GR Engineering Services Ltd v Eastern Goldfields Ltd
[2018] WASC 19
•24 JANUARY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: GR ENGINEERING SERVICES LTD -v- EASTERN GOLDFIELDS LTD [2018] WASC 19
CORAM: TOTTLE J
HEARD: 3 NOVEMBER 2017
DELIVERED : 24 JANUARY 2018
FILE NO/S: CIV 2140 of 2017
BETWEEN: GR ENGINEERING SERVICES LTD
Plaintiff
AND
EASTERN GOLDFIELDS LTD
First DefendantINVESTMET LTD
Second DefendantSQUIRE PATTON BOGGS (AU)
Third Defendant
Catchwords:
Arbitration - Arbitration clauses - Proper approach to construction
Arbitration - Stay of proceedings - Reference to arbitration under Commercial Arbitration Act 2012 (WA) s 8
Interpleader - Rules of the Supreme Court 1971 (WA) O 17 - Share transfer form held in escrow - Competing claims to share transfer form
Legislation:
Commercial Arbitration Act 2012 (WA), s 1C, s 7, s 8
Rules of the Supreme Court 1971 (WA), O 17 r 1, r 2
Result:
Matter referred to arbitration
Proceedings stayed in part
Interpleader relief granted
Category: B
Representation:
Counsel:
Plaintiff: Mr M L Bennett
First Defendant : Mr T P O'Leary
Second Defendant : Mr T P O'Leary
Third Defendant : Mr J C Vaughan SC
Solicitors:
Plaintiff: Bennett + Co
First Defendant : Gilbert + Tobin
Second Defendant : Gilbert + Tobin
Third Defendant : Jackson McDonald
Case(s) referred to in judgment(s):
Attenborough v London & St Katharine's Dock Co (1878) 3 CPD 450
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66
Carew Corporation Pty Ltd v The R&I Bank of Western Australia Ltd (Unreported, WASCA, Lib No 930713, 21 September 1993)
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304
Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206
Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3] [2013] VSC 435
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10
Sun Insurance Office v Galinsky [1914] 2 QB 545
Western National Plant Pty Ltd v Smith Broughton Pty Ltd (Unreported, WASC, Lib No 980368, 26 June 1998)
TOTTLE J:
Introduction
These reasons concern the following interlocutory applications:
(i)An application by the first defendant, Eastern Goldfields, to refer the dispute between it and the plaintiff, GR Engineering, to arbitration and to stay the proceedings. The application is brought pursuant to Commercial Arbitration Act 2012 (WA) (CAA) s 8.
(ii)An application by the third defendant, Squire Patton Boggs, for interpleader relief pursuant to Rules of the Supreme Court 1971 (WA) (RSC) O 17 r 1.
GR Engineering commenced this action by writ on 10 July 2017. It seeks:
(i)'liquidated damages' in the amount of $9,940,995.07 from Eastern Goldfields for breach of a design and construct engineering contract (the Contract);[1]
(ii)alternatively, $5,000,000 as due to it from Eastern Goldfields pursuant to the terms of an agreement (the Partial Accord and Satisfaction Agreement) it alleges was made between it and Eastern Goldfields and the second defendant, Investmet, by which it contends:
(a)first, that Eastern Goldfields agreed to pay $5,000,000 to GR Engineering in consideration of GR Engineering withdrawing a statutory demand; and
(b)second, that Investmet guaranteed the payment of $5,000,000 and pledged 18,461,538 shares in the capital of Eastern Goldfields as security for its guarantee;
(iii)an order that Investmet transfer to it 18,461,538 shares in the capital of Eastern Goldfields pursuant to the Partial Accord and Satisfaction Agreement;
(iv)an order that Squire Patton Boggs deliver up an executed share transfer form in respect of the 18,461,538 shares in the capital of Eastern Goldfields (the Share Transfer) held by the firm as Escrow Agent; and
(v)damages from Squire Patton Boggs for delay in delivery up of the Share Transfer.
[1] Although GR Engineering pleads a claim for 'liquidated damages' in submissions its counsel accepted that the claim was a claim in debt for amounts it claimed had been certified as payable to it pursuant to the Contract, ts 59.2.
Facts
The following outline of the facts relevant to the genesis and development of the disputes between the parties is derived from the affidavits relied on by the parties.[2] There was no contest about the primary facts.
The parties
[2] The affidavit of Tony Marco Patrizi sworn 5 September 2017 (Patrizi Affidavit); the affidavit of Tanya Rachel Lavan sworn 13 October (Lavan Affidavit); two affidavits of Timothy Paul O'Leary one affirmed on 30 August 2017 (O'Leary Affidavit) and the other on 22 September 2017; and the affidavit of Simon Gerard Cunningham Rear sworn 15 September 2017.
GR Engineering provides engineering design and construction services to the resources and mineral processing industry in Western Australia. Eastern Goldfields is a gold miner. It owns the Davyhurst Gold plant located about 140 km north-west of Kalgoorlie.
