Litigation and Dispute Resolution

No High Court sympathy for pranksters

16 March, 2015

The legal feud involving Australia’s richest person, Gina Rinehart and her children has come to an end, at least for now. Yesterday Justice Brereton of the Supreme Court of NSW delivered his long anticipated judgment in Hancock v Rinehart [2015] NSWSC 646.

The Court replaced Mrs Rinehart with her daughter, Bianca as the trustee of Hope Margaret Hancock Trust, set up by the late Langley Hancock in 1988, estimated to be worth $5 billion. The Court also dismissed a claim that Mrs Rinehart acted improperly in agreeing to certain amendments to the constitution of Hancock Prospecting Pty Ltd, shares of which are the Trust’s only significant assets.

The case has important implications for those acting or seeking appointment as trustees of trusts.

Appointment of trustee by Court

Mrs Rinehart’s children, John and Bianca brought proceedings to remove Mrs Rinehart as trustee for her alleged misconduct in administration of the Trust. Mrs Rinehart agreed to be discharged as trustee shortly before the hearing. In issue at the hearing was who should be appointed as the new trustee.

The dominant consideration, as noted by Brereton J, in appointing a trustee is the welfare of the beneficiaries. The Court’s task is to appoint the person best suited to administer the trust in the circumstances prevailing. The main considerations or guidelines, as set out in the judgment, are:

  • the wishes of the settlor, if expressed or implicit in the trust deed;
  • a trustee should not be appointed to promote the interests of some beneficiaries in opposition either to the wishes of the settlor or the interests of remaining beneficiaries. This reflects the Court’s desire to avoid conflict of interest; and
  • whether the appointment of the trustee would promote or impede the execution of the trust.

The parties’ positions in respect of a replacement trustee, as Bereton J noted, evolved and fluctuated over the course of the proceedings. The plaintiffs, John and Bianca ultimately proposed Bianca as the trustee, whereas Mrs Rinehart proposed one of three licensed trustee companies as the managing trustee and a special purpose vehicle owned by her four children as the custodian trustee.

The advantages of appointing a licensed trustee company as the managing trustee, as proposed by Mrs Rinehart, are that the trustee will be independent, and will bring experience and professionalism to that role. Such experience and professionalism, however, were found to be limited significance as the remaining functions of the trustee were considered limited and no longer included the broad discretionary powers that the trust deed conferred in the trustee as the Trust had already vested. The Court further noted that the appointment of any such managing trustee would:

  • trigger certain pre-emptive rights under a joint venture agreement, which will be adverse to the interests of the Trust – this by itself is not a determinative factor;
  • subvert the purpose of the managing/ custodian trustee dichotomy (by not providing for a proper separation between them);
  • require payment of substantial remuneration to the trustee, which would reduce the amount available for distribution to the beneficiaries;
  • not alleviate the concern that Mrs Rinehart’s may exert influence over the trustee company, and in fact, two of the trustee companies as suggested by Mrs Rinehart did not provide adequate assurance of independence from and ability to resist such influence, and there was potential for Mrs Rinehart to acquire influence in the third. In this context, the Court observed that Mrs Rinehart went to extraordinary lengths, including exerting pressure and influence, to retain, directly or indirectly, control of the Trust, and to secure the appointment of a trustee acceptable to her; and
  • could not be unconditional, at least in respect of two of the trustee companies, whose consent appointment had conditions attached to them.

In contrast, the proposal for appointment of Bianca had the following advantages:

  • her appointment would not trigger any pre-emptive rights prejudicial to the Trust’s interest;
  • she would act voluntarily and take no remuneration;
  • she had demonstrated her ability to assert the rights of the Trust against Mrs Rinehart;
  • her consent to act as trustee was unconditional; and
  • she was prepared to accept any conditions the court might impose on her appointment.

Importantly, her appointment as trustee was supported by two of the four beneficiaries, and as to those who did not support it, one did not object to her appointment and the other gave no evidence that she would find her intolerable or obnoxious. On that basis, the Court held that the balance of the weight of the beneficiaries’ wishes favoured the appointment of Bianca.

The Court further took notice that Bianca was a beneficiary of the Trust, which might give rise to a conflict of interest and duty, but in the context of this Trust and the remaining functions of the trustee, the Court considered such risks being too remote, and in any event, are capable of being sufficiently mitigated by imposing a condition that judicial advice or consent of beneficiaries be obtained before significant decisions are made. As is apparent from the decision in Michael Victor Henley; In the Estate of Hedy Jadwiga Weinstock and Leo Arie Weinstock [2013] NSWSC 975, another recent case involving family feud over administration of a trust, the Court is ready and willing to give its advice and guidance as and when sought by the trustees facing warring beneficiaries.

The Court, having considered all these, concluded that Bianca was better-suited and appointed her to replace Mrs Rinehart as the trustee of the Trust under section 77 of the Trustee Act 1962 (equivalent provisions of which exist in legislation of other states such as section 70, Trustee Act 1925 (NSW)).

Fraud on power

One of the other, and less significant, issues in this case was whether certain amendments to the constitution of Hancock Prospecting Pty Ltd, shares of which are the Trust’s most significant assets, had been improperly agreed to by Mrs Rinehart. The amendments restricted the transferability of the shares to maintain control within the Hancock family.

The Court held that a trustee must exercise its power in good faith for the purpose for which it was given, and not for an ulterior purpose – whether for the benefit of the trustee or otherwise. A “fraud on a power” is an exercise of a power for an extraneous purpose; in this context, the term “fraud” does not necessarily involve conduct which would ordinarily be described as dishonest or immoral. In determining whether a power has been exercised for an extraneous or ulterior purpose, the Court has to determine the following:

  • first, as a matter of law, for what purpose or purposes the power may properly be exercised; and
  • second, as a matter of fact, whether the purpose for which the power was in fact exercised was within the category of permissible purposes.

The onus of proof is on those who allege a fraud on the power.

The Court held that the evidence did not establish that Mrs Rinehart acted in breach of trust or for an improper or extraneous purpose, and so the amendments to the constitution to which she agreed remains effective and binding. Those amendments were made with a desire to ensure that the shareholding in the company was confined to Hancock family group members, so that there was no risk of triggering a change of control event under the joint venture in which the Trust had interest.


The case provides a good illustration of how the Court is likely to balance competing factors when tasked with the responsibility to replace a trustee of a family trust.

  • The primary consideration is the welfare of the beneficiaries, and who the Court considers to be most suitable in terms of discharging the duties as trustee of the trust.
  • The Court is keen to avoid any conflict of interests or duties, but that by itself will not preclude one of the beneficiaries being appointed as a trustee, particularly when sufficient safeguards may be put in place by requiring the trustee to get judicial advice or consent.
  • Independence of the trustees and their ability to discharge duties without interference or influence of others are important considerations.
  • All things being equal, in case of a choice of trustees, the Court’s preference is for those who are prepared to accept unconditional appointment and not overtly expensive.
  • The experience and professionalism of corporate trustees are valued, but a trust even with substantial assets does not necessarily require someone as sophisticated as them, particularly when administration of the trust does not involve exercise of broad discretion.

The Court’s decision also underpins the significance of a trustee exercising its power in good faith for the purpose for which it is given, and not for any ulterior or extraneous purpose.

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. 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As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.

Published by Leighton Hawkes
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Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

Published by Justin Pennay
10 August, 2023