Judge bounces lawyer tax scheme fight

From Justinian's hard copy era ... When tax schemes were in your face ... And Andrew Rogers ruled the NSW Supreme Court commercial division with an iron fist in a titanium glove 

From Justinian, July 1992

Justice Andrew Rogers seemed harsher than usual when confronted with a case brought by a finance company that lent money to a horse racing and breeding syndicate, largely comprising a bunch of solicitors.

But Rogers, Chief Judge of the NSW Supreme Court's Commercial Division, himself came in for some flak from Court of Appeal President, Justice M. Kirby.

In July last year the finance company, Mortgage Acceptance Nominees Ltd, MAN, lined up at the barrier in Rogers' court for a preliminary run-in with the syndicate.

But Rogers, with his hand firmly on the starter's button, asked what the issues were and added: "In its intrinsic nature it may be a commercial matter."

"There are three-and-a-half judges available to do the work of the commercial division and the construction list.

I see absolutely no reason why we should not devote ourselves to bona fide commercial transactions and leave you people, who are financiers of tax avoidance transactions, to sort yourselves out within the ordinary course.

Why should the court give what little time it has to completely unmeritorious litigants like your clients?"

MAN's counsel told the judge:

"We purchased horses and we leased them. We lent money. We took certain guarantees and certain other securities and we seek to enforce them."

Rogers: "You will, in the ordinary course of the court's business, but why should you get any preference whatsoever over paraplegics and widows and what have you?"

Counsel: "We are not asking, your honour... This is an action which your honour would ordinarily comprehend would be a commercial action."

Rogers: "I think I should remove it."

He ordered transfer of the three actions involved to the common law division.

In his reason for judgment Rogers said MAN, "saw fit, for its own business reason to make advances to persons who were indulging themselves in either tax postponement, tax reduction or tax avoidance."

"It is the absolute privilege of the plaintiff to do so. It is the absolute privilege of the defendants to borrow money for such purposes.

However, when it comes to competition between these who have entered into bona fide commercial transactions, which were in the ordinary course of business and which were not entered into simply for the purpose of fuelling tax reduction, then the persons and companies in the first category will always be accommodated by obtaining a hearing in this division of the court in preference to the second category of litigant."

 By a 2-1 majority Justices Mahony and Handley refused MAN's application for leave to the Court of Appeal.

However, in his dissenting judgment Kirby P said Rogers' decision would effectively delay determination of the actions by more than three years.

He would have granted leave, upheld the appeal and sent the matter back to Rogers to be dealt with according to law.

He said Rogers' power to transfer the proceedings "is controlled by law. It is not at large. It is not available to bend to the whim or idiosyncratic notions of the particular donee of the power".

"With very great respect to Rogers CJ Comm, whose experience and efficiency have contributed so greatly to the success of the commercial division, I do not believe that the imputed involvement of parties to a dispute, commercial in character, in tax minimisation provides a sound basis for distinguishing 'bona fide' from other commercial transactions.

It is commonplace that parties to commercial transactions will often seek to minimise the payment of income tax. To fail to do so may even amount to professional negligence on the part of the advisers of such parties."

 Kirby said making a decision on a transfer "does not provide an occasion for moral judgments."

Large sums were involved and the solicitor/borrowers were subject to the very high interest rate of 26 percent on any unpaid debt.

Listed as members of the horse racing and breeding syndicate were:

• Rodney Graham Alexander
• Russell John Clear
• John Kenneth Connor
• James Anthony Kennedy
• Trevor Stanley Harding
• Martin Arthur King
• Nadaisan Raj Blessington
• Bryce Norton
• Larry Bartle
• John Tomich
• Ortica Holdings Pty Ltd
• Sportpix Pty Ltd
• Robert Gray Logan
• Murray Raymond Bell
• Peter James Tonkes