CHESTERFIELDS PRESCHOOLS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC CHCH CIV-2009-409-002550

CHESTERFIELDS PRESCHOOLS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC CHCH CIV-2009-409-002550 [19 July 2012]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2009-409-002550[2012] NZHC 1525BETWEEN CHESTERFIELDS PRESCHOOLSLIMITEDPlaintiffAND DAVID JOHN HAMPTONSecond PlaintiffAND CHESTERFIELDS PARTNERSHIPThird PlaintiffAND CHESTERFIELDS PRESCHOOLSPARTNERSHIPFourth PlaintiffAND ANOLBE ENTERPRISES LIMITEDFifth PlaintiffAND THE COMMISSIONER OF INLANDREVENUEDefendantHearing: 15 March 2012(Heard at Christchurch)Appearances: S Kinsler and J Kerr for Applicant/DefendantD J Hampton in Person (Respondent/Plaintiff) in PersonJudgment: 19 July 2012JUDGMENT OF ASSOCIATE JUDGE OSBORNE[on defendant's strike out application]Introduction[1] This was an application to strike out the plaintiffs' claim.[2] The Commissioner (the defendant) filed a memorandum of decisions in June2007 relating to the plaintiffs' tax positions. The plaintiffs issued a Notice of Proposed Adjustment ("the NOPA") in September 2007. In this proceeding theplaintiffs seek a number of orders relating to the Commissioner's decisions, theNOPA and its consequences.[3] The Commissioner, in a lengthy Notice of Application, asserted that theplaintiff's claim is an abuse of the process of the Court and that it discloses noreasonably arguable cause of action.[4] This proceeding was commenced in October 2008. The present application was filed in December 2009. Appeals and other proceedings between the parties then took place.A brief history of judicial reviewMy summary of the background[5] I have, in a previous judgment1 traversed the background of dealings between the Commissioner and the plaintiffs, including this set of judicial review proceedings. I recorded:Background[2] The plaintiffs have been variously property holding companies or entities, or owners and operators of pre-schools. They all involve or are associated with David John Hampton who appeared for them in this interlocutory application by leave. The Hampton family home was transferred to the third plaintiff (a partnership) in 1990. A chronology of the various plaintiffs' dealings both betweenthemselves and with the Inland Revenue Department from 1990 to date would occupy many, many pages. Some of the history is captured in the judgments of this Court in judicial review proceedings on 15 December 2006 (reported at (2007) 23 NZTC 21,125) and on 25 November 2008 (reported at (2009) 24 NZTC 23,148) and of the Court of Appeal (on appeal in the same proceeding) [2010] NZCA 400, delivered on 31 August 2010.[3] The intertwining of the dealings of the plaintiffs is reflected in the first five paragraphs of their amended statement of claim which read:1 Chesterfields Preschools Limited v Commissioner of Inland Revenue (2011) 25 NZTC 20-092.1. The first plaintiff is a duly incorporated company ("CPL")set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company. From 1993 until 2001 CPL also owned and operated preschools previously owned by the third plaintiff.2. The second plaintiff at all material times was a director of CPL and the fifth plaintiff, Anolbe Enterprises Limited.3. The third plaintiff is a partnership formed in 1990 ("OCP")trading briefly as an owner of preschools in Christchurch OCP dissolved in 1993 and sold its assets to CPL. OCP ceased trading in 1993.4. The fourth plaintiff is the trading name of Mr Hampton("NCP") who from 2002 to 2004 owned and operated thepreschools previously owned by CPL.5. The fifth plaintiff is a duly incorporated company ("AEL")set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company.[4] Many of the issues which arose between Mr Hampton and the Inland Revenue Department arose in relation to GST, beginning with a GST refund claim on the transfer of the family home in 1990. GST claims were lodged. The Department made numerous assessments and took enforcement action. Discussions and negotiations occurred. Settlements were negotiated. In more recent years proceedings have been pursued by one or more of the plaintiffs.The Supreme Court's summary of the judicial review proceedings[6] A limited aspect of the plaintiffs' judicial review proceedings reached theSupreme Court in late 2010 on a leave application.2[7] The Court summarised the two High Court judicial review judgments givenby Fogarty J ("the review judgments") and related appeals in this way (citationsexcluded):[1] This case arises out of a long-standing dispute between the applicants and the Commissioner of Inland Revenue (Commissioner) around complaints by the applicants that the Commissioner:2 Chesterfields Preschools Limited v Commissioner of Inland Revenue [2010] NZSC 155;(2011) 25 NZTC 20-017.(a) had not honoured informal arrangements made as to the taxation (mainly GST) liabilities of the applicants;(b) had failed to act with reasonable diligence and celerity in progressing audits and processing GST returns;(c) had behaved unreasonably over the re-registration for GST purposes of one of the applicants (Anolbe Enterprises Ltd);(d) had acted unreasonably over the proposed remission of penalties and attempts to recover from the applicant their total tax indebtedness.