COMMISSIONER OF INLAND REVENUE v COMMERCIAL MANAGEMENT LIMITED [2019] NZCA 479

COMMISSIONER OF INLAND REVENUE v COMMERCIAL MANAGEMENT LIMITED [2019] NZCA 479[3 October 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA583/2018[2019] NZCA 479BETWEEN COMMISSIONER OF INLANDREVENUEAppellantAND COMMERCIAL MANAGEMENTLIMITED, EQUITY CAPITALINVESTMENTS LIMITED ANDDOWNSVIEW NOMINEES LIMITEDRespondentsHearing: 18 September 2019Court: Clifford, Collins and Goddard JJCounsel: M Deligiannis and N S Delamore for AppellantA C Beck for RespondentJudgment: 3 October 2019 at 2.30 pmJUDGMENT OF THE COURTA The appeal is allowed.B The order that Belmonte Dairy Ltd, Corporate Transport Ltd, Manly EstatesLtd, Marketing Agencies Ltd and Mountforts Pharmacy Ltd be restored tothe Companies Register is set aside.C The respondents must pay the appellant's costs for a standard appeal ona band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Goddard J)Introduction[1] The High Court made orders under s 329 of the Companies Act 1993 restoringfive companies (the removed companies) to the Companies Register (the register):1(a) Belmonte Dairy Ltd, which was incorporated on 25 November 1983and removed from the register on 17 February 1998;(b) Corporate Transport Ltd, which was incorporated on 12 March 1940and removed from the register on 25 September 1996;(c) Manly Estates Ltd, which was incorporated on 9 July 1970 andremoved from the register on 27 June 2000;(d) Marketing Agencies Ltd, which was incorporated on 18 December1939 and removed from the register on 23 April 1998;(e) Mountforts Pharmacy Ltd, which was incorporated on 24 January 1969and removed from the register on 22 December 2011.[2] The application to restore these companies to the register was made by threecompanies that were shareholders in one or other of the removed companies: we referto them below as "the applicants". It was opposed by the Commissioner of InlandRevenue (the Commissioner). The Registrar of Companies (the Registrar) abidedthe decision of the High Court.1 Commercial Management Ltd v Commissioner of Inland Revenue [2018] NZHC 2224 [High Courtdecision].[3] The Commissioner now appeals to this Court. The applicants no longer wishto have Belmonte Dairy Ltd restored to the register. So the focus of the appeal is onthe other four removed companies.2Background"Russell template" tax avoidance arrangements[4] The application to restore the removed companies to the register is anotherchapter in the long running litigation saga involving the late J G Russell, andthe "Russell template" tax avoidance arrangements. A typical Russell templatearrangement involved one company controlled by Mr Russell entering into a contractwith another company controlled by Mr Russell for provision of administration ormanagement services (management services contracts). No management serviceswere in fact provided. The fee paid for those "services" was primarily a device to shiftprofits from a profitable trading company to another company with large accruedlosses, in order to avoid paying income tax on the former company's profits.The Commissioner reassessed the relevant companies for income tax on a basis thatdisregarded the arrangements.3 The income tax consequences of the arrangements,and the Commissioner's reassessments, have been the subject of extensive litigationover many decades. The Russell template arrangements were repeatedly held to betax avoidance arrangements.4GST implications of non-provision of services under template arrangements[5] In light of the findings made about the arrangements in the income tax context,Mr Russell asserted that the Commissioner should take a consistent approach inthe context of GST assessments for the relevant companies. If the Commissioner wascontending in an income tax context that no services had been provided by the relevantRussell template companies, Mr Russell said, it necessarily followed that no GST was2 The parties asked the Court to make an order by consent amending the orders made bythe High Court to omit Belmonte Dairy Ltd from the list of companies to be restored to the register.We return to that request at [73] below.3 FB Duvall Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 20-101 (HC) at [5]. For amore detailed description of the Russell template arrangements see Miller v Commissioner ofInland Revenue [2001] UKPC 17, [2001] 3 NZLR 316 at [6]–[8].4 See Great North Motor Co Ltd (in rec) v Commissioner of Inland Revenue [2017] NZCA 328,(2017) 28 NZTC 23-022, see especially at [5] and [44].payable by the companies that had returned and paid GST output tax in relation tothe fees they received.[6] The Commissioner did not initially accept this analysis. A Russell templatecompany, FB Duvall Ltd (Duvall), challenged that stance in proceedings beforethe Taxation Review Authority (TRA). The Commissioner was successful inthe TRA.5 Duvall appealed to the High Court. While that appeal was on foot,the Commissioner formed the view that Duvall's contention was correct: because noservices had been provided, no GST was payable in connection with the managementservices contracts. The Commissioner conceded Duvall's appeal in the High Court.There was then a dispute about the consequences of that concession for Duvall's GSTassessments for certain periods.6 The litigation on that issue eventually reached thisCourt, which held that the Commissioner was required to amend Duvall's GSTassessments by deleting the amounts shown as payable by way of output tax in respectof administration fees for supplies made by Duvall to subsidiary companies.7 This ledto GST refunds to Duvall for the periods with which the proceedings were concerned.8[7] Mr Russell then sought to obtain similar outcomes in relation to GST paid byDuvall in other periods, and in relation to GST paid by a number of other Russelltemplate companies. He filed late objections to GST assessments on behalf of thosecompanies. The Commissioner declined to accept the late objections and revisitthe original GST assessments. The companies brought judicial review proceedings inrelation to the Commissioner's decision. That application was successful.The Commissioner was ordered to reconsider the decision to refuse to accept late GSTobjections from the plaintiff companies.9[8] That judicial review decision was delivered in December 2011. A settlementagreement was subsequently entered into between the Commissioner and sevenplaintiff companies in that proceeding.5 Case Q34 (1993) 15 NZTC 5,159 (TRA).6 See FB Duvall Ltd v Commissioner of Inland Revenue (1997) NZTC 13,470 (HC); FB Duvall Ltdv Commissioner of Inland Revenue (1999) 19 NZTC 15,039 (HC); and FB Duvall Ltd vCommissioner of Inland Revenue (No 3) (1999) 19 NZTC 15,515 (HC).7 FB Duvall Ltd v Commissioner of Inland Revenue (2000) 19 NZTC 15,658 (CA) at [28].8 See FB Duvall Ltd, above n 3, at [10] and [11].9 At [38].Request to negotiate settlement in relation to GST paid by removed companies[9] Following the settlement reached with those companies, CommercialManagement Ltd (Mr Russell's firm) advised the Commissioner that it wished to enterinto settlement negotiations in relation to GST issues in respect of a number of otherRussell template companies. Mr Russell's firm sought to include in those negotiationsa number of companies that had been removed from the companies register, includingthe removed companies with which this appeal is concerned.