THE COMMISSIONER OF INLAND REVENUE AND ANOR V PARK ESTATE LIMITED HC NAP CIV-2010-441-117

THE COMMISSIONER OF INLAND REVENUE AND ANOR V PARK ESTATE LIMITED HC NAP CIV- 2010-441-117 26 August 2010IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV-2010-441-117BETWEEN THE COMMISSIONER OF INLAND REVENUE First Plaintiff AND RAKAUNUI FRUIT COMPANY LIMITED Second Plaintiff AND PARK ESTATE LIMITED DefendantCIV-2010-441-179AND BETWEEN BEARSLEY FARM LIMITED Plaintiff AND PARK ESTATE LIMITED Defendant Appearances: E.M. Carpenter - Counsel for The Commissioner of Inland Revenue A. McEwan - Counsel for Rakaunui Fruiit Company Limited A. McEwan - Counsel for Bearsley Farm Limited C. Fletcher - Counsel for Park Estate Limited in both matters Judgment: 26 August 2010DECISION OF ASSOCIATE JUDGE D.I. GENDALLSolicitors: Commissioner of Inland Revenue, PO Box 1462, Wellington Langley Twigg, Solicitors, PO Box 446, Napier Fletcher Law, Solicitors, PO Box 29, Hamilton 3240[1] Before the Court are applications to place the defendant company into liquidation brought by substituted plaintiffs, the Commissioner of Inland Revenue, Rakaunui Fruit Company Limited and Bearsley Farm Limited. [2] Also before the Court is an application from the defendant seeking a stay of these liquidation proceedings. [3] The stay is based upon a creditor's compromise proposal which was placed before creditors of the defendant company at two meetings. The first of these meetings as I understand the position took place on 10 June 2010 and the second meeting on 26 July 2010. [4] At the second meeting, as I understand it from Mr Fletcher, counsel for the defendant, about 76.5% in value of the creditors of the company voted in favour of the proposal. [5] The broad proposal, as I understand it, is for a moratorium of about 12 months to be entered into, a Mr Robertson, a Chartered Accountant from Hamilton to be appointed to administer the affairs of the company, and for a property owned by the company to be sold. In the process the broad proposal suggests that all creditors it is hoped will be paid 100% of their debt. [6] Before me today Ms Carpenter appearing for the Commissioner of Inland Revenue raised concerns regarding the 26 July 2010 creditors' meeting and the integrity of information placed before the creditors both before and at that meeting. [7] In particular Ms Carpenter raised concerns that the amounts specified for tax debt owing to the Commissioner of Inland Revenue which comprised preferential debt was understated by, I understand, approximately $20,000.00. [8] Ms McEwan who appeared for Bearsley Farm Limited before me today also raised a concern regarding what she described as the integrity of what was put in front of creditors at this second meeting. In particular, as I understand the position,Bearsley Farm Limited and its group contend that they are owed some $70,000.00 approximately whereas before the creditors' second meeting, their debt was listed at some $59,000.00. [9] Mr Fletcher for the defendant indicated that so far as the Bearsley debt is concerned the information provided to the second creditors' meeting was accurate in the sense that it is only $59,000.00 of the debt which is effectively undisputed. [10] So far as the debt owing to the Commissioner of Inland Revenue is concerned, Mr Fletcher for the defendant also indicated that there was little moment in what may have turned out to be an understatement of preferential debt to the second creditors' meeting. As I understand his submission, this is because in terms of the broad proposal before the Court, Mr Robertson the accountant concerned, will have the authority to negotiate and determine the quantum of individual debts and in particular to resolve any questions outstanding with the Commissioner of Inland Revenue regarding its claim to preferential debt. [11] Finally, before me today Ms Carpenter for the Commissioner in opposing the application for stay requested that this matter might be adjourned for a period of two months in order that, as I understand it, discussions could take place concerning the level of debt outstanding to the Commissioner relative to the information which has been provided to all creditors. [12] What is clear to me with regard to these matters is that the broad proposal put before creditors of the defendant company is intended it is hoped to result in a 100% payment to all creditors within a period of 12 months. There is a certain attraction to such a proposal and hence the favourable vote from a significant proportion of all creditors. [13] Notwithstanding this, however, there have been doubts raised from two quarters as to the basis upon which the vote in favour of this proposal was made given the details of company indebtedness provided to creditors. Ms Carpenter has gone so far as to signal to the Court that the Commissioner has a concern that theincorrect information provided regarding the Commissioner's debt may not have been provided purely by accident. [14] This must raise a concern for the Court. [15] That said, in my view, the appropriate course for the Court to take here is to accede to Ms Carpenter's request and to adjourn these matters for a period of 1 month in order that these issues hopefully can be satisfactorily resolved. [16] No decision is therefore made on the application for stay before the Court or on the two liquidation applications from the plaintiffs in these cases. [17] Instead this matter is now adjourned to a call in the List at 10.00 am on 22 September 2010 to review the position. [18] In the mean time costs on all matters are reserved.'Associate Judge D.I. Gendall'