Commissioner of Inland Revenue v F Trust Holdings Limited pka Crawford Capital Limited
[2024] NZHC 2570
•6 September 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2024-409-203
[2024] NZHC 2570
UNDER the Companies Act 2993 IN THE MATTER
of the liquidation of F Trust Holdings
Limited (previously known as CRAWFORD CAPITAL LIMITED)
BETWEEN
COMMISSIONER OF INLAND REVENUE
Plaintiff
AND
F TRUST HOLDINGS LIMITED previously known as CRAWFORD CAPITAL
LIMITED
Defendant
Hearing: 5 September 2024 Appearances:
G A S McGillivray for Plaintiff
J P Hodgins for Defendant (as agent)
Judgment:
6 September 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 6 September 2024 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
COMMISSIONER OF INLAND REVENUE v F TRUST HOLDINGS LIMITED [2024] NZHC 2570 [6
September 2024]
[1] This is an application by the Commissioner of Inland Revenue for an order putting F Trust Holdings Ltd (FTH) into liquidation. The application has now been before the Court on several occasions.
[2] FTH is a developer and has a project at Rotherham St, Christchurch. There is no dispute the Commissioner is a creditor of FTH. The amount owing is presently
$300,601.47.
[3] FTH is represented by counsel but has not filed a statement of defence. Two creditors have filed late appearances opposing the making of an order for liquidation. Separately, FTH has filed proceedings for judicial review in respect of decisions said to have been made by the Commissioner not to accept settlement proposals and has, in that proceeding, applied for a stay of this proceeding pending further order of the Court.
[4] When the Commissioner’s application came before me yesterday the Commissioner asked to proceed and sought an order putting FTH into liquidation. FTH opposed that on the grounds that its stay application has not been determined and because two creditors oppose the making of an order for liquidation.
[5]The issues before me are:
(a)Should the Commissioner’s application be adjourned either:
(i)to a date after FTH’s stay application is heard; or
(ii)to allow FTH more time to pay its creditors.
(b)If there are no grounds for an adjournment, is the Commissioner entitled to the order it seeks.
Background
[6] The Commissioner filed this proceeding on 6 May 2024. FTH had failed to comply with a statutory demand issued in respect of its tax liabilities. The application
for liquidation was made under s 241(4)(a) of the Companies Act 1993 on the ground that FTH was unable to pay its debts. The application was given a first hearing date of 27 June 2024.
[7]FTH was served on 21 May 2024.
[8] On 11 June 2024, FTH filed an application to restrain advertising along with an affidavit in support. The application was out of time and made on the grounds FTH was arranging finance to pay its debt and advertising would damage its ability to do so.
[9] On 12 June 2024, Associate Judge Lester convened a telephone conference with counsel, and issued a minute recording that the Commissioner agreed not to advertise the proceeding prior to 15 July 2024. The application was adjourned to be called again on 25 July 2024. The Associate Judge noted:
[5] Ms McGillivray made the Commissioner’s position clear that the debt needs to be paid in full by 15 July 2024 failing which advertising will occur. Essentially, Ms McGillivray was signalling that this was a last chance for FTH to organise payment.
[6] Given the application to restrain advertising was to support an application for funding either FTH will have organised funding to clear its debt by 15 July 2024 or advertising will occur. Mr Hayes understood that situation and it gives his client a little over a month to organise funding.
[10] FTH did not obtain funding, but on 16 July 2024 counsel filed a joint memorandum seeking a further adjournment to 22 August 2024 with a restraint on advertising until 11 August 2024. The Commissioner was agreeable to this on the basis the file was marked that it was a final adjournment. This was recorded in the joint memorandum of counsel as follows:
[5] The Commissioner consents to the extension of time restraining advertising to 12 August 2024 provided the file is marked as a final adjournment.
[11]Associate Judge Lester issued a minute on 18 July 2024 in these terms:
By consent I make the directions sought at paragraphs [4] and [5] of that joint memorandum. While this matter will be called on 25 July 2024, it will be adjourned to Thursday 22 August 2024 and with appearances excused.
