The NSW Supreme Court has held that solicitors who advised Mr John Symond, founder of “Aussie Home Loans”, were negligent in the advice they gave him in relation to a revised ownership structure to allow him access to funds in a tax advantageous manner for the construction of his new home but which, instead, resulted in a significant personal tax liability. After Mr Symond had settled the resultant dispute with the Tax Office for over id=”mce_marker”.85m (including his personal liability and the resulting loss of franking credit to the company), Mr Symond sued his solicitors for negligent advice and misleading conduct under the Trade Practice Act 1974 (Cth) (TPA). In particular, he argued that his lawyers should have advised him as to the availability of other options.
In defence, the solicitors argued that the implementation of the alternative structures that Mr Symond suggested would have caused the payment of much greater amounts of tax than the amounts paid under the settlement with the Commissioner. They also contended that the deduction from the franking account did not cause him any compensable loss. The solicitors also contended that a number of other parties (namely, other engaged solicitors), were “concurrent wrongdoers” and that accordingly its liability should be correspondingly reduced.
The Supreme Court held that the solicitors were negligent and in breach of their contractual retainer with Mr Symond in relation to the structure they proposed, as well as their advice that the accompanying proceeds from the redemption of the preference shares would be “tax free” in his hands. Furthermore, the Court found that in proposing that structure and in providing that advice the solicitors were also negligent and engaged in conduct contrary to s 52 of the TPA. As a result, the Court found that the solicitors were obliged to advise Mr Symond not to proceed with the proposed restructure and instead should have advised him of other ways to restructure the business to achieve his objective of obtaining funds for the construction of his home.
The Court also found that had this advice been given, the imposition of the tax and penalties and the deduction from the company’s franking account that occurred as a result of the settlement with the Commissioner, would have been mostly avoided. Nevertheless, in assessing the quantum of Mr Symond’s loss the Court also found that it was necessary to bring to account certain extra tax liabilities that Mr Symond would have incurred had he implemented any of the alternative arrangements.
Finally, the Court concluded that other solicitors who also advised on the matter were “concurrent wrongdoers” and should bear 15% of the total losses.
(Symond v Gadens Lawyers Sydney Pty Ltd [2013] NSWSC 955, NSW Supreme Court, Beech-Jones J, 19 July 2013.)
[LTN 139, 22/7/13]