Twigg v Twigg

Decision

1. I am not persuaded that I should make any of the injunctive orders sought by Diane.

Is there a serious question to be tried? Good arguable case?

1. Max does not dispute that the relevant distributions were made by him alone and without reference to Diane.
2. On the face of it, Max purported to pass single director resolutions on behalf of the Corporate Trustees.
3. Diane claims that she was unaware of the distributions and that Max represented to her that, after the debts of the Corporate Trustees were discharged, the net proceeds of sale were modest and were to be shared between Diane, Max and Diane's two daughters (Max's sisters). As a result, Diane contends, she and her two daughters received only $5 million each. Diane contends that she has only recently discovered the true position.
4. Thus Mr Elliott submitted: "In short, the plaintiffs say that Max has misappropriated virtually all of the proceeds of the sale [of the business]. The distributions were the result of breaches of fiduciary duty [Max] owed to the [Corporate Trustees] and in breaches of trust effected by him".
5. Neither Diane nor Max gave evidence on the application. Each of their solicitors swore affidavits setting out their client's position, on information and belief.
6. Max's solicitor gave such evidence that in 2001 Diane and Max had a conversation, in the presence of their accountant, Mr Adrian Fitzpatrick, in which Diane said: "I want control and ownership of the business to go to Max, who can run it and take on the debts and [Diane's daughters] can get everything from my estate". And that Mr Fitzpatrick said words to the effect: "I understand." And Max said words to the effect: "Ok".
7. Max's solicitor also gave evidence, again on information and belief, from: 1. Max that Diane left the day to day management and decision making in respect of the Corporate Trustees to Max and that Max was solely responsible for the day to day operations of the business and its acquisitions and expansion during the 10 year period from 1997 to 2007; and 2. Max and Mr Fitzpatrick that between 1997 and 2017 they observed Diane "attend all meetings in relation to the effective transfer of control and beneficial ownership of the Twigg Group" and that during meetings that Diane attended after the 2007 sale there were conversations to this effect: "Max: [Mr Fitzpatrick], from the proceeds of the sale, do you think a gift of $5 million for Mum, Frances and Elizabeth would be appropriate? [Mr Fitzpatrick]: Yes, I think so, Max. and Max: Mum, I want to give you $5 million from the sale proceeds. Diane: Oh no, Max. You take the money and do what you want with it. It's yours. You earned it. Max: Look, I've done really well out of this, better than I could imagine, and I want to give $5 million to you, [and Diane's daughters]. Diane: Well, okay Max. If its for the girls as well. Thank you."
8. Mr Fitzpatrick has sworn an affidavit in which he corroborates the conversation set out at [29].
9. In that affidavit, Mr Fitzpatrick also gave this evidence: "A meeting was held at Pitcher Partners on 26 May 2009 between myself and [Diane], [Max] was in attendance. The meeting lasted for 3 hours which was unusually long because it involved the following agenda items: (a) The litigation which was occurring between [Diane] [and Diane's daughters] against Ron Bray, their former financial planner; (b) The personal returns of [Diane] and [Max]; (c) review, discussion and presentation of financial reports, income tax returns, trust distribution minutes; (d) Discussion of the various investments of [Diane] with Adam Stanley, her financial advisor; and (e) a review of each of the Second, Third and Fourth Plaintiffs activities. (f) The conversation that took place was along the lines of: [Mr Fitzpatrick]: 'The financial reports and tax returns show the distribution of funds from the sale proceeds in 2008 to the various group entities. It is important that you understand this information to sign all the necessary tax returns.' Max: '[Diane] do you understand everything and do you have any questions for [Mr Fitzpatrick][?]' Diane: 'Yes I understand and Max is able to do what he likes with the sale proceeds as it was his business and we received $5,000,000 which was very generous'." (Emphasis added.)
10. Diane's solicitor swore an affidavit, on information and belief from Diane, stating that Diane "specifically" denies the matters to which Mr Fitzpatrick has deposed.
11. As a list response is yet to be filed, the legal consequences said to flow from these alleged conversations is not yet articulated. Mr Giles SC, who appeared with Mr Kaufmann for Max, submitted that the conversations, if established, would amount to the appointment of Max as Managing Director of each of the Corporate Trustees pursuant to provisions in the company constitutions, such as cl 19.2 of the constitution of the second plaintiff. Alternatively Mr Giles submitted that the conversations give rise to an estoppel.
12. On the other hand, Mr Elliott submitted that: "The evidence therefore establishes the existence of serious questions to be tried. On the face of the trust documents and records those questions are answered in favour of the plaintiffs. It is only the allegations of fact now made by Max about oral assurances or statements by Diane, being alleged assurances and statements not recorded in any document produced by Max, and being allegations that are denied by Diane, that stand between the plaintiffs and their success in the proceeding".
13. This submission appears to accept that, if the conversations to which Mr Fitzpatrick has deposed, and to which it appears that Max will also depose, are established, this would be a matter which would "stand between the plaintiffs and their success in the proceeding".
14. Of course, I am not in any position to make an assessment as to what finding the Court will make about whether these conversations occurred.
15. To make out a case for a freezing order, Diane must show a "good arguable case" being one "more than barely capable of serious argument, and yet not necessarily one which the judge believes to have better than 50 percent chance of success": per Mustill J in Ninemia Maritime, cited with approval by McColl JA in Samimi v Seyedabadi at [69].
16. I am satisfied that Diane has such a "good arguable case". There is also a serious question to be tried as to whether the conversations took place and as to their significance.
17. But the task ahead for Diane includes establishing that Max's and Mr Fitzpatrick's recollection of these conservations should not be accepted.

