THE COMMISSIONER OF INLAND REVENUE V JUNCTION SKI SHOP (1992) LIMITED HC WANG CIV 2008-483-93

THE COMMISSIONER OF INLAND REVENUE V JUNCTION SKI SHOP (1992) LIMITED HC WANG CIV 2008-483-93 30 July 2008IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY CIV 2008-483-93UNDER the Companies Act 1993 BETWEEN THE COMMISSIONER OF INLAND REVENUE Plaintiff AND JUNCTION SKI SHOP (1992) LIMITED Defendant Hearing: 30 July 2008 Appearances: L.C. Rowe - Plaintiff and Creditor in Support Snoworld Sports Ltd F.C. Devlin - Defendant S. Burlace - Creditor in Support South Ruapehu FM Ltd Judgment: 30 July 2008ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLSolicitors: Armstrong Barton, Solicitors, PO Box 441, Wanganui 4540[1] Before me is an application by the plaintiff to place the defendant company into liquidation. [2] The statement of claim issued by the plaintiff in this matter indicates that the defendant is indebted to the plaintiff in the sum of $232,715.97. [3] This amount appears to relate to a substantial amount of PAYE tax deductions ($114,254.10) dating back to the period 31 July 2006 to 30 November 2007 together with certain KiwiSaver employer deductions totalling $298.99, student loan employer deductions totalling $1,133.95, GST totalling $102,810.57 and a range of penalties and interest with regard to these assessments. Of the total assessments some $55,498.22 appears to have been paid. This left a balance outstanding noted in the plaintiff's statement of claim at $232,715.97. This amount has continued to increase from the time the statement of claim was filed on 1 April 2008 to the present. The debt owing to the plaintiff now exceeds $270,000.00. [4] A statutory demand was issued against the defendant and served on 1 February 2008. No application to set aside the statutory demand was made. [5] A statement of claim was filed and then served on 11 April 2008 and, as I understand the position, at the request of the defendant the plaintiff agreed to delay advertising in this matter. This was to enable the defendant to pursue a possible sale of its business. [6] I am told by counsel for the plaintiff that no sale has eventuated and finally the plaintiff completed advertising of this matter on 16 and 17 July 2008. [7] No payment of the debt claimed has been made and as Mr Rowe for the plaintiff indicated the debt is continuing to climb on a daily basis. [8] Notices of Appearance in support of the present application have been filed. The first is by Snoworld Sports Limited. This claims that Snoworld Sports Limited is a creditor of the defendant company for $165,181.62. The second is by SouthRuapehu FM Limited and this indicates that it is a creditor of the defendant to the extent of $12,231.34. [9] There has been no formal opposition or defence filed by the defendant to the plaintiff's present application. [10] Instead Ms. Devlin appeared before me today on agency instructions to appear for the defendant company and sought an adjournment of this matter for a period of 2 weeks. As I understand the position, it is suggested that this is to enable the defendant company to endeavour to finalise a compromise proposal for all its creditors. [11] On this Ms. Devlin for the defendant, at my request, sought instructions from her instructing solicitors regarding the present financial position of the defendant company. [12] In haste she spoke with her instructing solicitors at a brief adjournment of this matter given for this purpose and then she advised the Court that her instructions were as follows: a) The total level of debt of the defendant company was said to be in the region of $420,000.00 to $450,000.00. b) Some recent stock sales had reduced down the total level of the company's debt. c) It was not clear whether this indication of debt level included secured debts of the defendant company or whether it was simply a reflection of the company's unsecured debt position. d) The defendant company's business was on the market for sale at a price in the vicinity of $1,000,000.00 and if a sale at this figure was able to be achieved in Ms. Devlin's words this would "clear all creditors".e) So far as unsold stock of the company is concerned Ms. Devlin indicated that her instructions were that this had "a value of $700,000.00". It is unclear, however, whether this represents book value or claimed market value for the stock. [13] I note immediately that there is no firm evidence before this Court of the defendant company's financial position. The matters I have outlined in the preceding paragraph were merely indications given to the Court by Ms. Devlin (in response to questions from the bench) following a hasty telephone call to her instructing solicitor. [14] Needless to say all this is rather unsatisfactory. Mr. Rowe for the plaintiff submitted that this defendant company has had a considerable period of time to effect a sale of its business but has been unable to do so. Mr. Rowe contended that the company has continued to trade whilst its position, particularly with regard to the plaintiff Commissioner of Inland Revenue, has worsened considerably. [15] Mr. Rowe noted, as I have indicated earlier, that the Commissioner of Inland Revenue originally delayed advertising of this matter to enable the defendant company to endeavour to obtain a sale of the business. This, however, has been to no avail. [16] Mr. Rowe said the Commissioner of Inland Revenue opposes any adjournment of this matter and contends that the only tenable position is for the defendant company now to be placed into liquidation. [17] On this I need also to make mention of the fact that in the list today are two related matters. The first, CIV 2008-483-104 is an application by Rojo Distribution (NZ) Limited also to place the defendant company into liquidation. On this, Ms. Burlace appeared for the plaintiff and indicated that also Rojo Distribution NZ Ltd first, opposed any adjournment of the present applications and secondly sought an order today that the defendant company be placed into liquidation. The Rojo Distribution NZ Ltd debt appears to be $31,510.70.[18] The second, being matter CIV 2008-483-25, is an application by Jones Brothers Limited to place the defendant company into liquidation. It was also called in the list today. Although that matter in part involves an application by the defendant to restrain advertising and stay the proceeding, as I understand the position, the debt claimed by Jones Brothers Limited is something in excess of $43,000.00. [19] The debt owing to the plaintiff, Commissioner of Inland Revenue, in the present proceeding 2008-483-93, as I have noted above, is substantial and is increasing on a daily basis with the imposition of penalties and interest. The debt relates in substantial part to PAYE and other deductions which the defendant made from employee's wages and for which it then failed to account to the Commissioner of Inland Revenue. This occurred in the case of the PAYE deductions for a considerable time dating back to the period July 2006 to November 2007. This is a matter of some concern. [20] The debt owing to the Commissioner of Inland Revenue is not in any way disputed by the defendant company. Similarly the debt owing to Rojo Distribution (NZ) Limited is also entirely undisputed. [21] Given that in the company liquidation list today there are three separate and substantial sets of proceedings against the defendant company, it is somewhat surprising that no formal opposition at least to the applications brought by the Commissioner of Inland Revenue and Rojo Distribution (NZ) Limited have been filed by the defendant company. Similarly, there is a complete absence of any affidavit evidence from the defendant regarding either of these matters or deposing as to the company's financial position. [22] I accept the contention advanced to the Court by Mr. Rowe that the defendant company's financial predicament is dire and that it would seem that matters can only worsen if the company continues to trade.[23] On that aspect, before me Ms. Devlin confirmed that the defendant company is continuing to trade and is hoping that this will result in some relief for its outstanding creditors. [24] The information provided to the Court by Ms. Devlin today, which I appreciate she properly put before the Court simply in confirmation of what she had been told by her instructing solicitor, does not provide a great deal of assistance to the Court in its deliberations. The total level of company indebtedness indicated at between $420-450,000.00 would seem to be surprising to say the least. Earlier today, Ms. Devlin indicated to the Court that if the defendant company was placed into liquidation then there was unlikely to be any funds available from the sale of assets for unsecured creditors as the total amount realised would pass to secured creditors. [25] The debt owing to the Commissioner of Inland Revenue in this matter exceeds some $470,000.00 alone. No mention is made of secured creditors. To suggest that total creditors of the defendant company might be in the region of $420- 450,000.00 would seem to me to be far from the mark. [26] The suggestion also with no supporting evidence of any kind that the present stock position of the defendant company shows a figure of some $700,000.00 is again of minimal help to the Court. Finally, the suggestion that the business might be sold at a market value of $1,000,000.00, also made without any supporting valuation or verification, is of little help. [27] The request from the defendant company communicated from Ms. Devlin today is simply for a 2 week adjournment to "finalise a compromise proposal with creditors". [28] I take the view however that under all the circumstances which have been presented to the Court here a 2 week adjournment in this matter is inappropriate and would simply be to delay the inevitable.[29] From the material before the Court I am satisfied that the defendant company is quite unable to pay its debts as they fall due and is insolvent [30] An order for liquidation is appropriate therefore. . A certificate of non- payment of the plaintiff's debt has been filed and a consent of the proposed liquidators provided. [31] That said the following orders are now made: a) An order is made placing the defendant company into liquidation. b) Craig Alexander Sanson and Vivian Judith Fatupaito are appointed liquidators. c) Costs are awarded on this proceeding to the plaintiff the Commissioner of Inland Revenue together with South Ruapehu FM Limited and Snoworld Sports Limited as supporting creditors, on a Category 2B basis together with disbursements as fixed by the Registrar. d) An order is made approving the liquidator's remuneration in accordance with the affidavit of Craig Alexander Sanson filed here and dated 17 July 2008 subject to s. 284 of the Companies Act 1993. e) A further order is made allowing the liquidators to exercise their powers individually pursuant to s. 242 of the Companies Act 1993. f) This order is timed at 11.20 am today, 30 July 2008.'Associate Judge D.I. Gendall'