Investmet is a private investment company and a shareholder in Eastern Goldfields. Mr Michael Fotios is the Executive Chairman of Eastern Goldfields and Investmet.
Squire Patton Boggs is a firm of legal practitioners who acted on instructions from Eastern Goldfields and Investmet in the circumstances described in more detail later in these reasons.
The Contract
On 22 September 2016 GR Engineering and Eastern Goldfields entered into the Contract. The Contract provided that GR Engineering would design and carry out certain refurbishment works on the Davyhurst Gold Plant. It incorporated various general conditions.[3] The Contract Sum (as defined) was $12,487,638.
The superintendent
[3] Unless otherwise stated in the balance of these reasons references to clauses are references to clauses in the general conditions of the Contract.
Eastern Goldfields was required to ensure that a superintendent was appointed to perform the role and functions stipulated in the general conditions (cl 20). One of the issues between the parties is whether Eastern Goldfields appointed a superintendent.
The contractual payment regime
The Contract provided for payment to be claimed progressively by GR Engineering by the making of progress claims (cl 37.1).
Within 14 days of receipt of a progress claim the superintendent was obliged to issue:
(i)a Progress Certificate evidencing the moneys due from Eastern Goldfields to GR Engineering pursuant to the progress claim and reasons for any difference; and
(ii)a certificate evidencing any validly claimed retention moneys and moneys due from GR Engineering to Eastern Goldfields pursuant to the Contract (cl 37.2(a)).
Clause 37.2(c) provided that if the superintendent did not issue a Progress Certificate within 14 days of receiving a progress claim, that progress claim would be deemed to be the relevant Progress Certificate unless the superintendent had notified a valid dispute in relation to the progress claim.
Within seven days of receipt of the certificates issued pursuant to cl 37.2(a) Eastern Goldfields was obliged to pay GR Engineering the balance of the amount recorded in a Progress Certificate after setting off any validly claimed retention moneys or moneys due by GR Engineering pursuant to the Contract as Eastern Goldfields elected to set off.
Notices of suspension and claims
Clause 39 governed the rights of the parties in the event of default or insolvency. Clause 39.7 provided that if Eastern Goldfields committed a substantial breach of Contract GR Engineering could serve a notice to show cause why it should not exercise any of the rights specified in cl 39.9. Those rights included the right to suspend the whole or any part of the works required to be completed under the Contract.
Dispute resolution
Clause 41 governed the resolution of disputes as follows.
41.1Notice of dispute
(a)If a difference or Dispute (together called a 'Dispute') between the parties arises in connection with the subject matter of the Contract, including a Dispute concerning:
(i)a Direction; or
(ii)a Claim
(A)in tort;
(B)under statute;
(C)for restitution based on unjust enrichment or other quantum meruit; or
(D)for rectification or frustration,
or like claim available under the law governing the Contract,
(b)then either party shall, by hand or by registered post, give the other a written notice of Dispute adequately identifying and providing details of the Dispute.
(c)Notwithstanding the existence of a Dispute, the parties shall, subject to clauses 39 and subclause 41.4, continue to perform the Contract.
41.2Conference
(a)Within 14 days after receiving a notice of Dispute, the parties shall confer at least once to resolve the Dispute or to agree on methods of doing so. At every such conference each party shall be represented by a person having authority to agree to such resolution or methods. All aspects of every such conference except the fact of occurrence shall be privileged.
(b)If the Dispute has not been resolved within 28 days of service of the notice of Dispute, that Dispute shall be and is hereby referred to arbitration.
41.3Arbitration
If within a further 14 days the parties have not agreed upon an arbitrator, the arbitrator shall be nominated by the person in Item 30(a). The arbitration shall be conducted in accordance with the rules in Item 30(b).
41.4Summary relief
Nothing herein shall prejudice the right of a party to institute proceedings to enforce payment due under the Contract or to seek injunctive or urgent declaratory relief.
The word 'Claim' as it appears in cl 41.1 is not defined in the Contract.
Disputes over payment arise
By letter dated 24 March 2017 GR Engineering alleged that Eastern Goldfields had failed to pay amounts due under the Contract in January and February 2017 and gave notice to Eastern Goldfields to show cause why GR Engineering should not suspend its services until payment was made.[4]
[4] O'Leary Affidavit, Annexure TPO-4, 89.
Eastern Goldfields replied by letter dated 28 March 2017 confirming that those amounts were owing and offering to make payment later than agreed under the Contract.[5]
[5] O'Leary Affidavit, Annexure TPO-4, 90.
On 29 March 2017 GR Engineering wrote to Eastern Goldfields and agreed to accept payment on the amended terms proposed by Eastern Goldfields.[6] GR Engineering however did not agree to abandon its rights under the Contract in the event that Eastern Goldfields failed to meet its amended obligations.
[6] O'Leary Affidavit, Annexure TPO-4, 91 - 92.
