Federal Court of Australia

Siemens WLL v BIC Contracting LLC (garnishee order) [2023] FCA 1664

ORDERS

THE COURT ORDERS THAT:

1.    Order 3 of the orders made on 11 September 2023 be vacated.

2.    The garnishee order for debts issued upon LMENA Pty Ltd on 11 September 2023 be set aside.

3.    The applicants, jointly and severally, pay LMENA Pty Ltd’s costs.

4.    The parties have liberty to apply to vary order 3 by filing and serving any evidence and brief submissions in support of any such variation by 16 February 2024, in which event:

(a)    any party opposing the variation file and serve any evidence and brief submissions in opposition within seven days thereafter;

(b)    the party applying for the variation file and serve brief submissions in reply within seven days thereafter; and

(c)    subject to further order, the application for variation be determined on the papers.

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    LMENA Pty Ltd (the garnishee), an Australian registered company, applies for an order setting aside a garnishee order made ex parte on 11 September 2023. The essential background to the garnishee order is the following.

2    On 30 August 2022, I entered judgment in favour of Siemens WLL and Siemens AG (together, Siemens) against BIC Contracting LLC (BICC) for sums in excess of $52 million. That judgment was by way of enforcement of two arbitral awards, one made in London and one in Dubai, under s 8(3) of the International Arbitration Act 1974 (Cth) (IAA). The further circumstances behind judgment being granted are canvassed in Siemens WLL v BIC Contracting LLC [2022] FCA 1029.

3    Siemens WLL is a company incorporated with limited liability in Qatar. Siemens AG is a company incorporated under the laws of the Federal Republic of Germany. BICC is a company incorporated in the United Arab Emirates.

4    Following judgment in its favour, Siemens set about locating assets of BICC in Australia for the purpose of satisfying its judgment. After first targeting CIMIC Group Ltd (formerly Leighton Holdings Ltd), an Australian company that owns all the shares in the garnishee, Siemens identified a payment of US$1 million that was due to be paid by the garnishee to BICC under a series of multi-party contractual arrangements to which I will return. It also identified that further payments may be accruing and be payable by the garnishee to BICC in the future.

5    The garnishee order of 11 September 2023 is in the following terms which are based on Form 70 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR):

1     It is ordered that all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of this order are attached to the extent of $57,135,130 to answer a judgment in these proceedings.

2     You are ordered to pay any amount so attached to the judgment creditor within 14 days after the date on which the order is served on the garnishee or, if the debt attached is a debt that falls due after that date, within 14 days after the date on which the debt becomes due.

6    The sum of more that $57 million dollars represents the capital sum of the judgment plus interest.

The source of the garnished debt

7    Prior to February 2021, CIMIC held a 45% shareholding interest in BICC. That interest was held through the garnishee and in turn its then subsidiary, LMENA No 1 Pty Ltd.

8    BICC, which was formerly known as Al Habtoor Leighton LLC, is a construction company incorporated in the UAE which was involved in various infrastructure and major building projects throughout the Middle East. A relevant feature of those projects is that BICC was typically required to procure that a bank provide a performance bond to the project owner to cover risks of non-performance and defects. Certain bank facilities supporting these performance bonds have been guaranteed by CIMIC, such that the relevant bank can demand payment from CIMIC in the event that a performance bond is called on by a project owner and BICC does not itself pay the relevant bank.

9    On 23 January 2020, CIMIC announced to the market that it had completed an extensive strategic review of its financial investment of the non-controlling 45% interest in BICC and, following an accelerated deterioration in local market conditions, it had initiated a confidential M&A process and decided to exit the Middle East region.

10    Subsequently, on 15 February 2021, the garnishee, BICC and various other parties entered into a Sale and Purchase Agreement (SPA) in order to transfer CIMIC’s interest in BICC to SALD Investment LLC, a Dubai company, and provide for transitional arrangements to procure, over time, the release of the performance bonds and hence CIMIC’s liability to the banks as current projects were brought to completion.

11    The SPA is stated to have been executed as a deed. There is no evidence of where it was executed or where it is now located, if indeed that is at only one place. The relevance of that will become apparent shortly.

12    The SPA, to which there are ten parties, is long and complex. Amongst other things, the SPA provided for the following:

(1)    The shares in BICC (both the 45% owned by LMENA No 1 and the other 55% owned by a Mr Alsadik) were to be purchased by SALD (cl 4).

(2)    SALD would immediately assume the risk, reward and responsibility for managing and operating BICC as a going concern in the ordinary and usual course of business (cll 4.2 and 11.1.1).

(3)    The garnishee (described in the SPA and subsequent agreements as LMENA Holdco) was to make a series of payments up to a maximum of US$130 million into a nominated account with HSBC Bank Middle East (cl 9.1.1).

(4)    Those payments were to be applied to BICC’s statutory obligations and were otherwise to be used for the purpose of operating BICC in a commercially prudent manner in the best interests of BICC and its subsidiaries (cl 10.1).

(5)    Many of the payments were conditional upon the return, repayment or cancellation of the “Guaranteed Bonds” listed in Sch 14, whereby SALD would be incentivised to procure this outcome because the garnishee would then pay a portion of the otherwise outstanding liability in respect of the relevant performance bond (cll 9.2 and 9.3).

