Supreme Court New South Wales Medium Neutral Citation: Hancock v Rinehart [2013] NSWSC 1979 Hearing dates: 10 October 2013 Decision date: 10 October 2013 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Decline to permit plaintiffs to propound second plaintiff as candidate for replacement trustee. Catchwords: TRUSTS AND TRUSTEES - Appointment of replacement trustee - where order made directing plaintiffs notify defendants as to identity of proposed replacement trustee by certain date - second plaintiff proposed as replacement trustee after deadline, on day before trial commenced - desirability that court have before it all reasonable available options - injustice of denying defendants opportunity to dispute fitness and appropriateness of proposed replacement trustee - not just to permit plaintiffs to belatedly propound second plaintiff. Category: Interlocutory applications Parties: John Langley Hancock (first plaintiff) Bianca Hope Rinehart (second plaintiff) Gina Hope Rinehart (first defendant) Ginia Hope Frances Rinehart (second defendant) Hope Rinehart Welker (third defendant) Hancock Prospecting Pty Ltd (fourth defendant) Hope Downs Iron Ore Pty Ltd (fifth defendant) Representation: Counsel: C Withers w N Zerial & A Hochroth (plaintiffs) N Hutley SC w B McClintock SC, C Bova & J Hutton (first defendant) R McHugh SC w P Flynn (second defendant) M Deutsch (solicitor) (third defendant) D Studdy SC w I Colquhoun (fourth & fifth defendants) Solicitors: Yeldham Price O'Brien Lusk (plaintiffs) Corrs Chambers Westgarth (first, fourth, fifth defendants) Gadens Lawyers (second defendant) Deutsch Miller (third defendant) File Number(s): 2011/285907 Judgment - EX TEMPORE Plaintiffs' Application Regarding Appointment Of Replacement Trustee (T86) 1HIS HONOUR: When the trial commenced, the plaintiffs sought to propose as a candidate for appointment as replacement trustee the second plaintiff, Bianca Rinehart. Leave to do so is opposed by the second defendant, Ginia Rinehart. 2Although the following summary is incomplete, the essential relevant history is as follows. In the plaintiffs' original pleading, no replacement trustee was identified. The second defendant made a number of requests for particularisation of which of the plaintiffs was to be nominated as replacement trustee. The defence filed by the second defendant on 8 February 2012 she objected to "such of the plaintiffs as may subsequently consent to becoming trustee of the trust" on grounds specified in paragraph 84 of that defence. Ultimately, on 3 August 2012, the solicitors for the then plaintiffs indicated that, in the event of the first defendant's removal they would seek the appointment in her place of the then first plaintiff Hope Welker, and the then third plaintiff Bianca Rinehart. 3Following Hope Welker's ceasing to be a plaintiff and becoming a submitting defendant in the proceedings, doubt arose as to whether she would still be nominated by the remaining plaintiffs as a replacement trustee. In that context, at a directions hearing on 12 March 2013, I made an order directing the then second plaintiff, John Hancock, and the then third plaintiff, Bianca Rinehart, to notify the defendants in writing as to the identity of their proposed replacement trustee or trustees by 9 April 2013. On 4 April 2013, the solicitor then acting for the plaintiffs wrote to the first and second defendants' solicitors, advising that Bianca Rinehart was no longer nominated as replacement trustee. On 9 April 2013, the plaintiffs' solicitors nominated Mr Bruce Carter for appointment as replacement trustee. 4After some further correspondence, on 9 May 2013, Bergin CJ in Eq, who was then managing the case, made orders relevantly to the following effect: 1. By 15 May 2013 the plaintiffs provide the defendants with the name of each person the plaintiffs suggest shall be considered for appointment as replacement trustee or trustees in the event that the first defendant be removed, together with consents and the terms of consents to the appointment. 2. By 14 June 2013 the defendants notify the plaintiffs whether they object to the appointment of any of the persons so identified and serve any evidence they wish to rely on in opposition to their appointment. 3. In the event the defendants give such notice and wish to propose alternative persons for the Court to consider as the replacement trustee they provide to the plaintiffs the name of each person they suggest should be considered, together with a signed consent to the appointment and the terms of that consent. 5Plainly enough, those directions were made in order to clarify, well before the hearing, the competing positions of the parties so far as appointment of a replacement trustee is concerned. 6On 30 May 2013, the proceedings were listed for directions before the Chief Judge. The transcript records counsel for the second defendant observing that it was understood that the plaintiffs' position was that only two candidates would be put forward as replacement trustees, namely Mr John Hancock and Mr Bruce Carter, and that the second defendant was proceeding on the footing that those were the only two candidates for consideration at the trial to be held in October 2013. Counsel for the plaintiffs responded that, as things then stood, those were the two persons who the plaintiffs suggested should be considered by the Court as replacement trustees. Counsel said: At the moment we propose those two persons. If the Court is not satisfied with them the Court may identify some other person or request the parties provide further assistance in providing persons but the Court if it determines to remove the first defendant won't leave the trust without a trustee. 7Her Honour asked counsel, "So the only two persons that you have suggested are Mr Hancock and Mr Carter?", and counsel responded, "That's correct." 