WRIGHT PROSPECTING PTY LTD -v- HANCOCK PROSPECTING PTY LTD [No 7] [2016] WASC 305 (23 September 2016)

3 The Consolidated Proceedings and the Rhodes Proceeding have been listed for trial commencing on 31 October 2016.

4 Bianca Rinehart (Bianca) and John Hancock (John) are the applicants in NSD1124 of 2014 in the Federal Court (Federal Court Proceeding). The respondents include Georgina Rinehart (Mrs Rinehart) in her personal capacity as trustee of the Hope Margaret Hancock Trust and as trustee of the HFMF Trust, HPPL, HDIO, Hancock Minerals Pty Ltd (HML), Hancock Family Memorial Foundation Ltd (HFMF), Ginia Rinehart (Ginia), and the trustee of the bankrupt estate of the late Langley Hancock. The applicants seek relief based substantially upon allegations of misconduct by Mrs Rinehart since the death of Langley Hancock and concerning the administration of one or more trusts of which the applicants are beneficiaries. Amongst the relief sought by the applicants is a declaration that HDIO holds the Hope Downs and East Angeles tenements on trust for Bianca, John, Hope and Ginia (the Children) who are children of Mrs Rinehart.

5 Mrs Rinehart and the HPPL respondents contend that the applicants are disentitled from seeking relief because they are contractually bound by certain agreements to resolve the disputes that are the subject of the Federal Court Proceeding by arbitration. On 26 May 2016 Gleeson J delivered judgment on interlocutory applications by which Mrs Rinehart and other respondents including HPPL, HDIO and HML sought orders pursuant to s 8(1) of the Commercial Arbitration Act 2010 (NSW) (NSW Act) and s 8(1) of the Commercial Arbitration Act 2012 (WA) (WA Act) that the parties to the Federal Court Proceeding be referred to arbitration in respect of the matters the subject of the proceeding and orders that the proceeding be dismissed or permanently stayed. Gleeson J ordered that there be a trial of the question whether any of the specified agreements is null and void, inoperative or incapable of being performed within the meaning of s 8(1) of the NSW Act or the WA Act: Rinehart v Rinehart [No 3] [2016] FCA 539. The parties referred to the trial of that question as the proviso hearing. On 9 June 2016 Mrs Rinehart, HPPL, HDIO and others sought leave to appeal from the decision of Gleeson J. John and Bianca subsequently served a proposed notice of crossappeal and a proposed notice of contention.

6 In each of the Consolidated Proceedings and the Rhodes Proceeding the plaintiffs have applied for the Children to be joined as parties. Bianca and John consent to their joinder on terms that the trial dates commencing 31 October 2016 be vacated. Ginia opposed the joinder principally on the ground that she will be prejudiced by being joined. HPPL and HDIO submitted that the joinder application should be stood over until the outcome of the Federal Court appeal is known.

7 For the reasons which follow I will order that each of the Children be joined as defendants and that the trial dates commencing on 31 October 2016 be vacated.

8 WPPL claims to be entitled to declaratory and other relief, which if granted will establish that the interest held by HDIO in the Hope Downs mining operations is held on trust for the Hancock and Wright partnership, that is the partnership of HPPL and WPPL, in so far as the mining lease extends over the area of the former East Angeles exploration licences. WPPL refers to this claim as its constructive trust claim. WPPL also seeks ancillary relief, including an account of profits, against HPPL and HDIO. WPPL in the Consolidated Proceedings and the Rhodes Parties in the Rhodes Proceeding seek orders requiring the payment of royalties in respect of iron ore produced and sold. WPPL seeks royalties from the areas known as Hope Downs 1 to 3. WPPL seeks royalties from the areas known as the East Angeles or Hope Downs 4 to 6 as an alternative to its constructive trust claim. The Rhodes Parties seek royalties from all of the area of Hope Downs 1 to 6.

9 In the Federal Court Proceeding the applicants claim to be entitled to declaratory and other relief which if granted will establish that the interest held by HDIO in the Hope Downs mining operations is held on trust for the Children. The applicants also seek ancillary relief including an account of profits against HPPL and HDIO. Their claims do not acknowledge the existence of the rights that WPPL or the Rhodes Parties are asserting, either in respect of WPPL's constructive trust claim or the entitlements to royalties claimed by WPPL and the Rhodes Parties.