(6)    Any dispute arising out of or in connection with the SPA was to be referred to and finally resolved by arbitration in London pursuant to the rules of the London Court of International Arbitration (cl 26.17).

(7)    The SPA was stated to be governed by, and to be construed in accordance with, English law (cl 26.18).

13    The SPA was the subject of several amendments and supplementary contracts. Of present relevance is that on 9 July 2022, the garnishee entered into a Sale and Purchase Deed (SPD). The SPD was entered into by a subset of three parties to the original SPA, plus an additional party, Royal Mem for Investment in Commercial Enterprises & Management Co LLC, which agreed to purchase the shares in LMENA No 1 (as blocks on BICC’s commercial licence then had the effect of preventing the transfer of shares in BICC to SALD). BICC is not a party to the SPD.

14    The SPD has governing law and arbitration clauses in the same terms as the SPA (cll 14.9 and 14.10). There is also no evidence as to where it was executed, or where it is now located.

15    The SPD was subsequently amended on 5 May 2023 by a deed of amendment which also has governing law and arbitration clauses in the same terms (cll 4.7 and 4.8). The deed of amendment provides for certain conditions around the timing of, and prerequisites for, payments to be made by the garnishee. The amendment inserted a new cl 7.3.4 of the SPD, which provides:

7.3 Partial Tranche 2 Payment

Subject to clauses 4.1, 4.4 and 4.5 (as applicable), LMENA Holdco must pay the Partial Tranche 2 Payment to BICC in cleared funds to the BICC Account on the following terms:

…

7.3.4     US$1,000,000 five Business Days after the date that the Purchaser delivers or causes to be delivered to the LMENA Holdco a certified copy of the BICC amended commercial licence issued by the DDED amended to reflect the removal of Mr Alsadik as a registered owner of BICC and replaced with the Purchaser (“BICC Commercial Licence Date”).

16    On 31 August 2023, SALD informed the garnishee that it had procured the transfer of Mr Alsadik’s shares in BICC. BICC’s commercial license was also updated to reflect that Mr Alsadik was no longer a shareholder. There is thus no dispute that the payment of US$1 million referred to in cl 7.3.4 became due, owing and payable by the garnishee to BICC five business days after 31 August 2023.

17    There is a minor disagreement between the parties as to what other payments (apart from the US$1 million) are caught by the garnishee order. The garnishee contends that there are other payments by the garnishee accruing to BICC in respect of which all that is required for them to become owing is the passage of time, which are caught by the garnishee order and, under that order, will have to be paid to Siemens when they become payable. The total amount of those payments is said to be about US$3.96 million (subject to the possibility of reduction by any amounts that CIMIC has to pay if performance bonds are called on).

18    Siemens initially contended that only the US$1 million is relevant for the purposes of the garnishee’s application but, in the course of the hearing, senior counsel for Siemens accepted in principle that debts which are accruing subject only to the effluxion of time would also be caught. The remaining difference between the parties is accordingly narrow: Siemens accepts that a future payment of US$956,000 is likely to be caught by the garnishee order, but says that a future payment of US$3 million may not be caught because the precise amount of that particular payment is not currently capable of ascertainment. The amount captured by the garnishee order on Siemens’ case is therefore US$1.956 million.

The applicable statutory provisions, rules and principles

19    The Court’s power with respect to garnishee orders is derived from s 53 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 41.10 of the Federal Court Rules 2011 (Cth) (FCR). Those provisions have the effect that a judgment creditor is entitled to the same remedies for enforcement in this Court as if the relevant judgment was given by, relevantly, the Supreme Court of New South Wales. For that purpose, the procedural rules of the Supreme Court of NSW apply, being, relevantly, Pt 8, Div 3 of the Civil Procedure Act 2005 (NSW) (CPA) and Pt 39, Div 4 of the UCPR.

20    Section 117(1) of the CPA provides that “a garnishee order operates to attach, to the extent of the amount outstanding under the judgment, all debts that are due or accruing from the garnishee to the judgment debtor at the time of service of the order.” As I will get to, a determinative issue in this case is whether the debts that are identified in the garnishee order are debts within the meaning of this provision with reference to where the law regards them to be located.

21    Section 123(4) of the CPA provides that “[a]s between the garnishee and the judgment debtor, the amount attached under the garnishee order is taken, subject to any order of the court, to have been paid by the garnishee to the judgment debtor.” That is a critical protection against prejudice to the garnishee in the nature of being susceptible to having to pay the debt twice, first to the garnishor under the garnishee order and again to the judgment debtor (the garnishee’s creditor).

22    The Court has a broad discretion to refuse to make a garnishee order if it is “of the opinion that such an order is inappropriate”: UCPR, r 39.38(1). The Court also has an inherent power to set aside or vary its own orders, including where they have been made on an interlocutory or ex parte basis: FCA Act, s 23; FCR, r 39.05(a) and (c). The same discretionary considerations to those which inform the Court’s decision whether to issue a garnishee order also arise in respect of the Court’s discretion to set aside a garnishee order already made. That is to say, in the opinion of the Court, is it inappropriate that the garnishee order be made?

