Siemens v Bulgana

2 The short interim injunction of 2 December 2019 was granted to preserve the then status quo of the parties' earlier instigated agreed restraint in respect of access to the Performance Securities, and on the bases generally outlined in my reasons given on 28 November 2018 for granting that interim injunction. Those considerations included that by today, when the interim injunction expired, SGRE would be in a positon where it had commenced its foreshadowed application for leave to appeal in the Victorian Court of Appeal and SGRE would also have been in a position to clarify when, or about when, the Court of Appeal would fix SGRE's application for hearing.

3 As matters have transpired, and as explained in the Affidavit of Xin Jack Fan affirmed 5 December 2019, SGRE has not yet effected the issue of its appeal in relation to Judgment in the underlying proceeding, and no clarity has yet been provided via enquiries of the Registry of the Court of Appeal, as to the date, or approximate date, on which the SGRE application for leave to appeal (or that application and the substantive appeal) is likely to be dealt with by the Court of Appeal.

4 In passing I note that in relation to these matters that BWF criticize SGRE for what is asserted to be a breach of paragraph [2] of the Orders of 2 December 2019 in this matter, and also as to what is asserted to be a breach of undertaking given by Counsel for SGRE on 28 November 2019, namely that SGRE would prosecute its application for leave to appeal and any appeal with due expedition.[1]

5 These ancillary complaints were not pursued in any substantial way by BWF in this application for an extension of the present interim injunction. At all events, I am satisfied that the said affidavit of SGRE's solicitor, Xin Jack Fan at [7]-[8], sufficiently explains why to date SGRE has not issued its application for leave to appeal. Further, the same matters in large part meet BWF's complaint as to a lack of expedition on the part of SGRE. Further, in any event the nature of the undertaking in that regard by Counsel for SGRE was, I consider as to best endeavours and in my view has not been breached at this point.

SGRE's arguments in support of a continuation of the present brief interim injunction restraining BWF from accessing the subject Performance Securities

6 SGRE argues that if the existing interim injunction is not continued, by inference until the determination of the appeal which SGRE is about to initiate, and initially to 13 December 2019, it is likely that its appeal will be rendered nugatory.

7 SGRE puts this contention on the basis that without a continuing injunction there will be access to the Performance Securities and, as a result, the agreed contractual fetter which it argues arises pursuant to the agreed terms of the controversial letter dated 30 September 2019, will be negated. SGRE submits that in this way, if successful on its appeal, the benefit it says it is entitled to by reason of the 30 September 2019 Agreement will be significantly eroded.

8 Further, in this regard, SGRE argues that the removal of the present interim injunction, and thereby permitting BWF to access the Performance Securities, will in effect confer a successful outcome to BWF in relation to the underlying dispute between the parties about delayed achievement of Practical Completion and whether BWF is entitled to Delay Liquidated Damages (DLDs) at all, or in what sum.

9 SGRE also argues that if a continuing injunction is not in place pending its appeal, BWF will access the Performance Securities and thereby give rise to the risk of prejudice asserted in relation to SGRE's concern that it may have difficulty recovering the funds drawn down by BWF, from BWF, in the event that SGRE successfully defends any DLDs claim. SGRE founds this risk of prejudice on what it submits is the modest extent of BWF's paid up capital, BWF's financial circumstances referred to in the First Hertling Affidavit of 8 October 2019 at [35], and the outlined commercial consequences to SGRE as a result of access to the Performance Securities in the nature of risk of loss of reputation and negative market perceptions, reduced capacity to borrow, greater cost to do so and also the unspecified possible impact of access to the Performance Securities in connection with SGRE's relations with its existing clients.[2] SGRE also submits that Hertling's evidence in the First Hertling Affidavit at [35] has not been challenged by BWF.

10 Additionally, in relation to the asserted risk of repayment of any BWF drawdown on the Performance Securities, in the event that SGRE's successfully defended DLDs claims, SGRE sought to rely on a document reporting the Neoen Group's present financial position. BWF forms part of the Neoen Group.

