Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd; Chief Commissioner of State Revenue v CCT Motorway Company Nominees Pty Ltd

Court of Appeal (NSW)|2014-02-24|Before: Gleeson JA

Background to the dispute 4Holdings and Nominees are companies in the CCT Motorway Group (CCT Group) which owns and operates the Cross City Tunnel (Tunnel) in Sydney. Holdings is an intermediate holding company within the CCT Group, and is the trustee of the CCT Motorway Property Trust. Nominees is the trustee of the CCT Motorway Company Trust. The sole beneficiary of each of these trusts appears to be CCT Motorway Group Holdings Pty Ltd, the ultimate holding company of the CCT Group. 5The transactions giving rise to the assessments the subject of the two appeals occurred in 2007 when ownership of the Tunnel was transferred to a new consortium formed by ABN Amro Australia Ltd, ABN Amro Infrastructure Capital Management Ltd, and Leighton Contractors Infrastructure Investments Pty Ltd. 6At that time, the assets of the Tunnel were held by a trust known as the Cross City Motorway Property Trust (the Property Trust) and a company known as the Cross City Motorway Pty Ltd (CCM). The transactions were structured so that $691,715,880 was paid for units in the Property Trust, and $3,405,120 was paid for shares in CCM. The total consideration paid was $695,121,000. The assessment of duty on those transactions by the Commissioner gave rise to the proceedings below in the Equity Division of the Supreme Court. 7Holdings applied (the Trust proceedings) to review the Commissioner's assessment of land rich duty under the Duties Act 1997 of $36,285,490, plus penalty tax of $5,442,823.50 and interest, on the transfer to it of units in the Property Trust (the PT Transfer). Nominees applied (the Company proceedings) to review the Commissioner's assessment of duty under the Duties Act of $20,431.20 plus interest, on a transfer to it of shares in the CCM (the CCM Transfer). 8Both proceedings were heard before Bergin CJ in Eq over six days in March and April 2013 and judgment was given on 9 August 2013: CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue; CCT Motorway Company Nominees Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1072. 9The issues in the Trust proceedings included whether the Property Trust was "land rich" at the relevant date under the applicable provisions of the Duties Act, and if so, whether the PT Transfer was exempt from duty pursuant to the combined operation of s 163ZB(1)(i) and s 54(3) of the Duties Act. Her Honour found (at [295]) that the Property Trust was land rich, but went on to find that the exemption applied (at [391]). Accordingly she revoked the Commissioner's assessment of duty plus penalty and interest on the PT Transfer (at [393]). 10The issue in the Company proceedings was whether Nominees was only liable to concessional duty of $10 under s 54(3) of the Duties Act. Her Honour was so satisfied (at [390]), and revoked the Commissioner's assessment of $20,431.20 plus interest: at [394]. 11Declarations and orders were made by her Honour on 16 August 2013, except in relation to costs as to which it was noted that the parties were having discussions as to the appropriate orders. 12On 13 September 2013, the Commissioner lodged a notice of appeal against each decision. On the same date, Mr Hall and Mr Merryweather of PwC were appointed joint and several voluntary administrators of each of Holdings and Nominees by the directors of those companies under Part 5.3A of the Corporations Act. By virtue of section 440D of the Corporations Act the appeal proceedings were stayed as the Commissioner did not obtain the administrators' written consent, or the leave of the Court, to either begin or proceed with the appeals. 13On 19 September 2013, Mr Madden and Ms Matthews of Korda Mentha were appointed as receivers and managers of companies within the CCT Group, including Holdings and Nominees, by the secured creditors, Royal Bank of Scotland NV and Royal Bank of Scotland Plc (together RBS). 14On 24 September 2013, the Commissioner lodged a proof of debt with the administrators of Holdings for $68,623,963.69 (including interest and penalty tax), and a proof of debt with the administrators of Nominees for $35,575.28 (including interest), in advance of the first meetings of creditors on 25 September 2013. The voluntary administrators admitted each of the Commissioner's proofs for voting purposes as a contingent claim for an amount of $1.00 pending the outcome of the appeals. 15On 25 September 2013, the secured creditors lodged informal proofs of debt (for the purpose of voting) with the administrators of both Holdings and Nominees totalling $613,920,000. As at 28 January 2014, the outstanding balance of the secured debt was $582,375,009. 16The administrators' report to creditors dated 14 October 2013 noted the following matters: (1)With the exception of the ultimate holding company of the CCT Group (CCT Motorway Group Holdings Pty Ltd), all entities within the CCT Group are common obligors under the facility documents, and have guaranteed the secured debt on a joint and several basis. (2)The secured creditors, via a security trustee, hold first ranking registered fixed and floating charges across all the entities within the CCT Group. (3)The consolidated CCT Group balance sheet as at 30 June 2013 recorded negative net assets of $11.538 million, before taking into account the contingent liability to the Commissioner. (4)The book value of the non-current asset represented by the toll road concession held by the CCT Group had decreased from $644.49 million (as at 30 June 2010) to $568.76 million (as at 30 June 2013). 17On 21 October 2013, the second meetings of creditors of Holdings and Nominees (and the other companies in the CCT Group) were held. Creditors voted in favour of resolutions that each of those companies execute a DOCA. The minutes of the combined meetings of creditors recorded the following statement by Mr Merryweather as chairperson: "Impact of proposal on unsecured creditors: The Chairperson noted that at this stage it is impossible to determine whether there will be surplus assets available from the sale of the assets, business and/or companies of the CCT Group after the payment of secured creditors and the costs of receivership. This will not be known until a sale has been completed." 18On 11 November 2013, Transurban announced to the Australian Stock Exchange (ASX) that it had reached agreement with RBS to acquire all of the senior secured debt exposure to the CCT Group for $475 million, with potential further payment of up to $27.5 million over four years in the event that certain traffic performance assumptions were exceeded. 19On 16 December 2013, the Commissioner filed a notice of motion in each appeal seeking leave to proceed against Holdings and Nominees respectively, pursuant to s444E of the Corporations Act. 20On 13 February 2014, Transurban announced to the ASX that it had completed the acquisition of the senior debt on the Tunnel for $475 million in December 2013, and had been named as the preferred bidder in the receivers' sale.

