Twigg v Twigg - [2022] NSWCA 68 - NSWCA 2021 case summary — Zoe

NSWNSWCA

Twigg v Twigg

[2022] NSWCA 68

Court of Appeal (NSW)|2021-03-19|Before: Bell CJ, Payne JA, Brereton JA

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Source facts

Court

Court of Appeal (NSW)

Decision date

2021-03-19

Before

Bell CJ, Payne JA, Brereton JA

Source

Original judgment source is linked above.

Judgment (24 paragraphs)

[1]

Limitation of Actions Act 1958 (Vic) s 5, s 21, s 27 Trustee Act 1958 (Vic), s 3(1) Limitation Act 1935 (WA), s 3, s 38 Judicature Act 1873 (UK), s 25(2) Limitation Act 1939 (UK), s 19 Limitation Act 1980 (UK) s 21, s 23, s 38 Trustee Act 1888 (UK), s 8(1) Trustee Act 1925 (UK), s 68(17) Cases Cited: Allcard v Skinner (1887) 36 Ch D 145 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; [1981] HCA 1 Ashton, In the marriage of (1986) 11 Fam LR 457; (1986) FLC 91-777 Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467 Auzhair Supplies Pty Ltd (in liq), Re (2013) 272 FLR 304; (2013) 92 ACSR 554; [2013] NSWSC 1 Auzhair Supplies Pty Limited v Roy Gerace [2014] HCASL 231 Barker v The Duke Group Ltd (in liq) (2005) 91 SASR 167; [2015] SASC 81 Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 All ER 333 Barnes v Addy (1874) LR 9 Ch App 244 Barnsley v Noble [2014] EWHC 2657 (Ch) Bath v Standard Land Co Ltd [1911] 1 Ch 618 Beckford v Wade (1805) 17 Ves 87 Betjemann v Betjemann [1895] 2 Ch 474 Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44 Bonney v Ridgard (1784) 1 Cox Eq Cas 145 Bradford Old Bank v Sutcliffe [1918] 2 KB 833 Bridgman v Gill (1857) 24 Beav 302 Burdick v Garrick (1870) LR 5 Ch App 233 Burnside v Mulgrew [2007] NSWSC 550 Cambodian Buddhist Society of NSW v Thai [2017] NSWSC 1433 Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) (2020) 102 NSWLR 537; 382 ALR 158; [2020] NSWCA 117 Cattley v Pollard [2007] Ch 353, [2007] 2 All ER 1086; [2007] 3 WLR 317; [2006] EWHC 3130 (Ch) Central Bank of Nigeria v Williams [2013] QB 499 Chase v Chase [2020] NSWSC 1689 Cia de Seguros Imperio v Heath (REBX) Ltd (formerly C E Heath & Co (North America) Ltd) [2000] 2 All ER (Comm) 787 Clanricarde v Henning 30 Beav 180; 30 LJ Ch 865 Clarkson v Davies [1923] AC 100 Cohen v Cohen (1929) 42 CLR 91 Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Crossman v Sheahan [2016] NSWCA 200; (2016) 115 ACSR 130 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25 Darley Australia Pty Ltd v Walfertan Processors Pty Ltd [2012] NSWCA 48; (2012) 188 LGERA 26 Davidson & Davidson (1990) 14 Fam LR 817; (1991) FLC 92-197 Di Sante v Camando Nominees Pty Ltd [2000] VSC 211 Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234; [1984] HCA 17 Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366; [2003] 2 All ER (Comm) 451 Ecclesiastical Commissioners v North Eastern Railway Co (1877) 4 Ch D 845 Endresz v Commonwealth of Australia (2019) 273 FCR 286; [2019] FCAFC 197 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544 Federal Republic of Brazil v Durant International Corp (Jersey) [2016] AC 297; [2015] UKPC 35 Feiglin v Ainsworth [2011] VSC 454 Feiglin v Ainsworth [2014] VSC 376 Feiglin v Ainsworth [2015] VSCA 326 FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; [2015] AC 250 Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664 Fireproof Doors Ltd, Re [1916] 2 Ch 142 Foskett v McKeown [2001] 1 AC 102; [2000] UKHL 29 Fourniotis v Vallianatos (2018) 56 VR 85; [2018] VSC 369 Frith v Cartland (1865) 2 H&M 417; 71 ER 525 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435; [2014] NSWCA 181 Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10 Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424; [2006] NSWSC 725 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048, [2004] 1 BCLC 131 Halton International (Holdings) Inc Sarl v Guernroy Ltd [2006] WTLR 1241 Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29 Harris & Harris (1991) 15 Fam LR 26; (1991) FLC 92-254 Harris v Knight (1890) 15 PD 170 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41; [1984] HCA 64 House v The King (1936) 55 CLR 499; [1936] HCA 4 Hovenden v Lord Annesley (1806) 9 RR 119, 2 Sch & Lef 607 Jane v Bob Jane Corporation Pty Ltd [2013] VSC 406 JJ Harrison (Properties) v Harrison [2001] EWCA Civ 1467, [2002] 1 BCLC 162, [2002] BCC 729 Kingham v Sutton [2002] FCA 506 Knox County v Ninth National Bank 147 US 91 (1893) L'Estrange v F Graucob, Ltd [1934] 2 KB 394; [1934] All ER Rep 16 Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 Linke v Linke [2018] VSC 505 Mantovani v Vanta Pty Ltd [2021] VSC 771 Mara v Browne [1896] 1 Ch 199 McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835 McNab v Graham (2017) 53 VR 311; [2017] VSCA 352 Menegazzo v Pricewaterhousecoopers [2016] QSC 094 Morgan v Stephens (1861) 3 Giff 226; 66 ER 392 Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12; (2022) 398 ALR 658 Nolan v Nolan [2004] VSCA 109 Nowell v Palmer (1993) 32 NSWLR 574; [1993] NSWCA 199 O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262; 29 ACSR 148 Orr v Ford (1989) 167 CLR 316; [1989] HCA 4 Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400; 1 ITELR 735 Pearce v Pearce (1856) 22 Beav 248; 52 ER 1103 Peconic Industrial Development Ltd v Lau Kwok Fai [2009] 5 HKC 135; 11 ITELR 844 Piwinski v Corporate Trustees of the Diocese of Armidale [1977] 1 NSWLR 266 Port Ballidu Pty Ltd v Frews Lawyers [2017] QSC 19 Queensland Mines Ltd v Hudson (1976) ACLC 40-266 Reader v Fried [2001] VSC 495 Reckitt v Barnett Pembroke and Slater Ltd [1928] 2 KB 1244, approved [1929] AC 176 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286; (2003) 45 ACSR 244; [2003] NSWCA 71 Savage v Lunn (No 2) [1998] NSWCA 204 Savage v Lunn [1998] NSWCA 203 Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 2 All ER 1073; [1968] 1 WLR 1555; [1968] 2 Lloyd's Rep 289 Seymour v Seymour (1996) 40 NSWLR 358 Soar v Ashwell [1893] 2 QB 390 Sze Tu v Lowe [2014] NSWCA 462; (2014) 89 NSWLR 317 Tavistock Ironworks Company, Re (1867) LR 4 Eq 233 Taylor v Davies [1920] AC 636 Tito v Waddell (No 2) [1977] Ch 106 Tobin v Broadbent (1974) 75 CLR 378; [1947] HCA 46 United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 Urquhart v M'Pherson (1880) 6 VLR(E) 17 Wheatley v Bower [2001] WASCA 293 Williams v Central Bank of Nigeria [2014] AC 1189; [2014] UKSC 10 Williams v Milotin (1957) 97 CLR 465; [1957] HCA 83 Williams-Ashman v Price [1942] 1 Ch 219 Wilson v Moore (1834) 1 My & K 337 Texts Cited: HAJ Ford & WA Lee, Principles of the Law of Trusts, (2nd ed, 1990) HAJ Ford & WA Lee, Principles of the Law of Trusts, (4th ed, 2010) JD Heydon, MJ Leeming & PG Turner, Meagher, Gummow & Lehane's Equity: Doctrine & Remedies (5th ed. 2014 Lexis Nexis Butterworths) RP Meagher, WMC Gummow & JRF Lehane, Equity: Doctrine & Remedies (3rd ed. 1992 Butterworths) NSWLRC 3, First Report on the Limitation of Actions, October 1967 RP Austin, "Trading Trusts", Equity and Commercial Relationships (ed PD Finn, 1987) Category: Principal judgment Parties: Maxwell James Twigg (First Appellant) Twigg Landfill Pty Ltd (Second Appellant) Byron Bay Beach Hotel Properties Pty Ltd (Third Appellant) Twigg Consulting Pty Ltd (Fourth Appellant) B Bay H Pty Ltd (Fifth Appellant) Twigg Investments Pty Ltd (Sixth Appellant) Maly Holdings Pty Ltd (Seventh Appellant) Twigg Property Development Pty Ltd (Eighth Appellant) Twigg Motor Sport Pty Ltd (Ninth Appellant) Vision Motor Sport Pty Ltd (Tenth Appellant) Twigg Motor Racing Pty Ltd (Eleventh Appellant) Surf Street Holdings Pty Ltd (Twelfth Appellant) W & E Twigg Pty Ltd (Thirteenth Appellant) Twigg Co Pty Limited (Fourteenth Appellant) Diane Twigg (First Respondent) Ipswich Landfill Pty Ltd (Second Respondent) Brooklyn Landfill & Waste Recycling Pty Ltd (Third Respondent) Twigg Plant Hire Pty Ltd (Fourth Respondent) Representation: Counsel: B Walker SC, J Evans QC & PM Knowles (Appellants) MR Elliot SC & DK Smith (Respondents)

[4]

HEADNOTE [This headnote is not to be read as part of the judgment] The first appellant Mr Max Twigg is the son of the late Mr William Twigg, who founded and until his death operated a waste disposal and landfill business through a structure of discretionary family trusts, the beneficiaries of which included William's wife Mrs Diane Twigg (the first respondent), and their three children Frances, Max, and Elizabeth. The other appellants are companies controlled by Max, and the other respondents are the corporate trustees of the family trusts, in each of which since William's death Diane has been the sole shareholder and Diane and Max the directors. Since William's death, Diane has been the appointor and guardian of the three trusts and as such had effective control of their assets. Since William's death in 1996, the businesses have been operated by Max, their affairs entrusted to him by Diane. In 2007, Max negotiated the sale of the businesses for over $150 million. Apart from three 'gifts' of $5 million to each of Diane, Frances and Elizabeth, the net sale proceeds were directed to Max and entities he controlled, and then used for his own benefit. In 2019, Diane commenced proceedings complaining about Max's use of the sale proceeds. The primary judge held that Max breached his fiduciary duties as a director of the Trustee Companies by causing them to distribute trust property in breach of the respective trusts, and that he was also liable as a trustee de son tort, and that as a result he held the trust assets distributed to himself and his companies, and their traceable proceeds, as a constructive trustee. On appeal by Max and his companies: Held (per Brereton JA, Bell CJ and Payne JA agreeing), dismissing the appeal and allowing in part the cross-appeal [10] (Bell CJ and Payne JA), [257] (Brereton JA). As to the written resolutions distributing the trust income:

Per Brereton JA; Bell CJ and Payne JA agreeing: The primary judge did not err in concluding that the resolutions were made by Max after 30 June 2007, with the consequence that the trust income which was distributed to Max had vested by default in Diane (in respect of Ipswich and Brooklyn) and the Twigg Family Trust (in respect of TPH): [2(1)] (Bell CJ and Payne JA); [26]-[28], (Brereton JA). McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835; Harris v Knight (1890) 15 PD 170; Kingham v Sutton [2002] FCA 506; Burnside v Mulgrew [2007] NSWSC 550; Chase v Chase [2020] NSWSC 1689; Mantovani v Vanta Pty Ltd [2021] VSC 771, considered. As to delegation and authority:
Per Brereton JA; Bell CJ and Payne JA agreeing: The primary judge did not err in holding that Max did not have delegated authority to make the resolutions or the impugned payments that they purported to authorise; in concluding that Max did not have authority to cause the trustee companies to make the impugned distributions; and consequently in holding that the payments were made in breach of Max's fiduciary duty and that Max and his companies held the Sale Proceeds as constructive trustees: [2(1)] (Bell CJ and Payne JA); [46] (Brereton JA). Tobin v Broadbent (1974) 75 CLR 378, considered. As to the nature of Max's liability:
Per Brereton JA; Bell CJ and Payne JA not deciding: The primary judge was in error in holding that Max was liable as a trustee de son tort. Before one can be liable as a trustee de son tort for a breach of trust, one must first have assumed the trusts by purporting to act as if one were the trustee. Max had not assumed to act as a trustee before procuring the misapplication of trust property. It follows that the liability of Max and his companies was founded only in his breach of fiduciary duty, not as a trustee de son tort: [4] (Bell CJ and Payne JA); [57]-[62], (Brereton JA). Barnes v Addy (1874) LR 9 Ch App 24; Williams v Central Bank of Nigeria [2014] AC 1189; Mara v Browne [1896] 1 Ch 199; Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 1 WLR 1555; Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400; Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366; Nolan v Nolan [2004] VSCA 109; Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266, considered. As to dishonesty:
Per Brereton JA; Bell CJ and Payne JA agreeing: The primary judge did not err in concluding that Max acted dishonestly in the relevant sense, in that he deliberately withheld information from Diane that may have caused her to object to what he did - that is to say, what Max did in disposing of the Sale Proceeds and excluding Diane from the decision-making process involved conscious wrongdoing and conscious active concealment on his part: [2(2)] (Bell CJ and Payne JA); [80]-[82], (Brereton JA). Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266; Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 All ER 333; Seymour v Seymour (1996) 40 NSWLR 358, considered. As to the defence of laches:
Per Brereton JA; Bell CJ and Payne JA agreeing: The defence of laches should have failed in respect of the personal claim, as it rightly failed in respect of the claim for proprietary relief. It was not established that Diane knew, or that she ought reasonably have known, of the wrong, before about 2018. Thereafter, she acted with reasonable expedition to ascertain the true position and commence proceedings: [2(3)] (Bell CJ and Payne JA); [107], (Brereton JA). Nowell v Palmer (1993) 32 NSWLR 574, distinguished. Savage v Lunn (No 2) [1998] NSWCA 204 Allcard v Skinner (1887) 36 Ch D 145, considered. As to limitations:
Per Brereton JA; Bell CJ and Payne JA agreeing: the primary judge was right to hold that Limitation of Actions Act 1958 (Vic), s 21(2) did not bar the claims in respect of breach of fiduciary duty. The liability of Max and the Max companies was not as a trustee (of an institutional trust) within the meaning of s 21, but remedial only. Section 21(2) has no application where a remedial constructive trust is imposed by the Court: [6], [9] (Bell CJ and Payne JA), [141], [151] (Brereton JA).
Per Bell CJ and Payne JA: It was not open to open to the appellants, on the pleadings and having regard to the conduct of the case, to rely on s 5 of the Limitation of Actions Act 1958 (Vic) by analogy: [7]-[8] (Bell CJ and Payne JA).
Per Brereton JA; Bell CJ and Payne JA not deciding: The primary judge was right to hold that Limitation of Actions Act 1958 (Vic), s 5 did not bar the claims in respect of breach of fiduciary duty, although for reasons that differ from his Honour's. Section 5 does not apply to claims for an account in equity where the liability to account is equitable, save insofar as, by s 5(8), it may be applied by analogy. A claim for proprietary relief against an accessory is within the analogy: it is a claim for the accessory to account for the trust property it has received, by restoring it to the trust. An action for equitable compensation against an accessory is also within the analogy, as it so closely corresponds to "an action for an account". However, in the present case, because s 5 applied only by analogy, time did not begin to run until the cause of action was discoverable, which was not until about 2018 or 2019. [9] (Bell CJ and Payne JA); [171], [184], [187]-[188] (Brereton JA). Tito v Waddell (No 2) [1977] Ch 106 at 250 (per Megarry V-C), followed; per Malcom CJ, Kennedy and Wallwork JJ, not followed. Feiglin v Ainsworth [2011] VSC 454 per Mukhtar AsJ, distinguished. Wheatley v Bower [2001] WASCA 293; Menegazzo v Pricewaterhousecoopers [2016] QSC 094, not followed. FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; In re Caerphilly Colliery Co, Pearson's Case (1877) 5 Ch D 336, considered. Cohen v Cohen (1929) 42 CLR 91; Auzhair Supplies Pty Ltd (in liq), Re (2013) 272 FLR 304; (2013) 92 ACSR 554; [2013] NSWSC 1, distinguished. Cia de Seguros Imperio v Heath (REBX) Ltd (formerly C E Heath & Co (North America) Ltd) [2000] 2 All ER (Comm) 787; Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400; Feiglin v Ainsworth [2011] VSC 454, considered.
Per Brereton JA; Bell CJ and Payne JA agreeing: If any limitation period otherwise applies directly, then the limitation period would in any event be postponed by s 27 to commence not before 2018: [9] (Bell CJ and Payne JA); [199] (Brereton JA). As to refusing leave to amend the defence:
Per Brereton JA; Bell CJ and Payne JA agreeing: There was no material error in refusing leave to the appellants to amend to rely by analogy on the limitation period provided by Corporations Act, s 1317K, as it would not ultimately have availed them [2(4)] (Bell CJ and Payne JA); [202] (Brereton JA). As to tracing:
Per Brereton JA; Bell CJ and Payne JA agreeing: The inference that the entire $12.2 million advanced by Max to BBH was derived from the Sale Proceeds is overwhelming. His Honour did not err in so concluding, even if it was not common ground: [2(6)] (Bell CJ and Payne JA); [230] (Brereton JA). Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; Endresz v Commonwealth of Australia (2019) 273 FCR 286; Crossman v Sheahan (2016) 115 ACSR 130; Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286; Federal Republic of Brazil v Durant International Corp (Jersey) [2016] AC 297; Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337, considered.
Per Brereton JA; Bell CJ and Payne JA agreeing: The primary judge did not err in concluding that the proceeds of the Hotel were traceable trust property: [5] (Bell CJ and Payne JA); [226] (Brereton JA).
Per Brereton JA; Bell CJ and Payne JA agreeing: The primary judge did not err in concluding that Albatross Ave was not traceable proceeds of the trust property: [2(5)] (Bell CJ and Payne JA); [244]-[245] (Brereton JA). Frith v Cartland (1865) 2 H&M 417; Heperu Pty Ltd v Belle (2009) 76 NSWLR 230, distinguished.

[5]

Judgment

BELL CJ AND PAYNE JA: We have had the benefit of reading the careful and scholarly judgment of Brereton JA and adopt the abbreviations contained in that judgment.
We agree with his Honour's conclusion and have nothing to add in relation to: 1. breach of fiduciary duty (appeal grounds 1-5), dealt with at [18]-[46] of his Honour's reasons; 2. dishonesty (appeal grounds 7-8), dealt with at [63]-[82] of his Honour's reasons; 3. laches (appeal ground 10 and cross-appeal ground 1), dealt with at [83]-[107] of his Honour's reasons; 4. the primary judge's refusal to grant leave to amend the defence to plead a defence relying on s 1317K of the Corporations Act 2001 (Cth) by analogy, dealt with at [200]-[202] of his Honour's reasons; 5. Albatross Avenue (cross-appeal ground 2), dealt with at [231]-[245] of his Honour's reasons; and 6. the finding that the whole of the $12.2 million advanced by Max to Byron Bay Beach Hotel Properties Pty Ltd (BBH) was from the Sale Proceeds, (appeal ground 11) dealt with at [227]-[230] of his Honour's reasons.
In light of our agreement about these matters, it is unnecessary to address a number of the remaining issues and we would prefer to await a case where the conclusions reached are dispositive before deciding those issues.
In relation to appeal ground 6, dealt with at [47]-[62] of his Honour's reasons, as we agree with Brereton JA's conclusion that Max had breached his fiduciary duty as a director of the Trustee Companies, it is strictly not necessary to consider whether Max was also liable as a trustee de son tort. It may be, as his Honour explains at [58]-[61], that because when Max distributed the Sale Proceeds he did so as director of the Trustee Companies (albeit in breach of his duty as such), his conduct could not be taken to be an assumption of the office of trustee by Max personally so as to constitute him a trustee de son tort.
In relation to appeal ground 12, dealt with at [203]-[226] of his Honour's reasons, it is not necessary to express a view about the resolution of the tracing issues addressed in [203]-[223] and we reserve our position in relation to those issues. We agree, however, with Brereton JA at [224], by reference to Federal Republic of Brazil v Durant International Corp (Jersey) [2016] AC 297; [2015] UKPC 35 that the fact that BBH was found to be Max's alter ego is dispositive of this issue. Whatever difficulties there may be with an alter ego analysis (see Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12; (2022) 398 ALR 658 per Leeming JA at [26]-[28]), no challenge was made to the primary judge's finding that BBH was Max's alter ego. We agree with Brereton JA's analysis at [226] that the Hotel was acquired by Max's alter ego with traceable Sale Proceeds and replaced those Proceeds, itself becoming to that extent traceable property. The primary judge did not err in concluding that the proceeds of the sale of the Hotel were traceable property.
In relation appeal ground 9, dealt with at [108]-[199] of his Honour's reasons, we agree with Brereton JA at [131] (see also [151]) of his Honour's judgment that the primary judge was correct to conclude that s 21(2) of the Limitation of Actions Act 1958 (Vic) did not bar the claim relating to Max's breach of fiduciary duty because that provision has no application where a remedial constructive trust is imposed by the Court as a result of a particular transaction.
As to whether it was open to the appellants to rely on s 5 of the Limitation of Actions Act 1958 (Vic) by analogy, and the related notional rejoinder that it would be unconscionable to do so, this was a matter that was not, but which should have been, pleaded.
Ultimately Senior Counsel for Max at the trial accepted that he relied on s 5 only to the limited extent that it provided, in its terms, a defence to a claim for breach of contract. The appellants did not seek to rely on s 5 by way of analogy as a bar to a claim for account, as they now contend on appeal.
The respondents' submission, that the way the case was now sought to be put was abandoned before the primary judge, is correct. It is not open to the appellants to revive that case on appeal. Even if the case could be advanced, we agree with Brereton JA at [195]-[199] that the limitation period was postponed by reason of Max's fraudulent concealment of the cause of action and had not expired by the time the respondents commenced proceedings.
We agree with the orders proposed by Brereton JA.
BRERETON JA: The first appellant (defendant below) Mr Max Twigg is the son of the late Mr William Twigg, who founded and until his death in 1996 operated a waste disposal and landfill business ("the Twigg Group business"), through a structure of discretionary family trusts, the beneficiaries of which included William's wife the first respondent (plaintiff below) Mrs Diane Twigg, and their three children Frances, Max, and Elizabeth. The other appellants (defendants) are companies controlled by Max ("the Max Companies"), and the other respondents (plaintiffs) the corporate trustees of the family trusts ("the Trustee Companies"): Twigg Plant Hire Pty Ltd ("TPH"), Brooklyn Landfill & Waste Recycling Pty Ltd ("Brooklyn") and Ipswich Landfill Pty Ltd ("Ipswich"), in each of which since William's death Diane has been the sole shareholder and Diane and Max the directors, and which are respectively the trustees of the Twigg Family Trust, the Brooklyn Landfill Trust and the Ipswich Landfill Trust. Since William's death, Diane has been the appointor and guardian of the three trusts and as such had effective control of their assets.
After William's death in 1996, the Twigg Group business was operated by Max. Diane, who reposed trust in him, left their operational affairs to him. However, she continued to play a part in some essential decision-making functions of the Trustee Companies, in particular in respect of the distribution of income: each year from 1996 to 2006, without exception, Max and Diane joined together in resolutions of the directors of each Trustee Company adopting the financial statements and distributing the trust income amongst the beneficiaries.
On 2 April 2007, the Twigg Group business was sold to Transpacific Waste Management Pty Ltd, a subsidiary of Transpacific Industries Group Ltd ("Cleanaway"), for the sum of $155.8 million, subject to certain adjustments. 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. In addition, Cleanaway agreed to enter into a consulting agreement with Sibley Group Pty Ltd, a company controlled by Max, under which Max would provide consultancy services to the business for a period of 12 months following its sale, in return for a fee of $10 million.
Of the sale price, an amount of $30 million was paid in the form of shares in Cleanaway issued to Twigg Landfill (a company controlled by Max which is the trustee of the Max Twigg Family Trust). The sum of $113,804,668 was deposited into the bank account of TPH. From that $113.8 million, Max caused debts and tax to be paid, and payments - characterised by Max as "gifts" - of $5 million each to be made to Diane, Frances, and Elizabeth, and $1 million to other recipients. He caused the remaining proceeds - which were apportioned as to $50,225,300 to the Ipswich Trust, as to $41,978,347 to the Brooklyn Trust, and as to $5,674,033 to the Twigg Family Trust ("the Sale Proceeds") - to be paid to himself and entities controlled by him, and used the funds received by him and his entities for his own benefit, inter alia to acquire several properties in Queensland, including one at Hedges Avenue, Mermaid Beach (which he purchased in about May 2007 for $18.5 million and later sold for $7.6 million, following which he purchased another nearby at Albatross Avenue), and the Byron Bay Beach Hotel ("the Hotel"), which was purchased in late June 2007 by Byron Bay Beach Hotel Properties Pty Ltd ("BBH") upon trust for the BBH Property Trust - both entities controlled by Max - for $47.2 million, and later sold in 2017 for $68.2 million.
In 2007, Max was 36 years of age, while his mother Diane was 61. Max had had operational control of the business for a decade, and Diane did not involve herself in operational decision-making; she trusted and relied on Max, signed documents she was asked to sign, and had a limited understanding of corporate structures and her responsibilities as a director. Although Diane was, with Max, one of the signatories to the contract for sale and aware of the gross selling price, Max emphasised to her that the business had been under financial pressure and had a large amount of debt which would have to be repaid out of the proceeds of the sale. Max did not inform Diane that the net sale proceeds were in the order of $113 million, that Max was intending to take nearly $100 million for himself, and that this would exhaust the family trusts for all time so that nothing would remain for the benefit of the family in the future. This occurred in circumstances where until then Diane had always been involved, at least formally, in decisions as to distribution of income, and where Max admittedly understood that if other members of the family discovered the amount of the Sale Proceeds and that he was intending to distribute them in so final and unilateral a fashion, there was a "real possibility" that they would object. [1]
Twelve years later, in 2019, Diane commenced proceedings complaining about Max's use of the Sale Proceeds. Ball J held that Max breached his fiduciary duties as a director of the Trustee Companies by causing them to distribute trust property in breach of the respective trusts, and that he was also liable as a trustee de son tort, and that as a result he held the trust assets distributed to himself and his companies, and their traceable proceeds, as a constructive trustee. [2] His Honour rejected Max's contention that the distribution of the funds was pursuant to valid resolutions of the directors of the Trustee Companies, [3] or that Diane had later (in 2009) ratified them. [4] His Honour also rejected limitation defences, [5] a defence of laches in respect of claims for proprietary relief (although laches was held to bar claims for personal relief against Max), [6] and an argument that tracing was not available in respect of certain assets derived from the sale of the Hotel. [7] In subsequent judgments, his Honour declined an application to reopen in one respect but allowed such an application in another, [8] and made orders as to costs and resolved further disputes as to tracing. [9]
Max and his companies appeal to this Court. They challenge the primary judge's conclusions that the payments made to him out of the Sale Proceeds were not authorised and that he acted in breach of his fiduciary obligations (Grounds 1-5); that he was liable as a trustee de son tort (Ground 6); that he dishonestly concealed what he had done from Diane (Grounds 7 and 8); that proprietary relief was not barred by limitation or laches (Grounds 9 and 10); and that the respondents could trace into certain assets held by him or his companies derived from the sale of the Hotel (Grounds 11 and 12). By cross-appeal, Diane and the Trustee Companies challenge his Honour's upholding of the defence of laches in respect of the claims for personal relief (Cross-appeal Ground 1), and the rejection of a claim to trace into Albatross Avenue (Cross-appeal Ground 2).

[6]

Breach of fiduciary duty (Grounds 1, 2, 3, 4, 5)
The primary judge held that, subject to any defences that Max might have, the Trustee Companies were entitled to equitable compensation in respect of Max's breach of fiduciary duties, and that he and his companies were liable to account to the Trustee Companies and/or Diane (in whom most of those proceeds had, by default, vested) for any part of the Sale Proceeds they had received. [10]
There were two bases for his Honour's conclusion that the impugned payments from the Sale Proceeds were procured by Max in breach of his fiduciary duty as a director of each relevant Trustee Company. The first was that no valid resolution of the relevant trustee authorising any such distribution had been adopted prior to 30 June 2007, [11] in the context that the terms of the trust deeds provided that, in default of such a resolution by that date, in the case of Ipswich and Brooklyn (to which in excess of $92 million of the net Sale Proceeds had been apportioned) the trust income vested in Diane - with the consequence that it was no longer available for distribution by the relevant Trustee Company, and their purported dispositions were in breach of trust - and in the case of the Twigg Family Trust, in the trust estate generally. [12] The second basis was that Max was not authorised to exercise alone the decision-making powers of the Trustee Companies in respect of the distribution of income, and that such powers had not been delegated to him. [13]
The appellants contend that the primary judge erred in concluding that no resolutions were adopted by the Trustee Companies in respect of the distribution of income of their respective trusts for the period ending 30 June 2007 on or before that date (Ground 1); in concluding that the decision-making powers of the directors of the Trustee Companies in respect of the distribution of income had not been delegated to Max alone (Ground 2); in concluding that Max did not have authority to cause the Trustee Companies to make the impugned distributions (Ground 3); and consequently in holding that the payments were made in breach of Max's fiduciary duty (Ground 4) and that Max and his companies held the Sale Proceeds as constructive trustees (Ground 5).

[7]

1.1 Timing of resolution (Ground 1)

The impugned payments were ostensibly authorised by three documentary "resolutions" - one for each of the Trustee Companies - signed by Max alone, and recording him as the only person present. All three were in the following form: 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.

