Rinehart v Rinehart (No 2)

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FEDERAL COURT OF AUSTRALIA

Rinehart v Rinehart (No 2) [2015] FCA 339

Citation: Rinehart v Rinehart (No 2) [2015] FCA 339
Parties: BIANCA HOPE RINEHART and JOHN LANGLEY HANCOCK v GEORGINA HOPE RINEHART (IN HER PERSONAL CAPACITY, AS TRUSTEE OF THE HOPE MARGARET HANCOCK TRUST AND AS TRUSTEE OF THE HFMF TRUST), HANCOCK PROSPECTING PTY LTD (ACN 008 676 417), HANCOCK MINERALS PTY LTD (ACN 057 326 824), HANCOCK FAMILY MEMORIAL FOUNDATION LTD (ACN 008 499 312), TADEUSZ JOSEF WATROBA, WESTRAINT RESOURCES PTY LTD (ACN 009 083 783), HMHT INVESTMENTS PTY LTD (ACN 070 550 104), 150 INVESTMENTS PTY LTD (ACN 070 550 159), HOPE RINEHART WELKER, GINIA HOPE FRANCES RINEHART, MAX CHRISTOPHER DONNELLY (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF THE LATE LANGLEY GEORGE HANCOCK), HOPE DOWNS IRON ORE PTY LTD (ACN 071 514 308), ROY HILL IRON ORE PTY LTD (ACN 123 722 038), MULGA DOWNS INVESTMENTS PTY LTD (ACN 132 484 050) and MULGA DOWNS IRON ORE PTY LTD (ACN 080 659 150)
File number: NSD 1124 of 2014
Judge: GLEESON J
Date of judgment: 13 April 2015
Catchwords: PRACTICE AND PROCEDURE – application for discovery – application by respondents for proceeding  to be stayed and parties referred to arbitration – identification of issues to be determined on stay application – whether discovery order would facilitate the just resolution of the proceeding as quickly, inexpensively and efficiently as possible – whether discovery necessary for determination of issues in proceeding – whether discovery would deprive respondents of any right to an order that the parties be referred to arbitration – order for discovery made – Federal Court Rules 2011 (Cth), rr 1.32, 20.11 – Commercial Arbitration Act 2010 (NSW), s 8; Commercial Arbitration Act 2012 (WA), s 8
Legislation: Commercial Arbitration Act 2010 (NSW), ss 1(1), 8, 16(1), 17(3)(b)
Commercial Arbitration Act 2012 (WA), ss 1(1), 8, 16(1), 17(3)(b)
Federal Court Rules 2011 (Cth), rr 1.32, 1.34, 20.11, 20.13, 20.15
Cases cited: Alliance Craton Explorer Pty Ltd v Quasar Resources Pty Ltd (No 4) [2013] FCA 1044
Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45
Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45
Construction, Forestry, Mining & Energy Union v Rio Tinto Coal Australia Pty Ltd [2014] FCA 462
Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951
Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Hancock v Rinehart [2013] NSWSC 1352; (2013) 96 ACSR 76
Joint Stock Company “Aeroflot Russian Airlines” v Berezovsky [2013] 2 Lloyd’s Rep 242
Rinehart v Rinehart [2014] FCA 1241
Taylor v Saloniklis [2013] FCA 679
Trade Practices Commission v CC (New South Wales) Pty Ltd (No 4) (1995) 58 FCR 426
Date of hearing: 2 April 2015
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 69
Counsel for the Applicants: Mr CH Withers, Mr AM Hochroth and…
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Details
Case
[2015] FCA 339
Decision Date

CaseChat Overview and Summary

The case of Rinehart v Rinehart (No 2) involved an application for discovery by the applicants against the respondents, who opposed the application. The dispute was a continuation of a long-running conflict between some of the children of GHR and their mother regarding her alleged misconduct in administering a trust of which the children were beneficiaries. The applicants sought discovery of specific documents from the respondents to assist in determining the validity of arbitration agreements. The court had to decide whether the discovery order would facilitate the just resolution of the proceeding quickly, inexpensively, and efficiently, and whether the discovery was necessary for the determination of issues in the proceeding.

The court considered the arguments of both parties and concluded that the discovery was necessary to address the factual issues arising from the terms of the proviso in s 8(1). The court acknowledged that the respondents were likely to have better records of the communications in question. The court emphasised that the discovery should not deprive the respondents of their right to an order that the parties be referred to arbitration. The court also noted that the arbitral tribunal would have the power to determine the applicants' claims about the invalidity of the various arbitration agreements and the agreements in which they are found. The court ordered the respondents to provide verified discovery of specified categories of documents within seven days.

