Commissioner of Inland Revenue v L J Leasing Limited

[2017] NZHC 564

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2016-485-493 [2017] NZHC 564

UNDER

the Companies Act 1993

IN THE MATTER

of liquidation proceedings

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

L J LEASING LIMITED Defendant

Hearing:	27 March 2017
Appearances:	T D Lancaster for the plaintiff J Sumner for the defendant
Judgment:	27 March 2017

ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      The  plaintiff  filed  a  liquidation  claim  on  6  July  2016,  based  on  the defendant’s failure to comply with a statutory demand served on it on 24 May 2016, in which the Commissioner claimed the sum of $187,574.72.

[2]      The defendant filed a statement of defence denying liability for the amounts claimed (GST and income tax, with penalties and interest thereon, going back to

2011).  The defendant also contended that it was solvent and that it would not be just and equitable to make a liquidation order.

[3]      The  defendant  also  applied  for  an  order  staying  the  proceeding  and restraining advertising.   Interim orders were made and continued on a number of occasions, to allow the defendant to file amended tax returns for the years in issue, and for the Commissioner to consider whether the assessments which had been made

should be amended under s 113 of the Tax Administration Act 1994 (the TAA).

THE COMMISSIONER OF INLAND REVENUE v L J LEASING LIMITED [2017] NZHC 564 [27 March 2017]

[4]      On 5 October 2016 the defendant’s accountants wrote to the Commissioner asking that each of the defendant’s assessments for the years ended 2009 to 2014 be amended  to  show  the  defendant’s  income  at  nil.    The  Commissioner  requested further information, and further submissions were received on 21 October 2016.

[5]      The Commissioner considered the various matters put to her, but concluded that it was not clear that the proposed amendments would result in correct returns. The request to amend the assessments under s 113 of the TAA was declined.

[6]      The case was called again on 7 February 2017. At the hearing the defendants sought leave to withdraw the application for a stay of the proceeding and restraint on advertising, and that leave was granted.   Directions were given for the filing of further affidavits and submissions in the substantive liquidation proceeding.

[7]      On 23 February 2017, Levin Bobcats Ltd, the sole client of the defendant and the party to whom the defendant leased plant and equipment, was placed in liquidation.

[8]      In a reply affidavit sworn on 3 March 2017, Mr Tremain, a recovery and enforcement specialist at the Inland Revenue Department, deposed that the defendant has not been meeting its current tax obligations.   Mr Tremain’s evidence is that, since this proceeding was commenced, the defendant has failed to file a GST return for the periods ending 31 July 2016, 30 September 2016, 30 November 2016, and

31 January 2016.  It has not filed an income tax return for the year ended 31 March

2015.   Default assessments have been issued for the GST periods ending 31 July

2016 and 30 September 2016, and interest and penalties apply.

[9]      No further affidavits have been filed by the defendant since an affidavit was provided by its director on 18 July 2016.   Nor has the defendant provided any written submissions for today’s hearing.

[10]     For the defendant, Mr Sumner explained that the defendant does not accept that the claimed tax is owing, but the defendant has not had the resources to embark on  judicial  review  proceedings  challenging  the  Commissioner’s  exercise  of  her

discretion under s 113 of the TAA to decline to amend the assessments.  Mr Sumner accepts that the result of his instruction is that the evidence recently presented by Mr Tremain is not contested.  Mr Sumner referred only to a joint memorandum of counsel filed at an interlocutory stage in the proceeding, but did not make specific submissions as to how that memorandum might affect the evidence provided for the Commissioner.

[11]     For  the  Commissioner,  Mr  Lancaster  relies  on  s  109  of  the  TAA,  and Mr Tremain’s evidence that no challenge proceedings have been initiated by the defendant under the TAA, and the defendant is now out of time to take any such proceedings.

[12]     Section 109 of the TAA provides:

109     Disputable decisions deemed correct except in proceedings

Except  in  objection  proceedings  under  Part  8  or  a  challenge  under

Part 8A,—

(a)       no  disputable  decision  may  be  disputed  in  a  court  or  in  any proceedings on any ground whatsoever; and

(b)      every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.

[13]     I accept that Mr Tremain’s evidence, and the clear wording of s 109 of the TAA, have the effect that there can no longer be any dispute as to the amounts of the debts as originally assessed.   I also accept Mr Lancaster’s submission that it is entirely a matter for the Commissioner’s discretion whether tax assessments should

be amended under s 113 of the TAA.1     If the defendant wished to challenge the

Commissioner’s exercise of her discretion under s 113, I accept that judicial review

proceedings would have been required.

[14]     In all of those circumstances, I reject the defence that the amounts assessed

are not properly due.  It also appears from the defendant’s recent failure to pay taxes

which  have  fallen  due,  and  from  the  liquidation  of  its  sole  customer,  that  the

1      The Commissioner of Inland Revenue v Wilson (1996) 17 NZTC 12, 512.

defendant is unable to pay its debts as they fall due for payment.  No other basis for resisting a liquidation order having been put forward, I make the following orders:

(a)       the defendant company is put into liquidation.

(b)      Rhys James Cain and Rees Graham Logan are appointed liquidators. (c)       the defendant company is pay scale 2B costs to the plaintiff, plus

disbursements as fixed by the Registrar.

(d)the rates of remuneration the liquidators and staff working under their supervision and control are fixed at the rates set out in the liquidators’ consents dated 14 and 15 March 2017.

(e)      the liquidators are to apply at the conclusion of the liquidation for approval of their overall remuneration.

[15]     The foregoing orders are timed at 10.25am.

Associate Judge Smith

Solicitors:

Ford Sumner, Wellington for the defendant