Hastings based Hawk Packaging was ordered into liquidation by the High Court with special conditions; liquidation is to sit dormant for three years enabling holding company Hawk Group to benefit from tax losses arising from a catastrophic fire.
A major fire at Hawk Packaging Ltd in January 2012 destroyed the company’s moulded fibre packaging plant causing $2.4 million damage to neighbouring businesses. Its insurers refused to pay out. Hawk Group offered a deal to all neighbours suffering losses caused by the fire; Hawke Group would pay over the odds to buy out subsidiary Hawke Packaging assets, recovering this cost by having Packaging tax losses written off against future Group profits. All Hawke Packaging debts would eventually be repaid. Neighbours were to be paid off over time using taxpayer money through a tax write off against future Group profits. The proposed deal would run through to 2023.
Neighbour Rathmore Properties Ltd, having suffered losses totalling $1.7 million, upped the ante suing to have Hawke Packaging put into liquidation. It had every right to do so; Hawke Packaging owed it $1.7 million and was clearly insolvent. Judges have a residual discretion to refuse liquidation, even when all grounds for a company’s liquidation are proved.
Associate judge Johnstone ordered Hawke Packaging into liquidation, subject to conditions. There was no risk to the public by freezing the current position; Hawke Packaging was not continuing to trade. Keeping Hawke Packaging dormant, but legally intact, enabled tax losses to be utilised.
Rathmore Properties Ltd v. Hawk Packaging Ltd – High Court (28.02.20)
20.044