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

Mr Crown's property development business

1. Mr Crown operates a business involving the acquisition of properties for renovation or development and subsequent sale. He gave the following evidence of his usual practice in respect of this business.
2. When Mr Crown identifies a property for development and negotiates a purchase of the property, he usually incorporates a new special purpose vehicle (SPV) for the purpose of holding that property.
3. If Mr Crown expects the SPV to hold the property long term, his usual practice is to open a bank account with National Australia Bank (NAB) for that entity after it has been incorporated. If, however, he expects the SPV to sell the property within six months or so after purchase, he will usually not open a bank account for that SPV, but will instead use either Mr Crown's Account or the Joint Account for transactions relating to that SPV.
4. The SPVs typically do not have assets or available capital of their own. Consequently, once an SPV has been incorporated, it will generally obtain finance from a third-party financier in order to purchase the property. Mr Crown is responsible for negotiating and obtaining such finance on behalf of the SPV.
5. Where the purchase of a property involves a GST component, Mr Crown's usual practice is to negotiate with the financier to ensure that the principal loan amount covers the GST payable on the property. Upon repayment of the loan, the financier will typically receive the principal loan amount which includes the GST component.

Usual practice in relation to refunds of GST

1. Where an SPV purchases a property in respect of which GST is payable, Mr Crown's usual practice is to instruct his accountants, after the purchase has settled, to prepare and lodge a BAS for that SPV, in order to obtain a refund or credit of any amount of GST which the SPV paid when purchasing that property.
2. When the BAS has been processed and any refund has been received, Mr Crown's usual practice is to make an entry in a ledger, detailing when the BAS refund was received, the amount, and the relevant entity.
3. Mr Crown gave the following evidence regarding his usual practice upon receipt of such a refund: "When I have performed work for the benefit of a particular SPV, I typically cause the SPV to pay the BAS Refund(s) to the SPV's unitholder in the Crown Group. This payment is for work that I performed for the particular SPV, including research into the target property, performing an assessment of development potential and profitability, negotiation of the purchase of the property, obtaining finance and negotiating terms of that finance, preparing financial and project modelling and liaising with consultants on planning and development. Essentially, it represents the SPV paying for all that is done for it through the full lifecycle of the project up to final exit. It may also be used as repayment for any costs that I have paid on behalf of the SPV where there is no JV partner. The practice described above ensures that the holding companies have sufficient cash flow while the property is being prepared for on-sale or development. Those payments to the holding companies are also recorded on a ledger. As I explained above, the holding companies in the Crown Group are generally trustees for the various trusts of which I am a beneficiary. As such, these payments ultimately benefit me and my family, since this is my main form of employment."

Spring Farm Properties - Negotiations regarding Finance

1. Mr Crown first became aware of the Spring Farm Properties in 2022, and subsequently became interested in purchasing those properties.
2. From about March 2023, Mr Crown engaged in conversations and correspondence with employees of Audant Investments Pty Limited with respect to the purchase and development of the Spring Farm Properties. Audant Investments is the entity responsible for managing various assets held by Mr Robert Whyte. Warneet is the trustee of a self-managed super fund of which Mr Whyte is the sole member.
3. On 28 March 2023, Mr Crown and the Executive Director of Audant Investments, Mr Troy Thompson, had a telephone call regarding the Spring Farm Properties. At 3:05pm on the same day, Mr Crown sent an email to Mr Thompson, stating as follows: "As discussed this morning, I've secured the former 'Spring Farm Quarry' properties in a deal directly with the vendors for $27m". In the email, Mr Crown provided Mr Thompson with "high level details" regarding the purchase and development value of the Spring Farm Properties.
4. On 2 May 2023, Mr Thompson sent an email in reply which stated as follows: "Spring Farm profit share, Robert's [Mr Whyte's] proposal: • Audant to provide 100% of capital funding required • 10% pa coupon on capital • 60% (Audant)/ 40% (Crown) profit share, given larger capital required to be deployed/ committed I am open to discussion on proposal & structuring similar to [that] which occurred on Manx Park & Farm Gate."
5. In his affidavit of 14 October 2024, Mr Thompson explained that his reference to "Manx Park" in his 2 May 2023 email was a reference to a previous transaction involving Warneet and Mr Crown which had involved a 50/50 profit share and which had involved no success, management or performance fee payable to Mr Crown.
6. Later that same day, Mr Crown sent Mr Thompson another email containing his "response/counter to Robert's offer". In response to the proposed "60% (Audant)/40% (Crown)" profit share, Mr Crown suggested a "50%/50% profit share to keep consistent with Manx Park deal as Spring Farm will also be another 'on-sale' deal". Mr Crown added: "As discussed, my preference is to keep consistent with our 50/50 relationship where Audant provide the capital & Crown provides the 'cleverness' (the Crown way & all the work) to deliver us the 'win-win' via another profitable 'on-sale' deal."
7. On 5 May 2023, Mr Thompson replied to Mr Crown's email as follows: "Following our discussion, updated proposal: … 60% (Audant)/40% (Crown) profit share: Adjusting to 50%/50% if the following events occur within 12 weeks of exchange (prior to settlement): a) Binding agreement with Council for $8M+ sale or equivalent for portion of rural lands b) Material progress with the on sale of residential land (i.e. Stockland/ Mirvac) If no binding sale agreement has been achieved on the Residential land by 31 December 2023, profit share to adjust to 75% (Audant)/25% (Crown)."
8. On 8 May 2023, Mr Crown sent an email in response, confirming his agreement to this proposal.
9. On 11 May 2023, Mr Crown and Mr Thompson had the following exchange of text messages: Mr Crown: "Hey Troy, was just checking in on Spring Farm. Cheers." "Sorry on call, will call you once done." Mr Thompson: "Ok from Robert for you to take 100% of units, we will lend. Similar to Manx Park." Mr Crown: "Sorry I missed your call (was with kids). Ok great, I'll finalise SPV [tomorrow] and confirm"

Establishment of Macarthur Farm and Macarthur Farm Trust

1. On 12 May 2023, Macarthur Farm was incorporated, with Mr Crown as its sole director and shareholder.
2. On the same date, Mr Crown executed a Trust Deed on behalf of each of Macarthur Farm as Trustee and CFE as Original Member. The Trust Deed created the Macarthur Farm Trust. By cl 3 of the Trust Deed, Macarthur Farm was required to hold the "Trust Fund" on trust for CFE. The Trust Fund effectively comprised the entire property of Macarthur Farm.
3. Clause 6.1(b) of the Trust Deed provided as follows: "The Trustee will pay out of the gross income of the Trust Fund all costs and disbursements and commissions, fees, taxes, management charges and other proper outgoings in respect of the investments and administration of the Trust Fund."
4. Clause 23 of the Trust Deed was entitled "Conflict of Interest" and provided as follows: "23.1 Exercise of powers The Trustee may exercise any of its powers notwithstanding that the Trustee or a director of the Trustee or any one or more of the Members may be directly or indirectly interested in any transaction. 23.2 Contracts The Trustee may enter into any contract with any of the directors of a Trustee or any of the Members or any trustee or trustees of any other trust of which any of the Members is a beneficiary, whether present, contingent or prospective."
5. Further, clause 10.3.1 of Macarthur Farm's Constitution relevantly provided as follows: "A Director and any firm, body or entity in which a Director has a direct or indirect interest may: (a) enter into any contract or arrangement with the Company; … (d) receive and retain for their own benefit any remuneration, profits or benefits as if they were not a Director."
6. Mr Crown deposed that, in accordance with his usual practice, he did not open a bank account in Macarthur Farm's name because he anticipated that the Spring Farm Properties would be sold soon after purchase.