[10] The removed companies were all parties to Russell template arrangements.The Commissioner had reassessed the removed companies for income tax purposes.It appears from the limited information before the Court that those reassessmentsrelated to periods in the 1980s and early 1990s. There was no reassessment ofthe removed companies for GST purposes. None of the removed companies filedan objection to its GST assessment for any relevant period, prior to its removal fromthe register.[11] The Commissioner has made it clear in correspondence with Mr Russell's firmthat she will not entertain settlement discussions in relation to companies that havebeen removed from the register, and which therefore no longer exist.The Commissioner's stance in relation to inclusion of the removed companies in anysettlement negotiations led to the application to restore the removed companies tothe register. The genesis of that application explains why the Commissioner wasnamed as a respondent in the application, in addition to the Registrar.The asymmetric nature of the reassessments sought by the applicants[12] At the time the removed companies entered into the management servicescontracts, GST was a "closed loop" within the Russell group companies. A GSTinvoice was issued by the company that purportedly provided the managementservices. That provider company was required to account for GST output tax.The company that purportedly received the management services and paid for thoseservices was entitled to a GST input tax credit of the same amount. The net result forGST purposes was a wash: the Russell template companies were not required to makeany net GST payments in respect of the management services contracts.[13] Correspondence between the Commissioner and Mr Russell's firm recordsthe Commissioner's view that there had been no need for any reconstruction for GSTpurposes (as distinct from income tax purposes) as a result of the Commissioner'sconclusion that no services had been provided under the Russell templatearrangements because "it was considered that the GST was a closed loop in that oneRussell company paid, while another claimed." The response from Mr Russell's firmread as follows:Historically there may have been a closed loop with most of the GST involvedbut any loop is now broken beyond repair with some of the companiesremoved and the time bar on GST assessments that increase tax liability.[14] It is necessary to bear in mind, when considering the application to restorethe removed companies to the register, that the objective that Mr Russell's firm ispursuing is to secure a tax advantage — refunds of GST output tax paid by the removedcompanies — that would result from:(a) the Commissioner's determination, upheld by the courts, thatthe management service arrangements were tax avoidancearrangements under which no services were in fact provided; and(b) the time that has elapsed since the periods in which the GST wasreturned and paid, as a result of which it has become difficult(Mr Russell's firm says, legally impossible) for the Commissioner toreassess and recover the input tax credits that were obtained by otherRussell template companies in connection with the arrangements, andthat offset the GST payments that Mr Russell's firm now seeks torecover.[15] The goal of Mr Russell's firm in restoring the removed companies tothe register is to achieve a partial and asymmetric reversal of the GST consequencesof the highly contrived and artificial tax avoidance arrangements entered into by thosecompanies. As that firm has in effect acknowledged, this result could only be achievedbecause of the passage of time since the removed companies were in existence andfiled the relevant GST returns. That is not a promising starting point for an argumentthat it would be just and equitable to restore the companies to the register.The application to restore the removed companies to the register[16] The applicants sought restoration of the removed companies to the registerunder s 329(1)(b) of the Companies Act on the grounds that it is just and equitable forthem to be restored. The application was supported by a brief affidavit fromMrs Glenda Rogers, a longstanding business associate of the late Mr Russell.The affidavit did not provide any information at all about the circumstances in whichthe removed companies were removed from the register, or about the financial positionof those companies at the time of their removal. Mrs Rogers asserted that the removedcompanies have similar claims to the plaintiffs in the Duvall judicial reviewproceedings. But no information was provided about the periods to which any suchGST claims related, or about the specific Russell template arrangements to whichthose companies were parties and the counterparties to those arrangements.The affidavit explained that the purpose of restoring the removed companies tothe register was to enable them to be parties to any settlement negotiations withthe Commissioner in relation to GST.[17] The Commissioner opposed the application on a number of grounds, including:(a) failure by the applicants to make full and frank disclosure ofthe circumstances leading to the removal of the companies fromthe register;(b) delay in making the application;(c) failure by the removed companies to comply with a number ofrequirements of the Companies Act;(d) the absence of any live disputes or claims by the removed companiesagainst the Commissioner; and(e) the risk to the tax base posed by restoration of the removed companies.[18] In these circumstances, the Commissioner said, restoration of the removedcompanies would not be just and equitable.[19] The Commissioner filed an affidavit from an Inland Revenue Department(IRD) officer summarising the history of Mr Russell's tax litigation, and providinginformation about the removed companies drawn from the companies register andfrom IRD records. Two of the removed companies, Manly Estates Ltd and MarketingAgencies Ltd, had outstanding GST debts at the time they were removed from theregister.10 Those outstanding GST debts were written off by the Commissioner in2001, following the removal of the companies from the register.[20] The affidavit records that the removed companies did not appear to be tradingat the time they were removed from the register. There are no outstanding or livedisputes between the removed companies and the Commissioner. It also records thatno settlement offers have been advanced by Mr Russell's firm in respect ofthe removed companies or any other Russell entities. From the Commissioner'sperspective there are no live settlement discussions in relation to the removedcompanies or other Russell entities.[21] Mrs Rogers filed a short affidavit in reply. She reaffirmed that the primary aimof the applicants was to restore the removed companies to the register so they can beparty to settlement negotiations with the Commissioner. She accepted thatthe removed companies were not trading when they were struck off the register, andsaid that the purpose of the application was not to enable them to trade.[22] Mrs Rogers said she had sought further information in relation to the removedcompanies in response to the points raised by the Commissioner. But the informationshe provided about the removed companies was scant. So far as relevant, her affidavitsaid that:(a) the Commissioner had objected to the removal of Corporate TransportLtd from the register in 1995;(b) there were four objections to the removal of Manly Estates Ltd fromthe register in 1995. No information was provided about who lodgedthose objections;10 That was also the case in relation to Belmonte Dairy Ltd.