GR Engineering Services Ltd v Investmet Ltd - [2021] WASCA 136

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   GR ENGINEERING SERVICES LTD -v- INVESTMET LTD [2021] WASCA 136
CORAM:   QUINLAN CJ
MURPHY JA
BEECH JA

HEARD:   25 JUNE 2021
DELIVERED          :   29 JULY 2021
FILE NO/S:   CACV 3 of 2020
BETWEEN:   GR ENGINEERING SERVICES LTD
Appellant
AND
INVESTMET LTD
First Respondent
SQUIRE PATTON BOGGS (AU)
Second Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   TOTTLE J
Citation: GR ENGINEERING SERVICES LTD -v- INVESTMET LTD [2019] WASC 439
File Number            :   CIV 2140 of 2017

Catchwords:

Contract - Construction of contracts - Escrow agreement - Where escrow agent obliged to release escrow property subject to limited provisos - Where interpleader clause in favour of escrow agent concerning 'disputes ... with respect to the escrow arrangements' in the escrow agreement - Where party with benefit of escrow agreement demanded escrow agent release the escrow property - Where escrow agent instead invoked interpleader clause - Whether in the circumstances escrow agent was entitled to interplead

Legislation:

Nil

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant	:	M L Bennett
First Respondent	:	No appearance
Second Respondent	:	M N Solomon SC & K A T Pedersen

Solicitors:

Appellant	:	Bennett + Co
First Respondent	:	In person
Second Respondent	:	Jackson McDonald

Case(s) referred to in decision(s):

AVWest Aircraft Pty Ltd v Clayton Utz [No 2] [2019] WASC 306
Beesly v Hallwood Estates Ltd [1961] Ch 105
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
GR Engineering Services Ltd v Eastern Goldfields Ltd [2018] WASC 19
GR Engineering Services Ltd v Investmet Ltd [2019] WASC 439
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27
R v Wright; Ex parte Waterside Workers' Federation of Australia (1955) 93 CLR 528
Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85
Sino Iron Pty Ltd v Mineralogy [2019] WASCA 80; (2019) 55 WAR 89
Smith v Allan (1993) 31 NSWLR 52
State Government Insurance Office (Qld) v Rees (Liquidators of KD Morris & Sons Pty Ltd) (1979) 144 CLR 549
Tame v New South Wales [2002] HCA 35; (2002) 211 CLR 317
Terrapin International Ltd v Inland Revenue Commissioners [1976] 1 WLR 665
Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609
Watkins v Nash (1875) LR 20 Eq 262
Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] Ch 375
Wyong Shire Council v Shirt (1980) 146 CLR 40

QUINLAN CJ & BEECH JA:

Introduction

The appellant (GR Engineering) challenges the primary judge's decision dismissing its claim against the second respondent (SPB), solicitors, for breach of an escrow agreement under which SPB was the escrow agent. In that capacity, SPB held a share transfer executed by the first respondent[1] (Investmet) in favour of GR Engineering in respect of shares constituting security for a debt owed by Eastern Goldfields Ltd (Eastern Goldfields) to GR Engineering.
[1] The appellant discontinued the appeal as against the first respondent by a discontinuance notice dated 17 June 2020.
GR Engineering performed works at Eastern Goldfields' Davyhurst gold plant under a contract between them. The escrow agreement was executed as part of a suite of documents by which there was a partial compromise of claims by GR Engineering against Eastern Goldfields.
GR Engineering gave notice to SPB requiring delivery to it of the share transfer. SPB refused to do so, contending that there was a dispute between the parties with respect to the escrow agreement, entitling SPB to invoke the interpleader clause of the escrow agreement. The escrow agreement included a clause providing that SPB as escrow agent was not liable for any acts done or omitted to be done in connection with it, except for gross negligence or wilful misconduct.
At the trial of GR Engineering's claim there were two primary issues: first, whether SPB had breached the escrow agreement by failing to deliver the share transfer to GR Engineering; secondly, if a breach were found, did SPB have contractual immunity from liability on the basis that the breach did not constitute gross negligence?
GR Engineering's claim could succeed only if it succeeded on both issues. The primary judge found against GR Engineering on both issues.
GR Engineering now appeals against that decision. By grounds 1 and 2, GR Engineering challenges the judge's conclusion on the first issue. Ground 3 challenges the judge's conclusion on the second issue.
For the reasons that follow, we would dismiss the appeal. We would uphold the appeal as it relates to the first issue. In our view, in the circumstances, SPB was in breach of the Escrow Agreement by failing to deliver the share transfer it held as escrow agent to GR Engineering. However, GR Engineering fails on the second issue. We would dismiss ground 3, which challenges the learned trial judge's conclusion that SPB was not guilty of 'gross negligence' within the meaning of the release and waiver in cl 7 of the Escrow Agreement.
We will outline some background facts before turning to the provisions of the escrow agreement. The outline below substantially reproduces, or draws upon, the primary judge's outline.

Background facts

On 22 September 2016, GR Engineering and Eastern Goldfields entered into a contract for engineering, design and construction of refurbishment works associated with a goldmine at Davyhurst (the Contract). The conditions of the Contract included a provision entitling GR Engineering to serve a 'notice to show cause', explaining why it should not exercise its various specified rights in the event of a 'substantial breach' by Eastern Goldfields. A 'substantial breach' included failing to make a payment within seven days of the payment becoming due. The specified rights included the right to suspend the whole or any part of the works required to be completed under the Contract.[2]
[2] GR Engineering Services Ltd v Investmet Ltd [2019] WASC 439 (primary reasons) [6].
On 24 March 2017, GR Engineering alleged that Eastern Goldfields had failed to pay it $7,724,009.60 due under the Contract in January and February 2017 and gave notice to Eastern Goldfields to show cause why it should not suspend the works until payment was made.[3]
[3] Primary reasons [7].
The judge found that in the correspondence that ensued:
(1)Eastern Goldfields did not dispute that the sums claimed by GR Engineering were due; and
(2)in response to representations that Eastern Goldfields was raising money in the form of equity capital, GR Engineering indicated that it was prepared to continue performing the Contract provided certain payments were made by agreed dates.[4]
[4] Primary reasons [7].
On 28 April 2017, Eastern Goldfields paid $4,596,925 to GR Engineering.[5]
[5] Primary reasons [7].
On 3 May 2017, Eastern Goldfields failed to make payment of the further amount then said by GR Engineering to be outstanding, namely a sum of $6,601,496.68. On 4 May 2017, GR Engineering gave notice to Eastern Goldfields that it was suspending works under the Contract until it received full payment of the amount due under the Contract.[6]
[6] Primary reasons [7].
On 11 May 2017, GR Engineering's solicitors served a statutory demand on Eastern Goldfields for payment of the sum of $6,601,496.68.[7]
[7] Primary reasons [9].
On 31 May 2017, Eastern Goldfields made a payment proposal to GR Engineering under which:
(1)Eastern Goldfields proposed to pay GR Engineering $5 million on or before 9 June 2017;
(2)payment of the $5 million would be secured by a guarantee over $6 million worth of share options held by Apollo Corporation Pty Ltd in Galaxy Resources Ltd;
(3)the security would become exercisable by GR Engineering in the event of a failure by Eastern Goldfields to make the proposed payment following a 10‑day cure period;
(4)the proposal was conditional upon GR Engineering withdrawing its statutory demand, ending its suspension of works and other matters.
On 1 June 2017, Eastern Goldfields applied to the Supreme Court of Western Australia for orders setting aside the statutory demand on the ground that it had offsetting claims. SPB acted on behalf of Eastern Goldfields in that application. The application was listed for hearing on 15 June 2017.[8]
[8] Primary reasons [10].
On 1 June 2017, GR Engineering gave notice of its acceptance of the 31 May payment proposal subject to an amendment to the proposed cure period - GR Engineering proposing no cure period.
On 1 June 2017, Mr Rear, on behalf of Eastern Goldfields, proposed a seven‑day cure period and other modifications to the previous proposals.
Between 2 June 2017 and 12 June 2017, the parties exchanged various drafts, in a marked‑up form, of the deed of guarantee and the letter of agreement.
On 14 June 2017, Mr Rear proposed an amendment to the terms of agreement as to the security - that it was to be provided by 18,461,538 shares held by Investmet in Eastern Goldfields.
On 15 June 2017, Eastern Goldfields, Investmet and GR Engineering entered into a deed entitled 'Guarantee'.

The Guarantee Deed

The material terms of the Deed of Guarantee (the Guarantee Deed) were to the following effect:
(1)Eastern Goldfields would pay GR Engineering $5 million (including GST) by 21 June 2017. The Guarantee Deed contained a recital that Eastern Goldfields had agreed to pay the $5 million by 21 June 2017 but it did not include a provision specifically imposing an obligation on Eastern Goldfields to make that payment.
(2)Subject to the satisfaction of conditions precedent (referred to below) Investmet would irrevocably guarantee the payment of the $5 million to GR Engineering (cl 3).
(3)The payment of $5 million would be secured by 18,461,538 fully paid ordinary shares in the capital of Eastern Goldfields held by Investmet (cl 2(c) and cl 3.3(c)).
(4)Investmet would execute an off market share transfer in favour of GR Engineering in respect of the shares being provided as security which would be held by SPB as escrow agent (cl 2(c)).
(5)Consent orders would be executed by GR Engineering and Eastern Goldfields setting aside the statutory demand with no order as to costs (cl 2(b)).
(6)The conditions precedent were as follows:
(a)execution of what is referred to below as the Escrow Agreement by all parties to it;
(b)execution of the consent orders setting aside the statutory demand and the deposit of the consent orders with SPB; and
(c)the provision by Eastern Goldfields to GR Engineering of evidence that the share transfer had been signed by Investmet and deposited with SPB 'to be held and dealt with in accordance with the Escrow Agreement' (cl 2).
(7)Immediately upon satisfaction of the conditions precedent:
(a)Eastern Goldfields would provide GR Engineering with a date and time prior to 21 June 2017 for GR Engineering and Eastern Goldfields to meet in good faith to discuss various issues arising under the Contract, including the 'Offsetting Claims' that formed the basis of Eastern Goldfields' application to set aside the statutory demand; and
(b)GR Engineering would lift the suspension of the works under the Contract and would 'immediately and unconditionally recommence works towards commissioning', and would immediately arrange for, and procure, the Server to be immediately returned and installed, and all tags placed on electrical boards on Site by GR Engineering to be removed (cl 4).
(8)Clause 3.3 of the Guarantee Deed governed the rights of the parties if payment of the $5 million were not made by 21 June 2017. It provided:
3.3 Non-payment
(a)If [Eastern Goldfields] does not pay the Guaranteed Money by the Date for Payment, [GR Engineering] may issue a default notice in writing requiring [Eastern Goldfields] to pay the Guaranteed Money on or before the expiry of the Cure Period.
(b)Following the expiration of the Cure Period and provided [Eastern Goldfields] does not pay the Guaranteed Money to [GR Engineering] prior to the expiry of the Cure Period, [GR Engineering] may issue a notice in writing requiring the Escrow Agent to release the Share Transfer Form in accordance with the Escrow Agreement.
(c)Following receipt of the Share Transfer Form, [GR Engineering] may lodge the Share Transfer Form with [Eastern Goldfields] (and its share registry) to procure that the Shares are transferred to [GR Engineering] provided that [GR Engineering] may only do so if Investmet is able to trade the Shares in accordance with the securities trading policy (Securities Trading Policy) of [Eastern Goldfields]. If Investmet is prohibited from trading the Shares pursuant to the Securities Trading Policy, [GR Engineering] may only lodge the Share Transfer Form with [Eastern Goldfields] and its share registry when Investmet is able to trade under the Share Trading Policy.
(d)In the event [Eastern Goldfields] only partially pays the Guaranteed Money by the Date for Payment or on or before the expiry of the Cure Period:
(i)[GR Engineering] may only lodge the Share Transfer Form for an equivalent proportion of the Shares (based on the share price of [Eastern Goldfields] as at the close of trading on the Effective Date) to be transferred to [GR Engineering]; and
(ii)the Escrow Agent is authorised to complete the Share Transfer Form, and do any other actions necessary, to give effect to the transfer of a proportion of the Shares in accordance with sub-clause (i) above.
(e)Once realised by [GR Engineering], to the extent that the value of the Shares exceeds the Guaranteed Money, any excess Shares will be returned to the Guarantor. This sub-clause (e) survives termination of this deed.
(f)In realising the proceeds of the sale of the Shares, [GR Engineering] must:
(i)act reasonably and promptly in selling the Shares;
(ii)seek to obtain the best price for the sale of the Shares; and
(iii)not take any action (other than selling the Shares), or fail to act, which may prejudice the ability to obtain the best price for the sale of the Shares.
(9)By cl 1.1, the 'Date for Payment' was 21 June 2017, 'Default' meant, in effect, non‑payment of the $5 million by Eastern Goldfields by 21 June 2017, and the 'Cure Period' was seven days following 'Default'.

