THE COMMISSIONER OF INLAND REVENUE V AUCKLAND LABOUR SERVICES LIMITED HC AK CIV 2005-404-7207

THE COMMISSIONER OF INLAND REVENUE V AUCKLAND LABOUR SERVICES LIMITED HC AK CIV 2005-404-7207 9 June 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-7207UNDER the Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE Plaintiff AND AUCKLAND LABOUR SERVICES LIMITED Defendant Hearing: 9 June 2006 Counsel: L Farmer for plaintiff G Clews for defendant Judgment: 9 June 2006 at 15:00JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to place defendant into liquidation and appoint a liquidator]Solicitors: Meredith Connell, PO Box 2213, Auckland for plaintiff Russell McVeagh, PO Box 8, Auckland for defendant[1] The plaintiff filed this proceeding on 16 December 2005. He seeks an order placing the defendant into liquidation and appointing a liquidator. The proceeding pleads service of a statutory demand on the defendant on 25 October 2005 and that same was not complied with within fifteen working days as prescribed by s 289 of the Companies Act 1993. The plaintiff relies on ss 287 and 241 of the Companies Act 1993 for the orders that he seeks. [2] The application was called on 30 March 2006. It has been subsequently called on 31 March 2006, 28 April 2006, 1 June 2006 and today. Adjournments have been granted specifically to see if the defendant could put in place arrangements to pay the debts due to the Commissioner. [3] A further adjournment is now sought. It is sought so that the defendant can take advantage of an arrangement which it has entered into with an Australian company, Jewel Residential Developments Pty Limited. It anticipates that, as a result of certain contracts which are being entered into in Australia, that that company will receive an Australian GST refund which it will apply to the defendant so that the defendant can satisfy, in full, its obligations to the Commissioner of Inland Revenue. [4] The Commissioner of Inland Revenue is understandably concerned and opposes a further adjournment of this proceeding. That opposition is based, primarily, upon the following: a) A previous arrangement has not produced the funds that were anticipated would be available to meet the debt; b) A delay in the appointment of a liquidator may prejudice the liquidator's ability to call in assets, in particular debts which are owed to the defendant which might be available to satisfy the debt due to the Commissioner.[5] The defendant's position, on the material placed before me at the present time, in summary, is as follows: a) It is not trading; b) Its sole director, Mr Williams, has undertaken to the Court to advise the Court and the Commissioner of Inland Revenue of any material change in the defendant's circumstances within 48 hours of same occurring; c) Apart from the Commissioner of Inland Revenue, there are no other known creditors. Certainly no creditors have appeared and no claims have been identified to the Court; d) The defendant is owed moneys by the First City Group of companies, including Gosford Investments Limited. The company is not able to immediately satisfy its obligations to the defendant company. One of the reasons for that is said to be a dispute which Gosford Investments Limited has with the Commissioner of Inland Revenue; e) The defendant company has entered into an arrangement with an Australian company. The circumstances are confirmed by a director of that Australian company, namely, Jewel Residential Developments Pty Limited. The arrangement is in the form of a deed of charge. The evidence given to the Court to date is that it is anticipated that, as a result of certain property transactions which have been undertaken in Australia, Jewel Residential Developments Pty Limited will receive an Australian GST credit which will be applied by it in satisfaction of the deed of charge and, in particular, in satisfaction of the debt owed by the defendant to the plaintiff in this proceeding. [6] Applications which involve the insolvency jurisdiction of the Court are not debt collection procedures but involve the exercise of a statutory discretion, in the case of companies, to place the affairs of a company in the hands of a liquidatorbecause of the insolvent position of the company. What the application for adjournment raises here is a balancing of the position of the two parties before the Court. The conclusion I have reached is that further time should be given, but on the strict basis that the Court will supervise the steps that are being undertaken to realise the funds which the defendant hopes can be applied in reduction of its debt to the plaintiff. It is for that reason that I announced in Court that I would adjourn this application to the Companies Winding Up List on 29 June 2006 at 10am and would consider further, at that time, an additional adjournment beyond that date to 27 July 2006 provided I was satisfied that there was, in fact, real progress towards the goal of a satisfaction of the debt due to the Commissioner. [7] Based upon the material that has been made available to me to date, I set out, in this judgment, an indication of the areas that I require to be covered before any adjournment beyond on 29 June 2006 will be considered. They are as follows: a) Have any or all of the contracts referred to in paragraph 5 of the affidavit of Douglas Williams, of 30 May 2006, settled? In particular, has Jewel Residential Developments Pty Limited obtained title to the property covered by those three contracts? b) Has an application to the appropriate Australian authorities been made seeking a refund of GST in respect of such contracts? If so, when was such application made? What refund was sought in respect of each of the contracts? On what date do the officers of Jewel Residential Developments Pty Limited expect to receive any GST refund in respect of each contract? c) Has Jewel Residential Developments Pty Limited and Mr Stephen Hall registered the deed of charge given by Jewel Residential Developments Pty Limited in favour of the defendant in this proceeding, as required by Australian law? d) For the avoidance of doubt, I would expect evidence from a properly qualified person as to the fact of Australian law which advises theprecise ground, in respect of the three contracts that I have mentioned, which justifies an application for a GST input credit and the time at which the right to obtain a GST input credit arises. In addition, I would expect evidence from a principal of PKF Chartered Accountants, Business Advisers which confirms when an application for a GST input credit was in fact lodged with the Australian authorities, what ground was relied upon, whether any direction or decision has been released by the Australian authorities in respect of such application, and when that person anticipates when a GST input credit would be available in respect of each of the contracts referred to in paragraph 5 of the Mr Douglas Williams' affidavit of 30 May 2006.Orders[8] The plaintiff's application for orders placing the defendant into liquidation and appointing a liquidator is adjourned to 10am on 29 June 2006. Whether further adjournments beyond that date will be granted will depend upon the Court being satisfied that there is then a real prospect of the debt, which is pleaded in the statement of claim, being paid to the Commissioner of Inland Revenue prior to the likely further adjourned date of 27 July 2006.Costs[9] The defendant company is seeking an indulgence. Mr Clews questioned whether the appearance today was necessary and sought costs. That application, in my view, is not a proper application to make. It is not proper because the defendant company is seeking an indulgence, namely, time to see if it can put its affairs in order and prevent the making of the orders which are sought by the Commissioner. I make no order for costs in favour of the defendant in respect of the appearance on9 June 2006. Costs in relation to this matter are reserved. _____________________ JA Faire Associate Judge