Rinehart v Rinehart

Court of Appeal (NSW)|2020-07-24|Before: Basten JA, Macfarlan JA, Meagher JA, Ward CJ

Background to the present appeal proceedings

The Trust was created by a deed of settlement made on 27 December 1988, and amended on 24 August 1995, by the late Langley George Hancock, Gina's father. Gina became the trustee of the Trust on Mr Hancock's death in March 1992. Gina's children are beneficiaries of the Trust and parties to the substantive proceedings in the court below. They include Mr John Hancock and Bianca, who are the plaintiffs below, and Ms Ginia Rinehart and Ms Hope Rinehart Welker, who were originally plaintiffs but are now defendants below.

Ward CJ in Eq's Orders

The next presently relevant step is that on 12 April 2019 Gina filed a Notice of Motion seeking detailed orders concerning her obligations to comply, and the means by which she should comply, with Brereton J's 2015 and 2018 orders, including, in its subsequently amended form, the following proposed order: "…that the first defendant [Gina] is to be indemnified from the Trust in respect of her compliance with the orders made by Brereton J on 28 May 2015, the 2018 Orders and these orders, for all costs reasonably incurred from the date of these orders." ("Proposed Order 6")
After the hearing of this and other Notices of Motion, on 25 October 2019 Ward CJ in Eq delivered a judgment of some 130 pages dealing with the multiple issues raised before her ([2019] NSWSC 1451). Included in her Honour's orders was the following order, which is one of the two subjects of the present appeal proceedings: "11. Order (subject to any further order of the Court) that the first defendant be indemnified from the HMH Trust in respect of the reasonable costs incurred from today's date by her compliance with Orders 2 and 3 of the 2018 Orders and otherwise in relation to the production of documents of the HMH Trust." (Emphasis added) ("Order 11")
Her Honour commented as follows on the time and cost involved in the production of documents to Bianca as the new trustee: "Another notable feature of the present applications is the extraordinary time and cost that it is now estimated will be required for the process of production of the documents to be undertaken if there is no modification of, or dispensation from, the orders as they presently stand (although for the plaintiffs' part they do not accept that those estimates are reliable indications of the time and cost that would necessarily be involved in the review process and are critical of some of the assumptions there involved)..." (at [32]).
By way of illustration of what her Honour was referring to, I note that later in her judgment her Honour referred as follows to the documents falling within the category of "personal correspondence with children": "[257] As to the second category of documents the subject of the proposed relief, it is said that there are approximately 47 archive boxes of documents (188 level-arch folders) constituting personal correspondence between Gina and her children between 1992 to 2015, and there are approximately 200,000 emails in Gina's 'mailbox' for the period 2011 to May 2015. It is said that these documents are largely personal in nature, and private, containing matters such as intimate family photographs."
Her Honour then referred to an estimate by Gina's solicitor that "reviewing all of these [category 2] documents would take four to six months and would cost between $600,000 to $900,000 …" (at [259]).
As to the category of documents "used" by Gina in the administration of the Trust which were received or held by her in some other capacity, the estimates given were of a cost of about $10 million and a period required of four years (Judgment at [235] and affidavit of H R Scott of 18 April 2019 at [25]).
Her Honour indicated at [255] that what she had in mind in respect of the production of documents that had been used in the administration of the Trust was an iterative process of identification and review of documents with further consideration to be given as the process progressed.
In relation to Gina's Proposed Order 6 seeking indemnity for her costs, her Honour referred at length to the parties' submissions, which included detailed submissions as to the circumstances in which a trustee's right of indemnity is available (at [305]-[350]).
Her Honour's principal reasons for concluding that Order 11 as quoted in [25] above should be made to give effect to Gina's Proposed Order 6 included the following: "[354] As to the proposition that Gina is disentitled to an indemnity in respect of the costs of production of the HMH Trust documents because of misconduct on her part, the circumstances in which she retired as trustee and the history of the litigation before Brereton J do not in my opinion inform the question as to whether she is entitled to an indemnity for the costs of future production. Costs of the delivery up of the trust documents are not costs that arise from any breach of duty by Gina as trustee in relation to contentious matters such as the vesting of the trust; nor am I persuaded that there should be any finding at this stage as to any breach of duty in the manner in which the trust documents were stored or filed. If, in due course, allegations of breach of trust in that regard are made and substantiated, then steps may be taken in relation to the recovery of any amounts now paid for the costs of production of documents established to have been caused by that breach of trust. (In this regard, I note that Gina submits that insofar as she is now only seeking indemnity for the future expense of complying with the 2015 Orders and 2018 Orders, it can safely be assumed that the past costs which will be borne by her personally account for any inefficiencies encountered by the intermingling of records.) [355] What is clear is that costs (and it would seem significant costs) will likely be incurred in production of the HMH Trust documents. In accordance with the principle in In re Grimthorpe [[1958] Ch 615], a trustee (by now, admittedly a former trustee) should not be required in the first instance to incur those costs and then seek later to recoup those costs out of the trust assets; rather, she should be indemnified now for those costs (subject to the possibility that in due course if it be found that the costs arose out of a breach of trust disentitling her to such an indemnity then she may be required to reimburse those costs). [356] As to the submissions for the plaintiffs that an order of this kind would visit unfairness on them, it should be noted that in a number of respects the need for such significant costs to be incurred arises from the insistence of Bianca (as she is, as trustee, entitled to insist upon) on the complete production of an enormous amount of documentation. Insistence upon the complete production of all personal communications between Gina and her children, to the extent those fall within the definition of "Trust documents", is but one example. Bianca's position is that Gina is required by the 2015 Orders, as clarified by the 2018 Orders, to produce all trust documents and that (given the information asymmetry, among other things) she cannot fairly be asked to comment on the adequacy of the categories of documents required to be reviewed for the purpose of compliance with those orders. As I have said earlier, so be it. However, it seems to me to be inconsistent with authority and principle to require Gina to bear the cost of such an exercise at least in the first instance, and the making of such an order does not preclude Bianca from making submissions in due course to vary such an order." (Emphasis added.)
The course her Honour took of not finally determining the indemnity issue was consistent with an exchange that her Honour had with counsel for Bianca in the course of the hearing. Counsel said that if his client needed a finding that Gina was a defaulting trustee to make good his proposition that she was not entitled to an indemnity for her costs of producing trust documents that "it may be that Brereton J has to decide that". Her Honour responded that "I would have thought your stronger argument on this issue was that one shouldn't determine it at this stage". Counsel accepted that proposition by saying "I will just run with that then, your Honour" (Tcpt, 26 June 2019, p 57(15)).
After directions hearings on 14 November and 5 December 2019 at which the parties presented to her Honour competing forms of short minutes of order, her Honour made orders on 5 December that largely reflected those in short minutes proffered by Gina on 4 December 2019. Those orders provided for the adoption of a regime to facilitate production of documents in the categories that Brereton J had identified (namely, third party documents, communications with beneficiaries, historical trust documents, and dividends and the constitution of HPPL). The regime required the parties to adopt a similar cooperative process in respect of each category. By way of example, in respect of third party documents, the regime essentially involved the following: 1. Gina to inform Bianca of the third parties from whom Gina has requested documents and the volume of documents received. 2. Gina to give Bianca an estimate of the costs likely to be incurred to review the documents and the time required to complete the review. 3. Subject to order 14 concerning indemnification, Gina to complete her review and provide the documents to Bianca.
Order 14, which together with Order 11 made on 25 October 2019, is the subject of the present appeal proceedings, was headed "Indemnification" and was as follows: "14. Subject to further order, pursuant to Order 11 of the orders made on 25 October 2019, Bianca is to deposit into the trust account of Gina's solicitors such amounts as may be requested to meet the reasonable costs to be incurred to comply with [the production orders just referred to]." (Emphasis added) ("Order 14")
Her Honour granted liberty to apply in respect of any issues arising out of implementation of the regime set out in Orders 1 to 15 and fixed the proceedings for further directions on 19 March 2020.
The words "Subject to further order" in Order 14 did not appear in the short minutes of order proffered by Gina to the Court. They were included in the orders in consequence of the following exchange between her Honour and counsel for Bianca, Mr Hochroth: "HOCHROTH: ... In relation to indemnification, could I just ask this? Your Honour will make the order today, I accept that. HER HONOUR: Subject to further order? HOCHROTH: Subject to further order. HER HONOUR: I was contemplating saying that, so-- HOCHROTH: I just may want an opportunity to argue it fully on the authorities on another occasion. HER HONOUR: In 14 - Mr Bova [counsel for Gina], I don't think this prejudices you - I'll just say "subject to further order". Then that means that if Mr Hochroth wants to have an argument about this, we can deal with it not at a directions hearing and when we've got more time to deal with it. HOCHROTH: Yes. BOVA: Yes."