Terms of the DOCAs 21The DOCAs for Holdings and Nominees are relevantly in the same terms. The DOCAs are described by Mr Merryweather as a "holding DOCA", the purpose being to preserve the status quo in respect of companies in the CCT Group until the completion of the sale process by the receivers. 22The expression "Creditor" is defined in cl 1 of the Deed as a person who has a Claim (whether asserted or not). "Claim" is defined in clause 1 as follows: "Claim means a debt owing by, or a claim subsisting against, the Company (whether present or future, certain or contingent, ascertained or sounding only in damages), irrespective of whether the debt or claim arose by virtue of contract, at law (including by statute), in equity or otherwise, being a debt or claim which arose on or before the Appointment Date or out of events or circumstances which occurred before the Appointment Date and which would be admissible to proof against the Company had the Company been wound up pursuant to Part 5.6 of the Act and the winding up was taken to have commenced on the Appointment Date." 23It is common ground that the Commissioner is a creditor of both Holdings and Nominees in respect of his claims that stamp duty is payable on the PT Transfer and the CCM Transfer respectively. 24Clause 5.1 of the DOCA provides for a moratorium in the following terms: "5.1 Deed binds all persons Subject to clause 4, this Deed binds: (a) all Creditors in accordance with section 444D of the Act; and (b) in accordance with section 444G of the Act, the Company, its Officers and Members and the Deed Administrators." 25Clause 5.2(e) provides that unless the Deed Administrators consent in writing, during the Deed Period, the Company, the Deed Administrators, and any person having a Claim in any other party bound by this deed, must not (as the case may be) begin or continue any proceeding against the Company except with the leave of the Court, and in accordance with such terms (if any) as the Court imposes. 26"Deed Period" means the period commencing on the Commencement Date and ending on the Termination Date. The "Commencement Date" means the date of the deed, namely 11 November 2013. The "Termination Date" means the date on which the deed is terminated pursuant to cl 14 of the Deed. 27The making and proof of claims under the DOCA is dealt with in clause 5.4. This provides that the specified provisions of the Corporations Act, in relation to the proof of claims in respect of a company in winding up, apply to claims under the deed as if the references to the liquidator were references to the Deed Administrators. 28By cl 6.1 of the DOCA, the Deed Administrators are required to establish a separate bank account referred to as the Distributions Account. Clause 6.2 provides: "6.2 Payments into the Distributions Account The Distributions Account shall comprise any amount, after deduction of any: (a) secured debt, secured liability or expense payable to the Secured Creditors or any beneficiary of the CrossCity Tunnel Security Trust; and (b) Receivers' Costs, that is paid to the Deed Administrators on behalf of the Company by the Secured Creditors following any sale of the Secured Property or Additional Secured Property, or otherwise that is received by the Deed Administrators on behalf of the Company following any sale of the Secured Property or Additional Secured Property, together with any Property."

