That wheel-clamping companies do not pay GST is akin to kidnappers not being liable for GST on ransom payments, Judge Bell mused when refusing Gordon Ward’s application to reverse a 2015 bankruptcy.
Mr Ward’s company, NZ Wheel Clamping Co Ltd, was pushed into liquidation by Inland Revenue in 2014 for unpaid taxes totalling some $300,000 including $115,712 claimed due for GST. Wheel Clamping liquidators chased Mr Ward for just over $712,000, money they claimed he had taken from the company plus damages due for alleged breaches of the Companies Act. Legal action was halted when Mr Ward filed for bankruptcy. He was automatically discharged from bankruptcy in July 2018. His bankruptcy creditors received nothing.
During his bankruptcy, Mr Ward learnt of a GST tax case successfully argued by another wheel-clamping company; no GST was payable on wheel-clamping revenue because motorists payments are a fine, there was no reciprocity of services creating a taxable supply.
Mr Ward sought to annul his bankruptcy, allowing him to resume control NZ Wheel Clamping. Back in control, he would have his company sue Inland Revenue for overpaid GST, pay off all company debts and have money left over for company shareholders, he told the High Court. Evidence was given that Inland Revenue had already repaid $190,000 GST to NZ Wheel Clamping liquidators. Mr Ward says his company is owed more than this.
Associate judge Bell refused the annulment. The post-bankruptcy speculative possibility of Mr Ward’s company recovering further GST did not justify annulment of a bankruptcy appropriately ordered six years previously, he ruled. Even if further GST could be recovered, payment first goes to NZ Wheel Clamping creditors before anything passes to Mr Ward personally, Judge Bell said.
Companies Office records show NZ Wheel Clamping creditors received nothing on liquidation; the $190,000 GST repaid by Inland Revenue was swallowed up by liquidators’ remuneration and expenses.
Ward v. Officlal Assignee – High Court (7.08.20)
20.135