Commissioner of Inland Revenue v Park Estate Limited HC Auckland CIV 2010-441-117

[2010] NZHC 1835

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2010-441-117

BETWEEN  THE COMMISSIONER OF INLAND REVENUE

First Plaintiff

ANDRAKANAUNUI FRUIT COMPANY LIMITED

Second Plaintiff

ANDPARK ESTATE LIMITED Defendant

CIV-2010-441-179

AND BETWEEN            BEARSLEY FARMS LIMITED Plaintiff

ANDPARK ESTATE LIMITED Defendant

Hearing:         22 September 2010

Appearances: E.M. Carpenter - Counsel for The Commissioner of Inland Revenue

A. McEwen - Counsel for Bearsley Farms Limited
P. Ross - Counsel for Park Estate Limited

Reasons for Decision:            23 September 2010

REASONS FOR DECISION OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Inland Revenue Department, PO Box 1144, Napier Langley Twigg, Solicitors, PO Box 446, Napier Fletcher Law, Solicitors, PO Box 29, Hamilton

THE COMMISSIONER OF INLAND REVENUE AND ANOR V PARK ESTATE LIMITED HC NAP CIV-

2010-441-117  23 September 2010

[1]      On 22 September 2010 applications by the Commissioner of Inland Revenue (“CIR”)  as substituted plaintiff in CIV-2010-441-117 and Bearsley Farms Limited (“Bearsley”) as substituted plaintiff in CIV-2010-441-179 for orders to place the defendant, Park Estate Limited (“the company”) into liquidation came before the Court.  In addition an application by the company for an order staying the liquidation proceedings, on the basis that a Part 14 Companies Act 1993 compromise proposal had been approved by creditors in terms of s 230 Companies Act 1993, was before the Court.

[2]      At  the  hearing  before  me,  Ms  Carpenter  for  CIR  and  Ms  McEwen  for Bearsley confirmed that although, those parties earlier had not approved the Part 14 creditors’ compromise proposal, following recent discussions with representatives of the company, they were now happy to provide their approval and therefore did not oppose the company’s application for stay of their current liquidation proceedings.

[3]     That said, orders were made yesterday effectively unopposed that both liquidation proceedings CIV-2010-441-117 and CIV-2010-441-179 were stayed for a period of 1 year from the date of this decision or until further order of this Court is made.

[4]      In  addition  an  order  was  made  reserving  leave  for  the  company or  any creditor of the company to apply to the Court on notice for any further orders which may be sought in the meantime.

[5]      Further, by consent, costs awards were made as follows:

(a)The company is to pay to Bearsley costs of $3,000.00 with respect to this proceeding.

(b)The company is to pay to CIR costs of $1,500.00 with respect to this proceeding.

[6]      When making these orders yesterday, 22 September 2010, I indicated that my detailed reasons for the decision would follow.  I now give those reasons.

[7]      The present liquidation proceedings were brought by CIR and Bearsley as substituted plaintiffs.   The debt claimed by CIR from the company as set out in CIR’s statement of claim filed 25 August 2010 totalled $66,226.67.  This related to GST, income tax, PAYE tax deductions, Kiwisaver employee deductions, Student Loan employer deductions and interest and penalties which were outstanding from the company.

[8]      The amount claimed by Bearsley and its group was originally approximately

$70,000.00 for outstanding invoices for apples supplied to the company.

[9]      The debts remain outstanding along with substantial other debts owing by the company.    In  this  regard  material  is  before the Court,  which  indicates that  the company has total unsecured creditors in the vicinity of $599,589.00 and preferential creditors totalling $10,198.00.

[10]     As I have noted, the other application before the Court made by the company seeks a stay of these liquidation proceedings based upon a Part 14 Companies Act

1993 creditors’ compromise proposal placed before creditors of the company at meetings on 10 June 2010 and 26 July 2010.

[11]     At the second meeting, as I understand the position, about 76.5% in value of the total creditors of the company (who comprised more than a majority in number of  the  total  creditors)  voted  in  favour  of  the  proposal.    The  general  proposal advanced by the company was for a moratorium of about 12 months to be entered into, a chartered accountant in Hamilton, a Mr Robertson to be appointed to administer the affairs of the company, and for a property owned by the company to be sold in the process.   The broad proposal suggests that it is hoped all creditors would be paid 100% of their outstanding debt over this 12 month period.

[12]     At the 26 July 2010 meeting it seems that 65 unsecured creditors of the company voted of which 57 were in favour (representing $425,624.00 of debt) and 8 were opposed (representing $130,851.00 of debt).

[13]     As I understand the position, included in those creditors who were opposed to the proposal were CIR and Bearsley.

[14]     When the liquidation applications and the application for stay were called before me originally on 26 August 2010, I adjourned matters to the call yesterday, 22

September 2010 over the opposition of CIR and Bearsley.  In a decision I gave on 26

August 2010 outlining this adjournment I noted that Ms Carpenter for CIR had raised concerns before me regarding the 26 July 2010 creditors’ meeting and the integrity of information which had been placed before the creditors both before and at that meeting.   In particular, Ms Carpenter raised concerns regarding what she suggested was an understatement of total taxation debt by approximately $20,000.00.

[15]     Also at the call on 26 August 2010, Ms McEwen for Bearsley raised similar concerns regarding the integrity of information put in front of creditors at this second meeting.   This related to the extent of debt which Bearsley and its group contend they were owed by the company.

[16]    As part of the adjournment agreed to on 26 August 2010, I noted that discussions were to take place between the company representatives, CIR and Bearsley in the ensuing month in an endeavour to resolve matters.

[17]     What seems clear now is that those discussions have taken place and matters have now been resolved.   CIR and Bearsley have both signed consent forms indicating that they now respectively approve the Part 14 creditors’ compromise proposal and agree to a stay of their liquidation proceedings on the basis I have outlined above.

[18]     Turning to the terms of that creditors’ compromise proposal, as I have noted above, it is to run for a period of 12 months, it involves complete control and supervision of the company by an independent accountant in Hamilton, it is to involve a managed sell-down of the company’s property and hopefully in the process result in a 100% payment to all creditors.  As I noted at [12] of my decision of 26

August 2010, there is a certain attraction to this proposal and hence what is now a very significant majority vote from all creditors in favour of it proceeding.

[19]     It seems also that the original concerns voiced as to the integrity of the information placed before creditors at the creditors’ meetings on 10 June 2010 and

26 July 2010 have now been allayed.  Certainly, before me yesterday Mr Ross for the company provided an explanation as to the small discrepancy in the figures with both CIR  and  Bearsley which may well have resulted  from  general misunderstandings between the parties.

[20]     Given these matters, I am now satisfied that the application for a stay sought by the company on the basis of what I see as a reasonable creditor’s compromise proposal  approved  now  by  almost  all  creditors  of  the  company  under  s  230

Companies Act 1993, should be granted.

[21]     It is for these reasons that the orders noted at [3], [4] and [5] above were made on 22 September 2010 and I now confirm those orders.

‘Associate Judge D.I. Gendall’