23    There is no disagreement between the parties with regard to the applicable principles governing that assessment of inappropriateness for the purpose of exercising that discretion.

24    A garnishee order is intended as a means of enforcing judgment by redirecting payments owed to the judgment debtor. It is not intended to affect the rights of third parties or visit harm upon the garnishee: see Commissioner of State Revenue v Can Barz Pty Ltd (No 2) [2016] QCA 323; [2017] 2 Qd R 537 at [63]-[67]. For example, a garnishee order will be inappropriate where it exposes the garnishee to the risk of having to make payment a second time. In Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd [2017] NSWCA 53; 94 NSWLR 606 at [112], Leeming JA observed (see also at [70] per Basten JA, Beazley ACJ agreeing):

[T]he UCPR make it clear that an order is not made as of right. There is a discretion not to issue a garnishee order if the order would be “inappropriate”. One relevant matter is indicated by r 39.38(2), namely, if the amount is small. Other occasions where the discretion might be exercised may be seen in Martin v Nadel [1906] 2 KB 26 (where a foreign garnishee would remain liable to pay the amount a second time pursuant to an order by a foreign court) and in the cases considered by Brereton J in ML Ubase Holdings Co Ltd v Trigem Computer Inc (2007) 69 NSWLR 577; [2007] NSWSC 859 at [56]-[60] of bankruptcy or insolvency where (speaking generally) the effect of an order is to give a preference to the judgment creditor.

25    Similarly, in Swiss Bank Corporation v Böehmische Industrial Bank [1923] 1 KB 673, it was held at 680-681 that:

[T]he Court will not make absolute a garnishee order where it will not operate to discharge the garnishee in whole or pro tanto from the debt; it will not expose him to the risk of having to pay the debt or part of it twice over. That is well established as a principle of discretion on which the Court acts.

26    See also: Société Eram Shipping Co Ltd v Compagnie Internationale de Navigation [2004] 1 AC 260 at [16]-[18], [28] and [47]-[53] (considered in European Bank Ltd v Citibank Ltd [2004] NSWCA 76; 60 NSWLR 153 at [65]-[68]) and Despot v Registrar General of NSW [2014] NSWSC 1303 at [6] and [10]-[12].

The garnishee’s grounds of challenge

27    The garnishee challenges the garnishee order on the following four grounds, which I have rearranged into what seems to me to be a more logical order.

28    First, the garnishee contends that the garnished debt is situated in England, not Australia, and is therefore beyond the reach of this Court. Reformulated, the contention is in effect that the debts referred to in CPA s 117(1) that can be garnished do not include debts that are located outside the territorial jurisdiction of the Court.

29    Secondly, the garnishee contends that the garnishee order presents a risk of harm to the garnishee and other third parties. Insofar as the garnishee is concerned, that risk is primarily the risk of being compelled to pay the debt to BICC even after having paid Siemens notwithstanding the provisions of CPA s 123(4). However, other commercial risks are also identified which I will come to.

30    Thirdly, the garnishee contends that a secured lender to BICC, namely Emirates National Bank of Dubai, has an interest in the garnished debt. That interest is said to be by way of assignment of all then current and future “accounts receivables” as security for certain banking facilities.

31    Fourthly, the garnishee contends that there are pending foreign bankruptcy proceedings against BICC in the UAE which is a powerful discretionary reason to set aside the garnishee order as being “inappropriate”.

Ground 1: the situs of the debt

32    The garnishee order is a mechanism of the execution of a judgment of the Court. In that regard, as explained by Lord Hoffmann in Société Eram at [54]:

The execution of a judgment is an exercise of sovereign authority. It is a seizure by the state of an asset of the judgment debtor to satisfy the creditor’s claim. And it is a general principle of international law that one sovereign state should not trespass upon the authority of another, by attempting to seize assets situated within the jurisdiction of the foreign state or compelling its citizens to do acts within its boundaries.

33    Lord Bingham (at [16]) and Lord Millett (at [98]) expressed the same idea. The House of Lords held that it was not open to the English court to make a third party debt order (ie a garnishee order) against a debt situated in Hong Kong which infringed Hong Kong sovereignty. Though the court had personal jurisdiction over the judgment debtor, it did not have subject matter jurisdiction over the debt due from the bank situated in Hong Kong. That was fatal to the application for a third party debt order.

34    Taurus Petroleum Ltd v State Oil Marketing Co of the Ministry of Oil, Republic of Iraq [2017] UKSC 64; [2018] AC 690 is to the same effect where it was held that the English courts do not have jurisdiction to make such a third party debt order in respect of debts situated outside the jurisdiction unless an English order would be recognised under the law applicable where the debt is situated.

35    I do not understand the principle expressed by Lord Hoffmann to be controversial. It has been recognised and applied in Australia: European Bank Ltd v Citibank Ltd [2004] NSWCA 76; 60 NSWLR 153 at [67] and [69]; Suzlon Energy Ltd v Bangad (No 2) [2011] FCA 1152; 198 FCR 1 at [43].