Satisfaction of the conditions precedent

On 15 June 2017, the parties entered into the escrow agreement (referred to below), Investmet executed the share transfer and it was delivered to SPB, and the consent orders setting aside GR Engineering's statutory demand were signed by Eastern Goldfields and GR Engineering, and provided to SPB.

The Escrow Agreement

On 15 June 2017, GR Engineering, Eastern Goldfields and SPB executed an agreement termed 'escrow letter agreement' in the form of a letter from SPB addressed to Eastern Goldfields, Investmet and GR Engineering and executed as a deed by Eastern Goldfields, Investmet and GR Engineering (the Escrow Agreement).
In the introductory paragraphs of the Escrow Agreement, SPB stated:
[SPB] wishes to confirm its appointment as escrow agent for [Eastern Goldfields], [Investmet] and [GR Engineering] (together, the Parties) in relation to the agreement dated on or about the date of this letter between the Parties concerning a guarantee provided by Investmet (Guarantor) in respect of an obligation for [Eastern Goldfields] to pay $5,000,000 to [GR Engineering] (Agreement).
Subject to receiving a signed copy of this letter from the Parties, we confirm the following terms and conditions of escrow[.] (emphasis added)
Clause 1 of the terms and conditions recorded the appointment of SPB as Escrow Agent. It provided:
1APPOINTMENT OF ESCROW AGENT
1.1The Parties appoint [SPB] to act as escrow agent (Escrow Agent) on the terms and conditions of this letter (Letter Agreement).
1.2Capitalised terms in this Letter Agreement have the meaning set out in the Agreement unless otherwise defined in this Letter Agreement.
1.3The Escrow Agent accepts its appointment as escrow agent and agrees to:
(a)hold the Escrow Documents (defined below) in escrow; and
(b)deal with and release the Escrow Documents (defined below) from escrow on the terms and conditions of this Letter Agreement. (emphasis added)
The Escrow Documents were not defined in the Escrow Agreement or the Guarantee Deed, but by cl 2 the 'Parties' were required to deliver to SPB a copy of the consent orders (Consent Order) and the share transfer (Share Transfer Form). Thus it is plain that those documents were the Escrow Documents.
Clause 3 contained an acknowledgment by the Parties of the terms on which SPB was obliged to release and deal with the Escrow Documents. It stated:
3ESCROW AGENT TO RELEASE AND DEAL WITH ESCROW DOCUMENTS
3.1The Parties acknowledge that the Escrow Agent:
(a)will only release and deal with the Escrow Documents strictly in accordance with the terms of clause 4; and
(b)is not liable at law or in equity (including for negligence, breach of contract, breach of statute or on any other basis) to any Party in respect of the release of and dealings with the Escrow Documents where the Escrow Agent has acted within the terms of clause 4.
3.2The Parties irrevocably instruct the Escrow Agent to and [sic] deal with the Escrow Documents as prescribed by or required under clause 4. (emphasis added).
Clause 4 set out SPB's obligations as the Escrow Agent. It provided:
4RELEASE AND DEALING WITH THE ESCROW DOCUMENTS
4.1Upon the Agreement[[9]] 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. (emphasis added)
[9] As seen at [25] above, the 'Agreement' was defined, in effect, to mean the Guarantee Deed. The conditions precedent to the performance of the Guarantee Deed are summarised in [22](6) above.
Clause 5, headed 'Costs of Escrow Arrangements' provided that SPB's 'reasonable costs', calculated 'in accordance with [its] current hourly charge out rates' in 'administering the Escrow Arrangements under the terms of [the Escrow Agreement]' would be borne by Eastern Goldfields and GR Engineering equally.
Clause 6 of the Escrow Agreement provided:
6DUTIES AND RESPONSIBILITIES
6.1The duties and responsibilities of the Escrow Agent are limited to those set out in this Letter Agreement.
6.2The Escrow Agent:
(a)acts as a depository only and is not responsible or liable for the sufficiency or validity of any document deposited with it;
(b)is not under any duty to inquire into the terms and provisions of any agreement or instruction other than as set out in this Letter Agreement;
(c)is not and must not be treated as being a trustee or fiduciary acting for the benefit of any of the Parties; and
(d)will have no further duties or responsibilities under this Letter Agreement following the release of the Escrow Agreements [sic - Documents] in accordance with clause 4.
6.3For the avoidance of doubt, the Escrow Agent is not required to use or advance its own funds or otherwise incur financial liability on its part in performance of its duties or the exercise of its rights under this Letter Agreement.
6.4The Escrow Agent is:
(a)subject to, and only obliged to recognise notifications or directions given in accordance with this Letter Agreement or any order made by a court of competent jurisdiction; and
(b)entitled to rely on any notification which the Escrow Agent in good faith believes to be genuine. (emphasis added)

Clause 7 of the Escrow Agreement governed the liability of SPB. It provided:
7RELEASE FROM LIABILITY
7.1The Escrow Agent is not liable for any error of judgement or for any acts done or steps taken or omitted by it in connection with this Letter Agreement, except for the Escrow Agent's own gross negligence or wilful misconduct.
7.2All Parties waive any claim which they may have or may assert against the Escrow Agent arising out of the execution, delivery or performance by the Escrow Agent of this Letter Agreement, unless that claim is based upon the gross negligence or wilful misconduct of the Escrow Agent.
7.3All Parties jointly and severally indemnify and hold harmless the Escrow Agent from any liabilities or claims (including reasonable legal fees) which the Escrow Agent may incur or sustain as a result of its performance under this Letter Agreement except if the liability or claim is due to the gross negligence or wilful misconduct of the Escrow Agent. (emphasis added)
Clause 8 of the Escrow Agreement applied in the event of 'a dispute … between the Parties with respect to the escrow arrangements contained in' the Escrow Agreement. It provided:
8INTERPLEADER 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 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 making the Escrow Agent a Party unless the dispute is based upon the gross negligence or wilful misconduct of the Escrow Agent. (emphasis added)

