Lambert v Twigg Investments Pty Ltd (No 2)

[2020] NSWSC 466

Supreme Court

New South Wales

Medium Neutral Citation:

Lambert v Twigg Investments Pty Ltd (No 2) [2020] NSWSC 466

Hearing dates:

29 April 2020

Decision date:

30 April 2020

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   The plaintiffs have leave to file and serve a Second Further Amended Summons and a Further Amended Statement of Claim;

 

(2)   The plaintiffs pay the defendants’ costs thrown away by reason of the amendment;

 (3)   The costs of the notice of motion dated 23 April 2020 be the plaintiffs’ costs in the cause.

Catchwords:

PRACTICE AND PROCEDURE – Application to file further amended statement of claim – Where application brought late with no real explanation for the delay – Where significance of absence of explanation for delay depends on circumstances – Where main consideration is whether amendments facilitate just, quick and cheap resolution of the proceedings under s 56(1) Civil Procedure Act 2006 (NSW) – Whether defendants would be unfairly prejudiced if amendments were allowed – Where defendants suffer no real prejudice for delay absence of explanation is of limited significance – Whether pleading sufficiently clear

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Category:

Procedural and other rulings

Parties:

Frances Lambert (First Plaintiff)
Elizabeth Flintoff (Second Plaintiff)
Diane Twigg (Third Plaintiff)
Twigg Investments Pty Limited atf Twigg Investments Trust (First Defendant)
Maxwell Twigg (Second Defendant)

Representation:

Counsel:

 

M R Elliott SC with DK Smith (Plaintiffs)
J Evans QC with P Miller (Defendants)

 

Solicitors:

  Rankin Ellison Lawyers (First Plaintiff)
Roberts and Partners Lawyers (Second and Third Plaintiffs)
O’Loughlin Westhoff (Defendants)

File Number(s):

2018/212326

Judgment

1. By a notice of motion filed on 23 April 2020, the plaintiffs sought leave to file a Further Amended Statement of Claim in this proceeding. I heard the motion on 29 April 2020 and at that time indicated that I would give that leave and publish my reasons later. These are those reasons.

2. The plaintiffs are beneficiaries of a trust established in April 2007 known as the Twigg Investments Trust. The trustee of the trust is the first defendant, Twigg Investments Pty Ltd. The sole director and shareholder of Twigg Investments Pty Ltd is Mr Maxwell Twigg, the brother of the first and second plaintiffs and the son of the third plaintiff.

3. Prior to the amendments the subject of the motion, the plaintiffs alleged (in an Amended Statement of Claim filed on 3 December 2018) that (1) in or before December 2009, the first defendant caused distributions to be made to the first and second plaintiffs of $2,577,295 each and to the third plaintiff of $2,147,746; (2) those distributions were not made; (3) as a consequence, Twigg Investments held the amount of the distributions as a bare trustee on separate sub trusts for each of the plaintiffs; (4) in breach of those trusts, Twigg Investments has not paid the plaintiffs the amount to which each of them is entitled. It was apparent to the plaintiffs, at least by the time the Amended Statement of Claim was filed, that Twigg Investments no longer has the funds to pay the entitlements claimed by them.

4. Twigg Investments raises various defences to that claim. Its principal defence is that the plaintiffs agreed in about early 2009 to give the unpaid distributions back to Twigg Investments in connection with an agreement by which the plaintiffs agreed that certain tax losses available to them could be used by the trust provided that the trust and Mr Twigg would cause the plaintiffs to be reimbursed for any future tax payable by them as a consequence of the trust being allowed to utilise their tax losses. The plaintiffs deny that they reached any such agreement.

5. The case is set down for hearing commencing on 1 June 2020. It is to be heard together with another case between the parties and entities associated with them in which the plaintiffs allege that Mr Twigg in breach of trust caused other family companies that acted as trustees of which the plaintiffs were beneficiaries to make large distributions to companies controlled by him. The details of that case are not relevant for present purposes.

6. By the Further Amended Statement of Claim, the plaintiffs seek to join Mr Twigg and to allege (1) that Twigg Investments had a duty to ensure that it had the financial resources to pay the distributions owing to the plaintiffs; (2) that in breach of that duty it paid away a total amount of $8,604,805 in the 2010 and 2011 financial years and made further payments totalling $3,324,825 in the 2012 to 2016 financial years, with the result that it could no longer pay the plaintiffs; (3) alternatively to (2), that at the time it made the distributions, it had assets from which those distributions could have been paid, but in breach of duty failed to realise those assets; (4) that Mr Twigg (as sole director and shareholder) induced or procured Twigg Investments to breach its duties; (5) alternatively to (4), that Mr Twigg or companies which were his alter ego were knowing recipients of funds paid away by Twigg Investments as part of a fraudulent or dishonest design on the part of Twigg Investments.