36    In any event, CPA s 117(1) must be interpreted against the presumption that statutes are not intended to apply to matters that, under the rules of private international law, are governed by foreign law: Karpik v Carnival plc [2023] HCA 39 at [19]. Also, s 12(1)(b) of the Interpretation Act 1987 (NSW) provides that “a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales”. There is nothing in the text or context of CPA s 117(1) (see BHP Group Ltd v Impiombato [2022] HCA 33; 96 ALJR 956 at [61]) that requires the reference to “debts” in that section to include debts that are not located in, at least, Australia.

37    Therefore, if the debts identified in the garnishee order are not situated in Australia, they are not “debts” referred to in CPA s 117(1) and cannot properly be subject to the garnishee order, which must then be set aside.

38    The general rule is that debts and other choses in action “are for legal purposes localised and are situated where they are properly recoverable and are properly recoverable where the debtor resides”: Jabbour v Custodian of Absentee’s Property of State of Israel [1954] 1 WLR 139 at 145; [1954] 1 All ER 145 at 151; AssetInsure Pty Ltd v New Cap Reinsurance Corp Ltd (in liq) [2006] HCA 13; 225 CLR 331 at [58]. That would be consistent with the Latin maxim actor sequitur forum rei, ie the general rule that the plaintiff must sue in the court to which the defendant is subject at the time of the suit: City Finance Co Ltd v Matthew Harvey & Co Ltd [1915] HCA 75; 21 CLR 55 at 64 (recognising that under Australian and English rules, presence in the jurisdiction when served is sufficient to establish in personam jurisdiction). Hence, prima facie, the debt is situated in Australia where the garnishee is registered and carries on business.

39    However, the position is more complicated than that. In Hardy Exploration & Production (India) Inc v Government of India [2018] EWHC 1916 (Comm); [2019] QB 544 at [82] it was held that the general rule or presumption is open to displacement if it can be demonstrated that the relevant debt is properly recoverable or enforceable in a jurisdiction other than the debtor’s residence or domicile. The example is given of a case where suit must be brought against the debtor in that other jurisdiction, such as by a “special agreement” or an “exclusive right of suit” agreed between the parties in question. It was observed that if the position were otherwise, the anomalous situation may arise where a third party debt order is made in respect of a debt which a foreign court with exclusive jurisdiction holds to be non-existent. That is a powerful consideration.

40    In Hardy Exploration, a third-party debt order against an English company which owed a debt to the Government of India under agreements subject to the jurisdiction of the Indian courts was set aside as being beyond the jurisdiction of the English court because the situs of the debt was in India.

41    The analysis in Hardy Exploration as set out above was adopted and applied by the Court of Appeal in SAS Institute Inc v World Programming Ltd [2020] EWCA Civ 599 at [59]-[60], although neither party to that case challenged that analysis. Citing those authorities, the authors of Dicey, Morris & Collins: The Conflict of Laws (16th ed, Sweet & Maxwell, 2022) at [23.026] state that:

[A]n exclusive jurisdiction or arbitration agreement is likely to establish that the debt is located at the place of the chosen court or agreed seat of the tribunal, as that replaces the debtor’s residence as the normal place of enforcement—enforcement for these purposes has been understood to mean the place where a judgment may be obtained against the debtor, not the place or places where the debtor’s assets are located.

42    It should be noted that there is a decision in England to the contrary. Judge Hellier in the First-Tier Tribunal (Tax Chamber) in Perrin v Revenue and Customs Commissioners [2014] UKFTT 223 (TC); [2014] SFTD 919 held that although the debt in question was subject to the law of the Isle of Man and any disputes were to be resolved in the courts of the Isle of Man, the debt was located in England where the debtor’s assets were and where it could thus be enforced (at [34]-[45]). That decision may be influenced by considerations peculiar to tax debts, and in any event must give way to the later, and higher, authorities of Hardy Exploration and SAS Institute. There are also more recent authorities in England that accept the Hardy Exploration analysis as correct: Enemalta plc v The Standard Asia Club Ltd [2021] EWHC 1215 (Comm) at [11]; Ross Leasing Ltd v Nile Air [2021] EWHC 2201 (Comm) at [17]-[20]; Lakatamia Shipping Co Ltd v Su [2023] EWHC 1874 (Comm) at [72].

43    As far as Australian authority is concerned, in Davies M, Bell AS, Brereton PLG and Douglas M, Nygh’s Conflict of Laws in Australia (10th ed, LexisNexis Butterworths, 2019) at [32.33], Hardy Exploration is cited as an example of the broader principle that a right of action is situated in the place where it can most effectively be enforced. There does not otherwise appear to be Australian authority directly on point.

44    Given its apparent acceptance in England, there being no Australian authority against it, and its consistency with the principle that a chose in action is situated where it is properly recoverable, I adopt the Hardy Exploration analysis as being applicable in Australia. The result is that the garnished debt is located in England. It is beyond the territorial reach of CPA s 117(1) and the garnishee order should be set aside.

45    Consideration should be given to the submission that an arbitral award against the garnishee in favour of BICC or SALD would be readily enforceable in Australia under s 8(3) of the IAA, and that since the garnishee has no assets in the United Kingdom and presumably does have assets in Australia, Australia is the place where the debt might most readily be recoverable. There are at least two reasons why I do not think that that approach would be correct. First, central to that analysis is the location of the debtor’s assets, because that it what makes the debt recoverable at that location, but on the authorities that is not the touchstone for the location of the debt. Secondly, under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 330 UNTS 3, known as the New York Convention, most countries would readily enforce an arbitral award made under the provisions of the SPA or SPD in London. The debt would therefore be situated at literally dozens of different places. That would be unworkable.

