An Auckland family trust is suing accounting advisers Crowe Howarth
alleging its failure to warn about the effect of tax arising on sales of
residential property within two years of purchase cost it $774,900. Crowe Howarth denies liability.
The High
Court was told Gabrielle Blackburn agreed in March 2016 to sell a property in
Tawa Street, Waiheke, to the Blackburn Family Trust for $2.85 million. A little over twelve months later the Trust onsold
for $5.2 million. This sale triggered a
tax liability of $774,900.
A much
publicised change to tax law in 2015 saw tax imposed on any gains from
residential property sold within two years of acquisition. Sales of family homes are exempt. Tawa Street was not the Blackburn family
home.
The
Blackburn trustees sued Crowe Howarth alleging they fell down on the job as tax
advisers to the Trust. In particular,
the trustees claim an email to Crowe Howarth asking for ‘your thoughts’ on the
deal amounted to a request for a specific review of the Tawa Street sale.
The
trustees asked for summary judgment, with the case to be decided ‘on the
papers’ relying on written evidence only.
Associate judge Osborne ruled the case needs to go to a full hearing. Crowe Howarth says it was never asked for specific
tax advice on the Tawa Street sale and alleges Blackburn Trust itself was at
fault. Trustees had been previously told
in general terms of the tax consequences of selling within two years of
purchase, Crowe Howarth said.
Blackburn Trustee Ltd v. Crowe Horwarth (NZ) Ltd – High Court (8.03.18)
18.050