|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 17 April 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-406-000015 [2018] NZHC 696
BETWEEN COMMISSIONER OF INLAND REVENUE
Plaintiff
AND STUART DOUGLAS ROBERTSON
Defendant
Hearing: 21-23 March 2018
Appearances: N H Malarao and H M McKee for Plaintiff
A A H Low and T M Kelly for Defendant
Judgment: 17 April 2018
JUDGMENT OF JAGOSE J
This judgment is delivered by me on 17 April 2018 at 3.30 pm pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Solicitors:
Meredith Connell, Auckland
Alexandra Low and Associates, Auckland
COMMISSIONER OF INLAND REVENUE v ROBERTSON [2018] NZHC 696 [17 April 2018]
Contents
Introduction [1]
Factual background [6]
Commissioner’s objections to documents [30]
Recovery under s 301 of the Act [34]
Affirmative defence of estoppel [46]
Commissioner’s other causes of action [51]
—recovery under the rule in Re Condon [52]
—recovery as mistaken payment [54]
Interest [55]
Result [61]
Costs [62]
Introduction
[1] In this proceeding, the plaintiff (the “Commissioner”) seeks to recover some
$160,000 plus interest from the defendant, Mr Robertson. Mr Robertson was the liquidator of Hukatere Coastal Trustees Limited (“Hukatere”).
[2] The $160,000 comprised GST refunds paid to Hukatere (in liquidation). The Commissioner had earlier assessed Hukatere was liable to pay GST arrears and penalties in the amount of some $214,000, and her investigations were continuing.
[3] Section 46(6) of the Goods and Services Tax Act 1985 (the “GST Act”) entitles the Commissioner to apply the amount of a refund in payment of tax payable by the GST-registered person. Also relevant is s 310(1) of the Companies Act 1993 (the “Act”):
310 Mutual credit and set-off
(1) Where there have been mutual credits, mutual debts, or other mutual dealings between a company and a person who seeks or, but for the operation of this section, would seek to have a claim admitted in the liquidation of the company,—
- (a) an account must be taken of what is due from the one party to the other in respect of those credits, debts, or dealings; and
(b) an amount due from one party must be set off against an amount due from the other party; and
(c) only the balance of the account may be claimed in the liquidation, or is payable to the company, as the case may be.
[4] Mr Robertson took the view the GST refunds were properly payable to the trustee of the WBR Trust, which he belatedly understood Hukatere had ceased to be prior to his appointment as liquidator, and paid them across.
[5] The Commissioner contends her payment of the GST refunds to Hukatere is recoverable from Mr Robertson in damages under s 301 of Act; under the principles articulated in Re Condon;1 and as a mistaken payment.
Factual background
[6] Hukatere was incorporated on 12 November 2004. Roy Victor Brown was Hukatere’s sole director and shareholder, and settlor of the WBR Trust on Hukatere as trustee by deed dated the same day. The deed provided the office of trustee is vacated if the trustee is put into liquidation.
[7] In May 2009, the Commissioner issued the trustees of the WBR Trust with a Notice of Proposed Adjustment, identifying proposed adjustments of net tax shortfalls of approximately $456,000, plus shortfall penalties of approximately $20,000. The tax shortfalls were contended to relate to input credits claimed by the WBR Trust for purchases of two residential properties in the GST period ending 30 April 2007, and of three cars in the GST period ending 30 April 2008. Mr Brown disagreed with the proposed adjustments, contending the returns made were correct.
[8] The Commissioner served Hukatere, as trustee of the WBR Trust, with a statutory demand dated 15 March 2010 for some $211,000 of unpaid GST payments and penalties.
1 Ex parte James; In re Condon (1874) LR 9 Ch App 609.
[9] The common bundle of documents contains documents dated 29 March 2010, which purport to record Mr Brown’s appointment of RVB Corporate Trustees Limited (“RVB”) in substitution for Hukatere, and Mr Brown’s advice to Hukatere of that removal. RVB was a company also associated with Mr Brown. (The Commissioner objected to the 29 March 2010 documents (and others), submitting they should not “be considered ... to be what [they appear] to be” pursuant to High Court Rule 9.5(1)(c). I agree with her objection, and give my reasons at [30] below.)
