By Denise McNabb*
The late John George Russell, accountant and scourge of the IRD for 30 years, has lobbed a hand-grenade at his nemesis from beyond the grave.
It comes via a court judgement on 28 August 2018 that reinstates five defunct companies to the Companies Register to pave the way for a test case about GST paid on administration fees.
The five companies reinstated under section 329 of the Companies Act are Belmonte Dairy Ltd (incorporated on 25 November 1983 and removed from the register on 17 February 1998), Corporate Transport Ltd (incorporated on 12 March 1940 and removed from the register on 25 September 1996), Manly Estates Ltd (incorporated on 9 July 1970 and removed from the register on 27 June 2000), Marketing Agencies Ltd (incorporated on 27 February 1939 and removed from the register on 23 April 1998) and Mountforts Pharmacy Ltd (incorporated on 24 January 1969 and removed from the register on 22 December 2011).
Details of the history of these companies are scant. But the court heard that the IRD liquidated Belmonte so the liquidation needed to be overturned before its reinstatement. The other four were presumed struck off for failure to comply with their statutory obligations.
The judgment of Justice Kenneth Johnson, after a hearing in the High Court in Wellington, reinstated the companies on behalf of Russell-registered companies, Commercial Management Ltd, Equity Capital Investments Ltd and Downsview Nominees Ltd (the plaintiffs).
They will now argue the administration fees charged for these reinstated companies were actually dividends and should not have been subject to GST because they were not providing services.
The companies involved were in a template income tax avoidance scheme devised by Russell where companies are always shareholders in other companies, concealing beneficial ownership.
The judge allowed the reinstatement of the five because a judgment involving another Russell company, FB Duvall Ltd, had already paved the way to test the claim. Russell had initially wanted to join the five with Duvall (details below).
The current Registrar of Companies, Ross van der Schyff, was named as the only respondent in the case involving the five, but the IRD joined the claim as first respondent because of the implications for its tax revenue.
If successful Russell’s action, started well before he died in May, aged 83 could create another tortuous chapter for the IRD. That’s because it would mean others in a similar situation could be eligible for tax refunds, even if their companies no longer existed.
IRD lawyer Maria Deligiannis told the court if the companies were restored to the Companies Register they would pose a threat to the IRD, and she said that was contrary to the public interest.
Under section 329 one or more of the applicants had to be a shareholder of each of the five defunct companies to be heard. As Russell made his companies shareholders in other companies, the three taking the action were eligible.
But as the judge noted, the overarching question was whether it was just and equitable to restore them.
He also noted the application was “not run-of-the-mill.” He said the period of time the defunct companies had been removed from the register of between seven and 22 years ago seemed to be extreme. He had not heard of any application for companies struck off longer than these.
In what could be deemed an ironic twist, the IRD’s bankrupting of Russell in November 2015 over claimed tax debts that had ballooned to $500 million with penalties and compounding interest at the time of his death, actually enabled the latest action to come to court.
That’s because bankrupts can’t be company directors or engage in other activities such as receiverships or liquidations as Russell was doing.
As he had registered more than 150 companies he asked Glenda Rogers if she would take over the directorships until the expiry of his bankruptcy.
Russell had been Rogers’ accountant for 30 years, but she never worked for him. Her husband, Trevor spoke at Russell’s funeral.
Glenda Rogers lists on LinkedIn her job at Russell’s firm as managing director of Commercial Management, one of the oldest companies in Russell’s stable.
She also lists a job in the nineties as an executive assistant at insurance company, NZI before she became chief executive of helicopter development company, TGR Helicorp in 1997.
Glenda Rogers found herself in the public spotlight in 2011 when she was jailed for a month for contempt of court, along with her husband over a case involving missing helicopter blueprints and parts after TGR Helicorp collapsed in 2008 (details below).
By stepping into John Russell’s shoes as director of his many companies not only has she provided continuity for Russell’s crusade against the IRD, but she also has a firm grasp of his modus operandi that involves making one company a shareholder in another. She went to court with Russell in February for one case (Emborion v the IRD) that had started at the Taxation Review Authority where Russell didn’t need a lawyer.