[8]

Attached to the copy of the resolution in evidence was a note, as follows: "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"
One resolution bears the date 30 June 2007; the others are undated. Although there was no direct evidence of the date on which the resolutions were signed, and the primary judge accepted that it "was not clear", his Honour found that it was probable that all were signed by Max after 30 June 2007: [14] "It is not clear when the resolutions were signed. The likelihood is that they were signed after 30 June 2007. The resolution of Twigg Plant Hire is dated 30 June 2007, which was a Saturday. The resolutions of Ipswich and Brooklyn are undated. According to Mr Fitzpatrick, it was not uncommon in 2007 for resolutions dealing with the distribution of income to be signed after year end, although he said that practice changed "much later" as a consequence of a ruling or statement of the Tax Office. Mr Fitzpatrick accepted that "quite probably the trust distribution in 2007 wasn't prepared or signed before 30 June 2007". Max made a similar concession. It is plain that that practice had been followed in at least some of the previous years. In my opinion, it is likely that it was followed in respect of the resolutions relating to the 2007 financial year trust distributions."
The appellants submit that this conclusion was flawed, first in inferring that the resolutions were signed after 30 June from evidence (namely the accountant Mr Fitzpatrick's concession that it was not uncommon in earlier years for resolutions to be signed after the end of the year, and an equivocal concession by Max in respect of the date of another document - not the three resolutions) that was insufficient to support the finding having regard to the "presumption of regularity"; and secondly, in focussing on the date a written document was signed, when the documents were merely records of resolutions made by Max which in all probability had been made at an earlier date, given that the money had been distributed from the TPH account for his own benefit well before the end of June 2007.
Mr Fitzpatrick, who prepared the written resolutions, not only said that up to and including 2007 it was not uncommon for trust income distribution resolutions to be prepared and signed after the end of the financial year, [15] but described a process of preparation of financial statements after year's end, accompanied by resolutions for adoption and distribution of income, which made that result highly probable, if not inevitable. [16] Max gave evidence to similar effect. [17] Mr Fitzpatrick agreed that the resolutions in question were probably not prepared or signed before 30 June 2007. [18]
In the light of that evidence, the judge was amply entitled to conclude that the written resolutions were prepared and signed after 30 June 2007. Reliance on the presumption of regularity is, as is so often the case, misconceived; there is no presumption in favour of the regularity of an impugned transaction. The presumption of regularity is one that where an act is done which can be done legally only after the performance of some prior act, proof of the later act carries with it a presumption of the due performance of the prior act. [19] It is concerned with formalities, not with the substantive validity of transactions. [20] And it only operates in the absence of evidence; where there is evidence to the contrary, the presumption does not arise at all, rather than being rebutted. [21] The presumption does not mean that when, as here, a transaction is impugned as being in breach of duty, one commences with a presumption that it was proper.
The appellants' argument that the written resolutions merely record an anterior decision by Max was not advanced at first instance. The appellants did not at trial assert that Max had made the relevant determination in any way other than by the written resolutions. Their pleading and submissions were to the effect that the relevant determinations were the written resolutions signed by Max, not some unexpressed decision made earlier but later recorded in the written instruments. The mere payment of funds out of TPH does not support any such anterior resolution, as although the trust deeds provide that a determination may be made by placing the relevant amount to the credit of the relevant beneficiary in the books or drawing a cheque for it to the beneficiary, or by oral declaration or written statement, the funds were not paid in accordance with the terms of the resolutions, but to Max. In any event, it is improbable that Max had earlier determined to make distributions so specific for each trust - including distributions from one trust to another - as are reflected in the written resolutions, and Max gave no evidence that he had conceived of such an elaborate distribution prior to signing the resolutions.
Accordingly, the primary judge did not err in concluding that the resolutions were made by Max after 30 June 2007, with the consequence that the trust income which was purportedly paid to Max had vested by default in Diane (in respect of Ipswich and Brooklyn) and in the Twigg Family Trust (in respect of TPH). But even if that conclusion were erroneous, it would not avail Max if he did not have the requisite authority, to which question I now turn.

[9]

1.2 Authority for resolution (Grounds 2, 3, 4, 5)

At first instance, Max's case that the requisite authority had been delegated to him was founded largely on an agreement said to have been reached between him and Diane, initially in 2001. That there was any such agreement was rejected by the primary judge: [22] "Max contends that there was an agreement by which Mrs Twigg agreed to give Max control of the Twigg Group business. It is not entirely clear how such an agreement itself could displace the requirements of the articles of association and constitutions of the Corporate Plaintiffs. In any event, no such agreement existed. The high water mark of Max's case that such an agreement was reached is Mr Fitzpatrick's letter dated 24 November 2004. But, as I have explained, that letter makes it clear that Mrs Twigg was not giving up her control of the Corporate Plaintiffs. Far from providing evidence of an agreement, it is inconsistent with there being one."
The appellants did not challenge that finding. What remains is an argument that delegation is to be inferred from the circumstance that Diane left decision-making in respect of the business operations to Max, had little understanding of the decisions in which she was involved, and trusted Max. The appellants submit that Diane had completely delegated her directorial functions to Max, so that (conformably with Corporations Act 2001 (Cth), ss 198C(1), 198D(1) and 198D(3)) the powers of the directors could be exercised by him alone, [23] and that the fact that Diane occasionally signed documents is not inconsistent with complete, or at least extensive, delegation of her functions to Max.
The primary judge found that while there was an implied delegation to Max, as the director responsible for managing the day-to-day business of the companies, of many of the functions of a managing director, and that he occupied that position with the tacit agreement of Diane, such delegation did not extend to a number of important functions, and in particular to paying the whole Sale Proceeds to himself, or passing resolutions which purported to authorise such a payment: [24] "There is no evidence that the directors of any of the companies resolved to appoint Max as the managing director, although I accept that there was an implied delegation to Max of many of the functions of a managing director because he was the director responsible for managing the day to day business of the companies and he occupied that position with the tacit agreement of Mrs Twigg, the only other director. There may be a question concerning the scope of the implied delegation to Max arising from those facts. However, as I have explained, whatever the scope of that delegation, it did not extend to a number of important functions of the directors, which continued to be taken at meetings or were the subject of resolutions signed by both of them."
The high point of the evidence relevant to whether there was an implied delegation was that Max deposed: [25] "31. After 24 July 2001, Diane remained a co-director of Brooklyn and Twigg Plant Hire and attended each of the meetings which were held in respect of distributions and financial reports. Diane left the day to day management, expansion and decision making in respect of those plaintiffs, to me. 32. Diane was not interested in the day to day matters of the business. I would always attempt to keep her included and would specifically include her in discussions of larger matters. I visited Diane at least weekly and sometimes fortnightly, as she lived across the road, to catch up on everything generally and discuss the business and talk to her about the employees, unless she was travelling. She regularly asked questions about the business which I happily answered."
However, Max accepted that every year from 1996 until 2006, he and Diane met together to make decisions about distribution of trust income: [26] "Q. Now what was happening in each of these years that I've taken you to, 2000 to 2006, was that you and your mother met and made a decision about whether or not to adopt a set of financial statements for each of the Brooklyn, Ipswich and Twigg Family Trust entities, correct? A. Correct. Q. And you and your mother together met and made decisions, when they fell to be made, about the distribution of income by the trusts? A. Yes."
Further, Max appreciated that resolutions signed by both of them were required, and he understood and acted on the basis that Diane was a "necessary decision-maker" for such resolutions: [27] "Q. So, it was important that decisions about what the financial statement and annual return would say were decisions that were to be made by the directors together. Correct? A. Yes. Q. You understood that resolutions of your mother and you were required in order for the company to make decisions about whether or not to adopt the financial statements that were prepared? A. Yes. Q. And you understood that resolutions of Diane and you were required in order for the company to make decisions about whether to distribute trust income. Correct? A. I did, yes. Q. And you did that year in/year out from 1996 to 2006; correct? A. I did. Q. You weren't just doing it for the fun of it - having these documents prepared and signed - were you? A. I understood the responsibility, yes. Q. You understood that it was something that had to be done; correct? A. Yes, correct. Q. In order for the company to make these decisions; correct? A. I did, correct."
Max considered Diane to be a director and treated her as such: [28] "Q. And by making resolutions and signing financial statements up to 2007, you treated Diane as a director of the company, didn't you? A. I did. Q. You considered her to be a director? A. Yes. Q. You understood she was a necessary decision-maker in relation to the resolutions that were signed? A. Yes."
Indeed, as one of two directors, Diane signed the contract for sale to Cleanaway on 2 April 2007. Max knew that she trusted him, including to tell him if decisions she was being asked to make were particularly important or potentially disadvantageous: [29] "Q. You appreciated that she was-- A. I was trusting-- Q. --she was trusting you that the decisions being made were appropriate ones? A. She did trust me, yes. Q. And you appreciated that she was trusting you to tell her if the decisions were particularly important ones. Correct? A. Yes. Q. And you appreciated she was trusting you to tell her if the decisions she was being asked to make might be harmful to her own interests. Correct? A. Correct."
He also knew that in 2007 she remained a director and was in a position to disagree with Max as to division of trust income, though he claimed not to have taken that into consideration: [30] "Q. Now, the question I'm putting to you, you can agree with it or not. You understood that in circumstances where your mother was a director, she was in a position to disagree with you if she wanted to about how the net sale proceeds would be divided up. You understood that, didn't you? A. I understood that, but it wasn't taken into consideration. Q. Not something you took into consideration? A. That's what I said."
The appellants submit that the making of payments was clearly within Max's usual authority. So much may be accepted. They then submit that this extended to the impugned payments, as Max had no reason to doubt that the requisite documents authorising them would subsequently be prepared and adopted. This overlooks, first, that his authority to make payments could not sensibly extend to payments that were distributions of trust income to beneficiaries which themselves required the authority of a resolution of the trustee; secondly, that historically, payment of trust distributions had been treated as requiring the approval of both directors; and thirdly, that Max suspected that were he to disclose the full details of what he was intending to do, it might be opposed.
It also overlooks that such payments were hardly in the ordinary course of business, but represented a final distribution to himself of the whole of the remaining trust property. This was not even a routine annual income distribution, but effectively a total and final distribution of corpus, to himself. As the primary judge observed: [31] "Underlying Max's submissions on this issue is the contention that signature by Mrs Twigg was a mere formality, since it was her usual practice to sign everything that was put in front of her. But that contention begs the question of why that formality was not followed in the case of what surely must have been the most important decision the trustees of relevant trusts had ever been asked to take - that is, how to distribute a very large and largely unexpected windfall arising from the sale of the whole business carried on by the trusts. …"
The "note" attached to the resolution, referred to above, [32] is inconsistent with delegation. Although the evidence did not explain the provenance of the "note", it is notable first, that the statement that the minute was incorrectly prepared as a multi-director minute would itself be incorrect if Max had delegated authority; and secondly, that while it is misconceived in claiming authority under Corporations Act, s 248B(1) (which is concerned with a proprietary company which has only one director, and has no application in the relevant circumstances), it does not claim that Max was acting pursuant to any delegated authority, whether under Corporations Act, ss 198C(1), 198D(1) and 198D(3), or otherwise. Thus, the note itself is inconsistent with Max having delegated authority, and this does not depend on any inference from the absence of evidence to explain it.
The fact that there was extensive de facto delegation of managerial responsibility to Max does not mean, or even begin to suggest, that there was delegation of authority in respect of approval of annual financial statements and distribution of income. The fact that Diane continued to participate in those decisions, even if in doing so she relied heavily or absolutely on Max and was accustomed to acceding to his suggestions in respect of them, is inconsistent with her having delegated them. To the contrary, it demonstrates that, in respect of those functions - of which annual approval of financial statements and trust income distribution is the foremost example - her functions were not delegated. The fact that Diane trusted and relied on Max, signed documents she was asked to sign, and had limited understanding of corporate structures and her responsibilities, does not mean that all her functions were delegated. Even if Diane did not actively advert to the content of the resolutions, that would not mean that she had delegated her function - she might have been performing it on advice, or with limited attention, but that is quite a different thing from having delegated it. As Mr Walker SC was compelled to concede, that she herself participated in making the resolutions was the antithesis of delegation. [33]
Moreover, even a wide general delegation does not import authority for self-dealing of the kind in question here. In Tobin v Broadbent, Dixon J said: [34] "Prima facie, a power, however widely its general words may be expressed, should not be construed as authorizing the attorney to deal with the property of his principal for the attorney's own benefit. Something more specific and quite unambiguous is needed to justify such an interpretation". That was in the context of a power of attorney - an express written actual authority - and must apply, with even more force, in the context of an implied delegation. The primary purpose of delegating powers to a managing director is to enable him or her to manage the company's affairs; not to make gifts to himself or herself of the company's property. [35]
As the primary judge rightly concluded: [36] "Consistently with Mrs Twigg's usual practice, she made no enquiries about the net proceeds realised by the sale or what would be done with those proceeds other than that she was told and accepted that $5 million would be paid to each of her and her daughters. At that stage, Mrs Twigg trusted Max to do the right thing. But the fact that she reposed that trust in him does not mean that she had delegated to him to do whatever he wanted, even supposing that that is something she could have done, or could have done absent a resolution of the directors. As I have said, there may be a question of what Max was entitled to do consistently with the position he occupied in the companies and with the implied authority he was given. But whatever that was, it did not extend to paying the whole proceeds of sale to himself or to passing resolutions which purported to authorise those payments."
In my opinion, the contention that Diane - or the Trustee Companies - had implicitly delegated to Max her functions in respect of resolutions for distribution of trust income was untenable. Whatever authority he had, there was no basis for considering that it extended to approval of annual financial statements, or distribution of trust income. The primary judge rightly held that Max did not have delegated authority to make the resolutions, or the impugned payments that they purported to authorise.
In the light of that conclusion, it is unnecessary to consider the additional basis on which the primary judge relied, namely that any delegation had to be by resolution of the Trustee Companies in conformity with their corporate constitutions, rather than by Diane, and that there was no evidence of it, in circumstances where the corporate constitutions required written resolutions, although there is no apparent reason to doubt it. The appellants' argument that in the context of a two-director company there is no distinction overlooks the requirements of the corporate constitutions.
It follows that the primary judge did not err in holding that Max did not have delegated authority to make the resolutions or the impugned payments that they purported to authorise; in concluding that Max did not have authority to cause the Trustee Companies to make the impugned distributions; and consequently in holding that the payments were made in breach of Max's fiduciary duty and that Max and his companies held the Sale Proceeds as constructive trustees.

[10]

Trustee de son tort (Ground 6)
The primary judge held that Max was also liable as a trustee de son tort: [37] "[135] As the plaintiffs point out, the liability can also be explained on the basis that Max held the money as a trustee de son tort. A trustee de son tort was explained in these terms by Smith LJ in Mara v Browne [1896] 1 Ch 199 at 209: [W]hat constitutes a trustee de son tort? It appears to me if one, not being a trustee and not having authority from a trustee, takes upon himself to intermeddle with trust matters or to do acts characteristic of the office of trustee, he may thereby make himself what is called in law a trustee of his own wrong - ie, a trustee de son tort, or, as it is also termed, a constructive trustee. [136] In the present case, the Corporate Plaintiffs as trustees had the power to distribute the proceeds of sale to Max. Max took it upon himself to exercise that power and in doing so took it upon himself to intermeddle with trust matters. The authors of Jacobs' Law of Trusts in Australia describe this as a "borderline" case of a constructive trust because of the similarities of such a trust to an express trust. As they point out (J D Heydon & M J Leeming, Jacobs Law of Trusts in Australia, 8th ed, LexisNexis, 2016 at [13-03]): The alleged trustee may have acted honestly; the alleged trustee may have believed that he or she was validly appointed an express trustee, ignorant of a fatal defect therein, and the breach of trust may have been a technical one. But the alleged trustee is liable by reason of the de facto assumption of office and can be in no better position in respect of a breach than an express trustee would be. [Footnotes omitted]"
The appellants contend that this conclusion was erroneous (Ground 6). They submit Max did not incur liability as a trustee de son tort because he did not purport to act in the role of trustee, and did not take it upon himself to act as trustee on behalf of or for the benefit of others, [38] but (on the primary judge's findings) intended from the outset to take control of trust property for his own benefit; and that he did not deal with the trust assets as if he were trustee but, at the highest, as a director of the Trustee Companies, caused them to deal with the assets, which may have been a breach of his director's duties, but did not render him a trustee de son tort.
Consideration of what is a trustee de son tort has usually arisen in the context of distinguishing between what are now called "institutional" constructive trusts (of which a trustee de son tort is an instance), and "remedial" constructive trusts (where liability is imposed on a dishonest assistant or recipient pursuant to one or other of the limbs in Barnes v Addy). [39] In that case, Lord Selborne adverted to two types of "constructive trustee": those who made themselves trustees de son tort, and those who participated in a breach of trust (emphasis added): [40] "Now in this case we have to deal with certain persons who are trustees, and with certain other persons who are not trustees. That is a distinction to be borne in mind throughout the case. Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees."
The distinction is between trustees de son tort - who without having been properly appointed as trustees, lawfully assume the obligations of the trust by acting in the administration of the trusts as if they had been so appointed, and are trustees under an "institutional" trust, and may incur liability if having done so, they subsequently act in breach of those trusts - and those on whom equity imposes liability by reason of their participation in the unlawful misapplication of trust assets, who are "trustees" under a "remedial" trust. As Lord Sumption JSC explained in Williams v Central Bank of Nigeria ("Williams") (emphasis added): [41] "It is clear that Lord Selborne regarded as a constructive trustee any person who was not an express trustee but might be made liable in equity to account for the trust assets as if he was. The problem is that in this all-embracing sense the phrase "constructive trust" refers to two different things to which very different legal considerations apply. The first comprises persons who have lawfully assumed fiduciary obligations in relation to trust property, but without a formal appointment. They may be trustees de son tort, who without having been properly appointed, assume to act in the administration of the trusts as if they had been; or trustees under trusts implied from the common intention to be inferred from the conduct of the parties, but never formally created as such. These people can conveniently be called de facto trustees. They intended to act as trustees, if only as a matter of objective construction of their acts. They are true trustees, and if the assets are not applied in accordance with the trust, equity will enforce the obligations that they have assumed by virtue of their status exactly as if they had been appointed by deed. Others, such as company directors, are by virtue of their status fiduciaries with very similar obligations. In its second meaning, the phrase "constructive trustee" refers to something else. It comprises persons who never assumed and never intended to assume the status of a trustee, whether formally or informally, but have exposed themselves to equitable remedies by virtue of their participation in the unlawful misapplication of trust assets. Either they have dishonestly assisted in a misapplication of the funds by the trustee, or they have received trust assets knowing that the transfer to them was a breach of trust. In either case, they may be required by equity to account as if they were trustees or fiduciaries, although they are not. These can conveniently be called cases of ancillary liability. The intervention of equity in such cases does not reflect any pre-existing obligation but comes about solely because of the misapplication of the assets. It is purely remedial. The distinction between these two categories is not just a matter of the chronology of events leading to liability. It is fundamental. In the words of Millett LJ in Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400, at 413, 1 ITELR 735, it is "the distinction between an institutional trust and a remedial formula - between a trust and a catch-phrase"."
The passage in Mara v Browne, to which the primary judge referred, explains only how one becomes a trustee de son tort, and not when such a trustee incurs liability for a breach. AL Smith LJ described a trustee de son tort as one who (emphasis added): [42] "not being a trustee and not having authority from a trustee, takes upon himself to intermeddle with trust matters or to do acts characteristic of the office of trustee, he may thereby make himself what is called in law a trustee of his own wrong - ie, a trustee de son tort, or, as it is also termed, a constructive trustee."
The distinction between becoming such a trustee, and incurring liability for breach, was explained by Ungoed-Thomas J in Selangor United Rubber Estates Ltd v Craddock (No 3) (emphasis added): [43] "It is essential at the outset to distinguish two very different kinds of so-called constructive trustees: (1) Those who, though not appointed trustees, take upon themselves to act as such and to possess and administer trust property for the beneficiaries, such as trustees de son tort. Distinguishing features for present purposes are: (a) they do not claim to act in their own right but for the beneficiaries, and (b) their assumption to act is not of itself a ground of liability (save in the sense of course of liability to account and for any failure in the duty so assumed), and so their status as trustees precedes the occurrence which may be the subject of claim against them. (2) Those whom a court of equity will treat as trustees by reason of their action, of which complaint is made. Distinguishing features are: (a) that such trustees claim to act in their own right and not for beneficiaries, and (b) no trusteeship arises before, but only by reason of, the action complained of."
That description of the distinguishing features of a trustee de son tort highlights a feature recognised in some of the later cases, that the assumption of office is not by the impugned transaction, but precedes it: liability as a trustee depends on having already assumed the office, whereby the trusts attach. This distinction between becoming a trustee de son tort and incurring liability as such for a breach of trust is also reflected in the judgment of Millett LJ (as he then was) in Paragon Finance plc v DB Thakerar & Co (a firm) (emphasis added): [44] "Regrettably, however, the expressions 'constructive trust' and 'constructive trustee' have been used by equity lawyers to describe two entirely different situations. The first covers those cases already mentioned, where the Defendant, though not expressly appointed as trustee, has assumed the duties of a trustee by a lawful transaction which was independent of and preceded the breach of trust and is not impeached by the Plaintiff. The second covers those cases where the trust obligation arises as a direct consequence of the unlawful transaction which is impeached by the Plaintiff. A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another. In the first class of case, however, the constructive trustee really is a trustee. He does not receive the trust property in his own right but by a transaction by which both parties intend to create a trust from the outset and which is not impugned by the Plaintiff. His possession of the property is coloured from the first by the trust and confidence by means of which he obtained it, and his subsequent appropriation of the property to his own use is a breach of that trust . . . . In these cases the Plaintiff does not impugn the transaction by which the Defendant obtained control of the property. He alleges that the circumstances in which the Defendant obtained control make it unconscionable for him thereafter to assert a beneficial interest in the property. The second class of case is different. It arises when the Defendant is implicated in a fraud. Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be 'liable to account as constructive trustee'. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were. He never assumes the position of a trustee, and if he receives the trust property at all it is adversely to the plaintiff by an unlawful transaction which is impugned by the plaintiff. In such a case the expressions 'constructive trust' and 'constructive trustee' are misleading, for there is no trust and usually no possibility of a proprietary remedy; they are 'nothing more than a formula for equitable relief': Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 2 All ER 1073, [1968] 1 WLR 1555 per Ungoed-Thomas J."
Again, the emphasised passage explains that liability as a trustee de son tort does not arise from a transaction in breach of trust, but from prior assumption of the role of trustee. Subsequently, in Dubai Aluminium Co Ltd v Salaam, relied on by the appellants, Lord Millett (as he had by then become) said: [45] [138] This summary is sufficient to show what Lord Herschell and Rigby LJ meant by "constructive trustee". They meant "trustee de son tort"; that is to say, a person who, though not appointed to be a trustee, nevertheless takes it upon himself to act as such and to discharge the duties of a trustee on behalf of others. In Taylor v Davies [1920] AC 636, 651, Viscount Cave described such persons as follows: ". . .though not originally trustees, [they] had taken upon themselves the custody and administration of property on behalf of others; and though sometimes referred to as constructive trustees, they were, in fact, actual trustees, though not so named." Substituting dog Latin for bastard French, we would do better today to describe such persons as de facto trustees. In their relations with the beneficiaries they are treated in every respect as if they had been duly appointed. They are true trustees and are fully subject to fiduciary obligations. Their liability is strict; it does not depend on dishonesty. Like express trustees they could not plead the Limitation Acts as a defence to a claim for breach of trust. Indeed, for the purposes of the relevant provision (s 25(3) of the Supreme Court of Judicature Act 1873), which distinguished between property held on express trusts and other trusts, they were treated by the courts as express trustees. That is why the action in Mara v Browne was not statute-barred.
Again, this is indicative that liability depends on the prior de facto assumption of the trust obligation, and not merely from procuring or participating in a breach of trust (which founds the second type of "constructive trust). The same distinction is apparent in the judgment of Ormiston JA in Nolan v Nolan, where, after referring, inter alia, to Selangor United Rubber Estates Ltd v Craddock (No 3), and Dubai Aluminium Co Ltd v Salaam, his Honour said (emphasis added, footnotes omitted): [46] "The subject of constructive trusts has over the years become contentious and differences in analysis have tended to confuse rather than inform. What has been described so far, however, supports the conclusion that trustees de son tort intend, by their actions, to assume the role of trustees and, at least in the first place, to take control of trust property for the benefit of others rather than for themselves. If the word "intermeddle" be used, it tends to confuse the issue to the extent that it suggests wrongful intermeddling, which frequently gives rise to cases where the question of liability is in issue, rather than circumstances in which the original intention is merely to act in the role of trustee in relation to certain property. These conclusions are consistent with what is said in Jacobs on Trusts and in Ford and Lee's Principles of the Law of Trusts, though it must be said that some differences appear in articles such as those by J D Heydon: "Recent Developments In Constructive Trusts" and R P Austin: "Constructive Trusts". Each article is critical of Ungoed-Thomas J in Selangor, but the latter is more cautious in his criticism. See also Cope: Constructive Trusts and Ong: Trusts Law in Australia. On this assumption I can see no evidence, even accepting the appellant's factual contentions, that Sidney Nolan purported to act as trustee of the paintings or any other property and thus cannot be characterised as a trustee de son tort for the purpose of the appellant's arguments. Nor is it necessary for the time being to examine those authorities which would seem to characterise the trustee de son tort as an "express trustee". See eg Soar v Ashwell, as discussed in Taylor v Davies. See also Cohen v Cohen. Those cases are often seen as having been largely influenced by the limitation statutes applicable at the time, although that may be an over-simplification: cf Paragon Finance plc v DB Thakerar & Co per Millett LJ."
The distinction has been recognised in this Court. In Hasler v Singtel Optus Pty Ltd, Leeming JA, with whom Barrett JA and Gleeson JA agreed, said (emphasis added): [47] "A non-trustee may be liable as a trustee de son tort if he, she or it presumes to act as a trustee although not so appointed, and then, say, commits a breach of trust or makes a profit from the position: see Williams v Central Bank of Nigeria [2014] UKSC 10; [2014] 2 All ER 489 at [54] and Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422 at [97]-[105] and [128]-[130]. That is quite different from the liability to account as a constructive trustee which may follow from either limb of Barnes v Addy. This was pointed out very clearly by Millett LJ in Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400 at 408-409 and (as Lord Millett) in Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 at [140]-[143]. Although the same expressions "constructive trust" and "constructive trustee" are used, the two situations are "entirely different": Dubai at [140]. A person liable pursuant to either limb of Barnes v Addy is: not in fact a trustee at all, even though he may be liable to account as if he were. He never claims to assume the position of trustee on behalf of others, and he may be liable without ever receiving or handling the trust property. If he receives the trust property at all he receives it adversely to the claimant and by an unlawful transaction which is impugned by the claimant: at [141]."
In my opinion these authorities establish that, before one can be liable as a trustee de son tort for a breach of trust, one must first have assumed the trust by purporting to act as if one were the trustee. The gist of liability as a trustee de son tort lies in the fact of voluntary assumption of the office, followed by conduct in breach. [48] What distinguishes the liability of a trustee de son tort from the personal liability of a stranger who receives trust property is that the former has first assumed the status of trustee. [49] Once one becomes a trustee de son tort, the trust obligations attach and thereafter a subsequent act inconsistent with them will incur liability for breach of trust. One does not become a trustee de son tort merely by wrongfully intermeddling with trust property, or participating in or procuring a breach of trust, without having first assumed the office, albeit de facto rather than de jure.
It is true that Max dealt with trust property, by paying it to himself. However, he has not been shown to have undertaken any antecedent act which involved assuming the status of trustee. Moreover, he never intended personally to act as if he were a trustee for the benefit of others. Rather, in his role as a director of the Trustee Companies, he contravened his fiduciary duties by procuring them to make payments for his benefit. The point can be illustrated, shorn of the complications of corporate personality, by imagining an individual trustee, who employs a manager with extensive authority, including to make payments. Assume the manager procures and "authorises" a payment of the trust property to himself or herself or an associate, inconsistent with the trusts. The manager does not thereby become a trustee de son tort: an agent does not become a trustee de son tort "unless he intermeddles in the trust by doing acts characteristic of a trustee and outside the duties of an agent". [50]
Being a director of a trustee company is not the same as assuming to act as trustee. To become a trustee de son tort, a director would at least have to arrogate to himself or herself the function of trustee, and not merely facilitate its discharge by the company. [51] In Bath v Standard Land Co Ltd, Cozens-Hardy MR said: [52] "Directors stand in a fiduciary relation to the company, but not to a stranger with whom the company is dealing. It is of course true that a company acts through its directors. But that does not involve the proposition that if a breach of trust is committed by a company, acting through its board, a beneficiary can maintain any action against the directors in respect of such a breach of trust."
Fletcher-Moulton LJ, although dissenting in the result, also said that it would not be "in accordance with the principles of equity to hold that [directors are] liable for all breaches of trust on the part of the company, even though such breaches of trust were planned and carried out by themselves". [53] Those statements are inconsistent with the idea that directors who procure their company to act in breach of trust are liable as trustees de son tort.
In purportedly making the distribution resolutions, Max was not acting as if he were trustee, but as a director of the Trustee Companies, albeit without requisite authority and inconsistently with his fiduciary obligations. The want of authority was not, however, in any appointment as trustee, but in his authority as a director. [54] Critically, before paying the Sale Proceeds substantially to himself, there was no anterior act by which he had assumed the obligations of trustee. Although the respondents submit that he was de facto trustee of the Sale Proceeds before distributing them to himself, no earlier act by which he purported to assume to act as trustee in place of the relevant Trustee Companies has been identified. He never assumed the trusts; rather he procured the misapplication of the trust property. He procured a breach of trust, and he received trust property as a result, but that sounds in liability under Barnes v Addy, potentially through imposition of a remedial constructive trust, and not as a trustee de son tort.
In my judgment, therefore, the primary judge was in error in holding that Max was liable as a trustee de son tort. Before procuring the misapplication of trust property, he had not assumed to act as if he were the trustee. It follows that the liability of Max and his companies was founded in his breach of fiduciary duty as a director, not in a breach of trust as a trustee de son tort.

