Federal Court of Australia

Hillier v Martin (No 14) [2022] FCA 984

REASONS FOR JUDGMENT

O’SULLIVAN J:

Introduction

1    The applicant (Mr Hillier) applies by interlocutory application filed 16 May 2022, amended by leave of the Court granted 14 June 2022 (interlocutory application), amongst other things, for leave to join Stephen Bradley Williams (Mr Williams), a legal practitioner and a Partner in the legal firm Norman Waterhouse; the legal firm Norman Waterhouse; (Norman Waterhouse) and Norman Waterhouse Lawyers Pty Ltd (NW Pty Ltd), to these proceedings as fourth, fifth and sixth respondents respectively (together, the proposed respondents). In these reasons I refer to Norman Waterhouse and NW Pty Ltd together as “Norman Waterhouse” unless otherwise indicated.

Documents read

2    The applicant reads and relies on the following documents without objection:

(a)    The thirteenth affidavit of Gene Sykes Bidstrup sworn and filed 16 May 2022 (thirteenth Bidstrup affidavit); and

(b)    The eighth affidavit of James Hillier sworn and filed 23 May 2022 (eighth Hillier affidavit) save for the words in the second last sentence of paragraph 34.5 “and an email … attachment thereto”.

3    Without objection, the proposed respondents read and rely upon the affidavit of Fiona Mary Errington (Errington affidavit) sworn and filed on 6 June 2022.

Background to this interlocutory application

4    This matter was listed for trial to commence on Thursday 16 June 2022.

5    Charlesworth J has the primary conduct of the action.

6    The action commenced in August 2020. Since that time there has been what might fairly be described as a resistance on the part of the first respondent (Ms Martin) and the second respondent, Nordburger Operations Pty Ltd (Nordburger), for the production of Nordburger’s financial records. Those records are contained, at least in part, in an electronic database known in these proceedings as the “Xero database”.

7    In Martin v Hillier [2022] FCA 351, (action number SAD 34 of 2022) in the course of considering an application for leave to appeal against an order of Anderson J in which his Honour dismissed an application to stay an order for production of the Xero database, I set out the history of the attempts by the applicant to obtain access to the Xero database: [10]-[22]. I do not repeat it.

8    Ultimately, on 17 March 2022, in the face of non-compliance with the Court’s orders for production of the Xero database, I extended the time for production of the Xero database by the provision to Mr Hillier of log-in access to software that facilitates readable access to the Xero database to 5.00pm on Thursday 17 March 2022: Order 1, Orders of 17 March 2022.

9    As a part of those orders, I made self-executing orders by which if Ms Martin did not comply with the order for production, then judgment was to be entered in these proceedings with damages and other appropriate relief to be assessed: Order 2, Orders of 17 March 2022. In the event of non-compliance, the orders also directed the Registrar to make an application in the proceeding or start a proceeding for punishment of Ms Martin’s contempt of this Court: Order 3, Orders of 17 March 2022.

10    In the thirteenth Bidstrup affidavit, Mr Bidstrup deposes that he had received instructions from Mr Hillier to amend the applicant’s third amended statement of claim in terms of annexure GSB-55 to that affidavit. He deposes further that based on conclusions drawn from the overall financial state of Nordburger, that Mr Hillier has been able to draw from the material produced from the Xero database on 21 March 2022 and he has been instructed by Mr Hillier to apply to join to the proceedings Norman Waterhouse Lawyers Pty Ltd and Mr Williams. A proposed further draft amended statement of claim pleading against Norman Waterhouse Lawyers Pty Ltd and Mr Williams was currently with senior counsel for settling: thirteenth Bidstrup affidavit [3], [6]-[9].

11    On the first return date of the interlocutory application on 19 May 2022, I offered to the parties to deal with the interlocutory application as a matter of urgency given the impending trial date. On that occasion, amongst other things, I adjourned the interlocutory application for a further case management hearing on 24 May 2022, which was subsequently adjourned to 25 May 2022.

12    On 23 May 2022, Mr Hillier swore and filed the eighth Hillier affidavit in support of the interlocutory application.

13    On 25 May 2022, I made programming orders for the argument on the interlocutory application by which affidavits and submissions were to be filed and served. The interlocutory application was listed for argument on 14 June 2022.

14    This matter was listed for trial on 16 June 2022. At the case management hearing on 25 May 2022, Mr Ower QC, who appeared for Ms Martin and Nordburger, sought a period of approximately two weeks to take instructions on the interlocutory application and to file and serve any documents as may be advised. Mr Blight QC, counsel for the proposed respondents, also requested time to consider the documents that had been filed in this matter, file any affidavits, and prepare any written submissions.

15    I indicated that I was prepared to provide both Mr Ower QC and Mr Blight QC with the time they required. However, although I was not the judge with the primary conduct of the matter, given the nature of the proposed cause of action, which was explained to me as relying on the second limb of Barnes v Addy (1874) LR 9 Ch App 244, and the parties proposed to be joined were the solicitors for the first to third respondents, it was almost certain that in the event an order for joinder was made, this matter would not be able to proceed to trial on 16 June 2022.

16    The proposed respondents and the applicant complied with the programming orders made on 25 May 2022. Ms Martin and Nordburger did not file any affidavits or submissions.

17    On Friday 10 June 2022, Mr Williams filed a notice under r 4.05 of the Federal Court Rules 2011 (Cth) (FCR) giving notice to Ms Martin and Nordburger of his intention to cease acting as their lawyer in the proceedings.

