Commissioner of Inland Revenue v Newmarket Trustees Limited

[2011] NZCA 291

IN THE COURT OF APPEAL OF NEW ZEALAND

CA158/2011
[2011] NZCA 291

BETWEEN  COMMISSIONER OF INLAND REVENUE
Applicant

AND  NEWMARKET TRUSTEES LIMITED
Respondent

Hearing:         14 June 2011

Court:             Chambers, Ellen France and Stevens JJ

Counsel:         P H Courtney for Applicant
M J Fisher for Respondent

Judgment:      23 June 2011 at 9.30 am

JUDGMENT OF THE COURT

AThe application for an extension of time to appeal is granted.

BThe respondent must pay the applicant costs for a standard application on a band A basis and usual disbursements.

REASONS OF THE COURT
(Given by Ellen France J)

Introduction

1. This is an application under r 29A of the Court of Appeal (Civil) Rules 2005 for an extension of time to appeal the decision of Associate Judge Bell dismissing an application by the Commissioner of Inland Revenue for an order that Newmarket Trustees Limited (Newmarket Trustees) be placed into liquidation.[1] 

Background

[1]Commissioner of Inland Revenue v Newmarket Trustees Ltd (2011) 25 NZTC ¶20,030 (HC).

1. Newmarket Trustees is a trustee company through which an Auckland law firm, Castle Brown, offers trustee services to its clients.  The company is a trustee of the trust in issue in this case and of more than 100 other trusts.  Newmarket Trustees is effectively assetless.

2. The issue in the present case arises in relation to a trust called the Southern Lights Trust (Southern Lights).  The trustees are Peng Hock (Tony) Goh, a client of Castle Brown, and Newmarket Trustees.

3. In early 2009, the Commissioner advised Mr Goh that default assessments of income tax and GST for several income years, totalling $152,624.45, had been made in relation to Southern Lights.  Mr Goh did not take steps to challenge the assessments, nor did he advise Newmarket Trustees of the letter or the assessments.  Ultimately, in October 2009 the Commissioner made a demand for the unpaid tax to Newmarket Trustees and advised that a statutory demand would be issued unless payment was made within seven days.

4. A statutory demand under s 289 of the Companies Act 1993 was duly served on Newmarket Trustees demanding payment of what was by then, with penalties, $293,251.23 owing for GST and income tax.  Newmarket Trustees applied unsuccessfully under s 290 of the Companies Act to set aside the statutory demand.[2]

   [2]      Newmarket Trustees Ltd  v The Commissioner of Inland Revenue (2010) 24 NZTC 24,176 (HC).

5. Newmarket Trustees did not pay the monies due in terms of the statutory demand and the Commissioner applied to have the company liquidated.  The Associate Judge declined to make an order for liquidation.  The Associate Judge did not consider any benefits would arise from a liquidation given the company had no assets and because the Commissioner did not press for investigation as a ground for a liquidation order.  Further, Associate Judge Bell was concerned that liquidation would be costly for the company because it was the trustee for numerous other trusts.  Finally, the Associate Judge said that the company should have the opportunity to seek adjustments of the Commissioner’s assessments.

6. The need for an extension of time has arisen because, although the Commissioner filed his appeal within time (on the afternoon of the last day),[3] service of the notice of appeal was just over a day and a half late.  Attempts had been made to serve Newmarket Trustees earlier at the address for service given for the company at the Companies Office and the solicitor for Newmarket Trustee was advised on the last day for filing an appeal as of right that notice had been filed.

   [3]      Court of Appeal (Civil) Rules 2005, r 29.

7. The application for an extension of time is opposed on the basis that the appeal is hopeless.

Discussion

1. The test for whether an extension of time to appeal should be granted under r 29A is as expressed in My Noodle Ltd v Queenstown-Lakes District Council in which this Court said there were a number of factors relevant to the decision including:[4]

   ... the reason for the delay, the length of the delay, the conduct of the parties and the extent of any prejudice caused by the delay: New Plymouth District Council v Waitara Leaseholders Association Incorporate [2007] NZCA 80 at [22]. The overall test, however, is whether granting an extension would “meet the overall interests of justice”: Havanaco Ltd v Stewart (2005) 17 PRNZ 622 at [5] (CA).

   [4]My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518 at [19].

2. In this case, the delay is minimal and the problem with service arose as a result of a genuine mistake.  There is no suggestion of any prejudice to Newmarket Trustees arising from the short delay in service. 

3. In terms of the merits of the proposed appeal, the Commissioner wants to advance two grounds.  First, that the Associate Judge’s approach in effect challenges the correctness of the default assessments.  The Commissioner says that is an error of law because s 109 of the Tax Administration Act 1994 provides that, except in challenge proceedings, no disputable decision (which includes default assessments) may be disputed in a court and the decision and all of its particulars are deemed to be correct.  Secondly, the Commissioner says the Associate Judge was wrong to conclude that there was no benefit to liquidation.  That is because there is a public interest in insolvent companies and those that do not comply with their obligations under the law being liquidated.  In this context, the Commissioner says that the High Court has not correctly applied the decision of this Court in Commissioner of Inland Revenue v Chester Trustee Services Ltd.[5]

   [5]    Commissioner of Inland Revenue v Chester Trustees Services Ltd [2003] 1 NZLR 395 (CA).

4. Mr Fisher for Newmarket Trustees says that the Associate Judge took into account relevant considerations and did not consider any irrelevant matter.  On the latter point, the submission is that the Associate Judge’s consideration of s 109 was peripheral to the decision.  Mr Fisher also submits that the Judge was correct to conclude that liquidation would serve no purpose in this case. 

5. We are not in a position at this point to examine the merits in any detail.  However, on the material before us, it is plain that this is not one of those cases where the appeal is so hopeless that an extension of time should be declined.  It may also be useful for this Court to consider the application of Chester Trustee Services Ltd, which dealt with the ability to set aside a statutory demand, to the court’s discretion to make an order for liquidation. 

6. In the circumstances, it is in the interests of justice to extend the time in which to file a notice of appeal.  The application for an extension of time in which to appeal is accordingly granted.

Costs

1. The Commissioner has been successful in his application.  Despite the fact that the Commissioner was seeking an indulgence from the Court, we consider it right to award the Commissioner costs.  As was the case in My Noodle, it should have been clear to Newmarket Trustees in the circumstances of this case, and for the reasons given, that an extension of time would be granted.  Both time and resources would have been saved had the respondent consented to an extension of time.  The applicant is awarded costs for a standard application on a band A basis and usual disbursements.

Solicitors:
Crown Law Office, Wellington for Applicant
D B Hickson, Auckland for Respondent