Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd

7; [1997] HCA 37 Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd [2022] NSWSC 59 Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 2) [2023] NSWSC 1405 Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 3) [2023] NSWSC 1596 Shun Sheng Pty Ltd v Lei (No 2) [2023] NSWSC 1623 Talifero v Asbestos Injuries Compensation Fund Ltd as Trustee for the Asbestos Injuries Compensation Fund (2018) 98 NSWLR 1107; [2018] NSWCA 227 Tavcol v Valbeet [2014] NSWSC 1563 United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168 Universal Publishers Pty Ltd v Australian Executor Trustees Ltd [2013] NSWSC 2021 Wolfenden v International Theme Park Pty Ltd (trading as Wonderland) [2008] NSWCA 78 Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443; [1979] HCA 21 Young v Cooke [2017] NSWCA 33 Texts Cited: P Elligner and D Neo, The Law and Practice of Documentary Letters of Credit (Hart Publishing, 2010) Category: Principal judgment Parties: Shinetec (Australia) Pty Ltd (First Appellant) Shanxi Construction Investment Group Co Ltd (Second Appellant) The Gosford Pty Ltd (First Respondent) David Anthony Hurst (Second Respondent) David Henry Sampson (Third Respondent) Macquarie Bank Ltd (Fourth Respondent) (submitting appearance) Bank of China Ltd (Fifth Respondent) Representation: Counsel: F Assaf SC, M Karam, B Smith (Appellants) JT Gleeson SC, RJ May (First, Second and Third Respondents) J Kay Hoyle SC, T Scott (Fifth Respondent)

Solicitors: Pinsent Masons (Appellants) Johnson Winter & Slattery (First, Second and Third Respondents) HWL Ebsworth Lawyers (Fourth Respondent) (submitting appearance) King & Wood Mallesons (Fifth Respondent) File Number(s): 2023/00465518 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division, Commercial List Citation: [2023] NSWSC 1405 Date of Decision: 20 November 2003 Before: Stevenson J File Number(s): 2021/220732

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The Gosford Pty Ltd ("Gosford") and Shinetec (Australia) Pty Ltd ("Shinetec") were parties to a "Design and Construction Head Contract", which provided that Shinetec would fund the first $37,000,000 of construction costs of a property development in Gosford, New South Wales. Shinetec agreed to provide a standby letter of credit in the amount of $37,000,000 to secure its funding obligation. Shinetec's parent company, Shanxi Construction Investment Group Co Ltd ("Shanxi"), procured a standby letter of credit in that amount in favour of Gosford from the Bank of China Ltd, Shanxi Branch. The standby letter of credit expired on 31 July 2021. On 26 July 2021 receivers were appointed to Gosford by a secured creditor. The receivers served a demand on the standby letter of credit on Bank of China on Friday 30 July 2021. On Monday 2 August 2021, Shinetec sought and obtained interlocutory relief from the Supreme Court of New South Wales. On the same day, Shanxi sought and obtained orders from the Taiyuan Intermediate People's Court, which have been extended subsequently, and presently remain in place until 24 July 2024. They have at all times bound the Bank of China, preventing it from making payment. In the Supreme Court of New South Wales, Shinetec sued Gosford, its receivers and their bank, Macquarie Bank Ltd, seeking to maintain that there was no entitlement to serve the demand on Bank of China. Shinetec withdrew its claim against that Bank well before trial, and disavowed fraud. Shinetec sought a declaration that the demand was "invalid and of no effect" and an order that the standby letter of credit be returned. Gosford by a cross-claim sued Bank of China, seeking judgment in the amount of the standby letter of credit, $37,000,000. The Bank's defences relied on the demand being signed by Gosford's receivers, and the order of the Taiyuan Intermediate People's Court. It did not allege fraud. The primary judge dismissed Shinetec's claim, and entered judgment in favour of Gosford, but in light of the order of the Chinese court, also issued a stay. Shinetec appealed, joining Shanxi as the second appellant. Shanxi and Shinetec contended that Gosford's demand on the standby letter of credit was invalid, or void, or of no effect, because the Construction Contract was suspended, but also because Gosford was subject to an "implied negative stipulation" in the Construction Contract that was breached when the demand was made. Shanxi and Shinetec also relied on the defences run by Bank of China in response to Gosford's cross claim, that the demand had been signed by Gosford's receivers, and the order of the Chinese court disentitled Gosford from obtaining judgment. The Court held, dismissing the appeal: (1) In the absence of any claim for fraud or unconscionability, any breach of the Construction Contract by Gosford did not mean that its call on the letter of credit was invalid or void or of no effect. It is axiomatic that, absent fraud or unconscionability, the issuing bank must pay if the documents presented are compliant. If the beneficiary is in breach, it will be liable in damages to its contracting party, but that gets determined at a trial, and is not a reason for the bank not to comply with its undertaking to pay: at [11], [134]-[140]. United City Merchants (Investments) Ltd v Royal Bank of Canada [1983] 1 AC 168, followed. (2) In the absence of fraud or unconscionability, an injunction may issue to prevent the beneficiary of a standby letter of credit from making a demand, where the beneficiary has promised only to make a demand in certain circumstances. Equity intervenes to prevent the demand being made, not because it is invalid (or "void" or "of no effect") as between beneficiary and bank, but because the beneficiary has promised its counterparty that it will only call on the security in certain circumstances. Equity will enforce that promise by an injunction, assuming it can be shown that damages are not an adequate remedy for the breach. In addition to quia timet injunctions, a mandatory injunction is available in principle, although there will often be powerful discretionary considerations telling against such relief. But neither Shinetec nor Shanxi ever sought such relief, either at trial or on appeal: at [12]-[13], [141]-[146]. Clough Engineering Ltd v Oil & Natural Gas Corporation Ltd [2008] FCAFC 136; 249 ALR 458, Dedert Corporation v United Dalby Bio-Refinery Pty Ltd (2017) 59 VR 607; [2017] VSCA 368, Universal Publishers Pty Ltd v Australian Executor Trustees Ltd [2013] NSWSC 2021, Merton v Bank of Queensland Ltd [2013] NSWCA 68 and Tavcol v Valbeet [2014] NSWSC 1563, followed and applied. (3) The appointment of receivers to a beneficiary does not change the beneficiary's name. Nor does it mean that the receivers are authorised transferees of the beneficiary. The receivers act as agents of the company, getting in the company's property. When the Bank of China received confirmation from Gosford's bank that the demand was made on Gosford's letterhead and on its behalf, albeit signed by receivers acting for Gosford, there was no proper basis for the Bank of China not to comply, save for the order made by the Taiyuan Intermediate People's Court: at [14], [163]-[172]. Australian Mutual Provident Society v George Myers & Co Ltd (in liq) (1931) 47 CLR 65; [1931] HCA 31 and Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407; [1997] HCA 37, applied. (4) The order obtained by Shanxi from the Taiyuan Intermediate People's Court which "suspended" the Bank of China's obligation to pay under the standby letter of credit did not extinguish the debt owed by the Bank to Gosford. It merely prevented the Bank from making payment for the time being. The order was interlocutory, expressed in the language of "suspending", was made without hearing from Gosford, and made it plain on its face that after the suspension expired, the Bank would have to pay: at [15], [182]-[190]. (5) When Shanxi sued Gosford in China, Shanxi said that Gosford had committed fraud. At trial in Australia, Shinetec disavowed any allegation of fraud. On appeal, neither Shinetec nor Shanxi maintained that Gosford or anyone acting on its behalf had committed fraud. Nonetheless, in this Court, Shinetec and Shanxi insisted that they were permitted to litigate in China irrespective of the outcome of the litigation in Australia. The parallel proceedings maintained in Australia and China were a clear case of an abuse of process: at [16]-[18], [191]-[197]. CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 393-394; [1997] HCA 33 and Carron Iron Company v Maclaren (1955) 5 HL Cas 416; 10 ER 961, followed and applied.

