Commissioner granted leave to appeal trustee company liquidation case
2011 case note - CIR granted leave to appeal trustee company liquidation case - extension of time to appeal, liquidation.
The Commissioner successfully applied to the Court of Appeal for an extension of time to appeal a decision by the High Court not to liquidate Newmarket Trustees Limited, a trustee company.
Impact of decision
The Commissioner can now proceed with his substantive appeal of CIR v Newmarket Trustees Ltd.
The present case stems from an application by the Commissioner to have Newmarket Trustees Limited ("Newmarket"), as trustee of the Southern Lights Trust, placed into liquidation following the expiry of a statutory demand for unpaid taxes.
Following the Newmarket liquidation hearing, the High Court declined to liquidate the company on the basis that, among other things:
- no benefit would arise from liquidation because Newmarket had no assets
- the Commissioner did not press for investigation as a ground for a liquidation order
- liquidation would be costly for Newmarket, as it was a trustee for numerous other trusts
- Newmarket should have the opportunity to seek adjustments of the Commissioner's assessments.
The Commissioner decided to appeal the High Court's decision (CIR v Newmarket Trustees Ltd HC Auckland CIV-2010-404-003913, 22 February 2011) not to liquidate Newmarket, and a notice of appeal was filed with the Court of Appeal within the required timeframe.
However, the notice of appeal was served on Newmarket approximately a day and a half late, although attempts were made to serve Newmarket at its registered office during that time. On the last day for filing, Newmarket's solicitor was advised that an appeal had been filed.
The Commissioner filed an application for an extension of time to appeal, which was subsequently opposed by Newmarket on the basis that the Commissioner's substantive appeal was hopeless.
The Court of Appeal considered that because:
- the delay in service was minimal
- the problem with service arose as a result of a genuine mistake, and
- there was no suggestion that the delay in service caused Newmarket any prejudice
the only reason for not granting an extension of time would be if the Commissioner's substantive appeal was "hopeless".
Although the Court of Appeal noted that it was not in a position to examine the merits of the substantive appeal in any detail, based on the material before it, the Court of Appeal decided that "it is plain that this is not one of those cases where the appeal is so hopeless that an extension of time should be declined".
As a further reason for allowing an extension of time in this case, the Court of Appeal noted that it might also be useful for it to consider the Chester Trustee Services Ltd v CIR  1 NZLR 395 (CA) decision in applying a court's discretion to make an order for liquidation.
In respect of costs, the Court of Appeal followed the case of My Noodle Ltd v Queenstown Lakes District Council  NZCA 224 (CA) and awarded costs to the Commissioner given that it should have been clear to Newmarket that in the circumstances an extension of time would be granted.
Companies Act 1993, Tax Administration Act 1994