Commissioner of Inland Revenue v Park Estate Limited HC Napier Civ-2010-441-117

[2010] NZHC 2348

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2010-441-117

BETWEEN  THE COMMISSIONER OF INLAND REVENUE

First Plaintiff

ANDRAKAUNUI FRUIT COMPANY LIMITED

Second Plaintiff

ANDPARK ESTATE LIMITED Defendant

CIV-2010-441-179

AND BETWEEN            BEARSLEY FARM LIMITED Plaintiff

ANDPARK ESTATE LIMITED Defendant

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

A. McEwan - Counsel for Rakaunui Fruiit Company Limited
A. McEwan - Counsel for Bearsley Farm Limited
C. Fletcher - Counsel for Park Estate Limited in both matters

Judgment:      26 August 2010

DECISION OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Commissioner of Inland Revenue, PO Box 1462, Wellington

Langley Twigg, Solicitors, PO Box 446, Napier

Fletcher Law, Solicitors, PO Box 29, Hamilton 3240

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

2010-441-117  26 August 2010

[1]      Before  the  Court  are  applications  to  place  the  defendant  company  into liquidation brought by substituted plaintiffs, the Commissioner of Inland Revenue, Rakaunui Fruit Company Limited and Bearsley Farm Limited.

[2]      Also before the Court is an application from the defendant seeking a stay of these liquidation proceedings.

[3]      The stay is based upon a creditor’s compromise proposal which was placed before creditors of the defendant company at two meetings.   The first of these meetings as I understand the position took place on 10 June 2010 and the second meeting on 26 July 2010.

[4]      At the second meeting, as I understand it from Mr Fletcher, counsel for the defendant, about 76.5% in value of the creditors of the company voted in favour of the proposal.

[5]      The broad proposal, as  I understand it, is for a moratorium of about 12 months to be entered into, a Mr Robertson, a Chartered Accountant from Hamilton 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 all creditors it is hoped will be paid 100% of their debt.

[6]      Before me today Ms Carpenter appearing for the Commissioner of Inland Revenue raised concerns regarding the 26 July 2010 creditors’ meeting and the integrity of information placed before the creditors both before and at that meeting.

[7]      In particular Ms Carpenter raised concerns that the amounts specified for tax debt owing to the Commissioner of Inland Revenue which comprised preferential debt was understated by, I understand, approximately $20,000.00.

[8]      Ms McEwan who appeared for Bearsley Farm Limited before me today also raised a concern regarding what she described as the integrity of what was put in front of creditors at this second meeting.  In particular, as I understand the position,

Bearsley Farm Limited and its group contend that they are owed some $70,000.00 approximately whereas before the creditors’ second meeting, their debt was listed at some $59,000.00.

[9]      Mr Fletcher for the defendant indicated that so far as the Bearsley debt is concerned the information provided to the second creditors’ meeting was accurate in the sense that it is only $59,000.00 of the debt which is effectively undisputed.

[10]     So  far  as  the  debt  owing  to  the  Commissioner  of  Inland  Revenue  is concerned, Mr Fletcher for the defendant also indicated that there was little moment in what may have turned out to be an understatement of preferential debt to the second creditors’ meeting.  As I understand his submission, this is because in terms of the broad proposal before the Court, Mr Robertson the accountant concerned, will have the authority to negotiate and determine the quantum of individual debts and in particular to resolve any questions outstanding with the Commissioner of Inland Revenue regarding its claim to preferential debt.

[11]     Finally, before me today Ms Carpenter for the Commissioner in opposing the application for stay requested that this matter might be adjourned for a period of two months in order that, as I understand it, discussions could take place concerning the level of debt outstanding to the Commissioner relative to the information which has been provided to all creditors.

[12]     What is clear to me with regard to these matters is that the broad proposal put before creditors of the defendant company is intended it is hoped to result in a 100% payment to all creditors within a period of 12 months.  There is a certain attraction to such a proposal and hence the favourable vote from a significant proportion of all creditors.

[13]     Notwithstanding  this,  however,  there  have  been  doubts  raised  from  two quarters as to the basis upon which the vote in favour of this proposal was made given the details of company indebtedness provided to creditors.  Ms Carpenter has gone so far as to signal to the Court that the Commissioner has a concern that the

incorrect information provided regarding the Commissioner’s debt may not have been provided purely by accident.

[14]     This must raise a concern for the Court.

[15]     That said, in my view, the appropriate course for the Court to take here is to accede to Ms Carpenter’s request and to adjourn these matters for a period of 1 month in order that these issues hopefully can be satisfactorily resolved.

[16]     No decision is therefore made on the application for stay before the Court or on the two liquidation applications from the plaintiffs in these cases.

[17]     Instead this matter is now adjourned to a call in the List at 10.00 am on 22

September 2010 to review the position.

[18]     In the mean time costs on all matters are reserved.

‘Associate Judge D.I. Gendall’