Jainti Pty Ltd v Fraser Panorama Pty Ltd - [2021] NSWSC 744

Supreme Court

New South Wales

Summary available

Medium Neutral Citation: Jainti Pty Ltd v Fraser Panorama Pty Ltd [2021] NSWSC 744
Hearing dates: 23 – 26 November 2020
Date of orders: 25 June 2021
Decision date: 25 June 2021
Jurisdiction: Equity
Before: Ward CJ in Eq
Decision:
1.   Order that the sum of $161,160 (plus interest) held in the controlled moneys account of Bird & Bird be paid to Jainti Pty Ltd as trustee for the Zambito Trust.
2.   Reserve the question of costs to be dealt with on the papers if possible.
3.   Direct the parties to file brief written submissions on costs within 14 days, with a view to dealing with the question of costs on the papers if possible, and any submissions on any interest claimed by Jainti for the period from payment of the distribution to Anthony Zamattia and the placement of the moneys in the controlled moneys account.

Catchwords:
EQUITY — Trusts and trustees — Beneficiaries — Wrongful distribution of trust property –– Rule in Saunders v Vautier

Legislation Cited:
Corporations Act 2001 (Cth), ss 436A, 477(2A)-(2B)

Cases Cited:
CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98; [2005] HCA 53
Australian Securities and Investments Commission v Rich (2005) 53 ACSR 752; [2005] NSWSC 417
Baden Delvaux & Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509
Barnes v Addy (1874) LR 9 Ch App 244
Beck v Henley (2014) 11 ASTLR 457; [2014] NSWCA 201
Boensch v Pascoe [2019] HCA 49
Brandi v Mingot (1976) 12 ALR 551
Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84
Giumelli v Giumelli (1999) 196 CLR 1; [1999] HCA 10
Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266
HML v R (2008) 235 CLR 334; [2008] HCA 16
Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR
Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191
Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
Lucent Technologies Inc v Krone Aktiengesellschaft (No 3) [2000] FCA 100
Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674
Northampton Borough Council v Cardoza [2019] EWHC 26
Payne v Parker [1976] 1 NSWLR 191
Re Marshall; Marshall v Marshall [1914] 1 Ch 192
RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56
Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406; [2009] NSWSC 43
Saunders v Vautier (1841) 41 ER 482
Stone v Melrose Cranes & Rigging Pty Ltd (2018) 125 ACSR 406; [2018] FCA 530

Category: Principal judgment
Parties: Jainti Pty Ltd (in liquidation) (Plaintiff)
Fraser Panorama Pty Ltd (First Defendant)
Anthony Zamattia (Second Defendant)
Representation:
Counsel:
Mr H W Somerville (Plaintiff)
Mr M Luitingh (Second Defendant)
Solicitors:
William James (Plaintiff)
Grace and Grace Plus (Second Defendant)

File Number(s): 2019/0042253
Publication restriction: Nil

Judgment

HER HONOUR: This proceeding involves a dispute as to the entitlement to the sum of $161,160 currently held in a solicitor’s controlled moneys account, those moneys being part of the final distributions made by Fraser Panorama Pty Ltd (Fraser Panorama) (which was formerly the first defendant in the proceeding), in its capacity as trustee of the Fraser Panorama Trust (to which I will refer as the Fraser Unit Trust), in respect of an approximately $20 million property development in Hervey Bay, Queensland (the Fraser Panorama development).
The plaintiff, Jainti Pty Limited (Jainti), which has been in liquidation since 2011, contends that it is entitled to those moneys, in its capacity as trustee of a discretionary trust (the Zambito Trust); its contention being that all distributions out of the Fraser Unit Trust in respect of 34 units in the Fraser Unit Trust (the 34 Units) were payable to it as trustee of the Zambito Trust.
The claim as against the first defendant (Fraser Panorama) for, among other things, breach of trust in relation to the payment of distributions to persons or entities other than Jainti, was settled on 27 June 2019 (see orders made by Robb J on that date), subject to approval pursuant to ss 477(2A)-(2B) of the Corporations Act 2001 (Cth) (Corporations Act), which approval was granted on 4 November 2019 (see orders made by Rees J on that date). The liquidator of Jainti, Mr Reidy, has deposed that Jainti settled the matter with Fraser Panorama, under the terms of agreed orders, in respect of Fraser Unit Trust distributions for 4/5^ths of the entitlements of the holder or holders of the 34 Units, which thus leaves only the claim by Jainti in respect of the 1/5^th entitlement paid to the account of the second defendant (Mr Anthony Zamattia) (those being the moneys that have been placed in a controlled moneys account pending the outcome of this dispute).
I will refer to the second defendant, without intending any disrespect, by his first name, as I will also do with the other members of his family (except where necessary to distinguish between family members with the same first name).
By its amended statement of claim filed 26 July 2019, Jainti now seeks declaratory relief (declarations that Anthony holds the sum of $161,160 on constructive trust for it – prayer 4; and that Jainti has a proprietary interest in and/or an equitable charge over the whole of the amounts frozen by orders of this Court on 7 and 12 February 2019 – prayer 5) and an order that Anthony either account to it or pay equitable compensation (prayer 6), with consequential claims for damages, interest and costs. (Jainti has confirmed that, following the settlement with Fraser Panorama, it does not press for the relief claimed at prayers 2-3 of the amended statement of claim – see at T 322.39-T 323.9.) Prayer 1 of the amended statement of claim, which is still pressed, seeks a declaration as to the holding of the 34 Units (as to which relief, some criticism is made by Anthony to which I refer in due course).
Although issue was taken in Anthony’s outline of opening submissions as to inconsistency between the relief sought in the amended statement of claim and that sought in the summons pursuant to which the proceeding was commenced, as far as I can see nothing here turns on this. I proceed on the basis that the substantive relief now sought is that claimed in prayers 1, 4-6 of the prayers for relief in the amended statement of claim.
In substance, what Jainti contends is that the sum held in the controlled moneys account is part of the distributions to which it was entitled in its capacity as trustee of the Zambito Trust; and that Anthony received that distribution knowing that it was made by Fraser Panorama (of which company he was a director) in breach of trust (i.e., a knowing receipt first limb Barnes v Addy (1874) LR 9 Ch App 244). To the extent that an issue was raised in oral submissions as to what relief might be granted if the knowing receipt claim were ultimately found not to be made good but it were nevertheless to be held that Jainti was the entity which was entitled to the sums that had been paid to Anthony – see the debate at T 321-T 323, I will address that in due course, if and when it arises. Suffice it to note that, in that event, Anthony ultimately accepted that Jainti would be entitled to an order for the money held in the controlled moneys account (see T 323).
What Anthony, on the other hand, contends is that he was entitled to be paid, and to receive, the distribution out of the Fraser Unit Trust in respect of 1/5^thof the 34 Units, as the registered unit holder in the Fraser Unit Trust of that 1/5^th share of the 34 Units or, alternatively, as the beneficial owner of that 1/5^th share in the 34 Units (see [35] of the amended defence).
Relevantly, Anthony contends that the 34 Units in the Fraser Unit Trust were never held by Jainti as trustee for the Zambito Trust but, instead, were held from 12 May 2006 by Jainti as trustee of a separate trust (to which I will refer as the Family Trust) for five individual beneficiaries: Anthony (i.e., himself); his brother, David Zamattia; their father, Bruno Zamattia; and Anthony and David’s uncles, Salvatore (known as Sam) Morabito and Sam’s brother, Frank Morabito. There is no suggestion that there were five separate trusts created, one each in favour of each individual beneficiary – rather, it is said by Anthony that what was intended was that there be a single trust held for the five beneficiaries each as to a 20% share.
Pausing here, as to the family connections, Sam and Frank are Bruno’s brothers-in-law (Bruno’s wife, Carol, being their sister). Another Zamattia family member who features in the proceeding (but is not suggested to be a beneficiary of the alleged Family Trust) is Sam Zamattia, David and Anthony’s brother, who gave evidence of a particular conversation with Anthony relating to the execution of documents by him (to which I will refer in due course). (For clarity, when I refer to Sam in these reasons, I am referring to Sam Morabito; where I refer to Sam Zamattia, I will use his surname in order to distinguish between the two.)
Anthony further contends that the Family Trust was terminated, insofar as it related to Anthony, David and Bruno only (i.e., the Zamattia family beneficiaries) in October 2008 but in any event by no later than in or around September 2016 (relying on Saunders v Vautier (1841) 41 ER 482 (Saunders v Vautier) and, for the later date, on a direction given by a document headed “Notification of Termination of Trust” bearing the date of 9 September 2016); with the effect, Anthony says, that Jainti does not have any right to the distributions of the Fraser Unit Trust insofar as those distributions relate to the three members of the Zamattia family.
The September 2016 “Notification of Termination of Trust” document (hereafter referred to as the Notice of Termination of Trust) bears the purported signatures of each of Anthony, David and Bruno. However, David denies having executed that document (see his first affidavit sworn 17 April 2019 at [10]); and he denies any knowledge of the Family Trust or that Jainti ever held the units in the Fraser Unit Trust in any capacity other than as trustee for the Zambito Trust. For Jainti, it is said that David’s position is contrary to his own financial interest and is confirmed by evidence from Frank and Sam, as well as objective documentation (including that which was supplied by Anthony to Jainti’s liquidator since his appointment, and by way of financial statements over many years). (For Anthony, criticism is made as to the submission that reliance can be placed on David’s evidence being contrary to David’s own financial interest, but I will come to that criticism in due course.)
As to the purported execution of the Notice of Termination of Trust by Bruno, the position is complicated by the fact that his affidavit in the proceeding was ultimately withdrawn by the liquidator (in the circumstances to which I refer below) and hence there was no direct evidence from Bruno in relation to the execution or otherwise of this document; and the liquidator accepts that a Jones v Dunkel inference (see Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (Jones v Dunkel)) is available in this regard (see T 334.12-20).
Ultimately, both parties accepted that the outcome of the present dispute turns largely, if not wholly, on what findings are made as to the 12 May 2006 meeting of the directors of Fraser Panorama (Anthony and John Derek Taylor (to whom I will refer as Derek Taylor)) in relation to the issue of units in the Fraser Unit Trust.
For his part, the liquidator accepts that, if there was a valid Family Trust and if it was validly terminated, then Jainti’s claim fails. Conversely, the liquidator maintains that, if (as he contends is the case) there was no valid Family Trust (such that Jainti only ever held units in the Fraser Unit Trust as trustee for the Zambito Trust), or if there was a Family Trust but there was no valid termination of that trust, then Jainti’s claim should succeed.
Anthony, for his part, says that if the 34 Units were held as contemplated by a unit holders’ agreement entered into in 2006 (Unit Holders Agreement) (as to which, see below), then Jainti’s claim must fail (and, conversely, that if he, Anthony, fails in establishing that the position is as was provided for in the Unit Holders Agreement, then he must fail) (see T 320.40-43). Anthony also maintains that the liquidator must not only establish that the 34 Units were held by Jainti as trustee for the Zambito Trust but also that the documents relied upon by Anthony were concocted (since it is said there is no other explanation for the competing versions of particular documents and the Unit Holders Agreement) and that such a serious allegation cannot be established.