[12] On 13 August 2024, FTH filed its judicial review proceeding. The Commissioner has never been formally served, although its counsel was provided with a courtesy copy of the papers.
[13] The statement of claim alleges that FTH has made multiple offers of settlement, and that the Commissioner has consecutively refused them. It is alleged the decision to decline settlement offers was based on incorrect and irrelevant considerations, and that FTH has paid $50,000 in good faith and intended to pay another $50,000 on 20 August 2024 on the understanding the Commissioner would agree to await refinancing of its business. It is pleaded that FTH has supplied evidence that it is close to refinancing another entity and/or obtaining the sale of some properties from which the debt can be paid in full. An order is sought declaring the decision to refuse settlement offers was predetermined and/or was based on incorrect information and directing the Commissioner to reconsider the decision to refuse to settle.
[14] With that judicial review proceeding FTH filed an interlocutory application for a stay of this liquidation proceeding. That application is set down for its first call on 23 September 2024. It is supported by a very brief affidavit of a Harry Crawford, the director of FTH. He asserts the Commissioner did not consider relevant considerations when it did not agree to settle. He says he has paid $100,000 to the Commissioner, the debt is reducing and that the liquidation would be disastrous for FTH and its shareholders, investors and tradespeople. Mr Crawford says FTH has a nearly completed 13-unit development in Rotheram St, with Christchurch City Council code compliance certificates to be issued in early September 2024. He says there is a 19-unit project at Brougham Street that is in the planning stages and a project at Grenville Street for 13 townhouses about to commence.
[15] On 16 August 2024, notices of appearance opposing the making of an order for liquidation on the Commissioner’s application were filed by Brougham Street Townhouses Ltd and a Mikaela Claire Peters. Brougham Street Townhouses Ltd claims to be a creditor for $1,025,000. Ms Peters claims to be a creditor for $219,000.
[16] In addition, a memorandum of counsel was filed prior to the hearing on 22 August 2024. Amongst other things, FTH’s counsel submitted that the issues
arising on the judicial review proceeding could not be determined by an Associate Judge in the Court’s company jurisdiction and so the only course available was to await a decision in the judicial review proceeding. This was because the judicial review proceeding would be rendered redundant if the liquidation order was made.
[17] When the matter was called before me on 22 August 2024. I granted an adjournment on the basis that the creditors opposing liquidation could file evidence and I would determine the Commissioner’s application at the next hearing. I issued a minute with my reasons and directions, which I set out in full.
[1] This application for liquidation of the defendant company came before the Court today. The Commissioner wished to proceed with the application. This was opposed.
[2] The position is that no statement of defence has been filed by the defendant company and the proceeding is not stayed. The defendant company has applied for a stay in another proceeding and that will be dealt with in that proceeding. I note that at this stage the application is scheduled to be called on 23 September 2024 and it is for counsel to consider whether an earlier date should be requested.
[3] However, notice has been given by Brougham Street Townhouses Ltd and Mikaela Peters who say they are creditors in the defendant company and oppose the making of an order for liquidation. They wish to be heard. I have made timetable directions to hear from them in anticipation of the application being determined at the next hearing (unless an earlier stay is granted).
[4]I make the following timetable:
(a)Any person who has filed an appearance in opposition to the making of an order putting the defendant company into liquidation is to file any evidence in support of their opposition by 4.00 pm on 29 August 2024.
(b)The Commissioner shall file any evidence in reply by 4.00 pm on 3 September 2024.
(c)The parties should file a synopsis of any further submissions they wish the Court to consider with their evidence.
(d)The liquidation application shall be called again at 10.00 am on 5 September 2024 in anticipation of it being heard and determined at the end of the Associate Judge’s List.
[18] On 2 September 2024, Ms Peters filed a very brief affidavit in which she says she has lent $219,000 to FTH in two tranches, on 23 January 2023 and 23 August 2023, and expected to be repaid by FTH from the Rotherham St project which she says
is virtually complete. She explains that losing that money would be devastating to her and her family. Ms Peters asks the Court to allow more time so funds can come in from the Rotherham St project and repay her.
[19]No evidence was filed on behalf of Brougham Street Townhouses Ltd.
