THE COMMISSIONER OF INLAND REVENUE v D P ALAM HORTICULTURE LIMITED [2015] NZHC 3166

THE COMMISSIONER OF INLAND REVENUE v D P ALAM HORTICULTURE LIMITED [2015] NZHC 3166 [11 December 2015]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYCIV-2015-441-26[2015] NZHC 3166UNDER The Companies Act 1993IN THE MATTER OF Liquidation proceedingsBETWEEN THE COMMISSIONER OF INLANDREVENUEPlaintiffAND D P ALAM HORTICULTURE LIMITEDDefendantHearing: 10 December 2015Counsel: M Mitchell for the PlaintiffR Hill for the DefendantM J Wenley for K J Williams, a supporting creditorJudgment: 11 December 2015ORAL JUDGMENT OF ASSOCIATE JUDGE SMITH[1] The claim in this case commenced on 27 March 2015. The Commissioner seeks a liquidation order based on a debt which was then said to be $292,950.21.[2] The proceeding was served on the defendant on 10 April 2015 and was first called in Court on 14 May 2015. There have been a number of adjournments since then. The defendant filed, on 9 October 2015, an application for extension of time to file a statement of defence. No supporting affidavit was filed with the application.[3] When the case was first called on 14 May 2015, Mr Hill appeared for the defendant, and advised that outstanding returns were either filed or in the process of being filed. Mr Williams had filed a notice of intention to support the liquidation claim, relying on a debt of $26,489.62. The application was adjourned by consent to 9 July 2015.[4] On 9 July 2015 a further adjournment was sought for the Commissioner toconsider a large volume of further material which the defendant's accountants hadproduced. The adjournment was not opposed, and the matter was adjourned to 17 September 2015.[5] When the case was called on 17 September 2015 the defendant sought a further adjournment. Again, it was not opposed, and the claim was adjourned to 12 October 2015.[6] When the matter came before me on 12 October 2015, the amount of theCommissioner's claim, with penalties and interest, had risen to approximately$440,000. The defendant had filed his application to extend time for filing a defence only three days before that hearing. I nevertheless adjourned the matter to today, for the purpose of allowing the defendant to put the picture properly before the Court. I noted that the application for extension of time to defend could then be dealt with on the basis of sworn evidence as to the defendant's financial position. I made variousdirections for the hearing on the basis that if the application for an extension of time to defend were refused, the Court would proceed immediately to deal with the liquidation claim. One of those directions was that the defendant was to file its affidavits by 2 November 2015.[7] No affidavits have been filed by the defendant, and there is no swornevidence before the Court on the defendant's financial position. Mr Hill consideredthat he may have to withdraw as counsel for the defendant, but he received late instruction and filed a memorandum attaching certain correspondence between thedefendant's accountant and the Commissioner. The Commissioner objected to thefiling of that material.[8] The material attached to the memorandum submitted by Mr Hill does not appear to show any prospect of immediate payment of the amount claimed by the Commissioner. The main bone of contention appears to be over withholding tax credits – the defendant says that it should be entitled to an immediate credit of approximately $130,000 for withholding tax credits. Ms Mitchell for the Commissioner submits that that is a matter to be resolved at the end of the financialyear, and that there is no certainty over the amount of any credit that would then be assessed.[9] Mr Hill conferred with the defendant's accountant (who was present in Court)and advised that his expectation was that the withholding tax credit might double by the end of the financial year, which would produce a figure of approximately$260,000 which I apprehend would be available to go towards the Commissioner'sclaim.[10] However a summary of the present claim which has been produced by the Commissioner shows that the debt has now risen to $479,228.10. The arrears appear to go back to at least May 2013, and it seems clear that defaults by the defendant in meeting its tax obligations go back for some years.[11] It was for the defendant to show that it has a defence which ought to be heard, notwithstanding its lamentable failure to comply with Court timetable directions and its particular failure to put before the Court any sworn evidence of the kind which might have persuaded the Court that the defendant is solvent, or at least has good prospects of paying off the debt within the near future. I bear in mind that this matter has now been before the Court for approximately seven months already, and the defendant has had a substantial period of time (far longer than that allowed to many defendants in this Court) to put its house in order with the Commissioner.[12] I acknowledge that however egregious a defendant's procedural defaults mayhave been, if there is sufficient merit put before the Court to show that there is a defence which ought to be heard, then in an appropriate case the justice of the case might require the procedural defaults to be put on one side, perhaps subject to questions of costs. In this case, however, there is nothing before the Court which gives the Court any reasonable ground for belief that the defendant will be able to pay the sum claimed by the Commissioner as indicated above. It appears, on a best case, that there might be a credit of $260,000 available at the end of the financial year, but that would appear to fall well short of where the Commissioner's claimnow lies.[13] I note too Mr Wenley's advice that the supporting creditor, with a debt of$26,489.62, apparently remains unpaid notwithstanding that its notice of appearance in support was filed as long ago as 12 May 2015. That, coupled with the defendant'spast failures to meet its tax obligations, suggests that the defendant is indeed insolvent as the Commissioner claims.[14] Weighing those factors, I am not satisfied (particularly in the absence of any sworn evidence) that the defendant has made out a case for the extension of time which is sought. That application is accordingly dismissed.[15] Although I indicated to the parties on 12 October 2015 that the Court would deal with the liquidation claim immediately if the application for extension of time were dismissed, Mr Hill has mentioned to me in the course of his submissions today that, although the defendant does not have much in the way of available assets, there may be a prospect of borrowing on the security of property owned by a trust or trusts. I am also mindful of the fact that the defendant is a substantial employer in the region, and that if there is any prospect of rescue its function as a substantial employer is a factor pointing in favour of further time being allowed to refinance and pay the debt. For that reason, I will not make a liquidation order today, but will adjourn the matter to 10am on 18 February 2016. That should give the defendant reasonable time to see if there is a prospect of refinancing, and to work out an appropriate arrangement to settle the matter with the Commissioner if that is possible. The defendant should be aware, however, that the prospects of any further adjournment being granted after 18 February 2016 if the matter has not been resolved by then, must be regarded as low.Associate Judge Smith