Twigg v Pitcher Partners Holdings Pty Ltd (No 4)

[2023] NSWSC 109

Supreme Court

New South Wales

Medium Neutral Citation:

Twigg v Pitcher Partners Holdings Pty Ltd (No 4) [2023] NSWSC 109

Hearing dates:

1, 2 and 15 December 2022; further written submissions 22 December 2022

Date of orders:

20 February 2023

Decision date:

20 February 2023

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Application to dismiss proceedings as an abuse of process refused

Catchwords:

CIVIL PROCEDURE – stay of proceedings – inherent power – abuse of process – dismissal or permanent stay of proceedings – where in earlier proceedings plaintiffs were successful in establishing a breach of fiduciary duty by the fourth defendant – where plaintiffs did not make full recovery in the earlier proceedings – where plaintiffs now seek in separate proceedings to establish that the first to third defendants are accessorily liable for the conduct impugned in the earlier proceedings – where facts substantially the same – where first to third defendants will advocate for different findings in these proceedings than were made in the earlier proceedings – where first plaintiff now unable to give evidence – where fourth defendant bound by findings in earlier proceedings – whether plaintiffs made forensic decision not to join first to third defendants in earlier proceedings – whether plaintiffs should have joined first to third defendants in earlier proceedings – whether continuation of these proceedings will occasion unjustifiable oppression to the first to third defendants – whether continuation of these proceedings will bring administration of justice into disrepute

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Evidence Act 1995 (NSW)

Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW)

Oaths Act 1900 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27

British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283; [2011] HCA 2

Charisteas v Charisteas [2021] HCA 29

Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404; [1995] NSWSC 136

Hana v Shad Legal Services Pty Ltd [2021] NSWCA 258

Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20

Johnson v Gore Wood & Co [2002] 2 AC 1

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 9

Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; [2001] NSWCA 142

State Bank of New South Wales Ltd v Stenhouse Ltd & Ors (1997) Aust Torts Reports 81-423

Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28

Twigg v Pitcher Partners Holdings Pty Ltd [2022] NSWSC 1043

Twigg v Twigg [2019] NSWSC 373

Twigg v Twigg [2022] NSWCA 68

Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159

Twigg v Twigg (No 5); Lambert v Twigg Investments Pty Ltd (No 4) [2020] NSWSC 1782

UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45

Walton v Gardiner (1993) 177 CLR 378; [1993] HCA 77

Category:

Procedural rulings

Parties:

Diane Twigg (First Plaintiff)
Twigg Plant Hire Pty Ltd atf The Twigg Family Trust (Second Plaintiff)
Ipswich Landfill Pty Ltd atf the Ipswich Landfill Trust (Third Plaintiff)
Brooklyn Landfill & Waste Management Pty Ltd atf the Brooklyn Landfill Trust (Fourth Plaintiff)
Pitcher Partners Holdings Pty Ltd (First Defendant)
Pitcher Partners Investment Services Pty Ltd (Second Defendant)
Pitcher Partners Advisors Proprietary Limited (Third Defendant)
Maxwell James Twigg (Fourth Defendant)
Twigg Co Pty Ltd (Fifth Defendant)

Representation:

Counsel:
M R Elliott SC with D K Smith (Plaintiffs)
D L Williams SC with J D Jaffray (First, Second & Third Defendants)

Solicitors:
Roberts & Partners Lawyers (Plaintiffs)
Gadens Lawyers (First, Second & Third Defendants)
O’Loughlin Westhoff (Fourth & Fifth Defendants)

File Number(s):

2022/150914

JUDGMENT

1. The first to third defendants (together, “Pitcher Partners”) are members of a national association of business advisory firms.

2. Pitcher Partners seeks to have certain of the claims made by the plaintiffs against them in these proceedings permanently stayed, dismissed or struck out on the basis that they constitute an abuse of the Court’s process.

3. The conclusion to which I have come is that I should not accede to that application.

Background

4. The late Mr William Twigg founded, and, until his death in 1996, operated a large waste and landfill business. The business was operated through a structure of discretionary family trusts, the beneficiaries of which included Mr Twigg’s wife, the first plaintiff Mrs Diane Twigg, and their three children Frances, Elizabeth and the fourth defendant, Mr Max Twigg.

5. During submissions, counsel referred to members of the Twigg family by their given names. I shall do the same. I intend no disrespect.

6. After William’s death in 1996, the businesses were operated by Max, evidently successfully. In 2007, Max negotiated the sale of the businesses for over $150 million. Apart from three “gifts” of $5 million to each of Diane, Frances and Elizabeth, Max directed the net sale proceeds (“the Sale Proceeds”) to entities he controlled. He then used those proceeds for his own benefit.

7. In March 2019, ^[1] Diane and three companies of which she and her daughters are presently directors, and of which Diane is the sole shareholder, brought proceedings (“the Earlier Proceedings”) in the Commercial List against Max and companies controlled by Max, including the fifth defendant in the current proceedings, Twigg Co Pty Ltd.

   1. Diane and her daughters commenced earlier proceedings in July 2018 that were ultimately heard together with the March 2019 proceedings. Nothing turns on the distinction between the two.

8. In substance, Diane alleged that Max had breached his fiduciary duties as a director of the corporate plaintiffs by causing those companies to distribute to Max the bulk of the Sale Proceeds; some $130 million.

