Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc

Supreme Court of NSW|2021-02-17|Before: Parker J, Adam P

R v Dunbabin; Ex parte Williams (1935) 53 CLR 434 Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441 Re Estate Nitopi, deceased [2018] NSWSC 1560 Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 Woods v Sherriff of Queensland (1895) 6 QLJ 163 Category: Procedural rulings Parties: Motion 21 December 2020 Hancock Prospecting Pty Ltd (First Applicant) Hope Downs Iron Ore Pty Ltd (Second Applicant) Bianca Hope Rinehart (First Respondent/Plaintiff) Georgina Hope Rinehart (Second Respondent) John Langley Hancock (Third Respondent) Hope Rinehart Welker (Fourth Respondent) Ginia Hope Frances Rinehart (Fifth Respondent)

Motion 22 December 2020 Georgina Hope Rinehart (Applicant) Bianca Hope Rinehart (First Respondent/Plaintiff) Hancock Prospecting Pty Ltd (Second Respondent) Hope Downs Iron Ore Pty Ltd (Third Respondent) John Langley Hancock (Fourth Respondent) Hope Rinehart Welker (Fifth Respondent) Ginia Hope Frances Rinehart (Sixth Respondent) Representation: Counsel: Motion 21 December 2020 J Giles SC/ C Colquhoun (Applicants) D Thomas SC/D Hume/A Hammond (First Respondent) CN Bova/TE O'Brien/D Farinah (Second Respondent)

Motion 22 December 2020 CN Bova/TE O'Brien/D Farinah (Applicant) D Thomas SC/D Hume/A Hammond (First Respondent) J Giles SC/ C Colquhoun (Second and Third Respondents)

Solicitors: Motion 21 December 2020 Corrs Chambers Westgarth (Applicants) YPOL Lawyers (First Respondent) Speed and Stracey Lawyers (Second Respondent) Deutsch Miller (Fourth Respondent)

Motion 22 December 2020 Speed and Stracey Lawyers (Applicant) YPOL Lawyers (First Respondent) Corrs Chambers Westgarth (Second and Third Respondents) Deutsch Miller (Fifth Respondent) File Number(s): 2020/142504 Publication restriction: Nil

Judgment

Before the Court are applications to set aside orders I made in these proceedings on 8 December last year. Those orders resulted from an application made following the judgment I delivered on 16 November: Application of Rinehart: 2020/142504 [2020] NSWSC 1624. I will refer to that judgment as "J1".
These proceedings concern the Hope Margaret Hancock Trust ("the Trust"). I set out the background to the proceedings at J1 [5]-[20]. This judgment assumes familiarity with my November judgment. Terms used in that judgment have the same meaning in this judgment.
In my November judgment I referred to earlier proceedings concerning the Trust which resulted in a judgment by Brereton J (as his Honour then was) on 28 May 2015: Hancock v Rinehart [2015] NSWSC 646. His Honour made orders removing Mrs Gina Rinehart as trustee of the Trust and replacing her with one of her four children, Bianca. I will refer to this as the "removal judgment".
The proceedings which resulted in my November judgment were brought by Bianca as plaintiff. She sought judicial advice to the effect that she would be justified in the interests of the Trust in bringing an appeal against orders made by the Chief Judge last February and March: see J1 [19]-[20]. Bianca had been obliged, pursuant to an undertaking which she gave to the Court at the time of her appointment as trustee, to consult the other beneficiaries (her siblings), and to obtain judicial advice, before commencing any legal proceedings on behalf of the Trust.
One issue which emerged with Bianca's application was whether the Court should treat it as an ordinary application for judicial advice in which the Court is asked to give its imprimatur to the expenditure of costs on proposed legal proceedings. I pointed out that ordinarily a trustee is free to litigate at the trustee's own risk as to costs. I suggested that if Bianca was prepared to accept responsibility for the costs of the appeal if it proved unsuccessful, the Court could probably see its way clear to varying the undertaking so as to allow her to proceed: see J1 [117].
As I recorded at J1 [125], counsel for Bianca did not take this suggestion up. Instead I was asked to deal with the application in the usual way, namely by giving advice that Bianca would be justified in pursuing the proposed appeal. If advice in that form had been given, then in the ordinary course the costs incurred by Bianca in the appeal (win, lose or draw) would have been chargeable to the Trust.
I decided to refuse the application. I was not satisfied that there was sufficient financial upside to the Trust to justify the costs risk if the proposed appeal were to prove unsuccessful.
