Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd

1. In the absence of any application prior to 3 December 2025 for an alternative costs order, the fifth to seventh defendants are to pay the plaintiff's costs of the separate question heard on 7 October 2025.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. The issue raised for determination as a separate question in this proceeding is whether, and on what basis, the proceeds of a letter of credit fall with the scope of "Secured Money" in a general security agreement.
2. In this proceeding, the plaintiff (Shinetec) seeks declaratory and other relief in respect of the distribution of the sum of $47,843,889.04 (SLOC Proceeds) that Shinetec contends was paid to the first defendant (The Gosford) by the Bank of China on or about 2 July 2025 in response to a demand made by the receivers appointed to The Gosford (Receivers) on a standby letter of credit (Letter of Credit) made in favour of The Gosford.
3. By prayer 6 of the originating process, Shinetec seeks a declaration that the SLOC Proceeds fall within the scope of "Secured Money" pursuant to a general security agreement between it and The Gosford dated 26 November 2020 (General Security Agreement). It appeared to be common ground, or at least there was no dispute, that each of the third to seventh defendants are secured creditors of The Gosford. The declaration sought by Shinetec is opposed by the fifth, sixth and seventh defendants (together, Gemi parties). The third, fourth, eighth, ninth and tenth defendants did not appear at the hearing of the separate question.
4. At the hearing of the separate question, Shinetec relied on affidavits from (a) Wei Nui, the General Manager of Shinetec at all relevant times, (b) Chongjun Wang, a director of Shinetec, (c) Weizhong Chen, a National Accreditation Authority for Translators and Interpreters certified translator, and (d) Professor Bing Ling, an expert witness on Chinese law. Shinetec's witnesses were not required for cross examination, and none of their evidence was otherwise disputed for the purposes of the determination of the separate question.
5. The Gemi parties did not rely on any affidavits at the hearing of the separate question. The Gosford and the second defendant, David Hurst as a receiver and manager of the property of The Gosford, appeared at the hearing and confirmed that, given there are several secured creditors with competing claims, they take a neutral position on the construction issue that has been raised.
6. For the reasons that follow, I have concluded that the liability of Shinetec to its ultimate parent company, Shanxi Construction Investment Group Co Ltd (SCIG) arising from the demand made by the Receivers on the Bank of China that led to the payment by the Bank of China of the SLOC Proceeds to The Gosford falls within the scope of the defined term "Secured Money" in the General Security Agreement.

1. On or about 15 June 2020, Shinetec and The Gosford entered into a design and construction contract (Construction Contract). Pursuant to that agreement, Shinetec, as a contractor, agreed to design and construct a development (Project) on a property owned by The Gosford in Mann Street in Gosford (Site) and to provide finance in an amount of $37 million, representing the first 20% of the construction costs of the Project, being $185 million.
2. On 10 July 2020, the Letter of Credit was issued by the Bank of China at the request of SCIG, the ultimate parent company of Shinetec.
3. On 26 November 2020, (a) Shinetec as the lender, The Gosford as the borrower, and Gregory John Walker as a guarantor, entered into a loan agreement (Loan Agreement), and (b) The Gosford, Mr Walker and Peter Zhu as grantors, and Shinetec as the secured party, entered into the General Security Agreement.
4. In late 2020 and early 2021, some preliminary works were undertaken on the Site, and Shinetec issued The Gosford with two progress claims for that work. It appeared to be common ground, or at least there was no dispute, that these claims in an aggregate amount of $5.2 million were deemed to have been lent by Shinetec to The Gosford.
5. On 26 July 2021, the Receivers were appointed by one of the Gemi parties, Gemi 149 Pty Ltd, as receivers of The Gosford.
6. On 30 July 2021, The Gosford, by the Receivers, served a demand on the Bank of China for payment under the Letter of Credit (Demand).
7. On 2 August 2021, Shinetec commenced proceedings in the Supreme Court of New South Wales seeking a declaration that the Demand was invalid and of no effect, and an order that The Gosford is to return the Letter of Credit (Supreme Court Proceeding).
8. On 20 November 2023, the Supreme Court Proceeding was determined adversely to Shinetec. The Court relevantly determined that The Gosford was entitled to make the Demand, the Bank of China was ordered to honour the Demand, and judgment was given in favour of The Gosford against the Bank of China in the sum of $37 million plus interest: Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd; The Gosford Pty Ltd v Bank of China Ltd (No 2) [2023] NSWSC 1405 (Stevenson J).
9. On 23 July 2024, the Court of Appeal of the Supreme Court of New South Wales dismissed an appeal from the judgment in the Supreme Court Proceeding: Shinetec (Australia) Pty Ltd v The Gosford Pty Ltd [2024] NSWCA 174 (Ward ACJ, Leeming and Kirk JJA) (Shinetec Appeal).
10. On 5 December 2024, the High Court refused an application by Shinetec for special leave.
11. On 1 July 2025, the Bank of China (a) paid the SLOC Proceeds in an amount of RMB226,641,286.77 ($47,843,889.04) to The Gosford, (b) seized funds from SCIG in excess of the SLOC Proceeds, and (c) refunded to SCIG the excess funds of RMB3,018,713.28. Pre-judgment and post-judgment interest calculated at Court rates from 10 August 2021 on the judgment for $37 million in the Supreme Court Proceeding (Shinetec (Australia) Pty Ltd v Gosford Pty Ltd; Gosford Pty Ltd v Bank of China Ltd (No 3) [2023] NSWSC 1596, [15] (Stevenson J)) and costs account for the difference between the $37 million amount in the Letter of Credit and the SLOC Proceeds in the amount of $47,843,889.04.
12. The SLOC Proceeds are currently held in a Macquarie Bank account in the name of The Gosford and are subject to interlocutory restraints made in this proceeding.