[2] In a judgment delivered on 15 December 2006 (the first review judgment), Fogarty J found generally in favour of the applicants. He set aside a June 2004 decision by the Commissioner declining the remission (under s 182 of the Tax Administration Act 1994) of additional tax. He required the remission issue to be reconsidered and gave certain directions (under s 4(5) of the Judicature Amendment Act 1972) as to that reconsideration. These directions imposed constraints on the Commissioner to ensure that the reasonable expectations of the applicants were not frustrated.Relevant to the required reconsideration was the Judge's apparentview that the Commissioner was required to remit additional tax to the extent necessary to ensure that the resulting impost was proportionate to the breaches on the part of the applicants and his conclusion that if the conditions for remission stipulated in s 182 could not be satisfied, the Commissioner should resort to his more general powers under ss 6 and 6A of the Tax Administration Act.[3] The reconsideration directed by Fogarty J resulted in a decision made on 5 June 2007 by an Inland Revenue Department officer (MrR K Budhia). Mr Budhia's role was not easy. His reconsideration was obviously required to accord with the law (including limitations provided for in s 182 of the Tax Administration Act as to the power to remit additional taxes). But he also had to give effect to FogartyJ's first review judgment which was never appealed by the Commissioner.[4] The result of Mr Budhia's reconsideration was that the totalindebtedness of the applicants was reduced, but not by much. This lead to a further judgment of Fogarty J delivered on 25 November 2008 (the second review judgment) in which he again found substantially for the applicants. He concluded that Mr Budhia had been wrong in a number of respects. So he set-aside the decision of Mr Budhia and directed further reconsideration. And associated with this further reconsideration he gave further directions. In the course of his judgment, he indicated that the Commissioner was under a positive duty to achieve a result under which the penalties were proportionate to the breaches.[5] The Commissioner appealed against the second review judgment, but with distinctly limited success. This was on issues which are not themselves subject to further challenge before us. The concerns of the applicants are rather directed to the interpretation which theCourt of Appeal placed on Fogarty J's comments as to proportionality and also to what the Court described as "guidance"in relation to the processes which should be followed by the Commissioner. Some of this guidance was reasonably prescriptive and based on the Court's interpretation of the first review judgment.The Commissioner's characterisation of this "tax challenge" proceeding[8] The Commissioner brings together this background. In support of the dual contentions of abuse of process and no reasonably arguable cause of action, heasserts that there exists no disputable decision which this "tax challenge" proceeding challenges. Counsel summarised the Commissioner's basis of application in threeparagraphs:The "tax challenge" proceeding2. The plaintiffs' "tax challenge" proceeding has been commenced bythem in the context of long-standing disputes (originating in about 1993 and continuing down to the present) between them and the Commissioner. The disputes include the plaintiffs alleging that (among other things) the Commissioner has:2.1 failed to honour informal arrangements made as to payment of tax (particularly GST) liabilities of the plaintiffs;2.2 failed to act with reasonable diligence in progressing audits and processing GST returns and/or GST input tax credit claims;2.3 behaved unreasonably over the re-registration (for GST purposes) of Anolbe Enterprises Ltd; and2.4 acted unreasonably with regard to remissions of penalties and in and by his attempts to recover from the applicant their total tax indebtedness.3. In the relevant respects, the plaintiffs have never challenged any of the relevant assessments.4. In the light of the Court of Appeal's judgment of 31 August 2010 (determining the Commissioner's appeal against the judgment ofFogarty J of 16 November 2008 in the plaintiffs' second judicialreview proceeding against the Commissioner), it appears that there isno disputable decision which the "tax challenge" proceedingchallenges, or could have challenged, had the other statutory prerequisites in Part VIIIA for such a challenge been met (which the Commissioner denies).[9] This background led the Commissioner in his notice of application for orders striking out the claim to identify the existence and outcomes of the judicial reviewproceedings as a bar to any success by the plaintiffs in this proceeding. Having regard to the length of the grounds of application relied on by the Commissioner I append those as Schedule A to this judgment but summarise them as follows:(a) The present proceeding is in essence an invitation to the High Court to reopen either or both of the two judicial review proceedings, in relation to which the High Court is functus officio;(b) The plaintiffs are precluded from pursuing the present proceeding either because of issue estoppel or the doctrine of res judicata;(c) The present proceeding is an attempt to circumvent the disputes andchallenge procedures in the Tax Administration Act 1994 ("the TAA");(d) The present proceeding involves "gaming and diversionary behaviour" in terms of the Court of Appeal's description in Westpac Banking Corporation v CIR.3[10] As is evident, the Commissioner's strike out application involves theproposition that the outcome of the judicial review proceedings in some way encompassed and disposed of the issues said to arise from the plaintiffs' NOPA.The standing of Mr Hampton[11] The second plaintiff, Mr Hampton, appeared at the hearing representing both himself and the other plaintiffs.[12] In the Commissioner's strike out application, the first matter relied on as constituting an abuse of process was the filing of this proceeding by Mr Hampton, purporting to act for the other plaintiffs, when he is not qualified to appear and had not obtained leave from the High Court to do so.3 Westpac Banking Corporation v CIR [2009] 2 NZLR 99; (2009) 24 NZTC 23,340 (CA)(on appeal see Westpac Banking Corporation v CIR (2009) 24 NZTC 23,435 (SC).[13] This issue was also addressed at case management conferences in relation to the proceeding where Mr Hampton (and through him the other plaintiffs) were reminded that leave had not been granted to Mr Hampton to bring or to conduct the proceedings for other parties.[14] For the purposes of having the Commissioner's strike out application come toa hearing, the Commissioner withdrew his opposition to the granting of leave to Mr Hampton to represent the other plaintiffs. I accordingly granted leave for that limited purpose.Principles applicable to a strike out application[15] High Court Rule 15.1 makes provision for orders striking out all or part of a pleading. In this case the defendants/applicants invoke r 15.1(1)(a) (no reasonably arguable cause of action) and r 15.1(1)(d) (abuse of the process of the court).[16] I adopt the following as principles applicable to the consideration of this application:4(a) The Court is to assume that the facts pleaded are true (unless they are entirely speculative and without foundation).(b) The cause of action must be clearly untenable in the sense that the Court can be certain that it cannot succeed.(c) The jurisdiction is to be exercised sparingly and only in clear cases.(d) The jurisdiction is not excluded by the need to decide difficult questions of law, even if requiring extensive argument.(e) The Court should be slow to rule on novel categories of duty of care at the strike out stage.4 Attorney General v Prince [1998] 1 NZLR 262; Couch v Attorney General [2008] NZSC 45.The Commissioner's decisions and the NOPABackground to the Commissioner's decisions[17] The Commissioner's memorandum of decisions was issued on 18 June 2007.[18] That followed the first review judgment of 15 December 2006 which had required the Commissioner to reconsider the remission of penalties and attempts to recover from the plaintiffs their total tax indebtedness. As summarised by the Supreme Court, the directions made by Fogarty J imposed constraints on the Commissioner in relation to the reconsideration. As a result of a decision made by Mr Budhia of the Inland Revenue Department on 5 June 2007, the Commissioner filed and served his memorandum of decisions.[19] The plaintiffs plead that the Commissioner filed and served a memorandum of his decisions on 18 June 2007. (The Commissioner by his defence asserts that the memorandum of decisions was served on the plaintiffs on 6 June 2007 with the original filed in the High Court on 18 June 2007. (Nothing turns on that differenceof factual allegation in the strike out context where the plaintiffs' allegations aretaken to be correct).[20] There was then a development in relation to what has become known in thevarious proceedings between the parties as the "Aronsen notes". Blair Aronsen wasan officer of the Inland Revenue Department. In 1993 he took over from a Mr Nimmo the pursuit of overdue taxes and returns of various of the plaintiffs. He had discussions with Mr Hampton. It has been established through the first reviewjudgment (15 December 2006) that, as a result of Mr Aronsen's and later discussions,Mr Hampton was led to believe that GST input claims which he was lodging would be considered and decisions made upon them and that refunds would be allocated to the best advantage of the plaintiffs.5 Mr Aronsen kept file notes which subsequently proved of importance to the judgments of this Court, particularly in the judicial review proceedings. The Aronsen notes were discovered late. As subsequently recorded by Fogarty J in the second review judgment (25 November 2008):65 First review judgment at [159].6 At [108].It is quite apparent from the December 2006 judgment that the disclosure of the Aronsen notes, ultimately by the Commissioner, had a very significant outcome in favour of the plaintiffs.This led his Honour to find that the late discovery of the Aronsen notes was a factor to be taken into account in the reconsideration ordered on the second review.7Disputes procedures under the TAA[21] Disputes procedures in relation to assessments and other disputable decisions are provided in Part 4A of the TAA.