7. The defendants objected to the amendments on three broad grounds. First, it was said that the application to make them was made late with no explanation for the delay. Second, the defendants submitted that they would be prejudiced by the amendments because they would be required to investigate the financial transactions of Twigg Investments over a number of years and that could not be done in the limited time before the trial is due to commence. Third, they took objection to the nature of the claim that the plaintiffs sought to advance. So, for example, they submitted that the alleged duty of Twigg Investments to ensure that it had the financial resources to pay the distributions was not one recognised by law. Further, it is alleged in the Further Amended Statement of Claim that Twigg Investments “removed” the amounts paid away from the trust. It is said that the quoted expression is too vague to form a proper pleading. The Further Amended Statement of Claim also alleges that Mr Twigg had knowledge of circumstances that would put an honest and reasonable person on inquiry as to whether there had been a breach of trust by Twigg Investments. Knowledge of that type is said to be insufficient for a case of breach of trust based on knowing assistance or knowing receipt.

8. Mr Elliott SC, who appeared for the plaintiffs, candidly accepted that there was no good explanation for the delay in seeking to make the amendment. It is apparent that it occurred to the plaintiffs legal advisors that the amendment was desirable as part of their preparation of the case for hearing. I accept that the absence of a good explanation is one matter that counts against allowing the amendment. But its significance depends on the circumstances. The primary question for the Court is whether the amendments will “facilitate the just, quick and cheap resolution of the real issues in the proceedings”, to quote from s 56(1) of the Civil Procedure Act 2005 (NSW). Where the amendments necessitate a vacation of the hearing date, the absence of a good explanation for the delay will be a very important consideration. But where the case can proceed and the defendant suffers no real prejudice as a result of the amendments, the absence of a good explanation for the delay is of limited significance. The question is whether the amendments raise a real issue which in the interests of justice the plaintiffs should be permitted to pursue.

9. As to the defendants’ second point, the defendants were unable to point to any real prejudice they will suffer if the amendments were allowed. It was not seriously suggested that the hearing date would have to be vacated. It was suggested that the defendants will need to investigate financial transactions extending over a period of a number of years and that that would put an unfair burden on them when they will be heavily engaged in preparing this case and the one being heard with it for a trial commencing in about a month’s time. But in my opinion, the burden that the defendants say will be placed on them was exaggerated. As the case currently stands, it seems to be accepted that the distributions were recorded in the financial statements of Twigg Investments and that, at the time they were made, Twigg Investments had the financial resources to make them. The defendants’ principal defence is that they were not made because of an agreement reached between the parties. The existence and terms of that agreement will no doubt be investigated fully at trial. It may be that Mr Twigg, in response to the amended claim, will seek to advance a case that even if there was no agreement, he reasonably believed that there was one and that that provides an answer to the case against him. But it is difficult to see how that requires any evidence over and above the evidence that will be adduced in relation to the case absent the amendment. And if details of the financial position of Twigg Investments and the payments it made between 2009 and 2016 that led to the position that it was able pay the distributions at the time they were made but no longer is able to do so really are important to the defendants’ defence, it is difficult to see why the defendants cannot adduce that evidence. Mr Twigg was the sole director and shareholder of Twigg Investments at all relevant times and he must have knowledge of the relevant payments. It is to be expected that he will give evidence in any event. It is hard to see why he could not give additional evidence concerning the payments if needs be.

10. As to the defendants’ third point, in my opinion, the pleading is sufficiently clear for them to understand the case that they must meet. The case does not strike me as a hopeless one; and is one the plaintiffs should be permitted to bring. The complaints that the defendants make raise legal questions that can be dealt with at trial.

11. Mr Elliott accepted that the plaintiffs should pay the defendants’ costs thrown away by reason of the amendments. I ordered that the costs of the motion should be the plaintiffs’ costs in the cause. That appeared to me to be an appropriate order in the circumstances. The plaintiffs were successful in the motion. On the other hand, it did not appear just that the defendants should have to pay those costs if the amended case ultimately failed.

12. The orders of the Court therefore were:

1. The plaintiffs have leave to file and serve a Second Further Amended Summons and a Further Amended Statement of Claim;

2. The plaintiffs pay the defendants’ costs thrown away by reason of the amendment.

3. The costs of the notice of motion dated 23 April 2020 be the plaintiffs’ costs in the cause.

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Decision last updated: 30 April 2020