High Court: July 2019

Contract law 

Arbitration clause – construction of contract 

Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13 (8 May 2019) concerned the scope of arbitration clauses in certain deeds and whether the validity of the deeds could also be subject to arbitration under the deed. The appellants (Bianca Rinehart and John Hancock, children of Gina Rinehart) brought proceedings in the Federal Court concerning the conduct of Gina Rinehart, Hancock Prospecting Pty Ltd and others. It was alleged that Ms Rinehart dealt with companies in the Hancock Group to her benefit and to the detriment of assets (shares in Hancock Group companies) of trusts of which Ms Rinehart is the trustee and of which the appellants are beneficiaries.

Prior to lodging a defence, the respondents sought an order pursuant to s 8(1) of the Commercial Arbitration Act 2010 (NSW). That section requires a court to refer parties to a proceeding before the court to arbitration in certain circumstances. The respondents’ applications relied on several deeds.

Three of those deeds, the subject of this litigation, were said by the appellants to be void because of misconduct on the part of one or more of the respondents. Each of those deeds contained a clause providing that in the event of a dispute ‘under this deed’ there was to be a confidential arbitration. The question was whether a dispute about the validity of the deeds could be referred to arbitration under the clause in the deed. The trial judge held that it could not. The Full Court disagreed, holding that the clauses should be given a liberal interpretation by which the arbitrator could deal with all issues including in respect of validity. The High Court unanimously dismissed the appeal, holding that, understood in context, the arbitration clauses extended to claims about validity. This was not a case that had to be decided on the language alone – the background and purpose of the deeds pointed to wide coverage of the confidential arbitration processes.

The High Court also considered a cross-appeal from an aspect of the Full Court’s decision which held that three companies not parties to the deeds could not be referred to the arbitration because they were not persons claiming ‘through or under’ the deed. By majority, the High Court held that, having regard to the subject matter in controversy, the third party companies were claiming through or under the deed and therefore were ‘parties’ that could be referred to arbitration under s 8 of the Act.

Kiefel CJ, Gageler, Nettle and Gordon JJ jointly; Edelman J separately concurring on the appeal and dissenting on the cross-appeal. Appeal from the Full Federal Court dismissed; cross-appeal allowed.