Hillier v Martin

Federal Court of Australia|2021-10-11|Before: Charlesworth J

Counsel for the Applicant: Mr R Whitington QC with Ms H Doyle

Solicitor for the Applicant: Sykes Bidstrup

Solicitor for the First Respondent: Norman Waterhouse

AND: VICTORIA MARTIN First Respondent

NORDBURGER OPERATIONS PTY LTD Second Respondent

order made by: CHARLESWORTH J DATE OF ORDER: 11 OCTOBER 2021

Norman Waterhouse Lawyers is to reimburse any company or entity in the Nordburger Group from which Norman Waterhouse Lawyers have received payments of fees and disbursements in connection with the representation of the first respondent in the within proceedings, such amounts to be paid into court pending the determination of these proceedings. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

CHARLESWORTH J 1 By an interlocutory application filed on 8 September 2021 the applicant, Mr James Hillier, sought three orders. These reasons are concerned with the order sought in the third paragraph, namely that: Norman Waterhouse Lawyers reimburse any company or entity in the Nordburger Group from which Norman Waterhouse Lawyers have received payments of fees and disbursements in connection with the representation of the first respondent in the within proceedings, such amounts to be paid into court pending the determination of the within substantive proceedings; and 2 For the reasons that follow, I am satisfied that it is appropriate to make an order in the terms sought.

BACKGROUND 3 The parties are in dispute as to the ownership and control of a hamburger business trading as Nordburger. Mr Hillier is the brother of the first respondent, Mrs Victoria Martin. 4 Mr Hillier's case is that there exists a joint venture agreement involving himself, Mrs Martin and the third respondent Erik Vari Pty Ltd. He alleges that, pursuant to the joint venture agreement, the assets of the business were held by the company Nordburger Pty Ltd, of which Mrs Martin was sole director and shareholder. He seeks a declaration to the effect that at all material times Mrs Martin held the shares in Nordburger Pty Ltd on trust for the joint venturers on the terms of the joint venture agreement. The material times date back to late 2012 when the joint venture was allegedly formed. I will refer to the trust alleged by Mr Hillier as the JV Trust. Mr Hillier asserts an equity share in the corpus and income of the JV Trust of at least 40%. He acknowledges Mrs Martin has an interest of at least 20% in the same. 5 Among other things, Mr Hillier alleges that Mrs Martin caused the assets of the business to be transferred to Nordburger Operations Pty Ltd in circumstances constituting a breach of the joint venture agreement, breach of fiduciary obligations arising by virtue of the JV Trust, and a fraud on a power in respect of the JV Trust. He alleges that the transfer had no valid effect on the terms and operation of the joint venture agreement. He alleges that the transfer was undertaken at a time when Mrs Martin was the sole director and shareholder of both Nordburger Pty Ltd and Operations and the controlling mind of each entity. Among other things, Mr Hillier seeks a declaration that Operations holds the business assets on trust for the benefit of the joint venture participants and on terms consistent with the joint venture agreement. 6 The fact of the transfer to Operations does not appear to be disputed. It is Mrs Martin's case that the transfer occurred in the context of a restructure of the business in late 2019. Mrs Martin denies the existence of a joint venture agreement and so denies the existence of any trust arising out of any such agreement. She alleges that Operations holds the business assets as the duly appointed Trustee of the Nordburger Holdings Trust (NH Trust), being an express trust settled by Deed (the NHT Deed) shortly prior to the transfer. According to the NHT Deed, Mr Hillier and Mrs Martin are the only primary beneficiaries. There appear to be many other persons meeting the description of secondary beneficiaries. 7 It is Mrs Martin's case that the terms of the NHT Deed are consistent with the terms of a prior family trust and reflect the prior legal relations between her and Mr Hillier in respect of their past business activities. She denies that Vari has any interest in the business, whether by virtue of any joint venture agreement, or at all. 8 The above summary is based on my current understanding of the pleadings and is not intended to be exhaustive of all of the issues to be tried. For present purposes it is sufficient to identify that the legal controversy to be determined at trial concerns the existence (or otherwise) of the JV Trust and the validity of the NH Trust as constituted by the NHT Deed. The factual subject matter of that controversy is a business that is a going concern and that (on the limited materials presently before me) appears to have been in a sound financial state at the time of the preparation of its accounts for the 2019 financial year. 9 It is important to emphasise that on the cases of both Mr Hillier and Mrs Martin, the assets of the Nordburger business are held on trust. Mrs Martin does not plead that Operations is owner of the trust assets other than in its capacity as a trustee. It is convenient to refer to the assets of the whole of the Nordburger business enterprise as the "trust assets" irrespective of the identification of the proper trust governing the relations between Mr Hillier and Mrs Martin. The identification of the proper trust is an issue yet to be tried. 10 Operations was joined as a party to these proceedings by virtue of orders made in June 2021. At the time of the publication of these reasons it has not filed a defence, although it proposes to do so. Vari has informed the Court that it proposes to submit to the outcome, although it is awaiting a defence to be filed by Operations before confirming its position. 11 It does not appear to be disputed that Operations is a company that forms a part of a group of associated companies referred to by the parties in their submissions as the Nordburger Group. 12 When these proceedings were first commenced, Mrs Martin was the sole director of Operations and the sole appointer under the NHT Deed. There appear to have been changes in the control of the NH Trust since the proceedings were commenced. Those changes are not presently reflected in the pleadings of any party. 13 Mrs Martin has at all times been legally represented in the proceedings by the firm Norman Waterhouse Lawyers (NW). 14 By a notice of address for service filed on 13 August 2021, Operations identified Mr Martin (the husband of Mrs Martin) as its lawyer. There is an application before the Court for an order that Mr Martin is not entitled to act or should otherwise be restrained from acting in that capacity. That application is yet to be decided and does not bear on the present application. 15 The following additional background is uncontroversial: (1) The financial records of the business are managed by way of a software accounting program known as Xero in a database referred to as the "Xero database". (2) At the commencement of the proceedings, Mr Hillier made an application for interlocutory relief by which he sought (among other things) production of the information contained in the Xero database. (3) On 10 December 2020 (before the interlocutory application was resolved), Mrs Martin consented to an order for standard discovery. (4) By an interlocutory application dated 18 March 2021, Mr Hillier sought an order for further and better discovery specifically in connection with the information contained in the Xero database. In opposing that application, Mrs Martin alleged that the information contained in the Xero database was not directly relevant and (in addition) that she should not be required to produce the information to Mr Hillier in any event because he was at that time engaged in a competing business. (5) Mr Hillier's application was allowed: Hillier v Martin (No 4) [2021] FCA 710 (Hillier No 4). Mrs Martin made an unsuccessful application for leave to appeal from that judgment and orders: Martin v Hillier (No 2) [2021] FCA 958 (Hillier No 2). (6) NW received instructions from Operations for the limited purpose of making a brief submission on its behalf on 24 June 2021, before orders were made joining Operations as a respondent. It has not otherwise purported to act as Operations' representative and the Court is aware that it has previously refused to accept service of documents on the company's behalf. 16 Following the delivery of judgment in Hillier No 2, Mr Martin informed the Court that the Xero database may contain information that is subject to claims of legal professional privilege. He confirmed that the information was in the nature of narrations on invoices contained in the database issued by lawyers. He confirmed that the lawyers included NW. He said that the privilege was that enjoyed by Operations and other entities in the Nordburger Group. 17 Mrs Martin subsequently informed the Court that she also asserts legal professional privilege in respect of information disclosed in invoices contained in the Xero database. That claim was first advanced by way of an affidavit affirmed by her solicitor Mr Stephen Williams (of NW) on 8 September 2021. Mr Williams asserted that Mrs Martin: … claims privilege over certain information contained in the database, being invoices from her solicitors. 18 No other particulars of the claim were given.

