The founder of Dunnes Stores, the late Bernard Dunne, wanted the group to continue to exist for 50 years after his death, the tribunal was told.
He wanted his children to be "tested" before they gained control of the valuable business, Liam Horgan, a former tax partner with Touche Ross in Cork, told senior counsel John Coughlan, for the tribunal.
It was for this reason that Mr Dunne and his late wife, Norah, established a trust in 1964. Mr Horgan said the late Mr Dunne had told him of his wish for the group. He said the trust was not set up for tax reasons as was often stated in the media.
"This was a real discretionary trust because Mr Dunne had six children that had to be tested. He insisted that the group should remain for 50 years after his death and this was the reason behind the discretionary trust." Mr Dunne died in 1984.
Mr Horgan, who retired in 1988, said that with the benefit of hindsight "maybe it would have been better not to set up the trust at all". This was because the tax bill that was building up within the trust would have to be settled at some stage.
Since the mid-1980s, trusts have had to pay a discretionary trust tax, equal to a percentage of the assumed value of the assets they hold. In the 1980s the tax was 1 per cent of the value and Mr Horgan said he believed it was now 6 per cent.
The tribunal heard that a £38.8 million capital gains tax assessment was raised against the trust at the end of its 21-year life-span, when the trustees transferred the assets to a new trust of which they were also trustees. This occurred in March 1985.
The Revenue decided a disposal had occurred, triggering the tax charge. The tax bill arose from an estimated value of £120 million as of March 1985 for the group, which the Revenue arrived at.
The trust appealed the assessment and the appeal commissioners ruled in its favour in November 1988. The commissioners found that no disposal within the meaning of the Act had occurred.
On legal advice the Revenue did not appeal the decision.
Mr Horgan said the trust had received advice from London and elsewhere.
Because no beneficiary of the trust had become entitled to any interest in the group, the trustees were "absolutely certain" their case was "unassailable".
"We were prepared to go to the Supreme Court on it." He agreed with Mr Justice Michael Moriarty that a number of such cases had gone to the Supreme Court and the House of Lords and the rulings had gone one way or the other over time.
Mr Coughlan said a valuation put on the Dunnes group as of January 1984, for the purposes of discretionary trust tax, was £100 million. This valuation was reduced to £82 million during settlement negotiations between the two sides; under law this valuation stood for three years.
It was used as a basis for evaluating discretionary trust tax up to 1990, when a new valuation was agreed between the two sides, of £220 million.
Mr Horgan said in the 1980s the group had 19 per cent of the grocery and retail clothing market in Ireland. "This was all pre-Celtic Tiger," he said.
He agreed that Dunnes pre-tax profits at the time were only outstripped by the major banks and public companies such as Cement Roadstone or the Smurfit group.
The Irish economy was in a bad state at the time, he said. "The trustees and the family reinvested every available pound," during this period, he said.
"There was an explosion" in the size of the group in the late 1980s and 1990s.