1. The Construction Contract provided that Shinetec's obligation to lend $37 million to fund the first 20% of construction costs was to be secured by its parent procuring a standby letter of credit in that sum in favour of The Gosford.
2. The Construction Contract comprised a "Formal Instrument of Agreement" (FIA) and "General conditions of contract for design and construct" (General Conditions). The contract price was $185 million (plus GST) (cl 2 of the FIA)
3. Clause 37.1A of the General Conditions was headed "Contractor funded payment" and provided:

"37.1A Contractor funded payment

The parties acknowledge and agree that:

(a) 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;

(b) in each progress claim made by the Contractor pursuant to clause 37.1 the Contractor shall identify:

(i) that part of the progress claim which relates to the GMP and direct design or construction-related costs of variations (but not Contractor additional entitlements);

(ii) that part of the progress claim which relates to Contractor additional entitlements.

B.3. The Loan Agreement and the General Security Agreement

1. Clause 2 of the Loan Agreement provided that the advances to be made under that clause were subject to satisfaction of the conditions precedent specified in cl 8 of the Loan Agreement. Clause 8 of the Loan Agreement relevantly included the following conditions precedent:

The right of the Borrower to draw on the Principal Sum and any liability of the Lender under this Agreement is subject to the following conditions precedent being satisfied by the Borrower (to the satisfaction of the Lender) or waived (in writing) by the Lender:

(a) a duly executed counterpart of each Specified Security Document;

...

(f) evidence that:

(i) each registrable Specified Security Document has been duly registered, as applicable; or

(ii) proper arrangements have been made, with the prior consent of the Lender, for the prompt registration of each Specified Security Document under the applicable legislation without any impediment to the Lender obtaining the priority intended by the Specified Security Document, including satisfactory update searches and results of and replies to requisitions and inquiries and the production at the Land and Property information of the relevant certificate of title for the property the subject of the Securities;

1. The term "Specified Security Documents" was defined in cl 1.1 of the Loan Agreement as:

(a) this Agreement;

(b) the General Security Agreement; and

(c) the Mortgage.

1. The Schedule to the Loan Agreement provided that the purpose of the loan was "to assist with the Borrower's construction funding for the Property", the principal sum was $37,500,000, and the securities to be provided included the execution of the General Security Agreement and PPSR registration over the assets of The Gosford and Mr Walker.
2. Pursuant to cl 3 of the General Security Agreement, The Gosford as a "Grantor" granted a security interest over all of its present and after-acquired personal property to Shinetec as security for payment of the "Secured Money". Clause 3.1 of the General Security Agreement provided:

The Grantor grants a Security Interest in the Collateral to the Secured Party as security for payment of the Secured Money.

1. Clause 1.1 of the General Security Agreement included the following definition of "Secured Money":

"means all amounts which:-

at any time;

for any reason or circumstance;

whether at law, in equity, under state or otherwise;

in each case connected with the Loan Deed, and whether or not of a type within the contemplation of the parties at the date of this deed;

(a) are payable, are owing but not currently payable, are contingently owing, or remain unpaid, by the Grantor to the Secured Party; or

(b) have been advanced or paid by the Secured Party:-

(i) at the express or implied request of the Grantor; or

(ii) on behalf of the Grantor; or

(c) the Secured Party is liable to pay by reason of any act or omission of the Grantor or has paid or advanced in the protection or maintenance of the Collateral or the security interest created by this deed following an act or omission by the Grantor; or

(d) are reasonably foreseeable as likely, after that time, to fall within any of paragraphs (a), (b) or (c) above,

but does not include an amount which is payable under a covenant or stipulation which is void under section 260 of the Income Tax Assessment Act 1936 (C'th).

