Investors take aim at judge

A High Court judge's "excesses" in criticising Auckland lawyer Garry Muir are likely to help efforts to challenge the Trinity tax scheme judgment, says Bruce Stewart, QC.

Trinity is a forestry scheme that the Inland Revenue Department alleged was set up to help investors claim more than $3 billion in tax benefits over 50 years.

In the judgment last week on the test case brought by Muir and other plaintiffs against the IRD - challenging the tax department's assessments - Justice Geoffrey Venning ruled the scheme was a tax dodge.

He also described the scheme's architect, Muir, as an evasive and unhelpful witness.

He said Muir, a partner in Auckland law firm Bradbury & Muir, was an unsatisfactory witness, especially under cross-examination.

The judge also expressed concern at Muir's failure to produce documents under "discovery" - the pre-trial process for the opposing sides to obtain documents and information.

In a letter to plaintiffs in the test case, Stewart said the judge contravened the "well-recognised convention that judges should not criticise or denigrate witnesses unless it is necessary for the decision". 

"Although disappointing, it is likely that the judge's excesses in this regard will assist the challenge to his views in relation to other matters contained in the judgment."

Stewart said there were numerous and significant grounds of appeal, which would be the subject of a formal opinion in the new year.

The plaintiffs in the test case have already indicated they will appeal.

The Venning judgment found tax avoidance was Trinity's dominant purpose.

"The uncertainty of the profitability of the forest venture is in stark contrast to the certainty and extent of the deductions and consequent tax advantages the scheme provided the plaintiffs as investors."

The IRD says it has assessed tax of $246 million in connection with the first three financial years that the scheme ran - 1997, 1998 and 1999 - and has also added 100 per cent penalties from 1998.

The Muir camp says the tax benefits were not that high.

The IRD says more than 300 people invested in Trinity and about 10 per cent have reached confidential settlements, with more indicating they plan to settle.

It also says more than 140 cases, where Trinity investors are challenging IRD assessments in the Taxation Review Authority and the High Court, will remain stayed until after the test case has been appealed.

Ten plaintiffs - including Muir's law firm partner, Clive Bradbury, and Westpac head of asset management Greg Peebles - took part in the test case.