Hancock v Rinehart

[2014] NSWSC 156

Supreme Court

New South Wales

Medium Neutral Citation:	Hancock v Rinehart [2014] NSWSC 156
Hearing dates:	21 February 2014
Decision date:	21 February 2014
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Motion dismissed with costs
Catchwords:	ARBITRATION - conduct of the arbitration proceedings - stay of arbitration proceedings - application for stay of proceedings pending appointment of trustee where trust is alleged to be interested in arbitration - held, trust not interested in arbitration - application dismissed PROCEDURE - Supreme Court procedure - interlocutory application - whether application for stay of arbitration may be brought by motion in proceedings
Legislation Cited:	(NSW) Supreme Court Act 1970, s 66(4) (WA) Commercial Arbitration Act 1973, s 17J (WA) Trustee Act 1962, s 8
Cases Cited:	Phillips v Walsh (1990) 20 NSWLR 206 Australian Hardboard Ltd v Hudson Investment Group Ltd (2007) 70 NSWLR 201 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Category:	Interlocutory applications
Parties:	John Langley Hancock (first plaintiff) Bianca Hope Rinehart (second plaintiff) Gina Hope Rinehart (first defendant) Ginia Hope Frances Rinehart (second defendant) Hope Rinehart Welker (third defendant) Hancock Prospecting Pty Ltd (fourth defendant) Hope Downs Iron Ore Pty Ltd (fifth defendant)
Representation:	Counsel: CH Withers w N Zerial (Plaintiffs) B McClintock SC w C Bova (First Defendant) P Flynn (Second Defendant) CJ Birch SC (Third Defendant) D Studdy SC w IC Colquhoun (Fourth, Fifth Defendants) Solicitors: Yeldham Price O'Brien Lusk (Plaintiffs) Corrs Chambers Westgarth (First, Fourth, Fifth defendants) Gadens Lawyers (Second Defendant) Deutsch Miller (Third Defendant)
File Number(s):	2011/285907

Judgment (ex tempore)

Application for leave to file motion

1. HIS HONOUR: The first question is whether leave should be granted to file in these proceedings the notice of motion signed by the solicitor for the first and second plaintiffs dated 21 February 2014 by which is sought orders said to be pursuant to (WA) Commercial Arbitration Act 1973, s 17J, and (NSW) Supreme Court Act 1970, s 66(4) effectively to stay proceedings under an arbitration commenced by the fourth defendant against the plaintiffs.

1. As McLelland J, as the later Chief Judge then was, said in Phillips v Walsh (1990) 20 NSWLR 206, the provisions of the Supreme Court Rules (and now the Uniform Civil Procedure Rules) that provide for an interlocutory or other application in proceedings to be brought by motion are not intended to describe the kinds of applications that can be made in existing proceedings; whether a particular application can properly be made in existing proceedings is to be determined according to general law principles as modified by any relevant legislation.

1. As is summarised in Ritchie's Civil Procedure (at [18.1.20]) generally any matter arising in connection with the preparation of the proceedings, the conduct of the hearing or the enforcement of a judgment may be made by motion in the proceedings. On the other hand, the notice of motion procedure is inappropriate where the substantive relief sought is substantially different to that which was sought in the originating process or granted in the judgment.

1. This is not a case which concerns the scope of liberty to apply, which was the subject matter of Phillips v Walsh and also of Australian Hardboard v Hudson Investment Group Limited (2007) 70 NSWLR 201. The present application is analogous to an application by a beneficiary to restrain a third party creditor from instituting proceedings against a trust, pending the hearing of a dispute as to the removal and replacement of the trustee, in circumstances where the trust was for practical purposes incapable of defending the proceedings for want of an active trustee. While I cannot immediately think of any directly relevant authority, there is some, albeit distant analogy with asset preservation orders against third parties, of the kind sought and granted in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, in which it was held that, at least in some circumstances, injunctive relief could be granted on motion against third parties in aid of the substantive relief sought in the proceedings.

