Turner v The Commissioner of Inland Revenue HC Auckland CIV 2006-404-000096

[2008] NZHC 2589

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006-404-000096

IN THE MATTER OF     the Insolvency Act 167

BETWEEN  WILLIAM HENRY TURNER Judgment debtor

ANDTHE COMMISSIONER OF INLAND REVENUE

Judgment creditor

Appearances: S North for Judgment creditor

D Visor for Official Assignee
No appearance for Judgment debtor/applicant

Judgment:      23 September 2008

ORAL JUDGMENT OF ASSOCIATE JUDGE ABBOTT

W H Turner, PO Box 75 012, Manurewa, Manukau 2243

Inland Revenue Department, PO Box 76-198, Manukau 2241

Insolvency & Trustee Service, Private Bag, 92513, Wellesley Street Auckland 1141

TURNER V  COMMISSIONER OF INLAND REVENUE HC AK CIV 2006-404-000096  23 September 2008

[1]      This is the first call of an application by William Henry Turner for annulment of his bankruptcy.

[2]      Mr  Turner  was  adjudicated  bankrupt  on  30  August  2006.    He  filed  his application on 19 August 2008.  The grounds stated are that the underlying judgment was obtained by default and he had not been served with that proceeding, and that he has at all times been willing to pay the debt but has never received an account with details of the amount claimed.

[3]      The Commissioner of Inland Revenue has filed notice of opposition.   The grounds of that opposition are that there was a lawful and proper basis for the bankruptcy proceeding (including satisfaction of all service requirements), that the debt has not been paid, and that there are no lawful or equitable considerations which could provide support for an application to annul

[4]      The Official Assignee appears today.   He neither consents to, nor opposes, the application.

[5]      The application was supported by a very brief affidavit by Mr Turner.  In it Mr Turner asserts that he did not receive any notice of the underlying proceeding in the Manukau District Court (or at least any notice of the date on which he was to appear).  He also states that the Commissioner’s judgment is based on an assessed amount,  and  has  never  received  “a  full  commercial  tax  invoice”  supported  by affidavit  evidence  that  the  amount  was  correct.     He  further  asserts  (without supporting evidence) that he was and is solvent because he has money held in a solicitor’s trust account and access to family trust funds, and that he has offered to settle the debt and remains willing to do so.

[6]      I take the view that Mr Turner has not established a basis for annulment.  The application states that it is made under s 309 of the Insolvency Act 2006.  Under the transitional provisions of that Act (s 444) the Insolvency Act 1967 continues to apply.  The appropriate provision under the 1967 Act is s 119.  I will deal with this application under that section, the relevant part of which reads:

119      When Court may annul adjudication

(1)In  any  of  the  following  cases  the  Court  may  by  order,  on  the application of the Assignee or any person interested, annul the adjudication-

(a)Where  the  Court  is  of  the  opinion  that  the  order  of adjudication should not have been made:

(b)Where the Court is satisfied that the debts of the bankrupt have been fully paid or satisfied:

…..

[7]      The first possible basis for annulment is under s 119 1(a), namely on the ground that the Court is of the opinion that the order of adjudication should not have been made.  Procedural defects can give rise to an application under this section.  I do not accept, however, that there is any applicable procedural defect in this case for the following reasons:

a)       Mr Turner applied to set aside the bankruptcy notice when it was served upon him.  When that application came before me on 5 April 2006 I noted the file as follows:

Applicant claims  debt  is not a  personal  one  but  that  of  a  trust; alternatively that the trust may be in a position to settle the debt.  He also claims that judgment was entered in error (it was a default judgment).   Application adjourned to 3 May 2006 at 11.45am to allow applicant to settle with Commissioner or alternatively to apply to the District Court to set aside the judgment.

b)Mr Turner neither settled with the Commissioner nor applied to the District Court to set aside the judgment.  His application to set aside the bankruptcy notice was dismissed when it came back before the Court on 3 May 2006. Mr Turner did not appear at that hearing.

c)       The Commissioner petitioned for Mr Turner’s bankruptcy on 10 May 2006.

That petition was enlarged on two occasions due to difficulties effecting service on Mr Turner.  The bankruptcy notice had been served at his place of employment,  but  the  process  server  gave  evidence  that  he  could  not  be located at those premises (although Mr Turner still worked there, the process

server was informed that he was not contactable).   An application for substituted service was made.  The documents were delivered to the person in control of the premises of Mr Turner’s employer with a letter asking that they be passed to him, and the application was advertised in the New Zealand Herald, pursuant to an order for substituted service.

d)Mr Turner did not appear at the hearing of the petition on 30 August 2006 (that being the date advised to him in the documents delivered to his employer’s office and stated in the public notice).

[8]      Equally, I do not accept the Mr Turner has made out grounds for annulment under s 119 1 (b), namely that his debts have been fully paid or satisfied.  One of the Commissioner’s officers has filed an affidavit in support of the notice of opposition rejecting Mr Turner’s assertion, and stating that the debt remains outstanding:

a)       She confirms that the judgment debt is based on a default assessment, but  points  out  that  it  was  Mr  Turner’s  obligation  to  dispute  the assessed amounts, that the assessed amounts are deemed to be correct if they are not disputed within the statutory time-frame.

b)She also points out that the taxpayer’s obligation to pay is statute based and does not require issue of a tax invoice, nor to be further verified by affidavit evidence.

c)       As to the contention that Mr Turner has previously offered to settle and was still prepared to pay, she stated that the Commissioner has never received any payment or serious offer of payment.

d)Furthermore, any offer since Mr Turner’s bankruptcy would need to have been made through the office of the Official Assignee.

e)       The Commissioner’s officer refers to a document described as “bill of exchange” presented by Mr Turner at a meeting with the Commissioner’s office on 11 April 2006 (in other words after service

of the bankruptcy notice).  She says that she rejected that document as a means of settlement of the debt.  She produces a copy of it in her affidavit of opposition.   I accept the comment that the document is incomprehensible.    It  certainly  has  no  legal  effect  as  tender  of payment of the debt.

[9]      I accept the statement of the Commissioner’s officer that as at 16 September

2008 Mr Turner had not complied with his obligation to pay the tax arrears and that the debt to Inland Revenue had still not been paid.  I find there is no basis to annul the bankruptcy under s 119(1)(b).

Decision

[10]     The application for annulment is dismissed.

[11]     Mr Turner is pay the Commissioner costs of and incidental and further to this application on a 2B basis together with disbursements as fixed by the Registrar.

Associate Judge Abbott