A reference to Secured Money includes any part of it;

This definition applies:-

(i) irrespective of the capacity in which the Grantor or Secured Party became entitled to or is liable in respect of the amount concerned;

(ii) whether the Grantor or Secured Party is liable as principal debtor or surety or otherwise;

(iii) whether the Grantor is liable alone, or jointly, or jointly and severally with another person;

(iv) whether the Secured Party is the original obligee or an assignee of the Secured Money and whether or not;

(A) the assignment took place before or after the delivery of this deed or the making of this Security Agreement;

(B) the Secured Party consented to or was aware of the assignment; or

(C) the assignment obligation was secured;

(v) whether the Secured Party is the original Secured Party or an assignee of the original Secured Party and whether or not the Grantor consented to or was aware of the assignment;

1. The term "Loan Deed" was defined in cl 1.1 of the General Security Agreement as "the Loan Agreement between the Grantor and the Secured Party dated on the date of this deed".

1. The legal principles governing the construction of contracts are well settled.
2. The Full Court in Goldus Pty Ltd v Australian Mining Pty Ltd (Recs and Mgrs Apptd) [2023] FCAFC 27 at [85]- [88] (Beach, Derrington, Halley JJ), provided the following distillation of the relevant principles:

First, it is necessary to ask what a reasonable businessperson would have understood the terms to mean, and in that regard consideration must be given to the language used, the surrounding circumstances known to the parties and the commercial purposes or objects secured by the contract; see Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 at [35] per French CJ, Hayne, Crennan and Kiefel JJ.

Second, the terms must be given a businesslike interpretation. The task should be approached on the basis that the parties intended to produce a result that made commercial sense given the evident commercial object; see Electricity Generation Corporation at [35] and Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [19] per Allsop P (as his Honour then was). But care must be taken to ensure that it is the evident commercial object that is being given effect, recognising that minds may differ as to the commerciality of a particular outcome. There is a difference between resolving an ambiguity in language so as to avoid a construction which is commercially unreasonable or plainly inconsistent with the evident commercial object of the instrument and choosing between alternatives on the basis of a sense of commercial fairness. The task is to construe the words used, rather than to remake the commercial bargain; see Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109 per Gibbs J (as his Honour then was) in dissent, but the principle is not in doubt.

Third, commercial instruments should be construed fairly and broadly without being too astute or subtle in finding defects; see Hillas & Co Ltd v Arcos Ltd [1932] UKHL 2; (1932) 147 LT 503 at 514 per Lord Wright, cited in Australian Broadcasting Commission at 109 and 110. They should be interpreted in a practical and realistic way, and not by adopting an overly theoretical approach. Words in a commercial contract should not be approached pedantically or in a manner that would be prone to defeat the evident commercial purpose of the document; see Franklins at [19].

Fourth, documents that form part of a suite of commercial instruments should be construed together.

1. In construing a suite of commercial instruments, it may also be necessary to have regard to (a) any contract, document or statutory provision referred to in the text of a contract: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46] (French CJ, Nettle and Gordon JJ), and (b) other agreements made contemporaneously in relation to the same transaction, including with third parties, where all parties can be taken to have knowledge of the contents of all relevant instruments: McVeigh v National Australia Bank Ltd [2000] FCA 187; (2000) 278 ALR 429 at [77] (Kenny J).
2. In construing the scope of the term "Secured Money" in a similar clause to the all moneys clause in the General Security Agreement, Buss JA (with whom Steytler P agreed) stated in Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (In Liq) (2008) 36 WAR 342; [2008] WASCA 80 at [46]:

That issue must be determined not only by reference to the language of the definition of 'Secured Money', but also by reference to the language of the Securities as a whole and, further, the purpose and object which the security transaction was apparently intended to achieve. There was no evidence before the learned primary judge as to the surrounding circumstances known to Windslow and the Bank when the Securities were executed. The proper construction of the Securities must be determined as at the date of their execution, and the common intention to be objectively ascertained is that of Windslow and the Bank.

1. Finally, notions of fairness, justice or reasonableness might well be relevant to issues arising under the Contracts Review Act 1980 (NSW) or in equity in claims of unconscionability, but are not relevant to questions of contractual construction: Olympic Holdings at [29] (Buss JA, with whom Steytler P agreed) citing Re Bankrupt Estate of Murphy; Donnelly v Commonwealth Bank of Australia (1996) 140 ALR 46 at 54-55 (Hill J).

1. The resolution of the construction issue raised by the separate question turns on a determination of the following questions:

(a) has the Bank of China made any payment to The Gosford under the Letter of Credit?

(b) was the payment made by the Bank of China in effect a full drawdown of funding made available to The Gosford under the Loan Agreement?

(c) what obligations of Shinetec were secured by the Letter of Credit?

(d) do the SLOC Proceeds, or any liability of Shinetec referrable to the SLOC Proceeds, fall within the definition of "Secured Money" in the General Security Agreement?