[11]

Dishonesty (Grounds 7, 8)
At first instance, Max submitted that the Court should apply Corporations Act 2001 (Cth), s 1322, to conclude or make an order that the resolutions he purported to pass were valid. [55] One of the conditions for making a validating order under s 1322(4)(a) is that "the person or persons concerned in or party to the contravention or failure acted honestly". [56] His Honour rejected Max's attempt to rely on s 1322, for multiple reasons, one of which was that he was not satisfied that Max acted honestly. In that respect, his Honour said: [57] "[124] Nor am I satisfied that Max acted honestly in failing to seek or to obtain Mrs Twigg's approval. Max gave evidence that he acted on the advice of Pitcher Partners and left it to them to prepare the appropriate resolutions, which he signed. But there was no evidence from Mr Fitzpatrick or anyone else from Pitcher Partners that Pitcher Partners gave Max advice that he alone was entitled to sign effective resolutions of the Corporate Plaintiffs or that explained why Pitcher Partners departed from the practice that appears to have been followed for years in which minutes were prepared on the basis that they recorded decisions made at meetings of directors of the Corporate Plaintiffs at which both Mrs Twigg and Max attended and on the basis that Mrs Twigg would normally sign those minutes as the chairperson. That is evidence that Mr Fitzpatrick might have been expected to give. [125] Underlying Max's submissions on this issue is the contention that signature by Mrs Twigg was a mere formality, since it was her usual practice to sign everything that was put in front of her. But that contention begs the question of why that formality was not followed in the case of what surely must have been the most important decision the trustees of relevant trusts had ever been asked to take - that is, how to distribute a very large and largely unexpected windfall arising from the sale of the whole business carried on by the trusts. If Mrs Twigg had been asked to participate in that decision, it is to be expected that Max or Mr Fitzpatrick if they had acted with her interests in mind would have given her at least some explanation of the consequences of the decisions she was being asked to join in taking. And if that had happened, there is at least a risk that Mrs Twigg would have questioned the decision. In my opinion, absent any other evidence, the likely explanation for the departure in what had been usual practice over a number of years was that Max did not want to take that risk. It was easier to proceed without Mrs Twigg's agreement in the expectation that she was unlikely ever to raise the issue herself. They are not the actions of an honest person."
Later, in the context of considering whether there had been fraudulent concealment for the purposes of Limitation of Actions Act 1958 (Vic), s 27, his Honour said: [58] "For the reasons I have given, it could be said that the plaintiffs' claim is based on Max's fraud or that the right of action was concealed by his fraud because Max deliberately withheld information from Mrs Twigg that may have caused her to object to what he did."
The appellants contend that the primary judge erred in finding that Max acted dishonestly in concealing the payments made to him and entities controlled by him (Ground 7), and in particular in finding that Max did not inform Diane of the impugned payments so that she would not question them, and in inferring dishonest intent from that (Ground 8).
Just how this is relevant to the appeal is somewhat opaque. The appeal did not challenge the primary judge's decision to decline to grant relief under s 1322, on which Max bore the onus of proving that he had acted honestly. Dishonesty was potentially relevant to whether the action was one "in respect of any fraud or fraudulent breach of trust" for the purposes of Limitation of Actions Act, s 21(1)(a); but that arises only in the event that the bar in s 21(2) applies, and below I conclude it does not. The appellants submitted that it was relevant to the liability of Max and the Max companies under Barnes v Addy as dishonest participants in a breach of fiduciary duty. This is doubtful, given that Max did not merely participate in, but himself committed, the relevant breach of duty, so that his liability does not depend on dishonesty, which becomes relevant only when seeking to visit liability on a third party who falls short of inducing or procuring a breach, but nevertheless participates in it: it is only then that it is necessary that the breach amount to a "dishonest and fraudulent design". However, dishonesty may also be relevant in the context of postponement of any statutory bar by reason of fraud or fraudulent concealment - whether under the Limitation of Actions Act 1958 (Vic) ("the Victorian Act"), s 27, or under corresponding equitable concepts, from which s 27 and its analogues are derived, which apply to the application of limitation statutes by analogy in equity.
The notion of dishonesty in the context of liability under Barnes v Addy is not necessarily identical to the notion of fraud or fraudulent concealment for the purposes of postponing the bar. In the context of liability under Barnes v Addy, this Court has held that dishonesty, for the purposes of liability for knowing assistance in a breach of fiduciary duty which amounts to a dishonest and fraudulent design, is a transgression of the ordinary standards of honest behaviour, and it is not necessary to demonstrate that the person thought about what those standards were. [59] In the context of postponement of the bar, the prevailing view in this Court is that expressed by Mahoney ACJ, with whom Meagher JA and Abadee AJA agreed, in Seymour v Seymour (which concerned Limitation Act 1969 (NSW), s 55, the New South Wales equivalent of s 27 of the Victorian Act) (emphasis added): [60] "In my opinion, the section is not confined to simple common law fraud. It extends to conduct beyond that. On the other hand, it is not, I think, sufficient merely that for the defendant to take advantage of the statute of limitations would be unconscionable or inequitable in the wide sense of these terms. Terms such as unconscionable and inequitable now are used to describe conduct which, in previous times, would not have fallen within them: see Baumgartner v Baumgartner (1987) 164 CLR 137 at 147 and Hibberson v George (1989) 12 Fam LR 725 at 731. Nor, in my opinion, is 'fraudulently' wide enough to include everything which would fall within the description of 'equitable fraud'. Equitable fraud is a doctrine which depends, for this purpose, too much upon nice distinctions which have been drawn in other times: see Snell's Equity, 29th ed (1990) at 550 et seq; Meagher, Gummow & Lehane, Equity: Doctrines and Remedies, 3rd ed (1992) at par 1208; and see the discussion in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 553. The history of the English legislation was recently reviewed in Sheldon v RHM Outhwaite (Underwriting Agencies) [1996] 1 AC 102: see, eg, at 144, 153. In my opinion, there must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing. At least, this is so in the generality of cases. (There is in this as in many things, the problem of dealing with the person who 'closes his eyes to wrong' or is so lacking in conscience that he is not conscious of his own lack of proper standards.)"
The appellants submit that, in circumstances where the judge found all parties unreliable, there was an unsound basis for findings of dishonesty; and that in any case, the evidence showed that Diane knew that Max was exercising control of the proceeds of sale and acquiesced in, if she did not agree to, that state of affairs (said to be evidenced by her delay in commencing proceedings, and by her having "written Max out" of her will because he had inherited the business). Further, they submit that the judge relied substantially on the fact that the 2007 resolutions were signed only by Max, and wrongly inferred dishonesty from the failure to adduce evidence from the accountants to prove that Max was only acting on advice in being the sole signatory - this was said to have "reversed the onus" borne by Diane to prove dishonesty, and to be unsound additionally because (1) there had been substantial delay (making such evidence difficult to call), (2) Max's (inherently probable) evidence that the accountants prepared the resolutions was not rejected, and (3) Max honestly believed that he was entitled to deal with the proceeds as effective owner of the companies. The more specific inference that Max did not want to risk Diane questioning the distributions is also said to be unsustainable: any such risk was negated by Diane's evidence that she signed any document placed before her by Max. Conversely, there is said to be a lack of evidence supporting a finding of dishonesty.
The finding that all parties were less than reliable witnesses - perhaps unsurprising itself in circumstances that when they came to give evidence at the trial more than twelve years had passed since the relevant events - does not mean that there was an unsound basis for a finding of dishonesty, once the relevant facts were found. The departure from the uniform and established practice of previous years whereby Max and Diane met and together made resolutions as to distribution, so that in 2007 Max alone did so, is striking. Had that process been followed, those matters of which Diane was not informed - the quantum of the net proceeds, that Max was going to take almost all of them, and that that would exhaust the trusts forever - would have come to her notice. There is force in the primary judge's observation that, if (as Max contended) signature by Diane was a mere formality and it was her usual practice to sign everything that Max put in front of her, that begs the question of why that formality was not followed in the case of the most important and final decision the Trustee Companies had ever been called on to make, namely how to distribute within the family this enormous and unanticipated windfall, consequent on the disposition of the whole of the Twigg Group's business assets.
The fact that Diane was accustomed to sign whatever Max asked her to does not mean that Max had no reason not to ask her to do so on this occasion - especially given the extraordinary nature of the transaction. So much is self-evident. Indeed, Max (ultimately) conceded that he appreciated that there was a real risk that if his sisters found out about what he was proposing in 2007 by way of distribution to himself, they might have objected (emphasis added): [61] "Q. You appreciated the risk that whatever Diane might think about whether your intended split was equitable or not your sisters if they found out about it would think the split was too one sided, correct? A. No. Q. I want to suggest to you that it's fanciful for you to suggest that it didn't even occur to you that your sisters might have something to say about the split that you intended to make? A. The distribution of the sale of the business was discussed with Adrian, my mother and my two sisters; that was agreed. I didn't speak to my sisters about the sale of business, it was - to me I was in charge of business, and running it, I just spoke to my mother about it. Q. You understood that they might have something to say if they found out that you were intending to split the available net proceeds in the way that you did? A. That was my mother's conversation with-- Q. You understood they might complain about that? A. There was - yes, I suppose; it's fair to say. Q. So, you didn't talk to Diane about how the proceeds would be split, did you? A. I did, at length. Q. Because you were worried that if you told her, she would tell your sisters; correct? A. No, my mother understood exactly. Q. And you were worried that if your sisters found out, their husbands would find out; correct? A. When I sold the business, the first person I spoke to was my mother; and I told her the number, told her - we were working back - expensing everything back and we'll - going to come up with a number. It's going to be a long enough time. She - she was aware the number that was going to be washed out and she knew that we had debt. She knew that we - mother was well aware of the - the deal, and she'd spoken to my sisters. She spoke to them. I wasn't obliged to speak to my sisters. I wasn't - I didn't ever do that. Q. You appreciated there was a risk that your sisters' husbands, if they found out about the intended split, would complain about it. Correct? A. It's a real possibility; it could have happened, yes. Q. And that's why you didn't tell Diane what the split was proposed to be; correct? A. No, Diane knew. Q. That's why you departed from the long-established practice of including Diane in decisions about distributions in 2007, isn't it? A. I think we had made the decisions in 2007 at the sale. So, those decisions had been made."
The curious circumstances of the 2007 resolutions called for an explanation. Max claimed that he was unconscious of the fact that what he was doing was wrong or that taking advantage of the situation involved wrongdoing. He contended that he believed that he was entitled to act as he did as the de facto controller of the business, and that he relied on advice from the accountants, Pitcher Partners, to do so. However, it was the primary judge's unchallenged conclusion that no evidence was adduced - from Mr Fitzpatrick, who was called, or anyone else - of any advice given by Pitcher Partners to the effect that it was appropriate for Max to act as he did in signing alone effective resolutions of the Trustee Companies, or otherwise explaining the departure from the practice which had been routinely followed since his father's death in 1996. The "note" attached to the resolutions tells the contrary. In circumstances where Max was seeking to establish (for the purposes of relying on s 1322) that he acted honestly, he bore the onus of proof, and it was entirely open to his Honour to rely on the absence of any such evidence as a relevant matter in concluding whether such advice had been given. Contrary to the appellants' submissions, the passage of time does not significantly detract from this, given that Max and Mr Fitzpatrick were not unable to profess to recall other conversations and events from the same period. This was not merely a Ferrcom [62] inference drawn from the failure to adduce relevant evidence from a witness, but an absence of any evidence to support Max's contention. And even where Max did not bear the onus (such as on the issue of fraudulent concealment), his failure to adduce such evidence from the accountants not only legitimately founded an inference that it would not assist him, but left a void of evidence to explain the otherwise suspicious circumstances.
Insofar as the 'advice' on which Max claimed to rely was that the form of the resolutions was prepared and provided by Pilcher Partners, there are further difficulties. First, the resolutions were drafted after the impugned payments, or at least some of them, had been made: before 30 June 2007, $58,750,000 had already been paid out of the TPH account, to Max or entities controlled by him. [63] Secondly, the accountants would not have departed from the practice they had followed in drafting resolutions for each year of the preceding decade, unless they were given instructions which caused them to do so. As to this, Max gave the following evidence: [64] "Q. And you told them that Diane was okay with the sale proceeds being spent in that way? A. That had already been discussed. That was - that was before. We'd moved on from then. Now we were buying a hotel. Q. And you expected them to prepare documents on that basis? A. Yes. Q. And when they did, you signed them? A. Correct."
A further matter telling against Max's claim that he believed he was entitled to act as he did is provided by a letter dated 24 November 2004, prepared by the accountant Mr Fitzpatrick, setting out "Dianne's [sic] thinking … regarding how the Twigg Family financial assets might be dealt with going forward". The primary judge observed: [65] "[52] 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. [53] 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."
Relevantly, under the heading "Key General Principles", the letter stated (emphasis added): [66] "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."
After explaining a number of matters, including what were the "non-business assets, and recording that it was Mrs Twigg's intention that "the Twigg business group continue to contribute the maximum deductible superannuation contribution on behalf of Dianne [sic], which is approximately $90,000 per annum" (which would not be possible if all its assets were distributed), the letter proceeded (emphasis added): [67] "This correspondence is not a legal document but merely a communication mechanism to indicate to each of you Dianne's [sic] thoughts and plans relating to the Twigg Family finances. I am recommending to Dianne [sic] that she reviews her personal financial position every 3 years, and plans and organises her financial affairs based on those reviews. It is important to note that at these reviews Dianne [sic] would not alter the "Key General Principles" outlined under Point 1 of this letter i.e. control of Twigg Group operating entities to Max and his family with Frances and Liz to jointly control the Twigg non-business assets. Examples of issues Dianne [sic] would consider each 3 years would include: • Dianne's [sic] salary and superannuation contribution levels together with other benefits provided by the Twigg Business Group. These discussions would be with Max in his capacity as the other director of the Group. • Assessment of the current value of the Lysterfield and Gold Coast properties. • Assessment of the performance of Dianne's [sic] Superannuation Fund, including considering the quantum of the benefit accumulated, future earning capacity and calculation of what the future pension entitlements might be. • Review of Business Group's operations generally and where profits are extraordinarily high, understand the reasons why and together with Max, give consideration as to whether it is equitable to share part of the extraordinary profits with Frances and Liz, or conversely where the trading performance is poor, give consideration as to whether the Business Group needs financial assistance and support from the non-business assets. This recognises that it is in the Twigg family's best interest to ensure the business is financially secure at all times. • Review the terms of Max's employment with the Twigg Business Group to ensure the remuneration package, other benefits, terms and conditions reflect the current market situation."
As the primary judge observed: [68] "Max places a great deal of emphasis on this letter. He gave the impression in his evidence and says in submissions that it was effectively the culmination of a process by which Mrs Twigg accepted that Max in effect owned and controlled the Twigg Group business. As part of that narrative, Max originally suggested in his affidavit evidence that by this stage he had become the sole guarantor for the Twigg Group business debts. However, on a proper reading of the letter, it does no such thing. The letter makes it quite clear that Mrs Twigg remained in control of the business. It sets out how she expected the business to be operated and what she intended to happen on her death. But it made clear that that was subject to revision depending on how the business performed and the value of her personal assets. That is entirely consistent with the fact that, despite Max's suggestion to the contrary, Mrs Twigg remained a guarantor of all the Twigg Group business debts. It is also consistent with the fact that it was only earlier that year that Ipswich was incorporated with Mrs Twigg as its sole shareholder and as the appointor and guardian under the Ipswich Landfill Trust."
Max had undoubtedly read and understood the letter. He was cross-examined about it: [69] "Q. Mr Twigg, while we're dealing with this subject of your mother's testamentary intentions, I want to take you to the document at 1608 of volume 3, now you recognise that document? A. I do. Q. A Pitcher Partners letter of 24 October 2004? A. Yes. Q. It's a document that you seek to deploy in your own evidence, correct? A. Yes. Q. And you seek to highlight particular parts of this letter in your evidence, don't you? A. This was certainly tendered in my affidavit, yeah. Q. Well it's more than tendered, in your affidavit you said that you read this letter, correct? A. Yes, I have read this. Q. And you read it in November 2004, you say in your affidavit? A. I did. Q. And you not only say that, but you go to some length to quote and deal with what appears at the bottom of page 1611, loose drawings arrangement of your sisters? A. Yep. Q. What I want you to do today is to have regard to the whole of the letter, not just that portion of it that you've dealt with in your affidavit. If you go back to 1608, paragraph 1, "key general principles", do you have that? A. Yeah, I do. Q. And you see that general principle was that Max and your family would ultimately take control of the Twigg Group operating businesses? A. That's right. Q. So not take control then, but ultimately? A. No, in the sale of business was that trigger point. It was to be done over a period of time, but the same came up and that's the trigger point that we used to do this. Q. And in paragraph 2 Twigg Group business assets control to ultimately pass to Max, so when you read this letter you knew it wasn't about control passing to you then? A. No, it was to be progressive. Q. It's a reference to something that would happen ultimately, wasn't it, and you understood-- A. Yeah, well it was progressive, and ..(not transcribable).. because there were tax implications to do it. Q. You understand what the word "ultimately" means? A. Ultimately, yeah, I know what it means. Q. Not then, later? A. No, it's progressive over a period of time to do that, and what I'm telling you is that during the sale, 2007, that that was the trigger point to do this."
The parts of the letter emphasised above tell strongly against Max's claim to have believed that he could deal with the Sale Proceeds as he did. His claim that "ultimately" in effect meant 2007, in the context of those aspects of the letter, and of the fact that there was no evidence, even from Max, that Diane was told that the effect would be that for all practical purposes the trusts would be at an end and there would be no remaining trust assets or business or income, is not credible.
The appellants pointed to a finding made by the primary judge in the context of consideration of the defence of laches which was said to be inconsistent with dishonesty on the part of Max, because it is said that upholding that defence, even in part, necessarily involved finding that Max believed he was entitled to deal with the Sale Proceeds as his own. In distinguishing the application of the doctrine to the personal claim and the proprietary claim, his Honour said (emphasis added): [70] "[188] The question, then, is how is a defence of laches to operate in those circumstances? In my opinion, the defence is available in respect of any personal claim against Max to pay equitable compensation for his breaches of fiduciary duty or breaches of trust. Over an extended period to time, Mrs Twigg permitted Max to deal with the proceeds of sale as if they were his own. He has paid a substantial portion of them away. He reached a final property settlement with his former wife on the basis that he was entitled to the proceeds of sale. Not only is the delay very substantial, but as a result of the delay Max has acted in ways that he otherwise would not have acted, and to his detriment. That is sufficient to provide a defence of laches to any personal action against him for breach of fiduciary duties or breach of trust. [189] On the other hand, I do not see why the defence should be available to a claim by the plaintiffs to recover what remains of the trust assets. To the extent that Max has retained trust assets or holds assets to which trust assets can be traced, he has not suffered the detriment of paying those assets away in the belief that he was entitled to treat them as his own. It is likely that Max dealt with other trust assets that have now been lost or spent in the way that he did in the belief that he was entitled to what remained, and in that sense he has acted to his detriment. But it also needs to be borne in mind that that was a risk that Max took from the time that he treated the assets as his own. On the findings I have made, Max knew that there was a risk that Mrs Twigg would object to the way in which the sale proceeds were dealt with if she knew the true position. Knowing that, he took the risk of dealing with them as if they were his own. Max must have appreciated that there remained a risk that Mrs Twigg would, either of her own volition or more likely at the prompting of Frances and Elizabeth, object to what he had done - a risk that he rationally must have expected would reduce over time. But I do not think that the reduction in risk with the passage of time can be equated to an effective right to keep the trust property and, despite the time that has passed, I do not think it would be inequitable to visit on Max the consequences of that risk coming to fruition. That conclusion seems to me to be consistent with the statement of principle of Deane J in Orr v Ford. Max may have acted to his detriment, but he did not do so as a consequence of any conduct by the plaintiffs. Rather, he did so in circumstances where he must have known of the risk that he was taking. That does not provide a sufficient basis for a defence of laches to a claim to recover trust property or its traceable proceeds."
The appellants submitted that it was implicit in these passages, and in upholding the defence of laches to the extent that it was, that Max honestly believed that he was entitled to deal with the proceeds as he did. I do not agree. First, insofar as these passages refer to Max's state of mind, they relate to the later times when he disposed of assets to his detriment, not the time in 2007 when he took the trust property in the first place. They are not inconsistent with him not having an honest belief that he was entitled to take the trust property in 2007; he may have developed a belief that he was entitled to deal with the assets as if they were his own over time, with the absence of objection. Secondly, this is reinforced by the fact that the passage in [188] refers to him dealing with the assets as if they were his own, but not to any honest belief to that effect, while the passage in [189] refers to any 'belief' only in respect of 'what remained'. Thirdly, the passage in [189] makes clear that such belief as he by then had was still accompanied by appreciation of a risk that objection might yet be raised because of the manner in which he had taken the Sale Proceeds. This is not a finding that Max honestly believed he was entitled to act as he did in 2007, and is not inconsistent with the express findings that he acted dishonestly.
Diane's state of knowledge - in 2007 let alone in 2009 - is not directly relevant to Max's honesty. On any view, she was not fully informed. Contrary to the appellants' submission, the delay in commencing proceedings does not evince acceptance on her part that Max was free to use the Sale Proceeds for his own benefit and was therefore not acting dishonestly: it could not do so unless Diane was aware of the amount and proportion of the proceeds that Max had taken. Nor does Diane's "writing Max out of her will" do so: Diane's will was consistent with what she intended "ultimately" to happen in accordance with the November 2004 letter. The fact that Max may have lived an opulent lifestyle is not inconsistent with his having a consciousness of wrongdoing: he may have reasoned that in the light of his other available resources it would not trigger suspicion, or that his mother so trusted him that she would not think to question it. In any event, it suffices that his conduct transgressed ordinary standards of honest behaviour, even if he did not appreciate it. As the primary judge said (emphasis added): [71] "Second, as I have explained, I do not think that Max was induced by any of Mrs Twigg's conduct to believe that he was entitled to do what he did or that no claim would be made against him. Rather, he recognised that if Mrs Twigg was given a full explanation of what the sales proceeds would be and how they were to be distributed and asked to agree to what was proposed at the time the sale agreement was signed, there was a risk that she would require some different distribution to be made. Conscious of that possibility, he signed the relevant resolutions himself. On the other hand, he did not attempt to conceal the fact that he dealt with the net sale proceeds largely for his own benefit. The likelihood is that he assumed, correctly as it turned out, that if the issue was not raised with Mrs Twigg directly, she would take no action herself. On that basis, he dealt with the proceeds of sale as if they were his own."
Max made the impugned payments and purported to pass the June 2007 resolutions as he did, in circumstances where he knew that Diane reposed trust and confidence in him (including to tell him of important issues or decisions that might be harmful to her interests), that Diane was a director and necessary party to previous distribution resolutions, and that there was a risk that if he disclosed his intention some beneficiaries might object. In my judgment, absent any better explanation, the probable explanation for this unprecedented departure from historical practice, in the context of the enormity and finality of the transactions under consideration, of which he was the beneficiary, was that Max was using his fiduciary position as Managing Director of the Trustee Companies for his own benefit to acquire for himself the trust property, in a manner calculated to minimise the risk that the other director would discover and exercise her legal right to object. Such conduct is plainly a transgression of ordinary standards of honest behaviour, and as has been noted, it is not necessary to demonstrate that Max thought about what those standards were. However, the very fact that he proceeded in a manner calculated to avoid discovery speaks eloquently in favour of the proposition that he knew he was not entitled to act as he did. The primary judge did not err in concluding that Max acted dishonestly in the relevant sense, and in particular that in proceeding as he did he sought to avoid the discovery by Diane of information that would ordinarily have come to her notice and may have caused her to exercise her legal right as the other director to object - that is to say, what Max did involved conscious wrongdoing, and conscious active concealment. This has consequences for the discussion, below, of laches and limitations.

[12]

