Fiddling the books to avoid payment of $391,000 GST came at a cost; liquidator of Wellington-based Matrix Homes clawed back $2.1 million as a voidable payment after Matrix went into liquidation insolvent. What were claimed to be pre-payments on a building contract were Matrix shareholder loans, the High Court ruled.
Matrix Homes Ltd was in the business of assembling homes from factory-built modular units, a departure from the usual practice of on-site builds. After its 2018 liquidation, Matrix liquidator John Scutter challenged transactions that saw Tawa LP, controlled by Matrix’s Sean Murrie and Joseph Hannah, wind up with ownership of a Matrix property development in Tawa without payment. Matrix had agreed to build eleven duplex style modular apartments at William Earp Place for a fixed price of $2.75 million.
The High Court was told Matrix was insolvent from the get-go. Banks refused to fund the project. Working capital was drip fed by Mr Murrie and Mr Hannah. Deposits paid by purchasers were recorded as pre-payments, with GST payable. Evidence was given that Mr Murrie’s and Mr Hannah’s working capital contributions for Matrix were supposedly Tawa LP pre-payments but were recorded in Matrix accounting system as shareholder loans to Matrix. Mr Murrie told the High Court that Matrix accounting staff had made a mistake. Justice Gwyn ruled there had been no mistake; Mr Murrie had instructed staff to record the transactions as Matrix shareholder loans to avoid liability for GST.
Shortly before Matrix was propelled into receivership by Sean Murrie himself, a flurry of accounting entries saw the shareholder loans transformed into payments by Tawa LP of the purchase price for Earp Place apartments. Tawa LP took ownership. Matrix liquidator challenged this arrangement; Tawa LP had gained a Matrix asset but had not paid for it, he said. Tawa LP was ordered to pay Matrix $2.16 million; the face value of credit invoices drawn up to re-categorise the Matrix shareholder loans as Tawa LP pre-payments.
Scutter v. Tawa Limited Partnership – High Court (28.04.22)
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