An application to adjourn the argument

18    When this matter was called on for argument on 14 June 2022, Mr Ower QC sought leave to appear without instructing solicitors for the purposes of applying to adjourn the argument. The applicant opposed the adjournment. The proposed respondents neither consented nor objected to the adjournment application.

19    I granted Mr Ower QC leave to appear to make the application for an adjournment of the argument.

20    Mr Ower QC explained during the course of his application that his clients were unable to comply with the programming orders that I had made on 25 May 2022 due to the conflict of interest between the proposed respondents and Ms Martin and Nordburger.

21    Ms Martin and Nordburger made their application for an adjournment on three grounds:

(1)    The factors in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 had not been made out;

(2)    A document that been exhibited to the eighth Hillier affidavit which may be the subject of legal professional privilege, a matter which Ms Martin and Nordburger may seek to have taken into account on any application for joinder; and

(3)    The prejudice to the respondent in proceeding with the argument.

22    As to the first of those grounds, being the factors in Aon Risk Services Australia Ltd French CJ said in relation to an application to amend a statement of claim close to trial at [34]-[35]:

34.    … A court faced with a late amendment seeking to raise new claims and the in terrorem prediction that a multiplicity of proceedings may follow if the amendment is not allowed, is entitled to have regard to the barriers to the implementation of suggestions of that kind.

35.    It might be said that the adjournment effected by the primary judge’s decision to entertain the amendment application and to allow written submissions to be filed and evidence to be put on, and the subsequent delay in his decision, rendered academic any concern about further waste of court resources or inefficiencies flowing from the amendment ultimately being allowed. It might be said that, in those circumstances to refuse the amendment would be punitive. It is true that a punitive response to the substance of a late amendment application is not appropriate. But neither is a party to be rewarded by weighing in its favour the disruptive consequences of its own application. In any event the granting of the amendment in this case, at the time it was granted, meant that there would still be further delay while interlocutory processes flowing from the new claims were put in place. Aon had to prepare a new defence. The further delay, in the circumstances of this case, would be such as to undermine confidence in the administration of civil justice. This factor was not taken into account by the primary judge, nor by the Court of Appeal. The discretion of the primary judge miscarried and the Court of Appeal was in error in not allowing the appeal. In the circumstances, giving proper weight to the factors to which I have referred, the application for the amendment should have been refused.

23    In a joint judgment, Gummow, Hayne, Crennan, Kiefel and Bell JJ, when considering the objectives of case management and the purpose of the court’s rules in question, which have as amongst their objectives the timely disposal of proceedings at an affordable cost, said at [98]-[99]:

98.    Of course, a just resolution of proceedings remains the paramount purpose of r 21 but what is a “just resolution” is to be understood in light of the purposes and objectives stated. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account. The Rule’s reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.

99.    In the past it has more readily been assumed that an order for the costs occasioned by the amendment would overcome injustice to the amending party’s opponent. In Cropper v Smith Bowen LJ described an order for costs as a panacea that heals all. Such a view may largely explain the decision of this Court in Shannon v Lee Chun, which upheld a decision allowing the plaintiff to raise a new case at the second trial, but which imposed a condition as to costs. The modern view is that even an order for indemnity costs may not always undo the prejudice a party suffers by late amendment.

(Citations omitted)

24    In the eighth Hillier affidavit, Mr Hillier deposes that a consideration of documents known as the “William Buck brief”, annexed to the affidavit of Mr Thomas Patrick Martin sworn and filed 11 March 2022 (Thomas Martin affidavit), allows the conclusion that Mr Williams was aware of certain matters and that Mr Hillier’s review allows for a proper pleading to the effect that Mr Williams and Norman Waterhouse provided assistance to Ms Martin to effectuate what is referred to in the proposed pleading as a “Plan”: eighth Hillier affidavit [34]-[35].

25    I deal with the proposed pleading later in these reasons, however it is clear from the eighth Hillier affidavit that part of the material which led Mr Hillier to make to this application, being the “William Buck brief”, was not available to him until at the earliest 11 March 2022. Further, it was not until 21 March 2022 that Mr Hillier had access to the Xero database. Mr Hillier deposes that access to the Xero database allowed him to reach various conclusions about Nordburger’s financial circumstances, including payments made to Ms Martin and her associates: eighth Hillier affidavit [26]-[31].

26    Consideration of the type of action sought to be raised by the applicant in these proceedings in their proposed amended statement of claim reveals that, if appropriate, joinder of the proposed respondents was both necessary for the efficient and timely resolution of the proceedings. Joinder of the proposed respondents, if appropriate, would also avoid a potential multiplicity of proceedings and remove the possibility of inconsistent findings between different courts.

27    Had Mr Hillier been on notice of the potential for a Barnes v Addy cause of action and/or had received the documents in the Xero database some time prior to receipt of Mr Martin’s affidavit, then there may well have been force in Mr Ower QC’s submissions that the interlocutory application should not be considered given the proximity of the trial and in view of the matters set out by the High Court in Aon.

28    However, given the late access to information provided by the respondents to Mr Hillier and the consequent lack of any opportunity to consider and plead appropriately not only the cause of action now contemplated but also the joinder of the proposed respondents, I did not accept the first and second respondents’ first ground advanced in support of the application to adjourn the argument.