Background

Jainti

Jainti was incorporated on 15 June 1993. At all relevant times, each of Frank, Sam, Bruno, David and Anthony was a director of Jainti; and the company secretary was Frank. It appears that for some time the Zamattia and Morabito family members were together involved in property development.
Following its incorporation, Jainti invested in two property developments: one, in respect of a property in Burradoo, New South Wales (not relevant for the purposes of this proceeding) and the other, in respect of the Fraser Panorama development, which comprised some 163 lots of real property in Hervey Bay, Queensland. Anthony’s evidence (corroborated by Derek Taylor) is that he sourced the Fraser Panorama development with Derek Taylor in or about 2005 and that he, Anthony, was the project manager of the development and received project management fees over a period of 14 years (see Anthony’s affidavit sworn 20 September 2019 at [3.1]-[3.12]; affidavit of Derek Taylor sworn 7 October 2019 at [3.1]-[3.2]).

Zambito Trust

The Zambito Trust was established by a Trust Deed dated 21 December 2004, which was executed by Mr Phillip John Ashton as settlor, and Jainti, as trustee of the Zambito Trust.
Mr Ashton is an accountant, who himself was an investor in the Fraser Panorama development (through an investment vehicle – Ashmoor Pty Ltd), and who prepared the financial statements of the Fraser Unit Trust and Zambito Trust for the relevant years. The Trust Deed of the Zambito Trust was varied by a Deed of Variation executed by Jainti on 1 July 2011. For reasons that I will explore in due course, Mr Ashton was (as acknowledged by Counsel in the course of submissions) what might be referred to as the “missing pachyderm in the room”, having not been called by either party (see T 287.45-50).
The liquidator has deposed that, so far as he is aware, Jainti did not undertake any business or activity other than in its capacity as trustee of the Zambito Trust (see Mr Reidy’s affidavit sworn 7 February 2019 at [10]).
The beneficiaries of the Zambito Trust at all relevant times included: Anthony, David, Bruno, Sam and Frank, and parties related to those individuals. I have referred above to the family connection between the Zamattia and Morabito families. The liquidator (in the context of Anthony’s submissions as to the Zamattia/Morabito families wishing in 2008 to separate their respective family interests) notes that the Zambito Trust remains in existence and that no steps have been taken to dissolve it.

Fraser Panorama – incorporation 14 February 2006

On 14 February 2006, Fraser Panorama was incorporated, with Anthony and Derek Taylor appointed as the directors of the company and Derek Taylor as its company secretary.

Fraser Unit Trust established

On the same day, the Fraser Unit Trust was established by Trust Deed dated 14 February 2006, executed by SMH Guardian Services Pty Ltd, as settlor, and Fraser Panorama, as trustee.
The Trust Deed establishing the Fraser Unit Trust provided that the trust fund was to be divided into the number and classes of units set out in the Schedule thereto and was to be held by the initial unit holders as set out in the Schedule. (While there was provision for differential classes of units, there was no reference in the Trust Deed to “A” Class or “B” Class units as such.)
The initial unit holders specified in the Trust Deed were Jainti as trustee for the “Zamabito [sic] Trust” (as to one ordinary unit) and an entity associated with Derek Taylor named Leading Edge (Pacific) Pty Ltd (Leading Edge) as trustee for the Raidell Trust (as to the second of the two ordinary units). It does not appear to be disputed that the reference in the Schedule to the “Zamabito Trust” is a typographical error and that it must have been intended to be a reference to the “Zambito Trust”. Anthony and Derek Taylor executed the Trust Deed in their capacities as directors of Fraser Panorama.
The Fraser Unit Trust Deed conferred rights on unit holders in relation to the participation in income distributions (see as pleaded at [8] of the amended statement of claim). Those rights were not preferential as between unit holders.

16 February 2006 meeting of Fraser Panorama

There is in evidence a copy of minutes of a meeting held by directors of Fraser Panorama on 16 February 2006 (signed by Anthony as chair) in which it is recorded that a trust deed for the Fraser Unit Trust was tabled and it was resolved that the company accept appointment of that unit trust with Jainti “atf The Zambito Trust” and Tuta Products Pty Ltd (Tuta Products) each being issued with one unit (see Exhibit A at 258).
Pausing here, as noted above, the Trust Deed in fact named Leading Edge as the holder of the second ordinary unit. Hence, it would seem that there was an error in the minutes in the reference to Tuta Products. However, as I understand it, both Leading Edge and Tuta Products are entities associated with Derek Taylor (and Derek Taylor gave evidence to which I refer below which suggests that he may have seen Tuta Products as a substitute unit holder or else treated the two entities interchangeably – referring to his interest in the Fraser Unit Trust as holder of 20 units; i.e., an amalgamation of the initial unit issued to Leading Edge and the additional units issued to Tuta Products). (He also had an interest in some “A Class Units” in the name of Pepco, to which I refer below.)
The 16 February 2006 minutes of meeting recorded that a contract was tabled for the purchase of vacant land at “Harvey Bay” [sic], Queensland, for a price of $7.75 million and it was resolved to execute the contract “on the basis of obtaining bank finance and from loans to be raised from unitholders”; and that the land was to be developed as residential building blocks in accordance with already existing approved council plans.
Therefore, from the inception of the Fraser Unit Trust, it is clear from the Trust Deed that there were created two ordinary units in the trust (held, as noted above, one each by Jainti and Leading Edge; and each held by those entities in a trustee capacity – the dispute here being as to the beneficiary or beneficiaries for whom Jainti held these, and other subsequently issued, units in the trust).

Preparation of documents to record issue of additional units in Fraser Unit Trust

At this point it is relevant to put what follows in context and to note in general terms the way in which the Fraser Panorama development was to be structured or undertaken, namely that, after the Hervey Bay property was “sourced” (i.e., presumably, identified as a suitable development project site and acquired), it was proposed that funds for working capital to develop the land would be procured by way of loans from investors in the project to whom units would be issued in the Fraser Unit Trust. Derek Taylor’s evidence was that he and Anthony came to an arrangement where Anthony would find the investors “to come in and fund the project” and that the difference in the classes of units that were ultimately issued was that he and Anthony would be allocated some “shares” that were “basically carried free” (because they had started the project) and that the balance of the investors would acquire a different class of “shares” (i.e., units in the trust) and those investors would provide loans to the trustee commensurate with their unit holdings (see T 129). Jainti, as trustee of the Zambito Trust, for example, is recorded in the accounts as having contributed some $700,000 by way of loan for the purposes of the development.

Further, it seems apparent from Derek Taylor’s evidence (to which I will refer in due course) that there was what I might charitably describe as some informality in how the investors’ interests in the project would be recorded (it being his evidence that there were some changes made to reflect the desire of one or more of the investors to bring in tax losses or the like). Therein, perhaps, lies an explanation for the fact that there are in evidence different versions of relevant documents recording the tabling of applications for, and issue of, units in the Fraser Unit Trust. However, whatever the cause of the competing versions of various of the documents, what that has ultimately led to is the present dispute as to the entity or persons for whom the plaintiff (Jainti) holds the 34 Units in the Fraser Unit Trust as trustee.
Anthony’s evidence is that in the two months prior to the meeting ultimately held on 12 May 2006 (to which I refer below at which the issue of the additional units was approved), he prepared a bundle of documents for each unit holder including a copy of: the Fraser Panorama certificate of incorporation; the Fraser Unit Trust Deed; the Unit Holders Agreement, documents relating to project feasibility, forecast cash flow, funding proposals and other related documents; unit holder certificates relevant for each unit holder; survey and photos of the site; marketing proposals; and, the Fraser Unit Trust meeting minutes (see his affidavit sworn 30 October 2020 at [3.4]). His evidence is that these were prepared for distribution or collection by other family members at the “communal office”. (Reference was made in cross-examination of various of the family members to documents being left on a snooker table; and it appears that the “communal office” was in fact the basement or pool room of Bruno and Carol’s house.) Those documents (that Anthony maintains were only draft documents but some of which he accepts bore his electronic signature – apparently in anticipation of the 12 May 2006 meeting) referred to the relevant units as being held by Jainti as trustee for the Zambito Trust.
In closing submissions, it was submitted for Anthony that those documents were prepared at an earlier time than that to which he deposed in his affidavit (i.e., in February 2006) (and indeed it was said by Counsel for Anthony that this was beyond dispute and that it was also beyond dispute that those documents were placed on the snooker table in the downstairs room of Bruno’s house). The February 2006 date placed by Counsel for Anthony on the creation of the “draft documents” (albeit inconsistently with Anthony’s own affidavit evidence) may derive from the fact that it was in February 2006 that the Fraser Unit Trust was established but there is no documentary record (or metadata) of the creation of those documents at that time.
There was, however, evidence in Frank’s cross-examination which placed the version of the documents on which the liquidator relies (and which Anthony refers to as the “draft documents” in his affidavit sworn 20 September 2019 at [10.11]) as being created in February (albeit that this “February” time frame may have been prompted by the question put to him). See in this regard the following exchanges with Frank (T 78.4-45):

Q.    Are you aware of when those certificates were prepared?
A.    Where they were prepared?
Q.    When they were prepared?
A.    They were prepared‑‑
Q.    Would it be in the February?
A.    They were, yeah, they were prepared on 16 February 2006.
[I interpose that 16 February 2006 is the date of the meeting of Fraser Panorama at which the Fraser Unit Trust Deed was tabled.]
Q.    They were prepared in anticipation of this meeting?
A.    Of what, could you‑‑
Q.    They were prepared in anticipation of this meeting, those documents?
A.    I don’t know what meeting you’re talking about.
Q.    12 May 2006‑‑
A.    I can’t‑‑
…
Q.    Are you aware of the fact that there was a meeting on 12 May 2006?
A.    I can’t recall that.
Q.    But you know that documents were prepared in February?
A.    I know the share documents were prepared in February, the certificates there.
Q.    You know that at some stage, during or about 12 May 2006, you took those documents off the table?
A.    I can’t recall that.

Earlier, Frank’s evidence as to taking documents from the snooker table was as follows (at T 75.40-T 76.2):

Q.   Did you from time to time take records off that table for your own self keeping?
A.    I took things which were not passed on to me by Anthony. I took copies of them and I kept a copy for myself, because I never received anything else off him.
Q.    Yes, so that was the Jainti records?
A.    That would have been the Jainti, the whatshisname, the Zambito certificates. The beneficiaries …
A.    That’s all I grabbed, I think it was, I’m not a hundred per cent certain. I can’t actually recall if there was any other stuff there.

Taken to [16] of his affidavit sworn 23 May 2019 in which Frank had deposed that it was his practice to attend the office and that he would normally take a copy of documents for safekeeping and would usually show them to Sam, he said (see T 76.12-26):

A.    … Right, the banking records, yes. The, the beneficiaries are the, the certificates. Yes, I did take them, I did take copies of them. I did take, I did put bank statements there.
…
Q.    You said “I would normally take a copy of them for filing and safekeeping and I would usually show the documents to Sam”. Is that still your evidence?
A.    Yes, of course it is. I did do that because otherwise, no one, Anthony never gave us copies of anything. You’d ask him for it, you don’t get it.
Q.    Copies of these documents were left on that table, is that your evidence?
A.    Yes, they were on the table, yes.
Q.    You would take copies of those documents and you would show them to Sam, is that correct?
A.    Correct.

Relevantly, I will refer to the documents that Anthony submits were created as draft documents (in either February or in April/May 2006 but in any event before the 12 May 2006 meeting), and on which the liquidator here relies, as the Zambito Version of the documents (see Exhibit A at 257) because those documents in terms provide that Jainti holds the relevant units as trustee for the Zambito Trust.
As noted above, Anthony says that the Zambito Version of the documents was left at Bruno’s house (on the snooker table) and that the evidence is that at some stage those documents were picked up by Frank or Sam (and hence came into the possession of the Morabitos). Frank, as noted above, gave evidence that he could not recall taking those documents off the snooker table but in re-examination he accepted that he had picked up at least the unit certificates comprised within the Zambito Version of the documents (see at T 79.16-30):

Q.    You gave evidence that you saw some share certificates with words on the snooker table. You also referred to unit certificates on the table?
…
Q.    You said that you picked up some share certificates‑‑
A.    In the office.
Q.    ‑‑off the snooker table, and you also said some unit certificates. I’d like to know are you talking about two different things?
A.    No, no the share certificates.
Q.    Share certificates?
A.    The beneficiary ones there, which, which said on the five, whatever units they were. I think it was 14 and 19, which were in Zambito Trust, they were not the individual ones. That’s all I picked up.