The appeal and the application for leave to appeal

In her "Applicant's Outline of Submissions" filed in this Court in support of both her purported appeal and her application for leave to appeal, Bianca identified (at [4]) the following questions as being involved in her application (and it follows, in her intended appeal): "(i) in what circumstances is a trustee disentitled from an indemnity for costs incurred in performing trust duties; (ii) is Gina disentitled from an indemnity because the cause of the costs was her own decision to resign in the face of allegations of serious misconduct, and her recognition that the application to remove her would succeed; (iii) is Gina disentitled from an indemnity because she intermingled trust documents, has not yet remedied that breach and wants advance payment for the cost of disaggregation; (iv) does a trustee have an indemnity for contingent liabilities; (v) ought Ward CJ in Eq have made a declaration as to a future state of affairs, the effect of which was to place on Bianca the onus of establishing that there was not a right of indemnity in respect of particular costs incurred by Gina; (vi) ought Ward CJ in Eq have enjoined the Trust to provide pre-payment to Gina for costs yet to be incurred; and (vii) is a former trustee entitled to an indemnity at all and, if so, is the former trustee entitled to an indemnity for costs incurred exclusively after ceasing in the office?"
None of these questions (except perhaps (v) and (vi) concerning timing) is however necessarily involved in Bianca's appeal proceedings because the primary judge did not make any final order that Gina was entitled to indemnity from the Trust in respect of her costs of production of the relevant documents. This is abundantly clear from the qualifications to Order 11 made on 25 October 2019 and Order 14 made on 5 December 2019 (see [25] and [35] above). Those orders, which are the subject of these appeal proceedings, are expressly stated to be subject to any further order.
That her Honour intended the orders to be interim, rather than final, is evident from the terms of her Honour's judgment of 25 October 2019. Although her Honour expressed an unqualified opinion as to whether the circumstances in which Gina retired as trustee and the history of the litigation before Brereton J disentitled her to an indemnity for production costs (at [354]), she expressly refrained from forming any final view as to whether Gina was alternatively disentitled by reason of the manner in which Gina had stored or filed the documents. In this context, her Honour expressly stated that she was not persuaded that "there should be any finding at this stage" (emphasis added). She then referred to the possibility that breach of duty allegations might be established "in due course" and that they might then impact on Gina's right to indemnity. Again, in [355] quoted in [32] above, her Honour referred to the possibility of a disentitling breach of trust being established "in due course" and of Gina then being required to reimburse costs paid to her by Bianca. Her Honour's conclusion on this issue in [356] stated: "it seems to me to be inconsistent with authority and principle to require Gina to bear the cost of such an exercise at least in the first instance, and the making of such an order does not preclude Bianca from making submissions in due course to vary such an order."
Similarly, her Honour's reason, as it appears from the transcript of 5 December 2019, for including the words "subject to further order" in Order 14 made that day was to the same effect: the issues raised by Bianca concerning Gina's right of indemnity should not be resolved at a directions hearing (such as that in which her Honour was engaged) but on another occasion when her Honour had time to deal with them (see [37] above).
Although in some circumstances the distinction between final and interlocutory orders is problematic (see for example Klewer v Attorney General (NSW) [2010] NSWCA 219 at [13]-[22]), the primary judge here made clear that she was not intending to finally determine the indemnity issue raised before her. As a result, her orders were interlocutory.
My conclusion that Orders 11 and 14 made on 25 October and 5 December 2019 respectively were not final orders largely, if not wholly, puts paid to Bianca's present appeal proceedings. As Bianca does not seek to challenge any final order she has no right of appeal (s 101(2)(e) of the Supreme Court Act 1970 (NSW)). Moreover, because the primary judge did not finally determine Gina's entitlement to indemnity, leave to appeal should prima facie be refused as there would be no utility in this Court determining the issues of fact and law sought to be agitated by Bianca (see the statement of "Questions Involved" quoted in paragraph [35] above) in the absence of a full and final consideration of them in the Court below. As her Honour's orders were not final, her Honour's expression of an unqualified opinion on the question referred to in the second sentence of [40] above does not require a different conclusion, as it will be open to challenge in due course at the further hearing that her Honour contemplated Bianca might seek.
Nevertheless there remains also to be addressed Bianca's contention that leave to appeal should be granted because the primary judge did not have power to order Bianca to indemnify Gina on an interim basis in respect of her costs of production of trust documents.
First, it should be noted that this was not however the effect of her Honour's orders. Their effect, when taken together, was to order production by Gina only to the extent that Bianca paid the costs of production. It was, and is, open to Bianca to refrain from pressing for production of particular documents or classes of documents in the event that she does not consider that any advantage in her obtaining production outweighs the relevant costs.
