Inland Revenue claims Tongan King's lawyer owes $245k, High Court declares him bankrupt

Barrister Kahungunu Barron-Afeaki has been declared bankrupt for a second time after the IRD said he owed nearly $250,000. Photo / File

A well-known lawyer who served as senior counsel to the Kingdom of Tonga has been declared bankrupt after Inland Revenue claimed he owed nearly $250,000.

Kahungunu William Barron-Afeaki provided advice to the King of Tonga, its government, royal commissions of inquiry and to the Tongan people on significant legal issues.

He has also acted in several prominent cases in New Zealand, including as counsel for former Maori Television chief executive John Davy, who was fired from the network and later jailed for fraud, and during the Urewera terror raids case.

However, Barron-Afeaki has since run into financial strife, with the Inland Revenue Department (IRD) claiming he owed it $245,430.88.

It applied for an order by the High Court adjudicating him bankrupt, before a hearing was held at the end of last month.

In his decision released publicly this week, Associate Judge John Matthews granted the application and adjudicated the barrister bankrupt.

It is the second time Barron-Afeaki has been adjudicated bankrupt. The first came in November 2011 after the IRD said he owed $415,808 in unpaid tax.

He was discharged from that bankruptcy in November 2014, but immediately began to accrue fresh income tax and GST debt, the High Court judgment reads.

Barron-Afeaki had opposed the latest adjudication, but accepted he was unable to pay the debt. He also said the interest and penalties calculated by IRD were incorrect, despite not presenting any evidence.

He asked the court to exercise its discretion because being declared bankrupt would "not serve any purpose" and jeopardise his ability to earn.

Kahungunu Barron-Afeaki, second from left, acted as the lawyer for sacked and jailed Maori television CEO John Davy, left. Photo / File

Barron-Afeaki added it would further cause him acute embarrassment and stigma in Tonga after being appointed senior counsel by the Supreme Court of Tonga and provided advice to the king and government.

His late father also held the title Afeaki, the High Court judgment reads.

"He was a high chief and protocol adviser to the king. This title has now been bestowed on his elder brother who holds the family land and title ... Another of Mr Barron-Afeaki's brothers has been appointed a Law Lord and sits on the Privy Council representing the Kingdom of Tonga.

"All of these persons share the Afeaki name and Mr Barron-Afeaki is concerned about the shame he would bring upon his family if an order were to be made."

Judge Matthews agreed and said Barron-Afeaki would have lesser standing within the culture and community of Tonga.

"I accept that in Mr Barron-Afeaki's case there is a prospect of material prejudice to him by his being adjudicated bankrupt. I am satisfied he has some stature within the Polynesian community in Auckland and it is clear that he holds a position of some seniority as a legal practitioner in Tonga," the judge said.

"I think it likely that adjudication in bankruptcy would carry with it a greater stigma for Mr Barron-Afeaki than for many other members of the community."

Kahungunu Barron-Afeaki, left, alonside Stephen White and Alfred Ngaro at a party in 2014. Photo / Norrie Montgomery

But, despite this, Judge Matthews said "it is fair to record that Mr Barron-Afeaki has entirely brought this upon himself by not meeting his commitments to the Commissioner for the last five years".

"The stigma of bankruptcy already surrounds him and to the extent that it has an effect within his community and in Tonga, he is already required to manage that situation," he said.

"There is no evidence that it is impeding his professional life or personal life. I am prepared to accept that a second bankruptcy may make the stigma greater, but I do not consider that this will be so to a material degree."

Barron-Afeaki, who has two children who rely on him for financial support, maintained he can repay the debt if given more time.

He said he has been waiting to take up "an extremely lucrative position" with the Hong Kong and Chinese-funded company JHT Management Services Ltd (JHT).

The director and owner of JHT, John Hauraki, said he was awaiting a $100 million investment.

Once it arrives, he said, Barron-Afeaki would hold a fulltime executive role with the company and be paid $2m as a sign-on fee to cease all other legal or corporate client relationships.

After that, Hauraki said in his letter to the court, Barron-Afeaki would receive an annual salary of $450,000, along with travel and entertainment allowances of $150,000, a vehicle and comprehensive insurance.

Kahungunu Barron-Afeaki speaking at a sports conference in Rotorua during 2006. Photo / NZ Herald

But despite the well-paid promise, the investment has been delayed by Chinese Government regulations and processes, Hauraki said.

Judge Matthews said there was "a shroud of uncertainty" over whether the transaction would proceed or, if so, when.

Although Barron-Afeaki does not have any other creditors or commercial ventures at risk, the judge ruled against exercising a discretion in his favour while the lawyer was "not even paying to the commissioner current GST obligations".

"Rather, he has completely abdicated his responsibility to comply with the GST legislation and to account to the commissioner for GST collected on business income which he has received," Judge Matthews said.

"The reason for this is not clear but if it stems from needing to use this money for living expenses [which is not suggested in evidence, but may be one inference which can be drawn], he is in a relatively parlous financial state in terms of income and liabilities."

Barron-Afeaki was also ordered to pay IRD's legal costs for the bankruptcy application, to the sum of $2454 plus disbursements of $1509.

Despite being adjudicated bankrupt Barron-Afeaki can continue to work as a lawyer.