THE APPLICATION 19 The order sought on the present application is directed in its terms to NW. It is not directed to Mrs Martin, nor is it directed to Operations. It is expressed in terms requiring the reimbursement of monies received by NW in connection with its representation of Mrs Martin in these proceedings, but not in connection with any other subject matter. 20 Counsel for Mr Hillier submitted that there was no need at present for an order restraining Mrs Martin from paying any future legal costs incurred in connection with the substantive proceedings out of the trust assets. It was submitted that if the order were to be made, Mrs Martin would be "bound by her duties as claimed trustee not to make any such future payment". 21 Counsel acknowledged that the order may therefore affect Mrs Martin's interests because if she were to act in accordance with the principles underpinning the order, she should refrain from turning to the trust assets for indemnification of any obligations she may owe to NW. Counsel said that if the present application were allowed, Mr Hillier would seek assurances from Mrs Martin that she would not do so. Counsel said that the application was deliberately cast in limited terms for that reason. Counsel intimated that if an assurance of the kind just mentioned was not given by Mrs Martin, a further application may be made. 22 Mr Williams accepted service of the present application on behalf of NW. Following service, Mr Hillier's solicitor requested that NW provide an urgent indication as to whether the firm proposed to appear at the hearing of the application in its own right and make submissions without being joined as a respondent to the proceedings. The correspondence stated that if no response was received, Mr Hillier may file a further interlocutory application seeking orders that NW be joined to the proceedings as a respondent to the interlocutory application. NW did not respond to that correspondence. No representative of NW attended at the hearing of the application to seek an audience on the firm's behalf, although Mr Williams was in attendance in his capacity as Mrs Martin's solicitor. 23 I conclude that NW does not seek to be heard (including on the question as to whether it should be joined as a party) and so consider it appropriate to determine the application in its absence. Given its status as a law firm and a solicitor on the record in the proceedings, there is no reason to suppose that NW would not comply with the order should it be made, notwithstanding that it is a non-party. The Court's attention has not been drawn to any matter that may affect NW's ability to comply with the order in any practical sense should it be made. 24 Operations has not sought to be heard on the application. It did not attend on the day listed for hearing by the decision of its representative Mr Martin. It is not necessary to discuss the reasons for his decision here.

Submissions 25 Mr Hillier's application proceeds from the following propositions: (1) Entities in the Nordburger Group have paid NW's invoices in connection with Mrs Martin's defence of these proceedings; (2) by virtue of the nature of the allegations made against her, Mrs Martin has no present entitlement to cause Operations or the other entities in the Nordburger Group to pay fees and disbursements owed by her to NW in connection with her legal representation; (3) the lack of entitlement arises by virtue of a substantive legal principle affecting the administration of trusts (discussed below) in the context of hostile litigation such as the present; and (4) the order sought gives effect to that principle. 26 Counsel for Mr Hillier submitted that the mechanism of the payment into court of the reimbursement amounts is a means by which the legal fees incurred in the proceedings may yet be paid from the trust assets, if it be appropriate to make such an order in light of the outcome of the proceedings once that outcome is known. 27 The application is opposed by Mrs Martin. On her behalf it is submitted that: (1) the application is in the nature of a mandatory interlocutory injunction and, accordingly, the preconditions for the exercise of the Court's jurisdiction to grant an injunction must be satisfied before the order can be made; (2) there is no serious question to be tried, either in the substantive proceedings or in respect of the factual question of whether Mrs Martin is presently turning to the trust to fund her defence; (3) the balance of convenience favours the dismissal of the application, including because it has not been shown that Mrs Martin would be unable to reimburse Operations from her own resources should it transpire that she has no entitlement to turn to the trust assets to meet her obligations to NW in respect of her fees at the conclusion of the case; (4) relatedly, if there be no entitlement to draw on the trust assets pending judgment, an order for damages against Mrs Martin at the conclusion of the trial would suffice; and (5) the application must be supported by an undertaking as to damages which has not been offered by Mr Hillier. 28 Whatever be the source of jurisdiction, it was submitted that Mrs Martin's present asserted entitlement to draw on the trust assets to fund her defence arises by virtue of the existence of the NH Trust and (by that mechanism), her control of the trust assets, (including its bank accounts) for the purpose of paying any of NW invoices. 29 Counsel for Mrs Martin submitted that the present application was akin to that which might be made by plaintiff minority shareholders in proceedings alleging oppression under the Corporations Act 2001 (Cth). Counsel referred to cases in which such plaintiffs had sought to restrain the majority defendants from drawing on the assets of the company to fund their defence. Examples are to be found in Sellar v Lasotav Pty Ltd, in the Matter of Lasotav Pty Ltd [2008] FCA 1766 and Sandalciyan v International Development and Construction Pty Limited [2010] FCA 1145; 80 ACSR 31 (the oppression cases). In each case, Foster J proceeded on the basis that principles governing applications for interlocutory injunctions were to be applied (whether directly or by analogy). His Honour concluded that the grant of relief at the interlocutory stage would not be appropriate in circumstances where it appeared that there would be ample funds to make the necessary adjustments in the financial accounts of the company at the conclusion of the proceedings to reflect the ultimate outcome and the parties' respective cost entitlements (at [33] and [81] respectively). 30 In Sellar, Foster J determined that for the purposes of injunctive relief there was a serious question to be tried, but said that that was not the end of the matter. His Honour continued (at [30]): … None of the authorities to which I have been referred involved an application for interlocutory relief founded upon the same ground as the ground relied upon by the plaintiffs in the present application. Further, some of those authorities support the proposition that, because it may be difficult to determine on an interlocutory basis which costs may be regarded as the legitimate responsibility of the corporate defendants over which the oppression suit is being fought, courts are reluctant to make a determination in advance, ie, at an interlocutory stage (Fexuto 28 ACSR 688 at 733; 20 - 28; Re A Company (No 001126 of 1992) [1994] 2 BCLC 146 at 155-156; Grace 25 ACLC 141; [2007] NSWSC 6 at [49] to [52] and at [59] to [61]). This latter point may not be a very strong point in favour of the first, second, fourth and fifth defendants in the present case but is one that nonetheless needs to be weighed in the balance. It seems to me that the Court is generally reluctant to interfere at the interlocutory stage with the payment of legal fees and expenses unless there is good reason to do so. 31 After the conclusion of the oral argument, Mrs Martin filed an affidavit deposing to her resignation as a director of Operations. I have not been asked to read that affidavit for the purposes of determining this application. My conclusions on this application are unaffected by any such recent change in the control of Operations as the corporate trustee of the NH Trust.

