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

Supreme Court

New South Wales

Medium Neutral Citation: Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159
Hearing dates: 1 to 5; 9 to 12; 17 and 18 June 2020
Decision date: 31 August 2020
Jurisdiction: Equity - Commercial List
Before: Ball J
Decision:
See paragraphs [272] to [274]

Catchwords:
EQUITY – Breach of fiduciary duties – Where director of corporate trustee used money borrowed on security over the corporate trustee’s assets to acquire properties – Where director of corporate trustee caused trust funds to be distributed to himself
EQUITY – Trustee de son tort – Whether doctrine applies – Where trustee a director of the corporate trustee – Where trust funds paid to entities controlled by trustee de son tort – Held doctrine applies where a person deals with trust assets without power to do so – Held whether trust funds paid to trustee de son tort’s alter ego is immaterial
EQUITY – Alternative claim – Claim that director was knowing recipient of trust property – Claim that director induced or procured breach of trust by corporate trustee – Claim that director knowingly participated in a fraudulent design by corporate trustee – Corporate trustees only capable of acting through individuals – Held attributing primary liability to corporate entity is mischaracterisation of facts where only conduct giving rise to breach of trust is that of director
EQUITY – Alternative claim – Decision to distribute trust funds not made honestly and in good faith – Held claim inconsistent with director liability on the facts of the case
EQUITY – Defences – Estoppel – Difference between promissory estoppel and conventional estoppel – Not found on the facts
EQUITY – Defences – Laches – Where defence applies to personal claim but not to proprietary claim
EQUITY – Just allowance – Where profit not derived as consequence of fiduciary’s skill and effort – Where some of trust property lost
EQUITY – Constructive trust – Application of proprietary remedy to breach of fiduciary duty – Application of proprietary remedy where finding of trustee de son tort made – Where proprietary remedy fails absent tracing – Held proprietary claim not precluded merely because recipient took trust assets under particular form of transaction – Held Court entitled to look at the substance of what occurs
EQUITY – Tracing – Tracing rules – Held Court should take a common sense and reasonable approach – Held Court should be prepared to draw reasonable inferences concerning what become of trust assets
CORPORATIONS LAW – Ratification – Where corporate trustee was sole shareholder – Where corporate trustee owes duties to beneficiaries – Whether sole shareholder can ratify director’s breach of duty where duty affects the discharge of the corporate trustee’s obligations toward beneficiaries
CORPORATIONS LAW – Defences – Corporations Act 2001 (Cth), s 1318 – Not found on the facts
LIMITATION OF ACTIONS – Leave to amend – Whether claim that directors’ declaration is void because in breach of Corporations Act 2001 (Cth) is founded on a “simple contract” under Limitation of Actions Act 1958 (Vic), s 5 – Whether Limitation of Actions Act 1958 (Vic), s 21 applies to constructive trustees – Question of what amounts to fraud under Limitation of Actions Act 1958 (Vic), ss 21(1)(a) and 27 – Whether Limitation of Actions Act 1958 (Vic), s 21(1)(b) applies to property received or held by fiduciary’s alter ego – Where facts relevant for limitation by analogy under Corporations Act 2001 (Cth), s 1317K arose during trial
TRUST AND TRUSTEES – Defences – Trustee Act 1958 (Vic), s 67, 68 – not found on the facts

Legislation Cited:
Companies Act 1961 (VIC)
Corporations Act 2001 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Limitation Act 1969 (NSW)
Limitation Act 1980 (UK)
Limitation of Actions Act 1958 (Vic)
Securities Industry Act 1975 (NSW)
Trustee Act 1958 (Vic)

Cases Cited:
Armitage v Nurse [1997] 3 WLR 1046
Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302, [2015] VSCA 9
Baden vSociété Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1992] 4 All ER 161; [1993] 1 WLR 509
Barnes v Addy (1874) LR 9 Ch App 244
Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721
Briginshaw vBriginshaw (1938) 60 CLR 336
Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2)) [2020] NSWCA 117
Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36
Cheerine Group (International) Pty Ltd v Yeung [2006] NSWSC 1047
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371
Di Sante v Camando Nominees Pty Ltd [2000] VSC 211
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22
Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544
Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664
Forge v Australian Securities & Investments Commission (2004) 213 ALR 574, [2004] NSWCA 448
Foskett v McKeown [2001] 1 AC 102; [2000] UKHL 29
Fourniotis v Vallianatos (2018) 56 VR 85; [2018] VSC 369
Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181
Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6
Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29
Honey v McLennan (1997) 18 WAR 384
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64
James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62
Ledir Enterprises Pty Ltd, Re (2013) 96 ACSR 1, [2013] NSWSC 1332
McNab v Graham (2017) 53 VR 311; [2017] VSCA 352
Mancini v Mancini (1999) 17 ACLC 1570; [1999] NSWSC 799
Mara v Browne [1896] 1 Ch 199 at 209
Moratic Pty Ltd v Gordon [2007] NSWSC 5
Orr v Ford (1988-89) 167 CLR 316
Parker v R (1997) 186 CLR 494
Port Ballidu Pty Ltd v Frews Lawyers [2017] QSC 19
Re Day (2017) 340 ALR 368; [2017] HCA 2
Re Hallet’s Estate, Knatchbull v Hallett (1880) 13 Ch D 696
Re Oatway [1903] 2 Ch 356
Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286, [2003] NSWCA 71
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Saad v Doumeny Holdings Pty Ltd [2005] NSWSC 893
Seymour v Seymour (1996) 40 NSWLR 358
Sze Tu v Lowe (2014) 89 NSWLR 317, [2014] NSWCA 462
Tecnicas Reunidas SA v Andrew [2018] NSWCA 19
Toksoz v Westpac Banking Corporation [2012] NSWCA 199; (2012) 289 ALR 577
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Warman International Ltd v Dwyer (1994-95) 182 CLR 544
Williams v Central Bank of Nigeria [2014] AC 1189; [2014] UKSC 10
Young v Lalic [2006] NSWSC 18

Texts Cited:
J D Heydon & M J Leeming, Jacobs Law of Trusts in Australia, 8th ed, LexisNexis, 2016
J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 5th ed (LexisNexis Butterworths 2015)

Category: Principal judgment
Parties:
In 2019/71329 (Main Proceedings):

Diane Twigg (First Plaintiff | First Cross Defendant)
Ipswich Landfill Pty Ltd atf Ipswich Landfill Trust (Second Plaintiff | Second Cross Defendant)
Brooklyn Landfill & Waste Recycling Pty Ltd (Third Plaintiff | Third Cross Defendant)
Twigg Plant Hire Pty Ltd (Fourth Plaintiff/ Fourth Cross Defendant)
Maxwell James Twigg (First Defendant | Fifth Cross Defendant)
Twigg Landfill Pty Ltd (Second Defendant | Sixth Cross Defendant)
Byron Bay Beach Hotel Properties Pty Ltd (Third Defendant | Seventh Cross Defendant)
Twigg Consulting Pty Ltd (Fourth Defendant | Eighth Cross Defendant)
B Bay H Pty Ltd (Fifth Defendant | Ninth Cross Defendant)
Twigg Investments Pty Ltd (Sixth Defendant | Tenth Cross Defendant)
Maly Holdings Pty Ltd (Seventh Defendant | Eleventh Cross Defendant)
Twigg Property Development Pty Ltd (Eighth Defendant | Twelfth Cross Defendant)
Twigg Motor Sport Pty Ltd (Ninth Defendant | Thirteenth Cross Defendant)
Vision Motor Sport Pty Ltd (Tenth Defendant | Fourteenth Cross Defendant)
Twigg Motor Racing Pty Ltd (Eleventh Defendant | Fifteenth Cross Defendant)
Surf Street Holdings Pty Ltd (Twelfth Defendant | Sixteenth Cross Defendant)
W & E Twigg Pty Ltd (Thirteenth Defendant | Seventeenth Cross Defendant)
Frances Lambert (Fourteenth Defendant | Cross-Claimant)
Twigg Co Pty Limited (Fifteenth Defendant)

In 2018/212326 (UBE Proceedings):
Frances Lambert (First Plaintiff)
Elizabeth Flintoff (Second Plaintiff)
Diane Twigg (Third Plaintiff)
Twigg Investments Pty Limited atf Twigg Investments Trust (First Defendant)
Maxwell Twigg (Second Defendant)
Representation:
Counsel:

M R Elliott SC with DK Smith (Plaintiffs | First to Fourth Cross Defendants in 2019/71329; First to Third Plaintiffs in 2018/212326)
J Evans QC with P Miller (First to Thirteenth and Fifteenth Defendants | Fifth to Seventeenth Cross Defendants in 2019/71329; First and Second Defendants in 2018/212326)
AJ McInerney SC (Fourteenth Defendant | Cross Claimant in 2019/71329)

Solicitors:
Roberts and Partners Lawyers (Plaintiffs | First to Fourth Cross Defendants in 2019/71329; First to Third Plaintiffs in 2018/212326)
Radcliffs (First to Thirteenth and Fifteenth | Fifth to Seventeenth Cross Defendants in 2019/71329; First and Second Defendants in 2018/212326)
Rankin Ellison Lawyers (Fourteenth Defendant | Cross-Claimant in 2019/71329)

File Number(s): 2019/71329; 2018/212326

TABLE OF CONTENTS

Introduction - paragraph 1
The evidence - paragraph 21
Factual background
Origins of the Twigg Group business - paragraph 31
Brooklyn established - paragraph 35
Max takes over the Twigg Group business - paragraph 39
Mrs Twigg’s first will - paragraph 43
Ipswich incorporated - paragraph 50
Letter setting out Mrs Twigg’s thinking - paragraph 51
Twigg Landfill is established - paragraph 60
The sale of the Twigg Group business - paragraph 61
Payment of the sale proceeds - paragraph 62
Events after the sale - paragraph 73

The Principal Claim in the Main Proceeding
The nature of the claim - paragraph 102
The claim in relation to Twigg Landfill - paragraph 104
The claim in relation to the sale proceeds - paragraph 106
Is the claim by Mrs Twigg or the Corporate Plaintiffs? - paragraph 127
Remedies - paragraph 130

The alternative claims in the Main Proceeding - paragraph 139
Other defences to the Principal Claim in the Main Proceeding - paragraph 143
Estoppel - paragraph 146
Ratification - paragraph 151
Time limitations - paragraph 156
Section 21 of the Limitation of Actions Act - paragraph 158
Section 5 of the Limitation of Actions Act - paragraph 175
Limitation by analogy to s 1317K of the Corporations Act - paragraph 180

Laches - paragraph 183
Defences under the Corporations Act and Trustee Act 1958 (Vic) - paragraph 190
Tracing - paragraph 193
Ozone Parade, Miami, Queensland - paragraph 206
The Property at Murlong Crescent, Palm Beach, Queensland - paragraph 207
Lots 1, 2 and 3 Surf Street, Mermaid Beach, Queensland - paragraph 208
Freshwater Place - paragraph 209
Shares and Investment portfolio - paragraph 210
Cash deposits held in the name of Twigg Co Pty Ltd and the Twigg Investment Trust No 2 - paragraph 220
Certain motor vehicles acquired by Max - paragraph 223
Albatross Avenue, Mermaid Beach, Queensland - paragraph 226
Harkaway - paragraph 230
Hedges Avenue, Mermaid Beach, Queensland - paragraph 232
The proceeds of sale of the Cleanaway shares - paragraph 233
Superannuation contribution of $2 million - paragraph 234

Just allowances - paragraph 235
The Cross-claim and related issues - paragraph 238
The UBE Proceeding and similar issues - paragraph 244
Was there an agreement? - paragraph 247
Estoppel - paragraph 255
Limitation defence - paragraph 258
Laches - paragraph 260
The Claim against Max - paragraph 261
The Alternative Claims in the Main Proceeding - paragraph 269