The receivership of Holdings and Nominees 29The report as to affairs in respect of Holdings, as at 19 September 2013, disclosed unsecured creditors of $373,997,442 (being an amount payable to CCT Motorway Finance Pty Ltd), and contingent liabilities of $68,623,964 in respect of the Commissioner's claim, which is described as a disputed stamp duty liability. 30The report as to affairs in respect of Nominees was not in evidence. All that is known is that it is a common obligor with Holdings in respect of the secured debt owing by the CCT Group, and has a contingent liability to the Commissioner in an amount of $35,575.28. 31Mr Merryweather, one of the Deed Administrators, has given evidence that the sole material asset of companies in the CCT Group are their rights in respect of the Tunnel. 32The CCT Group has been trading under the direction of the receivers since their appointment, and will remain under their control until a sale of the Tunnel can be completed. All revenue generated by the Tunnel is directed into accounts controlled by the receivers. 33The receivers are conducting a sale process in respect of the Tunnel. Expressions of interest were called for by 9 October 2013, indicative bids have been received, and as noted above, Transurban had been selected as the preferred bidder. The receivers expect the sale process to be completed prior to July 2014. 34Mr Merryweather has given evidence that whether or not funds will be available to meet the claims of the unsecured creditors of Holdings and Nominees will depend upon the price obtained for the Tunnel as a result of the receivers' sale process, after payment of the secured debt and costs of the receivership. 35It may be seen from [15], [16(4)] and [18] above, that the amount of the secured debt as at 28 January 2014 ($582,375,009) exceeded the book value of the toll road concession as at 30 June 2013 ($568.76 million) and also exceeded the amount for which RBS sold the secured debt to Transurban in December 2013 ($475 million plus a potential further $27.5 million over four years).

The administration of Holdings and Nominees 36Mr Merryweather has given evidence, which is unchallenged, that if the receivers' sale process is completed and fails to result in any surplus assets for unsecured creditors of Holdings and Nominees, there would be no reason for the DOCA to continue in operation in respect of those companies. In such event the Deed Administrators propose to convene meetings of unsecured creditors of Holdings and Nominees, to consider a motion to terminate the DOCA. The effect of a resolution of creditors terminating the DOCA would be that the creditors would be deemed to have passed a resolution that each company be wound up and the Deed Administrators will become the liquidators: see cll 14.1 and 14.2 of the DOCA. 37Mr Merryweather has also given unchallenged evidence of his usual practice in respect of a liquidation in which there are no funds available for distribution to unsecured creditors and he is unfunded as liquidator. This practice is to proceed to complete the winding up of the company without calling for and determining formal proofs of debt for unsecured creditors. Mr Merryweather says that, assuming termination of the DOCA, he intends to adopt this course in the case of Holdings and Nominees, in the event that there are no funds available for distribution to unsecured creditors and he is unfunded in the liquidation. 38The Deed Administrators oppose the grant of leave to proceed with the appeals. Mr Merryweather's unchallenged evidence is that Holdings and Nominees do not have funds to defend the appeals.

