Stiassny's $127m GST claim hits Supreme Court

Lawyers in the Supreme Court fighting to recover a $127.5 million GST payment say the money was paid to the IRD on a "mistaken assumption".

KordaMentha receivers Michael Stiassny and Grant Graham have been battling for some years to recover a GST payment they made when they took over as receivers of Forestry Corporation of New Zealand and Citic New Zealand in 2003.

Although FCNZ and CNZ were placed in receivership, the receivers were not appointed in respect of the Central North Island Forest Partnership.

In court today, CNIFP's lawyer Ralph Simpson said the crucial question in the appeal is whether or not the money was paid from the receivers' account or the partnership's account.

The 170,000ha forest was sold in 2003 for $US621 million, and a GST payment of $127.5 million was made to the IRD from Messrs Stiassny and Graham.

In March, the Court of Appeal struck out Mr Stiassny’s claim against the IRD to recover the funds and stopped creditors from gaining access to the millions.

However, at the time, Court of Appeal Justice Tony Randerson concluded:

"It is not in dispute that if the CNIFP (as the person registered for GST purposes) had been placed in receivership, then the receivers would have been the specified agent of the CNIFP.

"As such, the receivers would have been liable personally on the basis they were the specified agents of an incapacitated person within the meaning of the section.

"Counsel all agreed the difficulty for the commissioner is the CNIFP was not placed in receivership and was not therefore an incapacitated person.

Prima facie, the receivers were not therefore specified agents within the meaning of the section and were not personally liable for the payment of GST."

That ruling followed an earlier High Court decision which declined to strike out an application to recover the GST.

In May, the Supreme Court granted leave to appeal to look at whether any of the appellants can recover the amount of GST "so paid from the commissioner on the basis it was paid by the receivers under a mistaken belief they were personally liable to pay it or on any other basis".

A full court of Justices Tom Gault, William Young, John McGrath, Robert Chambers and Peter Blanchard is hearing the appeal.

Mr Simpson says the receivers' payment was based on a mistaken assumption they would be personally liable for any penalties.

He says when the payment was made, it was split into two components – the $US621 million was calculated in US dollars and placed into a US account, while the GST payment was made in New Zealand dollars, put into an account and deposited over the Christmas period.

The hearing continues tomorrow.