Supreme Court New South Wales

• Medium Neutral Citation: Welker & Ors v Rinehart & Anor (No 3) [2011] NSWSC 1471
• Hearing dates: Wednesday, 16 November 2011
• Decision date: 16 November 2011
• Jurisdiction: Equity Division
• Before: Brereton J

Decision

Application dismissed

• Catchwords: PRACTICE AND PROCEDURE - Pleadings - defendants apply to suspend operation of pleading timetable to avoid filing a defence before determination of appeal against refusal to stay proceedings - defendants contend that if successful on appeal any defence filed will not be required - Court proceeds on basis initial decision correct - defendants argue legal prejudice as pleading may entail forgoing ability to apply to stay proceedings - application for stay already dismissed - defendants argue should not have to plead as unsure of endurance of suppression order - suppression order generally refused and interim order made to preserve position pending appeal - parties ought to plead on assumption no suppression order will be in place - defendants contend that any defence filed will solidify parties in their positions undermining mediation efforts - parties already significantly at odds - defence will be protected by suppression order if defendants successful on appeal - steps involved in preparing defence will be required for any ADR proceedings.
• Legislation Cited: (NSW) Court Suppression and Non-publication Orders Act 2010, s 7
• Cases Cited: Rinehart v Welker & Ors [2011] NSWCA 345; Welker & Ors v Rinehart & Anor [2011] NSWSC 1238
• Category: Procedural and other rulings
• Parties: Hope Rinehart Welker (first plaintiff); John Langley Hancocok (second plaintiff); Bianca Hope Rinehart (third plaintiff); Gina Hope Rinehart (first defendant); Ginia Hope Frances Rinehart (second defendant)
• Representation: Counsel: D F C Thomas (plaintiffs); B A Coles QC (first defendant/applicant); F Kunc SC (second defendant); Solicitors: Johnson Winter & Slattery (plaintiffs); Corrs Chambers Westgarth (first defendant); Gadens Lawyers (second defendant)
• File Number(s): 2011/285907

Judgment (ex tempore)

1 HIS HONOUR: On 7 October 2011, I dismissed the defendants' applications for a stay of the present proceedings pending confidential mediation and arbitration, and ordered that the proceedings continue on pleadings [ Welker & Ors v Rinehart & Anor [2011] NSWSC 1238]. I directed that the plaintiffs file and serve a statement of claim within twenty-one days and that pleading thereafter continue in accordance with the rules of the Court. I reserved leave to the parties to apply to suspend or vary the timetable specified in that order in respect of pleadings.

2 On 4 November 2011, the plaintiffs filed a statement of claim of some fifty-nine pages. It was filed in an unverified form, under cover of a solicitor's letter which indicated that the plaintiffs were presently overseas and undertook to file verifications as soon as they were to hand. The Court has been informed that each plaintiff has now verified the statement of claim.

3 The defendants have filed applications for leave to appeal from the dismissal of their stay applications. Those applications are to be heard concurrently with any consequent appeal, potentially on 8 February 2012, although there is some risk that that date might not be able to be retained. In the meantime, the defendants have also obtained from Tobias AJA a suppression order pursuant to (NSW) Court Suppression and Non-publication Orders Act 2010, s 7, in substantially the same terms as the interim suppression order made by me on 7 October 2011 [ Rinehart v Welker & Ors [2011] NSWCA 345]. A review of that suppression order has been sought by the media interests, and is listed for hearing in the Court of Appeal some time in early December.

4 Today, the defendants move - pursuant to the leave reserved on the last occasion - for an order suspending the operation of the timetable in respect of pleadings, and adjourning the proceedings until after the anticipated hearing and determination of their appeal. Essentially, the defendants contend that they ought not be required to plead in these proceedings until the appellate proceedings have been resolved. This contention is advanced on a number of bases.

5 The first is that the statement of claim has not been verified. As I have said, it has been indicated to the Court that each plaintiff has now verified the statement of claim. I would in any event extend time for filing a defence until twenty-eight days after the verified statement of claim is filed and served. Beyond that, the absence of verification has nothing further to say on the question as to whether the requirement to plead should be suspended.

6 A further argument, and essentially the heart of the defendants' case, is the contention that if the defendants succeed in their application for leave to appeal and in any consequent appeal, the defence which they would otherwise be required to file will potentially not be required. First, upon an application of this type, the Court, whilst entertaining a healthy degree of suspicion as to the correctness of its orders, proceeds on the basis that its previous decision is prima facie correct. Adopting that approach, the probabilities are that a defence will be required. Secondly, and perhaps more significantly, even if a defence is not required in these proceedings, it is practically unthinkable in the context of the allegations made in this case that an arbitration would proceed without points of claim - which would no doubt mirror the statement of claim - and therefore also points of defence, which would mirror any defence that might be filed in these proceedings. Accordingly, it is most unlikely that a defence would be superfluous. Thirdly, while the possibility that costs might unnecessarily be incurred pending the hearing of the appeal would in some cases be a matter of concern, the resources in play in this case are such that that consideration matters little.

