MANAWATU TAXIS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC PMN CIV-2007-454-163

MANAWATU TAXIS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC PMN CIV-2007- 454-163 15 October 2007IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY CIV-2007-454-163BETWEEN MANAWATU TAXIS LIMITED Applicant AND THE COMMISSIONER OF INLAND REVENUE Respondent Judgment: 15 October 2007 at 3.30 pmJUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by Associate Judge Gendall on 15 October 2007 at 3.30 p.m. pursuant to r 540(4) of the High Court Rules 1985.Solicitors: K A Doherty, Solicitor, Legal and Technical Services, Inland Revenue Department PO Box 1462, Wellington[1] On 22 February 2006, the Applicant was served with a Statutory Demand by the Respondent requiring payment of $13,318.33 for Goods and Services Tax and income tax which was outstanding. [2] The Applicant then filed an application to have the Statutory Demand Set Aside. [3] The Applicant contended that there was a substantial dispute as to whether the debt was due or owing. In particular, the Applicant stated: a) The income tax and GST periods were subject to dispute. b) The Applicant's GST registration was cancelled in respect of the period ended 31 May 2006 and subsequent periods. c) The assessed amounts had been paid by deduction notices pursuant to Section 157 Tax Administration Act 1994. [4] The Respondent replied by submitting that there were no grounds upon which the Statutory Demand could be set aside. In particular, the Respondent contended there was no substantial dispute as to whether or not the debt was overdue. [5] The Application to Set Aside the Statutory Demand came on for hearing before me on 17 July 2007. The Respondent contends that at the time of this hearing $10,905.18 remained outstanding under the Statutory Demand. [6] At the hearing before me I noted at paragraph 14 of the Oral Judgment given on that date:"14. Mr Hill for the company as best as I can tell disputed this (that the amount claimed in the Statutory Demand was due and payable). He endeavoured to argue that when the complex of returns and assessments over what has been a reasonably lengthy period are finally resolved, this shouldshow that the company is not indebted to the Commissioner. Regrettably there was no evidence of any significant kind placed before the Court to support those submissions made by Mr Hill."[7] Notwithstanding this a pragmatic solution was reached which allowed an order to be made setting aside the Statutory Demand subject to the following conditions: a) The Applicant was required to pay $10,905.18 into Court by 31 July 2007, this sum to be held on interest bearing deposit. b) If the Applicant did not pay this sum into Court the Respondent could immediately bring an action to liquidate the Applicant. c) This $10,905.18 was to be held by the Court for no more than 4 months from 17 July 2007. d) Leave was granted for either party at any time on 5 days notice to apply to the Court for further directions with respect to this $10,905.18. [8] So far as the issue of costs was concerned I noted at paragraph 24 of my 17 July 2007 that no submissions were made to me on that date regarding costs and that:"If the parties are unable to reach agreement on this question of costs and the matter is in issue between them, then in this event, memoranda may be filed and I will decide the issue of costs based upon the material which is before the Court."[9] The parties have been unable to agree on the question of costs. Memoranda have been filed and I have now had a chance to consider this material. [10] The Respondent now seeks costs from the Applicant with respect to this matter, calculated on a Category 2B basis, amounting to $4,160.00. The Applicant opposes any order of costs in favour of the Respondent.[11] The starting point in any costs consideration is Rule 47(a) High Court Ruleswhich states:"47 Principles Applying to Determination of CostsThe following general principles apply to the determination of costs: (a) The party who fails with respect to a proceeding or an interlocutory application, should pay costs to the party who succeeds."[12] It is clear from Commerce Commission v Southern Cross Medical Care Society [2004] 1NZLR491 (CA) that there is " a presumption that in the absence of particular reasons to the contrary, costs will follow the event."[13] In the present case it is true that an order setting aside the statutory demand was made. This was made, as I have noted, however, on a clearly pragmatic basis, on the condition that the Applicant paid the $10,905.18 in question into Court and resolved any issue as to payment and its claim over amended tax returns by 17 November 2007. [14] As I noted in my 17 July 2007 Judgment, the Applicant had failed to provide any evidence to the Court substantiating its claim that the taxation debt was disputed. [15] Turning now to the test to be applied in setting aside a statutory demand, inTaxi Trucks Limited v Nicholson [1989] 2NZLR297 (CA) the required test was set out in the following way:"The applicant must show a genuine and substantial dispute as to the existence of the debt, and that it would be unfair – as it usually would be – to allow that dispute to be resolved by the Companies Court rather than by action commenced in the usual way."[16] In my view the Applicant here has entirely failed to meet this test expounded in Taxi Trucks Limited. The Statutory Demand was set aside but only upon conditions and upon the basis I have outlined above. The Respondent effectively succeeded against the Applicant here.[17] I am satisfied therefore that the Respondent is entitled to an award of costs in this matter and that these should be awarded on a Category 2B basis. [18] That said, an order is now made awarding costs to the Respondent against the Applicant calculated on a Category 2B basis, totalling $4,160.00 together with disbursements as approved by the Registrar. 'Associate Judge D.I. Gendall'