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[2021] FCA 1009
Federal Court of Australia
2021-08-24
Charlesworth J
Original judgment source is linked above.
CHARLESWORTH J 1 On 12 and 15 July 2021 the Court made orders in appeal proceedings SAD137/2021 having the effect that an order for production I made in this action on 25 June 2021 (the production order) be stayed until further order. The production order was made consequent upon orders for further and better discovery made against the first respondent, Mrs Victoria Martin, on the same day. 2 The orders in relation to discovery were as follows: 3. Pursuant to the order in paragraph 8 of the orders made on 10 December 2020 the following documents are discoverable: (a) all Xero programmes and files implemented and maintained, since 2013, in relation to the Nordburger businesses conducted at: i. 168 The Parade Norwood; ii. 259 Port Road Hindmarsh; iii. 179 Glen Osmond Road Fewville; iv. 31 Moonta Street Adelaide; (the Xero programmes and files); and (b) to the extent that the Xero programmes and files referred to above do not identify the income, assets and liabilities of the trust or trusts (trust information) under the control of the Respondent in relation to which the Applicant is a beneficiary or eligible beneficiary, such electronic files in read only format) within the possession, power or control of the Respondent that does contain that trust information. 4. On or before 28 June 2021 the first respondent, Victoria Martin, is to file an amended list of documents in compliance with r 20.16 and r 20.17 of the Federal Court Rules 2011 (Cth) giving discovery of the documents referred to in order 3. 3 I will refer to the documents identified in [3] as the Xero database. The production order was as follows: 5. On or before 12 July 2021 the first respondent, Victoria Martin, is to produce for inspection the documents referred to in order 3 by way of electronic access to a read only version of the documents, such access to be facilitated by the provision of log in access to software that facilitates readable access to the materials. 4 The orders were made upon the determination of a dispute concerning the sufficiency of Mrs Martin's compliance with a standard discovery order made pursuant to r 20.14 of the Federal Court Rules 2011 (Cth) on 10 December 2020. The date for compliance with the standard discovery order was 15 February 2021. On 18 March 2021 Mr Hillier filed an interlocutory application seeking further and better discovery on the basis that information contained in the Xero database was discoverable in accordance with the standard discovery order. I allowed Mr Hillier's application for reasons first pronounced orally on 25 June 2021 and subsequently published on 29 June 2021: Hillier v Martin (No 4) [2021] FCA 710 (Hillier No 4). 5 Immediately after oral reasons were pronounced, Counsel for Mrs Martin informed the Court that he had instructions to make an application for leave to appeal. The date for production was fixed at a time that would enable Mrs Martin to prepare the foreshadowed application for leave and to apply for a stay of that order before the time for compliance arrived. Mrs Martin did not seek to have the discovery order stayed. By her Counsel, she made submissions as to an appropriate date for compliance. On 29 June 2021 Mrs Martin filed an amended list of documents identifying (at item 21) the Xero database as a document within her control. 6 In the course of case managing the application for leave to appeal, on 12 July 2021, Besanko J made an order to the effect that the production order be stayed until 5.00pm on 16 July 2021. His Honour later varied that order on 15 July 2021 so that the stay was expressed to operate "until further order". 7 As Counsel for Mr Hillier submitted, the order imposing the stay should be understood as having been made in the exercise of the power conferred under r 41.11 of Rules for the purpose of ensuring that the production order could not be enforced against Mrs Martin until the application for leave to appeal (and, if leave be granted, the appeal itself) was determined. 8 The application for leave to appeal was argued before Anderson J on 6 August 2021. On 12 August 2021, Anderson J made orders refusing leave to appeal: Martin v Hillier (No 2) [2021] FCA 958 (Martin No 2). 9 By letter dated 17 August 2021 (emailed to my Associate on the same date), Mr Hillier exercised the general liberty to apply so as to have the orders of Besanko J set aside. Mr Hillier sought a further order varying the time for compliance with the production order to (he later confirmed) 25 August 2021. The Court invited the other parties to promptly confirm whether the orders sought by Mr Hillier were opposed. Mrs Martin did not respond. 