After I handed down my judgment, Bianca's position changed. She decided that she did, after all, wish to pursue the appeal at her own expense. She sought to amend the summons so as to seek orders varying the undertaking.
Although they had not formally been joined as defendants, the other beneficiaries, Bianca's siblings, were advised by Bianca's solicitors of what was proposed. There was no opposition either to the amendment or to the making of the orders.
On 8 December the application came before me and I acceded to it. I made the following orders (which reflected the form of the orders sought by Bianca): 1. The undertaking given by the Plaintiff pursuant to paragraph 1(d) of the orders made by Brereton J on 28 May 2015 be varied to permit the Plaintiff to continue to prosecute the application leave to appeal and an appeal from orders 1, 2 and 3(ii) and (viii) made by Ward CJ in Eq on 14 February 2020 and orders 7 and 9 made by Ward CJ in Eq on 23 March 2020 in proceedings 2017/86718 upon the following conditions: (a) she will personally pay the costs of prosecuting the appeal, subject to any order obtained in accordance with sub-paragraph (d); (b) she will personally be liable for any adverse costs orders made if the appeal proceedings are unsuccessful, subject to any order obtained in accordance with sub-paragraph (d); (c) she will be entitled to personally recover any costs orders made in her favour for costs which she has personally incurred in the prosecution of the appeal proceedings and for which she does not receive an indemnity from the Hope Margaret Hancock Trust; and (d) she will not indemnify herself from the funds of the Hope Margaret Hancock Trust for the costs of prosecuting the appeal proceedings incurred by her personally or for any adverse costs orders made in the appeal proceedings against her without obtaining an order of the Court allowing her to do so.
I did not deliver formal reasons for my decision. This was because, given the beneficiaries' position, I did not think there was any need to do so.
In the course of hearing Bianca's initial application, I had been satisfied that the proposed appeal raised points which were properly arguable. My reason for acceding to the revised application was essentially that, once Bianca agreed to conduct the appeal at her own risk, this changed the balance of advantage so far as the Trust was concerned.
The proceedings which were the subject of the Chief Judge's decision were commenced after advice had been given by the Court that Bianca was justified in bringing them in the interests of the Trust. The decision resulted in a substantial costs order against Bianca. Given the previous advice, it appears likely that Bianca will be entitled to indemnity out of the assets of the Trust. If the appeal succeeds, the costs liability will probably be reduced or disappear entirely. This represents a potential upside to the Trust. On the other hand, if the appeal fails, there will be no further cost to the Trust.
The first application to set my December orders aside comes from Mrs Rinehart. As already noted, Mrs Rinehart was the trustee of the Trust until she was removed pursuant to the judgment of Brereton J in May 2015. She was the first defendant in the removal proceedings.
A second application has been made by Hancock Prospecting Pty Ltd ("HPPL") and Hope Downs Iron Ore Pty Ltd ("HDIO"). HPPL is the holding company for the Hancock family mining business (the "Hancock Group") and the Trust owns 23% of HPPL's shares (see J1 [3]). HDIO is a subsidiary of HPPL. HPPL and HDIO were also parties to the judgment of Brereton J in May 2015. They were joined as defendants in the removal proceedings in circumstances described below.
Mrs Rinehart's notice of motion joins Bianca, Bianca's three siblings (the other beneficiaries) and HPPL and HDIO as respondents. HPPL and HDIO (who have their own representation) have filed a notice of motion which likewise joins the four Rinehart children and Mrs Rinehart as respondents.
I heard the application on 17 February. Mrs Rinehart, HPPL and HDIO, and Bianca were represented by counsel. The remaining Rinehart children played no active part in the applications.
There was a great deal of overlap between the arguments presented in support of Mrs Rinehart's application and the arguments presented in support of the application by HPPL and HDIO. Except where it is necessary to distinguish between the two applications, I will refer to Mrs Rinehart, HPPL and HDIO collectively as "the applicants".