SOURCE AND NATURE OF THE POWER 32 As Counsel for Mrs Martin correctly submitted, it is necessary to identify the source and nature of the Court's jurisdiction to make the order sought so that the correct principles can be stated and applied. 33 This Court is created by s 5 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). It is a superior court of record and is a court of law and equity: FCA Act, s 5(2). The Court has such original jurisdiction as is vested in it by laws made by the Parliament: FCA Act, s 19(1). Section 22 of the FCA Act provides: The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided. 34 In the substantive proceedings, the Court's jurisdiction is attracted by (at least), Mr Hillier's invocation of the Competition and Consumer Act 2010 (Cth), being a law of the Parliament. In accordance with s 22 of the FCA Act, the Court has jurisdiction to adjudicate upon the whole of the matter, which includes all such claims as are founded in equity. 35 The subject matter of the controversy being within the Court's jurisdiction, the Court may make such interlocutory orders "of such kinds … as the Court thinks appropriate": FCA Act, s 23. 36 The order presently under consideration is interlocutory in the sense that it does not finally determine the rights between the parties as asserted in the initiating process or the pleadings. 37 Counsel for Mr Hillier submitted that the Court's jurisdiction under s 19 and s 23 of the FCA Act extends to doing all things necessary for the proper conduct of the proceedings. I accept that submission. To the extent that it is necessary to identify any further statutory conferral of power it may be found in r 1.32 of the Federal Court Rules 2011 (Cth), which confers upon the Court discretionary power to make any order it "considers appropriate in the interests of justice". Counsel also referred to the Court's implied powers, which to my mind are unnecessary to draw upon in light of the breadth of the express powers to which I have referred. 38 Counsel for Mr Hillier submitted that the circumstance that an order is interlocutory and that it mandates a person to do a positive act does not have the consequence that the order is in the nature of a mandatory injunction. By way of example, Counsel referred to the Court's power to make an order for security for costs and the power to order discovery and production of documents. Orders of those kind compel a person to do a positive act at an interlocutory stage, but the principles governing the grant of interlocutory injunctions have no application to them. 39 Counsel submitted that the legal principles justifying the order in the present case are those explained by Lightman J in Alsop v Wilkinson (a firm) v Neary [1996] 1 WLR 1220 (at 1223 - 1224) and Hallen J in Rattigan v Hanly [2020] NSWSC 1722. Those cases, it was submitted, explain a rule in respect of the administration of a trust in the context of hostile litigation. The effect of the rule, it was submitted, is to preclude Mrs Martin from drawing on the trust assets to fund her defence in the proceedings (at least prior to judgment) as a matter of substantive law.