10 The second respondent, Nordburger Operations Pty Ltd, is a company of which Mrs Martin is a director. Operations became a party in the circumstances described in Hillier v Martin (No 5) [2021] FCA 949 (Hillier No 5). The other director is her husband Mr Thomas Martin. On 13 August 2021 Mr Martin filed a notice of address for service naming himself as the company's lawyer for the purpose of r 4.01(2) of the Rules. By an email to my Associate dated 18 August 2021, Mr Martin expressed opposition to the orders sought by Mr Hillier relevantly in the following terms: … The second respondent does not consent to, and will oppose, the orders sought by the applicant, on the following grounds: 1. the second respondent is the sole and exclusive legal owner of the documents sought for production; 2. the documents are in the control of the second respondent; 3. the documents are not in the control of the first respondent; 4. the second respondent was not heard on the discovery application; 5. the Federal Court Rules state, at FCR 20.13, that (3) An application [for discovery] may not be made until 14 days after all respondents have filed: (a) a defence; or (b) an affidavit in response to the affidavit accompanying the originating application. 6. accordingly, any order for discovery or production by the second respondent ought to await the close of pleadings, and ought to first require an application to be duly made in accordance with the Rules of Court, upon which the second respondent is allowed to be heard; 7. no urgency has been identified such as to warrant departure from the usual course provided for under the Rules of Court, or to give precedence to the discovery sought by the applicant, ahead of other parties' discovery, before all respondents have filed a defence; and 8. the second respondent is obtaining legal advice and representation in relation to the issue of discovery, and the proceedings generally. … 11 I have dispensed with the requirements of r 17.01 of the Rules in respect of Mr Hillier's application and I now determine it. 12 At the commencement of oral argument on 23 August 2021, Counsel for Mr Hillier foreshadowed a challenge to Operations' asserted entitlement to be represented by Mr Martin (a lawyer who does not presently hold a practising certificate issued under the Legal Practitioners Act 1981 (SA)). Counsel told the Court that disputes about Operations' legal representation could be agitated at another time and ought not present an impediment to the hearing proceeding on that day. To avoid any future argument as to Operations' legal representation at the hearing, I made an order that, to the extent necessary, Operations be granted leave to be represented by Mr Martin for the purpose of the argument. 13 Some of the background to these proceedings is set out in the earlier judgments of the Court in Hillier v Martin [2021] FCA 269 (Hillier v Martin), Hillier v Martin (No 2) [2021] FCA 509, Hillier v Martin (No 3) [2021] FCA 709, Hillier No 4 and Hillier No 5. Before proceeding further, it is necessary to repeat some salient parts of the background to the extent that it informs the present application. 14 Mr Hiller and Mrs Martin are brother and sister. They are in dispute over their rights and interests in the assets and income of a hamburger business trading as Nordburger. Mr Hillier's case is that the business was established pursuant to a joint venture agreement (JVA), such that any legal interests in the business assets and income were held by Mrs Martin on trust in accordance with the terms of the JVA. The JVA is alleged to have three participants: Mr Hillier, Mrs Martin and an entity that until recently had been described as the "Craig Interests". By his Third Amended Statement of Claim (3ASOC), Mr Hillier defines the "Craig Interests" as the company Erik Vari Pty Ltd, now joined as the third respondent. Erik Vari Pty Ltd has advised the Court that it abides the event in the proceedings. 15 By [3] of the 3ASOC, it is alleged: In or about September 2005, the Applicant agreed with Andrew Craig (Craig), his personal accountant of William Buck and Associates (William Buck), on behalf of interests associated with Craig (the Craig Interests being the Third Respondent an entity controlled by Craig's father, Robert Craig), that the Craig Interests would have a thirty per cent beneficial interest in the Applicant's share in NCM Pty Ltd. 16 The facts said to support the formation of the JVA are pleaded at [10] of the 3ASOC. On 10 December 2020 I refused (in part) an application of Mrs Martin to strike out various parts of Mr Hillier's pleading, including [10] (to which further particulars have since been included). I have previously determined that whether the facts are capable of proving the JVA is a matter properly to be determined at trial. In her defence filed on 29 January 2021, Mrs Martin denies that the facts there pleaded are capable of supporting a finding that the JVA was entered into. 17 Mr Hillier alleges that Mrs Martin breached her duties as trustee of a trust arising out of the JVA by, among other things, establishing a new trust (known as the Nordburger Holdings Trust), appointing Operations as the trustee and transferring all of the business assets to Operations. Mr Hillier alleges that whilst he and Mrs Martin are named as the two primary beneficiaries of the Nordburger Holdings Trust, the terms of the Deed establishing that trust are not consistent with the terms of the alleged JVA. More specifically, Mr Hillier asserts that he has at least a 40% equitable share in the assets and income of the Nordburger business, whereas under the Deed establishing the Nordburger Holdings Trust, his interest is that of a discretionary beneficiary. 