(c) Marketing Agencies Ltd was one of the parent companies of companiesthat were plaintiffs in the Duvall proceedings. It was removed fromthe register before that case was heard in 2011; and(d) Mountforts Pharmacy Ltd "was removed from the register for failing tofile an annual return".11 No relevant documents were provided tosupport this statement. No other information was provided aboutthe removal process, and in particular why Mr Russell's firm took nosteps to remedy any relevant non-compliance and avoid removal ofthe company from the register. In 2010 the Commissioner noted ina letter to Mr Russell that there appeared to be an unresolved objectionto the GST deregistration of the company, and asked whetherMr Russell wished to have this objection considered. (If so, the letteradvised, further information was required before the objection could beconsidered.)[23] Ms Rogers said that there had been ongoing correspondence withthe Commissioner regarding the possibility of settlements. But as she acknowledgedthe Commissioner's position, as conveyed in that correspondence, was that therecannot be a live dispute with a deregistered company.Relevant Companies Act provisions[24] Part 17 of the Companies Act sets out the circumstances in which a companymay be removed from the register, and the process by which a company is removed.It contains a number of safeguards designed to ensure that a company is removed fromthe register only if there is no good reason for it to continue in existence. It conferspowers on the Registrar (s 328) and on the court (s 329) to reverse a removal, andrestore a company to the register, where with the benefit of hindsight there is a goodreason for the company to have continued in existence. If a company is restored to11 This is not in fact a ground for removal of a company from the register. But failure to file annualreturns can provide grounds for the Registrar to form the view that the company is not carryingon business, and there is no proper reason for it to continue in existence: Companies Act,s 318(1)(b).the register, it is deemed to have continued in existence as if it had never been removed(s 330). The removal regime provides important context for the operation of s 329.Grounds for removal[25] Section 317 of the Companies Act provides that a company is removed fromthe New Zealand register when a notice to that effect signed by the Registrar isregistered under that Act. Section 318 sets out the grounds for removal fromthe register:318 Grounds for removal from register(1) Subject to this section, the Registrar must remove a company fromthe New Zealand register if—(aaa) the company does not comply with section 10 [whichprescribes essential requirements for a company, includinghaving at least one shareholder and one director]; or(a) the company is an amalgamating company, other thanan amalgamated company, on the day on which the Registrarissues a certificate of amalgamation under section 224; or(b) the Registrar has reasonable grounds to believe that—(i) the company is not carrying on business; and(ii) there is no proper reason for the company to continuein existence; or(ba) the company has failed to respond to a requirement madeunder section 365(1)(caaa) or (c) [which relate tothe Registrar's powers of inspection]; or(bb) the Registrar has reasonable grounds to believe thatthe company, or 1 or more of its directors or shareholders, hasfailed to respond to a requirement made in relation to that oranother company under section 365F or 365G [which relateto disclosure of information about who controls a company];or(bc) the Registrar has reasonable grounds to believe thatthe company, or 1 or more of its directors or shareholders, hasintentionally provided the Registrar with inaccurateinformation; or(bd) the Registrar has reasonable grounds to believe thatthe company, or 1 or more of its directors or shareholders, hasfailed in a persistent or serious way to comply with dutiesrelating to the company—(i) under this Act; or(ii) under the Financial Reporting Act 1993 while inforce, except that the Registrar may not rely on thisground after 5 years have elapsed after thissubparagraph came into force; or(c) the company has been put into liquidation, and—(i) no liquidator is acting; or(ii) the documents referred to in section 257(1)(a) havenot been sent or delivered to the Registrar within6 months after the liquidation of the company iscompleted; or(d) there is sent or delivered to the Registrar a request inthe prescribed form made by—(i) a shareholder authorised to make the request bya special resolution of shareholders entitled to voteand voting on the question; or(ii) the board of directors or any other person, ifthe constitution of the company so requires orpermits—that the company be removed from the New Zealand registeron either of the grounds specified in subsection (2); or(e) a liquidator sends or delivers to the Registrar—(i) the documents referred to in section 257(1)(a); and(ii) a copy of the notice referred to in section 320(4); or(f) the company has failed to pay the fee prescribed byregulations for the application for registration of the companyunder section 12.(4) The Registrar must remove a company from the New Zealand registerunder subsection (1)(b) only if—(a) the Registrar has complied with section 319; and(b) the company has not satisfied the Registrar that it is carryingon business or that a proper reason exists for the company tocontinue in existence; and(c) the Registrar—(i) is satisfied that no person has objected to the removalunder section 321; or(ii) if an objection to the removal has been received, hascomplied with section 322.The removal process[26] Section 319 requires a written notice of the Registrar's intention to removea company under specified limbs of s 318(1) to be given to the company, and to certainother persons. It sets out the information that must be included in the notice, includingthe section under, and grounds on which, the Registrar proposes to removethe company. It also provides for public notice to be given of the proposed removal.[27] Section 321 allows any person to object to removal of a company fromthe register. It sets out the grounds on which an objection can be made, including thatthe company is carrying on business or there is a proper reason for it to continue inexistence;12 that the company is a party to legal proceedings;13 or that for any reasonit would not be just and equitable to remove the company from the register.14[28] Section 322 addresses the consequences of the Registrar receiving an objectionto removal of a company from the register. Those consequences depend on the groundon which the objection is made. An objection may result in the Registrar deciding notto proceed with the removal, or advising the objector that the removal will proceedunless they apply to the court under s 323 for an order that the company not beremoved from the register. Section 323 provides for applications to the court foran order that the company not be removed from the register where an objection to itsremoval is made on certain grounds, including the "just and equitable" ground.Restoration of a company to the register: ss 328 and 329[29] As noted above, the provisions concerning removal of a company fromthe register are designed to ensure that a company is only removed if there is no goodreason for it to continue in existence. The controllers of the company and otherinterested persons are given the opportunity to object to removal for a range of reasons.12 Companies Act, s 321(1)(a).13 Section 321(1)(b).14 Section 321(1)(f).But there can be cases where a company is removed from the register as a result of anerror or oversight, or where circumstances change and it becomes apparent withthe benefit of hindsight that there were good reasons for the company to continue inexistence. In such cases, a company can be restored to the register.