By letter dated 5 April 2017 Eastern Goldfields noted that an amount of $9,248,394.33 remained outstanding to GR Engineering, but stated that Eastern Goldfields would make immediate payment once funds from a capital raising were received.[7]
[7] O'Leary Affidavit, Annexure TPO-4, 93 - 94.
On 28 April 2017 GR Engineering purported to give notice to Eastern Goldfields pursuant to the Contract that Eastern Goldfields had failed to pay to it an amount of $1,524,384.73 claimed by GR Engineering on 25 February 2017.[8] Eastern Goldfields claims the notice was defective because it did not comply with the formal requirements under the Contract and for other reasons.
[8] O'Leary Affidavit, Annexure TPO-2, 84.
Eastern Goldfields responded by letter dated 3 May 2017 disputing that GR Engineering's letter constituted a notice to show cause and contending that, in any event, pursuant to the Contract and because of its ongoing assessment of variation claims, GR Engineering was not entitled to suspend work.[9] Eastern Goldfields further noted its commitment at that time to pay the balance of the contract sum by 10 May 2017 and stated that GR Engineering was not entitled to announce to the ASX its intention to suspend work.
[9] O'Leary Affidavit, Annexure TPO-3, 85 - 86.
On 4 May 2017 GR Engineering replied by letter stating that it was owed $6,601,496.68 for work done under the Contract along with interest of $249,117.64 that had accrued.[10] GR Engineering also stated that Eastern Goldfields was in breach of the Contract. Accordingly, GR Engineering stated that from 4 May 2017 it was taking steps to suspend part of the work under the Contract and would only recommence work on payment of the outstanding amount.
[10] O'Leary Affidavit, Annexure TPO-4, 87 - 88.
On 11 May 2017 GR Engineering served a statutory demand for payment on Eastern Goldfields, describing the debt as amounts due in January, February and March 2017 to the total of $6,601,496.68.[11]
[11] Patrizi Affidavit, Annexure TPM-45, 512 - 513.
On 31 May 2017 Eastern Goldfields offered to make a payment to GR Engineering by 9 June 2017 of $5,000,000.[12] To secure that obligation, Eastern Goldfields offered to provide security over options in Galaxy Resources Ltd (Galaxy) worth $6,000,000 held by a third party company.
[12] Patrizi Affidavit, Annexure TMP-48, 524 - 526.
Eastern Goldfields applied to the Court to set aside the statutory demand on the ground that it had an offsetting claim.
On 1 June 2017 GR Engineering accepted the proposed payment and guarantee offered by Eastern Goldfields.[13]
[13] Patrizi Affidavit, Annexure TMP-49, 527 - 528.
Later that day, by email, Eastern Goldfields requested that the collateral under the guarantee be amended to include $3,000,000 worth of shares in Eastern Goldfields held by Investmet, with the Share Transfer to be held in escrow by an agent.[14] GR Engineering agreed to the amending of the terms of the guarantee.[15]
[14] Patrizi Affidavit, Annexure TMP-50, 529 - 531.
[15] Patrizi Affidavit, Annexure TMP-51, 532 - 536.
A draft guarantee was provided by Squire Patton Boggs to GR Engineering on 2 June 2017.[16] After a reduction in the share price of Galaxy, Squire Patton Boggs passed on Investmet's suggestion that only Eastern Goldfields' shares be collateral under the guarantee, and attached an amended agreement.[17] On 14 June 2017 GR Engineering's solicitors notified Squire Patton Boggs of GR Engineering's agreement to the revised guarantee.[18]
[16] Patrizi Affidavit, Annexure TMP-52, 537 - 558.
[17] Patrizi Affidavit, Annexure TMP-56, 595 - 623.
[18] Patrizi Affidavit, Annexure TMP-57, 624 - 633.
Later on 14 June 2017 Squire Patten Boggs provided a draft escrow agreement - as contemplated by the draft guarantee - to GR Engineering's solicitors for review.[19] Again, after revision, the parties agreed to execute the guarantee, and the escrow agreement as prepared by Squire Patton Boggs.[20]
[19] Patrizi Affidavit, Annexure TMP-58, 634 - 650.
[20] Patrizi Affidavit, Annexure TMP-60, 668 - 719.
On 15 June 2017 GR Engineering, Eastern Goldfields and Investment executed a guarantee in the form agreed between the solicitors, (the Guarantee). The Guarantee contained a recital that Eastern Goldfields had agreed to pay the 'Guaranteed Money' ($5,000,000) by the 'Date for Payment' (21 June 2017) but it did not include a clause imposing the obligation to make that payment. On the same day GR Engineering, Eastern Goldfields, Investment and Squire Patton Boggs executed the escrow agreement in the form agreed, (the Escrow Agreement), and the Share Transfer executed by Investment was delivered to Squire Patton Boggs.[21] Relevantly, the Escrow Agreement provided:
[21] Patrizi Affidavit, Annexure TMP-62, 761 - 772.
4 Release and dealing with the escrow documents
4.1Upon the Agreement becoming unconditional, the Escrow Agent must:
(a)release the Consent Order from escrow; and
(b)cause the Consent Order to be filed at the Supreme Court of Western Australia.