10 WPPL says that the competing ownership claims are inconsistent because WPPL, on the one hand, and the applicants in the Federal Court Proceeding, on the other, both claim against HPPL and HDIO to be entitled to ownership interests in respect of the East Angeles mining operations that are inconsistent with each others and cannot coexist. In essence WPPL claims that the operations belong in equity to the Hancock and Wright partnership. The Federal Court applicants claim that the operations belong in equity to the Children. As against both claims, HPPL's position is that the operations belong solely to it or its subsidiary HDIO. If the claims brought by WPPL in this court and those brought by the applicants in the Federal Court Proceeding both succeed the result will be orders that are mutually inconsistent.

11 WPPL also says that the claims of the applicants in the Federal Court Proceeding are inconsistent with WPPL's royalty claims because they claim relief requiring HPPL and HDIO to account for profits obtained by reason of the ownership, use and possession of the Hope Downs tenements since the mid1990s. WPPL and the Rhodes Parties claim royalties in respect of iron ore that has been produced and sold from the area of those tenements. Thus, the Federal Court applicants claim to be entitled to an account of all of the profits, without allowing for any royalty in favour of WPPL or the Rhodes Parties, whereas WPPL and the Rhodes Parties each claim to be entitled to royalties in respect of the production and sale of iron ore from the areas that are claimed variously to belong to HPPL or HDIO, the partnership and the Children.

12 WPPL says that in those circumstances the Children should be joined as defendants to ensure that they are bound by the result and to avoid the situation in which orders made in WPPL's favour are able to be set aside by any of the Children. WPPL says that the Children are necessary parties to these proceedings in order to ensure that all matters relevant to claims concerning ownership or other rights arising from the mining operations carried on in the Hope Downs and East Angeles areas are able to be fairly and finally determined by the court. Further, WPPL says that joinder is in the interests of the administration of justice generally to avoid the possibility of inconsistent findings being made in this court and the Federal Court.

13 The Rhodes Parties advance similar arguments. The Rhodes Parties claim that they are entitled to declarations that HPPL and HDIO and WPPL hold any interest they have in the East Angeles and Hope Downs projects on trust for the Rhodes Parties to the extent of the Rhodes Parties' entitlements to royalties. The Rhodes Parties claim they are entitled to payment of royalties from those projects. Further or alternatively they claim a declaration that HPPL and HDIO hold ownership of those projects on trust for the Rhodes Parties and HPPL and WPPL.

14 In the Federal Court Proceeding the applicants claim that the Children are entitled to ownership of the entire Hope Downs and East Angeles projects. Amongst other relief, the applicants claim a declaration that HDIO holds ownership of both Hope Downs and East Angeles projects on constructive trust for the Children.

15 In the Consolidated Proceedings and in the Rhodes Proceeding and in the Federal Court Proceeding HPPL and HDIO oppose the claims of WPPL, the Rhodes Parties and the Children on the basis that HDIO and Hamersley own the Hope Downs and East Angeles projects. The claims of the Federal Court applicants, WPPL, the Rhodes Parties and HPPL and HDIO as to ownership of those projects, and as to royalty rights, are directly in conflict with each other. Each of the parties will be directly affected by the findings and declarations sought from the respective courts on those matters.

16 The Rhodes Parties say the claims ought not to be decided in proceedings relating to declarations as to ownership of property, or as to their obligations, when other persons who claim ownership of that property or who are directly affected are not represented in those proceedings. That situation will occur if the Children are not joined. Furthermore, claims to royalties from the Hope Downs and East Angeles projects are being made by WPPL and the Rhodes Parties when it is possible that it may be determined in the Federal Court Proceeding that the Children are owners of the projects. The Children who have alternative claims in relation to the ownership or royalties in contest in the Consolidated Proceedings and the Rhodes Proceeding, if they are not heard in those proceedings, may maintain they are not bound by a determination in those proceedings in relation to ownership. Alternatively, they could apply to have the relevant determinations in the Consolidated Proceedings and the Rhodes Proceeding declared nullities: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 [136] - [138].

17 The court may order that any person be added as a party where their presence is necessary to ensure that all matters in dispute be effectually and completely determined and adjudicated upon. Order 18 r 6(2) of the Rules of the Supreme Court 1971 (WA) (RSC) provides:

(2) At any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application

(a) ...

(b) order that any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, be added as a party,

...