18 In Hillier No 4, I concluded that the Xero database was directly relevant to the issues to be determined between Mr Hillier and Mrs Martin including because Mr Hillier maintained a claim for equitable compensation and the content of the database bore on the assessment of any such award (at [40] - [42]). 19 Of course, it will only be necessary to quantify any such award if Mr Hillier succeeds in his claim that by establishing the Nordburger Holdings Trust and/or transferring the assets of the Nordburger business to Operations, Mrs Martin breached any pleaded duty owed to him. There are a multitude of issues in dispute (including the existence of the JVA itself), and there has been no order in the proceedings for the trial of any issue prior to any other. 20 On the present application, Mr Hillier submitted that the order of Anderson J dismissing Mrs Martin's application for leave to appeal automatically operated to lift the stay imposed by the orders of Besanko J. I do not accept that submission. The relevant order is expressed so as to remain in force "until further order". It was not expressed in self-expiring terms by reference to any particular event. 21 However, I do accept the submission that the orders of Besanko J were directed to achieve a specific purpose. The stay has served the purpose for which it was imposed, that is, to protect Mrs Martin from enforcement procedures pending the exercise of her right to apply for leave to appeal and the disposition of that application. 22 I will now summarise Mrs Martin's positon before considering the reasons advanced by Operations as to why the orders of Besanko J should not be set aside.
Mrs Martin's position 23 In opposing the order for further and better discovery, Mrs Martin did not contend that the Xero database was not a document within her control. Through her Counsel, she has acknowledged that she must comply with the order for production. She confirmed that the production order was expressed in a way that did not on its face give rise to any obstacle to compliance. Counsel for Mrs Martin properly acknowledged that non-compliance with the order has potentially serious consequences. Counsel acknowledged that the timeframe proposed for production (two days hence) is sufficient for compliance. 24 Mrs Martin's acknowledgement that she is in control of the Xero database (within the defined of the phrase is consistent with the position she has adopted throughout the proceedings. It appears to reflect the statutory right of a director to access a company's books and financial records conferred under s 198F and s 290(1) of the Corporations Act 2001 (Cth), which provide: 198F Right of access to company books Right while director (1) A director of a company may inspect the books of the company (other than its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. Right during 7 years after ceasing to be director (2) A person who has ceased to be a director of a company may inspect the books of the company (including its financial records) at all reasonable times for the purposes of a legal proceeding: (a) to which the person is a party; or (b) that the person proposes in good faith to bring; or (c) that the person has reason to believe will be brought against them. This right continues for 7 years after the person ceased to be a director of the company. Right to take copies (3) A person authorised to inspect books under this section for the purposes of a legal proceeding may make copies of the books for the purposes of those proceedings. Company not to refuse access (4) A company must allow a person to exercise their rights to inspect or take copies of the books under this section. Interaction with other rules (5) This section does not limit any right of access to company books that a person has apart from this section. … 290 Director access Personal access (1) A director of a company, registered scheme or disclosing entity has a right of access to the financial records at all reasonable times. ... 25 For the purposes these provisions, the word "books" is defined in s 9 to include: (a) a register; and (b) any other record of information; and (c) financial reports or financial records, however compiled, recorded or stored; and (d) a document; … 26 Counsel for Mrs Martin confirmed that she must and would make a request for access to the Xero database. I understood that submission to intimate that such a request may indeed be necessary. Counsel informed the Court that it may be the case that Mrs Martin may not be able to exercise the right of access.
