Thursday, 6 September 2012

Max acts for tax man in battle over settlement funds

A $1.95 million settlement between the former occupants
of this Manly property is in Max Donnelly's sights.
Photo: SiN Images  
FOR what is probably not the first time in his career, Max Donnelly has been ordered to produce his particulars.

Particulars about what bankrupt tax lawyer David Neill Bonnell knew.

Particulars about when Bonnell knew what he's alleged to have known.

And particulars about how Donnelly knows that when Bonnell transferred $5 million from his non-compliant super fund to Windoval, a company he controlled, it was done intentionally to foil the taxman.

The Windoval payment was made on July 1, 1999. Accrued interest might turn out to be quite a sum.

Ferrier Hodgson’s bankruptcy veteran was appointed trustee to the Bonnell estate in September, 2008 after the Commissioner of Taxation bankrupted the former tax lawyer. 

Donnelly is claiming certain distributions from the Windoval transfer vest with him. The Federal Court has asked him to prove it.

Windoval and several other Bonnell-related entities recently tried to have the trustee's statement of claim struck out, or failing that, have the entire proceedings dismissed. No such luck.

Last week Justice Lindsay Foster ordered Donnelly to amend his statement of claim with a focus on providing particulars of the facts that he claims prove the allegations against Bonnell and therefore his right to the Windoval transfers.

The claim is just the latest fallout from the notorious, non-compliant superannuation schemes debacle of the late 1990s, which resulted in the jailing in 2008 of former deputy tax commissioner Nick Petroulias.

Donnelly is focused on recovering distributions from various Bonnell-controlled entities to related parties including $1.95 million which stem from payments to the bankrupt’s ex-girlfriend between 2000 and 2005.

The girlfriend, who was the bankrupt's personal assistant in his tax law practice, used the money to buy a waterfront property in Stuart Street, Manly.

Over the next five years she utilized a further $1.85 million, also provided to her by Bonnell-controlled entities, to build a three level, architect-designed home. Unfortunately, dream homes are no guarantee of enduring affection.

In 2007 the bankrupt took the girlfriend to the Supreme Court claiming the property was held by her on constructive trust in his favour.

The parties agreed to settle for $1.95 million. It was paid into a solicitor’s trust account. Donnelly's application aims to prize it out for the benefit of the tax man.

Court documents show that $2.239 million was spent buying the Stuart Street site and building the new home, which features a 13 metre lap pool.

After the settlement terms were agreed in 2010 the former girlfriend sold the house for $3.52 million. Agents contacted by SiN said it sounded like a good price but weren't prepared to comment without first seeing the particulars.

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