Commissioner of Inland Revenue v Hayes

[2014] NZHC 3065

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-171 [2014] NZHC 3065

BETWEEN

THE COMMISSIONER OF INLAND

REVENUE Judgment Creditor

AND

NICHOLAS JOHN HAYES Judgment Debtor

Hearing:	3 December 2014
Appearances:	Mr Malarao for Judgment Creditor No appearance for Mr Hayes
Judgment:	3 December 2014

ORAL JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

THE COMMISSIONER OF INLAND REVENUE v HAYES [2014] NZHC 3065 [3 December 2014]

[1]      I have commenced dictating this oral judgment at approximately 10.20 on the day of the fixture,  3  December 2014.    Mr Hayes  the judgment  debtor  has  not appeared.  I am satisfied that he had notice that the fixture would proceed today.

[2]      The brief background to the hearing today is that outside the period provided for in the timetable Mr Hayes sought to file additional affidavits.  He also sought to have today’s proceeding adjourned so that he could have time to do so.   The application to adjourn the proceeding was declined in a minute which I issued on 25

November 2014.  Before I issued that minute Mr Hayes had written to counsel for the judgment creditor.  In that letter he raised a number of points to which I will now make brief reference.  The first point concerns Mr Hayes wish that the application for an order of adjudication be stayed or dismissed to allow him to obtain a student loan to continue his “re-training”.   The re-training which is referred to is the completion of a commercial helicopter pilot’s course which Mr Hayes has apparently partially  undertaken.    There  is  material  in  the  evidence  before  the  Court  that indicates that he had one semester remaining to complete his qualification.

[3]      The  second  point  concerned  the  position  that  the  Commissioner  took  in evidence and in submissions that it would be contrary to principle to allow Mr Hayes to continue as a liquidator when he was insolvent.  In response to that, in his letter Mr Hayes said that he would “undertake not to act as a liquidator for two years”.

[4]      The next point of relevance was that Mr Hayes reiterated his views that the recipients of the money that he wrongly paid out as liquidator of the company, Smartcare Services Group Limited, were unlikely to reimburse the money so paid. He said he had discontinued the proceedings because he considered that the persons in question, the Jensens, had a complete defence which would justify their retention of that money and further they had few realisable assets and so proceeding against them, it is to be inferred, would be a waste of time.

[5]      He made the point that his failure as a liquidator essentially came down to one mistake and that other liquidators and receivers have made more substantial

errors than him and therefore it was unfair for the Commissioner to proceed against him in bankruptcy. Again I summarise the contents of his letter.

[6]      He also made comments about the residential property that he lives in.  First he  noted  that  the  property  is  in  his  wife’s  name  and  secondly  he  disputed  a contention in the affidavit which Mr Sparrow for the Commissioner put forward to the effect that since the property was acquired in 2013 its value had probably risen from the figures that Mr Sparrow originally provided.  Mr Hayes said that this was not correct and that “we are talking house prices in Hamilton not Takapuna”.

[7]      As a response to evidence that Mr Sparrow gave about the desirability of investigating his affairs to see if there had been gifting etc Mr Hayes said that there had not been any.

[8]      He concluded by saying that bankruptcy would reveal nothing of interest for the CIR; he could provide evidence establishing that there was no “equity” available to  the  CIR,  and  he  agreed  not  to  be  appointed  a  liquidator  for  two  years. Alternatively he sought the agreement of the judgment creditor to adjourning the proceeding for six months so that he could get his student loan.  If that were to be done he said he would withdraw his opposition.

[9]      Counsel for the Commissioner, Mr Malarao, properly in my view took a neutral stance on whether the Court should have regard to the contents of the letter that Mr Hayes put in.   I issued a minute on 25 November 2014 which, as I have noted, declined  the application  to  adjourn  the proceeding and  recorded  that  the judgment debtor had an opportunity to place the letter before the Court.  The minute concluded by saying:

“I will consider whether the letter can, nonetheless, be put in evidence and

any conditions to be attached to such leave at the hearing scheduled for 3

December 2014.

[10]     My intention was to hearing the parties and probably to allow Mr Hayes to put his letter in subject to his being put into the witness box to be cross examined on matters that arose.  However that cause of action has been rendered irrelevant by the

failure of Mr Hayes to appear.  Nonetheless, I consider that it is open to the Court to consider the matters referred to in the letter.

[11]     Turning to the substance of the application I will briefly indicate my views why I consider that an order of adjudication ought to be made in this case.

[12]     I consider that the Commissioner is correct in taking the position that it is undesirable that Mr Hayes as liquidator should be in the position where he is dealing with monies of third parties while insolvent.  I accept that that position is established in authorities such as Allied Finance v Papesch.1    Further, there are very real uncertainties about whether any undertaking on the part of Mr Hayes to discontinue as a liquidator could be enforced and in any event the undertaking offered was for

two years only.  The second main point which was of considerable concern to me was that Mr Hayes was essentially asking the Court to exercise its discretion to decline an adjudication or postpone it so that he could assume still further liabilities in the form of a student loan.   He wanted the bankruptcy deferred  because he considers, probably correctly, that he would not be eligible for further student loan financing if he was bankrupt.   I regard such a proposal as being contrary to the objectives  of  the  Insolvency  Act  2006  and  one  that  the  Court  should  not countenance.

[13]   I consider that the Commissioner is justified in seeking an order for adjudication.  The Commissioner has proved by certificate filed today that the debt remains unpaid at $110,554.02 plus interest thereon.   There will be an order of adjudication which is timed at 10.32 a.m.  I further order that the Commissioner is to

have costs in the sum of $7,960.00 together with disbursements of $1,772.37.

J P Doogue

Associate Judge

1      Allied Finance v Papesch (2002) HC Auckland B64-IM02 (13 June 2002) at [21].