Sam’s evidence as to those documents (put to him as the documents evidencing the deal between Jainti and the Fraser Unit Trust) was that (see T 82.33-44):

A.   … I remember on the snooker table there were piles of documents which covered the whole table, of which those documents were for each of the unit holders and we were told not to touch them, they are for the unit holders and I've - my wife was a, a unit holder and she had a set of those documents and they had in them the feasibility, they had in them the - how many blocks there were, the subdivision, I've got the copies here if you want to have a look, but there was nothing between Fraser and Jainti that I'm aware of. I mean - yeah, Fraser and Jainti.
Q.    Did you ever have a look at what those packages, those documents were?
A.    No. I was just told not to because they're for the, for the unit holders and the information task was limited by Anthony.

Later, Sam seemed to accept that his wife had taken a set of those documents, saying that “[s]he was told she can have a set” and there was the following exchange (see T 83.22-45):

Q.    Did you have a look at that set?
A.    Later on when we smelt a dead rat, yes.
Q.    So you knew what that package was made up out of?
A.    I’ve got them here. Yes.
Q.    No, no. I’m asking you about at the time.
A.    This was sometime after the actual - yes. I did see them later on, yes.
Q.    Could you tell us more or less when that was?
A.    That was quite a while after, once we started having issues with Anthony.
Q.    Could you give me a year?
A.    Well, if I give it, it's only a guess.
Q.    Yes.
A.    So--
Q.    Your best estimate.
A.    Let me think. Because I think we got them to give them to the, to the lawyers. So it might've been eight, 2008, nine--
Q.    2008.
A.    --eight – I’m only guessing.

I draw from the above that it is likely that documents prepared in relation to the 12 May 2006 meeting (see below), prepared by Anthony, were indeed left on the snooker table; but when they were left there and when they were picked up (let alone looked at) by other family members is unclear.

Alleged 11 May 2006 conversation

Anthony deposes that, on 11 May 2006 (i.e., the evening before the 12 May 2006 meeting), he had a conversation with Sam; and that Sam said that he did not want “this” project (the Fraser Panorama development) affecting the previous development (at Burradoo) or the Zambito Trust because it was too “risky”.
Sam denies that at this stage he thought that the Fraser Panorama project was “too risky” (I refer to this evidence in due course). His affidavit evidence implicitly puts into dispute the suggestion by Anthony that Sam did not want the units held in the name of the Zambito Trust. In his affidavit sworn 23 May 2019, Sam deposed at [35] (which paragraph was read as to his understanding at the time) that he understood that the Zambito Trust would allow him and Frank to split income they received and that if that had not been the case, he would have wanted to raise this with Mr Ashton. For Anthony, it is said that Frank’s subjective belief is irrelevant – see T 278. I accept that it is not relevant to the construction of the documents in question. Nevertheless, it does put in issue whether there was any conversation on or around 11 May 2006 (as Anthony has deposed there was) between Anthony and Sam of the kind which Anthony says led to the changes to the Zambito Version of the documents. I refer in due course to the credit submissions made for Anthony in relation to Sam’s evidence in this regard.
Anthony says that the draft documents (resolution, certificates, Unit Holders Agreement and register) were changed to delete the reference to the Zambito Trust and to record that the 34 Units were to be held by Jainti “atf” the five individual family members (Anthony, David, Bruno, Sam and Frank), which Anthony says was a bare trust (see his affidavit sworn 20 September 2019 at [3.9]) and that in due course this trust was terminated by certain of the beneficiaries (see below).

12 May 2006 meeting – Fraser Panorama

What followed next was that, at a meeting on or about 12 May 2006, the directors of Fraser Panorama (Anthony and Derek Taylor) resolved that the company, in its capacity as trustee of the Fraser Unit Trust, accept applications for the issue of further units in the trust (and unit certificates were issued, bearing the date of 12 May 2006, in respect of those additional units and for the initial two units that had been created at the inception of the trust).
There are two versions of the minutes for this meeting (and two versions of the unit certificates purportedly issued on the date of that meeting).
On the version of the minutes that Jainti submits is the correct version (Exhibit A at 257), which is part of the bundle of documents to which I refer as the Zambito Version of the documents, it is recorded that the directors tabled applications by each of Jainti “atf The Zambito Trust” and by Tuta Products – in each case for 19 “B Class Units” (i.e., totalling 38 units) and by various entities for “A Class Units” (including 14 units in the name of Jainti “atf the Zambito Trust”), totalling 60 units. Thus, consistently with the fact that there were already 2 ordinary units that had been created at the inception of the trust, on the resolution as recorded in the Zambito Version of the minutes (relied upon by Jainti), there were then a total of 40 “B Class Units” (i.e., 19 new units plus the one original unit for each of Jainti “atf the Zambito trust” on the one hand and a combination of Leading Pacific/Tuta Products on the other). The liquidator places weight on the numerical consistency of this version of the documents (and the fact that the minutes record the tabling of applications for units not the substitution or cancellation of the two initial units).
On this version (the Zambito Version) of the minutes, 12 of the 60 “A Class Units” were recorded as being the subject of an application by T&L Walton Pty Ltd (atf Walton Family Trust).
This version of the minutes bears no handwritten annotations (and, on the evidence before me, is the only version that was provided to the liquidator prior to September 2016 (see T 254) – though I refer to Anthony’s submissions on this in due course). The liquidator emphasises that this version is consistent with the financial statements prepared by Mr Ashton in relation to the respective trusts – the Fraser Unit Trust and the Zambito Trust.
On the version of the minutes that Anthony says is the correct version (see Exhibit 1), to which I will refer as the Individual Beneficiaries Version of the documents, what is recorded as being tabled at the meeting on 12 May 2006 were, relevantly, applications for 40 “B Class Units” in total (20 for each of Jainti “atf Sam and Frank Morabito and Anthony, David, Bruno Zamattia” and Tuta Products (against which there appears the handwritten notation “Derek Taylor”)); and applications for 60 “A Class Units”, again including 14 for Jainti (but here again describing Jainti “atf” the five individuals).
There was on this competing version of the minutes a handwritten correction to the number of units applied for by T&L Walton (reducing the number from 12 to 10) and adding in handwriting a new applicant (Bland Investments) for two units. There is also a handwritten notation after the entry for Sam Zamattia/Sam Morabito, namely the words “(Partnership) 2 EACH”. Against the entry for Pepco (Australia) Pty Ltd (atf The Pepco Trust) of 10 “A Class Units”, on this version of the minutes appear the handwritten initials and numbers “DT 6 PL 4” (consistent with Derek Taylor’s evidence that six of the 10 Pepco units were for him as a “partner in the Pepco thing that I had”).
Anthony says that the changes to the unit holdings following his conversation with Sam are set out in the confirmed minutes of the 12 May 2006 meeting, with further hand-marked changes to the named unit holders of other units (i.e., the Individual Beneficiaries Version of the documents). Anthony’s evidence is that all parties were advised of the 12 May 2006 meeting, that the minutes of meeting were subsequently distributed; and that no objection thereto was received (see his affidavit sworn 20 September 2019 at [10.13]). (I was taken to no documentary record of any such notification of the outcome of this meeting; and it is relevant to note that when the Morabitos produced documents to the liquidator in 2016, the version they produced was the Zambito Version – although I note the uncertainty as to the precise sequence of events in which the Morabitos picked up the Zambito Version of the documents from the snooker table.)
Derek Taylor has deposed that he was at the “meetings” when the initial unit holding in the Fraser Unit Trust was agreed, including the holding of the 34 Units by Jainti (as trustee for the 5 listed individual beneficiaries). However, his cross-examination makes clear that this recollection is based largely on what he has read in the documents to which he was taken in the preparation of his evidence for this proceeding. In the witness box, he had no clear recollection of the basis on which Jainti held the 34 Units. In this regard, see the following exchange at T 117.10-19:

Q.   The reality is, isn’t it, that you’ve got no idea what capacity Jainti held those units in, do you?
A.    When you say capacity, what do you, what do you?
Q.    You don’t know whether it was as trustee for the Zambito Trust or whether it was trustee for some other trust? You just don’t know, do you?
A.    No, I don’t.
Q.    The best you could say is that Jainti held 34 units in the Fraser Unit Trust?
A.    Yes.

Derek Taylor nevertheless did maintain in cross-examination that he could recall (by looking at the Individual Beneficiaries Version of the minutes) that “there were conversations around the fact that they wanted to change the, the thing from Jainti to the Zambito Trust” (T 119.40-4). However, he gives no evidence of the content of any such conversations (and it is not suggested on the evidence that he was a party to any of the conversations between the Zamattia and Morabito family members).
It is not disputed that, following the issue of the new units in the Fraser Unit Trust, there were a total of 100 units in the Fraser Unit Trust (divided into 40 “B Class Units” and 60 “A Class Units”) (i.e., not 102 units), which is consistent with the evidence as to the subsequent distributions made out of the Trust; and it also does not appear to be disputed that the 40 “B Class Units” on issue included the two initial units that had been created on the establishment of the Fraser Unit Trust.
The distinction between the “B Class Units” and “A Class Units” (by reference to the Unit Holders Agreement – see below) is that the “A Class” unit holders (i.e., the investors that Anthony brought into the project) provided loans (of $50,000 per unit held – totalling $3 million) to establish working capital and that those loans were interest bearing “at appropriate market rates and as per the Unitholders Agreement”; whereas the “B Class Units” were said to be “free carry” units, reflecting Anthony and Derek Taylor’s initial involvement in relation to the Fraser Panorama development.
In cross-examination, Derek Taylor’s recollection of this was as follows (T 135.38-44; T 136.1-38):

Q.    Why don’t I come at it a different way. Was there any difference in terms of income rights as between A class and B class unit holders?
A.    I don’t recall any difference, apart from the fact that the A - or specifically Anthony and I went personal guarantees on all the loans. That was about the only, about the only difference. We, we funded the thing and, and put our personal guarantees up for all the loans which, which we, we didn’t ask anybody else to expose themselves to a personal guarantee.
…
A.    I think the B class got their money first. I mean, I can’t remember exactly, but there was some - we did something - I mean, what we, what we actually did, at one stage we wanted to distribute back to all the unit holders, apart from us, the B class unit holders, we distributed back to them their capital. We, we had a situation where we, we, we sold a whole bunch of blocks. We paid down a lot of the debt. And we actually refunded, took more money and refunded - took a, a loan again, which we once again guaranteed, to pay the unit holders their‑‑
Q.    I'm going to‑‑
A.    ‑‑money back‑‑
Q.    ‑‑interrupt you, I‑‑

A.    ‑‑90% of their initial investment back, so‑‑
Q.   I’m not asking about payments back of loans. I’m asking about distributions to unit holders.
A.    Well, the difference was we didn’t get any money - obviously we didn’t get any money. The unit - the point I’m making, we didn’t get money. The, the A class shareholders got virtually all their money back in, in a early tranche. So they, after about 15 months they had their money back.
Q.    You're talking about the repayment of loans. I want to ask you about distribution of income, and I’ve directed your attention to subclause 10.9(f). So I'm asking you about distribution of income by the Fraser‑‑
A.    Yeah, okay.
Q.    ‑‑Unit Trust. Do you understand?
A.    Yeah, yeah, yeah.
Q.    The first question I've asked you is in relation to the distribution of income that is referred to there. Was there any difference as between the different classes of shares?
A.     I, I, I don’t recall. I, I - you‑‑
Q.    You don't recall, okay.
A.    You’ll have to ask the accountant. I mean, that’s an accountancy thing, basically.