Contract for purchase of Spring Farm Properties

1. On 25 June 2023, Mr Crown sent the following text to Mr Thompson: "Hi Troy, Spring Farm contract agreed. I will execute tomorrow morning for exchange so if we can be ready to pay the deposit tomorrow that will be great. I'll email final contract once received tomorrow morning and also vendors solicitors details for deposit payment. Any questions let me know. Game time!!"
2. On 26 June 2023, M Collins & Sons Holdings Pty Ltd as Vendor and Macarthur Farm as Purchaser entered into a contract for sale of the Spring Farm Properties for the price of $27m plus GST. Mr Crown executed this contract on behalf of Macarthur Farm.
3. On around 26 June 2023, Mr Thompson received an email from Ms Rebecca Mercer of Hicksons Lawyers, who were acting for Audant Investments on the Spring Farm transaction. The email included the following statements: "As discussed, I have reviewed the contract and note the following: … 2. Purchase Price - The purchase price is $27,000,000 plus GST. … 4. GST - The sale of the property is a taxable supply. We recommend that you have your tax advisor consider whether there is any utility in structuring the sale as a going concern (as there may be a benefit in being able to apply the margin scheme to future lot sales)."
4. Mr Thompson deposed that prior to Macarthur Farm executing the contract for sale of the Spring Farm Properties, there had been some uncertainty as to whether Collins & Sons would charge GST on the purchase. In his affidavit, Mr Thompson stated: "I knew this because Mr Crown had brought this to my attention during telephone discussions between us before exchange of contracts for Macarthur Farm's purchase of the Property occurred because it would impact the amount of capital that Warneet would need to provide."
5. At 4:04pm on 26 June 2023, Mr Thompson forwarded Ms Mercer's email to Mr Crown, noting he was providing "Lawyer comments below as discussed" and requesting Mr Crown's "comment".
6. At 7:40pm on 26 June 2023, Mr Crown sent an email to Mr Thompson, stating as follows: "I executed the Spring Farm contract today … Settlement date is amended to 1Sep23 as discussed to get us to 3-months. FYI below vendor solicitors trust account details for deposit. Let me know once processed. Thanks"
7. The next day, 27 June 2023, Mr Crown sent an email in reply to Mr Thompson's email attaching Ms Mercer's advice with his comments. Mr Crown confirmed that it was "Correct" that the purchase price of the Spring Farm Properties was $27m plus GST. With regards to Ms Mercer's comments regarding GST (set out in paragraph [39] above), Mr Crown stated as follows: "I tried this, even with the license to the vendors, however as they are simply accessing the property to [remediate] it got very complicated as they are not operating a business from 1July as their soil/sand extraction consents officially end, which triggers their remediation obligations. So tried all aspects to negate GST but ultimately could not. I will claim back GST [in] monthly BAS post settlement as discussed."
8. On 18 July 2023, Collins & Sons and Macarthur Farm entered into a "Deed of Amendment" which varied the terms of the contract for sale of the Spring Farm Properties. The amendments are not material to the current dispute.