Notice of default and subsequent correspondence

Eastern Goldfields did not pay the $5 million on 21 June 2017. On 22 June 2017, GR Engineering sent a letter to Eastern Goldfields and Investmet, giving notice of default in accordance with cl 3.3(a) of the Guarantee Deed.[10]
[10] Primary reasons [23].
On 27 June 2017, a partner of SPB sent an email to Eastern Goldfields' solicitors, Gilbert + Tobin. The email attached the Contract, the Guarantee Deed, the Escrow Agreement, GR Engineering's notice of default of 22 June 2017, the Share Transfer Form and the Consent Order. The email stated:
As discussed, given that [SPB] is the escrow agent we are unable to act in relation to any advice regarding any potential dispute between Eastern Goldfields … and GR Engineering … in relation to this matter. Accordingly, we will not be attending the meeting [Eastern Goldfields] has scheduled today with you. I also refer you to paragraph 8 of the Escrow Agreement regarding our rights to interplead the share transfer form. If we are notified of a dispute in relation to the escrow agreement, we would currently expect that, in the capacity as the escrow agent, we would allow the parties 7 days to reach a resolution of the dispute or request further time to resolve the dispute, before we apply for interpleader in the court.
What legitimate purpose was to be served by SPB's indication to Gilbert + Tobin that, should a dispute be raised, SPB would make an interpleader application to the court is not immediately obvious. However, any question of that kind did not arise in the primary proceedings, in that, as will be seen, GR Engineering's claim against SPB asserted gross negligence by SPB, but made no claim of wilful misconduct.
On 28 June 2017, a letter was sent by Gilbert + Tobin, on behalf of Eastern Goldfields, to GR Engineering disputing that Eastern Goldfields was under any obligation to pay $5 million. The first five paragraphs of the letter read as follows:[11]
[11] Primary reasons [25].
1We act for Eastern Goldfields Limited (EGS) and refer to the [Guarantee Deed] dated 15 June 2017 ('Guarantee'), and to your letter dated 22 June 2017.
No primary obligation and so no amount is 'guaranteed'
2The document titled 'Guarantee' provides at page 3 under 'Background' that '[Eastern Goldfields] has agreed to pay the Guaranteed Money to [GR Engineering] by the Date for Payment'. But there is no identification of the source of that alleged obligation.
3It is apparent that [Eastern Goldfields] does not undertake any such obligation in the 'Guarantee'. And of course, given the statement in the 'Background', it would in any event be inconsistent for [Eastern Goldfields] to do so in that document.
4A guarantor's liability is co‑extensive with that of the principal debtor. In circumstances where [Eastern Goldfields] has not undertaken any obligation to pay the 'Guaranteed Money' by the Date for Payment, the guarantee is of no effect and the guarantor, Investmet Limited (Investmet), is discharged: the guarantor's liability cannot extend beyond that of the principal debtor.
5It follows that Investmet has no liability under the 'Guarantee' and [GR Engineering] has no entitlement under the escrow arrangements or otherwise to the Shares (as defined in the 'Guarantee'). Specifically, [GR Engineering] has no entitlement to require the release of the Share Transfer Form (as defined). We are copying this letter to the Escrow Agent, [SPB], to ensure that it is aware that the Escrow Letter Agreement dated 15 June 2017 is not enforceable.
In the remainder of the letter of 28 June 2017, Gilbert + Tobin:[12]
(1)Set out the basis upon which Eastern Goldfields asserted that GR Engineering had engaged in misleading conduct contrary to the Australian Consumer Law in relation to representations allegedly made by GR Engineering as to work performed under the Contract. It was asserted that:
Accordingly, if (which is denied) the 'Guarantee' is enforceable, [Eastern Goldfields] entered into that agreement in reliance on [GR Engineering's] misleading representations, and contrary to the Australian Consumer Law. It follows that [Eastern Goldfields] can obtain an order for rescission of the 'Guarantee', and will do so if [GR Engineering] makes any claim against [Eastern Goldfields] on the basis of that document.
(2)Asserted that GR Engineering had not complied with its obligations under cl 4 of the Guarantee Deed, in that it had not 'immediately and unconditionally [recommenced] work towards commissioning'.
(3)Asserted that there were defects and omissions in GR Engineering's work which were, among other things, the subject of Eastern Goldfields' 'offsetting claims'.
(4)Asserted that for the 'reasons set out above', 'no obligations [arose] under' the Guarantee Deed, and proposed a meeting on 11 July 2017 to discuss issues.
[12] GAB 495 ‑ 496.
On 29 June 2017, under cover of an email from its solicitors GR Engineering sent a letter to SPB giving notice that it required the release of the Share Transfer Form in accordance with cl 3.3(b) of the Escrow Agreement. The relevant paragraphs of GR Engineering's letter were as follows:
This notice to release is given pursuant to clause 3.3(b) of the Guarantee as [Eastern Goldfields] has not paid the Guaranteed Money to [GR Engineering] prior to the expiry of the Cure Period.
[GR Engineering] hereby gives notice requiring [SPB], as Escrow Agent, to release the Share Transfer Form in accordance with the Escrow Agreement.
Later on 29 June 2017, SPB sent a letter in reply to GR Engineering's letter of 29 June 2017 referred to in the preceding paragraph. SPB referred to the Guarantee Deed, the Escrow Agreement, Gilbert + Tobin's letter to GR Engineering of 28 June 2017 and to GR Engineering's notice seeking release of the Share Transfer Form. SPB's letter continued as follows:
The G&T Correspondence sets out details of a dispute in relation to the enforceability of the Guarantee (among other matters). In the circumstances, it is clear that a dispute appears to have arisen between the parties in relation to the Guarantee and the escrow arrangements.
We note that clause 8 of the Escrow Deed provides that 'if a dispute arises between the Parties with respect to the escrow arrangements … the Escrow Agent may interplead all of the assets held in escrow by it under this Letter Agreement in a court of competent jurisdiction…'
Accordingly, in the context of this potential dispute, we cannot release the Share Transfer Form to GRES as requested in the Notice and we request that GRES outlines its position in respect of the matters set out in the G&T Correspondence on an urgent basis. (original emphasis)
On 30 June 2017, GR Engineering's solicitors sent a letter to SPB again giving notice that GR Engineering required the release of the Share Transfer Form. Relying on cl 4.2 of the Escrow Agreement GR Engineering's solicitors argued that it was incontrovertible that Eastern Goldfields had not paid the $5 million by the expiration of the Cure Period and that the notice and the matters contained in it were genuine and thus there was no basis upon which SPB could refuse to release the Share Transfer Form. GR Engineering's solicitors contended that:
(1)SPB's purported reliance on cl 8 involved an 'ill‑conceived interpretation' of the provision and one that gave rise to an inference that SPB was using its position as escrow agent to benefit Eastern Goldfields and Investmet.
(2)Clause 8 could only be relied upon where there was a dispute with respect to the 'escrow arrangements' and not where there was a 'potential dispute' about the enforceability of other documents.
(3)SPB had no entitlement to compel GR Engineering to respond to the matters raised in Gilbert + Tobin's letter of 28 June 2017.
The point made in [41](1) above, which is tantamount to an allegation of wilful misconduct, was not pursued in the primary proceedings.
GR Engineering's solicitors threatened to commence proceedings for an injunction to compel the release of the Share Transfer Form if SPB did not release it voluntarily.
SPB responded to GR Engineering's solicitors' letter of 30 June 2017 on the same day and rejected any allegation that it was using its position for the benefit of Eastern Goldfields or Investmet, stating:
Your letter sets out your interpretation of the Escrow Agreement. We do not take a position on this interpretation other than to note that the letter dated 28 June 2017 from Gilbert + Tobin (G + T Letter) asserts that the Guarantee and Escrow Agreement are unenforceable and this conflicts with your view. We note that you have not addressed the matters raised in the G + T letter and that you do not consider that your client is obliged to. Our request was made in order to understand the position between the parties on what was, at the time of our earlier letter, a potential dispute. In the absence of a specific response to the issues raised in the G + T letter and your demand that we release the share transfers we understand your client to dispute the matters put forward in the G + T Letter. It is not our position as Escrow Agent to resolve the difference between the parties and this enlivens clause 8.1 of the Escrow Agreement.
On 4 July 2017, GR Engineering's solicitors sent a letter to Gilbert + Tobin attaching a draft writ of summons that they were instructed to file to enforce payment by Eastern Goldfields of sums due under the Contract. The draft writ also named Investmet and SPB as prospective defendants. GR Engineering's solicitors' letter was copied to SPB.
On 5 July 2017, SPB responded to GR Engineering's solicitors' letter of 4 July 2017 and stated:
In our letter dated 29 June to your client and our letter dated 30 June to [GR Engineering's previous solicitors] we stated that we were willing to commence interpleader proceedings to resolve the issues between your client and Eastern Goldfields Limited. This remains our position. The proceedings will either be commenced by originating summons or if your client does commence proceedings, by summons in that matter.
We note that the draft writ attached to your letter names [SPB] as a defendant and seeks damages against us. We deny any liability for damages to your client. However, as we have previously advised the parties, we will otherwise abide by the orders of the court regarding the release of Escrow Documents that we hold.
On 5 July 2017, SPB filed the Consent Order setting aside the statutory demand. An order setting aside the demand was made on 17 July 2017.

The primary proceedings

On 10 July 2017, GR Engineering commenced the primary proceedings against Eastern Goldfields, Investmet and SPB.

Stay and interpleader applications

On 31 August 2017, Eastern Goldfields applied for orders staying the action against Eastern Goldfields and referring the matter to arbitration pursuant to an arbitration agreement contained in the Contract.
On 28 September 2017, SPB applied for interpleader relief.[13] SPB's application was expressed in terms that nothing in the orders sought would in any way limit or affect GR Engineering's claim in the action against SPB for damages for delay.[14]
[13] Order 17 r 1 of the Rules of the Supreme Court 1971 (WA) provides that relief by way of interpleader may be granted by the Court where the person seeking relief (called the applicant) is under liability (amongst other things) 'to yield up goods or chattels or any document … or security in respect of which he is or expects to be sued by 2 or more parties (called the claimants) making the adverse claims'. Order 17 r 2 provides, in effect, that the applicant must support its claim by evidence that: (1) it claims no interest in the subject‑matter in dispute other than for charges and costs; (2) it does not collude with any of the claimants to that subject‑matter; and (3) it is willing to dispose of any property involved in any such manner as the Court or a judge may direct.
[14] Primary reasons [37].
On 3 November 2017, the primary judge heard Eastern Goldfields' application for a stay with referral to arbitration, and SPB's claim for interpleader relief. His Honour reserved judgment. Reasons were delivered on 24 January 2018.[15] His Honour granted a stay of GR Engineering's claims against Eastern Goldfields on the basis that the claims should be referred to arbitration for resolution of the disputes between those parties. In relation to GR Engineering's claims against Investmet and SPB, his Honour said:[16]
GR Engineering's claims against Investmet and [SPB] 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 [SPB] to be stayed. The litigation is in the early stages. It is premature to make a decision that those claims should be stayed.
[15] GR Engineering Services Ltd v Eastern Goldfields Ltd [2018] WASC 19.
[16] GR Engineering v Eastern Goldfields [61].
The judge also said, with particular reference to SPB's claim for interpleader relief:[17]
I am satisfied that there is no collusion between Eastern Goldfields and Investmet on the one hand and [SPB] on the other.
I am also satisfied that [SPB] 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 [SPB] 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 [SPB's] 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 [SPB] 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.
[17] GR Engineering v Eastern Goldfields [69] ‑ [72].
His Honour then made orders giving effect to the interpleader relief as follows:[18]
1.[SPB] be granted relief by way of interpleader.
2.[SPB] hand over the document currently held by [SPB] in escrow, namely the executed Share Transfer Form (as defined in para 138.4 of the amended statement of claim dated 14 August 2017) (Property), to the Principal Registrar or other officer of the Court.
3.No further action be brought by [GR Engineering] or [Eastern Goldfields] and [Investmet] against [SPB] in respect of the Property provided that nothing in this Order … in any way limits or affects [GR Engineering's] claim in this action against [SPB] for damages for delay.
4.The costs of [SPB's] application for interpleader relief dated 28 September 2017 be reserved to the Trial Judge.
[18] Primary reasons [40].
On 5 August 2019, judgment was entered against Investmet for damages to be assessed. His Honour subsequently heard GR Engineering's claims for damages against SPB.

GR Engineering's damages claims against SPB

GR Engineering's claims against SPB for damages for alleged breach of the Escrow Agreement were heard on 18 November 2019.

GR Engineering's pleading

By its amended statement of claim (S/C) filed 8 August 2019, GR Engineering pleaded, relevantly in effect:[19]
[19] BAB 57 - 72.
(1)The appointment of SPB as 'escrow agent pursuant to a Deed of Guarantee executed on 15 June 2017 between' GR Engineering, Eastern Goldfields and Investmet: S/C par 5.
(2)By a 'Partial Accord and Satisfaction Agreement dated 15 June 2017', GR Engineering, Eastern Goldfields, Investmet and SPB 'agreed that [GR Engineering] would withdraw its Statutory Demand … on the terms and conditions set out in that agreement (Partial Accord and Satisfaction Agreement)': S/C par 11.
(3)The Partial Accord and Satisfaction Agreement was in writing and comprised various communications between the parties and their respective solicitors up to and including 15 June 2017, the Guarantee Deed dated 15 June 2017 and the Escrow Agreement: S/C par 11, Particulars.
(4)On 15 June 2017, GR Engineering, Eastern Goldfields and Investmet executed the Deed of Guarantee and the Escrow Agreement: S/C par 13.

3

(5) The Escrow Agreement contained the terms in cl 4.2, cl 6.2, cl 6.4(b), cl 7.2 and cl 8.2 of the Escrow Agreement: S/C par 14.[20]
[20] S/C pars 14.3, 14.4 and 14.5 do not in terms refer to the numbered provisions of the Escrow Agreement, but evidently appear to be directed to, respectively, cl 6.4(b), cl 7.2 and cl 8.2.
(6)By SPB's letter to GR Engineering dated 29 June 2017, SPB wrongly withheld the Share Transfer Form from GR Engineering, asserting that Eastern Goldfields, by its solicitors, had raised issues concerning the enforceability of the Guarantee Deed and the Escrow Agreement: S/C par 25.
(7)By a letter dated 30 June 2017 to SPB, GR Engineering's solicitors demanded the immediate release of the Share Transfer Form: S/C par 26.
(8)By a letter dated 30 June 2017, SPB refused to release the Share Transfer Form in breach of its obligations pursuant to the Escrow Agreement: S/C par 27.
(9)The refusals by SPB to release the Share Transfer Forms as pleaded in pars 25 ‑ 27 constituted gross negligence on the part of SPB: S/C par 28.

