Canterbury Tales - New Zealand Law Society

Canterbury tales
Canterbury tales
Canterbury Westland Branch New Zealand Law Society
November 2011, Vol. 17, No. 9
A reality check for tax
payers and their lawyers
By Geoff Hardy
On August 24 the Supreme Court
issued its eagerly awaited judgment
in the Penny & Hooper case, which
clarified the rules on tax avoidance.
Penny & Hooper were the orthopaedic
surgeons who restructured their medical
practices for the purpose of (among other
things) avoiding the last Labour Government’s
increase in the top tax rate from 33 per cent to
39 per cent.
The Supreme Court’s judgment was a victory
for the Inland Revenue Department (IRD) and
a setback for those who want to minimise their
tax burden through means that would normally
be regarded as perfectly legitimate.
What Penny & Hooper did was no different from
what thousands of other kiwis have done on
the advice of their accountants or tax
consultants. That is, they diverted some of their
income to their trustees or to various family
members who were all on lower marginal tax
rates than they were.
The result was that income that would
otherwise have been taxed at 39 per cent was
taxed at 33 per cent (the trustee rate) or lower
(the rates that their wives or children paid on
their own modest incomes). In the case of
Penny & Hooper this saved them between
$20,000 and $30,000 a year.
The structure their accountants set up was
pretty standard. They transferred their medical
practices to companies which they exclusively
controlled. The shares in those companies were
owned by their family trusts.
The companies then employed the surgeons
to provide the same medical services to the
“This case is going to give a lot
of New Zealand taxpayers and
their tax advisers some sleepless
nights, given that the Penny &
Hooper arrangements are
extremely common. It would be
a good time to touch base with
those clients of yours that might
be vulnerable.”
— Geoff Hardy.
same patients as the surgeons used to provide
directly. Instead of the income going to the
surgeons it now went to their companies.
But the companies only paid the surgeons very
modest salaries — in Hooper’s case only 18
per cent of what he was earning before, and in
Penny’s case only 14 per cent or less. The rest
of the net profits were distributed by the
companies to their shareholders — the family
trusts — as dividends. And of course those trusts
ended up spending the money on their
beneficiaries — the surgeons and their families.
These types of arrangements inevitably tilt the
playing field, because every tax dollar that does
not have to be paid by someone who has one
of these arrangements in place, is a tax dollar
that has to be paid by all the other taxpayers.
So from a fairness point of view you can
understand the Government wanting to clamp
down on cunning schemes that are designed
to artificially reduce someone’s tax liability.
The opposing argument, however, is that
people should be entitled to structure their
affairs in whatever way gives them the best tax
result, as long as it is done legally.
Why should people not be able to benefit from
their own industriousness, ingenuity, diligence
and innovation, or at least that of their
professional advisers? Is not that the
cornerstone of a free enterprise society, and
the reason why the per capita income of the
western-style democracies is so much higher
than anyone else’s?
Continued Page 9
Death notice
The Canterbury-Westland Branch of the
New Zealand Law Society records with
regret the death on 28/10/11 of Gerald
Victor Dallison, aged 83 years.
At the time of his death Mr Dallison was
the holder of a practicing certificate and
working in the firm of Dallison Stone.
Mr Dallison obtained his first practicing
certificate on the 27th February 1953.
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Canterbury
Canterburytales
tales
Vino Fino
Photo Caption
Each month we have a photo caption
competition where we invite you to submit a
caption. The winner will receive two bottles of
wine sponsored by Vino Fino.
Send your entry to the Canterbury Westland
Branch New Zealand Law Society, P.O. Box 565,
Christchurch. All entries must be received by
December 9 2011. The winner will be
announced in the next edition of Canterbury
Tales.
The winning entry for last month’s picture
(below) was submitted by Anonymous.
“When he said he would play us a tune I
thought he had brought his own instrument.”
President’s Column
As we farewell Show Day, the
Melbourne Cup and the New
Zealand Cup a little lighter in the
pocket we can all focus on year’s
end and a well-deserved break.
Last month was an extremely busy month on
the social scene with the well attended cocktail
function to formally welcome Justice Whata and
Judge Matthews.
The function held at the Westpac hub was
highly successful with the Chief Justice and a
number of other Judges from Christchurch in
attendance. It was great to see the Judiciary in
one place as the Courts have been scattered
to the four winds during 2011.
A recent discussion with representatives of the
Ministry of Justice confirmed that courts in
various jurisdictions are operating in over 18
different venues: from hotel rooms to golf clubs,
from Dunedin to Nelson and the West Coast.
The amount of travel time and significant loss
of productive hours has and will continue to
have an impact on all firms. It is hoped that a
more centralised Court will be operating during
2012 with a distinct possibility that the Tower
block maybe in use during mid to latter part of
the year.
