WESTERN JOINERY LIMITED v COMMISSIONER OF INLAND REVENUE [2017] NZHC 3297

WESTERN JOINERY LIMITED v COMMISSIONER OF INLAND REVENUE [2017] NZHC 3297 [22December 2017]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-510[2017] NZHC 3297UNDER the Companies Act 1993, Section 290BETWEEN WESTERN JOINERY LIMITEDApplicantAND COMMISSIONER OF INLANDREVENUERespondentHearing: On the papersAppearances: R J Macdonald for the ApplicantS J Leslie for the RespondentJudgment: 22 December 2017JUDGMENT OF ASSOCIATE JUDGE R M BELLThis judgment was delivered by me on 22 December 2017 at 1:30pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors:MBC Law Limited (John Macdonald), Auckland, for the ApplicantCrown Law (Sarah Leslie), Wellington, for the Respondent[1] The Commissioner of Inland Revenue seeks leave under s 56(3) of the SeniorCourts Act 2016 to appeal against my decision of 6 October 2017 in which I declinedto change my decision of 21 July 2017 extending the time to comply with the statutorydemand for $201,692.76 served on Western Joinery Ltd on 15 March 2017. On22 March 2018 the Court of Appeal is to hear Western Joinery Ltd's appeal againstAssociate Judge Christiansen's judgment upholding the statutory demand.[2] I directed that I would decide the leave application on the papers because therewas no time available to hear the leave application during the first quarter of 2018.The Commissioner filed submissions on 20 December 2017. I directed WesternJoinery Ltd to file submissions by 21 December, but by agreement the parties soughtan extension of time. Having read the Commissioner's submissions, I do not need tohear from Western Joinery Ltd. It is desirable to give this matter a prompt decision.Procedural history[3] On 28 March 2017, Western Joinery Ltd applied to set aside theCommissioner's statutory demand dated 7 March 2017 served on 15 March 2017.Associate Judge Christiansen dismissed the application on 16 June 2017.1 Heextended the time to comply with the statutory demand to 11:45am on 7 July 2017when the case would be called in the miscellaneous companies list. The parties fileda joint memorandum dated 4 July 2017. The applicant had given instructions to appealand senior counsel in Wellington had been instructed. The memorandum advised thatthe parties had agreed that pending the outcome of the appeal the Commissioner wouldtake no further steps in the proceeding and would not enforce the demand. Anadjournment was sought pending the lodging of an appeal. Associate JudgeChristiansen adjourned the matter to 21 July 2017 at 11:45am. While JudgeChristiansen did not say so expressly, time to comply with the statutory demand wasextended, given the Commissioner's indication that she would not enforce thedemand. If time had not been extended but the time for complying with the demand1 Western Joinery Ltd v Commissioner of Inland Revenue [2017] NZHC 1293.had expired, the Commissioner would now be out of time under s 288(1) of theCompanies Act to rely on the presumption of insolvency.2[4] When the matter was called before me in the miscellaneous companies list on21 July 2017, Western Joinery Ltd sought an extension of the time to comply with thestatutory demand. The Commissioner objected. I heard submissions. Neither sidefiled evidence or objected to a lack of evidence by the other side. I extended time forcomplying with the statutory demand pending the appeal. I said:3[7] I am adjourning this matter to 6 October 2017. That is to allow mattersto be reviewed. I wish to be satisfied that the appeal is being prosecuted withdue diligence and that steps have been taken to obtain a prompt hearing datein the Court of Appeal. I make an order under s 290(3) of the Companies Actextending the time to comply with the statutory demand pending further orderof the court.The Commissioner has not sought leave to appeal that decision. She would be out oftime if she were now to seek leave.[5] At the call on 6 October 2017 the Commissioner objected to time beingextended to comply with the statutory demand. She said that Western Joinery Ltd hadnot progressed its appeal in a meaningful way. She also said that she stood to beprejudiced if she could not start a liquidation application immediately because thespecified period for voidable transactions is calculated by reference to the two yearsbefore the liquidation application is filed, not from any decision on a statutory demandapplication.4 Neither side filed any evidence for that call. While there had been someslippage, Western Joinery Ltd had met the deadline for filing the case on appeal in theCourt of Appeal. I declined to revisit my decision of 21 July extending time to complywith the statutory demand.