Richard Grant Simpson and Timothy Wilson Downes as Receivers v Commissioner of Inland Revenue

IN THE SUPREME COURT OF NEW ZEALAND

SC 30/2012
[2012] NZSC 62

BETWEEN RICHARD GRANT SIMPSON AND TIMOTHY WILSON DOWNES AS RECEIVERS OF CAPITAL + MERCHANT INVESTMENTS LIMITED (IN RECEIVERSHIP)
Appellants

AND COMMISSIONER OF INLAND REVENUE
Respondent

Court: Elias CJ, McGrath and William Young JJ

Counsel: G J Toebes for Appellants
H W Ebersohn and P W O'Regan for Respondent

Judgment: 25 July 2012

JUDGMENT OF THE COURT

A We grant leave to appeal.
BThe approved question is:
Were the applicants required to pay the GST on the sales to the Commissioner of Inland Revenue?

____________________________________________________________________

REASONS

With our decision not to grant leave to appeal in respect of the contractual argument (which we are about to discuss), there is no need to address the proposed cross-appeal. We record, however, that the Commissioner is not confined to reliance on the judgment of the Court of Appeal but may also rely on the other possible bases for liability canvassed in the judgment of Dobson J[1] or advanced by the Commissioner in the Court of Appeal.[2]
[1] Simpson v Commissioner of Inland Revenue [2011] 3 NZLR 533 (HC).
[2] Simpson v Commissioner of Inland Revenue [2012] NZCA 126.
The GST in question was paid to the Commissioner by the applicants pursuant to an interim agreement which was arguably premised on a distinction between a “personal liability” of the applicants to pay the GST and any obligations to do so which they may otherwise have. The agreed question which was put to the Court was in these terms:
Do Messrs Simpson and Downes as receivers of Capital + Merchant Investments Ltd (In Receivership) (“CMI”) have personal liability for payment to the Commissioner of Inland Revenue (“The Commissioner”) of the Goods and Services Tax (“GST”) payable by CMI, but not paid, in relation to five specified mortgagee sales undertaken by CMI?

Under the interim agreement, a negative answer to this question would have resulted in the Commissioner being required to repay the GST.

The applicants have taken the position that this question referred only to their possible liability under ss 5(2) and 17 (and presumably ss 58 and 51B as well) of the Goods and Services Tax Act 1985 and that their “non-personal” liability, if any, associated with s 185 of the Property Law Act 2007 (and related arguments) is irrelevant. They say that the Court of Appeal’s rejection of the Commissioner’s arguments under ss 5(2), 17, 58 and 51B should have resulted in a negative answer, thus requiring the Commissioner to refund the GST. That Court did not consider that it was restricted to answering the particular question posed by the parties as interpreted by the applicants.
Although the applicants wish to challenge this aspect of the Court of Appeal’s judgment, we consider that this point does not warrant leave to appeal. In the first place, and despite the assertions of counsel for the applicants to the contrary, it does not raise a point of general or public importance. Instead it turns on a very particular set of facts and the interpretation of a one-off agreement which will plainly not be used as a template for future agreements. Secondly, there is no appearance of a miscarriage of justice. The conclusion and reasons of the Court of Appeal are unassailable. The applicants are individuals and any obligations they have arise out of their actions as receivers. In this context, the supposed distinction between a “personal liability” and other liability (for instance as receivers) is meaningless. There is also the additional and overlapping consideration that while parties to litigation can invite the Court to answer a particular question, it is always open to the Court to decline to do so if it considers that the question was wrongly put.

Solicitors:
JTLaw, Wellington for Applicants
Crown Law Office, Wellington for Respondent

CaseChat Overview and Summary

In the case of Richard Grant Simpson and Timothy Wilson Downes as Receivers of Capital + Merchant Investments Limited (In Receivership) v Commissioner of Inland Revenue, the Supreme Court of New Zealand was tasked with determining whether the receivers had a personal liability to pay Goods and Services Tax (GST) on sales made by the company they were receivers of. The case arose from an interim agreement between the receivers and the Commissioner of Inland Revenue, which was predicated on a potential distinction between personal liability and any other obligations the receivers might have had.

The central legal issue before the Court was whether the receivers, Simpson and Downes, were personally liable for the GST on the sales made by the company under their receivership, or if any liability was non-personal. The Court of Appeal had previously rejected the Commissioner's arguments under various sections of the Goods and Services Tax Act 1985, but the receivers argued that this should have resulted in the Commissioner being required to refund the GST. However, the Supreme Court held that the Court of Appeal's broader consideration of the matter was justified and not limited to the specific question posed by the parties. The Court found that the issue did not raise a point of general or public importance, and there was no miscarriage of justice in the Court of Appeal's decision. The Supreme Court held that the receivers, as individuals, could only have obligations that arose from their actions as receivers, and any distinction between personal and other liabilities was irrelevant in this context.

The Supreme Court granted leave to appeal on the specific question of the receivers' personal liability for the GST, but declined to address the receivers' challenge to the Court of Appeal's jurisdiction to answer the question as it was posed. The Court noted that the Commissioner could rely on other possible bases for liability, including those canvassed in the High Court judgment or advanced in the Court of Appeal. The Court did not make a final order regarding the GST liability, as it found that the issue was more appropriately dealt with on the merits in the High Court.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established