Commissioner of Taxation v Macquarie Health Corp & Ors [1998] FCA 1133

IN THE FEDERAL COURT OF AUSTRALIA NG 118 of 1996

NEW SOUTH WALES DISTRICT REGISTRY NG 445 of 1995

BETWEEN: COMMISSIONER OF TAXATION

Applicant

AND: MACQUARIE HEALTH CORPORATION LIMITED

First Respondent

BUSINESS AND PROFESSIONAL LEASING PTY LTD

Second Respondent

RYNDALE PTY LTD

Third Respondent

SARZANA HOLDINGS PTY LTD

Fourth Respondent

RICHARD WALTER PTY LIMITED (IN LIQUIDATION)

Fifth Respondent

AT HOLDINGS PTY LTD

Sixth Respondent

MORLEA PROFESSIONAL SERVICES PTY LTD

Seventh Respondent

JUDGE: EMMETT J

DATE: 11 AUGUST 1998

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: On 7 February 1997 the fifth respondent, Richard Walter Pty Limited ("the Taxpayer"), filed a cross-claim in which, inter alia, the following allegations were made: · the Taxpayer received sums of money between 1 July 1980 and 30 June 1984 which after receipt gave rise in part to alleged unsecured debts due to the Commissioner referred to in the section 218 notices issued by the Commissioner to the first, second, third and fourth respondents ("the Debtors"); · those sums were paid to the Taxpayer by Morlea Professional Services Pty Limited as agent for the Morlea Partnership and the Taxpayer provided no consideration for those sums; · there was no agreement between the Taxpayer and the Morlea Partnership to repay the said sums and the Taxpayer knew that the sums were held by the Morlea Partnership as trustees of the trusts described as the Aurelius Unit Trust and the Aborda Trust; · in those circumstances the Taxpayer held those sums on a resulting trust for the Morlea Partnership immediately the sums were received. The Taxpayer filed a further amended cross-claim which abandoned the allegations of a resulting trust to which I have just referred. That was done in a context where the proceedings had been listed for hearing and a second cross-claim had been filed on behalf of AT Holdings Pty Limited, the trustee of the Aborda Trust. In the second cross-claim AT Holdings Pty Limited took up and expanded the allegations which had been made by the Taxpayer in the first cross-claim. The thrust of the allegations in the second cross-claim was that the moneys paid to the Taxpayer by the Debtors were held on constructive trust for the benefit of the Morlea Partnership and/or the beneficiaries of the Aborda Trust and the Aurelius Unit Trust. In the defence filed on behalf of the Taxpayer to the second cross-claim, a number of allegations in the second cross-claim were admitted and the balance of the allegations were not admitted. There were no denials and no positive assertions made in the defence. The paragraphs of the second cross-claim which asserted that the moneys paid to the Taxpayer by the Debtors were held on constructive trust and that those sums were paid to the Taxpayer in breach of fiduciary obligations owed to the beneficiaries of the trusts were amongst the paragraphs not admitted. When the proceedings were called on for hearing yesterday, counsel for the Taxpayer foreshadowed an application for leave to amend its defence to raise matters which had been raised by the Commissioner in his defence to the second cross-claim. The Commissioner's defence raises positive assertions by way of answer to the allegation of resulting trust and breach of fiduciary obligations. In its proposed amended defence, the Taxpayer seeks to raise the matters which are contained in paragraphs 32 and 35 of the Commissioner's defence. The Taxpayer has also foreshadowed that if the Commissioner is successful in his application for leave to amend his defence, the Taxpayer will also seek to rely on the amended paragraphs. The paragraphs sought to be relied on by the Taxpayer involve allegations that there was, and is, such a degree of identification between the Taxpayer, the trustees of the trusts and the beneficiaries of those trusts that they are estopped from contending that the debts to which I have referred were received or held by the Taxpayer for the beneficiaries of those trusts. The estoppel is said to arise out of determinations made in proceedings in this Court between the Taxpayer and the Commissioner in which the Taxpayer sought to establish that the amounts in question were, in fact, debts and that the amounts were received by the Taxpayer by way of loan. Those matters were resolved unfavourably to the Taxpayer in those proceedings on the basis that the sums in question were received beneficially by, and were income in the hands of, the Taxpayer. In addition, the Commissioner's defence raises further matters, said to be an answer to the claim in the second cross-claim, as follows: (1) reliance is placed on sections 47 and 48 of the Limitation Act 1969 (NSW); (2) it is said that the claim is barred because the claimants have been guilty of laches, acquiescence and delay, so that they are no longer entitled to claim that any property