[20] On behalf of the Commissioner an affidavit was filed by Nicholas Ustin, an officer of Inland Revenue, responding to Ms Peters’ affidavit. He challenges Ms Peters’ status as a creditor of FTH and points out the close personal and business connections between her and Mr Crawford.
[21] When the matter came before me yesterday, Mr Hodgins appeared for FTH but he had few instructions beyond what was contained in a memorandum filed by FTH’s counsel before the hearing. FTH’s position was that the information Mr Ustin was relying on was not correct, an adjournment should be granted so that Mr Ustin could explain his evidence and so the application for stay can be heard. It was submitted that the making of an order for liquidation would override the jurisdiction of a High Court Justice who will be asked to stay the liquidation proceeding.
Should the Commissioner’s application be adjourned?
[22] The Court has a wide discretion to postpone or adjourn a hearing upon any terms it thinks just.1 The commentary in McGechan on Procedure states:2
In assessing whether the interests of justice favour postponing or adjourning the trial, the Court must consider and weigh, not only the interests of the immediate parties, but as well those of parties in cases “waiting in the queue” for a hearing and the public interest in achieving the most efficient use of court resources.
[23] The learned authors also note that another factor to be considered is whether the parties and those representing them have done everything reasonably practicable to avoid having to seek an adjournment.3
1 High Court Rules 2016, r 10.2.
2 McGechan on Procedure at [HR10.2.02(1)] and Cygnet Farms Ltd v ANZ Bank New Zealand Ltd
[2016] NZHC 1945.
3 At [HR10.2.02(2)(a)].
[24] Here, there is no dispute that the Commissioner has satisfied the statutory requirements for obtaining an order for liquidation. It is prima facie entitled to the order sought. As noted in Brookers Insolvency Law and Practice:4
Normally, if the relevant statutory requirements have been met, the person making the application is entitled to his or her order for the company’s liquidation; “…the insolvency policy of the companies legislation is clear: (1) insolvency results in winding up; and (2) insolvency is proved by inability to establish a substantial dispute over the debt or by way of cross claim”; (Baragwanath J in Commissioner of Inland Revenue v Chester Trustee Services Ltd ... as quoted (with approval) by the Court of Appeal in Commissioner of Inland Revenue v Newmarket Trustees Ltd ...
[25] The fact that FTH’s application for a stay has not been determined is not a reason for granting an adjournment for several reasons. The context is all important in this case.
[26] First, up until when FTH filed its judicial review proceeding its position was that it was taking steps to pay the Commissioner in full and needed time to arrange funding. The Commissioner withheld advertising and agreed to adjournments on that basis. Importantly, it was understood by FTH and its counsel that the Commissioner agreed to an adjournment to 22 August 2024 on the basis that it was a final adjournment, and this was confirmed by Associate Judge Lester in his minute of 18 July 2024.
[27] At no prior stage had FTH’s counsel indicated that if funding was not arranged FTH would seek a stay of the proceeding on the grounds now advanced. The position FTH now takes is contrary to the understanding upon which the Commissioner and the Court was prepared to agree, and did agree, to grant it indulgences.
[28] Second, having filed the judicial review proceeding and stay application FTH has done nothing to advance them. In my minute of 22 August 2024 I made it plain that I intended to determine the Commissioner’s application at its next call on 5 September 2024. I noted also that the stay application was presently to be heard on 23 September 2024 and that it was for FTH’s counsel to consider whether an earlier date was requested. Mr Hodgins was unable to advise me of any steps that had been
4 Brookers Insolvency Law & Practice (looseleaf ed, Thomson Reuters) at [CA241.04].
taken to obtain an earlier date. There is no indication on the file that any steps were taken either. This is a case where FTH has not taken reasonable steps to avoid the need to apply for an adjournment.
[29] Third, while the application for stay is not to be determined by me, it has been put before. In my view it is clearly without merit. I have already noted that the filing of the proceeding occurred after FTH had been granted what was intended as a final adjournment, but the problems go deeper than that. While the claim alleges that the Commissioner rejected settlement offers based on incorrect information, there is no pleading of what settlement offers were made, what reasons were given for rejecting them, what particular decisions are impugned or the information the Commissioner is said to have had and considered in deciding to reject the settlement offers.