[10] As Hukatere’s director, Mr Brown resolved Hukatere was unable to pay its debts as they fell due, and as its shareholder, appointed Mr Robertson as liquidator, who consented to that appointment. Resolution, appointment, and consent all occurred at noon on 14 April 2010.
[11] On that same day, Mr Robertson issued Mr Brown his standard questionnaire on appointment as liquidator, and required delivery of all Hukatere’s documentation. Mr Brown’s cursory response to the questionnaire identified Hukatere’s business as “bare trustee”, and identified Sharlene Phillimore of Isolve Accounting and Taxation as Hukatere’s accountant. (Ms Phillimore, formerly employed by Mr Robertson as an accountant, acquired Isolve Accounting and Taxation Limited from Mr Robertson on 30 July 2002, from which she took over Mr Robertson’s accounting and tax agency clients on 1 April 2004.) Mr Brown explained Hukatere “has no liabilities”, but “[t]he Trust was unable to meet obligations”, leading to the resolution to wind up Hukatere.
[12] Mr Robertson’s first report as Hukatere’s liquidator, dated 22 April 2010, explained the company acted as a bare trustee of an unnamed trust. A shortfall remained after realisation of the trust’s assets, meaning the trust could not indemnify the trustee, and Mr Brown decided to put Hukatere in liquidation. From Mr Robertson’s inspection of Hukatere’s records, it appeared “the only remaining asset due to the trustee could be a GST refund being withheld by the Inland Revenue Department”. He proposed to dispense with any creditors’ meeting, as any funds recovered would not exceed those owed to the secured creditor, identified as $44,000 to Instant Finding Limited. He also identified Isolve Accounting as a creditor for less than $800.
[13] A letter dated 29 April 2010 purports to provide Mr Brown’s further response to Mr Robertson’s 14 April 2010 letter. Now enclosing the sought documentation, the letter advises Hukatere “acted as Trustee of the WBR Trust until 29 March 2010 when it was replaced”. (The Commissioner objects to this letter: see [30] below.)
[14] On 7 May 2010, the Commissioner lodged proof of debt with Mr Robertson for some $214,000 in unpaid GST, advising “this is not our final claim as the company is subject to an investigation and upon completion an amended claim will be filed”. At the same time, the Commissioner sought to replace Mr Robertson as liquidator. On 11 May 2010, Mr Robertson rejected the Commissioner’s proof of debt, pending issue of assessments for the period under review, and incorporating refunds payable, observing his expectation of an ultimate reimbursement due “to the trust”.
[15] Mr Robertson replied on 11 May 2010 – on Isolve Limited letterhead, identifying his “Isolve.co.nz” email address domain – to reject the Commissioner’s proof of debt “[u]ntil such time as the assessments are issued for the periods under review and the refunds are determined and applied to the periods showing indebtedness”. He expressed his view “the Inland Revenue Department is in fact a Debtor to the trust which will give rise to a reimbursement entitlement”.
[16] The Commissioner responded by letter of 24 May 2010, insisting its proof of debt was an admissible claim, being certain notwithstanding refunds may be offset against it. She characterised s 46(6) of the GST Act as stating “the Commissioner will only refund an amount when he is satisfied as to the correctness of the refund”. She reinforced she was “under no obligation, subject to relevant notices being issued, to release that refund until such time as he becomes satisfied that it is payable”.
[17] After considering Mr Brown’s explanations of WBR Trust’s treatment of its GST inputs and outputs, on 25 June 2010 the Commissioner issued her statement of position to “Trustees in the WBR Trust”. Her revised net tax shortfall was approximately $195,000, plus penalties of some $23,500.
[18] There was then further correspondence:
- (a) dated 21 June 2010, purporting to be from Mr Robertson to Mr Brown, which requested the WBR Trust deed and financial statements; and
(b) dated 30 June 2010, purporting to be from Mr Brown to Mr Robertson, which enclosed the deed and “Notice of Discharge of Trustee Obligation”, and noted “[t]he company has no copies of financial statements as they remain the property of the Trust”.
(The Commissioner objects to this correspondence: see [30] below.)
