Auckland-based receivers Michael Stiassny and Grant Graham will not be able to recover a $127.5 million GST payment, allegedly paid in error.
In the culmination of a long-running and complex legal wrangle Central North Island Forest Nominees took the GST battle to the Supreme Court after payment was made based on what it says was a "mistaken assumption".
Messrs Stiassny and Graham took over as receivers of Forestry Corporation of New Zealand and Citic New Zealand in 2003.
Although FCNZ and CNZ were both placed in receivership, the receivers were not appointed in respect of the Central North Island Forest Partnership.
The 170,000ha forest was sold in 2003 for $US621 million, and a GST payment of $127.5 million was made by Messrs Stiassny and Graham.
The pair had been advised and assumed they were personally liable for the GST. However, before the GST was due to be paid, CNIFN, the second debenture holder behind the banks, lodged a protest with the receivers, asserting it was entitled to be paid before the IRD.
CNIFN subsequently challenged the decision to pay the GST to the IRD.
The Supreme Court’s decision, out this afternoon, said the issues on this appeal were whether the receivers were in fact personally liable and, if not, whether the GST is recoverable.
Justices Tom Gault, Willie Young, John McGrath, Robert Chambers and Peter Blanchard say they are in agreement with the Court of Appeal.
“The Supreme Court has unanimously held that it has not been shown at this stage of the case that the receivers were personally liable. On that basis, the Court has proceeded to consider the claim for recovery and found that none of the appellants has an arguable case.”
They said the court was satisfied the GST was paid by the partnership and it was therefore a debtor-initiated payment for which s 95 of the Personal Property Securities Act 1999 gave the Inland Revenue Department commissioner the ability to claim priority.
“The commissioner was entitled to rely upon that section because it was not arguable that he had knowledge at the time of receipt of the GST that the payment was made in breach of the rights of the secured creditors under their security agreements.
"Nor had he acted in bad faith. The secured creditors’ claim failed for that reason.”
The partnership’s claim for recovery of the GST as a payment made by mistake or under the compulsion of the penalties and interest under the GST Act also failed.
"It did owe the GST and the commissioner therefore gave good consideration in accepting its payment in discharge of that debt.
“There was no unjust enrichment of the Crown at the expense of the partnership.”
This article is tagged with the following keywords. Find out more about MyNBR Tags
Most listened to
- Tim Hunter on why Veritas is doing it the hard way
- Matthew Hooton on whether Steven Joyce will be the next national leader
- Rodney Hide on why all city planners should be fired
- Nevil Gibson discusses his latest Editor's Insight on films
- The NBR crew throw around some of the week's top stories
- Rob Hosking breaks down the political and economic week that was
- "A tragedy" - David Farrar on his disappointment with Simon Bridges
- New F&P product pipeline exciting, says Macquarie senior investment adviser Brad Gordon
- Taupo Motorsport Park executive director Tony Walker on the park's rebranding
- NZIER senior economist Christina Leung on why she does not think the OCR will hit 2%
- NBR's Cameron Officer talks about the NBR Car of the Year 2015
- John Barnett on Brewer: ‘Boy, has he got a bit to learn’