Mr Martin's submissions 27 Mr Martin's email of 18 August 2021 asserted that it was Operations that was in possession of the Xero database and not Mrs Martin. When asked to address the Court on the statutory provisions to which I have just referred, Mr Martin appeared to be unfamiliar with them. In the course of the hearing, Mr Martin informed the Court that he did not rely on the allegation that Mrs Martin did not have possession for the purposes of the hearing, but at the same time said that he "did not concede the point". He tentatively suggested that the Xero database may not fall within the statutory definition of the word "books" 28 For immediate purposes it is unnecessary to express any view about the consequences of Mr Martin appearing to reserve a presently unarticulated right or purported right to prevent Mrs Martin obtaining access to the Xero database for the purposes of complying with the production order. Mr Martin submitted that arguments on that question can be advanced at another time.
Pleadings 29 Mr Martin submitted that Mr Hillier should not have the benefit of the discovery orders because the 3ASOC is so defective that it discloses no cause of action. He submitted the alleged facts and circumstances upon which Mr Hillier relies in support of the formation of the JVA are incapable of proving the existence of a binding agreement. He submitted that the 3ASOC disclosed no connection between Mr Andrew Craig (the accountant named in [3] of the 3ASOC) and Erik Vari Pty Ltd. He submitted that there was no evidence to establish any such connection and that the entire proceedings had been conducted by Mr Hillier on the basis of false allegations that had no foundation in truth. His submissions were to the effect that Operations would be prejudiced by the lifting of the stay because the allegations in the 3ASOC attacking the validity of the Nordburger Holdings Trust were false. He said that he had documents in his possession that would prove that the dealings between Mr Hillier and Mr Andrew Craig were designed to conceal the role of Mr Craig in certain transactions with other persons. His submissions were to the effect that the stay of the production order should not be lifted unless and until the asserted defects in the 3ASOC were resolved. 30 I am not satisfied that the matters raised in those submissions provide a proper basis for refusing to make the orders sought by Mr Hillier for two reasons. 31 First, on the limited submissions made by Mr Martin I am not presently satisfied that there is a proper basis to strike out the whole of Mr Hillier's pleading or any part of it. Mr Martin did not have the pleading before him when making his submissions. He did not take the Court to any particular paragraph to demonstrate non-compliance with the Rules. To the extent that the pleading is lacking in detail, he did not explain why his complaints could not be resolved by a proper request for particulars, and he confirmed that no request for particulars had been made in any event. 32 Second, Mr Martin's complaints as to the sufficiency of the pleading merged impermissibly into arguments as to whether Mr Hillier's allegations will ultimately be proven at trial. To that end, Mr Martin sought to tender a number of business records which, he said, would disprove the pleaded allegations. I upheld an objection to the tender of that material on the basis that it formed no part of the Court's present task to determine questions of fact that will ultimately arise for determination on the basis of all of the testimony and documentary evidence admitted at the trial. As to whether the 3ASOC pleads sufficient facts to support a finding that there was a binding JVA in existence, that is a matter that has previously been the subject of submissions before me. Mrs Martin has pleaded (not improperly) that the facts alleged by Mr Hillier, if proven, cannot support a finding that there was a binding JVA. Whether Operations has a proper interest in re-agitating the same pleading arguments can also be deferred to another time. 33 Whilst Counsel for Mrs Martin confirmed that she was in agreement with the submissions of Mr Martin in respect of the asserted defects in the 3ASOC (if not their consequences), Counsel confirmed that he was not instructed to rely upon any such issue as a basis for opposing the order presently sought by Mr Hillier. To my mind, that raises a question as to whether the two directors of Operations (Mr and Mrs Martin) are in accordance with each other as to the position that it should adopt in opposition to the particular application that is presently before me. That, too, is a question that is unnecessary to decide. The two factors referred to in [31] and [32] above are sufficient to reject Mr Martin's submissions on this topic, on the usual assumption that he was properly instructed by Operations' board of directors or some other organ of the company to advance them.
