Federal Court of Australia East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd (No 3) [2024] FCA 1213 File number: WAD 72 of 2024 Judgment of: FEUTRILL J Date of judgment: 18 October 2024 Catchwords: PRACTICE AND PROCEDURE – form of security for conditional leave to defend Cases cited: East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd [2024] FCA 759 East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd (No 2) [2024] FCA 1014 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 12 Date of hearing: Determined on the papers Date of last written submissions: 9 October 2024 Counsel for the Applicant: Mr SK Dharmananda SC with Mr L Firios and Mr NL Pham Solicitor for the Applicant: Herbert Smith Freehills Counsel for the First, Second and Third Respondents: Mr C Young KC with Mr TJ Porter Solicitor for the First, Second and Third Respondents: Gilbert + Tobin ORDERS WAD 72 of 2024 BETWEEN: EAST ROCKINGHAM RRF PROJECT CO PTY LTD ABN 83 623 495 278 AS TRUSTEE FOR THE EAST ROCKINGHAM RRF PROJECT TRUST Applicant AND: ACCIONA CONSTRUCTION AUSTRALIA PTY LTD ACN 618 030 872 First Respondent ACCIONA M&E PTY LTD (FORMALLY JOHN BEEVER (AUST) PTY LTD) ACN 618 030 872 Second Respondent ACCIONA INDUSTRIAL AUSTRALIA PTY LTD ACN 620 692 784 (and others named in the Schedule) Third Respondent order made by: FEUTRILL J DATE OF ORDER: 18 October 2024 THE COURT ORDERS THAT: 1. There be no direction to the Registrar to deliver the originals of irrevocable bank guarantees numbered AAUSYS003914 and AAUSYS003915 each dated 27 September 2024 and issued by JPMorgan Chase Bank, N.A., in the sums of AUD25,754,099.76 and AUD12,877,049.88 respectively, to the applicant. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT FEUTRILL J: 1 On 4 September 2024 I made orders requiring the first, second and third respondents to provide security as a condition upon which they are permitted to defend the applicant's claims against them in the proceeding: East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd (No 2) [2024] FCA 1014. Those orders followed earlier orders I made on 12 July 2024, amongst others, dismissing an interlocutory application for summary judgment the applicant had brought against the first, second and third respondents: East Rockingham RRF Project Co Pty Ltd as Trustee for the East Rockingham RRF Project Trust v Acciona Construction Australia Pty Ltd [2024] FCA 759. For ease of reference, I refer to the parties and use the capitalised terms in these reasons in the same manner as they are used, described or defined in the reasons for the orders made on 12 July 2014 and 4 September 2024. These reasons are also to be read with those earlier reasons that describe the relevant background and issues in the proceeding. 2 Paragraph 1 of the 4 September 2024 orders provided for the first, second and third respondents (Acciona parties) to provide security by 30 September 2024 in the sum of AUD38,631,149.64 as a condition upon which they are permitted to defend the applicant's (Employer's) claims against them for a mandatory injunction or, alternatively, specific performance. Security was to be provided by way of irrevocable bank guarantee(s) payable on demand in a form satisfactory to the Registrar, alternatively by payment into Court. Amongst other things, the orders prescribed that any bank guarantee must have terms to the following effect: (a) the issuing bank agrees that payment will only be made in accordance with the 4 September 2024 orders; (b) subject to the following subparagraph, any amount payable under the guarantee must be paid into Court or at the direction of the Court; (c) if at the time of making a demand for payment the Employer gives the issuing bank notice that no objection has been made by the Acciona parties in accordance with certain notice provisions in the orders, then the issuing bank be directed to pay the amount demanded to or at the direction of the Employer; and (d) except as was inconsistent with para 1 of the orders (the order requiring the provision of security) and the terms prescribed in subparas (a) – (c), the guarantee was to be in the form and on the terms set out in Schedule 20 of the EPC Contract. 3 On 27 September 2024 the Acciona parties delivered two bank guarantees totalling AUD38,631,149.64 to the New South Wales Registry of the Court. A dispute then emerged between the Employer and the Acciona parties as to whether delivery of those guarantees complies with the orders. 4 The Employer contends that the orders contemplate that, if security is given by bank guarantees, the Employer is to hold the originals of the bank guarantees so as to be able to avail itself of the provisions made in the orders for the Employer to make demand for payment under the guarantees. The Acciona parties contend that, because the bank guarantees were largely required to be in the form and on the terms contemplated by the EPC Contract, the Security Trustee is named as a beneficiary and, if the guarantees are delivered to the Employer, the Security Trustee would be entitled to make demand for payment under the guarantees without having to comply with the notice provisions in the orders. Consequently, so the Acciona parties submit, the orders must have contemplated that the Court hold the bank guarantees to avoid the Security Trustee making demand under the guarantees and receiving payment without complying with the notice provisions of the orders. 5 Paragraph 1 of the orders does not contemplate that the Security Trustee be a beneficiary of the bank guarantees provided as security. The security, as the reasons in East Rockingham RRF (No 2) make plain, is not a Bank Guarantee provided under the EPC Contract, but rather it is security as a condition upon which the Acciona parties are permitted to defend the Employer's claims. The Security Trustee is not a party to the proceeding. The Security Trustee has no right to the security given in accordance with the order and no right to demand payment under that security. As the reasons in East Rockingham RRF (No 2) also make plain, absent further agreement between the parties, I made no order that depended upon the Security Trustee's co-operation. In my view, bank guarantees under which the Security Trustee is a beneficiary is inconsistent with para 1 of the orders and does not comply with the terms of para 2 of the orders. 