On a sad note we must note the recent deaths
of both Judge Michael Green and Gerald
Dallison. Malcolm Ellis confirmed that Gerald
Dallison held a practising certificate at the time
of his death and had been in practice since
1953, so was one of our oldest practitioners.
Judge Green passed away 1st November in
Auckland where he resided with his wife. He
will be remembered for his no-nonsense
approach to the bench and courageous attitude
towards life.(See obituary Page 3).
We welcome back to Christchurch Judge Paul
Kellar from Dunedin, where he has served his
sentence but got early release, as a result of
good behaviour, in October. With Judge Kellar’s
arrival we have to bid farewell to Judge Crosbie
who will now sit in Dunedin.
Judge Crosbie left Christchurch with a feeling
of regret as he had done outstanding work post
the February earthquake in getting the Courts
up and running again.
He worked countless hours with the Ministry
of Justice to establish the courts and always
had the best interests of the local Bar at heart.
We wish him well. The irony is, that we will
probably see more of him on the Bench in
Christchurch now than during 2011!
The Council recently met with Charles Chauvel
and Leanne Dalziel to discuss a number of
matters around the justice system including
refining civil litigation procedures. It was certainly
an interesting hour of discussion with a number
of ideas being promoted by your council.
And now the joke.
Alison visited a psychic of some local repute.
In a dark and hazy room, peering into a crystal
ball, the mystic delivered grave news:
“There’s no easy way to say this, so I’ll just be
blunt — prepare yourself to be a widow. Your
husband will die a violent and horrible death
this year.”
Visibly shaken, Alison stared at the woman’s
lined face, then at the single flickering candle,
then down at her hands. She took a few deep
breaths to compose herself.
She simply had to know. She met the
fortuneteller’s gaze, steadied her voice, and
asked: “Will I be acquitted?”
And a true story from within our office. These
instructions (verbatim) for an employment
contract were sent by e-mail to Marty Boyce:
If party B has died while he is in New
Zealand. Regarding of the circumstances
party A agrees to take care of his funeral
and will have his carcase cremated and the
ashes send back to China at party A’s
expense. If his death has occurred at work
because of an accident then party A will
sought from ACC the right amount of
compensation for his family in China.
Allister Davis
Canterbury tales
3
OBITUARY
Judge Michael John Green
Judge Michael John Green will be
remembered for his no-nonsense
approach to the bench and
courageous attitude towards life.
Born on 21 May 1936 to Jane and Thomas
Hillier Green, Judge Green suffered from polio
as a child (an event that caused all the schools
on the West Coast to close). The illness caused
him to spend the rest of his life with a limp.
Never heard to complain or be limited by his
physical disability, Judge Green led a full and
active life. He played bowls, golf and bridge.
He also had “a love affair” with France, often
travelling to and exploring many different parts
of France.
After completing secondary school at
Christchurch’s St Bede’s College, he initially
studied medicine at the University of
Canterbury. Finding that physics was not his
strongest point, he changed to a law degree.
While studying he worked as a law clerk for
Layburn and Hodgins at Christchurch.
He graduated from the University of Canterbury
in 1959, but finished his professional studies
at Otago University in 1960 while he worked
for around 18 months as a solicitor for
Bannerman Brydon and Folster in Gore.
Judge Green and wife Joan, who he married in
1959 in Christchurch, then moved to Timaru
to take up a position as a barrister and solicitor
where his four daughters were born. He then
established an all-round private practice.
In 1981 he was appointed to the bench in
Hamilton as a District Court Judge then was
transferred to Christchurch at the end of 1989.
He retired on 9 February 1997, then continued
to work part-time in a relieving capacity for
some years.
Long-term friend and associate District Court
Judge John Bisphan says Judge Green was
Library addition
Library staff are thrilled to welcome Sarina
Barron as part of the library team. Sarina has
been employed as a part-time Library Assistant.
After spending six years in London, Sarina and
her husband Scott returned to New Zealand in
2009 and she has, until recently, been
concentrating on bringing up her two small
children.
Sarina has a Masters degree in Library and
Information Studies from City University
London. While in London Sarina worked for
Nabarro LLP as a Knowledge Officer, where she
specialised in hardcopy acquisitions, knowledge
management and enquiry/research work.
“fairly down to earth and straightforward — a
stern sort of judge.”
“He was the sort of judge that didn’t suffer fools
lightly. But he was a good judge, who was proud
to be very competent at jury trials.
“He was generous giving help or advice if you
needed it. He wasn’t the sort of judge that was
flowery or philosophical — he got to the facts
and did that very well.”
