Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 10)
[2023] VSC 524
•4 September 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2019 04430
| TIMELESS SUNRISE PTY LTD (ACN 126 299 634) as trustee for DAVINA FAMILY TRUST & ORS (according to the attached schedule of parties) | Plaintiffs |
| v | |
| BIGJ ENTERPRISES PTY LTD (ACN 084 199 084) as trustee for JASON BRANDI FAMILY TRUST & ORS (according to the attached schedule of parties) | Defendants |
S ECI 2020 01675
| TANIA BRANDI | Plaintiff / Defendant by Counterclaim |
| v | |
| DAVID BRANDI | Defendant / Plaintiff by Counterclaim |
S ECI 2020 04804
| DAVID BRANDI | Plaintiff |
| v | |
| JASON BRANDI | Defendant |
S ECI 2021 04644
| DAVID BRANDI | First Plaintiff |
| TINA BRANDI | Second Plaintiff |
| v | |
| ZIGAROO PTY LTD (ACN 006 005 401) (ADMINISTRATORS APPOINTED) AS TRUSTEE FOR MK NO.13 TRUST | Defendant |
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JUDGE: | DELANY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15-18 August 2022, 22-23 August 2022, 25 August 2022, 29 August 2022, 1 September 2022, 5-6 September 2022, 8 September 2022, 26 – 29 September 2022, 3-4 October 2022, 8-10 November 2022, 14-15 November 2022, 21-24 November 2022, 7 December 2022 |
DATE OF JUDGMENT: | 4 September 2023 |
CASE MAY BE CITED AS: | Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 10) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 524 |
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EVIDENCE – Whether onus discharged – Multiple and alternative claims – Claims made and abandoned – Evidence advanced by parties consistent with abandoned claim and inconsistent with alternative claim now pressed – Evidence so advanced cannot be ignored in determining whether onus discharged – Evidence Act 2008 (Vic), s 140 – Claudia Leung in her capacity as Executrix of the Estate of the late Robert Ho v Paul Mervyn Fordyce t/as Pmf Legal Trading [2019] NSWSC 18; Rhesa Shipping Co SA v Edmunds [1985] 2 All ER 712; Eumeralla Estate Pty Ltd v Chen [2022] VSCA 78, applied.
TRUSTS – Whether unit trust established – Trust validly constituted upon execution of unit trust deed – Signatory to the trust deed acted as a director and had implied authority to execute – Corporations Act 2001 (Cth), ss 9, 126, 127, 129 – Resource Equities v Carr; Resource Equities v Garett [2009] NSWSC 1385; Melbourne Property Group Pty Ltd v SC Australia Pty Ltd [2013] VSC 701, applied.
TRUSTS – Whether express trust established – Words and conduct of brothers over 14 year period established express intention to create trust in accordance with terms of the unit trust deed – From establishment discretionary trusts for each brother held equal units – Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413; Alston v Cormack Foundation Pty Ltd (2018) 358 ALR 263, applied.
TRUSTS – Whether properties and proceeds of sale are assets of the unit trust – Accounting documents treated property as asset of unit trust – Land tax assessed on that basis – Properties and proceeds of sale assets of the unit trust.
TRUSTS – Whether half of the units vested in new trustee of the discretionary trust for brother upon the appointment of new trustee – Whether the units were assets of the trust at the date of appointment – Whether at an earlier date previous trustee validly transferred units to trustee of another discretionary trust controlled by the same brother – Liquidation of previous trustee followed by deregistration – Transferor’s claim asserting earlier valid transfer of units abandoned during trial – Evidence by plaintiffs supporting the validity of the earlier transfer – Allegations of forged signatures on books and records – Metadata of books and records considered – Not satisfied that that the new trustee established its asserted entitlement to half the units – Not satisfied that there was not an effective transfer of units to the transferor which had abandoned its claim – Corporations Act 2001 (Cth), s 251A; Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2006] FCA 1802; Claudia Leung in her capacity as Executrix of the Estate of the late Robert Ho v Paul Mervyn Fordyce t/as Pmf Legal Trading [2019] NSWSC 18, applied.
TRUSTS – Whether ipso facto clause caused previous trustee to cease to be trustee upon liquidation – Whether assets of discretionary trust vested in Commonwealth upon deregistration – Whether Commonwealth’s position is defeasible – Whether assets of discretionary trust vested in new trustee upon execution of appointment deed – Corporations Act 2001 (Cth), ss 601AD and 601AE; Danich Pty Ltd; Re Cenco Holdings Pty Ltd (2005) 53 ACSR 484; Thorne Developments Pty Ltd v Thorne (2015) 296 FLR 334; Re Inavas Pty Ltd [2017] NSWSC 1312; Bloomingdale Holdings Pty Ltd v 87 Stevedoring Street Pty Ltd (2010) 6 ASTLR 271; Elsworthy v ASIC [2016] VSC 14, applied.
TRUSTS – Fiduciary duty – Whether fiduciary relationship arose between two brothers – Accountant brother was reposed with trust and confidence to act in the best interests of his brother in financial matters – Fiduciary relationship established – History of joint business enterprises – Scope of fiduciary duty did not include duty to avoid conflict of interest – No breach by the accountant brother in relation to conduct establishing the unit trust – Ying v Song [2010] NSWSC 1500; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Townsend v Collova [2005] WASC 4; Pavan & Anor v Ratnam (1996) 23 ACSR 214; Monster Tyson Pty Ltd v Harbinson [2014] VSC 278; Dupal v The Law Society of New South Wales [1990] NSWCA 56; Hitchins v Hitchins (1998) 47 NSWLR 35; Breen v Williams (1996) 186 CLR 71; ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1, applied.
TRUSTS – Fiduciary duty – Allegations that accountant brother forged loan transaction documents in respect of property held in unit trust – Caveats lodged without knowledge of brother – Accountant brother breached fiduciary duty – Damage suffered – Compensation awarded.
TRUSTS – Fiduciary duty – Loan sought by trust associated with brother of accountant – Accountant misrepresented that lender was controlled by a third party – Trust entered into loan – Interest rate under the loan purportedly higher than other available rates – Accountant brother controlled lender – Accountant brother stood to benefit from the loan – Breach of duty – Representation to brother not made in good faith – Order for an account – Order 52 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
TRUSTS – Duties owed by trustee – Denial by trustee of unit trust of breach allegations – Relevant plaintiffs lack standing to seek relief – Accessorial liability claims against non-accountant brother dismissed – New trustees appointed over unit trust – New trustees also appointed as receivers and managers of unit trust.
CONTRACT – Whether disputed transactions constituted loan agreements or an investment in units in a unit trust – Whether loans were personally guaranteed – No copies of loan agreement or guarantee adduced in evidence – Business records unreliable and inconsistent – Not persuaded the transactions entered into constituted loan agreements as alleged – Guarantee not proved – Claims dismissed – Gattellaro v Westpac Banking Corporation (2004) 204 ALR 258; Bank of Scotland v Hussain [2011] EWHC 1934 (QB), applied.
PROPERTY – Caveats lodged in support of personal guarantee claim – Whether caveatable interest – Personal guarantee claim dismissed – No caveatable interest – Caveats to be removed – Transfer of Land Act 1958 (Vic), s 90.
TRUSTS – Alleged breach of duty by corporate trustee of family trust – Alleged loans from family trust to son of those who established the trust – Son acted in accordance with wishes of the parents – Whether failure to repay loans constituted breach of duty – Corporate trustee in administration – Accountant brother has standing to bring claim – Not satisfied intention to create legal relations – Family context surrounding the treatment of assets of family trust – If a binding loan, legal obligation to repay loans was acquiesced, waved or discharged by mother the director of corporate trustee – New independent trustees to be appointed to family trust – New trustees also appointed as receivers and managers of corporate trustee and family trust – Robert Deutsch & Ors v Erwin Deutsch & Ors (2012) 6 ASTLR 386; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, applied.
TRUSTS – Loans obtained by corporate trustee – Funds transferred to personal bank account of director – Breach of duty – Son of director liable for knowing involvement in breach of duty – Harstedt Pty Ltd v Tomanek (2018) 55 VR 158; Hasler v Singtel Optus Pty Ltd; Curtis v Singtel Optus Pty Ltd; Singtel Optus Pty Ltd v Almad Pty Ltd (2014) 87 NSWLR 609, applied.
PROPERTY – Properties owned by brothers as equal tenants in common – Determination of appropriate contributions – Property Law Act 1958 (Vic), ss 225, 230, 232 and 233.
PROPRIETARY ESTOPPEL – Whether parents promised the transfer of property to accountant son and his wife – Property held in family trust and not transferred – Son and wife act to their detriment upon reliance on the promise – Renovations undertaken on property – Son and wife rent out property and collect rent proceeds – Son procured loans on the security of the property – Property sold by mother – Proprietary estoppel claim made out – Compensation awarded to son and wife – Repatriation Commission v Tsourounakis (2007) 158 FCR 214, applied.
ADMINISTRATION OF JUSTICE – Evidence of dishonest behaviour relating to corporations and their tax affairs – Phoenixing of corporations – Forgery – Backdating of documents – Destruction of evidence – Parties warned – Referral to ASIC, Deputy Commissioner of Taxation and the DPP.