4.2Upon the receipt of a notice from [GR Engineering] that [Eastern Goldfields] has failed to pay the Guaranteed Amount by the expiration of the Cure Period, the Escrow Agent will release the Share Transfer Form to [GR Engineering] provided that:
(a)acting reasonably, there are no grounds for the Escrow Agent to believe the notice or the matters set out in the notice are not genuine; and
(b)any amendments to the Share Transfer Form required by clause 3.3(d) of the Agreement have been made by the Escrow Agent.
…
8 Interpleader and legal proceedings
8.1If a dispute arises between the Parties with respect to the escrow arrangements contained in this Letter Agreement, the Escrow Agent:
(a)may interplead in all of the assets held in escrow by it under this Letter Agreement in a court of competent jurisdiction; and
(b)will then be fully relieved from any liability or obligation with respect to those interpleaded assets.
8.2All Parties will pursue any legal redress or recourse in connection with any dispute relating to the escrow arrangements contained in this Letter Agreement, without marking the Escrow Agent a Party unless the dispute is based upon the gross negligence or wilful misconduct of the Escrow Agent.
On 22 June 2017 GR Engineering wrote to Eastern Goldfields giving notice of default by Eastern Goldfields of its obligation to make payment pursuant to the Guarantee.[22]
[22] Patrizi Affidavit, Annexure TMP-67, 832.
On 28 June 2017 Eastern Goldfield's present solicitors, Gilbert + Tobin, replied, contending that Eastern Goldfields had no obligation under the Guarantee to make payment to GR Engineering.[23] For that reason, they stated that Investmet had no obligation to pay anything to GR Engineering and that Squire Patton Boggs was not required to release the Share Transfer. The letter went on to provide details of claims Eastern Goldfields was said to have against GR Engineering for misleading conduct and defects in work carried out by it.
[23] Patrizi Affidavit, Annexure TMP-68, 833 - 836.
Additionally, Eastern Goldfields' solicitors alleged that GR Engineering had breached its obligation under the Guarantee to recommence work which had resulted in additional expense for Eastern Goldfields.
On 29 June 2017 GR Engineering wrote to Squire Patton Boggs giving notice that it required the release of the Share Transfer to it.[24] Later that day Squire Patton Boggs replied that there was a dispute between GR Engineering and Investmet as to whether the Share Transfer should be released.[25] On the basis of cl 8 of the Escrow Agreement, Squire Patton Boggs refused to release the Share Transfer and requested GR Engineering respond to the contentions of Eastern Goldfields' solicitors and Investmet.
[24] Patrizi Affidavit, Annexure TMP-69, 837.
[25] Patrizi Affidavit, Annexure TMP-70, 838 - 839.
On 30 June 2017 GR Engineering's solicitors wrote to Squire Patton Boggs again giving notice that GR Engineering required the release of the Share Transfer, relying on cl 4 of the Escrow Agreement.[26] GR Engineering's solicitors rejected Squire Patton Boggs' reliance on the interpleader provision in cl 8 of the Escrow Agreement on the basis that no dispute existed between the parties as to the withholding of the Share Transfer.
[26] Patrizi Affidavit, Annexure TMP-71, 840 - 841.
Squire Patton Boggs responded on 30 June 2017 rejecting any allegation that it was using its position for the benefit of Eastern Goldfields or Investmet.[27] Squire Patton Boggs noted that it considered that Investmet and GR Engineering were in dispute as to whether it should release the Share Transfer and again relied on cl 8 of the Escrow Agreement in refusing to release it.
[27] Patrizi Affidavit, Annexure TMP-72, 842 - 843.
By letter dated 7 July 2017 Eastern Goldfields' solicitors alleged that because GR Engineering's notice to show cause dated 28 April 2017 was ineffective, GR Engineering's suspension of work from 4 May 2017 was wrongful.[28] Eastern Goldfields' solicitors further alleged that GR Engineering had breached a warranty under the Contract by reason of defects in the works it carried out and had failed to recommence work as represented it would to Eastern Goldfields.
[28] O'Leary Affidavit, Annexure TPO-7, 108 - 111.
On 18 August 2017 Eastern Goldfields' solicitors responded to GR Engineering's filing of its amended statement of claim in this proceeding.[29] They stated that the matter should be stayed on the basis that the parties had agreed that in the event that a Dispute (as defined in cl 41.1 of the Contract) could not be resolved by conferral it would be referred to arbitration.
[29] O'Leary Affidavit, Annexure TPO-8, 112 - 113.
On 18 September 2017 GR Engineering's solicitors requested details from Squire Patton Boggs as to whether it acted for Eastern Goldfields, Investmet and other related clients.[30] On 12 October 2017 Squire Patton Boggs' solicitors responded that Squire Patton Boggs did act and continued to act for Eastern Goldfields and Investmet in unrelated matters; and otherwise said that details of the clients for whom Squire Patton Boggs acted were irrelevant and confidential.[31]
[30] Lavan Affidavit, Annexure TRL-1, 3 - 4.