18 In Pegang Mining Co Ltd v Chong San [1969] 2 MLJ 52 Lord Diplock considered an English predecessor to this rule. His Lordship said:

[A] better way of expressing the test is:

Will his 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? (55)

19 This direct interest test was applied by the Full Federal Court in News Ltd v Australian Rugby Football League Ltd [1996] FCA 870; (1996) 64 FCR 410. The case arose out of the super league war during the mid1990s between News Corporation backed Super League and the Australian Rugby League and New South Wales Rugby League over broadcasting rights for and control of professional rugby league competition in Australia. In this action Super League sought to set aside Commitment Agreements and Loyalty Deeds signed by clubs committing to play in the League's competition. The Australian Rugby League and New South Wales Rugby League and 'loyal' clubs brought a crossclaim alleging breach of contractual and fiduciary duties by 'rebel' clubs who had joined the Super League. The Full Federal Court held that the players and coaches allied with the Super League should have been joined. Although the players and coaches were not parties to the contracts, the orders sought would directly affect their rights to choose the employer for whom they would work. Order 6 r 8(1) of the Federal Court Rules 1979 (Cth) is similar to RSC O 18 r 6(2). The Court (Lockhart, von Doussa and Sackville JJ) at 522 523 said:

There are some classes of case where the ascertainment of the necessary parties who 'ought to have been joined' is not difficult. Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties. This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.

20 The High Court authoritatively stated the law on joinder in John Alexander's Club Pty Ltd v White City Tennis Club Ltd. Poplar as nominee of John Alexander's Club Pty Ltd (JACS) exercised an option to purchase land in Sydney conferred by an agreement between JACS, the trustees of the Sydney Grammar School and Sydney Maccabi Tennis Club Ltd (who owned the land as tenants in common), and White City Tennis Club Ltd (the Club), who since 1948 had operated on the land. Poplar obtained the funds to exercise the option from a loan granted by Walker Corporation secured by an unregistered mortgage over the land. In the events that occurred the Club brought proceedings against JACS and Poplar for a declaration that Poplar held its interest on constructive trust for the Club. Young CJ in Eq dismissed the proceedings. The New South Wales Court of Appeal allowed an appeal by the Club, declared that Poplar held its interest on constructive trust and ordered it to transfer the land to the Club upon the Club paying the option sum. Walker Corporation then applied to the Court of Appeal to be joined as a respondent and for orders setting aside the Court's earlier orders. The Court of Appeal dismissed the application. The High Court held that Walker Corporation was entitled to have the orders set aside. The Court (French CJ, Gummow, Hayne, Heydon and Keifel JJ) said:

Walker Corporation submitted that where a court is invited to make, or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined. That submission is correct. The Court of Appeal's orders directly affected Walker Corporation. The majority of the Court of Appeal ... erred when it held to the contrary [131].

The Court cited with approval the passage from the judgment of the Full Federal Court in News Ltd v Australian Rugby Football League Ltd to which I have referred. Their Honours then said:

Walker Corporation submitted that if a court makes an order affecting a person who should have been joined as a necessary party, while the order will not be a nullity, that person is entitled to have the order set aside, and is not limited merely to seeking the favourable exercise of a discretion, whether or not the person in question becomes a party. As a general proposition this submission is correct. The setting aside of the order 'lays the ghost of the simulacrum of a trial, and leaves the field open for a real trial'.

In contrast, the Court of Appeal majority said:

'If there had been reason, for convenience rather than necessity, to have Walker Corporation's claim determined together with resolution of the disputes between the [Club] and [JACS and Poplar], it is far too late for Walker Corporation now to be joined. It was not a party at first instance, and its claim should not be entertained for the first time on appeal. Even as an applicant in the appeal, it failed to apply at an earlier time, apparently in the expectation that the outcome would not be the imposition of a constructive trust. That its expectation has been disappointed is not a reason for allowing it to participate.'

In this passage the Court of Appeal majority erred, not only in electing not to exercise a discretion in Walker Corporation's favour, but also in treating it as a matter of discretion at all and in treating the question of joinder, rather than the question of setting aside the orders, as decisive. If there is any exception to the principle relied on (which it is unnecessary to decide in this case), it can have no application in the present circumstances, in which there was evidence that a plaintiff claiming a constructive trust over Torrens system land is cognisant of a mortgage which would be affected by its claim [137] - [138].

The second respect in which the Court of Appeal's orders fail to avoid injustice is as follows. The Court of Appeal first made a decision that the Club had a proprietary right. Then, some weeks later, it made a decision that in other proceedings there should be a determination of whether there was some other right having priority over the Club's proprietary right. That is unsatisfactory. As was pointed out earlier, the first decision binds Walker Corporation to the result of proceedings to which it was not a party a result which it could have affected, by evidence or argument. Walker Corporation does not just want priority over an interest which it has to accept exists. It wants that interest to be held non-existent, and it was deprived of the opportunity of achieving that result under conditions in which all matters would have been disposed of in one proceeding, with all evidence called, all submissions made and all questions considered together. That type of prejudice cannot be overcome by future proceedings about priorities in which Walker Corporation will have no opportunity to contend that the constructive trust now competing against its claimed mortgage should never have been recognised and does not exist [161].

21 The presence of the Children before the court is necessary to ensure that all matters in dispute in the Consolidated Proceedings and the Rhodes Proceeding may be effectually and completely determined and adjudicated upon. In the Federal Court Proceeding the applicants make claims to the Hope Downs tenements. The applicants say that in 1992 Mr Lang Hancock created the HFMF Trust. The applicants say that the Children are the beneficiaries of the HFMF Trust. They say that at the time of the death of Mr Lang Hancock HFMF held the exploration licences for the Hope Downs tenements. Mrs Rinehart says that the beneficial ownership of the Hope Downs tenements was always with HPPL. The applicants claim that Mrs Rinehart wrongfully caused the Hope Downs tenements to be transferred to HPPL. In the Consolidated Proceedings and the Rhodes Proceeding the plaintiffs claim their interest in the Hope Downs tenements through HPPL. Thus, the claims made by the applicants in the Federal Court proceedings are not only inconsistent with those of Mrs Rinehart, HPPL and HDIO but also inconsistent with the claims of WPPL and the Rhodes Parties.

22 The Children claim a proprietary interest in the land or mining interests which is inconsistent with that claimed by the plaintiffs and the defendants in the Consolidated Proceedings and the Rhodes Proceeding. Their joinder is necessary to ensure that all matters in dispute in the Consolidated Proceedings and the Rhodes Proceeding may be effectually and completely determined and adjudicated upon.

23 RSC O 18 r 6(2) is in discretionary terms - the court 'may' order that any person be added as a party. In APT Finance Pty Ltd v Wingside Nominees Pty Ltd [No 2] [2009] WASCA 235 Wheeler JA, with whom Newnes JA agreed, said:

It has been held that the court has a discretion to refuse an order for joinder: Lancaster Banking Company v Cooper (1878) 9 Ch D 594. However, it is difficult to justify the exclusion of a party whose presence is necessary for the effectual determination and adjudication of matters in dispute and, consequently, it would seem that any discretionary power to decline an order would generally be confined to practical matters of convenience or disruption which might tell against the late admission of such a party: Southern Cross Pipelines Australia Pty Ltd v Kenneth Comninos Michael Western Australian Independent Gas Pipelines Access Regulator [2002] WASC 149 at [8] [29].

24 It will be a rare case where the court exercises its discretion to refuse to join a party who claims a proprietary interest inconsistent with a proprietary interest sought to be established in a case. There is no good reason to refuse joinder in these cases. The scheduled trial was more than two months away when the plaintiffs applied for joinder and is more than a month away now. The plaintiffs accept that if the Children are joined then the scheduled trial dates must be vacated. That will not cause any prejudice to any party beyond the prejudice of the determination of the proceedings being delayed. That is far outweighed by the prejudice to the plaintiffs of the proceedings being determined without the outcome being binding on the Children and by the public interest in ensuring that all matters in dispute concerning the ownership and royalty rights in relation to the Hope Downs and East Angeles be effectually and completely determined.

HPPL, HDIO , Ginia say joinder should be deferred

25 HPPL, HDIO and Ginia submit that the joinder application should be dismissed or stood over on the ground that it is premature to join the Children. Senior counsel for HPPL and HDIO, Mr Finch SC, said: 'We're not saying nada, we're saying not yet'.

26 Their position, somewhat oversimplified, is as follows. HPPL and others including each of the Children executed, or are bound by, a deed described as the Hope Downs deed. Clause 7(b) is an undertaking by each of the parties to the deed not to challenge the right of any member of the Hancock Group, which means HPPL and any related body corporate of HPPL, to any of the Hancock Group interests which includes the Hancock Group's interest in the Hope Downs tenements and the Hope Downs joint venture. HPPL says that the applicants in the Federal Court Proceeding are precluded by the deed from pursuing its claims against HPPL in relation to the Hope Downs tenements and Hope Downs joint venture. The applicants submit that the deed does not preclude them from pursuing their claims and furthermore the deed should be set aside on grounds including misrepresentation, fraudulent concealment, misleading and deceptive conduct, unconscionable conduct, undue influence and duress. HPPL says that whether or not the applicants are precluded by cl 7(b) from pursuing the relevant claims should be referred to arbitration because the Hope Downs deed contains an arbitration clause. Justice Gleeson determined in effect that the arbitration clause prima facie covers the issue of whether the applicants may maintain the relevant claims and should be referred to arbitration if the arbitration agreement is valid and enforceable. The applicants maintain that the arbitration agreement, together with the rest of the Hope Downs deed, is null and void and unenforceable for the reasons for which they say the deed should be set aside. Her Honour has referred that question to a preliminary hearing - the proviso hearing. Justice Gleeson's decision to conduct the proviso hearing as a preliminary hearing is the subject of the appeal to the Full Federal Court. Mr Finch says that whatever the outcome of the appeal, there are various possible outcomes of the Federal Court Proceeding. If HPPL is successful in the proviso hearing, the right of the applicants to sue will be referred to arbitration. If HPPL is successful in its arguments before the arbitrator then the arbitrator will determine that the Children are bound by a covenant not to sue and that will preclude any further agitation of their claim in the Federal Court or this court and, Mr Finch says, it would make the joinder of the Children to these proceedings unnecessary. Further, Mr Finch says that if the Children have already been joined then the joinder will have to be unwound. It will be impossible to unwind some things such as the inspection of documents discovered by the other parties. If, on the other hand, HPPL is unsuccessful in its argument about the efficacy of the covenant not to sue then the Children will be entitled to maintain their claim to the relevant assets and at that point there will be a live claim in the Federal Court. Mr Finch says that at that time a determination would need to be made as to how and in what court the conflicting claims should be resolved. In summary, Mr Finch says that there are proceedings in the Federal Court, one outcome of which may be that the Children never get to sue in respect of the contested assets. If that is the case, this court should not exercise its discretion to join them on the basis that they are entitled to sue where there is no prejudice to any party to deferring the question of joinder until the Federal Court Proceeding, and possibly the arbitration, has determined whether the Children are entitled to sue and it is necessary to join them.

27 Mr Flynn, on behalf of Ginia, put essentially the same argument. Mr Flynn says it is not necessary to join the Children before the Federal Court proviso hearing and before it has been determined whether the applicants in the Federal Court proceeding have the right to sue in respect of the relevant assets. Mr Flynn says that Ginia should not be put to the trouble and expense of dealing with the proceedings in this court until it is necessary.

28 The arguments advanced by Mr Finch and Mr Flynn are not a sufficient reason for not ordering that the Children be joined as defendants. The Children claim in the Federal Court a proprietary interest in the tenements or mining interests which are inconsistent with those claimed by the plaintiffs and the defendants in the Consolidated Proceedings and the Rhodes Proceeding. They are necessary parties to the Consolidated Proceedings and the Rhodes Proceeding. The argument of HPPL and Ginia is in effect that although the Children are presently necessary parties, events may occur in the Federal Court and arbitration proceedings such that they will cease to be necessary parties. That is, of course, speculative. Many things might happen. The court must manage this action with the objects set out in the rules including promoting the just determination of the litigation, disposing efficiently of the business of the court and facilitating the timely disposal of its business. Furthermore, it is by no means clear that even if HPPL is successful in its arguments on the proviso hearing in the Federal Court and in a subsequent arbitration that the Children will cease to be necessary parties to the Consolidated Proceedings and the Rhodes Proceeding. Counsel for the Rhodes Parties, Mr Ryan, submitted that Justice Gleeson has held that some of the claims made by the applicants in the Federal Court Proceeding, which are inconsistent with claims made by the plaintiffs in the Consolidated Proceedings and the Rhodes Proceeding, are not covered by the arbitration agreements and hence will be determined in the Federal Court Proceeding. Mr Ryan pointed to the applicants' claim for an order that HDIO provide an account of profits to the applicants in relation to the benefits obtained by it from the ownership, use, possession and exploitation of the Hope Downs tenements or alternatively an order that HDIO pay equitable compensation to the applicants for their loss of opportunity to earn profits from the exploitation of the Hope Downs tenements.

29 The Children are necessary parties to the Consolidated Proceedings and the Rhodes Proceeding and should be joined.