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S ECI 2019 04430
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs by Original Proceeding and First Defendant by Counterclaim | Mr J Graham KC with Mr S Clement and Ms Z Anderson | Frenkel Partners |
| For the First to Third Defendants by Original Proceeding and Plaintiffs by Counterclaim | Mr D Bongiorno with Mr L Molesworth | Strongman & Crouch |
| For the Fourth Defendant by Original Proceeding | No appearance at trial | |
| For the Second Defendant by Counterclaim | Mr P Miller | Madison Marcus |
S ECI 2020 01675
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff by Original Proceeding and First Defendant by Counterclaim | Mr D Bongiorno with Mr L Molesworth | Strongman & Crouch |
| For the Defendant by Original Proceeding and Plaintiff by Counterclaim | Mr J Graham KC with Mr S Clement and Ms Z Anderson | Frenkel Partners |
S ECI 2020 04804
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Graham KC with Mr S Clement and Ms Z Anderson | Frenkel Partners |
| For the Defendant | Mr D Bongiorno with Mr L Molesworth | Strongman & Crouch |
S ECI 2021 04644
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P Miller | Madison Marcus |
| For the Defendant | No appearance at trial | Aitken Partners |
TABLE OF CONTENTS
Overview.............................................................................................................................................. 1
The family members and their entities...................................................................................... 1
The real properties........................................................................................................................ 3
The proceedings............................................................................................................................ 5
The evolution of and the issues for determination.................................................................. 9
The witnesses: some observations............................................................................................ 12
Summary of findings.................................................................................................................. 17
The course of the trial...................................................................................................................... 22
The trial sequence....................................................................................................................... 22
The split trial Ruling................................................................................................................... 25
David’s election to give evidence and amendments to the David Brandi parties’ case... 29
The s 128 privilege against self-incrimination ruling............................................................ 32
Atida.............................................................................................................................................. 32
CEG............................................................................................................................................... 33
Filing allegedly false ASIC documents.................................................................................... 35
Leaning Back loan....................................................................................................................... 35
Accounts of PDJ Crew Unit Trust for the 2015 and 2016 financial years........................... 35
Other forgery allegations........................................................................................................... 36
Other s 128 issues........................................................................................................................ 38
Jason and the deletion of the contents of the hard drive....................................................... 39
Claims made and defences taken: later abandoned or not pressed....................................... 41
The witnesses.................................................................................................................................... 45
Erminio (Ernie) Brandi............................................................................................................... 45
Mr Skerrett................................................................................................................................... 51
Ms Holt......................................................................................................................................... 51
David Brandi................................................................................................................................ 55
Tina Brandi................................................................................................................................... 62
Jason Brandi................................................................................................................................. 65
Tania Brandi................................................................................................................................. 69
Fernanda Brandi.......................................................................................................................... 70
James Black................................................................................................................................... 71
Teresa Mammoliti....................................................................................................................... 73
Rocco Mammoliti........................................................................................................................ 73
The burden of proof and issues of credibility........................................................................... 73
Chronology........................................................................................................................................ 78
PDJ Crew and Newsom Street..................................................................................................... 103
Introduction............................................................................................................................... 103
The competing claims to relief................................................................................................ 105
David Brandi parties’ pleadings and submissions............................................................... 106
Jason Brandi parties’ pleadings and submissions................................................................ 109
The date of the Trust Deed...................................................................................................... 111
The execution of the Trust Deed by Ernie............................................................................. 113
Issue 1(a): The Trust was validly constituted upon execution of the Trust Deed............. 113
Conduct between 2004 and 2018 and issue 1(b): an express trust relying on conduct and events...................................................................................................................................................... 121
Conduct relied on to prove an express trust......................................................................... 121
Developments by the brothers prior to 2004......................................................................... 125
2004: The initial contract for the purchase of 9 Newsom Street......................................... 127
2007: The second contract for the purchase of 9 Newsom Street....................................... 131
Events concerning Newsom Street: 2008–2009..................................................................... 133
Moonee Valley Council carpark: late 2010: the alleged agreement................................... 135
The 2011-2014 calendar years.................................................................................................. 137
The 2015 purchase of the Adjacent Land and shared expenses......................................... 140
The 2015 accounts of the PDJ Crew Unit Trust: three versions.......................................... 142
Unit transfer documents: MPG to Timeless Sunrise: 1 July 2014....................................... 145
The 2016 financial accounts of the PDJ Crew Unit Trust: two versions............................ 151
Accounts of the PDJ Crew Unit Trust: 2017-2018................................................................. 153
2017: Newsom Street Land Tax............................................................................................... 155
2017: Proposals to sell Newsom Street................................................................................... 157
The events of August 2018 to February 2019........................................................................ 158
Issue 1(b): Findings: an Express Trust....................................................................................... 165
Issue 4: 9 Newsom Street and the Adjacent Land are assets of the PDJ Crew Unit Trust 168
Issue 3: Mr Landlord has not proved that it is a unitholder in the PDJ Crew Unit Trust 169
The David Brandi parties’ submissions................................................................................. 169
The Jason Brandi parties’ submissions.................................................................................. 172
Findings...................................................................................................................................... 175
March 2008........................................................................................................................ 176
July 2014............................................................................................................................ 176
Metadata........................................................................................................................... 180
25 February 2019.............................................................................................................. 182
Alternative analysis: assume MPG held the units on 25 February 2019............................. 184
Submissions............................................................................................................................... 185
The position of the Commonwealth....................................................................................... 188
Alternative analysis.................................................................................................................. 188
Did David owe fiduciary duties? Claims and defences......................................................... 200
The 3AC...................................................................................................................................... 200
Defence to 2AC.......................................................................................................................... 206
The issues to which the fiduciary allegations relate............................................................ 207
Jason Brandi parties’ submissions.......................................................................................... 208
David Brandi parties’ submissions......................................................................................... 210
The principles: existence of the duty...................................................................................... 213
Application of the principles................................................................................................... 219
The PDJ Crew Unit Trust and Newsom Street: duty owed, no breach............................. 224
CEG and Atida: duty owed and breached................................................................................. 227
The pleadings............................................................................................................................. 227
The evidence.............................................................................................................................. 229
Factual findings......................................................................................................................... 234
Findings concerning duty and relief...................................................................................... 236
Findings in relation to compensation..................................................................................... 238
Leaning Back: duty owed and breached.................................................................................... 241
Pleadings.................................................................................................................................... 241
The evidence.............................................................................................................................. 243
Findings...................................................................................................................................... 245
The debt claim for $593,532 by PDJ Crew against David not proved.................................. 246
Pleadings.................................................................................................................................... 246
The evidence.............................................................................................................................. 248
Findings...................................................................................................................................... 250
The claims against Jason and PDJ Crew for breach of fiduciary duty (issues 6-12)......... 251
The Jason Brandi parties’ claim to set off................................................................................. 256
The ITM personal guarantee claims are not proved............................................................... 257
The pleadings............................................................................................................................. 257
The issues................................................................................................................................... 260
Was there a guarantee?............................................................................................................ 261
The available documents......................................................................................................... 262
The evidence of the witnesses................................................................................................. 270
Jason Brandi...................................................................................................................... 270
Tania Brandi..................................................................................................................... 273
Fernanda Brandi.............................................................................................................. 280
David Brandi.................................................................................................................... 280
Findings...................................................................................................................................... 290
PDJ Crew, Jason and Tania do not have a caveatable interest in Wellington Parade.... 294
Does the provision for interest in the alleged guarantee constitute a penalty? Is the claim statute barred?............................................................................................................................... 295
The claims by the David Brandi parties against Zigaroo and Jason.................................... 295
Introduction............................................................................................................................... 295
The David Brandi parties’ pleadings..................................................................................... 296
Zigaroo’s defence to the David Brandi claims...................................................................... 299
Jason’s defence to the Zigaroo claims.................................................................................... 300
The issues that fall for determination.................................................................................... 302
The conduct of the affairs of the trust.................................................................................... 303
Who are the beneficiaries of the MK No 13 Trust?.............................................................. 313
Findings...................................................................................................................................... 314
What are the assets of the MK No 13 Trust?......................................................................... 316
David has standing to bring the C.5A amended claim........................................................... 317
The submissions........................................................................................................................ 317
The principles............................................................................................................................ 318
Application to the facts............................................................................................................ 320
Did Zigaroo owe duties and did it breach those duties?....................................................... 320
Pleadings and submissions...................................................................................................... 320
The pleaded case concerning the Zigaroo Loans is not made out..................................... 322
Jason is not liable as an accessory concerning the Zigaroo Loans....................................... 326
There was no Zigaroo/Jason Loan Agreement......................................................................... 326
Pleadings and submissions...................................................................................................... 326
Findings...................................................................................................................................... 328
No agreement binding Zigaroo.............................................................................................. 329
No intention to create legal relations..................................................................................... 330
Alternative: acquiescence / waiver / discharge.................................................................. 335
The sale of Clovelly Avenue.................................................................................................... 336
The Resimac and La Trobe loans............................................................................................ 338
Repudiation................................................................................................................................ 340
The Secure Funding Loan............................................................................................................. 340
The pleadings............................................................................................................................. 340
The loan...................................................................................................................................... 341
Did Zigaroo act in breach of trust?......................................................................................... 352
Jason is liable as an accessory for Zigaroo’s breach of trust............................................... 354
What relief should be granted in respect of the David Brandi parties’ claims against Zigaroo and Jason?.......................................................................................................................................... 355
Clean hands..................................................................................................................................... 357
The Tarwin Lower Land............................................................................................................... 360
Lot 28/157 Ascot Vale Road.......................................................................................................... 362
Cooper Street and Holmes Road................................................................................................. 363
Contribution disputes............................................................................................................... 364
Issues arising on the sale of Holmes Road............................................................................ 367
Findings...................................................................................................................................... 368
David and Tina’s claim to Ascot Vale Road............................................................................. 372
Overview.................................................................................................................................... 372
The evidence and the pleaded case........................................................................................ 373
Jason Brandi parties’ submissions.......................................................................................... 382
David and Tina’s submissions................................................................................................ 382
Findings and relief.................................................................................................................... 383
Referral of proceedings................................................................................................................. 388
HIS HONOUR:
Overview
These proceedings involve the determination of very bitter disputes between members of the Brandi family whose relationships with one another, while never easy, have completely fractured. On one side, David Brandi (‘David’) and his wife Tina, on the other, David’s brother Jason Brandi (‘Jason’), their sister Tania, and their elderly mother, Fernanda. The father of the Brandi children, Erminio (‘Ernie’), who had been a patriarchal head of the family and with whom the relationships of family members had ebbed and flowed over time, died on 20 December 2020. Ernie died after proceedings had been commenced and a statutory declaration and affidavits made by Ernie and videos of him taken not long before he died formed part of the evidence at trial.
With no disrespect intended, for clarity and convenience, I will refer to the parties by their given names.
The family members and their entities
So far as is relevant the Brandi family tree is set out below:
David and Tina control, or have from time to time controlled, or been closely associated with the following corporations and entities:
— Timeless Sunrise Pty Ltd (‘Timeless Sunrise’) as trustee of the Davina Family Trust.
— Davtin Pty Ltd (‘Davtin’), deregistered 22 October 2006.
— Melbourne Property Group Pty Ltd (in liquidation) (‘MPG’), previously trustee of the Brandi Family Trust, liquidator appointed 25 February 2019, deregistered 6 December 2019.
— Sleepless Nights Pty Ltd (‘Sleepless Nights’), deregistered 16 January 2019.
— Mr Landlord Co Pty Ltd (‘Mr Landlord’).
— Independent Tube Mills Pty Ltd (in liquidation) (‘ITM’), liquidator appointed 30 June 2014.
— Australian Steel Assets Pty Ltd (‘Australian Steel Assets’) incorporated 16 May 2018 and Australian Steel Manufacturing Pty Ltd (‘Australian Steel Manufacturing’).
— Sputnik Pty Ltd (in liquidation) (previously called Australian Pipe and Tube (‘APT’) Pty Ltd) (‘Sputnik’), wound up by order of the Federal Court made 21 December 2018.
— Leaning Back Pty Ltd (‘Leaning Back’), deregistered 12 May 2021.
— Childs Play International Pty Ltd (‘Childs Play’).
— Midnight Express Group (in liquidation) Pty Ltd (‘MEG’) deregistered 6 September 2017.
Jason controls and has previously controlled or been associated with the following corporations and entities:
— PDJ Crew Pty Ltd (‘PDJ Crew’), as trustee for the PDJ Crew Unit Trust.
— BigJ Enterprises Pty Ltd (‘BigJ’), as trustee for the Jason Brandi Family Trust.
