City will lose if Krukziener declared bankrupt, court told

Andrew Krukziener arrives at the High Court in Auckland yesterday. Photo / Greg Bowker

Metropolis developer Andrew Krukziener is a reputable businessman who has made a big contribution to Auckland and will continue to do so unless the Inland Revenue is successful in bankrupting him, a court heard yesterday.

Krukziener was in the Auckland High Court yesterday defending his creditors' proposal that, if approved, will save him from bankruptcy.

IRD lawyer Nick Whittington said the department could not allow Krukziener to walk away from his tax obligations because it would send out the wrong message.

He said the department needed to promote voluntary compliance, otherwise it would create problems in the future.

The IRD has a judgment against Krukziener for $575,000 after winning a case that classified loans he received from his trusts as income and therefore taxable.

Whittington said Krukziener took "an abusive tax position" between 1991 and 2002 when the loans were paid to him because the vast amount of his capital was tied up in property development.

Krukziener has strongly denied that the loans, of which the majority have been repaid, can be considered income.

Krukziener's lawyer Bruce Stewart, QC, said 70 per cent of his client's creditors had accepted the proposal he has offered: 2.7c in the dollar on a $47 million debt.

Krukziener has put $350,000 aside for the creditors' proposal; about $320,000 will be available to creditors after trustee Meltzer Mason Health - which will administer the proposal if accepted - has been paid.

Stewart said Krukziener had made a significant contribution to the Auckland community and had generated hundreds of millions of dollars in economic activity for the region through his property development empire.

He said Krukziener was not a commercial risk to the wider public and therefore there would be no benefit in bankrupting him.

Krukziener is contesting the amount he owes IRD, claiming that two judgments - a Taxation Review Authority and a High Court judgment - are wrong.

More than 40 businessmen and architects have written testimonials on Krukziener's character.

Former Auckland City mayor John Banks said in a statement that Krukziener had been a part of the "realisation" of Auckland for years, and that he had respect for the city's heritage.

Stewart said Krukziener, through his companies and staff, had paid millions in PAYE and GST returns.

Bob Hollyman, the lawyer representing the creditors in the proposal, said the court should accept their view unless it has a significant reason not to.

The case continues today.