[31] Lavan Affidavit, Annexure TRL-2, 5.
The stay application
Summary of the substantive issues in dispute
Although it might not reflect the parties' contentions with complete accuracy the following summary is sufficient for the purposes of the stay application.
First, GR Engineering contends that Mr Ben Ofri, an employee of Eastern Goldfields, became the superintendent. In the alternative, GR Engineering contends that Eastern Goldfields is estopped from denying that Mr Ofri was the superintendent. Eastern Goldfields contends that no superintendent was appointed and contests the existence of an estoppel.
Second, GR Engineering contends that progress claims were submitted to Mr Ofri in accordance with cl 37 of the Contract and that the amounts claimed became payments due to it pursuant to cl 37. Eastern Goldfields contends that in the absence of a superintendent the progress payment provisions in cl 37 did not apply and no payments are due pursuant to that clause. Eastern Goldfields contends that the fact that before the appointment of its present solicitors it had mistakenly accepted that payments were due did not mean that as a matter of law they were due.
Third, GR Engineering contends that Eastern Goldfields was obliged to pay it $5,000,000 under the Partial Accord and Satisfaction Agreement. Eastern Goldfields contends that there was no agreement on its part to pay $5,000,000 as no express provision imposing such an obligation is to be found in the formal documents executed by the parties and no consensus was reached in the correspondence that preceded the execution of the formal documents.
I am satisfied that the contentions between the parties are such that there are differences or disputes between them that engage cl 41 of the Contract.
The statutory provisions
Section 1C of the CAA provides:
1CParamount object of Act
(1)The paramount object of this Act is to facilitate the fair and final resolution of commercial disputes by impartial arbitral tribunals without unnecessary delay or expense;
(2)This Act aims to achieve its paramount objective by -
(a)enabling parties to agree about how their commercial disputes are to be resolved (subject to subsection (3) and such safeguards as are necessary in the public interest); and
(b)providing arbitration procedures that enable commercial disputes to be resolved in a cost effective manner, informally and quickly.
(3)This Act must be interpreted, and the functions of an arbitral tribunal must be exercised, so that (as far as practicable) the paramount object of this Act is achieved.
(4)Subsection (3) does not affect the application of the Interpretation Act 1984 section 18 for the purposes of interpreting this Act.
Section 8 of the CAA provides:
8Arbitration agreement and substantive claim before court (cf Model Law Art 8)
(1)A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party's first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(2)Where an action referred to in subsection (1) has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.
An 'arbitration agreement' is defined to mean 'an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not'. It must be in writing and may be contained in a clause in a contract: s 7.
An outline of the parties' submissions on the stay application
Eastern Goldfields' principal submissions are as follows:[32]
(i)By cl 41 of the Contract, the parties agreed to arbitration of any 'difference or Dispute … [arising] in connection with the subject matter of the Contract' and the current dispute falls within that definition;
(ii)The present dispute does not fall within the carve‑out constituted by cl 41.4 because on its true construction, leaving to one side applications for injunctive or urgent declaratory relief, the clause only permitted proceedings to enforce payment found to be due under the Contract in accordance with a ruling of an arbitrator.[33]
(iii)In any event the present proceedings are not 'proceedings to enforce payment due under the Contract' as the claim made by GR Engineering is made pursuant to an alleged, apparently unwritten agreement outside the Contract (as GR Engineering's claims cannot have been certified for payment as no superintendent was appointed under the Contract), or any claim made by GR Engineering is made pursuant to an alleged 'Partial Accord and Satisfaction Agreement' pleaded by GR Engineering, neither of which are claims for payment made 'under the Contract'.
[32] First and Second Defendants' Outline of Submissions in Support of Application to Stay Proceedings filed 22 September 2017.
[33] ts 63.
GR Engineering's principal submissions are as follows:[34]
[34] Plaintiff's Outline of Submissions in Opposition to First and Second Defendants' Application for a Stay of Proceedings and Referral to Arbitration filed 6 October 2017.
