Twigg v Twigg

Introduction

1. 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.
2. 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.
3. 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".
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. 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

1. Before setting out the factual background, it is necessary to say something about the evidence given in the case.
2. Each of Mrs Twigg, Frances, Elizabeth and Max gave evidence.
3. 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.
4. On the other hand, neither Mrs Twigg nor Max was a satisfactory witness, although for very different reasons.
5. 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.
6. 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.

Origins of the Twigg Group business

1. 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.
2. 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. …".
3. 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.
4. 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

1. 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.
2. 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).
3. 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.
4. 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

1. 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.
2. 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"]".
3. 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. …
4. 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

1. 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.
2. 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.
3. 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.
4. 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. …

Ipswich incorporated

1. 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

1. 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".
2. 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.
3. 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.
4. 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.

Twigg Landfill is established

1. 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

1. 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

1. 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.
2. 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 Proceeds 155.80 Sale Price 6.60 A Sale of business - EBITDA payment (cash) 0.30 Sale of business - EBITDA payment (shares) - (cash = 2M less $1.7M loss) 0.73 Sale of business - earn out - Ipswich (shares) - (cash = $1.3M less $.57M loss) 3.20 Proceeds on sale of TPI shares (scrip $30M) 166,63 Deductions (0.47) Sale adjustments - employee entitlements (30.00) B TPI shares (scrip) (21.40) Tax paid on sale of business (37.80) Debt repaid on sale of business (0.61) Payment to vendors of Ipswich (90.08) Net proceeds from sale of business 75.55 Gifts (5.00) Gift-Dianne [sic] (5.00) C Gifts-Frances (5.00) Gifts-Liz (0.50) Gifs - Brendan (15.50) Byron Bay & Rental (11.00) D Purchase of Byron Bay property 1.80 Net rental from BBH June 07-June 12 (9.20) Hedges Avenue (18.50) E Purchase of Hedges Avenue property & stamp duty 7.60 Sale of Hedges Avenue (10.90) F Albatross (10.50) Purchase of Albatross property & stamp duty G Harkaway (5.00) Cost of Harkaway property (net of sale proceeds - previous house) H Superannuation (2.00) Contributions to superannuation I Trueloc / AEF (8.20) Cash advanced to Trueloc/AEF J … K Failed Businesses ... (12.45)

1. More will be said about amounts that can be traced from the sale of the Twigg Group business later in this judgment.
2. 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.)
3. 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 Comments Brooklyn Landfill Trust 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: 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. DISTRIBUTION OF DIVIDEND INCOME: 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. TREATMENT OF DISTRIBUTIONS: 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.

1. 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
2. According to the accounts of the Ipswich Landfill Trust, a distribution of $51,900,300 was made to beneficiaries.
3. 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.
4. 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.
5. 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.

Events after the sale

1. Mrs Twigg remained on good terms with Max following the sale.
2. 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
3. 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.

The nature of the claim

1. Mrs Twigg and the Corporate Plaintiffs' principal claim in the Main Proceeding has two limbs. First, they claim that Max breached his fiduciary duties as a director of the Corporate Plaintiffs by establishing Twigg Landfill and the Max Twigg Family Trust to acquire the properties comprising the Heatherton landfill site in April 2006 using money borrowed on security over the assets of the then existing Twigg Group business. Second, they claim that Max breached his fiduciary duties as a director of the Corporate Plaintiffs by causing those companies to distribute the sale proceeds to himself or entities controlled by him. Alternatively, they claim that Max held those assets as a trustee de son tort. In both cases, it is said that Max or the entity that received a benefit as a consequence of Max's breach of duty held the benefit as a constructive trustee for the Corporate Plaintiffs or Mrs Twigg.
2. The plaintiffs' submissions focussed on the distribution of the consideration paid by Cleanaway in 2007 and the three resolutions of Ipswich, Brooklyn and Twigg Plant Hire purportedly passed by Max in accordance with which it was said that distribution was made. The critical resolution is the resolution of Twigg Plant Hire, since that is the resolution which purports to distribute the net proceeds of sale to Max. It is common ground that the deferred consideration paid by Cleanaway was also distributed to Max or entities controlled by him, again in accordance with resolutions signed by Max alone. It was not suggested that the distribution of the deferred consideration raised different issues from those raised by the original distributions. Moreover, the plaintiffs did not contend that the later distributions were capable of being traced to particular assets. For those reasons, it is appropriate in this judgment to follow the approach taken by the plaintiffs and to focus on the distributions made in 2007.

The claim in relation to Twigg Landfill

1. Mr Evans properly conceded in final submissions that Max breached his fiduciary duties in establishing Twigg Landfill and the Max Twigg Family Trust to acquire the Heatherton site, although he submitted that it was an innocent breach of duty. Max used his position as a director of the Corporate Plaintiffs and the resources of those corporations to secure for entities he controlled a benefit in the form of the Heatherton site. That was a clear breach of fiduciary duties: see, for example, Boardman v Phipps [1967] 2 AC 46; [1966] 3 All ER 721; Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36.
2. Max's primary defence to this claim is that it went nowhere because the assets of Twigg Landfill were sold to Cleanaway in exchange for Cleanaway shares, those shares were sold at a loss and the sale proceeds were paid to Twigg Plant Hire. In other words, Max or Twigg Landfill accounted to Twigg Plant Hire for any benefit arising from Max's breach of duty. The difficulty with that defence is that it is not factually correct. The shares in Cleanaway were not part of the principal consideration payable under the sale agreement. The shares were issued directly to Twigg Landfill as consideration for its assets. What became of the proceeds of sale is not known.

