FALOON V THE COMMISSIONER OF INLAND REVENUE HC TAU CIV 2005-470-508

FALOON V THE COMMISSIONER OF INLAND REVENUE HC TAU CIV 2005-470-508 7 November 2005IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY CIV 2005-470-508BETWEEN CLARENCE JOHN FALOON Plaintiff AND THE COMMISSIONER OF INLAND REVENUE Defendant Hearing: 31 October 2005 (Heard at Rotorua) Appearances: C J Faloon appearing on his own behalf HS Hancock for Defendant Judgment: 7 November 2005JUDGMENT OF ASHER JThis judgment was delivered by me on at am/pm pursuant to Rule 540(4) of the High Court Rules .. Registrar/Deputy Registrar .. DateSolicitors: CJ Faloon, 10B Taramea Rise, Pyes Pa, Tauranga Crown Law Office, PO Box 2858 Wellington Central (HS Hancock)[1] This judgment deals with an application to strike out a Statement of Claim, brought by the Defendant, the Commissioner of Inland Revenue, against the Plaintiff, Clarence John Faloon.Background[2] On 26 July 2005 Mr Faloon filed a Statement of Claim in this Court. It related to a challenge under s 138F of the Tax Administration Act 1994 to an assessment of gift duty dated 12 July 2005 made by the Commissioner of Inland Revenue. The claim alleged that the Commissioner had erred in his assessment, and sought a direction that he alter his decision. It is necessary, however, to give the background in greater detail before dealing with the specific issues that arise. [3] The background facts of the present proceeding have been considered by the High Court on at least 11 occasions. The Court of Appeal has considered aspects of the disputes on at least three occasions. The relevant decisions include the following: a) Bank of New Zealand v Faloon (M354/96, High Court Wellington, 18 October 1996, Goddard J; b) Faloon v District Land Registrar and Palmerston North Airport Limited (No 1) (M453/96, High Court Wellington 6 March 1997, Ellis J; c) Traveller and Fatupaito as liquidators of Trade Lines Limited v Faloon (M137/97, High Court Wellington, 1 May 1997, Neazor J; d) Faloon and Piesse v District Land Registrar [1997] 3 NZLR 498; e) Trade Lines Limited (in liquidation) v Piesse (M181/97, High Court Wellington, 20 May 1997, Gendall J;f) Trade Lines Limited (in liquidation) v Faloon, Piesse and District Land Registrar (M195/97, High Court Wellington, 27 May 1997, McGechan J; g) Faloon and others v Attorney-General (CP310/99, High Court Wellington, 5 October 2000, Gendall J); h) Faloon v Central Equipment Company v Attorney-General(CA255/00, 23 July 2000); i) Faloon and Piesse v Trade Lines Limitation (in liquidation) and the District Land Registrar (CA121/97, 122/97, 13 December 2001; j) Faloon v The Commissioner of Inland Revenue & Ors, (2002) 20 NZTC 17,618. [4] The factual and procedural background leading to these proceedings is complex. I use as a summary of the background events that of Gendall J in CP310/99, which I have referred to above. He said at paras [9] – [14] of his judgment, (also relied on by Elias CJ in her judgment in Faloon v CIR (High Court Auckland M757/SD/01, 4 March 2002):[9] The relevant facts have their origin in two events. The first was the carrying out of a piped diversion of a stream, (the Kawau Stream) which diversion ran across the land owed by Trade Lines Limited pursuant to an arrangement between Mr Faloon's father now deceased, and the Palmerston North City Council. Trade Lines Limited was a Faloon family company. Secondly, there was a taking of a portion of land owned by Trade Lines Limited by the Crown for the purposes of the Palmerston North Airport. At all material times the company owned the land and the Crown paid $80,000 to it on account of compensation under the Public Works Act 1981, after the land was taken by proclamation in December 1993. Trade Lines Limited is in liquidation. A claim for further compensation, over and above the $80,000, by the company, remains unresolved but is being pursued by the liquidators of Trade Lines. [10] An issue arose in relation to the diversion of the stream, which was a dispute over payment for work and designs relating to the diversion, and possible contractual arrangements between Mr Faloon's father and the Palmerston North City Council. [11] Trade Lines Limited, however, had gone into liquidation and the liquidators wished to sell the retained piece of land. This led to the lodgingof a number of caveats by Mr Faloon and his sister and also by Mr Faloon's wife. They sought to prevent the sale. Caveats were also lodged in respect of the airport land which was said to protect an "easement in gross" over such airport land, but was, it seems, really no more than a fiction; see the decision of Ellis J in Faloon and Piesse v District Land Registrar [1997] 3 NZLR 498. But Trade Lines Limited had purported to create, in 1993, in favour of the other Faloon family company, Central Equipment, what was said was a "drainage easement in gross" so as to endeavour to provide some platform to pursue a claim in respect of the stream diversion. [12] Mr Faloon's father died in 1977 and the Public Trustee were Executors of his estate with Mr Faloon's mother having a