Hillier v Martin

Matters in issue between the parties as to whether there should be an order for security

1. I have mentioned three matters that were in issue between the parties, namely:

(1) Are the business structures adopted by Mr Hillier an 'additional factor'?

(2) Are the steps taken by Mr Hillier in relation to his residence an 'additional factor'?

(3) Would submissions as to the merits of Mr Hillier's case assist?

1. The NW Parties also appeared to claim that there was evidence that the proceedings were being funded by a third party, Americanas Pty Ltd, and that was a reason why security should be ordered. This gives rise to the following issue: (4) Does the evidence concerning Americanas Pty Ltd support the making of an order for security?
2. In addition, Mr Hillier relied upon aspects of the way in which the proceedings had been conducted by the NW Partes as a matter that weighs against the making of an order for security. This gives rise to a further issue: (5) Has there been conduct by the NW Parties that counts against the making of an order for security?

(1) Are the business structures adopted by Mr Hillier an 'additional factor'?

1. Mr Hillier relied upon the following observation by Weinberg J in Logue v Hansen Technologies Ltd at [54]:

Any person is entitled to render themselves 'litigation proof' if they so choose. Many high wealth individuals in this country have done so, sometimes for sound commercial reasons. That fact alone will not be sufficient, in my view, to warrant the making of an order for security for costs under s56.

1. I regard that observation to be directed towards those instances where business structures are put in place without the claims of particular creditors in view. Accordingly, it would not apply to instances where litigation proofing was undertaken with the prospect of particular litigation in mind (whether the litigation is to be commenced by the individual or defended by the individual). I also would regard that statement as not applying in an instance where an individual sought to pursue proceedings which, though personal, were related to the affairs of entities in which the individual had no legal interest, but which affairs were conducted for the benefit of the individual either solely or with others. Rather, I consider his Honour's observation to be concerned with instances where a business structure was put in place to confine any future claims that can be made as to the conduct of that business to the assets held within that structure.
2. There is no evidence that the business structures were established with the claims of particular creditors in view and were anything other than structures that would confine claims concerning the business activities conducted within those structures to assets associated with conducting those activities.
3. The submissions for the NW Parties went further and, in effect, sought to equate Mr Hillier with an individual who holds all their assets outside the jurisdiction. He was said to be someone who went to considerable lengths to ensure that he had no personal assets, going so far as to not even operate a bank account in his own name.
4. Although, I do not regard the evidence of the adoption of business structures of the kind described as an additional factor, I do regard the fact that Mr Hillier conducts his affairs on the basis that he holds no personal assets at all to be a matter that might amount to an additional factor, especially when taken with other matters. I do so because it puts him in the position where, by choice, he has no personal stake in the litigation, a matter which undermines the usual incentives at play in litigation where cost orders may be made. In effect, it is conduct that deprives the proceedings of the discipline which the prospect of the making of cost orders usually brings. Mr Hillier is not a man of limited means, he is a man of means who by choice conducts his affairs on the basis that he holds no personal assets. Also, he is not a person who is impecunious in the sense that he lacks the means to be able to conduct litigation and whose access to the Courts would be barred if he were required to provide security by reason of his financial circumstances. On his own account he has access to significant financial resources that have enabled him to conduct the proceedings.

(2) Are the steps taken by Mr Hillier in relation to his residence an 'additional factor'?

1. The NW Parties relied upon emails sent by Mr Hillier to lawyers who were acting for him in proceedings brought against him by the Craig Interests. In 2017, Mr Hillier sent an email to his lawyer seeking advice in the context of purchasing a residential property. It was in the following terms:

On another topic, is there anything that I should be doing to prepare my commercial structures/arrangements to the possibility of and [sic] adverse outcome in the Craig matter...?

Just asking, as I was feeling pretty nervy this morning after that document emerged yesterday.

Re structures - absolutely do not purchase the house in your name if at all possible. Ideally it should be held by a standalone family trust not connected in any way to any of the other corporate or trust entities.

Even if the house is in your wife's sole name that is good.

If you have any questions about the home you're purchasing please call me.