Laches (Ground 10)
It is convenient next to deal with the defence of laches. As has been noted, the primary judge upheld the defence in respect of claims against Max personally for equitable compensation, but not in respect of claims for proprietary relief. In this respect, after referring to the observations of Deane J in Orr v Ford, [72] his Honour said (emphasis added): [73] "[185] 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. [186] It must also be the case that Mrs Twigg's knowledge of those matters is to be imputed to the Corporate Plaintiffs. She was at the relevant time the only other director of those companies; and it is difficult to see why her knowledge should not be imputed to the companies for the purpose of determining whether a defence of laches is available to the claims that they make. [187] Second, as I have explained, I do not think that Max was induced by any of Mrs Twigg's conduct to believe that he was entitled to do what he did or that no claim would be made against him. Rather, he recognised that if Mrs Twigg was given a full explanation of what the sales proceeds would be and how they were to be distributed and asked to agree to what was proposed at the time the sale agreement was signed, there was a risk that she would require some different distribution to be made. Conscious of that possibility, he signed the relevant resolutions himself. On the other hand, he did not attempt to conceal the fact that he dealt with the net sale proceeds largely for his own benefit. The likelihood is that he assumed, correctly as it turned out, that if the issue was not raised with Mrs Twigg directly, she would take no action herself. On that basis, he dealt with the proceeds of sale as if they were his own. [188] The question, then, is how is a defence of laches to operate in those circumstances? In my opinion, the defence is available in respect of any personal claim against Max to pay equitable compensation for his breaches of fiduciary duty or breaches of trust. Over an extended period to time, Mrs Twigg permitted Max to deal with the proceeds of sale as if they were his own. He has paid a substantial portion of them away. He reached a final property settlement with his former wife on the basis that he was entitled to the proceeds of sale. Not only is the delay very substantial, but as a result of the delay Max has acted in ways that he otherwise would not have acted, and to his detriment. That is sufficient to provide a defence of laches to any personal action against him for breach of fiduciary duties or breach of trust. [189] On the other hand, I do not see why the defence should be available to a claim by the plaintiffs to recover what remains of the trust assets. To the extent that Max has retained trust assets or holds assets to which trust assets can be traced, he has not suffered the detriment of paying those assets away in the belief that he was entitled to treat them as his own. It is likely that Max dealt with other trust assets that have now been lost or spent in the way that he did in the belief that he was entitled to what remained, and in that sense he has acted to his detriment. But it also needs to be borne in mind that that was a risk that Max took from the time that he treated the assets as his own. On the findings I have made, Max knew that there was a risk that Mrs Twigg would object to the way in which the sale proceeds were dealt with if she knew the true position. Knowing that, he took the risk of dealing with them as if they were his own. Max must have appreciated that there remained a risk that Mrs Twigg would, either of her own volition or more likely at the prompting of Frances and Elizabeth, object to what he had done - a risk that he rationally must have expected would reduce over time. But I do not think that the reduction in risk with the passage of time can be equated to an effective right to keep the trust property and, despite the time that has passed, I do not think it would be inequitable to visit on Max the consequences of that risk coming to fruition. That conclusion seems to me to be consistent with the statement of principle of Deane J in Orr v Ford. Max may have acted to his detriment, but he did not do so as a consequence of any conduct by the plaintiffs. Rather, he did so in circumstances where he must have known of the risk that he was taking. That does not provide a sufficient basis for a defence of laches to a claim to recover trust property or its traceable proceeds."
The appellants support the primary judge's holding that the claims against Max personally were barred by laches, but contend that his Honour erred in not applying the same reasoning to the claims for proprietary relief (Ground 10). They submit that: 1. The decision not to apply laches to the proprietary claims was founded on the "unsustainable" finding of dishonesty by Max. However, as I have concluded, above, that finding was far from unsustainable; [74] 2. The judge was wrong to focus on Max's state of mind, the relevant consideration being the state of mind of Diane, who knew the matters that it was said that Max failed to disclose (namely, the sale price and distributions). However, the context in which his Honour referred to Max's state of mind was in considering whether he had acted to his detriment in reliance on a belief that he was entitled to the remaining assets. The point was that any such belief must have been a qualified one, because of the risk - which Max was found to appreciate - that at some stage Diane or others might object, and this was relevant in evaluating, for the purposes of the defence of laches, whether it was inequitable to visit on Max the consequences of that risk coming to fruition. The question of Diane's knowledge is dealt with below; 3. There was no principled basis for applying laches to some claims but not others. However, in the course of argument Mr Walker SC, for Max, accepted that, at least in theory, outcomes for equitable compensation and proprietary claims could be different, although he submitted that in this case, where Max's actual belief that he was entitled to deal with the remaining assets as his own was applicable to both, there was no reason to reach different results. Even accepting the premise that Max had such a belief (which for reasons already given I do not), the distinction is that proprietary relief merely requires Max and his companies to disgorge what they have received, whereas equitable compensation would compel them to make good the losses out of their own resources. In any event, because of the view I take, below, in respect of the cross-appeal, no different outcome remains; 4. The judge wrongly found little or no detriment to Max in "paying [the] assets away", as the disposal of the assets constituted detrimental reliance; prejudice is demonstrated in respect both of Max's property settlement with his former wife (as it was necessarily informed by his financial position at the time, and would have been less unfavourable to Max if his assets were diminished by any outcome of the present proceedings), and more generally in that Max and his companies no longer have the funds available to them to meet the present claims, which would not have been the case but for the delay; further, the primary judge overlooked that Max suffered detriment also in that he would have been better able to defend the proceedings without delay and loss of evidence. However, I do not accept the respondents' submission in reply, that no prejudice was established because being able to deal with the Sale Proceeds as if they were his own was not prejudice but merely unlawful benefit, and there was no evidence that Max's property settlement with his former wife would have been different had the present proceedings been commenced at that time; in my view, it can reasonably be inferred that he would have had to pay his former wife less if his asset pool had been less. However, the judge did not find that there was "little or no detriment": his Honour found that "It is likely that Max dealt with other trust assets that have now been lost or spent in the way that he did in the belief that he was entitled to what remained, and in that sense he has acted to his detriment", and that "Max may have acted to his detriment, but he did not do so as a consequence of any conduct by the plaintiffs". While his Honour did not refer to the impact of delay on Max's capacity to defend the proceedings, there was no evidence that it had any such impact: there was no evidence of prejudice from the loss of documentary evidence or witness memory due to the passage of time.
However, for reasons that follow, the foregoing matters are of only subsidiary relevance. The respondents support the primary judge's conclusion that laches did not bar the claims for proprietary remedies, but by their cross-appeal (Ground 1) contend that his Honour erred in holding that laches did bar personal remedies against Max. They submit that Max failed to discharge his onus to establish laches, as he did not demonstrate either that Diane had knowledge of his wrongdoing sufficient to establish laches, or that he suffered prejudice such as to make it inequitable to enforce the claim.
For laches to bar an equitable claim, the plaintiff must first possess "sufficient knowledge of the facts constituting the title to relief". [75] The delay is measured from the time the plaintiff is sufficiently aware of the facts which constitute the wrongdoing upon which the claim is based. [76] In Savage v Lunn, [77] this Court said (emphasis added): "Laches is a defence and the defendant has the onus of proof. See Meagher and Ors, at 797. One of the matters that must be proved is that the plaintiff had sufficient knowledge of the facts and his rights to justify the commencement of proceedings. In Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 241, Lord Selborne (see errata) said: "In order that the remedy should be lost by laches or delay, it is, if not, universally at all events ordinarily ... necessary that there should be sufficient knowledge of the facts constituting the title to relief". In Erlanger v The New Sombrero Phosphate Co (1878) 3 App Cas 1218 at 1279, Lord Blackburn said: " ... a court of equity requires that those who come to it to ask its active interposition to give them relief, should use due diligence, after there has been such notice or knowledge as to make it inequitable to lie by". See also Orr v Ford and Anor (1988-89) 167 CLR 316 at 343. The appellants failed to establish that the plaintiffs, or their predecessors, had any knowledge of the forgeries until shortly before their caveats were lodged. The delay between then and the commencement of proceedings could not ground this defence where equitable relief was sought in aid of a legal right. In any event, there was no evidence that the appellants did anything during that short period which would make it inequitable to grant relief to the plaintiffs. See Lindsay Petroleum Co v Hurd at 239-240."
The appellants cite Meagher Gummow & Lehane, Equity: Doctrines and Remedies, 5th ed at [38-070], [78] for the proposition ventured by the authors that where the delay causes prejudice through detrimental reliance, there seems no reason why the plaintiff's ignorance of its rights should bar a defence of laches. For that suggestion, the only authority to which the authors refer is the judgment of Mahoney JA (with whom Meagher JA and Handley JA concurred) in Nowell v Palmer. [79] However, with great respect, I see no statement in that judgment supportive of that proposition. Moreover, the judgment of Handley JA endorses Lindsay Petroleum as the "classic statement" of the equitable principles governing the defence of laches and delay. Savage v Lunn (No 2), [80] which is also relied on by the appellants, in fact affirms the requirement for knowledge (emphasis added): "Mr Reynolds submitted that the Court failed to deal with the defence of laches based on inordinate delay, and he relied on the acts or omissions of the plaintiffs, or their predecessors, dating back to 1913 or 1916, including the failure of the executrix to become registered as the holder of the shares. He particularly relied on the following statement in Meagher, Gummow and Lehane, 3rd Ed, 1992, para3617: "... in the kind of laches which consists of a plaintiff's long delay leading to the defendant (or some third person) reasonably altering his position to his detriment in reliance thereon, there seems to be no reason why the fact that the plaintiff is ignorant of his rights should bar a defence of laches". The claimants' difficulties, however, arise from lack of evidence that the plaintiffs or their predecessors knew that a forgery had occurred. In the passage referred to the authors deal with a case where the plaintiff was unaware of his "rights", which is not the issue in this case. Earlier in the same paragraph the authors state: "In order to have one's claim barred by laches, to what extent is it necessary to know what one's rights are? The answer is that, in the kind of laches which really consists of waiver implied by conduct, the party against whom the defence is urged must know both the facts on which his rights depend and also what his rights are ... But it would appear that knowledge of the relevant facts gives rise to a presumption of knowledge of one's rights ... and the availability of the means of knowledge is as good as knowledge". In our judgment we referred to statements by Lord Selborne, Lord Blackburn and Sir William Deane which establish that proof of laches "ordinarily" requires proof that the plaintiffs remained inactive after acquiring "sufficient knowledge of the facts". Nothing in Meagher, Gummow and Lehane controverts, or could controvert, this principle. When we reserved our decision on this application, we gave Mr Reynolds leave to submit a list of any authorities which established that this defence could succeed without actual or inferred proof of such knowledge. The Court was later supplied with the following list of authorities: Baburin v Baburin (No 2) [1991] 2 Qd R 240 at 257.3-258; Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 at 630, 651; Lamshed v Lamshed (1963) 109 CLR 440 at 453 and 455; Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 at 582-583; Ashburner, "Principles of Equity", (2nd Edition) at p515-p516; "Halsbury's Laws of England", (4th Edition), Volume 16, para 1476 ff; Spry, "Equitable Remedies", (4th Edition) p227-p228, p232-p233; Erlanger v New Sombrero Phosphate Co Ltd (1878) 3 App Cas 1218 at 1279; Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 at 239-240, 241; Stafford v Stafford (1857) 1 De G & J 193 at 202, 44 ER 697 at 701; Holder v Holder [1968] Ch 353 at 394; Allcard v Skinner (1887) 36 Ch D 145 at 186; Pickering v Lord Stamford (1795) 2 Ves 581; 30 ER 878; Life Assn of Scotland v Siddal (1861) 3 De G F & J 58; 45 ER 800; Browne v McClintock (1873) LR 6 HL 456 at 471.5; Marquis of Clanricarde v Henning (1861) Beav 175, 54 ER 855 at 857.9. The passages cited have all been read, but, individually and collectively, they do not furnish any support for the proposition that actual or inferred knowledge of the facts is not a necessary requirement of this defence. In any event the decisions listed either predate Lindsay Petroleum Co v Hurd and Erlanger v The New Sombrero Phosphate Co or contain nothing contrary to the relevant statements of Lord Selborne and Lord Blackburn."
The proposition that means of knowledge is as good as knowledge does not simply mean that if one could find out upon making inquiries, one is taken as having knowledge, in the absence of anything to put the plaintiff on inquiry. It is derived from the judgment of Lindley LJ in Allcard v Skinner, where his Lordship said: [81] "It was urged that the plaintiff did not know her rights until shortly before she asked for her money back. But, in the first place, I am not satisfied that the plaintiff did not know that it was at least questionable whether the defendant could retain the plaintiff's money if she insisted on having it back. In the next place, if the plaintiff did not know her rights, her ignorance was simply the result of her own resolution not to inquire into them. She knew all the facts; she was in communication with her present solicitor in 1880; his remark that "it was too large a sum to leave behind without asking for it back" was a clear intimation that she ought to ask for her money back, and was a distinct invitation to her to consider her rights. She declined to do so; she preferred not to trouble about it. Under these circumstances it would, in my opinion, be wrong, and contrary to sound principle, to give her relief on the ground that she did not know what her rights were. Ignorance which is the result of deliberate choice is no ground for equitable relief; nor is it an answer to an equitable defence based on laches and acquiescence."
Thus the proposition that ignorance which is the result of deliberate choice is not an answer to an equitable defence based on laches and acquiescence presupposes knowledge of the relevant facts, though not of the rights to which they give rise. The requirement for more than mere notice of facts which might put one on inquiry was also illustrated by Pagone J in Reader v Fried (emphasis added): [82] "The length of time which has elapsed between (a) the events and the plaintiffs' fair appreciation of them, and (b) the commencement of the proceeding, is regrettable. Mere delay, however, is not sufficient to establish laches or acquiescence. The event which occurred in 1990 that was said by the defendants to provide sufficient details of the transaction, was the giving to the members the report of the fund for the year to 30 June 1990. That report refers to the fact of ownership of the Moorabbin property and an assertion of the value of the property at $770,750. Such facts, perhaps combined with others that may have been known to the members, might have put the plaintiffs on a line of enquiry that would have enabled them to discover the breaches. However, in my view, the defendants needed to do much more than that if they are to rely successfully upon their own conduct, or their own disclosure, to fix such events as the relevant date from which the plaintiffs might be in jeopardy if they fail to take action to protect their rights. In my view the 1990 report, even when combined with such other facts as may have been common knowledge, is not sufficient."
The appellants invoke the primary judge's finding that "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." [83] Elsewhere, in the context of concealment, his Honour found that "She knew that the Twigg Group business had been sold for approximately $155 million. She knew that she and her daughters were to receive part of the proceeds of sale. She could easily have asked Max or Mr Fitzpatrick what was going to happen to the balance of the proceeds of sale. But she chose not to do so".
His Honour's conclusion that by about 2009, Diane knew Max had dealt with the Sale Proceeds after paying tax and repaying debt without consulting her and largely for his own benefit, was founded on the following elements: 1. that Diane knew that Cleanaway paid approximately $155 million for the trust assets; 2. that Diane knew that Max exercised control over the proceeds of sale and used them to buy a number of valuable assets, including 1. the Byron Bay Hotel for a purchase price of $40 million, 2. 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 3. a property at Albatross Avenue, Mermaid Beach for which she recalls he paid $6 million; 1. that Diane also knew that Max had an extravagant lifestyle, which included racing expensive sports cars, and must have understood that, in part at least, that lifestyle was supported by proceeds from the sale of the business; and 2. that Diane knew that Max had made the decision to pay $5 million of the proceeds of sale to each of her, Frances, and Elizabeth.
Where the timeframe of 2009 referred to by the primary judge is sourced is not apparent. It may be accepted that Diane knew, as a signatory to the contract, that the gross selling price was approximately $155 million. However, there is no evidence that establishes that she was aware of the quantum of the net proceeds. To the contrary, the existence of a large amount of debt was emphasised by Max. Diane's following account of what she was told and understood was not challenged (emphasis added): [84] "138. I recall having another conversation with Max a period of time after the first discussion in which words to the following effect were said: Max said: "Mum we are going to sell the business to this guy Peabody and we are going to be rich." I said: "Max that is fantastic. Well done." Max said: "It is unbelievable." 139. I never discussed the proceeds of the sale, other than as I depose to below at paragraph 147 with Max or with Adrian Fitzpatrick. I also never met the solicitor preparing the sale documentation for the Twigg Group, Mr Noel Martin until I signed the sale documents which I depose to below. I never took any advice from anyone about the sale, and no-one suggested to me that I should do so. … 142. I knew that the sale price of the Twigg Group to Mr Peabody's company then called Transpacific was approximately $155 million. I did not believe that the Twigg Group would receive anything like $155 million though because Max had been telling me over the years that the Twigg Group and the business: a. was under financial pressure; b. had a lot of debts to repay, and c. had a lot of expenses to pay. 143. I understood that all those things had to be "paid up" from the sale proceeds. 144. I did not enquire about balance of the purchase price because I had complete trust in Max and in Adrian and I received what I considered to be an enormous amount of money from the sale, being the $5 million dollars which I depose to below."
Max himself said that Diane was aware that the $155 million "was going to be washed out and she knew that we had debt". [85]
Diane admittedly knew that Max had caused payments to be made of $5 million each to her daughters as well as to herself: [86] "147. I recall that it was after the dinner, however I cannot recall precisely how soon after the dinner, that I had a conversation with Max on the telephone in which words to the following effect were said: Max said: "Mum I am thinking of giving Frances and Elizabeth about $5 million from the sale." I said: "And what about me?" Max said: "Yes you will get that too." 148. After the payment of the $5 million I did not inquire about the balance of the sale proceeds as I trusted Max and thought he would do the right thing by the family. I thought there was some more money left over but I was not sure exactly how much it was but I thought that Max would manage it and it could be used by the family members as was necessary. It was my understanding that these payments were payments from the profitable sale of the family business."
In that context, she thought Max received about $10 million: [87] "Q. I want to suggest to you that after the sale you were aware that Max had received much more than $5 million, weren't you? A. Yes. I think he, yeah I thought he got ten. I don't, yeah, I thought he got about ten."
Max's contention that he told Diane that, after the three payments of $5 million, "the rest is mine", was denied by Diane, and not accepted by the primary judge. Diane said: [88] "Q. I want to suggest to you that what happened was that Max told you before the big sale, before that meeting at Pitcher Partners you've spoken about, that he said to words to the effect that he'd done really well out of this, better than I - he said to you these words: "I've done really well out of this, better than I ever expected, and I want to distribute $5 million each to you, Frances and Elizabeth. I would like to do this all for you as a gift"? A. Yes, I remember him saying that. Q. Did he say to you then, "I've always said I'm working for myself and no-one else, so after the gifts the rest is mine"? A. No, I don't remember that. Q. And he said, "I told Peabody that I'm still happy to keep working. I'll need the money for all the work I've done to establish something else to do after the sale goes through"? A. No, he didn't tell me that. I heard about that, round the traps, if you like. It's, I just heard he was working for Peabody. Q. After the sale went through, you knew that Max had given Frances $5 million? A. No. No. I couldn't tell you how that happened, but you better find, yeah, I need more information from you first, before I tell you what I know. Q. Mrs Twigg, you knew, you became aware that Max had given Frances $5 million, didn't you? A. Yes. Q. You became aware that Max had given Liz $5 million? A. Yes. Q. You became aware that Max had given you $5 million? A. Yes, I had to ask him that. I said, "What about me?" Q. And he said that you would get $5 million as well, is that right? A. Yes."
Diane's version was preferred by the primary judge (emphasis added): [89] "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."
As to knowing that Max was exercising control over the proceeds, his Honour had earlier observed that this was consistent with his control of the Twigg Group business before it was sold, and that it was likely that from Diane's point of view matters proceeded much as they had in the past (emphasis added): [90] "Mrs Twigg says in her affidavit evidence that she did not understand the will she made in 2013. I accept that it is unlikely that she appreciated that her will made no allowance for Max because the proceeds of sale of the family business had already been given to him. Nothing had occurred that was likely to have brought home to Mrs Twigg that that is what had happened. Max, of course, controlled the proceeds of sale and what happened to them with Mrs Twigg's tacit consent, just as he had controlled the Twigg Group business before it was sold. For a period of time following the sale, Max purported to continue to sign most if not all of the minutes of meeting and directors' declarations that formed part of the accounts for the trusts of which the corporate plaintiffs were trustees. However, from about 2011, Mrs Twigg signed a number of minutes, particularly of Kastillia Nominees, which recorded both her and Max as being present at the relevant meeting. Consequently, it is likely that from Mrs Twigg's point of view matters proceeded much as they had done in the past."
In other words, Max's ongoing control over the proceeds was consistent with his previous permitted control of the business and in that context was not a red flag.
As to the proposition that Max enjoyed and displayed an opulent or extravagant lifestyle and did not hide his wealth, the only evidence he gave referable to this was that in about 2007, he purchased the Hedges Ave property for $17,500,000 in the hope that it might improve his marriage which was then in difficulties, and subsequently sold it, at a substantial loss, for $7,700,000. [91] Diane's evidence was to the effect that she knew that, at about the time of the 2007 sale of the business, Max had purchased a property in Queensland, and assumed that he had used some of money he must have received from the Sale Proceeds to do so; [92] that Hedges Ave was a "big and imposing" house, where "there was always lots of cars there; and they were all flash, don't you worry"; that she learned that he had purchased Hedges Ave for $16 million, and "he sold it for much less … only got ten or nine for it" and purchased Albatross Ave (where she had spent at least one Christmas with him), she thought for about $6 million. [93]
Diane also knew that after the sale of the Twigg Group business Max purchased the Byron Bay Beach Hotel, about which she gave the following evidence, which was not challenged (emphasis added): [94] "150. I knew that after the sale Max purchased the Byron Bay Beach Hotel and I recall a conversation with Max in which words to the following effect were said: Max: ''Mum I have bought the Byron Bay Hotel. I think it's going to be a great investment." I said: "Oh well done Max." 151. I had assumed that Max was purchasing the Byron Bay Beach Hotel for the benefit of the family. 152. In the months following Max purchasing the Byron Bay Beach Hotel I travelled from my Queensland property known as La Sabia to the Byron Bay Beach Hotel to have a look around. By that I mean, I just drove down and walked around the common areas of the pub to see what it was like. I recall that I then spoke to Max and said words to the effect: I said: "Max the pub looks great. A bit of an icon I believe. " Max said: "I think it is going to go really well. Adrian [Fitzpatrick] helped organise it."
Notably, it was her understanding - consistent with her understanding, referred to above, that Max would manage any surplus proceeds, which could be used by members of the family members as necessary, and with her not understanding that Max had effectively wound up the trusts - that Max had used some of the Sale Proceeds to acquire the Hotel for the ongoing benefit of the family, and not for his exclusive personal benefit.
Thus, Diane was aware that Max had acquired a substantial house and some expensive cars for himself, and the Hotel for the benefit of the family. Such acquisitions did not bespeak that the net proceeds of the sale were in the order of $113 million, let alone that Max had taken nearly $100 million for himself. As has been noted, Diane's understanding was that Max had received about $10 million. [95] In addition, he had a number of other sources of funds, including the consulting fee of $10 million paid to him by Cleanaway, [96] the income from the ongoing operations of the Hotel, and, apparently, his own flooring company Truebridge (or Architectural Floors). [97] Although it is not clear that all of these potential sources of funds were known to Diane, the $10 million from the sale of the business, together with the $10 million consultancy fee, was more than ample to fund an "opulent" lifestyle, without suggesting that he had taken very much more. That he had a substantial house and expensive cars is not inconsistent with his having taken no more than the $10 million which Diane assumed and the consultancy fee also referred to in the sale contract, and did not convey that he had taken nearly $100 million or anything like it.
Moreover, Diane also gave evidence, which was supported by contemporaneous correspondence, that until early 2018 she had complete trust in Max (and the accountant Mr Fitzpatrick); that it was not until Frances commenced making enquiries about unpaid beneficiary entitlements that she began to become suspicious of Max, as he was refusing to pay Frances; that as a result, in 2018 she engaged solicitors to undertake an investigation into her financial affairs and the Sale Proceeds; that it took time for those solicitors to obtain the underlying source documents from Pitcher Partners and third parties; and that it was not until her solicitors obtained sufficient documentation in late 2018 and into early 2019 that was she able to receive advice in respect of the situation concerning her assets, estate and the Sale Proceeds. [98]
The references in his Honour's judgment to what Diane knew tend to obscure the critical gaps in her knowledge. It is notable that there was no finding, and no evidence, that she knew: 1. that the net proceeds of sale were in the order of $113 million, or had any idea of their true approximate quantum; 2. that Max had taken nearly $100 million for himself; or 3. that the payments of $5 million which she and her daughters had received were in effect a final distribution, with the trusts ceasing to operate any business or hold any funds of substance.
Indeed, in rejecting a defence of ratification, the primary judge rightly found that Diane was plainly not fully informed of the relevant breach and its consequences: [99] "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."
There was no evidence that Diane "chose not to ask"; no occasion arose for her to think about asking. Diane did not know, before about 2018 or 2019, that Max had appropriated to himself something like 90% of the net proceeds of sale amounting to some $113 million dollars, or anything like it. It was not established that Diane knew, or that she ought reasonably have known, of the wrong, before about 2018. Thereafter, she acted with reasonable expedition to ascertain the true position and commence proceedings. For those reasons, the defence of laches should have failed in respect of the personal claim, as well as in respect of the claim for proprietary relief.

[13]

5.1 Introduction

It was uncontroversial that the proper law of the trusts was that of Victoria. Section 21 of the Victorian Act provides as follows: 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. (3) No beneficiary as against whom there would be a good defence under this Act shall derive any greater or other benefit from a judgment or order obtained by any other beneficiary than he could have obtained if he had brought the action and this Act had been pleaded in defence.
Section 5 of the Victorian Act relevantly provides as follows: 5 Contracts and torts (1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued - (a) Subject to subsections (1AAA), (1AA) and (1A), actions founded on simple contract (including contract implied in law) or actions founded on tort including actions for damages for breach of a statutory duty; (b) Actions to enforce a recognizance; (c) Actions to enforce an award, where the submission is not by an instrument under seal; (d) Actions to recover any sum recoverable by virtue of enactment, other than a penalty or forfeiture or sum by way of penalty or forfeiture. … (2) An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action. … (8) This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the enactment corresponding to that provision was applied before the repeal of that enactment by the Limitation of Actions Act 1955.
The primary judge held that: 1. the claim relating to Max's breach of fiduciary duty was not barred by s 21(2), because s 21(2) does not apply to a remedial constructive trust imposed by the Court; [100] 2. the claim founded on Max being a trustee de son tort was not barred by s 21(2), because the exceptions in s 21(1)(a) and (b) applied; [101] and 3. none of the claims was barred by s 5, because they were not claims for debt or for an account. [102]
His Honour also refused leave to Max to amend his defence to rely, by analogy, on Corporations Act 2001 (Cth), s 1317K, which provides a limitation period of six years for proceedings for a compensation order against a person who has contravened a civil penalty provision such as Corporations Act, s 181, which provides that directors of a corporation must exercise their powers and discharge their duties in good faith in the best interests of the corporation, and for a proper purpose.
The appellants challenge all of those holdings. However, because I have concluded that Max was not liable as a trustee de son tort, it is unnecessary to consider that aspect.
The appellants submit that the claims for relief for breach of fiduciary duty were barred by s 5 and/or s 21(2) of the Victorian Act.
As to s 5, the primary judge said: [103] "[175] 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)). [176] 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."
The appellants submit that relief imposing a constructive trust on a defaulting fiduciary engages s 5(2) because it is relief arising from a liability to account. Further, they submit that the relief granted included an account to establish the quantum of rents and profits derived from trust property, and that at least this claim was caught by s 5(2) and barred.
As to s 21(2), the primary judge held that that provision does not apply to remedial (as distinct from institutional) constructive trusts: [104] "[164] Despite the fact that the meaning of "trust" is defined to include a constructive trust, it now appears to be settled that s 21 of the Limitation of Actions Act does not apply to all types of constructive trustee. As Lord Sumption (with whom Lord Hughes concurred and Lord Neuberger in a separate judgment agreed) explained in Williams v Central Bank of Nigeria [2014] AC 1189; [2014] UKSC 10 at [9], when dealing with s 21 of the Limitation Act 1980 (UK) (which is in identical terms to s 21 of the Limitation of Actions Act), a distinction needs to be drawn between express or de facto trustees and constructive trustees whose liability results from the impeached transaction: …"
His Honour then referred to the passage in Lord Sumption's judgment which has been set out above, [105] and continued: "[165] Lord Sumption concluded that s 21 is only concerned with constructive trustees of the former type, not persons whose liability as trustees result from a remedy imposed by the Court. Section 21(3) (the United Kingdom equivalent to s 21(2) of the Limitation of Actions Act) was designed to relieve trustees of the former type from the harsh position under the pre-existing law under which no limitation defence, whether by analogy or otherwise, was available. Section 21(1) created exceptions to that relief. [166] The decision in Williams v Central Bank of Nigeria has been referred to with approval by the Victorian Court of Appeal in McNab v Graham (2017) 53 VR 311; [2017] VSCA 352 at [85]ff per Tate JA (with whom Santamaria JA and Keogh AJA agreed) and by Applegarth J in Port Ballidu Pty Ltd v Frews Lawyers [2017] QSC 19, dealing with the Queensland equivalent of s 21. Whether or not any of those decisions are strictly binding on me, I should follow them. [167] It follows that s 21 has limited application in this case. It does not apply to the plaintiffs' claims based on a breach of fiduciary duty by Max. It does apply to the claim insofar as it is said that Max is liable as a trustee de son tort. That, however, raises the question whether that claim falls within one of the exceptions created by s 21(1). The plaintiffs rely on both exceptions."
The appellants accept that there is a relevant distinction between institutional and remedial constructive trusts (and also that, at least in Australian law, breach of fiduciary duty by a company director does not give rise to an institutional trust, as a director is not to be equated with a trustee or de facto trustee), [106] but submit that the distinction is relevant only to the exception in s 21(1), and not to the bar in s 21(2), which, they say, applies to remedial as well as institutional trusts. The respondents on the other hand submit that the primary judge rightly held that s 21(2) as well as s 21(1) applies only where there is an express or de facto trustee, and only to actions by beneficiaries (which the trustee companies are not) in respect of a breach of that trust. The respondents also submit that only the Max companies (not Max personally) have pleaded this provision, in bar of their liability under Barnes v Addy. In reply, the appellants assert that Max as well as the Max companies rely on s 21(2); they maintain that s 21(2) applies to remedial as well as institutional constructive trusts, and they emphasise that it applies to actions "to recover trust property", which this case was. They also submit that the respondents cannot avoid the operation of s 21(2) by saying that the trustee companies are not beneficiaries, as the provision captures claims brought by trustees on behalf of beneficiaries, as well as claims by beneficiaries themselves.

[14]