Zigaroo Pty Ltd (Administrators Appointed) (‘Zigaroo’) is the trustee of the MK No 13 Trust, a discretionary trust set up many years ago at the instigation of Ernie for the benefit of the family. David and Jason are specified beneficiaries and are the (joint) appointors and guardians of the MK No 13 Trust. Immediately prior to the appointment of administrators to Zigaroo on 11 July 2022, Fernanda was the sole director of Zigaroo.
JAG Group Holdings Pty Ltd (‘JAG Group’) is the trustee of the JAG Group Unit Trust. Prior to his death, Ernie, who was sometimes known within the family as ‘Jag’, was the sole director of JAG Group. 50% of the Units in the JAG Unit Trust are owned by BigJ as trustee of the Jason Brandi Family Trust. In the latest pleading relied on by the David Brandi parties, the other 50% of the units are alleged to be owned by Mr Landlord in its capacity as trustee of the Brandi Family Trust.
JAG Investment Group Pty Ltd, deregistered on 9 November 2007, is a company that had been intended to purchase and undertake an apartment development at 155-157 Epsom Rd, Ascot Vale (‘Royal Ascot’). Ernie was the sole director and shareholder of that company.
The Little Man Holdings Pty Ltd (‘TLMH’) was the company that purchased the land and undertook the Royal Ascot development. Fernanda is both the sole shareholder and the sole director of TLMH.
The real properties
The disputes concern a number of real properties in Victoria:
(a) 9 Newsom Street, Ascot Vale and adjoining land (‘the Adjacent Land’) (together ‘Newsom Street’), a development site of which PDJ Crew was the registered proprietor until it was sold for $10.5m in June 2020.
(b) 306 Ascot Vale Road, Moonee Ponds (‘Ascot Vale Road’) of which first Ernie and then Zigaroo was the registered proprietor until it was sold on 25 October 2021.
(c) 86 Cooper Street, Essendon (‘Cooper Street’) at which Fernanda and Jason reside, of which David and Jason are currently the joint proprietors as tenants-in-common. It is agreed that regardless of the outcome of the proceedings that Fernanda is entitled to reside at Cooper Street for so long as she should wish to do so.
(d) 48 Holmes Road, Moonee Ponds (‘Holmes Road’), owned by David and Jason as tenants-in-common in equal shares until it was sold by the mortgagee in December 2021.
(e) Lot 28, 157 Epsom Road, Ascot Vale (‘Lot 28’), air rights above the Royal Ascot residential development, of which TLMH is the registered proprietor.
(f) 2072 Inverloch-Venus Bay Road, Tarwin Lower (‘Tarwin Lower’), a broadacre property with development potential held in a unit trust structure[1] involving the Brandi family as to 60% and external investors as to 40%. The Brandi family interests are held by Tarwin River Holdings Pty Ltd in which David and Jason hold equal interests.
[1]As submitted by the David Brandi parties, the structure comprises Tarwin Group Pty Ltd, as trustee for the Tarwin Group Unit Trust (the sixth defendant in the main proceeding), JAG Group Holdings Pty Ltd as trustee for the JAG Group Unit Trust (the fifth defendant in the main proceeding) and Tarwin River Holdings Pty Ltd, as trustee for the Tarwin River Holdings Unit Trust (the seventh defendant in the main proceeding). Those parties have been joined as necessary parties and served with process in the main proceeding but have not filed any appearance or taken any active step.
Following the sale of the properties in dispute at Newsom Street, Holmes Road and Ascot Vale Road, the net proceeds of sale were paid into Court or into trust. Pursuant to various orders, part of those funds were later paid out to the parties, primarily to fund legal costs.
The following table lists the funds remaining in Court or in trust referable to each of those properties including interest as at 30 June 2023. The figures in the table are based on information provided by Funds in Court and Sinisgalli Foster.
Property Order directing funds Amount remaining Newsom Street · Orders dated 7 August 2020 (Almond J)
· Orders dated 7 August 2022, 12 August 2022, 8 September 2022 and 7 November 2022
$5,116,757.10 Holmes Road · Application by mortgagee in possession pursuant to s 77 of the Transfer of Land Act 1958 (Vic) and s 69 of the Trustee Act 1958 (Vic)
· Consent orders dated 15 October 2021 and 7 November 2022
$760,804.05 Ascot Vale Road 17 November 2021 (AsJ Matthews) in S ECI 2021 04142 $615,231.43 The proceedings
There are four related proceedings involving the individual Brandi family members and entities associated with them. The proceedings were heard together at a lengthy trial commencing on 15 August 2022, ending with further written submissions in December 2022. Evidence in each proceeding was evidence in the other.
The issues in the proceedings arise out of events and dealings, both personal and business, between the family members and corporations and entities associated with them spanning more than two decades, beginning in around 1997.
At the start of the trial, David and the companies associated with him, Timeless Sunrise and Mr Landlord (together the ‘David Brandi parties’), were the moving party in proceeding S ECI 2019 04430 (‘Timeless Sunrise proceeding’). The Timeless Sunrise proceeding was commenced by originating motion on 26 September 2019 and is the main proceeding. The trial was conducted on that basis. The initial plaintiffs in the Timeless Sunrise proceeding were Timeless Sunrise and David. The third plaintiff, Mr Landlord, was added pursuant to orders made on 3 December 2020. The defendants who counterclaimed in the Timeless Sunrise proceeding are Jason and companies controlled by him, BigJ and PDJ Crew (together, the ‘Jason Brandi parties’).[2]
[2]BigJ Enterprises, PDJ Crew and Jason are the first to third defendants in the Timeless Sunrise proceeding, and Jason and PDJ Crew are the first and second plaintiffs by counterclaim in that proceeding.
Amongst the counterclaims against David in the Timeless Sunrise proceeding is a claim to enforce personal guarantees allegedly given by David in favour of Jason and PDJ Crew of loans made to ITM. David denies the existence of the loans and of the personal guarantees alleged.
The Jason Brandi parties also counterclaimed against David and against Childs Play, the company that today operates the accounting practice established in around 2001 by David called ‘Brandi & Co’. After closing addresses, the Court was informed that the disputes between the Jason Brandi parties and Childs Play had been resolved. On 20 January 2023, the Court made Orders by consent dismissing Jason and PDJ Crew’s counterclaim against Childs Play.
The relationship between certain of the claims made in the Timeless Sunrise proceeding at the outset of the trial and the family members and entities associated with them was the subject of an aide memoire prepared on behalf of the David Brandi parties prior to trial.
It will be observed that the aide memoire makes no reference to Mr Landlord whose claims at the outset of the trial were claims in the alternative only to the claims by Timeless Sunrise.
Proceeding S ECI 2020 01675 was initiated by Tania against David (‘Tania’s proceeding’) seeking to enforce an alleged personal guarantee by David of a debt of ITM to Tania. David denies the existence of the alleged debt and of the guarantee.
In reliance on the alleged personal guarantees by David of the ITM’s debts, each of Tania, Jason and PDJ Crew lodged caveats against the title to land owned by David at 111 Wellington Parade South, East Melbourne (‘Wellington Parade’). David seeks orders for the removal of those caveats in the Timeless Sunrise proceeding and in Tania’s proceeding.
David is the plaintiff and Jason is the defendant in proceeding S ECI 2020 04804 (formerly VCAT proceeding BP908/2019). When initiated, the relief sought included orders pursuant to ss 230, 232, 233 and 245 of the Property Law Act 1958 (Vic) (‘Property Law Act’) for the sale, alternatively for Jason to transfer to David his share, of Cooper Street and of Holmes Road in consideration for half the value of each property. Holmes Road was later sold by the mortgagee. Fernanda continues to reside at Cooper Street.
David and Tina are the plaintiffs in proceeding S ECI 2021 04644 (‘Zigaroo proceeding’). They are represented by separate counsel and solicitors in that proceeding in which Zigaroo is the sole defendant. In the Zigaroo proceeding, David and Tina claim that Zigaroo holds the property at Ascot Vale Road, now represented by the proceeds of sale of that property, on trust for them.
On 11 July 2022, Michael Carrafa and Fabian Kane Micheletto (‘the Administrators’) were appointed as joint and several administrators of Zigaroo. On 20 July 2022, Orders were made granting David and Tina leave to proceed with their claims in the Zigaroo proceeding. On 22 July 2022, leave to proceed against Zigaroo was given to the David Brandi parties in the Timeless Sunrise proceeding.[3] Those orders were made on the premise that the defence of the claims against Zigaroo would be undertaken by the Jason Brandi parties and that the Administrators would play no active part in the trial. That is in fact what occurred.
[3]Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 2) (Unreported, Supreme Court of Victoria, Delany J, 22 July 2022).
The evolution of and the issues for determination
The issues for determination across the proceedings, except the Zigaroo proceeding, were identified in a joint statement of issues first filed on 10 May 2021 pursuant to s 50 of the Civil Procedure Act 2010 (Vic) (the ‘CPA’). There were later versions of the statement of issues. The most recent statement of issues, updated on 8 November 2022, listed 82 issues for determination (‘Joint Statement of Issues’). On 12 August 2022, a list of issues was filed in the Zigaroo proceeding.
The course of the trial involved many twists and turns, including the abandonment by the lead plaintiff, Timeless Sunrise, of all claims made by it. David also abandoned some of his substantive claims in the Timeless Sunrise proceeding. In the course of the proceeding, including during the trial the Jason Brandi parties, and Tania, also abandoned or advised that they did not press various claims and defences earlier relied on by them.
Some of the 82 issues listed in the Joint Statement of Issues do not require determination. As advised in closing submissions, some issues are no longer pressed. Issues concerning the Tarwin River Group Unit Trust, TLMH and the Cooper Street and Holmes Road properties are largely resolved. Other issues remain hotly contested.
While not displacing the pleadings, the Joint Statement of Issues provides a helpful identification by the parties of the issues requiring determination. While not providing a template for the judgment, it also provides a helpful checklist to ensure that all issues in this complex litigation are considered and determined.
Claims and defences made and abandoned or not pressed, and aspects of the course of the trial itself, including two significant rulings, one concerning a split trial application by the David Brandi parties and the other relating to David’s claims of privilege against self-incrimination are relevant to the issues that remain.
By closing addresses, there had been substantive amendment to many of the pleadings. The final pleadings comprise:
(a) In the Timeless Sunrise proceeding:
(i) Fourth Further Amended Statement of Claim (‘4FASOC’) of Timeless Sunrise, David and Mr Landlord dated 27 September 2022;
(ii) Defence of Zigaroo dated 16 February 2021. This pleading was filed at a time when Fernanda was the sole director of Zigaroo. It predates the appointment of the Administrators;
(iii) Third Further Amended Defence (‘3FAD’) of BigJ, PDJ Crew and Jason dated 28 September 2022;
(iv) Reply by Timeless Sunrise, David and Mr Landlord to the Second Further Amended Defence of BigJ, PDJ Crew and Jason dated 27 September 2022;
(v) Third Amended Counterclaim (‘3AC’) of BigJ, PDJ Crew and Jason dated 7 November 2022; and
(vi) David’s Defence to the Second Amended Counterclaim of BigJ, PDJ Crew and Jason dated 27 September 2022 (‘Defence to 2AC’).