An almost ideal situation would be to purchase it in your wife's name solely and have your wife removed as any director or secretary of any corporate entity, i.e. remove her from all corporate and business structures so that she can't be attacked in her personal capacity, and therefore the house is safe, due to a conflict arising from a business dispute.

Re the remainder of your entities - I was thinking about that over the weekend. That will take some time and perhaps some brain-storming. Something to deal with a little later but definitely

1. On the evidence, Mr Hillier proceeded to arrange the purchase of the residential property in a discretionary trust structure.
2. In March 2019, Mr Hillier sent an email to his lawyer referring to the settlement of the proceedings with the Craig Interests. It was in the following terms:

Thanks again for your efforts last week and in the lead up to the mediation. Sondra and I are happy that we have to come extent put this to bed, however meeting our obligations under the terms of the settlement is going to be extremely trying for us.

With this in mind, I am not going to be in any position to even consider any action against Nordburger until I have made serious inroads into the settlement sum, or wiped it out completely. We have begun too [sic] explore all measure to make this payout as quickly as possible, but in the meantime, there is no way that we can incur any professional fees whatsoever. It is my view that the Craigs will wish to join any action against Tom Martin and Victoria, however there is some way to go to generate sufficient goodwill and trust for them to feel comfortable about teaming up.

It was a real push for us just getting to the start line at that mediation conference, and there is no doubt that the Craigs would have completely bled us out at trial. I'm happy to still be alive, but the next twelve months are going t really tough.

We are having the Birch Road Trust deed amended immediately to specifically exclude me as a beneficiary.

The detailed advice that Gillian has already provided in relation to Nordburger seems to me to be the main groundwork already completed for any action, so it's nice to have that in the back pocket.

1. A response was sent by the lawyer. It began by confirming that Mr Hillier had arranged to have the relevant trust deed for his residential property amended to specifically exclude Mr Hillier as a beneficiary. It then addressed the terms of settlement of the proceedings between Mr Hillier and the Craig Interests. It said:

The terms of settlement render all costs orders that were made through the litigation process nugatory as the terms are that there be no orders as to costs against any parties whatsoever. Therefore no monies will be added back to any parties for any interlocutory costs orders.

There is one thing I must do in terms of my professional services following mediation and that is to give you a letter of advice setting out the date upon which each payment to the Craigs is due pursuant to the settlement and the consequences for not doing so.

1. It was submitted for Mr Hillier that the steps that he took in relation to the establishment of the trust and his removal as a discretionary beneficiary were not taken with a view to putting his assets beyond the control of the parties to the present proceedings. Further, it was submitted that there was no contemplation that the NW Parties would be parties to any proceedings. The joinder of the NW Parties occurred sometime after the present proceedings were commenced when further information was obtained through court procedures.
2. However, those submissions do not answer the submissions by the NW Parties. Their contention is that there was deliberate conduct by Mr Hillier to make himself litigation proof and those steps were taken at a time when he was involved in litigation with the Craig Interests. Further, the steps taken in relation to his removal as a discretionary beneficiary were taken at a time when Mr Hillier was contemplating the commencement of proceedings in relation to the Nordburger business.
3. I accept that this evidence demonstrates that Mr Hillier took specific steps as a person involved in the conduct of litigation and took further steps at a time when he was planning to commence the present proceedings that were directed towards protecting his residential property from claims arising from that litigation. No other justification is advanced for the conduct. I am persuaded that conduct taken together with Mr Hillier's more general conduct to ensure that he has no personal assets comprise additional matters that mean that the general principles concerning the making of security for costs orders against individual litigants do not apply.

(3) Would submissions as to the merits of Mr Hillier's case assist?

1. It may be accepted that one of the factors that may be considered as going to whether it is in the interests of justice for an order as to security to be made (and if so in what amount) is the strength and bona fides of the applicant's claim. Reliance was placed by Mr Hillier upon the following observation in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; (2003) 130 FCR 317 at [252] (Finkelstein J).:

... I think that the court should not shy away from making a preliminary evaluation of the merits. That task is not as difficult as it might seem. Every day judges are required to decide whether or not a party has made out a prima facie case, or has raised a serious issue to be tried, in an application for an interlocutory injunction, the appointment of a receiver or other serious forms of relief.