Loan Agreement and General Security Deed

1. On 1 September 2023, Mr Crown sent Mr Thompson a "draft loan doc just in from my lawyer with their mark-ups", requesting that Mr Thompson "Let me know as soon as you have an execution version so I can execute". Mr Thompson sent an email in reply to Mr Crown the same day which included the following: "Loan facility limit of $30,100,000. Please provide breakdown of expected draw downs and purpose."
2. Mr Crown responded on the same day, addressing Mr Thompson's query as follows: "Loan facility Limit: $26m + 10% GST = $28.6m + Stamp duty/ costs ~ $1.6m Actually equals a little more based on the final settlement statement (emailed earlier & reattached to this email). Total funds needed for settlement (if today 1Sep23) = $27,602,864.89 So total Loan facility limit needs to be amended to ~$30.3m All funds are being used for settlement as per settlement statements including previously paid deposit."
3. On 7 September 2023, Macarthur Farm in its personal capacity and as trustee for the Macarthur Farm Trust entered as "Borrower" into a Loan Agreement with Warneet. Macarthur Farm and Warneet also executed a Mortgage, General Security Deed and Deed of Undertaking on the same day.
4. Clause 3(a) of the Loan Agreement is headed "Purpose of Loan" and provided as follows: "The Borrower must apply the proceeds of the Loan for the sole purpose of purchasing the Property and payment of the Acquisition Costs, any associated costs an[d] any GST payable by the Borrower in relation to the Borrower."
5. Clause 3(c) provided as follows: "The Borrower may not acquire any assets, property or interests, enter into any agreement (including any deed), arrangement or understanding, carry on any business or incur any Liabilities other than on arm's length terms and in connection with the owning of the Property, without the prior written consent of the Lender."
6. Clause 4 of the Loan Agreement was headed "Repayment". Clause 4.1 provided as follows: "4.1 Repayment Date (a) Without limiting clauses 4.2 and 9.2, the Borrower must, on the Repayment Date, upon completion of the sale of the Property under clause 5.1(b)(ii) or on the Lender having declared the Secured Money to be immediately due and payable under clause 9.2(a): (i) repay to the Lender the principal amount of the outstanding Loan; (ii) pay to the Lender any amount of interest which has accrued in accordance with clause 5.1(b); and (iii) pay to the Lender any other unpaid costs, fees or expenses under this document, in immediately available funds to the account or place notified by the Lender to the Borrower. (b) Notwithstanding any other provision of this document, if the Borrower has not on the Repayment Date fully satisfied its obligations under clause 4.1(a), the Borrower remains liable to pay the Secured Money and interest calculated in accordance with clauses 5.2 and 5.4 up until the payment of all the Secured Money to the Lender. (c) Subject to clause 9.2, the Lender agrees not to call on the Borrower to repay the Loan until the earlier of the Repayment Date and the Rescission Date (if any)."
7. The "Repayment Date" was defined in Item 2 of Schedule 1 of the Loan Agreement as being the earlier of 26 June 2024, twelve months from the date of the Contract for Sale, and the Completion of an On-Sale.
8. Clause 5 of the Loan Agreement was headed "Interest" and provided as follows: "5.1 Definition of Profit In this clause 5, Profit means: (a) if an On-Sale is completed on or before the Repayment Date, the net profit on the sale of the Property pursuant to the On-Sale is to be calculated in accordance with the following formula: P = G - (S + A + H + FI) where: • P is the Profit; • G is the gross proceeds of the sale of the Property pursuant to and payable on completion of the On-Sale; • S is the Selling Costs; • A is the Acquisition Costs; • H is the Holding Costs; and • FI is the Fixed Interest calculated under clause 5.2(a); and (b) if an On-Sale is not completed on or before the Repayment Date: (i) but the Borrower repays the Secured Money on the Repayment Date, an amount calculated in accordance with the following formula: P = MV - (A + H + FI) where: • P is the Profit; • MV is the Market Value of the Property as at the Repayment Date • A is the Acquisition Costs; • H is the Holding Costs; and • FI is the Fixed Interest calculated under clause 5.2(a) adjusted if required under clause 5.4(b); and (ii) otherwise, the parties agree that the Property must be sold and will be placed on the market for sale within 30 Business Days of the Repayment Date, the Borrower agrees that any such sale process will be at the cost of the Borrower but under the control of the Lender who agrees to use all reasonable endeavours to effect a sale of the Property which is to be offered publicly and promptly, in consultation with the Borrower who must co-operate and take such steps as are reasonably required by the Lender and the Lender will reasonably determine what is a fair and reasonable sale price to accept and the Profit is an amount calculated in accordance with the following formula: P = SP - (S + A + H + FI) where: • P is the Profit; • SP is the gross sale price of the Property; • S is the Selling Costs • A is the Acquisition Costs; • H is the Holding Costs; and • FI is the Fixed Interest calculated under clause 5.2(a) adjusted under clauses 5.4(b). 5.2 Interest Interest on the Loan Amount must be paid by the Borrower to the Lender on the Repayment Date, upon completion of the sale of the Property under clause 5.1(b)(ii) or such earlier date on which the Secured Money becomes due and payable whether under clauses 4.2 or 9.2 or otherwise, in the amount equal to the sum of: (a) if an On-Sale is: (i) achieved within 12 weeks of Contract Completion, $0; and (ii) not achieved within 12 weeks of Contract Completion, the amount calculated in accordance with the following formula (Fixed Interest): FI = (0.09 x SM)/365 x N where: • FI is the Fixed Interest; • N is the number of days from the Drawdown Date up to and including the Repayment Date or such other date that the Secured Money is repaid to the Lender in accordance with clause 4.1; and • SM is the Secured Money; and (b) the Profit Share. 5.3 Profit Share For the purposes of clauses 5.2(b) the Profit Share is the amount equal to: (a) 50% of the Profit if an On-Sale is achieved within 12 weeks of Contract Completion; (b) 60% of the Profit if an On-Sale is achieved after the period described in subclause 5.3(a) but on or before 31 May 2024; or (c) otherwise, 75% of the Profit. …"
9. Clause 8.3 of the Loan Agreement provided for a range of "Other Undertakings", including that the Borrower must "not sell, assign, transfer or otherwise dispose, or part with possession of, any Secured Property other than as permitted by the terms of a Security".
10. Clause 9 of the Loan Agreement was headed "Default" and relevantly provided as follows: "9.1 Default events Each of the following is a Default Event for the purposes of this document: … (b) failure by the Borrower to perform any of its obligations under any Finance Document; … 9.2 Default declaration The Lender may at any time during any Continuing Default: (a) declare the Secured Money (including to be immediately due and payable whereupon the Secured Money becomes immediately due and payable by the Borrower); (b) enforce the General Security Deed and/or the Mortgage and/or (c) do any one or more of those things …"
11. By cl 2.1(a) of the General Security Deed, Macarthur Farm as Grantor granted a security interest in "the Collateral" to Warneet as the Secured Party. Clause 2.1(b) provided as follows: "This security interest is a charge. If for any reason it is necessary to determine the nature of this charge, it is a floating charge over Revolving Assets and a fixed charge over all other Collateral."
12. "Collateral" was defined in the General Security Deed as follows: "Collateral means, in relation to the Grantor: (a) all present and after acquired property in respect of which the Grantor has at any time sufficient rights to grant a security interest, including all of the following: (i) the assets, undertaking and goodwill of the business of the Grantor; and (ii) the uncalled and called but unpaid capital of the Grantor; and (b) all Trust Assets of the Trust, wherever located."
13. By cl 3.1 of the General Security Deed, Macarthur Farms agreed not to "dispose, or part with possession, of any Collateral", "unless permitted to do so by clause 3.2". Clause 3.2 provides for "Permitted dealings" as follows: "The Grantor may do any of the following in the ordinary course of the Grantor's ordinary business unless it is prohibited from doing so by another provision in the Loan Agreement: (a) create or allow another interest in, or dispose or part with possession of, any Collateral which is a Revolving Asset; or (b) withdraw or transfer money from an account with a bank or other financial institution for the legitimate purpose of meeting operating expenses of a business being undertaken by the Grantor."
14. The General Security Deed defined a "Revolving Asset" as including any part of the Collateral which is "money, (including money withdrawn or transferred to a third party from an account of the Grantor with a bank or other financial institution) other than money in any account which is blocked under the terms of a Finance Document."
15. Two points about these provisions should be noted. First, there was no obligation on Macarthur Farm to pay to Warneet the amount of any refund of GST which it received. Secondly, the amount of any such refund was not included in the moneys from which the profit share was calculated. Mr Thompson subsequently realised that these matters represented, from Warneet's commercial perspective, deficiencies in the loan arrangements.
16. There was, on the affidavit evidence, a factual dispute as to whether there was a conversation between Mr Thompson and Mr Crown to the effect that, on receiving any refund of GST in respect of the Spring Farm Properties, Mr Crown would ensure that such moneys were used to pay down the loan account. It is unnecessary to resolve this issue. Macarthur Farm did not press, in closing, any contention that the payment of GST into Mr Crown's Account amounted to a breach of any such oral agreement.

September BAS Refund

1. On 8 September 2023, the purchase of the Spring Farm Properties settled. Warneet advanced $30,315,000 to Macarthur Farm, comprising the purchase price, plus GST, stamp duty, and settlement costs.
2. On 1 October 2023, Mr Crown caused Macarthur Farm to lodge a BAS in respect of the month of September 2023.
3. On 4 October 2023, Mr Syd Cassimaty, the Chief Financial Officer of Audant Investments, sent an email to Mr Crown asking: "Can you confirm whether the GST return for the Spring Farm purchase has been lodged for Sept 23?" Mr Crown replied: "I believe so, just awaiting confirmation from my accountants. Will confirm asap."
4. On the following day, 5 October 2023, the sum of $2,614,900, representing the amount of the September BAS Refund, was deposited by the ATO into Mr Crown's Account.
5. In his affidavit, Mr Crown deposed that the BAS Refunds were paid into Mr Crown's Account because Macarthur Farm did not have a bank account. Mr Crown confirmed in cross-examination that he understood that the BAS Refunds were, upon payment into Mr Crown's Account, held by him on trust for Macarthur Farm.
6. On 10 October 2023, an amount of $9,000,000 was withdrawn from Mr Crown's Account. This money was transferred into the Joint Account. The balance in the Joint Account on the day prior to the receipt of this sum was $554.28.
7. It was common ground that the transfer of $9,000,000 into the Joint Account included the funds received in respect of the September BAS Refund (that is, the amount of $2,614,900).
8. In his affidavit, Mr Crown gave the following evidence regarding the reason why, and basis upon which, he transferred the amount of the September BAS Refund into the Joint Account: "I transferred [the] September BAS Refund into the Joint Account to pay [CFE] for performance and management work undertaken by me on the Spring Farm Property. I have summarised various tasks which I undertook as part of this work, including engaging in protracted negotiations with the Spring Farm Property vendors, negotiating the Spring Farm Contract, Deed of Amendment to the Spring Farm Contract and the reduction of the purchase price, which led to the Deed of Variation, as well as the work referred to at paragraph 128 above. My view at the time was that the work undertaken by me was considerable and, so in accordance with my usual practice, I caused Macarthur Farm to pay [CFE] performance fees for that work. At the time that I transferred the September BAS Refund to [CFE], for the works I had undertaken on the Spring Farm Property transaction, I believed that it was an appropriate time to pay the performance and management fees, and also that the payment was reasonable in all the circumstances. This is because, at the time that those payments were made: (ss) in respect of the financial position of Macarthur Farm, it had no employees, no overhead expenses such as rental payments on office spaces, and no creditors other than: (i) Warneet Super, whose loan was secured by the Warneet Mortgage; and (ii) me and/or [CFE] as unsecured creditors, both of whom I controlled, and I did not expect Macarthur Farm to incur any further debts; (tt) as I explain above, I personally (or [CFE]) incur the liability to pay Macarthur Farm's creditors, for example, consultants and advisors for work undertaken on aspects of that deal; and (uu) I had, by that stage, worked for about 6 months on developing the Spring Farm Property and the project had progressed significantly through the work I had performed."