JUDGMENT

1. THE COURT: The Gosford Pty Ltd ("Gosford") and Shinetec (Australia) Pty Ltd ("Shinetec") were parties to a "Design and Construction Head Contract", which provided that Shinetec would fund the first $37,000,000 of construction costs of a property development in Gosford, New South Wales. Shinetec agreed to provide a standby letter of credit in the amount of $37,000,000 to secure its funding obligation. Shinetec's parent company, Shanxi Construction Investment Group Co Ltd ("Shanxi"), procured a standby letter of credit in that amount in favour of Gosford from the Bank of China Ltd, Shanxi Branch. The standby letter of credit expired on 31 July 2021. On 26 July 2021 receivers were appointed to Gosford by a secured creditor (Gemi 149 Pty Ltd). The receivers served a demand on the standby letter of credit on Bank of China on Friday 30 July 2021. The standby letter of credit and the demand are annexed to this judgment.
2. Some three years later, Bank of China has neither honoured nor dishonoured that demand. That is not said by way of criticism of the Bank. It came about because on Monday 2 August 2021, Shinetec sought and obtained interlocutory relief from the Supreme Court of New South Wales, and on the same day Shanxi applied for relief from the Taiyuan Intermediate People's Court, obtaining an order suspending payment the following day. The orders made by the Supreme Court of New South Wales were made ex parte, and remained in force for a few days, but thereafter continued, consensually, pending the trial, against parties other than Bank of China. The orders made by the Taiyuan Intermediate People's Court were also made ex parte. They have been extended subsequently, and presently remain in place until 24 July 2024. They have at all times bound the Bank of China. In March 2023, Bank of China itself approached the Shanxi Higher People's Court to seek a revocation of the orders, but its application was refused.
3. Two proceedings were tried over three days last November in the Commercial List of the Supreme Court of New South Wales. 1. First, Shinetec by summons sued Gosford, its receivers and their bank Macquarie Bank Ltd, seeking to maintain that there was no entitlement to serve the demand on Bank of China. Shinetec had originally joined Bank of China but withdrew its claim against that Bank well before trial. Shinetec did not contend that Gosford or anyone acting on its behalf had committed fraud when making a demand on the standby letter of credit. Shinetec sought a declaration that the demand was "invalid and of no effect" and an order that the standby letter of credit be returned. 2. Secondly, Gosford by a cross-claim sued Bank of China. Gosford said that Bank of China was in breach of its obligations under the standby letter of credit. It sought judgment in the amount of the standby letter of credit, $37,000,000. The Bank's defences relied on the demand being signed by Gosford's receivers, and the order of the Taiyuan Intermediate People's Court. It did not allege fraud.

Factual background

1. The dispute arises from a failed property development of land in central Gosford owned by the first respondent, Gosford. (Subsequent to the events giving rise to this litigation, in around June 2022 the land was sold to a third party for $32,000,000.)
2. Gosford had the benefit of a development consent described as "Approved Mixed Use Development, Commercial/Retail, Supermarket, Hotel and Shoptop Housing Development", granted by the local council. By letter dated 18 November 2019, the council modified that consent pursuant to s 4.55(1A) of the Environmental Planning and Assessment Act 1979 (NSW) (being of the view that doing so was a minor modification able to be done without further public consultation), so as to permit certain development, including "demolition of existing structures" to occur prior to the issue of a construction certificate.

The Construction Contract

1. By "Design and Construction Head Contract" made on 15 June 2020 ("Construction Contract"), Gosford as "Principal" agreed with Shinetec as "Contractor" to design and construct the development. The "Formal Instrument of Agreement" stated that the Guaranteed Maximum Price (or GMP) was $185 million plus GST, and the rights, entitlements, liabilities and obligations of the parties were suspended until all conditions precedent were satisfied. One of the conditions precedent was "the Principal securing finance (on terms acceptable to the Principal) sufficient to meet the finance amount".
2. Clause 37.1A, titled "Contractor funded payment", acknowledged and agreed that: pursuant and subject to the terms of a separate agreement between the Contractor and the Principal, the Contractor has agreed to fund the payment of the first part of the GMP and direct design or construction-related costs of variations (but not Contractor additional entitlements), to the amount in the aggregate of the funding amount".
3. The "funding amount" was defined to be the amount in item 6A of an annexure. That definition took the following form: $37,000,000 (plus GST) and the parties acknowledge and agree that: (a) the Contractor shall provide a stand-by letter of credit (SBLC) in favour of the Principal from its parent company or nominee for the purpose of securing the Contractor's obligation to finance that part of the Works to which the funding amount applies; (b) the Principal must return the SBLC to the Contractor upon the earlier to occur of: (i) the termination of the contract; (ii) the whole of the funding amount being deemed to have been paid to the Contractor in accordance with clause 37.2(d).
4. The words "Terms & Conditions of funding subject to the loan agreement" were written in hand immediately after that definition.

The Loan Agreement

1. So far as the evidence disclosed, there was no extant loan agreement at the time the Construction Contract was entered into. A "Loan Agreement" dated 26 November 2020 identified the development site and its purpose was to assist with Gosford's construction funding for that site. The Loan Agreement referred to an entitlement on the part of Gosford as borrower to draw down funds from time to time for the loan purpose. It was in the amount of $37,500,000 but nothing was said to turn upon the $500,000 discrepancy.
2. Returning to the Construction Contract, cl 37.2 referred in broadly familiar terms to the making of progress claims and their assessment by a superintendent, following which they were to be paid. However, cl 37.2(d) provided: prior to the application of the whole of the funding amount in accordance with clause 37.1A(a), be deemed to have paid to the Contractor the amount of the progress certificate as relates to the GMP and direct design or construction-related costs of variations (but not Contractor additional entitlements);
3. The appellants maintained that the Construction Contract and the Loan Agreement were to be read together. When Shinetec performed construction work and made a progress claim, the effect of cl 37.2(d) was to deem there to have been a payment by Gosford of the amount, as well as a draw down notice under the Loan Agreement pursuant to which Shinetec would be paid using its own funds. The practical effect of the deeming for which Shinetec contended is that, for the first $37,000,000 of work done by Shinetec for Gosford, it would be taken to have been paid by monies borrowed by Gosford from itself, and would emerge as if those progress claims had been paid in full but nonetheless Gosford owed Shinetec that amount under the Loan Agreement.
4. That construction is not without its difficulties, not least insofar as its effect appears to be to circumvent the regime established by the Building and Construction Industry Security of Payment Act 1999 (NSW), but they were not the subject of argument and may be passed over for present purposes. We proceed on the basis of the operation of the Construction Contract and Loan Agreement for which the appellants contend, noting that in any event, nothing turns on this.