(i)It commenced the current proceedings in accordance with its right under the Contract to enforce payments due to it from Eastern Goldfields, on the basis that:
(a)Its primary claim against Eastern Goldfields is for payment due under the Contract;
(b)Its alternative claim against Eastern Goldfields is for breach of the pleaded Partial Accord and Satisfaction Agreement, which is a variation to the payment provisions of the Contract, and is therefore a claim to enforce payment under the Contract which falls within the carve out in cl 41.4;
(ii)The pleaded Partial Accord and Satisfaction Agreement was a mechanism by which Eastern Goldfields sought to address its liability to GR Engineering for payments due under the Contract, by which Eastern Goldfields acknowledged its obligations to make payment;
(iii)Contrary to Eastern Goldfields' and Investmet's contentions, payment claims were certified by an officer of Eastern Goldfields, who became the superintendent under the Contract;
(iv)Eastern Goldfields, whose obligation it was to appoint a superintendent to certify payment claims, cannot have the benefit of its failure to do so by now requiring the proceedings to be stayed on the basis that GR Engineering cannot bring a proceeding to enforce payments due under the Contract;
(v)A notice of dispute, required to trigger the arbitration clause under the Contract, has not been issued, and accordingly it is not possible to refer the dispute to arbitration;
(vi)The Contract is only enforceable as between GR Engineering and Eastern Goldfields, and Investmet has no standing to apply for an order pursuant to CAA s 8; and
(vii)GR Engineering's claims against Investmet and Squire Patton Boggs cannot be referred to arbitration without Eastern Goldfield's consent, which has not been provided. Accordingly, to refer only the dispute between GR Engineering and Eastern Goldfields to arbitration would result in a multiplicity of proceedings, an increase in costs, and the possibility of inconsistent findings or results.
Disposition of stay application
Clause 41 of the Contract constitutes an arbitration agreement - that is not in dispute.
GR Engineering does not contend that the agreement was 'null and void, inoperative or incapable of being performed'.
If a dispute between parties falls within the ambit of an arbitration agreement, that is, '… if an action is brought in a matter which is the subject of an arbitration agreement …', the Court must refer the parties to arbitration. The Court has no discretion.
The issue on which the stay application turns is whether GR Engineering's claims against Eastern Goldfields fall within the ambit of the arbitration agreement. There was no argument that absent cl 41.4 the claims would constitute a 'Dispute' for the purposes of cl 41.1. The critical question is whether the proceedings are 'proceedings to enforce payment due under the Contract' for the purpose of cl 41.4 and are thus 'carved out' from the operation of the arbitration agreement. When addressing this constructional issue the authorities provide that the Court should generally adopt a 'broad, liberal and flexible approach … and should favour a construction which provides a single forum for the adjudication of all disputes arising from, or in connection with, that agreement'.[35] This approach does not mean, though, that the Court may usurp or ignore the language used in the particular provisions of the arbitration agreement.[36] Otherwise, the general principles applying to the construction of commercial contracts apply.[37] That is, the words used by the parties must be construed objectively by ascertaining what a reasonable businessperson would have understood the clause to mean 'by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose'.[38]
[35] Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 [44] (Martin CJ) and cases there cited.
[36] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 [43] (Martin CJ) citing Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 [46] (Martin CJ); Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10 [42] - [48] (Martin CJ); Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 [55] - [63] (Martin CJ, Buss JA agreeing).
[37] Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 [44] (Martin CJ).
[38] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] - [47] (French CJ, Nettle & Gordon JJ); Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35] (French CJ, Hayne, Crennan & Kiefel JJ).
Before turning to cl 41.4 reference must be made to cl 41.1. The words 'arises in connection with the subject matter of the Contract' are words of wide import.[39] A reasonable business person would understand those words to mean that all disputes having some degree of connection with the Contract should be resolved by the process set out in cl 41.
[39] Fitzpatrick v Emerald Grain Pty Ltd [2017] WASC 206 [48] ‑ [51] (Martin CJ).
Clause 41.4 is headed 'Summary relief'. The Contract does not provide that headings are for convenience only and the heading may thus be used as an aid to construction.[40] The heading suggests that the clause is only concerned with those proceedings that are capable of summary determination, that is, 'proceedings to enforce payment due under the Contract' about which there is no dispute. More fundamentally, however, to give the words 'proceedings to enforce payment due under the Contract' a construction that embraced a payment about which there is a dispute would suggest that the parties intended some disputes to be resolved by arbitral proceedings and some by curial proceedings. This is not a construction that would be favoured by a reasonable business person. I would add that a reasonable business person would readily understand the distinction between determining whether a claimed payment is due under the Contract (an issue to be resolved by arbitration) and enforcing a payment due under the Contract (a matter for the courts).
[40] George v Cluning (1979) 28 ALR 57, 61-62 (Mason J).
Clause 41.4 must be construed harmoniously with cl 41 as a whole paying attention to the intention of the parties evinced by the clause, which is that all disputes about whether payments are due under the Contract should be determined in arbitral proceedings. The construction of cl 41.4 for which GR Engineering contends would create uncertainty as to which disputes must be resolved by arbitration and which disputes could be the subject of proceedings. This is not a result that the parties to a commercial agreement can be taken to have intended.
I am fortified in the view I have taken of the preferred construction of cl 41.4 by the decision of Martin CJ in Eriez Magentics Pty Ltd v Duro Felguera Australia Pty Ltd.[41] In that case the Chief Justice was called upon to consider a sub-clause in identical terms to cl 41.4 albeit that the sub-clause in Eriez was found in a dispute resolution provision that was in different terms to cl 41 of the Contract. His Honour noted the breadth of the disputes that were the subject of the reference to arbitration and that they included a claim for payment of money under the contract. His Honour concluded that the preservation of the right of a party to institute proceedings to enforce payment due under that contract could not refer to the payment of amounts which were disputed.[42] Instead, his Honour considered that the provision was directed to the enforcement by the Court of payment of moneys due and owing and no longer disputed under the relevant contract.[43] That approach, his Honour said, was consistent with the exemption from referral to arbitration of proceedings seeking injunctive or urgent declaratory relief.[44] That was because, like injunctive or declaratory relief, an order for the enforcement of payment is not relief of a kind easily or readily given by an arbitrator (or given at all).[45]
[41] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 (Martin CJ).