In the prayer for relief, GR Engineering claimed against SPB: (1) an order requiring SPB to forthwith deliver up to GR Engineering all documents necessary or required to enable GR Engineering to be registered as the holder of the securities in Investmet; and (2) 'damages for delay'.
His Honour recorded the parties' respective cases in relation to those claims, as follows.

GR Engineering's contentions

GR Engineering contended, in effect, that:
(1)SPB had breached the Escrow Agreement by not releasing the Share Transfer Form to GR Engineering.
(2)SPB's breach was not protected by cl 7 and cl 8 of the Escrow Agreement in that the breach constituted 'gross negligence' within the meaning of cl 7.1 and cl 8.2 of the Escrow Agreement.
In relation to the first contention (the proper construction of cl 4.2 of the Escrow Agreement), GR Engineering submitted that the obligation in cl 4.2 of the Escrow Agreement was strict and the obligations of SPB thereunder were analogous to those undertaken by a commercial bank on the issue of a performance bond. In that regard, GR Engineering's submissions were as follows:[21]
GR Engineering described the interpleader provision as incidental to the broader purpose of the Escrow Agreement. It contended that it was not open to [SPB] to use cl 8 to relieve itself of its core obligation to release the share transfer and that cl 8 could not be relied on to relieve [SPB] of liability where it had been grossly negligent by completely mistaking its obligations under the Escrow Agreement.
In support of its contention that the obligation imposed on [SPB] by cl 4.2 was a strict one, GR Engineering relied upon the text of the Escrow Agreement, the commercial context in which the Escrow Agreement was made and its commercial purposes. GR Engineering described those commercial purposes as: avoiding the expense of litigation; providing GR Engineering with security; and providing an efficient transfer of value to GR Engineering in the event of a default by Eastern Goldfields in the payment of the $5 million.
GR Engineering contended that the obligations assumed by [SPB] were analogous to the obligations assumed by a commercial bank that has given a performance bond. It placed particular emphasis on the principle of autonomy that holds that the obligations of the issuing or accepting bank are not to be read as qualified by reference to the terms of the underlying contract between the parties. The ultimate point of GR Engineering's analogy was that once [SPB] had satisfied itself that the notice and its contents were genuine the contentions raised by Gilbert + Tobin on behalf of Eastern Goldfields about the underlying transaction embodied in the Guarantee Deed were of no concern to [SPB] and could not justify its failure to hand over the share transfer.
Extending the performance bond analogy GR Engineering submitted that in the circumstances in which Eastern Goldfields argued that there was no liability to pay the $5 million guaranteed by Investmet it was incumbent upon Eastern Goldfields to seek an injunction restraining the release of the share transfer in much the same way as a party who has provided a performance bond will often seek an injunction restraining its contractual counterparty from presenting the bond for payment.
GR Engineering argued that the provisions of cl 8 had a narrow field of operation. As a preliminary point GR Engineering argued that cl 8 should not be analysed in terms of conferring a 'right' to interplead because such a right existed by virtue of O 17 of the Rules of the Supreme Court 1971 (WA). Its submission was to the effect that the only circumstance in which cl 8 was relevant was in the event that Eastern Goldfields or Investmet applied for an injunction to restrain [SPB] from releasing the share transfer. In that event if [SPB] interpleaded the share transfer it would be relieved of liability.
[21] Primary reasons [45] - [49].
In relation to the allegation of 'gross negligence', GR Engineering contended that s 5B(2) of the Civil Liability Act 2002 (WA) (CLA) applied to the determination of the standard of care and that when account was taken of the factors listed in subparagraphs (a) ‑ (d) of s 5B(2) of the CLA 'the standard of care required of [SPB] was high and, in effect, a minor departure from the standard would amount to negligence and a major departure would more readily constitute gross negligence'.[22]
[22] Primary reasons [50].
GR Engineering also submitted that if, contrary to its primary case, SPB's obligation to release the Share Transfer Form was not strict, then cl 8.1 of the Escrow Agreement set a standard that had to be met before SPB was entitled not to comply with a request for a release of the Share Transfer Form. In that regard, the following conditions had to be met: (1) there had to be a dispute; (2) the dispute had to be between all the Parties; and (3) the subject matter of the dispute had to be 'with respect to the escrow arrangements'. GR Engineering contended that these conditions were not fulfilled.[23]

SPB's contentions

[23] Primary reasons [51].

The judge observed that SPB's case was along the following lines:[24]
[SPB's] primary case rests on two propositions. First, on the proper construction of the Escrow Agreement cl 4 did not create a strict unqualified obligation to release the share transfer upon receipt of a valid notice to release because cl 8 entitled [SPB] to interplead in the event of a dispute between the 'Parties' with respect to the escrow arrangements. Secondly, it was plain from the correspondence exchanged in the period between the issue of a notice of default on 22 June 2017 and [SPB's] letter to GR Engineering's solicitors on 30 June 2017 that there was a dispute between all the 'Parties' about the escrow arrangements.
[SPB] argues that even if its construction of cl 4.2 and cl 8.1 was incorrect and its obligation to release the share transfer was strict, or, if it was incorrect in concluding that the 'standard' imposed by cl 8 was satisfied, it was not negligent or if it was negligent, it was not grossly negligent.
[SPB] advances a secondary case based on the proposition that an issue estoppel arises from the conclusion recorded in my reasons published on 24 January 2018 that 'I [was] 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'. [SPB] contends that part of the issue GR Engineering seeks to pursue had already been determined against it.

The primary reasons - GR Engineering's damages claims against SPB

The proper construction of cl 4.2 of the Escrow Agreement

[24] Primary reasons [52] ‑ [54].

The judge rejected GR Engineering's submissions to the effect that SPB was in a position under the Escrow Agreement analogous with that of a commercial bank having issued a performance bond.[25] His Honour held that, read as a whole, including cl 8:[26]
[Clause 4.2] should be construed as relieving [SPB] of the otherwise strict requirement to release the [Share Transfer Form] if 'there is a dispute between the Parties with respect to the escrow arrangements'. This is not a strained construction. It is a construction that reflects and gives weight to the text of cl 8.
[25] Primary reasons [64].
[26] Primary reasons [62].
His Honour later considered whether there was 'a dispute … between the Parties with respect to the escrow arrangements'. First, his Honour held that there was a 'dispute' and not merely a potential dispute. His Honour said:[27]
In my view there is no merit in GR Engineering's contention that all that had arisen was a potential dispute. The use by [SPB] of the expression 'potential dispute' in its letter of 29 June 2017 should not distract from the reality of the situation. Gilbert + Tobin's letter to GR Engineering contending that GR Engineering had no entitlement under the escrow arrangements was sent by email at 4.15 pm on 28 June 2017. GR Engineering's solicitors sent the notice to release the share transfer to [SPB] at 2.16 pm on 29 June 2017. GR Engineering's notice to release the share transfer made it plain beyond peradventure that it did not accept that it had no entitlement to call for the release of the share transfer. It was sent after receipt of Gilbert + Tobin's letter of 28 June 2017 and, by necessary implication, constituted a rejection of the contention that GR Engineering had no entitlement to call for the release of the share transfer. If there was any room for doubt about the existence of a dispute (and I do not accept that there was) then that doubt was removed by GR Engineering's solicitors' letter of 30 June 2017 sent by email on that day at 2.43 pm.
[27] Primary reasons [73].
Secondly, his Honour considered whether there was a dispute 'with respect to the escrow arrangements'. His Honour said:[28]
GR Engineering submits that if there was a dispute it concerned the issue of whether Eastern Goldfields was under any obligation to pay $5 million, the allegations of misleading conduct and the offsetting claims and not the 'escrow arrangements'. I do not accept that submission. At the forefront of the arguments raised by Gilbert + Tobin in its letter of 28 June 2017 was the contention that Eastern Goldfields had no primary obligation to pay $5 million and the consequences that flowed from this were Investmet had no liability as a guarantor and '... [GR Engineering] has no entitlement under the escrow arrangements or otherwise to the Shares (as defined in the 'Guarantee)'. Although the initial focus of the dispute may have been the liability to pay the $5 million, the dispute was 'with respect to the escrow arrangements'.
[28] Primary reasons [74].
Thirdly, his Honour considered whether the dispute had 'arisen between the Parties' and in particular whether Investmet was in dispute. His Honour said:[29]
There are a number of matters which both highlight the commonality of interest between Eastern Goldfields and Investmet and give rise to an inference that as at 29 June 2017 Investmet's position in respect of the escrow arrangements was the same as that of Eastern Goldfields.
Those matters are: first, [SPB] acted on behalf of Eastern Goldfields and Investmet in the negotiations preceding the execution of the Guarantee Deed and the Escrow Agreement. Secondly, in an email sent by Mr Rear of [SPB] to GR Engineering on 1 June 2017 Mr Rear recorded that Mr Fotios controlled Investmet. Thirdly, the Guarantee Deed and the Escrow Agreement were sent to Mr Fotios for execution and he signed them on behalf of Eastern Goldfields and Investmet. Fourthly, Mr Fotios also signed the share transfer on behalf of Investmet. Fifthly, the potential adverse effect on GR Engineering's ability to sell the shares as a consequence of Mr Fotios being a director of both Eastern Goldfields and Investmet was taken into account in cl 3.3(c) of the Guarantee Deed. The inference that Investmet's position was the same as that of Eastern Goldfields was not negated by the fact that Gilbert + Tobin recorded that it was instructed by Eastern Goldfields and did not mention Investmet.
I make a factual finding that as at 29 June 2017 Investmet disputed GR Engineering's entitlement to the release of the share transfer and that thus there was a dispute between all the 'Parties' in respect of the escrow arrangements. Subsequent events confirmed that this was so. In this action Gilbert + Tobin filed a memorandum of appearance on behalf of both Eastern Goldfields and Investmet and in March 2018 Gilbert + Tobin filed and served a defence on behalf of Investmet in which Investmet disputed that the escrow arrangements were binding and maintained that GR Engineering was not entitled to the release of the share transfer.
[29] Primary reasons [76] - [78].
His Honour concluded that SPB had not breached cl 4.2 of the Escrow Agreement as there was 'a dispute … between the Parties with respect to the escrow arrangements'.[30]

Gross negligence

[30] Primary reasons [79].

