Commissioner of Inland Revenue v Rath

[2022] NZHC 990

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-000533

[2022] NZHC 990

BETWEEN

COMMISSIONER OF INLAND REVENUE

Applicant

AND

COLIN DAVID RATH

First Respondent

AND

WAIPARA WINDS LIMITED

Second Respondent

Hearing:	9 May 2022 via telephone conference
Appearances:	K I S Naik-Leong for the Applicant S G Lukey for the Respondents
Judgment:	10 May 2022

JUDGMENT OF NATION J

[1]    On 29 November 2021, by consent, the Court made a freezing order as to properties registered in the name of Waipara Winds Ltd and/or the proceeds of sale from those properties.

[2]    On 2 February 2022, by consent, an order was made for the freezing order to continue until further order of the Court.

[3]There was a case management telephone conference on 9 May 2022.

[4]    In a memorandum of 5 May 2022, counsel for the Commissioner said the respondents had advised that three of the four lots subject to the freezing order are under a conditional offer of sale. At that time, the Commissioner had not been provided with copies of the agreements for sale and purchase.

COMMISSIONER OF INLAND REVENUE v RATH [2022] NZHC 990 [10 May 2022]

[5]    The Commissioner also had a concern that a lender with security over the properties had advanced further finance to the respondents without obtaining an order from the Court to vary the current freezing order. Counsel for the Commissioner said she understood that the respondents contended no variation was required because the further lending was obtained to complete subdivision work so certificates of title could be issued.

[6]    By memorandum, the Commissioner sought orders from the Court that the respondents provide forthwith, firstly:

(a)  copies of the agreements for sale and purchase of the properties which are under conditional agreements for sale;

(b)  information as to the amounts that have been paid as deposits for the relevant properties; and

(c)  information as to who currently has possession of any deposits paid for the properties.

Secondly:

(a)  a copy of the agreement to lend the additional amount, including the terms, and how those funds were secured;

(b)  itemisation of the steps taken with the subdivision to date;

(c)  copies of any invoices for the subdivision works undertaken to date;

(d)  details of who currently has possession of the additional funds;

(e)  details of who authorises payment of the costs to be paid; and

(f)  an account of how the additional amount borrowed has been applied.

[7]    In a memorandum for the respondents, Mr Lukey advised that, on its terms, the freezing order is to continue and the respondent’s consent to that. He advised that steps had to be taken to obtain title, the work was almost complete, and Waipara Winds Ltd expects to be in a position to have titles issued for the relevant lots from mid June 2022. One lot remains on the market with an asking price of $615,000.

[8]    During the telephone conference, counsel for the Commissioner advised that counsel for the respondents had recently sent three contracts to the Commissioner but counsel needed further time to consider the information in those contracts.

[9]    Mr Lukey, for the Commissioner, explained that the lender with first mortgage security over the relevant properties will have first call on the proceeds of sale. The lender with second mortgage security will have the next call, commensurate with the claims of the Commissioner of Inland Revenue. He suggested the second mortgagee and the Commissioner of Inland Revenue therefore have a common interest in ensuring that only monies needed to complete the subdivision are advanced and any further advances are applied to complete the subdivision to ensure the sales go through. He said arrangements had been made for all invoices relating to the subdivision to be sent to Mr Rick Teal, the person dealing with the situation for the second mortgagee. Mr Lukey said he would be able to provide counsel for the Commissioner with contact details for this person.

[10]   Mr Lukey acknowledged it is now a matter of public record that Mr Rath has been allegedly involved in the forgery of a number of documents. With that knowledge, it is in the interests of both the Commissioner and the lender that information be provided by the party best positioned to verify its authenticity. Subject to that, the respondents did not oppose the making of the orders sought.

[11]   Rule 32.3 of the High Court Rules 2016 permits the Court to make ancillary orders, ancillary to a freezing order, if the Court considers it just. An ancillary order may be made for the purpose of eliciting information relating to assets relevant to the freezing order.

[12]   I consider the orders sought are reasonably required to ascertain the value of the properties subject to the freezing order and to ensure that the proceeds from the sale of those properties is preserved for the purposes which required the making of the freezing order.

[13]Accordingly, I make ancillary orders as set out in [6] above.

[14]   I acknowledge that counsel for the respondents has indicated this information may be made available through the respondents facilitating contact directly between the Commissioner, or counsel for the Commissioner, and Mr Rick Teal.

[15]   The Court expects that the information required from the respondents will be made available to the Commissioner without delay. The Commissioner will then consider that information and decide what, if any, further applications have to be made to the Court as to the freezing order.

[16]   The proceedings are adjourned for a further telephone conference at 2.00 pm on 13 June 2022 for the Commissioner to make any further applications that might be necessary. If, with the information that has been made available to the Commissioner that conference is not required, the parties are to file a memorandum as to how the proceedings are to be progressed.

[17]The interim freezing order remains in place on the terms already stipulated.

Solicitors:

Crown Law Office,  Wellington SG Lukey, Barrister, Christchurch.