
Misusing Company Funds: Lessons from Macarthur Farm Pty Ltd
Mar 12, 2025Company directors owe strict legal duties when managing corporate funds, and breaches of these duties can lead to significant legal consequences. This was evident in the recent case of In the Matter of Macarthur Farm Pty Ltd [2025] NSWSC 40, where the Supreme Court of New South Wales examined allegations of breach of trust, breach of directors’ duties, and misappropriation of company funds.
The case involved a dispute over $2.6 million in GST refunds received by Macarthur Farm Pty Ltd, which were transferred by its sole director, Mr Thomas Crown, into a joint bank account held with his wife, Ms Vanessa Crown. The funds were later used to purchase a luxury property in Bronte, NSW, raising serious legal questions about whether the transfer was legitimate or constituted a misappropriation of corporate assets.
Ultimately, the Court found that Mr Crown had breached his fiduciary and statutory duties as a director and was liable for the misappropriation of funds. However, it did not impose liability on Ms Crown, as she was not found to have knowingly participated in the breach.
This case serves as a strong reminder of the risks directors face when handling company funds, particularly when corporate assets are mixed with personal finances.
Factual Background
The Company and Key Individuals
- Macarthur Farm Pty Ltd was a special purpose vehicle (SPV) incorporated by Thomas Crown for the purchase and development of land at Spring Farm, NSW.
- Macarthur Farm was the trustee of the Macarthur Farm Trust, with all units held by Crown Family Estates Pty Ltd (CFE)—another entity controlled by Mr Crown.
- Mr Crown was the sole director and shareholder of both Macarthur Farm and CFE.
- Vanessa Crown, Mr Crown’s wife, was not a director or shareholder but was the co-owner of the joint bank account where the disputed funds were deposited.
The Disputed Transactions
- Macarthur Farm secured funding from Warneet Super Pty Ltd to purchase the Spring Farm properties, including GST and transaction costs.
- After settlement, Macarthur Farm lodged Business Activity Statements (BAS) for September and October 2023, receiving GST refunds totalling $2,616,500 (the BAS Refunds).
- Instead of keeping these funds in a corporate account, Mr Crown transferred them into his personal bank account.
- Five days later, he moved the money into a joint bank account held with Ms Crown.
- On 23 October 2023, funds from the joint account were used to purchase a luxury property in Bronte, NSW, registered solely in Ms Crown’s name.
These transactions triggered legal action by Macarthur Farm (under new management), alleging breach of trust, misuse of company funds, and breaches of directors’ duties.
Main Legal Issues Considered by the Court
The Court examined several key legal questions:
1. Did Mr Crown hold the BAS Refunds on trust for Macarthur Farm?
Yes. The Court accepted that the BAS Refunds were corporate funds, and upon receipt, Mr Crown held them on trust for Macarthur Farm. As such, he was obligated to use the money for company purposes, not personal benefit.
2. Did Mr Crown breach his fiduciary and statutory duties as a director?
Yes. Under sections 181 and 182 of the Corporations Act 2001 (Cth), directors must:
- Act in good faith and in the best interests of the company (s 181).
- Not improperly use their position for personal gain or to cause detriment to the company (s 182).
By transferring corporate funds into his personal and joint accounts—and ultimately using them to purchase property—the Court found that Mr Crown gained an unauthorised benefit at the company’s expense.
3. Was the transfer a legitimate payment for services to Crown Family Estates (CFE)?
No. Mr Crown argued that the transfer was a “performance fee” owed to CFE for property development services. However, the Court found no evidence of a valid agreement between Macarthur Farm and CFE to justify such a payment.
- There was no written contract or invoice for the alleged services.
- No record-keeping or financial documentation supported the claim.
- The payment method (via a joint personal account) was inconsistent with standard business practices.
As a result, the Court rejected Mr Crown’s explanation and ruled that the transfer was a breach of trust.
4. Was Ms Crown liable for receiving misappropriated funds?
No. While the funds were used to purchase a property in her name, the Court found no evidence that she was aware of their improper origin at the time of receipt.
- Under Black v Freedman (1910) 12 CLR 105, a recipient of misappropriated trust funds can be held liable if they had actual or constructive knowledge of the breach.
- The Court found that Ms Crown only became aware of Macarthur Farm’s claims months later, meaning she could not be held personally liable for restoring the funds.
However, had she known earlier, she may have been required to return the funds or their traceable products (such as the Bronte property).
The Court’s Decision
Findings Against Mr Crown
✅ Breach of trust established – Mr Crown held the BAS Refunds on trust but misappropriated them.
✅ Breach of directors’ duties established – He used his position to obtain an unauthorised benefit for himself and his wife.
✅ Restitution ordered – Mr Crown was ordered to repay the full amount of the BAS Refunds to Macarthur Farm.
Findings Regarding Ms Crown
❌ No liability established – Ms Crown was a volunteer recipient of the funds and did not have notice at the time of receipt.
Costs and Future Orders
The Court directed the parties to agree on final orders, including costs and restitution measures. If an agreement could not be reached, the Court would determine the orders in a later hearing.
Key Takeaways for Directors and Companies
📌 Corporate funds must be kept separate from personal finances – Mixing company money with personal accounts raises red flags and can lead to legal liability.
📌 Directors must act in the company’s best interests – Using corporate funds for personal benefit violates fiduciary duties and can lead to civil and criminal penalties.
📌 Proper documentation is critical – If directors claim company funds are used for legitimate business expenses, they must provide clear records (contracts, invoices, financial statements).
📌 Third parties can be liable for misappropriated funds – If a recipient knows or should have known about a breach of trust, they may be required to return the funds.
Conclusion
The decision in Macarthur Farm Pty Ltd reinforces the serious consequences of misusing corporate funds. Mr Crown’s actions led to findings of breach of trust and directors’ duties, resulting in significant legal and financial penalties. While Ms Crown escaped liability due to lack of knowledge, the case highlights the importance of financial transparency and corporate governance.
For directors and business owners, this case serves as a cautionary tale: mismanaging company funds can have severe legal repercussions. To avoid similar disputes, directors should ensure that all transactions are properly documented and corporate funds are handled with integrity.
Contact the Shire Legal team if you have any questions.
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