The claim in relation to the sale proceeds

1. Mr Evans also conceded that, if the payments of the principal consideration arising from the sale agreement were not made in accordance with valid resolutions of the Corporate Plaintiffs, then Max committed what was said to be an innocent breach of fiduciary duty. In making that concession, Mr Evans must be taken (properly) to have abandoned a submission made in Max's written submissions that it was not a breach of Max's duties as a director to cause the relevant trustees to commit a breach of trust on the basis that there was no position of conflict between him and the company and he did not make a gain at the expense of the company. One difficulty with that submission is that Max had an interest in seeing the proceeds of sale distributed to him (or entities controlled by him), whereas the trustee companies had an interest in complying with their respective constitutions and their obligations as trustees.
2. Max's primary defence to the claim in relation to the sale proceeds was that the money was distributed in accordance with valid resolutions of the Corporate Plaintiffs, with the result that there was no breach of duty. That submission depends on a contention that Max himself was in some way or another authorised to sign documents which took effect as resolutions of the Corporate Plaintiffs.
3. A note appended to the resolutions suggest that they were signed by Max in exercise of a power conferred by s 248B(1) of the Corporations Act 2001 (Cth), which states that "The director of a proprietary company that has only 1 director may pass a resolution by recording it and signing the record". However, that section is plainly concerned with a proprietary company which has only one director. It has no application in the present case.
4. In para 293 of the List Response, Max pleads a number of matters which are said to provide a defence to the whole of the plaintiffs' claim and which appear to be directed at establishing that Max was given the power to make the relevant decisions on behalf of the directors of the Corporate Plaintiffs. Some of those matters are merely background facts, such as the history of the Twigg Group business before and after Mr Twigg's death and Mrs Twigg's involvement in the business. The critical allegations appear to be that (1) from about 2001, Mrs Twigg delegated the decision making function of the Corporate Plaintiffs to Max including by appointing him the managing director of each of those companies; (2) in about 2001, Mrs Twigg and Max agreed that Max had ownership and control of the Twigg Group business and that his sisters would inherit Mrs Twigg's personal assets on her death; and (3) Mrs Twigg executed an enduring power of attorney in Max's favour.

Is the claim by Mrs Twigg or the Corporate Plaintiffs?

1. One difficulty in answering this question is that it is not clear to which companies the sale proceeds belonged. The net sale proceeds were paid into the cheque account of Twigg Plant Hire, which presumably received them as agent for all the vendors. There is no evidence concerning the value of the business held by each of the Corporate Plaintiffs. The sale proceeds were divided among the Corporate Plaintiffs, but there is no evidence of how that was done; and any division appears to have been done by Max alone, presumably on the advice of Pitcher Partners. Absent any other evidence, it seems to be appropriate to accept that division.
2. According to the accounts, the Ipswich Trust received $50,225,300 from the sale of assets, the Brooklyn Trust received $41,978,347 and the Paternal Trust received $5,674,033. The plaintiffs submit that the resolutions purportedly passed by Max dealing with the distribution of those amounts were not signed until after 30 June 2007, with the result that the amount received by the Ipswich Trust and the Brooklyn Trust had already been distributed to Mrs Twigg in accordance with the trust deeds governing those trusts. As already mentioned, both trust deeds provide that any income earned in a particular accounting period that was not the subject of a specific decision of the trustee either to distribute or to accumulate it was held on trust for Mrs Twigg as the person who is entitled to the trust fund on the Vesting Day.
3. Max resisted that conclusion. He appeared to accept that the amount received by each trust was properly regarded as income for the purposes of the relevant provisions of the trust deed. However, he submitted that the Court should conclude that the resolutions were signed on 30 June 2007. I have already rejected that submission. However, there is another difficulty in the way of the suggestion that Mrs Twigg was the proper plaintiff in respect of distributions made by Ipswich and Brooklyn. There is no suggestion that Max signed the resolutions on which he relies before 30 June 2007 (as opposed to on or about 30 June 2007). According to evidence given by Mr Potter, the relevant bank accounts show that before 30 June 2007, a total amount of $58,750,000 was paid out of the Twigg Plant Hire cheque account. More will be said about some of those payments later in the context of tracing. However, the likelihood is that the total amount was paid to Max or entities associated with him. The payment of those sums absent any resolution or other authority given to Max to make the payments involved a breach of duty by him or the intermeddling by him in the affairs of the relevant trusts. And at the time the sums were paid, there had been no distribution to Mrs Twigg under the relevant trust deeds. Consequently, to the extent that the sale proceeds were distributed to Max or entities controlled by him before 30 June 2007, the proper plaintiffs appear to be the Corporate Plaintiffs.