1. However, when considering merits for the purposes of deciding whether to order security for costs, there must be due regard to the nature of the particular application and the need for there to be material from which an assessment of merits is to be undertaken: Entyre v Australian Broadcasting Corporation [2021] FCA 610 at [14]- [15] (Abraham J).
2. It is accepted by the NW Parties that Mr Hillier has an arguable case with reasonable prospects. It is not suggested that the claim lacks bona fides. Therefore, this is not a case where a lack of bona fides or merits counts in favour of the making of an order for security for costs. However, as has been mentioned, in support of his opposition to the application, Mr Hillier sought to demonstrate that he had a strong case. He said that, in those circumstances, it was not likely that he would have to face an order for costs and that was a matter to be taken into account as weighing against the making of an order.
3. Mr Hillier put on an extensive affidavit addressing the merits. I have read and considered the matters to which he has referred. However, the statement of claim in the proceedings is in its seventh iteration and is some 104 pages long. As I have noted, the trial is expected to take 4 weeks. The claims are based upon allegations of fraud and dishonesty. Their success will depend upon the accounts to be given of dealings over a number of years. The case against the NW Parties appears to involve the demonstration of knowing participation in a conspiracy with clients of Norman Waterhouse.
4. I do not see how any meaningful conclusion could be reached as to the strength of a case of that kind for the purposes of the application for security. I consider it to be impossible to be able reach a conclusion with such a degree of certainty that the Court might be able to conclude that it is unlikely that Mr Hillier will have to meet a costs order.
5. For those reasons, I declined to hear submissions form Mr Hillier directed to demonstrating that his claim had 'strong merits'.

(4) Does the evidence concerning Americanas Pty Ltd support the making of an order for security?

1. Before the Registrar it was suggested that Americanas was a third party funder of the proceedings for Mr Hillier. This was on the basis of evidence of two substantial payments being made to the lawyers for Mr Hillier by Americanas. Since then, Mr Hillier has deposed that the amounts were received in discharge of loans and were not payments made by Americanas. In the result, the submission concerning Americanas was not put in the same terms as it was advanced before the Registrar. On the hearing by way of review, the submission was that the fact that Mr Hillier had been able to meet his own costs by a flow of funds from Americanas did not establish that he held personal assets that he could deploy to meet a future costs order. Rather it was said to demonstrate that Mr Hillier depended upon funds from other various business structures in order to meet those obligations. In my view, the evidence about the Americanas does not take the matter any further than the general conclusions I have reached in relation to the nature of Mr Hillier's business structures.

(5) Has there been conduct by the NW Parties that counts against the making of an order for security?

1. Mr Hillier relies upon aspects of the conduct of the proceedings to date as matters that count against the grant of security. They are:

(1) The taking of unreasonable positions in relation to interlocutory applications which has been productive of considerable cost and delay;

(2) Evidence of what is said to be deliberate delays by Mr Williams in the filing of a proper defence (at a time before the joinder of the NW Parties when Norman Waterhouse was on the record), including the making of a submission as to the time for filing the defence that was characterised by the Court as 'disingenuous';

(3) Conduct by Mr Williams in relation to access to the database of financial information for the Nordburger business that was sought to be characterised as giving a false and misleading impression as to the access that could be given; and

(4) Mr Williams continuing to act in the proceedings and having a significant role in preparation of witness statements when it was said to be apparent that he would be a material witness.