The court's decision was based on the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction. The court also considered the objects of the Commercial Arbitration Acts of New South Wales and Western Australia, which aim to facilitate the just resolution of disputes through arbitration. The court's order for discovery was tailored to the specific circumstances of the case, in line with the principles set out in Taylor v Saloniklis.

Orders

Orders of the court

1. The first and the second, third, fifth, sixth, seventh, twelfth, thirteen and fifteenth respondents (“the HPPL Respondents”) provide verified discovery of the following categories of documents within seven days:

a. Documents created on or before 30 September 2003 recording or referring to any communication to or with the first applicant (“Ms Bianca Rinehart” or “BHR”) or the second applicant (“Mr Hancock” or “JLH”) concerning clause 16.2(a) of the Porteous Settlement Deed (referred to in paragraph 16 of the submissions of the HPPL Respondents dated 23 December 2014), or any draft thereof;

b. Documents created on or before 30 April 2005 recording or referring to any communication to or with Mr Hancock concerning clause 14 of the Deed of Obligation and Release (referred to in paragraph 359 of the Statement of Claim), or any draft thereof;

c. Documents created on or before 31 August 2006 recording or referring to any communication to or with Ms Bianca Rinehart concerning clause 20 of the Hope Downs Deed (referred to in paragraph 275 of the Statement of Claim), or any draft thereof;

d. Documents created on or before 30 April 2007 recording or referring to any communication to or with Ms Bianca Rinehart or Mr Hancock concerning clause 9 of the April 2007 HD Deed (referred to in paragraph 284 of the Statement of Claim), or any draft thereof;

e. Documents created on or before 31 August 2009 recording or referring to any communication to or with Mr Hancock concerning clause 16 of the Deed of Further Settlement dated 10 August 2009, or any draft thereof;

f. Documents created on or before 30 November 2010 recording or referring to any communication to or with Mr Hancock concerning clause 11(ii) of the Deed of Variation dated 18 November 2010, or any draft thereof; and

g. Board minutes of any meeting of the directors of HPPL concerning clause 16.2(a) of the Porteous Settlement Deed, clause 20 of the Hope Downs Deed or clause 9 of the April 2007 HD Deed, or any draft thereof.