Set-aside applications

The applicants challenged my December orders in two ways. First, they contended for various reasons that the orders were invalid because I had no power to make them. This meant that I should set them aside and dismiss Bianca's application. The second contention was that if I had power to make the orders at all the applicants had been entitled to be heard on whether I should do so. This meant that I should set the orders aside and conduct a fresh hearing of the application at which Mrs Rinehart, HPPL and HDIO would be represented.
On Bianca's behalf the standing of the applicants was challenged. This makes it convenient to consider first the applicants' contention that they were entitled to be heard on the making of the orders. But before doing so I need to refer to the proceedings before Brereton J, and the removal judgment, in more detail.

Removal judgment

The proceedings which resulted in the removal judgment began in September 2011. Initially all four of the Rinehart children were plaintiffs but Hope and Ginia later withdrew, leaving John and Bianca to pursue the case.
John and Bianca sought the removal of Mrs Rinehart as trustee on the ground of various alleged breaches of trust. The gravamen of those alleged breaches was that Mrs Rinehart had used her position as trustee to further her own interests, by allowing the affairs of HPPL to be conducted for her personal benefit.
One of the major ventures of the Hancock Group is an iron ore project called Hope Downs. The Group's interest in the project is held through HDIO. The project is the subject of a joint venture agreement between HDIO and Hamersley WA Pty Ltd ("Hamersley"). The agreement is known as the Hope Downs Joint Venture Agreement ("HDJVA"). The HDJVA gives Hamersley pre-emptive rights over the project in the event that HDIO ceases to be controlled by members of the "Hancock Family Group", which is defined as Mrs Rinehart and her descendants (including spouses of those descendants while married to them).
HDIO and Hamersley entered into the HDJVA in 2006. At around the same time, amendments were made to the constitution of HPPL which had the effect of preventing the transfer of ownership or control of its shares outside the Hancock Family Group.
In August 2013 John and Bianca amended their pleadings so as to add a challenge to the validity of the amendments. This resulted in HPPL and HDIO being joined as additional defendants.
The case had been fixed for hearing in October 2013. Shortly before the hearing, Mrs Rinehart decided not to defend her position as trustee any longer. She indicated that she wished to withdraw as trustee and have the Court appoint a replacement pursuant to s 77 of the Trustees Act 1962 (WA) ("the WA Act"). Many of the issues in the proceedings thus fell away and the hearing was truncated.
One of the matters to be determined was who should replace Mrs Rinehart as trustee. There was some debate about this at the October hearing, but the parties' positions had not crystallised and factual questions emerged which required the production of further documents (see his Honour's interlocutory judgments at [2013] NSWSC 1998 and [2014] NSWSC 658).
The replacement issue was the subject of a three day hearing in June 2014. John and Bianca proposed the appointment of Bianca (assisted by a professional advisory trustee under the WA Act, s 14). On the other hand, Ginia objected to the appointment of Bianca on various grounds and proposed a structure whereby a proprietary company controlled by the four Rinehart children (or such of them who wished to participate) would be appointed as custodial trustee with a professional trustee company as managing trustee (see the WA Act, s 15). Hope did not take a formal position on the issue, but made submissions generally favourable to Ginia's proposal.
Mrs Rinehart did not in the end seek to be heard on the replacement issue. HPPL and HDIO abandoned the objections they had previously made to the appointment of Bianca but made submissions in support of Ginia's proposal.
In the course of recounting the evidence, Brereton J referred to an affidavit sworn by Bianca in October 2013 (at [275]): Bianca has deposed that she would welcome the advice of an advisory trustee, and any assistance that he or she may be able to provide in facilitating cooperation and communication between the beneficiaries; that, where it is appropriate to do so, she intends to seek judicial advice; that she is not aware of any reason why she would not be able to discharge her duties as trustee fairly and independently; and that she understands that the terms of the trust effectively require her to distribute the income and assets of the trust evenly to all four beneficiaries because they each share an equal one quarter interest in the trust. She is prepared to be appointed on whatever conditions the court may consider appropriate, including conditions that would require her to (a) consult regularly with any advisory trustee, including before making any application for judicial advice; (b) consult with the beneficiaries before making any application for judicial advice; (c) disclose to the court in any application for judicial advice the views of the advisory trustee and the beneficiaries; (d) provide regular statements of trust assets and accounts to the beneficiaries; (e) confer with and have regard to the beneficiaries in making decisions that may materially impact the trust; and (f) retain suitably qualified lawyers, accountants and or financial advisors to advise and assist her in managing the affairs of the trust where necessary.
His Honour considered various objections to Ginia's proposal. In particular he concluded that the appointment of a professional trustee company as managing trustee would trigger Hamersley's pre-emptive rights under the HDJVA. He also found that, given her wealth and her track record, Mrs Rinehart was capable of asserting extreme commercial pressure in order to get her way. His Honour questioned whether a professional trustee company would be able to stand up to her.
His Honour then considered the objections which had been made by Ginia to the appointment of Bianca as trustee. His conclusions were (at [313]): The objections that Bianca lacks the requisite judgment, commercial understanding and understanding of trusteeship, and cannot be trusted, to perform the remaining functions of this trustee honestly, diligently and fairly; that she is biased and harbours animus against Ginia; and that she is not committed to the role of trustee, are not sustained. While it is conceivable she that she may spend substantial time out of Australia in the future, that is of very slight significance. While the appointment of Bianca is not without some disadvantages, and it would be preferable, if possible, to appoint an independent trustee rather than a beneficiary, the practical risk of an actual conflict of interest relevant to the discharge of the functions of this trustee is slight, and can be mitigated by the imposition of an appropriate condition requiring consent or judicial advice before selling HPPL shares. It is significant that, although objections were made and pursued on behalf of Ginia, neither Ginia nor Hope has offered any evidence that they hold the view that Bianca would be unable to discharge the duties of trustee, or that they would be unable to communicate and interact with her in connection with the affairs of the Trust, or do not trust her to act in their best interests.
His Honour's summation was (at [336]): While Bianca's appointment is not ideal, in particular because she is a beneficiary, with consequent potential for a conflict of interest and duty, and that she does not have the knowledge and experience of a professional trustee, it is far less unsatisfactory than the alternatives. Her appointment also accords with where the predominant weight of the wishes of the beneficiaries lies. For those reasons, Bianca is better-suited than any of [the proposed professional trustee companies] to administer this trust in the prevailing circumstances. I would have reached this conclusion, even if I had not concluded that the defendants' proposal would trigger Hamersley's pre-emptive rights. However, if Bianca is to be the trustee, the s 14 machinery of an advisory trustee should not be engaged. Ginia (and perhaps Hope) will be more comforted if Bianca is required to obtain judicial advice, rather than the advice of an advisory trustee, in order for her decisions to be protected.
In the end, his Honour made orders appointing Bianca as trustee, upon her giving various specified undertakings to the Court (order 1) and vesting the property of the Trust in her as trustee (order 2). Among the further orders he made were orders dealing specifically with the delivery up of documents (orders 3 and 4).
Orders 1 and 2 are set out in full at J1 [9]. I repeat the relevant undertakings for convenience: not [to] commence or continue proceedings on behalf of the Trust in a court, tribunal or arbitration without the advice of the court, provided that this does not preclude the commencement of proceedings for urgent interim relief; unless [Bianca] is of the opinion that in any particular case it would be contrary to the interests of the trust to do so, [to] consult the beneficiaries before seeking the advice of the court and disclose to the court the views of the beneficiaries when seeking such advice.
Following the delivery of his Honour's judgment on 28 May 2015, a question arose about the effect of order 1. On behalf of Mrs Rinehart it was suggested that the order would not take effect until Bianca formally came back to court and proffered the undertakings. In a supplementary judgment delivered on 18 June ([2015] NSWSC 788) his Honour ruled that the undertakings had already been offered and the effect of the judgment had been to accept them. No further order was therefore required.

