COMMISSIONER OF INLAND REVENUE v CLARENCE JOHN FALOON [2016] NZHC 760

COMMISSIONER OF INLAND REVENUE v CLARENCE JOHN FALOON [2016] NZHC 760 [14 April 2016]IN THE HIGH COURT OF NEW ZEALANDTAURANGA REGISTRYCIV-2015-470-95[2016] NZHC 760BETWEEN COMMISSIONER OF INLANDREVENUEPlaintiffAND CLARENCE JOHN FALOONDefendantHearing: 11 and 14 April 2016Appearances: C D Walmsley for PlaintiffDefendant in personM P Ward-Johnson as amicus curiaeJudgment: 14 April 2016ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELLSolicitors:Inland Revenue Department (Charles d Walmsley), Hamilton, for PlaintiffWard-Johnson Barristers Ltd (M P Ward-Johnson), Tauranga, amicus curiae[1] The Commissioner of Inland Revenue applies for Mr Faloon to be adjudicated bankrupt. The act of bankruptcy the Commissioner relies on is non- compliance with four bankruptcy notices served on Mr Faloon on 29 July 2015. The debt in each notice was an order for costs made in proceedings between Mr Faloon and the Commissioner. In this proceeding the Commissioner is not pursuing Mr Faloon for unpaid taxes. The face value of the costs orders is $46,735.63. Interest has been accruing on the costs orders at the statutory rate of 5 per cent per annum.[2] Mr Faloon applied to set aside the bankruptcy notices. He was unfortunately caught out by a technicality. While he filed his application within 10 working days of service, the Inland Revenue did not receive his application until the 11th day. When the setting-aside application was called on 21 September 2015, Mr Faloon withdrew the application without any orders being made against him. I assured him at the time that the withdrawal of the application to set aside the bankruptcy notices would not prevent him from defending any subsequent bankruptcy application on the merits. In opposing the application today he has relied on materials in affidavits he filed in support of his application to set aside the notices.[3] The Commissioner filed her application on 8 October 2015. When the matter was first called on 9 February this year, Mr Faloon applied to have a litigation guardian appointed. I did not appoint a litigation guardian, mainly because I was concerned that that might disempower Mr Faloon. Instead, I appointed Mr Ward- Johnson as an amicus to assist me.[4] Mr Faloon filed a notice of intention to oppose the application with extensive affidavits including the ones he relied on in his application to set aside the bankruptcy notices. All up, he has filed eight affidavits.Commissioner's costs orders[5] For the bankruptcy notice in CIV-2015-470-92, the Commissioner obtained the costs order of $16,604.74 in the Wellington High Court in Faloon v Commissioner of Inland Revenue.1[6] For the notice in CIV-2015-470-93, the Court of Appeal dismissed Mr Faloon's application for an extension of time which he required in order topursue his appeal from the decision of the Wellington High Court proceeding which was the subject of the bankruptcy notice in proceeding CIV-2015-470-92. The Courtof Appeal's decision of 2 July 2014 was for $3,433.00.2[7] For CIV-2015-470-94, Katz J made an order on 5 November 2013 for costs of $6,877.45 in Faloon v Commissioner of Inland Revenue.3[8] And finally for CIV-2015-470-95, Goddard J made an order for costs for $19,820.44 on 29 July 2014 in CIV-2010-470-922.[9] All of those costs orders are final orders. There are no orders staying execution. While Mr Faloon appealed against the orders made in the Wellington High Court for the CIV-2015-470-92 notice, that appeal failed when the Court of Appeal dismissed his application for an extension of time. That aside, there have been no appeals against any orders for costs.Requirements of s 13 prima facie satisfied[10] If this application were not opposed, I would consider that the Commissioner has brought herself within the requirements of s 13 of the Insolvency Act 2006. Thatis, of course, subject to Mr Faloon's grounds in opposition. In short, Mr Faloon'sdebts to the Commissioner are for more than $1,000. Mr Faloon has committed four acts of bankruptcy under s 17 of the Insolvency Act in failing to comply with the notices served on him on 29 July 2015: his application to set aside the notices was1 Faloon v Commissioner of Inland Revenue [2013] NZHC 2643, (2013) 26 NZTC 21-061; [2013] NZHC 3092.2 Faloon v Commissioner of Inland Revenue [2014] NZCA 292.3 Faloon v Commissioner of Inland Revenue [2013] NZHC 2912.unsuccessful because of the technical slip. Mr Faloon has not made any payments to the Commissioner in reduction of his indebtedness