1. In their written submissions, the Gemi parties submit that the proposition that the Bank of China had paid moneys under the Letter of Credit was doubtful given the Taiyuan Intermediate People's Court had made orders on 13 June 2025, enjoining the Bank of China from paying the $37 million to The Gosford. In the course of oral submissions, it appeared that the Gemi parties resiled from this submission.
2. In any event, I am satisfied that the funds paid by the Bank of China to The Gosford were paid under the Letter of Credit. Both the Bank of China bank statements recording the seizure of funds from SCIG's account, and the letter from the Bank of China's solicitors, King & Wood Mallesons, dated 2 July 2025 referring to the Supreme Court Proceeding, confirm that the bank had now wholly satisfied the judgment debt.

1. Shinetec contends that the payment under the Letter of Credit effectively amounted to a full drawdown of funding made available under the Loan Agreement. It submits that the fact the funds were advanced under the Letter of Credit does not alter their essential character as funds advanced pursuant to the initial funding obligation and subject to the terms of the Loan Agreement.
2. I do not accept that the payment made by the Bank of China under the Letter of Credit could in any relevant sense be construed as, in effect, a drawdown of any funding under the Loan Agreement.
3. As the Court of Appeal observed in the Shinetec Appeal at [137], the Letter of Credit expressly incorporated the provisions of International Standby Practices (ISP98) in which cl 1.06 and cl 1.07 provide the following description of a standby letter of credit:

1.06 Nature of Standbys

(a) A standby is an irrevocable, independent, documentary, and binding undertaking when issued and need not so state.

(b) Because a standby is irrevocable, an issuer's obligations under a standby cannot be amended or cancelled by the issuer except as provided in the standby or as consented to by the person against whom the amendment or cancellation is asserted.

(c) Because a standby is independent, the enforceability of an issuer's obligations under a standby does not depend on:

(i) the issuer's right or ability to obtain reimbursement from the applicant;

(ii) the beneficiary's right to obtain payment from the applicant;

(iii) a reference in the standby to any reimbursement agreement or underlying transaction; or

(iv) the issuer's knowledge of performance or breach of any reimbursement agreement or underlying transaction.

(d) Because a standby is documentary, an issuer's obligations depend on the presentation of documents and an examination of required documents on their face.

1.07 Independence of the Issuer-Beneficiary Relationship

An issuer's obligations toward the beneficiary are not affected by the issuer's rights and obligations toward the applicant under any applicable agreement, practice, or law.

1. A standby letter of credit is an independent documentary undertaking. The obligation on the Bank of China to make a payment to the beneficiary under the standby letter of credit is "independent of the underlying contract between the beneficiary and the applicant": Shinetec appeal at [140] (Ward ACJ, Leeming and Kirk JJA) citing Peter Ellinger and Dora Neo, The Law and Practice of Documentary Letters of Credit (Hart Publishing, 2010) at 138.
2. The only exceptions to what is generally described as the "independence principle" are fraud, unconscionability and a contractual promise not to call upon the standby letter of credit: Clough Engineering Ltd v Oil & Natural Gas Corporation Ltd [2008] FCAFC 136; (2008) 249 ALR 458 at [77] (French, Jacobson and Graham JJ). None of those exceptions was advanced or sought to be relied upon by Shinetec on the separate question.
3. It follows that the payment made by the Bank of China under the Letter of Credit was a payment that was made independently of any funding obligation imposed on Shinetec in the Loan Agreement or the Construction Contract. In those circumstances, the payment under the Letter of Credit cannot be characterised as a full drawdown of funding provided by Shinetec under the Loan Agreement.
4. Shinetec ultimately did not press its contention that the Bank of China made the payment under the Letter of Credit as the agent of Shinetec. It maintained, however, that the effect of the payment under the Letter of Credit was to discharge the funding obligation imposed on Shinetec under the Loan Agreement and the Construction Contract but not to discharge the obligation of The Gosford to repay those amounts to Shinetec pursuant to the Loan Agreement.
5. The critical issue in this context, however, is whether any amounts advanced to The Gosford under the Letter of Credit, that might have had the effect of discharging the funding obligation imposed on Shinetec, would fall within the definition of "Secured Money" in the General Security Agreement. Before addressing that issue, it is first necessary to determine the scope of the obligations secured by the Letter of Credit.

D.4. Obligations secured by the Letter of Credit

1. The Letter of Credit was addressed to The Gosford, noted that Shinetec had entered into a contract for the design and construction of the Project and relevantly provided:

AND, WHEREAS IT HAS BEEN STIPULATED BY YOU IN THE SAID CONTRACT THAT THE CONTRACTOR SHALL FURNISH YOU WITH A STANDBY LETTER OF CREDIT BY A RECOGNIZED BANK FOR THE SUM OF AUD37, 000, 000. 00 (SAY AUSTRALIAN DOLLARS THIRTY SEVEN MILLION ONLY) WHICH IS EQUIVALENT TO 20 PCT (TWENTY PERCENT) OF THE CONTRACT PRICE AS SECURITY FOR COMPLIANCE WITH THE CONTRACTOR'S PERFORMANCE OBLIGATIONS IN ACCORDANCE WITH THE CONTRACT.