Applicable principles 39The relevant legal principles applicable to the exercise of the Court's discretion under s444E are not in dispute. The approach adopted under section 444E will depend on the form taken by the DOCA: Meehan v Stockman's Australian Cafe (Holdings) Pty Ltd (Meehan)(1996) 22 ACSR 123 at [125] per Lehane J. There was no issue that, having regard to the form of the DOCA in the present case, the approach to be adopted is similar to that taken to applications for leave to proceed against a company in winding up under section 471B of the Corporations Act. 40The test for the grant of leave under s 471B requires the applicant to satisfy the Court that there is a serious question to be tried, in the sense that "the claim has a solid foundation and gives rise to a serious dispute": Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550 at 556 (Wilcox, Burchett and Beazley JJ). 41The relevant factors affecting the exercise of the discretion to grant leave to proceed cannot be stated exhaustively: Ogilvie- Grant v East (1983) 7 ACLR 669 at 672; Meehan at [127]; Attard v James Legal Pty Ltd [2010] NSWCA 311; 80 ACSR 585 at [136]. However, in Attard v James Legal Pty Ltd, Tobias JA at [146]-[147] per (Beazley and Giles JJA agreeing) adopted and expanded on a summary of factors listed in J F Keir Pty Ltd v Brierley Management Systems Pty Ltd [2007] NSWSC 748 at [8] per Rein AJ. Tobias JA also approved at [148] the matters referred to by Lehane J in Meehan. It is unnecessary to repeat that list. To the extent that the Commissioner relied upon particular factors in the present case these are detailed below. 42To those factors may be added the following - whether it might be futile for the Court to grant leave: Distinctive FX 9 Pty Ltd V Statewide Developments Pty Ltd [2013] NSWCA 110 at [19] per Emmett JA (Ward JA agreeing) and at [20] per Barrett JA.

Submissions of parties 43Counsel for the Commissioner submitted that the following factors weigh in favour of the grant of leave: "(a) the Appeal Proceedings involve a claim for a substantial amount and a serious claim; (b) if leave were not granted to proceed with the Appeal Proceedings, it is likely that an appeal in relation to the assessment of any proof of debt lodged by the Chief Commissioner would be inevitable; (c) the Appeal Proceedings have reached an advanced stage; (d) a determination of the Appeal Proceedings would have substantial precedential value; (e) the Appeal Proceedings would not cause the Deed Administrators to be unreasonably distracted from their duties or to incur substantial costs; (f) the Appeal Proceedings will not give rise to any associated litigation." 44Counsel for Holdings and Nominees submitted that: (1)the appeals are futile because there will be no surplus available to unsecured creditors, including the Commissioner, upon completion of the sale process by the receivers; (2)alternatively, the applications are premature because it is not presently known whether there is any prospect of a return to unsecured creditors; (3)the respondents will not be able defend the appeals if leave is granted as the Deed Administrators have no funds to cover the defence of the appeals; (4)the appeals do not have strong prospects of success; (5)the appeals are not at an advanced stage; and (6)the asserted "precedential value" of the appeals is not a factor to be given weight.

Serious claim 45Counsel for Holdings and Nominees fairly acknowledged in oral argument that the dispute between the parties is serious and bona fide. It may be accepted that the appeals involve a serious claim. Insofar as both parties made written submissions concerning the merits of the Commissioner's appeal grounds, it is inappropriate for the Court to embark upon such an assessment on the present applications. 46It may also be accepted that the appeal by Holdings involves a claim for a substantial amount, being approximately $68 million. However, the fact that the claim is a large claim, though relevant, does not necessarily mean that leave to proceed should be granted: Meehan at 128. It is also necessary to consider the size of the claim relative to the claims of other unsecured claims, and the costs of litigating such a claim in the ordinary way relative to the amount available for distribution to unsecured creditors. 47There is an additional factor relevant to both appeals. It is presently uncertain whether any amount will be available for distribution to the unsecured creditors of either Holdings or Nominees. The significance of this factor is dealt with below. 48The claim by Nominees involves an amount which is significantly less than $100,000. This raises an additional consideration. An appeal does not lie to this Court, except by leave, from a judgment or order in the proceedings below which involves a matter at issue amounting to less than $100,000: see s 101(2)(r) of the Supreme Court Act 1970 (NSW). The Commissioner did not file an affidavit of competency at the time of filing the notice of appeal, as required by Uniform Civil Procedure Rules 2005 (UCPR) r 51.22. When the threshold value of Nominees' appeal was raised by the Court, it was not suggested by the Commissioner's counsel that the Commissioner has a realistic prospect of changing the result against Nominees by $100,000 or more: Hansen v Slattery Transport (NSW) Pty Ltd [2011] NSWCA 193 at [4] (Basten JA); Sneddon v New South Wales [2012] NSWCA 351 at [15]. 49Accordingly, the Commissioner requires leave to appeal against Nominees. Further, in view of the lapse of time, the Commissioner also requires an extension of time to file and serve a summons seeking leave to appeal: UCPR r 51.10(1). 50It follows that if it were otherwise appropriate to grant leave to proceed against Nominees, it should be on terms that leave be granted to proceed with an application for an extension of time to seek leave to appeal (and any consequential appeal if an extension of time and leave to appeal be granted).

