Case: Clough Engineering Ltd v Oil &amp; Natural Gas Corporation Ltd (No. 2) [2007] FCA 927
Outcome: referred to
claims against the Banks concern their intention to pay under the performance guarantees where such payment would constitute the Bank's being, directly or indirectly, knowingly concerned in ONGC's contraventions of the TPA. Injunctive relief is available against the Banks under s 80 of the TPA: Clough Engineering Ltd v Oil &amp; Natural Gas Corporation Ltd (No. 2) [2007] FCA 927 at [11] - [14] . Injunctive and other relief would also be available under s 87(1A) of the TPA. The orders, including injunctive orders, previously obtained by Clough against ONGC were obtained on an ex parte basis, and supported by affidavit material which was uncontested. ONGC had not entered an appearance at that time. Only ONGC could contradict Clough's case that Clough was not in breach of the Construction Contract, or where it was in breach, that this was occasioned by ONGC's breach. Accordingly, the claim by Clough, that ONGC was in contravention of s 51AA of the TPA, proceeded on the basis of unchallenged fact, namely, that ONGC had called for payment under the performance guarantees when there was no proper foundation for doing so, because Clough was not in breach of the Construction Contract or if it was, then this was as a direct consequence of breaches by ONGC: Clough Engineering Ltd v Oil &amp; Natural Gas Corporation Ltd (No. 2) at [7] and [39]. It was not necessary, then, to consider the question of whether a call by ONGC under the performance guarantees could be made merely upon the basis of a bona fide claim of breach or whether it required, by admission or by curial or arbitral determination, a demonstrated actual breach. This was because, whatever the proper construction of cl 3.3.3, on the uncontroverted facts, a prima facie case, or serious issue that s 51AA had been contravened was made out. Accordingly, I expressly left that question open: Clough Engineering Ltd v Oil &amp; Natural Gas Corporation Ltd (No. 2) at [45]. For the first time in these proceedings, the question of construction requires to be considered. It is fundamental to the disposition of the Motion. In the reasons for judgment in Clough Engineering Limited v Oil and Natural Gas Corporation Ltd [No 2] [2007] FCA 927 at [46] - [66] , I concluded that the balance of convenience strongly favoured the grant of injunctive relief. As I have said, ONGC, although a party, had not then appeared. This, importantly, meant that there was no party to contradict the existence of serious issues to be tried, as contended for by Clough. I formed the view that to have discharged the injunctions could very well lead to irreparable harm to Clough, its shareholders, employees and third parties. I concluded that damages would not be an adequate remedy. [66] The position has now changed. ONGC has appeared, put on evidence, cross-examined and advanced submissions through counsel. Clough's financial circumstances have also changed. The changed position is disclosed by a further affidavit of Mr Simons sworn on 7 September 2007. The expression "G1 contract" as used in this affidavit is a reference to the Construction Contract. It is to the following effect: (a) Clough's annual results for the financial year ended 30 June 2007 reported an audited loss of $105.3 million, which ' loss directly resulted from provisions taken on the BassGas and G1 contracts ', such that Clough is materially in default of its secured debt facilities with the Banks [3]-[5]; (b) each of the Banks want Clough to repay all secured debt facilities and because of Clough's defaults and because of the legal action threatened by ONGC, the Banks will not allow the use of current facilities or extend any further facilities to Clough ' until such time as the injunction and the related matters are dissolved or otherwise dispensed with ' [6], such that Clough will not have sufficient available debt facilities to fund the encashment of the performance guarantees [7]; (c) the announced capital raising ' will provide new liquidity to replace the cash that has been utilised in funding the costs on the G1 contract which have not been reimbursed or paid to Clough by ONGC ' [10]; (d) Clough has paid creditors of US$167.4 million on the G1 contract, but has received payments from ONGC of only US$139.4 million, a cash short fall of US$28 million [11], and Clough still owed some A$52.4 million to creditors on the G1 contract [13]; (e) between 1 July 2007 and 4 September 2007, Clough has paid G1 contract creditors about A$31.2 million, leaving a balance of A$21.2 million, which will need to be paid from cash flow [14]; (f) the payments to G1 contract creditors is causing significant strain [15]; (g) to replace Clough's cash deposits that have been depleted by reason of the G1 contract, Clough proposes to recapitalise to enable it to make payments to the remaining G1 contract creditors and fund its capital expansion [16]; (h) the recapitalisation is not directed to funding the encashment of the performance guarantees but is for paying the G1 creditors, funding capital expansion and repaying the Banks [17] and, importantly, if the performance guarantees were paid, Clough would be prevented from some or all of these objectives, with the consequences described in Mr Simons' 28 May 2007 affidavit [18]; (i) the proposed recapitalisation will not be completed until the end of December 2007 and is dependent upon shareholder approval [19]-[20]. Against that, in cross-examination, Mr Simons conceded that Clough's capital expansion program will be secured by the Murray and Roberts funding and the recapitalisation and that there will be no need to retrench staff. This is a very different position to that which existed at the time that I refused the application of the Banks to discharge the injunction: Clough Engineering Ltd v Oil &amp; Natural Gas Corporation Ltd [No 2] [2007] FCA 927 at [54] - [63] . There is no evidence to establish specific irreparable damage to Clough. Consequences of the kind that I have referred to are not uncommon in such matters and indeed are often the probable consequences. Certainly, Mr Simons accepted that such consequences, broadly, were in the anticipation of Clough when the performance guarantees were given. I have also considered Clough's claims that payment under the performance guarantees will adversely affect its commercial reputation. As to that I accept the submissions of ONGC which derive their factual foundation from the second affidavit of Mr Simons, his cross-examination and various media reports admitted into evidence. The market knows of Clough's dispute with ONGC, and it has been the subject of public disclosure to the ASX by Clough. Clough's Board has told the market that it considers the claims to be "spurious" and uses public relations to protect its position.