9. The Earlier Proceedings were complex. They were resolved by judgments given by Ball J on 31 August 2020,^[2] and on 11 December 2020. ^[3] Before Ball J, Diane and the corporate plaintiffs were, in substance, successful. They obtained orders entitling them to recoveries from Max and his associated companies in the order of $120 million.

   2. Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159.

   3. Twigg v Twigg (No 5); Lambert v Twigg Investments Pty Ltd (No 4) [2020] NSWSC 1782.

10. On 4 May 2022 the Court of Appeal dismissed Max’s appeal from Ball J’s decision. ^[4]

    4. Twigg v Twigg [2022] NSWCA 68 (Brereton JA; Bell CJ and Payne JA agreeing).

11. Diane and the corporate plaintiffs (I will simply refer to “the plaintiffs” unless the context otherwise requires) have recovered some $30 million from Max and his associated companies.

12. On 25 May 2022, three weeks after delivery by the Court of Appeal of its decision, the plaintiffs commenced these proceedings against Pitcher Partners. Pitcher Partners was engaged to provide services to the Max Twigg group at the relevant times and, it is alleged, to Diane.

13. The plaintiffs have also joined Max and Twigg Co as defendants.

14. The plaintiffs allege that Pitcher Partners breached fiduciary duties owed to them and knowingly assisted in a fraudulent design or plan undertaken by Max in respect of the misuse of the Sale Proceeds. These are, obviously, very serious allegations with grave professional implications.

15. The allegations raise issues substantially similar to those agitated in the Earlier Proceedings against Max and his companies and are based substantially on the same materials.

16. Diane and the plaintiffs make further grave allegations concerning Pitcher Partners’ role in the Earlier Proceedings, to which I will return.

17. Diane and the plaintiffs also allege that Max caused Twigg Co to transfer “certain bonds” to himself in breach of his fiduciary duty and that one of the Pitcher Partners’ corporations, the second defendant, is liable for knowingly assisting in that breach of trust.

18. Diane and the plaintiffs seek to recover from Pitcher Partners equitable compensation being the “balance of their losses”, ^[5] that is some $120 million beyond that recovered from Max and his associated companies.

    5. Amended Commercial List Statement par A6.

The application to stay, dismiss or strike out

19. By Notice of Motion filed on 15 July 2022, Pitcher Partners seeks an order that pars 12D, 16B-150 of the Amended Commercial List Statement filed on 17 June 2022 be:

1. permanently stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW), or alternatively in the Court’s inherent jurisdiction;

2. alternatively, dismissed pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 13.4, or alternatively in the Court’s inherent jurisdiction; or

3. alternatively, struck out pursuant to UCPR r 14.28, or alternatively in the Court’s inherent jurisdiction.

20. The paragraphs of the List Statement that Pitcher Partners seeks to have stayed, dismissed or struck out relate to the claims made by Diane and the plaintiffs against Pitcher Partners alone. Pitcher Partners do not seek to have stayed, dismissed or struck out the claim that Diane and the plaintiffs seek to maintain against both Pitcher Partners and Max, described at [17] above. Thus, success on the current application will not dispose of the proceedings.

21. Prior to filing the 15 July 2022 Notice of Motion, Pitcher Partners filed a Notice of Motion seeking to have these proceedings transferred to the Supreme Court of Victoria pursuant to s 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW). On 5 August 2022 I dismissed that application. ^[6]

    6. Twigg v Pitcher Partners Holdings Pty Ltd [2022] NSWSC 1043.

Abuse of process – principles

22. The relevant principles concerning abuse of process are:

1. the judication to stay proceedings permanently as an abuse of process is to be exercised with caution and only in the most exceptional or extreme cases; ^[7]

   7. Hana v Shad Legal Services Pty Ltd [2021] NSWCA 258 at [44] (Payne JA, with whom Bathurst CJ and Brereton JA agreed), citing a number of High Court authorities.

2. the circumstances in which an abuse can be found do not lend themselves to exhaustive statement,^[8] and are insusceptible of a formulation that comprises closed categories; ^[9]

   8. UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45 at [1] (Kiefel CJ, Bell and Keane JJ).

   9. Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; [2006] HCA 27 at 265 [9] (Gleeson CJ, Gummow, Hayne and Crennan JJ); Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at 518 [25] (French CJ, Bell, Gageler and Keane JJ).

3. there is no hard and fast rule to determine whether, on given facts, an abuse is to be found or not; ^[10]

   10. Johnson v Gore Wood & Co [2002] 2 AC 1 at 31 (Lord Bingham); cited with approval in UBS AG v Tyne at [7] and [67] (Kiefel CJ, Belle and Keane JJ).

4. what is called for is a broad merits-based judgment, taking account of the public and private interests involved and all of the facts of the case; ^[11]

   11. Johnson v Gore Wood (supra) at [31]; approved in terms in UBS AG v Tyne (supra) at [7] and [69]-[70].

5. ultimately a normative judgment is involved; ^[12]

   12. UBS AG v Tyne at [69] (Gageler J).

6. the decision as to whether there has been an abuse is informed by notions of finality and fairness; ^[13]

   13. Ibid at [62] (Gageler J).

7. an abuse of process arises when use of the court’s procedures either occasions unjustifiable oppression to a party, or serves to bring the administration of justice into disrepute; ^[14]

   14. Ibid at [1] (Kiefel CJ, Bell and Keane JJ).

8. the critical question is “whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it an issue which could have been raised before”; ^[15]

   15. Johnson v Gore Wood (supra) at [31].

9. the relevant public interest is a timely and efficient administration of civil justice; ^[16]

   16. UBS AG v Tyne at [72] (Gageler J).

10. the court’s power is informed by considerations arising from the familiar provisions in ss 56 to 58 of the Civil Procedure Act focusing on the need of the parties and the court to ensure that all is done to achieve the just, quick and cheap administration of justice; this representing a “culture shift” in the conduct of civil litigation over the last 20 years; ^[17]

    17. Ibid at [125] (Gordon J).

11. categories where abuse has been found include where:

1. a plaintiff seeks to make a collateral attack on an earlier judgment; ^[18]

2. the defendant in the current proceeding has been twice vexed over the same complaint; ^[19]

3. there has been great delay; ^[20] and

12. a close fact-based inquiry is involved in each case and other cases are unlikely to be informative otherwise than as to the general principles involved.