under the orders for costs and he has not taken any other steps that would amount to compliance with the bankruptcy notices. The debts in favour of the Commissioner are for certain amounts and debts were payable when the orders for cost were made.The residual discretion[11] Even if the Commissioner establishes the grounds under s 13, bankruptcy does not follow automatically. The court has a discretion under ss 36 and 37 of the Insolvency Act whether to make an order for adjudication. The debtor has the onus of persuading the court that an order ought not to be made. In Baker v Westpac Banking Corporation Richardson J said:4The principles governing the exercise of the discretion under s 26 to grant or refuse an order of adjudication in bankruptcy are well settled and have been discussed by this court in recent years in Elks v NZI Finance Ltd andMcHardy v Wilkins & Davies Marinas Ltd. It is proper for the court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest. A creditor who establishes the jurisdictional facts set out in s 23 is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved, including the publicinterest in the continuing oversight of a bankrupt's affairs and the disqualifications that go with bankruptcy. In the end, the Court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.That was a decision under the Insolvency Act 1967, but that approach has been consistently applied under the Insolvency Act 2006.[12] Under s 38 of the Insolvency Act the court may halt a creditor's applicationfor adjudication on terms and conditions and for such period as the court thinks appropriate.4 Baker v Westpac Banking Corporation CA212/92, 13 July 1993.Mr Faloon's history of litigation[13] As part of his defence, Mr Faloon proposes that this proceeding be halted under s 38 while other litigation he has on foot is determined. Mr Faloon has a considerable history of litigation. In Faloon v Commissioner of Inland Revenue,5Asher J identified at least 11 decisions in the High Court and noted that the Court ofAppeal had considered aspects of Mr Faloon's disputes on three occasions. I haveidentified more decisions which I list in the appendix to this judgment, involving cases running from 1988 until 2015. I was advised during the hearing that there have been further decisions of the Taxation Review Authority which I have not taken into account. In addition, Mr Faloon has also been involved in a number of proceedings concerning two companies – Central Equipment Co Ltd and Trade Lines Ltd.[14] Much of Mr Faloon's litigation goes back to events many years ago. Therewas first his grievance over the diversion of the Kawau Stream on land near the Palmerston North airport in the 1970s. A second matter is the taking of land by the Crown for the Palmerston North airport in the 1990s. In Faloon v Commissioner of Inland Revenue, Asher J set out at paragraph [4] a summary of background events given by Gendall J in Faloon v Attorney-General:6[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 owned by Trade Lines Limited pursuant to an arrangement betweenMr 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. A5 Faloon v Commissioner of Inland Revenue (2005) 22 NZTC 19,653 (HC). 2005.6 Faloon v Attorney-General HC Wellington, CP310/99, 5 October 2000.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 thePalmerston 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 lodging of a number of caveats by Mr Faloon and his sister and also by Mr Faloon's wife. They sought toprevent the sale. Caveats were also lodged in respect of theairport 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, CentralEquipment, what was said was a "drainage easement in gross" so as to endeavour to provide some platform topursue a claim in respect of the stream diversion.[12] Mr Faloon's father had died in 1977 and the Public Trusteewere Executors of his estate with Mr Faloon's motherhaving 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 in 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 asresiduary beneficiaries in their father's estate, because theyhad 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 asbetween Trade Lines and Central Equipment the "easement in gross" was registered by the Faloon interests. It hinderedsubdivision. 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 hisinterests, called their creation an "easement in gross" itreally 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 adjoinedthat of the grantor of the "easement", so as to be a "dominant tenement". But an easement in gross does not require adominant 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 Kawau 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 favourof 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 properlyextinguished 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.