An example of a standout ruling by Judge Green
was his 1998 decision on a company called
Health Pride’s “fat busters” and “hunger
busters” pills. The Commerce Commission
reported him as saying the pills were “an
unconscionable rip-off of an extremely
vulnerable section of our society” and the
promotion of a Negative Calorie Book as
“intellectually and scientifically dishonest”.
The case was upheld on appeal to the High
Court with the presiding judge commenting on
the quality of Judge Green’s ruling, Judge
Bisphan says.
A dedicated husband, Judge Green was very
proud of his four daughters, Joanna, Sally,
Jacquie and Melissa and seven grandchildren
Olivier, Saskia, Stella, Lorenzo, Lea, William and
Hugo.
Diagnosed with a lymphoma eight years ago,
he then battled cancer which eventually
deprived him of his sight. The February 22 2011
Christchurch earthquake condemned his home
and he relocated with Joan to Auckland where
Judge Michael John Green died on 1
November 2011, aged 75 years.
Could we do with a swear box?
The following letter was received recently by Malcolm Ellis, the local Law Society
Branch Manager
Dear Mr Ellis,
I note with interest that a lawyer was disciplined recently for using bad language
to another lawyer and was fined $250 for telling him to “go away” in less than
polite terms.
I would like to note that a lawyer I know well has been known to use bad
language when speaking to me and, in fact, has done so several times since
last Thursday. If the Canterbury-Westland branch would like to charge him
$250 every time I record this use of such language, I suggest that this may
allow your staff to have an elaborate Christmas Party this year. I will await my
invitation.
Name withheld
Mr Ellis replies: It is our observation — and alas, even experience — that, if such a
regime was implemented and expanded, the benefit to us could be substantial. We
look forward to suggestions as to how this could be put into practice so that we
remain — mostly — on the right side of the law. And end up with a bit more than a
bottle of Mr Watties’ tomato sauce on a bag of greasy chips.
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Case summaries (51)
New Zealand Police v K — 21
October 2011 — CA 320-2011 —
Stevens, Ronald Young JJ
CARE OF CHILDREN
Successful appeal by New Zealand Police
against HC decision to quash two convictions
for breaching s78 Care of Children Act 2004,
which made it an offence to contravene a
parenting order HELD: HCJ erred in law in relation to the correct
interpretation of an element of the offence
under s78 Care of Children Act 2004; namely
the intent to prevent a parenting order from
being complied with - s78 was inelegantly
drafted - there was no intention within s78 to
introduce a requirement that the prosecution
prove the motive of a defendant charged with
contravening a parenting order - prosecution
was required to prove knowledge of the terms
and conditions of the relevant parenting order
and an intentional, i.e. deliberate, act or
omission contravening or preventing
compliance with the parenting order - once
such elements of the offence were established,
it would still be open for a defendant to
demonstrate that such conduct occurred with
reasonable excuse - charges should not have
been quashed - findings in DC that there was
no reasonable excuse and an intent to prevent
the parenting order being complied with were
a sufficient basis for a conclusion that the charge
was proved beyond reasonable doubt - appeal
allowed - appeal had been brought as a test
New Zealand’s legal research tool
case - appropriate outcome was that appellant
was now convicted and discharged.
New addresses
The Canterbury-Westland Branch of the
New Zealand Law Society and Library are
now situated at Unit 1, 8 Homersham
Place, Burnside, Christchurch. Phone 3583147, fax 358-3148. Library 377-1852.
The High Court advises that until further
notice documents to any Christchurch High
Court matter can be filed by post to PO
Box 4618 or DX WX 10021, by courier to
Unit 7, 4-6 O'Briens Road, Sockburn, ChCh.
Family Court applications can be posted
to the same address details listed above.
Economic indicators
As an investor, some understanding of economic indicators, what
they are and the messages they convey is essential. Even at a basic
level, that understanding can assist in enhancing investment success
by educating investors about what factors to consider when making
investment decisions.
Simply stated, an economic indicator is any economic statistic that
helps an investor understand current state of play in the economy.
More importantly from an investment perspective, they also provide
some clues as to the likely future direction of the economy. Armed
with that type of information, investors can make more forwardlooking investment decisions.
Perhaps the key indicator is gross domestic product (or GDP). GDP
measures total production of goods and supply of services in an
economy. Other important broad categories of indicators include
employment, inflation, business activity and interest rates among
others.
Indicators can be lagged, coincident or leading. Lagged indicators
are useful as a rear view mirror. Unemployment tends to keep rising
for some time after economic growth has improved, so is a lagged
indicator.
Coincident indicators provide a check on what the overall condition
of the economy is today. Inflation pressures and high employment
tend to be coincident with economic growth, for example. From
an investor’s point of view, though, it is leading indicators that are
the most valuable, because they provide some guidance as to the
future.
