Commissioner of Inland Revenue v Anmol Wineries Limited

[2023] NZHC 971

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-643

[2023] NZHC 971

IN THE MATTER OF

the Companies Act 1993

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

ANMOL WINERIES LIMITED

Defendant

ANMOL SETH

Applicant

CIV-2018-404-645

IN THE MATTER OF

the Companies Act 1993

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

AND

ANMOL FUND LIMITED

Defendant

ANMOL SETH

Applicant  Cont/…

Hearing:	On the papers
Counsel:	JR Duckworth for the Applicant
Judgment:	28 April 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 28 April 2023 at 4pm pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar

THE COMMISSIONER OF INLAND REVENUE v ANMOL WINERIES LTD [2023] NZHC 971 [28 April 2023]

CIV-2018-404-646

IN THE MATTER OF     the Companies Act 1993

BETWEENTHE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND  ANMOL RESIDENTIAL LIMITED

Defendant

AND  ANMOL SETH

Applicant

Introduction

[1]    The applicant, Mr Anmol Seth, is the director of Anmol Fund Limited (AFL), Anmol Wineries Limited (AWL) and Anmol Residential Limited (ARL), all placed in liquidation by order of this Court on 5 October 2018. The applicant now seeks orders pursuant to s 250 of the Companies Act 1993 terminating their liquidations. The grounds on which the orders are sought include that:

(a)the applicant has settled all outstanding claims against the companies, with deeds of settlement prepared and signed by all parties confirming the settlement sum due;

(b)payment has been made in full of the settlement sum of $361,000 on 18 February 2022;

(c)following payment of the settlement sum on 18 February 2022, there are no unpaid creditors and the companies will meet the solvency test as prescribed in s 4(1) of the Companies Act;

(d)all costs of the liquidators have been paid in full;

(e)the applicant is the sole ultimate shareholder of the companies and has consented;

(f)it is in the public interest that orders terminating the liquidations be made.

Affidavits

[2]    Mr Seth has sworn affidavits in support of each of the three applications on 21 December 2021, together with an updating affidavit sworn on 23 May 2022. When the matter was called in the list on 3 June 2022, the originals of the affidavits had not yet been filed.   The memorandum of counsel filed on 1 June 2022 recorded that    Mr Seth was currently in India and counsel did not have the original sworn affidavits. It was anticipated that Mr Seth would return shortly and counsel would file the original affidavits at that time. The originals of the 23 May 2022 updating affidavits were

received by the Court on 14 October 2022 but not of the three affidavits sworn on 21 December 2021.

[3]    I issued a Minute on 2 December 2022 after only the originals of the updating affidavits were filed, directing either the further originals be filed or a memorandum setting out the reasons why the originals were not able to be filed and the grounds for proceeding on the basis of copies.

[4]    A memorandum was filed on 9 February 2023 in accordance with that direction but has only recently been referred to me. The memorandum records that the original affidavits dated 21 December 2021 have been misplaced as the applicant has been moving around whilst in India staying with various family members.

[5]    Counsel submits that although the standard practice of the Court is to have the original documents before it before a decision is made, that it would be appropriate to proceed on the basis of the copies filed as these are the documents that the liquidators have relied on in filing their reports and because the liquidators are not opposed to the orders being sought.

[6]    My direction for the originals to be filed was based on counsel’s memorandum that the originals would be filed shortly and because some of the documents annexed to the affidavits were not particularly legible. Now that the originals of the updating affidavits have been filed and in circumstances where I have been able to decipher the copies of the other affidavits sufficiently, I consider that I can proceed on the basis of the copies filed.

Factual background

[7]    The three companies that are the subject of this judgment were put into liquidation on 5 October 2018 with Craig Sanson and Malcolm Hollis appointed as liquidators.

[8]    At the time that the liquidation orders were made, the three companies were in arrears to the Inland Revenue Department (IRD) based on tax owed on default assessments made by IRD. The applicant, who is a director of each of the defendant

companies, engaged accountants to apply pursuant to s 113 of the Tax Administration Act 1994 for revised assessments as he considered that the tax liability owed could be reduced considerably if proper returns were filed, enabling the debts to be settled.

[9]    An application pursuant to s 113 was submitted by a tax agent to IRD on 30 March 2020 in respect of AFL and in September 2020 in respect of ARL. No s 133 application was submitted for AWL. As a consequence of these applications, certain of the debts owed to the IRD by the companies were reduced from the initial claim filed on behalf of the Commissioner.

[10]   The liquidation of another company within the Anmol group of companies, Anmol Investments Limited, was terminated on 29 March 2019 with a copy of the termination order annexed to the affidavits filed. The termination order was made on the basis that a deed of settlement had been signed on 19 March 2019 between Mr Seth, the liquidators, the Anmol companies (including Anmol Investments Limited) and the applicant’s mother, Sangeeta Seth.

