Commissioner of Inland Revenue v Tait-Jamieson

[2016] NZHC 1123

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-000331 [2016] NZHC 1123

UNDER

The Insolvency Act 2006

AND

IN THE MATTER OF

an application to cancel a proposal under
Part 5, Subpart 2 of the Insolvency Act
2006

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Creditor

AND

PETER JOHN TAIT-JAMIESON Insolvent

Hearing:	9 May 2016 and 26 May 2016
Appearances:	M Hartfield for the Commissioner of Inland Revenue The Insolvent in person
Judgment:	26 May 2016

ORAL JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

26.05.16 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

THE COMMISSIONER OF INLAND REVENUE v P J TAIT-JAMIESON [2016] NZHC 1123 [26 May 2016]

Background

[1]      The Commissioner of Inland Revenue (the Commissioner) applies to cancel the insolvent’s creditors’ proposal approved by the High Court on 8 March 2012. The Commissioner also wishes the insolvent to be adjudicated bankrupt.

[2]      The Commissioner says the insolvent has failed to comply with the terms of the proposal; that creditors have voted to cancel the proposal; and asserts injustice or undue delay will occur if the proposal is permitted to endure.

[3]      The  application  is  supported  by  Mr  P  Sargison  an  Auckland  chartered accountant who was appointed as trustee of the insolvent’s proposal filed in January

2012.

[4]      Mr  Sargison  deposes  that  the  insolvent  has  met  the  first  four  quarterly payments  due  and  also  paid  the  second  four  quarterly  payments  due,  albeit sometimes  very  late,  and  he  has  not  paid  anything  of  the  last  eight  quarterly payments he agreed to pay.

[5]      Mr Sargison deposes that in an attempt to resolve the nonpayment issue he held a creditors meetings on 2 February 2015 and 26 August 2015.  Paragraph 11 of the proposal provided such meetings may be called to decide on whether or not to cancel the proposal if the insolvent failed to perform his obligations for more than

10 working days.

[6]      The proposal at 11.1 provided:

(a)       The trustee must give notice of the creditors meeting to the insolvent; (b)     The insolvent is entitled to attend and speak;

(c)       The  creditors  are  entitled  to  decide  whether  or  not  to  cancel  a proposal;

(d)If the proposal is cancelled all rights and claims against the insolvent are enforceable.

[7]      The Commissioner’s representative attended meetings called by the trustee on 2 February 2015 and 26 August 2015.   On both occasions the Commissioner voted to cancel the proposal. At the 2 February meeting a majority of creditors voted not to cancel the proposal.  At the August meeting a majority of creditors voted to cancel the proposal.  Issues have arisen regarding service of Mr Sargison’s notice of that meeting.

[8]      Those issues concern the fact that Mr Tait-Jamieson as well as possibly four others may not have received notice of that meeting about which Mr Sargison gave evidence before the Court.   Mr Sargison explained that he has only just become aware that the insolvent and some (possibly four) creditors had a change of address between the February and August meetings, which may be why they did not receive notice of the August meeting.

[9]      It is clear from Mr Sargison’s evidence that the lack of notification was a result of inadvertence and was not deliberate.

[10]     The Commissioner’s position is that regardless of any proposal procedural failings the Court’s intervention to cancel the proposal is warranted and is permitted by s 339 of the Insolvency Act 2006.

[11]     The insolvent’s tax liability under the proposal is for $32,642.16 in respect of

Income Tax and GST periods between 2006 and 2011.

Opposition to the application

[12]     The insolvent opposes the application to cancel his proposal.  He claims:

(a)       He was not notified of the creditors meeting when the decision was made to cancel the creditors proposal;

(b)      Not all known creditors were notified of that meeting;

(c)       Therefore the creditors vote in favour of cancellation was invalidated;

(d)The Commissioner has breached the proposal terms by seeking to enforce debts without the consent of other creditors;

(e)       Money is owed to the insolvent which will allow creditors to be paid in full in terms of the proposal.

[13]     The insolvent has sworn  an affidavit in support of his opposition to the application.

[14]     It is clear that while the insolvent attended the creditors meeting held on

2 February 2015, he did not attend the meeting held on 26 August 2015.   The insolvent says he did not receive any notice of that meeting and although it is recorded there was a majority of creditor votes in favour of cancellation of the proposal, the insolvent has contacted a number of creditors since.  He says that even though there were a number of creditors who did receive notice of the meeting, he believes that there were some who did not receive that notice.  The insolvent says that had he been advised of such a meeting he would have attended and exercised his rights to be heard and would have been able to advise the creditors of an outline of the situation which he believes would have persuaded a majority not to cancel the proposal.

[15]     It is the insolvent’s position, as explained by his meeting with the creditors in February 2015 that Broadlands Finance Limited owed him $123,625 in unpaid director’s fees for work as an independent director from February 2013 until August

2015; that he always intended to pursue a claim for that amount.  He says however that pursuit of that claim was hindered by a number of factors including that on or around May 2015 his diary had gone missing and his laptop was stolen and that a number of emails between himself and Mr Radisich of Broadlands Finance Limited were missing.  He deposes having now located the diary along with other relevant material and is of the view that his claim is now ready to proceed.  There have been delays however because his claim is opposed, and funds are needed by him so he can pursue that claim further.

[16]     The insolvent also refers to health issues which have impacted on his ability to progress his claim.