The trust cases 40 The trust cases are to be considered having particular regard to their procedural context. 41 The applicants in Alsop were trustees who had been joined in an action in the Chancery Division of the High Court of England and Wales. In the substantive action, the plaintiffs sought (among other things) a declaration that the transfer of assets into two trusts administered by the trustees were void under personal insolvency legislation. The trusts were settled and the transfers made by another defendant who had named himself among the beneficiaries. The trustees applied for directions as to whether to defend the proceedings (referred to as a Beddoe application after Re Beddoe, Downes v Cottan [1893] 1 Ch 547) and for a pre-emptive costs order. The applications were made by summonses within the substantive action. Both applications were refused. 42 Lightman J described the trustees as being in a dilemma in deciding what course they should take in the proceedings (at 1223). The settlor was defending the proceedings and the settlor's wife (also a beneficiary of the trusts) had threatened proceedings for breach of trust against them if they did not also defend the suit. In that context, Lightman J was asked to consider the correctness of an earlier decision to the effect that trustees of settlements in general have a duty to defend actions challenging the validity of the settlements and accordingly should have their costs out of the settlement whatever the outcome of the action: see Ideal Bedding Company Limited v Holland [1907] 2 Ch 157 (Kekewich J). 43 In resolving that question, Lightman J described three classes of dispute in which a trustee may be involved and considered the role of the trustee in each case. 44 The first (referred to as a "trust dispute") is a dispute as to the trusts on which the trustees hold the subject matter of the settlement. Such litigation may be "friendly" (for example, a matter involving the true construction of the trust instrument) or "hostile". Cases in the hostile category included challenges in whole or part to the validity of the settlement, and encompassed claims to the effect that the trustee holds the subject matter on trust for beneficiaries other than those specified in the instrument. 45 The second (referred to as a "beneficiaries dispute") is a dispute as between the trustee and one or more beneficiaries as to the propriety of any act or omission by the trustee, such as proceedings seeking damages for breach of trust or the removal of the trustee. 46 The third (referred to as a "third party dispute") is a dispute with persons (other than persons in the capacity of beneficiaries) in respect of rights and liabilities assumed by the trustee in the course of the administration of the trust, which may include actions founded in tort or contract. 47 Lightman J went on to discuss the purpose of a trustee's application for directions as to whether to defend proceedings (the Beddoe application), commencing with the uncontroversial observation that trustees (express and constructive) are entitled to an indemnity against all costs, expenses and liabilities properly incurred in administering the trust (my emphasis) and have a lien on the trust assets to secure that indemnity. As trustees have a duty to protect and preserve the trust estate for the benefit of the beneficiaries they have a corresponding duty to represent the trust in a third party dispute. Accordingly, his Honour said, the trustee's right to an indemnity and lien extends to the costs of defending a third party dispute properly brought or defended for the benefit of the trust estate. However, to avoid the risk of a challenge by a beneficiary to their entitlement to an indemnity, trustees "are well advised to seek court authorisation before they sue or defend" in respect of such a dispute. The application for authorisation is one that should be made in a separate action to which all of the beneficiaries are represented. Provided that the trustee on that application makes full disclosure of the strengths and weakness of the case to be brought or defended, the entitlement to indemnity will be secure in respect of acts authorised by the Court. 48 As to beneficiary disputes, his Honour said (at 1224) that such disputes are ordinarily hostile litigation in which costs follow the event. They do not come out of the trust estate: see McDonald v Horn [1995] ICR 685. 49 Lightman J then turned (at 1225) to critique the decision in Ideal Bedding as it applied to a "trust dispute": I do not think that the view expressed by Kekewich J in the Ideal Bedding case that in case of a trust dispute (as was the dispute in that case) a trustee has a duty to defend the trust is correct or in accordance with modern authority. In a case where the dispute is between rival claimants to a beneficial interest in the subject matter of the trust, rather the duty of the trustee is to remain neutral and (in the absence of any court direction to the contrary and substantially as happened in Merry's case [1898] I Ch 306) offer to submit to the court's directions leaving it to the rivals to fight their battles. If this stance is adopted, in respect of the costs necessarily and properly incurred e.g. in serving a defence agreeing to submit to the courts direction and in making discovery, the trustees will be entitled to an indemnity and lien. If the trustees do actively defend the trust and succeed, e.g. in challenging a claim by the settlor to set aside for undue influence, they may be entitled to their costs out of the trust, for they have preserved the interests of the beneficiaries under the trust: consider In re Holden, Ex parte Official Receiver (1887) 20 Q.B.D. 43. But if they fail, then in particular in the case of hostile litigation although in an exceptional case the court may consider that the trustees should have their costs (see Bullock v Lloyds Bank Ltd [1955] l Ch 317) ordinarily the trustees will not be entitled to any indemnity, for they have incurred expenditure and liabilities in an unsuccessful effort to prefer one class of beneficiaries e.g. the express beneficiaries specified in the trust instrument, over another e.g. the trustees in bankruptcy or creditors, and so have acted unreasonably and otherwise than for the benefit of the trust estate: consider R.S.C., Ord. 62, r. 6; and see National Anti-Vivisection Society v Duddington, The Times, 23 November 1989 and Snell's Equity, 29th ed. (1990), p. 258. 50 As to the Beddoe application before him, Lightman J said that the application was fundamentally flawed for two reasons. The application was of a kind that ought to have been made in separate proceedings, because the purpose of the application was to inform the judge of the strengths and weaknesses in the trustee's case, including alternative courses that may be taken by way of compromise. Such matters are not appropriately revealed to the judge responsible for adjudicating the case. In addition, the necessary parties were not before the Court. That circumstance defeated the purpose of the application, which was to give the beneficiaries the opportunity to make submissions before the order was made. Accordingly, the summons within the substantive proceeding was not the appropriate procedural vehicle to seek the Court's authorisation to defend the plaintiffs' claim. 51 As to the application for a pre-emptive costs order, Lightman J said (at 1226) that the Court had an "exceptional jurisdiction" in hostile litigation to make an order at an early stage of the proceedings regarding the ultimate costs outcome. The relevant considerations being the strength of the party's case, the likely order as to costs at trial, the justice of the application and any special circumstances. In assessing the likely order as to costs at trial in a case involving a trustee, "it must appear that the judge at the trial could properly exercise his discretion only by ordering that the applicants [sic] costs be paid out of the trust estate". In that context, his Honour said (at 1227): As regards the likely order for costs, as I have already pointed out, the usual order in such hostile litigation will be that the trustees (if they activity defend and lose) will have to pay their own and the other party's costs and (as this is a case of a trust dispute) will not be entitled to an indemnity or lien from the trust fund. 52 In the result, the trustee's application for a pre-emptive costs order was dismissed. 53 The principles stated in Alsop were applied in an Australian context by the Supreme Court of New South Wales in Rattigan on an application bearing a closer resemblance to the application now before me. The plaintiff (as beneficiary of a deceased estate) commenced proceedings against the executor of the estate alleging various acts of maladministration and breach of fiduciary duties. In the same action, the plaintiff filed a notice of motion seeking an order that the executor repay to the estate amounts that had been paid out of the assets of the estate in respect of his legal fees incurred in the substantive proceedings. By an amendment, the executor's lawyer was joined as a party on the notice of motion and an alternative order was sought to the effect that the lawyer repay the amount of legal fees that had been paid to him by the executor. Hallen J allowed the amended notice of motion and ordered that the executor and lawyer reimburse the legal fees, which amounts were to be paid into court pending the determination of the substantive proceeding. 54 On the facts, it was not disputed that the defendant's legal costs and disbursements in defending the action had indeed been drawn from the estate and had not otherwise been drawn from his own resources. The balance of the estate was nonetheless sufficiently large to enable the executor's costs to be paid from the estate if an order for costs was to be made at the conclusion of the substantive proceedings. Neither the defendant nor the lawyer offered security for any liability to reimburse the estate. Hallen J also identified as uncontroversial the following (at [44]): … (b) Prior to any costs and disbursements being deducted from the estate of the deceased, the Defendant had not sought judicial advice on the question whether he was justified in defending the substantive proceedings. Nor had he sought a pre-emptive costs order (in this context, known as a 'Beddoe order' as formulated by Lindley LJ in In Re Beddoe; Downes v Cottam [1893] 1 Ch 547) that he be indemnified in respect of his costs out of the deceased's estate. (There was no evidence provided, or submissions made, going to the reasons for not doing so, but, typically, applications are not granted where an executor or trustee is involved in 'hostile litigation'.) (c) There was no evidence of any other judicial assessment having been made, prior to the deduction of legal costs from the deceased's estate, of the prospects of the Defendant successfully defending the substantive proceedings at trial, or that he would, otherwise, obtain at trial, or later, an order permitting him to exercise his right of indemnity to meet his legal costs from the assets of the estate. … 55 Rule 54.3 of the Uniform Civil Procedure Rules 2005 (NSW) provided that "proceedings may be brought" for an order directing an executor of a deceased estate to do or abstain from doing any act or "directing any act to be done in the administration of an estate that the Supreme Court could order to be done if the estate were being administered under the direction of the Court". Hallen J rejected the executor's contention that the notice of motion (an interlocutory process) was not a "proceeding" for the purposes of that rule (at [49]). The rule was described in the authorities as a "procedural expedient" that was "designed to provide [a] summary, cost effective [alternative] to an application for general administration of a trust by the Court": see Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484 at [12]. His Honour identified that the New South Wales Supreme Court in any event had inherent powers, as part of its equitable jurisdiction, to supervise the administration of trusts, including to make an order of the type that was sought. 56 In summarising the applicable principles, his Honour referred to Alsop and said: 64 At 1224, Lightman J also observed, in relation to the question of costs in a beneficiary dispute: 'A beneficiaries' dispute is regarded as ordinary hostile litigation in which costs follow the event and do not come out of the trust estate: see per Hoffmann LJ in McDonald v Horn [1995] ICR 685, 696.' 65 This statement does no more than reflect the principle that an executor or trustee will not be able to rely upon the right of indemnity in respect of legal costs incurred in protecting only his, or her, personal interests. Thus, in Miller v Cameron (1936) 54 CLR 572 at 578-579; [1936] HCA 13, Latham CJ expressed the view that a trustee who defended an action for his removal was thereby representing his own interests and not those of the trust estate. 66 The rationale of indemnification, in respect of the expenses of litigation, as between trustees and the trust estate, or other fiduciaries and those on whose behalf they are acting, is that the party who has incurred the expense has not been acting for his, or her, own benefit but for the benefit of the estate or person in question: Wishart v Castlecroft Securities Ltd 2010 SC 16 at 46 [71]; [2009] CSIH 65 at [71] (Lord Reed for the Court). 67 In National Trustees Executors and Agency Company of Australasia Limited v Barnes (1941) 64 CLR 268 at 279; [1941] HCA 3, Williams J (Rich ACJ agreeing) observed: 'Such expressions as acting 'for the benefit of' 'with reference to' or 'on indiscriminately in the judgments, but they all mean the same thing, namely, that the question is whether the costs, charges and expenses are properly incurred by the trustee as an incident of his administration of the estate.' 68 (On the basis of these authorities alone, the concession made by the Plaintiff, referred to earlier as to the costs of administration, was properly made.) 69 However, that is not the end of the matter. Generally speaking, if, as executor, a defendant proceeds to defend proceedings without the authority of an order of the Court, or without an indemnity of the other residuary beneficiaries, he does so at his own risk as to costs. As the plurality of the High Court wrote in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 93-94 [70]-[71]; [2008] HCA 42 at [70]-[71]: 'In particular, trustees who are sued, particularly for breach of trust, may sometimes experience uncertainty about whether they will be able to obtain indemnity as to the costs of their defence under s 59(4) in any event. Perhaps they will if their breach is excused under s 85(2); but they cannot be sure, in advance, that the court's discretionary power to excuse the breach will be exercised in their favour, and one of the matters to be excused is their failure to obtain the court's direction under s 63 or otherwise … In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs.' (emphasis in original) 70 In Application of Uncle's Joint Pty Ltd (2014) 12 ASTLR 487 at 494 [24]-[25]; [2014] NSWSC 321, Brereton J (as his Honour then was) wrote at [24]-[25]: 'Typically, as in National Trustees Executors and Agency Company of Australasia Ltd v Barnes, trustees will be allowed their costs out of the estate in this type of case only after the proceedings against them have been resolved in their favour. Thus in Armitage v Nurse [1998] Ch 241, Millett LJ, with the concurrence of the other members of the court, said (at 263): In my judgment the respondents should have the right to recoup themselves out of the trust fund but only if and when the action against them is discontinued or dismissed. In Frost v Bovaird, the full Federal Court rejected (at [79]) the submission that in the case of beneficiaries disputes the trustee was, pending the determination of the claim and without more, entitled to use the trust funds to meet legal costs incurred in defending the claim, the prima facie position being, as stated by Lightman J, that a trustee's legal costs incurred in defending a beneficiaries dispute do not come out of the estate. However, the Court acknowledged (at [75]) that the judgment of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 ('St Petka') recognised that it was open to trustees faced with an allegation of misconduct by a beneficiary to apply for judicial advice, pursuant to which they might be entitled to resort to trust assets for their defence.' (emphasis added) 57 Hallen J went on to reject a submission that the notice of motion (insofar as it sought repayment of money taken) was in the nature of a mandatory injunction, but did not elaborate, other than to confirm that amounts were "simply taken from the estate for legal costs". His Honour considered that if the principles applicable on an injunction application were to be applied, they were fulfilled in the circumstance of the case in any event (at [58] - [60]). 58 The trust principles were also discussed by the Full Court in Frost v Bovaird (2012) 203 FCR 95 (to which Hallen J referred). Jacobson, Siopis and Nicholas JJ said that in the case of a beneficiaries dispute involving allegations of misconduct against a trustee, the trustee has no prima facie entitlement to use trust funds to meet the costs incurred in defending the claim pending its final resolution (at [79]). I will apply the same principle.

