Krukziener v Commissioner of Inland Revenue HC Auckland CIV-2010-404-000728

[2011] NZHC 746

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-000728

BETWEEN  ANDREW MARK KRUKZIENER Appellant

ANDCOMMISSIONER OF INLAND REVENUE

Respondent

Hearing:         On the papers

Judgment:      21 June 2011 at 3:00 PM

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 21 June 2011 at 3:00 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date……………………….

Solicitors:           Crown Law, P O Box 2858, Wellington 6140

Fax: [phone] – H Ebersohn
Knight Coldicutt, Private Box 106214, Auckland
Fax: [phone]

Counsel:             M T Lennard, P O Box 117, Lambton Quay, Wellington 6140

Fax: [phone]

KRUKZIENER V COMMISSIONER OF INLAND REVENUE HC AK CIV-2010-404-000728 21 June 2011

[1]      In my decision 17 September 2010 I dismissed an appeal by Mr Krukziener against a decision of the Taxation Review Authority.[1] Following the decision counsel filed a joint memorandum agreeing that the Commissioner should be entitled to costs of $4,000 and disbursements of $1,554.34, a total of $5,554.34. However, Mr Krukziener was subsequently adjudicated bankrupt. The Commissioner of Inland Revenue seeks an order that the sum of $1,600 that Mr Krukziener had paid into

court be paid out to him in respect of the agreed costs.

[1] Krukziener v Commissioner of Inland Revenue HC Auckland CIV-2010-404-000728, 17 September 2010.

[2]      The Commissioner has filed a memorandum setting out the grounds on which an order might be made that the money be paid to him. The Official Assignee has not filed a memorandum in response.

[3]      Although this situation has not arisen commonly, there is precedent for it. In Sutherland v North Shore Marine and Industrial Ltd (in liquidation) money was paid into court pursuant to a court order pending an application to set aside a judgment should and the appellant was placed in liquidation before the case could be determined.[2]  Rejecting the liquidator’s application for an order that the money be paid to him, Hardie Boys J said of the money that:

[2] Sutherland v North Shore Marine and Industrial Ltd (in liquidation) (1981) 1 NZCLC 98,167 (HC).

It was paid into court pursuant to and as a condition of an order of the Court to abide the eventual determination of the action.   That event not having occurred, the fund is still subject to that order.  The company would not be entitled to uplift it had it not gone into liquidation, and for that reason alone its liquidator is not entitled to do so either. That however is an incomplete and  rather  academic  answer  to  the  problem,  for  it leaves  open the  real question, which is whether the plaintiff would be entitled to the fund in the event that it is ultimately successful in its claim, notwithstanding that the effect of that would be to give it a preference over other unsecured and non- preferential creditors. If it would not be, then no purpose at all would be achieved be retaining the fund. It should be released to the liquidator and the plaintiff left to endeavour to satisfy the liquidator that it should be admitted as an unsecured creditor without having to go to trial.

........In all these circumstances, the money in question is invested with a special character.  It comes under the control of the Court and is to be held and applied subject to the direction of the Court, exercised in accordance with the provisions of the rule or other statutory provision under which it has been paid or, where it has been paid pursuant to an order under the Court’s inherent jurisdiction, then exercised in accordance with that jurisdiction.  It would defeat the whole purpose for which the payment was made if a liquidator were able to uplift it and thus put the party for whose protection it was paid into the position of an unsecured creditor.

[4]      These statements apply equally to the present case. I note that Sutherland

was followed by the Employment Court in Orakei Group (2007) Ltd v Doherty (No

2)[3], which also concerned the fate funds paid into the Court by way of security for costs by a party who subsequently went into liquidation.  The Court held that money paid into court was not an asset of the company.   It was under the control of the Court, to be held and applied subject to the direction of the Court and paid out only upon court order.

[3] Orakei Group (2007) Ltd v Doherty (No 2) [2008] ERNZ 505 (EMC) at [20].

[5]      I am satisfied that there is no difference between the position in this case and that in Orakei Group.   The money paid into court as security for costs is under control of the High Court.   It was paid in for the purpose of meeting the Commissioner’s costs in the event of Mr Krukziener’s appeal failing.   As, Hardie Boys J observed in Sutherland, this purpose would be defeated if the liquidator were able to uplift the money.

[6]      I accordingly make an order in favour of the Commissioner for costs and disbursements in the amounts agreed in counsels’ joint memorandum and direct that the security for costs of $1,600 (together with any interest accrued) be paid to the

Commissioner in respect of those costs and disbursements.

P Courtney J