[19] On 7 July 2010, the Commissioner asked Mr Robertson as liquidator for information in relation to Hokianga Farm Management Limited, RVB Limited and Hukatere. In relation to the last, Mr Robertson responded:
I need to take legal advice as regards my position as Liquidator of Hukatere Coastal Trustees Limited (In Liquidation). If the Company is no longer the Trustee and I believe it not to be, then it is simply a creditor of an insolvent trust with no power over any of the assets, if there were any. I need to clarify what are my powers in relation to recovering any monies on behalf of the Trustees [sic] Creditors. That after all is the purpose of any Liquidation.
[20] The Commissioner then sought certain of Hukatere’s financial and other records from Mr Robertson. Mr Robertson responded on 15 July 2010 with reference to Hokianga Farm Management Limited, RVB Limited and Hukatere – now on ‘Stuart D Robertson, Insolvency Practitioner’ letterhead, but still with an email address domain of “Isolve.co.nz”. He denied having any records or other information for the WBR Trust, explaining “[o]n my appointment as Liquidator the Deed of trust terminated the Companies appointment as trustee”. The Commissioner replied on 18 August 2010, seeking confirmation of the new trustee’s appointment, and identifying the company’s liability for periods while corporate trustee.
[21] By letter of 10 September 2010, the Commissioner’s solicitors indicated the Commissioner’s intention to have Mr Robertson declared disqualified from acting as liquidator for any of Hokianga Farm Management Limited, RVB Limited and Hukatere, on which it sought Mr Robertson’s contrary explanation or resignation.
[22] On 13 September 2010, the Commissioner advised Mr Robertson the WBR Trust was deemed to have accepted the Commissioner’s position set out at [17] above.
She explained “[t]he Trust will receive Notices of Assessment shortly confirming these changes”. On 16 September 2010, the Commissioner advised Mr Robertson “the audit of the WBR Trust has now been completed”. On 24 September 2010 and 19 October 2010, the Commissioner then disbursed cheques respectively for $157,662.04 and
$2,248.54 to Mr Robertson.
[23] In her evidence, Rosalie Eagleton explained how the disbursements occurred. Ms Eagleton is Inland Revenue’s employee in charge of collecting Hukatere’s tax debts. The Commissioner’s investigation and audit of Hukatere’s GST returns meant “a halt had been placed on the Company’s account within Inland Revenue’s system. The halt meant no refunds would be released”. But, once the Commissioner’s assessment was deemed accepted, “the audit was complete, and as a result the halt on the Company’s account was removed”. Ms Eagleton did not discover the refunds had been paid to Mr Robertson until 29 November 2010, but Mr Robertson had deposited the cheques into his account on the same days as their disbursements.
[24] On 12 November 2010, Mr Robertson issued his second report as Hukatere’s liquidator. He recorded, for the period to 14 October 2010, “[t]here have been no realisations, no distributions and no Liquidator remuneration during the period”, and noted:
The Liquidator has primarily been involved in the identification and qualification of creditors, attempting to obtain the Trust records and understanding the events that took place prior to the appointment of the Liquidator.
An ongoing dispute between the Trust and the Inland Revenue Department wherein certain transactions of the Trust have been disallowed will have a material outcome on the trusts final liabilities. The Trustee now in Liquidation is totally dependent on the obligation of the Trust to indemnify the Trustee for claims made in the Liquidation.
A letter dated 20 December 2010, purporting to be from Mr Brown to Ms Phillimore, states she is holding funds in trust for WBR Trust, identifies WBR Trust’s appointment of a new trustee, encloses the deed of appointment of RVB Corporate Trustees Limited, and directs the funds be released to Napier Investment Trust. A letter dated 21 December 2010, purporting to be from Ms Phillimore to Mr Robertson, states he is holding funds for WBR Trust, explains the current trustee has requested the funds be
released to her, and provides her account details for their deposit. (Again, the Commissioner objects to these two letters: see [30] below.)