29    The second ground concerned a document apparently in the possession of the applicants which may have been the subject of legal professional privilege. That document is an email dated 29 April 2016 which is the subject of [34.5] of the eighth Hillier affidavit but was not read by the applicant at the hearing of the application. The email is, however, the subject of the proposed fourth amended statement of claim (4ASoC).

30    As I understand the submission made by the first and second respondents, the email dated 29 April 2016 is a document that should not be relied upon and that they sought time to investigate the provenance of the document.

31    I do not accept that submission. The issue on the interlocutory application is the joinder of the proposed respondents and leave to file the 4ASoC. If such an order is made, there will be an opportunity to address any questions of legal professional privilege and the impact on any pleading, assuming that leave is granted to amend in the form of, or substantially in the form of 4ASOC, in the near future.

32    The third ground concerned prejudice to Ms Martin and Nordburger. That prejudice was not clearly identified but again, as I understand the submission, they sought an opportunity to allow them to instruct new solicitors.

33    That submission should be rejected for the following reasons. First, Ms Martin and Nordburger had been on notice since on or about 16 May 2022 of this application. It was abundantly clear that it was inappropriate for the proposed respondents to continue to act for Ms Martin and Nordburger under those circumstances yet no steps have been taken to instruct alternative solicitors.

34    Second, it was not until Friday 10 June 2022 that Mr Williams gave notice under FCR 4.05 of his intention to cease acting for the first and second respondents. There is no satisfactory explanation for the delay, at least no affidavit evidence has been filed and served deposing as to the reasons for the delay.

35    Third, no submission was put as to why it is that Ms Martin and Nordburger seek to be heard about the joinder of the proposed respondents. I can understand opposition to joining the proposed respondents on the basis that the trial will be adjourned and that it is too late for such an amendment, however that is not what is put. Rather, an adjournment of some four weeks was sought to allow for new solicitors to be retained, but the purpose of instructing new solicitors on this application was not explained.

36    In the circumstances, I refused the application for an adjournment of the argument and proceeded to hear the matter. I granted Mr Ower QC leave to withdraw at the conclusion of the application to adjourn the argument.

The parties’ submissions

37    In this section, I deal with the proposed respondents’ submissions, the applicant’s submissions in reply, and my conclusion in relation to each of those submissions.

38    Mr Blight QC resists the application for joinder on two broad grounds:

(a)    First, the applicant has failed to discharge his onus to demonstrate that he has an affirmative case against the proposed respondents. As part of this ground, the proposed respondents submit the pleadings are defective and there is no credible evidence supporting the allegations; and

(b)    Second, the applicant has not explained properly why the application was brought very late. As part of this ground, the proposed respondents submit the late application has been prompted by concerns about the Nordburger business and not any new information about any potential liability of the proposed respondents.

General principles

39    The proposed respondents submit that FCR 9.05(1)(b), which sets out the criteria for a party to be joined to an existing proceeding, requires the applicant to demonstrate an “affirmative case” supported by positive credible evidence: Comcare v John Holland Rail Pty Ltd [2009] FCA 660; Brisbane Slipways Operations Pty Ltd v Pantaloni [2010] FCA 654; (2010) 270 ALR 13.

40    Comcare concerned the former FCR O 6, r 8 which provided in part that for there to be an order joining a party to a proceeding, the joinder of the party must be necessary so as to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon. I do not consider that “positive credible evidence” is required although the applicant is required to demonstrate an affirmative case in its proposed pleading.

No affirmative case against proposed respondents

41    The proposed respondents refer to the proposed 4ASoC annexed to the thirteenth Bidstrup affidavit as annexure GSB-55. Broadly speaking, the claim against the proposed respondents is one of knowing assistance to the respondents in breach of fiduciary duty. The proposed respondents identify five topics upon which they say leave to join them should not be granted.

The joint-venture is improperly pleaded

42    The first complaint concerns [31] of 4ASoC which pleads representations as to the equity interests as between Ms Martin and Mr Hillier in what is referred to as the Nordburger Joint Venture (NJV). The NJV is defined in [10] of 4ASoC where extensive particulars are given as to how the NJV was formed and at [12] which sets out the terms of the NJV.

43    The proposed respondents complain that there is no proper arguable case of a joint-venture agreement between the three joint-venturers namely, Mr Hillier, Ms Martin, and what is referred to in 4ASoC at [3], as “the Craig Interests”. They submit that there is no pleading of any oral or written agreement and submit further that the lack of that pleading is important because what is subsequently pleaded as “the Plan” has as its subject, the NJV.

44    That submission should not be accepted. The 4ASoC pleads in detail the genesis of what became the NJV. I accept that there is no pleading of an oral or written agreement, however that does not prevent the proposed respondents being on notice as to how it is said the NJV arose and if established, the Court determining the existence of the NJV.

A dishonest plan

45    The second complaint concerns the pleading of what it described as a dishonest plan to take control of the NJV assets. There are two components to this complaint – the first being the “the Plan” and the second, the dishonest character of “the Plan”.

Plan

46    “The Plan” is pleaded in 4ASoC at [45A] in these terms:

45A.    The Meeting Invitation Conduct and the 29 April Meeting Conduct formed part of a scheme or plan devised by the First Respondent. Martin and the Fourth Respondent to take control of the Nordburger assets and businesses held within the Nordburger Joint Venture from the Craig Interests and the Applicant and , thereafter, to claim ultimate economic ownership of such assets and businesses (the Plan).

