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17 Apr 2018
Appeal Status

Company liquidator who misapplied GST refund ordered to pay compensation

High Court found that Mr Robertson had misapplied company funds and ordered him to repay the money to the Commissioner pursuant to s 301 of the Companies Act 1993.

Commissioner of Inland Revenue v Stuart Douglas Robertson [2018] NZHC 696


Mr Robertson was appointed liquidator of a company by resolution of the sole director and shareholder. The company was under audit by the Commissioner of Inland Revenue (“the Commissioner”) and a GST refund of $159,910.58 which had been claimed by the company was held back. When the Commissioner’s audit was completed it was clear that a net debt was owed by the company to the Commissioner. However when the audit was completed the system automatically lifted the halt on payments and the GST refund was paid out to Mr Robertson. Mr Robertson proceeded to disburse the funds. The ultimate recipients of the refund were: a trust with which Mr Robertson was associated; the former shareholder/director of the company; and Mr Robertson’s former business associates/employees. The High Court found that Mr Robertson had misapplied company funds and ordered Mr Robertson to repay the money to the Commissioner pursuant to s 301 of the Companies Act 1993 ("the CA").


The decision is a useful authority in the application of s 301 of the CA where a liquidator has misapplied company funds.


Mr Stuart Robertson was appointed liquidator of Hukatere Coastal Trustees Limited ("Hukatere") when on 14 April 2010 the company's director Roy Brown resolved Hukatere was unable to pay its debts as they fell due. Mr Robertson consented to the appointment.

Mr Robertson's first report as Hukatere's liquidator, dated 22 April 2010, explained the company acted as a bare trustee of an unnamed trust. From Mr Robertson's inspection of Hukatere's records, it appeared "the only remaining asset due to the trustee could be a GST refund being withheld by the Inland Revenue Department". He proposed to dispense with any creditors' meeting, as any funds recovered would not exceed the $44,000 owed to the secured creditor. He also identified Isolve Accounting (Mr Robertson's former accounting practice, now operated by his former employee Ms Phillimore) as a creditor for less than $800.

On 7 May 2010, the Commissioner lodged proof of debt for some $214,000 in unpaid GST, advising the company was the subject of investigation. At the same time, the Commissioner sought to replace Mr Robertson as liquidator.

Mr Robertson refused to resign and rejected the Commissioner's proof of debt, observing his expectation of an ultimate reimbursement due "to the trust". The Commissioner responded, insisting the proof of debt was admissible, being certain notwithstanding refunds may be offset against it.

On 25 June 2010 the Commissioner issued her statement of position. Following expiry of the response period and the consequent deemed acceptance of the Commissioner's position, the Commissioner advised Mr Robertson on 16 September 2010 that the audit had been completed. On 24 September and 19 October 2010 two cheques were disbursed to Mr Robertson totalling $159,910.58 ("the GST Refunds") which Mr Robertson banked into his trust account. The payments were made as a result of the IRD system automatically lifting the halt on payments when the audit was completed.

Mr Robertson issued his second report as Hukatere's liquidator on 12 November 2010 for the period to 14 October 2010 stating "[t]here have been no realisations, no distributions and no Liquidator remuneration during the period".

Mr Robertson asserted that in June 2010 there was some correspondence between Mr Brown, Ms Phillimore and Mr Robertson which purportedly advised Mr Robertson that Hukatere was no longer the trustee of the WBR Trust and had been discharged from its trustee obligations. Another letter purporting to be from Ms Phillimore to Mr Robertson dated 21 December 2010, stated Mr Robertson was holding funds for WBR Trust, and requested the funds be released to Ms Phillimore. The Commissioner questioned whether the correspondence was genuine and objected to its admissibility in evidence.

On 21 December 2010 $150,000 was paid from Mr Robertson's Trust account to Ms Phillimore's client funds account and was on the same day disbursed from that account. $30,000 was split in equal shares and paid to Ms Phillimore's practice account and to a trust which Mr Robertson was involved with. The remaining amount was paid as $100,000 to "E Krasniqi" (a former employee of Mr Robertson and for whose companies Mr Robertson may have acted as liquidator), $10,000 to "S Cannon" (Mr Brown's personal assistant) and $10,000 to Mr Brown.

Mr Robertson eventually resigned as a liquidator of Hukatere in January 2012 following a court application by the Commissioner to disqualify him from acting as a liquidator.


Admissibility of documents

Jagose J upheld the Commissioner's objection to the admissibility of certain correspondence on grounds that the correspondence was inconsistent with Mr Robertson's repeated assertions stating Hukatere was a trustee of the WBR Trust. His Honour further noted that the Commissioner's objection to the incorporation of those documents in the common bundle begged evidence to be called from at least Mr Brown and it could be inferred from the fact Mr Brown was not called that his evidence would not have assisted Mr Robertson.

Recovery under s 301

Given Mr Robertson's acceptance that he had failed in his duties of care and skill as a liquidator, Jagose J had little difficulty finding Mr Robertson was caught by the provisions of s 301. His Honour rejected the argument that something more than mere negligence was required and disposed of the defendant's assertion that Re Avon Chambers Ltd [1978] 2 NZLR 638, (1977) 1 BCR 149 applied, noting that Casey J in that case was concerned with the wording of the predecessor to s 301. Jagose J found that the Commissioner's loss was directly caused by Mr Robertson paying away the GST Refunds in circumstances in which he was responsible to retain them for set-off under s 310 of the CA. His Honour could see no factor giving rise to a lesser award for compensation.

Affirmative defence of estoppel

Mr Robertson was unsuccessful in claiming a defence of estoppel, asserting that the Commissioner had represented that the GST Refunds were the Commissioner's final position. Jagose J did not see how any of the Commissioner's actions amounted to such a representation.

Alternative causes of action

Although not necessary to consider the alternative causes of action, Jagose J noted that he would equally have found Mr Robertson liable to repay the GST Refunds to the Commissioner on the alternative grounds plead. Under the rule in Ex parte James; In re Condon (1874) LR 9 Ch App 609, liquidators are "obliged to act in a manner consistent with the highest principles" and Mr Robertson had conceded his conduct in disbursing the GST Refunds without taking advice was not consistent with those principles. On the same basis the 'unconscionability' ground was established which disentitled Mr Robertson to a defence of change of position in respect of the cause of action claiming restitutionary relief from a mistaken payment.

Companies Act 1993 ss 301, 310; Companies Act 1955 s 315; Goods and Services Tax Act 1985 s 46; Interest on Money Claims Act 2016 cl 1 of Schedule 1; Judicature Act 1908 s 87; Senior Courts Act 2016 s 182; Judicature (Prescribed Rate of Interest) Order 2011 cl 4.