    18. Hana v Shad Legal Services (supra) at [49].

    19. As was the case in UBS AG v Tyne (supra).

    20. Walton v Gardiner (1993) 177 CLR 378; [1993] HCA 77 and Batistatos v Roads and Traffic Authority of New South Wales (supra).

23. A non-exhaustive list of considerations which may inform a finding of an abuse of process include:

“(a)    the importance of the issue in and to the earlier proceedings, including whether it is an evidentiary issue or an ultimate issue;

(b)    the opportunity available and taken to fully litigate the issue;

(c)    the terms and finality of the finding as to the issue;

(d)    the identity between the relevant issues in the two proceedings;

(e)    the extent of the oppression and unfairness to the other party if the issue is relitigated and the impact of the relitigation upon the principle of finality of judicial determination and public confidence in the administration of justice; and

(f)    an overall balancing of justice to the alleged abuser against the matters supportive of abuse of process.”^[21]

21. State Bank of New South Wales Ltd v Stenhouse Ltd & Ors (1997) Aust Torts Reports 81-423 at 64,089; cited with approval in Hana v Shad Legal Services Pty Limited (supra) at [43].

24. The circumstances in this case are different from those in which an abuse of process has been found in the past. The case does not fall within any of the categories to which I referred at [22(k)] above. The plaintiffs do not seek to make a collateral attack on the earlier judgments of Ball J and the Court of Appeal. Indeed, they seek the same finding as against Max as they established in the Earlier Proceedings and, in addition, seek to hold Pitcher Partners accessorily liable for Max’s conduct. Pitcher Partners is not being twice vexed. It was not a party to the Earlier Proceedings; although a former partner, Mr Adrian Fitzpatrick, and a current partner, Mr Adam Stanley, were called by Max as witnesses. There has been no delay.

25. This is a case where the plaintiffs, successful in the Earlier Proceedings against one set of defendants, Max and his companies, seek to sue a different set of defendants, Pitcher Partners, for a different, albeit related, cause of action arising out of the same facts and circumstances.

26. Can that be an abuse of process?

Can it be an abuse of process to commence second proceedings after success in the first?

27. My attention has not been drawn to any case where it has been found that a plaintiff, successful in earlier proceedings, has engaged in an abuse of process when later suing a different defendant arising out of the same circumstances.

28. In Haines v Australian Broadcasting Corporation, ^[22] Hunt CJ at CL held, albeit in obiter, that there can be no abuse of process in these circumstances.

    22. (1995) 43 NSWLR 404; [1995] NSWSC 136.

29. Thus, his Honour said:

“[In order to be an abuse of process], the issue determined in the earlier case which is sought to be litigated in the latter case must be one which the party propounding it in the latter case lost in the former. The principle does not work in reverse to enable the party who won the issue in the earlier case to prevent it being litigated in the latter proceedings by someone who was not a party in the former.”^[23] (Emphasis added.)

23. At [414].

30. His Honour did not cite authority for that proposition.

31. The decision in Haines v Australian Broadcasting Corporation has been cited with evident approval in Rippon v Chilcotin Pty Ltd, ^[24] albeit without reference to nor specific endorsement of Hunt CJ at CL’s statement that the “principle does not work in reverse”. The correctness of his Honour’s conclusions that an abuse of process cannot be found in the case of a party who won the earlier case was doubted by Giles CJ in Comm Div in State Bank of New South Wales Limited v Stenhouse. ^[25]

    24. (2001) 53 NSWLR 198; [2001] NSWCA 142 at [31] (Handley JA, Mason P and Heydon JA agreeing).

    25. (Supra) at 64,088.

32. A quarter of a century has passed since Hunt CJ at CL made the remarks in Haines v Australian Broadcasting Corporation to which I have referred. I do not think that they can be reconciled with the broader and more flexible approach now mandated by the observations of the High Court in UBS AG v Tyne to which I have referred, nor with the “culture shift” that has occurred in relation to civil litigation since 1995.

33. It may be a rare case that an abuse of process will be found where there was success in the earlier proceedings. But, in my opinion, it can no longer be said that there can never be an abuse of process where, as here, the plaintiffs were successful in the Earlier Proceedings and now seek to run a different case against a different defendant arising out of the same circumstances as arose in the Earlier Proceedings.

34. Whether there has in fact been an abuse of process in this case is a question to which I will now turn.

The “Stenhouse” factors

35. In relation to the considerations set out at [23] above, the issue in question, Pitcher Partners’ involvement in Max’s alleged conduct, is undoubtedly an important and ultimate issue. The plaintiff could have joined Pitcher Partners as defendants in the Earlier Proceedings. The findings made in the Earlier Proceedings about Max, and to some extent about Pitcher Partners, particularly the evidence of Mr Fitzpatrick to which I will return, were made on a final basis.