[15] That deals with the stream diversion. But there is also the land taking in the1990s. Mr Faloon alleges that the Crown's taking of land belonging to Trade LinesLtd under the Public Works Act was invalid. He contends in his submissions today that no compensation was paid, although observations have been made in other decisions that compensation of $80,000 was fact paid. I do not need to determine that conflict. It is only necessary to note that Mr Faloon has an ongoing grievance over the taking of the land belonging to the family farming company, Trade Lines Ltd.[16] In recent years Mr Faloon has been in dispute with the Commissioner of Inland Revenue. Associate Judge Christiansen set out the background in his decision, Faloon v Commissioner of Inland Revenue.7In recent times Mr Faloon has endeavoured to file accounts with the Inland Revenue Department wherein he has claimed income receivable upon that sum he considers was payable by way of compensation at the time land was compulsorily acquired from Trade Lines Ltd for the purpose of an extension to the Palmerston North airport. He considers that the sum actually paid at that time neglected to take into account other factors for which compensation ought to have been paid including a sum of $432,554 for noise pollution. The ultimate purpose of this exercise is unclear. I assume that Mr Falooncan obtain the Commissioner's acceptance of a claim that income, in theform of accumulated unpaid interest, has continued to accrue to the sum of more than $11,000,000 now identified by Mr Faloon, then that may form some basis upon which he can pursue a claim for further compensation.[17] Throughout his many proceedings, Mr Faloon has had a consistent lack of success. That has drawn comments from judges as to the futility of Mr Faloon continuing to pursue these matters. For example, in Faloon v Commissioner of Inland Revenue,8 Associate Judge Christiansen struck out a proceeding in which Mr Faloon ran causes of action in which he had failed in earlier proceedings. The judge said:[41] The proceeding is hopelessly misconceived. Mr Faloon will, I am sure, continue to contrive means by which his case can be re-cast. In the past he has attracted the sympathy of the court because he appeared genuinely affected by perceptions of injustice. I think it is time to stop feeling sorry for Mr Faloon and for a firm hand to be taken over what appear to be deliberate actions designed to exhaustthe court's patience and resources.[18] There is further ongoing litigation. Mr Faloon says that he presently has five proceedings now pending in the High Court at Wellington. In one of them he is suing Palmerston North Airport Ltd. Three of them seem to involve the Commissioner of Inland Revenue; two are appeals from decision of the Taxation Review Authority. In another he is appealing against a decision of the Commissioner of Patents. That relates to inventions apparently developed by his late father and Mr Faloon.7 Faloon v Commissioner of Inland Revenue (2011) 25 NZTC 20-097 (HC) at [22].8 Faloon v Commissioner of Inland Revenue (2010) 24 NZTC 24-230 (HC).[19] As to the appeals from the Taxation Review Authority, in one the Authority found that Mr Faloon was not entitled to be registered for GST purposes on the basis that he was not carrying on a taxable activity. In another the Commissioner haddisregarded Mr Faloon's self-assessed income on the basis that Mr Faloon had not in fact derived any income which could be subject to income tax.[20] Mr Faloon has been made bankrupt once before. That was on 17 December 1997 under the Insolvency Act 1967. Mr Faloon advises that he was automatically discharged after three years. He says that the bankruptcy was never annulled. One effect of that bankruptcy was that all his assets at the date of adjudication vested in the Official Assignee. Of course that did not include assets he held on trust.Mr Faloon's technical objections[21] Mr Faloon contended that the costs orders attached to the bankruptcy notices were defective because they had not been certified correct. He is correct that certified copies of orders were not attached. But that is not fatal. A similar objection was taken in Harrison v Harrison.9 Associate Judge Osborne rejected that, observing that certification of an order for cost was not required because the court can take notice of its own seal upon a judgment.