Secondly, her Honour's adoption of the production regime implicitly recognised the possibility that Bianca's "adamant position that Gina is to be held [to] compliance with the 2018 Orders without dispensation or variation (other than in minor respects)" (at [61]) might become unreasonable unless tempered by the prospect of at least initially having to pay the costs of production. Her Honour's exercise of discretion to make the orders under challenge was informed by her view that it was not unreasonable, in the circumstances revealed by the evidence before her, that "the incoming trustee's insistence on complete production should be coupled with an indemnity in respect of those costs" (at [62]).
The challenged orders were steps properly made by the primary judge as part of the working out of the orders for production of broad categories of documents. The generality of the orders made by Brereton J by his Trust Documents Judgment left considerable room for doubt and dispute as to precisely what documents, including documents that were not then in Gina's possession, needed to be provided by Gina to Bianca. At the instance of the parties, the Court was entitled to establish a means by which those documents might be identified and produced, and the unnecessary production of irrelevant documents avoided. In doing this, her Honour had to balance competing considerations: on the one hand Bianca contended that Gina was bound to provide the documents to her without payment to Gina of the costs and, on the other hand, Gina contended that she was entitled to her reasonable costs of producing the documents to Bianca. Who was correct would at least in part, if not wholly, depend on the merits and relevance of Bianca's arguments that Gina breached her duties as trustee in a variety of ways. The issues that these arguments raised would inevitably have to be determined at a final hearing and not on a directions hearing such as that of 5 December 2019. In the meantime, production of documents by Gina to Bianca needed to be regulated because the documents to be produced would themselves be likely to have considerable relevance to the ultimate determination of the issues. That is, the documents would be likely to play a significant, and perhaps decisive, role in revealing whether, and if so the extent to which, Gina breached her duties. Production of the documents could not therefore reasonably be deferred until after final determination of the indemnity issue.
Her Honour made orders to facilitate the production of documents to Bianca but in light of the breadth of the documents sought and Bianca's relevantly unqualified insistence on complete production, her Honour did so on terms that were likely to be conducive to a sensible and cooperative approach by and between the parties. This gave effect to the Court's duty under s 56 of the Civil Procedure Act 2005 (NSW) to advance "the just, quick and cheap resolution of the real issues in the proceedings".
The regime adopted was well within her Honour's powers as to the working out of orders earlier made and to make interlocutory and case management orders for the purpose of bringing proceedings to a final resolution. In any event, as the proceedings concerned the appointment of a new trustee of a trust and the consequences, including as to the delivery up of trust documents and indemnification of the previous trustee, that should flow from that, the broad powers conferred by Uniform Civil Procedure Rules 2005 (NSW) r 54.3(3) and (4) in relation to the execution of trusts were applicable. In particular r 54.3(3)(d), which permits a court to order a trustee "to do or abstain from doing any act".
On the question of her Honour's powers, Bianca relied on Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [15]-[19] and [88] for the proposition that interlocutory injunctive relief cannot be granted in the absence of an underlying cause of action (see also Glencore International AG v Federal Commissioner of Taxation (2019) 265 CLR 646; [2019] HCA 26 at [8], [12]; Smethurst v Commissioner of Police (Cth) [2020] HCA 14; (2020) 94 ALJR 502 at [77], [85]). That decision is however of no assistance to her as here Bianca sought to exercise her right as trustee to obtain trust documents from a previous trustee in circumstances where the identity and extent of the documents the subject of the right was a matter of doubt and dispute, and her opponent, Gina, sought to rely on an arguably applicable right of a former trustee to be indemnified for the costs of production of trust documents to the new trustee. There were thus competing claims to rights recognised by law and her Honour was entitled to make interlocutory orders which would facilitate the Court's ultimate determination of the opposing claims.
Bianca also relied upon Phillips v Walsh (1990) 20 NSWLR 206 at 209-210 to support a submission that the challenged orders did not involve any "working out" of the final orders made by Brereton J. For the reasons already given they did however do this, as his Honour's general order for Gina to provide trust documents to Bianca required specific orders to be made to enable its full and proper implementation (see ibid at 210).
Bianca also contended that the primary judge's orders could not be characterised as a case management regime because they required the transfer of property from a trust. As I have however indicated, the effect of the orders when read together was not to require Bianca to pay for the costs of production. Rather, her entitlement to production of the documents in advance of a final hearing was made conditional on payment of the production costs pending any application she might subsequently make for reimbursement.

