Commissioner of Inland Revenue v Jia

[2024] NZHC 3903

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-003242

[2024] NZHC 3903

UNDER

the Tax Administration Act 1994, Income Tax Act 1994 and Part 32 of the High Court Rules 2016

IN THE MATTER

An interlocutory application for freezing and disclosure orders

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

XIAOQUAN JIA

First Defendant

YAN XU

Second Defendant

Hearing:	(On the papers)
Counsel:	K Naik-Leong for Plaintiff
Judgment:	18 December 2024

JUDGMENT OF VENNING J

[Application for freezing, ancillary disclosure and substituted service]

This judgment was delivered by me on 18 December 2024 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Crown Law Office, Wellington

THE COMMISSIONER OF INLAND REVENUE v JIA [2024] NZHC 3903 [18 December 2024]

[1]    The Commissioner of Inland Revenue Department (Commissioner) issued proceedings against the first and second defendants. In his claim the Commissioner raises two causes of action. In the first cause of action the Commissioner pleads that the first defendant has no ability to dispute the tax assessments which have been finalised and as a result the first defendant owes a debt to the Commissioner of

$3,280,018.43. In the second cause of action the Commissioner alleges that the first and second defendants were parties to a sham transaction, namely the disposition of a property at 12 Stella Maris Lane which is held by the second defendant as bare trustee for the first defendant.

[2]    The Commissioner now applies, on a without notice basis, for freezing, ancillary disclosure and substituted service orders. The application is supported by a substantive memorandum from counsel and by a substantial affidavit of Sharon Tata.

[3]    Having read that affidavit and considered counsel’s memorandum the Court is satisfied that requiring the Commissioner to proceed with the application on notice would cause prejudice in that the defendants are likely to dissipate assets.

[4]Further, the Court is satisfied that:

(a)the requirements for the freezing orders sought in this case are made out. The Commissioner has a good arguable case against the respondents in relation to both causes of action;

(b)there are assets to which the orders can apply. There is a clear arguable link between the respondents and the property subject to the freezing order;

(c)given the actions of the defendants there is a factual basis upon which a proven sensible commercial person could properly infer there is a real risk that the respondents may dissipate or dispose of assets to defeat a judgment in the substantive proceeding; and

(d)the interests of justice support the issue of the freezing orders and the ancillary disclosure orders sought.

[5]    The Court is also satisfied that in the circumstances an order for substituted service of the proceedings on the second defendant is appropriate.

[6]    Having regard to the Commissioner’s status, I make no order in relation to an undertaking.

[7]    The Commissioner may seal orders in accordance with the draft filed (as amended) as attached to this judgment.

Venning J