(b) In Tania’s proceeding:
(i)Tania’s Writ and Statement of Claim dated 7 April 2020;
(ii)David’s Amended Defence and Counterclaim dated 18 July 2022; and
(iii)Tania’s Reply and Defence to David’s Amended Defence and Counterclaim dated 26 July 2022.
(c) In proceeding S ECI 2020 04804:
(i)David’s Points of Claim dated 20 May 2019;
(ii)Jason’s Points of Defence dated 6 September 2019; and
(iii)David’s Statement of Contributions & Receipts dated 5 December 2019.
(d) In the Zigaroo proceeding:
(i)Further Amended Statement of Claim (FASOC) of David and Tina dated 2 September 2022;
(ii)Defence and Counterclaim of Zigaroo dated 3 May 2022. This pleading predates the appointment of the Administrators. It was filed at a time when Fernanda was the sole director of Zigaroo; and
(iii)David and Tina’s Reply and Defence to Zigaroo’s Defence and Counterclaim dated 29 July 2022.
The witnesses: some observations
Nothing about the very lengthy trial could be described as edifying. It was a sad conclusion to a series of long running disputes between the family members.
While the evidence of the key witnesses is discussed in more detail below, it is appropriate to make some brief observations about the evidence as part of the overview of the proceedings as a whole.
Each of David, Tina, Jason, Tania and Fernanda gave evidence. So too did Tina’s father, Rocco Mammoliti, and her mother, Teresa Mammoliti. Two affidavits and a statutory declaration made by Ernie and videos of Ernie formed part of the evidence. A solicitor, Michael Skerrett, gave evidence about his signature having been forged. An expert witness, Melanie Holt, gave evidence about forged signatures, primarily those of Jason, on financial and security documents. An accountant in the Brandi & Co accounting practice, James Black, gave evidence. His evidence became less relevant with the resolution of the cross claims by the Jason Brandi parties against Childs Play. A witness statement of Dennis Marinos was admitted into evidence without the requirement for him to attend for cross-examination. An expert report of Leanne Balit, a digital forensic investigator, whose report related to actions taken by Jason during the course of the trial was admitted into evidence, also without her being required to attend for cross-examination.
Mention should be made of some other persons, none of whom were called to give evidence, but who feature in these reasons. The first is Sandra Ah-Yu who for many years was David’s personal assistant at Brandi & Co. The second is Dr Maurice Fabiani, a cousin of Tania, David and Jason, who in the period 2019-2022 appears to have lived close to Cooper Street. The third is a solicitor, Chris Lilley of Dorsia Legal. Mr Lilley’s office was for a time located in the same building as or nearby David’s office in Richmond. From time to time, Mr Lilley acted in accordance with instructions provided by David. The fourth person is Alfio Carrozza, a friend of David’s, who, amongst other things, was appointed a director of MEG on 13 August 2012 and the sole director of Leaning Back on 25 November 2019 in place of David and Ernie, just before Leaning Back was wound up in insolvency by the Federal Court on 29 November 2019.
The cross-examination of David and Jason was lengthy, in each case bordering on exhausting. Large parts of the cross-examination of both brothers was directed solely to credit issues. I made detailed notes of the credit cross-examination at the time of the trial together with proposed findings.
The trial was marked by dishonest evidence given by David and Jason on the occasions and in respect of the specific matters detailed in these reasons. The level and the extent of dishonesty was such that prior to closing addresses I warned the parties that I would consider referring aspects of the evidence to the Director of Public Prosecutions and to the Australian Taxation Office (‘ATO’). I invited submissions as to why I should not adopt that course.
Until late 2018, Jason and David had a close relationship, albeit one in which there were robust exchanges of view between them.
David is a well-educated, disqualified chartered accountant and a disqualified company director. There was evidence during the trial of calculated, persistent and dishonest behaviour by David over many years, some of which was relevant to matters in issue, some of which was relevant to credit only. David’s behaviour which was the subject of cross‑examination included the forging of signatures and the backdating of documents to the detriment of his brother Jason and the manipulation of corporations so as to avoid paying creditors including the ATO. At the time of trial, David was serving a suspended sentence for GST fraud. He had also been charged with forgery in relation to a real property mortgage to which evidence of Mr Skerrett and Jason was relevant. At the time of trial, that charge remained outstanding.
David was a witness whose evidence could not be acted upon, sometimes even where apparently supported by contemporaneous documents. That is the case because of concerns that such documents may have been prepared for a particular purpose so as to convey the existence of a particular state of affairs or may have been forged or backdated or both, by or at David’s instigation.
David, either personally or through Brandi & Co, of which he indirectly remains a part owner, was responsible over the years for the preparation of accounts and for the tax affairs of a number of companies and trusts involving he and his wife Tina and other members of the Brandi family from whom he is now estranged. He installed family members including Ernie, who, on David’s own evidence, could only read and write English ‘very poorly’, as the sole director of companies, including companies controlled by him as and when it suited him. It appears that a number of the companies and trusts associated with David have not filed tax returns for many years. That is also the case concerning the companies and trusts associated with the Brandi family for whom David, through Brandi & Co, provided accounting and taxation services. As an example, in the case of Zigaroo as trustee for the MK No 13 Trust, the last tax returns were for the 2015 financial year. Over the years, David and Tina and the companies and trusts he, she or they control appear to have accumulated substantial assets.
David involved Tina in his pursuit and retention of wealth over time. In the context of David’s disqualification as a director in May 2021, and on other occasions, Tina was appointed the sole director of various corporations. In early 2022 under the ‘control’ of Tina, certain of the David Brandi family assets were refinanced with borrowings of $16.1 million.
I did not find Tina to be an impressive witness. She gave answers that she thought would help the case of the David Brandi parties. Although according to ASIC records Tina was the director of 23 companies at the time of trial owning a variety of assets, including assets held on trust, Tina was not able to answer even the most basic questions about the activities of those entities or about critical transactions involving them, including the refinancing of the David Brandi family assets earlier in the 2022 calendar year. David continues to control and manage those companies and entities.
David’s brother Jason is a builder by trade. He was apprenticed to his father Ernie. Although he completed year 12, Jason is not as sophisticated in his approach to business or to the dispute between the family members as David. Before the brothers had a falling out in late 2018, Jason had been involved in various building and development projects with David. Over many years Jason had taken direction from David in relation to companies and trusts, acting on David’s advice and at his behest. The evidence included examples of Jason giving effect to David’s wishes and instructions. Most notably, in July 2014 when David, seeking to thwart the interests of external creditors of ITM, a company in which David was involved, at a time when it went into liquidation, arranged for Jason to attend the meeting of creditors and to vote as the holder of various proxies. David was and remained overseas at that time.
From late 2018, Jason reacted to his brother’s behaviour in a number of different ways. As the disputes between them dragged on, Jason exhibited paranoia towards David. When money to fund these proceedings and other legal costs became tight, Jason and Fernanda sought to conceal funding transactions involving Zigaroo. Jason sent emails from addresses other than his own, including purportedly from Tania, seeking to attract the active attention of law enforcement agencies and the press to pursue David for what Jason perceived to be David’s dishonest and dishonourable behaviour.
When he gave evidence, Jason, like his brother David, was shown to have told lies and to have given dishonest answers. Unlike his brother, Jason’s level of sophistication meant that he was more readily shown to be doing so. A clear example concerned actions taken by him to return his laptop to factory settings during the trial. The deletion of the contents of the hard drive and the return to factory settings occurred only hours before the laptop was scheduled to be searched for emails and documents by an independent IT consultant. This incident is discussed in more detail below. Just as David involved his wife Tina in the pursuit and defence of his claims, Jason was joined by his sister Tania and his elderly mother Fernanda in seeking to resist David’s claims and to advance his and Tania’s own claims.
Tania is the eldest of the three Brandi children. Tania completed Year 12 in 1989. In 2002, she enrolled in a Diploma in Children’s Services at Holmesglen TAFE and, in 2003, she obtained a Bachelor of Business from Victoria University. Between 2004 and 2012, Tania ran a childcare centre business. During that period, Tania was the main breadwinner for her family, being her former husband Andrew MacDonald and their three children. For a time Tania was estranged from her parents. In around 2013, Tania separated from Andrew MacDonald. From around 2013, Tania and Andrew MacDonald were involved in disputed property proceedings in the Family Court. In 2015, various members of the Brandi family made affidavits in support of Tania’s position in the Family Court proceedings.
For many years, Tania has suffered a series of serious health conditions which have left her oxygen-dependent and unable to work. In 1992, Tania was diagnosed with Hodgkin’s lymphoma. When she gave evidence, Tania did so from a wheelchair and with the support of her carer.
Fernanda is approximately 87 years of age. At the time she gave evidence, Fernanda was suffering from physical restrictions of movement resulting from a relatively recent hip operation. She has been the recipient of dialysis treatment twice a week for approximately the last 20 years. Although she presented with those and other physical difficulties, intellectually Fernanda was alert and ‘on the ball’.
Fernanda and Jason are co‑executors of the Estate of Ernie. In that capacity they control, and, since approximately June 2021, have controlled, Tarwin Group Pty Ltd (‘Tarwin Group’), Tarwin River Holdings, JAG Group and TLMH.
In litigation where serious issues of credibility infect the evidence of the key protagonists whose evidence is in conflict, the most reliable course is generally to have regard to contemporaneous documents and records to resolve disputed questions. Some such documents, including some emails, are helpful in this case. However, many other documents, including corporate financial and business records, do not help resolve factual conflicts and issues. In some cases more than one version exists of critical documents such as financial accounts prepared by or at David’s direction.
The fundamental change in the David Brandi parties’ case in the Timeless Sunrise proceeding which occurred after the trial commenced, leaving the formerly faintly pressed alternative claim by Mr Landlord as the sole surviving substantive claim, gives rise to serious questions about whether the David Brandi parties have discharged their burden of proof in relation to the claims that Mr Landlord seeks to advance. The same question of whether those who bear the burden of proof have discharged the onus arises in different circumstances in relation to the claims by Jason, PDJ Crew and Tania against David to enforce personal guarantees allegedly given by David of the obligations of ITM.
Summary of findings
At the conclusion of the trial the parties provided draft minutes of the orders for which they contend in each of the proceedings.
For the detailed reasons that follow:
(a) I find that Ernie had implied authority to execute the PDJ Crew Unit Trust Deed on behalf of PDJ Crew and that the execution of the Trust Deed was sufficient to establish the PDJ Crew Unit Trust.
(b) If I am wrong about the execution of the Trust Deed itself being sufficient to establish the PDJ Crew Unit Trust, I accept that the evidence of the events and communications between 2004 and 2018 constituted an express intention by David and Jason to create a trust relationship in accordance with the terms of the PDJ Crew Unit Trust Deed, with equal unit holdings, 50% held by MPG and 50% held by BigJ on behalf of discretionary trusts established for the benefit of each brother.
