The New Zealand High Court has held that a company in voluntary administration was not an "incapacitated person" for the purposes of section 58 of the Goods and Services Tax Act 1985 ("GST Act"), as that section applied prior to certain 2023 amendments. As a result, the voluntary administrators were not personally liable for GST incurred by the company during the administration period.
Russell McVeagh acted for the successful plaintiffs, with Matt Kersey and Callum Burnett appearing in the High Court.
The case, Lamacraft v Commissioner of Inland Revenue [2026] NZHC 979, provides important guidance on the limits of section 58 of the GST Act, the concept of corporate capacity, and the effect of subsequent legislative amendments to the GST and Companies Acts.
The facts of the case
Sanctuary Developments No. 8 Ltd ("Sanctuary") was a GST-registered property developer. It was placed in voluntary administration in December 2020. Mr Meltzer and Mr Lamacraft, the plaintiffs in the proceeding, were appointed as its administrators.
Voluntary administration is a procedure available under the Companies Act 1993 to allow third-party voluntary administrators to take control of a company and consider its position. It is usually a short and confined process, culminating in "watershed meeting" of creditors at which the future of the company can be determined.
While Sanctuary was in administration, it sold some residential apartments, attracting GST liability. Sanctuary (which was later placed into liquidation) lodged GST returns showing this GST liability but was not in a position to pay the GST to Inland Revenue, and its administrators, the plaintiffs in the proceeding, applied for a ruling that they were not liable to pay the GST amount in their personal capacities.
Inland Revenue considered that the administrators were personally liable to pay the GST, relying on section 58 of the GST Act. That section provides that if a person registered for GST becomes an "incapacitated person" (as defined in that section), certain "specified agents" can be personally liable for GST.
At the relevant time, section 58 did not specify that a company in voluntary administration was an "incapacitated person" or that voluntary administrators could be "specified agents". Instead, it said that an "incapacitated person" was a person who "dies, goes into liquidation or receivership, or becomes bankrupt or incapacitated". The issue between the parties was whether Sanctuary, as a company in voluntary administration, was "incapacitated" during the administration period.
What the parties argued
The plaintiffs argued that the word "incapacitated" was not intended to apply to companies, including companies in voluntary administration. The text and context of the section supported reading "incapacitated" as a state applicable to natural persons. And, in any event, companies are granted "full capacity" by the Companies Act, which is not limited if the company goes into voluntary administration – the company is able to act in the same way, albeit with different agents.
The Commissioner defended Inland Revenue's position by arguing that "incapacitated" is a "catch-all" term intended to apply to all circumstances in which a person registered for GST is not able to undertake their taxable activity because they cannot function in the "normal way". The Commissioner argued that features of the voluntary administration process meant the company did not act in the normal way and therefore it was "incapacitated".
The High Court decision
The High Court, in a decision released by Justice Kawharu on 17 April 2026, found in favour of the administrators and declared that Inland Revenue's decision to impose personal liability was incorrect.
Focusing on the words of section 58, Justice Kawharu considered that "incapacitated" is a term most naturally associated with natural persons (individuals), not companies. The definition does not say "otherwise incapacitated" and was not clearly intended to be a "catch-all" provision. Other aspects of the statutory language were not definitive, but overall "the sentence structure generally favour[ed] the administrators' view", the Court said.
Justice Kawharu undertook detailed examination of the concept of capacity and incapacity at law, particularly with respect to companies under the Companies Act 1993. Section 16(1) of that Act confers on a company "full capacity", and incapacity generally only arises from acts breaching the company's own constitution. The Court found that "it makes sense to understand the deprivation of legal capacity in its context, which in the case of s 58 of the GST Act, is a person's capacity to carry out a taxable activity within the terms of that Act".
Although accepting a company in voluntary administration does not function in the normal way, Justice Kawharu did not consider the differences incapacitated the company. If anything, the directors were incapacitated, but Sanctuary itself was still able to undertake its taxable activity.
The Court also addressed the 2023 amendments to section 58 of the GST Act, which changed the law prospectively to provide that a company in administration is "incapacitated". The rational explanation for the amendments, Justice Kawharu said, was that they had work to do – that is, they were necessary because section 58 did not previously cover voluntary administration.
In conclusion, the Court held that it would "strain the meaning of 'incapacitated'" to include a company in voluntary administration and that, on a fair construction, such a company is excluded from the scope of section 58.
The significance of the Court's decision
Notwithstanding the 2023 amendments (which mean that voluntary administrators are now personally liable for GST incurred by the company in administration), the High Court's decision in Lamacraft has ongoing practical significance.
The decision confirms that the term "incapacitated" in section 58 requires a GST-registered person to be deprived of legal capacity to carry out their taxable activity, consistent with Inland Revenue's current interpretation statement on section 58 (IS 23/03).
The decision also offers a careful analysis of capacity in New Zealand corporate law, confirming that capacity is generally understood within a specific statutory context and, in the case of companies, requires a close examination of the Companies Act.
Significantly, the Court confirms that the term "incapacitated" in section 58 generally would not apply to companies, because their capacity is usually only limited by constitutional restriction. Outside of liquidation, receivership and (from 2023) voluntary administration, section 58 generally should not apply to companies registered for GST.
If you have any questions about the decision, or how it may affect you or your business, please reach out to one of our experts or your regular Russell McVeagh contact.