[22] Mr Faloon said that the costs orders attached to the bankruptcy notice did not comply with r 5.12 of the High Court Rules, which says:5.12 Heading of the judgmentThe heading of a judgment and of an order that is required to be registered under any enactment must be the same as the heading on the statement of claim or other document by which the proceeding was commenced.The applicable orders give only the parties' names and their status in the proceeding(for example applicant and respondent), without also giving the parties' occupationsand addresses, as is required under r 5.11(g). In one of the orders for costs theparties' names and status are given, as well as their occupations and addresses, but inthe others they are not. Even so, I do not regard the sealed costs orders as invalid on9 Harrison v Harrison [2015] NZHC 244.that count. These are simple irregularities which do not invalidate the orders for costs.10 I am in any event satisfied that Mr Faloon has not been prejudiced in any way by the irregularity. Mr Faloon is very experienced in litigation. He could not be under any mistake as to the identities of the parties to the proceedings in which the costs orders were made. There is only one Commissioner of Inland Revenue. The Commissioner does not need to be identified further by giving her address and status. Mr Faloon would know very well that he is the only Clarence John Faloon involved in proceedings with the Commissioner.[23] The bankruptcy notices do have the full heading. The attachment of each order for costs to the bankruptcy notice would be adequate to identify the parties in the costs orders as also the respective creditor and debtor in the bankruptcy notice.[24] I do not consider that the service of the orders for costs and the terms in which they are sealed invalidated the bankruptcy notices. I refer here to s 418 of the Insolvency Act 2006 which provides that a proceeding under the Insolvency Act is not to be invalidated or set aside by reason of a defect (which may be a misdescription, misnomer or omission) in a step that must be taken in connection with a proceeding, unless a person has been prejudiced by the defect. Again, I am satisfied that Mr Faloon has not been prejudiced.[25] Mr Faloon challenged the way in which the Commissioner resisted his application to set aside the bankruptcy notices. His written submission was that the Commissioner ought to have made an application under r 1.5 of the High Court Rules. In fact the Commissioner was entitled to oppose the setting-aside application on the ground that it was served out of time, even though that was a technical point. When the case was called, after discussing the matter with me, Mr Faloon withdrew his applications to set aside. That brought the application to an end. For present purposes it is irrelevant how the Commissioner actually went about raising the point that the setting-aside application was out of time. The Commissioner did file a notice of opposition, a conventional way by which to oppose an application to set aside a bankruptcy notice. The Commissioner was not required to make any cross- application.10 High Court Rules r 1.5.[26] In short, on the technical aspects raised by Mr Faloon, I see nothing that stands in the way of finding that the Commissioner has made out her case under s 13 of the Insolvency Act.Mr Faloon's immunity arguments[27] Mr Faloon raised a number of arguments to suggest that an order adjudicating him bankrupt could not be made. He first relied on s 6 of the Insolvency Act:6 Corporations and other entities not subject to ActA corporation, association, or company incorporated or registered under any Act must not—(a) be adjudicated bankrupt:(b) make a proposal to its creditors:(c) be the subject of a summary instalment order under this Act:(d) be admitted to the no asset procedure.[28] Mr Faloon is not a corporation, association or company incorporated or registered under any act. He is very much a human and as such may be made bankrupt. Mr Faloon tried to develop a submission that he and his father were under"special powers" when they undertook the diversion of the Kawau Stream. Mr Faloon did not explain quite what that meant. Even if they had special powers, that does not bring him within 6 of the Insolvency Act. Moreover, Mr Faloon incurred the orders for costs personally in proceedings he had taken against theCommissioner. He was not operating under any "special powers" when he broughthis proceedings.