Commissioner of Inland Revenue v Ly

[2015] NZHC 118

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2011-419-000768 [2015] NZHC 118

IN THE MATTER OF

the Tax Administration Act 1994, Part 32

of the High Court Rules, and Sections 347 and 348 of the Property Law Act 2007

BETWEEN

COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

HON LY
First Defendant

TA LY
Second Defendant

VANDRA LY Third Defendant

VANDRA LY and THIARY LY as Trustees of the VANDRA LY FAMILY TRUST

Fourth Defendant

HON and TA LY as Trustees of the HON

and TA LY FAMILY TRUST Fifth Defendant

Hearing:	4 February 2015
Counsel:	S J Leslie and E M Connolly for the Plaintiff No Appearance of, or for the First Defendant J S T Ngtuy for the Second, Third and Fourth Defendants No Appearance of, or for the Fifth Defendant
Judgment:	4 February 2015

(ORAL) JUDGMENT OF DUFFY J

Solicitors:    Crown Law, Wellington

Jesse and Associates, Auckland

COMMISSIONER OF INLAND REVENUE v LY [2015] NZHC 118 [4 February 2015]

[1]      Two issues remain to be determined in this proceeding. They are:

(a)       Entry of summary judgment against the first and second defendants;

and

(b)      Approval  of  the  form  of  orders  to  be  sealed  in  the  plaintiff’s

application for orders under s 348 of the Property Law Act 2007.

[2]      In  relation  to  the  second  issue,  in  a  judgment  dated  16  March  2012,1

Andrews J granted the application by the Commissioner for orders under s 348 of the Property Law Act 2007.  At [64], Andrews J invited counsel to consult and submit the draft form of the orders to be made as a result of the judgment.  Regrettably, it seems the parties concerned have not been able to agree on the form of the orders to date, which may explain why the matter is back before the Court as at February

2015.

[3]      The Commissioner sought to have the matter set down for hearing today, to enable the two outstanding issues to be determined.

[4]      It has come to my attention that there is one obstacle in that there is no proof of service of today’s hearing date on the first defendant.  I am aware that the first defendant resides outside of New Zealand and has done so now for some time.

[5]      On 14 June 2011, Toogood J made an order for substituted service on the first defendant, who, at that time, was believed to be currently at an unknown location in either Cambodia or Australia.2   Those directions are set out in an order as to service, dated 14 June 2011.  Service was to be effected by service on the second defendant, who is the wife of the first defendant, and on the solicitor, who has continued throughout the relevant time to act for the second defendant, namely Mr Jesse Nguy,

solicitor of Auckland.

[6]      At today’s hearing, Mr Nguy is present to represent the second, third and fourth defendants.  He has advised me that they wish the matter to proceed today.

1      Commissioner of Inland Revenue v Ly [2012] NZHC 443, (2012) 25 NZTC 20, 117 at [63].

2      Commissioner of Inland Revenue v Ly & Ors HC Auckland CIV-2011-419-768, 14 June 2011.

He has also advised me that he has not had contact with the first defendant for some time, and he would not be able to provide a copy of notice of today’s hearing date, or any future such date to the first defendant.  So substituted service on Mr Nguy would be pointless.

[7]      Mr Nguy has advised me that the second defendant now resides in Sydney, Australia, so substituted service on her in respect of the first defendant would be onerous.

[8]      In addition, at the hearing before Andrews J, the first defendant was not represented. He did not appear.

[9]      Given  the  delays  that  have  occurred  to  date  and  the  state  of  matters,  I consider that this matter should proceed.  The fact of the failure to effect service of the hearing date on the first defendant should not be a bar to this matter being resolved.

[10]     I am satisfied that the circumstances warrant me making an order that service on the first defendant should be treated as dispensed with altogether.   He has had every opportunity in the past to register any opposition he might wish to make against the steps the Commissioner has taken.  No such action has been taken.

[11]     I now turn to the approval of the formal orders under s 348 of the Property

Law Act 2007. Those orders will affect the first to fourth defendants.

[12]     Mr Nguy, who appears on behalf of the second to fourth defendants, has been provided with a copy of the orders as sought by the Commissioner.  He consents to those orders being made.

[13]     The fifth defendant in the proceeding is not affected by the orders.

[14]     The first defendant has not been served with a copy of the orders, but I consider  it  appropriate,  for  the  reasons  earlier  given,  that  service  on  the  first defendant of the orders be dispensed with.  I have read the orders, and I have read the decision of Andrews J.  I am satisfied that the form of the orders is consistent with the findings reached by Andrews J in her judgment.  Accordingly, I now make orders as follows:

(a)      In respect of the property at 3 Miriama Street, Taumarunui, being the property comprised in Certificate of Title SA603/198, South Auckland Land   Registry,   being   Lot   7,   Block   II,   Deposited   Plan   4980, comprising 0.0759 hectares more or less, that under s 348 of the Act, it be vested in the first and second defendants for the purpose only of enabling the administration of their future bankruptcies; and

(b)That under s 350(3) of the Act, the net proceeds of the sale of the property  at  1/46  Sunset  Road,  Glenfield,  Auckland,  which  is  on deposit in the Courts’ bank account, being an interest-bearing account under the reference CIV 2011-419-768, continue to be held pending release to the Official Assignee for the purpose of enabling the administration of the future bankruptcies of the first and second defendants.

[15]     The Commissioner seeks entry of summary judgment against the first and second defendants.

[16]     Mr Nguy has advised the Court that there is no opposition by the second defendant to entry of summary judgment on liability and quantum.  As regards the second defendant:

(a)      Judgment  is  entered  against  her  in  the  sum  of  $285,819.45,  plus penalties and interest;

(b)Judgment for joint and several liability against her with the first defendant, Hon Ly in the sum of $379,783.97, plus penalties and interest to date.

[17]     As regards the first defendant, he is not represented today.  I have read the relevant material.   That is the statement of claim, the interlocutory application on notice  for  summary judgment,  and  the  affidavit  of  Michelle  Rintoul  (sworn  on

10 June 2011) in support.  I have also read the affidavit of service of Jason Bischkopf (sworn on 26 July 2011) deposing that in accordance with the Court’s orders as to service of the pleadings, on 8 July 2011, the second defendant was served on behalf of the first defendant.   There is also an affidavit of service of Margaret Ramsey (dated 15 August 2011) in which Ms Ramsey deposes to service in accordance with the Court’s orders on Mr Nguy in his capacity as solicitor for the first defendant.  I am satisfied from reading the relevant material that the first defendant is liable for the undisputed tax debts that are sought in the application for summary judgment.

[18]     Accordingly:

(a)       Judgment  is  entered  against  the  first  defendant  in  the  sum  of

$924,395.80, plus penalties and interest; and

(b)Judgment is entered for joint and several liability against the first defendant   with   the   second   defendant,   Ta   Ly,   in   the   sum   of

$379,783.97, plus penalties and interest to date.

[19]     I award costs in relation to both defendants at category 2B.

[20]     There may remain some outstanding issues regarding the fourth defendant’s ability to recoup Court costs, or legal costs from the moneys currently held in the Court account.  There have been discussions with Mr Nguy, on behalf of the fourth defendant, and with Crown Counsel, Ms Courtney, who was formerly acting for the Commissioner.  Today, Ms Leslie and Mr Nguy will have an opportunity to discuss that matter.  If there are any unresolved issues in which the Court’s assistance might

be required to reach a final conclusion, leave is reserved to the Commissioner and the fourth defendant to return to Court on that matter.

Duffy J