The standby letter of credit

1. The definition of funding amount in item 6A of the annexure of the Construction Contract not merely identifies the amount of $37,000,000 plus GST, but also includes an acknowledgement and an executory promise by each party. The drafting is less than ideal, but the meaning is clear.
2. Shinetec complied with its obligation to provide a standby letter of credit, and it is the call upon that letter of credit which gives rise to this dispute. Its parent Shanxi applied to the Bank of China, Shanxi Branch. Its application included, as part of what was described as a "solemn commitment", the following: We are fully aware of the risks under the Standby Letter of Credit and understand that this falls under the category of cross-border guarantee. Where there is a claim, an advance will be paid by you first and reflected in our company's credit information. We are will to bear all the risks that may result from this.
3. The standby letter of credit had a transaction reference number of "GC0377020000874". It was addressed to "The Gosford Pty Limited (ACN 630 253 557)" and then stated Gosford's address in Sydney. It stated that "Bank of China Ltd, Shanxi Branch", hereinafter called the "Guarantor", "have agreed to give the standby letter of credit on behalf of the Contractor". The Contractor was defined to be Shinetec. There followed: Therefore, we hereby affirm that we are responsible to you, on behalf of the Contractor, up to a total amount of AUD37,000,000.00 (say Australian dollars thirty seven million only), and we undertake to pay you unconditionally and independently upon our receipt of your first written demand in original paper form declaring the Contractor fails to perform its obligations under the contract and specifying in which respects the Contractor is in failure and amount claimed.
4. The standby letter of credit also provided: For the purpose of identification, any such demand in original should be presented to us through your bank confirming that the signatures thereon are authentic with their confirmation by authenticated SWIFT.
5. The reference in that passage to "your bank" was a reference to Gosford's advising bank, Macquarie Bank Limited. Macquarie Bank sent the Bank of China such a confirmation on 30 July 2021.
6. The standby letter of credit was said to be "only personal to you and is not assignable or transferable". It was expressed to be subject to "ISP 98", which is a reference to "International Standby Practices 98", being rules issued by the International Chamber of Commerce in 1998. This Court (coincidentally including two of the judges hearing the present appeal) considered the operation of those rules upon a standby letter of credit in Griffin Energy Group Pty Ltd (Subject to Deed of Company Arrangement) v ICICI Bank Ltd [2015] NSWCA 29; 317 ALR 395. It was common ground between the experts on Chinese law that the wording was sufficient to incorporate those provisions.

The events leading up to the demand on the standby letter of credit

1. Following the modification of the development consent, various work including demolition occurred on the site and two progress claims were lodged by Shinetec and approved by the superintendent. They were in the amounts of $3,193,225.42 (including GST) and $2,035,668.23 (including GST), and were dated 4 December 2020 and 21 January 2021 respectively.
2. Work thereafter ceased and an exchange of correspondence including show cause notices ensued. No fewer than three sets of receivers were appointed to Gosford. The circumstances in which the first appointment occurred were not fully explained in the evidence, but the appellants said, seemingly uncontroversially, that they were appointed "by a party unrelated to this litigation". Shinetec appointed Messrs Albarran and Kijurina as receivers and managers of Gosford on around 6 April 2021 seemingly pursuant to an unregistered second mortgage. However, on 26 July 2021 the second and third respondents were appointed receivers, pursuant to a first ranking registered mortgage granted by Gosford in favour of its lender, Gemi 149 Pty Ltd. Correspondence between the receivers was to the effect that the latter, appointed by a first ranking secured creditor, displaced the former; a position which accords with what was said in comparable circumstances in In re Metropolitan Amalgamated Estates Ltd; Fairweather v Metropolitan Amalgamated Estates Ltd [1912] 2 Ch 497 at 502 ("It is clear, however, that notwithstanding the order appointing Whitehill, the first mortgagees were entitled to come in and displace him"). In any event, no challenge was made to the validity of their appointment. The receivers appointed by Gemi 149 caused the demand upon the standby letter of credit to be made. It was common ground that the demand was served on the Shanxi Branch of the Bank of China on 30 July 2021.
3. The demand was a lengthy document, as may be seen from the attachment to these reasons. It concluded as follows: DEMAND A. This letter of demand is being presented by and on behalf of Gosford to the counter at the BOC branch at No. 186 Pingyang Rd, Taiyuan, Shanxi Province, being the branch named in the Letter of Credit. B. Gosford's bank, Macquarie Bank, has duly confirmed via SWIFT that the signatures on the letter of demand are authentic. C. This letter constitutes a demand upon your bank to comply with the unconditional and independent undertaking to Gosford in the Letter of Credit to pay the sum of AUD37 million forthwith. D. This demand is being presented with the original of the Letter of Credit which shall remain in the possession of Gosford's representative. E. Your bank is authorised to make the payment by either delivering to Gosford's representative a bank cheque made out to Gosford for the sum of AUD 37 million or alternatively by EFT to: Account name: The Gosford Pty Ltd (Receiver and Manager Appointed) BSB: [XXXXXX] Account no: [XXXXXX] Swift Code: [XXXXX] In the case of the latter, it is a condition that your bank must provide written details of a completed transfer to Gosford's representative before the representative leaves the branch.

The steps taken thereafter in Australia

1. On Monday 2 August 2021, Shinetec approached the Duty Judge in the Equity Division of the Supreme Court of New South Wales ex parte, appearing by solicitor and counsel. As is usual in this country, orders were made on an interim basis, meaning that they expired of their own force on Friday 6 August unless renewed beforehand, and the onus lay on Shinetec to demonstrate a sufficient reason for their continuation. This was explained by McLelland J in Resort Hotels Management Pty Ltd v Resort Hotels of Australia Pty Ltd (1991) 22 NSWLR 730 and confirmed in Minister for Local Government v Blue Mountains City Council (2018) 97 NSWLR 1132; [2018] NSWCA 133 at [47]. As is usual in this country, orders were made requiring all five defendants (Gosford, its receivers, Macquarie Bank and Bank of China) to be served promptly with all of the material relied on by Shinetec. As is usual in this country, Shinetec gave the "usual undertaking as to damages", exposing it to an unlimited liability to anyone (including third parties) if it turned out that the injunctive relief should not have been given and loss was thereby sustained. On that basis, Shinetec obtained temporary orders preventing Gosford, the receivers, the Bank of China and Macquarie Bank from taking any further steps on the demand, or from issuing any further demand. The orders are quite elaborate, including eight substantive injunctions, but all deal with the transfer of money pursuant to the demand and any future demand. All that presently matters is that none required Gosford or its receivers to withdraw or countermand the demand.
2. On the same day, Shanxi approached the Taiyuan Intermediate People's Court, filing a civil complaint. The defendant was Gosford, and Bank of China Shanxi Branch was identified as the "third party". As translated, the "Complaint reason" was "Dispute over fraud in relation to letter of credit" and the "Claims" were: 1. The Plaintiff requests to affirm the act of Defendant that demanding Third Party to pay RMB 177 million (AUD 37 million) under a standby letter of credit No. GC0377020000874 has constituted fraud in relation to letter of credit; 2. The Plaintiff requests an order that the Third Party terminate the payment of RMB 177 million (AUD 37 million) under the standby letter of credit No. GCO377020000874; 3. The Defendant shall be responsible for the cost of this proceeding.

