Application to stay judgment pending appeal dismissed

Summary

The plaintiffs had previously unsuccessfully applied to have the Commissioner of Inland Revenue's ("the Commissioner") statutory demands set aside. This application was to stay the orders of the judgment of Faire AJ, pending the hearing and determination of an appeal. The plaintiff's application was refused.

Impact of decision

This judgment sets out the applicable law and the factors to be balanced when considering whether a stay of a proceeding should be ordered.

This judgment also confirms the position that due to the debt being owed and not paid within the ordered time frame of 10 working days by the plaintiffs, the Commissioner is entitled to make an application for the liquidation of the companies.

Facts

On 12 September 2013, Faire AJ declined the plaintiffs' application to set aside the statutory demands. Faire AJ ordered that the plaintiffs pay the sums claimed in the respective statutory demands and if they failed to make the required payments within ten (10) working days of the judgment, the Commissioner could make an application to put the companies into liquidation.

The plaintiffs have filed an appeal against the judgment of Faire AJ based on the grounds that one, the tax liability of the plaintiffs has not been finally determined as there is an outstanding application by the plaintiffs to set aside the 2004 Venning J decision Accent Management Ltd v Commissioner of Inland Revenue (2004) 22 NZTC 19,027, and two, that the Commissioner is not a creditor.

The plaintiffs now apply for orders seeking to:

1. extend the time for payment until ten (10) working days after the Court of Appeal has delivered its decision; or alternatively
2. stay the orders of the judgment of Faire AJ, pending the hearing and determination of the appeal.

Decision

Extension of time pursuant to r 1.19 of the High Court Rules

The Court noted that this matter was considered by Bell AJ, who made an order on 31 May 2013 as follows:

• I make an order under s 290(3) of the Companies Act 1993 extending the time for compliance with the statutory demands until a decision is given on the application under s 290 to set aside the statutory demands.

Faire AJ held that if the judgment of 12 September 2013 was to be stayed, pending the hearing of the appeal, the order made by Bell AJ would apply and time would be extended by his order without the need for the possible and questionable intervention of rule 1.19(2) of the High Court Rules.

Stay of the orders sought in reliance on r 12 of the Court of Appeal (Civil) Rules 2005

Faire AJ was required to balance the two principles set out in Duncan v Osborne Building Ltd (1992) 6 PRNZ 85 (CA) at [87], as well as consider the matters set out in Keung v GBR Investment Ltd [2010] NZCA 396, [2012] NZAR 17.

After considering these matters, Faire AJ found as follows:

1. The status of the plaintiffs will ultimately depend on whether an application to appoint a liquidator is filed and its outcome. The right of appeal will not be rendered nugatory by a refusal of a stay.
2. There is a risk of prejudice and injury to the Commissioner if the stay is granted; if the liquidation of the companies is the ultimate outcome, any delay will prejudice the remedies available to a liquidator and therefore the benefits that might accrue to creditors.
3. The public interest favours the refusal of a stay. Faire AJ made this conclusion after hearing the submissions of counsel for the Commissioner. The Commissioner submitted that there was a public interest in maintaining the integrity of the tax system, and in not allowing meritless litigation to consume public resources and delay the collection of tax that has been determined to be due after taxpayers have exhausted their challenge rights.
4. The plaintiffs have no intention of paying or providing security for the debt, despite the Supreme Court judgment. The balance of convenience favours a refusal of a stay in this case.
5. The debt arose following the upholding of decisions by the High Court, Court of Appeal and Supreme Court. The debt was accordingly due on the thirtieth day following completion of the final appeal in relation to the challenge to the assessment. This first ground of the plaintiffs' appeal is not soundly based.
6. The new ground sought to be introduced, that the Commissioner is not a creditor, is a novel argument. A final view on the issue is not expressed and the plaintiffs will need leave from the Court of Appeal to raise this further ground. This ground is not a significant factor in determining whether a stay should be granted in this case.

Faire AJ accordingly held that a stay, pending the appeal, should not be granted. The plaintiffs' application was refused and costs were reserved.