46    There is an alternative approach, which is with reference to the exception to the general rule with regard to the territorial limitation on the execution of judgments identified in Taurus Petroleum and cited at [34] above. That is, if payment under the garnishee order would be recognised in English law, being the law of the place where the debt is situated, as discharging the debt then this Court would have the jurisdiction (in the sense of power) to make the order. See Société Eram at [26] and Dicey, Morris & Collins at [25-090].

47    Discharge of the debt is governed by its proper law: Barcelo v Electrolytic Zinc Co of Australasia Ltd [1932] HCA 52; 48 CLR 391 at 425; Merwin Pastoral Co Pty Ltd v Moolpa Pastoral Co Pty Ltd [1933] HCA 31; 48 CLR 565 at 573; European Bank Ltd v Citibank Ltd at [51]. In this case that is English law. There is no choice of law rule in English law whereby CPA s 123(4) would be applied so that payment by the garnishee under the garnishee order to Siemens would have the effect of discharging the garnishee’s debt to BICC; BICC or SALD could still pursue the debt by way of London arbitration and payment under the garnishee order would not be an available defence under the applicable law.

48    Therefore, even on the alternative approach, the garnishee order must be set aside.

49    Resisting that conclusion, Siemens submits that the debt created under the SPA and the SPD must be treated as being situated where physical copies of the SPA and SPD are to be found. That is on the basis of what is said to be a general rule that a debt created by deed is a specialty which is regarded as being located where the deed itself is to be found: Mortensen R, Garnett R and Keyes M, Private International Law in Australia (5th ed, LexisNexis, 2023) at [24.11]; Toronto General Trusts Corporation v The King [1919] AC 679 at 683-684.

50    The difficulty, as adverted to earlier, is that there is no evidence as to where the deeds are located, and they may have been executed in multiple copies. To overcome this difficulty, Siemens submits that where there are duplicate (or more) deeds “regard must be had to the other circumstances of the case” to determine the location of the debt, citing Toronto General Trusts at 684. Siemens also cites Ex parte Coote (1948) 49 SR (NSW) 179 at 185 where it was said by the Court of Appeal that “if a specialty debt is created or evidenced by two deeds situated in different places, all the relevant circumstances must be taken into account in determining to what place the notional situation of the rights created by the deeds should be attributed.” On that basis, Siemens submits that it may be inferred that the duplicates of the deeds are in the locations of the parties that executed the deeds, being the UAE and Australia. (Siemens overlooks that one of the parties is a Qatari corporation which introduces yet a further locality.)

51    However, for reasons of practicality, as well as logic, property should not be held to be situated in more than one place simultaneously: Toronto General Trusts at 684 and Ex parte Coote at 185. Those cases are, rather, authority for the principle that all relevant circumstances must be taken into account in the determining of a single location of the debt. On that basis, Siemens submits that the place of payment stipulated under the deeds, being the “BICC Account” in the UAE, should be given significant weight. That approach, however, still leads one away from Australia and beyond the territorial reach of the Court and CPA s 117(1).

52    It is to be noted that the rule that a debt arising under a deed is situated where the deed is may in any event be limited to taxation debts: Dicey, Morris & Collins at [23-032]. There may be different reasons for having to determine where the situs of property lies, each giving rise to its own rule or rules, with taxation being a leading example: Nygh at [32-17]-[32-23]. The relevant cases all involve the levying of duties: Toronto General Trusts; Royal Trust Co v A-G (Alberta) [1930] AC 144 at 150; Ex parte Coote; Photios v Cussen [2015] NSWSC 336 at [62]-[63]. No authority for the broader application of the rule has been brought to my attention. However, in view of my prior conclusions, it is not necessary to determine this point.

Ground 2: risk of harm to the garnishee and other third parties

Objections to certain evidence

53    In support of ground 2 for setting aside the garnishee order, the garnishee relies on an affidavit of Colin Wiley Young, who is a Consultant at CIMIC, affirmed on 8 December 2023. In certain paragraphs of that affidavit, Mr Young deposes to conversations that took place between himself and a Mr Mohamed Oraby, who is the Chief Legal Officer and Group Legal Councillor of BICC and who holds a “legal advisory role” with SALD.

54    Mr Young gives evidence that Mr Oraby informed him of various matters, including that the garnishee’s inability to make payments to BICC because of the garnishee order has impacted on BICC’s progress in rectifying defects on a particular construction project. That was said by Mr Oraby to have the consequence that the project owner will call on the performance bond guaranteed by CIMIC and/or terminate the project if the rectification works are not completed. Also, SALD considers the garnishee to be in default of its obligations under the SPD and will likely terminate the SPD and consider making claims against the garnishee.

55    Siemens objects to those paragraphs of Mr Young’s affidavit on the basis that that evidence is hearsay and thereby excluded under s 59 of the Evidence Act 1995 (Cth). The objected to paragraphs are 24(b) (the final sentence), 24(c)-(e), 26 and 27.