47    Prior to considering the complaints made by the proposed respondents about the pleading of “the Plan”, it is trite that the pleading must be considered as a whole.

48    Much of the first part of 4ASOC is directed at the NJV: 4ASoC [10], [12], [14]-[16]; how the NJV operated and was put into practice: 4ASoC [19]-[20]; the alleged respective equitable interests in the NJV; and the duties set to arise in the pleaded circumstances: 4ASoC [21]-[24].

49    The pleading continues with a history of attempts to document a formal structure for the NJV reflecting the NJV agreement terms during the period November 2014 to October 2015: 4ASoC [26].

50    Next, the pleading alleges that during the period November 2014 to October 2015, representations were made by Ms Martin to Mr Hillier that he held at least a 40% share in the NJV and that Ms Martin held no more than a 35% share in it.

51    It is against that background that Mr Hillier pleads the critical meeting which was ultimately held on 29 April 2016. The pleading commences with the arrangements for that meeting and the reasons for it: 4ASoC [33], [34]. It continues at 4ASoC [36] by pleading in detail what is alleged to have occurred during the meeting in the following terms:

36.    At the meeting, the fourth respondent and Martin variously made the following statements to the applicant:

36.1    The fourth respondent said he had been approached by Martin with a variety of claims against Craig and William Buck;

36.2    The fourth respondent said the claims were detailed at great length in a brief of documents that had been prepared for the purpose of the preparation of a statement of claim in a future action against William Buck (William Buck brief) if the accusations could not be dealt with satisfactorily otherwise;

36.3    The fourth respondent said the claims were wide-ranging but generally to the effect that Craig had improperly used his position as the accountant for Nordburger to benefit himself at the expense of the business and the first respondent;

36.4    The fourth respondent said Martin had formed the view that the applicant had most likely been complicit in the wrongful conduct committed by Craig and William Buck;

36.5    The fourth respondent said unless the applicant was prepared to assist Martin and Norman Waterhouse in whatever actions they deemed necessary it would be assumed that the applicant had worked in concert with Craig and would be joined in any action against Craig and William Buck.

36.6    Martin said that for the applicant to show he was prepared to assist in the first respondent taking action against Craig and to prevent the applicant being joined to proceedings he was required to:

36.6.1    hand over his email address and password for Martin to scrutinise his correspondence; and

36.6.2    sign a deed by which the applicant handed over all authority to the first respondent to conduct any actions required to correct the serious and detrimental conduct of Craig and William Buck and which would prevent the applicant from having any contact with Craig.

36.6A    Martin or the fourth respondent said words to the effect that the applicant would not be given a copy of the William Buck brief unless he signed the Deed Poll referred to at paragraph 37 below;

36.7    The fourth respondent said that the applicant should obtain advice from his solicitor about the conduct of Craig and William Buck that was discussed at the meeting.

52    Apart from “the William Buck” brief referred to in [36.2] above, the central document is a Deed Poll. Certain terms of the Deed Poll are pleaded at 4ASoC at [38]:

38.    The Deed Poll included the following material recitals and terms, inter alia:

"F.    For a number of reasons, Victoria has considerable concerns with the conduct of Andrew Craig and the performance of William Buck.

G.    Such concerns include, but are not limited to, conflicts of interest, falsification of tax records, inappropriate billing practices and general incompetence.

J.    Victoria's primary concern has been and is the conduct of Andrew Craig, who has conducted himself in a manner which is inappropriate, unprofessional and in breach of his fiduciary duties to Victoria, James and the Business.

I.    One consequence of the conduct of William Buck and Andrew Craig is that the ownership structure of the business is unsatisfactory and prejudicial to Victoria's interests.

K.    Victoria will, in her personal capacity, and as the sole director of Nordburger Pty Ltd, terminate the retainer she and the company have with William Buck.

L.    Norman Waterhouse, solicitors, act as Victoria's solicitors in all aspects of her dealings with James, William Buck and Andrew Craig.

M.    Victoria requires James to assist and cooperate with her in all respects in managing the future conduct of the Business and the issues that have arisen as a consequence of Victoria's complaint.

N.    James has agreed to sign this Deed of Undertaking to record his commitment to bringing his agreement to assist and cooperate into effect.

2.    James provides an unconditional and enforceable undertaking that he will:

2.1    Waive, and by this Deed does waive, any claim or claims that he or any entity that he controls is entitled to operate the Business or make any binding decision in respect of the Business without first consulting Victoria.

2.2    Not to seek to operate the Business.

2.3    Not make any binding decisions in respect of the Business without first consulting with Victoria.

2.5    Cooperate with all reasonable requirements of Victoria and her advisors for the purposes of any investigation into the Conduct of William Buck and Andrew Craig, including but not limited to meeting with providing all necessary assistance and information to:

2.5.1    any forensic accountant engaged by Victoria; and/or

2.5.2    any IT forensic expert engaged by Victoria, which will include providing such expert with access to any electronic devices in the possession of James, his Gmail address and password and any other access reasonably required, including any other email accounts that are or have been operated by him.

2.7    Not contact or communicate or seek to communicate with Craig, Mavrakis or any member of the Craig family.

2.10    Do all things necessary and cooperate in all respects so as to give effect to a complete restructuring of the Business.

2.11    Do all things necessary in order to achieve a complete separation of Victoria and the Business from the Craig Group.

2.12    Sign all necessary documentation reasonably required of him to allow for the ongoing operation of the Business, including any assignments of leases required to assign the leasehold interests of Norwood Central Market in the Premises or any of them.