Conclusion

As earlier indicated, Bianca has no right of appeal against the challenged orders as they are not final. Her purported appeal should therefore be dismissed as incompetent.
So far as her application for leave to appeal is concerned, as again earlier indicated, the issues of principle which she identifies would in large measure not in fact necessarily arise on any appeal that would follow a grant of leave and any consideration of them by this Court should await final determination of them at first instance. Moreover, Bianca has not established that the challenged orders have caused her any injustice or that she otherwise has an arguable case to challenge them on appeal.
Bianca has a number of different courses of action open to her, including the following: 1. If she considers on good grounds that any estimate of production costs given to her by Gina is excessive, she can approach the primary judge for a further order or direction to overcome that difficulty. 2. If she does not consider that information given to her by Gina in respect of documents to be produced is accurate and sufficient, she can also approach the primary judge pursuant to the liberty granted to apply. 3. If, after receiving from Gina information about relevant documents and an estimate of the costs of production, Bianca does not wish to press for production of some or all of the documents, it is open to her not to do so, and thereby avoid payment of the production costs.
For the reasons above, I propose the following orders: 1. Notice of Appeal filed on 19 December 2019 dismissed. 2. Summons seeking leave to appeal filed on 1 May 2020 dismissed. 3. Order Bianca Rinehart to pay Gina Rinehart's costs of these appeal proceedings.
MEAGHER JA: I also agree with Macfarlan JA that Bianca Rinehart's challenge to the orders made by Ward CJ in Eq in October and December 2019 should be dismissed. They were not final orders; and as interlocutory orders directed to the implementation of earlier orders made by Brereton J (as his Honour then was) for delivery up of documents of the Hope Margaret Hancock Trust, it is not suggested that they are likely to work any substantial injustice as between the parties, and no sufficiently arguable error of principle is apparent. My reasons for those conclusions follow. They adopt the abbreviations used by Macfarlan JA.

The parties and the proceedings for Gina's removal as trustee

At least for presently relevant purposes, this dispute has its origins in the proceedings before Brereton J in which Bianca and her brother, John Hancock, sought Gina's removal as trustee of the Trust, "essentially" for misconduct related to her attempt to extend the vesting date of the Trust: Hancock v Rinehart [2015] NSWSC 646 (the 2015 Judgment) at [38]. On 1 October 2013, one week before the hearing was set to commence, Gina announced that she desired to step down and consented to the appointment of a new trustee.
Bianca and Gina, the applicant and first respondent, are the present and former trustees of the Trust. The principal and only significant asset of the Trust is a shareholding of approximately 24% in the second respondent, Hancock Prospecting Pty Ltd. HPPL is the ultimate holding company of the third respondent, Hope Downs Iron Ore Pty Ltd, whose interest in an iron ore mining project at Hope Downs is the ultimate source of the value of the Trust.
Gina is the ultimate beneficial owner of all of the shares in HPPL not held by the Trust: 2015 Judgment at [7]. Accordingly, throughout her tenure as trustee she held either legally or beneficially 100% of the issued shares in HPPL, and was and remains the company's controlling shareholder. As will be seen, it is critical to the history of this appeal, and application for leave to appeal, that during that period she also served as director and Executive Chair of HPPL.
In addition to Gina's removal and replacement, thereafter not in issue, John and Bianca sought an order that Gina produce "for the years 1988 to date, the books and records of the Trust, including the accounts of the Trust, all resolutions executed by the Trustee authorising the transfer of property, and all documents referred to in paragraph 58 of the third further amended statement of claim (which lists some 16 categories of trust documents)" (at [357]).