56    Siemens also advances an objection to those paragraphs of Mr Young’s affidavit on the basis of s 135 of the Evidence Act, which confers upon the Court a general discretion to exclude evidence if its probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party, misleading or confusing, or cause or result in undue waste of time. Siemens complains that it cannot test the indirect evidence of Mr Oraby sought to be given through Mr Young.

57    In response to Siemens’s hearsay objection, the garnishee relies on the exception contained in s 75 of the Evidence Act. That is that in an “interlocutory proceeding” the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source. The only question that arises in relation to that section in this proceeding is whether the proceeding is an “interlocutory proceeding”. The parties take opposing positions on that issue. Neither suggests that the fact that the relief that is sought is by way of interlocutory application is determinative of the issue. As will be seen, that is the correct approach as the issue is one of substance, not form.

58    In the interests of expediency, I provisionally allowed the objected-to evidence on the basis that I would make a ruling on its admissibility in the course of delivering judgment. The parties did not oppose that course, and Mr Young was cross-examined by senior counsel for Siemens on that basis.

59    There is no direct, conclusive authority on the proper characterisation of a proceeding for, or to set aside, a garnishee order.

60    The term “interlocutory proceeding” is not defined in the Evidence Act. There is some controversy between the parties as to the relevant principles for determining whether a proceeding is interlocutory or final for the purpose of s 75.

61    In Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (No 3) [1996] FCA 518; 64 FCR 55, Lindgren J held that the question is to be determined “by reference to the kind of relief sought.” A final order is one which “finally disposes (subject only to appeal) of an action or an existing dispute between the parties”, in contrast to orders made in interlocutory proceedings which “contemplate that the parties will be before the same court again when a decision will be made which will determine the parties’ jural relations after which they will not be before that court again on the same matter” (at 58D-G).

62    The question of the relevant test was considered by the Full Court in Hastwell v Kott Gunning [2021] FCAFC 70. In that case, the Full Court considered whether leave to appeal was required from the decision of the primary judge permanently staying the applicant’s claim for damages against the respondent. The Full Court also considered whether the primary judge erred by admitting hearsay evidence of extracts of a psychiatrist’s report pursuant to s 75 of the Evidence Act in circumstances where the applicant alleged that the nature of the primary judge’s decision was “a conclusive adverse determination” rather than interlocutory. Although acknowledging that the terms “final” and “interlocutory” may mean different things in different contexts (citing Malouf v Malouf [1999] FCA 284; 86 FCR 134 at [33]), in relation to the appeal ground concerning s 75 of the Evidence Act the Full Court (McKerracher, Kerr and Charlesworth JJ) held at [75] that:

This ground cannot succeed. The proceedings were clearly interlocutory… Moreover, as Kott Gunning correctly points out, the same tests have been applied in determining whether proceedings are interlocutory for the purposes of requiring leave to appeal and for the purpose of s 75 of the Evidence Act: Ashby v Commonwealth (No 3) [2012] FCA 788; (2012) 206 FCR 44 (at [8]); Bray v F Hoffman-La Roche Ltd [2000] FCA 243; (2002) 118 FCR 1 (at [29]-[31]); FAI Home Security Pty Ltd v Price [1999] VSC 274 (at [27]-[28]); and Ungar v A-G (NSW) [2019] NSWCA 86 (at [113]-[116]).

63    The Full Court then referred to Allstate and Bouwer v Titan Corp Ltd [1997] FCA 1077; 73 FCR 241, expressing the view that “Allstate was explained and distinguished in Brouwer”. The Full Court held that the primary judge did not err with respect to s 75 of the Evidence Act for the same reasons why leave to appeal was required. Namely, the primary judge’s decision did not finally determine the rights of the parties on the substantive issues in dispute notwithstanding that it had the practical effect of ending the proceeding because it remained open to the applicant to apply to set aside the order or to bring a fresh complaint based on the same facts.

64    That analysis in turn directs attention to cases that consider whether a judgment is an “interlocutory judgment” under s 24(1A) of the FCA Act, and analogous provisions, such that leave to appeal would be required before there could be any appeal from it. There appears to be no direct authority on that point with regard to a garnishee order.

65    In Brouwer, a non-party to the proceeding was issued two subpoenas for the production of documents and the primary judge rejected the existence of a public interest immunity sufficient to release the subpoenaed person from producing the documents. The Full Court held the primary judge’s decision was interlocutory and leave to appeal was required (at 243):

[I]f a subpoena is issued to a stranger to existing proceedings, and, as occurred in the present case, an order is made requiring the stranger to produce documents to the Court, the order does not “finally determine the rights of the parties” for the purpose of the notion of a “final” order.

66    The finding in that case supports the characterisation of garnishee orders as interlocutory orders. The garnishee is a stranger to the existing proceedings between Siemens and BICC and the issue concerns the appropriateness of an enforcement action which is an incident of the procedures governing the substantive proceedings.

67    Firebird Global Master Fund II Ltd v Republic of Nauru [2014] NSWCA 360; 89 NSWLR 477 is also of some assistance in fortifying that view. Following a garnishee order being set aside, the applicant filed a summons seeking leave to appeal to the Court of Appeal. In the reasons on the appeal, Basten JA noted at [216] that:

The applicant sought leave to appeal on the basis that the judgment was probably to be characterised as interlocutory, for the purposes of the Supreme Court Act 1970 (NSW), s 101(2)(e) [that provision being equivalent in its terms to s 24(1A) of the FCA Act]. Accepting that to be so, no party suggested that the issues raised were not of significant public importance and warranting a grant of leave.