Timing of order 34 In his email, Mr Martin placed reliance on r 20.14 of the Rules. It provides that an application for discovery may not be made until 14 days after all respondents have filed (relevantly) a defence. He submitted that "any order for discovery or production" should await the close of pleadings and then be the subject of a formal application on which Operations would be entitled to be heard. He submitted that no urgency had been identified to "warrant departure from the usual course" provided for under the Rules. 35 As for r 20.14, Mr Martin's submission fails to appreciate that the order presently sought by Mr Hillier is not an order for discovery. As mentioned at the beginning of these reasons, the obligation to discover the Xero database arose by virtue of the standard discovery order made on 10 December 2021. It was made in circumstances where both Mr Hillier and Mrs Martin agreed that an order for standard discovery should be made. The discovery order has not been stayed and Mrs Hillier complied with it on 29 June 2021. The original deadline for giving standard discovery was six months ago. 36 Mrs Martin and Mr Hillier agreed the timeframe for the giving or discovery and the production of documents. Their representatives each told the Court that it would be sensible to defer consideration of an application for interim and interlocutory relief (contained in Mr Hillier's originating application) until the parties' obligations to give standard discovery were discharged. To the extent that the Court made an order for discovery before Mrs Martin had filed a defence, the Court's order prevails over any inconsistent Rule: Rules, r 1.35. It is otherwise explained by the consensual position adopted by the parties to the proceeding at that time. The circumstance that additional respondents have since been joined does not set any prior order relating to discovery at nought, and nor should it. 37 At the time of the hearing on the present application, Mrs Martin was in default of an order that she file an amended defence by 18 August 2021 and Operations was in default of an order that it file its defence on the same day. Whilst those deadlines were extended at the conclusion of the hearing, there is no material before me to indicate that the pleadings filed by either of them will narrow the issues in dispute. There is no reason to suppose that either Mrs Martin or Operations will admit that Mr Hillier is entitled to an award of equitable compensation and no reason to suppose that the parties will agree the quantum of the award or the method for its assessment. 38 As for the submission concerning the absence of any urgency, the necessary consequence of Hiller No 4 and Martin No 2 is that Mrs Martin was obliged to produce the Xero database more than six months ago. There is nothing unusual about a court moving promptly to revoke an order imposing a stay in circumstances where the purposes for the order are plainly spent. Mr Hillier is entitled to the benefit of the order and the ongoing dispute concerning the Xero database is preventing the progression of the whole of the matter to trial. 39 Mr Martin's submission that Operations has not been heard in respect of the orders made against Mrs Martin is dealt with under the heading "Procedural fairness" below. 40 In all of the circumstances described in these reasons, I do not consider r 20.14 of the Rules provides a proper basis for refusing to grant the orders now sought by Mr Hillier.
Allegations of misconduct 41 Not for the first time, Mr Martin complained that in support of the application for interim and interlocutory relief made from the outset of the proceedings, allegations were made against him that were unfounded and defamatory. The same complaints are the subject of my judgment in Hillier v Martin and need not be repeated here. 42 Mr Martin is not a party to these proceedings, although he has been permitted to make submissions to the Court in different capacities at previous hearings, including in his personal capacity. On the material presently before me, it is not clear what point Operations is seeking to make in connection with the complaints previously made to the Court concerning Mr Martin's personal reputation. Whilst it may be accepted that Mr Martin is personally aggrieved by allegations made against him in the proceedings, the relevance of those allegations on the present application has not been clearly articulated. To the extent that it is submitted that Mr Hillier seeks to inspect the documents for an improper purpose relating to his complaints, that submission is not made good on the material before me.