Choice between alternative forms of procedure 51The Commissioner submitted that as the Deed Administrators have already rejected the Commissioner's proofs for the purposes of voting in connection with the meetings of creditors, it may be reasonably anticipated that the same will occur when proofs of debt are called by the Deed Administrators. 52The Commissioner further submitted that if leave to appeal is not granted, it is "inevitable" that an appeal will be brought by the Commissioner under s 1321 of the Corporations Act in respect of the decision to reject the Commissioner's proofs of debt. Thus, it was argued that the Commissioner should be permitted to pursue the appeals to this Court, as this is the more convenient procedure for determination of the dispute. 53The Commissioner made a related submission that the "proceedings" by way of appeal have reached an advanced stage, having regard to the proceedings at first instance. It may be accepted that the proceedings have progressed beyond a first instance decision, although the appeals themselves are only at a very early stage. No steps have been taken beyond the filing of the notices of appeal. 54The Commissioner relied upon the often cited observation by McPherson J (with whom Campbell CJ and Sheehan J agreed) in Ogilvie-Grant v East at 672 that: "The question whether a claimant shall be permitted to proceed by action, or should be required to submit his proof of debt and, if dissatisfied, appeal to a judge, is therefore reduced largely to one of choosing between alternative forms of procedure." 55However while the risk that the same issues would be relitigated if the claims were the subject of a proof of debt, is generally a strong factor in favour of the grant of leave to proceed: Capita Financial Group Ltd v Rothwells Ltd (1989) 15 ACLR 348 at 352, this will not always be so. There may be other factors against the grant of leave such as where there is no prospect of surplus assets in the company for distribution to unsecured creditors and no question of insurance, because the Court will not give its imprimatur to fruitless proceedings: Haviland v Joslow (No 4) Pty Ltd [1979] 2 NSWLR 318 at 319 per Needham J; Maher v Taylor [1984] 1 NSWLR 231 at 234 per Hunt J; Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 at [21] per Besanko J (Doyle CJ and White J agreeing). 56In the present case, the premise underlying the Commissioner's submissions is misconceived. The unchallenged evidence of the Deed Administrators is that they do not intend to call proofs of debt unless there is a surplus from the sale by the receivers available for unsecured creditors. That will depend upon the outcome of the sale process, which is expected to be completed prior to July 2014. 57Counsel for the Deed Administrators submitted that the Court should infer that there will be no surplus for distribution to unsecured creditors. This submission was based on two matters. First, that Transurban had acquired the secured debt, at a discount to its face value. This was said to indicate that RBS had placed a value on its security (over all of the assets of the CCT Group) at less than the face value of the secured debt. Secondly, it was contended that it was unlikely that Transurban, as the preferred bidder, would purchase the assets of the CCT Group from the receivers for an amount exceeding the face value of the secured debt. 58Although the prospect of any surplus for distribution to unsecured creditors appears quite low, it is not possible to conclude that there will be no surplus. First, the affidavit evidence of Mr Merryweather did not go this far, and this is not what he told the combined meetings of creditors on 21 October 2013. Secondly, there is no evidence as to the value of the assets of the CCT Group other than the book value of the toll concession as at 30 June 2013, nor any evidence of the matters which led RBS to the conclusion that it should sell the secured debt to Transurban for less than its face value. Thirdly, there is no evidence as to how much Transurban is prepared to pay as the preferred bidder for the assets of the CCT Group. 59Nonetheless, it may be accepted that it is at best uncertain whether a surplus will arise for unsecured creditors. Hence it is uncertain whether the Deed Administrators will call for proofs of debt. 60Accordingly, a factor weighing against the grant of leave to proceed with the appeals at this time, is that even if the appeals were successful, the prospect that they would result in any monetary return for the Commissioner is at best uncertain. 61The Commissioner suggested three disadvantages if leave to proceed was refused. The first was the inability of a liquidator of Holdings and Nominees to pursue potential causes of action against third parties which depended upon the Commissioner succeeding in establishing his claims on appeal. The second was the Commissioner's potential exposure to a costs order below. The third was that the precedential value of a successful appeal would be lost.