Conclusions - paragraph 272

Judgment

Introduction

Prior to April 2007, the Corporate Plaintiffs, Twigg Plant Hire Pty Ltd (Twigg Plant Hire), Brooklyn Landfill & Waste Recycling Pty Ltd (Brooklyn), and from 2004 when it was incorporated, Ipswich Landfill Pty Ltd (Ipswich), carried on a waste disposal and landfill business (the Twigg Group business) as trustees of discretionary trusts, the beneficiaries of which included Mrs Diane Twigg and her three children, Frances, Max and Elizabeth. Max had managed and substantially expanded the business following the death on 7 August 1996 of Mr William Twigg, Mrs Twigg’s husband, the children’s father and the founder of the business.
As part of the expansion of the business, Max had, through a company controlled by him, Twigg Landfill Pty Ltd as trustee for the Max Twigg Family Trust (Twigg Landfill), acquired a number of properties which together comprised a landfill site at Heatherton, Victoria, in July 2006. Although following his father’s death, Max became responsible for managing the Twigg Group business, Mrs Twigg became the sole shareholder of the three Corporate Plaintiffs and a number of other companies she and her husband had owned jointly. She remained a director and became the chairperson of those companies and appointed Max as a second director. She also became the appointor and guardian of the three trusts of which the Corporate Plaintiffs were trustees. In those capacities, she had effective control of the assets of the three trusts.
On 2 April 2007, Mrs Twigg and Max on their own behalf as guarantors and on behalf of the Corporate Plaintiffs, Twigg Landfill and Kastillia Nominees Pty Ltd as trustee for the W & D Twigg Family Trust (No 2), another company controlled by Mrs Twigg that owned certain plant and equipment used in the Twigg Group business, signed a contract for the sale of the business to Transpacific Waste Management Pty Ltd, a subsidiary of Transpacific Industries Group Ltd (now known as Cleanaway Waste Management Ltd), for the sum of $155.8 million, subject to an adjustment depending on the actual earnings of the business for the financial year ending 30 June 2007 once known. It will be convenient in this judgment to refer to the purchaser and its parent company as “Cleanaway”.
Under the terms of the sale agreement, Cleanaway agreed to enter into a consulting agreement with Sibley Group Pty Ltd, a company controlled by Max, under which Max provided consultancy services to the business for a period of 12 months following its sale in return for a fee of $10 million.
Cleanaway also agreed to pay by way of additional consideration an amount of at least $10 million depending on the financial performance of the business in 2008 and expected savings arising from synergies achieved from the merger of the business into other businesses carried on by Cleanaway.
Of the sale price, an amount of $30 million was paid in the form of shares issued in Cleanaway to Twigg Landfill in exchange for its assets. As things transpired, the consulting fee of $10 million paid for Max’s services was also paid in the form of shares issued in Cleanaway. Subject to a number of deductions explained below, the balance of the purchase price of $113,804,668 was paid in cash into the cheque account of Twigg Plant Hire.
After repayment of debt, the payment of tax, the payment (described by Max as a “gift”) of $5 million to each of Mrs Twigg, Frances and Elizabeth, and the payment of other gifts totalling approximately $1 million, Max caused the balance of the proceeds of sale paid into the cheque account of Twigg Plant Hire to be distributed to him or entities controlled by him. Max used the money to make a number of investments, including the acquisition of the Byron Bay Hotel and a number of other properties in Queensland.
Mrs Twigg, Frances and Elizabeth invested the $5 million paid to each of them on advice from an investment adviser, Mr Ronald Bray. They largely lost the amounts they invested during the Global Financial Crisis.
In 2009, Cleanaway paid the deferred consideration under the sale agreement. Those payments were made or distributed to Twigg Investments Pty Ltd as the trustee of a discretionary trust known as the Twigg Investments Trust. Twigg Investments and the Twigg Investments Trust were controlled by Max. The beneficiaries of the trust included Mrs Twigg, Frances and Elizabeth. The deferred consideration attracted capital gains tax in the hands of those to whom the funds were ultimately distributed.
It appears that Pitcher Partners, who had acted as the family accountants since the mid-1990s, proposed that Max could utilise the capital losses made by Mrs Twigg and his sisters by distributing part of the deferred consideration received by the Twigg Investments Trust to them. It was proposed that, in return, Max would indemnify his mother and sisters against any capital gains tax that they were subsequently liable to pay.
Pitcher Partners’ proposal was implemented and each year from 2009 the accounts for the Twigg Investments Trust showed an undistributed beneficial entitlement of $2,577,295 payable to each of Frances and Elizabeth and an undistributed beneficial entitlement of $2,147,746 payable to Mrs Twigg. Twigg Investments no longer has the money to pay those entitlements.
In late 2013 or early 2014, Frances and Elizabeth settled a claim in negligence against Mr Bray for $900,000 each. The resulting settlement sum meant that each of them was required to lodge amended returns in respect of the 2009 financial year disclosing the capital gains arising from the settlements. They claim that it was not until then that they appreciated that their capital losses has been utilised in the way that they were. By this stage, Frances had a new accountant, Mr Brian Wise. As a result of enquiries he made of Pitcher Partners, it became apparent that the accounts of the trust disclosed that the unpaid beneficiary entitlements were held on sub-trusts for Mrs Twigg, Frances and Elizabeth. Frances sought to be paid her entitlement. She was told by Pitcher Partners that the trust had no money to do so. Subsequently, in about mid-2017, Frances became aware that the Byron Bay Hotel had been sold for $70 million. On 20 October 2017, her accountant wrote to Mr Adrian Fitzpatrick, who had up until that time been the partner at Pitcher Partners who was primarily responsible for looking after the Twigg family’s financial affairs, asking whether Max intended to fund the Twigg Investments Trust from the proceeds of sale of the hotel to enable the trustee to pay her unpaid beneficiary entitlement. Mr Stephen Schonberg, another partner of Pitcher Partners, replied to that letter on 21 December 2017 saying that there was no financial connection between the entity that owned the Byron Bay Hotel and the Twigg Investments Trust and that the Twigg Investments Trust did not have the financial capital to pay Frances. That response led to further correspondence and investigations by Frances’s accountant, an accountant engaged by Elizabeth and eventually solicitors engaged by Mrs Twigg and her two daughters. Those investigations have led to the two proceedings that are the subject of this judgment.
The first proceeding to be commenced (referred to by the parties as the “UBE Proceeding”) was commenced by Mrs Twigg, Frances and Elizabeth initially against Twigg Investments seeking documents. The proceeding was subsequently amended to claim the unpaid beneficiary entitlements (UBEs) and to claim them not only from Twigg Investments but also from Max on the basis that he breached his duties as a director of that company by putting it in a position where it had paid away sums of money that it held on trust for Mrs Twigg and his sisters.
In the second proceeding (referred to by the parties as the “Main Proceeding”), Mrs Twigg and the three Corporate Plaintiffs make claims against Max and various entities associated with him principally arising out of the distribution of the proceeds of sale of the Twigg Group business in 2007. Those claims are put in various ways. First, it is alleged that Max breached his fiduciary duties as a director of the Corporate Plaintiffs by causing those companies to distribute trust assets in breach of the respective trusts. Second, it is alleged that Max is liable as a trustee de son tort in respect of trust assets distributed to himself or entities he controlled and holds those assets as a constructive trustee either for the Corporate Plaintiffs or Mrs Twigg. It is also said that Max breached the fiduciary duties he owed to the Corporate Plaintiffs by acquiring the landfill site at Heatherton through Twigg Landfill.

Alternative cases in relation to the proceeds of sale of the Twigg Group business are put on the basis (1) that Max was a knowing recipient of trust property (a claim falling within the first limb of Barnes v Addy (1874) LR 9 Ch App 244); (2) that Max knowingly induced or procured a breach of trust by the Corporate Plaintiffs; (3) that Max assisted the Corporate Plaintiffs with knowledge of a dishonest and fraudulent design (a claim falling within the second limb of Barnes v Addy); and (4) that the decisions in question were not made honestly and in good faith.
The Corporate Plaintiffs and Mrs Twigg seek equitable damages from Max and seek to trace the proceeds of sale to assets held by the second to thirteenth and fifteenth defendants and orders declaring that those assets are held on constructive trust either for the Corporate Plaintiffs or Mrs Twigg.
Max and the defendants he controls (Max, for short) raise various defences to these allegations to which it will be necessary to return. They include limitation defences. They also include in the Main Proceeding a claim that Mrs Twigg by 2004 had expressly or impliedly delegated the power to make decisions on behalf of the Corporate Plaintiffs to Max and the decisions he made were made in exercise of that power, with the result that there was no breach of trust.
In response to that defence, Frances, as the fourteenth defendant in the Main Proceeding has filed what is described as a cross-claim in which she brings (1) a claim in her own right against the Corporate Plaintiffs that they, by virtue of the conduct of Mrs Twigg and Max, breached their duties as trustees to her as a beneficiary under the trusts; and (2) a derivative claim on behalf of the Corporate Plaintiffs alleging that both Mrs Twigg and Max breached their duties as directors of the Corporate Plaintiffs. Frances seeks the same remedies as the plaintiffs in the Main Proceeding in respect of those alleged breaches of duty.
The plaintiffs accept that if they succeed in their principal claims in the Main Proceeding, they cannot succeed in the UBE Proceeding since the amounts they claim properly belong to the Corporate Plaintiffs or Mrs Twigg.
Finally, if all else fails in the Main Proceeding, the plaintiffs in that proceeding make a claim for specific sums of money said to be owing to them as disclosed in the accounts of a number of companies controlled by Max. Those claims are dealt with at the end of this judgment.

The evidence

Before setting out the factual background, it is necessary to say something about the evidence given in the case.
Each of Mrs Twigg, Frances, Elizabeth and Max gave evidence.
Frances and Elizabeth were both credible witnesses. Both gave evidence in a straightforward manner. Both willingly made concessions where concessions were appropriate. Their evidence was plausible and consistent with the documents. I generally accept the evidence given by both of them.
On the other hand, neither Mrs Twigg nor Max was a satisfactory witness, although for very different reasons.
It is apparent that Mrs Twigg had only the most rudimentary understanding of what the cases were about and no real understanding of her duties as a director, the nature of a trust or the respective roles of the companies of which she was a director and the trusts of which they were trustees. Over the years she signed a great number of documents including contracts, company accounts and board minutes without having any real understanding of what they contained or the legal effect they had. Originally, she did so at the request of her husband. On his death, she did so largely at the request of Max. That she had no interest in or knowledge of business or legal matters is not a criticism of her and does not itself go to the quality of her evidence, although it does not absolve her of the responsibilities she had as a director.
However, the problems with Mrs Twigg’s evidence went further than that. 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.
I have reached the same conclusions in relation to Max’s evidence, although, as I say, for quite different reasons. Max was inclined to tailor his evidence to suit his case and was willing on occasions to say whatever he thought might assist it. Examples include the incorrect claim in his affidavit evidence that Mrs Twigg had ceased to provide guarantees in respect of the Twigg Group business well before it was sold in 2007 and the vague and inaccurate account he gave in his affidavit evidence of the benefits he got from what he did with the proceeds of the sale of the business. Another example is the evidence he gave that he raised with Mrs Twigg his intention to give her and his sisters $5 million each before the sale of the business, which was contradicted by evidence his solicitor gave on information and belief based on what Max had told him. Max was also inclined to be evasive and argumentative when giving evidence. It appears that he thought that the success of the business and the highly attractive offer that was made for it were the results of his efforts and that as a consequence he was entitled to the lion’s share of the benefits and that that entitlement provided a justification for what he did. For these reasons, I have concluded that Max’s evidence should not be accepted except to the extent that it is corroborated or inherently probable.
Something also needs to be said about Mr Fitzpatrick, who also gave evidence. It might be thought that he was an independent financial advisor who could give reliable evidence on the events in question. Regrettably, that is not the case. It is apparent that by 2000 or so, he saw his principal role as being to advance the interests of Max. He played a large role in giving instructions for Mrs Twigg’s will. That itself is not a cause for criticism. It is an appropriate step for a trusted advisor to take. But in this case, it is likely that the driving force behind the preparation of Mrs Twigg’s will was Max and Max appears to have been present whenever Mrs Twigg’s will was discussed with Mr Fitzpatrick or the solicitor who prepared it. Mr Fitzpatrick must have understood that Mrs Twigg deferred to her husband while he was alive and her son following her husband’s death. It might be thought that he had a duty to ensure that Mrs Twigg was properly advised but there is no evidence that Mr Fitzpatrick discharged that duty, at least in relation to the proceeds of sale of the Twigg Group business. Mr Fitzpatrick swore an affidavit prepared by Max’s solicitors that was supportive of Max’s case, but in cross-examination he was forced to accept that he did not have recollections that were attributed to him. In those circumstances no weight can be placed on his evidence except to the extent that it is corroborated or inherently probable.
The difficulties with the evidence of the principal witnesses are compounded by the fact that to a large extent the events in question occurred 14 or more years ago. As a result, a substantial number of records that would once have been available no longer are. Those records would have been particularly useful in working out what had become of the sale proceeds. Mr Terrence Potter, an expert accountant retained by the plaintiffs, prepared a report dealing with that issue. It is apparent from the report that the absence of records has made that task more difficult in the case of some payments and impossible in the case of many others. Mr Evans QC, who appeared for Max, also suggested that the absence of evidence was relevant to the question whether the Court could be positively persuaded of the allegations made by the plaintiffs in the case, as it must be in order for the plaintiffs to succeed: see Re Day (2017) 340 ALR 368; [2017] HCA 2 at [18] per Gordon J, citing Briginshaw vBriginshaw (1938) 60 CLR 336 at 361. He pointed to the absence of information concerning the financial position of the Twigg Group business before Max became responsible for its management and the absence of many minutes from which a practice might be established as examples.
It is undoubtedly true that relevant evidence is no longer available because of the passage of time and that the plaintiffs must largely bear the consequences of that. However, as will become apparent, many important documents have survived and in my opinion they, together with other largely undisputed evidence, provide a sufficient foundation to make the factual findings which are critical to the outcome of these proceedings.