An important leading indicator is the level of building approvals. If
building approvals are high, it is an indication of high construction
activity in the not too distant future. That, in turn, means increasing
demand for building materials and increasing employment in both
the construction and materials industries. To complete the picture,
more jobs means more income being earned, and increases in
personal consumption. That flows through to higher economic growth.
From an investment point of view, it also means that shares in
companies involved in those industries might do well. Forward looking
investors might therefore buy those stocks as building approvals start
to increase. Stock prices rise in anticipation of increasing profits —
meaning the market itself is a leading indicator.
Trends need to be monitored over time, rather than relying on a
single reading of an indicator and the data needs to be up to date
but they can be a good starting point in understanding the
performance of your portfolio.
For more information, talk to your financial adviser who can discuss
which economic indicators to be look out for.
Advert
Canterbury tales
5
Help with insurance complaints
Do your clients have unresolved
claims or complaints against
insurers or insurance brokers? If so,
they may be able to take their
complaint to Financial Services
Complaints Ltd (FSCL).
As from 1 December 2010, or 1 April 2011 for
some advisers, it became compulsory for any
person or organisation in New Zealand that
provides a financial service to members of the
public to belong to an approved dispute
resolution scheme.
FSCL is one of three dispute resolution
schemes approved by the Minister of
Consumer Affairs under the Financial Service
Providers (Registration and Dispute Resolution)
Act 2008. The other two approved schemes
are the Banking Ombudsman and the
Insurance and Savings Ombudsman.
FSCL has over 4000 participants or members,
including a few insurance companies, and all
of the large insurance broking firms in NZ. FSCL
operates in exactly the same way as an
Ombudsman scheme in that:
• it is free to the consumer to lodge a complaint
• its processes are informal, fair and impartial
• it has power to make awards of
compensation that are binding on the
participant, but not the consumer.
FSCL is intended to be used as an alternative
to District Court action, and can consider
complaints where the compensation claimed
does not exceed $200,000.FSCL’s CEO, Susan
Taylor, has the power to make binding awards
of compensation up to $100,000, or up to
$200,000 with the participant’s agreement.
FSCL’s staff are all lawyers or have extensive
experience in dispute resolution. Its CEO, Susan
Taylor, was formerly the deputy Banking
Ombudsman.
Examples of the types of complaints FSCL can
investigate are where a person:
• disputes the declinature of an insurance claim
•
disputes the amount that the insurer is
prepared to pay under the claim
• claims that s/he has been sold the wrong
type of policy
• claims that s/he was given incorrect or
unsuitable advice at the time of purchasing the
insurance, or was not told of the relevant
exclusions
• claims that his/her instructions were not
followed by the broker.
The benefits of using the dispute resolution
schemes, such as FSCL, rather than the Courts
are that:
• there is no cost to your client
• complaints are investigated quickly and
efficiently by expert case managers, familiar with
industry practice and the law
• the process is less formal than the courts wherever possible, a negotiated or mediated
settlement will take place
• if your client does not like the result, his/her
rights to take the complaint to the courts or
Disputes Tribunal still exist.
So, if you have a client wishing to pursue a
complaint or claim against an insurer or
insurance broker (or any other type of financial
service provider), remember there will be a
dispute resolution scheme that can help.
For more information, and a list of FSCL’s
participants, please visit FSCL’s website at
www.fscl.org.nz or, if you would like to discuss
making a complaint on behalf of a client, call
FSCL on 0800 347 257.
Would you like
to have a say?
The Publications Committee is urgently
looking for people to contribute articles to
Canterbury Tales.
If you have an interest in a specific area of
law, want to grumble to the editor, have a
photo of interest (past or present) then send
them to us or make enquiries at the
Canterbury-Westland Branch New Zealand
Law Society, Unit 1, 8 Homersham Street,
Burnside. PO Box 565 Christchurch.
Phone 358-3147, fax 358-3148 or email
[email protected].
Visiting Fellow named
Andrew Ashworth is visiting New Zealand in February and March 2012 as the New Zealand
Foundation’s 2012 distinguished Visiting Fellow. His visit is being hosted by the Faculty of
Law at the University of Canterbury.
While in New Zealand Professor Ashworth will give public lectures on:
• The fundamental right to liberty of the person, looking at the ways in which this basic
individual right has been interpreted and negotiated by the courts, so as to apply to
situations involving police stops, house arrest, and the detention of ‘dangerous’ people.
When is a deprivation of liberty arbitrary, and when is it justifiable?
• The Foundations and limits of criminal liability for omissions. Is it right to convict a
person for doing absolutely nothing, or are there situations when citizens ought to have a
duty to act and to intervene, reinforced by the criminal sanction? Beyond some wellestablished duties, should we recognise some broader civic responsibilities to help others?