AND WHEREAS WE, BANK OF CHINA LTD., SHANXI BRANCH, HAVING OUR REGISTERED OFFICE AT NO. 186 PINGYANG ROAD, TAIYUAN, SHANXI PROVINCE, P. R. CHINA (HEREINAFTER CALLED THE 'GUARANTOR') HAVE AGREED TO GIVE THE STANDBY LETTER OF CREDIT ON BEHALF OF THE CONTRACTOR:

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.

...

THIS STANDBY LETTER OF CREDIT SHALL BE VALID FROM ITS ISSUANCE AND CONSTITUTE AN ENGAGEMENT BINDING ON US UNTIL THE PRESENTATION TO US OF THE COPY OF THE PROGRESS CERTIFICATE UNDER THE CONTRACT OR UNTIL JULY 31, 2021, WHICHEVER IS EARLIER (THE EXPIRY DATE), AND ANY DEMAND IN RESPECT OF THIS STANDBY LETTER OF CREDIT SHOULD REACH US AT OUR COUNTER NOT LATER THAN THE CLOSE OF OUR BUSINESS HOURS ON THE ABOVE EXPIRY DATE.

1. Shinetec submits that the Letter of Credit was only arranged to secure its funding obligation under the Loan Agreement.
2. The Gemi parties submit that the Letter of Credit secures both funding and performance obligations of Shinetec under the Construction Contract. They point in particular to the phrase "FOR COMPLIANCE WITH THE CONTRACTOR'S PERFORMANCE OBLIGATIONS IN ACCORDANCE WITH THE CONTRACT" and submit that textually, this must apply to all obligations of Shinetec under the Construction Contract. It is a superficially attractive construction but does not withstand closer scrutiny, as explained below.
3. In addition, the Gemi parties rely on a Bank of China application form for a "Letter of Guarantee/Standby Letter of Credit" completed by SCIG, in which the type of facility sought was identified in a list of 30 different types of facilities as "(2) Performance Guarantee". The document is of little probative value. It was a standard application form which listed some 30 different types of facilities, each of which was relatively specific, other than the inclusion of the type that was generically described, without any particularisation, as "Performance Guarantee".
4. The scope of the obligations secured by the Letter of Credit necessarily must be construed in the context of the Construction Contract because that contract imposed the obligation on Shinetec to provide the Letter of Credit to The Gosford. The annexure to the Construction Contract included an "Item 6A funding amount" in the following terms:

$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 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).

1. The following handwritten annotation was added after (b)(ii):

Terms and Conditions of funding subject to the Loan Agreement.

1. Once the Letter of Credit is construed in the context of Item 6A in the Construction Contract, it is readily apparent, for the following reasons, that the evident commercial intention of the parties was that the obligations of Shinetec to be secured by the Letter of Credit were limited to the funding obligation.
2. First, the purpose of the provision of the Letter of Credit is expressly stated in Item 6A to be "for the purpose of securing [Shinetec's] obligation to finance that part of the Works to which the funding amount applies". The funding amount is defined as "$37,000,000 (plus GST)". The obligation of Shinetec to be secured by the Letter of Credit was confined to the provision of funding.
3. Second, the circumstances in which the Letter of Credit was to be returned to Shinetec are inextricably tied to the funding obligation. Other than an earlier termination of the Construction Contract, the Letter of Credit must be returned to Shinetec once the whole of the funding amount has been deemed to have been paid in accordance with cl 37.2(d). Pursuant to cl 37.1A of the Construction Contract, Shinetec was required to provide the funding amount in order to fund the first part of the GMP (Guaranteed Maximum Price) and direct design or construction-related costs of variations (but not Shinetec's additional entitlements under the Construction Contract). Hence, necessarily, the provision of the funding amount, in full, would occur well before the date for practical completion specified in Item 7 of the annexure to the Construction Contract, being the later of 21 December 2022 and 33 months from the satisfaction or waiver of all conditions precedent.
4. Construing the Letter of Credit as applying to both the funding and performance obligations of Shinetec under the Construction Contract would therefore make little commercial sense and be inconsistent with a businesslike interpretation. On no view did the performance obligations of Shinetec under the Construction Contract cease on the provision of the funding amount. Shinetec's performance obligations would continue until at least the date of practical completion. If the Letter of Credit was to be objectively construed as extending to Shinetec's performance obligations under the Construction Contract, there is no apparent commercial explanation as to why the Letter of Credit would be returned to Shinetec on the provision of the funds under the funding obligation, rather than on a date on which Shinetec had satisfied all, or at least substantially all, of its performance obligations under the Construction Contract.
5. Third, the amount secured by the Letter of Credit was limited to the funding amount. If the evident commercial object of the Letter of Credit was to secure both the funding amount and the performance obligations of Shinetec under the Construction Contract, it would make no commercial sense to limit the quantum of the amount secured by the Letter of Credit to the funding amount.
6. It follows that the demand made by the Receivers on the Letter of Credit was confined to the funding obligation under the Construction Contract and the Loan Agreement and did not extend to any alleged or purported failure of Shinetec to perform any other obligations in those agreements. The significance of this finding is that it (a) creates an inextricable link between the payment under the Letter of Credit and the discharge of the funding obligation under the Construction Contract and the Loan Agreement, and (b) precludes any suggestion that the Letter of Credit might have secured any other obligation of Shinetec to The Gosford.