[29] Mr Faloon also contended that he was acting either as a trustee or as an administrator of the estate of his late father. As a trustee he would enjoy the normal rights of indemnity from trust assets under s 38 of the Trustee Act 1956. As an executor he would enjoy some right of indemnity out of estate assets.[30] I was unable to understand from his submissions how a trust could have arisen. As for being an administrator of the estate of his late father, he accepted that probate of the will of his late father had been granted to the Public Trust. On his own account Mr Faloon may have acted as an executor de son tort before the grant of prob ate to the Public Trust. But that does not give Mr Faloon any right to takeproceedings on behalf of his father's estate. Even if he were the executor of hisfather's estate, in bringing the proceedings against the Commissioner he would incurpersonal liability. All that his right of indemnity would give him is a power to recover for any liabilities incurred as executor out of the estate assets. It would not prevent the Commissioner being able to recover debts from Mr Faloon which he had incurred personally.[31] Mr Faloon also tried to argue that he enjoyed immunities for more esoteric reasons. He cited a number of statutory provisions: s 30 of the Local Government Act 1989, s 37 of the River Boards Act 1908, s 7(c) of the Manawatu-Oroua River District Act 1923, s 2 of the River Boards Amendment Act 1910, s 388 of the Resource Management Act 1991, s 30(4) of the Soil Conservation and Rivers Control Act 1942, s 2 of the Soil Conservation and Rivers Control Amendment Act1946 and the definition of "person" in the Income Tax Act 1976. None of thesematters were relevant, and Mr Faloon could not bring himself within any of them.[32] I mention one in particular. Mr Faloon contended that he was a "special drainage or river authority" under s 2 of the Soil Conservations and Rivers ControlAmendment Act 1946. I mention that simply to illustrate the strangeness of his submissions. They do not justify any basis for showing that he did not incur personal liability for the court orders for costs made against him in this court and the Court of Appeal so as to take him outside the Insolvency Act. In short, Mr Faloon does not enjoy any immunity from bankruptcy.The security submission[33] Mr Faloon took issue with the standard pleading in the bankruptcy application that the Commissioner had no security for the debt. Mr Faloon submitted that he would be able to offer security to the Commissioner. He accepted that at present the Commissioner does not have an enforceable security against his assets. Mr Faloon contended that there was security because he was a deemed holder of a water permit in respect of the diversion of the Kawau Stream in the 1970s. He was a deemed holder of a water permit under s 306 of the Resource Management Act 1991. That permit ran for 35 years and would expire on30 September 2026. In his submission, that gave a right to charge the users of the water diversion for the discharge of water down the diversion. He apparently had the Palmerston North Airport Ltd in mind as the target.[34] He also referred to s HR6 of the Income Tax Act 2007 which deals with airport assets, and contended that that would allow the Commissioner to decide what assets belonged to the airport, apparently in anticipation of a favourable decision in his favour. Mr Faloon claimed that the stream diversion gave him, personally, an interest in the land. As Asher J pointed out in his decision, Mr Faloon tends to mix up interests held by family companies such as Trade Lines Ltd, and his own personal interest.[35] Plainly the security that Mr Faloon is offering is entirely speculative. It is hard to see how it gives any enforceable rights that would be of any interest or value to the Commissioner. I am unable to take seriously his proposal that he can offer any security to the Commissioner. The security issue does not disqualify the Commissioner from applying for adjudication and cannot be taken into account in the exercise of the discretion under ss 36 and 37 of the Insolvency Act.Insolvency set-off[36] Mr Faloon referred a number of times in his submissions to the wrong he alleges he has suffered and his anticipation or expectation that he may be able to bring proceedings against the Crown which would give him relief more extensive than the orders for costs made against him to date. While he did not put his submissions in quite these terms, I understand that his augment might be considered as a matter of insolvency set-off under s 254 of the Insolvency Act 2006.