BHP Billiton Ltd v Schultz

Decision

The orders which are the subject of the proposed appeal arose from applications made to the Court by way of notice of motion. As will be seen, one of the reasons the Chief Judge gave for awarding indemnity costs against Bianca on the arbitration and stay motions was that she did not seek judicial advice before resisting those motions.
Clearly, not every procedural step which may be taken by a trustee must first be the subject of a separate application for judicial advice. Advice initially given to the trustee to prosecute the proceedings must carry with it some level of authorisation for ancillary steps. Counsel argued that Bianca was entitled to defend the arbitration and stay motions by Mrs Rinehart and HPPL without the need to obtain further advice. But it is not necessary to decide now whether that is correct. Counsel did not extend the argument to an appeal from the Chief Judge's decision. The Court was asked to give judicial advice authorising the appeal proceedings on a stand-alone basis.
I have already referred to the beneficiaries' positions on the proposed appeal. Bianca and John are in favour. After some grumbling about the course Bianca took in opposing the arbitration and stay applications, Hope has gone silent. Ginia neither supports nor opposes the proposed appeal, but says that if it is to take place at all the Trust should be represented by solicitors independent of Bianca.
Bianca (both in the statement of facts and in submissions made on her behalf by counsel) rejects the imposition of such a condition. Bianca's solicitors, Yeldham Price O'Brien Lusk ("YPOL"), acted in the application for judicial advice before Rein J in 2017 and have acted in the corporate governance proceedings since then. Bianca's position is that any change of representation in those proceedings would disadvantage the Trust because of the loss of the knowledge and experience built up by YPOL.
The statement of facts also noted that it would have been obvious to all concerned that YPOL were acting and no point was taken about it until after the Chief Judge delivered her judgment. Nor was the point pursued when judicial advice was obtained from Lindsay J in May this year which enabled Bianca to appeal an earlier judgment of the Chief Judge (that judgment is not relevant for present purposes: it concerned Mrs Rinehart's delivery up of documents dating back to her time as the trustee of the Trust).
The statement of facts (and counsel for Bianca, in their submissions) went on to raise an apprehension that, in taking the position she has taken in this application, Ginia might be doing Mrs Rinehart's bidding. Brereton J recorded in his judgment that Ginia was financially dependent upon her mother and was her chosen successor as the controller of HPPL. The statement of facts recorded that Bianca "continues to be concerned" that Ginia (and Hope, who also apparently reconciled with her mother before Brereton J's judgment) are in league with Mrs Rinehart. The contention was that this affected the extent to which Ginia's and Hope's stated wishes should be taken into account.
But counsel for Ginia rejected this. They pointed out, correctly, that there is no direct evidence of any collusion and the statements by Brereton J now go back more than five years.
Bianca may genuinely believe that it is in the Trust's interests to pursue an appeal against the Chief Judge's decision. But the contrary view, based on the resulting delay and risk of further adverse costs orders, is also open. I am not satisfied that Ginia is acting otherwise than in good faith. It hardly needs to be said that Bianca has no greater interest in the Trust than Ginia does. I see no reason to discount the submissions made on her behalf.
I have summarised the Chief Judge's orders which are the subject of the present application at [19]-[20] above. The substantive orders provided for the claims other than the claim for access to documents under s 247A to be referred for arbitration, and for the s 247A claim to be stayed. I will deal first with the proposed appeal against the substantive orders and return later to the question of costs.
The Chief Judge concluded that all of the claims other than the s 247A claim were arbitrable, and were caught by cl 20 of the Hope Downs Deed. This meant that those claims had to be referred to arbitration; the Court had no discretion in the matter.
While her Honour concluded, with some hesitation, that the s 247A claim was arbitrable, she decided that it was not covered by cl 20. However, her Honour considered that, in the exercise of the Court's discretion, that claim should be stayed. This was because it overlapped with the claims being referred to arbitration, and it was undesirable to have parallel court and arbitration proceedings. Also, and independently, her Honour considered that the s 247A claim was an abuse of process because of inconsistency between that claim and claims being advanced by Bianca in the Federal Court proceedings.
All of these points had been contested by counsel for Bianca at the hearing before the Chief Judge. In the opinion they produced for the purpose of this application counsel contended that her Honour's adverse conclusions on the points were arguably incorrect.
There had been an extensive debate before her Honour about the proper scope of cl 20 of the Hope Downs Deed. The view of the Full Federal Court (upheld in the High Court) was wider than that earlier taken by the Court of Appeal. Her Honour concluded that the Court of Appeal's approach (which would otherwise have been binding on her at first instance) had been impliedly overruled by the High Court. Counsel argued that this was arguably wrong, and the Court of Appeal approach continued to apply. Counsel acknowledged, however, that even on that approach there would still be room to argue about whether cl 20 applied or not.