5.2 Section 21 - limitation in respect of breaches of trust

I do not accept the respondents' submission that only the Max companies and not Max personally relied on s 21(2). The pleading was in general terms, and expressly "in answer to the whole of the plaintiffs' claim". [107] The argument that only the Max companies relied on it is founded on the appellants' submissions at trial, [108] which admittedly contain one passage which emphasises the position of the Max companies ("the second to tenth defendants"), [109] but I do not think amounts to any eschewal of reliance on the provision on behalf of Max personally.
Nor do I accept the respondents' submission that s 21(2) does not apply to the claims by the Trustee Companies against Max or his companies because they are not "action[s] by a beneficiary" within the provision. The primary judge held that the proper plaintiffs were the Trustee Companies (as distinct from Diane personally). [110] In my opinion, it makes no difference whether the action is brought by beneficiaries (which is expressly within s 21(2), or by a trustee (for example, a replacement trustee) for the exclusive benefit of the beneficiaries. In Cattley v Pollard, [111] it was said (of the Limitation Act 1980 (UK) ("the UK Act", in which s 21(1) and (3) are respectively in identical terms to s 21(1) and (2) of the Victorian Act): "[98] Mr Halpern points out that s 21(3) applies to actions brought by beneficiaries. The second proceedings are brought by the trustees. But as Mr Halpern also pointed out, a beneficiary has no cause of action against a third party save in exceptional circumstances (see Hayim v Citibank NA [1987] AC 730, [1987] 3 WLR 83 per Lord Templeman). Section 21(1) also refers to an action brought by a beneficiary but I consider that it would be surprising if it did not apply also to actions brought by trustees (including new trustees appointed in place of trustees who have committed a fraud on the trust estate) on behalf of the beneficiaries. [99] In Underhill and Hayton p 922, the following is stated: 'Oddly, ss 21(1) and (3) only apply at face value to actions by a beneficiary under a trust, so that an action by a trustee on behalf of his beneficiaries (who maybe unborn or unascertained) against a co-trustee or former trustee or a third party (owning trust property or in its traceable product or personally liable in respect of dishonest assistance in breach of trust or dishonest dealings with the trust property) is neither helped nor hindered, so the result of an action against such a defendant depends on whether it be brought by a beneficiary or a trustee. This cannot be justified: the courts will surely apply the six year period by analogy with the statutory period for actions by beneficiaries so that the position is as it was under the Trustee Act 1888.' [100] Lewin p 1391 (paras 44-20, 44-21) states (citations omitted save where mentioned): 'Section 21(3) of the 1980 Act applies in terms only to actions by beneficiaries. It therefore does not apply to bar an action brought by the Attorney-General to enforce a charitable trust for the benefit of the public at large: there is no beneficiary in such a case [A-G v Cocke [1988] 2 All ER 391, [1988] Ch 414]. The same may not be true of a charitable trust for the benefit of a defined class, even if the Attorney-General is the claimant [St Mary Magdalen, Oxford (President, etc) v A-G (1857) 6 HL Cas 189]. 44-21 Even in the case of a non-charitable trust, however, it may happen that a trustee sues on behalf of his beneficiaries to recover the trust property, or compensation for breach of trust, from his defaulting co-trustee. The question may then arise whether the six-year period in section 21(3) applies to such an action. The corresponding section of the Trustee Act 1888, applied to such an action, but that section did not contain the words "by a beneficiary". It seems that such actions were not excluded from the express terms of section 21(3) by design and that (except where the trustee sues to recover trust land) the court would apply the six-year period by analogy with the statutory period for actions by beneficiaries: for it would be strange if the result of an action against a defaulting trustee depended on whether it was brought by a beneficiary or by his trustee on his behalf.' [101] Mr Halpern submitted that the analogy cannot be taken too far. Trustees are not in the same position as future beneficiaries and should fulfil their duties immediately on behalf of those with future interests. He submitted that the rationale for the last subparagraph of s 21(3) as explained in Armitage v Nurse has no application to trustees. [102] On this issue I accept the submission of the claimants. I find that s 21(3) applies in the present case, at least by analogy to the present claim brought by the trustees. The claimants as trustees have no personal interest in the outcome. The real litigants - those with a real interest in the outcome - are the beneficiaries. I consider that when s 21(3) refers to an action by beneficiaries, it includes, at least by analogy, actions brought exclusively on their behalf by trustees who do not have any personal interest in the outcome. This approach echoes that followed in St Mary Magdalen, Oxford (President, etc) v A-G (1857) 6 HL Cas 189 and the argument considered by Harman J in A-G v Cocke [1988] 2 All ER 391, [1988] Ch 414 which he appears to have accepted in principle but did not apply to the facts (action brought by the Attorney General for the benefit of the public at large and there were no beneficiaries in any meaningful sense)."
For the reasons given in that case, in my opinion the circumstance that the claims are made by the Trustee Companies and not by their beneficiaries would not avoid the effect of s 21(2), if it were otherwise engaged.
The key question is whether s 21(2) is engaged. For the following consideration of the application of limitation statutes to claims for equitable relief in respect of a breach of fiduciary duty, I am indebted to the judgments of Lord Sumption JSC in Williams, [112] and of Gleeson JA in Sze Tu v Lowe. [113] For convenience, while conceding that they are not entirely accurate, I will use the terms "accessorial liability" and "accessory" to describe the liability of a person who has, under either limb of Barnes v Addy, become amenable to equitable remedies by reason of having participated in the unlawful misapplication of trust assets, whether by dishonestly assisting a misapplication of the funds by the trustee, or by receiving trust assets knowing that the transfer to them was a breach of trust.
Historically, equity has distinguished in its application of limitations between institutional trusts, and remedial trusts imposed on accessories. While equity generally applied statutory limitation periods to purely equitable claims by analogy, it refused to do so in the case of a claim by a beneficiary of an "actual" (or institutional) trust against the trustee. The rationale for this exception was that the possession of the trustee was the possession of the beneficiary, and the trustee's possession could not operate as a bar because it was possession according to law. However, that rationale did not apply to an accessory, who was not an "actual" trustee but would only become a trustee by decree of the court. Thus, claims for an accessory to account by virtue of their participation in the unlawful misapplication of trust assets were considered to be subject to the application, by analogy, of the statute of limitations. [114]
As Lord Sumption points out, [115] during the 19th century confusion and inconsistencies emerged, culminating in Soar v Ashwell. [116] That was a case of a trustee de son tort - an institutional trustee - but the Court of Appeal, obiter, expressed the view that an accessory would be treated, for limitation purposes, in the same way as an express trustee. However this development, which Lord Sumption exposes as heretical, [117] was not embraced by Dixon J in the High Court in Cohen v Cohen, who, despite reference to Soar v Ashwell, described the position in the traditional way (emphasis added): [118] "Upon the assumption made the first question which arises is whether these three causes of action are of such a nature that they may be barred directly by, or else by analogy to, these provisions. In at least two of these three instances the defendant was accountable in equity for what he had received on the plaintiff's behalf. The Statute of Limitations, by its terms, does not operate directly upon equitable remedies - see also, for Victoria, s 79 (3) of the "Supreme Court Act 1915." But such remedies are barred in Courts of Equity by analogy to the Statute. The analogy is found in the case of constructive trusts, where the equity is fastened upon the trustee, not because he intended to become the fiduciary of property, but because of the character of his dealings, and in spite of his intention to take the property for himself. But Courts of Equity have refused to see any analogy when a person, intending to act in a capacity which is fiduciary, has received, as and for the beneficial property of another, something which he is to hold, apply, or account for specifically for his benefit. Such a person is either an express trustee, or if that name does not in strictness belong to him, he stands in the same position as a direct or express trustee - see Soar v Ashwell, (1893) 2 QB 390, and particularly pp 393, 394 (per Lord Esher, M.R.), and pp 397, 398 (per Bowen, LJ)."
As Lord Sumption proceeds to explain, statute intervened, first, to restate the equitable rule that an express trustee could not plead a limitation, and later, to permit an honest trustee to do so ‒ "except where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use". [119] In a Canadian appeal, the Privy Council held that the exception did not apply to accessories whose liability to account arose from the wrongful misapplication itself, with the consequence that such an accessory was entitled to rely on the limitation statute, at least by analogy. [120] The same view was taken again by the Privy Council in Clarkson v Davies, which is of present interest because it related to the knowing receipt of a company's funds by its directors: [121] "The effect of the Limitations Act on a claim arising under a constructive trust was considered in the case of Taylor v. Davies, and it was there laid down that there is a distinction between a trust which arises before the occurrence of the transaction impeached and cases which arise only by reason of that transaction. The result is that in any event this action, so far as it proceeds at the instance of the liquidator of the Dominion Company, must fail."
Lord Sumption explains that the enactment of s 19 in the Limitation Act 1939 (UK) - which was relevantly in the same terms as s 21 of the 1980 UK Act under consideration in Williams and s 21 of the Victorian Act - was not intended to change this position. [122]
Lord Sumption referred to and drew significantly on the judgment of Millett LJ in Paragon, in which his Lordship, having explained, in the passage earlier quoted, [123] the distinction between (1) an institutional constructive trust and (2) a constructive trust imposed as a remedy in the context of accessorial liability, and that the case before him concerned the second class, proceeded to explain the significance of this distinction for limitation purposes: [124] "The importance of the distinction between the two categories of constructive trust lies in the application of the statutes of limitation. Before 1890 constructive trusts of the first kind were treated in the same way as express trusts and were often confusingly described as such; claims against the trustee were not barred by the passage of time. Constructive trusts of the second kind however were treated differently. They were not in reality trusts at all, but merely a remedial mechanism by which equity gave relief for fraud. The Court of Chancery, which applied the statutes of limitation by analogy, was not misled by its own terminology; it gave effect to the reality of the situation by applying the statute to the fraud which gave rise to the defendant's liability: see Soar v Ashwell [1893] 2 QB 390, [1891-4] All ER Rep 991 per Lord Esher MR: 'If the breach of the legal relation relied on … makes, in the view of a Court of Equity, the defendant a trustee for the plaintiff, the Court of Equity treats the defendant as a trustee … by construction, and the trust is called a constructive trust; and against the breach which by construction creates the trust the Court of Equity allows Statutes of Limitation to be vouched.' Lord Esher MR's reference to the breach of the legal relation shows that while the first kind of constructive trust was a creature of equity's exclusive jurisdiction the second arose in the exercise of its concurrent jurisdiction. That is why the statute was applied by analogy. For a fuller discussion of the distinction between the two categories of constructive trust, see Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 at 632-633, Soar v Ashwell, Taylor v Davies [1920] AC 636, Clarkson v Davies [1923] AC 100, Selangor United Rubber Estates Ltd v Cradock (No 3) and Competitive Insurance Co Ltd v Davies Investments Ltd [1975] 3 All ER 254, [1975] 1 WLR 1240."
Millett LJ rejected the proposition that this position had been affected by the 1939 Act, and in the course of doing so, said: [125] "(8) Although at first sight the distinction drawn in Taylor v Davies appears to be merely chronological, it marks a real difference between trustees (whether or not expressly appointed as such) who commit a breach of trust (however created) and persons who are not trustees at all but who are described as trustees for the purpose of enabling equitable relief to be granted against them. Actions founded on tort are barred after six years, and there is no exception for actions founded on fraud, though the start of the limitation period may be deferred in such cases. There is no logical basis for distinguishing between an action for damages for fraud at common law and the corresponding claim in equity for 'an account as constructive trustee' founded on the same fraud. Section 21 of the 1980 Act can sensibly be limited to wrongs cognisable by equity in the exercise of its exclusive jurisdiction. It makes no sense to extend it to the exercise of its concurrent jurisdiction."
Millett LJ noticed two first instance decisions of this Court which had taken the same approach. [126] In Queensland Mines Ltd v Hudson, [127] Wootten J applied Taylor v Davies to hold that an accessory was not within the exception then contained in s 69(1) of the Trustee Act 1925 (NSW), which then relevantly provided: "(1) In any action suit or other proceeding against a trustee or any person claiming through him, the provisions of this section shall have effect : Provided that this section shall not affect any action suit or other proceeding where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use. (2) All rights and privileges conferred by any statute of limitations shall be enjoyed in the like manner and to the like extent as they would have been enjoyed in such action suit or other proceeding, if the trustee or person claiming through him had not been a trustee or person claiming through him. (3) If the action suit or other proceeding is brought to recover money or other property, and is one to which no existing statute of limitations applies, the trustee or person claiming through him shall be entitled to the benefit of and be at liberty to plead the lapse of time as a bar to the action, suit, or other proceeding in the like manner and to the like extent as if the claim had been against him (otherwise than as a trustee or a person claiming through a trustee) in an action of debt for money had and received."
As a result, his Honour held that Mr Hudson was entitled to the benefit of the limitations available under s 69(2). In Piwinski v Corporate Trustees of the Diocese of Armidale, [128] Waddell J (as the later Chief Judge then was), also applied Taylor v Davies (footnotes omitted): "It is submitted for the defendant that the relevant provision as to limitation of actions is s. 69 of the Trustee Act, 1925, this section having been repealed by the Limitation Act, 1969, which came into effect on 1st January, 1972. Section 69 of the Trustee Act provides, in effect, that the same limitation periods are to apply in respect of proceedings against a trustee as apply in respect of personal claims subject to certain exceptions which are stated in the proviso to s. 69 (1). This reads: "Provided that this section shall not affect any action suit or other proceeding where the claim is founded upon any fraud or fraudulent breach of trust to which the trustee was party or privy, or is to recover trust property, or the proceeds thereof still retained by the trustee, or previously received by the trustee and converted to his use." The plaintiff relies upon this exception, and submits that no limitation period applies to the present proceedings. This submission involves a consideration of the effect of certain provisions of the Limitation Act, 1969 which, however on the view I take, it is not necessary to enter upon. The defendant submits that this is not a case which comes within the exception and that, consequently, the general period of limitation which applied to actions of this kind before the Act of 1969, namely, six years, applies to these proceedings, that the cause of action arose upon the establishment of the constructive trusts and was barred by limitation of time by the latest by the end of 1964, that is, six years after the trusts arose in 1958. The defendant relies upon a number of decisions of the highest authority which draw a distinction, so far as the exception is concerned, between cases which seek to establish a trust in respect of money or property, either received by or in the hands of the defendant, and cases which seek to recover trust property or proceeds thereof still retained by the trustee and in respect of which the creation of the trust is not in issue. The first of these cases is Taylor v. Davies, where, in relation to a statutory provision in similar terms to that contained in s. 69, their Lordships of the Privy Council said the exception referred "to cases where a trust arose before the occurrence of the transaction impeached and not to cases where it arises only by reason of that transaction". Also referred to were Clarkson v. Davies, which applied the decision of Taylor v. Davies and Metacel Pty. Ltd. v. Ralph Symonds Ltd. Counsel for the defendant points out that this is a case where relief is sought for the various breaches of trust which are alleged in the statement of claim. This, of course, is so, but the foundation of the relief sought is the establishment of a constructive trust or a trust of some kind as a result of the misrepresentations made. In other words, what is in issue here is the existence of the trust, and it seems to me that the decisions just cited clearly establish that such a case does not come within the proviso. It is, therefore, my opinion that the plaintiff's cause of action was barred by s. 69 of the Trustee Act before the Limitation Act, 1969, commenced."
Below, for reasons to which I shall come, [129] I conclude that the basis on which a limitation period was applicable in Queensland Mines and in Piwinski, was not s 69(2), which like s 69(1) did not apply to remedial constructive trusts, but by analogy with other provisions of the statute of limitations.
In Peconic Industrial Development Ltd v Lau Kwok Fai, [130] the Hong Kong Court of Final Appeal held that an equivalent provision of the Hong Kong Ordinance did not apply to a person liable to account as a constructive trustee on the footing of dishonest assistance. Lord Hoffmann, with whom every other member of the Court concurred, referred to Taylor v Davies and declined to follow the dicta of the Court of Appeal in Soar v Ashwell, which he regarded as wrong in principle and unsupported by authority. [131]
In Williams, with reference to these and other authorities, [132] Lord Sumption concluded that "These decisions represent a formidable corpus of modern and carefully reasoned authority in favour of a principle which is in my view correct", namely that s 21(1)(a) applied only to express and de facto trustees and not to persons liable only by virtue of their dishonest assistance in a breach of trust. [133] His Lordship proceeded to explain that this applied equally to cases of dishonest assistance and knowing receipt. [134]
Lord Sumption's judgment received the agreement of Lord Hughes JSC, and of Lord Neuberger PSC who wrote separately. The powerful dissents of Lord Mance JSC and Lord Clarke JSC show that these are questions on which the finest judicial minds might differ. But Lord Sumption's approach is also that of Lord Millett and Lord Hoffmann, and it is consistent with what was said by Dixon J in Cohen v Cohen. And, as the primary judge pointed out, it has been referred to with approval by the Victorian Court of Appeal in McNab v Graham, [135] as well as by Applegarth J in Port Ballidu Pty Ltd v Frews Lawyers. [136] Accordingly, it may be taken as established that s 21(1) does not apply to an accessory, with the consequence that an accessory is not precluded from relying on any available limitation, even in the case of a fraudulent breach of trust.
What is less clear is the position so far as concerns s 21(2) (of the Victorian Act). Another way of putting this is, in the case of an accessory, is the applicable limitation provided by s 21(2), or does it derive (directly or by analogy) from other limitation provisions? As has been foreshadowed, in Queensland Mines and in Piwinski, Wootten J and Waddell J respectively proceeded on the basis that it was provided by the equivalent of s 21(2), namely, the then s 69(2) of the Trustee Act 1925 (NSW). So did Sheldon QC in Cattley v Pollard. [137] And it appears that in Williams, the case was conducted on the basis that unless an exception in s 21(1) applied, the claims were barred by s 21(3) (of the UK Act). [138] This can be seen in the judgments in the Court of Appeal, [139] and in particular that of Morritt C, who said: [140] "CBN accepts that the action Dr Williams seeks to bring is "an action by a beneficiary to recover trust property or in respect of any breach of trust" for which section 21(3) prescribes a six-year limitation period. CBN also accepts that it is an action "in respect of" the fraud or fraudulent breach of trust committed by Mr Gale to which, therefore, Mr Gale was party or privy. But, CBN contends, section 21(1)(a) does not extend to actions brought against anyone other than the trustee who was party or privy to the relevant breach of trust. Counsel for CBN develops this contention by reference to the wording of section 21, its legislative history, consistency with the substantive law and certain alleged consequences if the argument for Dr Williams is correct."
This was embraced, in particular in the dissenting judgments, in the Supreme Court, to argue that if s 21(3) (of the UK Act) applies to a remedial trust, then s 21(1) must also apply. Lord Mance JSC said (emphasis added): [141] "[128] In asserting its limitation defence to Dr Williams' claim, the Central Bank of Nigeria submits that the six year limitation period provided by s 21(3) of the Limitation Act 1980 for "an action by a beneficiary to recover trust property or in respect of any breach of trust" is in terms wide enough to apply to an action by a beneficiary against a holder of trust property or against a trustee or someone assisting a trustee in respect of a breach of trust. The Central Bank has to assert this, since otherwise it has no basis for asserting any statutory limitation defence at all. But, when it comes to s 21(1)(a), the Bank alleges that the exception in respect of "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" does not cover an action by a beneficiary against someone dishonestly assisting in a fraud or fraudulent breach of trust to which the trustee was a party or privy. [129] As Lord Clarke of Stone-cum-Ebony JSC demonstrates in his judgment, it is unconvincing to suggest that the words "an action … in respect of any breach of trust" do, yet the words "an action … in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy" do not, cover an action by a beneficiary against someone who is not the trustee but who dishonestly assists a fraudulent trustee. Yet that is - and has to be - the Central Bank's case. …"
Lord Clarke JSC said (emphasis added): [142] "[173] The difficulty with an approach which depends upon the construction of the expression "in respect of any fraud or fraudulent breach of trust" as meaning that the action must be against the trustee is, as I see it, that it is common ground that in s 21(3) the expression "an action by a beneficiary . . . in respect of any breach of trust" includes an action against a dishonest assister. It is only by construing sub-s (3) in that way that, on the Central Bank's case, the relevant time period under the 1980 Act is six years."
Lord Neuberger PSC, with whom Lord Hughes JSC agreed, responded: "[97] Approached in this way, I consider that the fact that it is common ground that the words "an action . . . in respect of any breach of trust" in s 21(3) are broad enough to cover a claim against a dishonest assister or knowing recipient, actually support, rather than undermine this first reason. At first sight, there is force in Lord Clarke's argument that, if that expression in s 21(3) covers dishonest assistance or knowing receipt, the similar expression "an action . . . in respect of any . . . fraudulent breach of trust" in s 21(1)(a) should do so as well. But the vital words "to which the trustee was a party or privy" are not to be found in s 21(3). The essential point in this connection is that the fact that the expression "in respect of" in s 21(3) has a broad, rather than a restrictive, effect suggests that the expression should also have a broad effect in s 21(1)(a), in which case the words "to which the trustee was a party or privy" are otiose unless s 21(1)(a) as a whole is given the narrower meaning for which Central Bank of Nigeria contends, rather than the wider meaning supported by Dr Williams."
However, in my view, with great respect, it is not correct that only by construing sub-s (3) (of the UK Act) as capturing remedial trusts was there any basis for an accessory to assert any statutory limitation defence at all; in fact, as had always been the case, an accessory could invoke other provisions of the statute, by analogy. Moreover, as it seems to me, there are two essential elements in the majority reasoning which are incompatible with sub-s (3) (of the UK Act) applying to a claim against an accessory. That the application of s 21(3) was apparently common ground may explain why this question was not more closely analysed.
The first is Lord Sumption's explanation that the exception and the rule apply to the same people. While the focus of the issue in Williams was whether the exceptions in s 21(1) applied to a person who was a constructive trustee under a remedial constructive trust, as distinct from an express trustee or a trustee de son tort, the judgment of Lord Sumption recounts the history of limitation provisions in respect of trustees in a way which demonstrates that both the bar in s 21(2) and the exceptions in s 21(1) apply in respect of the trustees of institutional trusts only, as a person who was a constructive trustee under a remedial trust never had the same disability to plead the statute of limitations as did an institutional trustee. His Lordship said (emphasis added): [143] "In the first place the whole of the legislative history, as I have summarised it above, demonstrates that what is now s 21(3) was intended to relieve trustees, save in the two cases specified in s 21(1), from the harsh consequences of the equitable rule which held them liable to account without limitation of time. The exceptions must apply to the same persons as the rule. On a correct analysis of the law, restated in Taylor v Davies and Clarkson v Davies, the rule had never applied to strangers who were subject only to an ancillary liability, and they had therefore never needed to be relieved. This was essentially the ground on which Lord Hoffmann in Peconic Industrial Development Ltd v Lau Kwok Fai [2009] 5 HKC 135, paras 24 and 25 considered that the corresponding provision in the Hong Kong ordinance had no application to claims against such persons."
Thus, the predecessors of s 21(2) (of the Victorian Act) were intended to create an entitlement for an institutional trustee to plead the statute, subject to the exceptions in s 21(1). As s 21(2) was intended to relieve trustees, save in the two exceptions specified in s 21(1), from the harsh consequences of the equitable rule which held them liable to account without limitation of time, so the exceptions in sub-s (1) were for the same persons as the rule in sub-s (2). It follows that the rule (like the exceptions) did not apply to accessories who were subject only to accessorial liability and therefore did not need to be relieved: they were already protected, at least by analogy, by other limitation provisions of the statute.
This conclusion is supported by the symmetry, noticed by Lord Clarke, between s 21(1) and s 21(3) (of the UK Act): [144] "The purpose of s 21(3) is to reflect the position in s 21(1)(a) and (b), albeit treating them in the reverse order. It refers first to an action by a beneficiary to recover trust property, which is a reference back to s 21(1)(b), which is expressly concerned only with an action to recover trust property. It then refers to an action by a beneficiary in respect of any breach of trust, which is surely a reference back to s 21(1)(a), which refers to an action by a beneficiary in respect of any fraud or fraudulent breach of trust. It seems to me to be clear that s 21(1)(a) and s 21(3) must be read together. The purpose of them was to provide the circumstances in which there would be no limitation period and the circumstances in which the period would be six years. Since s 21(3) is expressly subject to the preceding provisions of the section, which of course include s 21(1)(a), s 21(3) has the effect that a claim by a beneficiary against a dishonest assister is six years unless s 21(1)(a) applies. Section 21(1)(a) applies where the dishonest assister assists a fraud or fraudulent breach of trust to which the trustee was a party or privy. If, as is correctly common ground, an action against a dishonest assister is an action in respect of a breach of trust within s 21(3), it seems to me that such an action must also be an action in respect of a fraud or fraudulent breach of trust to which the trustee is a party or privy where that is the position on the facts. (My emphasis)"
While I respectfully disagree that it was correctly common ground that an action against a dishonest assister is an action in respect of a breach of trust within s 21(3) (of the UK Act), the symmetry to which his Lordship refers is indicative that both subsections are dealing with the same people.
The second element of the majority reasoning which is incompatible with the application of s 21(3) (of the UK Act) to accessories and remedial trusts is Lord Neuberger's conclusion, in the following terms (emphasis added): [145] "For these reasons, which are much the same as those of Lord Sumption, with whose judgment I agree, I am of the view that, as against Dr Williams, Central Bank of Nigeria was not a "trustee" within the meaning of s 68(17), and that he cannot rely on s 21(1)(a), as it only applies to claims against fraudulent trustees. It follows from this that the 1986 trust claims are barred by limitation, and I would therefore allow the appeal."
In other words, the conclusion depended on the meaning of "trustee" in s 68(17) of the Trustee Act 1925 (UK), which was picked up by s 38(1) of the UK Act, and which provided that: The expressions 'trust' and 'trustee' extend to implied and constructive trusts … and to the duties incident to the office of a personal representative, and 'trustee' where the context admits, includes a personal representative …
Thus Lord Neuberger concluded that, in the context that the combined effect of the definition sections of the Limitation Act and the Trustee Act was that in s 21 of the UK Act, a trustee included a "constructive trustee", a person liable as an accessory was not a constructive trustee within the meaning of s 68(17), which was confined to the first class - so-called de facto trustees.
In Peconic, Lord Hoffmann had taken a similar definitional approach (his Lordship used the term "non-fiduciaries" in the sense that I have used "accessories"): [146] "[23] In my opinion, therefore, non-fiduciaries do not come within the definition of trustees in s 19 of the 1939 Act or s 20 of the Ordinance."
The word "trust" in s 21(3) equally takes its meaning from s 68(17) of the Trustee Act 1925. It cannot therefore mean one thing in s 21(1), and another in s 21(3). If an accessory is not a trustee for the purposes of s 21(1), the liability of an accessory to account cannot be a trust for the purposes of s 21(3).
There is nothing to distinguish the reasoning in Williams in this respect in its application to the Victorian Act, in which s 3(1) includes the following: trust trustee and trust for sale have the same meaning respectively as in the Trustee Act 1958.
In the Trustee Act 1958 (Vic), s 3(1) includes the following: trust does not include the duties incident to an estate conveyed by way of mortgage, but with this exception the expressions trust and trustee extend to implied and constructive trusts and to cases where the trustee has a beneficial interest in the trust property, and to the duties incident to the office of a personal representative, and trustee where the context admits, includes a personal representative, and new trustee includes an additional trustee;
It follows that in my opinion, notwithstanding the basis on which the case appears to have been conducted, the majority reasoning in Williams is incompatible with the application of s 21(3) of the UK Act, and its equivalent s 21(2) of the Victorian Act, to claims against accessories. [147] This conclusion is also consistent with the conclusion of Millett LJ in Paragon, referred to more fully above, [148] that "Section 21 of the 1980 Act can sensibly be limited to wrongs cognisable by equity in the exercise of its exclusive jurisdiction. It makes no sense to extend it to the exercise of its concurrent jurisdiction." His Lordship did not reserve that observation only for sub-s 21(1).
It is noteworthy in this context that s 21(1) contains exceptions, not merely to s 21(2) (of the Victorian Act), but to the entire Act. Thus the intention of s 21(1) is to provide that no statute of limitations applies to an action by a beneficiary under an actual trust, in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or 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. Otherwise, a trustee (of an actual trust) may take advantage of any relevant limitation period, including but not limited to that provided for such trustees by s 21(2).
Although the cases are often less than explicit as to which provision of the statute of limitations is applied by analogy in this context, it appears to be those which impose limitations in respect of proceedings in tort for fraud, and/or proceedings for an account. In Paragon, Millett LJ identified an analogy with an action in tort for fraud, in the passage which has already been quoted, above. [149] In Cattley v Pollard, Richard Sheldon QC also referred to the analogy with fraud: [150] "[90] In reaching this conclusion, I bear in mind that the provisions of s 21(1)(a) are an exception to the normal applicable periods of limitation. Category 2 encompasses persons who dishonestly participate in a fraud. In general, fraud claims are subject to a primary limitation period of six years (see s 2 of the 1980 Act). It is not illogical that this period should also apply to category 2 claims. The exception in s 21(1)(a) only applies to express trustees or category 1 trustees who are treated in the same way for limitation purposes."
Older authority shows that this analogy was in fact foundational. In Clanricarde v Henning, Romilly MR said: [151] "In Hovenden v Annesley [2 Sch & Lef 617] it was held that when a trust was created by the act of the parties themselves, then time was no bar to any transaction which had taken place in relation to the trust property; but that when the trust was founded on a decree of the Court, pronounced upon the ground of the transaction having been originally founded on fraud, time was a bar from the time when the fraud was discovered. If the person affected had not discovered it, from whatever circumstances, time did not operate as a bar. It was true that the period of time necessary to constitute a bar in such a case was not imposed by statute; it arose by way of analogy with the Statute of Limitations only; and time only began to run from the period when the person competent to set the transaction aside knew of the fraud, and was in a position to bring a suit for that purpose."
As to the analogy with account, in Paragon, Millett LJ also explained that an equitable claim for an account in respect of a breach of fiduciary duty is, except in the case of an actual trust of the money, barred by analogy with the statutes of limitation. [152] The causes of action under consideration by Dixon J in Cohen v Cohen were that the defendant was accountable in equity for property received. [153] In Williams, [154] Lord Clarke also referred in passing to s 23 (of the UK Act), which provides: "An action for an account shall not be brought after the expiration of any time limit under this Act which is applicable to the claim which is the basis of the duty to account."
The holdings in Williams - and also in Queensland Mines and Piwinski - that the claims were otherwise barred are explicable and supportable on the basis that they were barred by analogy, just as claims against accessories had always been treated on that basis. The application by analogy of limitation periods is discussed further, below. [155]

[16]

Does s 5(2) apply to equitable proceedings?

As has been noted, s 5(2) applies to an "action for an account". Since the Statute of Limitations 21 Jac 1 c.16 of 1623, there has been a six-year limitation for "actions of account" or "actions for account". Section 3 provided relevantly as follows (emphasis added): "III. And be it further enacted, That all Actions of Trespass Quare clausum fregit, all Actions of Trespass, Detinue, Action sur Trover, and Replevin for taking away of Goods and Cattle, all Actions of Account, and upon the Case, other than such Accounts as concern the Trade of Merchandize between Merchant and Merchant, their Factors or Servants, all Actions of Debt grounded upon any Lending or Contract without Specialty; all Actions of Debt for Arrearges of Rent, and all Actions of Assault, Menace, Battery, Wounding and Imprisonment, or any of them which shall be sued or brought at any Time after the End of this present Session of Parliament, shall be commenced and sued within the Time and Limitation hereafter expressed, and not after (that is to say) (2) the said Actions upon the Case(other than for Slander) and the said Actions for Account, and the said Actions for Trespass, Debt, Detinue and Replevin for Goods or Cattle, and the said Action of Trespass Quare clausum fregit , within three Years next after the End of this present Session of Parliament, or within six years next after the Cause of such Actions or Suit, and not after; … ."
It will be observed that the first reference is to "actions of account", and the second to "actions for account"; no distinction appears to have been intended.
In Feiglin v Ainsworth, [158] Mukhtar AsJ said that s 5(2) applied a six-year limitation to all actions of account, to be construed as meaning an account at law or in equity, and whether based on a legal or equitable liability to account. [159] In holding that s 5(2) applied in terms to an account in equity as well as one at law, his Honour relied on Wheatley v Bower, [160] in which the Western Australian Court of Appeal reached that conclusion in respect of the corresponding Western Australian provision. His Honour said: [161] "[32] Section 5(2) says what it says. Despite s 5(8), I think the plain effect of s 5(2) and the definition of "action" means that all actions for an account, which can be brought at law or equity, and based on either a legal or equitable liability to account are barred six years after accrual of a cause of action [See Meagher Gummow and Lehane's, Equity Doctrines and Remedies (4th ed) at [34-030]]. Such a view was taken unanimously by the Court of Appeal of Western Australia in Wheatley v Bower [[2001] WASCA 293 at [123] for legislation in that State which is not materially different. That case involved a claim for accounts for debts allegedly due under a dissolved partnership, a paradigm example of a fiduciary relationship. The court in Wheatley was asked to maintain the distinction between the common law and equitable remedy of account and to decide, as did Megarry VC in Tito v Waddell (No 2) [1977] Ch 106 at 250] that a claim for equitable relief against a person in a fiduciary position has no limitation period which is applicable directly or by analogy. That is, the argument was that the six year limitation for "an action for an account" (as that expression also appears in s 5(2) of the Victorian Act) refers only to the obsolete action for an account at common law. [33] The Court of Appeal in Wheatley v Bower [[2001] WASCA 293 at [123]] rejected this argument. It viewed the wide definition of "action" in the legislation, which as I say was in effect the same as s 5(2) of the Victorian Act, as embracing an action at law or equity and as distinguishing the legislation with which the English authorities were concerned. The court took the view, as would I, that if a statute says plainly that any proceeding in a court of law for an account shall not be brought in respect of a matter which arose more than six years before the commencement of the action, that means a proceeding in equity or at law. I would add, that does not undermine the "equitable relief" exclusion in s 5(8). Section 5(2) and (8) can be reconciled by seeing the former as revealing an intention to deal explicitly with any action for an account."
But his Honour held further that, if there was any doubt about the matter, a court of equity would in any event apply the sixyear limitation period in s 5(2) by analogy. [162]
Mukhtar AsJ's conclusion as to the effect of s 5(2) was not challenged on an appeal to a single judge, but it was included in a summary of Mukhtar AsJ's holdings which Elliott J referred to as "plainly correct", albeit without further consideration. [163] His Honour's conclusions were referred to but not further considered in the Court of Appeal. [164] In Jane v Bob Jane Corporation Pty Ltd, [165] Sifris J followed Wheatley v Bower and Feiglin v Ainsworth to hold that s 5(2) barred all actions for an account, at law or in equity, based on either legal or equitable liability to account.
The decision of the West Australian Court of Appeal in Wheatley v Bower was highly influential in the Victorian decisions to which I have referred. In it, the relevant limitation period was provided by the limitation period for an "action of account" in the context of s 38(1)(c)(ii) and s 38(1)(c)(iii) of the Limitation Act 1935 (WA), which provided: 38. Limitation of time for commencing other actions and suits (1) Subject to the preceding sections of this Act and as hereinafter provided, actions, suits, or other proceedings as herein set out shall and may be commenced within the time herein expressed after the cause of such actions, suits, or other proceedings respectively: - … (c) (i) Actions of debt upon any award where the submission is not by specialty; (ii) Actions of account or for not accounting, and suits for such accounts, as concern the trade of merchandise between merchant and merchant, their factors and servants; (iii) Actions of account other than such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants; (iv) Actions in the nature of actions for trespass quare clausum fregit, trespass to goods, detinue, or trover; (v) All other actions founded on any simple contract, including a contract implied in law; (vi) All other actions founded on tort; (vii) All other actions in the nature of actions on the case: 6 years
Malcom CJ, with whom Kennedy J and Wallwork J agreed, set out in full the following passage from the judgment Megarry V-C in Tito v Waddell (No 2): [166] "The law of limitation in relation to actions for an account seems to be in a curious state. An action for an account lay at common law, and s3 of the Limitation Act 1623 laid down a six years' period of limitation for 'actions of account.' However, the procedure in Chancery, and in particular the machinery for taking accounts, was so superior that by the 18th century the common law action for an account had come to be superseded by equitable proceedings for an account. Bills in Chancery for an account did not directly fall within the term 'actions of account' in s3 of the Act of 1623, and so any application of the six years' period to them had to be by way of analogy. In that state of affairs the Limitation Act 1939 came into force. S2(2) provided that 'an action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.' If that had stood alone, the matter would have been simple. There would have been nothing to prevent the six years' period from applying both to an equitable action for an account (for by s31(1) 'action' has a very wide meaning) and also, if anyone sought to revive it, to a common law claim. However, there is also s2(7) of the Act: 'This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except insofar as any provision thereof may be applied by the court by analogy in like manner as the corresponding enactment repealed by this Act has heretofore been applied.' If the effect of s2(7) is that an equitable claim for an account, being a 'claim ... for other equitable relief,' is excluded from s2(2), the result is that s2(2) is left to apply the six years' period only to the obsolete common law claim for an account. However, it may then be said that the second limb of subs(7) allows the six years' period of subs(2) to be applied by analogy to equitable claims for an account; for prior to the Limitation Act 1939 this is what equity did: see, eg, Knox v Gye [1872] LR 5 HL 656, 674, per Lord Westbury. On that footing, Parliament's scheme for dealing with equitable claims for an account seems to be first, to appear by subs(2) to subject to them to the express six years' period; then to appear to exclude them from that period by the first limb of subs(7); and finally, by the second limb of subs(7) to subject them to a six years' period by analogy, despite their exclusion from the express six years' period. This tortuous scheme of indirection is one that I should be reluctant to attribute to Parliament. After all, subs(2) is a subsection which deals solely and expressly with actions for an account. If the intention was to make it apply to both legal and equitable actions for an account, it would have been simple enough to say so, with perhaps the addition of a few words to subs(7) to make the word 'equitable' in subs(2) prevail over it. My reluctance to attribute to Parliament an intention to legislate expressly for the obsolete and only circuitously for the effective is increased by the way in which the court dealt with s2(7) in Poole Corp v Moody [1945] KB 350. There, in relation to a power of sale, the subsection was treated by the Court of Appeal solely as a provision which excluded the operation of s2 in claims for equitable relief, without any mention of the possibility of it applying the section by analogy. The omission is pointed: indeed, the quotation of s2(7) that is set out in the footnote on p351 gives only the first half of the subsection and omits altogether the second half, which deals with application by analogy. This is done despite the mention in argument on p353 of equitable applications of the statute and by analogy in the same breath as a reference to subs(7). I may add that I do not see any grounds for escape by saying that 'other equitable relief' does not include an equitable action for an account. I find this matter indeed puzzling. My difficulty is increased by the consideration that if, as I have held, no six years' period applies to the claim for equitable compensation, and there is no plea of laches which bars the claim, there may be items of claim beyond the six years which are not barred but to which the six years' period for an account would apply. However, I think the answer may be along the following lines. Insofar as the claim to an account is ancillary to the claim for equitable compensation, the application of the Act and the doctrine of laches to the ancillary claim ought to be the same as its application to the substantive claim. Thus, it seems clear that where a claim against a person in a fiduciary position is not barred by lapse of time, he must account without limited time: see Halsbury's Laws of England, 3rd ed, vol 24 (1958), p282. If, contrary to what I have held, there is a time limit in the present case, I would hold that neither directly or by analogy does s2 of the Act of 1939 impose any time limit on the claim to an account that is not imposed on the substantive claim for equitable compensation. The upshot is that if the plaintiff's claim were otherwise valid, I would hold that it is not barred by any statutory period of limitation, either directly or by analogy. Though, subject to the equitable doctrine of laches, it is not barred by laches either, since laches has not been pleaded."
Malcolm CJ then continued: "[123] It is suggested in Meagher, Gummow & Lehane (3rd Ed) that in Western Australia, all actions of account, at law or in equity and based on either legal or equitable liability to account, are barred six years after the accrual of a cause of action. It is said that this follows not only from the statutory provisions themselves, but also from the statutory definition of "action" contained in the Act. The definition in s3 of the Limitation Act is as follows: " 'Action' means a civil proceeding commenced, in the Supreme Court by writ or in such other manner as may be prescribed by Rules of Court, or in a Local Court or other inferior court in the manner prescribed by or under the Act conferring jurisdiction on such court." It follows that the complexities involved in applying the English statutes of limitation to actions of account do not apply. [124] For these reasons, I am of the opinion that, irrespective of the merits, the appellant's action was statute-barred in any event as against the respondents who retired from the partnership prior to 24 December 1992, being the first day of the limitation period of six years which expired on 24 December 1998, the day on which the writ was issued."
Unfortunately, this overlooked that, while there was such a definition of "Action" in s 3 of the Western Australian Act, s 38 itself contained the following provision: (3) In this section the word actions means such actions as are in the nature of actions at common law, but in reference to this section contained in the succeeding sections of this Act, the word "action" shall be construed as including "actions" or "actions and suits" or "actions, suits, and other proceedings" where any of such meanings is necessary in order to give a complete reference to the matters set out in subsection (1).
That provision makes manifest that the limitations imposed by s 38(1)(c)(ii) and s 38(1)(c)(iii) of the Western Australian Act were intended to apply only to actions at law. Wheatley must therefore in my respectful view be regarded as wrongly decided. Similarly, the observation in Meagher, Gummow & Lehane (3rd Ed) [167] to the effect that in Western Australia, all actions of account, at law or in equity and based on either legal or equitable liability to account, are barred six years after the accrual of a cause of action, which was said to follow not only from the statutory provisions themselves, but also from the statutory definition of "action" contained in the Act, apparently overlooked the same provision. [168]
In 1967, the NSW Law Reform Commission, chaired by Manning JA, considered the same complexities as were addressed by Megarry V-C in Tito v Waddell: [169] "Section 15 - Account 109. Section 15 is based on section 2(2) of the Imperial Act of 1939. The present statutory provision is in section 3 of the Imperial Limitation Act 1623. That section puts a six-year period of limitation on "all actions of account . . . other than such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants". This provision applies primarily, and perhaps exclusively, to the common law action of account which has been obsolete at least since the beginning of the nineteenth century. 110. Proceedings for accounts are now taken by suit in equity and this is so whether the liability to account is a legal liability or an equitable liability. Where a suit for an account is brought on a legal liability to account a court of equity applies a six-year period of limitation: it has, however, been a matter of controversy whether the six-year period of limitation is applied in direct obedience to section 3 of the Act of 2623, or by analogy to the requirements of that section. Where the liability to account is equitable, the court applies the six year period by analogy, for example, where the accounting party has a fiduciary duty. For discussions of the problems see Ashburner's Principles of Equity, 2nd Edition (1933), at pp. 504, 505; Preston and Newsom on Limitation of Actions, 3rd Edition (1953), at pp. 54-56. 111. The Imperial Act of 1939 provides, by section 2(2), that "an action for an account shall not be brought in respect of any matter which .arose more than six years before the commencement of the action" but, by section 2(7), that section 2 is not to apply to any claim for equitable relief except so far as any provision of the section may be applied by analogy. One view of these provisions is that section 2(2) applies directly only to the action at law for an account, long obsolete though that action is, but that the subsection will be applied by analogy in an action for an account in equity (whether on a liability to account at law or in equity). This view is put in Preston and Newsum at pp. 54-56 and in Franks on the Limitation of Actions (1959) at pp. 43, 44. Another view is put in Halsbury's Laws of England, 3rd Edition, Volume 24 (1958), at pp. 225, 226, that, notwithstanding section 2(7), section 2(2) applies directly to an action in equity for an account whether the liability to account is legal or equitable. Each of these views has its difficulties. On the one hand, it would be odd if the Imperial Act of 1939 applied directly only to an action of account of a kind not brought for over a century. On the other hand, it is a bold construction of section 2(7) which would permit section 2(2) to apply directly to an action for an account in equity. 112. We have attempted to draw what we think is the right line in section 15 of the BilI. It will apply directly to an action, whether at law or in equity, for an account founded on a legal liability to account: it will be applicable by analogy to an action in equity for an account on an equitable liability to account. Section 23 of the Bill, the counterpart of section 2(7) of the Imperial Act of 1939, does not apply to section 15 of the Bill."
Thus the Law Reform Commission ultimately adopted, in what would become s 15 of the NSW Act, the approach of which Megarry V-C would say, in Tito v Waddell, 'This tortuous scheme of indirection is one that I should be reluctant to attribute to Parliament'. [170]
While I am conscious that we are construing a Victorian Act and should afford deference to decisions of the Supreme Court of Victoria in respect of it, the weight of those decisions is significantly undermined by their foundation in the incorrectly decided precedent of Wheatley. [171] The Victorian Act does not contain a direct equivalent to s 38(3) of the WA Act, but it does contain s 5(8), [172] which corresponds with s 2(7) of the English 1935 Act considered by Megarry V-C in Tito v Waddell. I am unable to accept that the definition of "action" in s 3 of the Victorian Act has the effect that s 5(2) applies to claims for an account in equity where the liability to account is equitable. Essentially, that is because s 5(8) explicitly says that it does not. My view is consistent with the view of Megarry V-C in Tito v Waddell. Mukhtar AsJ's observation that s 5(2) "says what it says" is no answer to that, where s 5(8) operates as an exception or proviso; it is fundamental that a proviso or exception prevails over the principal provision. This conclusion is fortified by the circumstance that the word "action" is also consistently used in the other subsections of s 5, so there is no basis for thinking that s 5(2) was uniquely intended to apply to claims for equitable relief. While there is some force in the argument, recognised by both the Law Reform Commission and by Megarry V-C, that it would be curious if Parliament intended by s 5(2) (and its equivalents) to legislate a limitation period for a form of action (account at common law) which had fallen into disuse, the explanation is that the statute of limitations has ancient origins and thus unsurprisingly may continue to make provision in respect of causes of action which are no longer litigated, that - as Megarry V-C explained in the first paragraph of the excerpt set out above - a common law action for account has been referred to in the statute from its inception in 1623, and that the statue has historically been confined to actions at law, and applied in equity only by analogy. It would be even more curious if, while providing in s 5(8) (and its equivalents) that - as had always been the case - the statute did not apply to claims for equitable relief except by analogy, that was somehow circumvented in the case of equitable relief by way of account by the definition of "action". In my view, s 5(2) is not concerned with a suit for an account founded on a liability to account imposed by equity, save insofar as, by s 5(8), it may be applied by analogy.

[17]

Does s 5 apply by analogy?

In purely equitable proceedings, where there is a corresponding cause of action at law in respect of the same matter which is the subject of a statutory bar, equity will apply the bar by analogy unless there is a ground which justifies not doing so because reliance by the defendant on the statute would in the circumstances be unconscionable. [173] For the purpose of limitations, a cause of action comprises 'the occurrence of all the facts which the plaintiff must show as part of his case', [174] or 'the essential ingredients in the title to the right which it is proposed to enforce', [175] or 'the fact or combination of facts which gives rise to the right to sue'. [176]
In principle, a claim for an account in equity based on a purely equitable liability to account is analogous to a claim for an account at law, and the statutory limitation period is applicable by analogy. Millett LJ explained in Paragon: [177] "The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received: see Burdick v Garrick (1870) LR 5 Ch App 233, Knox v Gye (1872) LR 5 HL 656 and Re Sharpe, Re Bennett, Masonic and General Life Assurance Co v Sharpe [1892] 1 Ch 154. A claim for an account in equity, absent any trust, has no equitable element; it is based on legal, not equitable rights: see How v Earl Winterton [1896] 2 Ch 626 per Lindley LJ. Where the agent's liability to account was contractual equity acted in obedience to the statute: see Hovenden v Lord Annesley (1806) 2 Sch & Lef 607 at 631 per Lord Redesdale. Where, as in Knox v Gye, there was no contractual relationship between the parties, so that the liability was exclusively equitable, the court acted by analogy with the statute. Its power to do so is implicitly preserved by s 36 of the 1980 Act (re-enacting in simpler terms the tortuous provisions of s 2(2) and (7) which were subjected to critical analysis by Megarry V-C in Tito v Waddell (No 2), Tito v A-G [1977] 3 All ER 129-250, [1977] Ch 106-252). Accordingly, the defendant's liability to account for more than six years before the issue of the writ in Nelson v Rye depended on whether he was, not merely a fiduciary (for every agent owes fiduciary duties to his principal), but a trustee, that is to say, on whether he owed fiduciary duties in relation to the money."
The Amended Summons included a number of claims explicitly for an account. [178] However, the only account that was ordered was one in respect of rents and profits derived from certain properties from 2018, [179] well within the six-year period before proceedings were commenced. Alternatively to the claims for accounts, the respondents claimed equitable compensation, [180] and proprietary relief. The primary judge held that, subject to the limitation and laches defences, the respondents were entitled to equitable compensation and proprietary relief.
The liability of an accessory is primarily a liability to account. In Hospital Products Ltd v United States Surgical Corp, Mason CJ said (citations omitted): [181] "… 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."
In Giumelli v Giumelli, Gleeson CJ, McHugh, Gummow and Callinan JJ said (citations omitted): [182] "[3] A constructive trust of this nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties. [4] The term "constructive trust" is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee's duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one "who dishonestly procures or assists in a breach of trust or fiduciary obligation" by a trustee or other fiduciary."
In Paragon, Millett LJ said: [183] "Equity has always given relief against fraud by making any person sufficiently implicated in the fraud accountable in equity. In such a case he is traditionally though I think unfortunately described as a constructive trustee and said to be 'liable to account as constructive trustee'. Such a person is not in fact a trustee at all, even though he may be liable to account as if he were."
In Hasler v Singtel Optus Pty Ltd Leeming JA, with whom Barrett JA and Gleeson JA agreed, observed: [184] "Irrespective of whether the third party has procured, or merely assisted, in the breach of fiduciary duty, the third party may be required to account as a constructive trustee. The third party may not have received any property. In Giumelli v Giumelli [1999] HCA 10; 196 CLR 101 at [5], the High Court said that the imposition of liability upon a third party in these circumstances does not create or recognise any proprietary interest, but instead imposes "a personal liability to account in the same manner as that of an express trustee": at [4]."
In Bofinger v Kingsway Group Ltd, [185] Gummow, Hayne, Heydon, Kiefel and Bell JJ said (citations omitted): "[47] In this situation assistance is afforded by a point emphasised by four members of the court in the joint reasons in Giumelli v Giumelli when considering the constructive trust as a remedial response to a claim to equitable intervention. The point is that the term "constructive trust" may be used not with respect to the creation or recognition of a proprietary interest but to identify the imposition of a personal liability to account upon a defaulting fiduciary. [48] In Jones v Southall & Bourke Pty Ltd, after reviewing the authorities, Crennan J said that they (at [62]): [62] … make plain [that] the term "constructive trust" covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account."
To those equitable personal remedies referred to by Crennan J might be added equitable compensation, as was claimed in this case. Equitable compensation is not the same as an account; its focus is compensation for loss, as distinct from depriving the accessory of benefits received. [186] This is apparent from the following passage in the judgment of McLelland AJA in Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd: [187] "In the present case, the transactions between GPI and ANI have not been effectively avoided and rescission is unavailable for the reasons already stated. Accordingly, no constructive trust (of the proprietary kind) has arisen. I turn now to the contention that GPI in fact suffered a loss as a result of the transactions. In my opinion this contention is well founded, since there is no legitimate basis for leaving out of account the effect of the put and call deeds. As a result of the subject transactions (which may for this purpose be considered together), GPI (a) parted with the subject securities; (b) had its indebtedness to SSL reduced by $35,180,453.50; (c) assumed liabilities to ANI under the put and call deeds; and (d) obtained rights against ANI under the put and call deeds. An order for the payment of equitable compensation is a remedy available to the victim of a breach of fiduciary duty against both the fiduciary and any other person who knowingly participated in that breach and has thereby become subject to a personal liability as a "constructive trustee" by application of the principles derived from Barnes v Addy (1874) 9 Ch App 244, as expounded by Gibbs J in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 395-398: see Nocton v Lord Ashburton [1914] AC 932 at 946, 956, 957; McKenzie v McDonald [1927] VLR 134 at 146; Peninsular & Oriental Steam Navigation Co v Johnson (1938) 60 CLR 189 at 249-250; Re Dawson; Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 84 WN (Pt 1) (NSW) 399; [1966] 2 NSWR 211; United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 816-817; reversed on other grounds - (1984) 156 CLR 41; Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129; Target Holdings Ltd v Redferns [1995] 3 WLR 352; [1995] 3 All ER 785 and see also IE Davidson, "The Equitable Remedy of Compensation" (1981) 13 Melbourne University Law Review 349 and WMC Gummow "Compensation for Breach of Fiduciary Duty" in TG Youdan (ed) Equity, Fiduciaries and Trusts, Toronto, 1989. The fact that an equitable right of action accrues as soon as the breach is committed does not mean that the quantum of compensation is to be fixed as at the date of that breach. The date as at which the quantum of compensation is to be fixed is the date of determination of the proceedings, according to the circumstances then pertaining and with the full benefit of hindsight. The assessment is of the loss to the victim caused by the breach on a common sense view of causation: see Target Holdings Ltd v Redferns (at 363-366; 797-798), per Lord Browne-Wilkinson, applying Canson Enterprises Ltd v Boughton & Co (at 154-164), per McLachlin J. … In the result, the quantum of equitable compensation for which ANI should be held liable to GPI, representing GPI's ultimate nett loss as a result of the breaches in question is the value of the subject securities (to be taken at $15,372,143.54) plus the amount of GPI's liability to ANI under the put and call deeds ($23,557,597.39) less the amount by which GPI's indebtedness to SSL was reduced ($35,180,453.50), a nett figure of $3,749,287.43."
In O'Halloran v R T Thomas & Family Pty Ltd, Spigelman CJ, with whom Priestley JA and Meagher JA agreed, said (emphasis added): [188] "The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation: Nocton v Lord Ashburton [1914] AC 932 at 952, per Viscount Haldane LC; see the discussion by Justice Gummow writing extra-judicially in "Compensation for Breach of Fiduciary Duty" in Youdan (ed) Equity Fiduciaries and Trusts (1989) at 57-61; see also Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3rd ed, pars 552-553; Davidson, "The Equitable Remedy of Compensation" (1982) 13 Melb Uni L Rev 349 especially at 372; Davies, "Equitable Compensation: Causation Forseeability and Remoteness" in Waters (ed) Equity Fiduciaries and Trusts (1993) at 304-305; Tilbury, "Equitable Compensation" in Parkinson (ed) The Principles of Equity (1996) pars 2202-2207, 2211."
In Crossman v Sheahan, Ward JA (as her Honour then was) said (emphasis added): [189] "The object of equitable compensation is to place the parties in the positions they would respectively have held had the relevant breach not happened (see O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 272 ; 29 ACSR 148 at 156-7; Re Dawson (dec'd) [1966] 2 NSWLR 211 at 214, where the obligation of the defaulting trustees was said by Street J, as his Honour then was, to be essentially one of effecting restitution to the estate). …"
Thus, while the liability of an accessory is usually explained as a liability to account, that liability may be satisfied by proprietary relief in respect of property received and retained by the accessory, by an account for property that has never been received by the accessory or is no longer retained, or by equitable compensation.
In my judgment, a claim for proprietary relief against an accessory is within the analogy: it is a claim for the accessory to account for the trust property it has received, by restoring it to the trust. As the Supreme Court of the United Kingdom has observed, "the expression equitable accounting can encompass both proprietary and non-proprietary claims". [190] The defaulting party is "liable, at the option of the cestuis que trust, to account either for the value … or … for the thing itself …' (emphasis added). [191] I do not accept the respondents' submission that Cohen v Cohen and Re Auzhair Supplies Pty Ltd establish that a proprietary claim is not analogous to an action for an account. In Cohen, the point that was made by Dixon J was that the analogy was not applied in case of the first class of constructive trustee (de facto trustees), but it was applied in the second (which includes accessories). [192] In Auzhair, I explained that Cohen was a case of a proprietary claim to property in the hands of the fiduciary - the point being that it was not a claim against an accessory, but against an actual trustee, such that the analogy did not apply. [193]
As to equitable compensation, it is true that in Tito v Waddell, Megarry V-C held that no limitation period applied to a claim for equitable compensation, but that was in circumstances where it was sought in lieu of setting aside a transaction which was voidable for breach of fiduciary duty, for which there was no limitation period. [194] On the other hand, in Cia de Seguros Imperio v Heath (REBX) Ltd (formerly C E Heath & Co (North America) Ltd), [195] the question was whether a court of equity would have applied limitation by analogy to a claim for equitable compensation for a dishonest breach of fiduciary duty. The Court of Appeal of England and Wales held that equity would have taken the view that it should apply the statute by analogy to a claim for compensation for a dishonest breach of fiduciary duty, because what was alleged as giving rise to a dishonest breach of fiduciary duty were precisely the facts which were also relied upon for alleging breach of contract or breach of duty in tort. And as has been noted, [196] there is a well-established analogy between an action in tort for fraud and a claim in equity for 'an account as constructive trustee' founded on the same fraud. In Paragon, Millett LJ said, in respect of the liability of an accessory: [197] "But I would offer a more vigorous response. I question whether so many different remedies should continue to be available for the same misapplication of property. They make proceedings of the present kind unnecessarily complex. But whatever the answer to this question, the present problem is a semantic one. The defendants cannot sensibly be described as constructive trustees at all. The expression is used in its remedial sense, though not in the sense in which it is used in the United States and Canada, where it is the basis of a discretionary proprietary remedy; in cases like the present a plaintiff is necessarily confined to a personal remedy. Before the Supreme Court of Judicature Act 1873 the expression was a catch-phrase which was employed by the Court of Chancery to justify the exercise of equity's concurrent jurisdiction in cases of fraud. 125 years later it is surely time to discard it. If we cannot bring ourselves to discard it, at least we can resolve not to take it literally."
In Feiglin v Ainsworth, [198] Mukhtar AsJ said: "To couch the claim as breach of fiduciary duty (for which there is no statutory limitation period) cannot be used to avoid the application of the six year limitation either directly or by analogy under s 5(8) of the Act. The limitation period will apply unless Feiglin is going to contend as part of his case that there has been fraudulent concealment of facts affecting the accrual of the cause of action."
The liability of an accessory to pay equitable compensation depends on substantially the same facts as the liability to account. Although the focus is different, the result will often be indistinguishable in quantum, in particular in the case of a dishonest assistant who does not receive trust property. In my view, even if an action for equitable compensation is not "an action for an account", it so closely corresponds to one as to fall within the analogy.

[18]

How does the analogy apply in this case?

It follows from the discussion above that the respondents' claims for proprietary relief and equitable compensation against Max and the Max companies so closely correspond to claims for an account, and/or claims in tort for fraud, that the six-year limitation period imposed by s 5(2) on claims for an account referred to in s 5(2), and/or by s 5(1)(a) (which provides that actions founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued), apply prima facie by analogy. Where a limitation statute applies by analogy, equity does not retain a general residual discretion to decline to apply it; however, equity will not apply the analogy where it is unconscionable to rely on it. There are two classes of cases in which courts of equity decline to apply limitation periods by analogy: the first is claims by a beneficiary against a trustee for breaches of trust, which has been discussed above; and the second is claims involving fraud or fraudulent concealment. [199]
The appellants did not plead, nor expressly rely on, the application by analogy of any limitation period (except in their application for leave to amend to rely by analogy on Corporations Act, s 1317K), until supplementary submissions made after the hearing of the appeal. As a result, the respondents did not advance evidence or arguments as to why it would be unconscionable to permit the appellants to rely on the analogy. As Mr Elliott SC, for the respondents, explained in the course of the appeal, not only was the reply of fraudulent concealment, though pleaded by the respondents, not vigorously prosecuted at the trial, but because no limitation by analogy was pleaded, the same factual matters which would have founded a reply of unconscionability - because of fraudulent concealment - to a defence of limitation by analogy, were not pressed. [200] These are powerful reasons as to why the application of the analogy in this case should be considered no further. However, the analogous application of s 5 (and its equivalents) is an important element of explaining why s 21(2) (of the Victorian Act) does not apply to remedial trusts. Ultimately, I have concluded that it is preferable to address these issues on the merits, and that this can be done without unfairness to either party: despite its not having been litigated at trial, the application of s 5 by analogy is a question of law; if it is to be considered, then it would be unfair to the respondents not to consider also whether it would be unconscionable to permit the analogy to be relied upon; the relevant issues (as to fraudulent concealment) were in any event raised and addressed in the course of the appeal, in the context of the challenge to the conclusion of laches; and the ultimate result is the same as would have eventuated had the application by analogy of s 5 not been considered at all.
That s 5 is applicable by analogy, and not directly, has the important consequence that time runs not from when the cause of action first accrued, but from when it was discovered or discoverable. As Gleeson JA, with whom Meagher JA and Barrett JA agreed, explained in Sze Tu: [201] "In equity, where the cause of action was one alleging fraud, or when fraud was an element in the cause of action, time did not run until the discovery of the fraud. Where the cause of action was one which did not involve fraud, but its existence was fraudulently concealed by the defendant, time did not begin to run until both the concealment was discovered and the cause of action ascertained: JD Heydon, MJ Leeming & PG Turner, Meagher, Gummow & Lehane's Equity: Doctrine & Remedies (5th ed. 2014 Lexis Nexis Butterworths) … at [36-100]."
Relevantly to the context of the present case, his Honour continued: [202] "This latter category of cases included causes of action for unauthorised investments by company directors, and drawings by a partner in excess of that partner's share of profits. In these latter cases, "active concealment by the defendant must be shown": Re Lands Allotment Co [1894] 1 Ch 616 at 639."
In Ecclesiastical Commissioners v North Eastern Railway Co, [203] Malins VC said, in the context of the application of the Statute of Limitations in equity by analogy, that the law was clearly settled that in cases of fraud the time begins to run only from the time the fraud was discovered, or by reasonable diligence could have been discovered. In Urquhart v M'Pherson, [204] a suit for an account of a partnership, Molesworth J, relying inter alia on Clanricarde v Henning, [205] and Ecclesiastical Commissioners v North Eastern Railway Co, observed that where a plaintiff may proceed in equity or at law, a court of equity would not adopt a different limitation period from that at law; but that in equity, in the case of fraud, the statute runs from the time when with due diligence the fraud might have been discovered. In Gerace, Meagher JA, with whom Beazley P and Emmett JA agreed, said: [206] "The grounds on which equity declines to permit a defendant to rely upon a statutory bar by analogy include where there has been fraudulent concealment, which requires either fraudulent conduct as an element of the right of action or conduct consisting of active concealment of a right of action that does not include fraud as an element: Meagher, Gummow and Lehane's Equity Doctrines and Remedies at [34-085]. The more recent cases which discuss this doctrine do so when applying the modern statutory equivalents of s 26 of the Real Property Limitation Act 1833 (UK). The references to "fraud", "concealment" and "fraudulent concealment" in those statutes have been understood in the same sense as they are in the equitable doctrine on which those provisions were based. The equitable doctrine is not confined to common law fraud or deceit and requires a consciousness on the part of the defendant that what is being done is wrong or that to take advantage of a particular situation involves wrongdoing: see Beaman v ARTS, Ltd [1949] 1 KB 550 at 559-560 per Lord Greene MR, Kitchen v Royal Air Force Association [1958] 1 WLR 563 at 572-573 per Lord Evershed MR, Applegate v Moss [1971] 1 QB 406 at 413 per Lord Denning MR, King v Victor Parsons & Co [1973] 1 WLR 29 at 33-34 per Lord Denning MR."
Although the primary judge did not consider this precise question in this context, his Honour was required to address analogous questions under the rubric of laches, and (obiter) in the context of s 27 of the Victorian Act - which, as explained by Meagher JA in the passage just cited, reflects the equitable doctrine, and which 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: …
In that respect, the primary judge said: [207] "Having regard to those conclusions, it is not strictly necessary to consider the application of s 27 of the Limitation of Actions Act. Had it been necessary, I would have concluded that the commencement of the limitation period was not postponed under that section. For the reasons I have given, it could be said that the plaintiffs' claim is based on Max's fraud or that the right of action was concealed by his fraud because Max deliberately withheld information from Mrs Twigg that may have caused her to object to what he did. The difficulty, however, is that any such fraud could have been discovered by Mrs Twigg with reasonable diligence. She knew that the Twigg Group business had been sold for approximately $155 million. She knew that she and her daughters were to receive part of the proceeds of sale. She could easily have asked Max or Mr Fitzpatrick what was going to happen to the balance of the proceeds of sale. But she chose not to do so. Consequently, the limitation period began to run under s 27 as soon as Max's breaches of duty in relation to the payment of the sale proceeds occurred."
While there was no Notice of Contention by which the respondents formally sought to challenge his Honour's obiter rejection of the argument based on s 27, the issue arises at this point in the context of the analogical application of s 5(2), which as has been noted the appellants did not plead nor otherwise invoke until their supplementary submissions, but which has had to be considered in the context of explaining why s 21(2) does not apply. And the relevant issues were addressed and argued on the appeal, albeit under the rubric of laches. For the reasons I have given for upholding the primary judge's conclusion as to dishonesty, his Honour's holding that the respondents' claim was based on Max's fraud and/or that their right of action was concealed by his fraud was correct. However, as to the conclusion that "any such fraud could have been discovered by Mrs Twigg with reasonable diligence", what is involved in the notion of "reasonable diligence" in this context was described by Lindley LJ in Betjemann v Betjemann (footnotes omitted): [208] "Now, even if I am wrong in that, it appears to me, I confess, that the learned judge is wrong upon the other point. The surviving partner then says: "If the statute is an answer, this is a case of concealed fraud"; and he proves that John did commit frauds in the way which was explained in the course of the argument, and which is not now disputed. The plaintiff's answer to that is that although John committed these frauds, the surviving partner had every opportunity of discovering them, and under these circumstances the statute applies, and the doctrine of concealed fraud is excluded. That appears to me to be erroneous and contrary to all the principles which a Court of equity has been in the habit of applying as between partners. I say nothing of the manner in which the Court has dealt with the question as between trustees and cestuis que trust, although I daresay that would be found to be based on similar principles. This doctrine of means of knowledge which is incorporated in terms in the Statute of Limitations 3 & 4 Wm. 4, c. 27, s. 26 is perfectly reasonable as applied to cases of ejectment. If a man brings an action of ejectment to recover property after twenty years lapse of time, it is only reasonable to say that, even in the case of concealed fraud, the statute shall apply if he has means of knowledge and has not used them. That is intelligible enough; but Field J. in Gibbs v. Guild went a little too far when he said the 26th section expressed the whole doctrine of equity applicable to concealed fraud. As between such persons as vendor and purchaser, where the maxim of caveat emptor applies, the observations of the learned judge were not open to criticism. I am not aware that there is any difference between law and equity in cases of that kind; but the learned judge was not correct in applying the same rule to partners. What right has a partner to say to his co-partner: "You ought not to have trusted me. You are bound to look at the books and see that I am not cheating you"? Such a doctrine as that is unfounded. I am not expressing this view of the law for the first time, for the doctrine will be found very well put in the leading case of Rawlins v. Wickham. There a partner had been induced to enter into a firm by a fraudulent misrepresentation. He continued a partner for four years, he had access to the books, and he had means of knowledge and means of finding out that he had been induced by these fraudulent representations to become a partner, and that circumstance was strongly relied upon as an answer to a suit in equity brought by him to have the contract for partnership rescinded and to be indemnified against the liabilities of the firm. How did Knight Bruce and Turner L.JJ. deal with that? I will read a passage from the marginal note before I read the passage in the judgment: "Where a person has been induced to enter into a contract by a material misrepresentation of the other party, he is entitled to have the contract set aside, and not merely to have the representation made good. Held, that the lapse of time was no bar to the plaintiff; for that although he had means of ascertaining the representation to be untrue, he was entitled as between him and the persons who made it to believe it to be true, and was not bound to make inquiry until there was something to raise suspicion." Knight Bruce L.J., who goes into this matter with great care, says: "If, therefore, Mr. Rawlins" - that is the plaintiff - "had discovered the misrepresentation earlier, and complained earlier, there could not have been any doubt as to the result. The extraordinary circumstance is the duration of the partnership for four years, during the whole of which time Mr. Rawlins might have inspected the books; might at least in some sense have done so; for I am not satisfied that difficulties would not have been thrown in his way, or that Mr. Bailey would not have objected. He, however, did not examine them, and, improbable as it may appear, I must hold that Mr. Rawlins entered into the partnership in complete ignorance of the contents of the books, and continued so for four years. Now there are many purposes for which a gentleman, in the position of Mr. Rawlins, could not be heard to say that he did not know the contents of the books. As regards many persons it was his duty to know them; but was it his duty as between himself and Mr. Wickham and Mr. Bailey, who had brought him into partnership as they did? I think not. He was entitled to believe their representations to be accurate, without looking at the books. He was entitled to continue in that belief until ground for suspicion arose, or information was given him by one of the partners. No such information was given." Turner L.J. makes remarks to the same effect. It appears to me that that is the principle which is applicable to a case of this kind of means of knowledge; unless suspicion is proved, and unless the person complaining not only has means of knowledge, but does not choose to avail himself of that means when his suspicion is aroused, it is not ad rem. On that ground it appears to me that the defendant is right in his counter-claim."
That case was referred to, with apparent approval, by Meagher JA in Gerace: [209] "Betjemann v Betjemann [1895] 2 Ch 474 is an example of the application of this doctrine to a claim for a partnership account, brought in equity's concurrent jurisdiction. That was a case of concealed fraud. The innocent partner did not know of the fraudulent drawings and was entitled to rely on the good faith of his co-partner. For that reason, the circumstances were not such as to give rise to a suspicion on his part as to the true position and the running of the statute was postponed."
In Sze Tu, Gleeson JA observed: [210] "The authors of Meagher, Gummow and Lehane continue at [36-100]: For a plaintiff to 'discover' such an action, the plaintiff must have either actual knowledge that a 'fraud' has been committed or actual knowledge of facts which give rise to such an action. The possessing of means of knowledge is not enough. The defendant is not allowed to say that the plaintiff ought diligently to have discovered the fraud, unless the defendant can prove that although the plaintiff's suspicions were aroused, the plaintiff deliberately refrained from inquiry. However the doctrine of imputed notice does apply; knowledge by an agent derived in the course of the agency is knowledge of the principal [citations omitted]."
Essentially for the reasons I have given for concluding that the defence of laches fails - namely, that such facts as Diane knew did not constitute "sufficient knowledge of the facts constituting the title to relief", in a context where, to Max's knowledge, she implicitly trusted him - I do not agree that Max's fraud and concealment of it was discoverable by Diane with reasonable diligence. Such knowledge as she had before 2018, coupled with her relationship with Max, was not such that a reasonable person in her position would have made further inquiries. His Honour's statement that "she chose not to do so" is, with respect, inapt: no occasion arose for her to make any such choice; none was identified or suggested; and there was no evidence that she did.
It follows that, although I have reached this conclusion by a somewhat different course, the primary judge was right to hold that neither s 5 nor s 21(2) barred the claims in respect of breach of fiduciary duty - the latter as the liability of Max and the Max companies was not as a trustee (of an institutional trust) within the meaning of s 21, but remedial only; and the former as time did not begin to run until the cause of action was discoverable, which was not until 2018 or 2019. Further, if I be incorrect in concluding that no limitation period applies directly, then any such limitation period would in any event be postponed by s 27. The same result would follow if the appellants were not permitted on appeal to rely on the application of s 5 by analogy because it had not been pleaded.

