Fed: High Court rules Virgin Blue dividends should cover tax

AAP General News (Australia)
12-05-2007
Fed: High Court rules Virgin Blue dividends should cover tax

CANBERRA, Dec 5 AAP - Australian budget airline Virgin Blue was obliged to retain funds
from dividends it owed to two foreign shareholders to cover their tax liabilities, the
High Court held today.

The court heard that Cricket SA and Virgin Holdings - both Geneva-based corporations
- were liable to pay tax on a capital gain made on the disposal of Virgin Blue shares
in 2003.

Cricket SA was liable to pay $64.4 million in tax and interest and Virgin Holdings'
liability amounted to about $20.5 million.

The Tax Commissioner attempted to recover the amounts in December 2005 by requiring
Virgin Blue to retain $65 million in declared dividends instead of paying them to the
two shareholder companies.

At the time, Cricket SA held 23 per cent of the issued capital of Virgin Blue and Virgin
Holdings held 2.08 per cent.

The day after the commissioner issued notices to retain the dividends the two companies
assigned their dividend rights to a third party - Bluebottle - which gave Virgin Blue
an irrevocable direction to pay a fourth party - Barfair.

Bluebottle, Cricket SA, Virgin Holdings and Barfair won an action they brought in the
NSW Supreme Court to declare the various transactions effective and the tax commissioner's
notices invalid.

The decision was overturned by the Court of Appeal which ordered Virgin Blue to pay
the commissioner the dividends.

The four companies appealed that decision to the High Court which today, in an unanimous
decision, ruled that Virgin Blue was obliged to retain from the dividends sufficient funds
to pay the tax liabilities of Cricket SA and Virgin Holdings.

The court held that Virgin Blue, despite the assignments to Bluebottle, had control
of money belonging to its shareholders on the day the dividends were declared.

As a result it remained liable to pay the dividends to Cricket SA and Virgin Holdings.

AAP rl/jfm/sp

KEYWORD: VIRGIN

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