Remedies

1. Subject to any defences that Max might have, the Corporate Plaintiffs are entitled to equitable compensation in respect of Max's breach of fiduciary duties. As I have said, they also claim proprietary remedies. The claim to proprietary remedies has two steps. First, it is claimed that Max or the companies controlled by him held the sale proceeds distributed to them on trust for the Corporate Plaintiffs or Mrs Twigg. Second, it is claimed that those sale proceeds can be traced to existing assets held by Max or entities that he controls. The issue of tracing is dealt with below. The question whether the plaintiffs are entitled to proprietary remedies is dealt with in the following paragraphs.
2. It is not necessary to consider in any detail whether the Corporate Plaintiffs (or Mrs Twigg) have a proprietary claim in respect of the Cleanaway shares acquired by Twigg Landfill. That issue depends on whether Twigg Landfill held the properties comprising the Heatherton site or any profits arising from the sale of those properties to Cleanaway on trust for the Corporate Plaintiffs. Max did not use the trust assets of the Corporate Plaintiffs to acquire those properties, but it may well be that the Court would impose a remedial constructive trust in respect of the profits Twigg Landfill earned on the sale of those assets. As Mason J explained in Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 at 107-8: … the fiduciary cannot be permitted to retain a profit or benefit which he has obtained by reason of his breach of fiduciary duty. … A fiduciary is liable to account for a profit or benefit if it was obtained (1) in circumstances where there was a conflict, or possible conflict of interest and duty, or (2) by reason of the fiduciary position or by reason of the fiduciary taking advantage of opportunity or knowledge which he derived in consequence of his occupation of the fiduciary position ... Any profit or benefit obtained by a fiduciary in either of the two situations already described is held by him as a constructive trustee. … Neither principle nor authority provide any support for the proposition that relief by way of constructive trust is available only in the case where a profit or benefit obtained by the fiduciary was one which it was an incident of his duty to obtain for the person to whom he owed the fiduciary duty. Once it is established that the fiduciary is liable to account for a profit or benefit which he has obtained there can be no objection to his being held to account as a constructive trustee of that profit or benefit. It can make no difference that it was not his duty to obtain the profit or benefit for the person to whom the duty was owed. What is important is that the advantage has accrued to him in breach of his fiduciary duty or by his misuse of his fiduciary position. The consequence is that he must account for it and in equity the appropriate remedy is by means of a constructive trust. [Citations omitted]

The alternative claims in the Main Proceeding

1. The plaintiffs advance a number of alternative claims in the Main Proceeding. They can be divided into three categories. First, there are those claims which seek to attribute accessorial liability to Max. They are the claims that Max was a knowing recipient of trust property; that he knowingly induced or procured a breach of trust by the Corporate Plaintiffs; or that he knowingly participated in a dishonest and fraudulent design of the trustee. Second, there is the claim that the decisions to distribute the proceeds of sale were not made honestly and in good faith. Third, there is the claim that Brooklyn, Mrs Twigg and Twigg Plant Hire are entitled to be paid certain amounts shown to be owing to them in the accounts of Twigg Investments, Maly (the Seventh Defendant) and the Max Twigg Family Trust.
2. These claims are advanced in the event that the plaintiffs' primary claims in the Main Proceeding fail. However, it is not clear what the claims falling into the first category add to the primary claim or how they could arise if the primary claim fails. Each claim depends on a breach by the Corporate Plaintiffs of their duties as trustees and participation in that breach by Max. But the Corporate Plaintiffs can only act through individuals and the only individual whose conduct is attributed to them and whose conduct is alleged to give rise to a breach is that of Max. Consequently, if Max has no personal liability it is difficult to see how any primary liability arising from his conduct could be attributed to them. On the other hand, if Max is primarily liable (as I have found him to be, subject to the availability of any defences), it would be a mischaracterisation of the facts to attribute primary liability to the Corporate Plaintiffs. For those reasons, nothing more needs to be said about those alternative claims.
3. The second type of claim proceeds on the basis that Max was entitled to make decisions concerning the distribution of the net proceeds of sale but alleges that those decisions were not made honestly and in good faith. In my opinion, the claim as formulated is misconceived. If Max was entitled to make decisions on behalf of the Corporate Plaintiffs - because the power to make those decisions had in some way or another been delegated to him - then the decisions he took were decisions binding on the Corporate Plaintiffs. It was not for them to claim that the decisions by which they were bound were not made honestly and in good faith. That was a claim to be made by other potential beneficiaries - in particular, Mrs Twigg, Frances and Elizabeth. Frances makes a claim of that type in her cross-claim. Any further consideration of the claim is best considered in that context.

Other defences to the Principal Claim in the Main Proceeding

1. Max advances a number of other defences. They may be grouped into the following categories: 1. Defences based on estoppel; 2. Defences based on ratification; 3. Defences based on statutory limitations; 4. A defence based on laches; and 5. A defence based on s 1318 of the Corporations Act and ss 67 and 68 of the Trustee Act 1958 (Vic).
2. In the event that the Court concludes that the plaintiffs are entitled to the relief they claim, Max claims a just allowance for the contributions he made to the value of the relevant property and the expenses he incurred. It is convenient to deal with that defence after dealing with the remedies claimed by the plaintiffs.
3. In his List Response, Max also pleaded a defence relying on provisions contained in each relevant trust deed which excluded any liability of the trustee for any loss occasioned by the exercise or failure to exercise any discretion conferred on the trustee by the trust deed. Max did not make submissions in support of the defence and, although not apparent from the transcript, Mr Evans acknowledged during closing submissions that the defence was no longer relied on. Accordingly, nothing more needs to be said about it.

