The Paradise Papers a set of 13.4 million confidential electronic documents relating to offshore investment, were leaked to the public on 5 November 2017. The documents might provide evidence of tax minimization by more than 120,000 people including politicians, celebrities, corporate giants and business leaders.
The Papers originated from offshore law firm Appleby, and the corporate services providers Estera and Asiaciti Trust, and business registries in 19 tax jurisdictions. According to the Boston Consulting Group, the amount of money involved is around $10 trillion.
The Paradise Papers were so named as many of the low tax offshore jurisdictions, including Bermuda, the HQ of Appleby are idyllic locations – interestingly the French term for a tax haven is paradis fiscal.
Michael Hutchence, the lead singer of the band INXS, was found dead in a Hotel room in Sydney on November 22, 1997. His death was ruled a suicide.
Hutchence had made a Will the year before he died, in which Amnesty International and Greenpeace were each to receive $US250, 000, his daughter Heavenly Hiraani Tiger Lily, was to receive 50 per cent of his estate, with the rest split equally between his partner, Paula Yates, his mother, Patricia Glassop father Kell, brother Rhett and sister Tina.
Eight years after his death, and despite having a fortune estimated at between $10 and $20 Million, the executor’s report on the late singer’s estate claimed that after the sale of artworks, real estate, guitars, a Harley-Davidson, a jeep and other items, and the outgoings of the estate, including $670,000 in legal fees, there was nothing for the beneficiaries.
It was reported that the assets of Hutchence estate did not include three Gold Coast properties worth more than $10 million, a villa in France, a house in London, a development in Indonesia, a string of luxury cars, or ongoing royalties from INXS.
In the years before he died Hutchence structured his financial affairs to minimise tax and to reportedly secure himself against
“(a) his ‘thieving relatives’, (b) his ‘girlfriends’, and (c) in the event he married, his wife/ies (sic).”
In order to meet these requirements a complex array of companies and trusts ultimately controlled by the “Vocals Trust” of which Hutchence was not the beneficiary were established.
The paradise papers confirm that Hutchence and his business manager, Colin Diamond, established a company Chardonnay Investments, which held ownership of Michael’s broadcast royalties relating to INXS’s catalogue, as well as control of his likeness rights relating to TV and merchandise.
It has been reported that following his death in 1997, Diamond became the sole owner (“ultimate beneficial owner”) of the company, as well as being co-executor of Hutchence’s will-a role he later recused to avoid a conflict of interest.
The Hutchence family took action against Diamond however in 2005 the Court accepted that the singer’s assets had been legally transferred and were held through a complex arrangement of offshore trusts set up in tax havens by financial advisers including Diamond.
In 2010, Chardonnay Investments sued the five remaining members of INXS, claiming a one-sixth share of the airplay rights and revenues from the exploitation of Hutchence’s image.
In an email sent by Diamonds lawyer to Appleby “In the settlement with the estate of Michael Hutchence it was agreed that all intellectual property rights belonged to Chardonnay Investments Ltd which is controlled by Colin Diamond and by virtue of him being the ultimate beneficial owner, he controls the assets of Chardonnay,”
In 2015, Diamond formed a new company, Helipad Plain, with its purpose being the aim of “commercial exploitation of the sound recordings, images, films and related materials embodying the performance of Michael Hutchence”.
Some of the material appeared in the recent documentary Michael Hutchence: The Last Rockstar, in which Diamond appeared.
A trust occurs where a person or company (trustee) agrees to hold and manage assets or property in a way that will benefit someone else (beneficiary), under this relationship the trustee has a ‘fiduciary duty’ to the beneficiary. It is the existence of this relationship that forms a trust.
As a particular individual in their own right does not own the trust assets personally, they cannot be dealt with in a Will. A deceased estate is a trust, and the executor is the trustee who manages the property and assets of the deceased prior to distributing them to the beneficiaries named in the Will.
However trusts are usually governed by a written trust deed, stipulating the rules for its maintenance, the rights and obligations of all parties, and how income from the trust’s assets is ‘distributed’.
In establishing a trust Hutchence could legally minimise tax and protect his assets from creditors as property and assets moved into a trust become trust property. What seems unusual is that Hutchence transferred his assets into a trust where ultimately he was not the beneficiary. Hutchence had to trust that those who he effectively transferred his assets to would act in his interests.
Trusts are another way that you can plan for your future. However trust law is complex and expert advice from an accountant, lawyer or both should be sought if you are considering setting one up.