[25] Under cross-examination, Ms Phillimore:
(a) acknowledged receiving the Commissioner’s 24 September 2010 and 19 October 2010 cheques as addressed to Mr Robertson at her office, and possibly depositing them at the bank on his behalf;
(b) agreed Mr Robertson had transferred $8,000 into Isolve Accounting and Taxation Limited’s bank account on 19 October 2010, which she knew had come from the WBR Trust, and was in payment or settlement of fees owed by WBR Trust to Isolve Accounting and Taxation Limited;
(c) said Mr Robertson came into Isolve Accounting and Taxation Limited’s office, she handed him the 21 December 2010 letter, and showed him the 20 December letter and the enclosed deed;
(d) identified a transfer on 21 December 2010 of $152,387.89 from Mr Robertson’s account to her client funds account on behalf of the WBR Trust as meeting her 21 December 2010 request of Mr Robertson;
(e) identified her transfer also on 21 December 2010 of $150,000 within her client funds account as being “from WBR to Napier Investment Trust as a deposit for the purchase of a carpark” – “[s]o Napier now has the money in their bank account under my name”; and
(f) explained, in her client funds account, the $150,000 was separated into
$30,000 and $120,000 batch payments:
(i) the former split evenly in $15,000 payments to each her practice account on account of fees owing by other entities, “[p]ossibly including Napier Investments”, and to Pinevale Trust, with which Mr Robertson was involved; and
(ii) $100,000 of the latter paid to one “S Cannon”, who Ms Philimore identified as Mr Brown’s personal assistant and Mr
Robertson’s former employee, and the $20,000 balance paid equally to an “E Krasniqi”, a former employee of Mr Robertson and for whose companies Mr Robertson may have acted as liquidator, and to Mr Brown.
[26] On 17 February 2011, Mr Robertson was also appointed liquidator of RVB Corporate Trustees Limited, and of Shakespeare Trustees Limited, another company of which Mr Brown was the sole director and shareholder. Shakespeare Trustees Limited acts as trustee for Napier Investment Trust.
[27] In January 2012 – after some interlocutory skirmishing on the Commissioner’s application to disqualify Mr Robertson from acting as liquidator for Hokianga Farm Management Limited, RVB Corporate Trustees Limited and Hukatere – Mr Robertson proposed resigning from those positions. To consider that proposal, the Commissioner requested a full account of all funds received “(including GST refunds)”, and of payments made, in the liquidations. Mr Robertson’s counsel advised “Mr Robertson received no funds in relation to the three liquidations and he made no payments”. The Commissioner’s solicitors identified the GST refunds paid to Mr Robertson, and sought confirmation he retained them. Mr Robertson counsel forwarded Mr Robertson’s explanation:
After my appointment a cheque arrived in the post a[d]dressed to the Trust. It was banked into my Trust Account awaiting clarification of what I needed to do with it as I planned to return it to the IRD.
The Trust (by way of the replacement Trustee) advised their Accountant who then advised me that a new Trustee had been appointed prior to my appointment and I had no right to withhold the proceeds and insisted that I release the monies without deduction, I did so.
That is the total explanation.
[28] There were continued interlocutory skirmishes on the Commissioner’s application for disqualification. Ultimately, Associate Judge Abbot gave orders by consent striking out Mr Robertson’s defence; and orders were also made on the Commissioner’s application, declaring his appointment as liquidator invalid, and appointing new liquidators. Mr Robertson unsuccessfully attempted to recall Abbott
AJ’s decision on grounds he misunderstood the effect of his consent as preparatory to his resignation as liquidator.2
[29] Mr Robertson initially responded constructively to the new liquidators’ request for information about Hukatere. He explained:
I received one GST refund. I banked it believing it belonged to the Trustee and would be available to make payment to the IRD, it was after all a refund that I understood was due, however I was advised [differently], so I released it to the replacement Trustee.
But follow up requests were met only by Mr Robertson’s provision of information predating the liquidation, but refusing information arising thereafter on grounds “the Liquidation has been ‘[j]udged not to have taken place’”.
Commissioner’s objections to documents
[30] The index to the common bundle of documents in this proceeding records the Commissioner’s generic objection to certain of the documents tendered in evidence by Mr Robertson. Pursuant to r 9.5(2), the objections “must be determined by the court at the hearing or at any prior time that the court directs”.