1. In light of my conclusions above, it is now necessary to determine if, and on what basis, the SLOC Proceeds, or any liability of Shinetec referrable to the SLOC Proceeds, fall within the definition of "Secured Money" in the General Security Agreement.
2. The amounts secured under cl 1.1 of the General Security Agreement are expressly limited to amounts which are in "connection with" the Loan Agreement.
3. The Gemi parties submit that the meaning to be given to the phrase "in connection with" must be construed in the context in which it appears. They submit that in the present circumstances, there is a significant inconsistency between the Loan Agreement and the Construction Agreement because the Loan Agreement suggests on its face that money was to pass from Shinetec to The Gosford, whereas the Construction Contract makes plain that the actual arrangement was that Shinetec was deferring payment of its progress certificates. They submit that rather than lending money under the Loan Agreement, Shinetec had agreed to defer receiving payment for the first $37 million of the work that it was undertaking.
4. Next, the Gemi parties submit that the deferral of payment procedure under the Construction Contract makes plain that the actual transaction and everything that happened is referrable to the terms of the Construction Contract, and the subsequently entered into Loan Agreement is irrelevant. They submit that the Letter of Credit related to the deferral of payment of progress certificates under the Construction Contract, not to any purported loan pursuant to the terms of the Loan Agreement and, therefore, the payment of money under the Letter of Credit could not be construed as "connected with" the Loan Agreement.
5. I do not accept those submissions.
6. The liability of Shinetec is "connected" to the Loan Agreement because the Letter of Credit was expressly required to be provided for the purpose of securing the initial funding obligation which, in turn, was governed by the terms of the Loan Agreement.
7. The phrase "in connection with" has been broadly interpreted. The Full Court in Minister of Immigration and Multicultural Affairs v Singh (2000) 98 FCR 469; [2000] FCA 845 observed at [28]-[29] (Black CJ, Sundberg, Katz and Hely JJ):

The case law on the phrase "in connection with" indicates that it is an expression of wide connotation that merely requires a relation between one thing and another: for example, Perrett v Commissioner for Superannuation (1991) 29 FCR 581; Burswood Management Ltd v Attorney-General (Cth) [1990] FCA 203; (1990) 23 FCR 144; Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280. But in Burswood at 146 the Full Court quoted with approval a statement made by Davies J as follows:

"Expressions such as 'relating to', 'in relation to', 'in connection with' and 'in respect of' are commonly found in legislation but invariably raise problems of statutory interpretation. They are terms which fluctuate in operation from statute to statute ... The terms may have a very wide operation but they do not usually carry the widest possible ambit, for they are subject to the context in which they are used, to the words with which they are associated and to the object or purpose of the statutory provision in which they appear."

The phrase "in connection with" does not necessarily require a causal relationship between the matters said to be connected: Perrett, and phrases such as "having to do with" are sometimes referred to as a useful synonym_: Re Nanaimo v Community Hotel Ltd_ [1944] 4 DLR 638. But so too are phrases such as "in the course of", or "forming part of": Dawson v Hoffman Brick and Potteries Ltd [1924] ArgusLawRp 19; [1924] VLR 208. As the Full Court emphasised in Burswood at 146 reference to reported cases is of little assistance, because the nature of the relationship between one thing and another which is encompassed by the phrase "in connection with" depends so much upon the statutory context in which the words appear.