Transactions following transfer of the September BAS Refund into the Joint Account

1. On 23 October 2023, an amount of $7,192,844.21 was debited from the Joint Account with the narrative "Balance Required for Settlement". The balance of the Joint Account prior to this withdrawal was $10,003,588.66. The balance following this withdrawal was around $2.819m.
2. The moneys withdrawn from the Joint Account were applied to the settlement of the purchase of the Bronte Property, which occurred on 23 October 2023.
3. The Bronte Property was purchased in the name of Ms Crown for an amount of $22,650,000. Ms Crown remains the registered proprietor of the Bronte Property.

Queries regarding BAS Refunds

1. On 30 October 2023, Mr Cassimaty forwarded his email of 4 October 2023 regarding the September BAS Refund to Mr Crown again and requested that Mr Crown "please confirm where this is at". Mr Crown replied: "Nothing received yet, but I'll check in with Pitchers and revert." In fact, as outlined above, the September BAS Refund had, to Mr Crown's knowledge, been received into Mr Crown's Account more than three weeks earlier, and had been transferred by Mr Crown into the Joint Account.
2. Mr Crown accepted that his response to Mr Cassimaty's query was dishonest. In his affidavit, Mr Crown gave the following explanation for his answer to Mr Cassimaty's query: "By 30 October 2023, I had received the September BAS Refund. At the time I did not understand why Mr Cassimaty was asking about the GST refunds and I had a suspicion that Mr Whyte wanted to take the proceeds of the September BAS Refund from Macarthur Farm. As I explain above, at no point in time did I ever agree to utilising the September BAS Refund to pay Warneet Super or reduce the Warneet Loan and I did not understand there to be any obligation to that effect in the Loan Agreement."
3. On or about 7 November 2023, Macarthur Farm's BAS for October 2023 was lodged with the ATO. On 10 November 2023, the amount of $1,600, representing the October BAS Refund, was paid into Mr Crown's Account.
4. On 12 November 2023, Mr Thompson sent an email to Mr Crown which, relevantly, asked Mr Crown about "the status of the GST on Spring Farm", noting that "Robert [Whyte] will not fund until this is resolved/ known". (The reference to funding which had not yet occurred was a reference to another transaction that Mr Crown was negotiating with Audant Investments in respect of another property known as Newbury Farm).
5. Mr Crown replied the next day indicating that he had been "assured by Pitchers I will have status today and will revert once in". Again, this statement was, to Mr Crown's knowledge, false. Mr Crown was aware that the BAS Refunds had already been received into Mr Crown's Account.
6. On 22 November 2023, Mr Thompson and Mr Crown exchanged the following text messages: Mr Thompson: "… What is the status of GST refund?" Mr Crown: "ATO confirmed its being refunded - should be within 7 days" Mr Thompson: "Hi Peter, I have discussed both loan and spring Farm with Robert. he has advised he won't proceed on loan until GST repaid. For spring farm, if they are chasing an indicative price we should determine and advise, can offer deferred terms if required for planning so they know we are in a position of strength. …"
7. Again, Mr Crown's statement that the GST would be "refunded … within 7 days" was, to his knowledge, false.
8. On 30 November 2023, Mr Thompson sent Mr Crown a text asking for "Any update on GST refund?" On the same day, the two exchanged the following messages: Mr Crown: "Sorry on call, will call you once done." Mr Thompson: "Peter, need an update on GST today and or contact with your accountant to understand position."
9. Mr Thompson did not receive a response to this text message.
10. On 4 December 2023, Mr Thompson and Mr Crown exchanged the following further messages: Mr Thompson: "Peter, if you do not respond to Robert's phone call I will be forced to issue a Notice to Inspect. Please respond to Robert or provide the information we have requested regarding the GST refund by close of business today." Mr Crown: "Whole family is down with illness & Covid (I've been + since fri) so will return calls when recovered/back on deck" Mr Thompson: "Peter, we wish your family well. Out of respect we will wait until Friday. Robert has never had an issue like this with a JV partner before."
11. On the subsequent Friday, 8 December 2023, Mr Crown and Mr Thompson exchanged the following text messages: Mr Thompson: "Peter, can we speak before 5pm?" Mr Crown: "Hi Troy, sorry I'll have to call Robert back tomorrow. Won't have a chance today" Mr Thompson: "Thank you. I will let him know."
12. In her affidavit, Ms Crown deposed that she recalled a conversation with Mr Crown around November or December 2023 where words to the following effect were said: Mr Crown: "Robert [Whyte] is blowing up about this GST refund. I don't know what he is on about because the loan agreement says that I don't have to pay him anything until the property sells." Ms Crown: "You will just have to speak to him."

Default under Loan Agreement and Subsequent Events

1. On 11 December 2023, a second mortgage was registered over the Spring Farm Properties in favour of MC Coronam Pty Ltd.
2. On 15 December 2023, Warneet lodged a "Declaration under Clause 9.2 (a) of the Loan Agreement". The declaration referred to the Loan Agreement and stated as follows: "On or about 11 December 2023 the Borrower created a Security Interest over some or all of the Secured Property in breach of clause 8.3(a) of the Loan Agreement. That breach is a Default Event under clause 9.1 of the Loan Agreement and is a Continuing Default. The Lender hereby declares the Secured Money to be immediately due and payable."
3. Also on 15 December 2023, Mr Rahul Goyal and Mr Barry Wight were appointed as receivers and managers of the assets of Macarthur Farm (the Receivers and Managers).
4. By correspondence dated 17 January 2024, 30 January 2024, and 9 February 2024, the Receivers and Managers demanded that Mr Crown arrange for the BAS Refunds to be repaid into a nominated bank account of Macarthur Farm. Mr Crown has not complied with these demands.
5. On 4 April 2024, this proceeding was commenced.