Other events prior to trial

1. As noted above, the proceedings pending in the Taiyuan Intermediate People's Court remain undetermined. There is some evidence that attempts have been made, in early 2024, to serve Gosford. This Court was told that service had not as yet been effected. The orders suspending payment on the standby letter of credit have repeatedly been extended.
2. The proceedings in the Supreme Court of New South Wales returned to the Duty Judge later that week, and on 13 August 2021 the interlocutory orders were continued until further order by consent, once again upon Shinetec by its counsel giving the usual undertaking as to damages. On the same date the proceedings were transferred into the Commercial List.
3. It is not quite clear why it took slightly more than two years for the proceedings to be listed for trial. In part it was a consequence of an unsuccessful application for a stay by Bank of China, based on forum non conveniens principles. The Bank's motion was filed on 10 October 2021, heard on 1 February 2022 and dismissed for reasons occupying 107 paragraphs on 4 February 2022: Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd [2022] NSWSC 59. In part it will have been because the dispute extended to a number of issues of Chinese law, leading to Shinetec and Gosford retaining experts. In part it was because both Shinetec and Gosford advanced claims for damages which were withdrawn before the trial. We are not seeking to attribute blame for the delay between the resolution of the application for a stay in February 2022 and the hearing in October 2023. We wish merely to note that in circumstances where injunctive relief had been obtained preventing payment pursuant to a letter of credit, one would ordinarily have expected the proceedings to have been listed for hearing more swiftly than occurred.
4. One other matter which occurred prior to trial should be noted. In March 2023, the Bank of China approached the Shanxi Higher People's Court to seek a revocation of the Civil Ruling made by the Taiyuan Intermediate People's Court. The ruling of that Court was in evidence, as was a translation. The latter records that the Bank submitted that its standby letter of credit was "in essence an independent guarantee", that the terms of the Chinese statutes were not met, in that contrary to Article 14 of the PRC Independent Guarantee Provisions, "Shanxi Construction Investment failed to sufficiently prove the existence of a high probability of fraud described in Article 12 of the PRC Independent Guarantee Provisions". The entirety of the reasoning of the Court (as opposed to reproducing the background and Bank of China's submissions) was as follows: After examination, the Court believed that the application for suspension of payment of the subject standby letter of credit by Shanxi Construction Investment Group Co., Ltd. was in compliance with the provisions of PRC law, the application of law of the (2021) Jin 01 Min Chu No. 809 Civil Ruling made by the Taiyuan Municipal Intermediate People's Court was correct. The Australian court also rules to suspend payment under the subject standby letter of credit. The suspension of the payment under the subject standby letter of credit is conductive [sic] to protecting the legitimate rights and interests of the parties. According to the provisions of Article 157 of the Civil Procedure Law of the People's Republic of China and Article 13 of the Supreme People's Court on Several Issues concerning the Trial of Letter of Credit Dispute Cases, the Court rules as follows: The request for reconsideration made by Bank of China Shanxi Branch shall [be] rejected.

The trial of Shinetec's summons

1. In light of grounds 1 and 4 of the appeal, it is necessary to summarise some aspects of the case presented by Shinetec at trial.
2. The trial commenced on Wednesday 25 October 2023 and the evidence was complete on Thursday 26 October. As is usual in the Commercial List, the parties had supplied written submissions in support of their cases in advance of the trial (they were dated 20 October). The parties provided written submissions in advance of oral addresses on Monday 30 October. The parties were also granted leave to supply supplementary submissions shortly after the trial, the last of which was supplied on 7 November.

Shinetec's case at trial

1. Shinetec's case at trial was that the demand upon the standby letter of credit was invalid. It sought a declaration that the demand was "invalid and of no effect", and an order for the return of the letter of credit. In its opening written submissions, dated five days before the trial commenced, it abandoned its claim for damages.
2. Shinetec's further amended summons, filed 3 April 2023, which was the form of the originating process which went to trial, joined Gosford as the first defendant, the receivers as the second and third defendants, and Macquarie Bank as the fifth defendant. There was no fourth defendant. Although Bank of China had originally been joined, Shinetec did not proceed against Bank of China at trial. Bank of China was present at trial, but only as a cross-defendant on Gosford's cross-claim.
3. At the commencement of a submission made after the conclusion of the trial, Shinetec explained that its decision not to sue Bank of China was deliberate, and that it affected the relief that it sought: 2. It is important to note that when the CLS [Commercial List Statement] was filed on 8 September 2021, Bank of China was not a party to the proceedings. Bank of China has never been a party to the primary proceedings brought by Shinetec and was only subsequently sued in the Cross-Claim, a proceeding to which Shinetec is not a party. 3. Plainly, a declaration as to invalidity could not bind a non-party, namely the Bank of China. In any event, the absence of a contractual entitlement under the Construction Contract between Shinetec and The Gosford to make the Demand could not affect the validity of the Demand as against the Bank of China. Shinetec has been clear about that. If that was what was intended by the CLS, at the very least Bank of China would have been a party. 4. However, when the CLS was filed, separate proceedings were already on foot in China against The Gosford and the Bank of China in which the Bank of China had already been restrained from making any payment pursuant to the SBLC. 5. In those separate Chinese proceedings, Shinetec's parent was already seeking to impugn the Demand on the basis of fraud: see the Civil Complaint at Ex 1/CB 15/5265-5267. No allegation of fraud has ever been made here and it is common ground that such an allegation is required to seek to set aside a demand as against a bank. 6. The claims made in the Chinese proceedings against The Gosford and Bank of China and the injunctive relief already granted there explain why the same case was not being prosecuted by Shinetec here. It was unnecessary and, importantly, the bringing of such a parallel case here would have been inappropriate and open to claims of it being an abuse and subject to a stay: Henry v Henry (1996) 185 CLR 571 at 590-591.

Shinetec's belated claim for injunctions

1. Extraordinarily, Shinetec submitted at the close of trial that the interim injunctions made by Lindsay J should remain in force until a final determination of the rights and obligations of the parties under the Construction Contract which, save for the demand, were not the subject of the proceedings. This was done in paragraphs 23 and 25 of its written submissions after the conclusion of evidence as follows: 23. Shinetec seeks the following relief: (a) Declarations as set out in paragraphs 19, 20(a) and 20(b), above; (b) An order for the return of the original SBLC (prayer 2 of the final relief claimed in the Further Amended Summons); (c) Additionally, Shinetec submits that there should be no orders made disturbing or discharging the injunctions granted by Lindsay J on 2 August 2021 and extended (by consent) by Lindsay J on 13 August 2021 until further order - in particular orders 8, 9, 10, 11 and 14 made on 2 August 2021. … 25. In relation to the injunctions granted by Lindsay J, those orders, inter alia, restrain The Gosford from transferring or dealing with any sum of money transferred to it by the Bank of China (see order 14 made on 2 August 2021). The injunctions were extended, with the consent of the Defendants, until further order of the Court. The Defendants have not foreshadowed any application to discharge or vary those orders and there would be no proper basis for doing so, particularly noting that there has been no final determination of the substantive rights and obligations, claims and counterclaims between the parties under the Construction Contract and there will be no such determination in these proceedings (other than in relation to the question of any entitlement to make the Demand).
2. There is no way of describing this other than to say that it was misconceived. To be sure, we did not understand that any attempt was made by counsel now retained by the appellants to defend this aspect of the case advanced by their predecessors. The fact that such a submission could be made at all warrants our making the following points.
3. The purpose of interlocutory relief is to maintain an appropriate position pending the final resolution of the parties' rights at trial. There is never any occasion for a defendant to "foreshadow" an application to vary interlocutory relief at the conclusion of a final trial on all issues. If a plaintiff loses at trial, then it will ordinarily follow that it should never have been entitled to the interlocutory relief. It will also follow that the plaintiff may be exposed to a claim by the defendant or a third party on the usual undertaking as to damages.