[37] On adjudication, there is a set-off of mutual credits, debts, and other dealings between the bankrupt and anyone claiming in the bankruptcy. There is a useful outline of the way the law operates in the judgment of Lord Hoffmann in Stein v Blake.11 Insolvency set-off is substantive. As such, it displaces r 5.61 of the High Court Rules which imposes restrictions on claiming set-offs and counterclaims when11 Stein v Blake [1996] 1 AC 243 (HL) at 251-254.the Crown is a party to proceedings. The Commissioner, of course, is part of the Crown. Insolvency set-off under s 254 can apply between the Crown and a taxpayer.12[38] If Mr Faloon had a genuine claim against the Crown, which could be properly taken into account under s 254 of the Insolvency Act, that would provide grounds to consider whether Mr Faloon should be adjudicated bankrupt. If the net effect under s 254 is that Mr Faloon would not owe any debts to the Commissioner then it may be appropriate not to adjudicate him bankrupt, given that there would be no net liability to the applicant creditor. I would assume for the purpose of s 254 that the requirements of mutuality could be satisfied. Moreover, to clear away any procedural objections, it is necessary to make the point that the fact that Mr Faloon did not apply to set aside the bankruptcy notice on the grounds of set-off does not prevent him raising the same matter in opposition to a bankruptcy application. But, even with those potential obstacles out of the way, it is clear that any hope that Mr Faloon might have of being able to raise mutual credit and set-off under s 254 of the Insolvency Act is forlorn. The matters that he wants to raise against the Crown are matters he has already litigated in court before and they are matters on which he has a consistent history of losing.[39] Asher J and Associate Judge Christiansen have noted Mr Faloon's ingenuityin trying to conjure up new arguments to bring against the Crown for grievances going back to the 1970s and the 1990s. I am not prepared to take seriously any suggestions that there could now be any basis for a claim by Mr Faloon. He clearly mixes up rights that may be held by companies (such as Trade Lines Ltd) with any rights he has personally. He may have a personal grievance but his legal rights, if he had any, must by now be well and truly statute-barred. Notwithstanding his attempts to come up with new arguments, I cannot understand how he could now have any prospect of success at all in trying to re-litigate matters on which he has failed so many times before.12 Commissioner of Inland Revenue v The Fishing Company Ltd [2012] NZCCLR 5 at [20]-[28],Re DH Curtis (Builders) Ltd [1978] 1 Ch 162, and Secretary of State for Trade & Industry v Frid[2004] UKHL 24, [2004] 2 AC 506.Oppression[40] Mr Faloon contends that the Commissioner is acting oppressively in bringing this bankruptcy application against him because the Commissioner wishes to stymie any further litigation. As to that, the Commissioner has the normal rights of any litigant to enforce an order for costs in her favour. The fact that she is the Commissioner of Inland Revenue neither gives her more rights nor fewer rights than any other judgment creditor. She is unsecured. The bankruptcy notices and a bankruptcy application are conventional means for enforcing orders for costs.[41] The prejudice that Mr Faloon points to is the prospect that he may no longer be able to bring claims against the Commissioner or the Crown generally. The fact that that result might follow does not mean that that is the Commissioner's motive.The Commissioner is bringing her application in the same way that any other judgment creditor does. There is nothing in the circumstances of this case which suggests that the Commissioner is bringing this application out of an untowardmotive. The fact that a creditor's recovery steps may bear hard on a debtor does notby itself make the application oppressive. I do not regard the Commissioner as acting in any way improperly in this case.