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04 Jul 2014
Appeal Status

Duplicative claims struck out, security for costs ordered

2014 case note – duplicative claims struck out and security for costs ordered - duplication of process, abuse of process, vexatious.

Peter William Mawhinney as trustee of the Forest Trust v Commissioner of Inland Revenue [2014] NZHC 1554


The Commissioner of Inland Revenue ("the Commissioner") successfully had a new cause of action struck out of the pleading because it was duplicative of other proceedings and an abuse of process. The Forest Trust was ordered to pay security for costs, as it had provided no evidence that it would be able to satisfy a costs order should it prove unsuccessful on its claims.

Impact of decision

The Court will entertain applications to strike pleadings (or portions of pleadings) when they are duplicative of other proceedings and/or an abuse of process.


This decision relates to interlocutory applications by the Commissioner to strike out parts of Mr Mawhinney's second amended statement of claim and for security for costs.

The underlying dispute involves a claim for a goods and services tax ("GST") refund of $67,011.65 relating to the Forest Trust's ("the Trust") purchase of a property for $600,000 in 2009, which the Commissioner had reassessed to nil under section 89C(eb) of the Tax Administration Act 1994 ("TAA").

On 12 July 2012, Mr Mawhinney filed a statement of claim of 88 pages, containing claims for 19 separate breaches of statutory duty; a claim for money had and received; and claims for six breaches of duty of care. Mr Mawhinney sought damages and/or compensation of $5,113,810.72.

In December 2013, Mr Mawhinney filed an amended statement of claim of 156 pages that included an additional cause of action alleging statutory entitlement and also purported to include an application for judicial review (despite the fact he had separately filed a proceeding for judicial review of the same decisions made by the Commissioner).

In February 2014, Mr Mawhinney filed his second amended statement of claim of 188 pages that included an additional, fourth cause of action purporting to be a challenge under Part 8A of the TAA.

The strike-out application concerned the new fourth cause of action.


The fourth cause of action was struck out and the application for security for costs in the sum of $40,000 was granted. The proceeding was to be stayed until that payment is lodged with the Court.

Strike-out application

The causes of action the Commissioner sought to have struck out were:

  • a challenge to the Commissioner's reassessment of GST to nil for the period ended 31 July 2009;
  • her decision that section 89C(eb) of the TAA provided grounds, function and power for the Commissioner to reassess the amount of GST to nil;
  • her decision to accept that output tax was payable on the sale of the property at issue, while refusing the input tax refund on the same sale; and
  • the Commissioner's failure to issue a challenge notice under section 89(P) of the TAA for the GST period ended 31 July 2009.

Mr Mawhinney argued that if he supplied information in support of GST refund claims, then his assessment must be accepted if the Commissioner takes no action within 15 working days after receipt of that information.

The Commissioner's position was that:

  • she had retained refunds for seven GST periods for which she gave valid notices that she would withhold payment under section 46 of the Goods and Services Tax Act 1985;
  • she offset refunds due for other tax periods; and
  • for the GST period ended 31 July 2009, she validly amended the self-assessed amount of $67,011.65 to nil under section 89C(eb) of the TAA.

Mr Mawhinney contended that the disputes process under Part 4A of the TAA had concluded. He submitted that due to the Commissioner's failure to comply with time constraints, a GST refund is deemed payable by the Commissioner to the Trust.

However, the Court found that the disputes process was still underway, with the Trust's matter in the Taxation Review Authority ("TRA") stayed, pending the Court of Appeal's decision on Mr Mawhinney's appeal of the determination of the judicial review in the Commissioner's favour (by Cooper J on 23 December 2014). Thus, the fourth cause of action was a duplication of process.

The Court further held that if it was Mr Mawhinney's position that he retains access to challenge under Part 8A (as opposed to the Part 4A dispute access) then he faces a nearly insurmountable obstacle by virtue of what the Supreme Court said in the Tannadyce Investments Limited v Commissioner of Inland Revenue [2011] NZSC 158 ("Tannadyce") case:

  • In summary therefore we would hold that disputable decisions (which include assessments) may not be challenged by way of judicial review unless the tax payer cannot practically invoke the relevant statutory procedure. Cases of that kind are likely to be extremely rare. [61]

The Court concluded that Mr Mawhinney's fourth cause of action does not by any measure qualify itself as being of the rare kind envisioned by the Supreme Court in Tannadyce, and thus should be struck out.

The Court further held that the fourth cause of action was prima facie vexatious because it concerns precisely those issues already subject to consideration in other pending litigation. The Court found the fourth cause of action was a duplication of process and an abuse of process, because Mr Mawhinney was attempting to relitigate a matter already determined, while duplicating the proceedings already underway pursuant to the disputes process.

Security for costs application

The Commissioner sought, as security for costs, $40,000 and for the proceeding to be stayed until the sum is paid or security given.

The Commissioner argued that the cost of defending the litigation is unjustified, particularly as it is overly complicated and unnecessarily protracted and the Trust will be unable to pay costs if unsuccessful.

It was not challenged that the Trust has inadequate resources to meet any costs. However, Mr Mawhinney opposed costs saying that he personally would be able to meet those costs, and furthermore, in his view, the claim has a very strong prospect of success.

The Court found there was no clear reason to believe costs could be paid if the claims are unsuccessful. It was not sufficient for Mr Mawhinney to claim he would meet costs.

While the Court did not attempt an overall assessment of the claims as to the merits, it noted that in a prior decision on Mr Mawhinney's summary judgment claim, Bell J found that the Commissioner had an arguable defence to the claims. The Court also noted that a number of Mr Mawhinney's pleaded causes of action face significant hurdles.

The Court reviewed the Commissioner's calculations of attendances in connection with the trial and came to the opinion that should the Commissioner succeed in due course, costs to be awarded would exceed the sum of $40,000 by a comfortable margin.

Tax Administration Act 1994, Goods and Services Tax Act 1985