Supreme Court dashes fraud claims against IRD in $3.7b Trinity case

The Supreme Court has rejected a claim the Inland Revenue Department fraudulently won its $3.7 billion tax case involving the Trinity forestry scheme.

The court bench, comprising Chief Justice Sian Elias and Justices Andrew Tipping, John McGrath, William Young and Thomas Gault, upheld an appeal by the Commissioner of Inland Revenue and restored a High Court decision maintaining IRD's interpretation about tax deductions made by the scheme's investors.

The decision was delivered by Justice McGrath in Wellington today.

The tax department has previously said the investment scheme would have cost taxpayers up to $3.7 billion over its 50-year lifespan.

A group of Trinity investors, including the scheme's architect Garry Muir, claimed the IRD "deliberately refrained from putting material facts and law" before the High Court in the original proceeding, "so as to secure a judgment that department officers knew would not have been available if there had been full and frank disclosure of the legal position," the judgment says.

The group, led by Muir's Redcliffe Forestry Venture, said the commissioner "knowingly and wrongly applied a depreciation allowance to expenditure incurred by the Trinity investors" under a certain provision of the Income Tax Act.

The Supreme Court judges rejected the accusation, saying "Redcliffe cannot credibly claim that the litigation strategy attributed to the commissioner compromised its ability to mount an argument on the subpart's applicability".

Because Redcliffe challenged the legal correctness of a Supreme Court ruling, underpinned by the allegation of fraud, it erred in filing a new proceeding in the High Court, the judgment said.

"What Redcliffe alleges does not constitute a case capable of leading the High Court to set aside the 2004 judgment," it said.

Redcliffe and the other Trinity investors were ordered to pay $15,000 in costs with reasonable disbursements, and reversed a costs order in their favour in the Court of Appeal.

(BusinessDesk)