[11]   The amounts owed by each of the companies were advised by the liquidators, through their lawyers, as at 12 August 2021. AFL and AWL had only one creditor, IRD. In addition to IRD, ARL had a further unsecured creditor, Areev Taimoori. However this debt was settled in full by Mr Seth on or about 24 November 2021. Negotiations continued between the liquidators, the applicant and IRD, following which an amount was agreed for full and final settlement of the debts owed.

[12]   Further negotiations were undertaken between the liquidators and Mr Seth as to the final terms of settling all of the debts of the companies and of Anmol Consultants Limited (in liquidation) with a further deed executed on or about 15 February 2022.

[13]   The updating affidavit of Mr Seth confirms that a further settlement deed was agreed between the parties to conclude matters. The amount agreed by way of settlement sum, including for legal costs and the liquidators’ costs and expenses as recorded in the settlement deed, was paid to the liquidators on 25 February 2022.

[14]   The liquidators then made a full distribution to IRD for the total outstanding debts owed by the companies.

[15]   In their reports the liquidators confirm that they are satisfied that all known creditors of the companies have been paid in full.

[16]   The liquidators further record that the claim admitted by the liquidators in the liquidation of ARL to Areev Taimoori in the sum of $239,320, which was initially thought to be enforceable against Anmol Investments Limited and Mr Seth under the settlement deed, was withdrawn in late 2021 following its payment by Mr Seth (as a co-debtor to Mr Taimoori) outside the context of the liquidation.

Termination of liquidation pursuant to s 250 of the Companies Act 1993

[17]Section 250 of the Companies Act 1993 relevantly provides:

250 Court may terminate liquidation

(1)The court may, at any time after the appointment of a liquidator of a company, if it is satisfied that it is just and equitable to do so, make an order terminating the liquidation of the company.

(2)An application under this section may be made by—

…

(c)       a director or shareholder of the company;

…

(3)The court may require the liquidator of the company to furnish a report to the court with respect to any facts or matters relevant to the application.

(4)The court may, on making an order under subsection (1), or at any time thereafter, make such other order as it thinks fit in connection with the termination of the liquidation.

…

(6) Where the court makes an order under subsection (1), the company ceases to be in liquidation and the liquidator ceases to hold office with effect on and from the making of the order or such other date as may be specified in the order.

[18]   The issue for the Court in applications pursuant to s 250(1) of the Companies Act is whether it is just and equitable to terminate the liquidations. It has been held that the Court will generally only exercise its discretion to order termination of a liquidation if:1

(a)all creditors have been paid in full or satisfactory provision has been made for them to be paid, or they have consented to the application;

(b)the liquidators’ costs have been paid; and

(c)the shareholders have consented or would be in no worse position if the liquidation had proceeded to its conclusion.

[19]   The Court is not constrained by these criteria with additional considerations including the public interest and a concern to protect the interests of the company’s present creditors and those parties who would, in future, have dealings with the company if the liquidations were terminated.2

Liquidators’ position

[20]   The liquidators, Craig Sanson and Malcolm Hollis, confirm in their report that they will receive final GST refunds to satisfy residual costs. The liquidators record that it has been agreed with Mr Seth that the final GST refunds may be retained by the liquidators for final legal costs and liquidators’ fees and costs.

[21]   On that basis, the liquidators record that all of the obligations of the companies have been satisfied and so the liquidators will abide the decision of the Court in respect of the applications to terminate the liquidations.

Is it appropriate to terminate the liquidations?

1. I am satisfied that it is just and equitable to terminate the liquidators because:

(a)all creditors of the companies have been paid in full amounts agreed;

1      Re Bell Block Lumber Ltd (in liq) (1992) 6 NZCLC 67,690.

2      Foundation Securities (NZ) Ltd v Direct Labour Services Ltd (in liq) [2008] NZCCLR 1 at [22].

(b)the liquidators’ costs have been paid and the liquidators have confirmed in their reports that they abide the decision of the Court on the applications;

(c)the applicant as the sole director of the companies and sole ultimate shareholder has brought the applications to terminate the liquidations and therefore consents to it;

(d)there do not appear to be any countervailing public interest factors suggesting it would not be appropriate for the liquidations to be terminated; and

(e)there do not appear to be any parties who would be adversely affected by the terminations of the liquidations.

[23]   I include an order below that the liquidators are able to retain any GST refunds received following payment of the settlement sum and prior to termination of the liquidations to protect the liquidators’ position.

Result

[24]I order:

(a)The liquidations of Anmol Fund Limited, Anmol Wineries Limited and Anmol Residential Limited are terminated from the time and date of this judgment.

(b)The liquidators are entitled to retain any GST refunds received following payment of the settlement sum and prior to termination of the liquidations for final legal costs and liquidators’ fees and costs.

Associate Judge Sussock

Solicitors:

Inland Revenue Department, Auckland Jennifer G Connell & Associates, Auckland

PricewaterhouseCoopers, Auckland