MAWHINNEY v THE COMMISSIONER OF INLAND REVENUE [2014] NZHC 60

MAWHINNEY v THE COMMISSIONER OF INLAND REVENUE [2014] NZHC 60 [4 February 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-003985[2014] NZHC 60BETWEEN PETER WILLIAM MAWHINNEYPlaintiffAND THE COMMISSIONER OF INLANDREVENUEDefendantHearing: (On the papers)Judgment: 4 February 2014JUDGMENT OF VENNING J(on application for review of Registrar's decision)This judgment was delivered by me on 4 February 2014 at 4.45 pm, pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCopy to: PlaintiffCommissioner of Inland RevenueIntroduction[1] Peter William Mawhinney as trustee of the Forest Trust seeks to review the decision of the Registrar declining to waive a filing fee on a proposed amended statement of claim.Background[2] The proposed amended statement of claim is dated 30 November 2013. It confirms that although Mr Mawhinney is named as plaintiff he sues as a plaintiff as trustee of the Forest Trust.[3] On 4 December 2013 the Registrar declined the application for fee waiver asthe information provided did not properly relate to the Trust's financial position.[4] Mr Mawhinney then filed a memorandum in response on 5 December 2013 in which he submitted the only asset of the plaintiff was a block of land, that the land was subject to two mortgages with the result that the Forest Trust, on his calculations, had a negative equity of $6,720,835.[5] The Registrar then issued a further decision on 20 December 2013 declining the application for fee waiver. He was not satisfied there was genuine undue hardship nor was the Registrar convinced about the reliance on the second mortgage of $10 million to Otium Trustee Limited as Mr Mawhinney was both a director and shareholder of that company.Review[6] The plaintiff now seeks to review that decision. In support of the applicationfor review he notes that Otium Trustee Limited has been struck off the company'sregister; that while Mr Mawhinney used to hold a 0.1% share in the company Otium Trustee Limited, that was as a trustee for a separate unconnected trust being the Dilworth Trust. He then referred to allegations in separate proceedings by the Auckland Council that Forest Trustee Limited is insolvent. Finally he makes the point that:A mortgage is a charge on land – it is not money. The existence of a mortgage to a company in which the plaintiff used to hold a 0.1% share is not an indication that the plaintiff is able to pay filing fees, especially in a proceeding that does not involve that company or any successor.[7] Mr Mawhinney submits in his memorandum that his claim against the defendant is for in excess of $700,000 GST, the inference being that if waiver is not granted the plaintiff will not be able to pursue that claim which will be a hardship.Decision[8] A fee waiver may be granted in accordance with the criteria set out in cl 19 of High Court Fees Regulations 2013 if a plaintiff is unable to pay the fees sought to be waived. The criteria in cl 19(a) and (b)(i) and (ii) do not apply. The only issue is whether it can be said the plaintiff would otherwise suffer undue financial hardship if required to pay the fee.[9] The Registrar considered there was insufficient evidence for him to come to that conclusion. I agree.[10] There is an obligation on the party applying for a fee waiver to make full disclosure of assets and liabilities. The memorandum by Mr Mawhinney on behalf of the Forest Trust Limited is woefully inadequate. The Registrar was justified in declining the application on that basis alone.[11] However, even taking account of the matters set out in Mr Mawhinney'smemorandum a number of issues arise. First, the Trust owns land which has a valuefor rating purposes of $4,510,000. Mr Mawhinney's memorandum refers to twomortgages over the property. He deducts from the equity of the property the priority amount stated in the mortgages. The priority amount is clearly not the same as what amount may have been advanced under the mortgages. The only detail provided of loan advances is a loan agreement to support the first mortgage of $420,000. That is quite different to the priority amount of $840,000.[12] Mr Mawhinney then seeks to add interest on that sum of $420,000 to the priority amount. That is a clearly incorrect approach.[13] The second mortgage registered on the title is in the name of Zebra Crossings Trading Limited and Peter William Mawhinney. There is no proper explanationprovided as to how or why that mortgage is apparently now held by Otium TrusteeLimited. There is no information as to how Otium Trustee has now come to hold themortgage. There is no information provided in relation to the extent of the moneyadvanced by the now second mortgagee to the proposed plaintiff. Further, OtiumTrustee Limited is apparently struck off the register. If, accepting Otium Trusteemay now hold the second mortgage, and the company has been struck off, themortgage will now vest in the Crown.1 There is no information before the Court asto whether the Crown maintains a claim in relation to that mortgage or its position.If, on the other hand, it is intended at some future date to apply to have the companyreinstated then Mr Mawhinney's interest as a shareholder in the company wouldbecome relevant.[14] The information provided to the Court is entirely inadequate and justified the declinature of the fee waiver.[15] The plaintiff also fails to satisfy the Court that there will be undue hardship if it is required to pay the filing fee.[16] The application for review is dismissed.__________________________ Venning J1 Companies Act 1993, s 324.