The reasons of the primary judge

1. It is not necessary to summarise the reasons of the primary judge in great detail, principally because Shinetec (now joined by Shanxi) in large measure does not seek to reagitate on appeal the submissions it made without success at trial. It suffices to note that the primary judge dealt with the substance of the two grounds relied upon by Shinetec as follows.
2. First, even if the demand contained false statements, as they were not alleged to be fraudulent, his Honour concluded that they could not affect the validity of the demand. The primary judge recorded the various matters which Shinetec contended made the demand false at [141], saying that it falsely asserted that the conditions precedent had been satisfied, Shinetec had failed to perform its obligations, Shinetec had ceased construction work at the site in or about October 2020 and had unlawfully suspended all activity on the site and abandoned the work, and had committed various breaches, including fundamental breaches, of the Construction Contract, and that Gosford had suffered loss and damage of at least $67,000,000 as a result of Shinetec's alleged breaches.
3. The primary judge recorded at [142] that, by alleging that those matters were "false", Shinetec was not alleging fraud: Shinetec contends these statements are false in the sense of being "factually incorrect". As I have said, Shinetec does not contend that the statements were made knowingly falsely. That is, it is not alleged the statements were made fraudulently.
4. Further, the primary judge recorded with some precision what Shinetec meant by its claim that the demand was invalid. It is important to bear in mind that Shinetec was not proceeding against Bank of China. The primary judge said at [143]-[146]: In its Commercial List Summons, Shinetec seeks a declaration that the Demand "is invalid and of no effect". That may have suggested that Shinetec's contention was that the Demand was invalid for all purposes, and not only as between Shinetec and Gosford. Indeed, at one point, Mr Zahra submitted that "our case is that the Demand was invalid full stop". However, Mr Zahra and Mr Galvin made clear that Shinetec's "case did not seek to impugn the validity of the Demand as against the Bank of China". Thus, in closing written submissions, Mr Zahra and Mr Galvin said: "It should be noted at the outset that Shinetec does not cavil with the propositions that (1) a bank in the position of the Bank of China, which is presented with an apparently compliant demand on a standby letter of credit, is required to pay; and (2) on the face of it, subject to the identity point involving the Receivers & Managers, the Demand was (as between [Gosford] and Bank of China) sufficient to engage the [Standby Letter of Credit]. That was made clear in opening and Shinetec does not resile from that position." This concession was correctly made. As between an issuer and a beneficiary, the existence of "factually incorrect" statements in a demand under a Letter of Credit are, absent fraud, immaterial.

The appeal to this Court

1. Appeals lie from judgments and orders, not reasons. Orders were made on 15 December 2023 following delivery of the second reasons for judgment. Shinetec lodged a notice of intention to appeal, extending the time within which it could appeal for three months. On 14 March 2024 it filed a notice of appeal. That document went through various iterations, but ultimately grounds 1, 4, 5, 6 and 7 of a further amended notice of appeal were pressed. In further answer to ground 6, Gosford and the receivers sought, by notice of contention, to rely upon an attempt to present documents in around April 2024, in belated answer to Bank of China's request for information concerning the identity and status of Gosford.
2. Grounds 6 and 7 reiterate points made by the Bank of China at first instance in response to Gosford's cross-claim, and which were not made by Shinetec, which withdrew its claim against Bank of China. It was common ground that the appellants needed leave to advance grounds 6 and 7.
3. Well in advance of the hearing of this appeal, in written submissions dated 24 May 2024, Gosford and the receivers made their position abundantly clear: [Shanxi] had submitted to the jurisdiction and has been joined as a party to these proceedings. The first to third respondents consent to Shinetec and [Shanxi] being granted leave to advance Appeal Grounds 6 and 7 (i.e. prayers 2 to 5 on the motion), only on the condition that [Shanxi] discontinue, and undertake to this Court not to reinstitute, its parallel proceedings in the Taiyuan Court. This is not a situation in which a party has invoked the exercise of the Court's jurisdiction as of right; it is instead seeking the exercise of a discretion in its favour. There are overwhelming considerations against the exercise of that discretion. [Shanxi] should not be given leave in order to maintain parallel proceedings in two jurisdictions: an appeal from a final judgment after a trial in New South Wales and proceedings at first instance in China in which no trial has yet been held. This gives rise to the very real risk of inconsistent judgments, particularly where [Shanxi's] whole purpose in pursuing the Chinese proceedings must be to obtain a judgment which will conflict with the judgment already given below and any judgment contrary to its interests in this Court. That would bring the administration of justice into disrepute. It also has the undesirable consequence of wasting the parties' and judicial resources. In those circumstances, unless [Shanxi] discontinues its proceedings in the Taiyuan Court, and undertakes to this Court not to reinstitute those proceedings, leave to advance Appeal Grounds 6 and 7 should be refused.

Ground 5 - error in refusing leave to amend?

1. The logical starting point is ground 5 of the appeal, which challenged the primary judge's refusal, at the outset of the trial, to permit Shinetec to amend its Commercial List Statement so as to advance a case based upon an implied term of the Construction Contract.
2. Importantly, in its written submissions dated 20 October, five days before the trial commenced, Shinetec had confirmed that it sought a declaration that the demand was invalid and the return of the standby letter of credit, and costs, adding that "The claim for damages is not pressed".
3. The proposed amended document (MFI-1) seems to have been supplied in the late afternoon of 24 October, the day before the trial was to commence. It alleged, for the first time, that "[i]t was an implied term of the Construction Contract that The Gosford was only entitled to make a demand pursuant to the standby letter of credit when there was a contractual entitlement to do so under the Construction Contract". It was then alleged that there was a new precondition to the making of a valid demand on the standby letter of credit. As sought to be amended, paragraph 23 provided: The Gosford was only able to make a valid demand on the Letter of Credit in circumstances where: (a) Shinetec had failed to secure finance as required by Item 6A of Part A of the Construction Contract and as reflected in the Loan Agreement; (b) the demand was made on or prior to 31 July 2021; (c) the demand was in writing to the counter of the Bank of China, Shanxi Branch; and (d) There was a contractual entitlement to do so under the Construction Contract.
4. The amendment was raised at the outset of the trial. Senior counsel explained why the amendment was sought: [I]n the event that your Honour finds firstly that the demand was invalid, and makes the declaration that's sought by my client, but then goes on to find - and this is the part that we suggest is unlikely - that the Bank of China is nevertheless liable to The Gosford; that would create a situation where the Bank of China would presumably pay out to The Gosford. The Bank of China would then claim on the plaintiff's parent, Shinetec Corporation, a Shanxi corporation in China … then the parent will claim against my client, and my client will be left out of pocket for $37 million, and so the reason for the amendment is in that unlikely, we say, contingency. We don't wish that to occur and so we then rely - we don't want it to be said that there is no cause of action - so we then rely on the implied negative term.

