUTE A FULL AND VALID DISCHARGE TO THE BANK IN RELATION TO THE PAYMENT.]

GOVERNING LAW

THIS UNCONDITIONAL UNDERTAKING IS GOVERNED BY AND IS TO BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF WESTERN AUSTRALIA

SCHEDULE 4 - PROGRESS CALCULATION

4.A Procurement Progress Calculation

The Subcontractor as part of their Progress Claim may include the value of procurement of the following items in accordance with clause 37.1 and the Procurement Progress Calculation document included in schedule 4 progressively.

1. Bulk material to be fabricated (steel structure, steel plate, liner etc).
2. Bulk material not to be fabricated (piping and E&I.
3. Equipment.

The subcontractor must provide sufficient evidence that the various procurement activities identified in the Procurement Progress Calculation document have been carried out in order to enable the Contractor's Representative to assess the Subcontract value thereof.

4.B Indirect Progress Calculation

When assessing the value of WUSC completed in accordance with the Subcontract up to the date of the progress claim, the Contractor's Representative shall use the following method for calculating the value of indirect Costs.

(Value of Direct Works completed to date divided by Direct Cost Total) x Indirect Cost Total

Note: There will be no increase to the contract indirect cost amount when the contract value of direct works do not exceed 110% of the original contract value of direct works cost amount.

1. Bulk Material - to be Fabricated (Steel Structure, Steel Plate, Liner etc.)