1. While at this point I am far from saying that the case will be so put, let alone made out, it seems to me that in circumstances where the plaintiff in the arbitration and the defendants in the arbitration are parties in these proceedings; where the arbitration arises under a deed which is the subject of these proceedings; and where, as I understand it, the burden of the application is to stay the arbitration until these proceedings have resulted in the appointment of a trustee capable of asserting (or defending) the trust's rights, I do not think it can be said that the application has insufficient connection with these proceedings to be able to be brought by motion in it.

1. I observe that it is not entirely clear to me at this stage whether there is or is not a trustee. A quick glance at s 8 of the (WA) Trustee Act suggests that, although the first defendant has tendered her resignation, she may formally remain the trustee until there is a replacement trustee, but I have not by any means looked at that question in any detail.

1. Upon the undertaking of Timothy Price, solicitor, to pay the appropriate filing fees, I grant leave to the plaintiffs to file a notice of motion in the form initialled by me dated this day and placed with the papers. I direct that the motion be returnable instanter. I dispense with further service of the motion.

Application for injunction

1. Clause 20 of the Hope Downs Deed provides as follows:

In the event that there is any dispute under this deed then any party to this deed who has a dispute with any other party to this deed shall forthwith notify the other party or parties with whom there is the dispute and all other parties to this deed ("Notification") and the parties to this deed shall attempt to resolve such difference in the following manner.

20.1 Confidential Mediation

(a) the disputing parties shall first attempt to resolve their dispute by confidential mediation subject to Western Australian law to be conducted by a mediator agreed to by each of the disputing parties and GHR (or after her death or non-capacity, HPPL);

(b) each of the disputing parties must attempt to agree upon a suitably qualified and independent person to undertake the mediation;

(c) the mediation will be conducted with a view to:

(i) identifying the dispute;

(ii) developing alternatives to resolving the dispute;

(iii) exploring these alternatives; and

(iv) seeking to find a solution that is acceptable to the disputing parties.

(d) any mediation will not impose an outcome on the disputing parties. Any outcome must be agreed to by the disputing parties;

(e) any mediation will be abandoned if:

(i) the disputing parties agree;

(ii) any of the disputing parties request the abandonment.

20.2 Confidential Arbitration

(a) Where the disputing parties are unable to agree to an appointment of a mediator for the purposes of this clause within fourteen (14) days of the date of the Notification or in the event any mediation is abandoned then the dispute shall on that date be automatically referred to arbitration for resolution ("Referral Date") and the following provisions of this clause shall apply:

(i) in the even that no agreement on the arbitrator can be reached within three (3) weeks of the Referral Date, the arbitrator will be Mr Tony Fitzgerald QC (provided he is willing to perform this function and has not reached 74 years of age at that time), or in the event Mr Tony Fitzgerald QC is unwilling or unable to act, the Honourable Justice John Middleton (provided he is no longer a judge of the Federal or other Australian Court and provided he has not reached 74 years of age at that time), and irrespective of whether either of these persons have carried out the mediation referred to above, or in the event that neither is willing or able to act,

(ii) subject to paragraph (iv) below by confidential arbitration with one (1) party to the dispute nominating one (1) arbitrator, and the other party to the dispute nominating another arbitrator and the two (2) arbitrators selecting a third arbitrator within a further three (3) weeks, who shall together resolve the matter pursuant to the Commercial Arbitration Act of Western Australia and whose decision shall be final and binding on the parties;

(iii) if the arbitrators nominated pursuant to paragraph 2(a)(ii) are unable to agree in the selection of a third arbitrator within the time provided in paragraph 2(a)9iii), the third arbitrator will be designated by the President of the law Society of Western Australia and shall be a legal practitioner qualified to practice in the State of Western Australia of not less than twenty (20) years standing.

(iv) in the event that a disputing party does not nominate an arbitrator pursuant to clause 2(a)(ii) within twenty-one (21) days from being required to do so it will be deemed to have agreed to the appointment of the arbitrator appointed by the other disputing party.