life interest, and he and his sister being residuary beneficiaries. The caveat in respect of the airport land was discharged, Ellis J holding that Mr Faloon, Central Equipment and his sister did not have a caveatable interest. The struggle to prevent liquidators selling the larger portion of land resulted in decisions of this Court on 1 October 1996 (Goddard J), 27 April 1997 (Neazor J), 19 May 1997 (myself) and 26 May 1997 (McGechan J). Each decision was to the effect that there was no caveatable interest held by Mr Faloon or his sister, in their own right, nor as residuary beneficiaries in their father's estate, because they had no interest in the land. The true position was the land had been owned by Trade Lines and vested in the liquidators of that company. [13] Although there was an appeal to the Court of Appeal lodged in respect of the decision of McGechan J a stay was not sought to prevent registration of the transfer of the residue of the land to the bona fide purchaser. This has proceeded. The appeal has not been brought on for hearing. Four of the entries on the Certificate of Title leading to the registration of that transfer are among those challenged by Mr Faloon in the present proceeding. [14] When the purchaser of the residue of the land from the liquidators proceeded to subdivide it, they found that as between Trade Lines and Central Equipment the "easement in gross" was registered by the Faloon interests. It hindered subdivision. Application was made to the Court to extinguish the easement and this was the subject of the judgments of Heron J of 18 May 1998 and Neazor J of 29 June 1998. As a consequence the easement was extinguished. I respectfully conclude that both Judges were correct in their reasoning. Although Mr Faloon and his interests, called their creation an "easement in gross" it really was no more than a device entered into by Mr Faloon, acting through the two companies, in an endeavour to create something which in fact and in law could not exist. Central Equipment Company did not own any land which adjoined that of the grantor of the "easement", so as to be a "dominant tenement". But an easement in gross does not require a dominant tenement. Yet there has to be a servient tenement and also the right claimed, or given by the easement, must be capable of forming the subject matter of a grant. So, in this case, despite it being claimed that Trade Lines Limited was the servient tenement, in truth it did not nor could not accommodate rights of others such as Central Equipment Company, independent of land ownership because such related only to the receipt of stormwater and drainage flowing in the Kaurau Stream watercourse. The engineers, surveyors and planners who prepared the plan, when reporting to Mr Faloon's sister on 28 June 1993 specifically stated that:"We consider the granting of an easement in favour of another company, owned by yourselves, somewhat unusual."[5] Gendall J also had this to say further about the "easement in gross":[15] I agree that the "easement in gross" was properly extinguished and whether there was a proper basis for it to have been created, which is doubtful in any event, it was extinguished by order of the Court and consequently such order was registered.The Statement of Claim[6] The Statement of Claim sets out the history of the purchase of the relevant land, beginning in 1966. The bulk of the Statement of Claim is concerned with covering the ground that has already been dealt with in the earlier cases, relating to the diversion of the water, the taking of the land by the Palmerston North City Council, and the non-payment of compensation. Much of this pleading seems to be irrelevant to the cause of action ultimately pleaded. [7] It is alleged that on 9 December 1993 Mr Faloon caused to be registered on the title to the land two easements in gross, shown as "A" and "B" on Deposited Plan 76883. It is asserted that the grantee (Central Equipment Limited) paid no consideration for its easements and that Mr Faloon was holding a "beneficial interest". In 2001 Mr Faloon filed an IR196 gift statement relating to dutiable gift duty in respect of the grant of the easements. It is alleged that the Plaintiff was a "controlling person" under s 65 of the Estate and Gift Duties Act 1968. [8] Although this is not pleaded specifically, Mr Faloon filed the gift statement on 5 March 2001. It seems that the Commission of Inland Revenue took no steps in relation to it until 4 July 2005, following some complaints about his alleged inaction. [9] On 12 July 2004 Mr Tony Black, a Technical Advisor to the Commissioner, wrote to Mr Faloon. He stated:You will notice from my letter of 22 March 2001 that I was uncertain whether the purported gift had been made by a controlled company. However, it is not necessary to resolve that issue since the easement in gross was held to be a nullity, and in my view no value can therefore be attributed to the creation of the easement in gross. I enclose a copy of the gift statement in which I have certified that no gift duty is payable.