[30] Section 328 provides for the circumstances in which the Registrar can restorea company to the New Zealand register after it has been removed. It provides:328 Registrar may restore company to New Zealand register(1) Subject to this section, the Registrar must, on the application ofa person referred to in subsection (2), and may, on his or her ownmotion, restore a company that has been removed fromthe New Zealand register to the register if he or she is satisfied that, atthe time the company was removed from the register,—(a) the grounds for the removal did not exist at the timethe company was removed; or(b) the company was a party to legal proceedings; or(c) the company was in receivership, or liquidation, or both.(1A) The Registrar may, on the application of a person referred to insubsection (2), or on his or her own motion, restore a company thathas been removed from the register to the register if the Registrar issatisfied that the company was carrying on business at the time of itsremoval and there is a proper reason for the company to continue inexistence.(2) Any person who, at the time the company was removed fromthe New Zealand register, was—(a) a shareholder or director of the company; or(b) a creditor of the company; or(c) a liquidator, or a receiver of the property, of the company—may make an application under subsection (1).(3) Before the Registrar restores a company to the New Zealand registerunder this section,—(a) in the case of a company that was removed fromthe New Zealand register under section 318(1)(aaa), (b), (ba),(bb), (bc), (bd), or (c), the Registrar must give public noticesetting out—(i) the name of the company; and(ii) the name and address of the applicant; and(iii) the section under, and the grounds on which,the application is made or the Registrar proposes toact, as the case may be; and(iv) the date by which an objection to restoringthe company to the register must be delivered tothe Registrar, not being less than 20 working daysafter the date of the notice:(b) in the case of a company that was removed fromthe New Zealand register under paragraph (d) or paragraph(e) of section 318(1), the person who made the applicationunder subsection (1) must give public notice setting out—(i) the name of the company; and(ii) the person's name and address; and(iii) the section under, and the grounds on which,the application is made; and(iv) the date by which an objection to restoringthe company to the register must be delivered tothe Registrar, not being less than 20 working daysafter the date of the notice.(4) The Registrar must not restore a company to the New Zealand registerif the Registrar receives an objection to the restoration withinthe period stated in the notice.(5) Before the Registrar restores a company to the New Zealand registerunder this section, the Registrar may require any of the provisions ofthis Act or any regulations made under this Act, being provisions withwhich the company had failed to comply before it was removed fromthe register, to be complied with.(6) The court may, on the application of the Registrar or the applicant,give such directions or make such orders as may be necessary ordesirable for the purpose of placing a company that is restored tothe New Zealand register under this section and any other persons asnearly as possible in the same position as if the company had not beenremoved from the register.(7) Nothing in this section limits or affects section 329.[31] Section 329 sets out the circumstances in which the court may restorea company to the register:329 Court may restore company to New Zealand register(1) The court may, on the application of a person referred to insubsection (2), order that a company that has been removed fromthe New Zealand register be restored to the register if it is satisfiedthat,—(a) at the time the company was removed from the register,—(i) the company was carrying on business or a properreason existed for the company to continue inexistence; or(ii) the company was a party to legal proceedings; or(iii) the company was in receivership, or liquidation, orboth; or(iv) the applicant was a creditor, or a shareholder, ora person who had an undischarged claim againstthe company; or(v) the applicant believed that a right of action existed, orintended to pursue a right of action, on behalf ofthe company under Part 9; or(b) for any other reason it is just and equitable to restorethe company to the New Zealand register.(1A) In considering whether to restore a company to the register onthe ground referred to in subsection (1)(a)(i) or (b), the court musthave regard to the reasons for the company's removal and whetherthose grounds existed at the time of removal or exist at the time ofthe hearing of the application.(2) The following persons may make an application under subsection (1):(a) any person who, at the time the company was removed fromthe New Zealand register,—(i) was a shareholder or director of the company; or(ii) was a creditor of the company; or(iii) was a party to any legal proceedings againstthe company; or(iv) had an undischarged claim against the company; or(v) was the liquidator, or a receiver of the property of,the company:(b) the Registrar:(c) with the leave of the court, any other person.(3) Before the court makes an order restoring a company tothe New Zealand register under this section, it may require anyprovisions of this Act or any regulations made under this Act, beingprovisions with which the company had failed to comply before it wasremoved from the register, to be complied with.(4) The court may give such directions or make such orders as may benecessary or desirable for the purpose of placing the company and anyother persons as nearly as possible in the same position as ifthe company had not been removed from the New Zealand register.[32] Section 328 contemplates a relatively simple and uncontroversial restorationprocess where it is apparent that the company should not have been removed fromthe register having regard to circumstances at the time of that removal, and where noone objects to that restoration. Section 329 enables a wider range of grounds to beinvoked, including the broad "just and equitable" ground. It is available in cases whererestoration is opposed. In circumstances where s 329 is invoked, and in particularwhere the "just and equitable" ground is relied on, an evaluative judgment is required.Responsibility for making that judgment is conferred on the court rather than onthe Registrar. As is apparent from the structure of these provisions, s 329 is aimed atmore complex cases where restoration may or may not be appropriate. A s 329application is not simply a mechanical procedural hurdle to be overcome beforearriving at an inevitable destination.[33] There was no equivalent to s 328 under the Companies Act 1955.All restoration applications, including straightforward cases, had to be dealt with bythe court.15 As one would expect, those straightforward cases predominated.The pre-1993 Act case law reflects that fact. The sense one gets from many of thosecases is that restoration was almost a foregone conclusion, and that refusal ofapplications for restoration under the 1955 Act would be rare.16 But that approachcannot be carried over uncritically to applications under s 329 of the 1993 Act, bearingin mind that the straightforward and uncontroversial cases have been filtered out bys 328.[34] Section 330 provides that a company is restored to the register when a noticeto that effect signed by the Registrar is registered under the Companies Act.15 See Companies Act 1955, ss 335, 335A(8), 336(7).16 See John Hammonds & Co Ltd v Registrar of Companies [1999] 3 NZLR 690 (HC) at [50]–[51].The application in that case was brought under the Companies Act 1955, as the company had beenremoved from the register in 1989.A company that is restored to the register is deemed to have continued in existence asif it had not been removed.17High Court decision[35] The applications in this case were made under s 329(1)(b).18 So asthe Associate Judge noted, the overarching question for the Court was whether it wasjust and equitable to restore each of the removed companies to the register.19Preliminary matters[36] The applicants challenged the standing of the Commissioner to opposethe applications.20 The Associate Judge held that the applicants could not object tothe Commissioner opposing their application in this case.21 Here, the Commissionerwas named as a respondent in the originating application. That distinguishedthe present case from Re Marketing Distribution Services Ltd, where Potter J rejectedarguments advanced by the Commissioner in opposition to the restoration ofa company to the register, and indicated that those arguments were relevant tothe merits of the tax disputes and not to the restoration application.22[37] The Associate Judge then proceeded to deal with an objection bythe Commissioner to use of the originating application procedure to commencethe proceeding. The Associate Judge considered that the time to object to the vehiclefor dealing with the litigation had passed, and the better course was simply to disposeof it on the basis on which it had been made.23Relevant principles[38] The Associate Judge summarised the basis on which the applicants soughtrestoration of the removed companies to the register, and the grounds on which17 Companies Act 1993, s 330(2).18 High Court decision, above n 1, at [4].19 At [4].20 At [5].21 At [6].22 Re Marketing Distribution Services Ltd HC Auckland M1835/97, 2 March 1998.23 High Court decision, above n 1, at [10].the Commissioner opposed the application.24 He then proceeded to identify therelevant principles governing such applications, setting out the frequently citedsummary in Re Saxpack Foods Ltd.25Identification of relevant factors[39] The Associate Judge then worked through each of the factors identified inSaxpack that he saw as relevant in this case. He began by noting that the five removedcompanies were removed from the register between 7 and 22 years ago.26 Hisassessment was that delay was not an absolute bar to the application.27 But, he said,the delay meant that the Court "must look carefully at the other relevant factors beforedeciding in favour of an application that would restore to the register companies thathave been defunct for such periods of time". 28[40] The Associate Judge noted that s 329(1A) requires the court to have regard tothe reasons for the companies' removal and whether those grounds still exist atthe time of the hearing.29 He addressed this topic as follows:[28] On its face this means that the Court cannot restore any company tothe register under the s 329(1)(a)(i) or (b) unless it has before it and considersevidence as to the reasons for the company's removal.[29] Neither the applicants' originating application nor the supportingaffidavit sworn by Ms Glenda Rogers, a director of each of the applicantcompanies, addressed the reasons for the companies being removed fromthe register in the first place. The Commissioner, in her notice of opposition,pleads that the applicants have not made full and frank disclosure to the Court,which is a reference to this gap in the applicants' case. In the affidavit swornin support of the Commissioner's opposition, the deponent, Mr Trevor Strang,a senior Inland Revenue Department Officer, provided some evidence as towhy each of the five defunct companies was removed from the register.[33] So, in terms of s 329(1A) it would seem that Belmonte Dairy Ltd wasplaced in liquidation after it amassed a substantial debt to the Revenue andthen removed from the register following the liquidation. The remaining fourcompanies appear to have simply ceased trading, did not comply with theirstatutory obligations (presumably in relation to such things as the filing of24 See [11]–[20].25 At [22], quoting from Re Saxpack Foods Ltd [1994] 1 NZLR 605 (HC) at 609–611.26 At [24].27 At [25].28 At [26].29 At [27].annual returns) and were removed from the register as a result. The otherimportant factor is that three of the defunct companies had undischarged taxobligations to the Revenue at the time they were removed.[34] To the extent that those considerations were grounds for the fivedefunct companies to be removed from the register I regard it as fair toconclude that there has been no change.[35] That is as far as the evidence goes.[36] On balance this consideration weighs against restoration.[41] The Associate Judge recorded that counsel had accepted in the course ofargument that the Court was not in a position to reach any view about the merits ofthe contention that the removed companies would, if restored to the register, be inthe same position as the Duvall plaintiffs, or whether there was any merit in the claimsthey are said to have to tax advantages.30 So, he said:31 [T]he question of whether there is a proper reason to order the restorationof the companies to the register reduces itself to whether it is proper to do soin order to enable them to test that issue, no doubt by seeking to participate inthe current negotiations and if those were to fail any litigation.He considered that appeared to be a legitimate objective on the part of the applicants,which weighed in favour of granting the applications.32[42] The Associate Judge did not accept the Commissioner's submission that therewas no live dispute involving the removed companies. He considered that thisargument was circular.33 There was no live dispute because the companies had beenremoved from the register, so did not exist in law. That did little more than begthe question of whether the defunct companies should be restored to the register, sothey can file late objections and matters can take their course from that point.34The balancing exercise[43] The Associate Judge then turned to what he described as the most difficultaspect of the case: balancing the countervailing private and public interests in30 At [38].31 At [39].32 At [40].33 At [41].34 At [44].restoration of the removed companies.35 He