Estoppel

1. Max submits that if any of the decisions are found to be invalid, then the plaintiffs are estopped from now denying their validity. The decisions in respect of which the estoppels are said to operate are the various resolutions that Max purported to sign on behalf of the Corporate Plaintiffs. Max relies on both promissory estoppel and conventional estoppel.
2. In order to make out a promissory estoppel, Max must establish (to apply the principles as summarised by Brennan J in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at (428-9) that (1) he assumed that he was authorised to sign binding resolutions on behalf of the Corporate Plaintiffs; (2) the plaintiffs induced him to adopt that assumption; (3) he acted in reliance on that assumption; (4) the plaintiffs knew he intended to do so; (5) his conduct will occasion detriment if the assumption is not fulfilled; and (6) the plaintiffs have failed to act to avoid that detriment.
3. In order to make out a conventional estoppel, Max must prove (to apply the principles as summarised by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32] and approved by the Court of Appeal in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [200]) that (1) he adopted an assumption as to the terms of his legal relationship with Mrs Twigg; (2) Mrs Twigg adopted the same assumption; (3) both parties conducted their relationship on the basis of that mutual assumption; (4) each party knew or intended that the other act on that basis; and (5) departure from the assumption will occasion Max detriment.
4. The principal difference between the two forms of estoppel is that in the case of promissory estoppel, the party estopped must have induced the other party to adopt a particular assumption but need not have held that assumption themselves whereas, in the case of conventional estoppel, no inducement is required but both parties must have acted on the basis of the assumption and known or intended that the other would as well. In this case, it is said that Mrs Twigg, and the Corporate Plaintiffs through her, induced Max to believe that he could act as if he alone controlled those entities or that both of them adopted that assumption knowing the other did as well. The acts of inducement, or the acts said to manifest a common assumption, are in substance the same acts which are said to demonstrate that Max was authorised to do what he did. In particular, it is said that Mrs Twigg told Max in 2001 that he would take control of the Twigg Group business on her death and told him in 2004 that he did in fact control and own the business and at the time of the sale in 2007 acted consistently with the business belonging to Max.

Ratification

1. Max submits that if the various resolutions he purported to pass as a director of the Corporate Plaintiffs were invalid, then Mrs Twigg ratified those decisions at the meeting at Pitcher Partners on 26 May 2009.
2. The plaintiffs advance various reasons for why it was not open to Mrs Twigg, in principle, to ratify Max's decisions to pay the proceeds of sale in the way that he did. It is not necessary to consider each way the plaintiffs put their case. In my opinion, the defence based on ratification must fail for at least two reasons.
3. First, it depends on an account of what happened at the meeting on 26 May 2009 which I do not accept. I do not accept that Mrs Twigg acknowledged at that meeting that Max was entitled to do what he liked with the sale proceeds.
4. Second, and in any event, as I have explained, Max's conduct amounted to a breach of fiduciary duty. There is a question whether Mrs Twigg as the sole shareholder of the relevant companies could ratify that breach of duty, since the duty was not just a duty that Max owed to the companies but was a duty that affected the discharge of the companies' obligations as trustees of the relevant trusts. As Garde AJA said in Australasian Annuities Pty Ltd (in liq) (recs and mgrs apptd) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302, [2015] VSCA 9 at [253]: The issue whether shareholders of a company that acts as a corporate trustee can give informed consent to a breach of trust by the company is an important issue that stands to be decided on a future occasion. As a matter of principle, there would appear to be significant difficulties in the way of the proposition that a director of a corporate trustee can be absolved of a breach of fiduciary duty by failing to act in good faith to ensure that the company properly administers the trust merely because shareholders who may have no actual or contingent interest in the affairs of the trust are prepared to give their consent. While Steven Rowley was a beneficiary of the Rowley Family Trust, no informed consent was given by any other beneficiary to any of the transactions. The transactions profoundly and adversely affected the interests of the beneficiaries ultimately resulting in the insolvency of the trustee.
5. But even accepting that in the circumstances of this case it was open to Mrs Twigg to ratify Max's decisions, she could only have done so if she had been fully informed of the relevant breach and its consequences: see Forge v Australian Securities & Investments Commission (2004) 213 ALR 574, [2004] NSWCA 448 at [402] per McColl JA (with whom Handley and Santow JJA agreed). Even on Max's and Mr Fitzpatrick's account of events, she plainly was not.

Time limitations

1. By his List Response, Max raises two limitation defences. First, he alleges that claims by Mrs Twigg to recover trust property and claims in respect of the alleged breaches of trust between 2007 and 2010 are statute barred by s 21 of the Limitation of Actions Act 1958 (Vic) (he also relied on similar provisions in New South Wales and Queensland but it is now common ground that limitation issues are governed by Victorian law). Second, he contends that to the extent that relief is claimed in debt or for an account, the claim is barred by s 5 of the Limitation of Actions Act 1958 (Vic).
2. After the hearing concluded, Max filed a notice of motion seeking leave to amend his List Response to raise three additional limitation defences. First, he sought to extend the limitation defence based on s 21 to claims by the Corporate Plaintiffs. Second, he sought to extend the limitation defence based on s 5 to declaratory relief relating to the invalidity of the resolutions purportedly passed by Max alone. Third, he sought to allege that claims that Max breached his fiduciary duties are barred in equity by analogy with s 1317K of the Corporations Act. Those amendments were opposed and I reserved my judgment in relation to the motion.