[31] Mr Robertson relies on those impugned documents to establish Hukatere was replaced by RVB Corporate Trustees Limited as trustee for the WBR Trust on 29 March 2010, before Hukatere was put into liquidation on 14 April 2010. They include Mr Brown’s specific advice of that contention to Mr Robertson dated 29 April 2010.
[32] I find the content of those documents to be inconsistent with Mr Robertson’s repeated assertions after 29 April 2010 expressly or impliedly stating Hukatere was trustee of the WBR Trust. They are also inconsistent with Mr Brown’s initial response to Mr Robertson, and to Mr Robertson’s first liquidator’s report, both before 29 April 2010. Mr Brown’s 29 April 2010 letter does not address the latter inconsistencies.
[33] I uphold the Commissioner’s objections. The Commissioner was right to dispute incorporation of those documents in the common bundle should have the consequence they were “to be considered ... to be what [they appear] to be” under
2 Commissioner of Inland Revenue v Robertson [2012] NZHC 1215 at [3], [21]-[22] and [46].
r 9.5(1)(c). The Commissioner’s objection begged evidence to be called from at least Mr Brown. Mr Robertson did not call Mr Brown to give evidence. I infer Mr Brown’s evidence would not have assisted Mr Robertson.3
Recovery under s 301 of the Act
[34] Section 301 of the Act provides:
301Power of court to require persons to repay money or return property
(1) If, in the course of the liquidation of a company, it appears to the court that a person who has taken part in the formation or promotion of the company, or a past or present director, manager, administrator, liquidator, or receiver of the company, has misapplied, or retained, or become liable or accountable for, money or property of the company, or been guilty of negligence, default, or breach of duty or trust in relation to the company, the court may, on the application of the liquidator or a creditor or shareholder,—
(a) inquire into the conduct of the promoter, director, manager, administrator, liquidator, or receiver; and
(b) order that person—
(i) to repay or restore the money or property or any part of it with interest at a rate the court thinks just; or
(ii) to contribute such sum to the assets of the company by way of compensation as the court thinks just; or
(c) where the application is made by a creditor, order that person to pay or transfer the money or property or any part of it with interest at a rate the court thinks just to the creditor.
[35] Mr Robertson’s counsel, Alexandra Low, provided a helpful memorandum of issues for trial, in which Mr Robertson accepts:
(a) Hukatere was liable for WBR Trust’s GST obligations, and Mr Robertson received the GST refunds as Hukatere’s agent;
(b) s 310 had application in Hukatere’s liquidation to require the amount due from the Commissioner to Hukatere to be set off against the amount due from Hukatere to the Commissioner;
3 Ithaca v Perry [2004] 1 NZLR 731, (2003) 9 NZCLC 263,386 at [151]-[154].
(c) Mr Robertson was wrong to comply with directions to disburse the GST refunds without taking advice on those instructions; and
(d) “he has failed in his duties of care and skill as a liquidator in respect of the GST refunds”, giving rise to liability to pay compensation under s 301(1)(b)(ii).
Given those concessions, I need not to rely on expert evidence given by Andrew John McKay for the Commissioner, as to how a reasonable liquidator in Mr Robertson’s position would have dealt with the GST refunds.
[36] But Mr Robertson resists any suggestion he has misapplied, or retained, or become liable or accountable for the GST refunds, so as to be required to repay the money under s 301(1)(b)(i). His argument is more than mere negligence is required, and therefore the order in s 301(1)(c) for payment of the money to the creditor has no application.
[37] I can dispense with that ground of resistance immediately.
[38] The “more than mere negligence” test was adopted by Casey J in Re Avon Chambers Ltd.4 The Judge was addressing the meaning of “misfeasance or breach of trust in relation to the company” appearing in the predecessor to s 301(1), s 315(1) of the Companies Act 1955. In s 301(1), the phrase is “negligence, default, or breach of duty or trust in relation to the company” – ie, the second limb for liability. Casey J was saying nothing about the first limb: “misapplied, or retained, or become liable or accountable for, money or property of the company”. In any case, even on that second limb, the ‘something more’ was met by showing “what occurred amounted to a breach of duty”,5 which Mr Robertson concedes.
