Manifest Group Limited v Commissioner of Inland Revenue

[2024] NZHC 1652

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-000932

[2024] NZHC 1652

BETWEEN

MANIFEST GROUP LIMITED

Applicant

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:

17 May 2024

Appearances:

T J P Bowler for the Applicant

C Van Der Merwe for the Respondent

Judgment:

21 June 2024

JUDGMENT OF ASSOCIATE JUDGE GARDINER

This judgment was delivered by me on 21 June 2024 at 4.30 p.m. pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date.......................................

Solicitors:

Neilsons Lawyers, Auckland

Inland Revenue, Auckland

MANIFEST GROUP LTD v IRD [2024] NZHC 1652 [21 June 2024]

[1]                 Manifest Group Ltd (MGL) has applied to set aside a statutory demand served upon it by the Commissioner of Inland Revenue (CIR) for unpaid Goods & Services Tax of $59,050.22 (the debt). The application is opposed by the CIR.

[2]The application to set aside states these grounds:1

(a)MGL is solvent and able to pay its debts as they fall due; and

(b)MGL and/or a related company is due to receive a significant tax refund which will more than extinguish the debt.

[3]                 In an affidavit in support of the application dated 21 March 2024, Ritesh Mani (Mr Mani), director of MGL, stated that MGL is solvent and able to pay its debts as they fall due. He stated that a related company was due a significant GST refund which would be applied for and processed “before the end of next month” (April 2024). Mr Mani stated that this refund would be applied to satisfy the debt owed to the CIR. He attached an email from MGL’s external accountant dated 20 March 2024, stating that the refund for March was $51,000 “so far”. The email was addressed to Eco-Smart Accounts and copied to Mr Mani.

[4]                 Under the Companies Act 1993, the Court may set aside a statutory demand if it is satisfied that:2

(a)there is a substantial dispute about whether or not the debt is owing or due;

(b)the company appears to have a counterclaim, set-off, or cross-demand and the amount specified in the demand less the amount of the counterclaim, set-off, or cross demand is less than the prescribed amount of $1000;3 or

1      Notice of originating application to set aside statutory demand, dated 21 March 2024, at [2.1]– [2.4].

2      Companies Act 1993, s 290(4).

3      Companies Act 1993 Liquidation Regulations 1994, reg 5.

(c)the statutory demand ought to be set aside on other grounds.

[5]                 MGL has not disputed the tax assessments underpinning the statutory demand through the disputes procedures in the Tax Administration Act 1994. A tax assessment is deemed correct unless challenged under the relevant processes in that Act.4 The correctness of the assessments cannot now be challenged in proceedings in this Court.5 Therefore, MGL is unable to dispute the assessments on which the statutory demand is founded.

[6]                 The solvency of a company served with a statutory demand does not usually provide a basis for the statutory demand to be set aside.6 In any case, Mr Mani has not offered any evidence to support his assertion that MGL is solvent and able to pay its debts as they fall due.

[7]                 Mr Bowler accepted these points at the hearing but advanced the argument that the debt had in fact been extinguished by the GST refund described by Mr Mani before the  statutory  demand  expired.    As  this  was  not  apparent  from  the  evidence,    I reserved my decision and directed MGL to file any evidence to prove that the debt demanded in the statutory demand was reduced to less than $1,000 within 15 working days of service of the statutory demand.

[8]                 The statutory demand was served on the applicant on 7 March 2024.   The   15 working day period for compliance expired on 28 March 2024.

[9]                 MGL filed a further  affidavit  of  Mr  Mani  affirmed  on  24  May  2024.  Mr Mani attached an email dated 24 May 2024 from the company’s external accountant advising that the debt owed to the CIR had been reduced to $30,451.39.

[10]              Mr Mani also attached the GST return for a related company, Eco-Smart Group Ltd, for the period 1 April 2024 to 31 May 2024. This return records a GST refund owing to that company of $7,818.10. Mr Mani said this refund would be applied in

4      Tax Administration Act 1994, s 109.

5      Tax Administration Act, s Smith v Commissioner of Inland Revenue [2019] NZCA 521, (2019) 29 NZTC 24-021 at [21].

6      AMC Construction Ltd v Frews Contracting Ltd [2008] NZCA 398, (2008) 19 PRNZ 13 at [7].

full to the balance outstanding to the CIR. Mr Mani stated that these payments would be processed on or before 3 June 2024, reducing the balance owing to the CIR to

$22,633.29. He said that the outstanding amount would be paid “before the end of next month” (June 2024).

[11]              This affidavit does not establish that the debt demanded in the statutory demand was reduced to less than $1,000 by 28 March 2024 when the time for compliance expired.

[12]Accordingly, the application to set aside the statutory demand is dismissed.

[13]              I order MGL to pay the debt within five working days. If MGL does not pay the debt within that time the CIR may make an application to have the company put into liquidation and proceed to advertise that application.

[14]              As the unsuccessful party, MGL will pay the CIR’s actual costs and disbursements, to be fixed by the Registrar.

Associate Judge Gardiner