Section 21 of the Limitation of Actions Act

1. Section 21 of the Limitation of Actions Act relevantly provides: 21 Limitation of actions in respect of trust property (1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action - (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use. (2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued: Provided that the right of action shall not be deemed to have accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession. …
2. "Trust" and "trustee" are defined in s 3 to have the same meaning as they have in the Trustee Act 1958 (Vic). Section 3 of that Act relevantly states that "trust and trustee extend to implied and constructive trusts …".
3. Section 27 is also relevant. So far as material, it provides: 27 Postponement of limitation periods in case of fraud or mistake Where, in the case of any action for which a period of limitation is prescribed by this Act - (a) the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or (b) the right of action is concealed by the fraud of any such person as aforesaid; or (c) the action is for relief from the consequences of a mistake - the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it: …
4. In my opinion, Max should be permitted to amend his defence to plead s 21 in answer to the claims by the Corporate Plaintiffs. The plaintiffs resisted that leave on the basis that, had the amendment been made before the trial, it would have been open to them to file a reply alleging, among other things, that Max had fraudulently concealed the right of action from the Corporate Plaintiffs and that therefore they were entitled to an extension of time under s 27. They also submitted that they had made forensic choices on the basis that the limitation defence had only been pleaded in answer to Mrs Twigg's claim, including choices in relation to the cross-examination of Max. However, Max accepted that if the amendment was allowed, the Corporate Plaintiffs should be entitled to rely on s 27 of the Limitations of Actions Act. That section raises similar issues in relation to a claim by the Corporate Plaintiffs as it does in relation to a claim by Mrs Twigg, since it seems clear in the circumstances that Mrs Twigg's (but not Max's) knowledge of any fraud on the part of Max is to be imputed to the Corporate Plaintiffs.

Section 5 of the Limitation of Actions Act

1. Section 5 of the Limitation of Actions Act relevantly provides a limitation period of six years for "actions founded on simple contract (including contract implied in law)" (s 5(1)(a)) and an action for an account (s 5(2)).
2. Max originally pleaded reliance on s 5 of the Limitation of Actions Act insofar as the plaintiffs "would otherwise be entitled to the relief claimed in debt or for an account". It is clear, however, that none of the relief now claimed by the plaintiffs has that character.
3. As I have said, Max sought to amend his defence to rely on s 5 as a defence to a claim for declarations that the various resolutions signed by Max relating to the distribution of the proceeds of sale of the Twigg Group business were void. The plaintiffs opposed leave to make that amendment, principally on the basis that leave would be futile.
4. Max submitted that the plaintiffs' claim for the declarations should be characterised as an action "founded on simple contract" because (1) the plaintiffs claim that the resolutions were not passed in accordance with the requirements of the Corporate Plaintiffs' constitutions, (2) under s 140(1)(b) of the Corporations Act, a company's constitution and any replaceable rules that apply to the company have effect as a contract between the company and each director and company secretary; (3) the claim is, therefore, properly characterised as a claim for a breach of contract.
5. I do not accept that submission. The fact that a breach of the constitutions can give rise to a claim for a breach of contract does not mean that every claim that depends on the terms of the constitutions is a claim of that character. In the present case, the plaintiffs contend that the relevant resolutions are void because they do not comply with the constitutions. That is not a claim for a breach of contract. It is a claim that something has no legal effect. Moreover, the declarations sought by the plaintiffs are not an essential part of their case. Their case is that Max breached his fiduciary duties or is liable as a trustee de son tort. That case does not depend on establishing a breach of contract. For those reasons, the amendments are futile and leave to make them should be refused.

Limitation by analogy to s 1317K of the Corporations Act

1. Section 1317K of the Corporations Act provides for a limitation period of six years for declarations of contravention and orders under the Act, including declarations and orders in relation to breaches of duties imposed on directors by the Act.
2. Max sought leave to amend his List Response to plead that "to the extent that the plaintiffs would otherwise be entitled to any relief claimed in respect of any breach of fiduciary duty by Max, then the plaintiffs' claims for such relief are barred in equity by analogy with s 1317K of the Corporations Act 2001 (Cth)". The plaintiffs opposed that leave.
3. In my opinion, leave to make the amendment should be refused. The Court will not apply a limitation period to an equitable claim by analogy where it would be unconscionable to do so: Gerace v Auzhair Supplies Pty Ltd (In Liq) (2014) 87 NSWLR 435; [2014] NSWCA 181 at [70] per Meagher JA (with whom Beazley P and Emmett JA agreed). Had the defence been raised before the hearing, it would have been open to the plaintiffs to plead in reply that it would be unconscionable to permit Max to rely on the defence. That reply would have raised a factual question that could then have been investigated, and on which Max could have been cross-examined. It is no answer to this point to say, as Max does, that the relevant facts already emerged during the course of the hearing. It is true that facts emerged during the course of the hearing which are relevant to the question whether Max's conduct was unconscionable so as to deprive him of a limitation defence by analogy. But if the plaintiffs had known that that was an issue in the case, they could have investigated those facts in more detail and cross-examined Max with a view to obtaining admissions on the issue. As a result, they would be prejudiced if the amendment was permitted now.

Laches

1. In Orr v Ford (1989) 167 CLR 316, Deane J (with whom Mason CJ agreed), after discussing generally what was meant by laches and "gross laches" and the difference between them and acquiescence said (at 341): The ultimate test effectively remains that enunciated by Lord Selborne L.C. … speaking for the Privy Council, in Lindsay Petroleum Co. v. Hurd (1874) 5 PC 221 at 239-40, namely, whether the plaintiff has, by his inaction and standing by, placed the defendant or a third party in a situation in which it would be inequitable and unreasonable "to place him if the remedy were afterwards to be asserted": … His Honour continued: Ordinarily, it is difficult to envisage circumstances, falling short of waiver, release, election or estoppel, in which the laches of a beneficiary would produce a situation in which it was inequitable and unreasonable to grant relief in proceedings for the enforcement of an express trust in relation to trust property which remained in the possession of the trustee (or his personal representative). There are, however, at least two categories of case where that is not so. The first is where there is or has been dispute or mistake about the existence of the trust or the identity or extent of the trust property. The second category is where prejudice to third parties, such as other beneficiaries, is involved.
2. In the present case, the focus of the attention was on what Mrs Twigg knew of Max's conduct and whether Max could be said to have altered his position in reasonable reliance on Mrs Twigg's acceptance of the status quo (to paraphrase the formulation of the doctrine of laches proposed by Meagher, Gummow and Lehane: see J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane's Equity Doctrines & Remedies, 5th ed (LexisNexis Butterworths 2015) at [38-005].)
3. The application of these principles is made difficult by two features of this case. First, it cannot be disputed that Mrs Twigg knew that Cleanaway paid approximately $155 million for the trust assets, that Max exercised control over the proceeds of sale and that he used them to buy a number of valuable assets, including the Byron Bay Hotel for a purchase price of $40 million, a property at Hedges Avenue, Mermaid Beach for a price of about $16 million (and that it was later sold for about $9 million) and a property at Albatross Avenue, Mermaid Beach for which she recalls he paid $6 million. Mrs Twigg also knew that Max had an extravagant lifestyle, which included racing expensive sports cars; and she must have understood that, in part at least, that lifestyle was supported by proceeds from the sale of the business. Lastly, she knew that Max had made the decision to pay $5 million of the proceeds of sale to each of her, Frances and Elizabeth. Consequently, by about 2009 at the latest, Mrs Twigg knew Max had dealt with the sale proceeds after paying tax and repaying debt without consulting her and largely for his own benefit.

Defences under the Corporations Act and Trustee Act 1958 (Vic)

1. Section 1318(1) of the Corporations Act provides: If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.
2. Sections 67 and 68 of the Trustee Act provide: 67 Power to relieve trustee from personal liability If it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed such breach, then the Court may relieve him either wholly or partly from personal liability for the same. 68 Indemnity for breach of trust Where a trustee commits a breach of trust at the instigation or request or with the consent in writing of a beneficiary the Court may, if it thinks fit, and notwithstanding that the beneficiary may be a married woman restrained from anticipation, make such order as to the Court seems just for impounding all or any part of the interest of the beneficiary in the trust estate by way of indemnity to the trustee or persons claiming through him. This section applies to breaches of trust committed as well before as after the commencement of this Act.
3. None of these sections applies. The application of s 1318(1) of the Corporations Act and s 67 of the Trustee Act depends on a finding that Max acted honestly or honestly and reasonably and that he ought fairly be excused. For the reasons I have given, I do not think that Max acted honestly or that his actions mean that he ought to fairly be excused. The application of s 68 of the Trustee Act depends on a finding that any breach of trust committed by Max was committed at the instigation or request or with the consent in writing of a beneficiary. Plainly, that condition has not been satisfied in this case. There was no consent, let alone consent in writing to the breaches of trust I have found to exist.

Tracing

1. Tracing is a legal mechanism for identifying property in respect of which a proprietary remedy may be exercised. The general principle behind tracing is that, subject to a number of qualifications, a plaintiff should be entitled to assert a proprietary right not only to the property the subject of the plaintiff's claim but also to property for which that property has been exchanged. It differs from following, which permits a plaintiff to exercise a proprietary right in respect of property that is the subject of the plaintiff's claim notwithstanding the fact that the property has been transferred to a third party. In the case of an equitable proprietary right an important qualification on the right to follow is that the proprietary right may not be exercised where the property is transferred to a bona fide purchaser for value and without notice of the plaintiff's claim. As Lord Millett (with whom Lord Hoffman agreed) explained in Foskett v McKeown [2001] 1 AC 102; [2000] UKHL 29 at 127: The process of ascertaining what happened to the plaintiffs' money involves both tracing and following. These are both exercises in locating assets which are or may be taken to represent an asset belonging to the plaintiffs and to which they assert ownership. The processes of following and tracing are, however, distinct. Following is the process of following the same asset as it moves from hand to hand. Tracing is the process of identifying a new asset as the substitute for the old. Where one asset is exchanged for another, a claimant can elect whether to follow the original asset into the hands of the new owner or to trace its value into the new asset in the hands of the same owner. In practice his choice is often dictated by the circumstances. … … A beneficiary of a trust is entitled to a continuing beneficial interest not merely in the trust property but in its traceable proceeds also, and his interest binds every one who takes the property or its traceable proceeds except a bona fide purchaser for value without notice. In the present case the plaintiffs' beneficial interest plainly bound Mr Murphy, a trustee who wrongfully mixed the trust money with his own and whose every dealing with the money (including the payment of the premiums) was in breach of trust. It similarly binds his successors, the trustees of the children's settlement, who claim no beneficial interest of their own, and Mr Murphy's children, who are volunteers. They gave no value for what they received and derive their interest from Mr Murphy by way of gift.

Ozone Parade, Miami, Queensland

1. This property was acquired by W & E Twigg Pty Ltd (the thirteenth defendant), a company owned by Max, in 2017 for a price of $820,000, shortly after Max was paid the option fee in respect of the Byron Bay Hotel. According to an internal file note dated 24 October 2017 of Pitcher Partners, which was prepared by Mr Stanley, "The balance of the $7 million for the right to purchase the Byron Bay Hotel has been used to purchase a property in Queensland for approximately $800,000 …". Max admitted in cross-examination that the property referred to in the file note was the one at Ozone Parade. The source of the funds to buy the Ozone Parade property was plainly within Max's knowledge. However, he led no evidence and made no submissions on the matter. Absent any evidence from Max, the available evidence is sufficient to establish that the property forms part of the traceable proceeds of the sale of the Byron Bay Hotel and therefore the traceable proceeds of the sale of the Twigg Group business.

