Commissioner of Inland Revenue v Ground Support (NZ) Limited HC Wellington CIV-2011-485-518 [2011] NZHC 731 (9 June 2011)

Last Updated: 30 July 2011

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV-2011-485-518}

IN THE MATTER OF the Companies Act 1993

BETWEEN THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND GROUND SUPPORT (NZ) LIMITED Defendant

Hearing: 9 June 2011

Counsel: A.L. Wilson and C. Doherty - Counsel for Plaintiff

A. Davie - Counsel for Defendant

Judgment: 9 June 2011

_{ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

Solicitors: Inland Revenue Department, Legal and Technical Services, PO Box 1462, Wellington

_{Treadwells, Barristers & Solicitors, PO Box 859, Wellington}

THE COMMISSIONER OF INLAND REVENUE V GROUND SUPPORT (NZ) LIMITED HC WN CIV-2011-

485-518 9 June 2011

Introduction

[1] Before the Court is an application to place the defendant company into liquidation. The application relates to a debt said to be owing to the plaintiff for unpaid GST, Income Tax deductions and Student Loan Employer Deductions which are said to total $40,247.72 at this point.

[2] The present proceeding is based upon a statutory demand which was served upon the defendant company on 4 February 2011. The statutory demand claimed the sum of $31,158.64 for outstanding taxation, interest and penalties.

[3] The defendant did not respond to that statutory demand.

[4] The present proceeding was then filed by the plaintiff on 21 March 2011 and served upon the defendant company on 23 March 2011.

[5] Advertising of the liquidation application took place in the Dominion Post on

6 April 2011 and the New Zealand Gazette on 7 April 2011.

[6] When this matter was first called before me on 18 April 2011 Ms Doherty appeared for the plaintiff and requested that the matter be adjourned until a date in June 2011 for settlement negotiations which were in the process of being conducted between the parties to be concluded.

[7] On 7 June 2011 when the matter was called before me again it was adjourned until today, 9 June 2011. This was on the basis that a payment of $15,000.00 of the debt was signalled by Mr Davie, counsel for the defendant as being available now, with the balance of the debt said to represent a possible tax refund.

[8] When the matter was called before me today, Mr Davie for the defendant indicated he held a bank cheque payable to the plaintiff for $17,000.00 which he wished to tender.

[9] In addition, he indicated that certain GST returns had been recently filed which he claimed showed that a refund of approximately $14,000.00 was due to the defendant.

[10] On this basis, Mr Davey requested that the present application either be dismissed or at least be adjourned to see whether all debt could be cleared from the GST returns which had been filed.

[11] In response Mr Wilson counsel for the plaintiff noted quite properly r 5.61 (1)

and (2) High Court Rules which provide:

5.61 Restriction when the Crown involved

(1) In a proceeding by the Crown for the recovery of taxes, duties, or penalties, a defendant is not entitled to advance any set-off or counterclaim.

(2) In a proceeding of any nature by the Crown, a defendant is not entitled to advance any set-off or counterclaim arising out of a right or claim to payment in respect of any taxes, duties, or penalties.

[12] Effectively therefore, no defence to any proceedings brought by the Commissioner of Inland Revenue on the basis of some set-off or counter-claim for taxation is allowed.

[13] In addition, Mr Wilson for the defendant expressed serious concern as to the credibility of these late filed GST returns and the refunds claimed by the defendant. He stated that at this early stage it appeared that the GST refunds sought related to transactions involving the sale of goods within a network of related companies. He indicated to the Court that these GST refunds were unlikely to be available given the nature of the transactions claimed. He noted also what he said was a generally unsatisfactory compliance history of this company in the past. And, he suggested that similar inter-related company transactions have been the subject of GST claims in the past which have been disallowed.

[14] Mr Wilson also communicated to the Court a concern as to the risk of future non-compliance by this company with its GST and other obligations. On this he

suggested that additional taxation amounts were continuing to accrue in the meantime and this was of concern to the plaintiff.

[15] Finally, Mr Wilson noted that, in any event, of the GST refunds which had been claimed which totalled some $14,000.00, approximately $4,300.00 of this amount had, in any event, been applied to other debts elsewhere and were not available for the defendant in this case.

[16] As to these matters, I note that the amount now indicated to be due to the plaintiff in the certificate provided to this Court is $40,247.72. It relates to substantial amounts for GST, penalties and interest, dating back as far as March

2010, amounts for unpaid tax deductions and also student loan employer deductions which were not made for earlier periods.

[17] Under all these circumstances, and given that no information of any kind as to the true financial position of the defendant company is before the Court, I am satisfied that there is no alternative here but for an order for liquidation to be made. The defendant in failing to comply with the statutory demand is presumed to be unable to pay its debts and it has put nothing before the Court to show the position is otherwise.

[18] That said, the following orders are now made:

(a) An order is made placing the defendant company, Ground Support

(NZ) Limited into liquidation.

(b) John Howard Ross Fisk and Jeremy Michael Morley are appointed liquidators.

(c) Costs are awarded to the plaintiff (one counsel only) on a Category

2B basis together with disbursements as fixed by the Registrar.

(d) An order is made approving the liquidator’s rates of remuneration in accordance with the affidavit of Jeremy Michael Morley filed herein dated 8 April 2011 subject to s 284 of the Companies Act 1993.

(e) A further order is made allowing the liquidators to exercise their powers individually pursuant to s 242 of the Companies Act 1993.

(f) These orders are timed at 10.17 am, today, 9 June 2011.

‘Associate Judge D.I. Gendall’