identified a private interest forthe applicants and the five removed companies in being able to pursue a tax advantagein the future.36 He considered that there may be a public interest involved in this aswell, as restoration of the companies to the register would enable them to pursue theirrights through the avenues available to all taxpayers.37 He described the right to dothis as "fundamental".38 He expressed the view that there is a public good inreinforcement of this right.39[44] The Associate Judge then proceeded to summarise the public interest factorsrelied on by the Commissioner in opposing the restoration of the removedcompanies.40 These focussed on the history of tax avoidance litigation involvingMr Russell, his firm, and other entities with which Mr Russell had been associated.The Commissioner submitted that this was another example of Mr Russell's firmseeking to prolong meritless claims against the Commissioner, and to attempt toextract money from the tax base.41[45] The Associate Judge declined to form any conclusions based on the history oflitigation between Mr Russell's firm and the Commissioner in relation to the proprietyof the applicants' motives in seeking restoration of the removed companies, orthe merits of the claims that they wished to make.42[46] The Associate Judge concluded that the removed companies should be restoredto the register. He summarised his reasons for reaching that view as follows:[60] I am acutely conscious that such orders will restore to the register fivedefunct companies:(a) that were removed from the register between seven and 22 years agoand which will now be deemed to have been in existence for all thoseyears;35 At [46].36 At [47].37 At [48].38 At [48].39 At [48].40 At [49]–[56].41 At [56].42 At [58].(b) two of which were originally incorporated under the 1955 Act andnever transferred to the current Act;(c) one of which was removed following its liquidation, with the resultthat it will be necessary, to ensure that the order for its restoration isefficacious, to make an ancillary order overturning the liquidators'final report;(d) none of which were trading at the time that they were removed;(e) none of which, in my assessment, have any real prospect of resumingtrading;(f) three of which were removed at a time when they had outstanding taxobligations (which may or may not re-emerge);(g) all of which are being restored for the sole purpose of what on its faceappears to be a speculative attempt to pursue a tax advantage.[61] However, the considerations that have [led] me to the conclusion Ihave reached are as follows:(a) although the periods of time that have passed since these five defunctcompanies were removed from the register are extreme (indeed, myown research has not thrown up any instance of longer periods), thereis no limitation provision in the Act, there is an explanation for whythe applications are being made now, and there is no obvious prejudiceto the Commissioner caused merely by the delay;(b) the applications are made in order to facilitate the five defunctcompanies pursuing a legitimate purpose, namely to establish whetherthey are entitled to a tax advantage of some sort. As already said,I reach no view as to the merits of their cases. That is a matter to bedetermined elsewhere;(c) on balance my view is that the private and public interests involvedfavour the making of the orders sought:(i) the five defunct companies have private claims that they wishto pursue;(ii) there is a public interest in the facilitation of New Zealandtaxpayers (or potential tax payers) pursuing claims that theyperceive themselves to have in the proper way;(iii) I do not accept that the mere fact that the restoration of thesecompanies might result in them pursuing tax advantages tothe detriment to the Revenue is itself contrary to the publicinterest;(iv) to the extent that I have any regard to the history of litigationbetween Mr Russell's firm, and entities associated with it, andthe Commissioner, I accept that it is not in the public interestthat the Commissioner should be embroiled in what on theirface appear to be long standing disputes. But the reality is thatthere is already a dispute between the existing F B Duvallplaintiffs and other parties and the Commissioner, and themarginal cost of including five additional claimants will beminimal;(v) in the end, I find myself reaching the same conclusion asPotter J reached in Re Marketing Distribution Services whereher Honour said:In summary, there are matters of dispute between thecompany and the Commissioner which require to bedetermined. It is in the interests of justice that theybe determined. It is not appropriate that otherdisputes between the Commissioner and Mr Russell'sgroup of companies, some but not all which havebeen resolved by litigation or otherwise, shouldinfluence the Court's determination of this matter.Restoration of the company to the register will enablethe companies' objection to the Commissioner'sassessment to be determined on its merits.Likewise, in this case, the restoration of the five defunctcompanies will enable them to file objections tothe Commissioner of Inland Revenue's assessments andmatters can then take their course.(Footnotes omitted.)[47] No orders were made under s 329(3) requiring provisions of the CompaniesAct to be complied with, or under s 329(4) for the purpose of placing the company andother persons in the same position as if the company had not been removed fromthe register. In particular, no consideration appears to have been given to makingorders that would enable the written-off GST obligations of the removed companiesto be pursued by the Commissioner.The Commissioner's submissions on appeal[48] The Commissioner appeals on the basis that the exercise of discretion bythe Associate Judge under s 329 was "plainly wrong". She says the Associate Judgefailed to give appropriate weight to a number of relevant considerations, and gaveundue weight to the purported objectives of the applicants.[49] In particular the Commissioner says that the Associate Judge gave too muchweight to the private interests of the applicants, and insufficient weight to the publicinterest factors that supported refusal of restoration of these companies, having regardto the length of time for which the companies had been removed from the register andthe threat to the integrity of the tax system posed by restoration of the companies.[50] The Commissioner submits that the High Court was wrong to conclude thatthere was a public interest in enabling the removed companies to pursue their rights"through the avenues available to all taxpayers".43 The public interest was in factentirely the opposite. It is highly likely that any attempt to extract money from the taxbase through restoration of these companies will be nugatory.[51] The Commissioner also emphasised the long delay in seeking restoration ofthe removed companies, the prejudice to the Commissioner in terms of the ability torecover written-off GST, and absence of full and frank disclosure aboutthe circumstances in which the companies were removed from the register.The applicants' submissions[52] The applicants support the decision of the Associate Judge. They submit thathe correctly identified and applied the principles relevant to s 329 applications.The Associate Judge considered all the relevant factors and exercised his powerappropriately. No proper basis has been identified to justify interference withthe decision.