Factual background

Origins of the Twigg Group business

Mr Twigg started a business that became the Twigg Group business in around 1970. The business started as an earthmoving, civil works and machinery hire business and evolved into a landfill and waste recycling business. It appears that from about 1976 the business was carried on by Twigg Family Properties Pty Ltd as trustee for the Twigg Family Trust (the Paternal Trust). On 5 February 1985, Twigg Plant Hire became the trustee of the Paternal Trust. Each of Mr and Mrs Twigg held a share in Twigg Plant Hire and each was appointed as a director of that company.
The Articles of Association of Twigg Plant Hire incorporated the regulations set out in Table A to the fourth schedule to the Companies Act 1961 (Vic) with a number of modifications. Regulation 73 provides that the business of the company shall be managed by the directors. Regulation 79 provides that the directors may meet together for the dispatch of business. Regulation 78 requires the directors to cause minutes to be made “of all proceedings at all meetings of the company and the directors”. Regulation 83 provides that the quorum necessary for the transaction of the business of the directors may be fixed by the directors and unless so fixed shall be two. Regulation 86 provides that the directors may delegate any of their powers to “committees consisting of such member or members of their body as they think fit”. Regulation 90 provides that “A resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held. …”.
The beneficiaries of the Paternal Trust included Mr and Mrs Twigg and their children. Clause 3(i) of the trust deed governing the trust provides that the trustee shall pay, apply or set aside the whole or part of any income for an accounting period for such of the beneficiaries or charitable purposes as it thinks fit (but after considering the wishes of the Guardian, who is defined to be Mr Twigg and after his death, Mrs Twigg). Clause 3(ii) provides that undistributed income accumulates to capital. Clause 6(a) gives the trustee a power to distribute any part of the capital “as the trustees in their absolute discretion shall think fit” to any of the beneficiaries.
Under cl 11 of the trust deed, a trustee or director of a trustee was entitled to benefit personally as a result of the trustee’s exercise of discretion. Under cl 21 the appointor had the power to remove any trustee and to appoint any new or additional trustee. The appointors were Mr Twigg and after his death Mrs Twigg.

Brooklyn established

Brooklyn was incorporated on 16 August 1995 to acquire as trustee of the Brooklyn Landfill Trust a landfill site at Brooklyn, Victoria. Mr and Mrs Twigg each owned one share in Brooklyn and each was appointed a director of the company.
The Articles of Association of Brooklyn were relevantly in substance in the same terms as those for Twigg Plant Hire. They provided for a minimum of two directors (Art 13.1) and stated the business of the company was to be managed by the directors (Art 14.1.1). The directors were required to keep minutes of all resolutions and proceedings of the directors and committees of directors (Art 14.4). The quorum for any meeting was two unless the directors determined otherwise (Art 15.5). The directors could delegate any of their powers to a committee consisting of one or more of them (Art 15.8).
With one important exception, the terms of the deed governing the Brooklyn Landfill Trust were similar to the terms of the deed governing the Paternal Trust. The deed established a discretionary trust which gave the trustee a broad and unfettered discretion to distribute the income and capital of the trust to the beneficiaries, who included Mr and Mrs Twigg, their children, and a number of companies including Kastillia Nominees and Twigg Plant Hire. The guardian and appointor were stated to be Mr Twigg during his lifetime and thereafter his legal personal representatives, who was Mr Fitzpatrick.
The exception is contained in cl 3.5 of the trust deed, which provides:

The Trustees shall hold so much of the net income of the Trust Fund for each Accounting Period as shall not be the subject of determinations effectively made pursuant to clause 3.2 at or prior to the end of such Accounting Period upon the same trusts as are declared in clauses 4.1, 4.2 and 4.3 hereof in respect of the Trust Fund as though the last day of such Accounting Period were the Vesting Day;

It is common ground that the effect of cl 3.5 is that any income earned in a particular accounting period that is not the subject of the specific decision of the trustee, either to distribute or accumulate it, was held on trust for Mrs Twigg as the person who until her death is entitled to the trust fund on the Vesting Day.

Max takes over the Twigg Group business

In early 1995, Mr Twigg was diagnosed with cancer. At about that time, Max, at his father’s request, became involved in the Twigg Group business and Mr and Mrs Twigg engaged Mr Fitzpatrick from Pitcher Partners to act as the family accountant.
On 19 November 1995, when it was obvious that Mr Twigg’s illness was terminal, he, Mrs Twigg, their children and Mr Fitzpatrick, as the executor of Mr and Mrs Twigg’s wills, signed a document entitled “Statement and Confirmation of Intentions and Desires of William Alan Twigg [“WAT”] and Diane Twigg [“DT”]”.
The statement relevantly said:

3   After the death of WAT, the following are his desires:
3.1   Of prime importance is the financial comfort and well being of his wife, DT. To this end the Trusts and Ashrye shall provide her, during her lifetime, with such income and/or capital as she may reasonably require.
…
3.3   For so long as she wishes during her lifetime, DT should have and retain ultimate control over the business and affairs of the Trusts and Ashrye. However, it is the wish of WAT that DT should not hesitate to take advice from others if she wishes to do so.
To secure this control to DT she is being left, under the terms of WAT’s Will, all his property and assets, which includes all the shares which he holds in the various trustee companies. DT will also be the guardian and appointor of each of the Trusts.
DT shall decide whether Frances, Max and/or Elizabeth should become directors of any of the trustee companies and whether they (or any of them) are to be employed (or continue to be employed) or otherwise involved in any of the various businesses and if so to what extent.
3.4   Whether or not any of the Trusts’ businesses should be sold and/or any of the Trusts would up at any time is a matter which should be decided in consultation with all family members, but with DT having the right to make the final decision for so long as she retains control of the relevant Trust.
…

Mr Twigg died on 7 August 1996. Following his death, Max, who was 25 at the time, took over the running of the business with assistance from Mr Ross Currie, the general manager of the Twigg Group business, and from Mr Fitzpatrick in relation to financial matters.

Mrs Twigg’s first will

On 10 May 2001, Mrs Twigg, Max and Mr Fitzpatrick attended a meeting with Mr Arthur Bolkas of Russell Kennedy in order for Mrs Twigg and Max to give instructions for the preparation of wills to be made by each of them.
The impression given by Max’s and Mr Fitzpatrick’s affidavit evidence is that it was Mrs Twigg who was keen to make a will and to ensure that following her death the family business went to Max. That, however, strikes me as unlikely. Mrs Twigg did not come across as someone who was focused on the financial arrangements that should be made following her death and the fact that both Max and Mr Fitzpatrick attended the meeting suggests that it was Max who was keen for Mrs Twigg to make a will which cemented his control of the family business on her death.
Mr Bolkas kept a detailed file note of the meeting. According to the file note, Mr Fitzpatrick gave an explanation of the Twigg Group business. He said that the business was worth between $10 million and $12 million. He explained that Mrs Twigg had 80 acres of land at Lysterfield worth approximately $800,000 to $1 million and that there was also the family home at Lysterfield worth approximately $700,000, which was presently owned by Kastillia Nominees as trustee for the W & D Family Trust No 2. According to Mr Bolkas’s note, Mr Fitzpatrick said that the plan was to discharge the mortgage over that house and to transfer it to Mrs Twigg. He also stated that Mrs Twigg had a superannuation fund worth approximately $700,000.
The note records that Mrs Twigg stated that she wanted her three children to be her executors and trustees, that she wanted her shares in the family companies to be transferred to Max and for Max to become the appointor under the Paternal Trust, the Brooklyn Landfill Trust and the W & D Family Trust No 2. The note also records that Mrs Twigg wanted the balance of her estate to be divided equally between her two daughters. The note states that Mrs Twigg also gave instructions that an enduring power of attorney was to be prepared appointing Max and her two daughters as joint and several attorneys. In addition, the note says:

We discussed at length the distribution of Diane’s wealth so as to ensure a fair distribution between her three children. Diane was firmly of the view that her son Max should take over the business after her death and wanted to ensure that this was achieved. However, she also wanted a fair outcome for her daughters. She stressed that she understood that a fair did not necessarily equate with equal. She said that she was comfortable with her two daughters getting a lesser amount provided that they had enough to lead comfortable lives. …

It appears that Mr Bolkas sent a draft of the documents he was instructed to prepare to Mr Fitzpatrick. On 14 June 2001, Mr Fitzpatrick wrote to Mr Bolkas saying that he was happy with their content. He also said that a key issue was removing the family home from the trust on a basis that was efficient from a stamp duty point of view and did not create capital gains tax issues. The letter continued:

Related to the need to do this to really provide some additional benefit to Dianne’s [sic] daughters in the event of her death will be the need to negotiate with the business banker to have this property released as security to the business.

On 24 July 2001, Mrs Twigg and Max met with Mr Bolkas. At that time, Mrs Twigg signed her will and deeds of variation to the Paternal Trust and the Brooklyn Landfill Trust appointing Max as the appointor and guardian under those trusts following Mrs Twigg’s death.
At the meeting, Mr Bolkas raised a question about the enduring power of attorney. Mrs Twigg stated that she wished to appoint Max as her enduring attorney. An enduring power of attorney was prepared in those terms and signed by Mrs Twigg on 30 July 2001. The power of attorney authorised Max “to do on [Mrs Twigg’s] behalf any thing that [she] may lawfully authorise an attorney to do”.

Ipswich incorporated

In 2004, Max decided to expand the family business by arranging for the purchase of a landfill site in Ipswich, Queensland. For that purpose, Ipswich was incorporated on 18 May 2004 and the Ipswich Landfill Trust was settled. The constitution of Ipswich is relevantly in substantially the same terms as the articles of association of Brooklyn and the terms of the Ipswich Landfill Trust Deed are relevantly in substantially the same terms as the trust deed for the Brooklyn Landfill Trust. Mrs Twigg was the sole shareholder of Ipswich. She and Max were appointed as its two directors. Mrs Twigg was named as the guardian and appointor under the trust deed during her lifetime. After her death, it was her legal personal representative. The trust deed was amended by a deed of variation dated 14 November 2005 which named Max as the guardian and appointor following Mrs Twigg’s death.

Letter setting out Mrs Twigg’s thinking

On 24 November 2004, Mr Fitzpatrick prepared a letter purporting to record “Dianne’s [sic] thinking … regarding how the Twigg Family financial assets might be dealt with going forward”.
The genesis and the recipients of the letter are unclear. The letter itself records that it was prepared following a meeting with Mrs Twigg in August 2004. It appears that its preparation arose from Max’s concern that from time to time Mrs Twigg would make drawings on the business for Frances and Elizabeth without discussing the drawings with him first. The likelihood is that those concerns were raised with Mrs Twigg and a draft letter was prepared for her to consider and discuss with Frances and Elizabeth. For reasons already mentioned, it is unlikely that Mrs Twigg instigated the letter. It is not the sort of thing to which she is likely to have turned her mind unprompted.
The draft letter is lost. However, according to a file note prepared by Mr Fitzpatrick, Mrs Twigg discussed the draft with Frances and Elizabeth and they were happy with its contents with one exception relating to the amount of a one-off payment to be made to each of them. The note suggests that that payment would be increased to $250,000 each, which would enable Frances to pay off her mortgage. The only copy of the final letter was discovered by Frances. Max claims to have received the letter and placed a great deal of reliance on it. Frances cannot recall receiving it. Elizabeth denies that she did receive it; and Mrs Twigg gives evidence that she did not see the letter until a copy was shown to her in connection with these proceedings. The likelihood, however, is that the letter was sent to each of Mrs Twigg and her children. It was addressed to “Frances, Max and Liz Twigg c/- Dianne [sic] Twigg”. It was plainly sent to Frances. There is no reason for it to have been sent to her alone. Given the passage of time, it is not surprising that the others did not retain a copy or could not recall it.
Under the heading “Key General Principles” the letter states:

It is Dianne’s [sic] desire that an equitable plan be put in place which facilitates the following fundamental principles:
• Max and his family to ultimately take control of the Twigg Group operating businesses and associated entities.
• Frances’ and Liz’s families to ultimately jointly own and control the Twigg family non-business assets.

The letter explains what constitutes the Twigg Group business assets. It also explains that those assets did not include Kastillia Nominees Pty Ltd as trustee for the W & D Twigg Family Trust (No 2) because that entity’s “key asset” was the family home at Lysterfield. The letter records that it was Mrs Twigg’s intention that that entity be jointly controlled by Frances and Elizabeth and it explains the process by which it would be separated from the Twigg Group business. The letter gives an explanation of the “Twigg Non-Business Family Assets”, which included Kastillia Nominees, the land adjoining the Lysterfield home block and Mrs Twigg’s superannuation benefits. It states that it was Mrs Twigg’s intention that “the Twigg business group continue to contribute the maximum deductible superannuation contribution on behalf of Dianne [sic], which is approximately $90,000 per annum”.
The letter also refers to a proposal to acquire a Gold Coast apartment for approximately $1 million. The letter states that the apartment was to be acquired in the name of Kastillia Nominees and that its acquisition was to be financed by the Twigg Group business. It also refers to the $250,000 to be paid to each of Frances and Elizabeth and states that following those payments “the Business Group’s obligation to make future payments ceases”, although it remained open to the business group to make future discretionary payments.
The letter goes on to state:

This correspondence is not a legal document but merely a communication mechanism to indicate to each of you Dianne’s [sic] thoughts and plans relating to the Twigg Family finances. I am recommending to Dianne [sic] that she reviews her personal financial position every 3 years, and plans and organises her financial affairs based on those reviews.
It is important to note that at these reviews Dianne [sic] would not alter the “Key General Principles” outlined under Point 1 of this letter i.e. control of Twigg Group operating entities to Max and his family with Frances and Liz to jointly control the Twigg non-business assets.
Examples of issues Dianne [sic] would consider each 3 years would include:
•   Dianne’s [sic] salary and superannuation contribution levels together with other benefits provided by the Twigg Business Group. These discussions would be with Max in his capacity as the other director of the Group.
•   Assessment of the current value of the Lysterfield and Gold Coast properties.
•   Assessment of the performance of Dianne’s [sic] Superannuation Fund, including considering the quantum of the benefit accumulated, future earning capacity and calculation of what the future pension entitlements might be.
•   Review of Business Group’s operations generally and where profits are extraordinarily high, understand the reasons why and together with Max, give consideration as to whether it is equitable to share part of the extraordinary profits with Frances and Liz, or conversely where the trading performance is poor, give consideration as to whether the Business Group needs financial assistance and support from the non-business assets.
This recognises that it is in the Twigg family’s best interest to ensure the business is financially secure at all times.
•   Review the terms of Max’s employment with the Twigg Business Group to ensure the remuneration package, other benefits, terms and conditions reflect the current market situation.