Dates for these lectures will be advertised early in 2012.
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LTO once a big part of
By Rohan Wills
With the positive feedback from my
last article I thought it appropriate
to reminisce on an institution that
affected many practitioners, namely
the Land Transfer Office.
With the advent of electronic registration and
the consequent standardisation of registerable
instruments, many practitioners and legal
executives of today would not appreciate the
impact of the LTO in shaping the careers and
skill levels of many senior practitioners.
Before the passing of the Land Transfer Act
1908 all of the land in New Zealand was held
under the English Deeds system. It was, and
still is, a very cumbersome system which relies
on historical deeds tracing the owners of the
land since original dedication and requires a
continual unbroken chain of Deeds to confirm
possession and ownership.
This was fine for the landed gentry who had
agents to manage and record their Deeds in
what was a tightly held land tenure that existed,
but not suitable for a young developing nation
like New Zealand which was founded upon
egalitarian principles and a free open market.
A political decision was made to adopt the
Torrens system of registration with a central
registry of titles and a government guarantee
of title for all the world to access and see.
Your title would be indefeasible once registered,
which allowed securities to be registered and
leases etc against the title, which hastened the
development of farms and cities, which was
important for a young country.
Rohan Wills
One can compare that with some of the Maori
land which only partly came under the Torrens
system because of multiple or hapu ownership
and the fragmentation that has led to today’s
multiple ownership of title and the
corresponding difficulty of obtaining unanimity
to move forward to develop the land.
As the title that issued under the Torrens system
was government guaranteed and indefeasible,
it was imperative that the process of obtaining
a title was watertight. Not only was a survey
required which had to be certified by a surveyor,
but the process of obtaining a title needed
some legal process and this job was entrusted
exclusively to Solicitors and Land Brokers. This
allowed a scale of fees for conveyancing to
develop with the consequent income that that
exclusivity attracts.
When land was surveyed, a plan was deposited
and titles issued from that plan. These titles
were handwritten on heavy parchment paper
and bound together in volumes, with each title
being a folio. The volumes were big, heavy
books measuring about 800mm by 600mm
and each contained around 250 folios which
over time could become quite thin as titles
became cancelled through sub-divisions and
the like.
Each province had a registration district, which
is where the LTO was sited, generally in a main
centre. The search room was a public office
and any member of the public could enter and
search to see who owned what and whether it
was mortgaged. The dealing number recorded
the full dealing including, in the case of a house
— the purchase price, the date of the contract,
the occupation of the purchaser and the
amount and name of the mortgagee.
I recall that these volumes, which were heavily
bound and about 500mm thick of heavy
parchment paper, were quite heavy and often
it was necessary to help young female law
clerks to lift them out of the steel shelves but
most had good memories and acknowledged
the help at the next round of Xmas parties.
When a client wished to purchase a property,
it was the law clerk’s job to search the title as is
the case today. This involved attending the LTO
usually at 11am after morning tea, as it was
like a meeting place, with a search book and
coloured pencils to trace the plan and transcribe
the memorials and easements, blue for
dominant and red for servient.
No biro or ink was allowed as this could deface
the register. To do a more detailed search, such
as easement or such, you had to fill in a chit
and give it to the counter who would go through
the stored documents and have the required
one available the next working day for perusal.
There were no photocopiers so again it was
necessary to transcribe all contents. It was not
long before you could recite and transcribe
many lengthy documents, which gave a good
grasp of land law generally.
To register a dealing, it was necessary to
complete an abstract and then book a time
with a clerk and attend with all documents for
checking. If there was a slightest error, as to
description or the like, the documents were
requisitioned and this then required the partner
Canterbury tales
7
a lawyer’s working life
to attend and initial any alteration in the
presence of a registrar. Not only was this
embarrassing but it also reflected on your ability.
It was vital to do a thorough pre-registration
check as registration was important because
of the priority issues such as when caveats or
liens were claimed.
To register the outstanding duplicate title was
necessary as that was the essential evidence
of an interest in the land, which allowed you to
deal on the Register. If that was lost it was an
expensive exercise to replace it and would take
at least four weeks.
In order to avoid losing the outstanding
duplicate, many law firms had walk in
storerooms where all client deeds were held.
This had the additional benefit of reinforcing
client loyalty.
More complex documents such as Easements,
Leases and Consents etc were much more
complicated and required a great deal of skill
— something far removed from the present
electronic procedure.
There were no standard easement forms and
all easements had to be registered by transfer
grant or by memorandum, requiring execution
by both dominant and servient tenements.