The case was adjourned because Russell was told he needed a lawyer in court when he tried to present the case himself. The timetable for that one is still rumbling through the courts and is another variation on a tax theme to that of the five reinstated companies.
Rogers said she took over the directorships with a view that it would be for the three years of Russell’s bankruptcy, working alongside him at his home office in Kawakawa Bay in southeast Auckland.
According to Land Transfer Office records Kawakawa Properties Ltd, formerly Pharazyn Street Properties Ltd, leased the home to Russell and his wife, Melva for 21 years from March 1, 1997. So he technically did not own it as the home has a circular company ownership, obfuscating the beneficial owner – in keeping with the way he structured his business.
The house lease expired two months before Russell’s death, but Rogers said another private lease was made to him that was not registered. She is now the director of Kawakawa Properties Ltd, and she and her team use it as their office to sort out Russell’s affairs and challenges for the IRD.
She would not reveal beneficial ownership of the home and could give no indication of when his house would be sold other than to say it would be sold eventually. Melva Russell is in care. The Russells had five children.
At the time Rogers took over Russell’s directorships he was frail and his health was failing. Russell died six months before the bankruptcy would have expired next month.
“He got the last laugh because he offered to repay a weekly amount until his death [$1000] but they chose to bankrupt him instead,” Rogers said.
Glenda Frances Rogers
She might be John Russell’s lieutenant, laying claims at his behest in the courts today, but in March 2011 Glenda Rogers, now 75, was on the receiving end of the law when she was sentenced to a month in jail for contempt of court, along with her husband, former National MP, Trevor Rogers, 75, who had already served a month by then on the same contempt charges. In the well-publicised case they refused to hand intellectual property over to receivers that belonged to TGR Helicorp Ltd, of which they were directors and major shareholders. Glenda Rogers took a swipe at a newspaper photographer with her handbag as she entered the High Court in Auckland for sentencing.
At TGR Helicorp the couple had been building what they described as a revolutionary unmanned or drone combat helicopter (the Snark), capable of holding 24 missiles for military use as well as an unmanned, diesel-powered helicopter (Alpine Wasp) for rescuing distressed and injured climbers in remote regions.
Three years on from the company being placed in receivership in April 2008 by 4.9 per cent shareholder, Bastia Investments Ltd, owed $661,726, the Rogers were accused in the High Court in Auckland of stealing company assets and helicopter blueprints, and secreting them away to Switzerland out of the grasp of the receivers who were looking to realise cash to repay Bastia. It emerged in court evidence that the Rogers were planning to relocate with the helicopter business to Switzerland.
The Crafar family, who owned Crafar Farms, the country’s largest dairy group on 22 farms, owned Bastia Investments. Following exposure of their malnourished cows and inability to repay debt their farm business was placed in receivership in 2009.
The Rogers claimed all of TGR’s tangible assets, apart from two inconsequential items, had been disposed of by sale or destruction in February 2008 when TGR’s factory had been shut down suddenly.
But the receivers were sceptical, so had gone to court in July 2008 seeking orders to search the Rogers’ property. Assets were progressively uncovered but none had been disclosed voluntarily, the receivers told the court.
Important assets not recovered included a complete set of technical drawings and related documents for prototype helicopters developed by TGR that were estimated as possibly being worth more than $50 million. The court heard of correspondence found in the Rogers' computer that said the documents were secure in European banks.
They continued to strenuously deny possession, control or knowledge of the whereabouts of any intellectual property or other missing assets of TGR Helicorp. However Justice Peter Woodhouse found them in contempt of court for failing to disclose those assets and ordered their jail sentences - a month each with the extension of another month for Trevor Rogers.
BNZ had bankrupted the Rogers in 2009.
In April 2013 the IRD, owed $736,699 in unpaid taxes by TGR Helicorp, appointed the Official Assignee (OA) as liquidator. The OA filed a notice in the New Zealand Gazette to wind up the company but then had that application reversed in the High Court in August 2017.