[19]

5.4 Corporations Act s 1317K - leave to amend

The primary judge refused leave to amend the defence to plead a limitation defence relying on Corporations Act 2000 (Cth), s 1317K, by analogy. The original notice of appeal made no complaint in this respect, but by notice of motion filed on 17 February 2021, the appellants sought leave to amend their notice of appeal to add grounds complaining that the trial judge erred in refusing to permit them to amend to plead such a defence (Ground 9(b)), and in failing to hold that the claims were thus barred (Ground 9(c)). Although the appellants conceded that leave to appeal was required for those grounds, and sought that the requirement to file a summons for leave be dispensed with, the concession was incorrectly made: it is open to an appellant on appeal as of right from a final judgment to challenge, without leave, any interlocutory decision which has affected it. However, it is uncontroversial that the primary judge's decision to refuse leave to amend was one to which the constraints of House v The King [211] apply.
The appellants submitted that the primary judge's discretion miscarried by reason that his Honour erred in finding a "general discretion" not to apply a limitation period by analogy; erroneously held that the question of whether it would have been unconscionable to apply the limitation was a new factual issue such as to justify a refusal of leave to amend, as it was already in dispute in the proceedings via the dishonesty arguments; and that the argument was already available on the pleadings.
This ground can be disposed of shortly. For the reasons already given, [212] any limitation period applicable by analogy would not have commenced to run until 2018 or 2019, when the fraud and cause of action was first discovered or with reasonable diligence discoverable. The amendment if granted at trial would therefore not ultimately have availed the appellants, and there is no utility now in granting leave to amend to permit the issue to be agitated.

[20]

Tracing (Grounds 11, 12)
The primary judge held that the proper plaintiffs were the Trustee Companies (as distinct from Diane personally), [213] and that: [214] "[130] 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. … [134] In my opinion, it does not matter whether the money was paid to Max himself or entities controlled by him. In either case, Max or the relevant entity held the money on trust for the Corporate Plaintiffs or Mrs Twigg. If the money was paid to Max, the analysis is straightforward. In breach of his fiduciary duties, he caused the money to be paid to himself and therefore held it on trust for the true owner. That liability can be explained on the basis that the money was obtained as a consequence of his breach of fiduciary duty and was therefore held by Max as a constructive trustee: see Hospital Products at 107-8 per Mason J (quoted above)."
His Honour held that any of the Max companies that received part of the Sale Proceeds were equally liable with him to account for it, on the basis that they were his alter ego: [215] "[138] The position is no different if the amounts held by Twigg Plant Hire were paid directly to entities controlled by Max rather than to Max himself. In Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 the Full Federal Court identified four circumstances in which "a third party's participation in another's breach of fiduciary duty or breach of trust, could render that person accountable in equity as a "constructive trustee"" (at [242]). One such case is where the third party was the alter ego of the defaulting fiduciary: The first, is where the third party is the corporate creature, vehicle, or alter ego of wrongdoing fiduciaries who use it to secure the profits of, or to inflict the losses by, their breach of fiduciary duty: see eg Cook v Deeks [1916] AC 554 ("Cook") at 565; Queensland Mines Ltd v Hudson (1975-1976) ACLC 28, 658 at 27,709, revsd on other grounds (1978) 18 ALR 1; Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 ("Timber Engineering") at (11); Green & Clara Pty Ltd v Bestobell Industries Pty Ltd (No 2) [1984] WAR 32 ("Green v Bestobell"); Gencor ACP Ltd v Dalby [2000] 2 BCLC 734 at [26]; CMS Dolphin Ltd v Simonet [2001] 2 BCLC 704 ("CMS Dolphin") at [97]-[105]. In these cases the corporate vehicle is fully liable for the profits made from, and the losses inflicted by, the fiduciary's wrong. The liability itself is explained commonly on the basis that "company had full knowledge of all of the facts": Cook, at 565; it is the alter ego of the fiduciary with a "transmitted fiduciary obligation": Timber Engineering, at (11); or that it "jointly participated" in the breach: CMS Dolphin at [103]. Liability does not turn on the need to show "dishonesty", although it often provides the reason for the interposition of the company. Proof of a breach of fiduciary duty will suffice; Green v Bestobell, at 40. And, as was said in CMS Dolphin (at [104]), it is "rather artificial" to use Barnes v Addy to explain this liability (at [243]). [139] Applying that principle, the entities controlled by Max which received any part of the sale proceeds were equally liable to account to the Corporate Plaintiffs or Mrs Twigg as trustees of those proceeds."
Although the appellants submitted that the obiter statement in Grimaldi v Chameleon Mining (No 2) [216] cited by the primary judge should not be taken as establishing the principle for which it was relied upon by his Honour, and alternatively that, if there is any such principle, it is confined to cases of dishonesty, the statement in Grimaldi is entirely congruent with the following statement of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd: [217] "There was no dispute about the fact that, subject to the operation of s 42 of the Real Property Act, if Farah was in breach of its fiduciary duty to Say-Dee, Mr Elias was liable, being in the same position, and that Lesmint was also liable, since it was Mr Elias' alter ego. Hence the imposition of constructive trusts over the items of property in the names of Mr Elias and Lesmint was an available remedy. The position was much more controversial in relation to the three units in No 15 in the names of Mrs Elias and her two daughters. The Court of Appeal found them liable under the "first limb" of Barnes, and also on a restitutionary basis. The respondent also argued for other bases of liability."
And even if the principle were confined to cases of dishonesty, this was, as has been explained, such a case.
As to tracing, as the primary judge explained, [218] the general principle is that, subject to certain qualifications, a beneficiary is entitled to assert a proprietary right not only to the trust property itself in the hands of a recipient, but also to property for which that property has been exchanged. This differs from following, by which a beneficiary may exercise a proprietary right in respect of trust property notwithstanding that it has been transferred to a third party. An important qualification is that the property may not be followed once it has been transferred to a bona fide purchaser for value and without notice of the claim. This was explained by Lord Millett (with whom Lord Hoffmann agreed) in Foskett v McKeown: [219] "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."
Three issues arise in the appeal in connection with the tracing relief to which the primary judge held the Trustee Companies were entitled. Two concern the Hotel: the appellants contend, first, that no more than $10 million of the $12.2 million advanced by Max to BBH to fund the purchase of the Hotel was derived from the Sale Proceeds, and so only that proportion and not the whole of the proceeds of the Hotel are traceable (Ground 11); and, secondly, that the primary judge erred in holding that respondents could trace into the Hotel and its proceeds, when the relevant transaction was a loan from Max to BBH as trustee of the BBH Property Trust, which had been fully repaid to Max before the Hotel was sold (Ground 12). The third issue is raised by the cross-appeal, and concerns the Albatross Avenue property: the respondents contend that the primary judge erred in holding that the Sale Proceeds could not be traced into Albatross Ave (Cross-appeal ground 2).

[21]

6.1 The Hotel

Many of the assets into which the respondents sought to trace were themselves acquired from the Hotel proceeds; thus entitlement to trace into them is dependent on the respondents being able to trace into the Hotel and its proceeds.
The Hotel was acquired in late June 2007 by BBH as trustee for the BBH Property Trust - both being entities controlled by Max - for a price of $47.2 million. BBH agreed to sell the hotel in 2017 for $68.2 million, and the sale was completed on 1 March 2018. [220]
In June 2007, the entire purchase price was borrowed by BBH, as to $35 million by way of a bill facility with the Commonwealth Bank, and as to $12.2 million from Max; whether all or only $10 million of this was sourced from the Sale Proceeds is considered under Ground 11 below. According to the annual financial statements of BBH, Max's loan account fluctuated over the ensuing years: from $12.2 million in 2007, it increased to $12.509 million in 2008 and $15.68 million in 2009, before reducing to $15.484 million in 2010, $15.22 million in 2011, $14.694 million in 2012, $13.726 million in 2013, $9,654 million in 2014, $6.901 million in 2015, $4.776 million in 2016, $2.932 million in 2017, and nil in 2018. Thus, the debt owed by BBH to Max had been discharged in full by 30 June 2018 - more or less contemporaneously with the completion of the sale of the Hotel on 1 March 2018. The primary judge observed: [221] "It appears to be common ground that the $12.2 million can be followed into the hands of BBH. However, Max submits that it cannot be traced into the hotel. Rather, according to Max, the $12.2 million is properly characterised as a loan to BBH which was repaid to him. In this respect the case is said to be similar to cases such as Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 and Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29."
Thus at first instance, it was submitted for Max that the $12.2 million could not be traced into the Hotel, as it was properly characterised as a loan to BBH which was repaid to him. The primary judge, after referring to several authorities, including Daly v Sydney Stock Exchange Ltd, [222] and Hancock Family Memorial Foundation Ltd v Porteous, [223] which were relied on for Max, concluded: [224] "[204] Relying on the decisions in Daly and Hancock, Max says that part of the proceeds of sale of the Twigg Group business that he advanced to BBH cannot be traced to the proceeds of the sale of the Byron Bay Hotel because they had been repaid before the hotel was sold. [205] I do not accept that submission. In Daly and Hancock, the loan was made by the person asserting the proprietary right. In the present case, the loan was made by Max to a company he controlled using money in respect of which a proprietary claim is made. In those circumstances, as in Farrow, the Court is entitled to look at the substance of what occurred. In substance, Max used the proceeds of sale of the Twigg Group business to acquire the Byron Bay Hotel. The fact that he chose some other entity he controlled to make the acquisition and the fact that he chose to characterise the payment to that company as a loan cannot affect the substance of what occurred."
The appellants submit that this conclusion was erroneous: in a field where the rights to trace property are determined "by fixed rules and settled principles" and do not depend on what is "fair, just and reasonable", [225] it was not possible to trace through a loan which had been repaid, and proprietary relief could be granted over assets of the borrower only if the loan had been avoided. Upon the making of the loan by Max to BBH, Max's relevant property was his chose in action to recover the loan; if the loan were avoided it might be available to trace into the borrower's assets; but if it were not - and a fortiori if it were repaid - it was not. Upon repayment, any traceable asset was extinguished.
The appellants referred to several cases to support the proposition that the position would be no different, even if BBH were to be attributed with Max's knowledge and be liable as a knowing recipient of the moneys advanced to it. [226] The first was Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd, where McLelland AJA, with whom Priestley JA and Meagher JA agreed, explained: [227] "In general, where there is a contract for the sale of property by A to B made in breach of a fiduciary duty owed to A by B (or by C in whose breach B knowingly participated), pursuant to which the legal title to the property has been transferred from A to B, the transaction is in equity voidable at the instance of A, who may (if necessary) obtain an order for rescission setting it aside. Unless and until A effectively avoids the transaction and (if necessary) obtains an order for rescission, B's property rights as a result of the transaction remain unaffected. However if A does effectively avoid the transaction and (if necessary) obtain an order for rescission, the parties will be treated in equity as if the transaction had never been effected; in other words equity will treat B as if he had held the property in trust for A, that is, as a constructive trustee, ab initio. A constructive trust arises in such circumstances as a consequence of the effective avoidance or rescission of the transaction. Where, for whatever reason, the transaction has not been and cannot be effectively avoided and rescission is unavailable, it remains effective and no constructive trust can arise: see generally Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 386-390, per Brennan J."
Next, in Grimaldi v Chameleon Mining NL (No 2), Finn, Stone and Perram JJ said: [228] "Distinctly while the proprietary liability referred to depends upon the existence of trust property in the strict sense, "trust property" for Barnes v Addy purposes extends beyond it to property held or controlled subject to a fiduciary obligation. Most importantly for present purposes, it extends to corporate property, ie property subject to the control and the fiduciary responsibilities of a company's directors. If the directors dispose of corporate property in a dealing which is beyond their authority, whether actual, ostensible or usual, the dealing ordinarily is void and no interest passes to the third party donee, purchaser, etc. However, if the dealing occurs in a transaction which is within the directors' authority but which is not in the company's interests (ie is an abuse of power) or is otherwise in breach of fiduciary duty, the transaction will only be voidable: Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 142. As Australian law now stands, even if the third party recipient falls within the knowing receipt limb of Barnes v Addy, the company will not ordinarily be able to bring a proprietary claim against the recipient as distinct from a personal one, unless and until the transaction itself has been avoided: see Daly v Sydney Stock Exchange (1986) 160 CLR 371 ("Daly"); Hancock Family Memorial Foundation Ltd v Porteus (2000) 22 WAR 193 (Hancock Family Memorial Foundation) at [173]-[206]. Though we later question the correctness of this particular requirement, what needs to be emphasised is that it still allows that a knowing recipient can be held accountable in rem for such of that property (or its traceable proceeds) as remains extant in that person's hands."
Further, in Endresz v Commonwealth of Australia, Rares and Markovic JJ, with whom Charlesworth J agreed, after referring to the above passage in Grimaldi, said: [229] "The Full Court did not say that a transaction which was void as ultra vires the company could not be the subject of a personal claim in equity where the transaction was also effected by a breach of fiduciary duty in which persons, other than the recipient, had knowingly assisted. It is implicit in what the Court said that it is not necessary to bring a claim in equity to avoid such a transaction. If the transaction was within authority but not in the company's interests or in breach of fiduciary duty, it may be voidable. The point that their Honours were making in that discussion was that a voidable, but presently unavoided, transaction or dealing does not give the injured party a proprietary claim against the knowing recipient of property passing under that transaction or dealing. The injured party had a personal claim only until the transaction was avoided. However, if the transaction or dealing were avoided (or void ab initio), in addition to the personal claim, the injured party would also have a proprietary claim to recover the property. Nothing said in Grimaldi at [254] prevents recovery against a party who knowingly assisted in a breach of fiduciary duty where a transaction was also void against the company."
And in Crossman v Sheahan, Ward JA (as her Honour then was) said, with reference to Grimaldi: [230] "[259] The Full Court noted that Daly's case was not one where the recipient took property with knowledge/notice of another's fiduciary wrongdoing (citing the majority judgment at 378) and that the extension of the rescission requirement to knowing receipt cases stemmed from Greater Pacific Investments, which involved, among other things, transfer of legal title to property under a contract of sale made in breach of fiduciary duty owed to the vendor by one of its directors, the purchaser knowingly participating in that breach. The Full Court suggested that, as the understanding of the constructive trust as a remedy had evolved (referring to Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566 at 585), it might be that there would be a review of the rescission requirement, speaking there in the context of a claim for a constructive trust over the property in question. [260] Relevantly, for present purposes, the Full Court (at [280]) stated that the function of Barnes v Addy was "simply to provide a personal remedy to compensate for loss suffered". [261] Accepting that rescission is not a precondition to an order for equitable compensation against a knowing recipient of trust property, that nevertheless does not address the question whether (as happened in the present case) an order setting aside a deed entered into in breach of trust (the Contempt Settlement Deed) should have been made in circumstances where restoration of the parties to their previous position was not possible and no relief was moulded which would accomplish "an approximate restoration that will be just" (in the words of Rich, Starke and Dixon JJ in AH McDonald & Co Pty Ltd v Wells [1931] HCA 24; (1931) 45 CLR 506 at 513; and see also Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216 per Dixon CJ, Webb, Kitto and Taylor JJ at 223)."
However, what these cases establish and illustrate is that where fiduciaries, in breach of their fiduciary duties, procure the disposition of trust property under a transaction for value (such as a loan or a sale) which is voidable but not void, the beneficiary cannot maintain a proprietary claim to the trust property in the hands of the recipient while the transaction remains on foot. This is an example of election, or of the rule that one cannot approbate and reprobate. It has no application to a voluntary transaction, nor to a subsequent disposition by the recipient, which is governed by the rules of tracing (though it bears some relationship to the rule that one cannot trace where there has been a bona fide purchaser for value without notice).
In the present case, the impugned transaction - the disposition of the Sale Proceeds by the Trustee Companies to Max - was not a transaction for value. There is nothing to avoid or rescind. The "loan" by Max to BBH was a subsequent transaction, to which the rules of tracing apply. Because of Max's control of BBH, Max's knowledge is attributable to BBH, and BBH is not a purchaser for value without notice. The principle that requires rescission before a proprietary claim is available has no application in these circumstances. This is another way of describing what the primary judge meant in saying "In Daly and Hancock, the loan was made by the person asserting the proprietary right. In the present case, the loan was made by Max to a company he controlled using money in respect of which a proprietary claim is made". [231]
However, that does not necessarily mean that one can trace through the loan, at least after it has been repaid. I accept that, generally speaking, it is not possible to trace through a loan into a borrower's assets. The borrower's assets are not a substitute for the traceable property of the lender; the substitute for that property is the chose in action to recover the loan from the borrower. Where the loan is voidable by reason of having been procured by the borrower in breach of its fiduciary duty to the lender, the lender may rescind the loan and trace the moneys advanced into the borrower's assets, but not otherwise, [232] and not if the loan has been repaid. [233] The judgment of this Court in Robins v Incentive Dynamics Pty Ltd (in liq) [234] is consistent with that approach: Mason P (with whom Stein JA agreed) accepted that "rescission is essential for cases (like the present one) where the loan transaction is at best voidable for breach of fiduciary duty or an analogous statutory duty" before a proprietary remedy was available; [235] as did Giles JA. [236] The majority found that tracing was available because there was at least an implied rescission, by reason that the lender "at all times acted on the basis that it was seeking to repudiate the formal transactions (whatever they truly were) that both effectuated and disguised the fiduciary and statutory breaches". [237] It is true that in Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq), [238] where the directors of the plaintiff had, in breach of their fiduciary duties, caused it to make a loan to the defendant - a related company having common directors with the plaintiff, which was used by the defendant to acquire a property in Queens Road - Hansen J held that by reason of their common directors the defendant had sufficient knowledge of the directors' breach of duty to incur liability as a knowing recipient, and that the plaintiff could "trace … into the Queens Road property because that property was the direct substitute of the money improperly transferred from [the plaintiff] to [the defendant] … . From there, the plaintiff can trace into the proceeds of the sale of that property - again, a direct substitute of the asset." In Robins, Mason P explained Farrow in the following terms: [239] "The fact that the breach of fiduciary duty resulted in a loan from [the plaintiff] to [the defendant] did not preclude [the plaintiff] from ignoring the form and terms of the loan transaction once it established FP's recipient liability."
As it seems to me, in the light of the insistence in Robins on at least implied rescission, Farrow Finance cannot be regarded as establishing that rescission is not necessary.
In any event, these cases do not address the position once, as here, the loan has been repaid. I am unconvinced that where a loan has been repaid by an arms-length borrower, there could be tracing into the borrower's assets. In my view, if BBH were not Max's alter ego, the appellants' arguments might well prevail: to the extent that the Sale Proceeds were the source of the funds advanced by Max to BBH, they became represented not by BBH's property but by Max's chose in action to recover the loan, and in turn by the assets Max received in repayment of the loan.
Even on that analysis, however, I would not accept that any traceable asset was extinguished upon repayment: the chose in action was substituted by the assets received in repayment of the debt, which themselves would have been traceable in Max's hands. Thus if it were the case that Max's loan account was reduced because BBH funds were used to purchase a car for him, the car would be traceable proceeds. Moreover, any moneys received by Max in repayment of the loan would have been traceable. However, the evidence did not identify how any of the reductions in Max's loan account was effected, and did not permit any asset to be identified as associated with repayment of the loan.
However, the fact that BBH was Max's alter ego has a radical effect on this. In Federal Republic of Brazil v Durant International Corp (Jersey), the Privy Council said that in the tracing process, the court must focus on the substance of the transaction and not form, and that it is "particularly important that a court should not allow a camouflage of interconnected transactions to obscure its vision of their true overall purpose and effect". [240] As has been noted, the primary judge held that the Max entities - of which BBH was one - were Max's alter egos. His Honour said (emphasis added): [241] "There can be no doubt that, to the extent that the proceeds of sale are traceable to property currently held by Max or one of the entities that he controls, those proceeds are properly described as trust property or the proceeds thereof which were converted to Max's use. It does not matter that those proceeds were not held by Max himself. They are held by entities that are properly regarded as his alter egos; and the claim to recover those proceeds is in substance a claim to recover them from Max."
The conclusion that BBH was Max's alter ego means that the internal arrangements made by Max between himself and his alter ego can be disregarded; in the case of an alter ego, the Court can disregard the form and look to the substance. As was said by Gibbs J, with whom Stephen J, Mason J, Aickin J and Wilson J concurred, in Ascot Investments Pty Ltd v Harper (emphasis added): [242] "The position is, I think, different if the alleged rights, powers or privileges of the third party are only a sham and have been brought into being, in appearance rather than reality, as a device to assist one party to evade his or her obligations under the Act. Sham transactions may always be disregarded. Similarly, if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it." Except in case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. …"
In substance, BBH was Max. No one else appears to have had any material interest in BBH. It was conceded that, although at some stage Max's wife Lyn was also nominally a shareholder and director, Max controlled BBH and its trust, and was appointor and a beneficiary, so that with a compliant trustee (which he had power to appoint and remove at his will), he could cause the whole of the assets of the trust to be disposed of at his discretion. [243] Whether he provided funds to it by loan capital or equity was entirely within his discretion. In particular, whether, having created a loan account, he caused BBH to repay it, or to use its available assets for other purposes, was entirely within his discretion. There is no reason why, for tracing purposes, its assets should be distinguished from his personal assets. On that analysis, the Hotel was acquired by Max's alter ego with traceable Sale Proceeds, and replaced those proceeds, itself becoming to that extent traceable property. For those reasons, in my opinion, the primary judge did not err in concluding that the proceeds of the Hotel were traceable property.
By Ground 11, the appellants submit that the primary judge erred in finding that the whole of the $12.2 million advanced by Max to BBH to fund the purchase of the Hotel was from the Sale Proceeds. They contend that, contrary to the judge's statement in [197], it was not common ground, the appellants' position being that only $10 million was sourced in the Sale Proceeds. Although it is far from clear that there was a crystallised dispute on the matter before the primary judge, and (as will appear) Max appears to have accepted in cross-examination that the entire $12.2 million was derived from the Sale Proceeds, it is correct that the appellants' submissions at trial were to the effect that $10 million (not $12.2 million) was paid from the Sale Proceeds to BBH.
At trial, Max provided only a limited explanation of how the Sale Proceeds were applied. The evidence of their application was chiefly provided by the report of an accountant, Mr Potter, who was called by the respondents. Relevantly, Mr Potter's report identified a payment of $10 million from TPH to BBH on 21 June 2007. [244] The balance sheet of the BBH Property Trust as at 30 June 2007 recorded a liability of $12.2 million, described as a "related party loan", which Mr Potter accepted was a loan from Max. [245] This loan from Max, together with a bill facility with the Commonwealth Bank, provided the whole purchase price for the Hotel.
The appellants rightly submit that the existence of a loan of $12.2 million from Max does not of itself establish that the whole of that loan was sourced from the Sale Proceeds. However, while Mr Potter identified a payment of $10 million to BBH, he also identified a further $2.2 million paid to Herbert Geer, [246] who were the solicitors retained by Max to act on the purchase of the Hotel. Max's affidavit evidence was to the effect that the purchase of the Hotel was funded "with approximately $11 million from the Twigg Group sale". [247] In cross-examination, however - and contrary to the effect of the appellants' submission that he said that he did not recall the exact amount but accepted that it was "over $10 million" - he appears to have accepted that it was $12.2 million: [248] "Q. Byron Bay Hotel, paragraph 72 of your affidavit, page 406 of volume 1. In fact, $12.2 million was applied out of the sale proceeds for the purpose of acquiring the Byron Bay Hotel, wasn't it? A. Yes. Q. Not 11? A. I don't recall exactly. Q. So, you've not told the truth? A. These numbers are extracted from documents and put into this affidavit. I don't recall every cent I spent, or ..(not transcribable).. Q. You haven't told the truth in paragraph 72 either, have you? A. I always tell the truth. Q. Well, if you were telling the truth, you would have said it was funded with approximately $12.2 million. A. Okay."
Given that evidence, his Honour's view that it appeared to be common ground that the $12.2 million was derived from the Sale Proceeds is understandable. In any event, while it is correct that Mr Potter did not say that the $2.2 million paid to Herbert Geer had been applied to the purchase of the Hotel, in my judgment, when one has regard to the time at which the Sale Proceeds were received by TPH (2 April 2007), the timing of the payments to Herbert Geer (31 May 2007) and to BBH (21 June 2007), the state of the BBH Property Trust's balance sheet as at 30 June 2007 (showing a loan from Max of $12.2 million), and the absence of any other apparent source of funds, the inference that the entire $12.2 million advanced by Max to BBH was derived from the Sale Proceeds is overwhelming. His Honour did not err in so concluding, even if it was not common ground.