[39] I do not see any material difference between the positions of Mr Robertson here, and of the defendant, Mrs Flay, in Sanders v Flay.6 Both misapplied company funds by paying them away. As Heath J describes the facts of that case:
4 Re Avon Chambers Ltd [1978] 2 NZLR 638, (1977) 1 BCR 149 at 641.
5 At 641 citing Walker v Wimborne [1976] HCA 7; (1976) 50 ALJR 446, 449-450.
6 Sanders v Flay (2005) 9 NZCLC 263,906 at [5]-[6].
The sum of $85,000 was paid to Mrs Flay on or about 28 November 2000. The sum was tendered to Mrs Flay as agent for her company. It appears from the evidence that that sum was not paid over to the company but, rather, was held initially in the trust account of Mrs Flay’s solicitors and then applied to meet personal indebtedness of Mrs Flay.
Following that application of funds, one of two consequences resulted. Either Mrs Flay would have been required to repay that sum to the company on demand or the sum should be regarded as a misapplication of company property. There is no evidence that that sum was repaid.
On application for formal proof, the Judge held “[f]rom a legal point of view, the nature of the claim falls squarely within s 301 relating as it does to misapplication of company funds”.7 The same could be said on the facts of this case.
[40] If I am wrong in that, I cannot see any factor giving rise to a lesser award of compensation. While the Court has discretion in fixing the amount of compensation, the discretion is to be exercised in accordance with principle.8 Three factors – causation of the loss, culpability of the defendant, and duration of the breach – are especially relevant to that discretion.9 Here, the loss was caused directly by Mr Robertson paying away the GST refunds, in circumstances in which he was responsible to retain them for set-off under s 310, and the breach continues.
[41] Ms Low relied heavily on the Commissioner’s contribution to the circumstances leading to disbursement of the GST refunds to Mr Robertson. She emphasised Mr Robertson had told the Commissioner Hukatere was not WBR Trust’s trustee. But before and after that advice, Mr Robertson’s formal reports as liquidator of Hukatere addressed the WBR Trust’s position. And the Commissioner had not been advised of any other trustee.
[42] Ms Low also asserted Mr Robertson properly rejected the Commissioner’s proof of debt, and the Commissioner had not provided Mr Robertson with any amended proof of debt. But Mr Robertson disregarded the mandatory set-off provided by s 310. Mr Robertson had no basis to believe nothing was due from Hukatere to the Commissioner. By the time he received the cheques, he had received the
7 At [16].
8 FXHT Fund Managers Ltd (in liq) v Oberholster [2010] NZCA 197 at [33].
9 Mason v Lewis [2006] NZCA 55; [2006] 3 NZLR 225, (2006) 9 NZCLC 264,024 (CA) at [110].
Commissioner’s advice WBR Trust was deemed to have accepted the Commissioner’s statement of position (stating WBR Trust’s tax liability was larger than the GST refunds). Mr Robertson’s statement in evidence he believed the GST refunds to represent the Commissioner’s final position is not credible. It is belied by the multiplicity of indications in the evidence he apprehended the GST refunds would have to be repaid to the Commissioner.
[43] In Sanders v Flay, Heath J also explained:10
Ordinarily, the claim under s 301 for misapplication of company funds would result in restoration of those funds to company assets for distribution among all creditors. But the section itself gives standing to a creditor to bring the proceeding. It has been acknowledged that the Court has a discretion to award any moneys for which judgment is entered to be paid to the creditor rather than the liquidator, particularly when the liquidator takes no steps: see s 301(1)(c) and Marshall Futures Ltd v Marshall [1992] 1 NZLR 316, at 332- 333 per Tipping J.
At 332, of Marshall, Tipping J, referred to Re Cyona Distributors Ltd [1967] Ch 889 (CA), in which Lord Denning MR, at 902, made the point that when an application is made by a creditor who has been defrauded, the Court has power to order payment to the creditor. Similarly, Danckwerts LJ took the view at 908, that where a creditor begins proceedings at his or her own expense, the creditor ought prima facie to be entitled to the reward of judgment. Although Russell LJ took a different view, at 908, I am satisfied that the circumstances of this case justify an approach along the lines suggested by the majority in Cyona.