[22] Relevantly to this proceeding a taxpayer may under s 89D of the TAA issue a notice of proposed adjustment in respect of a notice of assessment issued by the Commissioner. The response period for a NOPA issued in response to an assessment by the Commissioner is two months.8The plaintiffs' NOPA[23] The Commissioner's memorandum of decisions was received by theplaintiffs in June 2007. The plaintiffs decided to propose adjustments in terms of the TAA. Their pleading in relation to the NOPA which follows reads:The plaintiffs issued a Notice of Proposed Adjustments, (the NOPA), inresponse to the Commissioner's Notice of decisions in three parts, the last part filed and served on the Commissioner on 10 September 2007.The plaintiffs' proposed adjustments in the NOPA were consistent with thefindings and determinations of the December 2006 judgment and the admitted failure by the Commissioner to disclose the evidence of the Aronsen filenotes at any time prior to issuing summary judgment proceedings against the plaintiffs in May 2004.The NOPA set out at paragraphs 33 to 37, the distinction between the disputable decisions that were addressed in the NOPA, and the discretionary decisions that were to be reviewed in judicial review proceedings, in the following terms:[33] There are two aspects to the decision of Justice Fogarty relevant to the plaintiffs in respect to this NOPA.7 At [110] and [118].8 See s 89D(5) TAA; s 89AB(2) TAA.[34] The first aspect is the judicial confirmation that the Aronsen arrangements created reasonable expectations between the plaintiffs and the Commissioner that the penalty situation in the plaintiffs various tax accounts from 1990 was under control.[35] The second aspect is that because of the inordinate failure of audit over 13 years, to make decisions in respect to the investigation of various refunds of the plaintiffs, in some cases indefinitely, and the reasonable expectations of the taxpayers that the taxes of the plaintiffs were under control during that time, the Commissioner was held to be bound by fairness to apply his discretion under the equitable relief provisions of the Tax Administration Act 1994 (TAA) to provide relief to the plaintiffs from the application to the penalty regime.[36] This NOPA deals with the decisions of the Commissioner in respect to the first aspect outlined above concerning enforcement of the Aronsen arrangements in terms of the provisions of the TAA 1994.[37] The second aspect involves review of the Commissioner'sdiscretionary equitable decisions and is not capable of challenge in a NOPA. The decisions of the Commissioner exercising the discretionary equitable powers under equitable relief provisions of the TAA will be the subject of further proceedings if necessary, now that the Commissioner has disclosed the Aronsen filenotes.[24] The allegations in these various paragraphs are generally denied by theCommissioner, the Commissioner's central allegation being that no valid NOPA was ever served on the Commissioner.[25] The plaintiffs' pleading in their claim goes on to assert that the NOPAcomplied with all the requirements of Part 4A of the TAA including in terms of content, form and timing.The Commissioner's position at this hearingThe Commissioner's focus on the impact of subsequent judgments[26] The Commissioner continues to deny that the plaintiffs have met the statutoryprerequisites for a challenge to the Commissioner's decisions through a NOPA butMr Kinsler for the Commissioner did not develop or pursue argument in relation to those matters in this strike out context. His submissions were instead developed inrelation to an abuse of Court process and res judicata / issue estoppel upon an assumption that the statutory prerequisites were met (which, he recorded correctly, the Commissioner had denied). I therefore do not focus further in this judgment on the meeting of the statutory prerequisites which the plaintiffs assert in their pleadings have been met. Rather, I proceed to examine any impact of subsequent appeals or litigation upon the NOPA (upon an assumption that it was validly issued).Further litigation between the parties – reference to the NOPA[27] The plaintiffs took the view that the Inland Revenue Department, in the formof the Commissioner's decisions, had effectively ignored the first review judgment.Litigation came back before this Court again on 31 October 2007 when Fogarty J dealt with applications filed by the plaintiffs to deal with certain interim orderswhich affected the plaintiffs' property.9 Fogarty J recognised that there were serious grounds for challenging the June 2007 decision and that that could be by way of judicial review. His Honour recognised that other alternatives existed, one of whichwas "to take the matter up internally by way of a NOPA".10[28] In 2008 the plaintiffs made their second judicial review application. The favourable outcome for the plaintiffs was summarised by the Supreme Court in the passage I have referred to.11[29] Fogarty J's second review judgment issued on 25 November 2008.12 An area of dispute not resolved by the second review judgment related to what are referred toin this litigation as "the Anolbe sham issues" (a reference to transactions involvingthe fifth plaintiff (Anolbe Enterprises Limited)). Fogarty J concluded:13It is in the interest of the parties that the [Anolbe] sham question be resolved as soon as possible, and it seems to me the most reliably efficient way is to set the matter down for trial in the High Court.9 Chesterfields Preschools Ltd v Commissioner of Inland Revenue HC ChristchurchCIV-2004-409-001596, 31 October 2007.10 At [43] and [44].11 See above [5].12 Chesterfields Preschools Limited v Commissioner of Inland Revenue (No. 2) (2009) 24 NZTC23,148.13 At [100].His Honour made an order to that effect. A number of other orders were made in the second review judgment.14[30] The Commissioner did not appeal the first review judgment but appealed the second review judgment.