Grounds 1 and 4 - was the demand invalid because of breach of some provision of the Construction Contract?

1. These grounds may conveniently be addressed together. They have the same form: both maintain that by reason of a promise made by Gosford to Shinetec in the Construction Contract, Gosford's demand is "invalid" (or void or of no effect). In the case of ground 1, the point is said to be that the non-satisfaction of the conditions precedent has the result that the parties' rights and obligations were suspended. In the case of ground 4, the point is said to be that the demand was issued contrary to an implied negative stipulation. But in both cases, the express or implied provisions of the Construction Contract are said by the appellants to render the demand on the standby letter of credit invalid (or void or of no effect).
2. Ground 1 maintains that because the conditions precedent of the Construction Contract were not satisfied, the parties' rights and obligations under it were suspended, such that neither Gosford nor its receivers had power to make the demand upon the standby letter of credit. The consequence is said to be that the demand was "invalid and/or void and of no effect, for all purposes". This ground says that the primary judge erred in finding that the Commercial List Statement did not assert any link between the conditions precedent of the Construction Contract and Shinetec's contention that the demand was invalid, and erred in failing to determine whether the conditions precedent had been satisfied.
3. Gosford says that this ground was not advanced at trial, that it could have been met by evidence, and that in any event is it misconceived.
4. Ground 4 seeks leave to advance the ground which was the subject of the amendment rejected at the outset of the trial, namely, that there was an implied negative stipulation to which Gosford was subject, such that a valid demand could not be made unless Shinetec had failed to perform its obligation to lend $37,000,000. The appellants say that in making the demand, Gosford was in breach of the implied negative stipulation, and that the demand was consequently "invalid and/or void and of no effect".
5. Gosford says that this ground is not available unless ground 5 succeeds, and in any event it is misconceived.

Discretionary reasons relating to grounds 1 and 4

1. We have concluded that ground 5 should fail, and we agree that it would not be appropriate to grant leave in respect of ground 4, so as to permit the appellants to advance a ground which was correctly rejected at trial. It is to be borne in mind that Shanxi and Shinetec's application was far from an ordinary case of an appellant wishing to raise a new point on appeal. Shinetec's case at trial was diametrically opposed to the case now sought to be presented in this Court. This was not merely a case where the implied negative stipulation was outside the issues framed in the pleadings. As the primary judge recorded at [106], significantly, after the conclusion of the trial: In a note delivered following closing submissions at my invitation, Mr Zahra and Mr Galvin said: "Shinetec did not bring a breach of contract case and did not allege a breach of the negative stipulation in the Construction Contract. It was prevented from amending to plead and bring such a case. The Court will find no such case being advanced in any written or oral submission made on behalf of Shinetec."
2. Of course, subsequent to the trial Shinetec has appointed new solicitors and new counsel to conduct this appeal. But where a litigant consciously chooses not to advance a case at trial, it is no small thing to permit the same point to be advanced on appeal.
3. We also note that ground 1, at least as drafted, maintained that the demand was "invalid and/or void and of no effect, for all purposes". That seems to amount to an application to determine this appeal in a way that binds the Bank of China, which is antithetical to the limited way in which Shinetec's challenge was cast at trial, explicitly not so as to bind the Bank of China (against which Shinetec did not proceed). The divergence between how the argument was advanced at trial and how it was sought to be advanced on appeal was emphasised by Mr Gleeson: Whatever one makes of Mr Zahra's legal conceptions, he did seem to think he was not invalidating the demand as between us and [Bank of China], even if he proved his points. He did seem to think he could get an invalidating order as between Gosford and Shinetec, even though the demand was not issued between those parties. He never identified how that could happen in law.
4. Still further in relation to ground 1, the appellants contend that the primary judge was bound to resolve the question whether the conditions precedent were or were not satisfied. Their submissions characterise this as "error in the judicial reasoning process - the learned primary judge failed to determine all relevant factual and legal issues, thereby failing to make all appropriate factual findings material to the disposition of the case". This puts the position too high.

Substantive reasons for dismissing grounds 1 and 4

1. But the most fundamental reason why these grounds must fail is that they misconceive how the standby letter of credit operates.
2. First, contrary to the premise of ground 1, the Construction Contract is not the source of the power to issue a demand under the standby letter of credit. If as Shanxi and Shinetec contend, the conditions precedent were not satisfied, and the parties' rights and obligations under the Construction Contract were suspended, that did not mean that Gosford could not make a demand on the standby letter of credit. Making a demand involved presenting particular documents upon the Bank of China Shanxi Branch. Gosford's entitlement to do so did not depend on the Construction Contract. It was independent of the Construction Contract.
3. Shanxi and Shinetec sought to escape that proposition by relying on a variety of decisions in other areas of the law. Thus they submitted that their contention was "consistent with authorities to the effect that where essential conditions precedent to the exercise of a contractual right to renew or exercise an option have not been fulfilled, the purported exercise of a contractual right is 'ineffectual'", citing BS Stillwell & Co Pty Ltd v Budget Rent-A-Car System Pty Ltd [1990] VR 589 at 599. They submitted that "an analogy may be drawn to cases where a company passes a resolution where a condition precedent for that resolution (such as quorum) has not been satisfied. In such circumstances, the resolution will be void and of no effect for all purposes", citing (among others) Eastone Mining Pty Ltd v Eastone Holding Pty Ltd [2019] NSWSC 1850; 142 ACSR 38 at [43]. And they submitted that "[a] further analogy may be drawn to conditions precedent in insurance contracts: where a condition precedent has not been satisfied, any claim for indemnity pursuant to an insured's rights under the contract is ineffective for all purposes". But none of this is to the point. The standby letter of credit gave rights to Gosford as against the Bank of China, independently of the Construction Contract.
4. Secondly, Shanxi and Shinetec submitted that a demand on the standby letter of credit by Gosford which was in breach of the negative implied stipulation was itself "void and/or invalid and/or of no effect". That is not the law. The question for the Bank was whether the demand was made prior to 31 July 2021 and presented to the Bank of China Shanxi Branch by formal document on behalf of Gosford. There were certain circumstances which permitted the Bank to make enquiries (these are addressed below). But it is no element of the validity of the demand that Gosford be not in breach of any of the terms of the Construction Contract.