1. Nor was there any requirement for such a liability under the Letter of Credit to be in the specific contemplation of the parties at the time of entry into the General Security Agreement. The definition of "Secured Money" in the General Security Agreement expressly provided that amounts falling within the definition were secured "whether or not of a type within the contemplation of the parties as at the date of this deed".
2. Moreover, the definition of "Secured Money" in the General Security Agreement is expressly stated to apply irrespectively of the capacity in which the Grantor, including The Gosford, or Shinetec, as a Secured Party, became entitled to, or liable in respect of, the amount concerned and whether each was liable as a principal debtor, surety or otherwise.
3. The Construction Contract and the Loan Agreement must therefore be construed together. Clause 37.1A(a) of the Construction Contract provides that the parties have agreed that "pursuant and subject to the terms of a separate agreement", Shinetec has agreed to fund the first part of the construction costs up to the amount of the "funding amount". The separate agreement in context is clearly the Loan Agreement that was subsequently entered into between the parties to the Construction Contract, not least because the "Principal Sum" under the Loan Agreement ($37,500,000) was in substantially the same amount as the "funding amount" under the Construction Contract ($37,000,000), and the "Loan Purpose" in the Loan Agreement was stated to be "To assist with the Borrower's construction funding for the Property".
4. Further, the handwritten annotation on the definition of the "funding amount" in the Annexure to the Construction Contract expressly provided that the terms and conditions of the funding were "subject to the loan agreement".
5. I accept, as submitted by the Gemi parties, that the drawdown procedure for the provision of funds provided in the Loan Agreement is inconsistent with the deferral of payment of progress certificate procedure. Nevertheless, it is also readily apparent that it is only the Loan Agreement that provides any obligation on The Gosford to repay the advances represented by the deferral of the payment of the progress claims, for the payment of interest on the advances, and the date by which the advances are to be repaid. Significantly, the Loan Agreement also expressly provided that the securities to secure the advances made pursuant to the terms of the Loan Agreement included the General Security Agreement.
6. For these reasons, I am satisfied that the deferral of progress claims under the Construction Contract was made on the terms and conditions as to repayment, interest, date of repayment and security provided in the Loan Agreement. It necessarily follows that the deferred progress claims are "connected with" the Loan Agreement for the purposes of the definition of "Secured Moneys" in the General Security Agreement.
7. Next, Shinetec submits that the funds debited from SCIG's account with the Bank of China following the demand made by the Receivers on the Letter of Credit is a liability that falls within the scope of para (c) of the definition of "Secured Money", namely, an amount which:

(c) the Secured Party is liable to pay by reason of any act or omission of the Grantor or has paid or advanced in the protection or maintenance of the Collateral or the security interest created by this deed following an act or omission by the Grantor;

1. Shinetec submits that para (c) should be construed as applying to any amounts (a) Shinetec is "liable to pay by reason of any act or omission" of The Gosford, and (b) Shinetec "has paid or advanced in the protection or maintenance of the Collateral or the security interest created by this deed following an act or omission" by The Gosford.
2. Shinetec submits that the first limb of para (c) is engaged in the present case. It submits that the relevant act of The Gosford, as a Grantor, was performed by the Receivers, as the agent of The Gosford, calling on the Letter of Credit. It submits that by calling on the Letter of Credit, The Gosford caused Shinetec to incur a liability to pay SCIG the full amount of the SLOC Proceeds because Shinetec had assumed the responsibility for any liabilities incurred by SCIG in connection with the Letter of Credit. It was apparently common ground, or at least not disputed, that SCIG has both a contractual and statutory right of recourse against Shinetec in respect of obligations it incurred as a consequence of procuring the Letter of Credit on behalf of Shinetec.
3. The Gemi parties submit that by reason of the tenses used in para (c), it is plain that it is directed at a liability to make a payment (future looking) and payments made (past looking) in the "protection or maintenance of the Collateral or the security interest created by this deed". They submit that "the protection or maintenance of the Collateral or the security interest" qualifies both liabilities for future payments and payments or advances already made by Shinetec, as the Secured Party.
4. I do not accept the construction of para (c) advanced by the Gemi parties.
5. The equivalent paragraphs in the "Secured Money" clause in the mortgage considered in Olympic Holdings at [14] were expressed as applying to all amounts of money that came within the following terms:

(a) are payable, are owing but not currently payable, are contingently owing, or remain unpaid by the Mortgagor to the Bank on any account whatsoever; or

(i) at the express or implied request of the Mortgagor; or

(ii) on behalf of the Mortgagor; or

(c) have been advanced or paid by the Bank or which the Bank is liable to pay by reason of any act or omission of the Mortgagor; or

(d) are reasonably foreseeable as likely, after that time, to fall within any of paragraphs (a), (b) or (c) above,