(c) I find that Newsom Street, the Adjacent Land and consequently the proceeds of sale of those properties are assets of the PDJ Crew Unit Trust.
(d) I am not persuaded on the balance of probabilities that Mr Landlord has the entitlement to a 50% interest in the PDJ Crew Unit Trust or an entitlement to the 50% interest in the proceeds of sale of Newsom Street that it claims. The claim by Mr Landlord is dismissed.
(e) I am not persuaded on the balance of probabilities that Timeless Sunrise holds 50% of the PDJ Crew Units.
(f) In the alternative scenario, if I was persuaded that there was no effective transfer of the PDJ Crew Units from MPG to Timeless Sunrise in July 2014, I would have held that on and from 16 November 2020 any and all assets of the Brandi Family Trust, including the 60 units in the PDJ Crew Unit Trust, immediately vested in Mr Landlord as trustee.
(g) The question of who is now properly entitled to 50% of the PDJ Crew units held by MPG in its capacity as trustee of the Brandi Family Trust in 2008 is a matter that may need to be determined in the future by the trustee of the PDJ Crew Unit Trust.
(h) I am satisfied that David owed fiduciary duties to Jason, BigJ and to PDJ Crew in relation to the signing of the PDJ Crew Unit Trust Deed and the Application for PDJ Crew units by Jason, but that it was not a part of David’s fiduciary duty to avoid a conflict of interest. I do not accept that David breached his duties in relation to these events.
(i) I am satisfied that David owed fiduciary duties to Jason, BigJ and to PDJ Crew which he breached in relation to the CEG and Atida transactions. The Jason Brandi parties have proved that they suffered damage as a result. I am not persuaded that the claimed legal costs of $173,403.65 claimed by the Jason Brandi parties are all referable to the CEG and Atida transactions. I will award equitable damages in the sum of $61,831.07 to compensate Jason and PDJ Crew for legal costs incurred by them. In addition, I will order that David pay penalty interest on that amount pursuant to the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’).
(j) I am satisfied that David breached his fiduciary duties to PDJ Crew in relation to the Leaning Back loan. I am satisfied that the appropriate order is for the taking of an account.
(k) I am not satisfied on the balance of probabilities that the Jason Brandi parties have established that David is personally indebted to PDJ Crew in the sum of $593,532. That claim is dismissed.
(l) I find that Mr Landlord has no standing to seek relief in relation to the PDJ Crew Unit Trust and the accessorial liability claims against Jason. I am separately not persuaded that there is any basis to make an order for Jason to provide an account of profits. The accessorial liability claim against Jason is dismissed.
(m) I am not persuaded that it is more likely than not that the transactions between ITM, PDJ Crew, David, Jason or Tania involved loans to ITM as alleged by each of PDJ Crew, Jason and Tania.
(n) I am not persuaded on the balance of probabilities that David personally guaranteed loans from ITM to PDJ Crew, to Jason or to Tania. Each of the guarantee claims against David in the counterclaim in the Timeless Sunrise proceeding and by Tania in Tania’s proceeding is dismissed.
(o) Because I am not satisfied there were the personal guarantees alleged by PDJ Crew, Jason or Tania, it follows that the caveats lodged by PDJ Crew, Jason and Tania over Wellington Parade are not sustainable and must be removed. Orders will be made accordingly.
(p) I am satisfied that Zigaroo entered into the Secure Funding transaction which, as to the transfer of $255,000 to Fernanda’s personal account, was not for the benefit of the MK No 13 Trust and constituted a breach of trust on the part of Zigaroo. I am satisfied that Jason is liable for his knowing involvement in Zigaroo’s breach of fiduciary duty as to the amount of $255,000. The remaining claims by the David Brandi parties alleging Zigaroo’s breach of duty and Jason’s involvement in the breach are not made out.
(q) The claim brought by the David Brandi parties against Jason relying on the alleged Zigaroo/Jason loan agreement is not proved. That claim is dismissed.
(r) The David Brandi parties’ claim that Mr Landlord holds 25 of the units in the JAG Group Unit Trust fails.
(s) I will order that upon payment by Jason of $315,661.69 to David, David transfers his interest in Cooper Street to Jason.
(t) The amount payable to David in respect of his contributions to Holmes Road is $558,706.70. The amount payable to Jason in respect of his contributions to Holmes Road is $202,097.35.
(u) I am satisfied that David and Tina have established that ‘at some point’ Ascot Vale Road would be theirs. They have established that they, and Tina’s parents, acted to their detriment in reliance on that representation. I accept that David and Tina have made out their proprietary estoppel claim. I will order that the sum of $615,231.43, less any land tax referable to the property in the hands of MK No 13 Trust from 30 June 1998, be paid to David and Tina.
(v) Subject to them consenting to such appointments, I appoint Messrs Carrafa and Micheletto as trustees of:
i. The PDJ Crew Unit Trust;
ii. The MK No 13 Trust;
iii. The JAG Group Unit Trust;
iv. The Tarwin Group Unit Trust;
v. The Tarwin River Holdings Unit Trust; and
vi. Lot 28, 157 Epsom Road.
(w) Subject to them consenting to such an appointment, I appoint Messrs Carrafa and Micheletto as receivers and managers of the PDJ Crew Unit Trust.
(x) Subject to them consenting to such appointments, I appoint Messrs Carrafa and Micheletto as receivers and managers of the assets and undertakings of Zigaroo and the MK No 13 Trust.
(y) I will arrange for a copy of these reasons for judgment to be provided to the ATO, to ASIC and to the State Director of Public Prosecutions.
I direct the solicitors for the David Brandi parties, in conjunction with the solicitors representing other parties in the various proceedings, to prepare draft orders consistent with these reasons and to provide them to my chambers by 9 October 2023. I will stay the operation of such orders until 9 October 2023 or until further order. I grant liberty to any of the parties and to Messrs Carrafa and Micheletto to apply on two business days’ notice.
I proceed in relation to costs from the starting point that where a party has succeeded in a proceeding or within a proceeding upon a cause of action of substance, then that party should be awarded its costs. I encourage the parties to seek to agree upon appropriate orders as to costs relating to individual causes of action, or, where applicable, of the proceeding. There will be costs orders needed and costs consequences will flow from abandoned claims such as those by Timeless Sunrise. If the parties are unable to agree upon costs orders by 2 October 2023, then, a marked up form of draft costs orders, showing the areas of difference, should be provided to my Chambers by 4:00pm on 5 October 2023. If the parties are unable to agree, I propose in the first instance to refer the costs issues to mediation before a judicial officer either of the Court or of the Costs Court.
The course of the trial
The course of the trial was unlike any trial of which I have had experience, whether as a judge or as counsel. It was extraordinary.
I will briefly outline the trial sequence. I will then refer to some of the key rulings and developments.
The trial sequence
The trial which had been fixed to commence on 18 July 2022 began on 15 August 2022 following two adjournments granted on the application of the Jason Brandi parties. When the trial proceeded, it occupied 28 sitting days. The original, but later revised Court Book comprises 16,336 pages. That Court Book was supplemented during the trial by four Supplementary Court Books, the first Supplementary Court Book, 412 pages, the second Supplementary Court Book, 1147 pages, the third Supplementary Court Book, 1703 pages, the fourth Supplementary Court Book, 2737 pages and the fifth Supplementary Court Book, 631 pages.
There was some, but not significant repetition across the various Court Books. Not all pages in all Court Books comprised the evidence. Subject to objections, the evidence comprised documents referred to by the parties in written or oral opening submissions, or in written or oral closing submissions; documents referred to by a witness in their witness statement and documents put to witnesses in cross examination. After the trial concluded, the David Brandi parties provided a list of the documents tendered during the trial.
Opening submissions were made on behalf of all parties (except Zigaroo) between 15 and 23 August 2022. During opening submissions, the Jason Brandi parties withdrew certain claims that prior to their withdrawal formed part of their pleaded case.
At the conclusion of oral openings on 22 August 2022, the David Brandi parties applied for a Protean Holdings[4] split trial order. That application was refused on 24 August 2022 (set out further below).
[4]Protean (Holdings) Ltd (Receivers and Managers Appointed) v American Home Assurance Co (1985) VR 167 (Full Court).
The first witness was Mr Skerrett. He gave evidence in person on 25 August 2022 (day seven). He was not cross‑examined.
Ms Holt, the forensic document analyst whose expert evidence concerned the alleged forgery of Jason’s signature on over 100 documents and certain alleged forgeries of Tina’s signatures, was the next witness. She gave evidence and was cross‑examined on 1 September 2022 (day nine).
On the afternoon of 2 September 2022, pursuant to Orders made by consent that day, the Jason Brandi parties filed and served their Second Further Amended Defence (2FAD) and Second Amended Counterclaim (2AC). Amongst other things, a plea contained in an earlier proposed version of the 2FAD dated 4 August 2022, that Ernie’s signature on the PDJ Crew Unit Trust Deed had been forged, was deleted.
On the evening of 2 September 2022, the David Brandi parties filed a 4FASOC in the Timeless Sunrise proceeding. That pleading deleted various substantive claims, including the alleged transfer of the units held by MPG in the PDJ Crew Unit Trust from MPG to Timeless Sunrise on 1 July 2014. On the same day, David and Tina filed a Further Amended Statement of Claim in the Zigaroo proceeding.
David commenced giving evidence on 5 September 2022 (day ten). He adopted three revised witness statements in the Timeless Sunrise proceeding and two revised witness statements in the Zigaroo proceeding. Leading counsel for the Jason Brandi parties then commenced cross-examination.
The five witness statements adopted by David had earlier been the subject of detailed objections and a ruling concerning those objections.[5] After David adopted the five revised witness statements, additional claims by the David Brandi parties were abandoned.
[5]Order of Delany J in Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (Supreme Court of Victoria, S ECI 2019 04430, 31 August 2022).
Soon after the cross-examination of David commenced, David objected to giving evidence, relying on the privilege against self-incrimination provided for in s 128 of the Evidence Act 2008 (Vic). Argument was heard on the s 128 objections on 5 and 6 September 2022. I delivered my ruling on those objections on 15 September 2022 (set out further below).
The trial resumed on 26 September 2022 (day 13). At that time, the Jason Brandi parties applied for leave to file a proposed Third Further Amended Defence, a draft of which had been circulated on 21 September 2022. That proposed pleading included new allegations not previously foreshadowed by the Jason Brandi parties. On 27 September 2022, I refused the application for leave to amend.[6] I ordered that the Jason Brandi parties file and serve a third further amended defence substantially in accordance with the 21 September 2022 draft, but excluding certain paragraphs (3FAD).
[6]Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 8) (Ex Tempore, Supreme Court of Victoria, Delany J, 27 September 2022)
The cross-examination of David re-commenced on 27 September 2022 (day 14). It continued for an additional four days (28–29 September and 3–4 October).