2.14    Keep the contents of this Deed, the complaint by Victoria concerning William Buck and all conduct and communication contemplated by this Deed strictly confidential and will not disclose any such information to any person unless expressly authorised by Victoria to do so."

53    It is alleged Mr Hillier executed the Deed Poll on 2 May 2016 and to the knowledge of Mr Williams, did so without the benefit of any independent legal advice: 4ASoC [41].

54    The consequence of execution of the Deed Poll is pleaded at 4ASoC [42]-[45] as:

42.    By the execution of the Deed Poll the applicant apparently bound himself to cooperate in the control and decision-making of the Nord burger Joint Venture with the first respondent to the exclusion of Craig and the Craig Interests.

43.    The first respondent, procured and agreed in the conduct of the meeting including the presentation of the Deed Poll to the applicant as pleaded in paragraphs 33 to 39 (which is hereinafter referred to as the 29 April Meeting Conduct).

44.    By virtue of the 29 April Meeting Conduct, the first respondent engaged in conduct incompatible with and contrary to the Equity Representations and/or the Repeated Equity Representations.

45.    Further, by no later than 29 April 2016, the first respondent claimed to be the ultimate economic owner of the Nordburger Joint Venture and its assets and businesses to the exclusion of any legal or equitable interest therein of the applicant.

55    The pleading as to how “the Plan” was devised is found later in 4ASoC [72A]-[72O] under the heading “Conspiracy and Knowing Assistance by the Fourth Respondent and Norman Waterhouse”. That pleading commences with an alleged instruction given by Ms Martin to Mr Williams to commence preparing and compiling “a detailed investigative brief into allegations of professional misconduct and criminal fraud by Mr Craig which became, when completed, the William Buck brief”.

56    The pleading in this section of 4ASoC is long and detailed. It sets out at [72G] and [72H] Mr William’s knowledge of the history of how the NJV came about and consequently knowledge of “the Plan” and the fact it was dishonest.

57    It is against that background that the proposed respondents first complain that no material facts are pleaded as to how and when “the Plan” was devised. They observe that the events pleaded in [45A] are asserted to form “part” of a scheme or plan. They submit further that the pleading is made more ambiguous by 4ASoC [72M], in which it is alleged that between 12 January 2016 and 2 December 2019, Ms Martin, Mr Thomas Martin and Mr Williams wrongfully, and by unlawful means, conspired and combined together to create and execute “the Plan”, (defined as the “Conspiracy”).

58    The proposed respondents first complaint that no material facts have been pleaded as to how and when “the Plan” was devised must be seen against the structure of the pleading as I have set out above.

59    Mr Hillier submits that it is within the knowledge of Ms Martin, Mr Thomas Martin and Mr Williams as to when and how “the Plan” was devised. I accept that submission. The consequence of what is alleged to have occurred at the meeting on 29 April 2016 and its immediate sequelae, is that the applicant pleads “the Plan” had been devised and this was its manifestation. Part of that manifestation is what is now known as “the William Buck brief”. Although material facts as to the background to “the Plan” are set out in 4ASoC [72A]-[72O], nonetheless knowledge as to when it was devised and how, remains within the knowledge of Ms Martin, Mr Thomas Martin and Mr Williams.

60    Accordingly, I do not accept the pleading is defective because it fails to plead material which is distinctly within the knowledge of Ms Martin, Mr Thomas Martin and Mr Williams. As to the suggestion that [72M] makes a pleading “more ambiguous”, on the contrary, when taken with [72N], far from making the pleading more ambiguous, the paragraphs provide clarity to the pleading.

The Plan was dishonest

61    In 4ASoC [45B], Mr Hillier pleads “the Plan” was dishonest by the ordinary standards of reasonable and honest people.

62    The proposed respondents submit that the pleading in 4ASoC [45B] is a mere conclusion and that the factual basis for a conclusion that the invitation to the meeting on 29 April 2016 and the meeting itself was dishonest is not properly pleaded.

63    A number of points arise from this submission. The first is that the expression “the plan was dishonest by the ordinary standards of reasonable and honest people” is taken, albeit not word for word, from the judgment of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, 389. Although it is true that on one view the phrase is a conclusion, it is more to the point that it sets a standard of conduct. To that extent, I do not accept the proposed respondents’ first submission concerning the use of this phrase. To the same extent, the second submission concerning the pleading of dishonesty may also be rejected. In Royal Brunei Airlines the Privy Council observed that in the context of the accessory liability principle, which is the issue to which the pleading is directed, the question of whether a person has acted dishonestly is assessed by an objective standard. The Privy Council observed: at p 389 B – G.

Dishonesty

Before considering this issue further it will be helpful to define the terms being used by looking more closely at what dishonesty means in this context. Whatever may be the position in some criminal or other contexts (see, for instance, Reg. v. Ghosh [1982] Q.B. 1053), in the context of the accessory liability principle acting dishonestly, or with a lack of probity, which is synonymous, means simply not acting as an honest person would in the circumstances. This is an objective standard. At first sight this may seem surprising. Honesty has a connotation of subjectivity, as distinct from the objectivity of negligence. Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart dishonesty are mostly concerned with advertent conduct, not inadvertent conduct. Carelessness is not dishonesty. Thus for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another's property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour.

In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless. However, in the situations now under consideration the position is not always so straightforward.

64    Royal Brunei considered, amongst other things, the extent of the second or knowing assistance limb of Barnes v Addy. In Farah Constructions Pty Ltd and Ors v Say-Dee Pty Ltd (2007) 230 CLR 89, the High Court said that until it was necessary for the High Court to decide how far Royal Brunei had modified the second limb of Barnes v Addy, Australian courts should apply the formulation of the second limb in Barnes v Addy. The High Court did not disapprove the description of “dishonesty” in Royal Brunei set out above.

65    Mr Hillier has pleaded the material facts upon which on his case that the proposed respondents engaged in dishonesty is based. That will either be established objectively or it will not, but in my view the proposed respondents clearly know the case they have to meet and what conclusion the Court will be asked to reach on the basis that the conduct in question is established.

Associated points

66    The proposed respondents make three further points associated with the pleading of “the Plan” and its alleged dishonesty.

The meeting invitation conduct - 4ASoC [34]

67    The first associated point is that the proposed respondents submit it is not alleged that Mr Williams was involved in any meeting invitation conduct. To that extent, insofar as it is pleaded in [72H.2] that the applicant had been misled by Ms Martin as to the purpose of the meeting on 29 April 2016 in order to procure his attendance, and that Mr Williams had knowledge that the applicant had been misled, no particulars (nor evidence) are provided. Ignoring for the moment the question of evidence given that the complaints the proposed respondents make are against the proposed pleading, the applicant offers to provide a pleading to address this point noting that it is a matter of inference. In my view, the applicant should be given an opportunity to plead that inference and there will be an order accordingly.

The 29 April 2016 meeting conduct – 4ASoC [43]

68    The second associated point is that the proposed respondents submit that nothing is pleaded in 4ASoC [43] to justify a conclusion that any statement or representation made during the meeting on 29 April 2016 was dishonest. They submit further that there is nothing pleaded to the effect that “the William Buck brief”, or any of the matters taken from it and conveyed to Mr Hillier at the meeting, contained a dishonest statement or representation.

69    The applicant submits that the proposed respondents miss the point of the pleading. Rather, it is the effect of the representations and/or statements in the overall context having regard to the knowledge of Ms Martin, Mr Thomas Martin and Mr Williams of the underlying claims of the applicant and Mr Craig’s to a joint venture and their share in it which colours the conduct of Ms Martin, Mr Thomas Martin and Mr Williams.

70    The pleading in 4ASoC [43] refers to the 29 April meeting conduct and it is that expression which is used in [45A] in describing that conduct as part of “the Plan”.

71    I accept the applicant’s submissions. The proposed respondents are seeking to isolate parts of the pleading in a vacuum. Read in context and as part of the pleading as a whole, the effect of the pleading is clear.

Two documents

72    The third associated point refers to two documents annexed to the eighth Hillier affidavit as Annexure JH-78. Those documents are an email from Ms Martin to Mr Williams, Mr Thomas Martin and barrister Mr Mark Douglas sent on 2 May 2016 at 9.30am; and an email from Ms Martin to Mr Williams sent 29 April 2016 at 2.37pm with an attachment which the parties referred to as a “Script”.

73    The proposed respondents submit the two documents do not support the joinder and do not demonstrate a “dishonest plan” to take control of the NJV nor to oust the applicant from the business.

74    The applicant submits that these two documents form part of the case being advanced by him.

75    Once again, the proposed respondents focus on one aspect of a multi-faceted matter. Taken by themselves, the two documents may not assist the applicant’s case, however the two documents are not to be considered in isolation. They form part of an overall case advanced by Mr Hillier. Whether that case is made out is, of course, another matter but it cannot be said that any lack of assistance from these two documents to the applicant’s case has the consequence that the proposed respondents should not be joined to the proceedings.

Knowing assistance – 4ASoC [72S]

76    The next submission advanced by the proposed respondents concerns the pleading of assistance in 4ASoC [72S]. That paragraph pleads 10 matters by which it is alleged Norman Waterhouse, by Mr Williams and thereby Norman Waterhouse, assisted Ms Martin in relation to various matters including “the Plan”.

77    The first submission by the proposed respondents on this issue is that because the assistance is linked back to “the Plan”, then the assistance pleas fall away. Since I do not accept the proposed respondents’ submissions in relation to “the Plan”, the submission fails.

78    In the alternative, the proposed respondents rely on Say-Dee Pty Ltd at [161]-[163] in submitting that it is necessary for the applicant to plead assistance to a trustee or fiduciary with knowledge of a dishonest and fraudulent design on the part of the trustee or fiduciary. They submit that a critical element is a breach of trust and/or fiduciary duty by Ms Martin, referring to Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; (2014) 87 NSWLR 609 [9] (Gleeson JA), [123]-[124] (Leeming JA) and that nothing short of dishonest conduct by fiduciary and/or trustee is sufficient to engage the second limb of Barnes v Addy. They submit further that no material factual particulars are pleaded that disclose a case that the alleged breaches of trust and/or fiduciary duty by Ms Martin were a “dishonest and fraudulent breach”.

79    I do not accept that submission. The applicant pleads “the Plan” as dishonest, and pleads clearly a breach of trust and breach of fiduciary obligations on the part of Ms Martin at 4ASoC [57], [63]; knowledge on the part of Mr Williams at [72G], [72H], [72I], [72J]; and consequently Norman Waterhouse at [72K], and all [72S].