[42] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 [59] (Martin CJ).
[43] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 [59] (Martin CJ).
[44] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 [60] (Martin CJ).
[45] Eriez Magnetics Pty Ltd v Duro Felguera Australia Pty Ltd [2017] WASC 304 [60] (Martin CJ).
GR Engineering relied on the decision in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3], in which Vickery J considered a 'carve out' clause expressed in almost identical terms to cl 41.4.[46] His Honour held the parties 'agreed not to preclude a party to the dispute to institute proceedings before a court to enforce the payment claimed to be due under the [c]ontract'. (emphasis supplied).[47] With respect I consider that the construction of the carve‑out provision favoured by Vickery J is likely to have the consequence of fragmenting the dispute resolution process in a manner which cannot have been intended by the parties. For that reason (in addition to the reasons already given) I prefer the construction of the carve‑out provision in cl 41.4 of the Contract which I have set out above.
[46] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3] [2013] VSC 435 (Vickery J).
[47] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [No 3] [2013] VSC 435 [146] (Vickery J)
It follows from what I have said that GR Engineering's claims against Eastern Goldfields should be stayed and that GR Engineering and Eastern Goldfields should be referred to arbitration for the resolution of the disputes between them.
In the light of the view formed by me about the proper construction of cl 41.4 of the Contract it is not necessary for me to consider Eastern Goldfields' submissions that GR Engineering's proceedings are not proceedings to enforce payments due under the Contract.
In my view it does not matter that a notice of dispute has not been served in accordance with cl 41.1(b). The power to refer parties to arbitration is conditioned by the existence of an action being brought in a matter which is the subject of an arbitration agreement. In this case, those conditions have been satisfied. The power to refer to the parties to arbitration is not conditioned by the service of a notice of dispute.
GR Engineering's claims against Investmet and Squire Patton Boggs are not matters that are the subject of the arbitration agreement. GR Engineering accepted, however, that the court has a discretion to stay those claims pending the outcome of the arbitration of its claims against Eastern Goldfields. I am not persuaded at this stage that it is in the interests of justice for GR Engineering's claims against Investmet and Squire Patton Boggs to be stayed. The litigation is in the early stages. It is premature to make a decision that those claims should be stayed.
The interpleader application
Squire Patton Boggs seeks relief in the following terms:
1[Squire Patton Boggs] be granted relief by way of interpleader.
2Subject to further order, [Squire Patton Boggs] hold the document currently held by [Squire Patton Boggs] in escrow, namely the executed Share Transfer Form … as claimed by each of [GR Engineering and Eastern Goldfields and Investmet] until such time as determination of all matters in dispute between them in respect of the [Share Transfer].
3In the alternative to order 2, [Squire Patton Boggs] hand over the [Share Transfer] to the Principal Registrar or other officer of the Court.
4No further action be brought by [GR Engineering] or [Eastern Goldfields] or [Investmet] in respect of the [Share Transfer] provided that nothing in this order 4 in any way limits or affects [GR Engineering's] claim in this action against [Squire Patton Boggs] for damages for delay.
…
7[Squire Patton Boggs'] costs of this summons and all other costs incurred in administering the escrow agreement, in an amount to be fixed and paid forthwith, be payable equally by [GR Engineering] and [Eastern Goldfields] and [Investmet].
Order 17 rule 1 of the RSC is in the following terms:
1.When interpleader relief may be granted
Relief by way of interpleader may be granted by the Court -
(a)where the person seeking relief (called the applicant) is under liability -
…
(iv)to yield up goods or chattels or any document, muniment of title, or security,
in respect of which he is or expects to be sued by 2 or more parties (called the claimants) making adverse claims.
An applicant for interpleader relief must support their application by evidence that they claim no interest in the subject-matter in dispute other than for charges and costs, do not collude with any of the claimants to the subject-matter, and are willing to dispose of any property involved in such manner as the Court may direct.[48]
[48] RSC O 17 r 2.
As the Court said in Carew Corporation Pty Ltd v The R&I Bank of Western Australia Ltd:[49]
The purpose of interpleader is to protect a person who faces competing claims, but who has committed no legal wrong, from the risk of one claimant obtaining judgment against him and then being held liable to the other claimant in subsequent proceedings … it is necessary to bear in mind that a liberal construction ought to be placed on O 17.