Application of the principles in this action 59 The present action comprises both a hostile trust dispute and a hostile beneficiaries dispute. It is a trustee dispute because Mr Hillier contends that Operations holds the trust assets not for the beneficiaries specified in the NHT Deed on terms specified in that instrument, but for the participants of the joint venture on terms of the JV Trust. It is a beneficiaries dispute to the extent that Mr Hillier alleges that Mrs Martin breached her fiduciary duties and committed a fraud on the power by transferring the trust assets to Operations. Whilst in some cases the line between a friendly and hostile dispute may be difficult to draw, no such difficulty arises in the present case. The proceedings are remarkably hostile. 60 All that I have said thus far assumes Mrs Martin to be in the same position as a trustee. I am mindful that Mrs Martin is not presently the trustee of the NH Trust, nor is she presently to be regarded as the alter-ego of Operations. However, it has not been suggested on behalf of Mrs Martin that the principles summarised above have no application to her because she is not personally and presently a trustee. The submissions of both parties proceeded on the basis that her rights and obligations are presently equivalent to that of a trustee and I proceed on that basis without expressing any concluded view about it. 61 Proceeding from that assumption, Counsel for Mrs Martin could point to no legal authority vested in Mrs Martin to turn to the NH Trust for indemnity of her legal expenses pending judgment when invited to do so, consistent with the principles to which I have referred. No particular clause of the NHT Deed was relied upon. Counsel submitted "there does not need to be a legal principle. She is in possession of the trust fund. She is entitled to use it unless otherwise subject to a court order". 62 Counsel went on to submit that there may be legitimate drawings from the trust assets to make a distribution to Mrs Martin, including by way of a benefit ascribed to her in the accounts of the trust which she was free to spend or apply as her own money. I will deal with the question of distributions later in these reasons. 63 The suggestion that Mrs Martin is "entitled to use" the trust fund absent an order to the contrary is incorrect as a matter of law. Proceeding on the assumption that Mrs Martin has the status equivalent to that of a trustee of the NH Trust, her rights and obligations as trustee embroiled in hostile litigation would not include a prima facie right to fund her defence from the trust assets pending the outcome of the action. To the extent that Mrs Martin presently has control of the trust assets, it is not unbounded control. A trustee must act at all times in accordance with the equitable principles governing the administration of trusts, including in the course of hostile litigation. Those principles have a temporal element: they are directly concerned with the question of how the trustee may fund his or her defence in hostile proceedings before the substantive outcome is known. 64 If Mrs Martin does not have the status equivalent to that of a trustee of the NH Trust, then her opposition to the order would appear to be even more unmeritorious. The circumstance that she is (or was at the time of argument) a co-director of Operations does not of itself confer upon her any entitlement exceeding that of Operations as trustee. She cannot use her position as co-director to cause Operations to advance her own interests over the beneficiaries as emphasised in the trust cases. 65 In the absence of a pre-emptive costs order (which has not been sought), I do not consider Mrs Martin (assuming her to be in the equivalent position of a sued trustee) to presently have any prima facie entitlement to draw on the trust assets to fund her defence of the proceedings at any time before final judgment. Whether or not she presently has that entitlement is not a question that depends on the outcome of the substantive proceedings. Even if Mrs Martin were to succeed in the substantive proceedings, it would not follow that as at today's date she has and always had the entitlement to draw on the trust assets for that purpose before judgment. 66 To say that is not to make any finding of dishonesty or deliberate wrongdoing on Mrs Martin's part to the extent that she may previously have directly or indirectly drawn on the trust assets to fund her defence. The parties are presently in disagreement about what the law has to say on the subject. To the extent that money has previously been taken from the trust assets to fund Mrs Martin's personal defence, such conduct may well be explained by her misapprehension of the requirements of the law.

Jurisdiction in the present case 67 What then is the source of the power to make the order sought? 68 It is true that neither the JV Trust (as alleged) nor the NH Trust (as alleged) are trusts that are under the direct supervision of the Court in the same way that a deceased estate is under the supervision of the Court having inherent jurisdiction as (for example) an incident of its powers to grant probate. But it does not follow that the Court has no power to make the order. 69 This Court's jurisdiction is to be found in s 5 of the FCA Act together with the other provisions of the FCA Act to which I have referred. Whilst the Court's powers are not unlimited, they plainly include the power to regulate conduct that puts the subject matter of the controversy at risk in a way that is not in accordance with legal or equitable principles or that otherwise does not accord with the interests of justice. To the extent that Mr Hillier's application depends upon the application of the common law or any State law affecting the administration of trusts, that law applies in the proceedings either of its own force or by virtue of s 79 and s 80 of the Judiciary Act 1903 (Cth) as explained in (for example) Rizeq v Western Australia (2017) 262 CLR 1 and Blunden v Commonwealth (2003) 218 CLR 330 respectively.