Were any of the current assets of Max or his related entities acquired using the Impugned Sum?

1. Diane asserts a constructive trust over any assets acquired by Max and his related entities using the Impugned Sum. Thus, as I have set out, Diane seeks, as one alternative, an order restraining Max from dealing with the seven identified properties and the share and managed fund portfolio to which I have referred at [15(b)] above.
2. There is no direct evidence that any of those properties was purchased using the Impugned Sum.
3. One of those properties is located at Harkaway in Victoria. That property was purchased by Max and his former wife in January 2006, the year before the sale of the business. A new residence was built there from around 2008 to 2010. There is no evidence of the cost of constructing that residence. Max's former wife transferred her interest in that property to Max as part of their divorce settlement.
4. In about June 2007 Max caused the third defendant, Byron Bay Beach Hotel Properties Pty Ltd, to purchase the Byron Bay Beach Hotel for $44 million. Diane's solicitor has sworn an affidavit in which he infers from the consideration shown on the transfer and the amount of borrowing recorded on the relevant mortgage that the third defendant "must have had its own funds of $9 million" to complete the purchase.
5. In September 2010 Max purchased a property at Mermaid Beach in Queensland for $10 million. That is Max's current principal place of residence.
6. In August 2017, W & E Twigg Pty Ltd, a company which is not currently a defendant, purchased a property in Miami in Queensland. There is no evidence of the price for which that property was purchased. The evidence suggests that Max is currently causing that property to be developed.
7. In November 2017 Max bought two apartments at Southbank in Melbourne for $3.15 million. There is no evidence as to what funds Max used to acquire those properties.
8. The third defendant sold the Byron Bay Hotel in February 2018 for some $68 million. There is no evidence of what the third defendant has done with the proceeds.
9. In April 2018, another company, Surf Street Holdings Pty Ltd, also not a defendant, purchased a motel and two properties at Mermaid Beach in Queensland. The evidence suggests that Max is proposing to develop those two sites into a high rise development from which he hopes to realise some $20 million.
10. Finally, in May 2018 Max purchased another property at Palm Beach in Queensland for $1.75 million. The evidence suggests Max proposes to spend a further $5.5 million on that property for "improvements" in the hope of realising some $9.5 million on sale.
11. In addition to this real estate, Diane asserts a constructive trust over Max's share and managed funds portfolio. That portfolio is set out in a Pitcher Partners "Portfolio Valuation" and valued at some $17.2 million as at 19 March 2019. The earliest "Initial Purchase Date" of the investments in the portfolio is December 2017, some 10 years after the distribution of the Impugned Sum.
12. Mr Elliott submitted that the temporal sequence in which the real property acquisitions took place suggest that, at final hearing, Diane will be able to trace the Impugned Sum into some or all of them.
13. In my opinion, a high degree of speculation is involved in that proposition. The evidence suggests that Max owned properties and had access to funds prior to the 2007 sale of the business. The evidence, although far from complete at this stage, suggests that Max has made many successful, and some unsuccessful, investments since then. He has also had a property settlement with his former wife.
14. It is by no means clear to me that Diane will be able to establish that all or any of the assets now owned by Max and his related entities were acquired with the Impugned Sum.
15. As for the portfolio of shares and managed funds, my attention has not been drawn to any material which could cast light on any connection between it and the distribution of the Impugned Sum in FY 2007.
16. Mr Elliott emphasised that Max has remained "silent" as to how the acquisition of these properties was funded. But faced with Diane's application for injunctive relief, Max had no obligation to give any explanation about these matters.
17. In any event, Diane, through her legal representatives, has served on Max and his related entities a series of notices to produce. Many documents have been produced. There was no suggestion before me that there had been any failure by Max or his related entities to produce documents in response to those notices.
18. It may be that, at the final hearing of these proceedings, Diane will be able to show that all or some part of the Impugned Sum was used to purchase one or more of the properties to which I have referred or, in the case of the Harkaway property, to fund the construction of the new residence on that property in 2008 and 2009.
19. In that sense, there is a serious question to be tried as to whether, to adopt Mr Giles' words, Diane can "prove a fund or property which is comprised of the traceable proceeds of the impugned payments".
20. However, the temporal sequence of the real property acquisitions does not alone, in my opinion, provide any basis for predicting, with any confidence, what prospects Diane has of making out that proposition.