Procedural fairness 43 Mr Martin's submission that the Xero database is the property of Operations may be accepted. 44 It does not follow that the Xero database is not directly relevant to the issues to be determined as between Mr Hillier and Mrs Martin. 45 The question of whether the Xero database is discoverable as between Mr Hillier and Mrs Martin has been determined in Mr Hillier's favour. 46 In Hillier No 4, the Court had before it written submissions of Mrs Martin which in large part concerned the likely effect of the production order on the interests of the Nordburger business (operated by Operations as trustee), including material concerning the asserted commercial confidentiality in the information. The Court read an affidavit of Mrs Martin affirmed on 16 November 2020 in which Mrs Martin, referring to her capacities as director and managing director, explained how the documents were said to be commercially confidential. On 25 June 2021 the Court also read an affidavit of Mr Martin in support of an application he made (with leave, on behalf of Operations) to adjourn the proceedings and so defer the pronouncement of orders and the delivery of reasons for judgment on that day. That affidavit, too, asserted facts concerning the detrimental effect of the order for production on Operations. As explained in Hillier No 4, the matters contained in Mr Martin's affidavit were repetitive of the submissions and evidence already received by the Court and were taken into account particularly in the exercise of the discretion to make the production order. 47 In refusing to grant the adjournment on 25 June 2021, I observed that Mr and Mrs Martin (the only directors of Operations) had appeared at most, if not all, of the multitude of hearings conducted thus far in these proceedings. Regardless of the precise date on which Operations was formally joined as a party (as to which see Hillier No 5), I remain satisfied that both of its directors have from the outset been aware of the potential impact of the Court's orders on Operations and both have in fact made submissions with a view to protecting and advancing those interests. 48 In all of the circumstances, I do not accept that considerations of fairness warrant the stay remaining in place until after Operations has filed a defence and beyond. A stay imposed for the purpose of preserving the subject matter of an appeal requiring leave ought to be promptly lifted once that purpose falls away. In the general run of cases, a stay is expressed in terms that expire upon the disposition of an application for leave to appeal, without the need for the Court to hear any argument on the issue. 49 Finally, it should be mentioned that Mr Martin complained in the course of his submissions that he had been afforded too little time to prepare for the hearing in respect of the issue presently before the Court. However, Mr Martin did not apply for an adjournment when the Court asked what orders he sought on the basis of those complaints. After the Court received Mr Martin's email of 18 August 2021, the issues agitated by him were set down for a hearing after consulting with the parties. The parties were encouraged to agree a program for filing affidavit materials. Mr Martin did not communicate his preferred position on a program to the Court, nor did he reach an agreement with Mr Hillier's solicitor when urged by the Court to do so. The Court fixed a program in the absence of an agreement. In a later communication to the Court Mr Martin suggested that he should be provided with more time (a number of hours) to prepare an affidavit, but he did not make an application for the hearing time to be deferred. 50 The Court has moved promptly to determine the present application because of the importance of the parties complying with procedural orders that are not the subject of any pending appeal. In addition, the disputes over discovery of the Xero database have prevented this matter progressing in an expeditious way to trial. It is reasonable to anticipate that the information recorded in the Xero database is of a nature that will take some time for the parties to consider and incorporate into their trial affidavits (including expert affidavits). The Xero database should now be produced so that there can be some chance of a trial of this matter commencing within two years of its commencement. 51 Whilst Mr Martin foreshadowed reliance on his earlier affidavit of 25 June 2021, he ultimately did not ask the Court to read that affidavit in evidence for the purpose of supporting a finding of fact. He did not suggest that he had been deprived of the opportunity to prepare any other evidence on a particular question of fact upon which the present application may turn. 52 Given that the original contention concerning possession of the Xero database was not ultimately pressed (at least for now), Mr Martin did not identify any question of fact that could have been the subject of additional affidavit evidence in any event.
CONCLUSION 53 The discovery order was made in the adjudication of an interlocutory dispute between Mr Hillier and Mrs Martin. That Mrs Martin does not oppose the lifting of the stay weighs heavily in favour of making the order sought. I do not accept the submissions that have been advanced by Mr Martin as Operations' representative. To the extent that I have been invited by Mr Martin to consider the substantive merits of Operations' foreshadowed defence at trial, I have not done so. 54 I will make orders substantially to the effect sought by Mr Hillier, including an order varying the time for Mrs Martin to comply with the production order. No party has suggested that a period of two days is insufficient for compliance. Accordingly, the time for compliance will be varied to 4.30 pm on 26 August 2021. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.
Hillier
Martin