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29 Feb 2012
Appeal Status
Not appealed

Court's earlier decision confirmed

2012 case note – Court's earlier decision confirmed and appellant's application for review dismissed - disputable decision, mischievous, frivolous, vexatious.

Clarence John Faloon v Commissioner of Inland Revenue


Mr Faloon ("the appellant") sought review of a decision of an Associate Judge, wherein that Associate Judge made an order striking out the appellant's pleading and dismissed the proceeding before him. The appellant's case was that the respondent made a statement in a letter to the appellant that equates to a "disputable decision" for the purposes of the Tax Administration Act 1994 ("TAA") and he sought to challenge that decision accordingly.

The Associate Judge held that:

  • it was not reasonably arguable that the statement in the letter was a "disputable decision"; and
  • the pleading was mischievous, frivolous, vexatious and an abuse of the process of the Court.

Peters J of the High Court agreed with the Associate Judge and dismissed the appellant's application for review.

Impact of decision

This decision provides confirmation that the Associate Judge was correct in his earlier judgment. It also confirms the willingness of the Court to consider applications to strike out, in their entirety, before dismissing proceedings as frivolous or vexatious.


The appellant commenced judicial review proceedings in the High Court against the Commissioner of Inland Revenue ("the Commissioner") on 15 October 2010. He claimed he was entitled to a review of a decision by the Commissioner not to assess him for income that the Commissioner says he did not receive.

Rather than filing a statement of the defence, the Commissioner applied in November 2010 to have proceedings struck out.

On 8 August 2011, the appellant filed an amended statement of claim. No further applications were made by the Commissioner and the matter was heard before an Associate Judge on 3 November 2011.

The appellant argued the following with regard to the amended statement of claim:

  • He is a trustee of a trust named "the 1977-Year Diversion of Kawau Stream Trust" ("the trust") and that for the purposes of income tax legislation, he, as a trustee, is an "associated person" of a "holder" of a "financial arrangement" for the "disposition" of land and therefore, must file returns in respect of accrued income (alleged $8,790,852.46) as is due to the trustee.
  • His Notice of Proposed Adjustment ("NOPA") (which proposed to adjust the income of the trust by $7,677,702.90) was not rejected by a Notice of Response ("NOR") within two months and therefore, the Commissioner was deemed to have accepted the NOPA.
  • The Commissioner's decision to decline to take any further action regarding the NOPA is itself a "disputable decision".

The Associate Judge considered the arguments raised by the appellant. However, he ultimately struck out his pleading because:

  • it was not reasonably arguable that a statement made in a letter from the Commissioner to the appellant was a disputable decision; and
  • the pleading was mischievous, frivolous, vexatious and an abuse of the process of the Court.


Peters J was satisfied that the Associate Judge was correct to strike out the pleading in the basis that it was frivolous, vexatious or otherwise an abuse of process.

When looking at the appellant's second ground of review, Peters J held that although there is a real controversy, the Court may have regard to wider considerations and held that the Associate Judge correctly exercised this consideration. Further, her Honour was satisfied (after reviewing the Commissioner's bundle of authorities) that the Court's previous findings were as the Associate Judge described them.

When considering the appellant's additional grounds for consideration, Peters J held:

  • the Associate Judge made his statements based on the authorities which were made available to him (as well as knowledge from previous proceedings) therefore there was no error in judgement;
  • on an application to strike out, the Court tends to proceed on the basis that the matters alleged in the statement of claim will be established, unless it is plain that they cannot be correct;
  • it was for the Judge to receive such authorities as he saw fit;
  • there was no contradiction or relevancy to the issues which arise on an application for review;
  • the Associate Judge was aware and considered the amended statement of claim as he referred to it in his decision; and
  • it was clear that the Associate Judge was striking out the statement of claim under rule 15.1 as mischievous, frivolous, vexatious and an abuse of Court process.

After the above findings, Peters J accordingly dismissed the appellant's application for review.

Tax Administration Act 1994, High Court Rules