[53] The applicants emphasise that there is a public interest in ensuring that accessto justice is preserved. The Associate Judge's approach on this issue was consistentwith the approach taken in the past in cases such as Re Marketing Distribution ServicesLtd and Downsview Nominees Ltd v Commissioner of Inland Revenue.44[54] In response to the lengthy submissions by the Commissioner that focus onthe history of tax litigation involving Mr Russell's firm, and companies controlled byit, the applicants say that it is not appropriate for courts to make decisions based onthe identity of the litigants. The rule of law requires that justice be done to alleven-handedly.43 High Court decision, above n 1, at [48].44 Re Marketing Distribution Services Ltd, above n 22; and Downsview Nominees Ltd vCommissioner of Inland Revenue (2006) 22 NZTC 19, 971 (HC).Registrar's submissions[55] The Registrar did not wish to appear and be heard on this appeal. The Courtinvited the Registrar to file a memorandum setting out the Registrar's approach to theissues raised by the application. Counsel for the Registrar advised the Court that:(a) it is not the usual practice of the Registrar to seek conditions unders 329(3) and (4) regarding the filing obligations of the relevantcompany;(b) the Registrar's usual practice is to liaise with the director(s) ofthe relevant company or their legal advisers to ensure thatthe company's current filing obligations are complied with whenthe relevant company is restored;(c) that has occurred in this case. Current annual returns, directors' consentforms, updated company addresses (if required) and details ofthe ultimate holding company (if required) have been filed for the fourremoved companies;(d) the companies were not required to file financial statements onthe register;(e) it was open to creditors of the removed companies to apply to the courtfor restoration of the companies. If there are limitation issues thosecreditors can seek conditions under s 329(4). Because any creditorshave those remedies when a company is removed, the Registrar doesnot consider that it is appropriate to seek such conditions on a laterapplication to restore a company made by a person who is not a creditor.The creditors are not prejudiced because they had their remedy undersection 329(1)(a)(iv) and elected not to enforce it.AnalysisDelay[56] We agree with the Associate Judge that the long delay in making an applicationto restore these companies to the register is a factor that points against theirrestoration.45 It needed to be satisfactorily explained. It was not.Application for restoration failed to provide necessary information[57] More generally, we consider that the application for restoration of the removedcompanies was hopelessly inadequate. An applicant for an order under s 329 needs toprovide all the information that the court requires in order to consider the merits ofthe application. As we explained above, a s 329 application is not a mere proceduralformality. It involves the exercise of judgement by the court in a case that falls outsidethe straightforward circumstances that are provided for under s 328.[58] Section 329(1A) provides that the court must have regard to the reasons forthe company's removal and whether those grounds existed at the time of removal orexist at the hearing of the application. It is incumbent on an applicant associated withthe removed company (such as a former shareholder or director) to providethe information that the court requires in order to consider this mandatory relevantconsideration. The applicant should identify:(a) the ground on which the company was removed;(b) whether that ground was in fact satisfied at the time of the company'sremoval;(c) the position in relation to that ground at the time of the restorationapplication;45 High Court decision, above n 1, at [23].(d) what steps if any the company and its controllers took to preventremoval from the register. If no steps were taken, the reason forthe failure to do so needs to be explained;(e) what if anything has changed since the time the company was removedfrom the register, which would justify the controllers of the companychanging their position on the appropriateness of the companycontinuing in existence; and(f) the explanation for any delay between the time when the reason forseeking restoration was first identified, and the making ofthe application.[59] These matters should be addressed in an affidavit accompanyingthe application. Relevant documents should be exhibited.[60] The importance of this information was identified in Re Saxpack Foods Ltd.Hammond J referred to the decision of O'Regan J refusing restoration of a defunctcompany to the register in Re Ghuznee Securities Ltd.46 In that case the applicant'sfailure to provide any reason for or explanation of the defaults that led to the companybeing removed from the register was the central factor in the Judge's decision to refuserestoration. As O'Regan J observed, in the absence of such information "the Court iswithout material upon which it can make an assessment of the justice of the matter".47[61] The applicant should identify the steps that would need to be taken to remedyany failures to comply with filing requirements under the Companies Act, and providecopies of the documents that would be filed on restoration to remedy those failures.If any orders under s 329(3) would be appropriate, these should be identified inthe application.46 Re Saxpack Foods Ltd, above n 25, at 610, citing Re Ghuznee Securities Ltd (1983) 1 NZCLC95-097 (HC). See also Re Durweston Properties Ltd (1992) 6 PRNZ 95 at 98-99.47 Re Saxpack Foods Ltd, above n 25, at 95-098.[62] The application should address the financial position of the company atthe time of removal, and on restoration.48 If a restored company would be insolvent(as it appears two of the removed companies would be in the present case), there wouldneed to be a compelling reason to bring it back to life: for example, the discovery ofoverlooked rights or assets which could be realised for the benefit of creditors, orthe desire to appoint a liquidator to investigate the company's affairs.[63] The application should also identify any outstanding creditors of the company,and describe its financial affairs in sufficient detail for the court to be able to forma view on whether any orders should be made under s 329(4). If for examplethe company had outstanding obligations at the time it was removed from the register,and subsequently became aware of rights or assets that had been overlooked,appropriate orders should be made to ensure that despite the passage of time creditorswill be paid before any residual assets are distributed to shareholders.[64] There was an almost complete absence of relevant information in this case.Sketchy information was provided about why one of the four companies was removedfrom the register. No information was provided about whether the other companieswere removed on the initiative of the shareholders or of the Registrar,49 or aboutthe grounds for their removal. No explanation was provided about why the personscontrolling the companies had initiated, or acquiesced in, their removal fromthe register. No explanation was provided for the lengthy delay between Mr Russellforming the view that some Russell template companies might be entitled to GSTrefunds, and the application for restoration of these companies.