The Property at Murlong Crescent, Palm Beach, Queensland

1. The evidence in relation to this property is that almost straight after completion of the sale of the Byron Bay Hotel, Max purchased the property in the name of Twigg Property Development Pty Ltd (the eighth defendant) for $1.75 million. Max conceded that that money (in fact, a total of $1,740,000) came from the bank account of Twigg Investments Trust No 2. He also accepted that that money came from the proceeds of sale of the Byron Bay Hotel. Those concessions are sufficient to establish that this property forms part of the traceable proceeds of the sale of the Twigg Group business.

Lots 1, 2 and 3 Surf Street, Mermaid Beach, Queensland

1. These properties were purchased by Surf Street Holdings Pty Ltd (the twelfth defendant), a company controlled by Max. Lots 1 and 2 were purchased in late 2018 for $2.3 million. Lot 3 was purchased in February 2019 for a price that is not entirely clear on the evidence. Max admitted in cross-examination that he used the proceeds of sale of the Byron Bay Hotel to buy all three properties. Those admissions provide a sufficient basis to conclude that the properties form part of the traceable proceeds of the sale of the Twigg Group business.

Freshwater Place

1. According to Mr Stanley's file note dated 24 October 2017, Max used $300,000 of the option fee paid in respect of the Byron Bay Hotel to pay the deposit on the purchase of an apartment at Freshwater Place. Max accepted in cross-examination that that was the unit in Southbank. The note continues "That apartment will settle on November 6 2017 and he purchased it for $3.15 million. The deposit has been paid and stamp duty remains outstanding of $173,000." Settlement actually occurred on 2 November 2017. The balance of the purchase price of $3,016,734.09 was paid from the Twigg Investment Trust No 2 bank account. The property was sold in August 2019 for $4.5 million. However, on the material before the Court it is not possible to determine what happened to the sale proceeds. The bank statements for the Twigg Investment Trust No 2 account show the receipt of $2,027,769.86 on 12 August 2019 and $2,103,091.70 on 15 August 2019. But it is unclear whether those amounts relate to the sale. Moreover, the statements show the withdrawal of $1,900,000 on 15 August 2019 and the withdrawal of $2,455,000 on 28 August 2019. It is unclear what became of those amounts. The balance of the account as at 13 May 2020 was $109,344.78. Consequently, it is not possible to trace the sale proceeds of the Freshwater Place property.

Shares and Investment portfolio

1. The plaintiffs' submissions are of limited assistance in relation to this aspect of the claim. They simply assert that "Large sums of the proceeds of sale of the Byron Bay Hotel have been applied to acquire shares and other investments held in portfolios managed by Pitcher Partners and by Morgans Financial respectively. This is evidenced by the terms of the Investment Trust 2 bank account and by portfolio reports published by Pitcher Partners."
2. It seems apparent that substantial sums of money were withdrawn from the bank account of Twigg Investments Trust No 2 and used to acquire shares and investments held in a portfolio managed by Pitcher Partners. The plaintiffs' submissions also refer to a portfolio managed by Morgans Financial, but the submissions give no further information about that portfolio and an electronic search of the court book for "Morgans" reveals nothing.
3. The bank statements for the Twigg Investments Trust No 2 are in evidence. They show 134 debits totalling $83,337,926.43 and 266 credits totalling $81,529,612.27 for the period 1 December 2017 to 30 September 2019. For the most part, it is not possible to decipher the destination of the withdrawals or the source of the deposits from the descriptions in the bank statements. More recent statements are also in evidence. They show a substantial number of additional deposits and withdrawals and a balance as at 13 May 2020 of $109,344.78.
4. On 1 June 2020, Mr Radcliff, Max's solicitor, affirmed an affidavit in opposition to a freezing order sought by the plaintiffs. That affidavit annexes an email dated 31 May 2020 from Mr Stanley of Pitcher Partners to Mr Radcliff in which Mr Stanley gives an account of what happened to the proceeds of sale of the Byron Bay Hotel and the sale of Harkaway. According to that email, $4 million of the proceeds of the sale of the hotel were invested in "Various direct and managed fund investments (Trust)" and $1.1 million of the proceeds of sale of Harkaway were invested in "Various direct equity and managed fund investments". A further $7 million from the sale of Harkaway was held as "cash at call". The affidavit also annexes a portfolio valuation of the Twigg Investments No 2 Trust portfolio of $15,462,155.11 as at 31 March 2020. It is not possible on the evidence to say how much of that value is attributable to the $4 million. It is noteworthy that of the total of $15,462,155.11, $9,175,020.29 was held as "cash and equivalents". On 2 June 2020, the Court granted a freezing order covering that account.

Cash deposits held in the name of Twigg Co Pty Ltd and the Twigg Investment Trust No 2

1. I have already dealt with the cash deposit held in the Twigg Investments Trust No 2 bank account.
2. Twigg Co Pty Ltd (the fifteenth defendant) is another company controlled by Max. According to Mr Radcliff it is used "to acquire investment or yield assets" as opposed to the Twigg Investments Trust No 2, which is used by Max "to acquire capital growth assets". The plaintiffs simply say in relation to this company that "Large sums of the proceeds of sale of the Byron Bay Hotel have been transferred to Twigg Co Pty Ltd … Twigg Co has invested the cash in term deposits, including a term deposit of $2.953m".
3. It is unclear what the basis of this submission is. The bank statements of the Twigg Investments Trust No 2 do not obviously demonstrate that sums of money were transferred from that account to Twigg Co Pty Ltd. The total amount transferred from the Twigg Investments Trust No 2 far exceeds the proceeds of sale of the Byron Bay Hotel. Consequently, without more it is not possible to say that any amount currently held by Twigg Co Pty Ltd came from the proceeds of the sale of the hotel. For those reasons, any claim in respect of the money held by Twigg Co Pty Ltd must fail.