Entitlement to be heard on making of December orders

On this part of the case, Mrs Rinehart relied upon the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 36.16(2)(b), which provides: (2) The court may set aside or vary a judgment or order after it has been entered if - (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order
In JPMorgan Chase Bank, National Association v Fletcher (2014) 85 NSWLR 644 the Court of Appeal considered the meaning of the term "party" in this Rule. The Court concluded (at [146]-[147]) that it is not confined to a party on the record. It includes a person who, although not formally joined, was entitled to be heard on the making of the order in question.
HPPL and HDIO did not rely in terms on UCPR, r 36.16(2)(b). But they did contend that they too had been entitled to be heard, and were therefore entitled to have the December orders set aside under rr 36.15 or 36.16(3A) (see [95]-[102] below).
The question is therefore whether the applicants were necessary parties to the application which resulted in the December orders. Before addressing that question, it is necessary to say something about the nature of the application.
In her application, Bianca was invoking the equitable jurisdiction over the administration of trusts. This jurisdiction extends to the supervision and control of the exercise by trustees of their functions. That control may be exercised through an order in the nature of an injunction against the trustee. It is therefore open to the court to accept an undertaking from the trustee in lieu of making an order: see Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 164-165.
The Trust is governed by the law of Western Australia: J1 [113]. This Court is entitled, by cross-vesting, to exercise the equitable jurisdiction of the Supreme Court of Western Australia: Supreme Court Act 1935 (WA), s 16(1)(d)(i); Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 4; Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW), s 9. This Court's own equitable jurisdiction also extends to the administration of trusts governed by foreign law (which, for present purposes, includes the law of Western Australia): see J1 [50].
A defining feature of the equitable jurisdiction over the administration of trusts is that the jurisdiction exists to serve the interests of the trust, and through it, the beneficiaries. Even the giving of judicial advice, the immediate effect of which may be to protect the trustee personally, can ultimately be justified in those terms: see Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [71]-[72] ("Macedonian Orthodox Church"). The critical question is always: what will best serve the interests of the trust in the future?
Historically the jurisdiction was exercised in an administration suit, which could be a cumbersome and expensive procedure: Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441 at [20]. In the nineteenth century there was introduced an alternative summary procedure, described by the High Court as the "originating process" procedure. That is now found, in this State, in UCPR, Pt 54: see Macedonian Orthodox Church at [41]-[42].
UCPR, Pt 54 gives the Court full power to direct and control the administration of the trust through the trustee. As well as orders that the trustee take, or refrain from taking, specified action (r 54.3(3)), the Court can also approve any transaction by the trustee or give directions (r 54.4(4)).
The Pt 54 procedure is a very flexible one. As well as directing and controlling the administration of the trust, the Court can determine the rights of beneficiaries and creditors against the trust estate (r 54.3(2)(b) and (c)). Indeed the Court may determine "any question arising" in the execution of the trust (r 54.3(2)(a)) which makes it possible to use the procedure to decide claims against the trustee for breach of trust, as in Olsen v James [2020] NSWSC 1015; see also r 54.5. The procedure is also available for derivative claims on behalf of the trust against a third party, as in Re Estate Nitopi, deceased [2018] NSWSC 1560.
As I discussed in my November judgment, as a general rule the proper law of a trust governs its administration. But in exercising the Court's administrative jurisdiction over a foreign trust, the Court may exercise powers under local law which do not affect substantive rights, or are "machinery", to use Scott J's term in Chellaram v Chellaram [1985] Ch 409 at 432 (see J1 [67], [97]).
Counsel for Bianca submitted that the source for the Court's power to make the orders on 8 December was s 92 of the WA Act, which provides: (1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee. (2) Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
Section 92 is complemented by s 95: (1) Any trustee acting under any direction of the Court shall be deemed, so far as regards his own responsibility, to have discharged his duty as trustee in the subject-matter of the direction, notwithstanding that the order giving the direction is subsequently invalidated, overruled, set aside or otherwise rendered of no effect, or varied. (2) This section does not indemnify any trustee in respect of any act done in accordance with any direction of the Court if he has been guilty of any fraud or wilful concealment or misrepresentation in obtaining the direction or in acquiescing in the Court making the order giving the direction.
Although it does not bear directly on the issues I have to decide in this judgment, I should note in passing that in my November judgment (J1 [101]) I said that there was no equivalent in the WA Act of s 63(2) of the NSW Act (Trustee Act 1925 (NSW)). In saying this I overlooked s 95, the terms of which are in fact very similar to the terms of s 63(2). This does not however affect the point I was making, which was that the Court should, in the case of a Western Australian trust, exercise its cross-vested Western Australian jurisdiction (see J1 [111]-[113]). That will of course pick up applicable Western Australian legislative provisions which are not merely mechanical in nature.
This brings me back to the submission about s 92. I think it is unnecessary for present purposes to distinguish between that section and the general equitable jurisdiction to supervise the administration of trusts. The nineteenth century procedural reforms which introduced the originating process procedure did not alter or expand the court's equitable jurisdiction over the administration of trusts; they just provided a more flexible and convenient method of exercising it. In my view the power under s 92 to give directions is the same: it is a statutory codification, or supplementation, of the equitable jurisdiction. Whether s 95 has a substantive effect does not arise for consideration.
The Rules of the Supreme Court 1971 (WA) contain, in O 58 Div 2, provisions which parallel the "originating process" procedure in UCPR, Pt 54. But such provisions would appear to be "machinery" in the relevant sense, and thus it is Pt 54 which governs the proceedings.
UCPR, Pt 54 contains no provision specifying the parties to proceedings under that Part. That is left to other, more general, provisions of the Rules.
Where the Pt 54 procedure is used to decide claims for breach of trust, or claims against third parties to recoup monies to the trust, the Court is engaged in a final determination of rights and liabilities which could equally be the subject of ordinary proceedings inter partes. The same is so when the Court uses Pt 54 to determine rights with respect to trust property. In such circumstances, the same parties who would be joined in inter partes litigation need to be made party to the Pt 54 proceedings.
Where the Pt 54 proceedings instead involve an application for an order which is administrative in nature, the provisions of UCPR, Pt 7 Div 3, which deal with the parties to proceedings relating to estates and trusts, apply. All trustees must be made party (r 7.11(2)). Not all beneficiaries need to be made party; the plaintiff may make parties of such of the beneficiaries as the plaintiff sees fit (r 7.12(2)). This is subject to the Court's overriding power to join any party who the Court considers ought to have been joined: r 6.24. Similarly, the provision in s 92(2) of the WA Act concerning service on interested parties (which may be mechanical and therefore not directly applicable to proceedings in this Court) gives the court ultimate control over who has to be joined.