No reason for the reversal is in public files but a likely answer lies in Russell becoming the second receiver of TGR Helicorp in October 2008 on behalf of the Rogers who said they were a creditor, owed $251,179. When Russell was bankrupted in 2015 Roy Stephenson, of Manukau took over the receivership and it is still live.
Asked why the receivership was being continued when there was no chance of recovering the debt, Glenda Rogers said “there is a reason, but I won’t disclose it now”.
Asked whether the company would be wound up soon Stephenson said, “At the moment it is undecided”. When asked if he was an accountant he said: “I don’t want to deal with this thank-you.”
Trevor Rogers, who was National MP from 1990-1995 for Otara and Howick, touts himself on LinkedIn as president of UAS Teknik AG, a company formed in 2012 to represent the couple’s helicopter interests in New Zealand and Europe. This Swiss company does not exist but a New Zealand company, UAS Teknik Ltd was registered at Russell’s home in 2012 with Glenda Rogers as its director.
She said the company was not presently pursuing any helicopter interests.
Rogers is quick to point out that she has no intention of working on Russell’s affairs and battles with the IRD until her death, as Russell did.
“I want to retire at some point,” she said.
But she also conceded “there is quite a bit to sort out with the IRD”.
“It’s early days,” she said.
“We’re hoping for settlement with the IRD,” Rogers said of the case involving reinstating the five companies to the Companies Register.
“In the grand scheme of things it’s not a big deal,” she said, even though the IRD tried its best, but failed to keep the companies extinct.
The reinstatement of the companies was granted because the Russell case, FB Duvall Ltd v Commissioner of Inland Revenue, was allowed to proceed.
That was seven years ago. Russell had sought then to join other companies with FB Duvall, including the five defunct companies as he considered they were all in the same boat – or would be if they existed.
In the Duvall case Justice Rebecca Ellis determined that the IRD had erred in refusing to accept late objections by a number of companies controlled by Russell, or his firm, in relation to assessments for GST made in the early nineties.
The judgment came after the parties walked well-worn paths between the Taxation Review Authority and the High Court, Court of Appeal and back. There have been ongoing negotiations between Russell’s firm and the IRD to try and reach a resolution ever since.
FB Duvall, the five recently reinstated companies (and there were others) were all issued with assessments by the IRD in relation to GST, based on returns that were initially filed by Russell on behalf of each of those companies.
The IRD had assessed output tax (GST) on fees that the companies had received for administration or management services that these companies had provided to other companies.
The IRD was of the view no administration or those companies provided management services, and that the fees paid were merely a tax avoidance device for moving profits between participants in the Russell template scheme.
Russell’s barrister for FB Duvall, Simon Judd asserted that the IRD should take a consistent approach in relation to the GST assessments.
Effectively, what he said was that if the IRD said the plaintiff companies had not provided services, then it necessarily followed that they had been wrongly charged and had paid output tax in relation to the fees they had received in that respect.
After a Taxation Review Authority decision, Russell, on behalf of the companies, had filed amended GST returns claiming that the administration charges should be classed as dividends received by the companies and therefore they could not attract output tax. He also claimed entitlement to input tax credits and interest. In the case of FB Duvall that added up to $164,152.65 plus interest.
Russell also claimed that as no goods and services had been supplied to FB Duvall’s subsidiaries, the administration fees were exempt from the Goods and Services Tax Act in respect of financial services. This point has yet to be tested before the courts.
Wellington barrister, Andrew Beck acted for the Russell companies for the reinstatement of the five companies. As a barrister he does not come cheaply, nor will the slew of upcoming court action.
Glenda Rogers gave no clear-cut answer about where the funds were coming from to pay for legal representation. But as she ended the phone conversation to say goodbye to staff leaving the Kawakawa home for the day, she said there were businesses in the Russell stable that were still operating and generating income.
*Denise McNabb is a New Zealand freelance journalist. She can be reached here.
**This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.