7 The next argument advanced was that there was at least the potential for legal prejudice to the defendants if they were required to plead before the question of a stay were resolved. Alternatively, it was put that, as a matter of principle, the stay proceedings should be resolved before pleading. These arguments were founded on (WA) Commercial Arbitration Act 1985, s 53, which provides that if a party to an arbitration agreement commences proceedings in a Court against another party to the agreement in respect of a matter agreed to be referred to arbitration, the other party may, subject to s 53(2), apply to that Court to stay the proceedings, and that the Court, if satisfied of certain matters, may do so. The proviso in s 53(2) is that such an application shall not, except with the leave of the Court in which the proceedings have been commenced, be made after the applicant has delivered pleadings or taken any other step in the Court proceedings than the entry of an appearance.

8 In my view there is no substance in the claim of legal prejudice. The application for a stay has already been made - before any pleading was delivered - and has been dismissed. The appellate proceedings are an appeal against that dismissal. It is not conceivable that the delivery of pleadings pursuant to a direction of the Court after the application has been dismissed and pending the hearing of an appeal from it, could prevent that application from being made - it having already been made - or impact upon the determination of an appeal which has already been filed; the appeal is not a fresh stay application. So far as the suggested principle is concerned, the fact that it is not a principle of universal application is apparent from the very circumstance that the section contains the provision that the Court may grant leave to make an application for a stay, even after pleadings have been delivered. In any event, as I have said, the application for a stay has already - subject to the appeal - been heard and determined.

9 Another basis advanced was that the defendants ought not be required to plead until they know the fate of the suppression order. It needs to be borne in mind that the application for a suppression order generally has been refused, and what is in place is an interim suppression order to preserve the defendants' position pending the outcome of the appellate proceedings; a similar order has been made by the Court of Appeal itself. The assumption on which the order for pleadings was made was that there would be no suppression order, and I would have thought that parties pleading would have proceeded on the assumption that there would be none. If the appeal succeeds, there will be a suppression order and any document filed will not see the light of day, except to the extent that it might later be used in any confidential mediation or arbitration. If the appeal fails, then as contemplated in my previous judgment, the document will see the light of day. It does not seem to me that situation prejudices the ability of the defendants to plead.

10 It was said that requiring the defendants to plead would potentially result in the solidification of the position of the parties, so as to reduce the prospect of a successful mediation. I accept that in family disputes sometimes the filing of detailed written material can cause relations to become exacerbated and positions to be hardened. In the context of the present proceedings, it is difficult to contemplate that the parties could be much more at odds than the litigation presently indicates they already are, but it is conceivable that the position could be somewhat exacerbated. That is a factor which needs to be taken into account. On the other hand, pleadings also refine disputes and issues, and in that way are often desirable precursors to alternative dispute resolution procedures. For that reason, the potential impact of pleadings on the mediation process is a finely balanced factor, which does say not tell strongly one way or the other.

11 As I have foreshadowed, the appeal is likely to be heard in early February 2012, although there is some possibility that it might not be heard until April. On the one hand, making the orders sought would, in effect, delay the filing of a defence, and the ultimate resolution of the proceedings, by that period. On the other, although it might be said that the proceedings have been disposed of with some expedition to this point and are being afforded some degree of expedition in the Court of Appeal, it is fair to say that they are not attended by utmost urgency, and it does not appear to be suggested that trust assets are at risk. In those circumstances, the countervailing considerations of delay and urgency do not weigh significantly one way or the other.

12 At its core, the defendants' argument (aside from the question of verification, which I have indicated will in any event be addressed) boils down to there being a possibility that a defence will not be required - which possibility is offset by the presumption of the correctness of the first instance decision and the fact that a defence will, almost certainly, be required in any event, in the alternative dispute resolution context - and the possibility that filing a defence might result in a hardening of the positions of the parties before any mediation - which is offset by the prospect that it might refine and define the issues in dispute between them, and the fact that the plaintiffs have clearly filed their pleadings. Indeed, it rather behoved the defendants to make this application, if it was to be made, before they had been served with and had the benefit of the plaintiffs' statement of claim, rather than making it after the plaintiffs had pleaded, but before the defendants were required to do so.

13 Significantly, the defendants' appellate rights will not be rendered nugatory or otherwise jeopardised by any requirement to file a defence. If they ultimately succeed on appeal, their defences will be protected by the suppression order. The steps involved in preparing a defence will be practically necessary to be undertaken in preparing for alternative dispute resolution in any event.

14 For those reasons, save for the variation that I have indicated will be made to accommodate the verification issue, I will dismiss the application.

[Counsel addressed as to the time to be allowed]

15 I extend the time for filing and service of the defences of the first and second defendants to forty-nine days after service of the plaintiffs' verified statement of claim. Assuming it were served today, that would be 4 January 2012. I note that it is not expected that the second defendant plead the identity of any alternative trustee that the second defendant might propose.

16 I order that the defendants pay the plaintiffs' costs of today.

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Decision last updated: 21 December 2011