Commonwealth of Australia v Kupang Resources Pty Ltd

2025/00500507

EQUITY – in 2004, Mr Phillip Grimaldi appropriated the respondent’s funds to enable the completion of a transaction in which Murchison Metals Limited, a company of which Mr Grimaldi was a director and a significant shareholder, acquired an interest in valuable iron ore mining tenements in Western Australia – Mr Grimaldi obtained significant financial benefits from that transaction in the form of new shares and options in Murchison received as a “spotter’s fee” (Spotter’s Fee Securities) and an increase in the value of his existing Murchison shareholding (Existing Shareholding) via his nominees – on 20 October 2010, Jacobson J held that in so doing, Mr Grimaldi had breached his fiduciary duty owed to the respondent and that the respondent was entitled to an order for Mr Grimaldi to account for profits made as a consequence of his breaches of fiduciary duty – from 2008 to 2010, the Commissioner of Taxation (acting through the Australian Taxation Office (ATO)) pursued Mr Grimaldi for unpaid tax assessed on the premise that Mr Grimaldi and his superannuation fund were beneficially entitled to keep any profits earned on the Spotter’s Fee Securities and the Existing Shareholding – on 13 July 2009, the Commissioner obtained summary judgment against Mr Grimaldi in the Federal Court for $36,341,461.73 on that basis and ultimately settled the tax dispute with Mr Grimaldi and his nominees for close to $20 million – the majority of that sum was first paid to the New South Wales Treasury in purported satisfaction of a proceeds assessment order obtained by the New South Wales Crime Commission under the Criminal Assets Recovery Act 1990 (NSW), before being paid to the ATO from a confiscated proceeds account – the respondent brought proceedings against the appellant for “knowing receipt” of the profits earned on the Spotter’s Fee Securities and the Existing Shareholding, which it argued were “trust property” for the purpose of the first limb of Barnes v Addy by reason of Mr Grimaldi’s liability to account as a defaulting fiduciary, such that the appellant held the funds the ATO received from Mr Grimaldi and his nominees on constructive trust for the respondent or was otherwise liable to pay equitable compensation to it – the appellant contended that the funds were not “trust property” giving rise to a claim of knowing receipt because the orders of Jacobson J did not impose on Mr Grimaldi a fiduciary duty with respect to any property, including the proceeds of sale of both the Spotter’s Fee Securities and the Existing Shareholding – the primary judge held that the profits and their traceable proceeds arising from Mr Grimaldi’s breach of fiduciary duty were “property to which a fiduciary obligation attached” and therefore “trust property” for the purpose of a claim of knowing receipt under the first limb of Barnes v Addy – the primary judge further held that, as the appellant was aware of the 20 October 2010 judgment of Jacobson J at the time the ATO received the “trust property”, the appellant’s conscience was affected by knowing receipt of that property such that the funds received by the ATO were held on constructive trust for the respondent – the primary judge made orders in chambers entering judgment for the respondent in the amount of $15,139,745.67 – whether the primary judge erred in the holding that the funds or traceable profits arising from Mr Grimaldi’s breach of fiduciary duty were “trust property” – whether the primary judge erred in holding that the appellant was liable to account personally to the respondent by reason of the appellant’s receipt of the funds or traceable profits arising from Mr Grimaldi’s breach of fiduciary duty.

Kupang Resources Pty Ltd v Commonwealth of Australia (No 4) [2025] NSWSC 1477