[6] The Commissioner filed the leave application late. The parties agreed that timefor applying for leave was to be extended.52 The presumption runs for only 30 working days from the last day for compliance.3 Minute of 21 July 2017.4 Companies Act 1993, s 292(5).5 Minute of Hinton J dated 13 November 2017.[7] For context, the decisions of 21 July and 6 October were made in weeklyliquidation lists. Over the last year and longer the number of cases in a liquidationmorning in Auckland has been between twenty and thirty. That is because of the largenumber of liquidation applications brought by the Commissioner. She is by far theheaviest user of the liquidation court. Cases must be heard and disposed of promptly.Directions are frequently given on oral applications and submissions: adjournments,restraints on advertising, extensions of time for filing defences, substitution ofplaintiffs and the like. It is standard to give immediate oral rulings. This relativelyinformal approach allows for the efficient disposal of the court's business. Thatgenerally works for the Commissioner. An insistence on a more formalistic approachis likely to slow the court's process. On both calls I gave oral rulings after hearingcounsel's submissions.The proposed appeal[8] The Commissioner wishes to appeal only against the decision of 6 October2017. Her proposed grounds of appeal are:[a] I erred in finding that s 290(3) gave the court power to extend the timefor complying with the statutory demand pending an appeal to theCourt of Appeal.[b] Alternatively, if there is jurisdiction:[i] I erred in finding that Western Joinery Ltd had prosecuted itsappeal with due diligence;[ii] I failed to properly assess the balance of convenience; inparticular, I should have required Western Joinery Ltd toprovide submissions or adduce evidence in support of itsapplication for extension of time; I did not assess the merits ofthe appeal; and I did not have regard to prejudice to theCommissioner;[iii] I erred in finding that the Commissioner was not disadvantagedby her inability to file a liquidation proceeding relying on thefailure to comply with the statutory demand;[iv] I erred in finding the prospects of recovery under the voidabletransaction provisions of the Companies Act were unlikely; and[v] I erred in having regard to a proposed shortening of the two-year voidable preference period under s 292.The Commissioner says that leave to appeal should be granted because my decisionof 6 October 2017 has many errors of law and it undermines the statutory scheme inPart 16 of the Companies Act and the procedures under Part 31 of the High CourtRules.Principles on applications under s 56(3) of the Senior Courts Act[9] It is common ground that my decision of 6 October 2107 was interlocutory andleave to appeal is required under s 56(3). There is guidance on applications for leaveto appeal from interlocutory decisions in cases under former s 71A of the DistrictCourts Act 1947, under which leave was required for an appeal to this court from aninterlocutory decision of the District Court. In Sandle v Stewart, Somers J said:6The other features concerns leave. The purpose of this is to limit the caseswhich may go on appeal in the interests of finality of litigation and theworkload of the High Court, while preserving the integrity of the law and theinterests of justice. That is shown by the principles on which leave is given –where an issue of principle is concerned, where really greater sums areinvolved, where on the face of it an appeal is likely to succeed.[10] In Cummings v Vallant, District Court Judge Hubble said:7The Court must consider whether the interests of justice require the grantingof leave in all the circumstances of the case including:(a) the history of the matter;(b) the conduct of the parties;6 Sandle v Stewart [1982] 1 NZLR 708 (CA) at 715.7 Cummings v Vallant [1997] DCR 401.(c) the nature of litigation;(d) the needs of the applicants and the effect that granting of leavewould have on other persons;(e) any prejudice that may have been incurred; and(f) subsequent events and merits.This case[11] In my ruling on 21 July 2017, I extended time to comply with the statutorydemand pending the appeal. I said that I applied s 290(3) but dealt with the matter asif it were an application for interim relief under r 12 of the Court of Appeal (Civil)Rules. The purpose of the call on 6 October was to review whether Western JoineryLtd had prosecuted its appeal with due diligence. I did not intend to decide afreshwhether Western Joinery Ltd should have interim relief. The question whetherWestern Joinery Ltd had got on with its appeal was a live issue on 6 October. It hadto explain its slippage, but I was satisfied that no harm had been done. A decision notto withdraw interim relief despite alleged slippage is not an issue to grip the Court ofAppeal. That procedural ruling does not warrant an appeal.