Ground 6 - the operation of ISP 98 rr 6.11 - 6.13 following the appointment of receivers

Overview

1. This ground reflects an aspect of Bank of China's defence of the cross-claim at trial, and is not maintained by that bank on appeal. The ground turns on rr 6.11-6.13 of ISP 98 and the receivers' signatures on Gosford's demand. The short point is that the appellants seek leave to contend that because the demand was signed by the receivers, Bank of China was entitled to request further information, which was not supplied, and in the meantime it was entitled neither to honour nor to dishonour the demand. The respondents seek to uphold the reasons of the primary judge, to the effect that ISP 98 rr 6.11-6.13 are not engaged by the appointment of receivers. They further say, by way of fallback, that it was the interlocutory relief obtained by Shinetec which prevented a response being given, and that when that relief was discharged after final judgment was given, they provided an amply sufficient response to Bank of China's request.

Reasons of the primary judge and relevant provisions of ISP 98

1. This ground challenges the reasoning of the primary judge at [235]-[239]: First, it may be that a purpose of the requirement in the Letter of Credit that Gosford's bank confirm that the signatures on any demand were "authentic" was to confirm to the Bank, as the issuer of the Letter of Credit, that the signatures on any demand were "not fraudulently applied". But it was also "for the purpose of identification". Second, the Macquarie Bank 30 July 2021 SWIFT communication went further, and confirmed that the signatures on the Demand were the authentic signatures of "officers" of Gosford. That may not have been called for by the Letter of Credit. But it was a vital part of the documentary material placed before the Bank. It confirmed that the Receivers were not claiming to be successors to Gosford. It follows from this that r 6.11 was not enlivened. The Bank was not entitled to make a request for further documents under r 6.13, as it purported to do in its 3 August 2021 SWIFT communication to Macquarie Bank. The Bank's obligations to honour or give notice of dishonour were, for those reasons, not suspended. Rule 6.12 takes the matter no further, as it is only relevant if the presenting party is a "claimed successor" for the purpose of r 6.11. As the Bank accepts that the Demand was otherwise compliant, and subject to the matters to which I will now turn concerning the effect of the Civil Ruling in the Chinese Court, it follows that Gosford is entitled to judgment against the Bank. (Footnote omitted.)
2. Rules 6.11-6.13 of ISP 98 relevantly provide: Transfer by Operation of Law 6.11 Transferee by Operation of Law Where an heir, personal representative, liquidator, trustee, receiver, successor corporation, or similar person who claims to be designated by law to succeed to the interests of a beneficiary presents documents in its own name as if it were the authorised transferee of the beneficiary, these Rules on transfer by operation of law shall apply. 6.12 Additional Document in Event of Drawing in Successor's Name A claimed successor may be treated as if it were an authorised transferee of a beneficiary's drawing rights in their entirety if it presents an additional document or documents which appear to be issued by a public official or representative (including a judicial officer) and indicate: (a) that the claimed successor is the survivor of a merger, consolidation, or similar action of a corporation, limited liability company, or other similar organization; (b) that the claimed successor is authorised or appointed to act on behalf of the named beneficiary or its estate because of an insolvency proceeding; (c) that the claimed successor is authorised or appointed to act on behalf of the named beneficiary because of death or incapacity; or (d) that the name of the named beneficiary has been changed to that of the claimed successor. 6.13 Suspension of Obligations upon Presentation by Successor An issuer or nominated person which receives a presentation from a claimed successor which complies in all respects except for the name of the beneficiary: (a) may request in a manner satisfactory as to form and substance: (i) a legal opinion; (ii) an additional document … from a public official; (iii) statements … regarding the status of the claimed successor as successor by operation of law; …. (b) Until the issuer or nominated person receives the requested documentation, its obligation to honour or give notice of dishonour is suspended, but any deadline for presentation of required documents is not thereby extended.

Submissions

1. Shinetec and Shanxi said that the primary judge was wrong to find that the second and third respondents, the receivers Messrs Hurst and Sampson, were not claiming to be successors to Gosford for the purposes of r 6.11, including by reference to the principle of "strict compliance" to be derived from ISP 98 rr 1.03 and 1.11. They said that the rule was engaged, and that the Bank of China's obligation to pay was suspended pending a response to its request to Macquarie Bank dated 3 August 2021: Whereas: The demand letter dated July 28, 2021 is signed by "The Gosford Pty Ltd (Receivers and Managers Appointed)", but the beneficiary of the standby letter of credit issued by our bank is "The Gosford Pty Limited (ACN630253557)", there are significantly [sic] differences in the form of the two names. Therefore, in accordance with the provisions of Article 6.13A [sic] of ISP 98, you are now required to submit the following documents in original paper form: I. Legal Opinion: II. Additional documents issued by public officials mentioned in Article 6.12 of ISP 98, III. The statement, agreement and indemnity regarding the status of the claimed successor as successor by operation of law, The above-mentioned documents must be submitted to our bank within 7 working days. Until we receive the above-mentioned documents, our obligation to honour or give notice of dishonor is suspended.
2. Gosford and the receivers said that neither Shinetec nor Shanxi should be permitted to run arguments which Shinetec had not run at trial. They said that if the appellants were permitted to run the arguments, they wished to adduce fresh evidence of what occurred, which was to the effect that: 1. Macquarie Bank had been prevented, by the orders obtained by Shinetec on 2 August 2021, from passing on the SWIFT message to Gosford until those orders were discharged on 14 December 2023. 2. Following Shinetec filing a notice of appeal on 14 March 2024, a Chinese law firm was engaged to provide a belated response to Bank of China's request for documents. 3. On 11 April 2024 an attempt was made to deliver a legal opinion confirming that "The Gosford Pty Ltd (Receivers and Managers Appointed)" was the same legal entity as "The Gosford Pty Limited (ACN630253557)" and was not a successor, an ASIC search of the company and the General Security Deed and Deed of Appointment by which the receivers were appointed. However, apparently on the basis that the documents were not transactional, delivery could not be effected and the solicitor was told to deliver them to Bank of China's lawyers. 4. On 15 April 2024, the documents were supplied to Bank of China's (Australian) solicitors, King & Wood Mallesons.

Consideration

1. Subject to one point, we would permit Shanxi and Shinetec to argue this ground. Shanxi and Shinetec assert, and we accept, that they will ultimately be liable for any sum paid by Bank of China. There is no evidence of that, but there is no reason to doubt that Bank of China will look to Shanxi to meet the payment made pursuant to a letter of credit issued at its request, and to the extent that the payment discharges indebtedness of Shinetec, Shanxi will be entitled to an indemnity from its subsidiary. Accordingly, both are "aggrieved" or "sufficiently interested" in the judgment against Bank of China to entitle them to seek leave to appeal, within the meaning of the authorities collected in Talifero v Asbestos Injuries Compensation Fund Ltd as Trustee for the Asbestos Injuries Compensation Fund (2018) 98 NSWLR 1107; [2018] NSWCA 227 at [19].
2. The point was live before the primary judge, although Shinetec did not argue it at trial. However, telling against the grant of leave is the fact that, at trial, Shinetec chose not to sue Bank of China (it had originally been joined but was removed when on 31 March 2023 a Further Amended Summons was filed which did not include the Bank). Mr Gleeson SC characterised this as "a deliberate decision not to make claims which would determine the rights between them, us and Bank of China" (transcript, 12 July 2024, p 63), to which the appellants made no response. Accordingly, he maintained that if Shinetec of Shanxi were permitted to run these points, it would be an abuse of process. It was said on the first day of the appeal at the outset of its submissions: They're trying now to run Bank of China's points, which, for reasons unexplained, they never ran at trial. If they were to win them, presumably they say, "We love the New South Wales Courts," and they try and use that to say Bank of China doesn't have to pay. If they lose the points, they wish to continue in China to reach the same conclusion by alleging the fraud which they've disavowed in Australia. The dual proceedings are vexatious because of the refusal to accept that an adverse result here will be binding upon them in China. That's the vice in terms of CSR v Cigna.
3. We will return to the alleged abuse of process, because there are other aspects to the abuse relied on in connection with the orders obtained from the Taiyuan Intermediate People's Court which arise in connection with ground 7. Save for the submissions concerning abuse of process, we would be minded to grant leave to the appellants which are directly affected by the judgment against Bank of China to run the points the Bank ran at trial.

