Commissioner of Inland Revenue v Kaimai Palms Golf Resort Limited Previously the Pacific Palms International Resort and Golf Club Limited HC Rotorua CIV 2009-463-541

[2010] NZHC 1747

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

CIV 2009-463-000541

IN THE MATTER OF     the Companies Act 1993

BETWEEN  THE COMMISSIONER OF INLAND REVENUE OF WELLINGTON Plaintiff

ANDKAIMAI PALMS GOLF RESORT LIMITED PREVIOUSLY THE PACIFIC PALMS INTERNATIONAL RESORT AND GOLF CLUB LIMITED

Defendant

Hearing:         22 September 2010

Counsel:         M L Brown for Plaintiff

JH Olphert for Defendant Judgment:   28 September 2010 at 2:30pm Reasons:    28 September 2010

JUDGMENT OF ASSOCIATE JUDGE FAIRE [on reasons for judgment]

This judgment was delivered by me on 28 September 2010 at 2:30pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Inland Revenue Department, PO Box 432, Hamilton

McKay Hill, PO Box 1143, Napier 4140

THE COMMISSIONER OF INLAND REVENUE OF WELLINGTON V KAIMAI PALMS GOLF RESORT LIMITED PREVIOUSLY THE PACIFIC PALMS INTERNATIONAL RESORT AND GOLF CLUB LIMITED HC ROT CIV 2009-463-000541  28 September 2010

[1]      On 22 September 2010 I made an order placing the defendant into liquidation and I appointed Mr DC Parsons and Ms KL Kenealy the liquidators.  An order for costs and disbursements was also made.  The order was made at 11:10am.

[2]      The orders I made were made in an insolvency list.  This case had previously been called before me on 20 September 2010 and in the company’s liquidation list on that day.   An adjournment was sought by the defendant company.   The adjournment was opposed.  I granted the adjournment and in so doing recorded on the file the following reasons:

The plaintiff wishes to proceed.  The defendant seeks an adjournment and says that funds to enable this debt to be paid had been sent to NZ.  I adjourn this proceeding to 9:45am on 22 September 2010.  If the debt has not been paid by that time further adjournments will only be granted if the court is provided with evidence that sufficient funds to pay this debt and costs are held  by  the  ANZ  Bank  and  there  is  an  irrevocable  authority  from  the company to pay the debt on release of the funds by the bank.

[3]      On  22  September  2010  Mr  Olphert  renewed  the  application  for  an adjournment. The application was supported by an affidavit by Mr RCH Cribb.

[4]      Because this matter was called in a list I announced that I would provide my reasons for refusing the adjournment application and for making the orders that I have referred to in [1] of this judgment.  This judgment is the reasons for the orders made and therefore refusing the adjournment application.

[5]      This proceeding commenced with the filing of a statement of claim and notice of proceeding on 4 August 2009.  The plaintiff was a firm of solicitors.  A statement of defence was filed.  I will not, in this judgment, recount all the steps that were taken.   Suffice to say that the position between the original plaintiff and the defendant was brought to conclusion with orders made by Associate Judge Christiansen on 22 March 2010.  At that time his Honour minuted the file as follows:

[1]       Previously this matter was adjourned because the Law Society had assumed responsibility to review the plaintiff’s charges.  Since, the debtor has filed an affidavit addressing the issue of its solvency.

[2]The plaintiff is considering whether its insolvency proceedings can be classed as a proceeding for recovery of costs.  I offered my view on the matter to counsel.

[3]The Commissioner of Inland Revenue has filed a notice in support of the plaintiff’s proceeding.  It wishes to be substituted as the plaintiff. Its  notice,  filed  on  23  September  2009  identified  a  sum due  of

$104,936.40.  It says that amount remains unpaid and a further debt has since accrued.

[4]In the upshot, the plaintiff sought leave to withdraw.  I granted that application.  I direct that any costs upon it shall be reserved.

[5]The Commissioner seeks and is granted leave to be substituted as the plaintiff.

[6]      This matter will now be adjourned to a list call on 26 April 2010 at

10.30am.

[6]      The statement of claim by the Commissioner of Inland Revenue was duly filed and served.  It pleads that the defendant is indebted to the plaintiff in the sum of

$173,720.71.  It particularises that claim.  It pleads that no objections or challenges in relation to the assessment of the above debts have been made.  It further pleads that, by reason of the indebtedness and the lack of objection, the defendant is unable to pay its debts and is therefore insolvent.  It further says that it is just and equitable that the company be placed into liquidation.

[7]      The statement of claim of the Commissioner has been duly verified. [8]        The debt to the Commissioner is not opposed.

[9]      A series of adjournments have been sought on the defendant’s behalf and are the  subject  of  court  orders.    The  orders  granting  adjournments  were  made  on

26 April 2010, 24 May 2010, 21 June 2010, 26 July 2010 and 23 August 2010.  I have mentioned the fact that I stood the matter over until 22 September 2010 when the matter was called on 20 September 2010 before me.