8Accordingly, at least until very shortly before the trial commenced, the only persons who had been proposed as potential replacement trustees were Mr Hancock and Mr Carter. However, about a week before the trial commenced, the first defendant announced that she wished to be discharged as trustee of the trust. The second defendant then said that this radically changed the position, and foreshadowed that the second defendant might now propose a replacement trustee, she not having previously considered doing so in circumstances where she was supporting the first defendant remaining as trustee. 9In light of the directions that had been made by the Chief Judge, it seemed to me at that time that that position was fraught with difficulty for the second defendant. However, ultimately the second defendant did not propose a particular replacement trustee, but has propounded a proposal involving the appointment of a yet to be identified independent trustee. 10Those events occurred, as I understand it, on or about 7 October, the day before the trial commenced. Subsequently, and the plaintiffs say in response to that, the plaintiffs sought to tender a consent of the second plaintiff to be appointed trustee and to propound her as a candidate. 11The essential issues concerning the appointment of a replacement trustee in this suit are first, whether it is legally permissible; secondly, whether it is commercially prudent to appoint an independent trustee or whether, on account of legal restriction or commercial prudence, it is preferable to appoint a Hancock Family Group member; and thirdly, and particularly if it comes to a Hancock Family Group member, whether the particular candidate or candidates, is or are fit and proper. 12At present, the options available to the court appear to be limited to Mr Hancock, Mr Carter or an independent trustee (pursuant to the second defendant's proposal). It is plainly desirable, in an exercise which is no doubt not going to be easy or straightforward, that the court have all realistic options open to it. On the other hand, it is equally important that the parties have a proper opportunity to investigate and contest, if they wish, any proposal that is advanced. 13While it is correct, as Mr Withers has pointed out, that the second defendant was able, as long ago as February 2012, to plead a defence objecting to "such of the plaintiffs as may subsequently consent to becoming a trustee of the Trust" on the grounds then specified, at that stage no particular plaintiff had been identified as a candidate and, in any event, as Mr McHugh rightly points out for the second defendant, there is a world of difference between being in a position to plead a defence, and being in a position to challenge by cross-examination and contradict by evidence, a specific proposal at a hearing. I do not accept that ability to plead in February 2012, the defence in paragraph 84 of the defence detracts from the proposition that time and opportunity is required by the second defendant to prepare to contest the second plaintiff's proposed appointment at the hearing. 14I accept, therefore, that in the light of the directions that have been made and the course of the directions hearing to which I have referred in preparation for trial, it is entirely reasonable that the second defendant has done nothing to this point to investigate - or perhaps more relevantly, prepare - a case to oppose the appointment of the second plaintiff. In those circumstances, I also accept that, were the plaintiffs permitted to propound the second plaintiff as a candidate, the second defendant would be entitled to an adjournment which is, in the light of the time and the resources that have been invested in the preparation of and allocation of hearing dates in this case, a most undesirable and unacceptable outcome. 15Essentially, it reduces to a question of balancing the competing considerations of the strong desirability that the court have before it all reasonably available options and, against that, the injustice of denying the second defendant a suitable opportunity to dispute the appropriateness of the second plaintiff as a replacement trustee. I do not overlook that the proceedings generally have, at least in the last week or so, been in what was, perhaps unkindly, described by counsel as a "fluid" and, more generously, might be called a "dynamic" state. The withdrawal of the first defendant's opposition to being replaced has significantly contributed to that, and it has been necessary for the parties to adjust their position to accommodate it. 16That said, ultimately the interests of justice dictate that one cannot foist on the parties, or one of them, a proposal, without affording them an opportunity, and a proper opportunity, to consider and oppose it. Permitting the second plaintiff to be put forward as a candidate at this stage, attractive and desirable as it is from the court's perspective, would in my judgment work an unacceptable injustice to the second defendant and, with reluctance from the court's perspective, I think must be refused. 17For those reasons, I decline to permit the plaintiffs to propound the second plaintiff as a candidate for replacement trustee. That said, I note the observation made by counsel for the plaintiffs at the directions hearing on 30 May, that if the court is not satisfied with any of the candidates proposed, the court may identify some other person or request the parties to provide further assistance in providing persons. It may well be that, depending on the conclusions I reach as to the ability to appoint an independent trustee, it will not come to that; but if, ultimately, the court were to conclude that an independent trustee could or should not be appointed, and that the other candidate was unsuitable, the court might then request further assistance in identifying a suitable - or the least unsuitable - qualified person. 18For those reasons, I refuse to permit the second plaintiff to be propounded as a replacement trustee. ********** 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: 15 April 2014