CCM Holdings Trust Pty Ltd v Chief Commissioner of State Revenue; CCT Motorway Company Nominees Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCA 42

Summary

The Chief Commissioner appealed against decisions of Bergin CJ that assessments had been incorrectly made in relation to land rich duty regarding the CrossCity Motorway Property Trust, and duty on the transfer of shares in CrossCity Motorway Pty Ltd. Before the appeals were heard, a deed of company arrangement was executed, requiring leave of the Court for the appeals to proceed.

Gleeson JA decided there was no utility at present in granting leave to proceed with the appeals, but acknowledged that circumstances may change that may warrant a further application for leave, such as the respondents’ financial position following completion of the sale process.

Background

This matter consisted of two sets of proceedings:

1. the first and main set of proceedings (Case No. 2013/270858) was between the Chief Commissioner of State Revenue (“Chief Commissioner”), as appellant, and CCM Holdings Trust Pty Limited (“CCMH”), as respondent (“the Trust Proceedings”); and
2. the second set of proceedings (Case No. 2013/270865) was between the Chief Commissioner, as appellant, and CCT Motorway Company Nominees Pty Limited (“CCTM”), as respondent (“the Company Proceedings”).

In both proceedings, the Chief Commissioner appealed against the decision of Bergin CJ in Eq at first instance that the Chief Commissioner was incorrect to assess:

1. in respect of the Trust proceedings, a transfer of units in the CrossCity Motorway Property Trust to land rich duty of $36,285,490, plus penalty tax of $5,442,823.50 (following partial remission on objection) and interest of $19,346,220.38; and
2. in respect of the Company Proceedings, a transfer of shares in CrossCity Motorway Pty Limited to share transfer duty of $20,431.20, plus interest of $10,893.

Subsequent to the appeals in both proceedings being filed by the Chief Commissioner, both CCMH and CCTM executed a deed of company arrangement on 11 November 2013. The effect of s 444E of the Corporations Act 2001 was that the Chief Commissioner could not proceed with the appeal proceedings against the respondents, or in relation to any of the respondents’ property, except with the leave of the court.

The issue for determination before the court was whether the Chief Commissioner, pursuant to s 444E of the Corporations Act 2001 (Cth), should be granted leave to proceed against the respondents (being companies subject to a deed of company arrangement).

Decision

Gleeson JA refused to grant the Chief Commissioner leave to proceed with the proceedings, and dismissed the applications by the Chief Commissioner with costs.

In refusing to grant leave, Gleeson JA found as follows:

1. That the Chief Commissioner’s appeals involved a serious claim, however it was inappropriate for the Court to embark upon an assessment of the merits of the Chief Commissioner’s appeal grounds for present purposes.
2. A strong factor against the grant of leave is if there is no prospect of surplus assets in the company for distribution to unsecured creditors. In these proceedings, Gleeson JA concluded that the prospect of any surplus for distribution to unsecured creditors “appears quite low” (at 58), but that it was not possible to conclude that there will be no surplus. In this regard Gleeson JA ultimately determined that “it is at best uncertain whether a surplus will arise for unsecured creditors” (at 59), and so it was uncertain whether the Chief Commissioner would receive any monetary return if the appeals were successful.
3. In response to specific contentions made by the Chief Commissioner in support of leave being granted:
   1. Gleeson JA did not accept that the inability of a liquidator of the respondents to pursue potential causes of action against third parties (which depended on the Chief Commissioner succeeding in establishing his claims on appeal) was a factor weighing in favour of the grant of leave to proceed. In this regard:
      1. Gleeson JA referred to the trust deed for the CCT Motorway Property Trust as having the effect of exempting the unit holder from any liability to indemnify CCMH as trustee;
      2. Gleeson JA was not prepared to extend the principle in Hardoon v Belilios (concerning the equitable basis of a trustee’s right of indemnity) to a person who owns or controls a corporate beneficiary; and
      3. Gleeson JA found that any contention that the directors of the respondents had been given negligent advice to enter into the subject transactions was entirely speculative;
   2. Gleeson JA found that the Chief Commissioner would not be at a disadvantage, in respect of the issue of unresolved costs arising from the first instance proceedings, if leave were refused because there was no evidence that the Deed Administrators intended to seek costs orders in the proceedings below. Gleeson JA noted that if the Deed Administrators obtain costs orders against the Chief Commissioner, the Chief Commissioner could apply for leave to proceed with the appeals at that later stage; and
   3. Gleeson JA was not satisfied that the appeals had substantial precedential value.

Accordingly, Gleeson JA did not consider that there was any utility at present in granting leave to proceed with the appeals. However, Gleeson JA acknowledged that circumstances may change that may warrant a further application for leave, such as the respondents’ financial position following completion of the sale process of the tunnel by the receivers, or if the Deed Administrators obtain cost orders against the Chief Commissioner in the proceedings below.

Link to decision

Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd; Chief Commissioner of State Revenue v CCT Motorway Company Nominees Pty Ltd [2014] NSWCA 42