[10] The next two paragraphs of the Statement of Claim are the two crucial clauses, setting out the cause of action that the Plaintiff appears to rely on. They read:27. The defendant, by Technical Advisor, Mr. Tony Black, has not valued the gift of legal interests in land created under section 49A(1) and section 122 of the Property Law Act 1952 in the manner required by section 20 and section 68 of the Gift Duties Act 1968. By a "disputable decision", namely that, "the easement in gross was held a nullity, and in my view no value can therefore be attributed to the easement in gross", the respondent has issued an assessment dated 12 July 2005 to the plaintiff, that takes account of or relies on a "disputable decision". 28. The defendant has failed on 12 July 2005 to assess Gift Duty in accordance with section 61 and Part IV of the Estate and Gift Duties Act 1968.[11] The relief sought is an order from the Court directing the Commissioner to alter the disputable decision to the extent necessary to conform to the decision of the Hearing Authority " with the effect the Hearing Authority specifies". This effectively is asking the Court to substitute its view on the correct decision for that of the Commissioner's Technical Advisor. Although it concerns the easement, this is a new cause of action, relating as it does to the correctness of a decision of the Commissioner of Inland Revenue on gift duties. [12] In submissions from Mr Faloon it became apparent that what he was really seeking was an order that the Commissioner carry out a formal valuation process in respect of the alleged gift as, Mr Faloon asserts, was required by s 20 and s 68 of the Gift Duties Act 1968. I will refer to this in more detail below.The test to be applied[13] The application relies on Rules 186 and 477 of the High Court Rules. It is alleged by the defendant that the Statement of Claim: a) discloses no reasonable cause of action; b) is frivolous or vexatious;c) is otherwise an abuse of the process of the Court. [14] The principles to be applied are well known and neither party sought to address me on them. In relation to no reasonable cause of action being disclosed, and the proceeding being an abuse of the process of the Court, Rules 186 and 477 involve the application of the same principles. [15] When the ground is that no reasonable cause of action is disclosed, the power is to be exercised sparingly, and only in clear cases where the Statement of Claim is beyond repair and the claim so untenable that it cannot succeed. The Court proceeds in such a case on the basis that the pleaded facts are true. However, when the allegations in the Statement of Claim are demonstrably contrary to undisputed facts, then this will be recognised: Attorney General v McVeagh [1995] 1 NZLR 558, 566. [16] The ground of abuse of the process of the Court involves a litigant misusing the Court processes. It can be applied where relief is sought in relation to a matter that has already, in substance, been determined: Opua Ferries Limited v Northland Regional Council (High Court Whangarei CP4/99CL23-98, 17 May 2004, Williams J.) [17] Although the standard of proof on an applicant to strike out is high, where a Court can be certain that a cause of action cannot succeed, or is being used as a method to get around the effect of other Court determinations which have effectively settled the same issue, the jurisdiction may be invoked. Thus, a proceeding which has as its purpose a collateral attack on a decision in earlier proceedings where the same issue was fully contested may be struck out: Palmer v Hamlin (High Court Auckland CP43/SD01, 11 December 2001, Salmon J.) [18] It is not a ground to strike out, to assert solely that the proceedings are brought for a collateral purpose. If a legitimate cause of action is disclosed and the Plaintiff genuinely intends to pursue it, and does so correctly using the Court's processes, the motive for bringing the proceedings is irrelevant. Court proceedings are often brought for reasons that go far beyond the actual relief sought. Providing a reasonable cause of action is disclosed, and the plaintiff intends to properly pursuethe litigation and observe the Court processes, the Courts have no concern as to the wider purposes of the litigation. [19] "Abuse of process" was considered in the context of the tort of abuse of process in Hanrahan v Ainsworth (1990) NSWLR 73, 118-123. The tort has come under wide scrutiny in the United States, and there appear to be two elements, first, an ulterior motive or purpose and, secondly, an improper use of the Court's process. While there may be differences between the Court's approach to the tort, and a Court's approach to its discretion to strike out, the tort case law is of relevance. It confirms that proof that a plaintiff has brought an action with the intention or hope of achieving some collateral advantage associated with the action is not in itself enough. If the intention is to genuinely pursue the proceedings and to seek the remedies set out in the prayer for relief, ulterior motives do not warrant strike out. [20] The application to strike out