11 Although the thrust of SGRE's submissions is in support of the present interim injunction continuing until finalisation of its appeal, or further order, as earlier alluded to, its lawyers have sought agreement, via BWF's lawyers, to an extension of the present injunction made on 2 December 2019, until 5pm on 13 December 2019, so as 'to provide SGRE with time to complete and file the documents required for the appeal'.[3]

12 Further, in support of continuance of the present interim injunction, SGRE contends that there has been no material change in circumstances since 28 November 2019 when the interim injunction now sought to be extended was considered and ordered.

BWF's arguments re continuation of the present brief interim injunction restraining it from accessing the subject Performance Securities

13 BWF opposes any extension to the existing interim injunction restraining it from accessing the Performance Securities. However, as an alternative BWF submits that any order extending the present interim injunction should only be made on condition that SGRE pay BWF the present sum asserted to be owing to it in relation to DLDs, namely $15,854,132.90. This is the sum which represents DLDs accrued to 28 November 2019.

14 BWF emphasise that the subsisting position is that SGRE remains in breach of its express contractual obligation to pay DLDs which as at 28 November 2019 have accrued to the sum of $15,854,132.90, and which DLDs are accruing at the rate of $228,400 per day.

15 BWF argue that in the present circumstances in relation to the still pending application to the Court of Appeal including the further time required by SGRE to be in a position to commence its application for leave to appeal, it is effectively inevitable that the SGRE application will not be heard until the commencement of the 2020 legal year at the earliest, that is not before early February 2020.

16 BWF notes in that regard that by February 2020 the total amount of DLDs which would have accrued and will be payable by SGRE will substantially exceed the value of the Performance Securities.

17 BWF note that Practical Completion of the Works to be performed under the EPC Contract has not yet been achieved, and BWF notes further that SGRE has not advised, or committed to, any future date when it will achieve Practical Completion.

18 BWF also rely upon the Affidavit of Joshua Vaughan Williams sworn 5 December 2019 (Second Williams Affidavit) in which Mr Williams addresses the financial consequences to BWF resulting from both SGRE's failure to achieve Practical Completion and the impact on BWF as a result of it not being able to access the Performance Securities in relation to DLDs accrued to date and accruing. In short, BWF contend, on the basis of the evidence in the Second Williams Affidavit that as a result of the non-payment of DLDs by SGRE and BWF's inability to access the Performance Securities, BWF is suffering a material adverse financial impact, in particular in relation to its project financing arrangements.[4]

19 BWF's submissions note SGRE's key contractual obligations in relation to the Performance Securities and also SGRE's underlying obligation to reach Practical Completion and pay DLDs for failure to do so. BWF also points up both the EPC Contract terms in that regard and the terms of the EPC Contract which establish parties agreed 'risk allocation regime' which was accepted in its Reasons for Judgment[5] upon which the SGRE applications for injunctions and the underlying proceeding were recently dismissed.

20 BWF also again submits that for the Court to extend the present injunction would have the effect of defeating the parties agreed risk allocation regime which was accepted by the Court in its recent Reasons for Judgment.

21 As to balance of convenience issues, BWF submits that it is to be noted that SGRE's application for leave to appeal does not challenge the conclusions in the said Reasons for Judgment which identify the risk allocation agreement of the parties reflected in the EPC Contract. Nor does the SGRE application for leave to appeal challenge the way in which in the recent Reasons for Judgment analysed and described SGRE's liability to pay DLDs upon failure to reach Practical Completion.

22 The thrust of BWF's submission in relation to the operation of the abovementioned terms of the EPC Contract is that the underlying controversy between the parties, about delays to the Works, entitlements to DLDs and related issues, do not impair the operation of the scheme of the EPC Contract, that is, notwithstanding such disputes between the parties the contract operates in a way which allocates risk to the Contractor (SGRE) and provides a right of immediate access to the Performance Securities pending the outcome of the specified EPC Contract dispute resolution process in relation to such disputes.

23 As to balance of convenience issues identified by SGRE, BWF notes that if SGRE chose to make payment to BWF in relation to certified DLDs, SGRE could thereby avoid access to the Performance Securities (in relation to the present demand, and at least for the time being) and obviate the reputational damage it claims would afflict it if access occurs.

