Watson keeps tax dispute court file closed

Cullen Group, the investment firm founded by businessman Eric Watson, is being chased by Inland Revenue for $59.5m. Photo/File.

Attempts to shed light on Eric Watson's commercial ventures in the Cayman Islands have been stymied after lawyers acting for the high-profile businessmen succeeded in keeping the court file on his $60 million tax dispute closed.

Cullen Group is being chased by Inland Revenue for $59.5m after ruling a complex network of related-party loans and Cayman Island vehicles amounted to tax avoidance.

An earlier ruling on the dispute said the arrangement - started in 2002 on Watson's departure from New Zealand - resulted in Cullen paying only a two per cent levy instead of 15 per cent non-resident withholding tax Inland Revenue claims should have been paid.

Cullen Group is challenging the avoidance claim, arguing its arrangements were in line with both the letter and spirit of tax laws of the time.

A request by the Herald to the courts to inspect the file - particularly seeking to discover the links between Watson and Cayman-based Modena Holdings and Mayfair Equities - was declined following objections from Watson's Cullen Group.

Inland Revenue had indicated they would abide by the decision of the court.

Justice Timothy Brewer, considering the Herald's request to inspect the file at the High Court at Auckland, said "the trial has yet to be heard and there is a considerable amount of material on the file which would be considered commercially sensitive."

Brewer ruled there was no public interest in granting access to the file - but noted a three-week trial was set for late August and invited the Herald to both cover the case and resubmit the file inspection application on its conclusion.

The long-simmering dispute - with Inland Revenue first demanding payment in 2016 - faces another showdown next week at the Court of Appeal in Wellington where Inland Revenue are seeking to overturn an early ruling requiring them to furnish Cullen with advice given to Parliament decades ago.