[44] That Mrs Flay also obtained a benefit from the misapplication, in reduction of debt, was immaterial. There may be a foundation here on which to inquire whether payment to people and entities closely connected with Mr Robertson was also ultimately to Mr Robertson’s benefit. But, as I say, that is immaterial.
[45] Again, I do not see any material difference in the circumstances of the two cases. The Commissioner was entitled to have the statutory set-off applied in her favour, and Mr Robertson was bound so to exercise it. The Commissioner has prosecuted the proceeding, and is entitled to the fruit of my judgment in her favour.
10 Sanders v Flay, above n 11, at [18]-[19].
Affirmative defence of estoppel
[46] Mr Robertson pleads he reasonably relied on the Commissioner’s representations “no claim for the repayment of the GST [refunds] was being sought by the Commissioner”.
[47] Ms Low contended the Commissioner represented she would not pay a refund unless satisfied it was owing, would issue notices of assessment in wake of the audit, and would file an amended proof of debt. She said the Commissioner then paid the refunds, and issued notices of assessment “reflecting” the refunds,11 did not file any amended proof of debt, and remained silent both in respect of her mistaken payment and on her intent to seek recovery from Mr Robertson personally.
[48] Except for the last point, I do not understand how any of that constitutes the pleaded representation. As to that last, to constitute estoppel by silence, the Commissioner’s silence must be in the face of Mr Robertson’s known mistake as to “their respective rights and obligations”.12 But she had no obligation to prosecute Mr Robertson, and he had no right to know she intended to do so.
[49] Ms Low’s argument was rather the balance of the Commissioner’s representations overall represented the GST refunds were the Commissioner’s final position on WBR Trust’s tax liability. That argument is not sustainable either: the GST refunds were owing; it was just s 310 had application in the liquidation to require their set off against WBR Trust’s tax liability. And, because that set-off is “mandatory” and “self-executing”,13 no estoppel is effective to countermand it.14
[50] In any event, there is no evidence Mr Robertson relied on the Commissioner’s claimed representations. The evidence was he was instructed to disburse the GST refunds, and complied without more introspection.
11 The Commissioner produced assessments identifying a credit in an amount ‘reflecting’ the GST refunds, but showing larger debits by way of unpaid GST and penalties. They predated the GST refunds.
12 The Lutetian [1982] 2 Lloyd’s Rep 140 at 157.
13 Finnigan v He [2009] NZHC 2154; [2010] 2 NZLR 668, (2010) 10 NZCLC 264,648 at [22].
14 Re Paddington Town Hall Centre Ltd (1979) 41 FLR 239, 4 ACLR 673 at 241.
Commissioner’s other causes of action
[51] Given my decision the Commissioner is entitled to recover the GST refunds from Mr Robertson under s 301, it is unnecessary to consider the Commissioner’s other causes of action to the same end. However, had I been required to determine them, I would have held Mr Robertson liable under both causes of action.
—recovery under the rule in Re Condon
[52] Re Condon establishes that liquidators are not permitted to take advantage of strict legal rights available to them if to do so would mean they were acting unjustly, inequitably, or unfairly. This rule applies to liquidators because – whether they are Court appointed or not15 – they are “obliged to act in a manner consistent with the highest principles”.16 The rule was applied in Strategic Finance v Bridgman to hold “the liquidators are obliged ... to pay the mistaken GST refund ... to the Commissioner”.17
[53] Mr Robertson’s disbursement of the GST refunds is not a sufficient basis to escape application of the rule. Only if Mr Robertson’s disbursement of the GST refunds was consistent with those “highest principles” could such disbursement offer escape. But Mr Robertson concedes his conduct in disbursing the GST refunds without taking advice was not consistent with those principles, that conduct being a breach of his common law duty of care and skill owed as liquidator to creditors.