24 BWF also notes that SGRE has accepted that it has the means to make full payment of the DLDs which have been demanded by BWF and has also stated that it can make such payment promptly, if necessary.

25 BWF responds to SGRE's claim that there may be risks associated with SGRE recovering any sum accessed from the Performance Securities by pointing out that the Neoen half-year 2019 results, relied on by SGRE, in fact establish the financial strength of the Neoen Group and, contrary to SGRE's submission, when properly understood, do not establish, or suggest, any financial weakness or non-compliance with covenants on the part of BWF.

26 BWF refers to its financial report for half year to 2019 and points out that it has received $84 million (approx.) in equity referred to in the most recent BWF financial report ended 30 June 2019 and that BWF also has the benefit of a non-recourse debt from its commercial lenders under project finance arrangements, in the sum of $185 million (approx.).[6]

27 Further, BWF refers to the Second Williams Affidavit at [20] affirming that as legal director Australia of the parent company, Neoen Australia Pty Ltd, he confirms that BWF would be in a positon to repay any DLDs accessed from the Performance Securities to SGRE, for example if an arbitral order required such repayment.

28 BWF also point out that the First Francisci Affidavit (14 October 2019) at [60]-[61] refutes Mr Hertling's statements of concern about the reputational impact to SGRE of BWF calling on the Performance Securities.

29 In this matter, in particular in the present circumstances, I consider it to be material and important to recognise and give weight to the outcome of the underlying proceedings in which SGRE moved the Court to restrain BWF from accessing the Performance Security under the terms of the EPC Contract, and sought to do so principally relying upon the terms of an agreement, subsequent to the EPC Contract, made between the parties on 30 September 2019.

30 SGRE's contentions as to the proper interpretation, meaning and effect of the post-contractual agreement of 30 September 2019 were rejected and accordingly no injunctive relief was granted on the basis of SGRE's now dismissed motion and summons.

31 That resulted in BWF being in a position to action its foreshadowed demand to access the Performance Security so as to recover presently certified DLDs.

32 In the result BWF has been the successful party in the underlying proceedings which have been dismissed and is now in a position to action its clear prima facie contractual right to access to the Performance Security.

33 The underlying proceeding did not deal with the merits of the contractual disputes between the parties in relation to the Date for Practical Completion, failure to achieve Practical Completion and DLDs arising therefrom, entitlements to extension of time for delay, the effect, if any, of acts of prevention, or the proper character of the DLDs stipulated as recoverable under the terms of the EPC Contract.

34 In the underlying proceedings both SGRE and BWF addressed as relevant the risk allocation and Performance Securities regime established by the EPC Contract, because both parties accepted those matters to be a relevant part of the context in which the Court should construe the agreement of 30 September 2019.

35 In the underlying proceedings SGRE did not dispute the operation and effect of the Performance Securities and risk allocation regime under the EPC Contract as outlined in the Reasons for Judgment dismissing the underlying proceedings.

36 What SGRE did argue, contrary to the outcome of the matter, was that the 30 September 2019 Agreement, properly construed, amounted to a subsequent agreement fettering access to the Performance Securities under the EPC Contract. The issue decided and determined was the proper interpretation, meaning and effect of the post-contract letter of 30 September 2019, and on the outcome of that issue that the SGRE application for an injunction restraining access to the Performance Securities, should be refused.

37 Here the continuation of the interim injunction sought by SGRE amounts to a stay of judgment in favour of the unsuccessful party. However, BWF as the successful party below should not have the benefit and fruits of its success and judgment stayed or enjoined unless there are sufficiently good reasons to justify the Court in doing so.

38 In this matter, at this time I am not satisfied that there is any proper basis to justify the continuation of the present interim injunction, and I am also satisfied that since 28 November 2019 there have been material changes to the circumstances in which I am called upon to consider the present application by SGRE to continue the existing injunction.

39 Further, it is of some significance and weight, in my view, that notwithstanding the position being strongly disputed by SGRE, at present SGRE is prima facie in breach of its obligation to reach Practical Completion in accordance with the EPC Contract, as certified, and is also prima facie obliged to pay the presently certified DLDs in the sum of $15,854,132.90.