The disputes with respect to the delivery up orders made in 2015 and 2018

On 28 May 2015, Brereton J appointed Bianca as the new trustee and made a number of ancillary orders, including: (3) The first defendant deliver up of the second plaintiff within 28 days all documents of the Trust in her possession custody or power, including all those referred to in paragraph 3 of the claims for relief in the third further amended statement of claim. (4) The first defendant have liberty to apply to be relieved from order 3 in respect of any particular document or class of documents.
Within a few months of those orders, after a search of some 200 boxes of files and 30,000 emails and attachments, Gina caused to be delivered to Bianca 68 folders of documents comprising roughly 30,000 pages along with other items such as cheque and deposit books. Nonetheless a dispute emerged as to the scope of the delivery up obligation in order 3. On 3 September 2015 John and Bianca filed a notice of motion seeking further orders in aid of the orders of 28 May 2015. In turn, Gina filed a motion on 23 September 2015, seeking that she be relieved from her obligation to produce certain classes of documents of the Trust.
That dispute concerned the general phrase "documents of the Trust", not the 16 categories of documents specifically described in the third further amended statement of claim. That is a phrase which, as Brereton J recognised, has never been comprehensively defined. John and Bianca contended, and Gina disputed, that order 3 required the production of all documents which related to the administration of the Trust.
Brereton J delivered judgment on 5 November 2018, clarifying the scope of order 3 and ordering Gina to file and serve an affidavit by 5 December 2018 verifying that she had performed all reasonable enquiries and searches for the documents of the Trust, and delivered up all documents discovered thereby: Hancock v Rinehart [2018] NSWSC 1684 (the Trust Documents Judgment). Gina was also ordered to "procure" that any third parties likely to possess documents of the Trust deliver up such documents to her by that time. However, and despite John and Bianca's "powerful" arguments to that effect, Brereton J was not willing to find that Gina had not made a good faith attempt at compliance with order 3 (at [101], [143]).
For present purposes, his Honour's reasoning and conclusions can be stated shortly. Generally, the relevant question for the status of a document was not whether it was considered or adverted to by a trustee, but rather the capacity in which it came to be received or held. A document would be a trust document if it had been received or held by Gina in her capacity as trustee, even if it was received or held by Gina jointly with one of the companies, or by Gina in joint capacities (at [44], [45]).
The difficulty with the application of that test to the production dispute was that "so far as appears, [Gina] did not maintain a rigorous separation" between documents of the Trust and documents she received or used in other capacities, including principally as a director of HPPL (at [47]). Reasoning that "a diligent trustee would have obtained for the purposes of the Trust any document which was in fact used in the administration of the Trust", and that Bianca as the incoming trustee should not be disadvantaged by the fact of Gina's multiple capacities, Brereton J concluded that any document received or held by Gina in any capacity and used in the administration of the Trust was a "document of the Trust" (see at [48], citing Tiger v Barclays Bank Ltd [1952] 1 All ER 85).
Accordingly, Brereton J concluded, at [141]: The "documents of the Trust" which Mrs Rinehart is obliged to deliver up comprise: 1. all documents received or held by her or on her behalf exclusively in her trustee capacity (in which the Trust alone has a proprietary interest); 2. all documents received or held by her or on her behalf jointly in her trustee capacity and also in another capacity; 3. all documents received or held by her or on her behalf in her trustee capacity, in which the Trust and another entity or entities also have a proprietary interest, provided that where the original is not in her possession or control a copy must be provided; and 4. all documents received or held by her in some capacity other than as trustee, including as a director of HPPL, which were used in the administration of the Trust.
Documents falling into one of those categories would be a document of the Trust notwithstanding that they were, for instance (at [142]): 1. documents which while disclosing deliberations on the part of the first defendant in her Trustee capacity, do not reflect or refer to a decision taken by her in that capacity; 2. documents which record communications of the trustee with some or all of the beneficiaries but do not record a decision made by the trustee; 3. documents that were merely subject of the trustee's consideration in making a decision or administering the trust; ... 1. documents concerning only the affairs of companies and entities in the HPPL Group other than HMHT Investments Pty Ltd or the Trust; and ...
Gina's application for leave to appeal from the orders made on 5 November 2018 was dismissed by Basten JA and Simpson AJA, in part because her general objection to the breadth of Brereton J's orders, made without reference to any identified document or category of documents, invited the Court "to reformulate the orders in the abstract and without evidence": Rinehart v Rinehart [2019] NSWCA 54 at [41]. Special leave to appeal against that dismissal was refused: Rinehart v Rinehart [2019] HCASL 242.