The letter states that Mrs Twigg had asked Mr Fitzpatrick to forward a copy of the letter to each of her children “and arrange to meet with each of you on a one on one basis to thoroughly review and discuss its contents”. There is no evidence that those meetings occurred; and it is not entirely clear whether Frances and Elizabeth were ever paid the $250,000 contemplated by the letter, although the likelihood is that they were. Frances accepts that the mortgage on her house was paid out by Mrs Twigg, although she does not recall when.
Max places a great deal of emphasis on this letter. He gave the impression in his evidence and says in submissions that it was effectively the culmination of a process by which Mrs Twigg accepted that Max in effect owned and controlled the Twigg Group business. As part of that narrative, Max originally suggested in his affidavit evidence that by this stage he had become the sole guarantor for the Twigg Group business debts. However, on a proper reading of the letter, it does no such thing. The letter makes it quite clear that Mrs Twigg remained in control of the business. It sets out how she expected the business to be operated and what she intended to happen on her death. But it made clear that that was subject to revision depending on how the business performed and the value of her personal assets. That is entirely consistent with the fact that, despite Max’s suggestion to the contrary, Mrs Twigg remained a guarantor of all the Twigg Group business debts. It is also consistent with the fact that it was only earlier that year that Ipswich was incorporated with Mrs Twigg as its sole shareholder and as the appointor and guardian under the Ipswich Landfill Trust.

Twigg Landfill is established

On 31 March 2006, Twigg Landfill Pty Ltd was incorporated and the Max Twigg Family Trust was established to acquire 20 parcels of land at Heatherton in Victoria as part of the expansion of the Twigg Group business. The sole shareholder and director of Twigg Landfill was Max. The purchase price, which is unclear but which was between $20 million and $23 million, was borrowed. Those borrowings were secured over assets owned by the Brooklyn Trust, the Ipswich Trust and the Paternal Trust. They were also guaranteed by Mrs Twigg and Max.

The sale of the Twigg Group business

Mrs Twigg and Max signed contracts for the sale of the Twigg Group business on 2 April 2007. Mrs Twigg says that she was aware that the sale price was approximately $155 million, although she says that she did not expect the Twigg Group to receive anything like that amount of money from the sale. She says that she never asked Max how much the family would receive as a consequence of the sale. According to her, there was a dinner with representatives of Cleanaway to celebrate the sale and it was some time after that dinner that Max told her in a telephone conversation that he was planning to give each of Frances, Elizabeth and Mrs Twigg $5 million out of the proceeds of sale. That account is generally consistent with the evidence. Max gave evidence that he told his mother about the proposed gifts before the sale. However, as I have said, that evidence is inconsistent with evidence given by his solicitor on information and belief on the point. It appears that Frances and Elizabeth did not find out about the $5 million until after the sale. Indeed, Elizabeth says that she did not find out about the sale itself until after it had occurred. The likelihood is that Mrs Twigg would have told her daughters shortly after Max had told her about the gifts.

Payment of the sale proceeds

Following completion of the sale to Cleanaway (which occurred on 2 April 2007 – the date of the agreement), an amount of $113,804,668 was paid into the Twigg Plant Hire cheque account. The sum of $466,132 was paid in employee benefits. An amount of $11,529,200 was held in escrow pending the assignment or novation of various council contracts to Cleanaway. The balance of $30 million was paid as shares in Cleanaway issued to the Max Twigg Family Trust. Those shares together with a further $2 million worth of shares acquired by the Max Twigg Family Trust were sold on 13 August 2009 and 14 August 2009 for $3,427,103.98, resulting in a loss on sale of $28,572,896. There is no evidence of what Max did with the proceeds of sale of the shares.
Of the balance of the purchase price, sums totalling $110,484,366.43 were withdrawn from the Twigg Plant Hire cheque account between 2 April 2007 and 4 April 2007. The sum of $68,800,000 was paid to the Twigg Plant Hire cash deposit account, although a substantial portion of that amount was returned to the Twigg Plant Hire cheque account a few days later. It is not possible to trace what happened to all of the sale proceeds. According to an affidavit sworn by Max for the purpose of Family Court proceedings, the money was disbursed in the following way:

$M

A

Proceeds

Sale Price

Sale of business – EBITDA payment (cash)

Sale of business – EBITDA payment (shares) - (cash = 2M less $1.7M loss)

Sale of business – earn out – Ipswich (shares) - (cash = $1.3M less $.57M loss)

Proceeds on sale of TPI shares (scrip $30M)

155.80

6.60

0.30

  0.73

   3.20

166,63

B

Deductions

Sale adjustments – employee entitlements

TPI shares (scrip)

Tax paid on sale of business

Debt repaid on sale of business

Payment to vendors of Ipswich

  (0.47)

(30.00)

(21.40)

(37.80)

       (0.61)

     (90.08)

Net proceeds from sale of business

75.55

C

Gifts

Gift-Dianne [sic]

Gifts-Frances

Gifts-Liz

Gifs – Brendan

(5.00)

(5.00)

(5.00)

       (0.50)

     (15.50)

D

Byron Bay & Rental

Purchase of Byron Bay property

Net rental from BBH June 07-June 12

(11.00)

1.80

(9.20)

E

Hedges Avenue

Purchase of Hedges Avenue property & stamp duty

Sale of Hedges Avenue

(18.50)

     7.60

(10.90)

F

Albatross

Purchase of Albatross property & stamp duty

(10.50)

G

Harkaway

Cost of Harkaway property (net of sale proceeds - previous house)

(5.00)

H

Superannuation

Contributions to superannuation

  (2.00)

I

Trueloc / AEF

Cash advanced to Trueloc/AEF

(8.20)

J

…

K

Failed Businesses ...

(12.45)

More will be said about amounts that can be traced from the sale of the Twigg Group business later in this judgment.
Max signed a number of resolutions dealing with the proceeds of sale which are reflected in the financial accounts of the trusts for the year ended 30 June 2007. Although the accounts make provision for Mrs Twigg and Max to sign the relevant directors’ declarations, in contrast to what appears to have happened in previous years, there is no evidence that they were ever signed by Mrs Twigg. (Previous sets of accounts in evidence are either signed by both Max and Mrs Twigg or neither of them.)
According to the accounts of the Ipswich Landfill Trust, it made a net profit of $52,532,327, including profit on the sale of its business of $50,225,300. Max signed what purported to be a resolution of directors of Ipswich. The resolution was in the following terms:

Resolution of Directors

HELD

On 2007

PRESENT:

Maxwell Twigg (Chairman)

It was resolved pursuant to the powers contained in the Deed of Settlement, that the net income of the Trust for the financial year ended 30 June 2007 be set aside and applied for the benefit of beneficiaries as follows:

DISTRIBUTION OF ORDINARY INCOME:

Beneficiary/Unit Holder

Brooklyn Landfill Trust

Comments

The first $1,675,000 of profits constituting ordinary income. Accumulate the balance of profits constituting ordinary income.

And that the beneficiaries be and are hereby absolutely and indefeasibly entitled thereto.

DISTRIBUTION OF CAPITAL:

DISTRIBUTION OF DIVIDEND INCOME:

TREATMENT OF DISTRIBUTIONS:

It was resolved that all the capital profit realised by the Trustee of the Trust on the sale of the Ipswich Landfill Trust business assets as per the sale agreement and which represent the total capital gain of the Trust as defined under Division 115 of the Income Tax Assessment Act 1997 be distributed to the Brooklyn Landfill Trust for the financial year ending 30 June 2007.

It was resolved that all the dividend income as defined under section 44 of the Income Tax Assessment Act 1936 be distributed to the Brooklyn Landfill Trust for the financial year ending 30 June 2007.

Further resolved that the amounts so determined be credited to separate accounts for each beneficiary in the books of the Trust as soon as the amounts are ascertained.

Attached to the resolution in evidence was a note in the following terms:

PLEASE NOTE:
This resolution has been incorrectly prepared as a multiple director minute and contains no signing date, this should have been prepared as a single director’s decision as per the following:
DIRECTORS DECISION MADE PURSUANT TO SECTION 248B(1) OF THE CORPORATIONS ACT 2001

According to the accounts of the Ipswich Landfill Trust, a distribution of $51,900,300 was made to beneficiaries.
The accounts of the Brooklyn Landfill Trust disclose a net operating profit of $101,942,326, which included income of $51,900,300 from trust distributions and $41,978,347 from profit on the sale of assets. The income from trust distributions plainly comes from the Ipswich Landfill Trust. Max purported to sign a resolution of Brooklyn distributing that profit to the Maxwell Twigg Family Trust. The resolution was in similar terms to the resolution signed in respect of the distribution made by Ipswich.
The accounts for the Maxwell Twigg Family Trust disclose a net operating profit of $118,916,570 including income of $101,942,226 from trust distributions and an amount of $17,054,549 as profit on the sale of shares. The accounts also disclose a distribution to beneficiaries of $101,861,921. That amount was distributed to the Paternal Trust. The accounts for that trust disclose a net operating profit of $106,577,900 which includes trust distributions of $101,861,921 and profit on the sale of assets of $5,674,033. Max purported to sign a resolution of Twigg Plant Hire which included a resolution in the following terms:

It was resolved that all the capital profits arising from distributions received from Maxwell Twigg Family Trust and capital profits generated from the sale of the Twigg Family Trust business assets as per the sale agreement and which represent the total capital gain of the Trust as defined under Division 115 of the Income Tax Assessment Act 1997 be distributed to Maxwell Twigg for the financial year ending 30 June 2007.
It was resolved that all the dividend income as defined under section 44 of the Income Tax Assessment Act 1936 be distributed to Twigg Consulting Pty Ltd for the financial year ending 30 June 2007.

Again, the minutes show the only person present at the meeting was “Maxwell Twigg (Chairman)”. The accounts for the Paternal Trust show a distribution to Max of $98,862,139 and a distribution to Twigg Consulting Pty Ltd, a company controlled by Max, of $6,763,287. According to the accounts, Max drew $52,211,668 in respect of his beneficiary entitlements in the 2007 financial year.
It is not clear when the resolutions were signed. The likelihood is that they were signed after 30 June 2007. The resolution of Twigg Plant Hire is dated 30 June 2007, which was a Saturday. The resolutions of Ipswich and Brooklyn are undated. According to Mr Fitzpatrick, it was not uncommon in 2007 for resolutions dealing with the distribution of income to be signed after year end, although he said that practice changed “much later” as a consequence of a ruling or statement of the Tax Office. Mr Fitzpatrick accepted that “quite probably the trust distribution in 2007 wasn’t prepared or signed before 30 June 2007”. Max made a similar concession. It is plain that that practice had been followed in at least some of the previous years. In my opinion, it is likely that it was followed in respect of the resolutions relating to the 2007 financial year trust distributions.

Events after the sale

Mrs Twigg remained on good terms with Max following the sale.
In 2008, after Mrs Twigg and her daughters had suffered very large losses on their investments, they met at Mr Fitzpatrick’s suggestion with Mr Adam Stanley, another partner and financial planner with Pitcher Partners, to obtain financial advice. In connection with giving financial advice, Mr Stanley’s usual practice was to arrange for an internal record to be created, referred to as an “Xplan”, which recorded information relevant to the client and his or her financial affairs. The Xplan for Mrs Twigg contains the following entry under the heading “Wills and Estate Planning”, on which Max’s written submissions place considerable weight:

Will reflects her current wishes
Diane wrote her son Max out of her will as he inherited the family business (this is known to Max and the family)
Liz and Frances fulfil the roles of Executor and POA

In my opinion, little weight can be placed on this entry. Mr Stanley says in his affidavit evidence that he does not “recall the source of the information used to populate Xplan in this case but I believe it would have been the questionnaires and risk profiles that Diane and Elizabeth completed and gave to me”. Those questionnaires are not in evidence. Mr Stanley says that it was his general practice to instruct a junior colleague to populate the Xplan system with client data. In this case, the information could equally have come from Mr Fitzpatrick. There is no evidence that Mrs Twigg had made a new will following the will she made in 2001. There is evidence that a draft will was prepared for her in 2006 by Mr Kelliher, a solicitor with Russell Kennedy who had taken over from Mr Bolkas. That draft will did exclude Max. The likelihood is that the draft was prepared for Mrs Twigg on instructions from Mr Fitzpatrick. Certainly, the initial instructions for preparation of the will came from Mr Fitzpatrick and there is no evidence that Mr Kelliher ever met Mrs Twigg in relation to the will. Mr Kelliher gave evidence on the basis of an incomplete copy of his file that the will had been signed. However, he accepted, after having been shown a complete copy of his file, that in giving that evidence he had simply made an assumption on the basis of what he had been shown. He also accepted that his file indicated that the will was still in draft in 2008. A letter on Mr Kelliher’s file from Mr Fitzpatrick suggests that Mr Fitzpatrick discussed the draft will with Mrs Twigg. But it seems unlikely that that discussion would have been sufficient to cause Mrs Twigg to complete a questionnaire two years later to the effect that she had made a will in 2006 which excluded Max because the business had been given to him. Mr Fitzpatrick is a more likely source of that information.
Max gives evidence that on 26 May 2009 he and Mrs Twigg attended a meeting with Mr Fitzpatrick at the offices of Pitcher Partners to review and discuss financial reports, income tax returns and trust distribution minutes together with the activities of the Twigg Group following the sale of the business in 2007. According to him, the meeting lasted approximately three hours. The existence and length of the meeting is evidenced by a Pitcher Partner timesheet.
Max says that during the course of the meeting, there was a conversation to the following effect:

Adrian:   "The financial reports and tax returns show the distribution of funds from the sale proceeds in 2007 and 2008 to the various group entities. It is important that you understand this information to sign all the necessary tax returns."
Max:   "Thank you Adrian, Mum do you understand everything and do you have any questions for Adrian"
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"

Mr Fitzpatrick’s evidence of the same conversation is given in almost identical terms. Mrs Twigg was cross-examined on that conversation. She gave the following evidence:

Q.   I want to suggest to you that at a meeting on 26 May 2009 with Adrian and Max you had a conversation where Adrian was talking about the financial statements and he said words to the effect, the financial reports and the tax returns show the distribution of funds from the sale proceeds in 2008 to the various group entities, he said, "It is important you understand this information to sign all the necessary tax returns". Do you recall that?
A.   No.
Q.   Max then said, "Mum, do you understand everything and do you have any questions for Adrian"?
A.   I would ‑ no, I would've said no.
Q.    You then responded, "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 million which was very generous". Do you recall saying that?
A.   Yeah, I do, but ‑ yeah, I do remember saying that. For his business, I can't ‑ what his business to do the business maybe I thought, I don't know. ..(not transcribable).. to do the business.

