In the matter of Macarthur Farm Pty Ltd [2025] NSWSC 40

Coffee and a Case Note

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“Repay that tax refund into the trust!”___P was a Unit TeeCo incorporated by D1. D3 (whose sole dir and s/holder was D1) was the sole unitholder. D2 was D1’s spouse: [1] - [3]D1 incorporated P to buy a valuable piece of land (“Property”). P borrowed the funds from Lender for that: [4]After completion, D1 caused P to lodge a BAS. The resultant refund of ~$2.6m was paid to P: [5]P sued seeking repayment: [8], [10]The Ds said $1.1m of it was a “Success/Performance Fee” for D1 and $1.5m was a “Management/Performance Fee” for D1: [13]D1 was an experienced property developer whose usual practice was to incorporate SPVs (similarly to P) to exploit development opportunities: [14] - [16]Typically, as with P, the SPVs would have no funds of their own and would get third party finance: [17]Sometimes, as with P, D1 would not create a new bank account for a new SPV and would instead use D1’s own: [16], [36]In around 2022 D1 identified the Property and began speaking to the Lender: [22] - [24]A loan agreement followed and in 2023 the purchase of the Property for ~$30m completed: [25] - [30], [61]After completion the Lender realised any profit calculations were absent GST tax refunds: [59]In October 2023 the ~$2.6m GST refund was paid into D1’s account (remembering P did not have its own account): [64]Shortly after, $9m (which included the ~$2.6m) was transferred from D1’s account to the D1/D2 joint account: [66], [67]These funds were then applied to buy a $22m Bronte property in D2’s name: [69] - [71]The Lender chased D1 in relation to the GST refund position. D1 was evasive; at time dishonestly so: [72] - [83]The Lender appointed receiver managers demanding repayment of the BAS Refund to P. D1 did not comply: [87]The parties agreed D1 held the BAS Refund on trust for P: [89]D1 said the BAS Refund was then paid to D1 as fees “determined” by D1 as sole dir of P; but not pursuant to any written or oral agreement: [93]There was no evidence of an invoice, agreement, accounting entry etc. describing a fee to be paid to D1. Nor was there evidence for two types of fee: [97] - [100]There was written contemporaneous evidence against D1’s case seeing D1: (i) declaring there were no related party transactions [112] and failing to declare the purported fees in the relevant BAS: [114]The only evidence supporting the Ds’ view was D1’s affidavit. D1’s credibility was damaged by D1’s dishonesty in dealing with Lender regarding the BAS Refund: [115] - [118]The Ds failed to establish a basis for fees, those transfers therefore being a breach of trust and of DDs: [119], [120], [155]Separate claims against D2 and D3 were not successful: [145], [148]The question of costs had complexity (P’s success against D1, and failure against D2 and D3) and was saved for another day: [156], [157]

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