This allowed both competing parties to
negotiate terms and conditions, many of
extreme detail and running into many pages
in length. Easement such as water, pipeline,
support, access, light, drainage, noise and height
were all one off with many varied terms and
conditions. All were different and all needed
to be carefully read and recorded.
The assistant land registrars were the top local
officials administering the Land Transfer Act.
One I recall was Mr Mowat, the father of Kit
Mowat a current practitioner and Crown
Representative for land tenure dealings and
deeds land.
Another was Brom Cocks who was a single
man who loved his garden and his cats. He
was a continuous pipe smoker and I can recall
many hours being told every section of the Act,
which he knew off by heart, trying to breathe
through a blue haze and just wishing for him
to approve my documents so I could get the
hell out of it. He was an amazing tutor to many
lawyers and his knowledge was immense.
When he retired he was given the rare status
of honorary member of the CDLS.
In the late 1970s the LTO moved away from
Folios and introduced one page photocopy
titles with typed memorials. Searching was now
by filling out a chit and staff would get the
original title for you to photocopy and then
return to the counter. This was the start of a
charging system. Dispensing with the
outstanding duplicate helped speed up the
process and the adoption of standard forms
for transfer, mortgages, easements etc helped.
Further refinement allowed all easements to
be created by certificate without transfer and
for titles to automatically issue from plans once
approval was granted.
My firm was one of the lucky ones to be a pilot
for the new authenticated signature online
registration and I might say we took to it like a
duck to water. It was quite surreal in the early
part to think that here I was, doing the job of
an Assistant Land Registrar, updating the register
in real time and getting an indefeasible title at
the push of a button as well as securing a
mortgagees interest and then e-mailing to all
parties the completed dealing.
Gone were the days of the manual tracing, the
old parchment paper, the abstracts, the physical
attendance to register, the requisitions, the
lectures from Brom Cocks, the copious
precedents for easements and other profit a
prendres — and all the social intercourse we
enjoyed.
Now with all its personalities gone, the LTO has
disappeared, existing only in cyberspace, to be
accessed through the click of a button, generally
by a legal executive who little realises the history
and the skill of what were termed conveyancers
but were the backbone of the profession for
more than a hundred years.
Honour for Dr John Hopkins
University of Canterbury law academic Dr John
Hopkins, pictured right, has been named a Fulbright
Visiting Scholar in New Zealand Studies for 2012.
Dr Hopkins will research the Administrative
Procedure Act and the US system of federalism, and
teach a course on comparative global
constitutionalism from a Pacific viewpoint, at
Georgetown University in Washington, DC, for its
Spring 2012 semester.
The award for the senior lecturer in the School of
Law was announced by Fulbright New Zealand this
week.
Fulbright New Zealand was established in 1948 to
promote mutual understanding through educational
and cultural exchanges between New Zealand and
the United States of America.
It offers more than 70 exchange awards each year
and more than 1,400 New Zealanders and 1,100 Americans have benefited from a Fulbright
award to date.
The programme is mainly funded by the US and New Zealand governments with additional
funding from award sponsors, private philanthropists and alumni donors.
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Devils Own pictures
These are supplied pictures from the Devils Own weekend at Methven. See
story Page 12. On the right is the White Fox & Jones team (not sure about the
tiger) and below Nicholas Davidson could be reaching for his wallet, or
pretending to. Further below Ben Frampton is putting something into a box,
which Mike Kerr might be trying to extract. Who knows? The other pictures are
said to be self explanatory. There is a suggestion that in the bottom left picture
there may have been a near carting accident. (Could they be waiting for a
lawyer?) Clearly, you have to be there to understand the strange rituals of the
Devils Own.
Canterbury tales
9
Penny and Hooper tax case
Continued from Page 1
The short answer to those questions is that tilting
the playing field is currently not allowed. The
Income Tax Act 1994 contains a very broad
provision to catch tax avoidance arrangements,
which is known as section BG 1.
What it says (as confirmed by the Supreme Court
in Penny & Hooper) is that if you restructure
your affairs, and one of your objectives is to gain
a tax advantage, then even if you had plenty of
other worthy objectives in mind, the IRD can
tax you as if the restructure never happened.
The only way the arrangement will save you tax
is if tax savings were merely an accidental result
of the restructuring.
Not surprisingly, neither the Courts nor the IRD
are going to be fooled by any obviously weak
explanations for the restructuring. The problem
with most of these schemes is that there really
is no other objective except tax savings. So when
the schemes are challenged by the IRD, it is
very hard to concoct plausible reasons after the
event.
Penny & Hooper argued that they put the bulk
of their income and business assets into
companies in case they were sued for medical
malpractice. While the court found that these
concerns were genuine, it did not give much
weight to them given that the Accident
Compensation Commission (ACC) legislation
makes it very hard to sue a doctor for personal
injury and both surgeons were insured against
this anyway.
One of them also argued that he wanted to
minimise his income and assets because he
was going through a marriage breakup at the
time, but the court pointed out that that would
only apply for one year, not forever.
Even if there are plausible explanations for the
restructuring, invariably the taxpayers drop the
ball by acting like nothing has changed. Penny’s
argument that he wanted to get income and
assets out of his ownership fell a little flat when
he simply drew cheques on the company’s bank
account every time he needed some money.
At the very least you should rigidly observe all
applicable company and trust law formalities,
so that the arrangement does not look like a
sham.
The court also noted that it was hardly a
coincidence that their reduced salaries took
effect at the precise time when the higher tax
rates came into force. And those salaries were
so far below market rates that they were
inevitably going to attract the IRD’s attention.
Of course there will be situations where
unusually low salaries are justified. The director
may have reduced his work hours or
responsibilities, or the business may be suffering
financial difficulties or it may need to retain funds
for capital investment.
The real problem with Penny & Hooper, as the
court put it, is that they had suffered no actual
loss of income (because they benefited from
whatever they put through the trusts) but they
had obtained a reduction in tax liability as if
they had done so.
This case is going to give a lot of New Zealand
taxpayers and their tax advisers some sleepless
nights, given that the Penny & Hooper
arrangements are extremely common. It would
be a good time to touch base with those clients
of yours that might be vulnerable.
Geoff Hardy is an Auckland commercial
lawyer and ADLS Council member.
Reprinted courtesy Law News, ADLS
Comings & Goings
Joined Firm
Rebecca Burt (Duncan Cotterill), Rachel Connor
(Nick Morley), Paul Jarman (Romeo Margaritis),
Carla Kearney (Lane Neave), Benjamin Lenihan
(Duncan Cotterill), Tania Lowe (Chapman
Tripp), Danielle McKay (Buddle Findlay),
Elizabeth Shalders (Young Hunter), Louise
Taylor (Community Law Canterbury) Tien Wain
(Perpetual Trust) Tracey Yarrell (Saunders & Co).
Changed Firm
Georgina McIntosh (Amicus Legal to
Cuningham Taylor), Francis Taylor Boyd
(Ministry of Social Development to Weston
Ward & Lascelles),
Moved on
Heidi Badger (Anthony Harper), Samuel McIvor
(Wynn Williams & Co), Shannon Mony (Duncan
Cotterill), Sybrand van Schalkwyk (Tomlinson
Law), Stephanie Marsden (Canterbury Regional
Council).
New firms
George Linder, (left Eymard John Bradley),
Barrister as from 31.10.11, P O Box 564,
Greymouth 7840, phone (03) 768-0303, fax
(03) 768-0340.
Stephanie Marsden, (left Wynn Williams & Co),
Barrister as from 14.11.11, P O Box 29407,
Christchurch 8540, ph 027 413 6481.
Changed Status
David Haigh, partner with Wynn Williams & Co
as from 1.12.11.
Philip Maw, partner with Wynn Williams & Co
as from 1.12.11.
Emily Walton, partner with Wynn Williams &
Co as from 1.12.11.
Charlene Sell and Michael Abernethy,
associates with Wynn Williams & Co as from
1.10.11.
Edward Sullivan, now consultant with RSM Law.
Changed details
G.D. Horne, phone 332-5011 & fax 365-7034.
Gilbert Hay, new postal address 11 Harrods
Court, Burnside, Christchurch 8053.
Layburn Hodgins, change of physical address
to Level 1, 47 Montreal St, Sydenham,
Christchurch 8023. All other details remain the
same.
McGillivray Callaghan & Co, now located at
Airport Business Park, 92 Russley Road, P O
Box 79123, Avonhead, Christchurch 8446, no
longer using DX number. Ph 366-8996, fax
366-6253.
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10
Canterbury
Canterburytales
tales
Practice Notices
Canterbury-Westland
Branch/NZLS
Education
Programme
Proudly sponsored by
NZLS SEMINARS
February 2012
Christchurch
15 — Handling Intense Emotional
Situations, 9am -5pm, Chateau on the Park.
15 — Buying a Property in 2012, 1-5pm,
The George.
Canterbury-Westland Branch
Social
Junior Practitioners Bus Trip. This will now
be held in the New Year, look out for flyers
early in 2012.
23 February — Family Law Practitioners
Cocktail Function. Watch out for flyers in
the New Year.
Property Management
WYNN WILLIAMS
NEW NAME - NEW PREMISES - NEW LOOK
THREE NEW PARTNERS
Canterbury tales
11
Situations Vacant
Solicitor Required
City practitioner wanting to reduce
workload with view to retirement in 2-3
years is seeking an experienced
solicitor with an existing client base.