Similar or identical facts and issues

36. As to the other considerations at [23], there is no dispute that there is a “considerable overlap in the factual substratum” between these proceedings and the Earlier Proceedings. ^[26]

    26. Plaintiff’s submissions at par 29.

37. Indeed, the “commonality of issues” was a matter emphasised by the plaintiffs in their opposition to Pitcher Partners’ application to transfer these proceedings to the Supreme Court of Victoria.

38. The allegations made by the parties against Max in these proceedings are the same as those made in the Earlier Proceedings.

39. As Pitcher Partners pointed out, and this was not disputed by the plaintiffs, there are 53 paragraphs in the plaintiffs’ Commercial List Statement in the Earlier Proceedings that are identical or substantively identical to those in the List Statement in these proceedings, and a further 75 paragraphs that are relevantly similar.

Prospect of inconsistent findings

40. There is a prospect that the trial judge hearing these proceedings will make findings inconsistent with those made by Ball J in the Earlier Proceedings.

41. That is because Pitcher Partners will advocate for such an inconsistent result.

42. Pitcher Partners will seek to establish that:

1. Max did not engage in the conduct which was the subject of Ball J’s findings; and

2. in any event, Diane,

1. authorised, acquiesced or provided informed consent to Max’s actions;

2. agreed to give control of the Twigg group to Max;

3. authorised the resolutions leading to the distribution of the Sale Proceeds to Max;

4. had knowledge of the Sale Proceeds;

5. agreed that Max could distribute the Sale Proceeds to himself;

6. gave fully informed consent to Max’s use of the Sale Proceeds; and

1. engaged in conduct amounting to laches.

43. In that regard, Pitcher Partners will advocate for findings, inconsistent with those made by Ball J, concerning:

1. the significance of conversations between Diane and the solicitor who prepared her 2001 will;

2. a letter prepared by Mr Fitzpatrick that the parties referred to as the “2004 Letter of Wishes”;

3. the significance of Max’s management and expansion of the business between 2004 and 2007;

4. whether there were discussions between Max and Diane about the use Max could make of the Sale Proceeds;

5. the weight to be given to a questionnaire prepared by Mr Fitzpatrick in 2008;

6. whether Diane said at a meeting in May 2009 that “Max is able to do what he likes with the Sale Proceeds” in circumstances where in cross-examination, Diane said “I do remember saying that”; ^[27]

7. the significance of Max’s evident wealth following the 2007 sale; and

8. whether the plaintiff’s claim should be defeated on the basis of laches.

   27. I referred to this conversation in a judgment refusing to make a Freezing Order in the Earlier Proceedings: Twigg v Twigg [2019] NSWSC 373 at [32]. I return to this below at [79].

44. Obviously, I can make no prediction or assessment as to the likelihood of Pitcher Partners persuading the trial judge in these proceedings that such inconsistent findings should be made. But there is a possibility that this will be the result, should these proceedings continue.

45. Pitcher Partners made two submissions related to this.

46. The first was that the making of findings in these proceedings arising out of the same facts and circumstances as were before Ball J in the Earlier Proceedings, but inconsistent with those made by Ball J, might bring the administration of justice into disrepute.

47. The second, and allied submission, was that an apprehension of bias might arise in the mind of a fair-minded lay observer concerning a judge called on to make such inconsistent findings.

48. As to the first point, Pitcher Partners submitted that the fact that Pitcher Partners will invite the court to make findings directly contrary to those by Ball J in the Earlier Proceedings will “create insuperable practical difficulties for the court in performing its judicial function”. ^[28]

    28. First to Third Defendants’ submissions at par 60.

49. The suggestion appeared to be that a trial judge in these proceedings would have difficulty making findings inconsistent with those made by Ball J.

50. The trial judge of these proceedings will become aware of the findings in the Earlier Proceedings and would have to be prepared to make inconsistent findings if they are justified on the evidence.

51. It is clear enough that Ball J cannot be the trial judge in these proceedings and it may be that, having determined this application, I should not be the trial judge either. But whoever is the trial judge, that person will doubtless conform to his or her oath or affirmation to try the case without fear or favour, affection or ill-will,^[29] and on the basis of the evidence and submissions to hand.

    29. Oaths Act 1900 (NSW), Sch 4.

52. As to the second point, Pitcher Partners drew attention to the familiar principles in relation to apprehended bias. ^[30]

    30. As explained in British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283; [2011] HCA 2.

53. Pitcher Partners submitted:

“Here, a fair-minded lay observer might reasonably apprehend that a judge may not be able to bring an impartial and unprejudiced mind to the resolution of the issues raised in [these proceedings] in circumstances where:

(a)   issues of res judicata or issue estoppel will mean that the Court in [these proceedings] will be required to be familiar with the judgments (including in the Court of Appeal) in the [Earlier Proceedings]; and

(b)   for the Court to make substantive findings in favour of Pitcher Partners concerning allegations relating to the sale of the Twigg Group in 2007, the Court would need to be prepared to make findings inconsistent with previous decisions of the Court (including in the Court of Appeal), and inconsistent with findings against the Twigg defendants in the same proceedings who are bound by principles of res judicata or issue estoppel.”