68    The Court of Appeal granted leave to appeal but dismissed the appeal. Although the characterisation of the order setting aside the garnishee order was apparently not the subject of argument, the approach of the parties and of the Court of Appeal is consistent with the conclusion that garnishee orders are interlocutory. Fitz Jersey (at [87]) is to similar effect.

69    Brouwer is particularly pertinent to the current case. A subpoena on a third party is relevantly analogous to a garnishee order on a third party: the third party has no interest in the principal dispute before the court, yet the judgment with regard to the subpoena (or garnishee order) finally determines the obligations of the third party. Another subpoena or garnishee order can also be sought. It is also significant that the New South Wales Court of Appeal has regarded leave to appeal to be necessary from judgments affirming or setting aside garnishee orders, notwithstanding that it has not specifically had to decide that question.

70    In the result, in my view the proceeding for a garnishee order and the proceeding to set it aside are “interlocutory proceedings” such as to enliven s 75 of the Evidence Act. It follows that Mr Young’s evidence of his conversations with Mr Oraby is not inadmissible hearsay and Siemens’ objections to those paragraphs of Mr Young’s evidence on the basis of hearsay ought to be dismissed.

71    I am also not persuaded that those paragraphs are of such a nature as to be ruled inadmissible under s 135 of the Evidence Act. They have only a peripheral relevance to the case, and the fact that Mr Oraby is not available for cross-examination is a feature of all hearsay evidence that is rendered admissible under s 75. I fail to see how that feature in this case creates the kind of prejudice referred to in s 135.

Risk of harm

72    The relevant question is whether there is a “real or substantial” risk that the garnishee will suffer commercial harm by reason of paying the debt under the garnishee order rather than paying its creditor, the judgment debtor: Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v R’As al-Khaimah National Oil Co [1990] 1 AC 295 at 353. The most obvious risk is the risk of having to pay the debt twice, ie after having paid the garnishor, still being obliged to pay the judgment debtor.

73    There are three essential considerations in evaluating whether there is a real or substantial risk of the debt having to be paid twice, namely (1) the position under the applicable foreign law as to whether payment under the garnishee order in Australia would be treated as discharging the garnished debt; (2) the likelihood that someone in the foreign country would in fact take steps to enforce the debt; and (3) if such an order were sought and obtained, whether the garnishee has assets in the foreign jurisdiction against which a judgment enforcing the debt could be executed. See Soinco Saci & Eural KFT v Novokuznetsk Aluminium Plant (No 2) [1998] 2 Lloyd’s Rep 346 (CA) at 355.

74    Dealing first with the position under the applicable foreign law, it is common ground between the competing experts on the law of the UAE that if BICC or SALD sought to pursue the debt owing to BICC by the garnishee in a UAE court, at the instance of the garnishee the proceeding would be dismissed or stayed in favour of London arbitration. That is in accordance with the arbitration clauses in the applicable agreements. Alternatively, BICC or SALD could simply commence arbitration in London. In either event, the claim would be determined in accordance with English law. Even if the garnishee did not rely on the arbitration clause and a suit in a UAE court proceeded there, UAE law would recognise the parties’ choice of law so English law would in any event apply to determine the question of whether payment under the garnishee order served to discharge the garnishee’s debt to BICC. The experts on UAE law unconvincingly suggested that a UAE court might simply regard the debt as discharged because it was paid under order of an Australian court (T64-68). If that is right, then BICC and SALD could be expected not to pursue the debt in a UAE court, but rather to commence arbitration proceedings in London. In the result, all enforcement paths lead to the application of English law.

75    As I have explained, because the debt would be regarded under English law as being situated in England, and in any event not in Australia, English law will not recognise payment under the Australian garnishee order as discharging the debt to BICC. It follows that if BICC or SALD were to pursue the debt in the UAE or in London arbitration, there is a very substantial risk that the garnishee would be liable to pay twice.

76    Turning then to the second consideration, there is no evidence that BICC would, or might realistically, take that course. Indeed, the evidence is to the contrary inasmuch as Mr Oraby told Mr Young that he does not accept that the garnishee proceeding is relevant to the SPD as BICC is not a party to the SPD and has no ability to enforce it.

77    SALD is, however, a party to the SPD and it may have a right to enforce the debt in favour of BICC. Mr Oraby informed Mr Young that SALD will consider making claims against the garnishee in “local courts” (ie UAE courts) if the garnishee does not pay BICC because of the garnishee order. There is no apparent reason why SALD would not seriously consider such an option. I consider that there is a real risk that it might pursue it.

78    With regard to the third consideration, it does not matter that the garnishee has no assets in England, or in the United Kingdom more broadly. That is because an arbitration award against the garnishee in London will be readily enforceable under s 8(3) of the IAA in Australia.

79    On balance, I am accordingly satisfied that there is a real or substantial risk that the garnishee might have to pay twice.