Breach of trust - September BAS Refund

1. It is common ground between the parties that when the BAS Refunds were paid into Mr Crown's Account, Mr Crown held those moneys on trust for Macarthur Farm.
2. As regards the September BAS Refund, it is common ground that the amount of this refund was, after being received in Mr Crown's Account, paid into the Joint Account.
3. Macarthur Farm pleaded that, by causing the September BAS Refund to be paid into the Joint Account, Mr Crown gained an unauthorised advantage for himself and Ms Crown, in breach of trust.
4. Mr Crown denied that, by paying these moneys into the Joint Account, he gained an unauthorised advantage for himself and his wife. The Defendants relevantly pleaded as follows (Defence, [5(c)], [9A(b)]): "[5(c)] … the September BAS Refund: (i) was paid into [Mr Crown's Account]; (ii) was held by [Mr Crown] for Macarthur Farm; and (iii) was disbursed on behalf of Macarthur Farm, including in payment of its costs and expenses; and Particulars The payments made for or on behalf of Macarthur Farm included: i. a 'Success/Performance Fee' of $1,100,000 paid to [CFE] for services in relation to the acquisition by Macarthur Farm of properties at 186 and 214 Macarthur Road, Spring Farm NSW 2570 (the Spring Farm Properties); ii. a 'Management/Performance Fee' of $1,500,000 paid to [CFE] for the provision of services to Macarthur Farm in relation to the development of the Spring Farm Properties; and iii. fees payable to lawyers, consultants and professional advisors who provided services in relation to the acquisition or development of the Spring Farm Properties. Further and better particulars may be provided. … [9A(b)] … (i) on or around 10 October 2023, an amount of $2.6 million was transferred from [Mr Crown's Account] into an account: (A) in the names of [Mr Crown and Ms Crown] (the Joint Account); and (B) held by them on trust for [CFE] (ii) the transfer pleaded in subparagraph (a)(i) was made using money from the BAS Refunds; and (iii) the transfer from Macarthur Farm to [CFE] was made pursuant to an arrangement or agreement between Macarthur Farm and [CFE] pursuant to which [CFE] would provide services to Macarthur Farm in relation to its acquisition and development of the Spring Farm Properties in exchange for fees paid or to be paid by Macarthur Farm; …"
5. Macarthur Farm made a request for particulars of this pleading, seeking particulars of any agreement pursuant to which the fees were said to have been paid. The Defendants responded, through their solicitors, as follows: "The payments were made in accordance with an agreement or arrangement between Macarthur Farm and CFE. There was no written or oral agreement between Macarthur Farm and CFE. The agreement or arrangement between Macarthur Farm and CFE arose because their common sole director, Mr Crown: (i) determined, as director of CFE, that CFE would provide services to Macarthur Farm in relation to its acquisition and development of the Spring Farm Properties in exchange for fees paid or to be paid by Macarthur Farm; and (ii) determined, as director of Macarthur Farm, that he would accept those services in exchange for fees in the amount charged or to be charged by CFE."

Mr Crown's affidavit evidence

1. Macarthur Farm submitted that, even if the particularised "determinations" were established as a matter of fact, a contract cannot be, as a matter of law, formed by an uncommunicated subjective intention of which there is no objective evidence, relying on Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25], and Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2023] NSWCA 102 at [64].
2. It is unnecessary to determine this issue, as Mr Crown did not give any evidence, in his affidavit or in cross-examination, of having "determined, as director of CFE, that CFE would provide services to Macarthur Farm in relation to its acquisition and development of the Spring Farm Properties in return for fees paid or to be paid by Macarthur Farm" (emphasis added). Nor did he give any evidence of having "determined, as director of Macarthur Farm, that he would accept those services in exchange for fees in the amount charged or to be charged by CFE" (emphasis added). There was no evidence of any such agreement being formed prior to services being provided. Nor did he give any evidence of having determined, prior to services being provided, what fees would be charged for any such services.
3. Instead, Mr Crown's evidence was that, around the time that he transferred the amount of the September BAS Refund into the Joint Account, he formed the view "that the work undertaken by me was considerable and, so in accordance with my usual practice, I caused Macarthur Farm to pay [CFE] performance fees for that work", by paying the September BAS Refund into the Joint Account.
4. Mr Crown's affidavit evidence does not support his pleaded case that the moneys were transferred into the Joint Account by way of the payment of two separate fees, being a success/performance fee of $1,100,000 for services in relation to the acquisition of the Spring Farm Properties and a management/performance fee of $1,500,000 for services in relation to the development of the Spring Farm Properties. There is no reference in his affidavit to two different types of fees being payable of the type described in the pleading, let alone in the amounts referred to in the pleading, or any reference to two distinct amounts being payable which together totalled $2,600,000.
5. Nor did Mr Crown give any evidence that, as pleaded, any part of the September BAS Refund was paid to CFE in reimbursement of "fees payable to lawyers, consultants and professional advisers who provided services in relation to the acquisition or development" of the Spring Farm Properties. In particular, there was no evidence from Mr Crown regarding the identity of any third party service provider who was retained by CFE, or regarding any amounts invoiced by any such provider and paid by CFE. Instead, Mr Crown gave evidence in his affidavit in the following generalised terms: "I estimate that I have spent over about $298,000 on expenses in respect of the Spring Farm Property". This is not evidence that CFE paid any amount for which it was entitled to be reimbursed. Instead, Mr Crown's evidence is that such expenses were paid by himself, rather than by CFE.

Lack of objective evidence of payments for fees

1. There is no contemporaneous documentary evidence referring to Macarthur Farm and CFE having reached any agreement or arrangement for performance fees to be paid, or referring to Mr Crown having determined, at the time of the receipt of the September BAS Refund, that performance fees should be paid in the amount of that refund.
2. For example, there is no reference in any contemporaneous document to such fees being payable or having been paid. There is no evidence of any invoice being rendered in respect of any such fee. There is no reference to the payment of any such fee in the books or records of Macarthur Farm. Nor is there any reference to the receipt of any such fee in the books and records of CFE. There is no narrative in any contemporaneous bank statement referring to the payment or receipt of any such fee.

Evidence of usual practice

1. In closing address, the Defendants submitted that Mr Crown's evidence of his usual practice regarding performance fees was not challenged (see paragraph [21] above). However, Mr Crown gave evidence that his usual practice when a GST refund was received was to "make an entry in a ledger, detailing with the BAS Refund was received, the amount and the relevant entity". As Macarthur Farm pointed out, the Defendants have not produced any ledger recording any such payment. This suggests that the present case was not an instance where Mr Crown followed his usual practice.
2. In any case, it makes commercial sense that the arrangements which Mr Crown describes would be a "usual" rather than an invariable practice. The stated object of the practice is to ensure that Mr Crown receives, through an entity that is the trustee of a family trust of which he is beneficiary (such as CFE), "payment … for work that I performed for the particular SPV" through "the full lifecycle of the project up to final exit". Any assessment of whether the trustee of Mr Crown's family trust, and whether Mr Crown himself, was going to receive adequate payment for those services in respect of any particular development project would depend on the way in which that particular project was funded and how any profits from that particular project were to be distributed.
3. In the present case, Macarthur Farm was to receive a significant percentage of any profits from the Spring Farm project. Mr Crown negotiated this level of profit share on the basis that the profits received by Macarthur Farm would represent, in effect, a return for the contribution made by Mr Crown and CFE to achieving a profitable outcome. In his negotiations with Mr Thompson, Mr Crown described the agreed level of profit share as representing an appropriate return for "'cleverness' (the Crown way & all the work)" (see paragraph [27] above). Any such profit share received by Macarthur Farm would be for the benefit of the sole unitholder of the Trust, CFE, which in turn was the trustee of a family trust of which Mr Crown was beneficiary.