Risk of dissipation

1. Mr Elliott submitted that the risk that Max will dissipate assets that he, and his associated corporate entities, have acquired is "acute".
2. I see no basis upon which I could come to this conclusion.
3. Mr Elliott's first submission was that "the risk is evident from the defendants' ongoing refusal to provide a candid and meaningful explanation as to how any of the distributed funds have been applied".
4. But Max, faced with the very serious allegations made against him in these proceedings, has no obligation to give any explanation and, as I have said, has responded to all of the notices to produce that Diane has caused to be served.
5. Mr Elliott submitted that: "The defendants' protestation that it will take time to undertake and provide a full account cannot begin to explain why Max has not provided a meaningful overview of the key assets he has acquired with the funds. While he may not presently be able to account for every dollar and cent, he must know how he has spent the money and significant uses he has made of it".
6. That submission assumes that Max, faced with Diane's application, was obliged to provide the "meaningful overview" for which Mr Elliott contended.
7. In any event, through his solicitor, Max has given an account of the assets that he and his related entities have acquired.
8. I cannot infer from the nature of Max's response to this application that there is an "acute" risk that he will dissipate his assets.
9. On the contrary, the evidence suggests that Max is, through corporate entities that he controls, engaging in a redevelopment of two of the properties to which I have referred. It may be, as Mr Elliott submitted, that those redevelopments are at an early stage. But the fact that they are underway suggests that Max is intent on acquiring and developing property, rather than dissipating it.
10. Mr Elliott emphasised that Max has refused to give any undertaking to Diane or to the Court not to deal with assets owned and controlled by him. However, as Mr Giles pointed out, it is well established that failure by a party in Max's position to offer such an undertaking is not sufficient to grant an application for a freezing order: for example see Ward J, as her Honour then was, in In the matter of C & L Cameron Pty Ltd [2012] NSWSC 676 at [201].
11. Mr Elliott also submitted that the evidence showed that Max "lives an expensive lifestyle" and engages in the "expensive personal pursuit" of being a "semi-professional" racing car driver.
12. Assuming these matters are true, I cannot see what light they cast on the likelihood that Max will cause his assets to be dissipated. As Mr Giles submitted, it appears that Max is a wealthy man and can afford to engage in "expensive personal pursuits".
13. Finally, Mr Elliott drew my attention to the recent decision of Black J in In the matter of Twigg Investments Pty Ltd [2019] NSWSC 336.
14. Black J was dealing with an application to set aside a decision made by a Registrar that each party should pay their own costs of proceedings which sought to set aside two creditors' statutory demands. His Honour dismissed the application to review the Registrar's decision.
15. Mr Elliott submitted that the effect of his Honour's decision was that "Max cannot be relied upon to handle finances, books and records correctly", that "Max has made signed declarations…which he now claims are not even true" and that "Max is someone who is prepared to obfuscate and 'hold back' information, and only deployed at a time of his choosing, rather than when he ought to".
16. Assuming that that is a fair description of his Honour's findings, and assuming (without making any finding about this) that Max could be criticised for engaging in the conduct the subject of his Honour's findings, I cannot see how this points to an "acute risk" that, faced with Diane's application, he will seek to dissipate his assets.