(a) Potential claims by Holdings and Nominees 62It is established that, absent provision in the trust deed denying the right of indemnity, or circumstances indicating good reason why a trustee should not be so indemnified, a trustee is entitled to be indemnified by the beneficiaries in respect of liabilities properly incurred by the trustee in the execution of the trust, where the beneficiaries are all persons sui juris: JW Broomhead (Vic) Pty Ltd (in liq) v JW Broomhead Pty Ltd (JW Broomhead) (1985) 9 ACLR 593 at 635 where McGarvie J said: "The basis of the principle is that the beneficiary who gets the benefit of the trust should bear its burdens unless he can show some good reason why his trustee should bear the burdens himself." 63In Causley v Countryside (No 3) Pty Ltd (NSW Court of Appeal, 2 September 1996, unreported) this Court approved the above statement of McGarvie J in JW Broomhead. See also Balkin v Peck (1998) 43 NSWLR 706 at 712 per Mason P (Priestley JA and Sheppard AJA agreeing). 64Counsel for the Commissioner contended that if leave to proceed was granted and the Commissioner was successful on the appeals, then a liquidator of Holdings and Nominees would have potential claims for indemnity against the unit holders of the CCT Motorway Property Trust and the CCT Motorway Company Trust respectively on the principle in Hardoon v Belilios [1901] AC 118. 65The Commissioner's submissions were largely directed to the rights of indemnity available to Holdings. No real attention was given by the Commissioner to the separate position of Nominees. This reflected the relatively insignificant amount in issue involving Nominees. 66Counsel for the Commissioner initially identified the beneficiary of the CCT Motorway Property Trust as the "CCT Motorway Property Holdings Trust" of which CCT Motorway Group Holding Pty Ltd is trustee (AT 11, lines 20-24; 12, lines 15-16). As noted at [4] above, this entity is the holding company of the CCT Group. It is also the subject of a DOCA. The unchallenged evidence is that it has no material assets other than its interest in the Tunnel. Later, during oral argument, counsel for the Commissioner resiled from this position. Counsel stated that the Commissioner did not dispute, but did not know on the available material, whether CCT Motorway Group Holdings Pty Ltd was the beneficiary of the CCT Motorway Property Trust, of which Holdings is the trustee (AT 35, lines 27-28). Ultimately, nothing turns on the identity of the beneficiary for the reasons explained below. 67The Commissioner also contended that, by extension of the principle in Hardoon v Belilios, Holdings and Nominees would have a right of indemnity against "ABN Amro" because it created the structure which was put in place in 2007 and wholly controlled the beneficiary of the trusts, of which Holdings and Nominees were trustees. The relevant "ABN Amro" entities were said to be EISER Infrastructure Ltd (previously known as ABN Amro Infrastructure Capital Management Ltd) and RBS Securities (Australia) Ltd (previously known as ABN Amro Australia Ltd). 68Alternatively it was contended by the Commissioner that "ABN Amro" gave advice to the directors of Holdings and Nominees that the structure adopted in 2007 would have no stamp duty payable, that such advice was incorrect, and that those entities would have an action in negligence against "ABN Amro", if the Commissioner succeeded on his appeals. The identity and status of the ABN Amro entity alleged to have given such advice was not made clear in submissions. 69In support of these last two contentions, the Commissioner referred to an extract of the transcript of the evidence given in the proceedings below by Mr Hicks, a director of Holdings and Nominees. Mr Hicks said that the 2007 transactions were structured to allow the purchaser to meet its bid requirements, which was to have no stamp duty payable. The purchaser was the consortium referred to at [5] above, which included two ABN Amro entities. Mr Hicks also said that the directors of Holdings and Nominees "were asked to enter into an arrangement as advised by ABN Amro" and that "the details of the structure is something that ABN Amro put together, advised us on the details of how that works ...". 70There are a number of answers to the Commissioner's contentions.