(b) The dispute shall be resolved by confidential arbitration by the arbitrator agreed to by each of the disputing parties or appointed pursuant to paragraph 2(a)(i) above (or if more than one is appointed pursuant to paragraph 2(a)(ii) then as decided by not less than a majority of them) who shall resolve the matter pursuant to the Commercial Arbitration Act of Western Australia and whose decision shall be final and binding on the parties.

(c) The arbitration will take place at a location outside of a Court and chosen to endeavour to maintain confidentiality and mutually agreed to by the disputing parties and failing agreement in Western Australia and the single Arbitrator or the chairman of the Arbitral Tribunal as the case may be will fix the time and place outside of a Court for the purposes of the confidential hearing of such evidence and representations as any of the disputing parties may represent. If any of the parties request wheelchair access, this will be taken into account in the selection of the premises and parking needs. Except as otherwise provided, the decision of the single arbitrator or, if three arbitrators, the decision of any two of them in writing will be binding on the disputing parties both in respect of procedure and the final determination of the issues.

(d) The arbitrators will not be obliged to have regard to any particular information or evidence in reaching his/their determination and in his/their discretion procure and consider such information and evidence and in such form as he/they sees fit;

(e) The award of the arbitrator(s) will be to the extent allowed by law non-appealable, conclusive and binding on the parties and will be specifically enforceable by any Court having jurisdiction.

1. On 19 December 2013 the solicitors for the fourth defendant Hancock Prospecting Pty Limited served on the plaintiffs John Langley Hancock and Bianca Hope Rinehart by their solicitors a notice of dispute invoking the procedures referred to in clause 20 of the Hope Downs Deed. That notice of dispute forms part of a confidential exhibit. For relevant purposes it suffices to record that it is addressed to Mr John Hancock and Ms Bianca Rinehart and given by Hancock Prospecting Pty Ltd, and asserts that disputes have arisen under the Hope Downs Deed and, in particular, that Mr Hancock and Ms Rinehart have made statements or engaged in conduct in breach of certain clauses of that deed, the general effect of which is to release earlier claims and/or promise to refrain from making statements of a certain quality. The notice of dispute does not allege that the bringing of the proceedings pending in this court is a contravention of the deed.

1. By notice of motion filed in court by leave today, Mr Hancock and Ms Rinehart seek orders staying the progress of the arbitration and suspending the operation of various of the arbitration provisions of the deed to which I have referred. In essence, the applicants contend that as the first defendant Mrs Rinehart has indicated that she will resign as trustee of the trust, and as no replacement trustee has yet been appointed, it is inappropriate that she perform the functions of trustee in connection with the arbitration - and, in particular, the appointment of an arbitrator - and that the trust's interests may be jeopardised if no-one performs those functions.

1. Although, in the course of argument, I made the observation that it was difficult to see what the proper object of the arbitration was, the applicants did not advance a case of abuse of process and it would be unfair to decide the application on the basis of abuse of process where there had been no opportunity for the defendants to adduce evidence to meet any such contention.

1. The application is founded primarily on the jurisdiction (in this case, cross vested to this Court) by (WA) Commercial Arbitration Act2012, s 17J which provides as follows:

(1) The Court has the same power of issuing an interim measure in relation to arbitration proceedings as it has in relation to proceedings in courts.

(2) The Court is to exercise the power in accordance with its own procedures taking into account the specific features of a domestic commercial arbitration.

1. For the purpose of that section, "interim measure" is defined in s 17(2) of the same Act in the following terms:

(2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to -

(a) maintain or restore the status quo pending determination of the dispute; or

(b) take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; or

(c) provide a means of preserving assets out of which a subsequent award may be satisfied; or

(d) preserve evidence that may be relevant and material to the resolution of the dispute.

1. It is also relevant to note s 5, which provides as follows:

In matters governed by this Act, no court must intervene except where so provided by this Act.