In my opinion, Max’s evidence of the conversation was fabricated. There is no reason why Mrs Twigg would have gratuitously made the admission attributed to her at a meeting to discuss the 2009 accounts. It is not plausible that Max would remember the conversation from 2009. Nor is it plausible that Mr Fitzpatrick had precisely the same recollection after 10 or 11 years. Mr Fitzpatrick conceded in cross-examination that he had no recollection of what occurred at the meeting. His affidavit evidence to the contrary is an example of his willingness to accede to a version of events put to him by Max’s lawyers in order to assist Max’s case despite having no real recollection of the relevant events.
Mrs Twigg’s evidence in cross-examination is too inconclusive and confused to amount to an admission that the conversation occurred; and it is implausible that she would have had any recollection of it. Moreover, any admission made by Mrs Twigg must be understood in context. Mrs Twigg at that stage trusted her son completely. She was happy to leave the running of the business to him and to do with it want he wanted. But it does not follow from that that she understood that she had given up all the rights that she had in relation to the Twigg Group or that that is what she had intended or accepted had happened.
Mr Fitzpatrick also says in his affidavit evidence that it was at that meeting that he raised the possibility of Max using Mrs Twigg’s tax losses and that Mrs Twigg agreed, although again in cross-examination he accepted he had no recollection of what was said in the meeting on the subject. Mrs Twigg in her affidavit evidence denies that the issue of tax losses was discussed. When cross-examined on the subject, she gave the following evidence:

Q.   Yes. Mrs Twigg, do you recall the discussion or do you recall discussions about Max using your capital losses?
A.   Yes.
Q.   Do you recall whether there was a discussion about the making of distributions to you in order to assist Max in having to pay capital gains tax?
A.   I don't understand that. No, I wouldn't have ‑ well, if I did, I didn't understand it.
Q.   Did you talk with Elizabeth or Frances about the proposal that Max could use their capital losses arising out of the Ron Bray losses?
…
A:   Yes ‑ yes, but I don't know how it came up. But what was ‑ well, we'd got advice. Like ‑ yes, of course you can. That sort of advice, or ‑ I don't know. Yeah. It seemed like the right thing to do. And – and – like ‑ it was no skin off our nose. Like ‑ it's only when you want to get them back. Anyway, keep going.
Q.   I want to suggest that no‑one said to you that if this arrangement went through, you would be paid or you would have a right to be paid $2 million afterwards?
A.   No, never mentioned. No ‑no. Gosh, no. $2 million? That's ‑ I've ‑ I've never heard that ‑ that amount bandied around ever.

Despite this evidence, in my opinion, it is likely that the use of the tax losses was raised at the meeting. There is little doubt that the topic was raised with Mrs Twigg at some stage. According to a file note prepared by Mr Fitzpatrick of a telephone conversation he had with Frances and her husband on 25 June 2009 concerning use of the tax losses, Mr Fitzpatrick told Frances that “I’d had a discussion with Max and Diane and was going to have a similar conversation with Liz”. The meeting on 26 May 2009 was an obvious time to have that discussion, concerned as it was with the 2009 accounts for companies controlled by Max and Mrs Twigg.
It is also likely that Mrs Twigg consented to Max distributing otherwise taxable income to her to absorb her tax losses. She and Max were on good terms at the time the request was made. It was not in Mrs Twigg’s nature at that time to reject any proposal put to her by Max or Mr Fitzpatrick concerning the management of her financial affairs. Although there may be a question concerning Mrs Twigg’s understanding of precisely what was being asked of her, it is likely that it would have been explained to her that she would be no worse off. It would be surprising in those circumstances for Mrs Twigg not to have acceded to the request.
As I have said, according to Mr Fitzpatrick’s file note, he also spoke to Frances on 25 June 2009 concerning the tax losses. His file note records the following:

At the end of the conversation Frances said there was really no downside from her point of view in the short term and in the short to medium term she didn’t see where taxable gains were going to come from. I did say to her it was important that there be a legal deed between Max and Diane, Frances and Liz – that would be separate deeds with each of them – spelling out that Max would be responsible for tax payable on future taxable income being assessed to each of Diane, Frances and Liz as a consequence of Max effectively utilising their carry forward lax losses.
The conversation ended on the basis of Frances and Ian being happy to proceed on that basis.

I accept that that file note is an accurate record of the conversation.

At some stage, Mr Fitzpatrick also spoke to Elizabeth. There is a dispute about what was said. The likelihood is that Mr Fitzpatrick said something similar to Elizabeth as he said to Frances. According to Elizabeth, during the conversation the following words were said:

AF “You would never use all of your capital losses. You should help your brother out. We will organise a document to be put together about this for everyone to sign. Max will cover whatever your future capital gains liability would be. This is what I am advising you to do.”
I said “Why would I give him my losses with nothing in return? I want to see the document.”

Elizabeth said that she had a second conversation with Mr Stanley (of Pitcher Partners) to similar effect and in which she said “If you do this it is happening under duress. I do not want this to occur as I get nothing. Adrian [Fitzpatrick] was going to organise a document for me to read”. Although the details of the conversation may be in doubt, I accept that Elizabeth expressed reservations about the proposal and that she was told that she would be provided with a document that it was intended all parties would sign.
Mrs Twigg, Frances and Elizabeth’s tax returns were prepared on the basis that the amounts referred to earlier in this judgment were distributed to them by the Twigg Investments Trust. A copy of Frances’s tax return was sent to her under cover of a letter addressed to her husband, which also included his tax return. The letter said:

We note that the Twigg Investment Trust has distributed $2,478,270 of capital gains to you during the 2009 year. This has been offset by capital losses made on your investment portfolio during the 2008 and 2009 year. Noel Martin is drafting an agreement documenting this, and noting that when future capital gains are made in your name up to the distributed amount, Max will be liable for the capital gains tax.

There is no evidence that Frances saw the letter. However, she signed the tax return and it was returned to Pitcher Partners for lodgement.

The likelihood is that a copy of Elizabeth’s tax return was also sent to her, that she signed it and returned it to Pitcher Partners, although there is no direct evidence that that is what happened. There is a document in Pitcher Partners’ files in the following terms:

Cover letter to Liz Flintoft regarding her 2009 income tax return.
8 June 2010
Mrs E Flintoft
INCOME TAX RETURN – YEAR ENDED 30 JUNE 2009
We note that the Twigg Investments Trust has distributed $2,478,270 of capital gains to you during the 2009 year. This has been offset by capital losses made on your investment portfolio during the 2008 and 2009 year. Noel Martin is drafting an agreement documenting this, and noting that when future capital gains are made in your name up to the distributed amount, Max will be liable for the capital gains tax.

But that document is obviously not a file copy of a letter and is not evidence that a letter was sent to Elizabeth in those terms.

Both Frances and Elizabeth say that in accordance with their normal practice at the time, they signed the tax returns sent to them by Pitcher Partners without reading or trying to understand them. Mrs Twigg signed her tax return. It is unclear in what circumstances she did so. It is doubtful that she read or sought to understand it before doing so. Pitcher Partners never prepared the agreement relating to the distributions.
It is not in dispute that the deferred consideration paid by Cleanaway under the sale agreement was ultimately paid to Max or entities associated with him. The accounts for the Brooklyn Landfill Trust for the year ended 30 June 2009 show a profit on the sale of assets of $5 million, which represented the deferred consideration paid to it by Cleanaway. That profit was distributed to the W & D Twigg Family Trust No 2 in accordance with a resolution signed by Max alone. The accounts for that trust indicate that a distribution of $5,143,296 was then made to the M & L Twigg Family Trust, an entity controlled by Max. The $5,143,296 plainly included the amount received from the Brooklyn Landfill Trust. The accounts for the Paternal Trust also show a profit on the sale of assets of $5 million arising from the sale to Cleanaway. That profit (after some minor expenses) was distributed to the Twigg Investments Trust, again in accordance with a resolution signed by Max alone.
The accounts of the Twigg Investments Trust for 2009 show net income of $9,042,260, which includes trust distributions of $11,355,341 and a loss on the sale of investments of $2,530,062. The accounts also show a current liability in the amount of $8,996,349. A note to the accounts explained that that liability related to beneficiary entitlements of Mrs Twigg, Frances and Elizabeth. Those entitlements were referred to in the accounts for each subsequent year. From the 2012 accounts, the relevant note described the amounts under the heading “BENEFICIARY ENTITLEMENTS (SUB-TRUSTS)”. That description reflected a tax ruling or decision of the Commissioner announced on 16 December 2009 that an unpaid beneficiary entitlement was capable of amounting to “the provision of financial accommodation” by a beneficiary to the trust and therefore a loan for the purposes of Part 3 Division 7A of the Income Tax Assessment Act 1936 (Cth) and that that result could be avoided “through the creation of a sub-trust for the sole benefit of the private company beneficiary”.
Mrs Twigg continued to live in the family home In Lysterfield until it was sold in 2010. It was never transferred into her name. She then moved into a “granny flat” at the back of Max’s house, which was known as “Harkaway”. She was aware that Max had bought the Byron Bay Hotel, which she visited, although she says that she understood that it was bought as part of a continuation of the family business. She was also aware Max had bought two expensive properties on the Gold Coast, that he owned a number of expensive sports cars and that he and his family had an extravagant lifestyle.
On 10 September 2013, Mrs Twigg executed a new will. The effect of that will was to give all her assets to Frances and Elizabeth. It is not entirely clear how that will came about. However, it appears that Mr Fitzpatrick was again the driving force behind it. He originally asked on 20 June 2013 for a meeting with Mr Kelliher to review Mrs Twigg’s will and there is correspondence between Mr Kelliher and Mr Fitzpatrick in relation to it without any apparent involvement of Mrs Twigg. The will was executed at the offices of Pitcher Partners. A new will was clearly necessary following the sale of the family home. It was also made desirable by two loans that Mrs Twigg had made to Frances totalling $1,061,000 to enable Frances to complete the purchase off the plan of an apartment. The will provided for that loan to be forgiven and for a corresponding gift to be made to Elizabeth.
Mrs Twigg says in her affidavit evidence that she did not understand the will she made in 2013. I accept that it is unlikely that she appreciated that her will made no allowance for Max because the proceeds of sale of the family business had already been given to him. Nothing had occurred that was likely to have brought home to Mrs Twigg that that is what had happened. Max, of course, controlled the proceeds of sale and what happened to them with Mrs Twigg’s tacit consent, just as he had controlled the Twigg Group business before it was sold. For a period of time following the sale, Max purported to continue to sign most if not all of the minutes of meeting and directors’ declarations that formed part of the accounts for the trusts of which the corporate plaintiffs were trustees. However, from about 2011, Mrs Twigg signed a number of minutes, particularly of Kastillia Nominees, which recorded both her and Max as being present at the relevant meeting. Consequently, it is likely that from Mrs Twigg’s point of view matters proceeded much as they had done in the past.
Max separated from his wife in about July 2011. They were divorced on 18 March 2014 and reached a binding financial settlement on 24 April 2015. In 2017, Mrs Twigg moved from the granny flat to the unit she currently occupies.
As I have said, Frances and Elizabeth settled their claims against Mr Bray in 2014, giving rise to a capital gains tax liability. It is not entirely clear how the question of the payment of that tax was raised with Frances. It appears that the issue was raised at some stage with Mr Wise and Mr Wise was given a copy of a memorandum dated 24 February 2014 that was prepared by Mr Simon Kindred, a tax specialist with Pitcher Partners, which set out the history of the matter and how it was proposed to address that tax liability. The memorandum makes no reference to an agreement by which Max was permitted to use Frances’s tax losses and agreed in exchange to pay any additional tax for which they were liable. Mr Wise replied to that memorandum on 12 March 2014 providing comments on the analysis it contained and saying “I presume that the additional tax of $101,885.47 will be paid from the Twigg Investments Trust and this will be debited to the Unpaid Beneficiary Entitlement (UBE) owed to Frances in the books of the Twigg Investment Trust”. That, of course, did not happen. The further correspondence between Mr Wise and Pitcher Partners is adequately described in the introductory section of this judgment.
It appears that the issue of the tax liability was first raised with Elizabeth at a meeting on 10 February 2014, which was attended by Elizabeth and her husband and Mr Fitzpatrick, Mr Stanley and Ms Dianne Keith of Pitcher Partners. That meeting was arranged in connection with the financial planning advice Pitcher Partners had been giving Elizabeth. The minutes of that meeting record that Elizabeth explained that she had had a falling out with Max on Christmas day and that she and her husband asked “where this leaves them with regards to their tax liability”. Mr Fitzpatrick is recorded as saying that he expected Max would pay it.
Following that meeting, Elizabeth spoke to Mr Stanley and then sent the following email to Mr Fitzpatrick:

After speaking with Adam on Friday night, I have a few issues and concerns with what has occurred over the past years.
Under your advice and instruction, I allowed Max to use my tax losses. Yesterday, I was informed for the first time that it was to the sum of two and a half million dollars.
Pitcher Partners advised me to [sic] that it was the right thing to do, and that they would put something in writing to Max that would make him obliged to pay all my future tax debts.