[42] Mr Faloon's concern is that any right to litigate on his current causes ofaction will vest in the Official Assignee. I do not regard that as necessarily a bad thing. Mr Faloon has shown a keenness to litigate pointlessly many times. It may be helpful if an independent person such as the Official Assignee could view the matters afresh to see whether there are genuine matters that do need to be pursued in theinterests of Mr Faloon's creditors. In short, I dismiss the submission of oppression.Exercise of the residual discretion[43] That still leaves matters to be considered in the general exercise of the discretion under ss 36 and 37. It is clear that Mr Faloon is insolvent in that he cannot pay the orders for costs. He advised me that he did not have the funds. He is an experienced litigant. He must be aware that court orders have to be obeyed,including orders for court costs. I accept his explanation of inability, rather than defying the court.[44] Mr Faloon has not advanced any realistic alternatives to adjudication to address his insolvency. He did suggest that matters be put on hold while he continues to litigate. But I do not see any useful purpose in that. His prospects for future litigation appear dismal at best. That would only postpone dealing with his insolvency to no good end.[45] When a debtor has outstanding unmet liabilities, which he is unable to discharge from his own resources, bankruptcy can be an appropriate response. That places the affairs of the bankrupt under the independent control of the Official Assignee to administer the assets in the interests of creditors. That aspect counts in favour of adjudication in this case.[46] I want to make it clear that Mr Faloon has not acted so outrageously in incurring his liabilities that bankruptcy should be imposed on him as a matter of punishment. But there is another aspect which Mr Walmsley touched on in his submissions. I call that the matter of accountability. Accountability is relevant when debtors run up credit and then fall insolvent. Bankruptcy may be required to make them accountable for debts which they are unable to pay. It shows that there must beconsequences when debts are not honoured. Mr Faloon's case is different. He hasnot run up debt in a commercial context. He has instead incurred liabilities when undertaking litigation. But there is a similar need for accountability. Costs orders are a check to discourage irresponsible litigation. The prospect of orders for costs being made on the other side succeeding causes most litigants to pause and consider carefully whether to take proceedings. If a litigant were to push ahead with litigation expecting that even if costs were ordered against them they would never be enforced, costs would no longer operate as a check against irresponsible litigation. Accordingly there is a need for accountability in court costs, just as with credit run up in a commercial context. That aspect counts towards adjudication here.[47] Another factor is that Mr Faloon has been adjudicated bankrupt once before. The recurrence of insolvency difficulties is another factor pointing towards an orderfor adjudication. Against that, Mr Faloon resents the fact that on adjudication his assets will pass to the Official Assignee. That will include causes of action held by Mr Faloon (except for assets held on trust). Mr Faloon tried to persuade me that many of the causes of action would not in fact pass to the Official Assignee, but for this part of the decision I assume that any causes of action he has been running are for his personal benefit and would pass to the Official Assignee under s 101 of the Insolvency Act.[48] The inability to control proceedings is commonly raised in submissions against orders for adjudication. Sometimes the response is a rather patronising one: the Official Assignee will be able to judge the merits of any proceedings. All too often, the Official Assignee simply drops the proceedings because the Official Assignee has no funds to run the case. In this case I take a stronger stance. I am simply not satisfied as to the merits of any litigation in which Mr Faloon has taken part. Given his consistent lack of success, it is desirable that one of the consequences of his being adjudicated bankrupt is that he will no longer be able to take proceedings and that proceedings will only be undertaken if the Official Assignee can be satisfied that they will be viable and that there are good prospects of success.[49] The final aspect of a bankruptcy is that ultimately the debt is cleared off. If the debt cannot be paid from the assets of the bankrupt after administration by the Official Assignee, at the end of the bankruptcy the debt is simply discharged. Ultimately that burden will be lifted off the shoulders of Mr Faloon. He is now 76 years of age. Given that he has no present prospect of being able to meet the debts in any other way, that is an appropriate outcome for him.Outcome[50] After considering all those factors, there is nothing that strongly militates against an order for adjudication being made. I am satisfied in all the circumstances that an adjudication in bankruptcy is appropriate. I now make an order adjudicating Mr Faloon bankrupt. The time of the order is 1:11 pm.