Commissioner of Inland Revenue v Newmarket Trustees Ltd HC AK CIV-2010-404-003913

Commissioner of Inland Revenue v Newmarket Trustees Ltd HC AK CIV-2010-404-003913

Although Newmarket Trustees Ltd is insolvent and a creditor has prima facie entitlement to liquidation, the Court exercised its ultimate discretion under the Companies Act to refuse liquidation because the company holds no assets, liquidation would produce no practical benefit to creditors, alternative remedies...

Source-derived case information.

Citation
openlaw-f28c70fb_bc60_4585_b90c_c7db4d6790af.pdf
Parties
Plaintiff/creditor: Commissioner of Inland Revenue; Defendant/corporate Trustee: Newmarket Trustees Ltd
Court
High Court
Jurisdiction
New Zealand
Judgment Date
22 February 2011
Procedural Posture
Creditor's Liquidation Application / Final Judgment
Outcome
Application dismissed
Legal Topics
Liquidation, Statutory Demand, Goods and Services Tax, Income Tax, Trustee Liability and Indemnity, Tax Administration Act S109, Phoenix Company Provisions
Companies Law Insolvency Tax Law Trust Law Liquidation Statutory Demand Goods and Services Tax Income Tax +3 more

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Parties

Commissioner of Inland Revenue

Plaintiff/creditor

Newmarket Trustees Ltd

Defendant/corporate Trustee

Procedural Posture

Creditor's Liquidation Application / Final Judgment

Legal Issues

  1. 1 Whether Newmarket Trustees Ltd should be wound up as an insolvent corporate trustee
  2. 2 Whether s 109 Tax Administration Act prevents the company from contesting the Commissioner's default assessments in these proceedings
  3. 3 Whether Newmarket Trustees Ltd is a bare trustee and the consequences for liability and relief

Ratio Decidendi

Although Newmarket Trustees Ltd is insolvent and a creditor has prima facie entitlement to liquidation, the Court exercised its ultimate discretion under the Companies Act to refuse liquidation because the company holds no assets, liquidation would produce no practical benefit to creditors, alternative remedies (including pursuit through the settlor's bankruptcy and the Commissioner's amendment powers) exist, and the costs and disruption of liquidation (including removal from 118 trusts and phoenix company complications) outweigh the insolvency factor.

Court Disposition

Application dismissed

Orders

  • The application that Newmarket Trustees Ltd be put into liquidation is dismissed
  • The Commissioner to pay Newmarket Trustees Ltd costs on a 2B basis plus disbursements approved by the Registrar; if parties cannot agree on costs they may file memoranda for the Court's decision