Evidence regarding Joint Account

1. In addition, there is no documentary evidence that the moneys paid into the Joint Account were received on behalf of CFE (rather than being received for the benefit of the holders of that account, Mr Crown and Ms Crown).
2. For example, there is no ledger in respect of moneys held on trust for CFE, or in respect of moneys held in the Joint Account. Nor is there any contemporaneous document which refers to the amount of the September BAS Refund as having been received by Mr Crown and Ms Crown on behalf of CFE.
3. The only evidence that any moneys in the Joint Account were held on behalf of CFE comprises statements to this effect in Mr Crown's affidavit. In particular, Mr Crown deposed as follows: "Because, broadly speaking, many of the companies in the Crown Group consist of SPVs that do not have unsecured creditors, employees, recurring revenue with taxation obligations and other general liabilities, all funds received by each of the subsidiaries will ultimately flow to a joint account of mine and Vanessa's held with the National Australia Bank (NAB) and ending in the numbers 8747. I understand that this account is referred to as the 'Joint Account' by the plaintiff in these proceedings. For convenience, I will also adopt that term in my affidavit. The Joint Account comprises funds payable to [CFE] and is also used as the 'central' account for most of the holding companies within the Crown Group, and I transfer in and out of this account as required. … The reason that any funds for [CFE] are paid into the Joint Account is because as I explain above, [CFE] does not have its own bank account. So, any amounts that are required to be paid to [CFE] are paid into the Joint Account."
4. An express trust is created only if the settlor properly manifests an intention to create a trust: Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26 at [57]-[59] per Gummow and Hayne JJ (see also at [102]-[115] per Heydon and Crennan JJ). The Defendants did not point to evidence of an outward, objective manifestation of any subjective intention on Mr Crown's part that the September BAS Refund was received in the Joint Account on behalf of, or held on trust for, CFE.
5. Further, Ms Crown, who was the other signatory to the Joint Account, did not give evidence that any moneys in that account were held on trust for any other person. Instead, she acknowledged in cross-examination that moneys received into the Joint Account were used by her to fund personal expenses. For example, she identified that various payments were made from this account to a house cleaning service, a nail salon, a dog grooming and boarding business, and Uber Eats, as well as regular payments being made into her children's saving accounts.
6. Ms Crown gave evidence that, before using funds in the Joint Account for such purposes, she would check the balance in the account. However, she did not give evidence that she enquired, or considered it as a possibility, that any part of the balance was held on behalf of any other person. This indicates that, from Ms Crown's point of view, the funds held in the Joint Account from time to time represented funds which were available to her to spend as she saw fit.
7. Those matters are inconsistent with the Defendants' contention that the amount of the September BAS Refund was received into the Joint Account on behalf of, and was held on trust for, CFE.

Contemporaneous documents inconsistent with Defendants' case

1. Two contemporaneous documents which were completed by Mr Crown are inconsistent with the Defendants' contentions that there was an arrangement between Macarthur Farm and CFE regarding the payment of performance fees and that such fees were paid by Macarthur Farm to CFE.
2. First, on 22 December 2023, Mr Crown completed a report on company activities and property (ROCAP) in relation to Macarthur Farm, and signed a declaration that the answers to the questions contained in Part B of the ROCAP were "true, correct and complete to the best of my knowledge and belief at the date of this declaration". Mr Crown confirmed in cross-examination that he understood that he had an obligation to tell the truth when completing this document. The answers given by Mr Crown in Part B included the following: "In the last four years, has the Company entered into any financial transactions with a related party, including acquiring any property or businesses?" "No"
3. In cross-examination, Mr Crown confirmed that this was a truthful answer. However, this answer is inconsistent with the Defendants' case that, shortly prior to the ROCAP being completed, Macarthur Farm had entered into an arrangement with CFE to pay performance fees in relation to the Spring Farm Properties and had paid such fees. There is no apparent or rational reason why, if such an arrangement had been entered and performed, Mr Crown would not have indicated this in the ROCAP. Mr Crown did not offer any explanation for the inconsistency between this answer and the Defendants' case in this proceeding.
4. Secondly, on 1 January 2024, CFE lodged a BAS for the period October to December 2023, this being the period in which, on the Defendants' case, CFE had received an amount of some $2,600,000 from Macarthur Farm in respect of performance fees. Mr Crown acknowledged that he did not declare receipt of any such fees in this BAS, with the total sales for the period being recorded as $0.00. (In addition, such fees were not recorded in any preceding, or subsequent, BAS lodged by CFE.) Mr Crown was not re-examined on this issue, and therefore did not provide any explanation for the discrepancy between the information in this BAS and the defence advanced in this proceeding.

Mr Crown's dishonest statements regarding BAS Refunds

1. Ultimately, the only evidence in support of the contention that the payment of the September BAS Refund into the Joint Account represented a payment made to CFE in respect of performance fees for the acquisition and development of the Spring Farm Properties is Mr Crown's affidavit evidence to this effect.
2. Mr Crown's credit is, however, diminished by the fact that he has previously made a series of knowingly false statements in relation to the BAS Refunds. 1. On 30 October 2023, Mr Crown told a representative of Warneet that no GST refund had been received in relation to the Spring Farm Properties (see paragraph [72] above). In fact, to Mr Crown's knowledge, the September BAS Refund had been received in Mr Crown's Account on 5 October 2023 and had been transferred by Mr Crown to the Joint Account on 10 October 2023. Mr Crown accepted in cross-examination that this statement was dishonest. 2. On 13 November 2023, Mr Crown stated, in response to a request for an update on when the BAS Refunds would be received, that he had been promised by his accountants "a status today" and would "revert once done" (see paragraph [76] above). Mr Crown had not spoken to his accountants about this, and had no need to do so (having already received the funds). In his affidavit, Mr Crown stated that he made a decision to "lie" about not having received the BAS Refunds, "similar to what I had done" in response to the previous request on 30 October 2023. 3. On 22 November 2023, Mr Crown stated that the ATO had confirmed that the GST was "being refunded - should be within 7 days" (see paragraph [77] above). This was another knowingly false statement. In his affidavit, Mr Crown acknowledged that in providing this response he "continued to lie".
3. Mr Crown stated in his affidavit that: "In hindsight, I probably should have informed [Warneet's representative] that I had received the September and October BAS Refunds, and had paid the September BAS Refund to [CFE] for the work I had undertaken on the Spring Farm Property deal." He gave the following evidence in cross-examination: "Q. … the question [from Warneet's representative] is plain, isn't it? The question is what is the status of the GST on Spring Farm; do you see that? A. Correct. Q. There was no impediment on you providing an honest answer that it had been received; correct? A. No. Q. It's not correct, or you agree with me? A. Sorry, there was there was no impediment. Q. Yeah. A. Yeah. Q. So, you agree with me that you could have easily told them that you had received the GST; correct? A. Correct, in retrospect, I should have; yes."
4. As Macarthur Farm submitted in closing address, Mr Crown did not resolve the request by Warneet for payment of the BAS Refunds by stalling for time. Instead, this simply led to repeated requests by Warneet for updates. What would have dealt with Warneet's request would have been for Mr Crown to tell Warneet, if it had been the case, that Macarthur Farm was unable to pay the September BAS Refund to Warneet because Macarthur Farm had already paid away the full amount to CFE pursuant to an agreement relating to performance fees. Mr Crown's failure to give this simple response, which would have addressed Warneet's query, suggests that such a response was not in fact available, because the September BAS Refund had not been paid away pursuant to any such arrangement.

