On Thursday, the NSW Court of Appeal dismissed the Commonwealth of Australia’s appeal from a finding that it was liable for knowing receipt of millions of dollars in unauthorised profits obtained by a de facto director in breach of his duties, in Commonwealth of Australia v Kupang Resources Pty Ltd [2026] NSWCA 161.

This is an extraordinary case. The NSW Supreme Court decision appealed from is Kupang Resources Pty Ltd v Commonwealth of Australia (No 4) [2025] NSWSC 1477. I wrote about it when it was handed down in December last year (2025) – see my review here. The primary judge had ordered judgment for Kupang against the Commonwealth in the sum of $15,139,745.67 plus pre-judgment interest up to 18 December 2025 in the agreed sum of $20million.

This stems from a 2012 case that was decided by the Full Court of the Federal Court in Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296, which involved issues of secret commissions/bribes, directors’ fiduciary duties, de facto directors, Barnes v Addy liability and equitable remedies. Whilst the litigation was running, the ATO was monitoring it, and pursuing Grimaldi for an unpaid tax debt of $36.3 million. The Full Federal Court victory of Chameleon Mining NL (now renamed Kupang Resources Pty Ltd) in that case was rendered hollow. Before it could enforce its judgment against Grimaldi, the ATO had pursued and recovered most of Grimaldi’s remaining funds.

On appeal there were unchallenged findings that the ATO had actual and constructive knowledge that the funds had been obtained in breach of fiduciary duty and were traceable. In the context of how much the ATO knew, McGrath J at first instance had gone so far as to find that the ATO had conducted itself with a want of probity sufficient to fix its conscience with liability for knowing receipt (at [684]). However whilst clearly disapproving of the ATO’s conduct, his Honour did not need to go so far. On appeal the Court was unanimous that the Commonwealth was not permitted to raise a new argument about this on appeal, as the premise of the ground was that a “want of probity” was required to establish liability under the first limb of Barnes v Addy in addition to the accepted knowledge requirements, which was wrong as a matter of Australian law. (See [31]-[47] and [126] (Bell CJ), [129] (Ward P), [130] (Griffiths AJA).)

It is important to note that the NSW Court of Appeal discusses remedial and institutional constructive trusts in its judgment, on the question of whether it was trust moneys held by Grimaldi (for the benefit of Kupang/Chameleon) that the ATO received in payment of Grimaldi’s tax debts. The Court takes the strong view that unauthorised profits obtained in breach of fiduciary duty are held on trust for the principal, that this is an institutional constructive trust that arises at the moment of breach, and it does so independently of curial intervention. The character of the funds held by Grimaldi (before paying them to the ATO) as trust property had not been altered by the final orders made in the 2012 FCAFC judgment which relevantly granted Kupang/Chameleon only a personal remedy over Grimaldi to account for his unauthorised profits. Thus they remained trust property when received by the ATO. (See [53]–[109] (Bell CJ), [129] (Ward P), [130] (Griffiths AJA).) Wading into the doctrinal debate on this last aspect is beyond the scope of this short review. I note it to draw it to your attention, and encourage reading the judgment for yourself.