As adverted to above, Derek Taylor’s evidence was that the Individual Beneficiaries Version of the minutes was the correct version of the minutes but it was apparent that he was basing this on the fact that it recorded his own unit holdings correctly (rather than on any independent recollection of events at the relevant time) (T 134.25-50):

Q.    So you can’t say which one is the correct one. Is that right?
A.    This is the correct one.
[To my observation, as I noted at the time for the benefit of the transcript, Derek Taylor was there pointing to the Individual Beneficiaries Version at 1337 of the Court Book (see Exhibit 1)]
Q.    Why do you say that?
A.    Well, because that, because that’s the shares that I got. That represents what I had for my - I don’t know about anybody else’s shares. It represents the true position of what my position is in there. [my emphasis]
…
Q.    When you say that’s the correct one, you’re surmising that because you think that the units that are shown on 1337 represent the total of the units that your entity ever had in the Fraser Unit Trust.
A.    That’s correct, 20 and - well, six of, six of the ten in Pepco(?), which that actually notes down there, DT6 be the commentary for, because a partner in the Pepco thing that I had, that we had some - we were picking up some tax losses in again

Unit Certificates dated 12 May 2006

Corresponding to the two versions of the minutes of the 12 May 2006 meeting, there are two competing versions of the unit certificates purportedly issued pursuant to the resolutions at that meeting (each signed by the directors of Fraser Panorama – Anthony and Derek Taylor).
Relevantly, on the version relied upon by the liquidator (part of the Zambito Version of documents), the description reads: “Jainti Pty Ltd (atf The Zambito Trust)” on the unit certificates for 14 “A Class Units” (Certificate Number 5), 19 “B Class Units” (Certificate Number 3) and one “B Class Unit” (Certificate Number 1). The competing version of the Unit Certificates (also dated 12 May 2006 and similarly numbered) (part of the Individual Beneficiaries Version of the documents) relevantly records Jainti as the holder of the units as trustee for the five individuals.

Unit Holders Register

Again there are competing versions of the Unit Holders Register which reflect the same differences (as between the Zambito Version and the Individual Beneficiaries Version of the documents) as to the manner in which the holding of Jainti’s 34 Units was recorded in the register of the Fraser Unit Trust.
There is a copy of the Unit Holders Register that is consistent with the version of the unit applications and certificates contended for by Jainti (part of the Zambito Version of documents), which includes T&L Walton as the holder of 12 units. Anthony, however, relies on a competing version of the Unit Holders Register (part of the Individual Beneficiaries Version of documents).

12 May 2006 Unit Holders Agreement

I have referred above to a Unit Holders Agreement. Anthony places no little weight on this document, it being a Unit Holders Agreement dated 12 May 2006 between Fraser Panorama, Jainti “as trustee of the Zamabito Trust” [sic]; and Leading Edge as trustee of the Raidell Trust (Jainti and Leading Edge there being identified as the unit holders of the Fraser Unit Trust). It appears to bear a computer generated footer with the date “29.3.06”. It also bears a number of handwritten annotations (against which there are initials of at least one of the signatories). It is perhaps not insignificant that it has the same typographical error in respect of Zambito (Zamabito) as does the Fraser Unit Trust Deed (which might suggest it was prepared around the same time). It is consistent in a number of respects with the Zambito Version of the documents but it bears handwritten amendments consistent with the Individual Beneficiaries Version of the documents.
The Unit Holders Agreement recites: at Recital A, that the Fraser Unit Trust was created by Deed dated (incorrectly and incompletely) “17^th 2006”; at Recital B, that it is the intention of the unit holders (i.e., Jainti and Leading Edge in their (there acknowledged) trustee capacities) that Fraser Panorama “is acquiring” the Hervey Bay property for the purpose of subdivision into residential lots; at Recital C, that the Trust intends engaging Anthony and Derek Taylor to carry out the project management of the development; and, at Recital D, that the parties wished to record certain agreements and understandings that had been reached between them on the terms that were set out therein.
Relevantly, at cl 6, the parties, among other things: acknowledged, at (a), that there were 100 units to be issued in the Trust each having a $1 par value; provided, at (b), that 20 units in the Trust “shall be issued to Jainti and 20 units to Leading Edge (the “B Class Units”), with a handwritten annotation after “Jainti” to add the initials “ATF AZ, DZ, BZ, SM, FM” followed by the figure 20% and to cross out “Leading Edge” and add in handwriting “TUTA PRODUCT”; provided, at (c), that the balance of 60 Units be issued to the unit holders in the numbers there set out (see below); and, provided at (d), that each holder of an “A Class Unit" agreed to advance to the Trust the sum of $50,000 for each unit held by such unit holder on the terms there stated.
The list of “A Class” unit holders bore a number of handwritten amendments. Relevantly, the typed list commenced with a reference to “Jianti” [sic] for 10 units but was amended in handwriting to add “(ATF AZ, BZ, DZ, FM, SM)” and to change the number of units from 10 to 20 units; “Terry Walton” was included originally for 20 units and amended to 10 units; Samuel Zamattia was included for 4 units and amended to add “Samuel Morabito” and “Partnership”; and two additional investors were added in handwriting: Bland Investments for 2 units and “PEPCO” for 10 units. The handwritten amendments appear to have been initialled by Anthony and Derek Taylor.
As adverted to above, Anthony places some weight on this document. It certainly supports the conclusion that there was at some stage an intention that Jainti hold its 20 “B Class Units” as trustee for the five individuals. The difficulty, however, is in determining whether this came before or after the final decision at the 12 May 2006 meeting (assuming that was indeed when the final decision was made – a perhaps unsafe assumption in light of Derek Taylor’s evidence about “re-jigging” the unit holdings, which seems to suggest that Derek Taylor understood it to be a bit of a moveable feast depending on things such as whether investors had tax losses that they wished to bring in or otherwise deal with in some way referable to their investment in the trust – although any such later decision would require the necessary formalities to be complied with to effect a change in the beneficial ownership of units issued by reference to a decision on 12 May 2006).

Allocation of units

Anthony’s evidence is that his family members acquired 14 “A Class Units” upon a consideration of $700,000, initially in a trust of which Jainti was the trustee, and that he gave them a 1/5^th share each in 20 “B Class Units” so that all five acquired a 1/5^th share in the 34 Units (see his affidavit sworn 20 September 2019 at [3.1]).
Jainti, however, contends that the unit holding of the 34 Units was held by it as trustee for the Zambito Trust, as recorded in the Zambito Version of the documents (that Anthony acknowledges he prepared albeit, he says, in draft before the 12 May 2006 meeting) and as recorded in draft accounts prepared for Jainti in 2010, to which I refer below.
Derek Taylor’s account of how the units were allocated in broad terms was that (see T 128.45-T 123.20):

Q.    That’s what I’d like to ask you, were there 98 units issued in addition to the two or were there a hundred new units issued, do you remember?
A.    No, I don’t remember. I mean, I would’ve thought that there would’ve been 98 more issued, but actually no, probably a hundred because they would’ve substituted for those, I would’ve thought. Because what happened was Anthony and I, having started the thing off, we were the directors, shareholders and we had half the project each basically at its conception which you can see is represented by that.
And, and then we issued us, we came to this arrangement where Anthony would find the, the investors to come in and fund the project and we allocated ourselves 20 shares each into our various different entities which were basically carried free because they, we started the project. And the balance of the shares of which there, I mean presumably would’ve been 60, or whether it’s 58 or 60, I’m not sure because I don’t know what happened with those initial two units. But then there was therefore 60 shares, cause I think it was a hundred in total, were then used to sell down to investors to fund the project. So that’s an overview of the thing. Where, how, how that worked technically I can’t, I can’t recall but‑‑
Q.    You flagged a possible substitution. Do I take it that you’re just guessing as you sit here now, you don’t actually recall that occurring?
A.    I don’t recall, I don’t recall how, how that was structured. But I mean, that’s an overview of, of what the intention was and what in fact happened. But whether it was, whether we formed another 98 units or whether we had, I think we probably substituted, I don’t know how, how that worked but.

Taken to the version of the 12 May 2006 minutes on which the liquidator here relies (Exhibit A), Derek Taylor said (see T 129.31-49):

A.    Yes. That makes that pretty clear don’t it because we’ve issued another 19 units to Jainti Zambito Trust, and 19 units to another entity that, of mine, or mine and my, another partner that I put that in because we had some tax losses in there and we wanted to put it into that, that, so that’s where we ended up, so‑‑
Q.    You remember now?
A.    Well it’s obviously, it’s obviously there’s 19 there, so we, the other, the ones have stayed presumably in the original entity and those are the, and those 19 have been issued to make it up to the‑‑
Q.    I just want to be fair to you, are you agreeing that you remember or are you making presumptions? Because I don’t want the latter, I just want to ask you what you remember?
A.    Well, I, that’s, that’s actually not correct, because that only adds up to 60, doesn’t it.
Q.    We’ll deal with‑‑
A.    60 and plus 30 (as said) is 98, yes, okay. 38 is 98, yes, well.

When I attempted to clarify whether this was Mr Taylor’s independent recollection or if he was just drawing this from the document, Derek Taylor said (see T 130.17-21):

A. My recollection was that Anthony had, we split the first 40 units up between Anthony’s entity and my entity. Where that, where that ended up, I’m reminded now it looks as if it appears that it was Jainti and Tutor(?) [Tuta Products] which is, so that’s, yeah. I mean that’s, that’s, that appears to be what’s happened so, the documents show that. Is that what you need to know?

He also indicated that there was some ‘re-setting’ of the unit holdings (see T 132.13-29):

A.    This was, this was where we - you know, because mine was reset, you know, and there were various other people that wanted to reset them in different entities. So this was a, this was rejigging the original document.
Q.    Are you basing what you're saying on what you're seeing on the page here?
A.    No, but I, I, I recall there was - not specifically, the specific detail, but I remember there was - because I did the same thing, because mine, you know, I had some shares that, that I’d also bought with a partner, which had to, you know, we had to note that down. And I think there was somebody else wanted to change their, their - the Walton Family Trust wanted to change theirs. There was, there was, there was various changes where we adjusted - because you know, the original thing as, as you start to get into a project like that, you know, different people have different requirements. Like I sort, sort of was doing, picking up some tax losses and, and, and that sort of thing. So you know, there were some changes made to the original document. I remember that, and it’s, and the, this represents that document.

Pausing here, it is not wholly clear from this evidence whether the “rejigging” to which Derek Taylor there made reference was something he recalled was made right at the outset – i.e., at the time of the 12 May 2006 meeting, or during the course of the project as one or more investors changed their mind as to how they wished their units to be held. What is, however, clear from this is that Derek Taylor (at least) seemed to regard the allocation to investors of units in the trust as a relatively arbitrary matter; i.e., that investors could simply “substitute” in some fashion the entity through which units were held.
Significantly, Derek Taylor was not aware of any resolution having been passed by Fraser Panorama whereby there was any such substitution (see T 134.8-12):

A. I honestly don’t know the - all I know is we, we initially issued one share each, and then we, and then when we, we, we went to the, to the investors to, to bring the investors in, we allocated ourselves 20 shares each and sold down the rest of the shares. So you know, the one became 20, in some - I don’t know what that mechanism is. I’m not an accountant.

Taxation statement for Fraser Unit Trust year ended 30 June 2006

Also significant, in my opinion, is the taxation statement of the Fraser Unit Trust for the year ended 30 June 2006 (as to which there is no competing version in evidence) which recorded the Zambito Trust as the holder of 14 “A Class” and 20 “B Class Units” and recorded the Zambito Trust as having advanced $700,000 in loan funds (see Exhibit 1), that being the amount that Anthony says his family members invested (as I understand it through Jainti) in the project.

Family disputes

There was much focus during the hearing on the disputes between the various family members (both to set the context for the events that are said to have occurred in relation to the unit holdings in the Fraser Unit Trust and as to the credibility of evidence given by various of the witnesses).
Anthony has deposed (in his affidavit sworn 20 September 2019 at [4.1]) to a disagreement between Sam and Anthony’s mother (Carol, Sam’s sister) during 2007 and to his understanding that Sam did not want to work with any of the Zamattia family. In particular, he has deposed (in evidence admitted subject to relevance) to the taking out of an Apprehended Violence Order (AVO) by Carol against Sam during 2007. (The evidence suggested that there may have been similar AVOs taken out by one or both of Bruno and Anthony at the time – see T 293.) Anthony asserts that all parties made attempts up until September 2008 “to negotiate a reasonable outcome in respect of the Jainti Pty Ltd developments and for Jainti to achieve a winding up” (see at [4.3]).
There are varying accounts of when the dispute between the families occurred (Sam places this variously as being in 2007 and as late as 2009) but there is no doubt that there was a falling out between the Morabitos and the Zamattias (and indeed even between the members of the Zamattia family itself though that came later – see below). The significance of this from the point of view of this proceeding is that Anthony says that in 2008 there was an agreement for the family members to separate their interests in the trust. Sam and Frank deny this. However, Anthony maintains that both Sam and Frank accepted unequivocally that, after the family discontent came to a head, both wanted to end the relationship with the Zamattias.
At T 74.9-11, Frank’s evidence was that “we tried to separate our business interests with them, with the Zamattias. We gave my other sister a letter to take over to the Zamattias, right? She took the letter there and they said to her, ‘Mind your own business, get out of here’”. For Anthony, it is said that this shows that the Morabitos were trying to separate and that the Zamattias did not co-operate but it is submitted that the Morabitos never changed their mind and that, on 7 October 2008, the Zamattias agreed to separate (in effect some kind of bilateral but separate decision to separate).
Anthony submits that what occurred in October 2008 only makes sense if what happened was separation of transfer for the five beneficiaries; since otherwise there would have had been a dissolution of the trust with all five. With respect, that seems to me to beg the question.
As adverted to above, the falling out between members of the Zamattia family appears to have occurred somewhat later. So, for example, David gave evidence as to his falling out with Anthony (at T 50):

Q.    You also worked with Anthony at Zamtech is that correct?
A.    Yes.
Q.    You remember when you left Zamtech?
A.    2012.
Q.    Would it be correct to say that the relationship between you and Anthony has broken down?
A.    Well considering we haven’t spoken to each other since then, pretty much.
Q.    Since then?
A.    Pretty much.
Q.    Yes and so when you left Zamtech did you also, were you discontented with the fact that you left Zamtech?
A.    In part.
Q.    Was there conflict?
A.    There was a conflict between Anthony and myself, yes

Sam Zamattia (Anthony and David’s brother) who worked with Anthony at Zamtech also left the business in circumstances where he accepts that he was discontented as to the manner in which he “was removed” out of the business (see T 47.40-5):

Q.    And during or about 2016, 2017 you left that business?
A.    I was removed out of the business but no I didn’t leave. I was removed out of the business.
Q.    You were removed out of the business?
A.    Yep.

Returning to the chronology of events, it is clear that, by around 2008, the relations between the Zamattia and Morabito families were strained. Sam Zamattia confirmed that there was a “bit of a family feud” between the Zamattias and the Morabitos during about 2008 and that he was aware of the AVO obtained by his mother against Sam.
Sam himself agreed that the cooperation with Anthony “more or less came to an end during or about 2007”, saying that (see T 80.41-2):

A. In a way it did, cause Anthony chose to do, pursue his, his mechanical career.

“Meeting invite” – September 2008

Against the background of the family tensions at the time, Anthony says that a “meeting invite” was sent to Sam and Frank in about September 2008, inviting them to attend a meeting of Jainti to discuss the winding up (presumably of the trust) (and that agenda item 6 of the agenda was to deal with “the units held by Jainti on behalf of the [Family Trust] beneficiaries”) (see his affidavit sworn 20 September 2019 at [4.4]).

There is in evidence (Exhibit 1) a copy of a letter dated 18 September 2008 from Anthony (apparently signing on behalf of Jainti) to Sam and Frank giving notice of a meeting on 7 October 2008. Agenda item 6 reads simply “Update of Fraser Panorama Pty Ltd unit holdings and project by AZ [i.e., Anthony]”. (Whether such a meeting in fact happened on 7 October 2008 has been doubted by the liquidator – see below.)
Anthony has deposed that he delivered the “meeting invite” for this meeting to Sam’s home address, two houses up from Anthony’s parents’ house and (in oral evidence) he said that Sam and Frank were on the verandah at the time. This is at a time when, on Anthony’s evidence, there was an AVO in place against Sam and he, Anthony, was fearful of Sam and Frank (to the extent that he said that they were going to kill him – see T 186.39). Hence, it is somewhat implausible that Anthony would have chosen to hand deliver a meeting invitation to them (even by putting it in the letterbox) (or that he would have wished for Sam to attend the meeting – and query how Sam could have attended in person without infringing the AVO – an issue which Sam emphasised in cross-examination).
However, Anthony says that he dropped the meeting invitation in the letterbox and was not expecting Sam and Frank to be on the verandah. Anthony says that he spoke to them from the street. Anthony says that Sam said that they were not coming to any more meetings with Anthony or his family (see his affidavit sworn 20 September 2019 at [4.5]). That sentiment is perhaps not surprising in the context of the family disputes – moreover, there was some force to the observation made in the witness box by Sam that they (the Morabitos) were always outvoted 3:2 in any event – Sam saying in relation to the 24 October 2008 minutes which recorded confirmation of the minutes of the earlier meeting, that “every meeting of Jainti was voted three to two, because they all hung together. So they were all three to two, so why would this be any different?” (T 87).
Sam seemed quite genuine in his evidence as to the incongruity of Anthony delivering a meeting invitation at a time when the AVO was in place (see T 89.1-18):

Q.   I’d like you to have a look at - do you recall speaking to Mr Ashton about a meeting at that time, more or less October of 2008?
A.   We probably did speak to Mr Ashton regarding this, because with the AVOS that they had in place we were unable to speak to them directly, so we had to go to them through Mr Ashton. And at this particular time, three weeks before this, I think it was 26, I think it was 26 September, Anthony took out an AVO out against us, saying that he feared for his life because we are very, he’s never seen us so angry and he’s fearing for his life that we might kill him and his family. So that’s why we didn’t attend this.
Q.   Yes, and did you speak to Mr--
A.   And I don’t know anything about this meeting. He’s saying in his affidavit he delivered it to my place.
Q.   Yes.
A.   Which that’s not the case. If there was an AVO in place, he was scared, feared for his life, would he walk up to my place and deliver the invitation?

In any event, the metadata for the meeting invitation letter corroborates that such an invitation was created on 18 September 2008 (whether or not the meeting in fact went ahead).

September 2008 advice as to “transfer”

Anthony has deposed that, in preparation for the “transfer” (by which he is referring, as I understand it, to the transfer of Jainti’s beneficial holding in respect of the 34 Units to Anthony, David and Bruno directly), in or around September 2008 he contacted Fraser Panorama’s solicitors (Day Dockrill) and sought advice as to how to put effect to the transfer from Jainti to the individuals directly “as agreed in the resolution”.
There is an obvious timing difficulty with this (even leaving aside the doubts raised as to whether there was in fact a meeting on 7 October 2008 – see below) in that the relevant resolution is recorded as having been passed at the 7 October 2008 meeting, whereas Anthony places his request for advice as to how to effect the transfer “as agreed in the resolution” as occurring before the meeting (on or around September 2008). That may, however, simply be infelicitous wording in his affidavit evidence. More pertinently, there is no evidence of any such advice having been given by Day Dockrill (or as to what any such advice may have been). The mere assertion that Anthony sought advice as to this issue cannot corroborate anything. Moreover, what is not clear is that the “transfer” advice sought related to a transfer of the beneficial holding from the Zambito Trust or the Family Trust.

October 2008 events

As adverted to above, Anthony says that there was a meeting of Jainti held on 7 October 2008 in relation to the “updating” of the register of unit holders in the Fraser Unit Trust. He says that the meeting was held at the clubhouse at Abbotsford Cove, and that Sam and Frank did not attend (see at [4.5] of his affidavit sworn 20 September 2019). Anthony deposes that certain resolutions were passed at the 7 October 2008 meeting (in effect to separate the Zamattia family members’ “beneficiary interests” in the 34 Units and the Morabito family members’ “beneficiary interests” in the 34 Units) (and that these changes are set out in the amended documents that were then issued – see Exhibit 1). Anthony says that Bruno and David were at the meeting.
David’s evidence was that he could not recall any meetings of Jainti in which the relationship or the issues with Fraser Panorama arose (see at T 52.34-6); and that he did not remember having seen any minutes of the Fraser Panorama and Jainti meetings (though his affidavit sworn 17 April 2019 recorded at [6] that he had been shown certain minutes). He did recall having previously given Anthony a proxy but was unclear as to when or why he did so.
Anthony has deposed (see at [4.6] of his affidavit sworn 20 September 2019) that the resolution of the board authorised him to transfer 1/5^th of the 34 Units held in the Fraser Unit Trust to himself and 1/5^th each to David and Bruno “individually and respectively”. Anthony says that the minutes of this meeting were sent to Frank and Sam on or about 8 October 2008 and that he received no objection to those minutes. Further, Anthony says that, in July 2009, at the first following meeting of Jainti, the minutes of the October 2008 meeting and resolution to make these changes were confirmed (see below).
The minutes of the 7 October 2008 meeting of Jainti’s directors (Exhibit 1) include the statement that “SM and FM have advised through Phillip Ashton they will not be attending” (which I pause to note is somewhat inconsistent with Anthony’s evidence that this is what he himself was told when he delivered the “meeting invite” but I accept that that does not mean that there might not have been the same advice given through Mr Ashton as Anthony says was given to him at the time to the effect that they would not be attending the meeting). (Since Mr Ashton gave no evidence in the proceeding that issue could not be clarified with him.)
Item 4 of the minutes records as follows:

A minute of the Fraser Panorama P/L is tabled consenting of the transfer of units from Jainti to it’s [sic] members, AZ, DZ, BZ or as directed. It is resolved to authorise AZ to do all things necessary to distribute AZ, DZ and BZ interests in units as instructed. No representations have been made by FM or SM as to their wishes.