I return now to the applicants' contentions under UCPR, r 36.16(2)(b). Counsel for Mrs Rinehart contended on three separate bases that she was a necessary party to the application which resulted in the December orders: 1. as a party to the proceedings before Brereton J which resulted in the removal judgment; 2. as a respondent to the proposed appeal against the judgment of the Chief Judge; 3. as a party to the arbitration proceedings resulting from the Chief Judge's decision.
Counsel for HPPL and HDIO relied on bases (1) and (2). It seems however that HDIO was not a party to the proceedings before the Chief Judge, and therefore that basis (2) was available to HPPL only. In the end, nothing turns on this.
The principles which govern the identification of necessary parties were stated by the Full Federal Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 523-525. That statement of principle has often been cited as authoritative, including by the High Court: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [131].
The Full Court reviewed the authorities, referring to the test formulated by the Privy Council in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 at 55-56: Will [the prospective party's] rights against, or liabilities to, any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
The Full Court adopted that test. The Court continued (at 525, citation omitted): The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential.
The Court continued (ibid, citation omitted): Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties. Where the question arises after final orders have been made in the proceedings, the inquiry must be directed to the orders actually made, or which, on appeal it is contended should be made.
It was argued for Mrs Rinehart that her status as a party to the removal judgment gave her an automatic right to be heard on any application to vary Bianca's undertakings (assuming, contrary to their contention, that such a variation was permissible). It followed, in counsel's submission, that the application to vary the undertakings should, strictly speaking, have been brought in the removal proceedings, not separate proceedings.
In support of this argument counsel submitted that, because of Mrs Rinehart's status as a party to the removal proceedings, she would have been entitled to be heard on any appeal concerning the terms of the undertaking. Counsel also submitted that she would have been entitled to bring contempt proceedings in the event of any breach of the undertakings.
I find it difficult to accept that all parties to proceedings at first instance must be joined as respondents to the appeal, irrespective of whether there is any challenge to the orders affecting those parties. Counsel did not cite any authority which supported that proposition in terms. The proposition seems to be inconsistent with the last sentence of the passage from News Ltd quoted at [61] above. By the end of the argument counsel appeared to have backed away from the submission.
In support of the submission that, where an order of the Court (or an undertaking) is disobeyed, any party to the proceedings in which the undertaking was given may bring an application for contempt, counsel cited the judgment of the Court of Appeal in Director of Public Prosecutions v Australian Broadcasting Corporation (1987) 7 NSWLR 588. The case concerned the standing of the Commonwealth DPP to bring a contempt application concerning a committal hearing being conducted in a New South Wales magistrate's court with respect to a federal offence. The DPP was alleging that a broadcast had prejudiced the fair hearing of the proceedings.
The Court of Appeal set out a series of propositions which included (at 595): (2) Prima facie any person can bring proceedings for contempt in relation to proceedings in a State Court: R v Dunbabin; Ex parte Williams (1935) 53 CLR 434; European Asian Bank AG v Wentworth (1986) 5 NSWLR 445. (3) In particular any party to litigation may bring proceedings in respect of a contempt alleged to prejudice the due administration of justice in relation to that litigation.
The contempt alleged in the case before the Court of Appeal was an interference in the administration of justice in pending proceedings. The same was so in the cases cited by the Court in support of proposition (2). In R v Dunbabin; Ex parte Williams (1935) 53 CLR 434 the alleged contempt was scandalising the court. In European Asian Bank AG v Wentworth (1986) 5 NSWLR 445 the alleged contempt was assaulting a witness. The terms of proposition (3) were expressly limited to such a case.
The present circumstances are quite different. Counsel's hypothesis involved a contravention of the undertaking by Bianca after (and perhaps long after) it had been accepted. In such a case, no question of protecting the administration of justice in pending proceedings would relevantly arise (there have been further proceedings in this Court concerning the delivery up of trust records of the trust - see Hancock v Rinehart [2020] NSWSC 1853 - but this is a separate issue).
In any event the analogy is not helpful. In fact the rule, as reflected in the Court of Appeal's proposition (2), is that any person, whether a party or not, can bring a contempt application with respect to the protection of the administration of justice in pending proceedings. Whether or not the rule is desirable, it is well established (see Kirby P in European Bank at 459B-460A). But I do not think the rule necessarily applies to an application concerning a "civil" contempt resulting from alleged breach of an undertaking. Even if it does, that would not assist in resolving the issue in the present case.
For these reasons, I am not persuaded that Mrs Rinehart's standing as a party to the removal orders itself gave her an entitlement to be joined in any application to vary the undertaking.
In my view, whether the applicants were entitled to be joined must be determined in accordance with the accepted test, namely whether the orders had a direct effect on them. In answering this question, I will first consider the applicants' respective interests in the removal application, before going on to consider their interests in the application to vary the undertakings.
The WA Act, s 93(1) provides: An order under this Act for the appointment of a new trustee, or concerning any property subject to a trust, may be made on the application of any person beneficially interested in the property, whether under a disability or not, or on the application of any person duly appointed trustee of the property or intended to be so appointed.
This provision of course required Mrs Rinehart to be a party to the removal application (as did UCPR, r 7.11(2)). But I think that applying the Pegang test in the present case requires a distinction between the undertakings accepted by the Court on 28 May 2015, and the removal order made at the same time.
While both the removal order and the undertakings concerned the administration of the trust, each concerned a different facet of that administration. The removal order concerned the identity of the trustee. The undertakings, on the other hand, concerned the way in which the Trust was to be administered by the trustee in the future. Bianca's application did not in any way seek to disturb the removal order. Rather the application was concerned only with the future operation of the undertakings.
At no relevant time has Mrs Rinehart been a beneficiary of the Trust. She did not actually make any submissions about the form of the undertakings. In my view this reflected the fact that her status as outgoing trustee gave her no relevant interest in the ongoing administration of the Trust. That is even clearer now that she is only a former trustee, who has played no role in the administration of the Trust for more than five years.
