Commissioner of Inland Revenue v National CR Limited (formerly known as Enviro Clean & Restoration New Zealand Ltd)

[2014] NZHC 1716

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-425 [2014] NZHC 1716

BETWEEN

COMMISSIONER OF INLAND

REVENUE Plaintiff

AND

NATIONAL CR LIMITED (FORMERLY KNOWN AS ENVIRO CLEAN & RESTORATION NEW ZEALAND LTD)

Defendant

Hearing:	21 July 2014
Counsel:	Mr C Van Der Merwe for Plaintiff Mr R B Hucker and Ms A K Prasad for Defendant M Singh for DC's Carpet Services Ltd and Tasman Property Services Ltd
Judgment:	21 July 2014

ORALJUDGMENT OF ASSOCIATE JUDGE DOOGUE [Application to amend statement of claim]

COMMISSIONER OF INLAND REVENUE v NATIONAL CR LIMITED [2014] NZHC 1716 [21 July 2014]

Amendment of statement of claim

[1]      When  the  plaintiff  commenced  these  winding  up  proceedings,  it  filed  a statement of claim which alleged that the defendant was indebted to it in the sum of

$248,629.15.  As is usual in cases of this kind, the Commissioner annexed to the statement  of  claim  the  account  between  itself  and  the  plaintiff  setting  out assessments, penalties and interest payments as the main items.  The total allegedly owed was then carried forward at $248,629.15.  The Commissioner’s position today was  that  the  operative  amount  she  claims  to  be  owed  in  her  application  for liquidation was the amount set out in the affidavit of the employee, Mr Tremain dated 17 July 2014, that is the $300,000 approximately.  The position summarised then is that the Commissioner is now alleging that after receipting of payments made by the defendant and adding to the liabilities additional assessments, interest and penalties, the account showing the liability of the defendant on the basis of the net effect of the entries shown has gone up by something in the order of $50,000.

[2]      Mr Van Der Merwe, for the Commissioner, proposed that the Court should proceed on the assumption that the amount owing was $300,000.  Mr Hucker raised the question  of whether  the plaintiff ought  to be restricted  to  proving  only the amount set out in the original statement of claim.

[3]      Mr Van Der Merwe submitted that the Commissioner ought not to be so limited and that, even on the basis of the statement of claim in its original form, the Commissioner was entitled to prove that she was owed approximately $300,000. Alternatively, Mr Van Der Merwe sought leave to amend the statement of claim to plead that the current indebtedness was $300,854.44.

[4]      Mr Hucker opposed the grant of leave to amend.

[5]      The usual approach that is taken in these cases is to grant such amendments as are necessary to ensure that the real dispute is determined providing, of course, that such a course does not work injustice to the defendant.

[6]      Mr Hucker submitted that injustice would be caused to the defendant arising from the fact that it now faced a claim for a larger amount than it did previously.  He broadly submitted that it was far too late for an application to amend to be brought.

[7]      In my view, the question is whether granting an amendment would cause injustice to the defendant in procedural terms.   That is to say, it is necessary to consider  whether  allowing  the  amendment  would  result  in  some  procedural unfairness to the plaintiff.  Having heard Mr Hucker on the point, I am not satisfied that there would be any such procedural unfairness.  There was no submission, for example, that if the defendant were given more time, evidence would be forthcoming to dispute either the original amount of the debt or the augmented amount which the plaintiff now seeks to include in the statement of claim.

[8]      Secondly, it is obvious to any party in the position of the defendant that as it continues  to  trade  and,  as  time  goes  by  maintains  a  negative  balance  in the Commissioner’s accounts, penalties and interest are going to be added.   The relevance of the fact that it continues to trade is that additional liabilities such as PAYE payments and GST tax will accrue as well.

[9]      The Commissioner has, as I say, filed an affidavit not long before the hearing but long enough for the defendant to at least be in a position to demonstrate and outline what sort of additional evidence it would like to call to show that the Commissioner’s calculations are in error.  It would, of course, need to do that if it were to make anything of the point that the Commissioner was apparently now claiming an  additional  unjustified  increase in  the amount of the liability that  it alleged against the defendant.   But there has been no indication of any such procedural unfairness brought about by the increased figure.   There is simply an assertion that it would be unjust to allow the amount to be increased.

[10]     I was  referred  to  authority on  this  point  about  whether  leave  should  be granted on the eve of the trial in liquidation proceedings to permit an amendment, in particular, the decision of Associate Judge Osborne in CIR v The Fish and Chip Shop

Co Ltd1 was brought to my attention.  In that case there was an application to file an amended statement of claim and the Judge said the following: 2

[57]     I  note  that  my  conclusion  as  to  the  Commissioner’s  continued standing in law introduces a certain common sense and practicality to the workability of the winding up regime.   Creditors will frequently be demanding from debtors either judgment debts or contractual debts which carry interest as of right  The creditor continues to be a creditor for those sums.  The submissions of counsel for the defendant invite the conclusion

9expressly recognised by co9unsel) that the plaintiff creditor should be left to its rights through debt collection or otherwise to later pick up the balance,

notwithstanding that the plaintiff remains a creditor on the hearing date (for

more than $2000.00) and the defendant is presumed to be insolvent.  In my view, the Court should be reluctant to conclude that Parliament intended such an unwieldy and inconvenient outcome.

[11]     It   will   be   noted   that   the  Associate   Judge   accorded   weight   to   the considerations of whether the outcome suggested by the debtor in that case would be unwieldy and inconvenient.  In this case, Mr Hucker suggests that an amendment to the  statement  of  claim  should  be  refused  and  the  Commissioner  restricted  to enforcing the original lesser amount that was inserted in the statement of claim, and then she be left to take separate liquidation or other proceedings to recover the balance.   In my view, that would be an unwieldy and inconvenient outcome.   It would also, without any proper justification for so doing being put forward, have the effect of diverting the Court away from dealing with the real dispute between the parties.

[12]     For all of those reasons, I consider that the application to amend ought to be granted and I rule accordingly.

J.P. Doogue

Associate Judge

1      CIR v The Fish and Chip Shop Co Ltd CIV-2009-404-672.

2 At [57].