[51] I make an order for costs in favour of the Commissioner in the sum of $9,589.00 and disbursements of $2,306.29, totalling $11,895.29. Those costs are tobe paid out of the assets of Mr Faloon's estate.______________________________Associate Judge R M BellAPPENDIXCases involving Mr Faloon1. Faloon v Comptroller of Customs and the CIR (1988) 12 TRNZ 313 (HC)2. Faloon v The Attorney-General (1989) 12 TRNZ 476 (HC)3. Bank of New Zealand v Faloon HC Wellington M354/96, 18 October 19964. Faloon v District Land Registrar [1997] 3 NZLR 498 (HC)5. Re Faloon ex parte Bank of New Zealand HC Wellington B175/97, 12 August 19976. Faloon v Comptroller of Customs CA236/88, 16 March 19987. Faloon v Comptroller of Customs CA236/88, 15 June 19988. Faloon v Attorney-General HC Wellington CP310/99, 5 October 20009. Faloon v Attorney-General CA255/00, 11 December 200010. Faloon v Central Equipment Co CA255/00, 23 July 200111. Faloon v Trade Lines Ltd (In Liquidation) CA121/97, 13 December 200112. Faloon v Commissioner of Inland Revenue (2002) 20 NZTC 17,618 (HC)13. Faloon v Registrar of Companies HC Tauranga M53/02, 18 February 200314. Faloon v Registrar of Companies HC Tauranga CIV-2003-470-477, 16 July 200315. Faloon v Registrar of Companies HC Tauranga CIV-2003-470-477, 25 February 200416. Faloon v Commissioner of Inland Revenue (2005) 22 NZTC 19,65317. Faloon v Commissioner of Inland Revenue (2006) 22 NZTC 19,832 (HC)18. Faloon v Commissioner of Inland Revenue HC Tauranga CIV-2009-470-885, 11 June 201019. Faloon v Commissioner of Inland Revenue [2010] NZCA 223; (2010) 24 NZTC 24,325;(2010) 20 PRNZ 64120. Faloon v Commissioner of Inland Revenue [2010] NZCA 242; (2010) 24 NZTC 24,32921. Faloon v Commissioner of Inland Revenue HC Rotorua CIV-2009-470-319, 21 August 200922. Faloon v Commissioner of Inland Revenue HC Tauranga CIV-2009-470-319, 9 September 200923. Faloon v Commissioner of Inland Revenue HC Tauranga CIV-2009-470-319, 12 October 200924. Faloon v Commissioner of Inland Revenue (2010) 24 NZTC 24,230 (HC)25. Faloon v Commissioner of Inland Revenue [2010] NZCA 393; (2010) 24 NZTC 24,45626. Faloon v Commissioner of Inland Revenue (No 4)HC Tauranga CIV-2010-470-922, 5 July 201127. Faloon v Commissioner of Inland Revenue (2011) 25 NZTC 20-097 (HC)28. Faloon v Commissioner of Inland Revenue [2012] NZHC 307; (2012) 25 NZTC 20-12429. Faloon v Commissioner of Inland Revenue [2012] NZHC 115430. Faloon v Commissioner of Inland Revenue [2013] NZHC 129631. Faloon v Commissioner of Inland Revenue [2013] NZHC 1736; (2013) 21 PRNZ 45432. Faloon v Commissioner of Inland Revenue [2013] NZHC 214233. Faloon v Commissioner of Inland Revenue [2013] NZHC 2643; (2013) 26 NZTC 21-06134. Faloon v Commissioner of Inland Revenue [2013] NZHC 291235. Faloon v Commissioner of Inland Revenue [2013] NZHC 309036. Faloon v Commissioner of Inland Revenue [2013] NZCA 42537. Faloon v Commissioner of Inland Revenue [2014] NZCA 292; (2014) 26 NZTC 21-07838. Faloon v Commissioner of Inland Revenue [2015] NZHC 152939. Faloon v Palmerston North Airport Ltd [2012] NZEnvC 10540. Faloon v Palmerston North Airport Ltd [2012] NZEnvC 22241. Faloon v Palmerston North Airport Ltd [2013] NZHC 212442. Faloon v Palmerston North Airport Ltd [2014] NZCA 29143. Faloon v Palmerston North Airport Ltd [2014] NZCA 37244. Faloon v Palmerston North Airport Ltd [2015] NZEnvC 14445. Faloon v Palmerston North Airport Ltd [2015] NZHC 261046. Faloon v Commissioner of Patents, Trade Marks and Designs [2015] NZHC 85347. Faloon v Commissioner of Patents, Trade Marks and Designs [2015] NZCA 425Cases involving Central Equipment Co Ltd48. Barnes v Central Equipment Co Ltd P08/1979, 17 September 1979 (Intellectual Property Office)49. Central Equipment Co Ltd v District Commissioner of Inland Revenue, Palmerston North (1986) 8 NZTC 5,032 (HC)50. Central Equipment Co Ltd v Commissioner of Inland Revenue (1988) 10 NZTC 5,231 (HC)51. Commissioner of Inland Revenue v Central Equipment Co Ltd (2006) 22 NZTC 19,891 (HC)52. Commissioner of Inland Revenue v Central Equipment Co Ltd (2007) 23 NZTC 21,243 (HC)53. Central Equipment Co Ltd v Commissioner of Inland Revenue (2008) 23 NZTC 21,722 (CA)54. Commissioner of Inland Revenue v Central Equipment Co Ltd (2008) 23 NZTC 21,895 (HC)55. Commissioner of Inland Revenue v Central Equipment Co Ltd (2008) 23 NZTC 21,965 (HC)