[31] In the meantime the first review proceeding came back before Fogarty J on 30 September 2009 in relation to an application which the plaintiffs had filed inviting the Court to make further decisions in the first review proceeding. One of the directions sought was that the Anolbe sham issues discussed in the second review proceeding be set down for hearing. The Commissioner applied for orders strikingout the plaintiffs' applications. The judgment issued on 30 September 2009.15Fogarty J found that he was effectively functus officio and, pending the appeal in theCourt of Appeal, stayed consideration of the plaintiffs' applications.[32] In the course of argument, his Honour was referred to the existence of theplaintiffs' NOPA dated 20 July 2007 (but disputed as to its validity).16 In his submissions to the Court, Mr Hampton apparently drew the same distinction as is drawn in this proceeding between disputable determinations and exercises of discretion.17 Mr Hampton submitted that the NOPA could be seen as pursuing disputable decisions which could be addressed under the processes of the TAA whereas the second judicial review proceeding pursued challenges to the exercise of a discretion which could not be pursued by way of NOPA.18 Fogarty J was not called on rule on the point. His Honour observed that there was a serious argument as to whether pursuing the NOPA would be an abuse of process but observed that, depending on the outcome of the Court of Appeal hearing, there may yet be some life in bringing the NOPA issues for hearing.1914 At [118].15 Chesterfields Preschools Limited v Commissioner of Inland Revenue HC ChristchurchCIV-2004-409-001596, 30 September 2009.16 See the discussion at [10] and following.17 At [11].18 At [12].19 At [20]-[21].[33] The fate of the NOPA was again the subject of brief discussion in a further judgment of Fogarty J on 21 October 2009.20 The plaintiffs had applied for orders varying or rescinding the stay orders made on 30 September 2009. Fogarty J dismissed the application again on the basis that the Court was functus officio. Theplaintiffs' concerns over the fate of the NOPA were discussed in the course ofargument. Fogarty J recorded that counsel for the Commissioner had:21... reassured me by stating the obvious that if and when the question of the validity of the NOPA become relevant, and if it is found to be relevant, and he thinks that would probably be by way of a Court decision, then appropriate orders can be made as to the process thereafter.[34] The Court of Appeal heard the appeal on the second review judgment (and other judgments) in May 2010 before delivering a judgment on 31 August 2010.22[35] One of the Commissioner's grounds of appeal was that some of the decisionsmade by Mr Budhia could only be challenged by the statutory challenge route and not by judicial review.23 Of relevance to the present application was theCommissioner's contention that the Anolbe sham issues should have been dealt withby the statutory challenge procedures.24[36] In its discussion of the Anolbe sham issues the Court of Appeal said:Anolbe sham issues[130] The Commissioner submits that Fogarty J was wrong to order that the Anolbe sham issues be set down for hearing before the HighCourt. In the Commissioner's submission, these should have beendealt with by way of the statutory challenge procedures.[131] We accept the Commissioner's submission that judicial reviewproceedings will rarely be appropriate in taxation matters. [Westpac Banking Corporation v Commissioner of Inland Revenue [2009] NZSC 36; (2009) 24 NZTC 23,435.] We also accept the submission that the rejection of the four Anolbe returns could have been challenged by way of the statutory challenge procedures and Anolbe had been informed of its rights in this regard at the time the returns were20 Chesterfields Preschools Limited v Commissioner of Inland Revenue HC ChristchurchCIV-2004-409-001596, 21 October 2009.21 At [7].22 Chesterfields Preschools Limited v Commissioner of Inland Revenue [2010] NZCA 400;(2010) 24 NZTC 24,500.23 At [8].24 At [119](d).rejected. Any statutory challenge is now out of time unless a purported challenge (which, as we understand, was filed before the relevant decision) is upheld.152The text of the footnote 152 reads:We are not to be taken as making any comment on whether that purported challenge is valid or not. We accept that in Fogarty J's decision of31 October 2007, referred to at [6] above, a second judicial review was heralded as one possible means of challenging the Budhia decisions. However, this judgment was after the end of the statutory timeframe. It thus cannot provide any excuse for not using the statutory challenge procedures.The judgment continues:[132] We therefore set aside Fogarty J's order that the Anolbe sham issuesbe set down for hearing before the High Court. For completeness, weremark that it is implicit in the Judge's findings that theCommissioner was required to consider (if on reconsideration he persisted in the view that Anolbe was not the owner of the properties) whether input tax deductions were available to any other taxpayer, including Mr Hampton. In our view, this should now be done.