DO INJUNCTION PRINCIPLES APPLY? 70 I have not been taken to any authority in which an order of the present kind has been sought in this Court. There is no authority directly bearing on the question as to whether the application should properly be characterised as a claim for injunctive relief (or analogous to such a claim). 71 The question is whether the order sought by Mr Hillier has the characteristics of an injunction so as to attract the principles that apply on an interlocutory application of that kind. As Counsel for Mr Hillier correctly submitted, the circumstance that an order is interlocutory does not demand the conclusion that it is in the nature of an injunction. 72 One characteristic of an interlocutory injunction is that it is imposed at a stage in the proceedings when the rights and obligations of the parties in the substantive proceedings are yet to be finally determined. In addition, an order in the nature of an injunction has the effect of regulating the conduct of the parties pending the final resolution of their rights and obligations in a way that imposes a burden on the respondent party and a corresponding benefit upon the applicant party. The order is made in circumstances where the applicant's substantive entitlement to the particular benefit sought will not be known until the final outcome. An injunction imposing a restraint is typically directed to preventing future conduct of the kind alleged (but not yet proven) in the substantive proceedings to be wrongful. The purpose of the undertaking as to damages in such cases is to foreclose any argument that the applicant party will be liable for loss and damage occasioned by the burden imposed on the respondent party, should it be determined that the imposition of the burden at the interlocutory stage was not in accordance with the parties' rights and liabilities determined at trial. The undertaking advances the principle that there be finality in litigation and to an extent protects the restrained party from suffering the cost and inconvenience of further litigation to recover the loss. I say to an extent because the undertaking does no more than expose the applicant party to contempt proceedings for breach, but (absent the provision of security) does not guarantee that the damages will ultimately be paid. 73 The Court has a range of express powers directed to the protection of the subject matter of the controversy or otherwise to protect the administration of justice in the proceedings that bear the same or similar characteristics as an injunction, and to which the same principles apply. Examples include orders for the preservation of the respondent party's assets where there is risk of dissipation, orders for the appointment of external controllers to entities embroiled in the litigation and the like. At the interlocutory stage, those powers may be exercised before the applicant has established the parties' respective rights and obligations at trial. Accordingly, the principles akin to those applying on an application for an interlocutory restraining injunction apply to them, including the requirement that there be an undertaking as to damages. Whether the burden imposed by the order is in the nature of a restraint or a mandate, the same underlying principles are at play. The pre-conditions for making the order reflect the circumstance that the question of whether the respondent party in law should presently be burdened by the relevant restraint (or mandatory obligation) has not been substantively determined at the time that the interlocutory order is made, and the circumstance that the applicant bears the onus of proof to establish his or her entitlement at trial. 74 The critical difference in this case is that there exists a body of equitable principle directed to the conduct of trustees in the litigation in the period pending judgment in the substantive proceedings. In accordance with those principles, a trustee embroiled in litigation of certain kinds has no prima facie entitlement to turn to the trust to fund his or her case, absent an order authorising him or her to do so. The respective rights of Mr Hillier as applicant and Mrs Martin as respondent are the opposite from the general run of injunction-like cases in that Mr Hillier is not seeking any order that interferes with any presently existing prima facie right that can be lawfully asserted by Mrs Martin at the present time. 75 The oppression cases upon which Mrs Martin relied may be distinguished on that basis. As those cases show, there is no body of substantive law regulating the conduct of shareholders in the course of litigation pending judgment in respect of the personal cost liabilities they may owe to their lawyers. More specifically, there is no rule of law to the effect that the assets of a company must not be applied in the defence of an oppression action during the interlocutory stage of oppression litigation. In such cases, an interlocutory order is necessary to prevent the conduct complained of. It is not surprising that principles applicable on an application for an interlocutory injunction might have room to apply on an application for such an order. 76 I am satisfied that the principles relating to interlocutory injunctions do not apply to the application before me. Following the trial, Mrs Martin may well be entitled to turn to the trust assets to indemnify herself in respect of certain costs and liabilities, but she has no present right to pre-empt that outcome by funding her case from the trust assets whilst the proceedings are on foot. The starting point is that Mrs Martin has a present obligation to comply with the law in relation to trusts, irrespective of which trust applies. If it be a burden upon Mrs Martin to refrain from funding the defence of her case from her own resources, that is not a burden that depends for its existence on an interlocutory order of the kind sought by Mr Hillier or any other interlocutory order. It is a burden imposed under the general law as it has applied from at least the commencement of the action. Its existence is the starting point of Mr Hillier's application, not the end point. 77 My conclusion that the application is not subject to the conditions that apply to an application for injunctive relief is reinforced by the difficulties in logic that arise when an attempt is made to apply the test for an injunction in the present legal context, being the body of trust law to which I have referred. I am to give effect to the underlying principles whether or not the application is subject to the same conditions that apply on an application for injunctive relief. 78 The legal difficulty in applying the conditions for an injunction may be demonstrated by asking whether, for the purposes of Mr Hillier's application, there is a serious question to be tried: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, Gleeson CJ and Crennan J (at [19]), Gummow and Hayne JJ (at [65]). Whether there is a serious question to be tried requires consideration of both factual and legal questions. 79 I am satisfied that there is a serious question to be tried in the substantive proceedings particularly in respect of the "trust dispute" and the "beneficiaries dispute". In that respect, I have had regard to all of the evidentiary material filed in the Court, as Counsel for Mrs Martin acknowledged the Court may do. Mrs Martin's submission that there was no serious question to be tried in the substantive proceedings was not furnished with any detail. The Court's assessment is made at a stage of the proceedings where Mrs Martin has only recently filed a defence that complies with the Rules. The time for Mr Hillier to file his trial affidavits has not yet passed. As Counsel for Mrs Martin has not elaborated on the contention that there is no serious question to tried, I do not propose in these reasons to traverse the evidence in any more detail. It is sufficient to say that there is a serious question to be tried having regard to the pleadings and the evidence filed to date by the parties (taking Mr Hillier's evidence at its highest). I express no view as to the respective merits of the opposing cases. 80 However, as explained above, even if Mrs Martin were to succeed in her defence on the trial of that serious question, her success would not have the legal consequence that she was at all times pending judgment entitled to turn to the trust assets to fund her defence of the action, in the absence of a court order authorising her to do so. It is in that sense that the injunction principles appear to me to have no practical application. The parties' present day entitlements are to be ascertained by direct application of the trust cases. 81 I will nonetheless persist in my assessment of the application against the conditions that apply on an application for injunctive relief, proceeding from the assumption that I am wrong in my conclusion that they have no application.

