Commissioner of Inland Revenue v J F Contractors

[2012] NZHC 433

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-000372 [2012] NZHC 433

BETWEEN  COMMISSIONER OF INLAND REVENUE

Plaintiff

ANDJ F CONTRACTORS Defendant

Hearing:         14 March 2012

Appearances: Ms Nelson for plaintiff

Mr R Pidgeon for defendant

Judgment:      14 March 2012

ORAL JUDGMENT OF ASSOCIATE JUDGE DOOGUE

Solicitors:

Ms M Nelson for Inland Revenue Department -  [email protected]

Mr R Pidgeon for Defendant

COMMISSIONER OF INLAND REVENUE V J F CONTRACTORS HC AK CIV-2012-404-000372 [14 March

2012]

[1]      This proceeding is a claim for a liquidation order based upon the failure of the defendant company to comply with a statutory demand.  The statutory demand was  served  30  November  2011  and  it  required  the  company  to  pay  a  debt  of

$270,938.90.  Proof of service of the statutory demand has been filed.  There is no evidence that it has been complied with.  The defendant company is presumptively insolvent.

[2]      The substantive proceeding was served 9 February 2012 and a statement of defence ought to have been filed by 24 February 2012. That was not done.

[3]      When  the  proceeding  was  called  before  me  today  Mr  Pidgeon  filed  an affidavit of the principal of the company in support of an oral application for enlargement of time to file a statement of defence.  That application was based upon r 1.9 of the High Court Rules.  The application to enlarge time was opposed by the Commissioner.   Ms Nielsen said that the defendant company had been flagrantly ignoring its responsibilities under the Income Tax Act.  She said, and I assume that proof of these matters would be available were the liquidation to proceed today, that there is in the vicinity of $223,000 owing for PAYE and $75,000 for GST.  The total owing she said was in the order of $511,000 which I assume includes penalties and interest.

[4]      Mr Sione Fa’anunu, who describes himself as a director of the defendant company gave the affidavit which is relied upon in support of the oral application. He describes himself as being 62 years of age and that his native language is Tongan. He said he has limited English.  He says in his affidavit that four weeks are sought to enable the defendant to file a statement of defence and:

More  importantly  for  me  to  consult  with  a  Tongan  speaking  chartered accountant which [my solicitor] has arranged an appointment for me.

[5]      He goes on to say that the company is presently trading and that the failure to pay tax is a “consequence of me attending to doing the work on contracts obtained in the market out at Pukekohe”.

[6]      Mr Fa’anunu goes on to say that the company employs approximately 29 full time workers and that can go up by the addition of a further 22 casual workers who rely upon the company for their income.   The company contracts with what he describes as one of the largest market gardeners in Auckland.

[7]      Rule 31.7 requires that a statement of defence is filed 10 working days after the  date  on  which  the  statement  of  claim  is  served.    The  leading  authority on extensions of time for filing a statement of defence is Fresh Cut Flower Wholesalers Ltd v Living and Giving Gift Co Ltd[1]  a decision of Paterson J given in relation to the former High Court rule 700Q.   The headnote to the PRNZ report accurately summarises the effect of that case, which like this one was a case for extension of

time to file a statement of defence.   The headnote records that the Judge decided leave  should  not  be  granted  unless  the  applicant  could  show  on  the  papers  an arguable basis upon which it is not liable for the amount claimed and that, even if there is an arguable defence, leave should not be granted if the applicant is insolvent.

[1] Fresh Cut Flower Wholesalers Ltd v Living and Giving Gift Co Ltd, (2001) 16

PRNZ 173.

[8]      No defence is suggested here.   Mr Fa’anunu wants to go and talk to an accountant.   That falls a long way short of establishing even the beginnings of a defence.  Secondly, the company is as I say presumptively insolvent.  There has been no evidence provided that even attempts to make out that the company is solvent. Given  that  the  evidence  of  the  Commissioner  is  that  the  company  owes  over

$500,000 in taxes it is extremely unlikely, as I see it, that the company would be able to advance a credible defence of solvency.

[9]      For those reasons I consider that this is not a proper case in which the Court ought to grant leave.   I decline the oral application for extension of time and the

plaintiff is entitled to proceed on what is necessarily an undefended basis.

J.P. Doogue

Associate Judge