High Court Finds Deeds Subject to Arbitration Clause: Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13
Thursday 9 May 2019 @ 12.10 p.m. | Corporate & Regulatory | Trade & Commerce
In Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13 (8 May 2019), the High Court of Australia has, in a unanimous decision, dismissed appeals from two decisions of the Full Court of the Federal Court of Australia. The Court found that disputes as to the validity of certain deeds were subject to the arbitration clauses contained in those deeds. A majority of the High Court also allowed a cross-appeal from one of the decisions, finding that three companies who were not parties to the deeds were "part[ies]" within the meaning of the Commercial Arbitration Act 2010 (NSW) section 2(1) ("the NSW Act").
Initial Federal Court Proceedings
Proceedings were commenced in the Federal Court of Australia (October 2014) by the appellants, Ms Bianca Rinehart and Mr John Hancock, against their mother, Mrs Georgina Rinehart (“Mrs Rinehart”), Hancock Prospecting Pty Ltd (“HPPL”) and other persons and companies. The appellants alleged that there had been various forms of misconduct by Mrs Rinehart in the administration of trusts of which the appellants were beneficiaries. The appellants also called into question, based on alleged wrongdoing by Mrs Rinehart and HPPL, a series of deeds that had been entered into by one or both of the Appellants with various of the respondents in the proceedings between 2003 and 2010. The deeds that were called into question contained releases and covenants not to sue and each deed further contained, a provision that the parties to the deed were to resolve any dispute by confidential arbitration (the “Arbitration Agreements”).
Respondents Application to the Federal Court
In a further application a group of the respondents (“the HPPL respondents”) applied for the initial Federal Court proceedings to be stayed. The HPPL respondents argued that because they had executed the deeds the appellants had surrendered any rights to bring such proceedings and that the appellant's claims should be resolved by confidential arbitration. To support their application, in conjunction with the Arbitration Agreements, the HPPL respondents relied on the NSW Act section 8(1) and also the identical provisions of the Commercial Arbitration Act 2012 (WA) section 8(1) (“the WA Act”). The Arbitration Agreements several clauses identified “. . . all disputes hereunder” (in one deed), “. . . any dispute under this deed” (in two of the deeds), and “. . . [a]ny dispute or claim arising out of or in relation to this Deed” (in two of the deeds). Mrs Rinehart (along with one of the respondent companies) also made a similar application to that of the HPPL respondents, seeking the dismissal of the proceedings or that they be permanently stayed and that the parties be referred to arbitration.
In Rinehart v Rinehart (No 3) [2016] FCA 539 (26 May 2016), Justice Gleeson ordered a separate trial of the question as to whether any of the Arbitration Agreements was null and void, inoperative or incapable of being performed within the meaning of the NSW Act section 8(1) or the WA Act, following on Justice Gleeson holding that various matters in dispute did not fall within the scope of an apparently valid arbitration agreement. Such matters included the very validity of the Arbitration Agreements and of certain deeds themselves (on grounds that included the "non-disclosure of material information" and a "lack of negotiation at arms’ length"). Justice Gleeson considered that certain claims by the appellants could, if successful, lead to a finding that each of the Arbitration Agreements was void or inoperative.
The HPPL respondents and Mrs Rinehart appealed to the Full Court of the Federal Court.
Appeal to the Full Court of the Federal Court
In Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208 (15 December 2017), the Full Court of the Federal Court (Allsop CJ, Besanko and O’Callaghan JJ) set aside the orders made by Justice Gleeson and allowed both appeals in a unanimous decision. In reaching its decision, the Full Court held that the respective contexts of the relevant deeds, which involved the quelling of disputes about title to valuable mining assets, tended to widen the deeds’ operation. Although the meaning of the phrase “any dispute under this deed” was narrower than the meaning of “a dispute in connection with this deed”, the former phrase was "nevertheless to be read liberally so as to encompass any dispute framed by a claim that was met by pleading the deed". Such a dispute included the appellants’ "impugning" or calling into question of the deeds’ validity. The Full Court found that Justice Gleeson had erred in finding that the appellants’ respective claims "impugned" the Arbitration Agreements as distinct from the deeds containing them. The appellants’ claims of invalidity were for the most part directed at the deeds rather than at particular arbitration agreements within them. As a result the Full Court stayed the Federal Court proceedings, pending arbitration.
Appeal to the High Court
In Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors; Rinehart & Anor v Georgina Hope Rinehart & Ors [2018] HCATrans 90 (18 May 2018) special leave to appeal to the High Court was granted. In each appeal, the ground of appeal is:
That the Full Court of the Federal Court erred in:
(a) finding that the arbitration clauses in clause 14 of the 2005 "Deed of Obligation and Release", clause 20.2 of the "Hope Downs Deed" and clause 9.2 of the 2007 "HD Deed" extend beyond disputes, the outcomes of which would be governed or controlled by those Deeds, to cover disputes concerning the validity of those Deeds or provisions thereof (see the reasons of the Full Court, [2016] FCA 539 (26 May 2016) at par [193]); and
(b) failing to find that the claims for relief advanced in prayers 35 to 41 of the applicants’ Originating Application dated 31 October 2014 were not matters the subject of apparently valid arbitration agreements..
Three of the companies among the HPPL respondents, being the sixth to eighth respondents in appeal number S143/2018, filed a summons seeking leave to file a notice of cross-appeal out of time. The proposed ground of cross-appeal relating to a finding by the Full Court that the sixth to eighth respondents were not parties within the meaning of the NSW Act because they were not “claiming through or under” a party to certain of the Arbitration Agreements and therefore, they were not entitled to seek an order under the NSW Act section 8(1).
In respect of both appeals, Wright Prospecting Pty Ltd applied for leave to intervene and the Australian Centre for International Commercial Arbitration Limited applied for leave to be heard as amicus curiae.
The High Court's Decision
In deciding the case the High Court unanimously held that it is clear that the arbitration clauses, construed in context, include as their subjects the validity claims. It could not have been understood by the parties to the Deeds that any challenge to the efficacy of the Deeds was to be determined in the public spotlight - see para [44]
And at para [21]
In relation to the cross-appeal, at first instance three companies who are not parties to the Deeds applied for orders that the claims against them be referred to arbitration pursuant the NSW Act to section 8(1) on the basis that each was a person claiming ". . . through or under" a party to one of the Deeds, and, therefore, was a "party" within the extended definition in the NSW Act section 2(1). The primary judge rejected the application, and the Full Court upheld the rejection, however, by a majority decision, the High Court found that, having regard to the subject matter in controversy, the third party companies, as assignees of mining tenements from parties to the relevant Deed, are persons claiming "through or under" a party to that Deed and, therefore, are parties for the purposes of the NSW Act section 8.
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Sources:
Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13 (8 May 2019) and summaries and short particulars.
Rinehart & Anor v Hancock Prospecting Pty Ltd & Ors; Rinehart & Anor v Georgina Hope Rinehart & Ors [2018] HCATrans 90 (18 May 2018)
Hancock Prospecting Pty Ltd v Rinehart (No 2) [2017] FCAFC 208 (15 December 2017)
Hancock Prospecting Pty Ltd v Rinehart [2017] FCAFC 170 (27 October 2017)