54. I do not agree.

55. It is true that, as French CJ said in British American Tobacco Australia Services Ltd v Laurie, the Court is concerned with the confidence of the public who will not have access to details of the substantive law and all relevant aspects of practice and procedure, and that in considering whether an apprehension of bias has a reasonable basis, the courts must see themselves as others, and not judges or lawyers, would see them. ^[31] The hypothetical observer is not to be taken as a lawyer, but a member of the public served by the courts. ^[32]

    31. At [33] (French CJ).

    32. Charisteas v Charisteas [2021] HCA 29 at [21] (Kiefel CJ, Gageler, Keane, Gordon and Gleeson JJ).

56. It may well appear to a fair-minded lay observer, at first blush, curious that different trial judges could make different findings about the same factual circumstances.

57. But the hypothetical fair-minded lay observer is to be “attributed with the nature of the decision, the context in which it is made and the circumstances leading to it”. ^[33] This must include the reasons given for the decision. Just as appellate courts explain why they disagree with the reasons of a trial judge whose decision is to be overturned, if the trial judge in this case made findings inconsistent with those made in the Earlier Proceedings he or she would doubtless explain why that is so. The fair-minded lay observer would take these reasons into account.

    33. Isbester v Knox City Council (2015) 255 CLR 135; [2015] HCA 20 at [23] (Kiefel J (as the Chief Justice then was), Bell, Keane and Nettle JJ).

58. I do not see how, in these circumstances, the administration of justice could be brought into disrepute by the continuation of these proceedings.

Diane’s incapacity

59. On the other hand, there are respects in which Pitcher Partners is in a disadvantageous position as a result of not being joined in the Earlier Proceedings.

60. The first relates to Diane’s capacity to give evidence.

61. On 11 October 2022, Diane’s daughter, Elizabeth, was appointed as her tutor on the basis of Diane’s cognitive impairment. Diane will therefore not be available to give evidence in these proceedings. Pitcher Partners will not be able to cross-examine her. No Jones v Dunkel ^[34] inference can arise.

    34. (1959) 101 CLR 298; [1959] HCA 9.

62. It is common ground that, in those circumstances, I should decide this application on the assumption that the plaintiffs will succeed in having Diane’s affidavit and transcript evidence heard before Ball J admitted in these proceedings on the basis that Diane is “not available” for the purposes of s 63 of the Evidence Act 1995 (NSW) and that, accordingly, the hearsay rule is not applicable. This is the assumption least favourable to Pitcher Partners as defendants in these proceedings.

63. This means, as Pitcher Partners submitted, that although Diane’s evidence in the Earlier Proceedings will be before the court, Pitcher Partners has lost the ability, that would have been open had they been joined as defendants in the Earlier Proceedings, to test Diane’s evidence and obtain concessions from her, especially on the questions of informed consent laches and limitation.

64. Mr Williams SC, who appeared with Ms Jaffray for Pitcher Partners, informed me that had Pitcher Partners been defendants in the Earlier Proceedings, Pitcher Partners would have “taken a different approach” to Diane’s cross-examination than was taken by counsel appearing for Max.

65. It is difficult to assess to what extent Pitcher Partners is thereby prejudiced, especially in circumstances where Ball J found that the evidence Diane gave before him was unreliable.

66. As Ball J said in the primary judgment:

“She appeared to have a poor grasp of what was contained in her affidavit evidence, which was plainly drafted by lawyers; and it was evident that her affidavit evidence went beyond what she could really remember or what she really understood. Her oral evidence was no better. I accept that she was doing the best she could to give honest answers to the questions that she was asked. But she was quite often emotional when giving evidence and was no doubt upset by what has happened to her family and her role in the events giving rise to this litigation, which, as might be expected, has affected her memory of those events. Her recollection of many of the events was poor, which is hardly surprising given how long ago they occurred. On occasions she denied things that were obviously true or gave evidence which she accepted was inconsistent with her affidavit evidence. So, for example, she initially denied that she had read Max’s affidavits when she obviously had. A substantial number of the answers she gave to simple questions were rambling and difficult to follow. The result is that her evidence must be treated with a great deal of caution.”^[35]

35. Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) (supra) at [26].

67. A fair reading of Ball J’s judgment shows that his Honour placed little, if any, weight on Diane’s evidence in reaching his conclusions favourable to the plaintiff.

68. In those circumstances, it is hard to say, at this remove, whether it will be the plaintiffs or Pitcher Partners who will be most disadvantaged by Diane’s incapacity. But I accept that such problem as does now arise for Pitcher Partners would not have arisen had it been joined as a defendant in the Earlier Proceedings. Of course, Pitcher Partners will not be bound by the findings that Ball J made about Diane’s knowledge of Max’s conduct.

Max – res judicata and issue estoppel

69. The second respect in which Pitcher Partners is in a position of disadvantage relates to Max’s position.

70. From Pitcher Partners’ point of view, the evidence that Max may be able to give about Diane’s conduct and communications with him, and on the question of whether she agreed to or acquiesced in his conduct relating to the Sale Proceeds, will be of vital importance.

71. Had Pitcher Partners been joined as defendants in the Earlier Proceedings, its counsel would have been able to cross-examine Max. That may not be the position in these proceedings.

72. There is no dispute that Max will be estopped from raising and relying upon any allegations, non-admissions and denials, in defence of the plaintiffs’ claim in this case that are inconsistent with issues that he raised, or could reasonably have raised, and findings made, in the Earlier Proceedings.

