THE COMMISSIONER OF INLAND REVENUE V BERRYTIME LAND LIMITED HC TAU CIV 2008-470-809

THE COMMISSIONER OF INLAND REVENUE V BERRYTIME LAND LIMITED HC TAU CIV 2008-470- 809 9 October 2008IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY CIV 2008-470-809UNDER the Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE, OF WELLINGTON, STATUTORY APPOINTEE Plaintiff AND BERRYTIME LAND LIMITED Defendant Hearing: 6 October 2008 (Heard at Rotorua) Appearances: Mr Winsett for plaintiff Mr Patterson for defendant Judgment: 9 October 2008 at 12.30 p.mJUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on09.10.08 at 12.30 pm, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar DateSolicitors:Meredith Connell, P O Box 2213, Auckland Mr K J Patterson, P O Box 13006, Tauranga[1] The statement of claim seeking an order placing the defendant into liquidation came before me 6 October 2008. Prior to that date the plaintiff filed an application for 'urgent fixture'. The application was made upon the grounds:A: The manner in which the defendant is being operated is a threat to New Zealand's tax system. B. The urgent appointment of competent liquidators is required to minimise this threat.[2] The grounds upon which the Commissioner has founded his application for liquidation order is non-compliance with obligations to file company's returns and the 'just and equitable' ground. [3] The defendant has not filed a statement of defence. Mr Patterson says that it has until 10 October 2008 to do so. It is not yet known if the defendant is going to file a statement of defence but the indications are that it will. Nonetheless, the defendant has filed a notice of opposition to the application. [4] The defendant denies that the way it has been operated is a threat to the New Zealand tax system; it says there are no compelling reasons to suggest that an abridgement of time will assist given the time frames that already exist are relatively short and the urgent appointment of a competent liquidator will not have a significant impact on the alleged threat. [5] The evidence in support of the application was filed by an employee of the Inland Revenue and an independent expert chartered accountant witness. [6] In summary the Inland Revenue was concerned about the fact that the defendant has not maintained the required records that he is supposed to keep in New Zealand; it has not filed returns of GST and income tax as required and it owes, even by the self-assessments that it has filed, very considerable amounts of GST and income tax. As to GST it accepts that an amount of $3,300,000 approximately isowed which is now increased to over $5,000,000 because of interest and penalties. Against that, the defendant has made only one payment of approximately $88,000. [7] While no definite figure is available for income tax, but the best estimates of the expert, Mr Robert Walker, is that the defendant owes between $88,000 and $7,000,000. [8] The defendant has filed evidence. Essentially it accepts fault and says that it has now instructed accountants to put its house in order in New Zealand. An affidavit has been filed by Mr Lomas who is the director of the company. He resides in Queensland, Australia. He says that he is the director of numerous companies including a listed Australian company. He says that his private worth is estimated to be approximately $AU 135,000,000. He intends that the company should meet its obligations. [9] My grasp of the overall fact position is rather limited given the material that I have been referred. One dimension of the matter which is a little surprising is the considerable time that went by after the Commissioner became aware that very substantial amounts of tax were accruing and before any enforcement was taken. While there may be a good reason for it in the case, I understand that even at this date no assessment has been carried out which is binding upon the company. [10] My overall assessment is that the company is not a 'threat to the New Zealand tax system'. I think it is more accurate to say that large amounts of tax are accruing, that payments have been minimal and that the Inland Revenue are likely to have limited prospects of success of enforcing the taxation liability, at least in this country. [11] I consider that the appropriate course is to wait until the time is expired to see whether a statement of defence is filed. If it has been, then the file should be referred to me in Auckland. My present view is that given the large amounts of tax that are unpaid and are accruing it would be appropriate in the public interest to make an order for a priority hearing of the proceeding. However I will defer coming to a concluded on that matter until the 10 October 2008._____________ J.P. Doogue Associate Judge