[54] That same concession establishes the ‘unconscionability’ ground on which courts have been prepared to consider restitutionary relief from a mistaken payment,18 and disentitles Mr Robertson from succeeding in any claim to a defence of change of position.19 The Court in Strategic Finance v Bridgman noted the “chief objection” ‘unconscionability’ is “too loose” a foundation for restitutionary relief (although that
17 At [120].
18 Thomas v Houston Corbett [1961] NZLR 151 at 161.
19 National Bank v Waitaki International [1999] 2 NZLR 211, (1999) 6 NZBLC 102,646 at 219.
criticism was in relation to proprietary, not personal, remedies).20 If the objection was upheld here, then the United Kingdom Supreme Court’s restatement of restitution’s objective – “to correct normatively defective transfers of value, usually by restoring the parties to their pre-transfer positions” – would have application to ensure the requirement in s 310(1) was met.21
Interest
[55] The Commissioner claims interest on the judgment sum.
[56] Schedule 1, cl 1 of the Interest on Money Claims Act 2016 – which came into force on 1 January 2018 – provides s 87 of the Judicature Act 1908, although repealed by s 182(1) of the Senior Courts Act 2016, “continues to apply to every civil proceeding commenced before this clause comes into force”.
[57] This proceeding commenced in 2015. Section 87 continues to apply. I thus have discretion to order:
... interest at such rate, not exceeding the prescribed rate, as [the Court] thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.
Since 1 July 2011, clause 4 of the Judicature (Prescribed Rate of Interest) Order 2011 prescribes that rate as “5.0% per year”.
[58] While not here applicable in its terms, also relevant to the exercise of my discretion is s 10(1) of the Interest on Money Claims Act 2016, which provides “In every money judgment, a court must award interest under this section as compensation for a delay in the payment of money”. While I have discretion to award interest at all, the 2016 Act illustrates a general expectation delays in payment of money will be compensated. But my discretion to award interest under the Judicature Act 1908 does not extend to a rate exceeding 5 per cent per annum.
20 Strategic Finance, above n 16, at [124].
[59] Section 13 of the 2016 Act mandates establishment of an “Internet site calculator”, which calculates interest rates for the purposes of the Act. The site’s FAQ explains:22
The interest rate is calculated for a specific day by:
(a) Taking the six most recent observations for the retail 6-month term deposit rate that have been published by the Reserve Bank of New Zealand (RBNZ), and taking an average of these six rates. The average is the base rate.
(b) Adding the base rate to the premium (0.15%). The result becomes the per annum simple interest rate.
(c) Converting the per annum simple interest rate into a daily effective rate. The formula for this conversion is as follows:
Daily effective rate = ((1 + “per annum simple interest rate as %” / 100) ^ (1 / “Days in the year” - 1) x 100
The result is the interest rate expressed as a daily effective rate for the specific day.
[60] I also take judicial notice of the Reserve Bank of New Zealand’s retail 6-month term deposit rate, which has been below 4 per cent per annum since mid-2015.23 I will award interest at rates calculated in accordance with the Interest on Money Claims Act 2016, but not exceeding 5 per cent per annum.
Result
[61] I order Mr Robertson pay to the Commissioner:
(a) the sum of $159,910.58 (the “judgment sum”); and
(b) under the Judicature Act 1908, interest:
(i) on $157,662.04 of the judgment sum from 24 September 2010; and
(ii) on $2,248.54 of the judgment sum from 19 October 2010—
22 “Civil Debt Interest Calculator” Ministry of Justice <www.justice.govt.nz>.
23 “Interest Rates on Lending and Deposits” Reserve Bank of New Zealand <www.rbnz.govt.nz/-
/media/ReserveBank/Files/Statistics/tables/b3/hb3.xlsx>.
at rates calculated in accordance with the Interest on Money Claims Act 2016, but not exceeding 5 per cent per annum.
Costs
[62] In my preliminary view, Mr Robertson should also be liable to pay the Commissioner costs calculated on 2B scale, including for second counsel, and actual and reasonable disbursements as certified by the Registrar.
[63] If my preliminary view is not accepted by either party, and costs cannot otherwise be agreed between them, costs are reserved for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by:
(a) the Commissioner within ten working days of the date of this judgment;
(b) Mr Robertson within five working days of service of the Commissioner’s memorandum; and
(c) the Commissioner strictly in reply within five working days of service of Mr Robertson’s memorandum.
—Jagose J
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2018/696.html