1. As to (1), the conduct of the interlocutory applications has been the subject of cost orders (a matter addressed further below). In substance, the NW Parties accept that there should be a set-off for outstanding cost orders against the NW Parties when it comes to determining the amount of any security. The NW Parties say that there has been no finding of any conduct by the NW Parties that has been vexatious or oppressive. There is no indication that indemnity cost orders have been obtained.
2. As to (2), (3) and (4), the NW Parties submit that there was no finding or order requiring the NW Parties to pay costs by reason of their conduct up until the time when they ceased acting.
3. The order for security relates to the costs to be incurred. The Registrar undertook an adjustment to remove costs that had been incurred before the bringing of the application. The NW Parties do not oppose the making of such an adjustment.
4. In my view, taking account of the adjustments to be made for cost orders made on the basis of the outcome of interlocutory applications, the matters raised by Mr Hillier fall short of demonstrating conduct that would disentitle the NW Parties from the making of an order by way of security for costs, assuming that the basis for such an order is otherwise demonstrated.

1. Taking account of the above matters, I was persuaded that there should be an order for security for costs. Of particular significance in the circumstances of the present case is the evidence of the arrangements put in place by Mr Hillier with a view to protecting him from claims arising from litigation in which he was involved as well as from further litigation that he contemplated concerning the Nordburger business, being the litigation that he subsequently commenced. It does not matter that he did not specifically contemplate the inclusion of the NW Parties as respondents at the time those steps were taken. Additionally, it is significant that Mr Hillier does not claim that an order would stultify the proceedings and he accepts that there was no delay in bringing the application.

1. As to the quantum of security, what is required is some basis to make a reasonable estimate of the costs which the party against who security is to be ordered would be required to pay of unsuccessful at trial: Norcast S.ár.L v Bradken Limited [2012] FCA 765 at [17]- [19] (Gordon J). However, in ordering security for costs the court does not endeavour to give a complete and certain indemnity to the respondent: Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171, 175. Determining the amount of security involves an exercise of discretion and is to be determined by what the court considers just in the circumstances: Fiedl Camp Services Pty Ltd v Site Accommodation Pty Ltd [2011] WASCA 118 at [27] (Newnes JA).
2. The application was for an order for security in the amount of $557,759. The NW Parties accept that there should be a reduction for an amount that relates to work done before the bringing of the application. An amount of $87,000 has been calculated.
3. It is accepted by the NW Partes that there should be a set-off for costs payable pursuant to costs orders that have been made against the NW Parties. The solicitor for Mr Hillier has provided estimates of the amounts that would be expected to be recovered pursuant to those orders. The NW Parties submit that the estimates are on the high side but may still fall within the range of reasonable estimates. The estimates total $120,000.
4. In addition, Mr Hillier says there should be some allowance for the costs of his successful application to join the NW Parties. Those costs have been reserved so there has been no determination of the liability for those costs. They have been estimated at $77,000. It might be thought that there is good reason why the NW Parties should have to bear those costs as the issue of joinder is a discrete question. However, as was acknowledged, there are other orders that might be made, such as an order that the costs be Mr Hillier's costs in the cause so that he is only entitled to them if he succeeds. Given the uncertainties, I am not persuaded to bring those costs to account.
5. Therefore, making adjustments for the amounts I have indicated, the amount reduces to $350,759.
6. I made a further adjustment to take account of two matters. First, an order for security does not provide a complete and certain indemnity. Second, even though there is no responsibility that falls on the NW Parties for the delay, there is a burden in requiring security at this stage of the proceedings when the trial is imminent and Mr Hillier has to make arrangements to meet his own costs after having incurred considerable costs in the conduct of the proceedings to date.
7. Taking those further matters into account and as a general exercise of discretion in all the circumstances, I would order the provision of security in the amount of $275,000.
8. As to the form of security ordered, at the time of hearing I invited submissions as to the appropriateness of a form of order that required security in the form of an irrevocable bank guarantee or payment of the amount into Court, with the choice as to which form to be a matter for Mr Hillier. Both parties accepted that a form of order in those terms would be appropriate. I required security to be provided by 26 March 2026. No submission was advanced to the effect that there should be a stay pending the provision of the security and given the trial dates that have been listed a stay would not appear to be appropriate. Of course, the NW Parties will be able to apply for such orders as they consider appropriate if there is default in compliance with the order. It seemed to me that, on matters presently known, the appropriate order as to costs of the application is that they be the NW Parties' costs in the cause. I made an order in those terms on the basis that any party may apply for a different order within 7 days.

I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Colvin.