Commissioner of Inland Revenue v Global Developments (Waltham) Limited [2015] NZHC 1697 (22 July 2015)

Last Updated: 8 March 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2015-404-1669 [2015] NZHC 1697

BETWEEN	THE COMMISSIONER OF INLAND REVENUE Plaintiff
AND	GLOBAL DEVELOPMENTS (WALTHAM) LIMITED Defendant

Hearing:	On the papers
Counsel:	P Saunders for the Plaintiff
Judgment:	22 July 2015

_{DECISION OF ASSOCIATE JUDGE CHRISTIANSEN}

This judgment was delivered by me on

22.07.15 at 4:00pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

THE COMMISSIONER OF INLAND REVENUE v GLOBAL DEVELOPMENTS (WALTHAM) LIMITED [2015] NZHC 1697 [22 July 2015]

[1] The Commissioner applies without notice for:

(a) the appointment of David Murray Blanchett and Malcom Grant Hollis as joint and several interim liquidators of the defendant company with rights and powers of a liquidator to the extent necessary, expedient or desirable to preserve or maintain the value of assets owned or managed by the defendant company, including, without limitation, the powers to:

(i) obtain books, records documents or information of the defendant company from its directors, accountants, solicitors and any other person who may have those items in their possession or control, as provided under s 261 of the Companies Act 1993;

(ii) inspect and copy documents under s 262;

(iii) examine on oath as provided by ss 261, 265 and 266 of the

Companies Act 1993;

(iv) take action and issue proceedings to recover monies owed to the defendant company (including, without limitation, recovery of amounts under ss 292, 293, 297 and 298 of the Companies Act 1993;

(v) realise assets owned or managed by the company.

(b) That the fees of the interim liquidators and of employees of their firm be charged at standard hourly rates currently charged by them for liquidation assignment.

(c) That such fees and expenses of the interim liquidators, including expenses incurred in exercising their rights and powers from the time of their appointment, be treated and paid as remuneration and

expenses of a liquidator in accordance with s 278 and paragraph 1 of the seventh schedule of the Companies Act 1993.

(d) That the cost of this application to be paid from the realisation proceeds of the assets of the defendant company.

(e) That leave is reserved to apply to the Court for such powers or directions as the interim liquidator considers appropriate.

[2] The grounds on which each order is sought are:

(a) Requiring the Commissioner to proceed on notice would cause undue delay or prejudice to the Commissioner.

(b) That appointment of an interim liquidator is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the defendant company.

(c) The defendant company will shortly receive $4,188,000 inclusive of GST from Housing New Zealand Limited (Housing NZ) for the sale of 60 – 64 Waltham Road, Sydenham, Christchurch.

(d) It is unlikely that the director will act to preserve this asset and an interim liquidator is required to safeguard the interests of creditors.

(e) An interim liquidator will be able to preserve the status quo with the least possible harm to all parties.

(f) The Commissioner’s liquidation application shows a strong prima facie case for putting the defendant company into liquidation.

[3] The application is supported by a number of affidavits sworn on behalf of the

Commissioner. As well the Court has received the Commissioner’s submissions.

[4] The Commissioner specifically requests a ruling on the application by 24 July

2015.

[5] Also filed is the Commissioner’s proceeding for liquidation and a verifying

affidavit.

[6] The Court has reviewed these documents and notes:

(a) The defendant company will on or about 31 July 2015 receive

$4,188,000 inclusive of GST from Housing NZ for the sale of 60 – 64

Waltham Road, Sydenham, Christchurch.

(b) The defendant company is registered for GST and will likely be required to return GST to the Commissioner within two months in an amount of approximately $546,260.

(c) It is claimed the defendant company is under the effective control of Mr John Clancy who has an extensive history of not making provision for tax payments in relation to companies in his control and divesting them of their assets.

(d) The Commissioner considers that service of this application upon the company would cause undue delay or serious detriment to the Commissioner given the short period of time within which the company will receive the sale proceeds from Housing NZ. The Commissioner believes there is a risk that those funds will be dissipated by Mr Clancy.

Jurisdiction to appoint an interim liquidator

[7] The Court may appoint an interim liquidator if satisfied it is necessary or expedient for the purpose of maintaining the value of assets owned or managed by the company.

[8] Mr Blanchett and Mr Hollis have provided written consent dated 15 July

2015 to being appointed jointly and severally as interim liquidators and/or liquidators of the company.

[9] An interim liquidator has the rights and powers of a liquidator to the extent necessary or desirable to maintain the value of assets owned or managed by the company.

[10] If the Court is satisfied, upon proof by affidavit, that there is sufficient ground for the appointment of interim liquidator, it may make the appointment, and may limit the rights and powers of the interim liquidator in any manner it thinks just.

[11] Before confirming the appointment of interim liquidators the Court must be satisfied that the company’s assets are in jeopardy; and should consider whether the status quo should be maintained; and should determine whether the interests of creditors require safeguarding.

Considerations

[12] The defendant company will shortly receive the house sale proceeds inclusive of GST from Housing NZ.

[13] The accountant for the company has advised that the company will have sufficient funds to pay the GST debt that will arise from the sale but is concerned the director will chose not to pay the GST.

[14] The Court has considered the provisions of Section 241 of the Companies Act

1993 which sets out the grounds upon which a defendant company may be put into liquidation and whom may bring such an application.

[15] The Court accepts that pursuant to the provisions of s 241(2)(c)(iv) the Commissioner may apply for liquidation of the defendant company as a prospective creditor.

[16] The Commissioner’s application identifies a number of companies of which Mr Clancy is the sole director and part shareholder, and which have outstanding tax debt. The nine companies identified collectively owe in excess of $1.8M unpaid taxes.

[17] Evidence has been provided in support of claims that Mr Clancy stripped one of those company’s of its assets prior to placing it into voluntary liquidation with an unpaid GST debt of about $766K.

[18] The evidence is that Mr Clancy left New Zealand on 1 July 2015 ostensibly to England but other evidence indicates he may have travelled to Thailand.

Result

[19] The Court considers the public interest would be promoted by the appointment of interim liquidators to ensure the collection of revenue due; that there are sufficient grounds for the appointment and for believing that the company assets may be in jeopardy if an interim appointment was not made.

[20] Accordingly there will be orders for the appointment of interim liquidators in the terms sought without the requirement of any undertaking from the Commissioner being obtained.

[21] Leave is reserved to the Commissioner to apply on short notice to the Court for such powers or directions or amendments to terms of appointment.

[22] Costs upon the application shall be reserved.

[23] Leave is reserved to the defendant company to apply on two days notice to set aside the order for interim appointment.

[24] The Court directs the Commissioner to forthwith serve the decision by email upon the company by its accountant Richard Somerville, and by its solicitors Lane Neave of Christchurch.

[25] The time for the appointment of Messrs Blanchett and Hollis as interim liquidators is 4:00pm, 22 July 2015.

[26] The Court approves the appointment of Messrs Blanchett and Hollis to exercise those powers they have sought be approved and the Court agrees that their

_{fees may be charged in terms applied for.}

Associate Judge Christiansen