Hoeberechts v Commissioner of Inland Revenue

[2024] NZCA 299

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA734/2023
 [2024] NZCA 299

BETWEEN	VERONICA ANNE HOEBERECHTS Applicant
AND	COMMISSIONER OF INLAND REVENUE Respondent

Court:	Goddard and Collins JJ
Counsel:	Applicant in person K I S Naik-Leong for Respondent
Judgment: (On the papers)	5 July 2024 at 11 am

JUDGMENT OF THE COURT

AThe application for an extension of time is declined.

BThe applicant must pay costs to the respondent for a standard application on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Collins J)

Introduction

1. Ms Hoeberechts applies for an extension of time to appeal a High Court judgment declining her leave to appeal.[1]  The application is brought pursuant to r 29A of the Court of Appeal (Civil) Rules 2005 (the Rules). 

   [1]Hoeberechts v Commissioner of Inland Revenue [2022] NZHC 2200, (2022) 30 NZTC 25-021 [High Court extension decision].

2. The Commissioner of Inland Revenue (the Commissioner) opposes the application on the basis that the proposed appeal has no prospect of success. 

Background

1. Ms Hoeberechts successfully challenged a decision of the Accident Compensation Corporation (ACC) in the District Court, resulting in her receiving a lump sum payment of backpay of ACC entitlements across several years.  That payment was then taxed by the Commissioner on the basis that the income was derived wholly in the year in which it was received, meaning it was taxed at a higher marginal tax rate than it would have been if it had been correctly paid in the first place.

1. Ms Hoeberechts challenged the Commissioner’s income tax assessment before the Taxation Review Authority.  This was unsuccessful.[2]

   [2]Case 2/2021 [2021] NZTRA 3, (2021) 30 NZTC 6-001.

2. Ms Hoeberechts then sought to appeal the decision to the High Court but was out of time.  The High Court declined her application for an extension of time, primarily on the basis that the proposed appeal could not possibly succeed.[3]   The High Court declined her application for leave to appeal its decision to this Court.[4]

   [3]High Court extension decision, above n 1.

   [4]Hoeberechts v Commissioner of Inland Revenue [2023] NZHC 1, (2023) 31 NZTC 26-000 [High Court leave decision].

3. Ms Hoeberechts then applied to this Court for leave to appeal against the High Court’s decision refusing to grant leave to appeal.  This Court declined the application on jurisdictional grounds, stating that:[5]

   [N]o appeal lies from a decision of the High Court refusing leave to appeal under s 56(3).  Instead, the correct jurisdictional pathway is for Ms Hoeberechts to appeal the extension decision, and she does not need leave to do so.

   [5]Hoeberechts v Commission of Inland Revenue [2023] NZCA 403 [Court of Appeal special leave decision] at [3] (footnote omitted).

4. Ms Hoeberechts now applies for an extension of time to appeal against the High Court’s extension decision under r 29A of the Rules.

Applicant’s submissions

1. Ms Hoeberechts submits that the extension of time should be granted.  She explains her difficulties with the court processes in both this Court and the High Court as a self-represented litigant.  Primarily, she submits that her proposed appeal is meritorious and proposes the following grounds for her appeal:

   (a)The Courts below erred in interpreting the relevant legislation to conclude that the Commissioner had correctly taxed the lump sum payment.

   (b)Alternatively, the Courts below erred in finding that there was no discretion for the Commissioner to alter the usual application of the legislation.

Respondent’s submissions

1. The Commissioner opposes the application for an extension of time to appeal on the basis that the proposed appeal is devoid of merit.  There is a large body of authority supporting the lower Courts’ approach to taxing the lump sum payment.  There is no discretionary power for the Commissioner to determine that Ms Hoeberechts’ tax liability in respect of the lump sum payment is less than prescribed by the Income Tax Act 2007.

2. The Commissioner also notes that there are imminent (now in force) changes to the Income Tax Act that address this precise issue and it would accordingly be inappropriate for the Court to intervene.

Analysis

1. The Supreme Court in Almond v Read set out five relevant factors in determining an application for extension of time to bring an appeal.[6]  We will address each in turn.

   [6]Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801 at [38].

2. The length of the delay is long, being approximately a year and a half.  However, the length of delay between this Court’s judgment informing Ms Hoeberechts that her original proceedings in this Court were incorrect jurisdictionally and her filing of this application is only a delay of approximately three months.  This is not a long delay.

3. The delay is explained.  Ms Hoeberechts originally filed proceedings on an incorrect understanding of the jurisdictional pathways.  Unfortunately, the jurisdictional error was not identified by the Commissioner either.[7]  Thus, Ms Hoeberechts was not made aware of the correct jurisdictional pathway until 28 August 2023 when this Court released its judgment to that effect.

   [7]Court of Appeal special leave decision, above n 5, at [25].

4. The conduct of the parties is largely a neutral factor.  Ms Hoeberechts has diligently prosecuted her appeals and related proceedings, and they are not frivolous or vexatious in nature, despite being substantively meritless.  Contrary to Ms Hoeberechts’ submissions, it does not appear that the Commissioner has acted inappropriately.

5. There is no identifiable prejudice to the Commissioner.

6. The issues raised by the proposed appeal are highly significant to Ms Hoeberechts, but not to the public generally.  This is because the legal issues relate to settled law.

7. The decisive factor in this application, in our assessment, is the merits of the proposed appeal. 

8. As stated in Almond v Read, the merits will not usually be decisive, unless the appeal is “clearly hopeless”.[8]  In this case, it is.  The law on the matter is settled, as explained by the High Court in its comprehensive decisions.[9]  There is real force in Ms Hoeberechts’ argument that the way in which the law operates for someone in her position is unfair, but the legislation is clear and any changes to the scheme are for Parliament, not the courts.  We note that legislative change has now occurred to address this issue prospectively, with the enactment of the new s RD 20B of the Income Tax Act.[10]  The provision is not retrospective and it would not be open to the Court to interpret the legislation to be so.

Result

[8]Almond v Read, above n 6, at [39(c)].

[9]High Court extension decision, above n 1, at [21]–[49]; and High Court leave decision, above n 4, at [49].

[10]Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024, s 116.  Section RD 20B came into force on 1 April 2024, see s 2(29).

1. The application for an extension of time is declined. 

2. The applicant must pay costs to the respondent for a standard application on a band A basis together with usual disbursements.

Solicitors:           
Te Tari Ture o te Karauna | Crown Law Office, Wellington for Respondent