Commissioner of Inland Revenue v Sunset Property Care Limited [2012] NZHC 1179 (30 May 2012)

Last Updated: 22 August 2012

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-83 [2012] NZHC 1179

IN THE MATTER OF the Companies Act 1993

BETWEEN THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND SUNSET PROPERTY CARE LIMITED Defendant

Hearing: 29 May 2012

(Heard at Christchurch)

Appearances: H. Sumner - Counsel for Plaintiff

D. Dellaway - Director of Defendant

Judgment: 30 May 2012

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

This judgment of Associate Judge Gendall was delivered on 30 May 2012 at 11.00 am under r 11.5 of the High Court Rules.

_{Solicitors: Inland Revenue, PO Box 1782, Christchurch 8140}

THE COMMISSIONER OF INLAND REVENUE V SUNSET PROPERTY CARE LIMITED HC CHCH CIV-

2012-409-83 [30 May 2012]

[1] Before the Court is an application by the plaintiff seeking an order to place the defendant company into liquidation.

[2] On 9 November 2011 the plaintiff served upon the defendant a statutory demand requiring payment of $145,015.30 representing an unpaid debt due by the defendant with respect to PAYE, Kiwi Saver Employee Deductions, Kiwi Saver Employer Deductions and Goods and Services Tax.

[3] The defendant made no response within the fifteen working day period allowed following service of the demand, and on 18 January 2012 the plaintiff brought this present proceeding seeking an order to place the defendant company into liquidation.

[4] The statement of claim and supporting documents were served on the defendant on 31 January 2012 and advertising of the liquidation application was published in the Press newspaper at Christchurch on 17 April 2012 and in the New Zealand Gazette on 19 April 2012.

[5] Initially, this proceeding was called before this Court on 20 March 2012 but adjourned on that date to 1 May 2012 to confirm advertising.

[6] Then, on 1 May 2012 when the matter was again called in the list, it was adjourned to 29 May 2012. This was to enable discussions to take place between the plaintiff and the defendant to see whether a negotiated settlement of this matter could occur.

[7] When the matter was called before me on 29 May 2012, Mr Dean Dellaway (Mr Dellaway) a director of the defendant appeared on behalf of the company. This was despite the accepted position that unless permitted by the Court to do so, no one has a right to present a case in Court for another or appear for a company litigant unless that person is a qualified lawyer – GJ Mannix Limited [1984] 1NZCR 309 (CA). Ms Sumner who appeared as counsel for plaintiff took no issue with Mr Dellaway as a director representing the defendant company here and effectively I granted leave to do so. Matters proceeded on this basis.

[8] No formal Notice of Opposition or defence to the present liquidation application nor any material in support had been filed here on behalf of the defendant. Mr Dellaway confirmed however that the application was opposed by the company. On 28 May 2012, Mr Dellaway had provided to the Court a letter on behalf of the defendant setting out a range of what were essentially matters of complaint. In addition, this letter annexed copies of letters said to be relevant here, the first being dated 21 March 2012 from the Canterbury Earthquake Recovery Authority (CERA) and the second from the plaintiff dated 25 May 2012. I will return to these later in this judgment.

[9] Turning first to the substance of the application before me, s 241(4)(a) Companies Act 1993 provides that the Court may appoint a liquidator if it is satisfied that the company in question is unable to pay its debts.

[10] Inability to pay debts by a company is dealt with in s 287 Companies Act

1993. This provides that, unless the contrary is proved, a company is presumed to be unable to pay its debts if it has failed to comply with a statutory demand.

[11] In the present case, as I have noted above, the defendant has clearly failed to comply with the plaintiff’s statutory demand served on it on 9 November 2011. In terms of s 287 Companies Act 1993 it is therefore presumed to be unable to pay its debts and the grounds for appointment of a liquidator set out in s 241(4)(a) are met.

[12] A solicitor’s certificate dated 29 May 2012 has been provided to the Court by the plaintiff. This confirms that a debt of $127,324.27 remains owing by the defendant to the plaintiff as at that date.

[13] In addition, the plaintiff has filed a consent to act from proposed liquidators, Craig William Melhuish and Keiran Anne Horne.

[14] Turning now to the defence to the liquidation application which Mr Dellaway has advanced on behalf of the company, as best I can tell this follows the following lines:

(a) First, Mr Dellaway claims he has put numerous settlement proposals to the plaintiff in an endeavour to resolve matters for his company but in his words they: “have not been co-operative or helpful” and the proposals “have all been declined”.

(b) Next, Mr Dellaway questions the penalties and interest which have been imposed on the core tax debt which has been assessed.

(c) Then, he appears to raise complaints as to the availability of demolition work for his company in the Canterbury region and the performance of CERA in all of this. As to these aspects, Mr Dellaway states in his 28 May 2012 letter which is before the Court:

... I’m always seeking work for my business and company, there are also a lot of other factors also one is I have been blackmailed by a North Island contractor who stole of (sic) my last demolition site in the CBD, as you will see from the letter attached I’ve tried to have CERA the earthquake authority listen to my concerns and have also been passed on, Lianne Dalziel local MP has also been involved for some weeks now the letter attached will hopefully give your (sic) insight as to my concerns I have tried to move forward but with no income it has been very difficult.

CERA the authority who controls the city at present needs a wakeup call I see no reason why any company in Christchurch should be liquidated with the work up and coming.