[17]     Affidavits in support of the insolvent’s opposition have been provided from a Mr Christie on behalf of Diocesan School who was owed $8,861, Mr Janisz who was owed $428,831, and Mr Johnson, the liquidator of First Merchant Finance Limited (in liquidation) who was owed $486,000.

[18]     Each by their affidavits appears to agree to the insolvent being provided an opportunity to pursue his claim against Broadlands Finance Limited for the funds he says is owing to him.

Considerations

[19]     The insolvent’s proposal was approved by order of this Court on 8 March

2012. At that time the Court accepted that the terms of the proposal were reasonable and were calculated to benefit the general body of creditors.

[20]     Section 336 of the Insolvency Act 2006 (the Act) requires an insolvent to do everything necessary to put the proposal into effect.

[21]     Section 339 of the Act provides at any time after the Court has approved a proposal, a trustee or a creditor can apply to vary or cancel that proposal and to adjudicate the insolvent bankrupt.  This, the Court may do, if it agrees the insolvent has failed to carry out or comply with the proposal terms.

[22]    Mr Sargison the proposal trustee acted as he was obliged to namely in accordance with the proposal terms.   He was concerned that nearly two years of instalment payments had not having been made, and decided to call a creditors meeting to determine the view of those creditors.

[23]     The insolvent was at the February meeting and he addressed the creditors.  In that outcome the majority did not accept that the proposal should be cancelled.  At that time creditors were advised a further meeting would be scheduled in August for the purpose of a review.

[24]     Issues  regarding  service  of  the  notice  of  the August  meeting  have  been identified.  The insolvent’s position is that the creditors having accepted his proposal they thereby conceded to the provisions of the proposal for determination of those issues which have arisen due to instalments not being paid by him.  Further he says it is clear that he and some other creditors did not receive notice of that meeting when creditors voted to cancel the proposal.

[25]     The insolvent argues the present application should be adjourned until after a further creditors meeting at which time he would then have the opportunity to put a variation of the proposal for the creditors to vote upon.

[26]     Regarding the Commissioner’s application, the insolvent has provided copies of Inland Revenue statements showing that a recent tax refund due to him has not been paid but was applied instead to that same debt which was the subject of his creditor’s proposal.

[27]     Mr Hartfield for the Commissioner acknowledged that occurred as part of a computer managed default process.  Of course that should not have occurred and Mr Hartfield reports the issue has now been rectified.

Conclusions

[28]     Section 336 of the Act requires that the insolvent to do everything necessary to put the proposal into effect.

[29]     That has not occurred in this case.  The proposal period is at an end and half only of the instalments promised have been paid.  There may have been good reason for this but none has convincingly been provided to the Court.  Rather the insolvent has offered to pay all outstanding instalments if he is successful in a Court action he intends to pursue.  In that regard it seems clear the insolvent has made no progress for more than a year.

[30]     Claims  by  the  insolvent  suggesting  the  Commissioner’s  misuse  of  the proposal process, do not assist him either.  The insolvent’s concern that he and others

did not/may not have received notice of the August meeting is understandable.  So too is his submission that creditors ought to abide the process that binds them. Clause 11.1 of the proposal provided that:

If [the insolvent fails] to perform my obligations under the Proposal and that failure continues for more than 10 working days, the trustee shall call a meeting of creditors.  The trustee will be obliged to give me notice of that meeting and I will be entitled to attend and speak.   At that meeting, the Creditors will be entitled to decide whether or not to cancel the Proposal.  If the Creditors decide to cancel the proposal, all rights and claims of the creditors against me will immediately become enforceable.

[31]     The insolvent submits that the proposal should endure for as long as the creditors agree it should.

[32]     However,  no  such  constraint  as  the  proposal  may  infer  precludes  the operation of s 339 of the Act by which the Court may cancel a proposal if:

[2]       …

(b)      The insolvent has failed to carry out or comply with the terms of the proposals:

(c)      The creditors generally will suffer injustice or undue delay if the proposal proceeds:

(d)      for any other reasons the proposal ought to be varied or cancelled.

[33]     In this Court’s view it is appropriate to cancel the proposal.

[34]     Only half of the promised instalments have been paid and some of those payments have been late.  Nothing since has been paid from April 2014.  It is clear some creditors have supported the continuance of the proposal in the expectation that all proposal claims would be met if the insolvent is successful in his claim against Broadlands Finance Limited for unpaid director’s fees.   However no progress has been made with that intended claim for more than a year. Also the insolvent does not appear to have the means to pursue it any further presently.

[35]     Mr Hartfield submits public interest considerations too are relevant in this case because the Commissioner is charged with collecting tax and recovering unpaid

tax  on  behalf  of  the  Crown  and  fulfilment  of  these  duties  has  wide  ranging implications affecting the economic and social wellbeing of New Zealanders.

[36]     Although  the insolvent’s  debts  are in  the order of $7.5  - $11M  and  the Commissioner’s debt just $32,642.16 of that sum, the New Zealand Tax system harbours expectations of cooperation and relies on voluntary compliance.

[37]     The Court agrees that these factors too may be relevant in reassessment of an

insolvent’s proposal compliance obligations.

Result

[38]     The Commissioner’s application for cancellation of the proposal is granted.

[39]     There is an order for adjudication of Mr Tait-Jamieson as bankrupt.  The time of the order is 12:00 noon.

[40]     The Commissioner’s  costs  shall  be payable on  a 2B basis  together with

disbursements approved by the Registrar.

Associate Judge Christiansen