Right of indemnity excluded by the trust deed 71The first answer, which was identified by counsel for Holdings, is that the terms of the trust deed in respect of the CCT Motorway Property Trust, of which Holdings is trustee, exempted unit holders from liability to indemnify the trustee in respect of any trust liability. Clause 13.1 of the Trustee Deed provided: "13.1 No further liability of Unit Holders (a) The liability of each Unit Holder in its capacity as Unit Holder is limited to its investment in the Trust. (b) A Unit Holder is not required to indemnify the Trustee or a creditor of the Trustee against any liability of the Trustee in respect of the Trust. (c) The recourse of the Trustee and any creditor is limited to the Assets. (d) Nothing in or under this deed makes the Trustee the agent of a Unit Holder nor does it create any relationship other than that of beneficiary and trustee. (e) Clauses 13.1(a), 13.1(b), 13.1(c) and 13.1(d) are subject to any agreement to the contrary made between the Trustee and a Unit Holder." 72It is well established that the terms of the trust deed may provide that the trustee is to have no right of indemnity as against any beneficiary personally: Hardoon v Belilios at 127; RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385 at 394; McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623; Causley v Countryside (No 3) Pty Ltd (supra). 73Counsel for the Commissioner did not suggest that cl 13.1 was ineffective to exempt the unit holder from liability to indemnify Holdings as trustee.

No right of indemnity against controller of beneficiary 74Secondly, no authority was cited in support of the contention that a trustee also has an equitable right of indemnity against a person who owns or controls a corporate beneficiary. Nor is it fairly arguable that the principle in Hardoon v Belilios should be extended beyond those persons who occupy the position of beneficiaries and who are sui juris. 75As explained by Lord Lindley in Hardoon v Belilios at 123: "The plainest principles of justice require that the cestui que trust who gets all the benefit of the property should bear its burden unless he can shew some good reason why his trustee should bear them himself. The obligation is equitable and not legal, ...". 76Authority requires acceptance of the rationale that a person who gets all or part of the benefit of trust property must also bear all or the proportionate part of the burden associated with it: Balkin v Peck at 712. For this reason, the principle in Hardoon v Belilios applies whether or not the beneficiaries requested the incurring of the liability or the payment in question by the trustee: Balkin v Peck at 713. However, there is nothing about the equitable basis of the trustee's right of indemnity or its rationale, which would support an extension of this principle to a person who owns or controls a corporate beneficiary.

Alternative claim is speculative 77Thirdly, the contention that "ABN Amro" had given negligent advice to the directors of Holdings and Nominees was entirely speculative. It was not made clear in submissions whether the alleged advice was of a legal or financial nature. Moreover, the nature and terms of any advice given by "ABN Amro", including any qualifications attached to any advice, was not in evidence, nor could it be discerned from the scant evidence given by Mr Hicks in the proceedings below.

(b) Potential exposure to costs orders below 78Next, the Commissioner submitted that it was likely that if leave to proceed with the appeals was refused, the Deed Administrators would seek to agitate the question of costs of the proceedings below and an order for costs would most likely be made against the Commissioner, notwithstanding his success on a number of issues. It was argued that the Commissioner would be at a disadvantage should costs orders be made against him, if he could not seek to set aside those orders by way of a successful appeal against the judgment below. 79The short answer to this contention is that there was no evidence that the Deed Administrators intend to seek costs orders against the Commissioner in the proceedings below. There is at the present time no identified disadvantage to the Commissioner flowing from the unresolved question of costs. 80If circumstances change and the Deed Administrators were to obtain costs orders against the Commissioner, then there is nothing to prevent a further application for leave: Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Ors [2010] NSWCA 196; 79 ACSR 383 at [97] per Spigelman CJ (Giles and Tobias JJA agreeing).