is usually based on the pleadings alone, and the assumption that the plaintiff can make out all of the factual allegations pleaded. However, when affidavit evidence is filed and is not contradicted, particularly where it presents documents that are critical to the proceedings, they may be taken into account: Peerless Bakery Limited v Watts [1955] NZLR 339; Bishop v New Zealand Airline Pilots Association [1992] 2 NZLR 237. Nevertheless, any agreement or document so produced will be construed in the way most favourable to the impugned pleadings: Wilkins v District Court (1997) 11 PRNZ 232. [21] Finally, a Court must bear in mind that if a reasonable amendment will correct a failure in the pleaded cause of action, then the Court should not strike out, but, rather, give the plaintiff an opportunity to amend.The nature of the proceeding[22] In submissions Mr Faloon said that the easement interest, which is the subject of the gift statement, was created in 1977. It was formally created by a transfer between Trade Lines Limited and Central Equipment Limited on 26 November 1993. I am able to refer to the actual transfer document, together withthe gift statement and Commissioner's letter, all of which have been exhibited to affidavit evidence, and have been the subject of submission from both parties. [23] The transferor was Trade Lines Limited, a company in which Mr Faloon owns 1,500 shares, and together with Anthony Morris Piesse (whom I understand is his brother-in-law) a further 1,250 shares. There appear to be 5,000 shares in total. [24] Trade Lines Limited was the grantor of the easement. The grantee was another company, Central Equipment Co. Limited. Mr Faloon has a beneficial interest in 1,000 shares in that company. He holds another 1,000 shares as trustee. A further 6,000 shares are held by the Public Trustee as trustee for the estate of Thomas John Faloon, the Plaintiff's father, and 1,000 shares are held by Mr Faloon as trustee for A M Piesse. [25] The operative part of the transfer document read as follows:AND WHEREAS the Transferor has agreed to transfer and grant unto CENTRAL EQUIPMENT COMPANY LIMITED (hereinafter with its successors and assigns called "the Transferee") an easement in and over those parts of the servient tenement more particularly marked "A" and "B" on Deposited Plan 76883, such easements being for the conveyance of stormwater drainage. NOW THIS TRANSFER WITNESSES that in consideration of the premises the Transferor doth hereby transfer and grant unto the Transferee an easement of right of stormwater drainage within the meaning of Section 90D of The Land Transfer Act 1952 through, under and along those portions of the servient tenement marked "A" and "B" on Deposited Plan 76883 through pipes laid or to be laid under the surface of the said land provided that nothing herein contained or implied shall be deemed to compel the Transferee to conduct stormwater drainage through the said pipes and the Transferee may discontinue such drainage at will AND IT IS HEREBY DECLARED that the rights hereby granted are in the nature of an easement in gross.[26] Although the document refers to there being an easement over a servient tenement for stormwater drainage, and although it is worded as if the Transferee may conduct stormwater drainage through the pipes, Central Equipment Company Limited did not own any neighbouring land. No explanation has been proffered as to why Central Equipment Company Limited might want an easement in gross to conduct stormwater drainage, when it had no stormwater to drain. It seems to create a meaningless right, and the question must arise as to whether its creation wastactical, to give Central Equipment Company Limited some sort of an interest over the land. It is not surprising that Gendall J described it as a "fiction", although I would hesitate to describe it on those terms, in that it was, at least for a while, registered. [27] Easements in gross are permitted. Section 122 of the Property Law Act 1952 refers to them specifically. It states:122 Easement in gross permittedAn easement over land may be created without being attached or made appurtenant to other land, and such an easement shall run with and bind the land over which it is created, and all persons claiming title to that land by, through, or under the person creating the easement; and the easement so created shall be to all intents and purposes an incorporeal hereditament, and shall be assignable accordingly[28] Thus, all that is required for an easement in gross is a servient tenement. There is no need for there to be a dominant tenement. [29] Ellis J expressed reservations about the easement in gross in Faloon and Piesse v District Land Registrar. He refused to grant an order that a caveat protecting it in relation to the land taken by Council for the airport not lapse under s 145 of the Land Transfer Act 1952. He found that even if the land had been taken subject to a valid easement, when it was transferred to the Council for the airport, that easement would have been "in favour" of the neighbouring Council land and the interest would merge. [30] In Warnaco Investment Limited v Central Equipment Company Limited (High Court Wellington, M124/98 18 May 1998), Heron J considered the history of the easement. He was considering an application to extinguish the easement, insofar as it related to the balance of the land not transferred to the Council. By this time Trade Lines Limited was in liquidation, and the liquidator wished to sell the land. He noted at page 2:It is also said that Central Equipment does not own any land which adjoins that owned by the applicant company. It is alleged therefore, that Central Equipment does not, and is not able to practically avail itself of the drainage rights confirmed on the easement.[31] He went on to say at page 4:However, on a reading of the papers, there is a strong case made out in my view for the extinguishment of the easement. On the face of it that would seem not necessarily to affect any claim for damages that there may be in respect of earlier dealings He made an order that the easement would be extinguished within a certain time unless the order was varied or extended. [32] After a number of adjournments the matter came before Neazor J on 29 June 1998. He could not discern any basis as a matter of law on which the application to extinguish the caveat could be resisted and he refused to extend the suspension of Heron J's order. At that point the easement was extinguished. [33] Subsequently the Plaintiff and his wife, Ruth Enid Faloon, were adjudicated bankrupt in the High Court at Wellington on 17 December 1997 on the application of a Bank as Judgment Creditor. [34] On 5 March 2001 Mr Faloon filed the gift statement that is the subject of this proceeding. He described himself as the donor and as the contact person. The donee was described as Central Equipment Company Limited, and reference was made to "rights in land held in trust under s 31 of the Wills Act 1837 (U.K.) for Thomas John Faloon (Deceased 8 April 1977). [35] The gift statement gives as the "Gift Details" two easements in gross shown as "A" and "B" in deposited plan DP76883 and 5.6293 hectares of land, created and registered in CT 804/42 (Wellington Registry). There is reference under the heading of "Other Gifts" to a rent charge dated 23 March 1996. No sum was inserted as the gross value of the easements, and beside the line providing for the consideration to be stated, the word "Nil" was typed. The gift statement was signed by T.J. Faloon as "Legal Personal Representative of T J Faloon". [36] The gift statement is a surprising document. It does not make any commercial sense. If there was a perception that a gift had been made either in 1977, when it is claimed that the easement was agreed, or in 1993 when the easement wasregistered, it would have been expected that a gift statement would have been filed then. If there was really a gift, a gift statement should have been lodged within 3 months of the making of the gift (s 79 of the Estate and Gift Duties Act 1968). The timing of the lodging of the very late statement, following a long chain of unsuccessful Court applications on the part of Mr Faloon relating to the same claimed easement, indicates a tactical move. Indeed, the only logical conclusion that can be drawn is that the intention was to try and keep litigation in relation to the drainage work done on the land and the claim to large compensation for compulsory taking alive by the device of lodging a gift statement. It was a way of keeping the matter before the Courts, despite a string of Court failures. The actual practical benefit to Mr Faloon of taking this cause of action is, however, still difficult to discern. It appears to be a way of penalising the Government for its actions by obtaining an order that gift duty should be paid, and then seeking to force the Government to pay it. [37] This perception of artifice is confirmed by the fact that Mr Faloon said in submissions that if any gift duty was payable he would expect it to be paid by the Government, as the party that was in the wrong. The logic of this assertion was not apparent, but it undoubtedly stemmed from Mr Faloon's strong feeling that he and his family interests have been wronged by the Government and the Local Council. He is still trying to get back at them. This is a way of doing so. [38] One has some sympathy for the Commissioner's failure to formally respond to the gift statement, given its opaque description of the parties, and the absence of any detail as to value. [39] The conclusion was ultimately drawn and expressed in the letter of 12 July 2004 that is the subject of the Statement of Claim, that the easement was valueless and no gift duty was payable. This would appear to be supported by the background circumstances of the easement, and the judgments that had led to the easement being extinguished. The Commissioner certified that no gift duty was payable.[40] The fact that Mr Faloon is effectively protesting in this litigation against a decision declaring that he is not liable for gift duty again shows the unreal nature of the proceeding, and the fact that it must be for an ulterior motive. Taxpayers do not naturally protest decisions that they should not have to pay duty or tax. Mr Faloon appears rather to want to be ordered to pay, so that he can then demand that the Crown meet the liability. [41] As best as I could ascertain, the core of Mr Faloon's argument before me, was that the Commissioner was obliged to carry out a valuation process of the easement in gross by virtue of ss 20 and 68 of the Gift Duties Act 1968. This appears to be the basis for the cause of action. [42] Section 20 is now repealed, but s 68A of the Estate and Gift Duties Act 1968, which appears to replace it in similar terms, provides that for the purposes of gift duty, the value of land situated in New Zealand must either be determined by agreement between the Commissioner and the donor, or, in the absence of an agreement, determined by the Commissioner in the manner provided by s 68A(6). Two methods are set out for this determination in s 68A(6), either by the capital value of the land being set at the figure that appears in the District Valuation Roll, together with the cost of improvements, or by there being a special valuation of the capital value of the land, made by a "Registered Valuer" at the request of the Commissioner. [43] Mr Faloon argued that the easement in gross is "land" for the purposes of the Act. He relied on the reference in s 122 of the Property Law Act. The section refers to an easement in gross being an "incorporeal hereditament". He relied on the Acts Interpretation Act 1924, which includes "hereditaments" in the definition of land. Mr Hancock, on the other hand, submitted that incorporeal hereditament being intangible, could not be land. [44] "Hereditament" is a word traditionally used in English land law. Its plain meaning is property, which at common law descended to the heir on intestacy. It means real property as opposed to personal property: Hinde, McMorland and SimLand Law in New Zealand para 1.003. Common law has always treated the rightsaffecting land as real property, and therefore the distinction between corporeal and incorporeal hereditaments has little practical significance. However, for the purposes of this argument, there can be no doubt that for land law purposes the word "hereditament" should be regarded as falling within the definition of "land". [45] This issue appears to be settled by the words of s 68A of the Estate and Gift Duties Act 1968. It is stated that land has the meaning set out in the Rating Valuations Act 1998. The Rating Valuations Act defines land as follows:"Land" means all land, tenements, and hereditaments, whether corporeal or incorporeal, in New Zealand and all chattel or other interest in the land, and all trees growing or standing on the land.[46] This appears to determine the argument about the appropriate process for valuation. An easement in gross is an incorporeal hereditament. Therefore, it is land. Mr Faloon may be technically correct. The Commissioner may have to apply the s 68A process.Is a reasonable cause of action disclosed?[47] If the key allegation against the Commissioner that he did not properly carry out his obligation to value under the Gift Duties Act 1968 has no chance of success, then this proceeding should be struck out. [48] As a matter of fact, the easements on the undisputed material before the Court, cannot be regarded as having any value. They are extinguished. They were extinguished at the time the gift duty statement was filed. It goes without saying that an easement that no longer exists cannot be said to have value. [49] Mr Faloon's answer to this is that the appropriate time to consider value is the time when the easement was created. [50] This may be so, but the Commissioner was entitled to consider events that had happened since the creation of the easement, for the purposes of deciding whether it had value at the time of its creation. The Commissioner was faced with the following undisputed facts:a) The easement granted a right to drain stormwater; b) The grantee of the easement, Central Equipment Company Limited, did not own any adjacent land, and therefore did not have any stormwater to drain. Adjacent land that needs to drain stormwater will have rights to do so in any event. There was nothing to indicate that any neighbour needed any particular stormwater easement. c) The stormwater easement does not appear to have had any function or use. d) The stormwater is now extinguished. [51] However, as Mr Faloon points out, s 68A of the Estate and Gift Duties Act 1968 imposes a valuation regime on the Commissioner in relation to valuing land. The easement in gross, while extinguished at the time the Commissioner received the gift statement, was nevertheless in existence at the relevant time, namely the time when the alleged gift was made. Accordingly, the Commissioner in the absence of agreement may have been obliged to follow the procedure set out in s 68A2(b) to value the easement in gross. The allegation of Mr Faloon that the Commissioner failed to do this and that he has a cause of action may have merit. It is certainly not so hopeless that the proceeding should be struck out on this ground. [52] Thus, although the whole process of lodging the gift statement and seeking a ruling seems to have an ulterior purpose, I do not consider it appropriate to strike out the Statement of Claim for that reason alone. The fact that proceedings have been brought for an ulterior or unsatisfactory reason is not a ground for striking them out. The point that Mr Faloon makes may be technical, but I cannot say that it is without merit, and has no chance of success.Mr Faloon has no status to bring the proceeding[53] Mr Faloon showed himself on the gift statement as personally being the donor of the easement. However, he was not the donor. The transfer document thatcreated the easement on which he relies shows the transferor to be Trade Lines Limited. That company is now in liquidation. [54] Pursuant to s 79 of the Estate and Gift Duties Act 1968 it is a donor who shall lodge a gift statement. This is to be done within three months after the making of any gift, a deadline which Mr Faloon has singularly ignored. [55] A "donor" is defined as the maker of a gift. If there was a gift, it must have been a gift by Trade Lines Limited as donor. Thus Mr Faloon is not the donor. He could not have filed a valid gift statement, and cannot challenge the way in which a gift statement has been dealt with. [56] Mr Faloon had three submissions in response to this proposition. [57] First, he claimed that he was a person with a "controlling interest" in Trade Lines Limited in terms of s 68D of the Estate and Gift Duties Act 1968. That section provides that a controlled company is a company which is controlled by or on behalf of the donor. [58] It is arguable that Mr Faloon, given his close relationship with Mr Piesse, may be able to establish that Trade Lines Limited was a controlled company. It may be that he may be able to persuade a Court that he had the controlling interest. However, these provisions do not assist Mr Faloon's argument, in that s 68D does not change the identity of "the donor" for the purposes of the Estate and Gift Duties Act. The donor remains the same. In this case it was Trade Lines Limited. It was Trade Lines Limited who, if anyone, should have filed the gift statement. [59] Mr Faloon in this argument, and the one that follows, appeared to have difficulty grasping the distinction between a company and its shareholders. Indeed, this has been a feature of his arguments in other cases which has been commented on by Judges. He cannot in this case lift the corporate veil and claim to be, for all intents and purposes, Trade Lines Limited. Trade Lines Limited, of course, is in liquidation, and that company if it still exists is under the control of the liquidator.[60] Mr Faloon when faced with the prospect that he might not have status as a shareholder of Trade Lines Limited, proceeded then to argue that he had status as a shareholder in Central Equipment Company Limited, the donee. This was his second argument. A donee may also file a gift statement pursuant to s 80 of the Estate and Gift Duties Act 1968. That gift statement must be filed within one month after the three-month period provided for the donor to file such a statement has expired. However, the same difficulties arise for Mr Faloon. He was not and is not Central Equipment Company Limited. Indeed, his shareholding is substantially less than 50%, the majority of the shares being held by the Public Trustee for his father's estate. There is nothing to indicate that he controls Central Equipment Limited. [61] Mr Faloon also argued that he has status as a Plaintiff, as a shareholder in Central Equipment Company Limited. However, as I have noted, his shareholding is less than 50%, and, in any event, it would still be Central Equipment Company Limited which would be the donor. The company would have the right to file, rather than Mr Faloon. [62] Mr Faloon then sought to justify his presence as Plaintiff on a third basis. He pointed to the fact that he had signed the gift statement as the representative of his father, T J Faloon. He said that he was entitled to do so because by virtue of s 31 of the Wills Act 1831 he has a right as trustee, and that in some way this gives him a status in these proceedings. I have to say I simply do not follow the argument. Section 31 of the Wills Act has no application, as Mr Faloon is not the trustee of his father's estate. The executor and trustee is the Public Trustee. Mr Faloon has no right to sign the gift statement on behalf of his father's estate. [63] Moreover, even if he did have such a right, his father's estate was neither the donor nor the donee. Nor would the fact that his father's estate might have had a controlling interest in Central Equipment Company Limited, elevate the estate's status to that of a donee. [64] I am satisfied that Mr Faloon had no legal right or status to lodge the gift statement.