Having so concluded, his Honour said, in effect, that it was unnecessary to consider whether the (alleged) breach by SPB involved gross negligence. Nevertheless, his Honour went on to hold that if there were a breach, it did not constitute gross negligence. His Honour said:[31]
It follows from the conclusions that I have reached on the construction of the Escrow Agreement and the existence of a dispute between the Parties with respect to the escrow arrangements that the first issue must be resolved in [SPB's] favour: it did not breach the Escrow Agreement as alleged by GR Engineering.
In those circumstances the second issue does not arise for determination. I will, however, state in summary form the views that I would have come to had I resolved the constructional issue and the issue about whether cl 8 was engaged in GR Engineering's favour.
Had I concluded the issue of contractual construction in GR Engineering's favour I would necessarily have concluded that [SPB's] failure to release the share transfer was a breach of the Escrow Agreement. In those circumstances [SPB] would have been found to have adopted a construction of the Escrow Agreement that was held by this court to be incorrect. The constructional question was not straightforward and in the counterfactual under consideration I do not consider that making the constructional choice that it did would constitute gross negligence, if indeed it amounted to negligence.
Likewise if I assume that I had found on the facts that the conditions to be satisfied for cl 8 to operate were not met because there was not a dispute between all the Parties with respect to the escrow arrangements, I do not consider that making an incorrect assessment of those facts in the manner alleged by GR Engineering was an error of sufficient gravity as to constitute gross negligence.
[31] Primary reasons [79] - [82].
In this context, his Honour said that 'gross negligence' means more than mere negligence and involves a serious or a significant departure from the standard of care required of [SPB] in discharging the obligations imposed upon it by the Escrow Agreement.[32]
[32] Primary reasons [70].
Accordingly, his Honour dismissed GR Engineering's action against SPB.

The appeal and the notice of contention

The grounds of appeal

Ground 1 alleges that the judge erred in the construction of the Escrow Agreement and, in particular, the construction of cl 8.1, read with cl 1.1, cl 3.1(a), cl 4.2(a), cl 6.1 and cl 6.1(b) in that, in effect, the judge failed to take into account or have sufficient regard to all the mutually known background facts. Ground 1 gives particulars of the facts alleged and the particulars of knowledge of SPB, Eastern Goldfields and Investmet.
3

Ground 2 alleges that the judge erred in finding that Gilbert + Tobin's letter of 28 June 2017, on behalf of, Eastern Goldfields, disputing the enforceability of the Guarantee Deed was a dispute between the Parties with respect to the escrow arrangements for the purposes of the Escrow Agreement. In particular, ground 2 alleges, in effect, that:
(1)SPB was required to deal with the Share Transfer Form strictly in accordance with cl 4 of the Escrow Agreement.
(2)The Gilbert + Tobin letter of 28 June 2017 was, at its highest, evidence of a dispute as to the enforceability of the Guarantee Deed only, and was not a dispute 'with respect to the escrow arrangements contained in' the Escrow Agreement.
(3)SPB's duties under cl 6 were limited to those set out in the Escrow Agreement and, in particular, SPB had no duty to inquire into the terms and provisions of any agreement or instruction other than as set out in the Escrow Agreement, and that accordingly SPB had no duty or entitlement to inquire into the terms of the Guarantee Deed or its enforceability.
(4)Further or alternatively, if a dispute as to the enforceability of the Guarantee Deed was otherwise capable of being a dispute for the purposes of cl 8.1 (which it was not), the judge erred in finding that there was a dispute 'between the Parties' given that: (a) Investmet, the owner of the shares, had not disputed the enforceability of the Guarantee Deed; and (b) the Gilbert + Tobin letter of 28 June 2017 was written only on behalf of Eastern Goldfields.

3

3

(5) Eastern Goldfields had, in any event, 'no standing' to assert such a dispute.
(6)The judge further erred by having regard to subsequent events, namely Gilbert + Tobin filing a memorandum of appearance on behalf of both Eastern Goldfields and Investmet, and in filing and serving a defence on behalf of Investmet on March 2018. Such further conduct is irrelevant to the determination of SPB's obligation to deliver up the Share Transfer Form.
Ground 3 alleges that the judge erred in fact in finding that the conduct of SPB did not, in the circumstances, constitute gross negligence. The judge should have found that:
(1)The standard of care required by SPB, having regard to s 5(b)(2) of the CLA or at common law was 'very high', having regard to Eastern Goldfields' precarious financial position and that both the probability of harm and the likely seriousness of harm was accentuated such that a breach of duty would potentially cause very significant economic loss to GR Engineering.
(2)Having regard to the alleged background facts and the object and purpose of the Escrow Agreement (effectively as alleged in ground 1), no competent legal practitioners acting as Escrow Agent, without gross negligence, could hold the view that a claim by Eastern Goldfields disputing the enforceability of the Guarantee Deed was a dispute 'with respect to the escrow arrangements contained in the [Escrow] Agreement'.

3

3

(3) SPB's erroneous characterisation of the dispute as one within the scope of cl 8.1, when (GR Engineering asserts) it was a dispute as to the enforceability of the Guarantee Deed, was not the product of mere negligence or carelessness in circumstances where GR Engineering's solicitors, by letter dated 30 June 2017, expressly pointed out, in effect, the error of such characterisation.
(4)Alternatively, SPB was grossly negligent insofar as it was plainly apparent that there was no dispute between the Parties given that Investmet had not joined in any dispute.
(5)Further or alternatively, SPB was grossly negligent in not concluding that Eastern Goldfields 'lacked standing' to raise the asserted dispute in relation to the Guarantee Deed under cl 8.1.
(6)In all the circumstances, SPB 'was so negligent as to warrant a finding that its conduct was a serious and egregious departure from the standard of care of competent solicitors acting as an escrow agent'.

Notice of contention

SPB, by its notice of contention, contended that the primary decision should be upheld on the basis that as a matter of construction of the Escrow Agreement, if two principal protagonists were in dispute, that is sufficient to constitute a 'dispute between the Parties', even if a third entity (Investmet) remained silent.

The parties' submissions on the appeal

GR Engineering's submissions

Ground 1

GR Engineering contended that, in the context of the mutually known background facts:
(1)The purpose and object of the Escrow Agreement was to provide further security to GR Engineering in addition to the Guarantee Deed, and that the Escrow Agreement was to be 'autonomous and insulated from any dispute' under the Contract and the Guarantee Deed. In other words, part of the purpose and object of the Escrow Agreement was that it should give effect to the principle of autonomy, analogous to commercial documents such as Bank Guarantees and Letters of Credit.[33]
(2)A proper consideration of the purpose and object of the Escrow Agreement would have reinforced the narrow reach of cl 8.1, which is that the dispute must be 'with respect to the escrow arrangements contained in' the Escrow Agreement. Clause 8.1, including read in the context of cl 6.2(b), does not in its terms extend to disputes concerning the Guarantee Deed.[34]
(3)The strict obligation on SPB to release the Share Transfer Form pursuant to cl 4.2 was subject only to the proviso in cl 4.2(a) that, acting reasonably, there were no grounds for SPB to believe that the notice from GR Engineering, or the matters set out in the notice, were not genuine.[35] SPB at trial conceded that there was no issue as to the genuineness of the notice.[36]
[33] Reference was made to Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 260 CLR 85 [2] ‑ [10]; appeal ts 10, 21.
[34] Appeal ts 20, 21 ‑ 22.
[35] See also appeal ts 7.
[36] Appeal ts 9 ‑ 10, 11.

Before the primary judge, GR Engineering's primary case was that cl 8.1 does not qualify SPB's obligations under cl 4.2.[37] However, in oral submissions on appeal, GR Engineering accepted that, when engaged, cl 8.1 operates in a manner that, in effect, qualifies cl 4 in that when a dispute within cl 8.1 has arisen, SPB's right to interplead means that it is not obliged under cl 4.2 to release the Share Transfer Form. The focus of GR Engineering's submissions was on the circumstances in which cl 8.1 would be engaged. That directs attention to the meaning of the phrase in cl 8 'a dispute … with respect to the escrow arrangements contained in' the Escrow Agreement. In this regard, GR Engineering submitted that, properly construed, the phrase is limited to disputes in relation to matters contained in the Escrow Agreement, as distinct from disputes as to its validity or as to the Parties' underlying obligations. Counsel submitted that disputes in relation to matters contained in the Escrow Agreement was likely to be limited to disputes under cl 4.2(a) and cl 4.2(b) of the Escrow Agreement conditioning the obligation to release the Share Transfer Form.[38]
[37] See [60] above.
[38] Appeal ts 8, 10, 12 ‑ 14, 20 -21.
GR Engineering sought to demonstrate that SPB's and, by implication, the judge's, wider construction of cl 8.1 was untenable. GR Engineering said, for example, the consequence of the wide construction is that the interpleader rights would be enlivened upon any suggestion that the notice to release is not effective, no matter how meritorious.[39] Such a wide interpretation of cl 8.1 'denudes' cl 4.2.[40]
[39] Appeal ts 52.
[40] Appeal ts 53.
GR Engineering also submitted that it was fundamentally inconsistent for SPB, as escrow agent, to have considered that there was a dispute as to the enforceability of the Escrow Agreement, and to have performed the obligation under cl 4.1 to release the Consent Order and cause it to be filed at the Supreme Court.[41]

Ground 2

[41] Appeal ts 18, 54 ‑ 55.

In relation to ground 2, GR Engineering submitted, in effect, that there was no dispute capable of interpleading within the meaning of cl 8.1. It effectively relied on its submissions in relation to ground 1 and further contended that:
(1)The dispute raised by Gilbert + Tobin on behalf of Eastern Goldfields was a dispute with respect to the guarantee given by Investmet, and not a dispute with respect to the 'escrow arrangements contained' in the Escrow Agreement.[42]
(2)In any event, Eastern Goldfields had no standing to raise a dispute as to the operation of the Guarantee Deed as it was not the guarantor nor the owner of the shares the subject of the Share Transfer Form.[43]
(3)The 'Parties' included Investmet and Investmet did not dispute the Guarantee Deed via Gilbert + Tobin's letter of 28 June 2017. The judge's inference to the contrary is in error and none of the matters relied on by the judge at [77] of the primary reasons supported the drawing of the inference. Further, the inference found by the judge was contradicted by the plain evidence that Gilbert + Tobin's letter of 28 June 2017 was written only on behalf of Eastern Goldfields, including the express statement to that effect in the opening line of the letter.[44] GR Engineering submitted that the judge drew the inference at [77] of the primary reasons based on matters that, in the judge's view, demonstrated a commonality of interest between Eastern Goldfields and Investment. GR Engineering submitted that this was, in light of the express wording of Gilbert + Tobin's letter of 28 June 2017, the error.[45]

Ground 3

[42] Appeal ts 28, 29.

[43] Appeal ts 31 - 33.

[44] Appeal ts 15 ‑ 16, 17 ‑ 18, 56 ‑ 58.

[45] Appeal ts 58.

