Commissioner of Taxation v Macquarie Health Corp Ltd & Ors [1998] FCA 1715

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: 18 AUGUST 1998

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: The second cross-claim was filed by AT Holdings Pty Ltd ("AT Holdings") in its capacity as trustee of the Aborda Trust. Morlea Professional Services Pty Ltd ("Morlea") is joined as second cross-respondent to the second cross-claim. Leave is now sought on behalf of AT Holdings and Morlea to file an amended second cross-claim in which Morlea is joined as second cross-claimant and ceases to be a cross‑respondent. In addition, there are further amendments sought to be made in the second cross-claim. Senior counsel for AT Holdings intimated that an amendment would be made to paragraph 25, which originally said as follows: The debts as between Richard Walter and the Debtors are therefore by virtue of the matters pleaded in paragraphs 1 to 23 held on constructive trust for the benefit of the Morlea Partnership and/or the beneficiaries of the Aborda Trust and the Aurelius Trust. The amendment foreshadowed was to insert at the end of that paragraph the following: to the extent necessary to repay the amount referred to in paragraph 7(d) together with compound interest on the amounts owed from time to time as referred to in paragraph 7(a) to (d) calculated at yearly rests and at the rates prescribed from time to time pursuant to the Federal Court Rules or at such other as the Court thinks fit (such amounts being referred to hereinafter as "the Trust Sum"). The moneys referred to in paragraph 7 are the moneys which were advanced by the Morlea Partnership to the Taxpayer and which advances are said, in the light of the decision of this Court in the earlier proceedings, to have been made in breach of trust or breach of fiduciary duty. In the course of discussion concerning the proposed amendment, the fact that moneys had been paid into court was adverted to. As originally foreshadowed, the amendment contemplated an order that there be paid out to AT Holdings from the moneys paid into court on 4 August 1998 the amount of the "trust sum" as referred to in the proposed amended paragraph 25. In the course of debate it was apparent that, to the extent that AT Holdings is entitled to be paid anything out of the moneys paid into court, it would be limited to 5 per cent of the "trust sum" and not all of the "trust sum" as alleged. The reason for that limitation is that it is common ground that the Morlea Partnership was a partnership between the trustees of the Aborda Trust and the Aurelius Unit Trust in the shares 5 per cent and 95 per cent respectively. The amendment which is now proposed involves a prayer for relief being included in the second cross-claim in the following terms: An order that the First Cross-Claimant on the Second Cross-Claim be paid the 5% of the Trust Sum and that the Second Cross-Claimant on the Second Cross-Claim be paid 95% of the Trust Sum out of the monies paid into Court on 4th August, 1998. AT Holdings is to be the first cross claimant and Morlea is to be the second cross claimant. The proposed amendment is opposed on behalf of the Commissioner and the Taxpayer. One concern expressed on behalf of the Commissioner is that it is not clear who is said to be ultimately beneficially entitled to the funds which would be paid out to Morlea in the light of the evidence that the Aurelius Unit Trust has long since been wound up and the benefits of that trust have been distributed to Aurelius Commodus BV, which itself has been wound up. However, there has always been an issue, raised in the proceedings at the behest of the Commissioner, concerning the winding up of the Aurelius Unit Trust and distribution of its assets to the unit holders. In the circumstances, while the amendment might ultimately be futile because the cross claimants will not be able to establish that any moneys are held on trust for the beneficiaries of a trust which has been wound up, that is a matter which can be adequately dealt with in the course of addresses. It does not involve any fresh factual matter in the light of the defence which has already been filed to the second cross-claim. One further matter which may require further evidence has been adverted to by counsel for the Taxpayer. It was foreshadowed that it may be contended that Morlea is not a fit person to be a trustee of the funds, if that is ultimately the conclusion which I reach. That, however, is a different question. Whether the funds would be secure if paid to AT Holdings or to Morlea may not be a matter in which either the Taxpayer or the Commissioner has any interest, depending upon what the ultimate destination of the funds might be. That is a matter which might be the subject of different proceedings once the funds sought by AT Holdings and Morlea are received by them. It may well be, for example, that, if the Commissioner or the Taxpayer, by some other route, is able to assert an interest in those funds or if the ultimate beneficiaries of the distribution from the Aurelius Unit Trust are capable of being located, they may well have an interest in the fitness of the trustee. However, as I have said, that might ultimately be a reason why I would not order the payment out of the moneys in court until I have been satisfied as to those matters. It does not seem to me to be a reason why I should refuse leave to make the amendment now sought. Accordingly, I give leave to AT Holdings and Morlea to file an amended second cross-claim in the form which I will now initial and date with today's date. I certify that this and the preceding three (3) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett