A company taxpayer failed to get an order for damages, in negligence (and cognate actions) against its tax agents in the Qld Court of Appeal.
- In November 2007, the appellant company transferred land for a consideration of $1.6m.
- For that transaction, the ATO assessed the company as liable to pay GST, income tax and penalties on each of those amounts.
- The appellant/taxpayer claimed it was not liable to pay any tax on the transactions because it held the land on trust and the respondent was aware or ought to have been aware of that arrangement.
- The appellant alternatively claimed that the sales were not taxable supplies for GST purposes.
- The respondent conducts a practice of accountants, business and financial advisers and, from 2005, it provided its services to the appellant, including the preparation and lodgment with the ATO all of the statements and returns which were relevant to the transaction in question.
In a proceeding brought in the Qld District Court in 2015, the appellant claimed it was by the respondent’s breach of contract and negligence that it had to pay any tax for the transaction.
- The claim was dismissed – see Davan Developments Pty Ltd v HLB Mann Judd (SE Qld) Pty Ltd [2015] QDC 121, 22 May 2015.
- The trial judge (Dorney QC DCJ) held there was no breach of contract or negligence by the respondent/accountants.
- And, in any event, the alleged wrongdoing had not caused the appellant/taxpayer to suffer any loss.
- He further held that, had the appellant proved its case, its damages would have been reduced by more than half for the appellant’s contributory negligence.
The appellant appealed challenging each of those conclusions but, after review of the matter, the Court of Appeal dismissed the appellant’s appeal.
(Davan Developments Pty Ltd v HLB Mann Judd (SE Qld) Pty Ltd [2016] QCA 90, Qld Court of Appeal, Gotterson, Morrison and Philip McMurdo JJA, 12 April 2016)
[LTN 72, 18/4/16]
Catchwords [2015QDC 121
Professional negligence – accounting advice and treatment of assets – whether “private” intentions for “limited development” of land – whether, if breach, there was causation
Catchwords [2016] QCA 90
PROFESSIONS AND TRADES – ACCOUNTANTS AND AUDITORS – ACCOUNTANTS – DUTIES AND LIABILITIES – NEGLIGENCE – where the appellant company retained the services of the respondent to prepare and lodge the appellant’s tax statements and returns – where the appellant acquired two adjoining lots in East Brisbane in 2005 with an intention to amalgamate and subdivide the property into three lots – where three investors of the appellant were the intended transferees of the subdivided lots – where the investors verbally agreed to contribute equally to development costs and held a right of first refusal over each lot – where in August and November 2007 the appellant sold two of the lots and, based on tax returns prepared by the respondent, the appellant paid GST on those sales – where the appellant claimed it was not liable to pay any tax on the transactions because the appellant held the land on trust and the respondent was aware or ought to have been aware of that arrangement – where the appellant alternatively claimed that the sales were not taxable supplies for GST purposes – whether the respondent was negligent in discharging its professional services