[10]     The Companies Act 1993, s 241 gives the court the discretion to appoint a liquidator if it is satisfied that the company is unable to pay its debts.

[11]     There is no dispute as to this debt.  This is not one of those cases where the court is called upon to decide whether there is a genuine dispute as to a debt so that it would be an abuse of process to order that the company be wound up.  The exercise of the court’s discretion in that situation has been the subject of judicial comment:

Exchange Finance Co Ltd v Lamington Holdings Ltd,[1] Taxi Trucks Ltd v Nicolson,[2]

Edge Computers Ltd v Colonial Enterprises Ltd (t/a PC Help).[3]

[1] Exchange Finance Co Ltd v Lamington Holdings Ltd 1984 2 NZLR 242.

[2] Taxi Trucks Ltd v Nicolson 1989 2 NZLR 297.

[3] Edge Computers Ltd v Colonial Enterprises Ltd (t/a PC Help) (1997) 11 PRNZ 159 (HC).

[12]     I am satisfied that the jurisdiction for the making of an order placing the defendant company into liquidation is present in this case.  It was not suggested by Mr  Olphert  that  the  position  was  otherwise.    All  that  was  suggested  on  the company’s behalf is that further time should be allowed to see if finance can be arranged to pay the Commissioner’s debt.

[13]     I have already set out in this judgment the long history of adjournments in relation to this proceeding.  Even if I restrict my comments to the period following substitution this case has had adjournments well beyond what is usual for liquidation cases.

[14]     A liquidation commences on the day on which a liquidator is appointed by the  operation  of  the  Companies  Act  1993,  s 241(5).    The  avoidance  provisions contained in the Companies Act 1993, s 292 (dealing with transactions having a prejudicial affect), s 293 (voidable charges), s 297 (transactions at an undervalue), s 298 (transactions for inadequate or excessive consideration) and s 310 (dealing with mutual credits and set off) have the trigger or start date for the period that can be reviewed, being the date when the liquidator is appointed.  Therefore, any delay in the disposal of an application for the appointment of a liquidator pursuant to the court’s powers under the Companies Act 1993, s 241 has potential prejudice to the liquidator’s ability to make a recovery.  The courts have long expressed the view that it is not appropriate for lengthy adjournments of insolvency proceedings whether they be personal or corporate because of the prejudicial affect on creditors.   The position is enhanced by the change in emphasis which was introduced by the Companies Act 1993, s 241(5) which stipulates that the date for the commencement of the liquidation is the date the liquidator is appointed.  The Commissioner is most

anxious that this proceeding be dealt with.   That position, in view of the amount outstanding, is understandable.   I was told from the bar, although there was no evidence placed before me of it, that action had been taken by the defendant’s mortgagee.  Had that matter been decisive of my reason for refusing the adjournment I would have called for precise evidence relating to it.   In my view that is not necessary in this case.  The delay and the number of occasions that this matter has been before the court simply speaks for itself.

[15]     Mr Cribb’s most recent affidavit, and what is significant of his affidavit, says that the funds that he anticipates will be available have not yet been received from an overseas  source  by  the  ANZ  Bank.    What  was  not  made  clear  in  Mr  Cribb’s affidavit,  but  was  confirmed  to  me  by  counsel  for  the  defendant,  is  that  the borrowing contemplated  is  not  being  undertaken  on  the  defendant’s  part.    It  is borrowing that has been undertaken by Mr Cribb personally.   I was advised that Mr Cribb, if he is successful in obtaining the funds, intends to advance them to the defendant.  I was told that he did not seek any security for the advance.

[16]     I am left in a position of concern as to these arrangements and, in particular, whether there is a real possibility that this defendant would be able to meet its responsibilities to the Commissioner of Inland Revenue.

[17]     I weigh that concern up with a further possibility.   That is, if Mr Cribb is successful in raising the funds and making them available so that the debt to the Commissioner and any other proper creditor of this company can be met, it is open to him in his capacity as a director or a shareholder of the defendant company to make an  application  to  the High  Court  for  an  order  terminating the liquidation pursuant to the Companies Act 1993, s 250.

[18]     When I consider the possibility of such an application under s 250 against the other matters that I have recorded, which clearly support the making of an order placing the company into liquidation, I reach the conclusion that the safest and most appropriate course is to make an order placing the company into liquidation and appointing a liquidator.   In that way the position of the company and its creditors will be preserved.  If, however, the funding can be arranged as Mr Cribb hopes, little

detriment if any will be caused to the company by an application for termination under s 250.  Indeed, with the cooperation of Mr Cribb and the liquidator, if that line is pursued, the matter could be dealt with expeditiously.

[19]     Accordingly, for the above reasons, I conclude that a further adjournment of this long-standing matter is not justified and the interests of all parties are best served by my making an order placing this company into liquidation and appointing liquidators.

[20]     These are the reasons for the order I made.

JA Faire

Associate Judge