The 25 October 2019 orders

In May 2019, Ward CJ in Eq heard motions of Gina and the companies for further orders or directions in relation to Brereton J's orders of 5 November 2018. The central issue was, as her Honour put it, "how Gina can be confident that all reasonable enquiries and searches have been taken" so as to verify production consistent with order 1 of those orders, in circumstances where the time and cost estimated by Gina to be required for strict conformity with those orders was "extraordinary" (Hancock v Rinehart [2019] NSWSC 1451 at [23], [32]). Her Honour also noted at [61] that: ... one of the ironies of the stance that has been adopted by Bianca (no doubt with the benefit of considered legal advice) is that, to the extent that Bianca is insistent upon completion of the process of production of trust documents within the extended definition in the 2018 Decision (and has not been able to assist meaningfully in limiting the scope of production even in the face of the evidence as to its likely exorbitant cost), then she can hardly be heard now to complain as to the time (and cost) required to complete the process of the wholesale review of documents and exhaustive production of the HMH Trust documents.
Gina sought, among other orders, a direction or order as to the means by which she might discharge her obligation to perform all reasonable enquiries and searches; relief from the obligation to produce some of the personal correspondence with her children; liberty to apply for relief from the production of other categories of documents following production to Gina of potential documents of the Trust by HPPL; and orders relating to the costs of production (at [41]).
Bianca and John's position was that Ward CJ in Eq had no power to grant the relief sought, which would (it was said) amount to a variation of final orders made by Brereton J (see at [111]). In brief, her Honour declined to accept that submission, stating that she would confine "the relief now to be granted to aspects of the matter that involve the 'working out' of the relevant orders or dispensation therefrom" (at [187]) and that Gina's application was "within power in that it is part of the 'working out' of the delivery up orders that have been made" (at [198], [199], [218]).
On 25 October 2019, her Honour delivered judgment and made orders granting Gina much of the relief sought, including, by way of example: (4) Further extend the time for compliance with Order 1 of the 2018 Orders to a date to be fixed after [HPPL] has made available for inspection by [Gina] and her legal representatives the possible documents of the HMH Trust. (5) Order that Order 2 of the 2018 Orders be varied to require the first defendant to use her reasonable endeavours to procure [certain third parties] to provide the first defendant all documents in their possession which are likely to be documents of the HMH Trust. (6) Direct that the parties provide agreed short minutes of order (or, failing agreement, separate proposed short minutes of order and submissions in support) within 14 days for a regime to permit access by a computer expert on behalf of [Bianca] to any electronic database or electronic information retention system maintained by [HPPL] in respect of documents of the HMH Trust for the purposes of compliance with Order 3 of the 2018 Orders. ... (8) By consent, vary Order 1(a)(iv) of the 2018 Orders to permit the production of a copy of any such documents received or held by the first defendant in some capacity other than as trustee of the HMH Trust, including as a director of [HPPL], which were used in the administration of the HMH Trust. ... (9) [Gina] have liberty to apply to be relieved from Order 3 of the 2015 Orders made by Brereton J on 28 May 2015 in respect of any particular document or class of documents after the fourth defendant has made available for inspection by the first defendant and her legal representatives the possible documents of the Trust falling within Order 1(iv)(a) of the 2018 Orders, including by reason of the claims brought against the first defendant in the Proceedings referred to in Order 13 below.
Of primary relevance to the present application, her Honour also made order 11, the first of the two orders that are challenged: (11) Order (subject to any further order of the Court) that the first defendant be indemnified from the HMH Trust in respect of the reasonable costs incurred from today's date by her compliance with Orders 2 and 3 of the 2018 Orders and otherwise in relation to the production of documents of the HMH Trust. [emphasis added]

The 5 December 2019 orders

After a directions hearing on 5 December 2019, Ward CJ in Eq made further orders, largely by consent, imposing a cooperative production regime. Orders 15 and 15A were headed "Temporary Stay", and provided: 15. Subject to further order and orders 1 to 13 above, order 3 of the orders made on 28 May 2015 [the order to produce the documents of the Trust] is stayed. 15A. Note that the temporary stay ordered at 15 above is in order to reflect the practical consequences of the iterative regime now being cooperatively put in place between the parties and does not impose any onus on the second plaintiff if and when such a stay is sought to be discharged.
The production regime contemplated that for several categories of documents - described as Third Party Documents, Communications with beneficiaries, Historical Trust Documents and Dividends and constitution of HPPL - Gina would take preliminary steps to estimate the volume of documents in each category and the reasonable costs likely to be incurred in reviewing them, and provide those estimates to Bianca. If Bianca requested that the searches be undertaken, the searches were then to be completed within a time agreed by the parties or, failing agreement, determined by further order, and any trust documents identified to be produced to Bianca.
The second of the challenged orders, order 14, which was not made by consent, provided for the payment by Bianca to Gina's solicitors of the estimates of Gina's likely reasonable costs: 14. Subject to further order, pursuant to order 11 of the orders made on 25 October 2019, Bianca is to deposit into the trust account of Gina's solicitors such amounts as may be requested to meet the reasonable costs to be incurred to comply with orders 3, 6, 10 and 13 [which required Gina to complete the searches if requested to do so] above. [emphasis added]
It is immediately apparent that although order 15 stayed order 3 of 28 May 2015, the 5 December regime was a means of giving effect to the substance of that order, which was stayed subject to orders 1 to 13. Indeed, the orders of 5 December 2019 presumed the existence of the various sets of earlier orders by Ward CJ in Eq and Brereton J, themselves workings out of order 3.
Order 1A of 5 December 2019, for instance, provided: 1A. On or before 19 December 2019 the first defendant (Gina) is to inform the Second Plaintiff (Bianca) (through their legal representatives) the identity of the third parties Gina has requested produce documents to her and the volume of the documents produced.
In doing so, that order presumed the obligation set out in order 5 of 25 October 2019, which varied order 2 of 5 November 2018 so as to "require [Gina] to use her reasonable endeavours to procure the third parties identified in the Schedule to the 2018 Orders, to provide [Gina] all documents in their possession which are likely to be documents of the HMH Trust".
Order 14 of 5 December 2019 similarly presumed the existence of, and was made "pursuant to", order 11 of 25 October 2019. Unlike order 11, order 14 required payment by Bianca in advance of search costs actually being incurred, albeit into a trust account; and as order 3 of 28 May 2015 was stayed subject to the 5 December regime, order 11 has no present effect in relation to the costs of production of documents not required to be produced under that regime. Nonetheless, because order 14 did not itself entitle Gina's solicitors to apply the funds deposited into their trust account, it could not sensibly operate independently of order 11 and its provision for payment by Bianca of Gina's reasonable costs.