Tina and her parents, Teresa and Rocco Mammoliti, gave evidence on 8 November 2022 (day 19). Tina adopted two revised witness statements in the Timeless Sunrise proceeding and one in the Zigaroo proceeding. She was cross-examined. Teresa and Rocco each adopted two witness statements in the Zigaroo proceeding and were cross-examined.
Jason commenced giving evidence on 9 November 2022 (day 20). He adopted three witness statements and was cross-examined over five days (9–10 November, 14–15 November and 22 November 2022).
Tania gave evidence on 22 November 2022 (day 25). She adopted two witness statements and was cross-examined.
Fernanda gave evidence on 23 November 2022 (day 26). She adopted three witness statements and was cross-examined.
On 24 November 2022 (day 27), James Black gave evidence. Mr Black adopted his witness statement and was cross-examined.
The trial concluded with oral closing submissions on 7 December 2022. The David Brandi parties’ written submissions in the proceedings (except the Zigaroo proceeding) comprised 178 pages. David and Tina’s written submissions in the Zigaroo proceeding were 28 pages. The written submissions for the Jason Brandi parties comprised 141 pages. Additional written submissions were filed and additional documents were provided to the Court on 7 December 2022 and on 20 December 2022.
The split trial Ruling
At the conclusion of opening addresses, I heard an application by the David Brandi parties, supported by Childs Play, for a Protean Holdings split trial order.[7] The application was to permit David and Childs Play to put their case in rebuttal in respect of all of the claims and allegations where the Jason Brandi parties bore the onus of proof.
[7]Timeless Sunrise Pty Ltd v BigJ Enterprises Pty Ltd (No 3) [2022] VSC 499.
The context for the application included that David had claimed privilege against self-incrimination in response to allegations in the pleadings filed on behalf of the Jason Brandi parties which alleged forgery and dishonest behaviour by David. The application sought to split the trial so that all of the forgery allegations would be the subject of evidence by the Jason Brandi parties before David was required to elect whether or not to give evidence.
For clarity, the pleadings at the outset of the trial comprised:
(a) In the Timeless Sunrise proceeding:
(i)Third Further Amended Statement of Claim of Timeless Sunrise, David and Mr Landlord dated 18 July 2022 (‘3FASOC’);
(ii)Further Amended Defence of BigJ, PDJ Crew and Jason dated 9 February 2022;
(iii)Defence of Zigaroo dated 16 February 2021;
(iv)Reply by Timeless Sunrise, David and Mr Landlord to the Amended Defence dated 25 March 2021;
(v)Further Amended Counterclaim of BigJ, PDJ Crew and Jason dated 10 February 2022;
(vi)David’s Defence to the Further Amended Counterclaim dated 25 March 2022; and
(vii)Childs Play’s Defence to the Further Amended Counterclaim dated 10 May 2022.
(b) In Tania’s proceeding:
(i)Tania’s Writ and Statement of Claim dated 7 April 2020;
(ii)David’s Defence and Counterclaim dated 20 May 2020; and
(iii)Tania’s Defence to Counterclaim dated 30 June 2020.
(c) In proceeding S ECI 2020 04804:
(i)David’s Points of Claim dated 20 May 2019;[8] and
[8]See also David’s Statement of Contributions & Receipts dated 5 December 2019.
(ii)Jason’s Points of Defence dated 6 September 2019.
(d) In the Zigaroo proceeding:
(i)Statement of Claim of David and Tina dated 23 December 2021; and
(ii)Defence and Counterclaim of Zigaroo dated 3 May 2022. This pleading was filed at a time when Fernanda was the sole director of Zigaroo, which predates the appointment of the Administrators.
The 10 June 2022 joint statement of issues, current at the time of the split trial application, identified issues on the pleadings which directly or indirectly concerned questioned documents. That is, documents questioned because of allegedly forged signatures, questioned as to authenticity or backdating, or a combination of all of those concerns. The issues relevant to questioned documents included:
(a)whether the PDJ Crew Unit Trust was established in 1 July 2007 or March 2008, with PDJ Crew as trustee and BigJ and MPG as equal unitholders pursuant to the terms in the Trust Deed;
(b)whether the transfer of 60 units in the PDJ Crew Unit Trust from MPG to Timeless Sunrise took place in 2014;
(c)whether documents dated 2014 in relation to the transfer of units relied upon by the David Brandi parties were not created until 2019;
(d)whether the transfer of units documented as having taken place in 2014 was valid and effective, or whether the units vested in Mr Landlord upon its appointment as trustee of the (David) Brandi Family Trust; and
(e)whether Newsom Street became an asset of the PDJ Crew Unit Trust such that the property and the sale proceeds are held by PDJ Crew in its capacity as trustee of the PDJ Crew Unit Trust.
At the time, a key issue was the claim by Timeless Sunrise to an entitlement to 50% of the units in the PDJ Crew Unit Trust based on unit transfer documents dated 1 July 2014 and, on that basis, a claimed entitlement by Timeless Sunrise to 50% of the proceeds of sale of Newsom Street. The David Brandi parties also claimed that the sale of Newsom Street in June 2020 under Jason’s control was at an undervalue and constituted a breach of trust by PDJ Crew with Jason’s knowing assistance. The Jason Brandi parties denied that the David Brandi parties or any of them ever had an interest in the PDJ Crew Unit Trust or in Newsom Street. They denied breach of trust and they denied the knowing assistance allegations.
As the split trial application developed, its scope was narrowed. Certain issues initially foreshadowed were not pressed in support of the application. Issues initially relied on by David in support of the split trial application but not pressed included allegations by the Jason Brandi parties that in 2016 a loan from Leaning Back for approximately $2 million was entered into by PDJ Crew on the basis of false representations and dishonest breaches of fiduciary duty by David; an allegation that Jason’s signature on a PDJ Crew loan application to Westpac dated 21 February 2008 was forged, and implied allegations that David had forged the PDJ Crew Unit Trust financial statements dated 30 June 2015 and 30 June 2016.
The expert evidence of Ms Holt was proposed to be relied on by the Jason Brandi parties to show, amongst other things, that David forged Tina’s signature on critical documents dated 1 July 2014 in relation to the purported transfer of units in the PDJ Crew Unit Trust. In its narrowed down form, the split trial application did not include a submission that evidence in relation to those allegations should first be led by the Jason Brandi parties.
The split trial application was ultimately confined to evidence relating to the alleged forgery by David of a mortgage dated 4 October 2018 over Newsom Street, of which PDJ Crew was the registered proprietor in favour of Atida Pty Ltd (‘Atida’) and others, and associated documents (‘the Atida transaction documents’) and evidence relating to the alleged forgery of a CEG Direct Securities Pty Ltd (‘CEG’) mortgage and associated documents (‘the CEG transaction documents’). The mortgage registered in favour of CEG had been relied on to support a caveat dated 31 May 2018 (‘CEG caveat’), lodged against the titles to Newsom Street.
Rocco said he did not want to start the renovations until David and Tina got married, just in case something went wrong and the wedding did not go ahead. Once David and Tina were married, Ernie gave Rocco the key, and Rocco commenced renovating the house.
Rocco is a registered builder. In cross-examination, he accepted that, although the work cost $70,000 to $80,000, it was carried out without a permit. There was no contract.
Fernanda did not dispute that Rocco carried out some work at the house, but she disputed the extent of his work.
I accept Rocco’s evidence about the approximate cost of the building work and the circumstances in which he came to carry it out. This was renovation by a builder for his family. The fact that there was no contract and no building permit, even though required by law, is not relevant.
David and Tina allege, and the evidence establishes, that, between 1999 and 2003, they arranged and paid for the construction of a new studio and garage at the back of Ascot Vale Road. Jason project managed the building work. David paid Jason $20,000. David and Tina paid between $150,000 and $200,000 in relation to that work.
On 6 December 2001, the original certificates of title to Ascot Vale Road were cancelled and a new certificate of title issued upon registration of a plan of consolidation. David both arranged and paid for these things to happen.
David and Tina alleged that:
28.On or about 19 December 2001, Fernanda, and Erminio, on his own behalf, and on behalf of Zigaroo, represented to David and Tina that:
(1)Clovelly Avenue is held on trust for Tania, her children and descendants;
(2)Ascot Vale Road is held on trust for David, his children and descendants; and
(3)Rose Avenue is held on trust for Jason, his children and descendants.
(2001 Representations)
The 2001 Representations were based on Ernie and Fernanda’s 2001 wills. David said he was aware of the contents of the wills.
At the date of the wills, Ernie was still the registered proprietor of Ascot Vale Road.
While the particulars to their pleading alleged that Tina also was aware of the contents of Ernie and Fernanda’s 2001 wills, her evidence did not support the allegation. Apart from conversations with Ernie and Fernanda prior to her marriage to David, she did not discuss Ascot Vale Road with them. When cross-examined, Tina said that she did not discuss Ernie and Fernanda’s wills with David.
Fernanda was cross-examined about the 2001 wills and about Ernie’s 2013 will. In each of the wills, reference was made to Ascot Vale Road to go to David.
Clause 5.1(b) of Ernie’s 2001 will deals with Ascot Vale Road. The corresponding will by Fernanda also lists properties to be given to Jason and Tania. Clause 5.4 states that ‘none of the properties in the Trust may be mortgaged, pledged or otherwise encumbered’. Clause 5 indicates that, at that time, Ernie and Fernanda thought they could deal with the property of the MK No 13 Trust and dictate what would happen in relation to Ascot Vale Road.
David and Tina allege that from 2000 to 2002 Ernie, on his own behalf, and on behalf of Zigaroo (of which he was not recorded as a director after May 2001), represented that:
(a) he would transfer Ascot Vale Road to Zigaroo for asset protection;
(b) Zigaroo would transfer Ascot Vale Road to David or alternatively David and Tina at some time in the future and for no consideration;
(c) Ernie would transfer Clovelly Avenue to Zigaroo for asset protection;
(d) Zigaroo would transfer Clovelly Avenue to Tania at some time in the future and for no consideration; and
(e) Zigaroo would transfer 11-13 Rose Avenue to Jason at some time in the future and for no consideration.
In his witness statement, David said that, in about 2000, Ernie told him that he wanted Jason and David to manage the MK No 13 Trust. He said they discussed that it would be a good idea to transfer Ascot Vale Road and Clovelly Avenue to the MK No 13 Trust for asset protection. I do not accept, as is David and Tina’s pleaded case, that Ernie made any representation about the transfer of assets ‘for asset protection’. David was the accountant and financial adviser. David was the person to both propose ‘asset protection’ strategies, and that is what David did.
David’s evidence is that at a time when Ernie was a director of Zigaroo, prior to May 2001, Ernie told him that 81-83 Cuthbert Street, Broadmeadows, held by Zigaroo as trustee for the MK No 13 Trust, should be kept as a rental property and that if he, David, took over the MK No 13 Trust, he should keep Cuthbert Street as a rental property, and pay Tania and Jason an amount equal to one third each of the value of Cuthbert Street. Unit 1, 39 Clovelly Avenue, Glenroy was not transferred to Tania in 2002 or at any later time. Fourteen years later, as part of the 2016 Settlement Deed, Tania received $1,721,666 in exchange for her interest in properties held jointly with David and Jason in exchange for a release.