Certain motor vehicles acquired by Max

1. The motor vehicles claimed by the plaintiffs comprise: 1. A Porsche motor vehicle purchased for $650,000 in January 2020; 2. A Dodge Ram 1500 crew cab purchased for $129,200 in February 2020 with additional customisations in excess of $74,000; 3. A MTRV Caravan FXV 6.5 purchased for $200,400 in April 2020; 4. A Holden HT "the Max Factor" Monaro motor vehicle, which is in the process of being restored; 5. A Hyundai Excel race car motor vehicle.
2. In relation to the Porsche motor vehicle, it is apparent that the source of the funds to buy that vehicle was the Twigg Investments Trust No 2 bank account. The bank statements indicate that the purchase price of the vehicle was paid to an account held in the name of BBH and from there to the vendor. It appears that Max uses the BBH bank account as an operating account from which many of his personal expenses are paid. Moreover, in Mr Stanley's email dated 31 May 2020 to Mr Radcliff, Mr Stanley lists how the proceeds of sale of the Byron Bay Hotel were distributed. One item of the list is the sum of "$0.65M" for "Purchase car". It is reasonable to infer that that is a reference to the Porsche, since the prices are identical. It was open to Max, who must know how he used the proceeds of sale of the Byron Bay Hotel, to give evidence on the matter. He chose not to. In those circumstances, it is reasonable to conclude that the Porsche motor vehicle was bought from the proceeds of sale of the hotel and is therefore the subject of a constructive trust in favour of the plaintiffs.
3. 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

1. 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.
2. 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.
3. 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.
4. 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

1. 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.
2. 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

1. 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

1. 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

1. 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

1. 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".
2. 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)
3. 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

1. 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.
2. 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, 8th 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.
3. 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.
4. 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.

The UBE Proceeding and similar issues

1. 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.
2. 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.
3. The UBE Proceeding raises several issues. They are: 1. Whether an agreement was reached by which Mrs Twigg, Frances and Elizabeth agreed to forego their unpaid beneficiary entitlements; 2. Whether Mrs Twigg, Frances and Elizabeth are estopped from asserting that Twigg Investments is obliged to pay the unpaid entitlements; 3. Whether the claims are barred by s 5 of the Limitation of Actions Act 1958 (Vic); 4. Whether a defence of laches is available; and 5. Whether Max has some personal liability in respect of the claim.

Was there an agreement?

1. In my opinion there was no agreement with Frances and Elizabeth. However, there was an agreement with Mrs Twigg.
2. 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).
3. 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.
4. In the case of Frances and Elizabeth, Max submits that an agreement can be inferred from the following circumstances: 1. 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; 2. It was never discussed that Frances and Elizabeth would receive the income themselves; 3. 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; 4. Frances and Elizabeth signed their 2009 tax returns which recorded the distributions to them.

Estoppel

1. Having regard to the conclusions I have reached on the existence of an agreement, it is unnecessary to consider the position of Mrs Twigg.
2. 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.
3. 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

1. 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.
2. 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

1. 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

1. The Claim against Max has the following elements: 1. Twigg Investments had a duty to ensure that it had the financial resources to pay the UBEs; 2. As at 30 June 2009, it had those resources. By 30 June 2010, it did not; 3. In paying away those financial resources, Twigg Investments committed breaches of trust; 4. 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.
2. 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.
3. 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.
4. 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.
5. 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.

The Alternative Claims in the Main Proceeding

1. In the Main Proceeding, the plaintiffs claim, in the alternative to their other claims, the following amounts: 1. Brooklyn claims the sum of $2,023,047 which is disclosed as a loan owing to it in the accounts of Twigg Investments; 2. 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; 3. Mrs Twigg claims the sum of $207,114 as an unpaid beneficiary entitlement of the trust of which Maly is the trustee; 4. Twigg Plant Hire claims the sum of $15,939,827 as an unpaid beneficiary entitlement of the Max Twigg Family Trust.
2. 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.
3. 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

1. On the conclusions I have reached, the following property is held on trust for the plaintiffs in proceeding 2019/71329: 1. The property at Ozone Parade, Miami, Queensland purchased by the first defendant in 2017; 2. The property at Murlong Crescent, Palm Beach, Queensland purchased by Twigg Property Development Pty Ltd in April 2018; 3. Lots 1, 2 and 3 Mermaid Beach, Queensland that were purchased by Surf Street Holdings Pty Ltd in late 2018 and early 2019; 4. A sum totalling $9 million held by Pitcher Partners on behalf of the Twigg Investments No 2 Trust; 5. The Porsche motor vehicle registered in Queensland as "Turn One" owned by the first defendant;
2. The cross-claim in that proceeding and proceeding 2018/212326 should be dismissed.
3. The Court gives the following directions: 1. 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; 2. On or before 28 September 2020, the defendants (other than the fourteenth defendant): 1. 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; 2. 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.

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: 31 August 2020