[65] Can he then have any legal right or status to challenge the decision of the Commissioner? He is not the donor or the donee. The donor, in any event, is in liquidation. He does not, as a shareholder in the donee company, have any legal interest in the gift and, therefore, no status as Plaintiff. There is nothing to indicate that either the donor or the donee wishes to have any part of this litigation. The fact that a plaintiff is a shareholder in a company that may have an interest in litigation, does not give that shareholder the right to bring the claim. Mr Faloon is not a disputant. He did not have the right to file a gift statement, and it is not he who would have to pay any gift duty if it was assessed. Only those who may have to pay can initiate a challenge: Laws of New Zealand (Taxation) para 117, (footnote 5). [66] While a good deal of latitude has been given to interested persons to bring applications under s 3 of the Declaratory Judgments Act 1908 (Wybrow v Chief Electoral Officer [1980] 1 NZLR 147), the Courts must be able to impose limits. Here Mr Faloon's indirect interest as a shareholder is not sufficient to qualify him as a party. The Courts must be able to say "enough" even at strike out stage, if the facts that are relied on are clear. This is such a situation.Any interest that Mr Faloon that had has passed to the Official Assignee[67] As I have stated, Mr Faloon was adjudicated a bankrupt on 17 December 1997. By virtue of s 42 of the Insolvency Act 1967, any property interest or power that he had passed to the Official Assignee. The right of action vested in a bankrupt before discharge does not automatically revert on the bankrupt's discharge from bankruptcy back to the bankrupt: Robert Jones Investments v Soljan, CP472/88 Wellington Registry, 9 August 1993, Master Thompson, The Official Assignee v Probert (High Court Palmerston North CP216/9 12 November 1990, Master Williams QC). Rather, it remains vested with the Official Assignee. [68] Section 42 provides that "all the property and powers" of the bankrupt vest in the Official Assignee. The property and powers of the bankrupt which vest are defined in s 42(2) including:The capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of any property whatsoever and wheresoeversituated as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or before his discharge.[69] It is Mr Faloon's essential argument that he has some right as a shareholder of the donor or donee to exercise a power or right to file a gift statement. Any such power must have vested in the Official Assignee, and has not been recovered by Mr Faloon. [70] Mr Faloon's interest does not come within any of the recognised exceptions to this rule. Any interests that he may have had had are gone. He had no right to lodge the gift statement, and has no right to challenge the way in which it has been dealt with by the Commissioner. [71] Pursuant to s 42(3), property held by the bankrupt in trust for any other person shall not pass to the Assignee. Mr Faloon does claim to have a right in relation to the gift statement arising from his position as a trustee of his father's estate. However, as I have stated, he is not a trustee of his father's estate. The Public Trustee is the trustee. This argument does not assist Mr Faloon in overcoming the effect of s 42.Conclusion[72] The proceedings have been filed and pursued as a way to avoid the affect of a number of earlier decisions of this Court. In that respect they are from one perspective an abuse of procedure. As was stated in Faloon v Attorney General(CA255/00, 280/00, 23 July 2001):It is an abuse of the process of the Court to continue to assert grievances long since addressed and finally decided.[73] However, I would not have struck out the proceeding on this ground alone, despite the urgings of the Crown. It seems to me that if Mr Faloon could show a cause of action that has some chance of success, based on the gift statement, that it should be allowed to proceed. While the basic grievance may be the same as in earlier cases, the reliance on the gift statement is a new (and ingenious) method adopted by Mr Faloon to continue proceedings. The gift statement has not been thesubject of any other proceedings, and I do not believe that the judgments in those other proceedings can be regarded as having, in any direct way, raised or determined the gift statement issue. [74] However, the ulterior motive would appear to be the reason why Mr Faloon has filed this proceeding as plaintiff, when he had no legitimate status to do so. He did not make the gift and he did not receive it. He therefore has no reasonable cause of action against the defendant and his proceeding must be struck out. It is also an abuse of the process of the Court for him to bring the application when he was not donor or donee. [75] Even if he did originally have a cause of action that has passed to the Official Assignee. That is a further reason why the proceeding should be struck out. [76] The Defendant is entitled to costs on the application, which I fix in accordance with the Third Schedule to the High Court Rules as for a Category 2 proceeding, band B, including reasonable travelling expenses for two counsel, to be fixed, if necessary, by the Registrar. ..Asher J