[65] For this reason alone we consider that the High Court should have declined torestore the removed companies. The applicant failed to provide the information thatthe Court needed in order to give proper consideration to the application.The consequence of failure to provide such information will generally be dismissal ofthe application.48 See Re Durweston Properties Ltd, above n 46, at 98.49 It appears that at one stage Mr Russell pursued a deliberate strategy of having some Russelltemplate companies removed from the register: Downsview Nominees Ltd v Commissioner ofInland Revenue, above n 44, at [4] and [34]. No information was provided about whetherthe removal of any of the removed companies with which this case is concerned was initiated byMr Russell's firm.Restoration either nugatory or contrary to the public interest[66] The application should also have been refused because restoration ofthe removed companies after such a long period of being deregistered would either benugatory, or contrary to the public interest.[67] We agree with the Associate Judge that access to justice is a relevant principlewhen considering an application under s 329.50 There is a public interest in restoringthe ability of a company that has been removed from the register to pursue a claim thatit wishes to bring, where it is acting in good faith and has taken timely steps to pursuethe claim after becoming aware of it. We also agree with the Associate Judge that it isnot appropriate, in the context of a s 329 restoration application, to embark ona detailed analysis of the merits of a claim that an applicant says the company may beable to pursue.51 But we do not agree that there is a public interest in the removedcompanies being permitted to pursue their proposed claims against the Commissionerin this case.[68] There are significant hurdles in the way of a successful claim by the removedcompanies for GST refunds, if they are restored to the register. Those companieswould not have any current right to object to their GST assessments for the relevantperiods under Part 4A of the Tax Administration Act 1994: the time for making suchobjections has long expired. They would need to apply for the Commissioner'sapproval to make a late objection under s 89K. The Commissioner could only grantthat approval in relation to the removed companies if exceptional circumstances hadprevented those companies from making their objections in a timely way, and thosecompanies had taken steps to make the objection as soon as reasonably practicableafter becoming aware of that failure. The prospect of the removed companies makingout those grounds seems slight. The removed companies might in the alternative askthe Commissioner to exercise the Commissioner's power to correct an assessmentunder s 113 of the Tax Administration Act. But that discretion will not be exercisedwhere to do so would circumvent the normal disputes process.52 So even on50 See High Court decision, above n 1, at [48].51 At [58].52 Westpac Securities NZ Ltd v Commissioner of Inland Revenue [2014] NZHC 3377, see especiallyat [67].a preliminary assessment that focuses solely on the process for making a lateobjection, and does not go into the merits of any such objection, the prospect of asuccessful claim by the removed companies for a GST reassessment and refund seemspoor.[69] The significant delay in seeking to pursue any claims that the removedcompanies might have had to GST refunds also counts against restoration ofthe companies for the purpose of pursuing those claims. There is a public interest infinality that is reflected in limitation statutes and in equitable principles of laches.In the present case, Mr Russell appears to have identified the potential claims byRussell template companies for GST refunds by 1993 at the latest, when Duvallpursued its claim before the TRA. Some 25 years then passed before any formal stepswere taken to assert similar claims on behalf of the removed companies. They couldall have pursued those claims before their removal from the register, and could havebeen kept in existence for that purpose. But a choice appears to have been made notto do so. No explanation has been offered for this extraordinary delay, or for whydespite that delay it would now be just and equitable to permit them to pursue thoseclaims.[70] The delay in asserting the claims is closely linked to another factor that countsagainst restoration of the removed companies to the register. It appears that the onlyway that pursuing a late objection could produce a benefit for the controllers ofthe removed companies would be if those companies could obtain GST refunds, butthe associated companies to which the removed companies purported to provideservices under a series of tax avoidance arrangements could avoid the correspondingincrease in GST liabilities, either because they had been removed from the register orbecause reassessments of those companies would be time-barred. If this unlikelyprospect were to eventuate, it would provide the applicants and their controllers witha windfall benefit from their entry into tax avoidance arrangements, coupled withthe passage of time since those arrangements were entered into. We agree withthe Commissioner's submission that such a result would undermine the integrity ofthe tax system in the eyes of law-abiding taxpayers. It is plainly contrary to the publicinterest. The applicants' private interest in such an outcome is obvious: butthe Associate Judge was wrong to suggest that there is a public interest in the belatedpursuit of asserted rights to perverse outcomes of this kind.[71] If the position in relation to the proposed tax claims were less clear cut, thenthe approach adopted by the Associate Judge of leaving the merits of those claims tobe resolved through the disputes process might have been appropriate. But in thiscase, the position is clear. Either restoring the removed companies to the register willbe pointless because they will not be able to obtain any benefit from belatedly seekinga reassessment of their GST liabilities, or it will achieve a positively undesirable andunjust outcome. Either way, it is not just and equitable to restore the removedcompanies to the register in order to enable them to pursue the claims thatthe applicants have identified as the sole rationale for their restoration.Conclusion[72] The approach adopted in the High Court decision was wrong as a matter ofprinciple. There were two compelling reasons to dismiss the application. We thereforeallow the Commissioner's appeal.[73] Because we have allowed the appeal, we do not need to consider the requestmade by the parties that the High Court order be amended to omit the reference toBelmonte Dairy Ltd. The basis on which this Court could make such an order if it didnot allow the appeal was not identified by the parties, and is not immediately apparentto us. But that is not an issue we need to address.Result[74] The appeal is allowed.[75] The order that the removed companies be restored to the Companies Registeris set aside.[76] Costs should follow the event in the ordinary way. The respondents must paythe Commissioner costs for a standard appeal on a band A basis and usualdisbursements.Solicitors:Crown Law Office, Wellington for AppellantDouglas Burgess Law, Auckland for Respondents