CANDLISH v THE COMMISSIONER OF INLAND REVENUE [2019] NZHC 1126

CANDLISH v THE COMMISSIONER OF INLAND REVENUE [2019] NZHC 1126 [22 May 2019]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2018-485-459[2019] NZHC 1126UNDER the Insolvency Act 2006IN THE MATTER of the bankruptcy of Jack Charles CandlishBETWEEN JACK CHARLES CANDLISHApplicantAND THE COMMISSIONER OF INLANDREVENUERespondentHearing: 21 May 2019Counsel: A Goble for applicantD Padmanabhan for respondentD Dingwell for Official AssigneeMinute: 22 May 2019JUDGMENT OF ASSOCIATE JUDGE JOHNSTON[1] On 12 March 2019 this Court made an order bankrupting the applicant,Mr Jack Candlish. The order was made on the application of the respondent, theCommissioner of Inland Revenue. Mr Candlish now applies for an order annullinghis bankruptcy. This application is made pursuant to s 309(1)(a) of the Insolvency Act2006 under which the Court may annul an adjudication that it considers should nothave been made.[2] On what basis does Mr Candlish say that the order should not have been made?It is not because he has never had an outstanding tax liability. It would seem that hestopped paying taxes in May 2017 and by the time the Commissioner took steps hehad amassed a tax liability of over $63,000. It is not because once the Commissionerinitiated recovery proceedings he immediately paid the outstanding tax. By the timethis proceeding was heard, to his credit, he had paid over $33,000, but still owed over$40,000. The reason is that when the Commissioner eventually managed to serve theoriginating documentation on him, she served an out of date summons. Service waseffected on 30 January 2019. The summons informed Mr Candlish that the applicationwould be heard on 14 November 2018. Instead of querying that, Mr Candlishapparently took the view that the obvious error entitled him to further time to repaythe outstanding tax. Again, to his credit, he has done that. He has paid off all but$699.49 and the Commissioner is not going to pursue that.[3] The Commissioner does not oppose Mr Candlish's application for an orderannulling his bankruptcy. Why should she? He has paid virtually all of the outstandingtax.[4] But Mr Candlish seeks costs totalling $5,240.50 together with disbursementsagainst the Commissioner.[5] Mr Candlish's argument is that this proceeding ought to be viewed in isolationand that the cause of him having to incur costs in making this application was theCommissioner's administrative error in serving a summons with an incorrect date onit.[6] I do not accept that it is realistic to view this proceeding as hermetically sealedfrom the background against which it arises. The obvious counterpoint to theargument advanced on Mr Candlish's part is that, but for his defaulting on hisobligations from May 2017, the Commissioner would not have had to pursue recoveryproceedings at all and no one involved would have incurred any costs.[7] Moreover, when the issue became apparent to the Commissioner, she offeredto make the application for annulment and incur the cost of doing so. Mr Candlishelected not to take that offer up because he regarded it as being too uncertain.[8] Finally, the reality is that it is only because Mr Candlish has paid theoutstanding tax that he is able to make this application. Had he not done so, then thisapplication would have been an exercise in futility because whilst the Court may havemade the order annulling the bankruptcy it would simply have set the matter down fora further hearing and made a corresponding order.[9] Against that background, my judgment is that Mr Candlish's application forcosts is without substantial merit.[10] The Official Assignee who has been served with the originating documentationtakes a neutral position insofar as Mr Candlish's substantive application is concerned,but applies pursuant to s 309(5)(a) of the Act for an order entitling her to recover hercosts from the Commissioner. For the Official Assignee, Mr Dingwell indicated thatshe is seeking an order for the payment of $8,577.10.[11] The Official Assignee's application has some force. She was of courseunaware of any defect in the process, and has undoubtedly incurred costs in relationto the administration of the bankrupt estate.[12] The Commissioner's response is that the Official Assignee's costs areexcessive. She criticises the Official Assignee for incurring costs " correspondingwith [Mr Candlish] rather than administering the estate". I should have thought thatthe Official Assignee's primary task at the outset of an administration is to extract whatinformation she can from the bankrupt. I see no foundation for the accusation that theOfficial Assignee's costs are excessive.[13] Notwithstanding a lingering concern as to exactly what is achieved byawarding costs between two Crown agencies, I propose to make the order sought bythe Official Assignee.[14] On the above bases:(a) the applicant's bankruptcy is annulled pursuant to s 309(1)(a) of theInsolvency Act 2006;(b) the applicant's application for costs is declined;(c) I order that the respondent pay the Official Assignee $8,577.10 onaccount of her costs.Associate Judge JohnstonSolicitors:Mahony Horner Lawyers, Wellington for applicant