1. Paragraph (c) of the definition of "Secured Money" in Olympic Holdings established a singular test limited to money that had been advanced or paid, or was liable to be paid, by the lender "by reason of any act or omission of the Mortgagor". The singular test in Olympic Holdings was established by placing the sole qualifier "by reason of any act or omission of the Mortgagor" at the end of the sentence directed at both past and future payments.
2. Paragraph (c) of the definition of "Secured Money" in the General Security Agreement, however, textually, is directed at two distinct matters. The first matter is qualified by the phrase "by reason of any act or omission of the Grantor", and the second matter by the phrase "following an act or omission by the Grantor". I accept, as submitted by the Gemi parties, that the first phrase is forward looking, and the second phrase is past looking. Nevertheless, in construing a contractual clause, it is necessary to have regard to all the words in a clause. The construction advanced by the Gemi parties would suggest that the first phrase was redundant and should be ignored. If the "protection or maintenance of the Collateral or the security interest" was intended to apply to both future liabilities and past payments, the qualification at the end of para (c), "following an act or omission of the Grantor", would be sufficient. The insertion of the first qualification, "by reason of any act or omission", not only introduces a different test, "by reason of an act or omission", in place of "following an act or omission", it also breaks up para (c) into two distinct matters.
3. The claim by the Receivers on the Letter of Credit was an act of The Gosford, as Mortgagor, for the purposes of para (c), and the amount that Shinetec must pay to its parent SCIG was an amount that Shinetec was liable to pay "by reason of" that act of the Receivers, as the agent of The Gosford.
4. For these reasons, I find that the liability of Shinetec to pay SCIG an amount equal to the SLOC Proceeds, by reason of its liability to repay its parent company, SCIG, the amount of the SLOC Proceeds paid by the Bank of China to The Gosford under the Letter of Credit, does fall within para (c) of the definition of "Secured Money" under the General Security Agreement.
5. Shinetec also seeks to rely on paras (a) and (d) of the definition of "Secured Money" in the General Security Agreement. Paragraphs (a) and (d) extends the definition of "Secured Money" to:

(a) are payable, are owing but not currently payable, or contingently owing, or remain unpaid by the Grantor to the Secured Party; ...

(d) are reasonably foreseeable as likely, after that time, to fall within any of paragraphs (a), (b) or (c) above,

1. Shinetec submits that para (a) is engaged because The Gosford does not "get a free $47 million from the bank without incurring any consequent liability to repay it to someone". It submits that the only party to whom it could be under an obligation to repay that amount was Shinetec. Next, it submits that if a person has agreed to lend money, but the money is not provided by the lender and is instead provided by a third party from the realisation of an independent security, that does not change the nature of the original obligation. It submits that the obligation to repay the loan does not "go away" because the funds were provided by a third-party intermediary.
2. The Gemi parties submit in response to the "windfall" contentions advanced by Shinetec that if there is any obligation on the part of The Gosford to "repay" any money to Shinetec, it would only be on the basis that Shinetec would be able to claim the amount as an unsecured creditor in an insolvent estate. They submit that Shinetec would be in no different position to other unsecured creditors.
3. Given my finding that para (c) is engaged, it is strictly not necessary to address Shinetec's contentions with respect to paras (a) and (d). Nevertheless, I am satisfied that para (a) would also have been engaged, if I had otherwise found that para (c) was not engaged.
4. In short, I am satisfied that the payment by the Bank of China under the Letter of Credit can give rise to an amount that is payable, owing but not currently payable, contingently owing or unpaid by The Gosford to Shinetec for the purposes of para (a). As explained above, the obligation the subject of the Letter of Credit was the funding obligation in the Loan Agreement and the Construction Contract. I accept that the SLOC Proceeds were paid pursuant to an obligation imposed on the Bank of China under the Letter of Credit, not pursuant to any contractual arrangements between The Gosford and Shinetec. Nevertheless, that payment necessarily had the effect of discharging any outstanding funding obligation owed by Shinetec to The Gosford and gave rise to an obligation on The Gosford pursuant to the terms of the Loan Agreement to repay Shinetec the amounts advanced in satisfaction of the funding obligation.
5. For these reasons, I am satisfied that the liability of The Gosford to repay the funding obligation to Shinetec pursuant to the terms of the Loan Agreement, by reason of the payment of the SLOC Proceeds to The Gosford, is an amount that is unpaid, or remains unpaid, by The Gosford as "Grantor" to Shinetec, as the "Secured Party" for the purposes of para (a).
6. Finally, I do not discern any basis on which para (d) could provide any independent or alternative basis by which any amount referrable to the SLOC Proceeds would fall within the definition of "Secured Money" if I had otherwise found that neither para (c), nor, alternatively, para (a) was engaged.

1. The separate question is to be answered in the affirmative but in terms that more precisely reflect the basis on which a liability referrable to the SLOC Proceeds, but not the SLOC Proceeds themselves, fall within the definition of "Secured Money" in the General Security Agreement.
2. In the absence of any application by a party for an alternative costs order, within seven days of the delivery of judgment, the Gemi parties are to pay the costs of Shinetec on the ordinary basis.

I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.

AQUAMORE CREDIT EQUITY PTY LTD AS TRUSTEE FOR THE SPRING PARK UNIT TRUST