Skycity Darwin Pty Ltd v Groote Eylandt Aboriginal Trust Incorporated (Statutory Manager Appointed)

Skycity Darwin Pty Ltd was the applicant in an appeal against a decision of a Master of the Federal Circuit Court, who had ordered pre-action discovery against the respondent, Groote Eylandt Aboriginal Trust Incorporated (Statutory Manager Appointed), under rule 32.05 of the Federal Circuit and Family Court of Australia Rules 2012. The applicant sought leave to appeal from the Master’s interlocutory judgment, contending that the evidence was insufficient to establish reasonable cause to believe that the requisite knowledge element might be made out for a possible action based on the first limb of Barnes v Addey. The central legal issue before the court was whether the evidence provided a reasonable cause to believe that the applicant may have had the requisite knowledge, which could be established by either wilfully and recklessly failing to make the inquiries that an honest and reasonable person would make or by having knowledge of circumstances which would indicate the facts of the breach of trust to such a person.

The court examined the evidence presented before the Master, which included details of significant dissipation of trust assets, the respondent’s gambling habits at the applicant’s casino, and the respondent’s status as a high-roller gambler. The court noted that the applicant was able to analyse its records to derive the amount of the respondent’s net losses and wins, which provided evidence of the regularity and quantum of losses and could potentially indicate unusual or remarkable gambling patterns. The Master concluded that there was reasonable cause to believe that the applicant may have had the requisite constructive knowledge, drawing a parallel to the case of K & S Corporation Ltd v Sportingbet Australia. The court found that the Master’s decision was interlocutory and pertained to a matter of practice and procedure, and that the applicant had not established that the decision was wrong or attended with sufficient doubt as to warrant leave to appeal.

Consequently, the court dismissed the applicant’s application for leave to appeal, finding no substantial injustice. The court emphasised that it was not determining the merits of the proposed substantive proceedings or the outcome of any potential action between the parties, but rather that the evidence was sufficient to establish reasonable cause to believe that the requisite knowledge might be made out.