80    There are also significant risks of commercial harm being visited upon CIMIC. As explained above, the relevant payments under the SPD accrue as different projects are completed and the performance bonds by the banks, which CIMIC has guaranteed, are released. The payments are an incentive to SALD and BICC to ensure that the projects are completed, and that CIMIC’s exposure to the banks is brought to an end. If the payments are interrupted by the garnishee order, there is a real or substantial risk that one or more projects will not be brought to the stage of final completion that allows for the release of the bonds, and that the bonds will then be called on. CIMIC would then have to meet its obligations to the banks.

81    The risk of that occurring is not merely hypothetical. The evidence is that CIMIC has been called upon previously more than once to pay the value of guaranteed bonds. Further, representatives of SALD have communicated to the garnishee and CIMIC that an outstanding bond is presently at risk of being called on having regard to unresolved claims for defects.

82    I am therefore satisfied that there is a real or substantial risk that CIMIC and the garnishee will suffer commercial harm in the event that the garnishee order is not set aside.

83    I need not be concerned about BICC facing harm as a consequence of the garnishee order, since it has not satisfied the judgment of this Court against it. However, under the SPA and the SPD there are a number of other parties. Those contracts provide for a complicated, interrelated set of rights and obligations between the different parties as a process of unwinding longstanding commercial relationships. There is a real or substantial risk that the garnishee order will intervene in those legal relationships and cause other parties harm. A garnishee order in those circumstances is, in the statutory language, inappropriate.

84    In that regard, the relevant payment obligation under cl 9.1.1 of the SPA is expressed to have been assumed by the garnishee “[i]n consideration for the rights and obligations assumed by the Parties under this Deed”. The garnishee’s payment obligation is thus not just owed to BICC. It is also an obligation owed to the other counterparties to the SPA and, arguably, the additional counterparty to the SPD. Those counterparties have assumed certain rights and obligations under the SPA in consideration for the garnishee assuming the obligation to make payments.

85    By way of example, SALD (quite apart from its interest as shareholder of BICC) has agreed to take on all economic risk and the ongoing obligation to prudently manage and operate BICC (cl 4.2 of the SPA). If the intended contractual source of funding for this task is redirected, SALD’s ability to discharge its contractual obligations in respect of running the BICC business is jeopardised. SALD and other counterparties (who are not judgment debtors of Siemens) would thereby be adversely affected by the garnishee order having the effect of redirecting payments to Siemens.

86    I would accordingly set aside the garnishee order as an exercise of discretion on the basis that there is otherwise a real or substantial risk that the garnishee and other third parties will face commercial harm.

Ground 3: assignment to Emirates National Bank of Dubai

87    The evidence is that by letter dated 13 November 2018, the Emirates National Bank of Dubai (ENBD) granted certain banking facilities, including substantial overdraft facilities, to BICC. It was a term of the facility letter that the facilities were subject to the bank’s general terms and conditions of credit facilities. Those general terms included (at cl 3.2.1) the following:

Each Borrower hereby assigns to the Bank, as continuing security for the Secured Obligations, all of its right, title and interest which it now has or in the future may have, in, under and to each of its accounts receivables.

88    The general terms provided that the facility is governed by the laws of the Emirate of Dubai and the federal laws of the United Arab Emirates (cl 12).

89    There is also evidence of a substantial judgment against BICC in favour of ENBD that was affirmed on appeal on 13 April 2023.

90    It certainly seems that the garnishee’s debt to BICC may have been assigned to ENBD under the facility letter, with the result that ENBD has a substantial interest in the debt. However, there is no evidence with regard to the meaning and effect of cl 3.2.1 of the general terms in UAE law, and I am not prepared to assume in the garnishee’s favour that “accounts receivables” in that clause would include the debt in question. That arises in particular because the payment obligation is owed not only to BICC but also to, at least, SALD.

91    In the circumstances, I would not set the garnishee order aside on the basis of ENBD’s possible interest in the debt. It is, though, a factor that would weigh with the risk of harm to the garnishee and third parties identified under ground 2 above in favour of the exercise of the discretion to set aside the garnishee order.

Ground 4: bankruptcy proceedings

92    During oral argument, and in particular following the concurrent evidence of the experts on UAE law, this ground lost what significance it may otherwise have had. The essential point is that existing winding-up or bankruptcy proceedings against the judgment debtor would be a relevant consideration in informing the discretion whether or not to confirm or set aside a garnishee order: ML Ubase Holdings Co Ltd v Trigem Computer Inc [2007] NSWSC 859; 69 NSWLR 577 at [69]. However, it became common ground that the prospect of BICC being wound-up in bankruptcy in Dubai, notwithstanding the commencement of an expert investigation into its solvency, is at this stage too far removed to be anything more than speculative.

93    In those circumstances, I am not persuaded that the garnishee order should be set aside on this ground.

Conclusion

94    In the circumstances, I will set aside the garnishee order that was made on 11 September 2023.

95    In accordance with the usual rule that the costs follow the event, I will order that Siemens pay the garnishee’s costs of the application. However, recognising that liability for costs has not been the subject of submissions and that there may be relevant matters that I am not presently aware of, I will make provision for the parties to apply to vary that costs order.

Associate:

Dated:    22 December 2023