[37] That is where past judicial discussion of the NOPA ends. The Supreme Court on 16 December 2010 dismissed the application by the plaintiffs for leave to appeal the judgment of the Court of Appeal.25Discussion[38] Since the plaintiffs issued their NOPA in September 2007 (whether validly or invalidly), it has been a recurring feature of the various branches of litigation that both protagonists have recognised the appropriateness of the statutory challenge procedures in relation to at least some of the issues which were allegedly in play. For the Commissioner, Mr Kinsler has emphasised the extent to which the judgment of the Court of Appeal on 31 August 2010 resolved a number of issues, largely for the benefit of the plaintiffs. But the Court of Appeal expressly recognised the possibility that a statutory challenge (which the Court understood had been purportedly filed before the relevant decision) might be upheld.25 Chesterfields Preschools Limited v Commissioner of Inland Revenue [2010] NZSC 155;(2011) 25 NZTC 20-017.[39] This was not a case where the parties (or the Court) ignored, either deliberately or inadvertently, the distinction between those matters properly to be determined through the statutory challenge procedures and that very limited category of matters which might be susceptible to judicial review. There was no implicit agreement between the parties that the distinction be ignored. Both parties were alert to the distinction and it was incorporated in submissions for and against the various applications made. Against this background, it is not correct to speak (as theCommissioner's strike out application does) of "an implied invitation to the Court to reopen either or both of the two previous judicial review proceedings". In terms of the Commissioner's abuse of process ground, the concept that the High Court might be functus officio in relation to the validity or outcome of the NOPA cannot arise.[40] The Commissioner when filing his application on 11 December 2009 submitted in the alternative that the plaintiffs were estopped by the doctrines of res judicata or issue estoppel, and by the sub judice rule, the Court of Appeal now beingseized of a number of appeals relating to "the same time period and subject matter as this claim". The Court of Appeal subsequently heard the appeals and gave judgment on 31 August 2010. To that extent the sub judice pleading fell away. The res judicata and issue estoppel pleadings fall away for parallel reasons to those relatingto the Commissioner's abuse of process pleading. The Court of Appeal was not asked to rule on the validity or outcome of the NOPA or the disputes procedures generally. To the contrary, the Court of Appeal expressly recognised the possibility that the purported challenge of 2007 might yet be upheld.[41] I recognise that there may be room, indeed substantial room, for the Commissioner to argue that at least some of the subject matter of the NOPA was not the proper subject matter of a NOPA. Submissions to that effect are to be properly determined when the validity of the NOPA is before the Court in a substantive hearing. Against the background of all the tentacles of this litigation, it would invite still further multiplication of procedural and substantive issues to, in some way, seek to carve out of the present litigation some matters which might be argued to be incorrectly included within the NOPA. The only appropriate course is to have all issues relating to the NOPA before the Court at a substantive hearing. Then issuesboth as to the procedure and as to the form and content of the NOPA may be determined once and for all.[42] This is not as clear a case as the authorities envisage for the exercise of the strike out jurisdiction. The primary avenue for resolution of issues properly taken in relation to tax assessments by the Commissioner must always lie in the statutory procedures under the TAA. The issues between these parties have been bedevilled by the period of judicial review litigation. It is appropriate that the determination of the validity and consequences of the plaintiffs' NOPA is now undertaken at asubstantive hearing.[43] The distinctive roles of the statutory procedures under the TAA and of judicial review render largely inapplicable the concept that a plaintiff might be issue estopped from pursuing a particular point because the point was not pursued in the judicial review proceeding. Given the history of these proceedings and repeated references to the appropriateness of statutory procedures, this is not a case where issue estoppel clearly arises. I deal with the matter in that way because of the test for strike out – the Commissioner is of course still entitled to pursue arguments of issue estoppel and the like at a substantive hearing if he sees fit.