Candlish v Commissioner of Inland Revenue

[2019] NZHC 1126

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-459

[2019] NZHC 1126

UNDER

the Insolvency Act 2006

IN THE MATTER

of the bankruptcy of Jack Charles Candlish

BETWEEN

JACK CHARLES CANDLISH

Applicant

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:

21 May 2019

Counsel:

A Goble for applicant

D Padmanabhan for respondent D Dingwell for Official Assignee

Minute:

22 May 2019

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    On 12 March 2019 this Court  made  an  order  bankrupting  the applicant, Mr Jack Candlish. The order was made on the application of the respondent, the Commissioner of Inland Revenue. Mr Candlish now applies for an order annulling his bankruptcy. This application is made pursuant to s 309(1)(a) of the Insolvency Act 2006 under which the Court may annul an adjudication that it considers should not have been made.

[2]    On what basis does Mr Candlish say that the order should not have been made? It is not because he has never had an outstanding tax liability. It would seem that he stopped paying taxes in May 2017 and by the time the Commissioner took steps he

CANDLISH v THE COMMISSIONER OF INLAND REVENUE [2019] NZHC 1126 [22 May 2019]

had amassed a tax liability of over $63,000. It is not because once the Commissioner initiated recovery proceedings he immediately paid the outstanding tax. By the time this proceeding was heard, to his credit, he had paid over $33,000, but still owed over

$40,000. The reason is that when the Commissioner eventually managed to serve the originating documentation on him, she served an out of date summons. Service was effected on 30 January 2019. The summons informed Mr Candlish that the application would be heard on 14 November 2018. Instead of querying that, Mr Candlish apparently took the view that the obvious error entitled him to further time to repay the outstanding tax.  Again, to his credit, he has done that.  He has paid off all but

$699.49 and the Commissioner is not going to pursue that.

[3]    The Commissioner does not oppose Mr Candlish’s application for an order annulling his bankruptcy. Why should she? He has paid virtually all of the outstanding tax.

[4]    But Mr Candlish seeks costs totalling $5,240.50 together with disbursements against the Commissioner.

[5]    Mr Candlish’s argument is that this proceeding ought to be viewed in isolation and that the cause of him having to incur costs in making this application was the Commissioner’s administrative error in serving a summons with an incorrect date on it.

[6]    I do not accept that it is realistic to view this proceeding as hermetically sealed from the background against which it arises. The obvious counterpoint to the argument advanced on Mr Candlish’s part is that, but for his defaulting on his obligations from May 2017, the Commissioner would not have had to pursue recovery proceedings at all and no one involved would have incurred any costs.

[7]    Moreover, when the issue became apparent to the Commissioner, she offered to make the application for annulment and incur the cost of doing so. Mr Candlish elected not to take that offer up because he regarded it as being too uncertain.

[8]    Finally, the reality is that it is only because Mr Candlish has paid the outstanding tax that he is able to make this application. Had he not done so, then this application would have been an exercise in futility because whilst the Court may have made the order annulling the bankruptcy it would simply have set the matter down for a further hearing and made a corresponding order.

[9]    Against that background, my judgment is that Mr Candlish’s application for costs is without substantial merit.

[10]   The Official Assignee who has been served with the originating documentation takes a neutral position insofar as Mr Candlish’s substantive application is concerned, but applies pursuant to s 309(5)(a) of the Act for an order entitling her to recover her costs from the Commissioner. For the Official Assignee, Mr Dingwell indicated that she is seeking an order for the payment of $8,577.10.

[11]   The Official Assignee’s application has some force. She was of course unaware of any defect in the process, and has undoubtedly incurred costs in relation to the administration of the bankrupt estate.

[12]   The Commissioner’s response is that the Official Assignee’s costs are excessive. She criticises the Official Assignee for incurring costs “… corresponding with [Mr Candlish] rather than administering the estate”. I should have thought that the Official Assignee’s primary task at the outset of an administration is to extract what information she can from the bankrupt. I see no foundation for the accusation that the Official Assignee’s costs are excessive.

[13]   Notwithstanding a lingering concern as to exactly what is achieved by awarding costs between two Crown agencies, I propose to make the order sought by the Official Assignee.

[14]On the above bases:

(a)the applicant’s bankruptcy is annulled pursuant to s 309(1)(a) of the Insolvency Act 2006;

(b)the applicant’s application for costs is declined;

(c)I order that the respondent pay the Official Assignee $8,577.10 on account of her costs.

Associate Judge Johnston

Solicitors:
Mahony Horner Lawyers, Wellington for applicant