80    The proposed respondents submit further that constructive notice, in the sense of knowledge of circumstances that would put an honest and reasonable person on inquiry, was not sufficient to meet the requirement of knowledge: Say-Dee [171]-[177] where the Court said:

171        What is required by the requirement of "knowledge" expressed in the second limb?

172        In the passage in which Lord Selborne formulated the second limb in terms of assisting with knowledge in a dishonest and fraudulent design on the part of the trustees, he contrasted those "actually participating in any fraudulent conduct of the trustee" and those "dealing honestly as agents".

173        As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards. Further, as early as 1801, Sir William Grant MR stigmatised those who "shut their eyes" against the receipt of unwelcome information.

174        Against this background, it has been customary to analyse the requirement of knowledge in the second limb of Barnes v Addy by reference to the five categories agreed between counsel in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA:

"(i) actual knowledge; (ii) wilfully shutting one's eyes to the obvious; (iii) wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; (v) knowledge of circumstances which would put an honest and reasonable man on inquiry."

In Bank of Credit and Commerce International (Overseas) Ltd v Akindele ("BCCI") , Nourse LJ observed that the first three categories have generally been taken to involve "actual knowledge", as understood both at common law and in equity, and the last two as instances of "constructive knowledge" as developed in equity, particularly in disputes respecting old system conveyancing. After noting that in Royal Brunei the Privy Council had discounted the utility of the Baden categorisation, Nourse LJ in BCCI went on to express his own view that the categorisation was often helpful in identifying the different states of knowledge for the purposes of a knowing assistance case.

175        Although Baden post-dated the decision in Consul, the five categories found in Baden assist in an analysis of that for which Consul provides authoritative guidance on the question of knowledge for the second limb of Barnes v Addy.

176        Thus, support in Consul can be found for categories (i), (ii) and (iii). Further, Consul also indicates that category (iv) suffices . However, in Consul, Stephen J held that knowledge of circumstances which would put an honest and reasonable man on inquiry, later identified as the fifth category in Baden, would not suffice. Gibbs J left open the possibility that constructive notice of this description would suffice. Barwick CJ agreed with Stephen J.

177        The result is that Consul supports the proposition that circumstances falling within any of the first four categories of Baden are sufficient to answer the requirement of knowledge in the second limb of Barnes v Addy, but does not travel fully into the field of constructive notice by accepting the fifth category. In this way, there is accommodated, through acceptance of the fourth category, the proposition that the morally obtuse cannot escape by failure to recognise an impropriety that would have been apparent to an ordinary person applying the standards of such persons.

81    The proposed respondents submit that the pleading must disclose that Mr Williams had knowledge of a dishonest or fraudulent breach by Ms Martin, but does not do so.

82    I do not accept that submission. The structure of the pleading, which I have set out above, alleges that Mr Williams is alleged to have knowledge of “the Plan” on the basis he was involved in devising it; “the Plan” was dishonest and that in implementing it by taking control of the NJV, Ms Martin engaged in a breach of trust or breach of fiduciary obligations: 4ASoC [57], [62] - [63]. There are a number of categories identified in Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l'Industrie en France SA [1993] 1 WLR 509 in the passage from Say-Dee set out above into which the knowledge of Mr Williams might fall. It is not exclusively constructive knowledge.

83    As to the attribution of knowledge of Mr Williams to Norman Waterhouse, as pleaded in 4ASoC [72K] and [1H], the proposed respondents submit there is no automatic attribution for dishonest conduct to a corporate entity, namely NW Pty Ltd. In support of this submission, the proposed respondents refer to Commonwealth Bank of Australia v Kojic [2016] FCAFC 186, (2016) 249 FCR 421, [94] and Krakowski v Eurolynx Properties Ltd [1995] HCA 68, (1995) 183 CLR 563, 583.

84    The applicant submits that both Kojic and Krakowski are concerned not with the attribution of knowledge but the aggregation of knowledge. So much so is apparent from the judgments in Kojic of both Besanko J at [73]-[78] and Edelman J at [89].

85    The proposed respondents submit further that the requirements for attribution of knowledge differ between, on the one hand, partners and on the other, an incorporated legal practice. That may be so depending on the particular circumstances but in this matter, it is pleaded clearly that Mr Williams engaged in the alleged impugned conduct whilst he was a Principal in and servant and agent of the legal practice trading under the name “Norman Waterhouse”: 4ASoC [1D], [1H] and also during the course of his employment by and as agent for NW Pty Ltd: 4ASoC [1H]. If the proposed respondents seek to make a distinction in attribution of knowledge depending on whether Mr Williams was a Principal in the legal practice or an employee of the incorporated legal practice, that is a submission that may be open to the proposed respondents at a later stage in the proceedings.

Delay

86    The next submission made by the prospective respondents relates to the question of delay. They submit there are three issues relating to the delay in bringing the joinder application:

(1)    No proper explanation for the delay;

(2)    6 year limitation; and

(3)    Multiplicity of proceedings (Supreme Court Action).

No proper explanation for the delay

87    The prospective respondents submit there was no proper explanation for the delay in bringing the joinder application. That submission may be disposed of quickly. In Martin v Hillier [2022] FCA 351, I set out the history of this matter in relation to access to the Xero database. I do not consider there has been no proper explanation for the delay in bringing the application.

6 year limitation

88    The proposed respondents’ submissions do not contend that the action against the proposed respondents is out of time. If it is, they will be able to plead that in their defence.

