Court of appeal denies application for interim relief
2015 case note - Court of Appeal denies an application for interim relief from a bankruptcy proceeding.
Court of Appeal (Civil) Rules 2005
The Court of Appeal dismissed Mr John George Russell's ("Mr Russell") application to the Court of Appeal for a stay/grant of interim relief of the Commissioner of Inland Revenue's ("the Commissioner") bankruptcy proceeding.
Mr Russell's judicial review of the Commissioner's decision to reject his proposal for instalment payments was struck out (Russell v Commissioner of Inland Revenue  NZHC 754) and he appealed to the Court of Appeal.
This judgment relates to Mr Russell's application to the Court of Appeal for a stay or interim relief (pending the outcome of his appeal of the High Court decision) to restrain the Commissioner from commencing bankruptcy proceedings against him.
Mr Russell had expressed that he could not meet his obligations but offered to pay all that he can. Mr Russell's initial proposal was to pay instalments of $1,000 per week for the rest of his life, leaving the Commissioner to pursue any claim for the remaining tax against his estate. A variant was also proposed by Mr Russell under which he offered to pay a lump sum of $150,000, which he would borrow against future earnings.
The Commissioner did not accept that Mr Russell could pay no more than he has offered, and therefore rejected both proposals. She now seeks to initiate bankruptcy proceedings against Mr Russell.
The Court of Appeal found that granting Mr Russell a stay or interim relief was not necessary to preserve his position:
- Firstly, the Court found no reason to presume that the High Court will, or must, deal with the application for adjudication in bankruptcy before Mr Russell's appeal is heard on 24 June 2015.
- Secondly, the Court agreed with the Commissioner that Mr Russell's position can be protected in the bankruptcy proceedings. The Court highlighted that the High Court has jurisdiction to halt the bankruptcy proceeding for such period as it thinks fit. The Court added that the High Court is less constricted when managing the bankruptcy proceeding, in which it may hear evidence allowing Mr Russell to verify his claim, as well as delaying its final decision if it thinks fit.
- Thirdly, the Court held that Mr Russell's position will be no worse should the High Court carry on and determine the Commissioner's proceeding. If Mr Russell is found to be unable to pay more than he has offered, the High Court may refuse an order of adjudication in the exercise of its discretion. In addition, the Court held that Mr Russell would be unable to claim to have been disadvantaged should the premise of his judicial review application be unfounded.
The Court concluded with the view that Mr Russell's appeal of the High Court decision has weak prospects of success and that his application for interim relief should have been made in the High Court in the first instance.