Hamish Fletcher

Business reporter for the NZ Herald

Investor fails to overthrow Trinity tax decision

High Court judge dismisses claim over forestry scheme as attack on colleagues.

The IRD claimed the proposed scheme would have cost taxpayers up to $3.7 billion.  Photo / Paul Escourt
The IRD claimed the proposed scheme would have cost taxpayers up to $3.7 billion. Photo / Paul Escourt

An attempt by an investor in the Trinity forestry scheme to set aside a nine-year-old tax avoidance ruling has been dismissed and labelled as a "collateral attack" on two Supreme Court judgments.

The bid was the latest round in a sustained series of legal fights between Trinity investors and the tax department since 2004.

The forestry scheme at the heart of the tax case involved up to 300 investors who in 1997 bought a 50-year licence to grow douglas fir trees on land owned by Trinity Foundation companies.

Investors agreed to pay a licence fee of $2 million a hectare in 2047- when the trees were to be harvested.

But although the $2 million was not to be paid until 2047, it was immediately tax deductible for the investors. The result was a 50-year tax holiday for the investors, who also claimed for the cost of a British Virgin Islands-based insurance policy that formed part of the scheme.

The IRD claimed the scheme would have cost taxpayers up to $3.7 billion over its 50-year-lifespan and it was found to be a tax avoidance arrangement by Justice Geoffrey Venning in 2004 - a decision upheld in the Supreme Court in 2008.

But this year, Trinity investor Accent Management Ltd filed fresh proceedings in the High Court attempting to set aside Justice Venning's decision.

Inland Revenue responded, at a hearing before Justice John Priestley last month, by saying the High Court did not have the jurisdiction to hear the case.

In his decision on the matter, Justice Priestley has called Accent's bid "startling".

"Indeed, in terms of any conventional analysis, the proposition is preposterous," the judge said.

In dismissing Accent's claim he said: "I am totally satisfied that the plaintiff's proceeding represents a collateral attack on not one but two judgments of the Supreme Court.

"I see the statement of claim as an impermissible attack on [Justice Venning's] 2004 judgment."

Another set of Trinity investors, which includes Ben Nevis Forestry Ventures, is also pushing for the 2004 decision to be set aside because Justice Venning was allegedly biased.

Inland Revenue has also argued in those proceedings that the High Court does not have the jurisdiction to deal with the case.

According to a lawyer involved in the Ben Nevis action, a decision has not yet been returned by Justice Sarah Katz, who was hearing the matter.

- NZ Herald

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n2 at 03 Oct 2014 06:26:55 Processing Time: 745ms