Amaltal appeals order it pay $6.1m to partner

Fishing company Amaltal is appealing an order that it pay $6.1 million to a former joint venture partner.

The hearing, which started in the Court of Appeal today, follows a ruling by Justice John Priestley in the High Court at Auckland about 18 months ago that Japanese joint venture partner Maruha had proven a civil case of deceit. Maruha was found to have acted on Amaltal's false representations and suffered a loss.

The joint venture, Amaltal Taiyo, was set up in 1985 to catch hoki for use in surimi, a fish product sold in Japan.

The events at issue happened between 1986 and 1991 but Maruha said it only learned of key facts in 2000, nine years after the joint venture was dissolved.

Maruha owned 24.99 per cent of the company and Amaltal the rest, with Amaltal handling tax affairs.

The judge found the joint venture company successfully claimed tax deductions that were a "try on" -- or "aggressive taxation accounting" -- by depreciating the cost of a five-year lease of 40,000 tonnes of hoki quota.

The judge said there was "a deliberate failure" by Amaltal to disclose the tax benefits to Maruha.

This led Maruha to pay an unnecessary $5.38 million under a profit guarantee deal and to miss out on a $732,000 share of the company's profits -- $6.1 million in total.

In the Court of Appeal today Alan Galbraith QC, for Amaltal, said probably the most important point to make at the appeal was that the IRD's failure to disallow the amortisation claim was entirely unexpected.

It was important to not take that unexpected outcome into account in interpreting what happened and on what basis the parties dealt with each other during the period of the joint venture.

The judge in the High Court was unduly influenced by the consequences of the IRD decision, Mr Galbraith said.

With tax, a benefit could be gained from the timing of payments, and it could be useful to have a deduction for a time until it was disallowed.

Regarding the profit guarantee, the judge had been wrong to prefer a method of calculation proposed by an accountant called by Maruha, which was different to the method the parties had adopted during the period of the joint venture.

It was also important that the High Court hearing was held up to 17 years after the events dealt with, and was held in the absence of full documentary material, he said.

No documents sought for the hearing could be discovered from Maruha in Japan, and evidence was given during the hearing of document destruction.

That made it almost impossible to know what Maruha in Japan knew, because the first way to prove what the company knew would have been to look at the material it had, Mr Galbraith said.

During the High Court hearing a witness for Maruha, described by the judge as being the eyes and ears on financial matters for the company, had made statements more than once which turned out to be significantly incorrect on core issues.

His evidence needed to be treated with a great deal of caution.

Mr Galbraith agreed with Justice Hammond that the issues to deal with were firstly what the arrangement between the parties was, and secondly the state of Maruha's knowledge about the way the venture's books were being run.

The hearing before Justices Hammond, O'Regan and Robertson is expected to take most of the week.

- NZPA