Stay of proceedings for arbitration agreements – the meaning of ‘under this deed’ and ‘a party’: Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart (2019) 366 ALR 635; [2019] HCA 13

This concerns the dispute between Mrs Rinehart and companies in the Hancock Group on the one side, and two of Mrs Rinehart’s children on the other. The children allege in proceedings in the Federal Court that Mrs Rinehart had misused her position as trustee to their disadvantage as beneficiaries under certain trusts, and certain of the respondent companies had knowingly received trust assets. Mrs Rinehart and the respondent companies sought a stay of the proceeding, on the basis that deeds had been entered with the children relating to these allegations and that disputes ‘under the deed’ would be referred to confidential arbitration. The children alleged in the Federal Court that the deeds were void because they were procured by misconduct (the Validity claims). As such, the Federal Court was asked to determine whether the Validity claims were claims ‘under the deed’ for the purposes of section 8 of the uniform Commercial Arbitration Act 2010 (NSW) (the CAA) which requires a Court to stay an action which is the subject of an arbitration agreement unless it finds the agreement is null and void, inoperative or incapable of being performed. If the Validity claims were claims ‘under the deed’, then they were capable of being determined by an arbitrator and the proceeding had to be stayed.

The primary judge construed the phrase ‘under this deed’ narrowly and dismissed the stay application. The Full Court disagreed and held that the phrase should be construed liberally, and therefore stayed the proceeding. The High Court agreed with the Full Court. The High Court reiterated the Full Court’s conclusion that context will almost always tell one more about the objectively intended reach of such phrases than textual comparison of words of a general relational character. The High Court therefore looked at the background to the deeds for the meaning of the phrase ‘under this deed’. 

In looking at the background, the High Court noted that the alleged misconduct had been aired previously, and the three deeds the subject of the stay application appeared to have been entered to ensure that such allegations were treated confidentially. Because of this, the High Court held that it was inconceivable that a person entering the deeds would have thought that misconduct allegations going to the validity of the deeds would not be the subject of the confidential dispute resolution processes under those deeds. 

The High Court also determined a cross-appeal by three of the respondent companies, which were seeking a stay but which were not parties to the deeds the subject of the arbitration agreements.  The CAA defines a party as any person claiming ‘through or under’ a party to an arbitration agreement. The children alleged in the Federal Court that the three respondent companies were knowing recipients of trust property and therefore held the trust property on trust for them. 

The primary judge and Full Court dismissed the stay applications by these companies. The High Court considered that the three respondent companies were saying, by way of defence, that either there was no breach of trust by the parties to the deeds, or that the deeds were entered into by the parties to the deeds so as to absolve them of any alleged breach of trust, and for this reason, those respondent companies were claiming defences ‘through or under’ the parties to the deeds. As such, the cross appeal was allowed and the proceeding stayed as against the three respondent companies.
 

Andrew Downie
 

Congratulations to Michael Whitten QC on his appointment

Michael Whitten QC, the chair of MTECC, has been appointed as the next Lord Chief Justice of the Kingdom of Tonga, commencing on 1 September 2019.  MTECC congratulates Michael on his appointment and wishes him and his family all the best in his new endeavour. MTECC also extends its gratitude to him for his service as chair of MTECC.
 

Society of Construction Law Australia seminar with Tim Margetts QC on 24 July 2019

Tim Margetts QC is presenting the seminar ‘Quantum meruit following repudiation – what you need to know about Mann v Paterson Constructions Pty Ltd‘ for the Society of Construction Law Australia on 24 July 2019 at King Wood & Mallesons in Melbourne. The details are here.

Society of Construction Law Australia Conference in Perth 1 to 3 August 2019

MTECC is once again sponsoring the SoCLA national conference held in Perth at the Westin from 1-3 August 2019. The conference theme is  “Doing it Overseas – the legal tips and tricks for taking Construction Smarts to foreign jurisdictions”. The details are here.