APPLICATION OF INJUNCTION PRINCIPLES 82 The conditions for the grant of interlocutory injunctive relief are well established, although there is some difference in their expression. In O'Neill, Gleeson CJ and Crennan J said (at [19]): …in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. … 83 As Gummow and Hayne JJ explained (at [65]), an applicant for an interlocutory injunction must show a "sufficient likelihood" of success to justify, in the circumstances, the preservation of the status quo pending trial. The sufficiency of the likelihood depends upon the nature of the rights the applicant asserts and the practical consequences likely to flow from the order: see Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, Kitto, Taylor, Menzies and Owen JJ (at 622); Samsung Electronics Company Ltd v Apple Inc (2011) 217 FCR 238, Dowsett, Foster and Yates JJ (at [59]). The "serious question to be tried" and "balance of convenience" criteria interrelate, such that a more doubtful claim which nevertheless raises "a serious question be tried" may still attract interlocutory relief if there is a marked balance of convenience in favour of the claim: Mobileworld Operating Pty Ltd v Telstra Corporation Limited [2005] FCA 1365, Weinberg J (at [20]), Tait v P.T. Ltd as Trustee of the Scentre Tuggerah Trust [2015] FCA 1015, Besanko J (at [23]). The extent to which it is appropriate to examine the merits of an applicant's claim for relief will always depend on the circumstances of the case: Australian Broadcasting Corporation v Lenah Game Meats Pty Limited (2001) 208 CLR 199, Gleeson CJ (at [18]). 84 In Samsung the Full Court, Dowsett, Foster and Yates JJ said: 61. The requirement that, in order to obtain an interlocutory injunction, the plaintiff must demonstrate that, if no injunction is granted, he or she will suffer irreparable injury for which damages will not be adequate compensation (the second requirement specified by Mason ACJ in Castlemaine Tooheys at 153) was not mentioned in Beecham. Nor was it referred to by Gummow and Hayne JJ in O'Neill. Nonetheless, Gleeson CJ and Crennan J included that requirement in their articulation of the relevant 'organising principles' (at [19] in O'Neill). They also agreed with the explanation of those principles given by Gummow and Hayne JJ at [65]-[72] in the same case. One way of reconciling the views of Gleeson CJ and Crennan J with those of Gummow and Hayne JJ on this point is to treat 'irreparable harm' as one of the matters which would ordinarily need to be addressed in the Court's consideration of the balance of convenience and justice rather than as a distinct and antecedent consideration. This has been the approach taken by some judges (eg Ashley J in AB Hassle v Pharmacia (Australia) Pty Ltd (1995) 33 IPR 63 at 76-77; Gordon J in Marley New Zealand Ltd v Icon Plastics Pty Ltd [2007] FCA 851 at [3]; Kenny J in Medrad Inc v Alpine Medical Pty Ltd (2009) 82 IPR 101 at [38]; and Yates J in Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38 at [55]-[64]). 62. The assessment of harm to the plaintiff, if there is no injunction, and the assessment of prejudice or harm to the defendant, if an injunction is granted, is at the heart of the basket of discretionary considerations which must be addressed and weighed as part of the Court's consideration of the balance of convenience and justice. The question of whether damages will be an adequate remedy for the alleged infringement of the plaintiff's rights will always need to be considered when the Court has an application for interlocutory injunctive relief before it. It may or may not be determinative in any given case. That question involves an assessment by the Court as to whether the plaintiff would, in all material respects, be in as good a position if he were confined to his damages remedy, as he would be in if an injunction were granted (see the discussion of this aspect in Spry, The Principles of Equitable Remedies (8th ed, 2010) at pp 383-389, 397-399 and 457-462). 85 I have already addressed the question of whether there is a serious question to be tried in relation to the substantive proceedings. There is a separate and discrete factual question as to whether payments have been made to NW by Operations or other entities in the Nordburger Group to fund Mrs Martin's defence. Counsel for Mrs Martin submitted that that discrete factual enquiry is to be undertaken at the same threshold level of enquiry and I will proceed on that basis. 86 I am satisfied that the materials upon which Mr Hillier relied (particularly the claims for privilege and the manner in which they are asserted in connection with Operations' financial accounts) are capable of supporting an inference that trust assets have been employed to fund Mrs Martin's defence in the proceedings. 87 I have taken into account the possibility that any payments made by Operations to NW may relate to matters other than Mrs Martin's legal representation in the proceedings. However, the circumstance that Mrs Martin personally advances a claim for legal professional privilege in connection with invoices issued by "her solicitors" demands the conclusion that the information subject to that claim is in the nature of legal advice to (or instructions from) Mrs Martin and not to or from any other entity. In addition, the circumstance that the invoices reside in the Xero database suggests that they are invoices recorded in the books of Operations as trustee of the NH Trust, which was constituted fairly recently, relative to the date of the commencement of the proceedings. I am satisfied that the phrase "her solicitors" in Mr Williams affidavit may be understood as a reference to NW, being Mrs Martin's solicitors in the proceedings. In addition, I take into account that NW has denied that it represents Operations generally in the proceedings. 88 Counsel for Mrs Martin denies that the inference of payment from the trust assets is available (or otherwise urges the Court not to draw the inference) on a number of other bases. 89 The starting point on this issue is that the invoices reside in the Xero database. It is reasonable to infer that they reside there because their payment has received treatment of some kind in the accounts of Operations or the accounts of the NH Trust (if there be a difference). 90 At least two inferences are available: either the trust assets have been directly applied to the payment of the invoices or there has been a benefit ascribed to Mrs Martin or another person in the accounts, perhaps in the nature of a distribution from which (or by reference to which) the invoices have then been paid. As to the latter, Counsel's submission was to the effect that Mrs Martin was able to apply benefits in the nature of distributions as she saw fit. Counsel submitted that there is no evidence to enable a finding to be made as to how the invoices were dealt with in the accounts, such that the Court could and should not draw necessary factual inferences in Mr Hillier's favour. 91 Counsel's submissions must be rejected for three reasons. 92 First, the inference that NW's invoices have been paid directly from the trust assets in connection with Mrs Martin's defence remains available to be drawn (at the level of a serious question to be tried) even if an alternative inference is also available. It was open to Mrs Martin and NW to adduce evidence to rebut the first of the available inferences. Neither has done so, notwithstanding that the information capable of rebutting the inference is within the knowledge of one or both of them. 93 Second, to the extent that Mrs Martin appears to be claiming the status of a trustee having rights of indemnity against the trust, then it must follow that she also owes equitable obligations of a trustee. If she has participated in causing Operations to make a distribution to her own benefit in the exercise of the trustee powers under (or purportedly under) the NH Trust (whether by direct payment or by the indirect conferral of any benefit recorded in the accounts of the trust by whatever means), then it would be unusual for that to have occurred without the beneficiaries of the trust (which include Mr Hillier) having been informed about the direct or indirect distribution. The absence of any notification to Mr Hillier that a distribution has been made from the trust assets for any purpose (howsoever treated in the accounts) further reinforces my view that the present factual question should be determined in Mr Hillier's favour. Assuming Mrs Martin has complied with her equitable duties, it is more likely that there has been a direct payment of NW's invoices from trust assets. If I am wrong in that analysis I do not consider the potential for different accounting treatment of the invoices assists Mrs Martin in any event. 94 If I have understood Counsel's submission correctly, the proposition is that Mrs Martin, perhaps in her capacity as a co-director of Operations, may cause a distribution to be made to herself or another person (whether by direct payment or the conferral of any benefit of any kind arising by any means of accounting treatment) for the payment of her legal fees pending the outcome of this action, and that such a distribution could legitimately be made without offending the principles discussed in Rattigan. If that was the import of the submission, I do not accept it. I am not satisfied that a trustee (or person claiming to be a trustee) could do, by means of distribution to herself as beneficiary, (or the conferral of any other benefit from the trust) what cannot be lawfully done by the means of resort to the trust assets by way of direct indemnity. 95 There is a degree of artificiality in applying the "serious question" test to the above factual enquiry. As emphasised earlier in these reasons, the Court is asked to make an order giving effect to the substantive principles as to the administration of trusts pending the resolution of trust disputes and beneficiary disputes. That law governs the present day conduct of the parties irrespective of the outcome of the trial. I have undertaken the above analysis only because Mrs Martin has taken issue with the factual assumption behind Mr Hillier's application, whilst at the same time adducing no evidence and making no admissions on the topic of how her defence has been funded to date. 96 If injunction principles do not apply, then for the purposes of the order, it is sufficient to be satisfied that there is a real possibility that the trust assets have been drawn upon in a manner that is not authorised, such that there is utility in ordering the reimbursement of any payments. I am satisfied that a real possibility exists. The circumstance that Mrs Martin presently asserts an indemnity entitlement of some kind reinforces my view that the order is necessary and appropriate.