The conclusion is clearer still for HPPL and HDIO. At the time Mrs Rinehart decided not to defend her position as trustee any longer, HPPL and HDIO had already been joined as parties to the proceedings before Brereton J because of other relief sought in those proceedings. That does not mean that they were entitled to be heard on the removal application.
HDIO was, in a sense, affected by the application because of the possibility that Hamersley's rights of pre-emption might be triggered. But no actual rights of HDIO's were relevantly in issue. Given that Hamersley had not been joined, the Court could not have made, and did not purport to make, any final determination as to the construction of the HDJVA binding as between HDIO and Hamersley.
The potential effect of appointing a new trustee on HDIO's rights under the HDJVA could have been raised by any of the beneficiaries, or by Mrs Rinehart as the outgoing trustee. No doubt it may have been convenient to hear directly from HPPL and HDIO on that question. But I think that, strictly speaking, HPPL and HDIO were not even necessary parties to the removal application. Still less did they have any interest in the particular terms of the undertaking given by Bianca, or the future operation of those undertakings.
I now turn to the second basis on which Mrs Rinehart and HPPL contended that they were necessary parties to the application to vary the undertakings; their interests as respondents to the proposed appeal.
This contention provoked an immediate difficulty. If merely being a proposed respondent (or defendant) to proceedings which a trustee wishes to bring were a recognised interest, the proposed respondent would be entitled to be heard on the trustee's application for judicial advice. Of course that would be absurd in practice and counsel disclaimed any such entitlement. Thus it became necessary to explain why the present circumstances were relevantly different.
As I understood counsel's arguments, they sought to escape from the difficulty by contending that, while they had no right to be heard on the initial judicial advice application, once I refused that application, the refusal operated as some sort of bar to further prosecution of the proposed appeal. The argument was that this gave the applicants an interest which required them to be heard on lifting the "bar". Counsel relied by analogy on three cases.
The first case was Garden Mews - St Leonards Pty Ltd v Butler Pollnow Pty Ltd (No 2) (1984) 9 ACLR 117. In that case receivers had been appointed over the assets of a company. An individual (P) was appointed by the court to exercise any rights of action the company might have had against the receivers. P commenced proceedings, in the company's name, against the receivers. The receivers then applied by notice of motion in the winding up proceedings to set aside the order appointing P.
McLelland J refused the application, but only on the ground that it should have been brought by way of notice of motion in the proceedings in which P had been appointed. His Honour accepted that the receivers would have had standing to challenge the order in those proceedings, even though they had not formally been joined.
The second case was Miltonbrook Pty Ltd v Westbury Holdings Kiama Pty Ltd (2008) 71 NSWLR 262. Miltonbrook granted options over property to a company ("Churnwood") or its nominee. Churnwood was placed into voluntary liquidation and, in the course of the liquidation, nominated Westbury as its nominee. After Churnwood had been deregistered, Westbury purported to exercise the option against Miltonbrook. Later, in order to regularise the position, Westbury successfully applied to have Churnwood's registration reinstated. Miltonbrook was not given notice of the application.
The order for reinstatement was set aside on the ground that Miltonbrook had had an interest in the reinstatement application. Spigelman CJ (at [85] and [100]) characterised the failure to notify Miltonbrook as a "denial of procedural fairness" which entitled it to have the order set aside "as a matter of unconditional right".
The third case was JPMorgan. That case concerned voidable transaction claims under the Corporations Act 2001 (Cth), s 588FF(1). The liquidators of a company successfully applied for an extension, and then a further extension, of the time within which they might bring an application under s 588FF(1). The prospective defendants were not notified of the applications. The Court of Appeal held that they should have been joined and set the orders aside on that ground.
In all of these cases, the absent parties had substantive defences to the proceedings which had been brought, or the prospective proceedings which were to be brought, against them. In Garden Mews, the plaintiff allegedly had no standing. In Miltonbrook, the plaintiff's claim depended, or arguably depended, upon Churnwood having been in legal existence at the time the option was purportedly exercised. In JPMorgan, the prospective defendants had the benefit of a limitation defence.
The present case is different. Had Bianca taken steps to pursue the appeal in defiance of the conclusions I reached in my November judgment, she might have been in contempt, but that would not have affected the validity of those steps. In my opinion, there is no analogy with the cases upon which counsel relied. My decision that I would not give the judicial advice which Bianca was seeking did not give the applicants any substantive defence to the appeal.
Counsel for the applicants submitted that, even so, the undertakings were in fact designed by the Court to protect their interests. I cannot agree. It is true that Brereton J referred to the desirability of avoiding conflicts of interest, and minimising disputation. But in my view he was plainly referring to issues which might arise as between the Rinehart children as beneficiaries.
There is no sign in his Honour's judgment that in considering who was to replace Mrs Rinehart, and the conditions on which that person should be appointed, he was concerned with the forensic interests of adverse parties in future litigation by the new trustee. Indeed, his expressed wish that the new trustee be able to stand up to Mrs Rinehart was quite inconsistent with any such concern.
Counsel for Mrs Rinehart submitted that protection of the defendants from vexatious proceedings (as he characterised the proceedings in this Court which were the subject of the application to the Chief Judge) gave the applicants a legitimate interest in Bianca's application. But I do not accept this.
It is true that the Chief Judge found that there was an element of abuse of process in the proceedings in this Court, in that they overlapped with, and propounded claims which were inconsistent with claims propounded in, other proceedings being conducted by Bianca. But that does not mean that the proposed appeal against the Chief Judge's decision can properly be characterised as being an abuse of process. There is nothing in Bianca's proposed challenge to the Chief Judge's decision which itself involves duplication of, or inconsistency with, the position taken by Bianca in other proceedings.
For these reasons, I think that the applicants' status as respondents to the proposed appeal did not give them a direct interest in the outcome of Bianca's application. Rather, it was a classic case of an indirect or consequential interest, to use the language from News Ltd. The same conclusion follows a fortiori for Mrs Rinehart's status as a party to the arbitration proceedings (basis (3) advanced on her behalf).
Counsel for Bianca suggested that, in fact, the applicants were either aware or ought to have been aware of the application which resulted in the December orders, and had only themselves to blame for not being heard on that application. If established, this would be a matter going to the Court's discretion. As it is, I do not need to deal with the point any further.

Validity of December orders

The applicants relied on three sources of power to challenge the validity of my December orders. The first, and widest, was the power under UCPR, r 36.16(3A) to set aside an order made by the Court as if it had not been entered. Both applications were filed within the fourteen day time limit prescribed by the rule.
The second power was found in UCPR, r 36.15 which allows the Court to set aside an order which has been made "irregularly, illegally or against good faith". The applicants contended that the making of the orders had been irregular in the relevant sense.
The third source of power was said to be the Court's inherent jurisdiction. I am not sure about this.
Prior to the enactment of the modern system of appeals as part of the Judicature reforms, it was possible in equity to obtain the reversal of a decree in some specified categories of case. One was where the decree affected someone who had not been joined. Another was where the decree had been obtained in circumstances of "surprise" involving "underhand dealings": Clone Pty Ltd v Players Pty Ltd (2018) 264 CLR 165 at [54]. In the post-Judicature system there are rules of court which cover such cases (now reflected in UCPR, rr 36.16(2)(b) and 36.15).
Strictly speaking the term "inherent jurisdiction" refers to powers defined by reference to the powers of the superior common law courts at Westminster: DJL v Central Authority (2000) 201 CLR 226 at [25]. In Clone, the High Court described the relevant pre-Judicature jurisdiction as having been an equitable one only. More importantly, UCPR, rr 36.15 and 36.16 arguably codify the Court's powers in this area, so that the pre-Judicature jurisdiction has not survived (just as the pre-Judicature bill of review procedure in equity has not survived: see Clone at [56]). However, it is not necessary, given the views I have formed, to consider this question further in the present judgment.
The applicants contended that the December orders were invalid on various grounds. The first ground was that the undertakings given by Bianca were equivalent to final orders. It was submitted that as such, they could not be varied by the Court. A related submission was that the orders could only be set aside on grounds which would be sufficient to set aside a contract, such as fraud or mistake. Alternatively, it was submitted that the orders could only be altered if there had been a relevant change in circumstances, and no change in circumstances had been demonstrated. Finally, it was submitted that "variation" of an undertaking is not possible and the orders were invalid for this reason also.
UCPR, r 36.15 does not specify who may make an application under it. Nor does UCPR r 36.16(3A). Both rules leave the question of standing to be determined in accordance with the general principles set out in Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493.
I have already concluded that the applicants were not necessary parties to the application which resulted in the orders of 8 December. I think my reasoning equally leads to the conclusion that the applicants lack standing to challenge the orders under UCPR, rr 36.15 and 36.16(3A). The applicants' arguments about the validity of the orders should be rejected for that reason alone. In any event I think the arguments fail on the merits.
Counsel for the applicants relied on what I will refer to as the "functus officio rule". The rule stated by Barwick CJ in Bailey v Marinoff (1971) 125 CLR 529 at 530 in terms which were approved by the full High Court in DJL at [38]: Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance … beyond recall by that court.
Counsel submitted that the functus officio rule applies to final orders but not interlocutory ones. Counsel accepted that it is open to the court, in a proper case, to vary an interlocutory injunction: Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177-178. Accordingly (subject to the technical point about "variation" discussed below) an interlocutory undertaking may be varied. But counsel contended that a "final" undertaking, namely one not expressed to operate until further order of the court, cannot be varied.
In Commonwealth Bank of Australia v The Law on Debenture Trust Corporation PLC [No 4] [2018] WASC 165 Pritchard J (as her Honour then was) was faced with an application to release and discharge an undertaking which had been given in earlier proceedings, fourteen years before. Her Honour's conclusion was (at [85]): There is no doubt that this Court has the power, as part of its jurisdiction to control its own orders, to release a person from an undertaking. That power exists both in respect of undertakings given and received in lieu of the grant of interlocutory relief, and in respect of undertakings given and received in lieu of the grant of final relief.
This conclusion was based on a review of the authorities, in particular the judgment of Griffith CJ, speaking for the Queensland Full Court, in Woods v Sherriff of Queensland (1895) 6 QLJ 163. Her Honour also rejected a submission that, in order to discharge the undertaking, it has to be shown that there has been a material change of circumstances. In her Honour's view, although in practice a change in circumstances is usually required, the authorities showed that the test is a more liberal one, namely whether it is, in all the circumstances, unjust for the undertaking to continue in force (at [111]).
Counsel for the applicants invited me not to follow the judgment of Pritchard J. Counsel relied on the judgment in McPherson SPJ in Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593. His Honour said (at 601): The absence of any such express limitation of the duration of the undertakings means that the Court is without power to discharge or vary the undertakings except in 35 circumstances in which, independently of the order of the Court, the undertakings, or the agreement that gave rise to them, would be discharged or varied without the consent of both parties.
McPherson SPJ's reasoning was (ibid): A Court has no general power to release a party from a contract or to vary its terms. It does not acquire any such power because the parties have elected to incorporate their promises in the form of undertakings tendered to the Court. The principal advantages to the parties in taking that course lie in facilitating proof and enforcement of their agreement. The terms of their promises are formally set out in the public records of the Court and are capable of being summarily enforced by attachment or other process of the Court. In addition, if the order or undertaking is of a character that requires working out, the Court may be applied to for its assistance in elucidating its terms so as to render it efficacious in matters of detail. None of this, however, invests the Court with a power to vary or determine the agreement of the parties.
But subsequently the Queensland Court of Appeal in Alford v Ebbage [2003] 1 Qd R 343 has cast doubt on what his Honour said. The majority view (Fryberg J at [61]; Wilson J at [69]-[70]) was that if there is a binding underlying contract which cannot be varied, that may be a very important factor in the exercise of the court's discretion. But the court always remains in control of its own processes and cannot be deprived of its power in a proper case to vary or discharge its orders. (If there is an underlying contract which is beyond the court's reach, that may also mean that even if the court does vary or discharge the order the contract remains enforceable in some other way: see A-Tech Australia Pty Ltd v Top Pacific Construction Aust Pty Ltd [2019] NSWSC 404 at [43]-[44]).