Limitation

1. An issue will arise in these proceedings as to whether Diane's claims are out of time.
2. Mr Giles submitted that it is likely that the law of Victoria will govern the parties' rights, and drew attention to s 21 of the Limitation of Actions Act 1958 (Vic) which provides for a six year limitation for "an action by a beneficiary to recover trust property in respect of any breach of trust" other than in the case of "fraud or fraudulent breach of trust".
3. I am not in any position to make any assessment, now, of what prospects Max has of showing that Diane's action is out of time.
4. It does arise out of events which occurred some 15 years ago but as Mr Elliott submitted, fraud is alleged in the Commercial List Statement and equitable remedies are sought which may not be susceptible to be defeated on the basis of statutes of limitation.
5. I can form no view about these matters at the moment and do not consider that they weigh in the balance.

Delay

1. Mr Elliott submitted that: "It was only on 15 October 2018 that Diane became aware of her rights and of Max's misappropriation of the proceeds of the sale [of the assets of the business]. Once Diane became aware of her rights she immediately took steps to protect them. Up to that point she had been proceeding on the basis of a misrepresentation made to her by Max in 2007 as to the quantum of sale proceeds available for distribution".
2. That submission is based on evidence, given on information and belief by Diane's solicitor that: "c. Diane was involved for a few years after the death of [Mr Twigg] in the management of the Twigg Group, however, within approximately 5 years, due [to] her trust in Max…as her son, she became less involved in the Twigg Group; d. Max would often tell Diane that the business was 'under pressure', that 'things were tight', 'there are a lot of expenses' and that 'the business has a lot of debt to pay off'; e. Although Diane was aware of the total sale price for the Twigg Group in early 2007, Diane did not appreciate that the Twigg Group would realise over one hundred million dollars from the sale for the reasons given below; f. In or about early 2007, Max…told Diane that he would sell the Twigg Group to Mr Peabody's company (then called Transpacific); g. From the sale of the Twigg Group, Max told Diane that she [and Diane's daughters] would receive $5 million each from the sale of the Twigg Group and Diane considered this to be an extremely large amount of money; h. It was only after Diane obtained the trust deeds and the financial accounts from Pitcher Partners did she appreciate that the quantum of the net proceeds of sale received from the Twigg Group sale and that the money was being held on trust for the beneficiaries which included herself which was not until the week commencing 15 October 2018."
3. I find it difficult to know what to make of this evidence.
4. It appears to show that Diane accepts that she knew of the sale price of the Twigg Group in early 2007 ($170 million) but that she did not understand how much money would be "realised" or "received" from the sale.
5. The material does not point to the conclusion that Max, in terms, misrepresented to Diane what funds were available from the sale of the Twigg Group. Rather, it suggests that Max simply stated how much Diane, and his sisters "would receive", namely $5 million, being an amount that Diane considered to be "an extremely large amount of money".
6. More importantly, the material also does not reveal what it was in October 2018 that prompted Diane to "obtain the trust deeds and financial accounts from Pitcher Partners" and thereby come to "appreciate" how much had been realised from the 2007 sale of the business and that such funds were "being held on trust" for her. Did Diane receive advice from someone that she should look at these documents? Did Diane make some observation of Max's conduct that caused her to enquire about these matters? If so, what was it? And why was it that these enquiries were made only after some 11 years from the sale? None of this is explained.

