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Commissioner's application for strike-out successful

Decision date: 25 October 2013

Case: TRA 40/10

Act(s): Income Tax Act 2004, Tax Administration Act 1994

Keywords: Strike out, Māori sovereignty, PAYE, evasion shortfall penalties


The Commissioner of Inland Revenue's ("the Commissioner'") application to strike out the remainder of the disputant's claim was granted.

Impact of decision

This decision confirms the principle that Māori sovereignty does not relieve taxpayers of their obligations under the Revenue Acts.


The disputant employed shearers and shed-hands. Until January 2005, the disputant had accounted for PAYE to the Commissioner. Following an investigation, the statutory disputes process was entered into and assessments were made for PAYE for the 2005-07 years. Shortfall penalties for evasion were imposed.

The disputant challenged those assessments and the shortfall penalties imposed, primarily on the basis that it was not liable to account for PAYE due to Māori sovereignty.

The Commissioner applied to strike out the proceedings on 7 March 2011 and again on 15 June 2012. In a judgment dated 19 September 2012 (reported as Case 9 (2012) 25 NZTC), Judge Barber struck out the pleadings on the basis that they disclosed no reasonably arguable cause of action and were an abuse of the court's process.

However, His Honour granted leave for the disputant to pursue two issues:

  1. whether the shearers and shed-hands were independent contractors rather than employees; and
  2. whether the disputant held a genuine belief that Māori sovereignty relieved it of its obligations to account for PAYE and so a lower shortfall penalty (than evasion) would be appropriate.

The disputant did not pursue the matter within the timeframe given and so the Commissioner applied to strike out the remainder of the case. Judge Barber gave the disputant two further opportunities to advance their case on the grounds as set out in his judgment of 19 September 2012.

In May 2013, the Commissioner again applied for strike-out and/or summary judgment on the grounds that the disputant had failed to advance its case on the issues open to it, and had advanced arguments beyond the scope of the leave granted.

The disputant failed to respond to the Commissioner's application for strike-out but instead filed numerous affidavits that appeared to evidence the Māori sovereignty arguments. At the hearing, the disputants sought to argue a third type of arrangement existed between the disputants and the shearers and shed-hands (so that the shearers and shed-hands were neither its employees nor independent contractors), known as "Whanau Kaitono".


The Commissioner submitted that the disputant's claims were 'hopeless and entirely without merit'. She further submitted that the disputant's claim was an abuse of process since leave was given to advance a case on only two narrow issues. The Commissioner also argued that the principle of res judicata applied since the Māori sovereignty arguments had already been heard and decided upon at the previous hearing. Finally, the Commissioner submitted that section 138G of the Tax Administration Act 1994 prohibited the disputant from bringing a proceeding in relation to matters not raised in statements of position without leave of the court.

The disputant's submissions and the briefs of evidence filed in the proceedings appeared to support the Māori sovereignty arguments. In essence, the disputant claimed it was exempt from New Zealand Revenue laws and not liable for PAYE due to Māori sovereignty.

The Commissioner's application for strike-out and/or summary judgment was granted. His Honour held that it was an abuse of process to bring the proceeding outside of the scope of leave granted. His Honour held res judicata applied and that the proceedings were an abuse of the Court's process.


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