6 The parties provided my chambers with copies of the bank guarantees delivered to the Registry and have agreed that I may have regard to those copies for the purposes of these reasons and resolving the dispute between the parties regarding the construction of the orders of 4 September 2024. For the purpose of these reasons, I will receive the copies of the bank guarantees as Exhibit A.1 and Exhibit A.2. 7 The bank guarantees provide that the Security Trustee is a beneficiary and, therefore, may make demand for payment under the guarantees. Accordingly, as already mentioned, the bank guarantees are manifestly inconsistent with para 1 of the orders and do not meet the terms of a bank guarantee as para 2 of the orders requires. Further, I have no evidence before me that there has been any agreement to the effect that the Security Trustee be a beneficiary of the bank guarantees provided as security in accordance with the orders or that it be entitled to make a demand under those guarantees. None of the parties or the Security Trustee has applied to vary the orders made on 4 September 2024 to allow the Security Trustee to be a beneficiary of the security to be provided in accordance with para 1 of those orders. 8 Evidently, the circumstance in which the Security Trustee has been named as a beneficiary under the bank guarantees arises from a misunderstanding that the expression 'in the form and on the terms set out in Schedule 20' of the EPC Contract in para 2(d) of the orders extends not only to the 'form' and 'terms' of Schedule 20 but also to the 'parties' to or 'beneficiaries' described in that schedule. However, even on such a wide reading, it ignores the qualifying words of para 2(d) 'except as is inconsistent with paragraph 1' of the orders. Paragraph 1 does not contemplate the provision of security to or for the benefit of the Security Trustee (a non-party). But, incongruency between the orders and the terms of the bank guarantees do not end with the 'form' that includes a beneficiary that is not entitled to the security. 9 Clauses 3(A) of the bank guarantees provide that any payment under the bank guarantees will only be made by the financier (issuing bank) in accordance with the orders of 4 September 2024. As already mentioned, the orders make no provision for the Security Trustee to make a demand for payment under the security provided in accordance with those orders. That observation applies equally to a bank guarantee and payment into Court as the alternative method of providing security. Yet, cl 3(B)(1) and cl 3(B)(2) make provision for the issuing bank to pay on demand of a beneficiary. Further, cl 3(E) provides that the guarantees are for the benefit of each of the beneficiaries jointly and a demand by one is a demand by both of them jointly. Put another way, cl 3(B) and cl 3(E) are inconsistent with cl 3(A) and the orders because a person other than the Employer may make a demand under the guarantees in the circumstances described in para 3 of the orders (any of the grounds upon which the Employer would be entitled to make demand under a Bank Guarantee provided in accordance with the provisions of the EPC Contract). 10 Notwithstanding the foregoing, I doubt that, if the Security Trustee (as a beneficiary) made a demand under one of the bank guarantees, that demand could result in payment to or at the direction of the Security Trustee in breach of the orders. To obtain a payment to the Security Trustee it would be required, first, to confirm with the issuing bank that the Security Trustee (or Employer) had complied with the 4 September 2024 orders, including the obligation to file and serve a notice of an intention to make demand in accordance with para 4 of the orders and certification that no objection has been made to the payment under para 5 of the orders: see, cll 3(B)(2)(III), (IV) and (VII). It would also not be possible for the Security Trustee to obtain payment without producing the original of the bank guarantee, which as explained later, should be delivered to the Employer: see, cl 3(B)(2)(VI). Otherwise, upon demand, the issuing bank must make any payment into Court: see, cl 3(B)(1). However, the inclusion of the Security Trustee as a beneficiary creates ambiguity and uncertainty. Further, the terms of cl 3 of the bank guarantees are not consistent with para 2(a) of the orders, which require the bank guarantee to have terms to the effect that the issuing bank agrees that payment will only be made in accordance with the orders. 11 Otherwise, I accept the Employer's construction of the orders to the effect that if security be provided by bank guarantee, that security is to be delivered to the Employer albeit in a form settled by the Registrar. Without possession of the original bank guarantees the security would not operate as the orders contemplate and the Employer could not obtain payment into Court or, in the absence of objection, to or at the direction of the Employer without further intervention from the Court. Where security is provided as a bank guarantee it should be as good as money, that is as good as if the money had been paid into Court. As a demand for payment could not be made under a bank guarantee other than in accordance with the orders, the Acciona parties are protected by contempt against an unauthorised demand. 12 Nonetheless, while I am of the view that the orders require the Acciona parties to deliver the bank guarantee(s) to the Employer, the obligation is to deliver guarantees that conform to the requirements of paras 1 and 2 of the orders. For the reasons given earlier, the bank guarantees the Acciona parties delivered to the Registry do not do so. Accordingly, I will not make a direction that the Registrar deliver non-compliant bank guarantees to the Employer. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate: Dated: 18 October 2024 SCHEDULE OF PARTIES WAD 72 of 2024 Respondents Fourth Respondent: ACCIONA INDUSTRIAL AUSTRALIA PTY LTD ACN 620 692 784 Fifth Respondent: HITACHI ZOSEN INOVA AUSTRALIA PTY LTD ACN 603 901 382