The primary judge's reasons for making order 11

As the arguments made on this application amply demonstrate, the nature and effect of the impugned orders is ambiguous. At least in that circumstance, it is permissible to have regard to the reasons for judgment in order to construe order 11, and consequently order 14: see Athens v Randwick City Council (2005) 64 NSWLR 58; [2005] NSWCA 317 at [28]-[29] (Hodgson JA, Tobias JA agreeing). Whether or not ambiguity need be present before regard to reasons for judgment may be had need not be decided in this appeal: but see Doyle v Commissioner of Police (No 2) [2020] NSWCA 34 at [58] (Leeming JA), citing Athens at [129] (Santow JA); and AVS Group of Companies Pty Ltd v Commissioner of Police (2010) 78 NSWLR 302; [2010] NSWCA 81 at [98]-[104] (Campbell JA, Handley AJA agreeing).
Several matters emerge from her Honour's reasons.
First, order 11, made "subject to any further order of the Court", does not purport finally to determine whether Gina is entitled as trustee to an indemnity for costs incurred. If it did so, it would have been made prematurely. The primary judge expressly declined to make any findings "at this stage" as to whether there had been any breach of Gina's duties as trustee "in the manner in which the trust documents were stored or filed" (at [354]). Instead, it was contemplated that once the nature and contents of the documents were known, Bianca might seek "the recovery of any amounts now paid for the costs of production of documents established to have been caused by that breach of trust". It follows that order 11 is to be read as requiring that Gina 'be paid' rather than 'be indemnified', to the extent that the latter expression has any more final connotation.
For that reason, the suggestion of the applicant that order 11 is in substance a declaration should also be rejected. As her submissions emphasise, a declaration is a form of final relief, which her Honour was not able to (and so did not) award.
Secondly, the primary judge did not accept the proposition that "the circumstances in which [Gina] retired as trustee and the history of the litigation before Brereton J" disentitled her to an indemnity for the costs of future production, on the basis that those costs were "not costs that arise from any breach of duty by Gina as trustee in relation to contentious matters such as the vesting of the trust" (at [354]). It remains the case that order 11 did not purport finally to determine Gina's entitlement to an indemnity.
Relatedly, her Honour did not accept the applicant's "doubts" as to whether a former trustee could ever be entitled to an indemnity out of the trust assets (at [351]). The submission based on that doubt is pressed only "formally" in this Court, having regard to Bruton Holdings Pty Ltd v Commissioner of Taxation (2009) 239 CLR 346; [2009] HCA 32 at [43].
Thirdly, the primary judge reasoned that it was in "accordance with the principle in In re Grimthorpe" (at [355]) and consistent "with authority and principle" (at [356]) that a trustee should not be required first to incur costs in performing his or her duties and later to recoup them, but rather should be paid his or her costs immediately subject to the possibility of a subsequent finding of disentitling conduct requiring the trustee to make reimbursement.
For current trustees, the exercise of their right of exoneration, which together with the right of recoupment constitutes their right of indemnity, may have the consequence that they are not in the first instance required to bear the costs of performing their duties. However, it is not clear that In re Grimthorpe [1958] Ch 615 supports that proposition in the general terms in which it was stated by the primary judge. The relevant passage provides: It is a commonplace that persons who take the onerous and sometimes dangerous duty of being trustees are not expected to do any of the work on their own expense; they are entitled to be indemnified against the costs and expenses which they incur in the course of their office; of course, that necessarily means that such costs and expenses are properly incurred and are not improperly incurred. The general rule is quite plain; they are entitled to be paid back all that they have had to pay out. [emphasis added]
Grimthorpe concerned the interpretation of a practice direction regarding the basis on which to tax the costs of trustees entitled to an indemnity for costs of litigation which they had already personally paid. Read in context, the statement that trustees "are not expected to do any of the work on their own expense" is better understood as referring to the ultimate rather than initial burden of any expenditure.
That question of principle may be put to one side, however, because it is plain that what justified the primary judge's order was not so much that general principle as (at [356]): ... the insistence of Bianca (as she is, as trustee, entitled to insist upon) on the complete production of an enormous amount of documentation. Insistence upon the complete production of all personal communications between Gina and her children, to the extent those fall within the definition of "Trust documents", is but one example. Bianca's position is that Gina is required by the 2015 Orders, as clarified by the 2018 Orders, to produce all trust documents and that (given the information asymmetry, among other things) she cannot fairly be asked to comment on the adequacy of the categories of documents required to be reviewed for the purpose of compliance with those orders. As I have said earlier, so be it.
Earlier, at [62], her Honour had made other remarks to similar effect: I might add that when the rationale of the production of trust documents by an outgoing trustee, as explained by Brereton J in the 2018 Decision, is borne in mind it might be doubted as to whether the production of some of the documents raised as examples in the course of the present application - such as dry cleaning bills in minor amounts presented by beneficiaries for payment out of the HMH Trust fund - are documents required by the incoming trustee for the ongoing administration of the HMH Trust. However, where the incoming trustee has insisted on complete production of the HMH Trust records and the outgoing trustee has been ordered to produce them, there is much to be said for the proposition that there should be complete production as ordered albeit that I consider the incoming trustee's insistence on complete production should be coupled with an indemnity in respect of those costs, something to which I will return in due course.