Ground 7 - the effect of the order of the Taiyuan Intermediate People's Court

1. This ground maintained that the primary judge erred in entering judgment against Bank of China, and ought to have found that "no right to payment ever from [the Bank of China] ever accrued to [Gosford] under the Letter of Credit" and accordingly dismissed the cross-claim. The appellants said that this was because: 1. the Bank of China's "obligations to honour or give notice of dishonour were suspended from 3 August 2021 until the requested documentation under r 6.13 of ISP 98 was provided"; and/or 2. "the Shanxi branch of the [Bank of China] was prevented, by no later than 4 August 2021, from making any payment under the Letter of Credit pursuant to the Civil Ruling of the Taiyuan Intermediate People's Court dated 3 August 2021 and Enforcement Assistance Notice dated 4 August 2021."
2. The first half of this ground takes the matter no further than ground 6. For the reasons given above, rr 6.11-6.13 of ISP 98 were not engaged when the receivers acting as agents of Gosford called on the standby letter of credit for funds to be paid to Gosford.
3. The second half of this ground involves a question of construing the effect of the order of the Taiyuan Intermediate People's Court dated 3 August 2021.
4. The primary judge addressed this at [248]-[260]. His Honour noted at [248] that there was a dispute between the experts about whether the Bank of China was bound, or merely the Shanxi Branch, and a dispute whether the effect of a judgment of the Supreme Court of New South Wales would cause the Civil Ruling to be suspended or terminated. His Honour did not resolve the dispute between them. However, his Honour noted at [250] that the experts were agreed that the Civil Ruling was binding, at least, on the Shanxi Branch of the Bank of China, and that the ruling was under Chinese law in the nature of an interim and not a final ruling.
5. The primary judge said that the Bank of China did not dispute Gosford's submission that entry of judgment does not in terms impose an obligation upon the defendant to do something: at [256]. The result was that: Thus, the mere entry of judgment in favour of Gosford against the Bank would not, itself, cause the Bank to contravene the Civil Ruling.
6. His Honour entered judgment in favour of Gosford but stayed it pending further approach by Gosford or the Bank to the Chinese Court.

Abuse of process

1. The arguments advanced in support of ground 7 acutely illustrate the parallel litigation which has been commenced by Shanxi and Shinetec. Shanxi and Shinetec seek to say that the primary judge erred in entering judgment against Bank of China because of an interim order Shanxi obtained in China, based on an allegation of fraud, when in the proceedings brought by Shanxi and Shinetec in this Court, fraud has been expressly disavowed.
2. Not all parallel proceedings are vexatious or oppressive. The joint judgment of the High Court of Australia in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 393-394; [1997] HCA 33 distinguished cases of parallel proceedings which were vexatious or oppressive from those which are not: One well established category of case in which an injunction may be granted in the exercise of equitable jurisdiction is that involving proceedings in another court, including in a foreign court, which are, according to the principles of equity, vexatious or oppressive. Thus, it was said in Carron Iron Company v Maclaren that "[w]here [there is] ... pending a litigation here, in which complete relief may be had, [and] a party to the suit institutes proceedings abroad, the Court of Chancery in general considers that act as a vexatious harassing of the opposite party, and restrains the foreign proceedings." In Société Aerospatiale, the Privy Council emphasised that the various cases decided in the nineteenth century with respect to vexation and oppression, including Peruvian Guano Company v Bockwoldt, have continuing significance for the grant of anti-suit injunctions. Those cases establish that the mere co-existence of proceedings in different countries does not constitute vexation or oppression. In particular, Peruvian Guano establishes that "double litigation [which] has no other element of oppression than this, that an action is going on simultaneously abroad, which will give other or additional remedies beyond those attainable in [the domestic forum]" does not amount to vexation or oppression. More recently, in Bank of Tokyo Ltd v Karoon, Robert Goff LJ pointed out, correctly, in our view, although without specific reference to underlying equitable principle, that foreign proceedings are to be viewed as vexatious or oppressive only if there is nothing which can be gained by them over and above what may be gained in local proceedings. On the other hand, they are vexatious or oppressive if there is a complete correspondence between the proceedings or, in terms used in Carron Iron Company, if "complete relief" is available in the local proceedings. (Footnotes omitted.)

Conclusion and orders

1. In summary, the substantive grounds raised by Shanxi and Shinetec based on the Construction Contract somehow rendering Gosford's demand invalid or void or of no effect (grounds 1 and 4) are bad in law, because they misapprehend the nature of a standby letter of credit. Further, the primary judge was correct to refuse to permit Shinetec to advance the ground based on an "implied negative stipulation" on the first day of the trial (ground 5), and as a matter of discretion, those grounds should not be permitted to be run.
2. Grounds 6 and 7 are arguments which were made by Bank of China in defence of the cross-claim. At trial, Shinetec had not proceeded against the Bank, which was present only as a respondent to Gosford's cross-claim. Bank of China accepts the correctness of the rejection of those grounds. However, in this Court, Shanxi has been joined, and both Shanxi and Shinetec wish to advance those grounds, in circumstances where they refuse to undertake to be bound by the outcome of this Court's decision in the pending proceedings between Shanxi, Gosford and Bank of China in China. The grounds are wrong as a matter of law, because they misapprehend the nature of the appointment of receivers and of interlocutory orders. And further, we have accepted Gosford's submission that it would be an abuse of process to permit Shanxi and Shinetec to advance these grounds.
3. During the hearing of the appeal, Mr Gleeson at one stage suggested that other orders should be made if this Court accepted his submission that there was an abuse of process. However, as was indicated at the time, in the absence of any formal application, we regard it as inappropriate to accede to that request. As we understand it, the stay of the judgment against the Bank of China ordered by the primary judge on 14 December 2023 remains in place, and application may be made to his Honour consequent upon the dismissal of this appeal.
4. For those reasons, the entirety of the appeal (save for those grounds which were dismissed on 11 July 2024 when they were abandoned by the appellants) must be dismissed. Because we have addressed the grounds substantively, in addition to dealing with the submissions pertaining to the grant of leave, and since the appellants have already filed a notice of appeal, it is not necessary for us separately to address the grant of leave. We have not determined the notice of contention, but that needs no separate order dealing with it. It has been unnecessary to resolve Gosford's notice of motion to adduce fresh evidence, which should be dismissed (but with its costs being costs in the appeal). No party sought to be heard against an order that costs of the appeal followed the event.

ANNEXURES Letter of Credit (592853, pdf) Demand (1012731, pdf) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 July 2024