is held on trust either as alleged or at all. In the proposed amendment, the Commissioner also seeks to raise a further matter by way of answer, namely that, by various transactions which occurred in 1984 and 1989, any obligation that the Taxpayer may have had to repay the payments in question had been satisfied or discharged and AT Holdings does not have any claim against the Taxpayer in respect of those payments or the proceeds of them. Further, it is said that it would be inequitable for AT Holdings now to be accorded any interest whether by way of constructive trust or otherwise in respect of the payments. I have deferred until tomorrow ruling on the question of whether that amendment should be allowed. It is accepted that the Taxpayer's amended defence, if allowed, will raise no matters which are not otherwise raised by the Commissioner, although it may be that the Taxpayer has standing to raise some of the matters whereas the Commissioner may not have standing. Resistance to the application to amend is essentially on discretionary grounds based on the obvious volte-face which has occurred in relation to the successive stances adopted by the Taxpayer in the conduct of these proceedings. The liquidator has sworn an affidavit in which he has outlined in somewhat vague terms the sequence of events which led to the changes in stance. He says that at the time of filing the original cross-claim he had become aware of the possible equitable claims by reason of the judgments of this Court in the earlier proceedings. On the advice of his solicitors, he sought to raise those claims in the cross-claim as originally filed, having been advised that it was proper for him to ventilate the claims in order to ascertain which party was beneficially entitled to the assets under his control. That course may have been misconceived. If there were doubts which the liquidator harboured, the appropriate course may have been to seek directions as to how the assets should have been disposed of rather than to make a positive assertion of claims contrary to the interests of the Taxpayer itself. The liquidator says that, subsequent to the filing of that cross-claim and after giving further consideration to the matter, the proceedings were reconstituted in the way which I have described. The precise advice which led to those circumstances is not in evidence before me. However, it may be that I should draw the inference that the liquidator was advised that there may well be some difficulty for him in conducting proceedings in which he was making positive allegations contrary to the interests of the unsecured creditors generally. It was in those circumstances that the second cross-claim and the Taxpayer's original defence to the second cross-claim came to be filed. The liquidator says that, following the adjournment of the hearing on 19 May 1998, he took steps to re-evaluate the position which he should properly adopt with respect to the second cross-claim which was in the best interests of the Taxpayer. That entailed reviewing the detailed material filed by the parties and seeking further legal advice. The liquidator says that in early July 1998 he sought and obtained oral advice from counsel in relation to the stance which he ought to adopt consistent with his obligations as liquidator. On 14 July 1998 he sought written confirmation of oral advice and received written confirmation in final form on 31 July 1998. It might be observed that that sequence of events is somewhat leisurely. The change of stance by the liquidator in May contributed in some manner to the need for the adjournment at that stage although I understand that is certainly not conceded. It was incumbent upon the liquidator, having perceived that there were difficulties, to ensure that the other parties were informed as soon as possible of the different stance which he was bound to take. Nevertheless, senior counsel for AT Holdings is not able to point to any actual prejudice in terms of the conduct of the proceedings by reason of the raising of the matters by the Taxpayer as distinct from the Commissioner. There may be some prejudice to the extent that the Taxpayer has standing to raise matters which the Commissioner might not be able to raise. However, those are matters which ought to have been raised by the Taxpayer in the first instance and the lateness of raising them is not said to constitute any prejudice to the position of AT Holdings in conducting the proceedings at this stage. In the circumstances, while it is most regrettable that the liquidator, an officer of the court, has, at least on the face of it, seemed to have engaged in inconsistent stances, I consider that the interests of justice are best served by permitting the amendment subject to the usual order that all costs thrown away by the amendment be borne by the Taxpayer. Accordingly, I propose to permit the amendment. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett