Skip to main content
26 Feb 2019
26 Feb 2019
Appeal Status

Commissioner wins liquidation rehearing

The Court found that the Commissioner of Inland Revenue had established the grounds for making an order of liquidation and accordingly placed Chesterfields Preschools Limited into liquidation.

The Commissioner of Inland Revenue v Chesterfields Preschools Limited & Therese Anne Sisson [2019] NZHC 272
Legal terms

S 241 Companies Act 1993


This was a liquidation rehearing. The Court found that the Commissioner of Inland Revenue (“the Commissioner”) had established the grounds for making an order of liquidation and accordingly placed Chesterfields Preschools Limited (“CPL”) into liquidation.


The Commissioner commenced this liquidation proceeding against CPL in 2015. The Commissioner relied upon the statutory presumption of CPL's insolvency arising through CPL not having satisfied the requirements of a statutory demand. On 6 October 2015 the High Court, following a defended hearing, made an order putting CPL into liquidation (Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2015] NZHC 2440, (2015) 27 NZTC 22-029).

Ms Sisson was subsequently joined as a second defendant in this proceeding to enable her to pursue an appeal. Her appeal was partially successful (Sisson v Commissioner of Inland Revenue [2017] NZCA 326, (2017) 28 NZTC 23-023). The Court of Appeal found the High Court had not made a determination as to the precise level of CPL's tax liability and accordingly sent the matter back to the High Court so that CPL could test the accuracy and methodology of the Commissioner's calculation.

In the meantime, interim liquidators were appointed to CPL by this Court on 15 December 2017 (Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2017] NZHC 3172, (2017) 28 NZTC 23-046).


Is the Commissioner a creditor of CPL?

Ms Sisson denied that CPL owes any debt to the Commissioner, her evidence (focused on core tax) was CPL owed $6,898.22 (without consideration of penalties and interest).

However, the Court noted that the Commissioner is a judgment creditor (in relation to costs judgments) in the sum of $32,105 (together with accruing interest).

Accordingly, the Court held that the Commissioner is a creditor of CPL.

Is CPL unable to pay its debts?

The statutory demand issued by the Commissioner was not complied with by CPL. There arose the rebuttable presumption that CPL is unable to pay its debts.

It was accordingly for CPL (or Ms Sisson) to establish in this proceeding that CPL is able to pay its debts.

CPL's tax debt to the Commissioner

The Court found that the logical starting point for consideration of CPL's debt were the detailed tables prepared by the Commissioner's officers in relation to each tax type on a strictly chronological basis. Ms Sisson also complied her own table extracted her starting figures and dates from the Commissioner's schedules.

The Commissioner's tables showed that the tax debt of CPL was $1,088,461.15.

The Court was satisfied on the evidence with the Commissioner's calculation and methodology of CPL's debt.

Other indebtedness claimed by the Commissioner

The Court was satisfied that CPL owed $307,389.01 in prospective or contingent debt (made up of unpaid GST and the associated UOMI (use-of-money interest) on the sale of a property and on insurance proceeds).

The Court also stated that the $280,000 the Commissioner had lent to the interim liquidators of CPL was to be taken into account as an established debt of CPL.

Resulting debt figures

For the purposes of assessing CPL's solvency or insolvency the Court recognised the established debt figure of $1,400,566.15 and that the Court could take into account the figure of $307,389.01 for contingent or prospective debts.


The Commissioner relied upon the presumption of insolvency under s 287 of the Companies Act 1993 as CPL had failed to comply with the statutory demand.

The Court noted that it is established that the s 241(4)(a) test of ability to pay debts involves primarily a ";cashflow” test of solvency to be contrasted with the ";balance sheet” test of solvency. Ms Sisson pleaded that CPL is balance sheet solvent.

The Court found that asset realisation in due course might achieve funds of $1,109,314.77 for CPL. However, this fell short of the established debt of CPL to the Commissioner, being $1,400,566.15. It was still further short of the figure including contingent and perspective indebtedness of $1,707,955.16, which includes $307,389.01 which the Court may take into account in assessing CPL's insolvency.

The Court held the CPL clearly is not balance sheet solvent. Even were there to be made available to CPL further time to realise its two remaining assets, the realisations would not enable CPL to clear its indebtedness. This is not a case where there has been a temporary lack of liquidity. The lack of liquidity has been longstanding and cannot be resolved through realisation of assets. Ms Sisson was unable to rebut the presumption the CPL is unable to pay its debts

The Court's discretion

The Court could not determine any basis upon which the Court might now appropriately refuse to make an order liquidating this company which for a long period has not been trading and is substantially insolvent. Accordingly, it ordered the liquidation of CPL.