The evidence is not as clear in relation to the other motor vehicles. The bank statements for the Twigg Investments Trust No 2 bank account do not show the withdrawal of sums corresponding to the purchase price of the vehicles. In the case of the Dodge vehicle and the caravan, it is possible to identify the deposit as coming from the Twigg Investments Trust No 2 account, but not the balance of the purchase price. Moreover, it appears that part of the purchase price of the caravan comes from a trade-in of another caravan owned by Max, and there is no means of knowing the source of the funds to acquire that caravan. The statements do show regular and substantial transfers of money from the Twigg Investments Trust No 2 account to the BBH account. However, as I have explained, the deposits into and withdrawals from the Twigg Investments Trust No 2 account far exceed the proceeds of sale of the Byron Bay Hotel. Relevantly, there were substantial deposits into the account before the motor vehicle was bought. The plaintiffs have not produced any analysis of the account which would permit the Court to conclude that the amounts transferred to the BBH account came from the proceeds of sale of the hotel or that they were used to pay for the motor vehicles. Consequently, I have concluded that the proceeds of sale of the hotel cannot be traced to the other vehicles.

Albatross Avenue, Mermaid Beach, Queensland

This property was acquired by Max in about September 2008 for $10.5 million. It is not clear from the records in evidence where the purchase price came from. In his report, Mr Potter says that the bank statements of Maly Holdings Pty Ltd (the seventh defendant and a company controlled by Max) show a payment of $8,033,445.68 on 4 September 2008 with the reference “Albatross”. Mr Potter says that he is unsure of the source of the balance of the purchase price.
The evidence is that the balance of the Maly bank account as at 26 August 2008 was $54,586.12. On 3 and 4 September 2008, amounts totalling $5,475,858.78 were paid into the account. The source of those funds is unknown. Following the payment of $8,033,445.68, the account was overdrawn in the amount of $2,503,791.28.
According to the affidavit Max filed in connection with the Family Court proceedings, $10.5 million of the proceeds of sale of the Twigg Group business was used to acquire the property at Albatross Avenue (the difference of $500,000 relates to the costs of purchase). It was open to Max to give evidence in these proceedings explaining why the evidence he gave in the Family Court proceedings was not accurate. He did not do so. However, in submissions, Max points out that Mr Potter stated in his report that he (Max) had personally derived $9.3 million from the sale in around September 2008 of shares owned by him as a result of his providing personal consulting services to Cleanaway. As Max points out, that was around the same time as he paid for the Albatross Avenue property. There is no evidence to suggest that the proceeds of sale of the shares were used for any other purpose. Speaking loosely, these facts are consistent with the evidence Max gave in the Family Court proceedings.
Having regard to those facts, I am not satisfied that the purchase price for the Albatross Avenue property can be traced from the proceeds of sale of the Twigg Group business. That is plainly true to the extent that the account was in overdraft following the payment of the $8,033,445.68. Having regard to the timing and in the absence of any other evidence, it is reasonable to infer that a large source of the purchase price of the property was the sale of the Cleanaway shares which did not form part of the sale consideration. It follows that this aspect of the plaintiffs’ claim must fail.

Harkaway

Harkaway is a property that Max owned in Victoria that was, until recently, his family home. It was sold in February 2020 for $9 million. The evidence does not disclose the price Max paid for it. The affidavit Max swore in the Family Court proceedings suggests that the property was purchased using the price realised from the sale of a previous house together with $5 million obtained from the proceeds of sale of the Twigg Group business. According to the email dated 31 May 2020 from Mr Stanley to Mr Radcliff, of the net amount realised from the sale of the property of $8.45 million, $7 million was held in cash at call. It appears that of that amount $1.6 million was paid to Max’s former wife as part of the property settlement with her, but there is no evidence of what has happened to the balance. Again, Max gave no evidence in relation to the property in the affidavit evidence he gave in these proceedings.
In my opinion, the evidence given by Max in the Family Court proceedings together with the absence of any evidence from Max in these proceedings on the subject provides a sufficient basis to conclude that $5 million of the purchase price of Harkaway came from the proceeds of sale of the Twigg Group business and that the plaintiffs, therefore, held an equitable lien over Harkaway in respect of that money. The Pitcher Partners portfolio report shows that as at 30 March 2020 they hold in excess of $9 million on behalf of Max. There is no evidence before the Court to suggest that that money is still not held by them. I have already concluded that of that amount $4 million is the traceable proceeds of the sale of the Byron Bay Hotel. In my opinion, it is reasonable conclude on the basis of what is said in Mr Stanley’s email dated 31 May 2020 that a further $5 million is the traceable proceeds of the sale of Harkaway.

Hedges Avenue, Mermaid Beach, Queensland

It is not entirely clear how much Max paid for this property. He says in his affidavit filed in the Family Court proceedings that it was $18.5 million and that the purchase price came from the sale of the Twigg Group business. Mr Potter suggests that it was $18 million. Of that amount, Mr Potter says that the property was later sold for $7.6 million. There is no evidence what was done with the sale proceeds. Consequently, they cannot be traced.

The proceeds of sale of the Cleanaway shares

There is no evidence concerning what Max did with the proceeds of sale of the Cleanaway shares. Consequently, they cannot be traced.

Superannuation contribution of $2 million

According to the affidavit Max swore for the purpose of the Family Court proceedings, he contributed $2 million of the proceeds of sale of the Twigg Group business to his superannuation fund. On that basis, the plaintiffs claim that Max’s superannuation fund is impressed with a trust in their favour subject to Max transferring the $2 million to them plus interest on a compounded basis since 2007. There is, however, no evidence concerning Max’s superannuation fund before the Court. It is not clear, for example, who the trustee is or what its current assets are. In my opinion, the evidence is inadequate to permit tracing to occur.

Just allowances

Max submits that if the Court imposes proprietary remedies or an account of profit, “the present circumstances warrant just allowance to [him] in all the circumstances”.
It is not easy to make sense of this submission. An errant fiduciary is normally liable to account for any profit the fiduciary makes as a consequence of his or her breach of duty. However, where the profit is derived partly as a consequence of the fiduciary’s own skill and effort, it may be appropriate to make an allowance in the fiduciary’s favour. As the High Court explained in Warman International Ltd v Dwyer (1994-95) 182 CLR 544 at 560-1:

But a distinction should be drawn between cases in which a specific asset is acquired and cases in which a business is acquired and operated. …
…
In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources.

And later (at 562):

Whether it is appropriate to allow an errant fiduciary a proportion of profits or to make an allowance in respect of skill, expertise and other expenses is a matter of judgment which will depend on the facts of the given case. However, as a general rule, in conformity with the principle that a fiduciary must not profit from a breach of fiduciary duty, a court will not apportion profits in the absence of an antecedent arrangement for profit-sharing but will make allowance for skill, expertise and other expenses. (Footnote omitted)

In the present case, it is not clear why an allowance should be made in Max’s favour, and Max suggests none. For the most part, Max took the trust property and paid it away or invested it poorly. The only exception is the Byron Bay Hotel. Plainly, Max made a very substantial profit from that investment. However, Max did not run the hotel and any profit that was made reflected an increase in value in the real property, not an increase in value of the business as a consequence of Max’s efforts. Even if it were appropriate in some cases to make allowances in respect of increases in the value of an asset acquired with trust property, this would not be such a case given the value of trust property that has been lost by Max. There should be no allowance in his favour.

The Cross-claim and related issues

Having regard to the conclusions I have reached, the issues raised by the cross-claim and the related issues raised by the plaintiffs’ claim do not arise and the cross-claim should be dismissed. However, I should say something about those issues in the event that I am wrong in relation to the plaintiffs’ principal claims.
As I have said, two claims are advanced in the cross-claim. First, it is said that the Corporate Plaintiffs, in distributing most of the proceeds of sale of the Twigg Group business to Max, did not act honestly and in good faith but rather acted irresponsibly, capriciously or wantonly and, in doing so, breached their duties as trustees: see J D Heydon & M J Leeming, Jacobs Law of Trusts in Australia, 8^th ed, LexisNexis, 2016 at [16-08]. Second, it is said that Max and Mrs Twigg, in causing the Corporate Plaintiffs to breach their duties as trustees, breached their duties as directors: see Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2015] VSCA 9; (2015) 318 ALR 302 at [228] per Garde AJA.
The second limb of this case is similar to a case that the plaintiffs seek to advance in the alternative – namely, that Max breached his duties as a director because he did not act in good faith and honestly when he caused the assets of the trust to be distributed in the way that they were. So, for example, it is said that Max failed to have regard to the document which was signed by all members of the family and Mr Fitzpatrick in November 1995, shortly before Mr Twigg’s death, that he failed to have regard to the fact that he owed his position in the companies to Mrs Twigg and that he failed to consider the position of his sisters. Implicit in this case is that the Corporate Plaintiffs themselves failed to discharge their duties as trustees and that failure arose because of Max’s breach of his duties as a director.
It is difficult to assess these cases because the hypothesis on which they proceed is unclear. That hypothesis is that the plaintiffs fail in their principal claims. But what is unclear is precisely what factual findings that failure involves. If the case is that Max was entitled himself to make decisions for the Corporate Plaintiffs because in some way or another that entitlement had been delegated to him, it is difficult to see how Mrs Twigg could have any liability. The suggestion appears to be that Mrs Twigg breached her duties as a director because she failed to discharge any of the responsibilities she had as a director and instead let Max run the Corporate Plaintiffs as if he were the sole director. But it is not entirely clear how that case can sit with a case that, as a result of Mrs Twigg’s conduct, Max did become entitled to make decisions concerning the distribution of the proceeds of sale of the Twigg Group business on his own – which is the hypothesis on which the alternative case appears to proceed.
In any event, had it been necessary, I would not have found that the Corporate Plaintiffs breached their duties as trustees in distributing the proceeds of sale of the Twigg Group business in the way that they did because of a failure by them, through Max, to give proper consideration to the other beneficiaries. On the present hypothesis, Mrs Twigg left it to Max to make the decisions regarding the distribution of the sale proceeds. It seems obvious that the four beneficiaries that needed to be considered were himself, Mrs Twigg, Frances and Elizabeth. He obviously considered all four because he chose to give the other three $5 million each and himself the rest. I do not think that that decision itself was so perverse or unreasonable or capricious that it could be said to amount to a breach of the duties owed by a discretionary trustee.
It is true that Max ignored the wishes expressed in the document signed by the family in November 1995. But that was not a legally binding agreement and a great deal had happened since then. The business was obviously worth very much more. Much of the increase in the value of the business was due to Max’s efforts. It was not due to the efforts of Mrs Twigg or Frances or Elizabeth. It appears that Mrs Twigg, Frances and Elizabeth had benefitted from the business up until 2005. Mrs Twigg set out in a letter in 2005 how she proposed the business would be dealt with from then on. It is apparent from that letter that pending any change of view on her part Max and his family would ultimately take control of the Twigg Group business. Max was never cross-examined on the reasons he took the decisions he did. If they were decisions for him to take, then, without more, I do not think it could be said that they involved the Corporate Plaintiffs breaching their duties as trustees or Max breaching his duties to them.

The UBE Proceeding and similar issues

Again, these issues only arise if, contrary to the conclusions I have reached, the plaintiffs fail in the main proceeding. The UBE Proceeding must fail because any money that the Twigg Investments Trust purported to distribute to Mrs Twigg, Frances and Elizabeth was money the subject of a trust in favour of the Corporate Plaintiffs. The claim of the plaintiffs in the Main Proceeding to individual sums shown as being owed to them in the accounts of entities controlled by Max must fail because they are caught up in the broader claim that has succeeded.
Again, however, it is necessary to say something about these claims in the event that I am wrong in relation to the conclusions I have reached in the Main Proceeding.
The UBE Proceeding raises several issues. They are:

Whether an agreement was reached by which Mrs Twigg, Frances and Elizabeth agreed to forego their unpaid beneficiary entitlements;

Whether Mrs Twigg, Frances and Elizabeth are estopped from asserting that Twigg Investments is obliged to pay the unpaid entitlements;

Whether the claims are barred by s 5 of the Limitation of Actions Act 1958 (Vic);

Whether a defence of laches is available; and

Whether Max has some personal liability in respect of the claim.