There was another point about the application of cl 20. Before the Chief Judge it was contended on behalf of Bianca that the clause did not apply to claims made by her in her capacity as a trustee. The Chief Judge did not rule on this one way or another, deciding that it was for the arbitrator to determine. Counsel's opinion contended that this was incorrect. But again counsel acknowledged that if this argument succeeded, so that the reach of the clause had to be determined by the court, that would not be the end of the argument. The court might come to the conclusion that on its true construction the clause did apply to Bianca's trust claims (a view with which the Chief Judge apparently had some sympathy: see [2020] NSWSC 68 at [197]-[199]).
On the s 247A claim, counsel contended that the Chief Judge had arguably been wrong to think that there was an inconsistency in Bianca's position, and wrong in any event to stay the claim. Counsel acknowledged however that her Honour's decision was a discretionary one which made it harder to challenge on appeal.
As this abbreviated description shows, the issues raised in counsel's opinion were extensive and complicated. Before the Chief Judge Mrs Rinehart and HPPL were separately represented and the hearing took place over seven different days. Counsel told me that the hearing would take at least two days. If the appeal failed, the further cost to the Trust (including costs orders in favour of both Mrs Rinehart and HPPL) would be well over $500,000.
I accept that there may be arguable grounds of appeal from the judgment of the Chief Judge. I do not need to decide whether it is necessary to go further and analyse the likelihood of success on those grounds. The problem is whether it is in the interests of the Trust to agitate them in the first place.
The claims against Mrs Rinehart and HPPL may potentially be very valuable to the Trust. But the Chief Judge's decision does not prevent those claims being pursued. It only requires that they be pursued by way of arbitration.
Counsel suggested that there could be "perceived forensic benefits" in pursuing the claims against Mrs Rinehart and HPPL in court rather than by way of arbitration. Counsel did not specify what those benefits might be. I find them hard to see (especially when confining attention to the Trust's interests) and harder still to quantify in financial terms. The result is that they cannot realistically be weighed up against the additional costs which would be incurred as a result of an unsuccessful appeal.
Clearly Mrs Rinehart thinks that her interests would best be served by a private arbitration of the dispute. That does not mean that the Trust's interests will be best served by reflexive opposition to that course.
At first sight, the s 247A application appears to be in a different category. Usually the proper administration of a trust requires access to information about its assets. Counsel submitted that Bianca was plainly justified in maintaining the s 247A claim on appeal, in aid of her rights (and obligations) as trustee of the Trust.
But this point was addressed by the Chief Judge. At [36] she said: [M]y conclusion that Bianca's s 247A application should be stayed is because, as I understand it, the hearing of that application will or is likely to involve a public airing of the matters the subject of the bargained-for confidentiality and, to the extent that the documents sought are relevant to the matters to be referred to arbitration, it will be open to Bianca to seek production of documents in the context of the arbitration. If, however, there are particular, limited categories of documents required by Bianca for the purpose of her administration of the HMH Trust, as its trustee (other than for the purposes of the prosecution of the claims the subject of this proceeding), then it may be that this would not give rise to the same difficulty and hence I do not rule out the possibility of entertaining an isolated s 247A application were that to be unconnected to the disputes the subject of the matters now to be referred to arbitration (and were it unlikely to involve the airing of factual disputes of that kind).
It is clear that the Chief Judge's decision that the s 247A application was an abuse of process focussed on the particular application before the Court. Her Honour concluded that the application was in effect ancillary to the main claims being made in the corporate governance proceedings. The decision does not prevent Bianca from making some other application for documents needed for the ongoing administration of the Trust.
I repeat that Bianca is not merely seeking to place herself in the position of being able to appeal at her own risk; she is seeking the imprimatur of the Court for doing so. That would mean, in all likelihood, that if the appeal fails all the parties' costs will come out of the Trust's assets. I am not satisfied there is sufficient benefit in a successful appeal to justify the delay and the expense if the appeal fails.
In particular, I do not think that the costs (no doubt heavy) incurred as a result of resisting the arbitration and stay applications by Mrs Rinehart and HPPL are themselves a justification for mounting an appeal. The prospects of success are not (and were not claimed by counsel to be) strong enough for that type of argument to come into play.
This conclusion means that there is no basis for challenging the costs orders made by the Chief Judge, so far as they concern the party-party costs of the arbitration and stay applications. Those costs must follow the event.
But her Honour's orders went further than this. She ordered that Bianca pay the costs of the arbitration and stay applications on an indemnity basis, and that those costs be payable forthwith.
As I have mentioned, in deciding to award indemnity costs, her Honour observed that Bianca did not obtain judicial advice before embarking on the course of resisting the arbitration and stay applications. Her Honour made this point at [141].
Counsel for Bianca challenged this aspect of her Honour's reasoning. Among other things, counsel argued that while the failure to obtain judicial advice might be relevant to Bianca's right to indemnity for her costs out of the assets of the Trust, it could not be relevant to the award of party-party costs.
Furthermore, counsel submitted that her Honour's reasoning assumed that the possibility of a stay application being made was not considered by Rein J in giving judicial advice. But there was no evidence on this question before her Honour, because the material before Rein J had been confidential. Counsel submitted that the assumption was unwarranted and this was a further ground for challenging the indemnity costs aspect of the order.
Given that judicial advice was obtained, it is very likely that the party-party costs awarded against Bianca on the application will be the subject of an indemnity from the assets of the Trust. The indemnity costs component is less clear. If Bianca behaved unreasonably in resisting the application, there may be an argument that she should not be protected from the consequences of doing so. Especially is this so if judicial advice was should have been, but was not, obtained.
It is not possible to determine this question in the present application. That would require a factual enquiry into the reasonableness of Bianca's conduct as trustee. It would be necessary to join the affected parties, who are the other beneficiaries of the Trust, so that they could present evidence and make submissions. It seems to me that the proper vehicle for the determination of such an issue would be administration proceedings under Part 54: see, for example, Olsen v James [2020] NSWSC 1015.
I am therefore not in a position to determine in this application whether the Trust will actually be required to bear the indemnity component of the costs awarded by the Chief Judge. But there is at least a risk that it will. It follows that there may be a financial benefit to the Trust from an appeal. Pursuing an appeal on the costs issue would also not result in any relevant delay as it would not interfere with the conduct of the arbitration.
The position is comparable with a case where a claim is made against the trust by a third party which succeeds at first instance and advice is sought about an appeal. As I have indicated above, in such a case I do not think that the appellate nature of the proposed proceedings creates any additional barrier. The question is simply whether the proposed argument is tenable and there is sufficient justification, in the interests of the Trust, for pursuing the appeal.
There are however some complications. I have already mentioned the uncertainty about whether the indemnity component of the costs ordered will come out of the Trust. And her Honour mentioned other factors in support of the indemnity costs award.
Furthermore, I do not know how much the indemnity costs component of the costs order against Bianca is likely to be worth. And the application before me was premised on an appeal on the substantive issues as well as the costs issue. I do not know how lengthy and expensive an appeal limited to the costs point would be.
In the circumstances, I think the best course is to adjourn the application so that Bianca's legal advisers can consider whether to press on with an application for advice, limited to the indemnity costs component of the Chief Judge's orders. If counsel consider that the benefit to be gained and the prospects of success are such as to warrant the cost of an appeal on that point then they can present the supplementary information needed in order to justify that evaluation.
Finally, there are her Honour's orders concerning the payment of costs forthwith. I have not considered this in any detail because it seemed to me unlikely that this issue on its own would justify an appeal. The costs order will carry interest from the date on which it is made (Civil Procedure Act 2005 (NSW), ss 101(4)-(5)) so whether it is immediately enforceable or not is unlikely to make much difference in terms of eventual quantum. But if Bianca's legal advisers consider that there is some issue of principle in her Honour's decision which would justify the inclusion of this point, then they may address that as part of any supplementary application.
These conclusions make it unnecessary, at least for the moment, to deal with the submission by counsel for Ginia that Bianca should be independently represented in any appeal. Nevertheless I will comment on it briefly.
In retrospect it certainly seems unfortunate that YPOL have acted for Bianca both as trustee and in her personal capacity. While one of the reasons Brereton J appointed Bianca was for her to stand up to Mrs Rinehart in the interests of the Trust, that did not require that the Trust's solicitors act for her in her personal capacity as well. The inconsistencies in approach between the different proceedings to which the Chief Judge referred illustrate the problem.
Having said that, the only issue actually raised in these proceedings is whether YPOL should act on the appeal. Given my conclusions, if there is any appeal at all the issues will be very narrow. For the reasons advanced by counsel for Bianca, changing horses at this point might not be in the Trust's interest. The Court might also agree (although this seems to me to be less likely) that any objection has been waived by conduct.
But these are the sort of issues which require proper factual investigation and full argument. They should not be resolved in proceedings of the present type, which are ill-suited to factual debate. If Ginia (or Hope) wishes to pursue the point, I think that, like the question of costs indemnity, it should be pursued in administration proceedings in which all parties may participate in the usual way, and which would enable the whole issue (that is, including whether YPOL should be acting for the Trust at all) to be canvassed.

At a glance

Court

Decision date

Before

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (16)

Cases Cited (24)