40 Further, as identified in my earlier Reasons for Judgment in the underlying proceeding, and as emphasised in BWF's submissions dated 5 December 2019 [24]-[28], the EPC Contract reflects an agreed risk allocation regime in the terms referred to in my earlier Reasons and in the above parts of BWF's submissions, including as to access to the Performance Securities in the clear terms set out in cl 25.7 of the EPC Contract and for the conversion of Performance Securities, on amongst other bases, in respect of certified DLDs pursuant to the principal's right to do so under cl 13.8(e) of the EPC Contract.

41 For the following reasons I reject SGRE's submission that its appeal will, or is at risk of being, rendered nugatory if the continuation of injunctive relief presently sought is not granted.

42 In my view, SGRE's submission on this aspect discloses an incorrect analysis of what has been earlier decided in the underlying proceedings, and the parties' present position under the EPC Contract, and also fails to take into account the likely effect of a positive outcome for it in the foreshadowed appeal by SGRE. In my view it is unpersuasive for SGRE to contend that to refuse the further relief which SGRE presently seeks will in substance deliver a successful outcome to BWF in relation to the contractual disputes between the parties, that is in relation to those disputes as to timely completion of the Works and consequent penalties and entitlements.

43 This is because the outcome of the foreshadowed SGRE appeal will, in my view, if favourable to SGRE, probably set aside my construction of the terms of the letter of 30 September 2019 and substitute the Court of Appeal's interpretation of that letter. The outcome of the appeal will not in any way foreclose the merits issues, rights or entitlements in connection with the underlying contractual disputes between the parties.

44 Furthermore, the outcome of the appeal, if favourable to SGRE, will also probably include the reinstatement of any sum accessed from the Performance Securities on account of DLDs levied by BWF, or require BWF to reinstate the Performance Securities. In this regard I am also, for the reasons referred to below, unpersuaded that BWF may not be able to meet a reinstatement order.

45 Accordingly, notwithstanding that BWF access the Performance Securities before the outcome of the foreshadowed appeal, the fruits of that appeal for SGRE, namely having its interpretation of the letter of 30 September 2019 declared and having any component of the Performance Securities which has been accessed or reinstated, will result in SGRE's position being made whole, leaving aside for the moment any reputational and related impairment which is addressed below. This I therefore consider wholly undercuts SGRE's present submission that its appeal will be negated on the bases of loss of benefit of the letter of 30 September 2019 and the asserted consequences of BWF having access to the Performance Security, if the present injunction is not continued.

46 Further, new and additional material has been put on by both parties on this application by SGRE to continue the existing interim injunction. That new evidence by way of the Second Williams Affidavit[7] and the Neoen half-year 2019 results,[8] which were relied upon by SGRE, and also relied upon thereafter by BWF together with other financial materials[9] satisfy me that there is no sufficient basis upon which to conclude that, were the Performance Securities hereafter accessed, and accessed before the outcome of the foreshadowed appeal by SGRE, and SGRE's appeal was ultimately successful, SGRE may not be able to recover that part of the Performance Securities accessed by BWF.

47 I also reject SGRE's submission that the position on this injunction extension application in relation to considerations concerning reputational and associated damage to SGRE is the same now as it was when the interim injunction was ordered on 2 December 2019, or that BWF does not dispute SGRE's evidence on that aspect.

48 As pointed out in argument by Senior Counsel for BWF, Mr Hertling's evidence in relation to what he affirms is irremediable reputational damage that may afflict SGRE if the Performance Securities are accessed, is in substance disputed by BWF, in the First Francisci Affidavit of 14 October 2019 at [60]-[61].

49 Further, in my view, the question of reputational damage to SGRE and any associated commercial impact which may be caused by BWF's access to the Performance Securities may, at SGRE's election, be rendered of no weight because SGRE has clarified that it is in a position, within 24 hours, to make payment in full of $15,854,132.90 claimed by BWF on account of DLDs to 28 November 2019.