Conclusion - breach of trust

1. Having regard to those matters, I am not satisfied that there was any agreement or arrangement between Macarthur Farm and CFE for the payment of performance fees in respect of the Spring Farm Properties; or that the September BAS Refund was transferred from Mr Crown's Account into the Joint Account pursuant to any such arrangement or otherwise in respect of any such performance fees; or that the September BAS Refund was, on being received in the Joint Account, held on behalf of CFE.
2. Accordingly, it follows that Mr Crown has not established that he caused the September BAS Refund to be paid into the Joint Account for the reason or on the basis pleaded in the Defence, or for any other legitimate purpose connected with the business of Macarthur Farm or the Macarthur Farm Trust. The claim for breach of trust has therefore been established.

Remaining claims against Mr Crown regarding September BAS Refund

1. It was common ground that, as a director, Mr Crown owed to Macarthur Farm the duties set out in ss 181 and 182 of the Corporations Act 2001 (Cth), as well as cognate fiduciary duties.
2. Having regard to the findings I have made above, the September BAS Refund which was held in Mr Crown's Account on behalf of Macarthur Farm was not paid into the Joint Account in satisfaction of any obligation of Macarthur Farm to CFE, or pursuant to any transaction entered between Macarthur Farm and CFE, or for any legitimate purpose connected with Macarthur Farm's business.
3. It follows that, by causing those moneys to be paid into the Joint Account, Mr Crown used his position as sole director of Macarthur Farm to gain an unauthorised advantage for himself and Ms Crown, and to cause detriment to Macarthur Farm, and failed to exercise his powers as a director in good faith in the best interests of Macarthur Farm and for a proper purpose. He thereby breached the statutory and fiduciary duties that he owed to Macarthur Farm.
4. Macarthur Farm did not, in closing, advance any submissions regarding its remaining claim against Mr Crown for money had and received. It is unnecessary to consider this claim separately since, as pleaded, it does not go beyond the other claims. The relevant enrichment is said to be the receipt of the BAS Refunds by Mr Crown, and such enrichment is alleged to be unjust because Mr Crown misappropriated the BAS Refunds in breach of trust and in breach of his duties as a director of Macarthur Farm.
5. I deal with the issue of relief below.

Claim regarding October BAS Refund

1. The October BAS Refund may be dealt with briefly.
2. It was common ground that, on receipt of the October BAS Refund in Mr Crown's Account, Mr Crown held this sum on trust for Macarthur Farm.
3. The Defendants did not plead that the October BAS Refund was (like the September BAS Refund) applied to the payment of any fee due to CFE. On the Defendants' own case, the amount of the fees to which CFE was entitled in respect of the Spring Farm development project was $2,600,000, and this amount was paid by the transfer of funds into the Joint Account following the receipt of the September BAS Refund, and prior to the receipt of the October BAS Refund.
4. The Defendants did not plead, let alone establish, any basis on which Mr Crown or CFE was entitled to retain the amount of the October BAS Refund.
5. Macarthur Farm has demanded that Mr Crown transfer the amount of $1,600 to it. Mr Crown, as trustee, is obliged to comply with this demand. He has not done so.
6. Macarthur Farm is accordingly entitled to an order that the amount of the October BAS Refund be paid to it.