Balance of convenience

1. The form of order sought by Diane directed to specific parcels of real estate is subject to a "carve out" such that the order would not prevent: 1. the sale of any of those properties for fair market value; 2. the payment from such proceeds of the reasonable costs and expenses of sale and any third party debt; 3. dealing with the Mermaid Beach and Miami properties "for the purposes of carrying on in its ordinary course the development of those properties"; and 4. the disposal or dealing with any property on giving seven days' notice.
2. As I have mentioned, Max, through one or other of his corporate entities, is in the process of developing the Mermaid Beach and Miami properties.
3. The proposed "carve out" may go some way to ameliorating the impact of an injunction directed to those, and indeed the other named properties. However Max would face the prospect of having to respond, no doubt urgently, were Diane to act within the proposed seven days' notice period and seek to prevent him from disposing of property.
4. No such "carve out" is proposed in relation to the proposed order restraining Max and his related entities from dealing with any assets up to an unencumbered value of $200 million. Such an order would very likely adversely affect Max's current development activities.

Value of Diane's undertaking as to damages

1. Diane is prepared to give the usual undertaking as to damages. Diane's only asset is a property in Victoria worth in the vicinity of $1.5 million.
2. Mr Giles submitted that Diane's undertaking "is not of sufficient worth" as "it is likely that any damage suffered by Max in respect of his real property holdings would well exceed [Diane's] assets".
3. Mr Elliott responded by submitting that it was most unlikely that Max would suffer damage exceeding $1.5 million were orders made as sought.
4. I am not able to come to any conclusion as to what quantum of damage Max might suffer by reason of being restrained as Diane proposes.
5. I do, however, conclude that the value of Diane's undertaking as to damages may well be insufficient to meet the damage the making of the proposed orders may cause Max to suffer.

Conclusion

1. I find the matter to be finely balanced, but have concluded that I should decline to make any of the orders sought by Diane.
2. I have set out at [16] why I would not make the first of the orders proposed by Diane directed to assets that "represent" the Impugned Sum or assets acquired "consequent upon" receipt of the Impugned Sum.
3. I am not persuaded to make either of the other orders sought, being an injunction directed to the preservation of nominated properties and assets or a freezing order.
4. This is for a number of reasons.
5. The first is that I am not persuaded Diane has shown that there is a sensible risk that, unrestrained, Max will dissipate his assets (see [61] to [76] above).
6. The second is that I am not persuaded that an adequate explanation has been given by Diane for the delay in bringing this application (see [82] to [87] above).
7. The third is the speculative nature of Diane's prospects of tracing the Impugned Sum into any of the real property Max and his related entities now own, let alone into Max's share and managed funds portfolio (see [52] to [54] above).
8. The fourth is the nature of the forensic task Diane faces in making out her case on liability. I accept that there is a serious question to be tried that Max acted without authority when purportedly passing the directors' resolutions leading the making of the Impugned Sum. But Diane's success in that regard seems likely to depend on establishing, amongst other things, that Mr Fitzpatrick's recollection of the conversations to which I have referred, and to which he has put his oath, should not be accepted. Although I cannot predict, and express no view about, Diane's prospects in that regard, it represents a stark potential barrier to her success in the proceedings.

Conclusion

1. Diane's Notice of Motion of 8 March 2019 should be dismissed.
2. I will hear submissions as to costs and on the question of whether I should order Max to serve an asset disclosure affidavit.

Amendments 05 April 2019 - Formatting corrected 22 February 2023 - Typographical error in [3] (year) corrected DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 February 2023