Was there an agreement?

In my opinion there was no agreement with Frances and Elizabeth. However, there was an agreement with Mrs Twigg.
It is uncontroversial that an agreement can be inferred from the conduct of the parties: see, for example, Tecnicas Reunidas SA v Andrew [2018] NSWCA 192 at [50] per Leeming JA (with whom Bathurst CJ and White JA agreed).
In the case of Mrs Twigg, as I have explained, the likelihood is that an express agreement was reached with her at the meeting on 26 May 2009. I have already concluded that the issue was raised with her at that meeting. It is likely that what was put to Mrs Twigg was similar to what was put subsequently to Frances and Elizabeth. And what was put involved Max obtaining the benefit of the income and utilising Mrs Twigg’s tax losses, on the basis that Max would pay any tax that Mrs Twigg was subsequently liable to pay as a consequence of Max’s utilisation of those losses. The likelihood is that it was not explained to Mrs Twigg the precise mechanism by which that would be achieved, or that she understood it if it was. But in Mrs Twigg’s case, I do not think that that matters. The essential elements of the agreement were that Mrs Twigg would not receive the money herself but in some way or another her tax losses would be used and Max would pay any additional tax she became liable to pay as a consequence of the arrangement. For the reasons I have given, in my opinion, it is likely that Mrs Twigg agreed to that proposal.
In the case of Frances and Elizabeth, Max submits that an agreement can be inferred from the following circumstances:

The proposal was put to each of Frances and Elizabeth and both of them understood that the proposal involved Max obtaining the benefit of the income and that their tax losses would be utilised but on the basis that Max would reimburse them for any tax they were later required to pay as a result of the utilisation of their losses. So, for example, Elizabeth gave evidence that she said to Mr Fitzpatrick when the proposal was put to her “Why would I give him my losses with nothing in return?” Frances accepted in cross-examination that she was told that the proposal was to help out Max;

It was never discussed that Frances and Elizabeth would receive the income themselves;

It is uncontroversial that Max agreed to pay any future tax liability that Frances and Elizabeth had as a consequence of the arrangement and he did;

Frances and Elizabeth signed their 2009 tax returns which recorded the distributions to them.

Although Max frames his defence on the basis of an agreement to be implied from all the relevant circumstances, critical to that defence is the contention that Frances and Elizabeth became bound by the agreement by signing (and returning to Pitcher Partners) their tax returns, which disclosed the trust income. Max’s case is that they must have understood that the relevant amounts were included in their tax returns in order to implement the proposal previously put to them – it could not have been included for any other reason, and certainly not because Max had decided to gift the money to them – and by signing the returns Frances and Elizabeth must be taken to have accepted that proposal, notwithstanding any reservations they may have expressed in the past or assumptions they may have made about the agreement being reduced to writing before it was implemented.
I do not accept that submission. One difficulty is that there is no evidence that Frances and Elizabeth were actually aware of the contents of their tax returns. Both say that it was their usual practice to sign their tax returns without reading them. I accept that evidence. This is not a case where a party has become bound by a written agreement because they have signed it: cf Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [45]-[47]. Frances and Elizabeth no doubt became bound by what they had signed so far as the tax office was concerned. But it does not follow that they became bound by every implication that might arise from their signed tax returns on the assumption that they knew what they contained. It appears that Max relies on the letter sent to Frances’s husband enclosing her tax return. But there is no evidence that Frances saw that letter. As I have said, the curious Pitcher Partners file note recording that a similar letter had been sent to Elizabeth is not evidence that the letter referred to in the document was sent to her, or that she read it. Both Frances and Elizabeth were proceeding on the basis that a document recording what was proposed would be sent to them so that they could consider it. They never received such a document. The reasonable inference from that is that, for whatever reason, Max had decided not to proceed with the proposal.

Another difficulty with Max’s case on this issue is that absent a document recording the proposal, it is not clear what was agreed. The position of Elizabeth and Frances is to be contrasted to Mrs Twigg’s in this respect. I do not think it could be said that they agreed to some general proposal and were happy to leave it to Pitcher Partners to sort out the details. At most it could be said that they agreed to consider a document once it was produced.
Max’s case seems to be that what was agreed was that the money would be distributed to Elizabeth and Frances, they would gift it to him and he would pay any tax for which Elizabeth and Frances became liable for which they would not have been liable but for the distributions to them. But, as I have said, there was no agreement specifically in those terms. Moreover, if that was the agreement, it does not appear to have been implemented, since the accounts of the Twigg Investments Trust still show the amounts as unpaid beneficiary entitlements.

Estoppel

Having regard to the conclusions I have reached on the existence of an agreement, it is unnecessary to consider the position of Mrs Twigg.
Max relies on a conventional estoppel. He submits that (1) he (and by extension Twigg Investments), Frances and Elizabeth mutually assumed that the UBEs would not be paid, (2) they conducted their relationship on that basis because payment was never requested until 2014, when Frances’s new accountant, Mr Wise, saw the entitlements in the accounts; (3) Max (and the Twigg Investments Trust) would suffer detriment if they were required to pay the entitlements now.
The difficulty with this case is that there is no evidence that Frances and Elizabeth knew of the entitlements before 2014; and when each of them became aware of the entitlements each requested that they be paid. Consequently, there was no mutual assumption. Max submits that they must have known of the entitlements when they signed off on their tax returns. I have already rejected that submission. I accept their evidence that they did not read through their tax returns and consequently did not pick up the income notionally distributed to them.

Limitation defence

Max seeks to characterise the entitlement to the UBEs as a claim for the payment of a debt, which were payable from 30 June 2009. Consequently, he submits that the six year limitation period imposed by s 5 of the Limitation of Actions Act applies.
I do not accept that submission. The distributions were made in the 2009 financial year, but were not paid. At the time the distributions were made, Max, as the controlling mind of Twigg Investments Pty Ltd (the trustee of the Twigg Investments Trust), must have intended that they would be treated in a tax effective manner, since his whole case in relation to the UBEs is that they were declared in order to reduce his own tax. In order to achieve that result, it was necessary for Twigg Investments to hold the amounts on sub-trusts. The accounts of the trust in later years expressly recognised that that was the case. Consequently, it is reasonable to infer that at the time the distributions were declared, they were held on sub-trusts for the beneficiaries – that is, Frances and Elizabeth.

Laches

The defence of laches must fail because, on the findings I have made, Frances and Elizabeth were not aware of their entitlements under the sub-trusts before 2014 and, as soon as they became aware of them, they sought to assert their entitlements.

The Claim against Max

The Claim against Max has the following elements:

Twigg Investments had a duty to ensure that it had the financial resources to pay the UBEs;

As at 30 June 2009, it had those resources. By 30 June 2010, it did not;

In paying away those financial resources, Twigg Investments committed breaches of trust;

Max induced or procured those breaches of trust, or was a knowing recipient of the funds paid in breach of trust or knowingly assisted in the breach of trust.

As to (a), Max submits that such a duty is not known to law. I do not accept that submission. Although the duty is somewhat oddly expressed, the position is that as at 30 June 2009, Twigg Investments held the sum of $2,577,295 on trust for each of Frances and Elizabeth. It was a breach of trust to pay those sums away to third parties, absent some agreement with or consent from Frances and Elizabeth. On the findings I have made, no agreement was reached and no consent was given.
As to (b), it is strictly correct to say that the Twigg Investments Trust did not have sufficient assets to pay all UBEs as at 30 June 2010. However, assuming that Mrs Twigg’s entitlement did not have to be paid, it appears from the accounts that there was a shortfall of $329,674. On the face of the accounts, that position did not change substantially over time. So, for example, the accounts for the year ended 30 June 2016, which are the most recent accounts in evidence, show that after taking account of the UBEs owing to Mrs Twigg, Frances and Elizabeth, the total trust funds were (2,301,260). What did change over time was the make-up of the trust’s assets. Before 2009, the assets included investments and a promissory note totalling $8,242,380, which presumably could have been realised to pay the UBEs. By 2011, those assets had been disposed of and apparently replaced by UBEs owing from the Twigg Family Trust, the Ipswich Landfill Trust and the M&L Twigg Family Trust. It is impossible from the accounts alone to decipher what has happened. There is, however, no reason not to accept Pitcher Partners’ assertion that the trust no longer has the means of paying the UBEs owing to Frances and Elizabeth.
As to (c), for the reasons I have already mentioned, to the extent that Twigg Investments is no longer able to pay the UBEs, in my opinion it is in breach of trust.
As to (d), the second and third ways in which this claim is put (knowing receipt and knowing assistance) correspond to the two limbs of Barnes v Addy. The first way in which the claim is put (that is, that Max induced or procured the breaches of trust), at least in Australia, continues to provide an alternative basis for accessorial liability: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [161]ff. The plaintiffs’ submissions focused on knowing receipt and the claim that Max induced or procured the breaches of trust. Both claims require knowledge by Max of the breaches of trust. The knowing receipt case requires proof that Max or his alter egos received trust property. The alternative case requires Max to have induced or procured the breach of trust.
There remains a question of what counts as knowledge for the purpose of attracting liability under either head. The answer to that question is usually given by reference to the five categories of knowledge identified by Gibson J in Baden v Société Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA] [1992] 4 All ER 161; [1993] 1 WLR 509. They are (1) actual knowledge; (2) the wilful shutting of eyes to the obvious; (3) wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; (4) knowledge of circumstances which would indicate the facts to an honest and reasonable person; and (5) knowledge of circumstances which would put a reasonable person on inquiry. The position appears to be that the first four categories are sufficient, but the fifth is not, at least in the case of recipient liability: see Grimaldi v Chameleon Mining NL (No 2) at [263]ff. The position is not clear in the case of liability based on inducement or procurement of the breach of trust. From a practical point of view, it is difficult to see how that head of liability would be satisfied without actual knowledge.
In this case, Max knew or must have known that the accounts of the Twigg Investments Trust recorded the UBEs owing to Frances and Elizabeth, since he signed them. It is less clear that he knew, or that an honest and reasonable person knowing what he knew would have appreciated, that by dealing with the assets of the trust in the way that he did would involve a breach by Twigg Investments of its obligations as a trustee. He had no reason to think that he had made decisions on behalf of the trustee that had the result that Frances and Elizabeth became entitled to the UBEs shown in the accounts; and, no doubt, would have been surprised to find out that he had. The likelihood is that he was present when the issue was raised with Mrs Twigg and that he understood Mr Fitzpatrick would raise the issue with Frances and Elizabeth. There is no evidence to suggest that he was ever told that there was some problem in obtaining their consent to his use of their tax losses. Consequently, whatever the accounts showed, there was no basis for him thinking that there were limits on what he could do with the assets of the trust because specific amounts were held on trust for Frances and Elizabeth. For those reasons, the accessorial liability case against Max must fail.
The plaintiffs’ place some emphasis on the fact that when Mr Wise (Frances’s accountant) first raised the question of payment of the UBE owing to her, Pitcher Partners responded that there was no money to pay the UBEs. They did not assert that the right to payment had been gifted back. But that response was sent on behalf of Twigg Investments, not Max. Even if it could be said that that response demonstrates that Pitcher Partners and Twigg Investments appreciated at the time that, contrary to what had been proposed, the entitlements had not been gifted back, the response does not demonstrate that Max knew at the time the breaches of trust occurred that that was the position.

The Alternative Claims in the Main Proceeding

In the Main Proceeding, the plaintiffs claim, in the alternative to their other claims, the following amounts:

Brooklyn claims the sum of $2,023,047 which is disclosed as a loan owing to it in the accounts of Twigg Investments;

Brooklyn claims the sum of $3,474,345 which is disclosed as a loan owing to it in the accounts of Maly Holdings Pty Ltd, the Seventh Defendant;

Mrs Twigg claims the sum of $207,114 as an unpaid beneficiary entitlement of the trust of which Maly is the trustee;

Twigg Plant Hire claims the sum of $15,939,827 as an unpaid beneficiary entitlement of the Max Twigg Family Trust.

The claims mirror the UBE Proceeding. In each case, the amounts are disclosed in the relevant accounts. The accounts form part of the business records of the relevant companies and are prima facie evidence of what they contain and, in particular, of the debts recorded in the accounts. Consequently, it is said that in the absence of any other evidence, the relevant plaintiff is entitled to recover the amount claimed.
Max offers no answer to that submission. Although, of course, the claimants are now under the control of Mrs Twigg – in one case, Mrs Twigg is the claimant – it is apparent that the entries were made by Pitcher Partners at a time when Max controlled Brooklyn and Twigg Plant Hire. It is equally plain that Pitcher Partners are under the control of Max, in the sense that they accept instructions from him, not Mrs Twigg. If there was an explanation for why the amounts recorded in the accounts do not actually reflect what is owing, then presumably Pitcher Partners could have given that explanation and Max could have asked them to do so. But none of that happened. In my opinion, that provides a sufficient basis for concluding that the amounts shown in the accounts are payable by the entities said to owe them. Accordingly, I can see no reason why these claims should not succeed if the principal claims made by the plaintiffs had failed.