[22]

6.2 Albatross Avenue

By Cross-appeal ground 2, the respondents contend that the Sale Proceeds can also be traced into Max's Albatross Avenue property.
The purchase of Albatross Ave was completed on 4 September 2008, for $10 million plus $500,000 costs. That day, $8,033,445 was paid from the bank account of Maly Holdings Pty Ltd, an entity controlled by Max, to complete the purchase. That payment was funded by $54,586 which had been held in the account since at least 26 August 2008, $5,475,858 which had been deposited into it on 3 and 4 September 2008, and an overdraft of $2,503,791. [249]
Between 25 July and 12 September 2008, Max had sold his Cleanaway shares received in respect of the consultancy fee for a total of $9,340,952 net of selling costs. The last tranche of 430,036 shares was sold at $6.5677 per share (a total of $2,824,347, less commission and GST of $5,281) during the period 8 to 12 September; thus he had received $6,521,886 prior to 4 September, which was sufficient to fund the 3 and 4 September deposits of $5,475,858. The proceeds he received subsequently ($2,819,066) were sufficient to discharge the overdraft, though there is no evidence as to whether they were in fact applied for that purpose.
In an affidavit sworn in his Family Court proceedings in November 2012, Max had deposed that the gross sale proceeds were $155.8 million, of which $125.8 million was paid in cash, and $30 million in shares in Cleanaway; that $37.6 million was applied to repayment of debt and $21.4 million to tax; and that he made gifts totalling $16 million (including $5 million each to Diane, Frances, and Liz). He continued: "5. Due to some factors beyond my control and due to some decisions which have turned out to be not as successful as I would have liked the balance of sale proceeds were less than that stated by Lynne. These funds were used as follows: … (d) The purchase of Albatross Avenue, Mermaid Beach, Queensland ("Albatross Avenue") for $10 million; …"
Annexed to the affidavit was a reconciliation, described by Max in his affidavit in the following terms: "Annexed hereto and marked with the letters "MTl" is a true copy reconciliation of the proceeds of the sale of business interests prepared by my accountants Pitcher Partners … ."
That reconciliation identifies the purchase of Albatross Ave for $10.5 million (including costs) as coming out of the Sale Proceeds of $155.8 million. Notably, the $10 million consultancy fee - ultimately also paid by way of shares in Cleanaway - was not part of the $155.8 million consideration for the sale described in the affidavit, but additional to it.
In cross-examination before the primary judge, Max gave this evidence: [250] "Q. Mr Twigg, I've asked to be brought back up on screen your November 2012 Family Court affidavit. I want to show you again paragraph 5 on page 6, where you say, "Due to some factors, some decisions turned out not to be successful", et cetera. Then the next paragraph, "These funds were used as follows". And in item subparagraph (d) on page 7 you identify having bought Albatross Avenue, Mermaid Beach for $10 million. You see that? A. Yes. Q. Then if you go to the reconciliation that you engaged Pitcher Partners to undertake - it's at page 15 and I'll just ask for that to be brought up. You can see that item as item F, Albatross, $10.5 million. So, that's what you swore in November 2012. Correct? A. I - I don't recall, but yes. Q. That's what you told the Family Court; correct? A. Yeah, a long time ago. Q. And it's true? A. Back then it was, yeah; I'd say so. I did - it was true, it's the purchase price. Yeah - yeah, of course, I agree."
Nonetheless, before the primary judge, it was submitted for Max that the source of funds was the consultancy fee, not the Sale Proceeds. This submission, which - as will appear - his Honour accepted, was founded on inference to be drawn from the timing, quantum and nature of the transactions referred to above.
In this respect, the primary judge said: [251] "[226] 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. [227] 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. [228] 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. [229] 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."
The respondents applied to the primary judge to reconsider that conclusion, and in a later judgment his Honour declined to do so: [252] "[16] The objective evidence is that the purchase of Albatross Avenue settled on 4 September 2008. At that time, the evidence is that Maly Holdings paid the sum of $8,033,445.68 towards the purchase price. Of that amount, $54,586.12 had been in the Maly Holdings bank account since 26 August 2008, amounts totalling $5,475,858.78 were paid in on 3 and 4 September 2008 and the balance was made up by an overdraft of $2,503,791.28. Most of those facts are recorded in the Principal Judgment at [227]. As I recorded in that judgment, Mr Potter was unable to say where the amounts paid into the account or where the balance of the purchase price came from. However, it is apparent from an email dated 12 September 2008 from a broker to Max that sometime after 25 July 2008 Max started selling his shares in Cleanaway, the last of which were sold on 12 September 2008 for an amount of $2,824,347.44. The total amount Max received from his Cleanaway shares was $9,340,952.29. [17] The timing of the sale of the Cleanaway shares and the payment of amounts into the account of Maly Holdings suggest that the shares were sold to finance the acquisition of Albatross Avenue. That inference is reinforced by the fact that the account went into overdraft at the time of settlement, suggesting that the overdraft was permitted in the expectation that it would be repaid from the sale of the remaining Cleanaway shares shortly after settlement. It is true that the sale of the Cleanaway shares realised approximately $9.34 million, whereas the purchase price of the property was $10 million plus costs. But the sale of the Cleanaway shares still accounts for a large proportion of the purchase price. [18] Against these matters, of course, had to be weighed the admissions made by Max in his Family Court affidavit and in cross-examination and the schedule prepared by Pitcher Partners. But the schedule and affidavit were prepared at a high level of generality and were not entirely accurate. The admissions made in cross-examination were made by reference to the affidavit. As I pointed out in the Principal Judgment, the Cleanaway shares were provided to Max in connection with the sale of the Twigg Group business and in a broad sense it could have been regarded by Max as part of the proceeds of sale of the business. Moreover, if it was correct that the $10.5 million of the proceeds of sale were used to acquire Albatross Avenue, it is difficult to see why part of the purchase price was paid with a bank loan (in the form of an overdraft). [19] If I made an error, it was in balancing the objective evidence against the evidence contained in the Family Court affidavit (and Max's admissions made by reference to that affidavit). That is not a sufficient ground to reopen my judgment. In effect, the plaintiffs are asking me to reconsider an analysis I undertook in the Principal Judgment."
The respondents submitted that his Honour's conclusion was wrong, having regard to Max's Family Court affidavit and his admissions in cross-examination, in the context that Max bore the onus of proving that the property was not traceable. They further submitted that the proceeds of the Cleanaway shares could not have funded the purchase of Albatross Ave as only $6.5 million had been realised by the completion date. The appellants submitted that resolution of this question of fact depended inter alia on the judge's assessment of Max's oral evidence, to which deference should be accorded, and that the contention that only $6.5 million had been received by the completion date overlooked his Honour's reasoning and the resort to an overdraft to fund the balance.
I do not accept the appellants' submission that on this issue there was any such dependence on evaluation of Max's evidence as to require deference to the position of the trial judge. Save for what has been set out above, Max's oral evidence did not illuminate this question, and there is no suggestion in the judge's reasons that his Honour relied on it. This is therefore a question of fact which this Court must, on rehearing, determine for itself.
On the other hand, I do not accept the respondents' submission that Max bore an onus of proving that Albatross Ave was not traceable proceeds. The respondents invoked Frith v Cartland [253] and Heperu Pty Ltd v Belle [254] as authority for the proposition that a defaulting fiduciary bears the onus of proving what property is its own and what is traceable proceeds, but in my opinion neither of those cases goes so far. They are concerned with the context of mixing, and in that context the proposition for which they stand is that "if a man mixes trust funds with his own, the whole will be treated as the trust property, except so far as he may be able to distinguish what is his own". [255] They do not authorise a presumption that all property acquired by the recipient of trust property is traceable proceeds except insofar as the contrary is proven. Before the proposition could apply to Albatross Ave, it would be necessary to show that at least some of the trust property or its proceeds had found its way into the Maly Holdings account, from which the purchase price of Albatross Ave was sourced. Here, the question is whether any trust property was used to acquire Albatross Ave, and on the primary judge's analysis, it was not shown that any was.
I agree with the primary judge that the timing of the sale of the Cleanaway shares and the deposits into the Maly Holdings account, together with the fact that that account became overdrawn to fund completion of the purchase of Albatross Ave, support an inference that the purchase price was sourced, not in the traceable Sale Proceeds, but in the (non-traceable) proceeds of the Cleanaway shares. Importantly, if the source were the Sale Proceeds, an overdraft ought not have been required. While Max's Family Court affidavit, and his admissions based on it, point in the contrary direction, the affidavit and schedule were, as the primary judge observed, at a high level of generality and not entirely accurate. Moreover, because of the connection between the consultancy fee and the sale, it is understandable that in the context of family property proceedings - where it would have made little difference - a distinction might not have been drawn between the Sale Proceeds and the consultancy fee, whereas the distinction is an important one in a tracing claim.
For those reasons, in my judgment, the primary judge did not err in concluding that Albatross Ave was not traceable proceeds of the trust property.

[23]

Conclusion

My conclusions may be summarised as follows.
The primary judge did not err in concluding that the resolutions were made by Max after 30 June 2007, with the consequence that the trust income which was distributed to Max vested by default in Diane (in respect of Ipswich and Brooklyn) and the Twigg Family Trust (in respect of TPH).
The contention that Diane had implicitly delegated her functions in respect of resolution for distribution of trust income to Max was untenable. Whatever authority he had, there was no basis for considering that it extended to approval of annual financial statements, or distribution of income. The primary judge did not err in holding that Max did not have delegated authority to make the resolutions or the impugned payments that they purported to authorise; in concluding that Max did not have authority to cause the Trustee Companies to make the impugned distributions; and consequently in holding that the payments were made in breach of Max's fiduciary duty and that Max and his companies held the Sale Proceeds as a constructive trustee.
The primary judge was in error in holding that Max was liable as a trustee de son tort. Before procuring the misapplication of trust property, he had not assumed to act as a trustee. It follows that the liability of Max and his companies was founded only in his breach of fiduciary duty, not as a trustee de son tort.
The primary judge did not err in concluding that Max acted dishonestly in the relevant sense, and that he deliberately withheld information from Diane that may have caused her to object to what he did - that is to say, what Max did in disposing of the Sale Proceeds and excluding Diane from the decision-making process involved conscious wrongdoing and conscious active concealment on his part.
The defence of laches should have failed in respect of the personal claim, as it rightly failed in respect of the claim for proprietary relief. It was not established that Diane knew, or that she ought reasonably to have known, of the wrong, before about 2018. Thereafter, she acted with reasonable expedition to ascertain the true position and commence proceedings.
The primary judge was right to hold that neither s 5 nor s 21(2) (of the Victorian Act) barred the claims in respect of breach of fiduciary duty, although for reasons that differ from his Honour's. Section 21(2) did not apply as the liability of Max and the Max companies was not as a trustee (of an institutional trust) within the meaning of s 21, but remedial only; and s 5 applied only by analogy, and time did not begin to run until the cause of action was discoverable, which was not until about 2018 or 2019. Further, if it be incorrect that no limitation period applies directly, then the limitation period would in any event be postponed by s 27 to commence not before 2018.
There was no material error in refusing leave to the appellants to amend to rely by analogy on the limitation period provided by Corporations Act, s 1317K: as it would have applied only by analogy, time would not have commenced to run until 2018 at the earliest so the amendment if granted would not ultimately have availed the appellants, and there is no utility now in granting, on appeal, leave to amend.
The primary judge did not err in concluding that the proceeds of the Hotel were traceable trust property.
When one has regard to the time at which the Sale Proceeds were received by TPH, the timing of the payments to Herbert Geer and to BBH, the state of the BBH Property Trust's balance sheet as at 30 June 2007 (showing a loan from Max of $12.2 million), and the absence of any other apparent source of funds, the inference that the entire $12.2 million advanced by Max to BBH was derived from the Sale Proceeds is overwhelming. His Honour did not err in so concluding, even if it was not common ground.
The primary judge did not err in concluding that the Albatross Ave property was not traceable proceeds of the trust property.
It follows that the motion for leave to amend the notice of appeal should be dismissed. The appeal should be dismissed. The cross-appeal should be allowed in part. The appellants should pay the respondents' costs of the appeal and cross-appeal. The conclusion that the personal claims are not barred by laches may entitle the respondents to additional relief; however, insofar as it overlaps with proprietary relief, there may be a requirement to elect, or at least to avoid double recovery. The respondents should be directed to bring in short minutes to give effect to this judgment.

[24]

Endnotes

Tcpt 10 June 2020, p 356(24).
Twigg v Twigg (No 4) [2020] NSWSC 1159 ("No 4 judgment") at [134].
No 4 judgment at [106]-[108].
No 4 judgment at [151]-[155].
No 4 judgment at [173], [176].
No 4 judgment at [188]-[189].
No 4 judgment at [196]-[205].
Twigg v Twigg (No 5) [2020] NSWSC 1782 ("No 5 judgment").
Twigg v Twigg (No 6) [2020] NSWSC 1856 ("No 6 judgment").
No 4 judgment at [130]-[138].
No 4 judgment at [72].
No 4 judgment at [38], [128]-[129]; No 5 judgment at [50].
No 4 judgment at [113]-[120].
No 4 judgment at [72].
Tcpt 11 June 2020, p 461(12-26).
Tcpt 11 June 2020, p 459(05)-462(07).
Tcpt 9 June 2020 p 303(23-38), 359(12).
Tcpt 11 June 2020, p 462(30-32).
McLean Bros & Rigg Ltd v Grice (1906) 4 CLR 835 at 850 (Griffith CJ), citing Knox County v Ninth National Bank 147 US 91 (1893).
Harris v Knight (1890) 15 PD 170 at 179-180 (Lindley LJ); Kingham v Sutton [2002] FCA 506 at [59] (Wilcox and Marshall JJ); Burnside v Mulgrew [2007] NSWSC 550 at [25] (Brereton J); Chase v Chase [2020] NSWSC 1689 at [34] (Rein J); Mantovani v Vanta Pty Ltd [2021] VSC 771 at [83] (McMillan J).
Cambodian Buddhist Society of NSW v Thai [2017] NSWSC 1433 at [91] (Sackar J), citing Darley Australia Pty Ltd v Walfertan Processors Pty Ltd (2012) 188 LGERA 26; [2012] NSWCA 48.
No 4 judgment at [117].
Citing Re Tavistock Ironworks Company (1867) LR 4 Eq 233 at 237; Re Fireproof Doors Ltd [1916] 2 Ch 142 at 149; Gosford Christian School Ltd v Totonjian (2006) 201 FLR 424 at [63].
No 4 judgment at [114].
Affidavit of M Twigg of 6 May 2020 at [31]-[32].
Tcpt 9 June 2020, p 298(18-26).
Tcpt 9 June 2020, p 301(34)-303(44).
Tcpt 9 June 2020, p 302(18).
Tcpt 9 June 2020, p 302(39).
Tcpt 10 June 2020 p 353(47)-354(04).
No 4 judgment at [125].
Above at [22].
Appeal Tcpt 18 March 2021, p 5(27).
(1974) 75 CLR 378 at 401.
Cf Reckitt v Barnett Pembroke and Slater Ltd [1928] 2 KB 1244 at 268 (Russell J), approved [1929] AC 176 at 183 and 195, and in Tobin v Broadbent (1974) 75 CLR 378 at 401 (Latham CJ).
No 4 judgment at [120].
No 4 judgment at [135]-[136].
Citing Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 at [138] (Lord Millett) and Nolan v Nolan [2004] VSCA 109 at [29] (Ormiston JA).
(1874) LR 9 Ch App 244.
(1874) LR 9 Ch App 244 at 251.
[2014] AC 1189; [2014] UKSC 10 at [9].
Mara v Browne [1896] 1 Ch 199 at 209.
[1968] 2 All ER 1073, [1968] 1 WLR 1555 at 1579, [1968] 2 Lloyd's Rep 289.
[1999] 1 All ER 400; 1 ITELR 735 ("Paragon") at All ER 408-409.
[2003] 2 AC 366 at [138].
Nolan v Nolan [2004] VSCA 109 at [29] (Ormiston JA).
[2014] NSWCA 266 at [69].
HAJ Ford & WA Lee, Principles of the Law of Trusts, (2nd ed, 1990) [2223]; this statement does not appear in the corresponding paragraph of the current (loose-leaf) 4th edition.
Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 1 WLR 1555 at 1579; [1968] 2 All ER 1073 (Ungoed-Thomas J); HAJ Ford & WA Lee, Principles of the Law of Trusts, (4th ed, 2010) [22A-1560].
RP Austin, "Trading Trusts", Equity and Commercial Relationships (ed PD Finn, 1987), p64, citing Williams-Ashman v Price [1942] 1 Ch 219 at 228 (Bennett J); see also Mara v Browne [1896] 1 Ch 199 at 209 (AL Smith LJ); Morgan v Stephens (1861) 3 Giff 226 at 236; 66 ER 392 at 397 (Stuart VC).
RP Austin, "Trading Trusts", Equity and Commercial Relationships (ed PD Finn, 1987), p64.
[1911] 1 Ch 618 at 625-626.
[1911] 1 Ch 618 at 637.
Cf Pearce v Pearce (1856) 22 Beav 248; 52 ER 1103, in which a person not validly appointed as a trustee due to a defect in the appointment but who believed he was a trustee was held a trustee de son tort. Incidentally, this case appears to mark the migration to trustees of the notion of an executor de son tort.
No 4 judgment at [121].
Corporations Act, s 1322(6)(a)(ii).
No 4 judgment at [124]-[125].
No 4 judgment at [174].
Hasler v Singtel Optus Pty Ltd [2014] NSWCA 266 at [121]-[125] (Leeming JA; Barrett JA and Gleeson JA agreeing); Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 All ER 333 at [16].
(1996) 40 NSWLR 358 at 372. See also Di Sante v Camando Nominees Pty Ltd [2000] VSC 211 at [51]-[53] (Warren J); Fourniotis v Vallianatos (2018) 56 VR 85; [2018] VSC 369 at [135] (Croft J). However, in Finance & Guarantee Company Pty Ltd v Auswild [2019] VSC 664 at [295]-[312], Riordan J undertook a thorough review of the authorities to conclude that the defendant's conduct must involve a consciousness of what is being done is wrong, or the taking of advantage of the relevant situation involving wrongdoing.
Tcpt 10 June 2020, p 355(33)-356(33).
Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389
No 4 judgment at [126], [129].
Tcpt 10 June 2020, p 360(16-25).
No 4 judgment at [52]-[53].
No 4 judgment at [54].
No 4 judgment at [55]-[57].
No 4 judgment at [59].
Tcpt 10 June 2020, p 347(05-06).
No 4 judgment at [188]-[189].
No 4 judgment at [187].
(1989) 167 CLR 316 at 341.
No 4 judgment at [185]-[189].
Above at [82].
Lindsay Petroleum Co v Hurd (1874) 5 PC 221 at 241; Orr v Ford (1989) 167 CLR 316 at 343.3 (Deane J).
Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467 at 472 (Street J); Linke v Linke [2018] VSC 505 at [124] (Keogh J).
[1998] NSWCA 203 at 28-29.
JD Heydon, MJ Leeming and PG Turner, Meagher Gummow & Lehane's Equity: Doctrines and Remedies (5th Ed, 2014, LexisNexis Butterworths).
(1993) 32 NSWLR 574.
[1998] NSWCA 204 at 5-7 (Handley, Sheller JJA and Sheppard AJA).
(1887) 36 Ch D 145 at 188.
[2001] VSC 495 at [27]. See also the cases referred to in the context of concealment, below at [195]-[197].
No 4 judgment at [185].
Affidavit of D Twigg of 31 January 2020 at [138]-[142].
Tcpt 10 June 2020, p 356(17-18).
Affidavit of D Twigg of 31 January 2020 at [147]-[148]; see also Tcpt 5 June 2020, p 193(47)-194(12).
Tcpt 5 June 2020, p 194(49)-195(02).
Tcpt 5 June 2020, p 193(29)-194(12).
No 4 judgment at [61].
No 4 judgment at [94].
Affidavit of Max of 6 May 2020 at [75]-[76].
Affidavit of Diane of 31 January 2020 at [149].
Tcpt 4 June 2020, p 158(09)-160(28).
Affidavit of Diane of 31 January 2020 at [150]-[152].
Tcpt 5 June 2020, p 194(49)-195(02).
Affidavit of Max of 6 May 2020 at [54]-[55], [67]-[68].
Tcpt 5 June 2020, p 243(43).
Affidavit of Diane of 31 January 2020 at [191]-[203].
No 4 judgment at [155].
No 4 judgment at [165]-[167].
No 4 judgment at [168], [173].
No 4 judgment at [176].
No 4 judgment at [175]-[176].
No 4 judgment at [164]-[167].
Above at [50].
Barker v The Duke Group Ltd (in liq) (2005) 91 SASR 167 at [75]-[78]; cf the English position in Gwembe Walley Development Company Ltd v Koshy [2003] EWCA Civ 1048; [2004] 1 BCLC 131.
Consolidated Commercial List Response at [300].
Tcpt 18 June 2020, p 670(30-45).
Tcpt 18 June 2020, p 670(37-38).
No 4 judgment at [127]-[129].
[2007] Ch 353, [2007] 2 All ER 1086, [2007] 3 WLR 317, [2006] EWHC 3130 (Ch) at [98]-[102] (Richard Sheldon QC, sitting as a deputy judge of the High Court). This judgment was favourably noticed by Lord Hoffmann NPJ in Peconic Industrial Development Ltd v Lau Kwok Fai [2009] 5 HKC 135; 11 ITELR 844 ("Peconic") at [19], and by Lord Sumption JSC in Williams v Central Bank of Nigeria [2014] AC 1189; [2014] UKSC 10 ("Williams") at [28].
The UK provision considered in Williams is relevantly identical to s 21 of the Victorian Act, save that s 21(3) of the UK Act corresponds with s 21(2) of the Victorian Act.
[2014] NSWCA 462; (2014) 89 NSWLR 317 ("Sze Tu").
Williams at [12]-[15], citing Hovenden v Lord Annesley (1806) 9 RR 119, 2 Sch & Lef 607 at 632-633; Beckford v Wade (1805) 17 Ves 87 at 95, 97; see also Bonney v Ridgard (1784) 1 Cox Eq Cas 145.
Williams at [12]-[15], referring to Wilson v Moore (1834) 1 My & K 337; Bridgman v Gill (1857) 24 Beav 302.
[1893] 2 QB 390.
Williams at [19].
(1929) 42 CLR 91 at 99-100.
Williams at [20]-[22], with reference to Judicature Act 1873 (UK), 25(2); Trustee Act 1888 (UK), s 8(1).
Williams at [23]; Taylor v Davies [1920] AC 636 at 650-651, 653 (Viscount Cave).
[1923] AC 100 at 110-111.
Williams at [24]-[27].
Paragon at 408-409; above at [53].
Paragon at 409-410.
Paragon at 413-414.
Paragon at 411.
(1976) ACLC 40-266 ("Queensland Mines") at 28,709-28,710.
[1977] 1 NSWLR 266 ("Piwinski") at 271-272.
Below at [135]-[151].
[2009] 5 HKC 135; 11 ITELR 844 ("Peconic") at [24] (Lord Hoffmann).
11 ITELR 844.
Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366, 404, [2003] 2 All ER (Comm) 451 (Lord Millett); Cattley v Pollard [2007] Ch 353, [2007] 2 All ER 1086, [2007] 3 WLR 317 (Richard Sheldon QC, sitting as a deputy judge of the High Court); JJ Harrison (Properties) v Harrison [2001] EWCA Civ 1467, [2002] 1 BCLC 162, [2002] BCC 729 (EWCA); Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048, [2004] 1 BCLC 131 (EWCA); Halton International (Holdings) Inc Sarl v Guernroy Ltd [2006] WTLR 1241 (EWCA).
Williams at [28]-[29].
Williams at [30]-[31].
(2017) 53 VR 311; [2017] VSCA 352 at [85] ff per Tate JA (with whom Santamaria JA and Keogh AJA agreed).
[2017] QSC 19.
[2007] 2 All ER 1086 at [94]-[103].
As has been noted, s 21(3) of the UK Act is identical to s 21(2) of the Victorian Act, and provides as follows: "(3) Subject to the preceding provisions of this section, 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."
[2013] QB 499 at [2], [4], [15], [37], [40].
[2013] QB 499 at [15].
Williams at [128]-[129].
Williams at [173].
Williams at [33].
Williams at [174].
Williams at [114].
Peconic at [23].
Somewhat ironically, the position would be otherwise if the corresponding but different NSW provision - Limitation Act 1969 (NSW), s 47, were applicable - because in the NSW Act, "trust" and "trustee" have been defined to include a constructive trust that arises only by reason of a transaction impeached.
Paragon at 413-414; above at [128].
Above at [127].
[2007] 2 All ER 1086 at 1107. "Category 1" and "Category 2" referred respectively to the first (de facto trustees) and second (accessories) classes of constructive trust described by Millett LJ in Paragon, in the passage cited above at [53].
30 Beav 180; 30 LJ Ch 865.
Paragon at 415-416, set out below at [173]; cited with approval by Gleeson JA in this Court in Sze Tu at 381 [359].
Cohen v Cohen (1929) 42 CLR 91 at 99-100.
Williams at [169].
Below at [172]-[187].
Consolidated Commercial List Response at [301].
No 4 judgment at [175]-[176].
[2011] VSC 454.
[2011] VSC 454 at [12].
[2001] WASCA 293 at [123].
[2011] VSC 454 at [32]-[33].
[2011] VSC 454 at [39].
Feiglin v Ainsworth [2014] VSC 376 at [33]-[34].
Feiglin v Ainsworth [2015] VSCA 326 at [10]-[11].
[2013] VSC 406.
[1977] Ch 106 at 250.
RP Meagher, WMC Gummow & JRF Lehane, Equity: Doctrine & Remedies (3rd ed. 1992 Butterworths)
The 5th edition correctly identifies that the law has since changed in WA, but continues to cite Wheatley v Bower as endorsing what was said in the 3rd edition for, inter alia, Victoria: JD Heydon, MJ Leeming & PG Turner, Meagher Gummow & Lehane's Equity: Doctrines and Remedies, 5th ed, [36-025].
NSWLRC 3, First Report on the Limitation of Actions, October 1967, "Note on Limitation Bill". See also see Sze Tu at 380-381 [357]-[363].
[1977] Ch 106 at 251.
The same is to be said of Menegazzo v Pricewaterhousecoopers [2016] QSC 094 at [107]-[108].
See [109] above.
Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181 ("Gerace") at [70] (Meagher JA; Beazley P and Emmett JA agreeing); SLR Auzhair Supplies Pty Limited v Roy Gerace [2014] HCASL 231; see also Sze Tu at [364]-[365].
Bradford Old Bank v Sutcliffe [1918] 2 KB 833 at 848.
Williams v Milotin [1957] HCA 83; (1957) 97 CLR 465 at 474 (Dixon CJ, McTiernan, Williams, Webb and Kitto JJ).
Do Carmo v Ford Excavations Pty Ltd [1984] HCA 17; (1984) 154 CLR 234 at 245 (Wilson J).
Paragon at 415-416; cited with approval by Gleeson JA in this Court in Sze Tu at 381 [359]; see also Feiglin v Ainsworth at [38]-[39].
Amended Summons [5], [10], [18], [23], [35], [43], [48], [57].
Orders 19 and 20 of 18 December 2020.
Amended Summons at [15], [28], [40], [53].
(1984) 156 CLR 41 at 107-108.
(1999) 196 CLR 101 at 111-112, [3]-[4].
[1999] 1 All ER 400 at 409.
[2014] NSWCA 266 at [79].
(2009) 239 CLR 269 at 289-290 [45]-[48].
United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 (Morritt LJ); Barnsley v Noble [2014] EWHC 2657 (Ch) at [300] (Nugee J).
(1996) 39 NSWLR 143 at 153-154.
(1998) 45 NSWLR 262 at 272; 29 ACSR 148 at 156-157.
(2016) 115 ACSR 130 at [262].
FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; [2015] AC 250 at [36].
In re Caerphilly Colliery Co, Pearson's Case (1877) 5 Ch D 336 at 341; cited in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] UKSC 45; [2015] AC 250 at [36].
(1929) 42 CLR 91 at 100.
Auzhair Supplies Pty Ltd (in liq), Re (2013) 272 FLR 304; (2013) 92 ACSR 554; [2013] NSWSC 1 at [45] ("Auzhair").
[1977] Ch 106 at 251.
[2000] 2 All ER (Comm) 787.
Above at [153]-[154].
[1999] 1 All ER 400 at 414.
[2011] VSC 454 at [12]; see also Sze Tu v Lowe at [362].
Gerace at [35], [74] (Meagher JA; Beazley P and Emmett JA agreeing); see also Sze Tu at [365]-[366].
Appeal Tcpt p 109(43)-110(36).
Sze Tu at [368].
Sze Tu at [369].
(1877) 4 Ch D 845 at 860-861.
(1880) 6 VLR(E) 17 at 23.
30 Beav 180; 30 LJ Ch 865, referred to above at [154].
Gerace at [75].
No 4 judgment at [174].
[1895] 2 Ch 474 at 479-480 (Lindley LJ; Lopes LJ and Rigby LJ agreeing).
Sze Tu at [41].
Gerace at [369].
(1936) 55 CLR 499; [1936] HCA 4.
Above at [188]-[199].
No 4 judgment at [127]-[129].
No 4 judgment at [130]-[134].
No 4 judgment at [138]-[139].
(2012) 200 FCR 296; [2012] FCAFC 6 at [242].
(2007) 230 CLR 89 at [110].
No 4 judgment at [193].
[2001] 1 AC 102 at 127; [2000] UKHL 29.
No 4 Judgment at [196].
No 4 judgment at [197].
(1986) 160 CLR 371.
(2000) 22 WAR 198; [2000] WASCA 29.
No 4 judgment at [204]-[205].
Foskett v McKeown [2001] 1 AC at 119-120; Caron and Seidlitz v Jahani and McInerney in their capacity as liquidators of Courtenay House Pty Ltd (in liq) & Courtenay House Capital Trading Group Pty Ltd (in liq) (No 2) (2020) 102 NSWLR 537; 382 ALR 158; [2020] NSWCA 117 at [135].
Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153; Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [254]; Endresz v Commonwealth of Australia (2019) 273 FCR 286 at [130]; Crossman v Sheahan (2016) 115 ACSR 130 at [261].
(1996) 39 NSWLR 143 at 153.
(2012) 200 FCR 296 at [254].
(2019) 273 FCR 286 at [130].
(2016) 115 ACSR 130 at [259]-[261].
No 4 Judgment at [205].
Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 379 (Gibbs CJ); 388 (Brennan J).
Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198; [2000] WASCA 29 at [206].
(2003) 175 FLR 286, (2003) 45 ACSR 244, [2003] NSWCA 71 ("Robins").
Robins at [73]
Robins at [83].
Robins at [78].
(1997) 26 ACSR 544 at 589 (Hansen J).
Robins at [67].
[2016] AC 297; [2015] UKPC 35 at [32].
No 4 judgment at [168].
(1981) 148 CLR 337 at 354-355.
Appeal Transcript, p 123(35)-126(08) Cf In the marriage of Ashton (1986) 11 Fam LR 457; (1986) FLC 91-777 (FCAFC per Strauss J); SLR 5 December 1986 (Gibbs CJ, Wilson and Brennan JJ); Davidson & Davidson (1990) 14 Fam LR 817; (1991) FLC 92-197 (Simpson, Nygh and Murray JJ); SLR 10 May 1991 (Mason CJ and Dawson and Gaudron JJ); Harris & Harris (1991) 15 Fam LR 26; (1991) FLC 92-254 (Ellis, Strauss and Lindenmayer JJ).
Tcpt 12 June 2020, p 533(14-22).
Tcpt 12 June 2020, p 544(13-40).
Tcpt 12 June 2020, p 532(36-39).
Affidavit of Max of 6 May 2020, [72].
Tcpt 10 June 2020, p 410(19-36).
No 4 Judgment at [227].
Tcpt 10 June 2020, p 418(37)-419(06).
No 4 judgment at [226]-[229].
No 5 judgment at [16]-[19].
(1865) 2 H&M 417; 71 ER 525 ("Frith").
(2009) 76 NSWLR 230 at [116].
Frith H&M 417 at 420; 71 ER 525 at 526. 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: 04 May 2022

Twigg v Twigg

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