Options for partnership and/or to
purchase existing practice in 2-3 years.
Enquiries: [email protected]
Missing Will
JANICE McILVANNEY
Would any practitioner holding a will for the
above named, late of Christchurch, advertising
agent, who died between 6 October 2011 and
8 October 2011 at Christchurch please
contact STROWAN LAW (Indira Sirisena),
Solicitors, P. O. Box 5046, Christchurch 8542.
Phone (03) 352-3769, fax (03) 352-7016
or email:[email protected].
Practice Notice
LISA KENNEDY has been appointed
an Associate of Strowan Law as from
1 July 2011.
To Let
It costs approximately $8000 per day to run
the City Mission’s services. A bequest
arranged today could really help secure their
future. If you have a client who may be
interested in providing assistance please make
email contact via [email protected], or
visit the website www.chchcitymission.org.nz.
2
12
Canterbury
Canterburytales
tales
Great weekend despite weather
By Brendan Callaghan
The annual Devil’s Own
weekend was held at Methven
over the weekend of 4-6
November.
This year a field of 80, with entrants as from as
far north as Auckland and as far south as
Dunedin, were out to test themselves against
the Methven golf course.
The course was in fantastic condition and not
even the cold and blustery conditions that
greeted the field on Friday could detract from
that. Many comments were cast about the
rough...some of which cannot be repeated here.
Friday was a case of four seasons in one day.
The sunshine that tried to break through was
repeatedly pushed away by the cold wind, rain
and even sleet.
The savouries and sandwiches provided by the
ladies of the Methven golf club were well
earned and well received by those who played.
Friday night was a good chance to catch up
with old acquaintances and share a few
stories....mostly about life post quake.
Saturday dawned cool and clear. Friday’s front
had left its mark on the Southern Alps with a
fresh dusting of snow creating a wonderful
backdrop. Scoring was red hot from a number
of participants who were lucky enough to
qualify for the Sunday pairs competition.
Some players, affected by the excesses of Friday
night at the Brown or the Blue, were not so
fortunate but hopefully they enjoyed their walk!
The foursomes at Methven and at Terrace
Downs were well supported.
Those who chose not to play took the
opportunity to support the start of Cup and
Show week and some took the opportunity to
catch up on some shake-free naptime.
Dinner this year was held at the Methven Resort
and as a base for the weekend the owners are
to be commended for the service they and
their staff provided to all the participants. The
normal arrangements for Sunday were finalised
after dinner and some opted for an early night.
Sunday was a glorious day. The course was lit
Celia Barker about to unleash a drive. More pictures Page 8.
up with some good scoring. Northern Raiders
Chris Darlow and Justice Geoff Venning were
the best of the field with a combined Stableford
score of 77. Well done to them. Unfortunately
a number of the trophies remained entombed
in the CBD but every effort will be made to get
the trophies to their new homes.
On behalf of the participants a huge vote of
thanks must go to the organising committee.
Also, the sponsors, without whom the weekend
would not be anywhere near as enjoyable, the
Methven Resort for providing the lodgings,
breakfasts and the Saturday night dinner and,
finally, the management and members of the
Methven Golf Club who allowed us the run of
their course for the entire weekend.
Devils Own prizewinners
South Canterbury Savings Bank Trophy: Geoff
Saunders.
Real Estate Institute Trophy: Hamish Douch.
SBS Trophy: Chris Darlow.
Kerry Flood Memorial Cup: Dennis Tuffery.
Senior Grade — Gross: Paul Hubbard.
Senior Grade — Stableford: Richard Worker.
Junior Grade Gross: Clarke Baldwin.
Junior Grade Stableford: Tim Allen.
Women’s Nine Hole Competition: Susan
Dwight.
G T Mahon Memorial Trophy: Bill Brown and
John Goodwin.
Drawn Pairs Combined Stableford: Chris
Darlow and Geoff Venning.
Inter-District Trophy: Auckland.
Most Honest Golfer: Scott Lochhead.
Inaugural Box Biting Competition: Susan
Dwight
Longest Drive:
Saturday 3 Senior — Geoff Barclay.
Saturday 3 Junior — Gerard De Courcy.
Saturday 18 Senior — Noel Chambers.
Saturday 18 Junior — Danny O’Neill.
Sunday 3 Senior — Noel Chambers.
Sunday 3 Junior — Stephen Jeffrey.
Sunday 18 Senior — Noel Chambers.
Sunday 18 Junior — Richard Walton.
Women’s Sunday 3 — Rosie Carruthers.
Closest to Pin
Saturday 6 — Andrew Marsh.
Saturday 17 — Mike Dixon.
Sunday 6 — Bryan Andrew.s
Sunday 17 — Paul Hubbard.