73. Pitcher Partners submitted:

“This will mean that Max will be constrained from pleading that he was authorised by any of the plaintiffs to distribute the net sale proceeds to himself in the manner that he did. The Twigg defendants will not be able to deny that Max caused the distribution of income in 2007, 2008, 2009 and 2010 for which there had been no decision or resolution by the directors of the corporate plaintiffs to distribute the income in that manner; that certain of that income ought to have been held on trust for Diane; and that Max took and appropriated the income to himself in breach of trust.” (Footnotes omitted.)

74. But Pitcher Partners is not so constrained.

75. If Max is called to give evidence, Pitcher Partners can cross-examine him. Max will, presumably, give evidence of his dealings with Diane to the same effect as he gave before Ball J. Although Max will not be able to contend for different findings about those matters than was made by Ball J, Pitcher Partners would not be constrained from doing so. There is no dispute about that.

76. If Max is not called as a witness, Pitcher Partners could call him and lead his evidence-in-chief. Whether Pitcher Partners would take that course would, presumably, depend on the degree of cooperation Max was prepared to afford Pitcher Partners, although Pitcher Partners would have available the evidence Max gave in the Earlier Proceedings.

77. Pitcher Partners could cross-examine Max if able to satisfy the requirements of s 38 of the Evidence Act, namely that Max’s evidence was “unfavourable” to Pitcher Partners, that Max was not making a genuine attempt to give evidence, or that Max had made a prior inconsistent statement. As Pitcher Partners has pointed out, it is not readily apparent that Pitcher Partners could persuade the trial judge that any one of those requirements was satisfied.

78. In these circumstances there is a real possibility that Pitcher Partners will be disadvantaged concerning the evidence Max might give by reason of being sued by the plaintiffs separately and following the conclusion of the Earlier Proceedings. The extent of such disadvantage or prejudice is hard to assess, but may be significant.

Mr Fitzpatrick

79. I have mentioned that, in these proceedings, Pitcher Partners will seek to establish that at a meeting on 26 May 2009, Diane said “Max is able to do what he likes with the Sale Proceeds”. ^[36]

    36. See [43] above.

80. In the Earlier Proceedings, Mr Fitzpatrick gave evidence that Diane had said this when he, Diane and Max were present.

81. As I discuss below, my refusal on 5 April 2019 to grant the plaintiffs a Freezing Order in the Earlier Proceedings was partly based on evidence Mr Fitzpatrick gave about that meeting in an affidavit sworn in support of Max’s position resisting the Freezing Order. ^[37]

    37. Twigg v Twigg [2019] NSWSC 373 at [104].

82. However, before Ball J, Mr Fitzpatrick accepted that his affidavit had been prepared by Max’s solicitors and that he did not in fact have the recollection attributed to him. Accordingly, Ball J concluded that no weight could be placed on Mr Fitzpatrick’s evidence unless corroborated or inherently probable. ^[38]

    38. Twigg v Twigg (No 4) (supra) at [28].

83. In those circumstances, Pitcher Partners submitted before me:

“Given the cross-examination which previously occurred in relation to [Mr Fitzpatrick’s] affidavit, the ability to rehabilitate Mr Fitzpatrick as a witness with credit is significantly compromised.”

84. That may be so, but it is hard to see why the position would have been any different had Pitcher Partners been a party to the Earlier Proceedings.

Did the plaintiffs make a “forensic decision” not to join Pitcher Partners to the Earlier Proceedings?

85. At the heart of Pitcher Partners’ submissions before me was the proposition that in the Earlier Proceedings, the plaintiffs had made a “forensic decision” not to join Pitcher Partners as a defendant and had “elected” not to do so.

86. In this regard, the submissions of both the plaintiffs and Pitcher Partners proceeded upon the basis that the relevant knowledge and belief was that of the plaintiffs’ solicitor, Mr Christiaan Roberts, rather than Diane.

87. On behalf of Pitcher Partners, Mr Williams and Ms Jaffray submitted:

“… it is clear that [Mr] Roberts knew or believed in or about March 2019 that Pitcher Partners had been relevantly involved in the alleged misappropriation by Max of the Net Sale Proceeds to himself and associated companies.” ^[39]

39. Defendants’ submissions at par 106.

88. That submission was, presumably, made without admission that Pitcher Partners was, in fact, “relevantly involved” in Max’s conduct.

89. The submission then listed some 40 matters that it is said Mr Roberts allegedly “knew or believed”, being objective facts, matters in respect of which Pitcher Partners had been involved, documents that Pitcher Partners had prepared and other matters that Mr Roberts allegedly knew, as at March 2019.

90. Included in the matters that Mr Roberts “knew or believed” was that the relevant declarations resolving to distribute the Proceeds of Sale in favour of Max were “without valid resolutions and in breach of trust”, these being the allegations made in the Commercial List Summons filed in the Earlier Proceedings on 5 March 2019.

91. On 22 March 2019 Mr Fitzpatrick swore the affidavit, to which I have referred, in support of Max’s position in relation to the plaintiffs’ application, made immediately after the commencement of the Earlier Proceedings, for a Freezing Order.

92. It was in that affidavit that Mr Fitzpatrick deposed to a conversation with Max and Diane as follows:

“[Mr Fitzpatrick]:   The financial reports and tax returns show the distribution of funds from the sale proceeds in 2008 to the various group entities. It is important that you understand this information to sign all the necessary tax returns.

[Max]:   Mum do you understand everything and do you have any questions for [Mr Fitzpatrick].

[Diane]:   Yes I understand and Max is able to do what he likes with the sale proceeds as it was his business and we received $5,000,000 which was very generous.”

