NBR on tax on Owen Glenn gift

A fascinating article in NBR (offline) on what Brian Henry says regarding tax on the Owen Glenn gift:

Mr Henry said last Friday that he had solicited the money from Mr Glenn. He told NBR this money was paid directly to him as accounts for costs – basically an arrangement for fees incurred in a case to date.

As I understand it, it is highly highly unusual for a barrister to get paid directly, let alone to go out seeking donations for his costs.

He said these were treated just as fees would be and so tax had been paid on the amount. “It’s my fees. It goes into my fees bill that goes to the IRD in the usual way.”

This is of course expected. You get your fees paid and you pay income tax. But that is separate to whether there is gift duty.

However, he said that Mr Peters had no legal obligation to pay him fees incurred in the legal proceedings and so there was no donation that was needed to be declared under Parliament’s register of pecuniary interests.

Essentially, Mr Henry said, there was no debt until he issued a final invoice (called a “fee note”) to the instructing solicitor in the case, who would invoice Mr Peters. However, he admitted Mr Peters had paid him directly in the past as a contribution to legal costs.

Brian Henry is arguing that as he had not actually issued an invoice yet, then there was no debt and no gift. But I am unsure if the lack of an invoice means there is no debt- the debt is incurred I would have thought when you contract someone to perform services for you – even if not yet invoiced for it. Otherwise thousands of people could rort the tax system by having someone pay for services on their behalf before an invoice is issued for it.

The substance is would Winston Peters have ended up paying an extra $100,000 to Brian Henry if Owen Glenn had not donated on his behalf. Absolutely. Both Henry and Peters have said he picks up the shortfall.

“There doesn’t have to be an invoice – he can pay on account of costs. He says I can afford to pay you this today and I say thank you.”

However, Bar Association president Jim Farmer QC said interim payments should not be accepted by barristers except for work actually done.

“A barrister must render a fee note if he wants to be paid,” he told NBR.

Sounds like Mr Henry’s practises are highly unusual, to say the least.

Sources close to the litigation in question – where Mr Peters tried to overturn the 2005 election result in Mr Peters‘ former seat of Tauranga – say Mr Peters “really had his bacon saved” when money came in for costs.

That’s because the respondent, National MP Bob Clarkson, had threatened Mr Peters with bankruptcy proceedings after the $40,000 costs order in favour of Mr Clarkson was not met within three weeks.

And that is an interesting aspect. What if some of the $100,000 went to the court costs not just Henry’s expenses. How can you claim that is not a gift?

Also if Peters was in dire financial straits, doesn’t that make it more likely he would have been in the loop?

NBR inquiries have turned up some uncertainty about how the costs award to Mr Clarkson was paid.

“I gave him about three weeks,” said Mr Clarkson. “Since he’s got a lot of rich friends I thought it’d take about three weeks. It didn’t turn up so we sent a note saying that proceedings would be taken if it wasn’t paid. And the money turned up.”

The cover letter with that payment was from Brian Henry, and the money was paid by a bank cheque. But the bank cheque meant the issuer could not be identified. It was not a bank cheque issued under Mr Peters‘ instructing solicitor’s trust account.

So either Owen Glenn or maybe even a second secret donor paid the court costs to Bob Clarkson? This just simply has to be investigated.

For his part, Mr Henry can’t remember where the payment for the costs order was made from. “I couldn’t answer that.”

Mr Peters‘ instructing solicitor in the case, Dennis Gates, would not comment when asked by NBR if the payment was with money out of his solicitor’s trust account.

It just gets murkier and murkier.