[44] In these circumstances the plaintiff's claim in relation to the validity of the NOPA is not clearly untenable.Outcome[45] The outcome accordingly is that the defendant's application for ordersstriking out the statement of claim is dismissed.[46] On an interlocutory application of this nature costs would usually follow the event. The plaintiffs however have not been represented by counsel. My present view is that they are therefore entitled only to their reasonable disbursements associated with the application.[47] Nothing in this judgment or in the directions previously given authorises Mr Hampton to act other than for himself in this litigation from this point. The issues involved are of complexity. The validity and consequences of the NOPA will involve assessments of the quality of the work undertaken by Mr Hampton on behalf of himself and his co-plaintiffs. The presentation of the litigation from this point will benefit from a degree of objectivity and distillation which counsel can bring. Against this background the plaintiffs (other than Mr Hampton) must understand that if they wish to pursue this litigation further, they will be required to enter appearances through a solicitor or will require leave to be represented by Mr Hampton. The granting of such leave is unlikely.Orders[48] I order:(a) The defendant's interlocutory application for orders striking out theclaim is dismissed.(b) There is no order as to costs.(c) The plaintiffs are entitled to their reasonable disbursements in relation to the application, such disbursements to be fixed by the Registrar.(d) The proceeding is adjourned for mention to a date to be separately advised to the parties.Solicitors:D Hampton c/- Edgeware Law Centre, PO Box 21319, ChristchurchCrown Law, PO Box 2858, Wellington 6140SCHEDULE AGROUNDS OF DEFENDANT'S INTERLOCUTORY APPLICATIONContent of Commissioner's Application1. The applicant, the Commissioner of Inland Revenue, will on the day of 20 , at am/pm, apply to the Court for orders:1.1 striking out the statement of claim; and1.2 awarding costs in favour of the Commissioner.2. The grounds on which each order is sought are that the statement of claim:2.1 is an abuse of the process of the Court;2.2 discloses no reasonably arguable cause of action or case appropriate to the nature of the pleading.3. The claim is an abuse of the process of the Court because:3.1 It is filed by the second plaintiff, Mr D J Hampton, purporting to act for the first to fifth plaintiffs, when he is not qualified to appear for these parties, other than himself, and has not obtained leave from the High Court to do so.3.2 In so far as the claim constitutes an implied invitation to the Court to reopen either or both of the two previous judicial review proceedings between the parties:3.2.1 The substantive judgment of 15 December 2006("December 2006 judgment") in the first judicial reviewproceeding (CIV-2004-409-1596) was not appealed by either party and has now been sealed.3.2.2 The costs judgment of 1 May 2009 in the first judicial review proceeding has been appealed in its entirety by the Commissioner and is currently before the Court of Appeal (as one of three consolidated appeals in CA 607/08, CA 800/08 and CA 271/09).3.2.3 Both final judgments in the second judicial review proceeding (CIV-2008-409-0722), delivered on 25 November 2008 ("November 2008 judgment") and (as tocosts) 1 May 2009, have been appealed in their entirety by the Commissioner and are also currently before the Court of Appeal.3.2.4 Both the first and second judicial review proceedings are now out of the hands of the High Court, in accordance withthe principle of functus officio and the hierarchical nature of our court system.3.3 In so far as the claim constitutes an attempt to bring a further and separate proceeding, the plaintiffs are estopped by:3.3.1 res judicata;3.3.2 issue estoppel; and3.3.3 the sub judice rule, the Court of Appeal now being seized of three interrelated and wide-ranging appeals covering the same time period and subject matter as this claim.All of the matters now pleaded were in fact in issue (or should, if they have the significance for which the plaintiffs now contend, have been placed in issue) in the first and second judicial review proceedings, and are therefore subject to res judicata and/or issue estoppel. In particular,3.3.4 The 1993 GST input credit claims of the fifth plaintiff, discussed in paragraphs 9, 10 and 11 of the statement of claim, were (as evident from the reliance upon orders made in the December 2006 judgment) placed in issue and fully traversed in the first judicial review proceeding.3.3.5 The principal relief now sought by the plaintiffs is the setting aside of a decision said to have been taken by the Commissioner in relation to notices of assessment issued on 20 July 2007 (which are now said to have included (re)assessments of the 1993 GST input credit claims).3.3.6 Those notices of assessment:(a) as recognised in paragraph 14 of the statement of claim, followed decisions taken and notified to theCourt in June 2007 ("the Budhia decision") inaccordance with the December 2006 judgment;(b) together with the other steps taken by the Commissioner in response to the December 2006 judgment, were squarely before the Court in the second judicial review proceeding.3.3.7 The "decision" now under attack is the absence ofamendment of the assessments to reflect what the plaintiffs now claim was a validly served notice of proposedadjustment ("NOPA").3.3.8 The alleged NOPA is said to have been served between June and September 2007, six to nine months after delivery of the December 2006 judgment.3.3.9 Assuming for strike-out purposes only that paragraph 21 of the statement of claim is true, the alleged NOPA was drawn to the attention of both the Commissioner and the Court in September 2007.3.3.10 The second judicial review proceeding was not heard until October 2008.3.3.11 The "decision" under attack is therefore said to have beentaken (or at least to have been first taken: there is no specificity as to dates in the statement of claim) in the time period under consideration in the second judicial review proceeding.3.3.12 Both the "legality and fairness" of the Budhia decision andits sufficiency to discharge the obligations imposed upon the Commissioner by the December 2006 judgment were squarely in issue in that proceeding.3.3.13 As paragraph 32 of the statement of claim confirms, theplaintiffs were aware that the Commissioner's position wasthat there had been no valid challenge to the assessments, and therefore (as a matter of necessary implication) no basis for adjusting them.3.3.14 The plaintiffs could have attacked that aspect of theCommissioner's conduct in the second judicial reviewproceeding and are now clearly estopped from doing so.3.4 The claim constitutes an impermissible recourse to litigation in an attempt to circumvent the disputes and challenge procedures in the Tax Administration Act 1994 ("TAA"):3.4.1 Eligibility for the relief sought presupposes the validity of the alleged NOPA now said to have been served on the Commissioner in 2007.3.4.2 However, the validity of a NOPA can only be established (and must, where disputed, be affirmatively established by a taxpayer) through the TAA challenge process.3.5 For the plaintiffs now to file a (further) proceeding in this Court seeking a judicial ruling on the effect of their alleged NOPA is, in the circumstances, properly regarded as the kind of "gaming and diversionary behaviour" warned against by the Court of Appeal inWestpac, and should not be tolerated by this Court.4. The claim discloses no reasonably arguable cause of action because:4.1 Although no application for review has been filed, the claim is insubstance, as evident from the focus on a "decision" of theCommissioner and the relief sought, an application for relief under the Judicature Amendment Act 1972.4.2 It is evident from the principles set out in Westpac Banking Corporation v CIR (2009) 24 NZTC 23,340 (CA) that the claim fails to disclose any tenable ground of review. The claim:4.2.1 asserts that a "decision" taken by the Commissioner inrelation to certain assessments was invalid on administrative law grounds (paragraphs 50-53 of the statement of claim);4.2.2 does not suggest that the assessments in question were not genuine assessments when issued (cf. Westpac (CA) at paragraph [53]);4.2.3 does not allege "conscious maladministration" (cf. Westpac(CA) at paragraph [59]);4.2.4 is (for reasons given above) substantially repetitive of previous review proceedings between the same parties.4.3 In these circumstances, the plaintiffs cannot possibly establish the"exceptional circumstances" necessary to survive this strike-out application (Westpac (CA) at paragraph [59]).5. This application is made in reliance on:5.1 High Court Rules 7.19 and 15.1;5.2 the Court's inherent jurisdiction;5.3 sections 6, 6A, 109, and Parts IVA and VIIIA, of the Tax Administration Act 1994;5.4 judgments in related proceedings between these parties, including:5.4.1 this Court's judgments in the first judicial review proceeding (CIV-2004-409-1596) of 15 December 2006, 1 May 2009 and 30 September 2009, and in the second judicial review proceeding (CIV-2008-409-722), of 25 November 2008 and 1 May 2009;5.4.2 the Court of Appeal's judgments in the consolidated appeals, CA 607/08, CA 800/08 and CA 271/09, of 31 July 2009 ([2009] NZCA 334) and 25 August 2009 ([2009] NZCA 373, to be heard in May 2010; and5.4.3 the Supreme Court's judgment of 8 December 2009 ([2009] NZSC 127).5.5 As to the availability of judicial review in tax cases: Westpac Banking Corporation v CIR (2009) 24 NZTC 23,340 (CA) and Westpac Banking Corporation v CIR (2009) 24 NZTC 23,435 (SC).5.6 As to strike-out principles: Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA); McGechan on Procedure, paragraphs HR12.01.01, HR15.1.02, HR15.1.04, HR15.1.05, HR15.1.09, HR15.1.11.5.7 As to failure to raise the points now raised previously/issue estoppel/ vexation: Hoystead v Commissioner of Taxation [1926] AC 155 (PC); Foley v BNZ [1953] NZLR 303; Hunter v Chief Constable of the West Midlands Police [1982] AC 529; Realty Corporation Ltd v Cooper (1989) 2 PRNZ 426; Fraser v Robertson [1991] 3 NZLR 257; Tower Insurance Ltd v Disputes Tribunal at Nelson (1999-2001) 14 PRNZ 338; Arthur JS Hall v & Co v Simons [2002] 1 AC 615; Johnson v Gore Wood & Co [2002] 2 AC 1; Secretary of State for Trade and Industry v Bairstow [2004] Ch 1; Z v Dental Complaints Assessment Committee [2009] 1 NZLR 1; and Douglas & Ors v CIR; Wire Supplies Ltd v CIR (2009) 24 NZTC 23,331.