It is relevant here to note that there does not appear to be a minute of an earlier meeting of Fraser Panorama (i.e., a meeting before the 7 October 2008 meeting of Jainti directors) at which any consent to the transfer of units was given and it is therefore not clear what is the minute that the 7 October 2008 minutes record as being tabled at that meeting. The liquidator points to this as casting doubt as to whether the meeting occurred on 7 October 2008 at all – or whether, more consistently with item 4, this is a reference to a meeting later on 24 October 2008 of Fraser Panorama. (It might also illustrate the unreliability of the minute taking as a whole.) Derek Taylor, asked about this, gave the following evidence (see T 124.33-48; T 125.17-37):

Q.    Can I just ask you to go down? If you’d again look at the left-hand side of the page, you’ll see various descriptors and in particular you’ll see, “4) Distribution of units Fraser Panorama.” Do you see that?
A.    Yep.
Q.    What’s referred to in this document is the following: “A minute of the Fraser Panorama Pty Ltd is tabled consenting of the transfer of units from Jainti to its members AZ, DZ, BZ, or as directed.” Do you see that?
A.    Yes.
Q.    As at 7 October 2008, can you tell the Court whether there had been any meeting whereby a resolution was passed by Fraser Panorama consenting to the transfer of units that were held by Jainti to Jainti’s members?
A.    I simply don’t recall. I, I mean, I just can’t recall this stuff now. It’s, I’ve gone half a dozen projects like this between then and now, and you know, I just don’t remember this stuff.
…
Q.    You agree, do you not, that the meeting that this refers to did indeed occur around 24 October 2008?
A.    It would appear that way, yes.
Q.    So it’s quite obvious but it occurred after 7 October 2008?
A.    Well, is, is there a date on this, there’s no date on this is there?
Q.    Yes, if you look at the top, the heading see the underlined stuff?
A.    Yeah, yeah 25 October, well yeah, that’s, so that’s correct. I mean I’ve got, I, I need to rely on the documents for my point of view because my, you know I just don’t remember this stuff now.
Q.    Have you seen minutes of any meeting prior to 7 October 2008 where there was some sort of resolution to transfer units from Jainti to its members?
A.    You’re asking me if there’s any documents?
Q.    Yes.
A.    Are there any, are you aware of any documents?
Q.    No, I’m asking if you’re aware of any?
A.    No well I, you know, without seeing the documents, I can’t tell you.

Sam, unsurprisingly, did not recall attending any such meeting (and it is not suggested that he did) (see T 90.4-8):

A. I could not attend this meeting due to the fact that there were AVOs in place.
…
A. So whether I recall or don’t recall, I could not attend.

Relevantly, Anthony contends that the outcome of the 7 October 2008 Jainti meeting was that: the beneficial interest in the 34 Units formerly held in the Fraser Unit Trust by Jainti (as trustee for Anthony, David, Bruno, Frank and Sam) was converted to a direct holding by each of Anthony, David and Bruno in respect of a 1/5^th legal interest in each in the 34 Units; and that those voting against the proposal remained, as originally constituted, as beneficial owners of a 1/5^th interest held in the 34 Units by Jainti (as trustee for Frank and Sam).
Anthony has deposed that he contacted Derek Taylor (his “fellow trustee”) and that they “tabled the new unit certificates and adopted the changes” and that the unit register was also updated and tabled at the meeting (which in the context of his affidavit seems to mean the 7 October 2008 Jainti meeting but seems more likely to be the 24 October 2008 Fraser Panorama meeting – see below) (see at [4.9] of his affidavit sworn 20 September 2019).
In evidence there is a copy of the version of the three Jainti unit certificates dated 12 May 2006 that described Jainti as trustee for the individual beneficiaries (i.e., the Individual Beneficiaries Version that Anthony contends was the correct May 2006 version of the unit certificates) ruled through with the word “VOID” (see Exhibit 1).
Derek Taylor’s affidavit evidence is that he was at the 24 October 2008 Fraser Unit Trust meeting when the unit holding was changed, as a result of which Anthony’s beneficial interest in the Fraser Unit Trust was changed to a direct unit holding of a 1/5^th interest in the 34 Units. Derek Taylor confirms that he signed the minutes of the 24 October 2008 meeting that resolved to make these changes (see his affidavit sworn 7 October 2019 at [3.13]). However, his evidence in cross-examination (see above) casts doubt on whether his recollection relates to a meeting on 24 October 2008 (or an earlier meeting), since it was clearly based solely on the documents he was shown.

24 October 2008 meeting

Unit certificates dated 24 October 2008 were in evidence in respect of the 34 Units in the Fraser Unit Trust held by Jainti in which the certification states that “Anthony Zamattia, David Zamattia, Bruno Zamattia and Jainti Pty Ltd (atf, Frank Morabito, Sam Morabito) in proportion 20% each” is the registered holder of the respective units. There is also a copy of the amended unit register (see Exhibit 1).
In evidence is a copy of minutes of a meeting of directors of Fraser Panorama (Anthony and Derek Taylor) on 24 October 2008, which includes the following:

Other New unit certificates issued for Jainti and unit register updated. Jainti minute tabled authorising transfer of units to beneficiaries Anthony Zamattia, David Zamattia, Bruno Zamattia. DT/AZ phone call with Day Dockrill to amend certificate with same number and note new percentage holding.

The minute includes two handwritten notes, the first of which is:

– Unit Certificate for Samuel Zamattia & Samuel Morabito amended to reflect request to pay distributions separately (50/50 split). New Unit Holders register tabled.

Pausing here, I note that Anthony’s evidence is that he paid tax of approximately $50,000 on distributions of income received from the Fraser Unit Trust during the 2006, 2007 and 2008 tax years (the funds for the distributions he says were not received but the distribution amounts were declared as income) (see his affidavit sworn 20 September 2019 at [4.11]).

18 June 2009 meeting

There was in evidence a copy of minutes of a meeting of Jainti on 18 June 2009, convened by a notice issued on 17 June 2009 (see Exhibit 2), to take place by teleconference. The minutes of meeting (apparently created on 24 June 2009 by reference to the metadata in evidence) record that it was attended by Anthony, David, Stephen Jenkins (a solicitor, as proxy for Sam) and Frank; and that Bruno had given a proxy to Anthony.
The minutes record that a vote was called to confirm the minutes of the previous meeting (i.e., the meeting in October 2008 – on whatever date that actually occurred), which was passed 3 to 2 (the dissenting votes being those of Sam and Frank). The minutes record that Sam and Frank claimed that they were not advised of the meeting; that Anthony advised that they had been advised of the meeting; and that Anthony advised that “discussions with Phillip Ashton confirmed FM and SM were advised of the meeting and Phillip was asked to act as their proxy but was unable to do so due to other commitments”.
Sam was cross-examined as to this meeting. He accepted that on at least one occasion he had given Mr Jenkins a proxy but, as I understand his evidence, he did not recall seeing the minutes of the meeting and did not recall speaking to Mr Jenkins about them (see T 86.22-5; T 88.27-T 89.47; T 90.4-8; T 90.41-7):

Q.    Yes, of course. Read the minute.
A.    Right. I don’t recall this meeting actually. I’m trying to work out - the only thing I could say, if this was accurate it would have been, it would have been the time of the AVOs. If it was accurate. I can’t recall, Mr Luitingh.
…
Q.    Is that, according to any recollection that you might have, correct; that you didn’t attend that meeting?
A.    Just to get it all straight, Mr Luitingh, so what you’re saying is that we were sent an invitation and we just sent apologies for being unable to attend, is that what you’re saying?
Q.    That’s what the minute says.
A.    Yes, so is this what your client is saying?
Q.    No, don’t worry about my client.
A.    That’s what the minute says.
Q.    I’m asking you if you have a recollection, is it correct that you did not attend that meeting?
A.    I can tell you exactly as to why we didn’t attend this meeting.
Q.    No, I don’t want to know that. I just want to know whether you attended it?
A.    No.
Q.    You didn’t. You say you can’t recall seeing this minute?
A.    No.
Q.    But you may have?
A.    Well I said I can’t recall
Q.    I’d like you to have a look at - do you recall speaking to Mr Ashton about a meeting at that time, more or less October of 2008?
A.    We probably did speak to Mr Ashton regarding this, because with the AVOS that they had in place we were unable to speak to them directly, so we had to go to them through Mr Ashton. And at this particular time, three weeks before this, I think it was 26, I think it was 26 September, Anthony took out an AVO out against us, saying that he feared for his life because we are very, he’s never seen us so angry and he’s fearing for his life that we might kill him and his family. So that’s why we didn’t attend this.
Q.    Yes, and did you speak to Mr--
A.    And I don’t know anything about this meeting. He’s saying in his affidavit he delivered it to my place.
Q.    Yes.
A.    Which that’s not the case. If there was an AVO in place, he was scared, feared for his life, would he walk up to my place and deliver the invitation?
Q.    Mr Morabito, please try only to answer the question that I’m asking you. Did you speak to Mr Ashton about this meeting?
A.    I can’t recall so, but we did speak to Mr Ashton about, regarding meetings, because we’re not allowed to speak to any of the Zamattias.
Q.    You can’t recall whether you spoke to Mr Ashton about this meeting?
A.    Well I can’t, no. I can’t say definite yes or no.
Q.    If you have a look at the subheading called, “Minutes,” just have a look at the last sentence. If says “FM and SM have advised to Phillip Ashton that they will not be attending.”
A.    Okay, so?
Q.    Is that correct?
A.    Well I’ve just told you I can’t recall that. And if we did do this, it was caused due to the AVOs.
Q.    Yes, I’m not asking you why.
A.    Yes.
Q.    I’m just asking you whether you can recall?
A.    No.
Q.    So you can’t recall whether or not you spoke to Ashton about this meeting, and you can’t recall contacting Mr Ashton about this meeting, but you do recall that you didn’t attend the meeting, is--
A.    But I’m saying I would not have attended this meeting due to the AVOs in place.
…
A.    I could not attend this meeting due to the fact that there were AVOs in place.
Q.    Okay.
A.    So whether I recall or don’t recall, I could not attend.
…
Q.    Yes, and that--
A.    Mr, Mr Zamattia always confirmed them regardless of - we were always a minority, so no matter what we said, we could, nothing would be changed. He, he was Jesus Christ, he, he signed everything, he did what he wanted.
Q.    That’s fine, Mr--
A.    So that’s what happened in these relations. Everything’s three-two.

2010 Financial statements

The liquidator places weight on the 30 June 2010 financial statements prepared by Mr Ashton in respect of the Zambito Trust (copies of which were provided to the liquidator’s office after his appointment as liquidator – see Exhibit A). The financial statements are unsigned and Anthony says that they are draft and unaudited accounts. Relevantly, the profit and loss statement records distributions from trusts for each of the 2009 and 2010 year. The liquidator points out that, arithmetically, the amount of those distributions represents 34% of the distributions made out of the Fraser Unit Trust (see the Fraser Unit Trust financial statements referred to below), which is inconsistent with Anthony’s assertion that Jainti held its units on trust for the individual family members.
Mr Ashton also prepared financial statements for the Fraser Unit Trust for that financial year, which recorded the beneficiaries’ profit distribution for 2009 in the amount of $722,493 (34% of which is $245,647) and for 2010 in the amount of $196,213 (30% of which is $66,713) (see the Zambito Trust figures in those amounts). It is noted that the Fraser Unit Trust income tax return, also prepared by Mr Ashton, recorded a distribution to the Zambito Trust of $66,713 in the 2010 financial year.

Second, it is said that, contrary to Anthony’s closing submissions, company property only vests in a liquidator by order; it otherwise remains the property of the company and is subject to the priorities imposed by the Corporations Act, including remuneration and expenses, and creditor claims, before any distributions can be made to beneficiaries. It is said that the decision of Boensch v Pascoe is irrelevant to the position of the Fraser Unit Trust, Jainti and Anthony as a beneficiary of the Zambito Trust. Further, it is noted that Anthony made a claim as a creditor not a beneficiary.