Balance of convenience 97 On its terms, the order that is sought requires reimbursement by NW of payments made by any company or entity in the Nordburger Group in connection with Mrs Martin's representation. It does not differentiate between payments made directly from trust assets and payments that are treated in the accounts in some other way. Counsel for Mrs Martin submitted that the application was one that sought to "actually reverse those potential distributions" (without admission that any such distributions have been made). I accept that the order sought by Mr Hillier captures payments made by the entities that are treated in the accounts in any way whatsoever. Whether it would operate to cause Operations to "reverse" any distribution made to the benefit of Mrs Martin is a matter within Mrs Martin's knowledge. She has not adduced any evidence to demonstrate what (if any) prejudice might be suffered should distributions (which are not admitted in any event) be "reversed" in the accounts as an indirect consequence of the order. There is insufficient evidence to demonstrate actual disadvantage to Mrs Martin of the kind that might follow from any such reversal. 98 Mrs Martin has not submitted that the order would inhibit the proper conduct of her defence in the proceedings or her contractual dealings with NW in any disadvantageous way. 99 There is no evidence that Mrs Martin has obtained judicial advice or directions in connection with the defence of the proceedings in any capacity relating to the NH Trust or any other trust, nor has a pre-emptive costs order been made. In assessing where the balance of convenience lies, the legal position is that she should defend the proceedings at her own risk in relation to costs. From Mrs Martin's perspective, the "loss" occasioned by the order is the possible cessation of a financial state of affairs that can have no proper basis in law or equity at the present point in time. The consequence of the order is that she must do what equity presently requires her to do in any event: pay her ongoing legal fees from her own resources. 100 I am satisfied that if the order is not made, there is a risk that Operations (and hence the beneficiaries) will bear the risk that Mrs Martin will, at the end of the day, be unable to reimburse the trust from her own resources in respect of any present drawings to which she has no entitlement. Having regard to the trust cases, any risk that Mrs Martin may be unable to meet her obligations to NW at the end of the day should ordinarily be borne by NW, not by the beneficiaries of the trust. On either party's case, the beneficiaries include Mr Hillier. 101 In identifying that risk to the trust assets, I have had regard to Mrs Martin's principal submission was that if the terms of the JV Trust prevail then she would have recourse to a significant asset of 20% of the corpus and income from which she may draw to reimburse the trust for monies taken by her to fund her defence. However, Mrs Martin has not demonstrated how she may readily realise her equitable interest in the trust assets under the alleged JV Trust without the permission of the other joint venturers. Even if that were permissible under the terms of the JV Trust, I am not satisfied that Mr Hillier should be exposed to yet further disputation concerning the manner and quantum of any restitution Mrs Martin should make to the trust at the end of the day. Mrs Martin has pointed to the existence of no other income or assets from which she can restore to the trust any money taken by her to fund her defence of the proceedings. 102 It is difficult to quantify the risk presented to the trust in precise financial terms. On that topic, Counsel for Mr Hillier referred to the circumstance that Mr Martin (in his capacity as the representative of Operations) has, at a recent case management hearing, adverted to "the possibility of these proceedings substantially exhausting the resources that would otherwise be available for the trust for the betterment of the business and for the advantage of the beneficiaries". I was urged by Counsel for Mrs Martin to dismiss Mr Martin's concerns as something of a rhetorical flourish. 103 I do not consider it necessary to weigh in the balance Mr Martin's subjective opinion about the impact of this litigation on Operations nor on the business as a going concern. The Court can readily infer from the manner of the conduct of the proceedings that they present a significant financial threat to the business. The financial reports for the 2019 financial year evidence an after-tax profit of $476,022.00. It is reasonable to infer that the overall costs of these proceedings have well exceeded that annual profit, thus preventing its reinvestment for the betterment of the business. That circumstances is likely to worsen. The proceedings are remarkable for their degree of contested interlocutory activity. The risk of the impact on the trust assets is heightened by Mr Martin foreshadowing a number of additional interlocutory applications on behalf of Operations which (irrespective of their merits) will only serve to increase the potentially irrecoverable costs of all parties, including Mrs Martin. 104 I do not consider it appropriate to confine Mr Hillier to an award of damages should it transpire at the end of the day that the trust assets have been depleted to fund Mrs Martin's defence of the proceedings. In light of the highly acrimonious manner in which the proceedings have been conducted to date, it is reasonable to infer that the process of quantifying and enforcing any such award of damages would only be productive of yet further litigation. Moreover, the contemplated damage is damage occasioned to the trust itself, thus giving rise to further unnecessary complexity potentially involving all of the beneficiaries in matters affecting the administration of the trust. The Court itself ought not to be put to the task of untangling legal fees recorded in the financial account, when the proper legal and equitable position is that the accounts should, at the present time, be untouched by them. 105 In contrast, the procedure contemplated on Mr Hillier's application would preserve in a court supervised fund the payments made by Operations to date. That fund would be immediately available for payment to the appropriate recipient. The order potentially affects NW's cash flow and possibly its contractual relations with Mrs Martin but, as I have said, no representative of NW has attended to oppose the application on that or any other basis. 106 If injunction principles apply, I am satisfied that the balance of convenience plainly favours the making of the order. The same considerations support my discretionary judgment that the application should be allowed on the assumption that injunction principles do not apply.

Undertaking as to damages 107 I do not consider that an undertaking from Mr Hillier is a necessary precondition to the Court's power to make the order. 108 If I am wrong in concluding that the principles relating to injunctions do not apply, in my view the case is an exceptional example in which the Court may grant the relief in the absence of the undertaking. The legal status quo is that Mrs Martin has no present entitlement to fund her defence from the trust assets, whether directly or indirectly. As I have said, that conclusion does not depend on the outcome of the substantive proceedings for its correctness. Mrs Martin (as an assumed trustee) must await the outcome of the trial before she may exercise any entitlement to have her costs indemnified by any trust. The effect of the order is to have reimbursed any money that has been drawn from Operations contrary to that principle. 109 In addition, Mrs Martin has not demonstrated that there could be any lawful basis to claim losses occasioned by the order as an award of "damages", even if she proves successful in the proof of her pleaded defence. The asserted entitlement to damages (and hence the undertaking) pre-supposes that the order precludes her from exercising a present legal entitlement. The order does not have that effect. 110 It has not been submitted on behalf of NW that the application should be supported by an undertaking as to damages that it may suffer as a consequence of having to reimburse any payments received in satisfaction of any past invoice. In all of the circumstances I am not satisfied that any payments received from entities in the Nordburger Group in the discharge of the relevant invoices are payments which NW should presently be entitled to retain at law.

CONCLUSION 111 In all of the circumstances I am satisfied that it is in the interests of justice to make the order sought. The order does no more than to compel NW to repay any money taken from the trust assets in circumstances that are not in accordance with legal principle. The order has utility for so long as there is a possibility that trust assets have directly or indirectly been employed for that purpose. I have not considered it necessary to make a conclusive finding as to whether or not that has occurred. As I have said, it was open to NW and Mrs Martin to adduce evidence to discount the possibility but they have not done so. 112 I express no view as to whether Mrs Martin would or should give any assurance that might be sought from Mr Hiller as to future payments to NW. If an assurance is sought and not given, that may be the subject of a further application, to be determined on its merits having regard to the facts as they exist at that time. 113 The parties should now be heard as to the appropriate time frame for NW's compliance and as to the costs of the interlocutory application. I certify that the preceding one hundred and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.

Judiciary Act 1903(Cth)ss 79, 80

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