Zigaroo as trustee for the MK No 13 Trust owned 11-13 Rose Avenue. In about 1998, Jason had purchased 7 Rose Avenue, Niddrie through BigJ. That land adjoined 11-13 Rose Avenue. In 2002, the MK No 13 Trust transferred 11–13 Rose Avenue to BigJ. The transfer took place with David, as the director of Zigaroo, signing the transfer forms to give effect to Ernie’s wishes.
As at December 2002, the Brandi Family Trust had been in existence for approximately four years. David accepted, and I find it is the case, that if Ascot Vale Road was ‘effectively’ his in 2002, it would have been transferred to the Brandi Family Trust. Instead, it was transferred on 13 September 2002 to Zigaroo.
While David denied that Ascot Vale Road was to remain a family asset, to transfer it nearly 12 months after the consolidation of the titles to Zigaroo, of which David and Jason were the recorded directors, was consistent with it remaining a family asset to be dealt with as determined by Ernie and Fernanda. The 2002 transfer to Zigaroo, just like Ernie’s 2001 and later will, is inconsistent with the proposition that at that time Ascot Vale Road was the property of, or was held for, David and/or Tina on the basis of any present entitlement.
David and Tina lived at Ascot Vale Road until about 2002, when they purchased another home. Between 2013 and 2021, Jason lived in the studio and garage at Ascot Vale Road. David’s evidence is that he told Jason that he could live in the studio and garage and that Jason agreed to pay David market rent when he had the money. David alleges that Jason never paid him any rent. David rented out the house at Ascot Vale Road to other people and directed how the rent was applied. David and Tina paid for the costs associated with Ascot Vale Road for the period 1998 to early 2021, including council rates, insurance, utilities, upkeep, repairs, and maintenance. Fernanda paid land tax on the basis that Ascot Vale Road was an asset of the MK No 13 Trust.
Fernanda gave evidence that ‘from 2000’ she paid land tax, and she asked rhetorically why she would do that if it was David’s property’.
David and Tina submitted that the fact that Fernanda was paying the land tax does not have any impact on the remedy that should be fashioned and that, while Fernanda asserted in cross-examination that she had been paying land tax, there is no evidence of that other than her assertion. That submission ignores the fact that, as a matter of law, land tax was payable on Ascot Vale Road by the MK No 13 Trust.
David and Tina alleged that, in about 2002, David and Jason agreed that:
(a)David would cause Zigaroo to borrow monies from the NAB;
(b)David would cause Zigaroo to use Ascot Vale Road as security for the loan; and
(c)David would use the loan monies to fund his contribution to the development of the Royal Ascot apartments.
It is a fact that David, like Jason, borrowed on the security of the assets of the MK No 13 Trust. Whether or not Jason agreed to that taking place is beside the point. It was for Ernie and Fernanda to agree to any such use of the trust assets. In cross-examination, David conceded that the loans he had taken out using Ascot Vale Road as security did not comply with the wishes in clause 5.4 of Ernie’s 2001 will. Fernanda said that she knew that David borrowed money in 2002 from the NAB using Ascot Vale Road as security.
In 2003, David arranged for Zigaroo to borrow $700,000 from the NAB, using Ascot Vale Road as security. David used the loan funds to assist his financial contribution to the development of the Royal Ascot apartments. In 2006, David arranged to borrow $416,000 from the CBA, using Ascot Vale Road as security, using those loan funds for his own use and benefit. In 2008, David arranged for Zigaroo to borrow $712,000 from Westpac, using Ascot Vale Road as security, once again using the loan funds for his own use and benefit.
David and Tina claimed that Ernie, Fernanda and Jason, directors of Zigaroo over the years, were aware that David procured each of those loans using Ascot Vale Road as security. They were aware that David was receiving the rental proceeds from Ascot Vale Road. Fernanda said that she and Ernie let David keep the rent to repay loans secured on the property. David and Tina submitted that these matters caused them to continue to hold their expectation that Ascot Vale Road would be transferred to them ‘one day’.
David gave evidence that, in 2013, he arranged for Zigaroo to borrow $730,000 from the ANZ using Ascot Vale Road as security, and that he used the ANZ loan moneys to refinance the Westpac loan. David used the offset account linked to the ANZ loan for his personal use and benefit. Fernanda said her signature was forged on the ANZ mortgage. She said David told her ‘at the start’ that he would use Ascot Vale Road to procure finance but ‘he kept doing it’. She said ‘I don’t know how many loan he got on his house, how many time he got the loan on that. The last one he took, he put in my name’.
David and Tina initially alleged that Fernanda caused Zigaroo to grant the 2013 ANZ mortgage and that Fernanda and Ernie provided personal guarantees in support of the loan. That allegation was later withdrawn. The withdrawal of those allegations occurred in the context of an allegation in Zigaroo’s defence that Fernanda’s signature on various documents relating to the ANZ loan was forged.
Fernanda gave evidence that David ‘forged all my signatures’ in connection with the $730,000 ANZ loan and that he stopped paying the loan. She complained to the police and to the ANZ. The ANZ paid her $73,000 in compensation. In the s 128 Ruling, referred to earlier in these reasons, I ruled that David was not required to give evidence concerning the ANZ loan.
The Jason Brandi parties submitted that David’s forgery of Fernanda’s signature on the ANZ loan goes to an absence of acquiescence in relation to David’s use of Ascot Vale Road over a period of time. David and Tina submitted that evidence in support of the alleged forgery is lacking, that there is no allegation that the forgery was committed by a particular person, whether that be David or any other person, and that there is no expert evidence for the Court to rely on. They further submitted that, as the ANZ loan matters are no longer relied on by them, the allegation of forgery in the defence and counterclaim can only be relevant to credit.
In 2015, Ascot Vale Road featured in Tania’s Family Court proceedings. On 26 June 2015, Fernanda made an affidavit in which she said the property was owned by the MK No 13 Trust and had not been given to David. Jason gave evidence to the same effect. In his 7 July 2015 affidavit, David confirmed that Fernanda and Jason had told the truth about the property. David denied he had been gifted Ascot Vale Road. He also said, which was false, that he denied that he received any rental proceeds from the lease of the property. He said that the only properties that were discussed, and agreed that Tania, Jason and he would receive, were Cooper Street and Holmes Road ‘upon the death of our parents’.
Responding on affidavit to Tania’s husband’s contentions in the Family Court, David said the contentions which asserted that Ascot Vale Road was his property were untrue. In his witness statement in this proceeding, David tried to explain away his evidence given in the Family Court, saying ‘Ascot Vale Road had not been transferred to me, and was being held in the MK No 13 Trust for asset protection reasons’.
The evidence given by each of the family members including David in the Family Court in 2015 is inconsistent with David and Tina’s claim to be entitled to Ascot Vale Road, whether in 2015 or at some time in the future.
Notwithstanding what was said in her 2015 affidavit, Fernanda accepted in cross-examination that she and Ernie always intended that Ascot Vale Road would go to Tina and David when they died, but not before.
The 15 September 2017 statement of wishes, which was given to David, stated that David would receive Ascot Vale Road when both parents died. Questioned about the statements of wishes, which included the statement that ‘you [David] whent [sic] better with the house in Ascot Vale Rd’, Fernanda responded by saying it was she and Ernie’s property and that David and Tina would get it when they died.
Fernanda said she sold Ascot Vale Road after she found out that David had forged her signature on the ANZ mortgage. She said she had to sell Ascot Vale Road as the ‘bank were gonna sell because he [David] stopped paying the loan’.
In February 2021, Fernanda and Jason took control of Ascot Vale Road. They changed the locks, and removed David’s access to the ANZ loan account. From that time on, David did not receive the rent from Ascot Vale Road and he no longer serviced the ANZ loan.
David lodged a caveat over Ascot Vale Road on 22 October 2021.
On 25 October 2021, Fernanda and Jason caused Zigaroo to enter into a contract for the sale of Ascot Vale Road for $1.27m. Orders were made on 17 November 2021 for the net proceeds of sale to be paid into Court.
On 21 December 2021, settlement of the sale occurred. The ANZ loan was paid out and $614,851.39 was paid into Court.
Jason was questioned about David’s interest in Ascot Vale Road. He denied that Ascot Vale Road was given to David and Tina in 1998. Jason said ‘I would accept that my parents were intending when they die to – they were going to leave that in their will that they had it…I believe that was their intention to leave it to them eventually.’
Jason Brandi parties’ submissions
The Jason Brandi parties did not file written submissions in relation to this claim. In oral closing submissions, leading counsel for the Jason Brandi parties agreed that one potential finding about Ascot Vale Road is that what was agreed was that the property would go to David and Tina when the last of Ernie and Fernanda died.
David and Tina’s submissions
Responding to the proposition that there was a promise that meant that David and Tina would not be entitled to Ascot Vale Road until the death of the survivor of Ernie and Fernanda, David and Tina submitted that there is a contest as to what the representation was. They submitted that there is no evidence that the 1998 promise was limited to a transfer on death. The transfer of Ascot Vale Road from Ernie to Zigaroo in 2002 was for the purposes of asset protection, but was not to affect the nature of the promise. It was submitted that the wills signed in 2001 and 2013 did not change the promise such that it became confined or limited to a promise to transfer upon death.
David and Tina submitted that Repatriation Commission v Tsourounakis (‘Tsourounakis’)[211] is authority for the proposition that a representation that property be transferred upon death is sufficient to found a proprietary estoppel if it is acted on by the representee to his or her detriment. They submitted that the representation that Ascot Vale Road would be transferred to them ‘one day’ is sufficient to found a cause of action of proprietary estoppel.
[211][2007] FCAFC 29; (2007) 158 FCR 214.
Findings and relief
Tsourounakis concerned how a real property asset owned by parents but in which the son and his family lived should be treated when assessing the pension entitlement of the parents. As well as living in the house, the son had made substantial improvements to the property. On the facts, there were two representations: first, that the son would inherit the property upon the death of both parents and second, that in the meantime, he and his family would be allowed to live there rent-free. The Court summarised the case advanced by the parents:[212]
[212]Ibid [10].
