Commissioner of Inland Revenue v MyPay New Zealand Ltd

[2024] NZHC 3238

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000938

[2024] NZHC 3238

UNDER

the Companies Act 1993

IN THE MATTER

of the liquidation of MyPay New Zealand Limited

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

MYPAY NEW ZEALAND LIMITED

Defendant

Hearing:	4 November 2024
Appearances:	H Tanielu / C Van Der Merwe for the Plaintiff A Grant for the Defendant
Judgment:	4 November 2024

JUDGMENT OF GARDINER J

This judgment was delivered by me on 4 November 2024 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Tompkins Wake, Auckland Inland Revenue, Auckland

IRD v MYPAY NEW ZEALAND LTD [2024] NZHC 3238 [4 November 2024]

The claim

[1]    The plaintiff, the Commissioner of Inland Revenue, seeks an order for the liquidation of the defendant, MyPay New Zealand Ltd (MyPay) on the grounds that MyPay is unable to pay its debts in terms of s 241(4)(a) of the Companies Act 1993 (the Act).

[2]    On 19 February 2024, the Commissioner purported to serve a statutory demand on MyPay at its registered office for the debt of $554,721.43. MyPay did not respond to the demand.

[3]    On 26 April 2024, the Commissioner served these proceedings on MyPay. The statement of claim asserts that MyPay is indebted to the Commissioner in the sum of

$596,131.29. The amount is composed of PAYE, support payments, penalties, and interest.

The defence

[4]    MyPay served a statement of defence on 10 May 2024.   It denies the debt.   It denies that it was properly served with the statutory demand.

[5]    MyPay’s then director, Mr Andy Zhang, has affirmed an affidavit. He deposes that neither he nor anyone else at MyPay ever received the demand prior to being served with the proceedings in April 2024. He says that the person to whom the Commissioner’s process server allegedly handed the statutory demand, a Mr Phoenix Guo, was not related to MyPay, but was instead a mortgage broker who sometimes used MyPay’s offices to meet clients. Mr Zhang deposes that when he inquired with Mr Guo, who speaks little English, Mr Guo could not remember what he did with the statutory demand.

[6]    MyPay submits, relying on the case of Richard Zhou Lawyers v Chen Ltd1, that leaving a document with a person unconnected with the company, even at the company’s registered office, does not discharge any of the methods of service under s 387(1) of the Act and is not therefore valid service.

1      Richard Zhou Lawyers Ltd v Chen [2015] NZHC 3230.

[7]    It follows, MyPay submits, that it cannot be presumed to be unable to pay its debts because it did not respond to the statutory demand.

[8]    Furthermore, MyPay submits that the Commissioner has not provided any evidence to support the assertion made in the statement of claim that a tax debt is owed, or that this debt means that MyPay is unable to pay its debts; or rather, that the Commissioner had not provided any such evidence before around 3.00 pm on Friday 1 November 2024.

[9]My decision follows.

Analysis

[10]   A creditor of a company may apply to this Court for a company to be placed into liquidation.2 The Court may exercise its discretion to place a company in liquidation if, relevantly, it is satisfied that the company is unable to pay its debts.3 The Court may also place a company in liquidation if it is satisfied that it is just and equitable that it do so.4

[11]   A company that has failed to comply with a statutory demand is presumed to be unable to pay its debts.5 However, a creditor may prove by other means that a company is unable to pay its debts.6

[12]   The Commissioner is in a unique position as a creditor. The effect of s 109 of the Tax Administration Act 1994 is that once a tax assessment has been made, its correctness can only be challenged in proceedings under the Tax Administration Act.

7     MyPay does not have any outstanding objections or challenges under that Act.   It

admits this fact in its statement of defence.

2      Companies Act 1993, s 241(2)(c)(iv).

3      Section 241(4)(a).

4      Section 241(4)(d).

5      Section 287.

6      Section 288(2).

7      Taylor v Commissioner of Inland Revenue [2024] NZSC 44, (2024) 31 NZTC 26-022 at [3]; save for limited circumstances where judicial review proceedings may be available: Tannadyce Investments Ltd  v  Commissioner  of  Inland  Revenue [2011] NZSC 158, [2012] 2 NZLR 153 at [58]–[61] per Blanchard, Tipping and Gault JJ.

[13]   It follows that the debt arising out of the tax assessments is beyond dispute in this Court. As an aside, I note that Mr Zhang does not attempt to dispute the debt in his affidavit.

[14]   The undisputed debt is due. The Commissioner’s statement of claim attaches MyPay’s summary of account at 5 April 2024. The statement of claim is verified by an employee of the Commmissioner. The summary of account shows that PAYE debt first fell due in November 2021 and has accumulated monthly to a core PAYE debt of

$311,638.85 at December 2023.

[15]   In my view, the fact that MyPay has not paid the debt as it has fallen due is itself evidence that it is unable to pay.

[16]   MyPay was served with the statement of claim over six months ago for a total debt of $596,131.29. An employee of the Commissioner has affirmed a further affidavit dated 1 November 2024, deposing that the outstanding debt is now

$804,411.34. The debt summary statement annexed to the affidavit shows that MyPay has accumulated further PAYE debt since the proceedings were filed.

[17]   The fact that MyPay has not paid the debt, especially when faced with liquidation proceedings, and has allowed the debt to increase, is itself evidence that it is unable to pay its debts.

[18]   MyPay has not put up any evidence to show that it is able to pay its debts.  Mr Zhang does not address the company’s solvency in his affidavit.

[19]   In these circumstances, I am satisfied that MyPay is unable to pay its debts in terms of s 241(4)(a) of the Act and should immediately be placed into liquidation. Alternatively, it is just and equitable that the company is placed into liquidation under s 241(4)(d).

Result

[20]   I order therefore that MyPay New Zealand Ltd is put into liquidation. The Official Assignee is appointed as liquidator.

[21]   The Commissioner will be paid his actual costs of $973.00 and disbursements of $1,317.17.

[22]The time of these orders is 10.25 am.

Associate Judge Gardiner