1. The West Australian Act substantially gives effect to the UNCITRAL Model Law on International Commercial Arbitration as adopted by the United Nations Commission on Trade Law on 21 June 1985 and amended in 2006, so as to be as uniform as possible with the model law.

1. It is said that the relief sought is an "interim measure" within s 17A. Accepting for the sake of present consideration that that is so, in order to gain interlocutory relief an applicant must ordinarily show a seriously arguable case for substantive relief and that the balance of convenience favours the granting over the withholding of the interim relief sought. In the present application, the crux of the applicant's case is that the trustee has a right to be heard in the dispute before the arbitral panel and a right to appoint an arbitrator and that, if the trustee does not appoint an arbitrator, then the nominee of the fourth defendant will, by default, be the arbitrator under clause 20.2(a)(iv).

1. Although there are some minor inconsistencies in the drafting, it seems to me that some features of clause 20 are telling. The initial concept is that the person who must give notice of a dispute is "any party to this deed who has a dispute with any other party to this deed". The next relevant point is that notice must be given to "the other party or parties with whom there is the dispute" and also to "all other parties to this deed".

1. Accordingly, a distinction is recognised between the parties between whom there is a dispute on the one hand, and all other parties to the deed (who nonetheless must still be notified, on the other.

1. Admittedly, the chapeau to clause 20 then appears to require "the parties to this deed" - as distinct from the disputing parties - to attempt to resolve such differences. However, clause 20.1 then proceeds to impose an obligation on "the disputing parties" to resolve the dispute by confidential mediation, and then on "the disputing parties" to attempt to agree on a suitably qualified mediator; that outcomes are not imposed on but must be agreed to by "the disputing parties", and a mediation being abandoned if "the disputing parties" agree or request it.

1. Then clause 20.2 imposes an obligation - not on the parties to the deed generally but on the disputing parties - in the event that the specified arbitrators are unable or unwilling to act, each to nominate one arbitrator. Thus, clause 20.2(a)(ii) provides for one "party to the dispute" to nominate one arbitrator and the other "party to the dispute" to nominate another arbitrator, and the two arbitrators so nominated to select a third arbitrator.

1. Clause 4 operates in the event that "a disputing party" does not nominate an arbitrator. While sub-clause (b) provides that the decision shall be "final and binding on the parties" the intention of this is I think made clear by sub-clause (c) which concludes with a provision that, except as otherwise provided, the decision of the arbitrators "will be binding on the disputing parties".

1. In the context of the notice of dispute, the persons to whom it is addressed and by whom it is given and by whom the respective breaches are alleged to have been committed, it cannot possibly be said that the trustee - past, present or future - is "a disputing party" in respect of this particular dispute. The issue is between one party to the deed - Hancock Prospecting - who alleges that two other parties to the deed Ms Bianca Rinehart and Mr Hancock - have committed breaches of the deed. The trustee is not party to that dispute.

1. It follows that the trustee is not a disputing party, has no right to appoint an arbitrator and no right to be heard in the arbitration. There is not a seriously arguable case that the interests of the trust will be jeopardised by any inability to appoint an arbitrator in the conduct of the pending arbitration because the trust is not entitled to appoint an arbitrator.

1. Having reached that conclusion it is, I think, unnecessary to deal with the other issues or the balance of convenience, but I would observe that I do not consider that the power of the Court to make orders in the nature of interim measures should readily be exercised in a context where it is plain that the primary forum in connection with an arbitration is intended to be the arbitral pane. In any event, in seems to me that the Court could not make orders amending or suspending the operation of the arbitration agreement: it must run its course, although the Court might ultimately be able to decide whether it had run the course validly or not.

1. However, chiefly because it seems to me that there is not a seriously arguable question that the trustee is a disputing party and has a right to appoint an arbitrator, this motion must be dismissed.

1. I order that the motion be dismissed with costs.

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Decision last updated: 01 July 2014