Leda Pty Ltd & Anor v Weerden (No 2) [2006] NSWSC 125

Reported Decision : 62 ATR 100

New South Wales Supreme Court

CITATION : Leda Pty Ltd & Anor v Weerden (No 2) [2006] NSWSC 125 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S) : 06/02/06, 07/02/06, 08/02/06, 09/02/06

JUDGMENT DATE : 10 March 2006

JUDGMENT OF : Gzell J

DECISION : Tax adviser negligent in failing to qualify advice but conduct not a material cause of loss or damage. Not liable to damages in negligence or under the Fair Trading Act 1987, s 68.

CATCHWORDS : TORTS - Negligence - General Matters - Purchase of shares in unitholder and trustee of trust with carry-forward tax losses and capital profit on sale of hotel - Whether tax adviser's letter constituted advice that carry-forward losses were available to offset future assessable income in the trust - Whether advice without qualification negligent - Whether client aware of the matters the subject of reasonable qualifications - Sophisticated client aware of risk of future offset being set aside under the Income Tax Assessment Act 1936 (Cth), Pt IVA - Purchase of tax losses bargained to 6 cents in the dollar when tax rate 39% - Significance of vendors' warranty that tax losses available to offset future income and solicitor's advice that they and the tax adviser could be sued if losses not available for offset - Commissioner of Taxation subsequently assesses capital gain on sale of hotel as on revenue account and tax losses are absorbed - Whether negligence of tax adviser a material cause of the loss or damage - Whether tax adviser liable to damages in negligence or under the Fair Trading Act 1987, s 68

Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth) LEGISLATION CITED : Fair Trading Act 1987 Corporations Act 2001 (Cth) Trade Practices Act 1974 (Cth) Taxation Administrative Act 1953 (Cth)