[12] The Commissioner tries to make more of my decision of 6 October. In hereyes my decision can be appealed on the question whether it was correct to giveinterim relief at all, not just on whether Western Joinery Ltd had been slow in itsappeal. She did raise an argument as to loss of opportunity to attack voidabletransactions in the hearing. I did not consider that there was anything in the pointbecause of the effect of the Supreme Court's decision in Allied Concrete Ltd vMeltzer.8 I declined to revisit my decision to extend time. The Commissioner seemsto be using my refusal to revisit my earlier decision as grounds on which to attack themerits of the earlier decision. That is an indirect attempt to get around the difficultythat the Commissioner is well out of time to challenge the decision of 21 July.[13] The Commissioner wishes to run new matters that were not raised in thehearings on 21 July and 6 October. She says that there is no power to extend timeunder s 290(3) after the court has given a final decision. That is a question of law,8 Allied Concrete Ltd v Meltzer [2015] NZSC 7, [2016] 1 NZLR 141.which may be considered on appeal even if it was not raised at first instance. But shealso wishes to raise factual matters – evidence of further investigations by the InlandRevenue after 6 October. These are said to show ongoing defaults by Western JoineryLtd. That will be relevant to whether interim relief should have been ordered. Thiswill involve the Court of Appeal deciding itself as if were the court of first instancewhether interim relief should have been ordered because of evidence not available tothe court of first instance. So long as the new evidence is admissible as fresh andcogent, that approach may be open when an appeal is on the substantive merits, butless so when a procedural ruling is under appeal. That would allow the appeal processto be used for ongoing review of procedural directions in the light of new informationas it comes to hand. That is not a good use of the Court of Appeal's resources.[14] The attack on the decision to give interim relief comes to these points:[a] Section 290(3) is not the right power. Rule 12(3) of the Court ofAppeal (Civil) Rules should have been used.[b] Western Joinery Ltd should have made a formal application, so thatevidence could have been exchanged.[c] My exercise of the discretion was wrong.[15] A decision from the Court of Appeal on the scope of s 290(3) would be usefulguidance. But even if the Commissioner is correct on that point, it will take the appealonly so far. It is not in dispute that there is power to give interim relief pending appeal.I referred to r 12 in my decision of 21 July. The matter will come down to whetherand how interim relief should be given. If relief can be given only under r 12, it ishard to see the Court of Appeal setting aside the order only because of a mistakenreliance on s 290(3).[16] The Commissioner did not take the point at either hearing that Western JoineryLtd should have made an interlocutory application for interim relief. She was contentto deal with the matter informally when it was called each time.[17] As to the exercise of the discretion, the principles for interim relief pendingappeal are well established and have been consistently applied by the Court ofAppeal.9 There is no suggestion that those principles need reconsideration. TheCommissioner's case seems to be that in the light of new information my decision wasplainly wrong. Even if that is arguable, it is not a good use of the Court of Appeal'sresources to run an ongoing review of procedural rulings, as I have held above.[18] Any appeal will be moot. The earliest that the Court of Appeal could hear anappeal by the Commissioner is when it hears Western Joinery Ltd's appeal. On appeal,the Court of Appeal will have all the powers of this court on an application under s 290of the Companies Act. If the appeal is successful, my orders extending time to complywith the statutory demand will fall by the wayside. If the appeal is unsuccessful, theCourt of Appeal is likely to make fresh orders under s 291. Either way, the court willnot have to consider whether it was appropriate to extend time to comply with thedemand pending the appeal. Because the appeal will be moot, there is no reason totrouble the Court of Appeal with it.Result[19] Overall I am not satisfied that this is an appropriate case to give leave under s56(3). Accordingly, leave to appeal is declined.______________________________Associate Judge R M Bell9 Keung v GBR Investment Ltd [2010] NZCA 396.