Multiplicity of proceedings

89    Mr Hillier commenced an action in the Supreme Court on 28 April 2022, being one day before the six year anniversary of the 29 April 2016 meeting. In the eighth Hillier affidavit, Mr Hillier deposes as to the reasons he gave those instructions, in particular his solicitors had been unable to take advice from Senior Counsel as to the proposed claim and an application to this Court to join the proposed respondents. He deposes further that if the proposed joinder is permitted, he will seek to cross-vest the Supreme Court action to the Federal Court. The proposed respondents submit the Supreme Court action has no obvious connection with this Court.

90    I do not consider that the existence of the Supreme Court proceedings is a basis upon which to refuse joinder of the parties to this matter.

Conspiracy

91    The proposed respondents submit the pleaded allegations of conspiracy fall short of what is required for such a cause of action.

92    They submit that the requirements for an action for conspiracy by unlawful means are:

(a)    A number of persons;

(b)    These persons, while they may not know the details of conspiracy, are aware of the context of the conspiracy;

(c)    These persons have an intention to injure the applicant;

(d)    They intended doing so by carrying out unlawful acts as the means effecting that injury (for example a breach of statute may constitute unlawful means);

(e)    The conspirators know that the conduct is unlawful and that it is the conduct which will bring about the conspiracy; and

(f)    The injury occurs in a way that causes actual loss.

93    Contrary to what is submitted by the proposed respondents, the elements of the tort of conspiracy by unlawful means comprise: Winfield and Jolowicz on Tort, Peel A and Goudkamp J (ed), (19th Ed, Sweet & Maxwell, 2014) [19-044]:

(a)    An arrangement between two or more parties;

(b)    Whereby they agree that at least one of them shall use “unlawful means” against the claimant;

(c)    The claimant suffers loss and damage as a result; and

(d)    Damage to the claimant need not be the predominant intention of any of the parties.

94    That is to be compared with conspiracy to injure or a “Crofter” conspiracy: Crofter Hand-Woven Harris Tweed Co Ltd v Veitch [1942] AC 435, 445 (Viscount Simon L.C). In that matter, the House of Lords held that if there is a combination of persons whose predominant purpose is to cause damage to the claimant, that purpose may render unlawful acts which would otherwise be lawful if committed by one person, even with the purpose of causing injury: see also Winfield and Jolowicz on Tort (supra) [19-036].

95    The applicant pleads conspiracy and knowing assistance at 4ASoC [72A]-[72U], and in particular pleads conspiracy at [72M] in the following terms:

72M    Between 12 January 2016 and 2 December 2019, the First Respondent, Martin and the Fourth Respondent wrongfully and by unlawful means conspired and combined together to create and execute the Plan (Conspiracy).

96    Given the pleading of unlawful means, the species of conspiracy is conspiracy by unlawful means. When the pleading is considered, it is apparent that it identifies:

(a)    The arrangement between two or more persons: [72M];

(b)    The “agreement”: [72M]-[72Q];

(c)    The “unlawful means” i.e. the purpose of the conspiracy and “the Plan”: [72M]-[72Q]; and

(d)    The applicant has suffered loss and damage as a result: [72P].

97    The fifth element of the Tort, which is that damage need not be the predominant intention of any of the parties is a matter to be determined at trial.

98    Accordingly, I do not accept the proposed respondents’ submissions that the applicant has failed to plead what is required for this cause of action.

Time

99    The proposed respondents make a further submission that the cause of action in conspiracy may be out of time. There is no positive submission by the proposed respondents that that is the case. If it is, the proposed respondents will be able to plead the cause of action is time-barred if so advised.

True motive for joinder

100    The final submission made by the proposed respondents is that the true motive for the joinder application concerns the financial health of Nordburger and the applicant seeks to join the proposed respondents as an alternative source of recovery in the event the applicant is successful in his claims. They submit that this is an impermissible purpose outside the scope of FCR 9.05.

101    The applicant submits the motive for joinder is irrelevant and the submission that having the proposed respondents as an alternative source of recovery is an impermissible motive and is a mere assertion of principle without any support or foundation.

102    The proposed respondents’ submission should be rejected. The reasons for joinder include that the person sought to be joined: FCR 9.05.

(b)    is a person:

(i)    whose co-operation might be required to enforce a judgment; or

(ii)    whose joinder is necessary to ensure that each issue in dispute in the proceeding is able to be heard and finally determined; or

(iii)    who should be joined as a party in order to enable determination of a related dispute and, as a result, avoid multiplicity of proceedings.

103    A consideration of those reasons demonstrate clearly that the joinder of the proposed respondents, even if it is for reasons of recovery, is within the rule.

Conclusion

104    It is for the reasons I have set out above that there will be an order:

(a)    Pursuant to FCR 9.05 granting leave to the applicant to join as respondents to the within proceedings Stephen Bradley Williams, Norman Waterhouse Lawyers (a Firm) and Norman Waterhouse Lawyers Pty Ltd; and

(b)    An order pursuant to FCR 16.53 granting leave to the applicant to amend the third amended statement of claim in the terms of annexure JH-77 (proposed 4th amended statement of claim) annexed to the affidavit of James Hillier sworn 23 May 2022 subject to the applicant pleading how it is that Ms Martin represented to the applicant the matters in [34] of the proposed 4th amended statement of claim.

105    I will hear the parties on the question of costs.

Associate:

Dated:    22 August 2022

SCHEDULE OF PARTIES