Yesterday the Supreme Court of NSW (McGrath J) held that the Commissioner of Taxation was in knowing receipt of approximately $20 million under the first limb of Barnes v Addy.
The origins of this case, Kupang Resources v The Commonwealth of Australia (No 4) [2025] NSWSC 1477 started 20 years ago when Mr Grimaldi, as a de facto director of Kupang (formerly Chameleon Mining), misappropriated its funds to acquire an interest in valuable iron ore tenements in Western Australia for Murchison Metals, a company in which he was a significant shareholder. The acquisition of the tenement greatly increased the value of Murchison shares.
In 2007, Kupang commenced proceedings against Grimaldi. In 2008, Grimaldi’s wealth drew the attention of the Commissioner of Taxation who ultimately recovered $20 million that Grimaldi paid to NSW Treasury to satisfy a proceeds assessment order obtained by the New South Wales Crime Commission. The confiscation of these funds frustrated Kupang’s recovery efforts.
In these proceedings, Kupang advanced a knowing receipt claim against the Commonwealth. It’s claim contended that a fiduciary’s duty to account for unauthorised profits when referable to identifiable property is a “fiduciary obligation with respect to property akin to a trust relationship or other custodial fiduciary relationships falling within the meaning of ‘trust property’ for the purposes of the first limb of Barnes v Addy”.
McGrath J, applying a “contemporary understanding of the application of a claim in knowing receipt under the first limb in Barnes v Addy” upheld the claim. His Honour further observed at [680] that the ATO, in relation to Kupang’s claims, had “a policy of willful blindness akin to a ‘tax now, ask questions later’ approach.”
Christopher Withers SC, Christopher Mitchell, Damian Morris and Jessica Hudson of Banco Chambers appeared for Kupang, instructed by Banton Group.