Your Honour I’ve tried to get a proper answer from the CERA outfit but the (sic) ignore emails and don’t reply I have followed all protocol as to the requirements from companies prospectus and yet I find myself trying to save my business not only do I lose the company I lose my accreditation to operate this is something I do not want or need I do hope you see that the current situation in Christchurch is not my fault.

Your Honour I proposed to pay $500.00 per week under the last proposal I

sent my case officer to which was declined ....

[15] Essentially from his letter and submissions advanced to me Mr Dellaway seeks an adjournment of this matter on an indefinite basis as he says to:

enable me to move forward and getting work out of town I will and do want to work with the Inland Revenue Department but they seem to not want this very shameful on their part under the circumstances.

[16] Mr Dellaway goes on to claim that he has about $100,000.00 of quotes on his books from clients needing their homes demolished but he says:

the insurance companies are holding up a lot of this work along with CERA given it to the North Island contractors ....

[17] Finally, Mr Dellaway indicates both in his letter and his submissions that “having no income” and with “no money to pay the lawyers” he has not been able to obtain legal representation for his company, but nevertheless he seeks the adjournment of this matter on the basis outlined above.

[18] In addition to the material outlined in his 28 May 2012 letter, Mr Dellaway in his submissions before me confirmed that, over and above the debt outstanding to the plaintiff, the defendant has outstanding debts to trade creditors and others totalling at least a further $100,000.00. He also confirmed the defendant company has no assets. He says it is leasing what plant it uses and has no property of any kind.

[19] Turning to the question of accreditation with CERA, in the CERA letter dated

21 March 2012 which Mr Dellaway has provided to the Court addressed to his MP, Lianne Dalziel it is confirmed that the defendant has Level D accreditation with CERA which is the lowest level. This accreditation authorises the defendant to carry out a large range of minor demolition works (or sub-contracted jobs under other accredited main contractors) including those carried out on residential properties, the sorting of material on site, make safe works and cartage. The letter from CERA confirms that Mr Dellaway and the defendant have been invited to tender for two projects within Level D accreditation limits but it says the defendant did not submit a tender for either of these. In addition, CERA advises that its officers explained to Mr Dellaway on behalf of the defendant the process for his meeting the requirements for a Level C accreditation. This includes the provision of a plant list of the appropriate gear that the defendant might own (including heavy machinery capable of doing demolitions on 1-2 storey buildings) together with the provision of written references for commercial demolition work undertaken within the last 24 months. None of this it seems has been provided however.

[20] On this issue of accreditation, it seems that at present it is the defendant which holds the Level D accreditation with CERA. There is no evidence before me to indicate that if the defendant is placed into liquidation this accreditation would necessarily lapse. In any event, as I see the position, even if the defendant’s accreditation was to be removed, presumably there would be nothing to stop Mr Dellaway himself taking steps to establish a demolition business under a new entity and if he was able to meet CERA requirements obtaining a new accreditation at the appropriate level.

[21] Turning now to address the other complaints Mr Dellaway has placed before the Court, it seems to me that many of these are general matters which have arisen subsequent to the unfortunate recent earthquakes which have occurred in the Canterbury region. Given that many of the debts here in question with the plaintiff were built up since January 2006, however, much of this debt was incurred well prior to the occurrence of these earthquakes.

[22] And in particular, the core debt here relates to unpaid GST, PAYE and KiwiSaver Employer and Employee deductions. The last three of these items are in effect payments which have a trust element given that they are amounts which should have been paid on behalf of third parties.

[23] Before me, Ms Sumner for the plaintiff confirmed that since its incorporation in 2005, the defendant company has paid no GST payments despite many assessments having been issued. In addition, Ms Sumner indicated that the defendant has made only one payment of PAYE and throughout there have been serious taxation non-compliance issues. Indeed, a letter which Mr Dellaway has himself placed before the Court from the plaintiff dated 25 May 2012 states that income tax returns for the defendant for the periods 31 March 2006, 2007, 2008,

2009, 2010 and 2011 together with GST returns for the periods 31 March 2011, 31

May 2011, 31 July 2011 and 31 January 2011 all remain outstanding. Clearly these must be matters of considerable concern.

[24] As noted above, Mr Dellaway has confirmed that the defendant company has no assets and it has outstanding debts in excess of $100,000.00 owing to general

trade and other creditors along with the current debt to the plaintiff totalling over

$147,000.00.

[25] There can be no question here that the defendant company is quite unable to pay its debts as they fall due and is clearly insolvent. This is not an appropriate case in my view where, as Mr Dellaway requests, the plaintiff should “work with local companies in the Canterbury region to resolve difficulties”. The defendant’s parlous financial position and its serious taxation non-compliance over many years clearly mitigate against this course of action being followed.

[26] In terms of s 241(4)(a) the defendant is unable to pay its debts. For all the reasons outlined above I conclude that the appointment of liquidators is appropriate here.

Orders

[27] The following orders are now made therefore:

(a) An order is made placing the defendant company Sunset Property

Care Limited into liquidation.

(b) Craig William Melhuish and Keiran Anne Horne are appointed liquidators.

(c) Costs are awarded to the plaintiff on a category 2B basis together with disbursements as fixed by the Registrar.

(d) This order is timed today, 30 May 2012 at 11.00 am.

‘Associate Judge D.I. Gendall’