The nature of orders 11 and 14

It has already been observed that order 11 is not a final order. Nor, consequently, is order 14, which was also made subject to further order. But it is apparent that the orders are not interlocutory orders in the usual sense.
If it is taken to be an interlocutory (mandatory) injunction, it is not clear that order 11 can be said to have been made in aid of an entitlement to final relief, Gina's or otherwise, in circumstances where there is no question about the solvency of any of Gina, Bianca or the Trust and no suggestion that the order was necessary to ensure the production of the relevant documents. Indeed, as Macfarlan JA observes at [48], order 11 appears designed in part to encourage Bianca to adopt a less strict insistence upon complete production of the trust documents.
More importantly, the orders are an unusual form of interlocutory relief in that they do not contemplate Gina being required at some future date to justify the continuation of that relief in final form. Rather, as is clear from the primary judgment, what is contemplated is that Bianca will be required to seek to vary order 11 in order to recover from Gina all or part of the amounts paid to her out of the trust to cover her reasonable costs of production.
It may be accepted - and it is not irrelevant - that legally, a trustee is prima facie entitled to his or her costs incurred in connection with the administration of the trust, unless and until those costs are shown to have been improperly incurred: see Australian Securities and Investments Commission v Letten (No 17) [2011] FCA 1420; (2011) 286 ALR 346 at [14]-[16] (Gordon J) and Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 at [46], [51] (Ormiston JA, Batt and Vincent JJA agreeing), citing Re Beddoe [1893] 1 Ch 547.
It does not follow that orders 11 and 14 do not alter the position that would otherwise prevail. Practically, they require that Bianca apply to recover payments for costs to which Gina was not entitled, rather than that Gina apply to recoup those to which she was not disentitled. In the interim they do not address the question of the entitlement of a former trustee to an indemnity for costs incurred on or after leaving office. They function as a form of security for Gina's entitlement to an indemnity, if any, as finally determined, and perhaps also as an inducement to Bianca to cooperate with Gina in order sensibly to implement the order for production.
It is apparent from her Honour's judgment that the other orders of 25 October 2019, and, it may be inferred, also 5 December 2019, were orders made in "working out" the 2015 and 2018 orders. It follows from the passages of that judgment referred to at [73] above that order 11, and therefore order 14, was also made in "working out" those earlier orders. The question for the validity of those orders, then, is not whether Gina is or ultimately will be entitled to an indemnity as a former trustee. It is whether Ward CJ in Eq had power to make them as part of a detailed series of orders, and in the case of order 14 a coherent regime, in working out Brereton J's earlier orders for production.
In oral argument, Bianca disputed that orders 11 and 14 were working out orders, submitting that they were not made "for the purpose of dealing with a matter involved in, or arising in the course of, working out that order; for example, by making more specific provision for its implementation or by modifying its operation to take account of some subsequent change of circumstance or by enforcing it": Phillips v Walsh (1990) 20 NSWLR 206 at 209-210 (McLelland J). The starting point for that submission was that order 11 involved the recognition or grant of an entitlement to an indemnity, being "a form of substantive equitable relief". For the reasons given above, that starting point was mistaken.
At the same time, it was accepted as a general proposition that it would be open to a Court to order, as a condition of an order for production, that the costs of the inquiry and production be paid by the other party, or at least in the first instance by the other party. In my view, in the circumstances described above orders 11 and 14 are to be understood as conditions imposed by Ward CJ in Eq in implementing and giving effect to the earlier orders for production made by Brereton J. Considered as conditions, they supplement those orders as worked out by the orders of 25 October and 5 November 2019, in circumstances where it had become clear that the implementation of those earlier orders might well involve considerable complexity and extraordinary expense.
Whether or not that is the correct characterisation of the impugned orders, the orders, properly understood, involve questions of procedure and do not purport finally to determine Gina's entitlement to an indemnity. None of the proposed grounds of appeal speak to them, so characterised. And there is no suggestion that Bianca or any of the beneficiaries of the trust are likely to suffer substantial injustice as a result of any uncorrected error in the making of those orders.
It follows that Bianca requires leave to appeal, which should be refused with costs.

Endnotes

Tcpt, 23/07/20, p 13(8).
(2019) 93 ALJR 807; [2019] HCA 20 at [31]. 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: 22 September 2020

Solicitors: YPOL Lawyers (Applicant) Speed & Stracey Lawyers (First Respondent) Corrs Chambers Westgarth (Second and Third Respondents) File Number(s): 2019/366237; 2020/133923 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: [2019] NSWSC 1451 Date of Decision: 25 October 2019 Before: Ward CJ in Eq File Number(s): 2011/285907

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Cases Cited (27)

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