93. It was that affidavit that led me to say, in my judgment refusing to make a Freezing Order:

“The fourth is the nature of the forensic task Diane faces in making out her case on liability. I accept that there is a serious question to be tried that Max acted without authority when purportedly passing the directors’ resolutions leading the making of the Impugned Sum. But Diane’s success in that regard seems likely to depend on establishing, amongst other things, that Mr Fitzpatrick’s recollection of the conversations to which I have referred, and to which he has put his oath, should not be accepted. Although I cannot predict, and express no view about, Diane’s prospects in that regard, it represents a stark potential barrier to her success in the proceedings.”^[40]

40. At [104].

94. As I have said, it turns out that Mr Fitzpatrick did not in fact have the recollection to which he deposed in that affidavit.

95. However, as at April 2019, that was the evidence with which the plaintiffs were confronted.

96. In the same judgment I also said:

“It is by no means clear to me that Diane will be able to establish that all or any of the assets now owned by Max and his related entities were acquired with the Impugned Sum.”^[41]

41. At [54].

97. Before me, Mr Elliott SC, who appeared with Mr Smith for the plaintiffs, described my findings as a “stark potential barrier to success” and submitted that “with the Court indicating that the claim even against Max appeared to have significant problems, it is inherently improbable that the plaintiffs would have been considering suing Pitcher Partners at this time”.

98. I see force in that submission.

99. During the course of 2019, the plaintiffs gained access to further documentation, principally from subpoenas addressed to Pitcher Partners.

100. Before me, Mr Roberts was cross-examined about the evidence that he gave that he had not formed any view about Pitcher Partners’ liability to the plaintiffs and had not given consideration to whether Pitcher Partners should be joined as a party to the proceedings.

101. It appears to me that the best evidence concerning Mr Roberts’ state of mind is contained in a letter that he wrote to the solicitors acting for Pitcher Partners on 19 November 2019.

102. The month before, on 11 October 2019, the Earlier Proceedings were listed for a three week hearing to commence on 1 June 2020. At that time, evidence had not been served and there had been no discovery. The Court was evidently persuaded that, nonetheless, a hearing date should be set.

103. The plaintiffs served a subpoena on Pitcher Partners which was returnable on 22 November 2019.

104. On 18 November 2019, the solicitors for Pitcher Partners requested that the date for compliance with the subpoena be extended to 28 February 2020.

105. It was in that context that, on 19 November 2019, Mr Roberts wrote to the solicitors for Pitcher Partners:

“Our client has a number of concerns regarding your client, in that, your client has been an active participant and advisor to [Max’s] purported distributions (which exceed $150 million) in breach of the plaintiffs’ trust deeds to [Max] and companies associated with him.

Historically, your client has been loath to produce documents to our clients as it knows such documents are going to be used against [Max] and his companies in the litigation, who are still clients of Pitcher Partners.

Our clients view your client’s request for a three month period in which to produce documents as a de facto attempt on behalf of [Max] to vacate the hearing set down on 1 June 2020.”

106. That letter should be read in the context of the letter that Mr Roberts sent the solicitor to Pitcher Partners a week or so earlier, on 10 November 2019. That letter stated:

“Until around September 2018, Pitcher Partners was the accountant and financial adviser to the Corporate Plaintiffs. We understand that Pitcher Partners has been the accountant and financial adviser to the defendants at all material times. Pitcher Partners may also have acted for Diane and the Twigg Family generally in the relevant period.”

107. In that context, Mr Roberts’ statement in his 19 November 2019 email of having “concerns” regarding Pitcher Partners as having been “an active participant and adviser” of Max’s “purported distributions”, appears to me to fall far short of bespeaking an understanding or belief that Pitcher Partners was knowingly involved in any dishonest design on Max’s part.

108. Mr Roberts’ language was inappropriately intemperate, especially his assertion that Pitcher Partners’ request for a three month extension within which to produce documents under subpoena was a “de facto attempt on behalf of” Max to vacate the hearing date. However, the letter was clearly enough directed to Mr Roberts’ frustration with Pitcher Partners’ response to the subpoena. The email does not appear to me to bespeak Mr Roberts’ belief that Pitcher Partners might be accessorily liable for Max’s alleged breaches of duty.

109. In any event, I see substance in Mr Elliott’s and Mr Smith’s submission that by November 2019 it was vital for the plaintiffs to maintain the June 2020 hearing date, particularly as they had failed to obtain the Freezing Order sought before me in March 2019.

110. Had the plaintiffs at that time sought to join Pitcher Partners to the proceedings, it appears very likely that the hearing date could not have been maintained.

111. There is no dispute that Mr Roberts did not raise with Mr Elliott or Mr Smith the possibility of joining Pitcher Partners as a defendant to the Earlier Proceedings. Surely, if this thought had crossed his mind, he would have shared it with his counsel.

112. I am not in these circumstances persuaded that Mr Roberts made a forensic decision to not join Pitcher Partners as a defendant to the Earlier Proceedings.

113. I also am unable to conclude that the plaintiffs “should have” taken what could have been the very risky decision of joining Pitcher Partners in the Earlier Proceedings.

114. I should add that, in argument, much attention was directed to an SMS that Diane sent Max on 11 September 2018, six days after passing resolutions removing Max as director of the corporate plaintiffs, stating “It’s Pitchers I am after”, as well as the affidavit sworn by Diane in the Earlier Proceedings on 31 January 2020 in which she described the circumstances leading to the 5 September 2018 resolutions. I am not in the position, in this application, to conduct a detailed examination of the circumstances that led to those documents or to draw any conclusions as to how they might be relevant to the question of whether the maintaining of these proceedings is an abuse of process.