[49] Carew Corporation Pty Ltd v The R&I Bank of Western Australia Ltd (Unreported, WASCA, Lib No 930713, 21 September 1993) 7 (the Court) citing Attenborough v London & St Katharine's Dock Co (1878) 3 CPD 450, 454; Sun Insurance Office v Galinsky [1914] 2 QB 545, 558.
In Western National Plant Pty Ltd v Smith Broughton Pty Ltd, Master Sanderson considered it inappropriate for interpleader relief to be reserved for cases where proceedings had actually been issued.[50] All that was required was for a party to become aware that there were two or more competing claims to property in their possession. That accords with the liberal construction to be placed on O 17, so that parties caught between competing claims may access relief. Additionally, Master Sanderson gave consideration to what amounted to collusion, noting that it was not used to mean conspiracy with dishonest or fraudulent overtones.[51] Instead, the Master considered it was a 'question of whether the applicant and one of the claimants "are playing the same game"'.[52] In that case, the Master considered that by taking a full indemnity from one party, the interpleader was precluded from relief. The Master considered that the discretion under O 17 should not be exercised on the further ground that the grant of relief would achieve nothing more than could be achieved with appropriate programming orders and because all aspects of the action were more likely to be resolved by the applicant remaining a party to the proceedings.[53]
An outline of the principal submissions on interpleader relief
[50] Western National Plant Pty Ltd v Smith Broughton Pty Ltd (Unreported, WASC, Lib No 980368, 26 June 1998) 7 (Master Sanderson).
[51] Western National Plant Pty Ltd v Smith Broughton Pty Ltd (Unreported, WASC, Lib No 980368, 26 June 1998) 7 (Master Sanderson).
[52] Western National Plant Pty Ltd v Smith Broughton Pty Ltd (Unreported, WASC, Lib No 980368, 26 June 1998) 7 - 8 (Master Sanderson), citing Murietta v South American & Co (Ltd) [1893] 62 LJ QB 396, 397 - 398.
[53] Western National Plant Pty Ltd v Smith Broughton Pty Ltd (Unreported, WASC, Lib No 980368, 26 June 1998) 8 (Master Sanderson).
In support of its application for interpleader relief, Squire Patton Boggs submits:
(i)It expects that if it releases the Share Transfer to either GR Engineering or Investmet, it will be sued by the other;
(ii)While Squire Patton Boggs acts for Eastern Goldfields and Investmet in other unrelated matters, that does not prevent it acting with neutrality and impartiality between the parties, in other words, there was and is no collusion;
(iii)GR Engineering contends that the Escrow Agreement is enforceable and thus Squire Patton Boggs is entitled to rely upon its terms, including cl 8, which entitles Squire Patton Boggs to interplead where a dispute arises between the parties as to the escrow arrangements (which entitlement, while on its face inconsistent with Squire Patton Boggs' obligation to release the Share Transfer on demand, operates where there is a dispute as to the release of that form); and
(iv)A dispute arose between GR Engineering, and Eastern Goldfields and Investmet with respect to the escrow arrangements, and Squire Patton Boggs acted appropriately in not releasing the Share Transfer and applying for interpleader relief.
In response, GR Engineering submits:[54]
(i)Interpleader relief should not be granted as it would not free Squire Patton Boggs from the proceedings;
(ii)Squire Patton Boggs has identified itself with the interests of Eastern Goldfields and Investmet, and is not a neutral stakeholder, because:
(a)It prepared the Guarantee Agreement and the Escrow Agreement as advisor to Eastern Goldfields and Investmet; and
(b)It accepts that it currently acts for Eastern Goldfields and Investmet in other matters;
(iii)There is no expectation by Squire Patton Boggs of being sued by two or more parties making adverse claims within the meaning of RSC O 17 r 1.
[54] Plaintiff's Outline of Submissions in Opposition to the Third Defendant's Application for Interpleader Relief filed 1 November 2017.
Disposition of application for interpleader relief
I am satisfied that there is no collusion between Eastern Goldfields and Investmet on the one hand and Squire Patton Boggs on the other.
I am also satisfied that Squire Patton Boggs faces competing claims from GR Engineering and Investmet. I am satisfied that there is a dispute between the parties 'with respect to the escrow arrangements' such that cl 8 of the Escrow Agreement is engaged.
The most difficult issue for Squire Patton Boggs is what purpose is served by the grant of interpleader relief given that if the relief is granted it will not be released from the proceedings because it will still face GR Engineering's claim for damages. Furthermore, it could avoid becoming embroiled in the dispute about the enforceability of the Escrow Agreement by agreeing to abide by the outcome of the dispute between GR Engineering and Investmet. Ultimately Squire Patton Boggs' position on the issue of the utility or lack of utility served by interpleader relief is that it has a contractual right to that relief and it should not be denied whatever benefit is to be derived from the grant of it.
Whilst I have reservations about the utility of the relief sought by Squire Patton Boggs I consider that it has a contractual entitlement to the relief sought by it and I will make an order substantially in the terms of [3] and [4] of its chambers summons of 28 September 2017.
I will hear the parties as to the form of the orders and in relation to costs.
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