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

Supreme Court New South Wales

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