Determination

I have set out in some detail above the chronology of events because this is a case where the two competing versions of the relevant documents are capable of different constructions. As I have indicated above, the February 2006 documents (the Fraser Unit Trust Deed, which is unamended; and the Unit Holders Agreement, which bears handwritten annotations) are consistent with the Zambito Version of the documents (if, in respect of the Unit Holders Agreement, one puts aside the handwritten annotations); and there seems to be no dispute that what was originally in contemplation was that Jainti would hold a number of units in the trust as trustee for the Zambito Trust (see T 292.38-47).
Anthony says that there is no logical regime in which there could have been a change back to the Zambito Trust as beneficiary from the five individual beneficiaries but that seems to me to presuppose when it was that the relevant decision was made as to the issue of units in the trust (because, once issued, the unit holders could not simply be amended by handwritten amendments to minutes and the like).
In a dispute such as this, where there are two competing versions of documents which purport to effect the issue of units in a trust to particular unit holders, it is a question of fact as to the order in which those documents were signed, and whether any communications occurred which might constitute consent to subsequent amendments to those documents. It is a question of law, however, as to whether particular documents validly give effect to the issue of units to unit holders (including by satisfying the requisite formalities for the issue of units in the particular trust) and whether any subsequent amendments constitute a valid transfer of units. The Fraser Unit Trust Deed provides that “upon becoming registered as the holder of a Unit”, the initial unit holders and each other person shall be deemed to have become a party to this Deed and entitled to benefit from and be bound by the terms and conditions of this Deed (cl 4.3); further, “[e]xcept to the extent provided in this Deed, the person from time to time entered in the register as the holder of a Unit shall be the only person recognised by the Trustee as entitled to such Unit or to exercise or enjoy the rights and privileges attaching thereto” (cl 5.3); and see also cl 8 relating to the transfer of units. Insofar as the register of units is the record of what units were issued (and noting that both versions of the register are unsigned) the question is which came first. Almost certainly, the Zambito Version was prepared first, taking effect in accordance with the Zambito Version of the Unit Holders Agreement.
As to the Unit Holders Agreement (upon which Anthony places no little weight), there are, it seems to me, a number of possibilities, depending on whether the document was signed before or after the handwritten amendments were made and depending on whether it actually recorded a final concluded and binding agreement – the first, is that the Unit Holders Agreement was signed before the handwritten amendments on that document were made (i.e., that it was initially intended to record the unit holdings as per the Zambito Version of the minutes of meeting) and subsequently amended by hand (as some kind of variation to that agreement – albeit, one to which it is not clear that the relevant unit holders had consented and in respect of which it is not evident that the necessary formalities were satisfied to effect a change in beneficial ownership; the second, is that the Unit Holders Agreement was prepared in draft but not signed until after the handwritten amendments were made (and the parties simply did not bother to have it executed in a final clean version) (in which case the only explanation for the signed Zambito Version of the short minutes might be if it was prepared and signed in advance of the Unit Holders Agreement being signed; the third, is that the handwritten amendments were made at some time later (i.e., after the 12 May 2006 meeting) and record some ex post facto re-jigging or attempted re-jigging of the unit holding (consistent with, but not necessarily so, the liquidator’s contention that this was in effect a later concoction). Anthony accepts that the Zambito Version was the earlier draft version (see T 292.38-47), so it makes sense that the Zambito minutes came first (and it is apparent that they were signed). However, what seems unlikely is that the Zambito Version minutes were signed (as well as the Zambito Version of the unit certificates) but that the Unit Holders Agreement was not signed before the handwritten amendments were made.
The matters which point in my mind to the first of the three possibilities above being the most likely, and thus the Zambito Version of the documents being the correct version as at 12 May 2006, are as follows.
First, that the version that was signed (being Anthony’s electronic signature) and left for collection on the snooker table prior to the 12 May 2006 meeting was not labelled “draft” and, on Anthony’s account of events, this was intended to be the final version of the unit holding applications (subject to what he says was the conversation on 11 May 2006 – which I cannot on the balance of probabilities find occurred).
Second, that the Zambito Version is consistent with the number of ordinary units initially created by the Fraser Unit Trust Deed – and this provided for 19 additional units for each of Anthony and Derek Taylor’s interests (rather than 20 – which would have required a “substitution” or cancellation of some kind).
Third, the informality of handwritten (albeit initialled) amendments to the Zambito Version of the documents. What troubles me about this is that there is nothing to suggest that those amendments were not made at some time after the 12 May 2006 meeting (i.e., after the units had been issued as contemplated by the Zambito Version). Derek Taylor’s evidence is not persuasive in this regard - he says “presumably” the amendments were made around that time; and he seemed sanguine about informally “re-jigging” the unit holders (see T 132).
Fourth, and significantly, there is no evidence that updated versions of these relevant documents were sent to any of the other so-called individual beneficiaries (except Anthony’s assertion to that effect); the financial statements and accounts accord with the Zambito Trust having a beneficial interest in the units of the Fraser Unit Trust; distributions were made on that basis and there is no evidence (beyond Anthony’s assertion) that the liquidator was apprised of the alleged Family Trust until September 2016.
As to the taxation documents signed by Anthony which reflected that the unit holding was held by Jainti on trust for the Zambito Trust, while a finding is not here being made that Anthony is dishonest in now suggesting that the units were held under a separate Family Trust, those documents lend support to the conclusion that the Zambito Version of the documents correctly recorded the beneficial ownership of the units as at the time of the meeting on 12 May 2006 and that any separate Family Trust may only have been contemplated informally, if at all, and without the requisite formalities to effect a change in beneficial ownership such as would have been necessary for tax recording purposes. At the very least, it points against Anthony’s argument given that he himself was not prepared formally to identify the separate Family Trust in taxation documents – indeed, if his version of events is what occurred at the 8 May 2012 meeting, then there is no reason not to record that. Again, as considered above, Anthony’s failure to call Mr Ashton in this regard gives rise to a Jones v Dunkel inference against Anthony insofar as he seeks to challenge the veracity of documents by reference to which the liquidator has advanced his case.
It is not necessary to make (nor do I here make) a finding that Anthony falsely concocted the competing version of the documents (whether back in May 2006 or later when the issue as to the payment of distributions out of the trust arose). It might well be, for example, that there was a working draft of proposed changes to unit holders that was prepared at some stage when the “re-jigging” process took place. It might also be that this was indeed the intention of Anthony and Derek Taylor at some time around 12 May 2006, albeit not properly documented at the time (or reached after the units had already been issued).
For the foregoing reasons, I find that the unit holdings held by Jainti in the Fraser Unit Trust were as trustee for the Zambito Trust. In those circumstances, whatever was sought to be achieved by the October 2008 meeting (and whether it was properly convened and when it was held) do not arise.
Had it arisen for determination, I would have concluded that any meeting held in October 2008 (whether on 7 October or 24 October) did not effectively terminate the (on this hypothesis) separate Family Trust and nor did the subsequent Notice of Termination of Trust because of the difficulty that there was not consent by each of the individual beneficiaries thereto.
The development and meaning of the rule in Saunders v Vautier was summarised by the High Court in CPT at [43] per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ as follows:

44. Saunders v Vautier is a case which has given its name to a "rule" not explicitly formulated in the case itself, either by Lord Langdale MR (at first instance) or by Lord Cottenham LC (on appeal). In Anglo-Australian law the rule has been seen to embody a "consent principle" recently identified by Mummery LJ in Goulding v James [1997] 2 All ER 239 at 247 as follows:
The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trusts, powers and limitations of a will or trust instrument.

In essence, the rule in Saunders v Vautier enables an adult beneficiary of a fixed or discretionary trust with absolute and indefeasible title to require the transfer of trust property to her or himself and thus, terminate any accumulation under the trust. This power is qualified and may be subject to the trustee’s rights to reimbursement or exoneration for the discharge of liabilities incurred in the administration of the trust, although the trustee cannot refuse a Saunders v Vautier direction for the trustee’s own benefit (see CPT at [50]-[51]; Beck v Henley at [36]).
Where there are multiple beneficiaries of the trust, the position, however, becomes more complicated. The rule does not apply where there are multiple beneficiaries of a trust made up of real property, as the distribution of a single beneficiary’s share prejudices the share of the remaining beneficiaries. However, that is not the case here (where the property is not realty). If any individual beneficiaries’ share in the trust is made up of personal property, then the beneficiary can call for the distribution of that beneficiary’s share, even though the distribution serves to reduce the overall value of the undistributed shares, unless there are “special circumstances”. In this regard, see the following discussion by Cozens-Hardy MR in Re Marshall; Marshall v Marshall [1914] 1 Ch 192 at 199:

Speaking generally, the right of a person, who is entitled indefeasibly in possession to an aliquot share of property, to have that share transferred to him is one which is plainly established by law. There is also another case which is equally plain and established by law, that where real estate is devised in trust for sale and to divide the proceeds between A., B., C., and D. – some of the shares being settled and some of them not — A. has no right to say “Transfer to me my undivided fourth of the real estate because I would rather have it as real estate than personal estate.” The Court has long ago said that that is not right, because it is a matter of notoriety, of which the Court will take judicial notice, that an undivided share of real estate never fetches quite its proper proportion of the proceeds of sale of the entire estate; therefore, to allow an undivided share to be elected to be taken as real estate by one of the beneficiaries would be detrimental to the other beneficiaries. But that doctrine, it seems to me, has no application, apart from special circumstances, to personal property.

In Beck v Henley, Leeming JA (with whom Beazley P, as her Excellency then was, and Sackville AJA agreed) summarised the principles applicable to a request by one of two or more beneficiaries to a trust for the distribution of their share and went on to discuss what constitutes “prejudice” from [75]; and it is worth setting this out in full:

75.     Equity long ago took the step to subject the terms of the trust established by the settlor or testator to the exercise of power by adult beneficiaries who are absolutely and indefeasibly entitled collectively. The question which then arose was what was to occur when they were not unanimous but the property could be divided. The answer was to have regard to any prejudice to a beneficiary who opposes an in specie distribution. However, not every form of prejudice is sufficient.
76.   To take an extreme case, one of three beneficiaries of a small trust where the trust property comprises listed securities may be prejudiced by a Saunders v Vautier direction made by another beneficiary, for it may not be possible to secure the same investment return if the principal is diminished, and the fees charged by the trustee will be borne by two rather than three beneficiaries. Yet no one would suggest that those considerations could defeat an adult beneficiary absolutely and indefeasibly entitled to his or her share of the trust property from calling for it. That is to say, the exercise of power by one but not all beneficiaries may be attended by actual prejudice upon the other, yet be insufficient to disentitle the exercise of power by the beneficiary.
77.   Similarly, suppose a parcel of non-voting preference shares is held on trust for a number of adult beneficiaries. To the extent that the rights attaching to those shares comprise, for practical purposes, the right to a preferred dividend and return on capital, it is difficult to see how there could be any prejudice if one beneficiary called for his or her share of the parcel. That would be so even if the parcel were large, and its division meant that no longer would a single shareholder be able to block a special resolution of preference shareholders varying class rights.
78.   On the other hand, if ten particular shares entitle their owner to exclusive occupation of an apartment in a company title building, and the parcel is held on trust for two adult beneficiaries absolutely and indefeasibly entitled, for my part I would find it difficult to see that one beneficiary would be entitled to call for five of the shares, leaving the balance held by the trustee for the other beneficiary. The prejudice is real and immediate, even though both beneficiaries are treated identically. The purpose of that parcel of shares is to confer a right to live in the apartment, and the analogy with trusts of land is very strong.

