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Daewoo (a Korean company) had been commissioned by INPEX, the Australian subsidiary of a Japanese parent company to construct, install and commission plant known as the “Floating Production Storage Offloading” (a gas platform) for the purposes of the extraction and processing of natural gas from Ichthys Gas Field situated 220kms off North Western Australian coast in the Timor Sea.

Various problems had arisen in relation to the performance of Daewoo and Daewoo’s contractors and subcontractors (for whom Daewoo was also contractually liable) in relation to the performance of the project and consequential time delays.  These matters had become the subject of an International Arbitration in Singapore in which there were a series of claims and cross claims.  Daewoo disputed its putative liability to INPEX in relation to a number of these claims. The international arbitration was expected to go on for some years before reaching a final determination.

In accordance with its contractual arrangements with INPEX, Daewoo had also provided a bank guarantee to INPEX in the amount of $US328,510,832.00 as a performance bond in respect of warranties given by Daewoo in the performance of the works under contract.

There was evidence before the Court suggesting that Daewoo’s financial performance had been significantly impacted and impaired by the supply chain constraints arising from the Pandemic as well as by the war in the Ukraine and the consequential trade embargoes on Russia, and there was a live issue as to whether Daewoo would over the life of the arbitration still be able to trade its way out of these financial difficulties.

INPEX had therefore given notice of intention to call on the bank guarantee, which had prompted Daewoo to seek injunctive relief in the Commercial List of the Supreme Court of New South Wales, restraining that call.  Whilst interim relief was ordered, INPEX sought to resist that injunctive relief at the hearing.

As expected, Justice Rees analysed the arguments through the conventional paradigm of “the balance of convenience”.  In coming to the conclusion that the proceedings for injunctive relief should be dismissed, her Honour had regard to and relied on the following matters:

  • There was substance in the argument that Daewoo had been significantly impacted by both the pandemic and the war in the Ukraine and was indeed incurring significant losses and burning cash reserves such that the long-term viability of the company was relevantly open to question.
  • The fact that neither of these events could have been foreseen in advance by Daewoo did not serve to disentitle INPEX from seeking whatever recourse it might otherwise have had under the bank guarantee.
  • In the event that the call on the bank guarantee was subsequently determined to have been unwarranted at the conclusion of the international arbitration, damages were considered to be an adequate remedy (other than in relation to any reputational damage) with INPEX as being seen to be good for those damages.
  • There was on a prima facie basis some proper basis to INPEX’s claim against Daewoo, the subject of the international arbitration.

The Court made it clear that where bank guarantees had been given in pursuance of contractual arrangements and were sought to be called upon in that context, there would be a very “high bar” for the applicant in a proceedings for an injunction to enjoin the calling in of that bank guarantee, and in weighing the balance of convenience.

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