[30] The affidavit of Mr Crawford that accompanies the stay application is just nine short paragraphs. It contains none of the information I have referred to above, indeed nothing to support the allegation that the Commissioner wrongly declined settlement offers beyond the following:
3. When agreement could not be reached I believe the Respondents [sic] officers did not take into account relevant considerations as outlined in the Statement of Claim.
[31] I do not consider any Court could give serious consideration to granting a stay of the liquidation proceeding on the basis of the papers that have been filed which are entirely inadequate.
[32] Fourth, there is the fact that it was again only after FTH had been granted what was intended as a final adjournment and had clearly not obtained funding to pay the Commissioner that FTH’s counsel filed the appearances of Ms Peters and Brougham Street Townhouses Ltd opposing the liquidation proceeding.
[33] I consider it a proper inference that the judicial review proceeding and the appearances have been filed to buy time in the face of a clear indication that further adjournments of the liquidation proceeding would not be granted. I consider there is no injustice to FTH in the Court now deciding the Commissioner’s application, notwithstanding that the stay application has not been determined. Furthermore, as
Ms McGillivray correctly points out, if despite all appearances FTH’s judicial review proceeding has any merit, a liquidator may pursue it on its behalf.5
[34] As far as the creditors who have filed appearances are concerned, Brougham Street Townhouses Ltd has not put any evidence before the Court that it is a creditor of FTH, despite being given the opportunity to do so. Its appearance can be put aside for present purposes.
[35] As far as Ms Peters is concerned, it is unnecessary for me to make any finding on the Commissioner’s submission that she is not a creditor. On any view, Ms Peters is just one creditor of FTH and is closely associated with Mr Crawford and some of his companies. No other creditors of FTH are opposing the Commissioner’s application.
[36] Ms Peters has not provided me with any evidence which could lead me to a view that an order for liquidation should not be made. She expresses the wish that the Court grant the company more time to repay her but no evidence to suggest that is a realistic possibility. Indeed, it is a singular feature of this case that, despite the same lawyer acting both for FTH and the two creditors who filed appearances, no evidence has been filed of the present financial position of FTH.
Is the Commissioner entitled to an order for liquidation?
[37] Although the Commissioner has established the grounds for the making of an order for liquidation the Court has a discretion to refuse to make such an order. The burden is on the party opposing the making of an order for liquidation to establish there are circumstances justifying that course.
[38] Here there are strong policy reasons why an order for liquidation should be made, which include the fact that FTH is clearly insolvent, there is a public interest in there being a proper level of scrutiny into the affairs of insolvent companies undertaken by a liquidator and, in a case like this, to maintain the integrity of the tax system. I note here that while FTH has in the past said it intends to obtain funding
5 Shane Warner Builders Ltd v Commissioner of Inland Revenue [2018] NZHC 1654 at [11].
and pay the Commissioner, and indeed pleads in the judicial review proceeding that it has supplied evidence it is “close to refinancing another entity and or the sale of some properties (from which the debt can be paid in full)”, on the last two occasions this application has come before the Court it has not been suggested that this is now possible.
[39] Neither FTH nor Ms Peters have provided any reasons upon which I could exercise my discretion to refuse to make an order for liquidation.
Result
[40] I refuse the application to further adjourn the Commissioner’s application to liquidate FTH.
[41]There shall be an order putting FTH into liquidation.
[42] The liquidators appointed are Elizabeth Helen Keene and Luke Norman. The liquidators’ remuneration is approved in accordance with the consent of Elizabeth Keene and Luke Norman dated 19 August 2024 subject to s 284 of the Companies Act. The liquidators are allowed to exercise their powers individually pursuant to s 242 of the Companies Act.
[43] There shall be costs to the Commissioner in the sum of $2,478.25 plus disbursements as fixed by the Registrar.
[44]This order is timed at 4.00 pm on 6 September 2024.
O G Paulsen Associate Judge
Solicitors:
Inland Revenue, Christchurch Hunwick Law Ltd, Hamilton
Kannangara Thomson, Christchurch
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