When considering if there are special circumstances preventing a Saunders v Vautier direction for the distribution of a single beneficiary’s share of personal property held on trust, it is necessary to consider the prejudice which the direction would cause to the other beneficiary or beneficiaries who oppose the distribution.
In the present case, the difficulty as I see it is that the unit holdings held on trust were particular parcels of units – one “B Class Unit” (the initial ordinary “unit”), 19 “B Class Units” (the additional units); and 14 “A Class Units”.
If one treats the initial “ordinary unit” as equivalent to one “B Class Unit” then I accept that the parcel of 20 “B Class Units” is divisible by 5 such that there could be no prejudice in one beneficiary (say Anthony) calling in the trust in respect of his 1/5^th share of those 20 units. However, the 14 “A Class Units” could not be readily divided into 5 and the effect of calling one beneficiary’s share would thus be to prejudice the remaining beneficiaries (since it would require, one would think, a realisation of the units and winding up of part or all of the trust).
As at 2016, when the Notice of Termination of Trust was issued, that might not have amounted to relevant prejudice insofar as the trust fund was then in a position to be wound up (and termination by one of the individual beneficiaries would affect the division of the proceeds of distribution out of the trust fund but not the holding of units per se). In those circumstances, if prejudice were not shown, then I accept that it would have been possible for one beneficiary (say, Anthony) to terminate the Family Trust in relation to his position as an individual beneficiary in accordance with the rule in Saunders v Vautier. However, that was not the case back in October 2008.
Therefore, it seems to me that there could well have been special circumstances in October 2008 that would have precluded the operation of the rule in Saunders v Vautier at least in relation to the “A Class Units” (and perhaps also, if Anthony’s alternative submission as to the discrete treatment of the initial ordinary units were to be accepted, in respect of all of the “B Class Units”). In any event, that does not here arise in view of the conclusion I have reached as to the trust itself.
Turning then to the question whether the claim of knowing receipt has been made good, the principles of knowing receipt on a Barnes v Addy claim are well known. A person who receives property for his or her own benefit, knowing (in the requisite sense) that its transfer is in breach of trust, will be made a constructive trustee of that property for the benefit of the principal. Whether a person has satisfied the knowledge requirement is often considered by reference to a scale of five categories of knowledge, as set out by Peter Gibson J (as the Lord Justice then was) in Baden Delvaux & Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 (Baden Delvaux); specifically, (see at 235; 242-243): actual knowledge; wilfully shutting one’s eyes to the obvious; wilfully and recklessly failing to undertake such inquiries as an honest and reasonable person would undertake; knowledge of circumstances which would indicate the facts to an honest and reasonable person; and knowledge of circumstances which would put an honest and reasonable person on inquiry.
The requisite degree of knowledge on the part of a third party recipient, in claims for knowing receipt, was considered by the Full Court of the Federal Court in Grimaldi. Relevantly, the Court (Finn, Stone and Perram JJ), in a unanimous judgment, said (at [268]):

268. The High Court in Farah Constructions did not settle the knowledge/notice requirement in relation to recipient liability. Nonetheless, from at least the 1990s and in the wake of the Baden classification, judges had begun in recipient liability cases to generalise from what had been said both by Gibbs J (at 398) and by Stephen J (at 412) with whom Barwick CJ agreed, about the insufficiency of traditional, or category (v), constructive notice — though not of category (iv) notice — as a basis for personal liability. To allow that, as Stephen J commented, would be “to disregard equity’s concern for the state of conscience of the defendant”: at 412; see eg Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 103G; Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd at 105; Hancock Family Memorial Foundation at 209; Tara Shire Council v Garner [2003] 1 Qd R 556 at [66]-[72]; Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 54 ATR 241 at [54]-[60]; see also United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at 252-254. In Kalls Enterprise Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557 — a decision which post-dates Farah Constructions — the New South Wales Court of Appeal applied Baden’s categories (i)-(iv), but not category (v) to a knowing receipt claim. Kalls Enterprise in turn has been applied subsequently: see eg Horsman v MG Kailis Pty Ltd [2009] WASC 166; Fodare Pty Ltd v Shearn (2011) 29 ACLC 11-036.

As the Full Court went on to say (at [269]-[270]):

269. There is, in other words, an established line of judicial decision and opinion both at first instance and in intermediate courts of appeal spanning at least 20 years adhering to the view taken in the above cited cases. We do not consider that that view is plainly wrong and should be rejected. On the contrary! Finally, for the sake of completeness, we should note we do not consider that what was said by Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 at [469]-[478] is inconsistent with that view. Commendably, his Honour emphasised the fault based character of recipient liability: “[u]nconscionability cannot be fictionalised, and the grounds on which constructive trust liability is imposed should be real and substantial”: at [471].
270. Accordingly, we do not consider the primary judge erred in law in finding that knowledge falling within category (iv) of Baden was sufficient for the imposition of liability for knowing receipt…

In Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191, the Court of Appeal (Giles JA, with whom Ipp JA and Basten JA agreed) held that it is sufficient, in a claim for knowing receipt, that the third party recipient had constructive knowledge of the kind captured in the fourth category (but not the fifth) in the classification deployed in Baden Delvaux (see at [199]). Accordingly, for the purposes of knowing receipt, knowledge in any of the first four categories identified above is sufficient.
Here, there can be no dispute that if (as I have found) the 34 Units were held on trust for the Zambito Trust then it was a breach of trust by Fraser Panorama to pay distributions referable to Jainti as trustee for the Zambito Trust direct to the individuals said to be beneficiaries of the Family Trust.
Anthony emphasises that for the knowing receipt claim to be established, it must be established that he received the funds with the requisite notice that they were funds paid out in breach of trust.
The difficulty for Anthony here is that on his own evidence he understood by the time the payment was received that there was an issue as to the way in which the unit holdings were recorded. He has asserted that he sought (and acted on) advice in that regard. There is no evidence of that advice; as adverted to above. In circumstances where he was on notice of a doubt as to whether the distribution was able to be paid to him, he must have been on notice of facts which would be sufficient to give rise to knowledge in the fourth category of knowledge in Baden Delvaux.
Had it been necessary to determine, I would therefore have found the claim for knowing receipt to be made good.
However, it is not necessary to go so far because it is conceded (T 323.26-32) that if the moneys (as I have found) were properly payable to Jainti as trustee for the Zambito Trust, then an order for the payment of those moneys to Jainti’s liquidator should be made. (Although not pleaded as a money had and received claim, that would be an alternative way to give rise to the same relief.)
As to the alternative arguments raised in closing and in supplementary submissions for Anthony, I say briefly as follows.
First, complaint as to an alleged failure to draw other family members’ attention to “Boensch v Pascoe rights” goes nowhere. Any complaint in that regard would be for them to make. Second, there is no pleaded defence based on laches or delay. Third, the basis on which the supplementary submissions are raised is not made good but, even if it were, the submissions as to a “gift” or as to there being no consideration for a gift of the “B Class Units” are not pleaded and cannot properly be raised in supplementary submissions after the hearing. Nor can the submissions here sought to be made as to the vesting of an interest under the Zambito Trust be raised.
Further, the invocation of the principles of minimum equity (now no longer an appropriate test or factor in the context in which it was invoked in Giumelli v Giumelli) seems to me to be inapt.
I have concluded that the 34 Units were held by Jainti as trustee for the Zambito Trust. Therefore, the relief sought in the amended statement of claim should be granted, with one exception. I do not see any need for the making of a separate declaration (as pressed in prayer 1) and declaratory relief will not ordinarily be made if it lacks utility.
An order for the payment of the moneys held in the controlled moneys account to Jainti is sufficient in my opinion to redress the wrong occasioned by the payment of the 1/5^th distribution to Anthony.
As to costs, at the request of the parties, I will reserve costs to be dealt with, if possible, on the papers.
As to the question of interest, beyond any interest that has accrued on the moneys since they were placed in the controlled moneys account, any claim for additional interest by the plaintiff on the funds distributed wrongly to Anthony would be limited in my view to the period from the distribution in December 2018 and the placement of the moneys in the controlled moneys account; and would be predicated on a finding of knowing receipt of trust moneys.

Orders

I make the following orders:

Order that the sum of $161,160 (plus interest) held in the controlled moneys account of Bird & Bird be paid to Jainti Pty Ltd as trustee for the Zambito Trust.

Reserve the question of costs to be dealt with on the papers if possible.

Direct the parties to file brief written submissions on costs within 14 days, with a view to dealing with the question of costs on the papers if possible, and any submissions on any interest claimed by Jainti for the period from payment of the distribution to Anthony Zamattia and the placement of the moneys in the controlled moneys account.

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Decision last updated: 25 June 2021

Medium Neutral Citation:	Jainti Pty Ltd v Fraser Panorama Pty Ltd [2021] NSWSC 744
Hearing dates:	23 – 26 November 2020
Date of orders:	25 June 2021
Decision date:	25 June 2021
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	1. Order that the sum of $161,160 (plus interest) held in the controlled moneys account of Bird & Bird be paid to Jainti Pty Ltd as trustee for the Zambito Trust. 2. Reserve the question of costs to be dealt with on the papers if possible. 3. Direct the parties to file brief written submissions on costs within 14 days, with a view to dealing with the question of costs on the papers if possible, and any submissions on any interest claimed by Jainti for the period from payment of the distribution to Anthony Zamattia and the placement of the moneys in the controlled moneys account.
Catchwords:	EQUITY — Trusts and trustees — Beneficiaries — Wrongful distribution of trust property –– Rule in Saunders v Vautier
Legislation Cited:	Corporations Act 2001 (Cth), ss 436A, 477(2A)-(2B)
Cases Cited:	CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98; [2005] HCA 53 Australian Securities and Investments Commission v Rich (2005) 53 ACSR 752; [2005] NSWSC 417 Baden Delvaux & Lecuit v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 Barnes v Addy (1874) LR 9 Ch App 244 Beck v Henley (2014) 11 ASTLR 457; [2014] NSWCA 201 Boensch v Pascoe [2019] HCA 49 Brandi v Mingot (1976) 12 ALR 551 Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84 Giumelli v Giumelli (1999) 196 CLR 1; [1999] HCA 10 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 HML v R (2008) 235 CLR 334; [2008] HCA 16 Ho v Powell (2001) 51 NSWLR 572; [2001] NSWCA 168 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR Kalls Enterprises Pty Ltd (in liq) v Baloglow (2007) 63 ACSR 557; [2007] NSWCA 191 Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 Lucent Technologies Inc v Krone Aktiengesellschaft (No 3) [2000] FCA 100 Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674 Northampton Borough Council v Cardoza [2019] EWHC 26 Payne v Parker [1976] 1 NSWLR 191 Re Marshall; Marshall v Marshall [1914] 1 Ch 192 RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56 Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406; [2009] NSWSC 43 Saunders v Vautier (1841) 41 ER 482 Stone v Melrose Cranes & Rigging Pty Ltd (2018) 125 ACSR 406; [2018] FCA 530
Category:	Principal judgment
Parties:	Jainti Pty Ltd (in liquidation) (Plaintiff) Fraser Panorama Pty Ltd (First Defendant) Anthony Zamattia (Second Defendant)
Representation:	Counsel: Mr H W Somerville (Plaintiff) Mr M Luitingh (Second Defendant) Solicitors: William James (Plaintiff) Grace and Grace Plus (Second Defendant)
File Number(s):	2019/0042253
Publication restriction:	Nil