(c) Precedential value 81The appeals broadly concern the interpretation and application of s 54(3) of the Duties Act, which provides for a concessional rate of duty to be applied in relation to certain transactions relevant to trusts. The Commissioner's written submissions contended that this provision is of general application that "may be relevant to a potentially wide range of transactions that concern changes in the identity of trustees". 82In oral argument counsel for the Commissioner contended that the dispute involved "a very common scheme" (AT 21, lines 1-2). However, no evidence was put before the Court of any other disputes concerning the operation of this provision. 83The contention that the appeals have substantial precedential value has not been demonstrated by the Commissioner. Moreover, it is not the function of the Court to provide advisory opinions in relation to other "potential" disputes. 84In these circumstances it is unnecessary to consider whether the grant of any leave should be subject to a condition that the Commissioner pay the respondents' costs of the appeal and, if so, whether such costs should be limited to the issues raised by the notices of appeal or extend to any matters which might be raised by the respondents by way of notices of contention.

Conclusion and orders 85I do not consider, in the circumstances, that there is any utility at present in granting leave to proceed against Holdings or Nominees by way of appeal. Accordingly, leave to proceed should be refused. 86It should be acknowledged that circumstances may change, such as Holdings' or Nominees' financial position following completion of the sale process by the receivers, or if the Deed Administrators obtained cost orders against the Commissioner in the proceedings below. As noted above, there is nothing to prevent a further application for leave: Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Anor at [97]. 87In each proceeding, the order of the Court is that the Commissioner's notice of motion filed on 16 December 2013 be dismissed with costs.

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2013/270865 Chief Commissioner of State Revenue (Applicant) CCT Motorway Company Nominees Pty Ltd (Respondent) Representation: Counsel: J E Marshall SC and I J M Ahmed (Applicants) A Hochroth (Respondents) Solicitors: I V Knight Crown Solicitor (Applicants) Herbert Smith Freehills (Respondents) File Number(s): 2013/270858; 2013/270865 Decision under appeal Jurisdiction: 9111 Citation: CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue; CCT Motorway Company Nominees Pty Ltd v Chief Commissioner of State Revenue [2013] NSWSC 1072 Date of Decision: 2013-08-09 00:00:00 Before: Bergin CJ in Eq File Number(s): 2012/119963; 2012/119972

Judgment 1HIS HONOUR: Before the Court are applications by the appellant, the Chief Commissioner of State Revenue (Commissioner), seeking the grant of leave to proceed against the respondent in each appeal. In the first appeal (2013/270858), the respondent is CCM Holdings Trust Pty Ltd (Holdings). In the second appeal (2013/270865), the respondent is CCT Motorway Company Nominees Pty Ltd (Nominees). 2The need for such leave arises from the execution of a deed of company arrangement (DOCA) by each of Holdings and Nominees on 11 November 2013. Section 444E of the Corporations Act 2001 (Cth) provides that: "(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed. (2) The person cannot: (a) make an application for an order to wind up the company; or (b) proceed with such an application made before the deed became binding on the person. (3) The person cannot: (a) begin or proceed with a proceeding against the company or in relation to any of its property; or (b) begin or proceed with enforcement process in relation to property of the company; except: (c) with the leave of the Court; and (d) in accordance with such terms (if any) as the Court imposes. (4) In subsection (3): 'property' of a company includes: (a) any PPSA retention of title property of the company; and (b) any other property used or occupied by, or in the possession of, the company. Note: See sections 9 (definition of property) and 51F (PPSA retention of title property)." 3The parties accept that the bringing of an appeal is the commencement of a proceeding for which leave is required: see Distinctive FX 9 Ltd v Statewide Developments Pty Ltd [2012] NSWCA 393 at [13] per Beazley JA in relation to the application of s 471B of the Corporations Act to proceedings by way of appeal (or a summons for leave to appeal).

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