50 It follows that SGRE is able to, by its own election and payment, avoid any risk to its reputation or related commercial consequences of the type it suggests. It can pay the DLDs claimed by BWF and can thereby avoid the threatened access to the Performance Securities and avoid the risk of reputational and associated damage.

51 At all events I also regard SGRE's argument based on possible reputational damage to be of little weight because from the outset SGRE contracted to provide the Performance Securities in issue an part of the bargain to win the EPC Contract and therefore recognised and understood, it can be accepted, that in the future those securities may well be accessed and also recognised and understood, it may be accepted, that such access may give rise to the reputational damage SGRE now seeks court ordered relief to obviate.

52 Further, I do not accept SGRE's submission that there has been no change in circumstances since the order of the present interim injunction. The additional evidence referred to earlier in the nature of the Neoen Group financial results for the half-year 2019, the further affidavit evidence now filed from Mr Williams of 5 December 2019, the additional important fact that practical completion has still not been achieved and that to date SGRE has not foreshadowed when the achievement of practical completion will occur (matters not refuted by SGRE), the undisputed further fact that at 5 December 2019 no dispute under the EPC Contract has been referred to arbitration and the additional affidavit information concerning the position with SGRE's proposed appeal, namely that the foreshadowed appeal has not yet been commenced at this time and will, in all probability, not be commenced until 12 December 2019, and the assertion by BWF, which I accept, that in all probability the SGRE application for leave to appeal will not be heard and determined by the Court of Appeal any earlier than the beginning of February 2020 at the earliest, are all relevant new facts and circumstances not in play at the time the existing interim injunction was considered and ordered.

53 For the reasons which I have referred to, I do not consider it is justified or appropriate to extend the existing interim injunction, save to a minor extent, for additional reasons which as I shall explain shortly.

54 Such an extension as is sought by SGRE would defeat the agreed risk allocation regime, would prejudice BWF in the way explained by Mr Williams' most recent affidavit, which I accept, and would in the circumstances, negate BWF's entitlement to the benefits of the recent judgment in this matter and the orders of 2 December 2019.

55 Accordingly, I reject SGRE's application for a continuation of the existing interim injunction either to the determination of the issues in the prospective appeal, or further order, or to 13 December 2019.

56 However, given that SGRE has informed the Court during the course of these applications that it is able to make prompt payment of the sum of DLDs presently demanded by BWF, and has further informed the Court that it would be in a position to do so within approximately a day, and further given that payment of the amount presently demanded by BWF (if made by SGRE) is likely to avoid any possible reputational, or like consequences, which may otherwise arise as a result of access to the Performance Security, I shall facilitate these matters, and for only that reason extend the present interim injunction to 5:00pm on Tuesday 10 December 2019.

57 Otherwise, I dismiss SGRE's application for an extension of the present interim injunction for the reasons I have stated.

58 I shall, when convenient, deal with costs, if they cannot be otherwise agreed between the parties.

[1] T22.12-24 and T5.14-16; First Defendant's Submissions, 5 September 2019, [4] and [11].

[2] First Hertling Affidavit, 8 October 2019 [35].

[3] Affidavit of Xin Jack Fan, 5 December 2019, [9].

[4] First Williams Affidavit, 22 November 2019, [27], Second Williams Affidavit, 5 December 2019, and in particular [7]-[8], [15(a) and (e)].

[5] [2019] VSC 771.

[6] First Francisci Affidavit, 14 October 2019, [63]-[64], Exibit 'LF-1' p 99; Note 5 p 97 cash in hand.

[7] Second Williams Affidavit, [20(b)] and First Francisci Affidavit, 14 October 2019, [63]-[64].

[8] Neoen half-year 2019 results, 01.2.2 - Neoen forecast EBITDA of between Euro 212 million and Euro 227 million in full year 2019; 02.3 (30 June 2019), total current group assets Euro 457.4M and total equity Euro 621.1M and note 17.2 as to net debt and 'bank loans financing projects'.

[9] First Francisci Affidavit, 14 October 2019, [63]-[64], Exibit 'LF-1' p 99; Note 5 p 97 cash in hand.