2. The parties have liberty to apply on 48 hours’ notice.

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

Background

Background to the litigation

The application for discovery is opposed by the first respondent (“Mrs Rinehart” or “GHR”) and the second, third, fifth, sixth, seventh, twelfth, thirteen and fifteenth respondents (“HPPL respondents”) (collectively “respondents”). Background to discovery application The proceeding was commenced in October 2014 by an originating application and statement of claim. It was described by the previous docket judge as “the latest iteration of a bitter and long running dispute between some of the children of GHR and their mother as to GHR’s alleged misconduct in her administration of a trust of which the children are beneficiaries”: Rinehart v Rinehart [2014] FCA 1241 at [2]. In that judgment, his Honour summarised the statement of claim as follows:32. ….It is 95 pages long and is accompanied by a “confidential addendum” of a further six pages.33. The allegations in the Statement of Claim are similar to those which were made in the claims in Rinehart v Welker [[2011] NSWCA 403]. There are allegations of serious breaches of fiduciary duty by GHR in her capacity as trustee. The breaches date back to 1992. HPPL, as the main company in the HPPL Group, is said to have knowingly assisted in the breaches.34. The differences between the earlier proceeding and the present may be stated briefly.35. The principal difference is that the allegations of breach of fiduciary duty are said to found proprietary rights in equity. Declarations of trust and an account of profits are sought.36. Another significant difference is the approach taken by GHR and JLH to the effect of a Settlement Deed entered into between the parties in August 2006 known as the Hope Downs Deed.37. In the earlier proceeding no challenge was made to the validity of the Hope Downs Deed which contained releases of claims against GHR to certain companies in the HPPL Group as well as an agreement to refer disputes “under this deed” to confidential arbitration. The question which arose in the earlier proceeding was whether the claims then made were a dispute under the Deed: see Rinehart v Welker [2012] NSWCA 95.38. In the present proceeding GHR and JLH seek to set aside the Hope Downs Deed and the Arbitration Agreement in that Deed by reason of, inter alia, misleading conduct on the part of GHR and officers of HPPL. They also seek to set aside a number of other settlement deeds entered into between 2005 and 2008, including the arbitration agreements in those deeds.39. Allegations of concealment of the causes of action are made in relation to the claims to set aside the Hope Downs Deed and the other settlement deeds.40. A further difference is the way in which the claims made by GHR and JLH are formulated. The new formulations of the claims include pleading the causes of action as claims for unconscionable conduct and a novel claim described as the tort of collateral abuse of process.41. The confidential addendum to the Statement of Claim deals with communications between certain parties to the proceedings in relation to arbitrations that are on foot and the status of those arbitrations.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; (2006) 157 FCR 45, Allsop J observed (at [216]) that, if the claim for nullity or voidness is properly directed to the arbitration clause itself, the need for the court to deal with the issue can be readily appreciated even accepting the doctrine of separability. I am not presently in a position to determine whether the Court will be required to decide if the proviso in s 8(1) is engaged. I accept the submission on behalf of the applicants that this is a case in which the respondents are likely to have documents of the kind in question, and are likely to have kept better records that the respondents. In those circumstances, I am satisfied that discovery is necessary in relation to the factual issues arising from the terms of the s 8(1) proviso, and that it is appropriate in the interests of justice.Conclusions about categories of documents sought by the applicants from Mrs Rinehart and the HPPL respondentsCategories 1 to 6: documents concerning allegation that arbitration agreements are “null and void, inoperative or incapable of being performed”1A copy of any document created on or before 30 September 2003 recording or referring to any communication to or with BHR or JLH which refers to the Porteous Settlement Deed or any term of the Porteous Settlement Deed.2A copy of any document created on or before 30 April 2005 recording or referring to any communication to or with JLH which refers to the Deed of Obligation and Release or the Deed of Loan or any term of the Deed of Obligation and Release or the Deed of Loan.3A copy of any document created on or before 31 August 2006 recording or referring to any communication to or with BHR which refers to the Hope Downs Deed or any term of the Hope Downs Deed.4A copy of any document created on or before 30 April 2007 recording or referring to any communication to or with BHR or JLH which refers to the Hope Downs Deed, the CS Deed or the April 2007 HD Deed, or any term of the Hope Downs Deed, the CS Deed or the April 2007 HD Deed.5A copy of any document created on or before 31 August 2009 recording or referring to any communication to or with JLH which refers to the 2009 Deed or any term of the 2009 Deed.6A copy of any document created on or before 30 November 2010 recording or referring to any communication to or with JLH which refers to the 2010 Deed or any term of the 2010 Deed. For the reasons given above, I am persuaded that the respondents should be ordered to give discovery of these documents to the extent that they refer to the alleged arbitration agreements.Categories 7 and 8: the Constructive Trust claim7.A copy of any initiating process, defence or pleading filed or served in the Constructive Trust Claim or any other document by which the Constructive Trust Claim was made or asserted.8A copy of any minutes of a board meeting of the fourth respondent or the sixth respondent recording a resolution not to contest the Constructive Trust Claim, or any document constituting such a resolution.

Ratio Decidendi

Legal Principle Established

Even if the Court is persuaded to make an order for discovery, the Court will fashion the order to suit the particular circumstances of the case: Taylor v Saloniklis [2013] FCA 679 at [7]. Consideration In my view, the applicants should be afforded discovery if that will facilitate the just resolution of the stay applications subject to the other considerations mentioned in rule 20.11. However, as far as possible, that process should not deprive the respondents of any right that they may have to an order that the parties be referred to arbitration. Discovery, by its nature, is a process that will tend to defeat any such right and, to the extent that the WA Act or the NSW Act applies in this case, the objects of those Acts. I accept the submission that, if the parties are referred to arbitration, the arbitral tribunal will have the power to determine the applicants’ claims about the invalidity of the various arbitration agreements and about the invalidity of the agreements in which they are found: s 16(1). I also accept that the arbitral tribunal will have the power to order discovery: s 17(3)(b). However, a referral to arbitration will itself defeat the asserted right of the applicants to have their claims determined by this Court. In this regard, I do not accept the contention on behalf of Mrs Rinehart that the Court and an arbitrator are “perfectly adequate fora” for all parties. I accept the general proposition put on behalf of the respondents that an application to stay proceedings in favour of an arbitration agreement should not involve the final determination of the underlying factual and legal issues between the parties, except in so far as that is necessary to determine the respondents’ entitlement to the stay. Any discovery is unlikely to facilitate the just resolution of the stay proceedings “as quickly, inexpensively and efficiently as possible” if it is directed towards the final determination of factual issues that are not required to be determined on the stay applications. I also accept the submission made on behalf of Mrs Rinehart that the applicants’ failure to offer mutual discovery is relevant to the exercise of the Court’s discretion to order discovery, because it is unclear whether any requirement that the applicants give discovery consequent to a discovery order in their favour will delay the proceedings.The applicants’ grounds for seeking discoveryConstruction of agreements relied upon by the respondents The applicants refer to the statement of Dixon CJ, Fullagar, Kitto and Taylor JJ in Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 at 129 to 130 that “equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor”.