18 May 2022
In the long-running Rinehart family litigation (Rinehart v Rinehart  NSWCA 66), the NSW Court of Appeal has ruled that a former trustee has obligations to promptly deliver documents and provide information to the trust’s new trustee.
In 2011, Bianca Rinehart and two of her siblings sought to remove Gina Rinehart as trustee of the Hope Margaret Hancock Trust. However, in 2015, Gina resigned as trustee before the court application was determined.
Similarly, in 2015, the court ordered Bianca be appointed as the trust’s new trustee, vested all the trust property in Bianca and required that Gina produce and deliver all trust documents in her possession to Bianca within 28 days.
There has since been several interlocutory applications about what “documents of the trust” meant.
In 2020, Bianca filed a motion seeking production of two classes of trust documents in Gina’s possession. Gina opposed production, contending that the documents sought were not “documents of the trust”. The primary judge disagreed. Alternatively, Gina argued that:
The primary judge was not satisfied that there was an abuse of process, ordering production of the documents but staying the orders pending the arbitration’s conclusion. This appeal in the NSW Court of Appeal concerned whether the documents in the two categories should be provided to Bianca, as the trust’s new trustee.
The Court of Appeal stated ordinarily an outgoing trustee must deliver all trust documents to the new trustee.
To the extent that Gina owned documents as a trustee, the title had vested in Bianca when Bianca became the trust’s trustee. Therefore, Gina was required to deliver what she had ceased to own at law to the new trustee. There is no reason why ownership of documents is different from the ownership of other chattels.
The Court of Appeal stated that if Gina, as trustee of a trust, was a co-owner of a document, the document or a copy of that document was still required to be provided to the new trustee. This is because a document jointly owned by the trust and another person or entity does not cease being a trust document because another party has an interest in it.
There is a duty of co-operation owed by the former trustee to the incoming trustee. This duty is to:
The Court of Appeal accepted that there is a discretion to excuse the outgoing trustee of their obligation to transfer documents or information to the incoming trustee. However, the onus is on the outgoing trustee to show why this should be the case.
Gina argued that Bianca was going to misuse the trust documents, by deploying them in Bianca’s personal capacity in an arbitration. The Court of Appeal stated:
The Court of Appeal held that any potential misuse of the trust documents is not a reason to withhold the production of documents.
The Court of Appeal overturned the primary judge’s reasoning that Bianca did not immediately need the documents and overturned the stay of the orders for production pending the arbitration’s conclusion.
The Court of Appeal stated that Bianca, as the trust’s trustee, is entitled to review trust documents and investigate any breach of trust. If a possible breach comes to her notice, she may need to investigate it. The Court of Appeal also said it is not an answer to an owner’s claim for possession of a chattel to say that the owner has no present need for the property.
The Court of Appeal therefore ordered that Gina deliver the documents within the two classes in dispute and dismissed Gina’s application for a stay or dispensation for production.
This case highlights three key lessons for trustees:
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Authors: Kim Nguyen
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