10.The contentions of the proprietary estoppel involved in this case were set out by the Full Court (Spender, Kiefel and Emmett JJ) (the first Full Court) (Repatriation Commission v Tsourounakis [2004] FCAFC 332) in setting aside the first decision of the tribunal in this case, and remitting the matter to the tribunal (at [46]-[48):
46.In essence, Mr and Mrs Tsourounakis contend that Michael has acquired an interest in the Property by the operation of the doctrine of proprietary estoppel, which finds its origin in the 19th Century (see Dillwyn v Llewelyn (1862) 45 ER 1285 and Ramsden v Dyson (1866) LR 1 E&IA 129). The attraction of that doctrine would require the establishment of the following matters (see Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214):
(a)an expectation or belief by Michael, created and encouraged by Mr Tsourounakis, that Mr and Mrs Tsourounakis will give the Property to him on the death of the survivor of them and will, in the meantime, permit him and his family to live there free of interest on the basis that he will bear all outgoings in respect of the Property and is otherwise free to do with the Property what he likes;
(b)knowledge by Mr and Mrs Tsourounakis of Michael’s expectation or belief;
(c)expenditure of time, energy and money by Michael in reliance upon that expectation or belief;
(d)knowledge by Mr and Mrs Tsourounakis of Michael’s expenditure of time, energy and money, coupled with a failure to assert any title to the Property, such that it would be fraudulent for them to rely on their legal ownership to defeat the expectation and belief encouraged by their conduct or the lack of conduct on their part.
In the earlier decision of the Full Federal Court set out in the quote above, the Court went on to discuss the remedy that might be ordered in a case of proprietary estoppel:[213]
52The object of the remedy that might be ordered by a court of equity in a case of proprietary estoppel is not necessarilyto make good the belief and expectation encouraged by the conduct of the owner, but to recompense the claimant for the expenditure or other detriment suffered as a consequence of reliance on the belief and expectation so encouraged. In many cases where the requirements summarised above are satisfied, it will be possible for the owner of property to fulfil the equitable obligation owed only by conveyance or transfer of the interest, the expectation of which was encouraged by the owner’s conduct. However, in other cases, it will be appropriate for lesser relief to be awarded. …
53… At one end of the spectrum, a court of equity may impose a constructive trust, if that is the only way in which equity can be done as between Mr and Mrs Tsourounakis on the one hand and Michael on the other. However, a court must first decide whether there is an appropriate equitable remedy that falls short of the imposition of a trust: see Giumelli v Giumelli (1999) 196 CLR 101 at [10].
…
55.Cases of proprietary estoppel involve a situation where departure from an assumed state of affairs would be contrary to the requirements of conscience. Whether departure is to be permitted, and the extent to which it is to be permitted depends upon all of the circumstances of the case. In some cases a court may require the party estopped to make good the assumption: see Commonwealth v Verwayen (1990) 170 CLR 304. Alternatively, the court may, in an appropriate case, impose terms upon departure from the assumption, determining that some lesser relief is appropriate. The court may require that a sum of money be paid to compensate a claimant as a consequence of the departure from the assumption.
[213]Repatriation Commission v Tsourounakis [2004] FCAFC 332, [52]-[55].
The facts concerning Ascot Vale Road are very similar to those outlined by the Court in Tsourounakis. David and Tina submitted that they formed an assumption that Ascot Vale Road would be transferred to them ‘one day’ based on Ernie and Fernanda’s (and Zigaroo’s) representations and also based on the acquiescence of Ernie and Zigaroo concerning reliance and acting to their detriment.
I accept that David and Tina have established, as they have alleged, a promise by Ernie and Fernanda that ‘at some point’ Ascot Vale Road would be theirs. They have established that they and Tina’s parents acted to their detriment in reliance on that representation. David and Tina were involved in the renovations in 1998; the consolidation of the titles in 2001; the construction of the studio and garage in 2003; and the payment of the expenses associated with Ascot Vale Road from 1998 to 2021.
Fernanda did not dispute that her intention and that of Ernie, consistent with their 2001 wills, the 2017 statement of wishes and Ernie’s 2013 will, was that Ascot Vale Road was to go to David following the death of the survivor of she and Ernie.
From 2002 until 2021, David and Tina treated Ascot Vale Road as their own property. They received the rent and they paid expenses, except for the land tax. Over the years, David borrowed on the security of Ascot Vale Road. He did so with the agreement of Ernie and Fernanda, with the exception of the ANZ mortgage where Fernanda’s signature was allegedly forged.
When Zigaroo pleaded to the claims by David and Tina, the forging of Fernanda’s signature on the ANZ mortgage was pleaded. In its counterclaim, Zigaroo sought an order that the net proceeds of sale, together with interest, be paid to it. Separately, it sought an order that the sum of $712,000 or alternatively $623,334.55 be paid by David. These amounts were alleged to represent the amount of the loan secured by the ANZ mortgage.
When the property was sold, the mortgage to the ANZ was discharged. The settlement statement shows that the ANZ loan of $623,334.55 was paid out of the settlement proceeds. It also shows that land tax was at that time payable in the amount of $1,775 per annum. Land tax was one of the required adjustments at settlement.
If it had not been for the falling out between David and Jason and between David and his parents, what likely would have occurred in relation to Ascot Vale Road is that things would have continued as they had in the past. In all likelihood, David would have continued to have received the rent and paid the outgoings, and David would have met and discharged the ANZ mortgage from his own resources. That is the way that arrangements between the family members worked when trust property was mortgaged for the benefit of David or Jason. Ultimately, David would have received Ascot Vale Road in specie following Fernanda’s death. However, the falling out between the brothers and between David and his parents brought what would otherwise have occurred to a premature end. The sale of the property meant that the promise that was made and acted upon could now not be satisfied.
I accept, applying the principles discussed in Tsourounakis, that David and Tina have made out their claim based on proprietary estoppel. I proceed on the basis, which is not controversial, that the object of the remedy available in such a case is not necessarily to make good the belief and expectation encouraged by the conduct of the owner of the land, in this case, Zigaroo, but to recompense the plaintiffs for the expenditure or other detriment suffered as a consequence of the reliance on the belief and expectation encouraged by the owner.
Although David’s conduct in relation to the ANZ mortgage was referred to in the Zigaroo defence and counterclaim, there was no plea that the relief sought concerning Ascot Vale Road should be refused on the basis of a lack of ‘clean hands’. If, as he and Tina contend, and as I find is the case, the property was to be held absolutely for them, the fact that the ANZ was paid out, is irrelevant to the equitable relief that might appropriately be granted. That is because, as the property was to go to David and Tina ultimately, there was nothing inconsistent with, upon sale, an obligation of David’s secured over the property being discharged.
As discussed in the earlier decision of the Full Federal Court, Repatriation Commission vTsourounakis, cases of proprietary estoppel involve a situation where departure from the assumed state of affairs would be contrary to the requirements of conscience. Because Zigaroo sold the land, the assumed state of affairs, namely, the receipt by David and Tina of Ascot Vale Road after the death of the survivor of Ernie and Fernanda, is no longer capable of being realised. I consider that, in those circumstances, to proceed other than by making the declaration sought, namely, that Zigaroo holds its interest in the net sale proceeds from the sale of Ascot Vale Road on trust for David and Tina, would be to proceed contrary to the requirements of conscience. The declaration that is sought is required in order to ensure that Zigaroo makes good the assumption. That is subject to one adjustment.
It was never part of the assumption that David and Tina would not pay all of the expenses relating to Ascot Vale Road. The paying of expenses was both agreed and was in return for David receiving the rent. Paying tax has never been front of mind for the Brandi family, and in particular David. I gained the clear impression at the trial when Fernanda gave evidence not only that she had been paying land tax on Ascot Vale Road from the bank account of Zigaroo over the years, but that this was news to David. It seems that, in respect of this particular tax, the State Revenue Office had more success in ensuring compliance than the ATO enjoyed in relation to a number of the companies and entities associated with David referred to in elsewhere in these reasons.
Rather than order that the sum of $615,231.43, being the amount held in Funds in Court as at 30 June 2023, together with accrued interest since that time, be paid to David and Tina, as is contended for in substance in the draft order provided on their behalf, I will order that those amounts, less land tax referable to the property in the hands of the MK No 13 Trust from 30 June 1998, be paid to David and Tina. The amount referable to land tax is to be paid to Zigaroo.
To ensure the calculation of the amount referable to land tax is ascertained and the remaining money can then be released to David and Tina, I will order that within 30 days, or such later time as the Court may order, Mr Carrafa and Mr Micheletto advise the solicitors for David and Tina of the amount in question. If there is no agreement within 45 days or such further time the Court allows as to the amount referable to land tax, short submissions should be filed setting out competing views as to the proper amount to be allowed, and I will determine the matter on the papers.
Referral of proceedings
At the conclusion of the evidence, the parties were warned that I was minded to refer the papers to the ATO, ASIC and the DPP. Submissions were invited as to why I should not adopt that course. The parties considered that it was a matter for the Court to determine whether such a referral should take place. In light of the evidence of dishonest behaviour relating to corporations and their tax affairs, the evidence of apparent intention to defraud and defeat the interests of creditors of corporations, the apparent phoenixing of corporations, the evidence of forgery and backdating of documents and the destruction of evidence, I will arrange for a copy of my reasons for judgment to be provided to the ATO, to ASIC and to the DPP. It will be up to those authorities to take such action as they consider appropriate.
I will order that should any of those organisations wish to access the Court Books and/or the transcript of these proceedings that a copy is to be provided to that organisation upon request.
SCHEDULE OF PARTIES
TIMELESS SUNRISE PTY LTD (ACN 126 299 634)
as trustee for DAVINA FAMILY TRUST
First Plaintiff
DAVID BRANDI
Second Plaintiff
MR. LANDLORD PTY LTD (ACN 116 921 834)
as trustee for BRANDI FAMILY TRUST
Third Plaintiff
-and-
BIGJ ENTERPRISES PTY LTD (ACN 084 199 084)
as trustee for JASON BRANDI FAMILY TRUST
First Defendant
PDJ CREW PTY LTD (ACN 111 546 519)
as trustee for PDJ CREW UNIT TRUST
Second Defendant
JASON BRANDI
Third Defendant
ZIGAROO PTY LTD (ADMINISTRATORS APPOINTED) (ACN 006 005 401)
as trustee for MK NO. 13 TRUST
Fourth Defendant
JAG GROUP HOLDINGS PTY LTD (ACN 101 293 065)
as trustee for JAG GROUP UNIT TRUST
Fifth Defendant
TARWIN GROUP PTY LTD (ACN 107 333 817)
as trustee FOR TARWIN GROUP UNIT TRUST
Sixth Defendant
TARWIN RIVER HOLDINGS PTY LTD (ACN 107 325 762)
as trustee FOR TARWIN RIVER HOLDINGS UNIT TRUST
Seventh Defendant
THE LITTLE MAN HOLDINGS PTY LTD (ACN 114 659 639)
Eighth Defendant
REGISTRAR OF TITLES
Ninth Defendant
(by original proceeding)
JASON BRANDI
First Plaintiff by counterclaim
PDJ CREW PTY LTD (ACN 111 546 519)
AS TRUSTEE FOR PDJ CREW UNIT TRUST
Second Plaintiff by counterclaim
and
DAVID BRANDI
First Defendant by counterclaim
CHILDS PLAY INTERNATIONAL PTY LTD (ACN 140 794 547)
TRADING AS BRANDI & CO
Second Defendant by counterclaim
(by counterclaim)
3
5
38