Forensic prejudice

115. Mr Williams and Ms Jaffray pointed to other matters which they submitted showed that Pitcher Partners were prejudiced by not having been involved in the Earlier Proceedings.

116. Pitcher Partners responded to some nine subpoenas in the course of the Earlier Proceedings and produced 20 packets containing thousands of documents. If these proceedings are to continue, Pitcher Partners will doubtless have to give discovery which may well involve what Mr Williams and Ms Jaffray described as “duplicative document review and categorisation of documents held by Pitcher Partners to ensure compliance with such discovery categories” as are agreed or ordered.

117. Further, the proceedings in the Earlier Proceedings are concerned with events which occurred many years ago, and further time has passed since the time of the trial of the Earlier Proceedings in June 2020. However, Pitcher Partners accepted that this factor was not itself decisive and that “oppression caused to parties due to the effluxion of time can arise to be dealt with by parties in the Courts”. ^[42]

     42. Plaintiffs’ submissions at par 139.

118. Mr Williams and Ms Jaffray submitted that it was not possible to delineate fully the nature of Pitcher Partners’ prejudice but that it included losing the benefit of being aligned with Max as it is no longer in Max’s interests, it was submitted, to defend the proceedings. It was also said that Pitcher Partners had lost the opportunity to be involved in attempts to settle the Earlier Proceedings.

119. It was also submitted that “given the cross-examination which previously occurred in relation to [Mr Fitzpatrick] the ability to rehabilitate Mr Fitzpatrick as a witness of credit is significantly compromised”. ^[43] That may be so, but it is hard to see how Pitcher Partners’ involvement in the Earlier Proceedings would have avoided that result.

     43. Plaintiffs’ submissions at par 166.

Unjustifiable oppression?

120. I have given careful consideration to all of the factors that I set out above. Overall, I accept that Pitcher Partners is disadvantaged by reason of not being joined as a defendant in the Earlier Proceedings and now, being sued separately in these proceedings. However, for the reasons I have set out, I am unable to conclude that the plaintiffs’ use of the court’s procedures to bring these proceedings against Pitcher Partners will occasion “unjustifiable oppression” on Pitcher Partners.

121. I am not persuaded that the plaintiffs gave active, or indeed any, consideration to joining Pitcher Partners to the Earlier Proceedings and I can see why, as the Earlier Proceedings developed, they did not do so.

122. I am not persuaded that, as was put on behalf of Pitcher Partners, it is now impossible for there to be a fair trial of the issues the plaintiffs seek to raise in these proceedings.

123. I am confident that the trial judge, whoever he or she might be, will be acutely conscious of the various factors to which I have referred and will ensure that no injustice is occasioned to Pitcher Partners by reason of their joinder in these proceedings.

124. Overall, making the broad merits-based normative judgment called for in this application, I am not persuaded that the plaintiffs are abusing the court’s process by bringing these proceedings against Pitcher Partners.

The claims made about Pitcher Partners’ conduct in connection with the Earlier Proceedings

125. As I have mentioned, ^[44] in addition to alleging that Pitcher Partners are accessorily liable for Max’s breach of fiduciary duty, the plaintiffs also allege that Pitcher Partners has acted in breach of its fiduciary duty to the plaintiffs by the manner in which it was involved in the Earlier Proceedings.

     44. At [16] above.

126. The conduct of Pitcher Partners in relation to the Earlier Proceedings is alleged to be that:

1. Pitcher Partners delayed production of documents in response to subpoenas served by the plaintiffs, sought guidance from Max about when and how the documents should be produced, produced documents with a false annotation that a relevant resolution had been “incorrectly prepared” and engaged in such conduct for the purposes of protecting Max from a contention that the resolutions were invalid; and

2. Pitcher Partners arranged for Mr Fitzpatrick and Mr Stanley to give evidence voluntarily for Max in circumstances where, to Pitcher Partners’ knowledge, Mr Fitzpatrick’s evidence was false and contained confidential matters.

127. The plaintiffs allege that Pitcher Partners worked closely with Max to assist him resist the plaintiffs’ claims in the Earlier Proceedings, and acted contrary to and in breach of their fiduciary duties to the plaintiffs.

128. The plaintiffs assert that they have suffered loss as a result of these alleged breaches of fiduciary duty, being the cost of the Earlier Proceedings that they have been unable to recover from Max.

129. Pitcher Partners seeks to have the paragraphs of the List Statement in which these allegations are made struck out on the separate ground that they are vexatious and oppressive, as the fiduciary duty contended for is said to be incapable of being established, and that any application that Pitcher Partners pay the costs of the Earlier Proceedings should have been made in those proceedings by application for a third party costs order.

130. In my opinion, the plaintiffs’ contentions are not such that they are amenable to summary disposition. I think that the plaintiffs were correct to submit that there is a triable issue as to whether there is a fiduciary duty of the kind contended for and as to whether the plaintiffs have the entitlement to seek damages, in respect of their unrecovered costs of the Earlier Proceedings, as sought.

Conclusion

131. Pitcher Partners’ Notice of Motion of 15 July 2022 is dismissed with costs.

132. I will stand the proceedings over for directions on 24 February 2023, or such other date as is convenient to the parties.

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Endnotes

Decision last updated: 20 February 2023