I do not accept counsel's submissions. In my respectful view, Pritchard J's conclusions are persuasive. As her Honour demonstrated, they are supported not only by Australian authority but also by clear and long-standing statements of principle in England, which have been approved by the United Kingdom Supreme Court (see Birch v Birch [2017] UKSC 53; 1 WLR 2959 at [7]-[11]).
So far I have discussed the issue in terms of ordinary inter partes litigation. But I am actually concerned with the exercise of the Court's jurisdiction over the administration of a trust. Had the Court made orders against Bianca about the way in which the trust was to be administered, the functus officio rule would not have prevented the Court from later varying those orders if it considered that to do so was in the interests of the Trust (note that s 95 of the WA Act expressly contemplates that a direction under s 92 may later be varied). Nor would any question of res judicata have arisen. The modification of undertakings can be in no different position.
For similar reasons this case does not involve a contractual compromise between opposing parties to litigation. If there is any analogy with such a compromise, the "contract" is one between Bianca as trustee and the Court, acting in the interests of the beneficiaries of the Trust. If both "parties" to the "contract" agree, as they in effect have, there can be no objection to varying the undertakings even on McPherson SPJ's reasoning in Fylas.
I think my conclusions are entirely consistent with the approach of Brereton J in his May 2015 judgment. In deciding what to do once Mrs Rinehart no longer wished to continue as trustee, his Honour was required to undertake a balancing exercise which involved (to use his Honour's term) "mitigating" (rather than eliminating) competing risks. There was no perfect solution.
Furthermore, the proceedings against Mrs Rinehart which led to the decision of the Chief Judge and then to the proposed appeal which was the subject of these proceedings lay some years in the future. It would be unreal to suppose that Brereton J would have anticipated the particular conjunction of events which resulted in Bianca's application to vary the undertakings.
In my view it is clear that his Honour cannot have contemplated that the undertaking regime would be fixed for all time. That would have been a denial of the cardinal principle that the court must always exercise its administrative jurisdiction so that the interests of the trust, as they appear at the time the jurisdiction is exercised, are paramount.
This leaves the argument about whether "variation" of an undertaking was possible. Counsel for the applicants relied on the following statement of Morton LJ in Cutler v Wandsworth Stadium Ltd [1945] 1 All ER 103 at 105D-E: … the court does not vary an undertaking given by a litigant. If the litigant has given an undertaking and desires to be released from that undertaking, the application should be an application for release, and an application supported by evidence showing why the litigant should be released from the undertaking which he has given … Litigants are not ordered to give these undertakings; they choose to give them, and an application to have an undertaking already given varied is wholly wrong in form.
In Birch v Birch Lord Wilson JSC said at [5]: An undertaking is a solemn promise which a litigant volunteers to the court. A court has no power to impose any variation of the terms of a voluntary promise. A litigant who wishes to cease to be bound by her (or his) undertaking should apply for "release" from it (or "discharge" of it); and often she will accompany her application for release with an o›er of a further undertaking in different terms. The court may decide to accept the further undertaking and, in the light of it, to grant the application for release. Equally the court may indicate that it will grant the application for release only on condition that she is willing to give a further undertaking or one in terms different from those of a further undertaking currently on offer. In either event the court's power is only to grant or refuse the application for release; and, although exercise of its power may result in something which looks like a variation of an undertaking, it is the product of a different process of reasoning.
Counsel for the applicants emphasised a recent statement of principle by Rees J in In the matter of Jimmy's Recipe Pty Ltd [2020] NSWSC 93. Her Honour said (at [52], citations omitted, emphasis added): An undertaking to the Court is as binding and effective as an order of the Court. It is not necessary to prove that the third and fourth defendants knew they had given the undertakings. The proper procedure for a party bound by an undertaking to vary it is to apply on notice for a release, with evidence justifying the release [referring to Cutler v Wandsworth Stadium Ltd]. There is no need to serve a minute of the undertaking with a penal notice on the party bound.
Her Honour's statement was made in the context of a contempt application. She was concerned to emphasise that once a party is bound by an undertaking, that party's obligation is to comply strictly with it, or if that creates some difficulty, to take action to have the obligation discharged (or modified). She was not dealing with the issue before me.
Counsel for Bianca referred me to authorities which refer to the "variation" of undertakings. I was also referred to In the matter of Colorado Products Pty Ltd [2013] NSWSC 611, where Black J was faced with an application to "vary" asset preservation undertakings previously made. His Honour said at [40]: The plaintiffs submit that the defendants' application to "vary" the undertakings is in improper form, because such an application should be for release from the undertaking, on the terms that a new undertaking would be given: Cutler v Wandsworth Stadium Ltd [1945] 1 All ER 103. I do not accept, as the Plaintiffs contend, that that application may be refused solely on that basis, which would seem to me to be inconsistent with the just, quick and cheap resolution of the matters in dispute for the purposes of s 56 of the Civil Procedure Act. I will proceed on the basis that, in substance, the defendants seek to withdraw their present undertakings and give substitute undertakings, with the only difference between them being that they are permitted to incur reasonable legal expenses up to the amount of $700,000.
I accept of course that where an undertaking has been offered by a litigant and accepted, the court has no unilateral power to alter the terms of that undertaking. But in the present case Bianca herself was seeking the variation. By her counsel she consented to it. In my view, for present purposes there is no meaningful distinction between the consensual discharge of an undertaking and replacement of it by a new undertaking in different terms, on the one hand, and the consensual "variation" of the undertaking, on the other. I reject the applicants' submissions on this point.

Orders

For these reasons, the applications to set aside my December orders fail. There is no reason why costs should not follow the event.
The orders of the Court are: Motion 21 December 2020 1. Order that the motion be dismissed. 2. Order that the applicant pay the respondents' costs of the motion. Motion 22 December 2020 1. Order that the motion be dismissed. 2. Order that the applicants pay the respondents' costs of the motion.

Amendments 13 April 2021 - amendment to legal representative DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 April 2021

(Trustee Act 1925(NSW)

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