Sale of a Nelson property was reversed by the High Court after evidence the owner sold on ludicrously uncommercial terms with instalment payments due over 25 years in order to frustrate a likely forced sale to meet tax debts.
Mila Amber was bankrupted in 2020 by Inland Revenue on unpaid tax debts of some $365,000 for unpaid tax, shortfall penalties and overpaid Working for Family credits. Her tax affairs had been under investigation from as far back as 2013.
The High Court was told Ms Amber and her then husband had for many years run a bed and breakfast business from an address in Weka Street, Nelson. The company they used to trade this business was itself put into liquidation by Inland Revenue in 2014, by which time the company name had changed to Abbey Services (Killed by Tax Maladministration) Ltd.
Over subsequent years, Ms Amber’s personal tax situation came under investigation. By 2017, she was on notice that tax arrears of at least $110,000 were owing with further investigation pending.
Evidence was given that Ms Amber then negotiated sale of Weka Street in December 2017 to a UK-registered company called Elite Telecomms Ltd owned by a Kevin Collins, resident in Scotland.
The agreed price was $847,008.74. Mr Collins said Ms Amber as a Filipino wanted to receive an amount equivalent to thirty million Phillipine pesos. No deposit was payable. The price was due by instalments spread over 25 years. No interest was payable on the unpaid balance. Ms Amber remained resident at Weka Street, paying rent.
Mr Collins claimed to have not known Ms Amber before the sale and that the purchase was simply an opportunity to diversify Elite Telecomms business activities with the opportunity to make tax-free capital gains in New Zealand.
Associate judge Paulsen said Mr Collins was not a credible witness. There was evidence of his involvement with Abbey Services prior to its liquidation. He was an acquaintance of Ms Amber’s former husband. He was aware of Ms Amber’s attitude to the then current Inland Revenue investigation.
Judge Paulsen ruled the Weka Street sale an ‘irregular transaction’ in breach of the Insolvency Act, intended to defeat Inland Revenue’s rights as creditor in Ms Amber’s bankruptcy. He set aside the sale, ordering title to Weka Street be transferred to Insolvency Service. Mr Collins’ Elite Telecomms will not be out of pocket, he said. Rent received to date exceeded instalment payments currently due on the twenty-five year deal.
Official Assignee v. Elite Telecomms Ltd – High Court (3.08.23)
23.129