Commissioner of Inland Revenue v Rarere HC Napier CIV-2011-441-68

[2011] NZHC 741

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-68

IN THE MATTER OF     the Insolvency Act 2006

AND IN THE MATTER OF the bankruptcy of ADELAIDE CHARMAINE RARERE

BETWEEN  THE COMMISSIONER OF INLAND REVENUE

Judgment Creditor

ANDADELAIDE CHARMAINE RARERE Judgment Debtor

Hearing:         16 June 2011 (Heard at Napier)

Judgment:      16 June 2011

ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Solicitors:           Inland Revenue Department, PO Box 1462, Wellington

Scott Jefferson, Barrister, PO Box 143, Napier

THE COMMISSIONER OF INLAND REVENUE V AC RARERE HC NAP CIV-2011-441-68 16 June 2011

[1]      Before the Court is an application by the judgment creditor seeking an order for adjudication with regard to the judgment debtor.

[2]      The debt in question relates to long outstanding GST and PAYE tax from the judgment debtor which totals something over $142,000.00 as core debt.  In addition interest and penalties have accrued which makes in all a total debt now due from the judgment debtor of $637,708.21.

[3]      As I understand the position, the judgment debtor was convicted in criminal proceedings regarding the PAYE debt in particular some time ago and she has been paying reparation regarding this debt at the rate of $20.00 per week for some time.

[4]      Mr Jefferson, appearing as counsel for the judgment debtor indicated that in addition to this $20.00 per week  reparation amount  (on which  a total  of about

$3,000.00 has been paid) the judgment debtor has been paying a further $30.00 per week to the judgment creditor in part reduction of the substantial debt outstanding.

[5]      As I understand the position from Mr Jefferson to date, a total of some

$6,000.00 has been paid by the judgment debtor.

[6]      The judgment debtor’s personal situation as confirmed by Mr Jefferson is such that  it  is  entirely unrealistic to  suspect  that  she  can  make  any substantial payments in reduction of this debt.  It is to her credit that she has made the $50.00 per week payments to the Commissioner from the benefit she receives to reduce in some way the huge debt which is outstanding.

[7]      According to Mr Jefferson, the judgment debtor has no assets, she is in receipt of a benefit and, other than the debt to the Commissioner of Inland Revenue, has no other substantial debts.

[8]      The application before me relates to a Bankruptcy Notice served upon the judgment debtor following a judgment obtained against her in the District Court at Napier in July 2009.   The Bankruptcy Notice requested on 3 February 2011 was served on 10 February 2011.  It met with no response from the judgment debtor.

[9]      Subsequently, the judgment creditor filed the present application on 1 April

2011 and it was served upon the judgment debtor on 10 April 2011.

[10]     On 15 June 2011 the judgment debtor filed an affidavit in this proceeding. From that affidavit it seems clear that she does not dispute the debt outstanding but wishes the Court to effectively exercise its discretion not to bankrupt her.  This is on the basis of a claim she makes that this would impact upon her ability first, to remain as a trustee of certain Ahu Whenua Trusts and secondly, to continue her involvement as a caretaker at Tangoio Marae if she is adjudicated bankrupt.

[11]     Ms Carpenter appeared before me as counsel for the judgment creditor and indicated  that  in  her  view  it  did  not  necessarily  follow  that  if  bankrupted  the judgment debtor could no longer continue in her role as a trustee of the various trusts or caretaker at the Marae.

[12]     This is particularly the case she said bearing in mind that the judgment debtor has already been convicted of criminal offences involving dishonesty offending but despite this, as I understand it, she has continued as a trustee of these trusts.

[13]     There can be no doubt here that the judgment debtor in failing to comply with the  Bankruptcy  Notice  served  upon  her  has  committed  an  available  act  of bankruptcy.  In addition, I am satisfied that she can only be considered as hopelessly insolvent  here,  given  the  huge  and  growing  debt  outstanding  to  the  judgment creditor.   In this regard, there seems no hope that the judgment debtor could even make substantial inroads into the core tax debt which has been outstanding in the case of GST as far back as 1999 and in the case of PAYE, since 2001.

[14]     Although it is clear that, given the huge debt outstanding to the judgment creditor,  the  judgment  debtor’s  financial  position  must  be  seen  as  somewhat hopeless, before me to her credit, Ms Carpenter for the judgment creditor indicated that the Commissioner has some sympathy for the position in which the judgment debtor finds herself.  As I have noted above, to her considerable credit the judgment debtor has been consistently paying $50.00 per week from her benefit by way of reparation and other payments to the judgment creditor. This is admirable.

[15]     Notwithstanding   this,   however,   the   fact   remains   that   the   total   debt outstanding to the judgment creditor remains something in excess of $630,000.00 and is growing with further interest and penalties.   Although Ms Carpenter also acknowledged  that  the  judgment  debtor  bears  little  risk  to  the  commercial community, it is clear to me that the Commissioner’s continuing request that she be adjudicated bankrupt for what is a substantial debt and, in a situation where that debt at least in part involved dishonesty offending, cannot be ignored.

[16]     Under all these circumstances therefore, I am of the view that although too I have considerable sympathy for the position in which the judgment debtor finds herself, the Court is faced with no alternative but to make an order for her adjudication.

[17]     That said the following orders are now made:

(a)       An order is now made adjudicating the judgment debtor, Adelaide

Charmaine Rarere, bankrupt.

(b)Costs on this application are awarded to the judgment creditor on a Category 2B basis together with disbursements as fixed by the Registrar.

(c)       This order is timed at 10.28 am.

‘Associate Judge D.I. Gendall’