As is implicit in the presence of ground 3, GR Engineering accepted that failing to release the Share Transfer Form to GR Engineering, pursuant to cl 4.2 upon receipt of a notice ‑ including failing to release the Share Transfer Form because SPB formed the view there was no obligation to do so in light of cl 8.1 ‑ was an omission 'in connection with' the Escrow Agreement which is encompassed by cl 7.1. It also accepted that its pleaded case was founded upon an allegation of gross negligence by SPB. It did not contend, at trial or on appeal, that issues of gross negligence arose in relation to SPB's acts in performance of its obligations but did not encompass its construction of the Escrow Agreement. Accordingly, GR Engineering accepted that it was necessary, in order for its claim to succeed, for it to establish that the omission by SPB to release the Share Transfer Form constituted gross negligence.[46]
[46] Appeal ts 24 ‑ 25, and see generally appeal ts 22 ‑ 25.
In relation to 'gross negligence', GR Engineering referred to the 'Shirt calculus'[47] and to s 5B of the CLA. It submitted that the 'reasonable person' in s 5B(2) of the CLA has an understanding of the relationship between GR Engineering and SPB, and of SPB's knowledge of the circumstances and characteristics of GR Engineering including GR Engineering's relationship with Eastern Goldfields and Investmet. GR Engineering submitted that the standard of care turns on whether the kind or class of harm suffered by GR Engineering was foreseeable as a possible consequence of SPB's conduct.[48]
[47] Wyong Shire Council v Shirt (1980) 146 CLR 40, 47.
[48] Reference was made to Tame v New South Wales [2002] HCA 35; (2002) 211 CLR 317, 386 [203].
Here, the relevant class of harm was the economic loss flowing from GR Engineering being unable to realise the value of its security in circumstances where Eastern Goldfields failed to meet its primary obligation. Preserving that value was the key to the commercial purpose of the Escrow Agreement.[49]
[49] GR Engineering's submissions [32].
GR Engineering submitted that the probability of harm was high. The probability that the Share Transfer Form would be called upon was high, and the probability that harm would be suffered by GR Engineering if the security was not realised was high. SPB had actual knowledge of those matters. Further, the underlying commercial reason for Eastern Goldfields' failure to pay is relevant to the likely seriousness of the harm. Eastern Goldfields had liquidity problems and eventually went into administration, rendering the security worthless. This was a 'worst case scenario' for GR Engineering. The entire value of the Guarantee Deed of 15 June 2017 and the reason for withdrawing the statutory demand was destroyed. For a company in GR Engineering's position, failing to receive the agreed sum or security of equivalent value 'was catastrophic'. The likely seriousness of harm was thus very high, increasing the degree of care required of SPB.[50]
[50] GR Engineering's submissions [33] - [34].
GR Engineering submitted that, in all the circumstances known to SPB, the judge should have found that any competent solicitor acting as Escrow Agent would have known that: (1) the assertion that there was no identification of the source of the alleged obligation upon Eastern Goldfields to pay the sum of $5 million, and that therefore the Guarantee Deed was unenforceable, was wholly without merit and not arguable;[51] (2) Eastern Goldfields had no standing to raise a dispute as to the enforceability of the Guarantee Deed;[52] (3) Investmet had not raised any disputes for the purposes of cl 8.1 and accordingly there was no dispute raised by 'the Parties';[53] and (4) in any event, a dispute concerning the Guarantee Deed was not one in respect of which SPB had a duty to inquire.[54]
[51] Appeal ts 28 ‑ 29.
[52] Appeal ts 30, 31 ‑ 33.
[53] Appeal ts 29.
[54] GR Engineering's submissions [37]; appeal ts 29.
GR Engineering also submitted that the judge should have found that no competent legal practitioner acting as Escrow Agent could have concluded, without gross negligence, that the claim by Eastern Goldfields disputing the Guarantee Deed was a dispute with respect to the escrow arrangements 'contained' in the Escrow Agreement.[55] Moreover, SPB was not guilty of mere negligence in that the 'dispute' by Gilbert + Tobin in their letter related to the terms and provisions of another agreement (the Guarantee Deed) and not the Escrow Agreement. The judge should accordingly have found that SPB's conduct in refusing to comply with the obligation under cl 4.2(a) of the Escrow Agreement and commencing interpleader proceedings was a serious, significant and egregious departure from the standard of care required of a competent solicitor acting as Escrow Agent.

SPB's submissions

[55] Appeal ts 28.

SPB submitted that it had a 'waterfall' of defences: it contended that the construction adopted by SPB was correct; if it was not correct, SPB was not negligent in choosing not to release the Share Transfer Form; and if SPB was negligent, it was not grossly negligent.[56]

Grounds 1 and 2

[56] Appeal ts 33; see also appeal ts 43 ‑ 44.

SPB addressed grounds 1 and 2 together. SPB submitted that:
(1)The Guarantee Deed was intrinsically connected with the Escrow Agreement and provided the foundation for the Escrow Agreement, as appears from the introductory paragraph of the Escrow Agreement and cl 1.2 of the Escrow Agreement. The two instruments were inextricably linked. SPB accepts that the operation of the Escrow Agreement is 'insulated' from any dispute under the Contract.[57]
(2)Clause 3.1(a) is confined in its operation to an acknowledgement by the Parties and is not an undertaking by SPB. The word 'strictly' in cl 3.1(a) is to be understood in that context.[58]
(3)Clause 6.2(a), cl 6.3 and cl 6.4(b) are to be construed in the context that SPB had acted for Eastern Goldfields, including in relation to the Guarantee Deed. In that context, those clauses provided that SPB was not required to inquire into the terms and provision of any agreement or construction, was not required to utilise any funds or incur any liability in performing its duties - for example, in seeking advice, and was entitled to rely upon 'any notification' which it believed in good faith to be genuine.[59]
(4)There was no analogy with a bank guarantee or bond, given that those documents are unconditional and have a 'cashlike status'. Clause 8.1 of the Escrow Agreement expressly provided for a 'carve out' of the obligation in cl 4.2 in the event of a dispute.[60]
(5)Insofar as ground 1 alleges that the judge ought to have found that the purpose and object of the Escrow Agreement was to provide further security for GR Engineering, his Honour did so find at [58] of the primary reasons. Nevertheless, as his Honour found, that purpose did not lead to the conclusion that the Escrow Agreement reflected a contractual scheme autonomous in the sense contended for by GR Engineering.[61]
(6)The alleged background facts in ground 1 go beyond the facts pleaded by GR Engineering insofar as they extend to allege knowledge by SPB (and Investmet) of Eastern Goldfields' financial position, particularly with respect to the matters preceding the statutory demand. Reference was made in particular to par 1.1.1 of ground 1 and particulars (b) ‑ (m) of par 1.1.1 of ground 1.[62]
(7)GR Engineering did not run a case at trial based on all of the mutually known circumstances alleged in ground 1, and is precluded from relying on those matters now, in that evidence may have been led at trial in respect of such matters.[63]
(8)Further, the contention by GR Engineering at [37.3.1] of its submissions that SPB, in effect, ought to have known that Gilbert + Tobin had no basis for contending that the Guarantee Deed was unenforceable because of the absence of the source of the obligation for Eastern Goldfields to pay $5 million, was a point not run at trial.[64] In any event, cl 6 of the Escrow Agreement provided that SPB was not required to undertake an evaluation of the merits of the claim.[65] Moreover, Gilbert + Tobin's letter of 28 June 2017 relied on other matters and not the mere alleged absence of identification of the source of the primary obligation.[66]
[57] SPB's submission [7] ‑ [9], [35]; appeal ts 39 ‑ 40.
[58] SPB's submissions [11] - [13].
[59] SPB's submissions [16] - [20]; appeal ts 41.
[60] SPB's submissions [39].
[61] SPB's submissions [40].
[62] SPB's submissions [43] - [44].
[63] SPB's submissions [45] ‑ [46].
[64] Appeal ts 43.
[65] Appeal ts 41.
[66] SPB's submissions [63] - [66].
SPB submitted that the judge was correct to find that there was 'a dispute … between the Parties with respect to the escrow arrangements contained in' the Escrow Agreement within the meaning of cl 8.1. In that regard, SPB submitted that:[67]
[67] SPB's submissions [25] ‑ [26], [29] - [37], [49] - [59].
(1)In substance, the Gilbert + Tobin letter of 28 June 2017 asserted that the Guarantee Deed was not enforceable because there was no primary obligation, it was liable to be set aside for misleading or deceptive conduct, and GR Engineering had failed to comply with the obligations imposed by the Guarantee Deed, and, moreover, the letter contained an express notification to SPB as escrow agent that the Escrow Agreement was not enforceable.[68]
[68] Appeal ts 40.
(2)It was plain that Eastern Goldfields (by its solicitors) contended that the Escrow Agreement was not enforceable, and SPB ought not release the Share Transfer Form.
(3)Further, as a 'fallback' position, SPB submitted that, given the interconnection between the Escrow Agreement and the Guarantee Deed, Eastern Goldfields' assertion that the guarantee is not enforceable meant an assertion that the escrow arrangement is not enforceable, and therefore it constituted a dispute with respect to escrow arrangements contained in the Escrow Agreement.[69]
(4)In cl 8.1, the words 'with respect to' are of the widest connection, and should not be narrowly construed.[70] Also, the word 'arrangements' in cl 8.1 encompasses more than the mere terms of the Escrow Agreement. The phrase 'a dispute … with respect to the escrow arrangements' in the Escrow Agreement encompasses a dispute about the validity or enforceability of the obligation of the Escrow Agent to release the Share Transfer Form.[71]
(5)The above matters, together with the contemporaneous execution of the Guarantee Deed and the Escrow Agreement, and the principles of construction referred to above, combined to indicate that the Gilbert + Tobin letter of 28 June 2017 evidenced 'a dispute … with respect to the escrow arrangements contained in' the Escrow Agreement.
(6)Further, the judge's inference that Investmet disputed GR Engineering's asserted entitlement to the Share Transfer Form was open on the evidence, particularly having regard to: (a) the unchallenged findings to the effect that Mr Fotios was both a director and executive chairman of Eastern Goldfields and, at the same time, controlled Investmet; and (b) the background facts recited by the judge at [4] ‑ [13] of the primary reasons, which establish that Investmet was in Eastern Goldfields' 'camp'. Further, the uncontroverted evidence was that Investmet was an entity controlled by Mr Fotios, who signed the Share Transfer Form on behalf of Investmet, that Mr Fotios made decisions for both Investmet and Eastern Goldfields, including signing the Guarantee Deed on their behalf, and that GR Engineering, via its solicitors, was aware that instructions were sought from Mr Fotios on behalf of both Investmet and Eastern Goldfields.[72] In oral submissions, SPB emphasised that the judge's finding was that Investmet disputed GR Engineering's entitlement to the release of the Share Transfer Form, and not that Gilbert + Tobin were acting for Investmet.[73]
(7)SPB also pointed to the correspondence from GR Engineering to SPB, dated 30 June 2017, in which GR Engineering wrote:
You purport to rely on the interpleader and legal proceedings provisions of the Escrow Deed (clause 8). Such a position is concerning, as any reliance would be on an ill-conceived interpretation of those provisions. The irresistible inference is that the Escrow Agent, in what should be its independent capacity, is using its position as Escrow Agent for the benefit of EGS and lnvestmet. (emphasis added)
SPB submitted that this indicated that GR Engineering itself considered that, in respect of this dispute, Eastern Goldfields and Investmet were 'on the same side of the fence'. In turn, this supports the proposition that there was a dispute between the 'Parties'.[74]
(8)The judge did not use subsequent events to construe the Escrow Agreement, as alleged. At [78] of the primary reasons, the judge merely observed that subsequent matters confirmed that the inference was correct.
[69] Appeal ts 40.
[70] Reference was made to Smith v Allan (1993) 31 NSWLR 52, 61.
[71] Appeal ts 43 - 44.
[72] Appeal ts 50.
[73] Appeal ts 49.
[74] Appeal ts 51.
SPB also submitted that GR Engineering's complaint as to Eastern Goldfields' lack of 'standing', lacked merit for two reasons. First, the contention was not raised at trial. Secondly, the reference to 'standing' in this context is unhelpful. The parties' rights are determined by the proper construction of the Escrow Agreement (in this instance, cl 8.1), rather than by reference to a general notion of 'standing'. There is nothing in the text or context of cl 8.1 which mandates a conclusion that Eastern Goldfields was excluded from asserting matters that could give rise to a dispute and, on the contrary, the reference to 'between the Parties' suggested the contrary.[75]
[75] SPB's submissions [60] - [62].
In response to GR Engineering's submission that 'escrow arrangements' in cl 8.1 refer only to matters in relation to cl 4.2(a) and cl 4.2(b), SPB observed that cl 8 is a standalone clause in unqualified terms, which does not refer to cl 4. The substance of cl 8.1 could have been included as a further express qualification to the obligation in cl 4.2 to release the Share Transfer Form upon receiving notice (for example, it could have been included as cl 4.2(c)), but this was not done. SPB submitted that these features suggest that cl 8 should not be confined to matters concerning cl 4 and that it should be given its natural meaning.[76]
[76] Appeal ts 47 ‑ 48.
SPB added that the construction issues ought to be assessed not only from the perspective of GR Engineering or by reference to the identity of SPB, as the escrow agent, and SPB's particular background to the matter. Rather, SPB submitted, one ought to ask whether, in light of the correspondence between the parties, 'an ordinary business person [would] conclude that cl 8.1 was engaged'. SPB submitted that that question ought to be answered 'yes'.

