Billabong rich-lister sues over $50m tax saga
Billabong founder Gordon Merchant has filed a massive lawsuit against top tier tax firm EY over advice he says ended up with him being pursued by the tax office, penalised about $13m and banned from running his self managed super fund.
Mr Merchant, the Gold Coast surf lover who founded Billabong in 1973, claims he hasn't tallied exact damages yet but lists about $58m has so far been lost by following advice about how to structure a company sale in 2015.
He, and former Billabong director Colette Paull, are seeking damages for advice from EY and EY partner Ian Burgess after an audit by the tax office has ended with Mr Merchant being disqualified for "recklessly contravening" superannuation laws, as well as owing millions in back tax and penalties.
The tax office finding means Mr Merchant, and Ms Paull, have had to resign as trustees of their self managed super funds and might have to cash out their investments to move into a retail fund which could cause more losses, the Supreme Court claim states.
According to court documents the dispute stems back to when Mr Merchant sold out of his stake in his eco plastic packaging business Plantic for about $US54m in 2015.
The sale involved a series of deals between Mr Merchant's entities including his self managed super fund that he claims were done in accordance with specialist EY advice.
Part of the deal included Mr Merchant transferring over 10m of his Billabong shares at a loss and writing off debts from cash he had loaned to Plantic.
In 2017 the tax office audited the income tax affairs of Mr Merchant, his family trust and superannuation accounts and later looked into the deal.
It last month declared Mr Merchant and his super fund owed about $45m in tax and interest and it also imposed penalties worth about $13m. Ms Paull was also penalised $13,600.
Mr Merchant is claiming damages for breach of contract and negligence alleging EY should have known he was "vulnerable to suffering economic loss if EY failed to use reasonable care and skill" in structuring his affairs.
EY is yet to file a defence to the claim.
Originally published as Billabong richlister sues EY over $50m tax saga