K J CUMMINGS LIMITED V THE COMMISSIONER OF INLAND REVENUE CA CA178/03

K J CUMMINGS LIMITED V THE COMMISSIONER OF INLAND REVENUE CA CA178/03 28 June 2004IN THE COURT OF APPEAL OF NEW ZEALAND CA178/03BETWEEN K J CUMMINGS LIMITED Appellant AND THE COMMISSIONER OF INLAND REVENUE Respondent Hearing: 28 June 2004 Coram: Anderson P Hammond J William Young J Appearances: R J Warburton for Appellant C K Wood and R J Wallace for Respondent Judgment: 28 June 2004JUDGMENT OF THE COURT DELIVERED BY ANDERSON P[1] This is an appeal against a judgment of Associate Judge Faire delivered in the High Court at Auckland on 29 August 2003 declining an application by the appellant pursuant to R700K of the High Court Rules for an order staying liquidation proceedings. Those proceedings have been brought by the Commissioner in respect of alleged debts totalling some $410,000 in respect of income tax and penalties for the periods ended 31 March 1981, 1982 and 1983. A demand under s289 of the Companies Act 1993 was served on the appellant without producing any payment. The tax sought was the subject of objections by the appellant. These were determined in favour of the Commissioner by the Taxation Review Authority on 23 August 1990. An appeal to the High Court by the company was dismissed on 14 November 1997. An appeal to this Court was deemed abandoned through non- compliance with the Rules as to time.[2] It is argued on behalf of the company that the tax is not payable by it having regard to the operation of s99(3) and (4) of the Income Tax Act 1974. The Associate Judge found in effect that there was no adequate factual basis before the Court to render such an argument feasible, but that of course does not exclude the pursuit of the same argument in the substantive proceedings for liquidation. [3] There is at the threshold a jurisdictional barrier to the success of the appeal. This is that the company has been removed from the Register. The Court has been informed from the Bar, and this is not disputed on behalf of the company, that the company was removed on 5 September 1998 and has not been restored. It cannot therefore commence or continue legal proceedings unless it should be restored. Restoration is an administrative act and not one which this Court can purport to carry out. [4] Even if there were no such technical barrier the appeal would fail before us on its merits. Usually an application for stay is approached on the basis not only that a debt is genuinely disputed but that publication and pursuit of the liquidation of proceedings would operate unfairly in its impact on the commercial reputation of the company itself or for some other functional reason. We assume from the fact that this company has not been on the Register now for some six years that it is not trading and it therefore has no commercial reputation to be affected in such a way that might warrant a grant of stay on a disputed debt. [5] It was submitted by Mr Warburton that liquidation proceedings are inappropriate in the particular case. This raises the question as to what more appropriate mechanism is available to the Commissioner in the circumstances of this case to recover a substantial debt which has been adjudicated upon by the Taxation Review Authority and the High Court. Technically the Commissioner could seek to obtain summary judgment or judgment in civil proceedings generally, but the only issue would be whether the assessed tax has in fact been paid or that the debt it represents has otherwise been discharged. The argument that this is the outcome of the operation of s99(3) and (4) of the Income Tax Act is relied upon in the present proceedings as it would be in such other proceedings, and can be more expediently dealt with on the current application for liquidation. As we have mentioned, thepursuit of that cannot affect the company in its commercial reputation or otherwise in respect of any trading matter. [6] For the reasons given by the Associate Judge, and the additional reasons indicated in the course of this judgment, we hold that the appeal must be and it is dismissed. [7] The question of costs is problematic when the company is technically out of existence at present. We think it appropriate therefore, to reserve the question of costs. Leave to the parties to apply should they be unable to resolve it in some pragmatic manner.Solicitors: Warburtons, Auckland for Appellant Crown Solicitor, Auckland for Respondent