Ground 3

SPB contended that:
(1)GR Engineering's assertion that Eastern Goldfields had a precarious financial position which affected the duty of care was a matter not pleaded by GR Engineering, and the issue of SPB's knowledge of that matter was not agitated in the proceedings below. Accordingly, it is not open to advance such a contention afresh on appeal.
(2)The law of negligence could not relevantly expand the scope of SPB's duties under the Escrow Agreement. Rather, the duties and obligations of SPB were to be determined by the Escrow Agreement on its proper construction.[77]
(3)Accordingly, SPB's duties were to be determined in accordance with the scope of the obligation under the Escrow Agreement as explained in relation to grounds 1 and 2, and that is irrespective of SPB's knowledge of Eastern Goldfields' financial position. It is also important to appreciate that SPB's duties were owed to all of the parties to the Escrow Agreement.
(4)Even if, which is denied, the construction of the Escrow Agreement contended for by SPB is incorrect, it does not follow that its conduct in the circumstances in adopting and acting upon such construction amounted to a serious and egregious departure from the standard of care required of competent solicitors. In circumstances where the judge has reached a conclusion as to the meaning and operation of the Escrow Agreement in accordance with that adopted by SPB at the time, it could not be said that no competent legal practitioner could have reached the conclusions reached by SPB.
[77] Reference was made to Fleming's The Law of Torts (10th ed, 2011) [8.350]; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27 [1119] ‑ [1125]; AVWest Aircraft Pty Ltd v Clayton Utz [No 2] [2019] WASC 306 [396].

Thirdly, the broad construction substantially undermines the achievement of the central purpose of the agreement. As explained above, cl 4 is the central core of the Escrow Agreement. Its evident purpose was to provide security to GR Engineering for Eastern Goldfields' payment of the sum of $5 million by providing for the executed Share Transfer Form to be delivered to it in the event of non‑payment, in the context where the underlying commercial purpose of the Guarantee Deed and the Escrow Agreement was to provide a mechanism to give certain and near immediate effect to a settlement of the dispute between the Parties. To permit a party such as Eastern Goldfields to assert the invalidity of the Escrow Agreement and the Guarantee Deed and thereby raise a dispute for the purposes of cl 8.1, entitling SPB to interplead and not to release the Share Transfer Form, is apt to defeat or substantially undermine those purposes. In our view, a reasonable businessperson in the position of the parties to the Escrow Agreement would not attribute that meaning and operation to cl 8.1.
We also agree with Murphy JA's additional observations at [167] below. For these reasons, we prefer the construction in [124] above. We turn next to applying that construction to the circumstances of this case.

Application in the present case

In the present case the dispute alleged to enliven cl 8 of the Escrow Agreement was said to arise from what was set out in Gilbert + Tobin's letter of 28 June 2017. In summary, that letter relevantly included assertions that:
(1)Investmet had no liability under the Guarantee Deed because Eastern Goldfields had not, under that Deed, undertaken any obligation to pay the Guarantee Money;
(2)consequently, GR Engineering had no entitlement under the Escrow Agreement to require the release of the Share Transfer Form as the Escrow Agreement was not enforceable;
(3)GR Engineering had engaged in misleading conduct contrary to the Australian Consumer Law in relation to representations allegedly made by GR Engineering as to work performed under the Contract, and that the Guarantee Deed was liable to be set aside on that basis;
(4)GR Engineering had not complied with its obligations under cl 4 of the Guarantee Deed, in that it had not 'immediately and unconditionally [recommenced] work towards commissioning'; and
(5)there were defects and omissions in GR Engineering's work which were, among other things, the subject of Eastern Goldfields' 'offsetting claims'.
In our view, none of these matters raised 'a dispute … with respect to the escrow arrangements contained in' the Escrow Agreement, as we construe that phrase. Each of those matters raises a collateral issue seeking to undermine the validity of the Guarantee Deed and the Escrow Agreement themselves, or otherwise makes claims in relation to different complaints by Eastern Goldfields that fall outside the scope of the escrow arrangements in the Escrow Agreement.
On its face, Gilbert + Tobin's letter of 28 June 2017 does not dispute any of the matters contained in the Escrow Agreement itself, on the basis of which the Parties irrevocably instructed SPB to release the Share Transfer Form. In particular it did not dispute:
(1)whether GR Engineering had issued a notice in accordance with cl 3.3(b) of the Guarantee Deed;
(2)the statement in the notice that Eastern Goldfields had not paid the $5 million to GR Engineering prior to the expiry of the Cure Period;
(3)the fact that Eastern Goldfields had not paid the $5 million to GR Engineering prior to the expiry of the Cure Period; or
(4)the 'genuineness' of any of the contents of the notice.
Nor is there any other operative provision of the Escrow Agreement (beyond cl 4) to which it could be said the matters in Gilbert + Tobin's letter of 28 June 2017 relevantly raised a 'dispute' as to the escrow arrangements.
For these reasons, we would uphold grounds 1 and 2 as to the proper construction of cl 4 and cl 8 of the Escrow Agreement and as to whether Gilbert + Tobin's letter of 28 June 2017 was a dispute with respect to the escrow arrangements contained in the Escrow Agreement.
We summarise our conclusions in relation to grounds 1 and 2 as follows:
(1)upon receipt of the notice from GR Engineering dated 29 June 2017, SPB was obliged, pursuant to cl 4.2 of the escrow agreement to deliver the Share Transfer Form to GR Engineering;
(2)on its proper construction, cl 8 of the Escrow Agreement authorised SPB to interplead the escrow documents only when there was a dispute about the operation of the express terms of the Escrow Agreement itself;
(3)none of the matters raised in Gilbert + Tobin's letter of 28 June 2017 was 'a dispute … with respect to the escrow arrangements contained in' the Escrow Agreement within the meaning of cl 8.1; and
(4)by failing to deliver the Share Transfer Form to GR Engineering as required by cl 4, SPB was in breach of the Escrow Agreement.

GR Engineering's other contentions

We turn to explain why we do not accept GR Engineering's further contentions advanced under grounds 1 and 2, which proceed on the basis that the judge's construction of cl 8.1 was correct.
First, GR Engineering submitted that the dispute raised by Gilbert + Tobin's letter of 28 June 2017 was a dispute with respect to the guarantee given by Investmet, rather than a dispute with respect to the 'escrow arrangements contained' in the Escrow Agreement.[94] We accept GR Engineering's contention that, in order for a dispute to engage cl 8.1, it is not enough that it is a dispute with respect to the Guarantee Deed. However, adopting the judge's construction, the dispute raised by Gilbert + Tobin's letter of 28 June 2017 was a dispute with respect to the escrow arrangements in the Escrow Agreement. The letter contended, in effect, that because the principal debtor, Eastern Goldfields, had no obligation to pay the relevant amount, Investmet had no liability under the Guarantee Deed, with the result that GR Engineering had no entitlement under the Escrow Agreement to require the release of the Share Transfer Form as the Escrow Agreement was not enforceable. Gilbert + Tobin's letter of 28 June 2017 thus raised a dispute as to the enforceability of the escrow arrangements constituted by the Escrow Agreement. On the construction adopted by the judge, cl 8.1 encompasses such a dispute.
[94] See [80](1) above.
Consequently, GR Engineering's 'standing' point, summarised in [80](2) above, falls away. The letter of 28 June 2017 did not simply raise a dispute as to the operation of the Guarantee Deed - it raised a dispute as to the Escrow Agreement, to which Eastern Goldfields was a party.
As to whether the dispute was 'between the Parties', we accept the notice of contention. In our opinion, on either the judge's construction or our preferred construction of cl 8.1, if any two of the Parties were in dispute concerning a matter of the character referred to in the clause, then there would be a dispute 'between the Parties' of that character. Considerations of both text and purpose support that construction. By its nature, a dispute must involve more than one party, but nothing in the language of the phrase 'a dispute between the Parties' requires that all three Parties are parties to the dispute. The evident purpose of cl 8.1 is to provide protection to SPB from liability in a situation where it is faced with competing claims with respect to the escrow arrangements. That purpose would be undermined if the protection were denied in a situation in which two of the Parties make competing claims, but the third is silent or otherwise neutral. It is the presence of competing claims, not the involvement of all Parties in such competing claims, that gives rise to the need for the protection that cl 8.1 is evidently designed to provide.
Consequently, it is not necessary to decide whether the judge erred in drawing the inference that Investmet's position in respect of the escrow arrangements was the same as that of Eastern Goldfields.
In the absence of any allegation of wilful misconduct, GR Engineering's complaint as to SPB's conduct in filing the Consent Order (see [79] above) goes nowhere. The two species of Escrow Document are dealt with separately in cl 4.1 and cl 4.2. SPB's obligation under cl 4.1 to file the Consent Order arose immediately the Guarantee Deed became unconditional on 15 June 2017. By contrast, the issue as to whether SPB was obliged to release the Share Transfer Form to GR Engineering arose under cl 4.2 following the receipt of Gilbert + Tobin's letter of 28 June 2017.

Conclusion on grounds 1 and 2

For these reasons, we would uphold grounds 1 and 2 and find that, on a proper construction of the Escrow Agreement, in the circumstances applying on 29 June 2017 and thereafter, SPB was obliged to release the Share Transfer Form and was not entitled to interplead. Consequently, in failing to release the Share Transfer Form to GR Engineering, it breached its obligations under the Escrow Agreement.