Conclusions

On the conclusions I have reached, the following property is held on trust for the plaintiffs in proceeding 2019/71329:

The property at Ozone Parade, Miami, Queensland purchased by the first defendant in 2017;

The property at Murlong Crescent, Palm Beach, Queensland purchased by Twigg Property Development Pty Ltd in April 2018;

Lots 1, 2 and 3 Mermaid Beach, Queensland that were purchased by Surf Street Holdings Pty Ltd in late 2018 and early 2019;

A sum totalling $9 million held by Pitcher Partners on behalf of the Twigg Investments No 2 Trust;

The Porsche motor vehicle registered in Queensland as “Turn One” owned by the first defendant;

The cross-claim in that proceeding and proceeding 2018/212326 should be dismissed.
The Court gives the following directions:

On or before 14 September 2020, the plaintiffs serve on the defendants (other than the fourteenth defendant) short minutes of order intended to give effect to these reasons for judgment together with the orders they propose in relation to costs;

On or before 28 September 2020, the defendants (other than the fourteenth defendant):

if they agree with the short minutes of order, notify the plaintiffs and my Associate of their agreement, in which case the orders will be made in chambers;

if they do not agree with the short minutes of order, serve on the plaintiffs a document (which may include alternative short minutes of order) setting out the matters on which they disagree and provide copies of the plaintiffs’ short minutes of order and their document to my Associate, in which case the matter will be listed, initially for directions, at 9.00 am on 6 October 2020, or such other date as is agreed with my Associate, to deal with any outstanding issues.

**********

Decision last updated: 31 August 2020

$M
A	Proceeds Sale Price Sale of business – EBITDA payment (cash) Sale of business – EBITDA payment (shares) - (cash = 2M less $1.7M loss) Sale of business – earn out – Ipswich (shares) - (cash = $1.3M less $.57M loss) Proceeds on sale of TPI shares (scrip $30M)	155.80 6.60 0.30 0.73 3.20
166,63
B	Deductions Sale adjustments – employee entitlements TPI shares (scrip) Tax paid on sale of business Debt repaid on sale of business Payment to vendors of Ipswich	(0.47) (30.00) (21.40) (37.80) (0.61) (90.08)
Net proceeds from sale of business	75.55
C	Gifts Gift-Dianne [sic] Gifts-Frances Gifts-Liz Gifs – Brendan	(5.00) (5.00) (5.00) (0.50) (15.50)
D	Byron Bay & Rental Purchase of Byron Bay property Net rental from BBH June 07-June 12	(11.00) 1.80 (9.20)
E	Hedges Avenue Purchase of Hedges Avenue property & stamp duty Sale of Hedges Avenue	(18.50) 7.60 (10.90)
F	Albatross Purchase of Albatross property & stamp duty	(10.50)
G	Harkaway Cost of Harkaway property (net of sale proceeds - previous house)	(5.00)
H	Superannuation Contributions to superannuation	(2.00)
I	Trueloc / AEF Cash advanced to Trueloc/AEF	(8.20)
J	…
K	Failed Businesses ...	(12.45)

Medium Neutral Citation:	Twigg v Twigg (No 4); Lambert v Twigg Investments Pty Ltd (No 3) [2020] NSWSC 1159
Hearing dates:	1 to 5; 9 to 12; 17 and 18 June 2020
Decision date:	31 August 2020
Jurisdiction:	Equity - Commercial List
Before:	Ball J
Decision:	See paragraphs [272] to [274]
Catchwords:	EQUITY – Breach of fiduciary duties – Where director of corporate trustee used money borrowed on security over the corporate trustee’s assets to acquire properties – Where director of corporate trustee caused trust funds to be distributed to himself EQUITY – Trustee de son tort – Whether doctrine applies – Where trustee a director of the corporate trustee – Where trust funds paid to entities controlled by trustee de son tort – Held doctrine applies where a person deals with trust assets without power to do so – Held whether trust funds paid to trustee de son tort’s alter ego is immaterial EQUITY – Alternative claim – Claim that director was knowing recipient of trust property – Claim that director induced or procured breach of trust by corporate trustee – Claim that director knowingly participated in a fraudulent design by corporate trustee – Corporate trustees only capable of acting through individuals – Held attributing primary liability to corporate entity is mischaracterisation of facts where only conduct giving rise to breach of trust is that of director EQUITY – Alternative claim – Decision to distribute trust funds not made honestly and in good faith – Held claim inconsistent with director liability on the facts of the case EQUITY – Defences – Estoppel – Difference between promissory estoppel and conventional estoppel – Not found on the facts EQUITY – Defences – Laches – Where defence applies to personal claim but not to proprietary claim EQUITY – Just allowance – Where profit not derived as consequence of fiduciary’s skill and effort – Where some of trust property lost EQUITY – Constructive trust – Application of proprietary remedy to breach of fiduciary duty – Application of proprietary remedy where finding of trustee de son tort made – Where proprietary remedy fails absent tracing – Held proprietary claim not precluded merely because recipient took trust assets under particular form of transaction – Held Court entitled to look at the substance of what occurs EQUITY – Tracing – Tracing rules – Held Court should take a common sense and reasonable approach – Held Court should be prepared to draw reasonable inferences concerning what become of trust assets CORPORATIONS LAW – Ratification – Where corporate trustee was sole shareholder – Where corporate trustee owes duties to beneficiaries – Whether sole shareholder can ratify director’s breach of duty where duty affects the discharge of the corporate trustee’s obligations toward beneficiaries CORPORATIONS LAW – Defences – Corporations Act 2001 (Cth), s 1318 – Not found on the facts LIMITATION OF ACTIONS – Leave to amend – Whether claim that directors’ declaration is void because in breach of Corporations Act 2001 (Cth) is founded on a “simple contract” under Limitation of Actions Act 1958 (Vic), s 5 – Whether Limitation of Actions Act 1958 (Vic), s 21 applies to constructive trustees – Question of what amounts to fraud under Limitation of Actions Act 1958 (Vic), ss 21(1)(a) and 27 – Whether Limitation of Actions Act 1958 (Vic), s 21(1)(b) applies to property received or held by fiduciary’s alter ego – Where facts relevant for limitation by analogy under Corporations Act 2001 (Cth), s 1317K arose during trial TRUST AND TRUSTEES – Defences – Trustee Act 1958 (Vic), s 67, 68 – not found on the facts
Legislation Cited:	Companies Act 1961 (VIC) Corporations Act 2001 (Cth) Income Tax Assessment Act 1936 (Cth) Income Tax Assessment Act 1997 (Cth) Limitation Act 1969 (NSW) Limitation Act 1980 (UK) Limitation of Actions Act 1958 (Vic) Securities Industry Act 1975 (NSW) Trustee Act 1958 (Vic)
Cases Cited:	Armitage v Nurse [1997] 3 WLR 1046 Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302, [2015] VSCA 9 Baden vSociété Générale pour Favoriser le Développement du Commerce et de l'Industrie en France SA [1992] 4 All ER 161; [1993] 1 WLR 509 Barnes v Addy (1874) LR 9 Ch App 244 Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721 Briginshaw vBriginshaw (1938) 60 CLR 336 Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2)) [2020] NSWCA 117 Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 Cheerine Group (International) Pty Ltd v Yeung [2006] NSWSC 1047 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 Di Sante v Camando Nominees Pty Ltd [2000] VSC 211 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544 Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664 Forge v Australian Securities & Investments Commission (2004) 213 ALR 574, [2004] NSWCA 448 Foskett v McKeown [2001] 1 AC 102; [2000] UKHL 29 Fourniotis v Vallianatos (2018) 56 VR 85; [2018] VSC 369 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29 Honey v McLennan (1997) 18 WAR 384 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 Ledir Enterprises Pty Ltd, Re (2013) 96 ACSR 1, [2013] NSWSC 1332 McNab v Graham (2017) 53 VR 311; [2017] VSCA 352 Mancini v Mancini (1999) 17 ACLC 1570; [1999] NSWSC 799 Mara v Browne [1896] 1 Ch 199 at 209 Moratic Pty Ltd v Gordon [2007] NSWSC 5 Orr v Ford (1988-89) 167 CLR 316 Parker v R (1997) 186 CLR 494 Port Ballidu Pty Ltd v Frews Lawyers [2017] QSC 19 Re Day (2017) 340 ALR 368; [2017] HCA 2 Re Hallet’s Estate, Knatchbull v Hallett (1880) 13 Ch D 696 Re Oatway [1903] 2 Ch 356 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286, [2003] NSWCA 71 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 Saad v Doumeny Holdings Pty Ltd [2005] NSWSC 893 Seymour v Seymour (1996) 40 NSWLR 358 Sze Tu v Lowe (2014) 89 NSWLR 317, [2014] NSWCA 462 Tecnicas Reunidas SA v Andrew [2018] NSWCA 19 Toksoz v Westpac Banking Corporation [2012] NSWCA 199; (2012) 289 ALR 577 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Warman International Ltd v Dwyer (1994-95) 182 CLR 544 Williams v Central Bank of Nigeria [2014] AC 1189; [2014] UKSC 10 Young v Lalic [2006] NSWSC 18
Texts Cited:	J D Heydon & M J Leeming, Jacobs Law of Trusts in Australia, 8th ed, LexisNexis, 2016 J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 5th ed (LexisNexis Butterworths 2015)
Category:	Principal judgment
Parties:	In 2019/71329 (Main Proceedings): Diane Twigg (First Plaintiff \| First Cross Defendant) Ipswich Landfill Pty Ltd atf Ipswich Landfill Trust (Second Plaintiff \| Second Cross Defendant) Brooklyn Landfill & Waste Recycling Pty Ltd (Third Plaintiff \| Third Cross Defendant) Twigg Plant Hire Pty Ltd (Fourth Plaintiff/ Fourth Cross Defendant) Maxwell James Twigg (First Defendant \| Fifth Cross Defendant) Twigg Landfill Pty Ltd (Second Defendant \| Sixth Cross Defendant) Byron Bay Beach Hotel Properties Pty Ltd (Third Defendant \| Seventh Cross Defendant) Twigg Consulting Pty Ltd (Fourth Defendant \| Eighth Cross Defendant) B Bay H Pty Ltd (Fifth Defendant \| Ninth Cross Defendant) Twigg Investments Pty Ltd (Sixth Defendant \| Tenth Cross Defendant) Maly Holdings Pty Ltd (Seventh Defendant \| Eleventh Cross Defendant) Twigg Property Development Pty Ltd (Eighth Defendant \| Twelfth Cross Defendant) Twigg Motor Sport Pty Ltd (Ninth Defendant \| Thirteenth Cross Defendant) Vision Motor Sport Pty Ltd (Tenth Defendant \| Fourteenth Cross Defendant) Twigg Motor Racing Pty Ltd (Eleventh Defendant \| Fifteenth Cross Defendant) Surf Street Holdings Pty Ltd (Twelfth Defendant \| Sixteenth Cross Defendant) W & E Twigg Pty Ltd (Thirteenth Defendant \| Seventeenth Cross Defendant) Frances Lambert (Fourteenth Defendant \| Cross-Claimant) Twigg Co Pty Limited (Fifteenth Defendant) In 2018/212326 (UBE Proceedings): Frances Lambert (First Plaintiff) Elizabeth Flintoff (Second Plaintiff) Diane Twigg (Third Plaintiff) Twigg Investments Pty Limited atf Twigg Investments Trust (First Defendant) Maxwell Twigg (Second Defendant)
Representation:	Counsel: M R Elliott SC with DK Smith (Plaintiffs \| First to Fourth Cross Defendants in 2019/71329; First to Third Plaintiffs in 2018/212326) J Evans QC with P Miller (First to Thirteenth and Fifteenth Defendants \| Fifth to Seventeenth Cross Defendants in 2019/71329; First and Second Defendants in 2018/212326) AJ McInerney SC (Fourteenth Defendant \| Cross Claimant in 2019/71329) Solicitors: Roberts and Partners Lawyers (Plaintiffs \| First to Fourth Cross Defendants in 2019/71329; First to Third Plaintiffs in 2018/212326) Radcliffs (First to Thirteenth and Fifteenth \| Fifth to Seventeenth Cross Defendants in 2019/71329; First and Second Defendants in 2018/212326) Rankin Ellison Lawyers (Fourteenth Defendant \| Cross-Claimant in 2019/71329)
File Number(s):	2019/71329; 2018/212326

HELD	On 2007
PRESENT:	Maxwell Twigg (Chairman) It was resolved pursuant to the powers contained in the Deed of Settlement, that the net income of the Trust for the financial year ended 30 June 2007 be set aside and applied for the benefit of beneficiaries as follows:
DISTRIBUTION OF ORDINARY INCOME:	Beneficiary/Unit Holder Brooklyn Landfill Trust	Comments The first $1,675,000 of profits constituting ordinary income. Accumulate the balance of profits constituting ordinary income.
And that the beneficiaries be and are hereby absolutely and indefeasibly entitled thereto.
DISTRIBUTION OF CAPITAL: DISTRIBUTION OF DIVIDEND INCOME: TREATMENT OF DISTRIBUTIONS:	It was resolved that all the capital profit realised by the Trustee of the Trust on the sale of the Ipswich Landfill Trust business assets as per the sale agreement and which represent the total capital gain of the Trust as defined under Division 115 of the Income Tax Assessment Act 1997 be distributed to the Brooklyn Landfill Trust for the financial year ending 30 June 2007. It was resolved that all the dividend income as defined under section 44 of the Income Tax Assessment Act 1936 be distributed to the Brooklyn Landfill Trust for the financial year ending 30 June 2007. Further resolved that the amounts so determined be credited to separate accounts for each beneficiary in the books of the Trust as soon as the amounts are ascertained.