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Rinehart v Rinehart

Rinehart v Rinehart

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Case Copied 28 August 2015 67 min read

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Rinehart & Anor v Rinehart & Anor [2015] NSWSC 1201
Hearing dates: 23, 24 June 2015
Decision date: 28 August 2015
Jurisdiction: Equity
Before: White J
Decision:
Refer to paras [110] and [111] of judgment.

Catchwords:
PRACTICE AND PROCEDURE – application for preliminary discovery – plaintiffs are two beneficiaries under a trust – first plaintiff succeeded the first defendant as trustee of the trust – shares held on trust entitled holder to dividends calculated on a certain basis – whether plaintiffs may have claims in respect of underpayment of dividends, inducing breach of contract, breach of trust, knowing involvement in a breach of trust, and breach of director duties – whether plaintiffs would have standing to bring potential claims against the former trustee and a third party – whether information obtained by plaintiffs to date is sufficient for them to decide whether or not to bring proceedings – whether plaintiffs made reasonable enquiries – held that an order for preliminary discovery should be made in respect of most categories sought by the plaintiffs

TRUSTS AND TRUSTEES – parties to suits – current trustee gave an undertaking not to commence proceedings on behalf of the trust – whether proceedings by a beneficiary against a former trustee would be brought on behalf of the trust – whether necessary to show ‘special circumstances’ – whether plaintiffs might be entitled to bring proceedings against a third party – held that the beneficiaries could have standing in their own right to bring proceedings against the former trustee and a third party
CORPORATIONS – constitutions and articles of association – amendment to constitution – doctrine of unanimous assent – whether members may vary the company’s constitution by a course of dealing despite the formal requirements for amendment not being met – whether the Duomatic principle applies to variations of substantive rights – held that the plaintiffs could not rely on the Duomatic principle in support of their claim for preliminary discovery
Legislation Cited: Corporations Act 2001 (Cth)
Evidence Act 1995 (NSW)
Iron Ore (Wittenoom) Agreement Act 1972 (WA)
Iron Ore (Wittenoom) Agreement Amendment Act 1972 (WA)
Cases Cited: Airways Corp of New Zealand v The Present Partners of PricewaterhouseCoopers Legal [2002] NSWSC 521
Alexander v Perpetual Trustees WA Ltd [2004] HCA 7; (2004) 216 CLR 109
Gibbins Investments Pty Ltd v Savage [2011] FCA 527; (2011) 84 ACSR 1
Hancock v Rinehart [2015] NSWSC 646; (2015) 106 ACSR 207
Hatfield v TCN Channel Nine Pty Ltd [2010] NSWCA 69; (2010) 77 NSWLR 506
Hope Rinehart v Rinehart [2015] NSWSC 205
Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432
Lidden v Composite Buyers Ltd (1996) 67 FCR 560
Morton v Nylex Ltd [2007] NSWSC 562
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323
Re Duomatic Ltd [1969] 2 Ch 365
Vermillion Resources Pty Ltd v Gibbins Investments Pty Ltd [2011] FCAFC 149; (2011) 86…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NSWSC 1201
Decision Date: 28 August 2015

CaseChat Overview and Summary

The plaintiffs, two beneficiaries under a trust, brought an application for preliminary discovery against the first defendant, who was the former trustee of the trust. The plaintiffs sought information to determine whether they had potential claims against the former trustee and a third party for underpayment of dividends, inducing breach of contract, breach of trust, knowing involvement in a breach of trust, and breach of director duties. The court was required to determine whether the plaintiffs had standing to bring these potential claims and whether they had made reasonable enquiries to obtain the information they sought.

The court found that the current trustee had given an undertaking not to commence proceedings on behalf of the trust, and that the plaintiffs could have standing in their own right to bring proceedings against the former trustee and a third party. The court also found that the plaintiffs had made reasonable enquiries to obtain the information they sought, and that an order for preliminary discovery should be made in respect of most categories sought by the plaintiffs.

The court held that the plaintiffs could not rely on the Duomatic principle in support of their claim for preliminary discovery, as the doctrine of unanimous assent applied to variations of substantive rights in a company's constitution. The court also found that the members could not vary the company's constitution by a course of dealing despite the formal requirements for amendment not being met.

The court made an order for preliminary discovery in respect of most categories sought by the plaintiffs, and declined to make an order in respect of certain categories of information.

Orders