Commissioner of Inland Revenue v Citadel Capital Limited

[2024] NZHC 3330

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000611

[2024] NZHC 3330

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

CITADEL CAPITAL LIMITED

Defendant

Hearing:

8 November 2024

Appearances:

H Tanielu for the Plaintiff

Mr Ryan for the Defendant (on agency)

Judgment:

11 November 2024

ORAL JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 11 November 2024 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Alexander Dorrington, Auckland Inland Revenue, Auckland

IRD v CITADEL CAPITAL LTD [2024] NZHC 3330 [11 November 2024]

[1]        The plaintiff, the Commissioner of Inland Revenue (the Commissioner), has filed proceedings for an order placing the defendant, Citadel Capital Ltd (Citadel), into liquidation.

[2]        When the statement of claim was filed, the debt owed by Citadel to the Commissioner was $616,265.17, which mainly comprised “Employer Activities” (PAYE) and some income tax.

[3]        The first call was 30 May 2024. The proceeding has been repeatedly adjourned since then to permit Citadel to try to reach an agreement with the Commissioner to resolve the debt.

[4]        On 16 September 2024, Citadel filed an application to restrain the Commissioner from advertising the proceeding. This application was resolved by consent on the basis that the Commissioner could advertise after 25 October 2024.

[5]        On 25 October 2024, Citadel filed another application to restrain advertising, and an affidavit in support. The grounds on which Citadel relies are essentially that it has made a series of settlement  offers  to  the Commissioner,  including  offers  on 22 October, 25 October and 4 November 2024, and the Commissioner has declined these offers. Citadel challenges the Commissioner’s refusal of these offers, saying amongst other things that the liquidation of the company will not provide the same or a better recovery than what is being offered by Citadel by way of settlement.

[6]        Citadel also raises concerns about the Commissioner’s approach. It says that the Commissioner’s latest rejection is unlawful and unreasonable, and it says that it will file judicial review proceedings.

[7]        Having considered the material before me, I am not prepared to order a restraint of advertising of the proceeding.

[8]       It is well settled that the Court may, in its discretion, order a restraint of advertising of a liquidation proceeding where the debt upon which the proceeding is founded is the subject of a genuine dispute. The leading authority there is Nemisis

Holdings Ltd v North Harbour Industrial Holdings Ltd.1 The discretion is flexible, but it is concerned with preventing an abuse of process.

[9]        Here, there is no dispute over the existence or the amount of the debt – nor could there be, because s 109 of the Tax Administration Act 1994 means that once an assessment is made, its correctness cannot be challenged in any court.

[10]      I am not persuaded that it is an abuse for the Commissioner to proceed to advertise the proceeding for any other reason. Citadel has had five months since the first call of the proceeding. There have been repeated adjournments, and the Commissioner has not advertised up until now in order to give Citadel the opportunity to try and agree a payment arrangement or a settlement with the Commissioner.

[11]      It is clear that Citadel has made a number of offers, and these have been considered by the Commissioner and rejected in writing, with the Commissioner giving reasons. Some of these rejection letters are before me through the memorandum of counsel for the defendant.

[12]      I am not prepared to order that advertising is restrained based on the threat of judicial review of the Commissioner’s approach.

Result

[13]      The application to restrain advertising is dismissed and the liquidation proceeding is adjourned to 28 November 2024 at 10.45 am.

Associate Judge Gardiner

1      Nemisis Holdings Ltd v North Harbour Industrial Holdings Ltd (1989) 1 PRNZ 379 (HC) at 385.