In a decision handed down on Tue 17.3.2015, the NSW Court of Appeal has partly allowed an appeal and has reduced the amount of damages awarded to the respondent, Mr John Symond (founder of “Aussie Home Loans”), by just over id=”mce_marker”m after finding that the primary judge had erred in including in his calculations of the respondent’s loss due to the forfeiture of franking credits of just over $5m.

In October 2013, in Symond v Gadens Lawyers Sydney Pty Ltd (No 2) [2013] NSWSC 1578, the NSW Supreme Court (Beech-Jones J) awarded damages to Mr Symond in the sum of $4,979,800 relating to certain tax advice he had received. Previously, on 19 July 2013 (in Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955), the judge had held that solicitors who advised Mr Symond were negligent in the advice they gave him in relation to a revised ownership structure of his business for the purpose of providing him with funds from the company for the construction of his new home but which, instead, resulted in a significant personal and company tax liability.

The Court of Appeal reduced that amount to $3,397,911 after finding that the primary judge had erred in awarding as an integer of Mr Symond’s damages the amount of id=”mce_marker”,291,178.50 together with pre-judgment interest of $290,710 as representing Mr Symond’s loss due to the forfeiture of franking credits by a holding company in the amount of $5,014,285. The Court said Mr Symond did not establish that he sustained any loss or detriment as a consequence of the forfeiture of the franking credits.

(Gadens Lawyers Sydney Pty Ltd v Symond [2015] NSWCA 50, NSW Court of Appeal, McColl JA, Gleeson JA, Tobias AJA, 17 March 2015.)

[LTN 51, 17/3/15]

The NSW Court of Appeal has reduced the amount of damages payable by a firm of solicitors (Gadens) to Mr Symond, the founder of “Aussie Home Loans”, for being negligent in tax advice given to him in relation to a business restructure.

In 2013, the Supreme Court had found that Gadens was negligent and in breach of its contract and awarded Mr Symond $4,979,800 in damages.

The restructure, effected in 2003 and 2004, partly involved a mechanism whereby Mr Symond could withdraw funds from the Aussie Home Loans Group by redeeming preference shares issued to him by a new corporate holding vehicle (the holding company). Further to an audit by the Commissioner of Taxation, Mr Symond entered into a deed of settlement with the Commissioner and agreed to pay a sum of $7,018,864 comprising tax, penalties and interest and also agreed to deduct an amount of $5,014,286 from the holding company’s franking account.

Gadens appealed to the Court of Appeal against the damages assessed by the Supreme Court.

On appeal, it was confirmed that the primary judge did not err in comparing Mr Symond’s financial position following the deed of settlement with the ATO and his hypothetical position if he had pursued an alternative structure that Gadens should have recommended.

However, the Court of Appeal found that the primary judge erred in including in the damages the amount representing the loss due to the holding company having to forfeit its franking credits. It held that Mr Symond had not established that he sustained any loss as a result of this. As a result, the award of damages was reduced to $3,397,911.

It was also confirmed on appeal that the primary judge correctly assessed damages based on compensating Mr Symond for the loss of use of his own funds at court rates and calculating interest on the benefit of the restructure at the holding company’s rate of earnings acquired on its own funds.

[IT 18/3/15]

Catchwords from [2015] NSWCA 50

DAMAGES – measurement of loss or damages – tax consequences of restructure – whether primary judge erred in the relevant comparison in determining loss – difference in tax consequences of restructure as implemented compared to structure that respondent would have pursued “but for” the negligent advice – difference between respondent’s financial position under the restructure and the “but for” scenario – benefit of restructure as implemented – whether benefit from paying dividends later under the restructure rather than earlier under the “but for” scenario is permanent or temporary – measurement of benefit – valuation of deduction in franking credits from franking account – whether primary judge erred in evaluating the loss to the respondent due to the forfeiture of franking credits?

INTEREST – recoverable pre-judgment interest – character of benefits of restructure and actual payments made on settlement due to negligent advice