Ground 3 - disposition

As already noted, ground 3, and GR Engineering's appeal generally, proceed on the basis that it was necessary, in order for GR Engineering's claim to succeed, for it to establish that SPB's failure to release the Share Transfer Form constituted gross negligence.[95] Further, at trial GR Engineering did not rely on the other potential basis of liability, namely, wilful misconduct.
[95] See [81] above.
While in some circumstances there is room for overlap in their application, the two contractually available bases of liability on the part of SPB - gross negligence and wilful misconduct - have different focuses. The foundation of any claim of gross negligence on the part of SPB must be conduct on its part that was not authorised by the Escrow Agreement. If SPB was entitled to decline to release the Share Transfer Form, it could not have been grossly negligent in doing so. In evaluating whether so declining was grossly negligent, attention is necessarily focused on the ground(s) on which SPB was not entitled to act as it did. By contrast, a claim of wilful misconduct may focus on other matters, for example whether SPB was exercising its contractual powers for an impermissible purpose such as to benefit Eastern Goldfields and Investmet.
Many of GR Engineering's submissions on ground 3 were apt to relate to a claim of wilful misconduct and were not germane to the claim of gross negligence, with its focus on the basis on which SPB was not entitled to act as it did. One such submission is the contention that any competent solicitor acting as Escrow Agent would have known that the assertion that there was no identification of the source of the alleged obligation upon Eastern Goldfields to pay the sum of $5 million, and that therefore the Guarantee Deed was unenforceable, was wholly without merit and not arguable.[96] This submission would have been relevant to a claim of wilful misconduct but is extraneous to the claim of gross negligence, as it does not bear upon the grounds on which SPB was not entitled, under the Escrow Agreement, to act as it did.
[96] Appeal ts 28 ‑ 29.
The primary judge considered a number of authorities concerning the meaning of the phrase 'gross negligence' in a variety of contractual and other contexts. The primary judge concluded that, in the context of the present case, gross negligence required more than mere negligence and connoted a serious or significant departure from the standard of care required of a reasonably competent solicitor in SPB's position.[97] The parties' submissions on appeal proceed on that basis.[98] We proceed on the same basis.
[97] Primary reasons [70].
[98] See, for example, GR Engineering's submissions [22], [37] - [40], SPB's submissions [69], [73].
We have found that the judge proceeded on a wrong construction of cl 8.1 and that, on a proper construction of the clause, SPB was obliged to release the Share Transfer Form to GR Engineering.
In our opinion, it cannot be said that acting on the basis of a contrary, broader construction amounted to gross negligence on the part of SPB. The question of construction as to the scope of cl 8.1 was and is less than straightforward. We have reached a conclusion in favour of the narrower construction only after substantial consideration and reflection. The broader construction is supported by the generality of, and the ordinary meaning of, the text. Moreover, the particular construction advanced by GR Engineering only emerged for the first time in oral submissions on appeal. It was not advanced before the trial judge or in the written submissions to this court.
The fact that the primary judge reached the broader construction of cl 8.1 is a very substantial obstacle to a conclusion that, in failing to adopt the more confined construction of cl 8.1, SPB was grossly negligent. SPB was required to determine the appropriate course of action within days. Unlike the primary judge, SPB did not have the benefit of detailed submissions as to the proper construction of cl 8.1 and the Escrow Agreement as a whole, and did not have the same opportunity for reflection.
A like conclusion is to be drawn if it is assumed that, contrary to our preferred construction, the phrase 'a dispute … between the Parties' requires that all three Parties to the Escrow Agreement be in dispute. In our view, it was, at the least, open to a reasonable solicitor in SPB's position to act on the basis that a dispute between GR Engineering and Eastern Goldfields amounted to a dispute between the Parties for the purposes of cl 8.1. We are not persuaded that, in so proceeding, SPB could be said to be negligent, much less grossly negligent.
Finally, we assume that, properly characterised, the dispute raised by Gilbert + Tobin's letter of 28 June 2017 was a dispute with respect to the guarantee given by Investmet, and was not a dispute with respect to the escrow arrangements contained in the Escrow Agreement. In acting in a manner that involves a contrary characterisation of the letter of 28 June 2017, SPB cannot be said to have been grossly negligent. There was, at the least, room for a reasonable conclusion that the letter raised a dispute as to the escrow arrangements in the Escrow Agreement, given the assertion in the letter that GR Engineering had no entitlement under the Escrow Agreement to require the release of the Share Transfer Form because the Escrow Agreement was not enforceable.
For these reasons, ground 3 fails.

Conclusion

For the above reasons, although, in the circumstances, SPB breached its obligations under cl 4.2 of the Escrow Agreement by invoking the interpleader clause in cl 8.1 and declining to release the Share Transfer Form under cl 4.2, SPB was not thereby grossly negligent.
The appeal must be dismissed.
We would hear from the parties as to the costs of the appeal.

MURPHY JA:

Quinlan CJ and Beech JA have set out the relevant background, arguments and issues for determination in this appeal. I agree that the appeal should be dismissed.
The essential obligations of SPB under the Escrow Agreement are to 'hold', and then to 'deal with and release', the Escrow Documents (relevantly the Share Transfer Form) 'from escrow' on the terms and conditions of the Escrow Agreement (cl 1, cl 3.1, cl 3.2, cl 4.1 and cl 6).
Relevantly for present purposes, under cl 4.2(a) of the Escrow Agreement, SPB is required to release the Share Transfer Form to GR Engineering, if:
1.it receives a notice from GR Engineering that Eastern Goldfields has failed to pay the Guaranteed Amount by the expiration of the Cure Period; and
2.SPB, acting reasonably, has no grounds to believe that either the notice itself, or the matters set out in the notice, are not genuine.
Clause 6.4(b), read in the context of cl 6.4 as a whole and in the context of cl 3.1, cl 7 and cl 8, indicates that SPB is not required to take positive steps to go behind a notice it receives for the purposes of cl 4.2(a), and that the second of the conditions referred to in the preceding paragraph will be satisfied unless SPB is put on actual notice of a ground indicating a lack of genuineness.
In this context, cl 8.1 looks at the matter prospectively prior to the release of (relevantly) the Share Transfer Form. At least in its principal sphere of operation, it evidently contemplates that a dispute might arise where a Party (most obviously Eastern Goldfields, but any 'Party', including Investmet) claims that the Share Transfer Form ought not be released under cl 4.2(a)[99] and alleges in that regard that:
1.SPB has not been sent, or otherwise received, a notice from GR Engineering that Eastern Goldfields has failed to pay the Guaranteed Amount by the expiration of the Cure Period; alternatively
2.acting reasonably, there are grounds for SPB to believe that either the notice itself, or the matters stated in the notice, are not genuine.
[99] Each party is otherwise bound by cl 3.1.
On receipt of such a claim or claims, SPB has effectively two options. First, it could satisfy itself (or not) that there was a notice and the notice and its contents were genuine and then release (or not) the Share Transfer Form. In that event, it could invoke the protection of cl 7 in the event of subsequent proceedings brought against it by a Party for alleged breach of cl 4.2(a). Alternatively, SPB could seek to invoke cl 8.1 for the purpose of seeking to avoid, at the outset, the risk of being sued.
A 'dispute' to which cl 8.1 applies is one which entitles SPB to 'interplead', using the processes of the court, 'all of the assets held in escrow', ie, the Escrow Documents. In its ordinary meaning and effect, particularly in the context of cls 1 ‑ 7 which precede it, it connotes a dispute over the performance of the Escrow Agreement, including, most obviously, with respect to performance by SPB pursuant to cl 4.2(a). The effect of cl 8.1(b) and cl 8.2 is that having interpleaded in respect of such a dispute, SPB is then exempted from the parties' litigation over the Escrow Documents (the 'interpleaded assets'), providing that the dispute is not based on SPB's own gross negligence or wilful misconduct.
Clause 7 applies to the execution, delivery or performance of the Escrow Agreement (cl 7.2, and the reference to acts or omissions in cl 7.1). In its application to cl 4.2(a), it is evidently intended to operate retrospectively, ie, (1) after the release of the Share Transfer Form, or (2) after a decision by SPB has been made not to release the Share Transfer Form. Its principal purpose is evidently to limit SPB's liability (again, other than in cases of wilful default or gross negligence by SPB). At least in its principal sphere of operation, it does this by limiting SPB's liability for damages:
1.in relation to a claim by Eastern Goldfields, where SPB has released the Share Transfer Form to GR Engineering purportedly in accordance with cl 4.2(a); and
2.in relation to a claim by GR Engineering, where SPB has not released the Share Transfer Form purportedly in accordance with cl 4.2(a).
In this context, the exclusion of liability in cl 3.1(b) in respect of 'negligence' is to be understood as a reference to mere negligence.
Accordingly, each of cl 7 and cl 8 is designed to operate cumulatively for the protection of SPB in cases other than for its wilful default or gross negligence. The drafting very much reflects a 'belt and braces' approach for the benefit of SPB, inevitably at the expense of certainty of outcome for GR Engineering in connection with the operation of the escrow arrangements.
The principal difference between cl 7 and cl 8 is that, particularly in relation to their application to cl 4.2(a), they operate at different times in relation to the performance of the Escrow Agreement. The latter (cl 8) operates prospectively and the former (cl 7) operates retrospectively, in the sense discussed above. Together, they are evidently concerned with shielding SPB from, or from the effect of, prospective and subsequent claims by the Parties in connection with the performance of its obligations to hold, and deal with and release, the Escrow Documents under the Escrow Agreement. Both cl 7 and cl 8 are predicated upon SPB having those obligations and each, in different ways, seeks to relieve SPB from the burden of those obligations within the context of the operation of the Escrow Agreement.

I agree with the reasons of Quinlan CJ and Beech JA, that the preferred construction is that referred to in [124] above, and with their Honours' reasons at [112] ‑ [118] and [124] ‑ [128]. That construction is confirmed by the matter referred to in the preceding paragraph and three further matters (perhaps more by way of emphasis): (1) the word 'contain' (the past tense of which is used in cl 8.1) signifies, in its ordinary meaning, 'to have within itself';[100] (2) cl 9.3 recognises that SPB's duties, responsibilities and obligations arise 'under' the Escrow Agreement, conformably with a construction that disputes regarding the escrow arrangements to which cl 8.1 refer are disputes arising under, or within the operation of, the Escrow Agreement; and (3) nowhere in the language of the Escrow Agreement is there a reference to its operation being affected by a dispute over its validity. The exercise of a right to interplead under cl 8.1 assumes the validity of the Escrow Agreement. Having regard to the terms of the Escrow Agreement (read as a whole but especially cl 3.1), its subject matter and the broader context in which it was entered into, clear words would be required if the right to interplead extended to a circumstance where the validity of the Escrow Agreement was itself put in issue by a Party. I also agree with their Honours' reasons in relation to Gilbert + Tobin's letter of 28 January 2017 at [130] ‑ [135], and also with their Honours' reasons at [136] ‑ [141] in relation to GR Engineering's other contentions. For all these reasons, I agree with their Honours' conclusion that grounds 1 and 2 should be upheld.
[100] Macquarie Dictionary (Online Version).
As to ground 3, it was not part of GR Engineering's case on appeal,[101] or below, that cl 7 applied only as to the performance of the Escrow Agreement on its proper construction. Rather, GR Engineering's case involved the acknowledgement that cl 7 protected SPB against liability in relation to performance based on a mistaken construction of the Escrow Agreement, where the mistaken construction could not be said to be grossly negligent. In this context, I also agree with their Honours' reasoning and conclusion on ground 3.
[101] Appeal ts 12, 17, 21 - 22, 24 - 25. See also [81] of the joint reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RC
Associate to the Honourable Justice Beech
29 JULY 2021