Tax disputes not a vehicle for collateral grievances

Summary

The disputant was unable to convince the court that a long-standing compensation grievance had any basis in the tax disputes process.

Impact of decision

The decision is positive for the Commissioner, it confirms that courts are unwilling to progress the actions of repetitive litigants with misconceived cases.  It also confirms the confinement of the disputes process in Part IVA of the Tax Administration Act 1994 to bona fide tax disputes. The process is not a vehicle for collateral grievances.

Facts

Mr Faloon's father was the director of two companies, Trade Lines Limited and Central Equipment Company Limited, which are in liquidation.

Mr Faloon claimed that there was compensation owing on assets which were once owned by the companies. The compensation related to a pipe diversion of a stream by the Palmerston North City Council and the taking of land by the Crown for Airport extensions. He also claimed that he should be compensated by the Commissioner for loss of patent rights which were owned by one of the companies.

Compensation of $80,000 was paid to Trade Lines Limited for the land in December 1993. The compensation was paid in accordance with the requirements of the Public Works Act 1993.

Mr Faloon remained aggrieved over the loss of company assets and claimed that compensation was inadequate. He had been involved in litigation against the Crown and the Commissioner of Inland Revenue for a number of years and despite those claims being rejected by the courts he continued to re-litigate the issues. There have been over 20 proceedings touching on these matters to date.

On this occasion he registered the "1977-Year Diversion of the Kawau Stream Trust" and filed income assessments in March 2009 claiming entitlement to compensation.

The Commissioner refused to accept the assessment and rejected a Notice of Proposed Adjustment (NOPA) filed by Mr Faloon in July 2009.

Mr Faloon then filed proceedings in the High Court claiming the Commissioner was bound to accept his assessment and that he had a right to contest the Commissioner's rejection of his NOPA. He also continued to claim compensation for patent rights.

The Commissioner applied for a strike out of the claim on the grounds of res judicata.

Decision

Associate Judge Christiansen held that res judicata applied in all causes of action.

In relation to the first at paragraph [30] of the decision, the Associate Judge noted that Mr Faloon "... appears to be unable or unwilling to accept that his own personal claims in respect of either of the two companies have no legal basis".

In relation to the second cause at paragraph [36] he went further and said that the proceeding is an "abuse of process".

The Associate Judge also found that the third cause relating to the patent rights had also been heard before and found against Mr Faloon; Central Equipment Ltd v CIR (1986) 8 NZTC 5,031 and Faloon v Attorney General (1988) 10 NZTC 5,273.

In summary the proceedings were seen to be "hopelessly misconceived" although the Associate Judge said he was sure that Mr Faloon would continue to "contrive" means to "recast" his case.

Costs were awarded in favour of the Commissioner on an indemnity basis.