Issued
2012
Decision
22 May 2012
Appeal Status
Appealed

Abuse of process

2012 case note - Appeal to High Court on basis that District Court erred in its decision to strike out plaintiff's claim - abuse of process.

Case
HH Jiao, HH Wu and SC Chiao as Trustees of the Harsono Family Trust v Commissioner of Inland Revenue
Legal terms
Strike out, abuse of process, input tax credit, GST, money had and received

Summary

The plaintiff appealed to the High Court on the basis that the District Court had erred in its decision to strike out the plaintiff's claim. The plaintiff made submissions on taxable activity, output tax and money had and received. The High Court dismissed the appeal and held that the proceedings were frivolous, vexatious, and an abuse of process. The Court held that it was simply an attempt to re-litigate matters that had already been disposed of by the lower courts.

Impact of decision

This decision again confirms the well-settled principles relating to strike-out and abuse of process.

Background

This proceeding is an appeal of the striking out of the Harsono Family Trust's ("HFT") District Court claim, which sought a reversal of a GST assessment requiring HFT to repay the $137,500 GST input tax credit it had received from the Commissioner of Inland Revenue.

This particular matter has a lengthy history, which is summarised below to provide some context to the present appeal.

In March 2002, Freeport Development Ltd (the vendor) entered into an agreement with Mr Barge (the purchaser) for the sale and purchase of 45 Anzac Ave, Auckland ("the Property").

Shortly after this agreement for sale and purchase went unconditional, HFT approached Freeport Development Ltd and expressed an interest in purchasing the Property for a higher price than Mr Barge had agreed to pay.

Following a number of interceding steps, HFT entered into its own sale and purchase agreement for the Property. HFT then paid the purchase price, accounted for GST on the purported sale, and claimed a GST input credit of $137,500 on the sale from the Commissioner.

Subsequently, Mr Barge disputed the legitimacy of HFT's purchase of the property and issued proceedings against HFT. In October 2005, the High Court held that HFT's agreement for sale and purchase of the property was invalid and, amongst other things, that:

  1. HFT had wrongly induced and procured the vendor to breach its previous agreement for sale and purchase with Mr Barge; and
  2. HFT was involved in an unlawful means conspiracy causing loss to Mr Barge.

HFT appealed the High Court's decision to the Court of Appeal but was unsuccessful. The Supreme Court refused leave to appeal the Court of Appeal's decision.

Following the High Court's decision that the purported sale and purchase was invalid, the Commissioner issued a GST assessment reversing the $137,500 input tax credit that had been paid to HFT.

HFT disputed this assessment but in May 2009 the Taxation Review Authority ("TRA") confirmed the assessment's correctness (Case Z16). HFT applied for a recall but the TRA held that to do so would be "inconsistent with the objective of finality and certainty in litigation and is an abuse of process" (Decision 13/2009). HFT appealed the TRA's decision, but this was dismissed by the High Court for want of jurisdiction.

HFT later issued a fresh proceeding against the Commissioner in the District Court seeking a reversal of the GST assessment (that had itself reversed the $137,500 GST input tax credit), claiming unjust enrichment, relief under section 94A of the Judicature Act 1908, money had and received, and restitution.

In October 2011, HFT's District Court claim was struck out on the Commissioner's application, on the grounds that it was untenable, an abuse of process and disclosed no reasonable cause of action. HFT appealed the strike-out decision to the High Court, whose decision is the subject of this summary.

At issue was whether the District Court had erred in its decision to strike out HFT's claim.

Decision

At the High Court appeal hearing, HFT submitted that as a consequence of the earlier High Court and TRA decisions, their purchase transaction in respect of the Property had no legal effect and, therefore, there had been no taxable activity. Accordingly, HFT's payment of $137,500 should not be considered a payment of GST output tax and, therefore, HFT was entitled to have that amount refunded by the Commissioner. HFT also submitted that, for the same reasons, sections 109 and 165 of the Tax Administration Act 1994 had no application. HFT further argued in the alternative that, amongst other things, the $137,500 had been paid by mistake and was therefore recoverable under the Judicature Act 1908, or in equity.

HFT concluded its submissions by asserting generally that the District Court had incorrectly applied the law and as such, the claim should not have been struck out.

In his decision, Venning J categorised the proceeding as frivolous, vexatious, and an abuse of process. Venning J held that although HFT had tried to argue that their latest claim was not about tax, it was simply an attempt to re-litigate matters that had already been disposed of by the TRA. His Honour held that the District Court had been correct to strike out the proceeding and accordingly dismissed HFT's appeal.

On the question of indemnity costs sought by the Commissioner, the Court asked HFT to file written submissions in relation to this point.

Goods and Services Tax Act 1985, District Court Act 1947, Judicature Act 1908, Tax Administration Act 1994