Claims against Ms Crown

1. In the course of the hearing, Macarthur Farm abandoned any contention that Ms Crown had notice, at the time when the September BAS Refund was paid into the Joint Account or at the time when the Bronte Property was purchased, that the September BAS Refund was property of Macarthur Farm, or that Mr Crown was acting in breach of trust or in breach of his duties as a director of Macarthur Farm in transferring the September BAS Refund into the Joint Account. Accordingly, Macarthur Farm abandoned any claim that Ms Crown had knowingly received moneys paid in breach of trust, or had knowingly assisted in a dishonest breach of trust or fiduciary duties, or was involved in any breach of statutory duties.
2. Instead, Macarthur Farm relied on the following factual matters: 1. Ms Crown received the September BAS Refund which was paid into the Joint Account as a volunteer; 2. shortly after the September BAS Refund was paid into the Joint Account, funds from that account were used in settlement of the Bronte Property; 3. on 29 July 2024, Ms Crown became aware, when she received a letter from Macarthur Farm's solicitors, that an issue had been raised about funds having been paid into the Joint Account in breach of trust or in breach of Mr Crown's duties as a director; and 4. at the time when Ms Crown was put on notice of those claims, she retained the Bronte Property.
3. Macarthur Farm submitted that the decision in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 at [163] (per Allsop P, with Campbell JA and Handley AJA agreeing) was authority for the proposition that a volunteer who receives funds, and who is subsequently put on notice that these funds had been misappropriated from another person, is under an obligation, based on the principles in Black v S Freedman & Company (1910) 12 CLR 105; [1910] HCA 58, to restore the funds derived from the misappropriation to the extent that she retained the funds or their traceable products when she had notice of the claim.
4. Macarthur Farm did not point to any evidence that Ms Crown retained, at the time when she received notice of its claim against Mr Crown, any part of the funds which were said to have been misappropriated by Mr Crown (cf. Moriah War Memorial College Association v Nosti [2020] NSWSC 942 at [9], [133]-[136], upon which Macarthur Farm relied). Ms Crown was said to have received notice of Macarthur Farm's claim in late July 2024, and the bank statements for the Joint Account indicated that this account had been in overdraft at all times since the end of March 2024.
5. As regards "traceable products" of such funds, the only "traceable product" identified by Macarthur Farm in closing submissions was Ms Crown's interest in the Bronte Property. Accordingly, Macarthur Farm relied on the principle in Heperu to contend as follows: "Insofar as the $2.6 million was paid into the Joint Account, and then funds from that account were used in the settlement of the Bronte Property, … Ms Crown is liable to restore the trust, relying on the principles addressed above regarding Mr Crown's breach of trust."
6. In response to this claim, the Defendants referred to s 42(1) of the Real Property Act 1900 (NSW), which provides as follows: "Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded …"
7. The Defendants noted that in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462, the Court of Appeal referred to both this provision and the decision in Heperu when considering the position of a volunteer recipient of misappropriated funds, who has used such funds to purchase real property prior to receiving notice of any claim that the funds had been misappropriated. At [238]-[243], Gleeson JA (with whom Meagher and Barrett JJA agreed) made the following observations: "Is the Black v Freedman claim an in personam exception to s 42? As already observed, an institutional constructive trust based on a Black v Freedman claim against a volunteer recipient arises from the fact that the recipient is placed on notice of an unauthorised receipt of funds or their traceable product. It does not involve an allegation of fraud in the sense of dishonesty on the part of the recipient. Rather it involves an allegation that the recipient is bound in conscience to recognise the claimant's rights once the recipient has been placed on notice of those rights: Heperu at [154]. Here the appellants were first placed on notice of the alleged unauthorised receipt of funds many years after they became registered proprietors of the properties (in 1979, 1983, and 1986 respectively). … It is trite law that the proprietary rights of a registered proprietor of Torrens Title land are derived from "the fact of registration and not from an event antecedent thereto": Mayer v Coe at 754 (Street J). Consistently with the principle of indefeasibility, it is not possible "to treat the holder of a registered mortgage over property that is subject to a trust, registration having been honestly obtained, as having received trust property": Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd at 157 (Tadgell JA; Winneke P concurring), cited in Farah at [193]. As mentioned, the equitable obligation of a volunteer recipient of stolen funds does not arise until the recipient is put on notice of an unauthorised receipt of funds. If notice comes after the volunteer recipient acquires an indefeasible title, then the notice is too late to impose an equitable obligation on the recipient, as a constructive trustee, to restore the property to the victim of the theft. It is not to the point that the recipient is a volunteer. Authority in this Court is that indefeasibility may be asserted by a volunteer: Bogdanovic v Koteff at 479-480 (Priestley JA; Hope and Samuels JJA agreeing): Gerard Cassegrain & Co Pty Ltd v Cassegrain [2013] NSWCA 453; 305 ALR 612 at [81]-[83] (Beazley P; Macfarlan JA agreeing). The present case is distinguishable from the result in Heperu where, as Allsop P noted (at [167]), no issue had been raised at trial or on appeal by way of a defence under s 42 of the Real Property Act. Subsequently in Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, Black J addressed the defence of indefeasibility in relation to a Black v Freedman claim. There, prior to being placed on notice, a recipient had applied what was claimed to be stolen funds to pay down a mortgage over a property in respect of which he was the registered proprietor. Black J concluded (at [102]-[103]) that the recipient's indefeasible title was an answer to a Black v Freedman claim. Although the facts in Break Fast Investments Pty Ltd v Giannopoulos are different from the present case, his Honour's reasoning reflects, in my view, a correct application of principle."
8. The Defendants submitted that, having regard to the decision in Sze Tu, a Black v Freedman claim was not available against a volunteer recipient of misappropriated funds who, prior to being put on notice of any such misappropriation, had used those funds to purchase real property.
9. Macarthur Farm said, in reply, that it did not press any proprietary claim in respect of the Bronte Property, but instead contended that a "personal claim in equity and restitution" was available against a volunteer who "retained the benefit in the property", noting that "it was a personal remedy which was sought and obtained in [Heperu]".
10. In Heperu, it was held that, based on the principles in Black v Freedman, the volunteer was obliged to restore "funds or their traceable products" which she retained at the time when she received notice of the claim. Allsop P commented as follows (at [154], emphasis added): "Black v S. Freedman is clear authority for the equitable obligation upon the innocent volunteer to restore to the plaintiff the fund identified and remaining (whether in original form or traceable product) in his or her hands. The equitable obligation arises from the later discovered position, not from wrongful conduct. Therefore, the extent of the personal equity involved, created by the circumstance in question, is the touching of the conscience of the volunteer recipient to deal with the property of another conformably with the interests of the owner, now discovered."
11. As noted above, in the present case, the only "traceable product" in issue is Ms Crown's interest in the Bronte Property. The decision in Sze Tu is authority for the proposition that, where funds have been used to purchase real property prior to the volunteer recipient being put on notice of any misappropriation, the recipient's indefeasible title to the property is an answer to any such Black v Freedman claim. Further, as Gleeson JA noted in the passage quoted above, the result in Heperu is distinguishable because, as Allsop P noted in Heperu (at [167]), no issue had been raised at trial in that case under s 42 of the Real Property Act. In contrast, such an issue was raised in Sze Tu and was raised in this case.
12. An alternative contention was raised in Sze Tu that "the appellants may have a personal liability to account for benefits received from the use of partnership funds, notwithstanding that they acquired indefeasible title" (at [246]). This contention was also rejected (at [256]-[261]). Gleeson JA noted that, in Super 1000 Pty Ltd v Pacific General Securities Ltd [2008] NSWSC 1222 at [235], White J had considered that there was an open question as to "whether personal remedies against a third party liable as a constructive trustee under the first limb of Barnes v Addy are also excluded because the person acquired the title to the property by registration". However, Gleeson JA concluded that it was unnecessary to decide this question because it had not been contended at trial that the relevant recipients were liable to account to the partnership as constructive trustees under either limb of Barnes v Addy.
13. In the present case, Macarthur Farm abandoned any contention that Ms Crown was liable to account to Macarthur Farm as constructive trustee under either limb of Barnes v Addy. Macarthur Farm asserted a claim in restitution against Ms Crown, but did not identify any basis for that claim other than the application of the principles in Black v Freedman (as applied in Heperu). However, for the reasons given in Sze Tu which are set out above, Ms Crown's indefeasible title to the Bronte Property is an answer to a Black v Freedman claim.
14. For those reasons, I am not satisfied that any claim against Ms Crown has been established.

Claim against CFE

1. Macarthur Farm's claim against CFE arose for consideration only in the event that it was established that (as the Defendants contended) the September BAS Refund was paid into the Joint Account for, and held in the Joint Account on behalf of, CFE.
2. In short, Macarthur Farm submitted that, on this factual premise, CFE was liable under the first limb of Barnes v Addy for knowing receipt of moneys transferred in breach of trust (as a result of being imputed with the knowledge of its controller, Mr Crown).
3. It is unnecessary to address this claim because the factual premise has not been established. For reasons given above, I am not satisfied that the payment of the September BAS Refund into the Joint Account represented a payment made to CFE, or that the amount of the September BAS Refund was held in the Joint Account on behalf of CFE.

Relief

1. For the reasons outlined above, the claims against Mr Crown for breach of trust and breach of director's duties have been established.
2. Macarthur Farm suffered loss and damage as a result of those breaches, being the loss of the amount of the BAS Refunds. It is entitled to compensation in the amount of the BAS Refunds, together with interest.
3. Macarthur Farm contended, in closing address, that it did not have any obligation at this point to make an election between compensation or an account of profits, referring to my recent decision in Firmtech Aluminium v Xie [2024] NSWSC 1293 at [554]-[555]. In that case, valuable commercial opportunities had been diverted by officers of a company to a rival entity which they controlled. The plaintiff company did not have sufficient information to make an informed choice between alternative remedies (and in particular, did not have information regarding the profits made from individual contracts): see Firmtech Aluminium Pty Ltd v Xie (No 2) [2024] NSWSC 1427.
4. In the present case, a sum of money, which was held on trust by Mr Crown, was transferred into the Joint Account. On Macarthur Farm's own case, those funds were then used to buy a property in the name of another person (Ms Crown), who did not have notice that the funds had been misappropriated. Macarthur Farm did not identify at trial, by way of evidence, or in written or oral submissions, any "profit" that may conceivably have been made by Mr Crown as a result of these transactions.
5. In those circumstances, the question of election between remedies is moot.

Conclusion & Orders

1. Macarthur Farm has failed to establish its claims against Ms Crown and CFE. Those claims will be dismissed.
2. Macarthur Farm has established its claims against Mr Crown, and is entitled to judgment against him in the amount of the BAS Refunds ($2,616,500) together with pre-judgment interest from the date of receipt of the BAS Refunds in Mr Crown's Account.
3. In circumstances where Macarthur Farm has been successful against Mr Crown, but not the other Defendants, I will give the parties an opportunity to be heard on costs in the event that there is no agreement as to the appropriate form of order.
4. Accordingly, I make the following orders. The Court: 1. Directs that the parties are to bring in short minutes of order by 5pm on 26 February 2025 to give effect to the reasons for judgment. 2. Directs that, in the event the parties are unable to agree on orders to give effect to the reasons for judgment (including orders as to costs), the parties exchange and provide to the Associate to Nixon J, by 5pm on 26 February 2025, the orders which each party proposes and submissions (limited to 5 pages) on those orders, indicating whether, and if so why, an oral hearing is requested to deal with the matters in dispute.

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