$400m IRD debtor stalls bankruptcy bid

John Russell has been fighting Inland Revenue for decades.

Accountant owing more than $400 million wins order stopping department taking action pending a judicial review.

A 79-year-old accountant who owes Inland Revenue more than $400 million has successfully stalled it from trying to bankrupt him.

John George Russell's tax debt - the bulk of which is interest and penalties - has ballooned from $74 million to more than $400 million in little over a decade.

The IRD in June won a judgment for $367 million against Russell, who developed a template that the Court of Appeal called a blatant tax-avoidance scheme.

Inland Revenue now intends to bring bankruptcy action against Russell, who is not giving up the fight against the department.

Russell has proposed three different settlement offers in the past eight years and alleges the rejection of these were not fair or reasonable.

He has filed for a judicial review over this refusal and while no date has been set for this, Russell last month asked the High Court for orders to stop the IRD taking any more enforcement action against him - including bankruptcy - pending the outcome of his bid.

Russell's lawyer, Simon Judd, told Justice Pamela Andrews last month that the IRD had not considered the relevant factors in the law when assessing whether to accept Russell's $1000-a-week instalment proposal.

Judd said the tax department was influenced by irrelevant factors, including Russell's bouts of litigation with IRD over decades.

IRD lawyer Pauline Courtney, opposing the interim orders, said the instalment proposal would not even keep on top of the interest and penalties and would mean the debt would continue to grow.

She said Russell's judicial review wasn't tenable and submitted that the IRD had considered relevant factors and given six reasons why the instalment proposal was not accepted.

In her decision, Justice Andrews concluded that an interim order was necessary to preserve Russell's position.

"Without an order he will be bankrupted," Justice Andrews said.

The judge said she was satisfied an interim order should be made prohibiting the IRD from launching bankruptcy action.

This order is to last only until the IRD's application to throw out the judicial review bid is determined, she said.

Between the late 1970s and 2000, Russell established what the Court of Appeal has said was an "elaborate, maze-like structure of companies, partnerships and trust", and provided advice on how others could avoid tax through their participation in the Russell template.

The IRD argued that through the use of a partnership, Russell avoided paying tax on income earned through Russell template transactions.

It reassessed Russell's personal income and said he should have declared income of $15.76 million between 1985 and 2000 instead of $298,700.

Russell's proposals - all rejected by IRD

2006: To pay a lump sum of $50,000 and undefined weekly payments for the rest of his life.

2012: To pay $1000 a week until his death, bankruptcy or mental incapacity.

2013: Payment of $150,000.

Read the court's decision here: