Hoeberechts v The Commissioner of Inland Revenue

[2022] NZHC 651

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2021-419-000288

[2022] NZHC 651

UNDER

the Income Tax Act 2007, the Tax Administration Act 1994 and section 20.9 High Court Rules 2016

BETWEEN

VERONICA ANNE HOEBERECHTS
Appellant

AND

THE COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:	On the papers
Counsel:	Appellant in person
Judgment:	1 April 2022

JUDGMENT OF GORDON J

This judgment is delivered by me on 1 April 2022 at 2 pm pursuant to r 11.5 of the High Court Rules.

.....................................................

Registrar / Deputy Registrar

To:  The Appellant

HOEBERECHTS v THE COMMISSIONER OF INLAND REVENUE [2022] NZHC 651 [1 April 2022]

[1]    Veronica Hoeberechts has filed an appeal against a decision of the Taxation Review Authority (TRA).1 She is self-represented. She submitted an application to the Court Registry for waiver (or refund) of her filing fee of $540.00 for the appeal (fee waiver application).

[2]    The application was declined by a Deputy Registrar. Ms Hoeberechts seeks a review of the Deputy Registrar’s decision (review application).

Relevant law

[3]    Section 157(1) of the Senior Courts Act 2016 (the Act), empowers the Governor-General to make regulations authorising a Registrar (or Deputy Registrar) of a senior court to waive (or refund), in whole or part, fees associated with a proceeding or intended proceeding. The underlying purpose of the provision is to “promote access to justice”.

[4]    Under s 157(2) the regulations made must provide that a Registrar or Deputy Registrar may only exercise a power under the regulations if they are satisfied, on the basis of prescribed criteria, that:

(a)   the person responsible for payment of the fee is unable to pay or absorb the fee in whole or in part; or

(b)    unless 1 or more of those powers are exercised in respect of a proceeding that concerns a matter of genuine public interest, the proceeding is unlikely to be commenced or continued.

[5]Section 157(3) of the Act provides that regulations may set criteria:

(a)  for assessing a person’s ability to pay a fee; and

(b)  for identifying proceedings that concern matters of genuine public interest.

[6]The High Court Fees Regulations 2013 (the Regulations) duly provide:

1      Disputant v Commissioner of Inland Revenue [2021] NZTRA 3 (TRA 015/2020).

18 Power to waive fees

(1)   A person otherwise responsible for the payment of a fee required in connection with a proceeding or an intended proceeding may apply to a Registrar for a waiver of the fee.

(2)  The Registrar may waive the fee payable by the person if satisfied,—

(a)   on the basis of one of the criteria specified in regulation 19, that the person is unable to pay the fee; or

(b)  that the proceeding,—

(i)  on the basis of one of the criteria specified in regulation 20, concerns a matter of genuine public interest; and

(ii)  is unlikely to be commenced or continued unless the fee is waived.

...

[7]    Regulation 19 provides that a person is unable to pay the fee sought if they have been granted legal aid, are a beneficiary, a superannuitant, on a veteran’s pension, or “would otherwise suffer undue hardship if he or she paid the fee”.

[8]    Regulation 20 sets out the criteria for determining when a proceeding concerns a matter of genuine public interest:

(a)  a proceeding that has been or is intended to be commenced to determine a question of law that is of significant interest to the public or to a substantial section of the public; or

(b)   a proceeding that—

(i)  raises issues of significant interest to the public or to a substantial section of the public; and

(ii)  has been or is intended to be commenced by an organisation that, by its governing enactment, constitution, or rules, is expressly or by necessary implication required to promote matters in the public interest.

[9]In short, an application for a fee waiver by an individual may be granted if:

(a)The person is unable to pay the fee; or

(b)   (i) The proceeding concerns a matter of public interest; and

(ii) The proceeding is unlikely to be commenced or continued unless the fee is waived.

Review of decision

[10]   The right to seek a review of a Registrar’s decision concerning fees is governed by s 160 of the Act, which provides that a person who disagrees with a decision of a Registrar or Deputy Registrar may apply to a Judge or Associate Judge of the relevant court to review the decision.2 The application may be made informally.3 The review is to be conducted by way of rehearing of the matter in respect of which the Registrar or Deputy Registrar made the decision, and dealt with on the papers.4 The Judge or Associate Judge may confirm, modify, or reverse the decision of the Registrar or Deputy Registrar.5

Discussion

Is Ms Hoeberechts unable to pay the fee?

[11]   In the review application Ms Hoeberechts states that although she has now paid the $540 filing fee, she could “ill-afford” it. However, her fee waiver application was clearly based on public interest grounds. She did not rely on an inability to pay. This issue does therefore not need to be addressed further.

Public interest

[12]   The fee waiver application states that the question of law at issue in the proceeding is:

... how the Commissioner of Inland Revenue assesses the late payment of weekly compensation entitlement in the year of receipt and not in the years of when the entitlement accrued. This issue has been in contention for nearly forty years, and I have attached some supporting documentation.

2      Section 160(1).

3      Section 160(3).

4      Section 160(4).

5      Section 160(5).

[13]   The fee waiver decision letter from the Deputy Registrar appears to be a standard form response. The wording of the letter reflects the wording of regs 18  and 20. It states:

The applicant’s request for the waiver of a fee of $540.00 is refused on the basis that I am not satisfied the application fulfilled the following criteria, as applied for:

o   The proceeding to which the fee relates is unlikely to be commenced or continued unless the fee is waived/reduced, and concerns a matter of genuine public interest on the basis that it:

o   Seeks to determine a question of law that is of significant interest to the public or to a significant section of the public.

[14]   The reason for the decision is then recorded as: “Not a matter of genuine public interest – Appeal continued”.

[15]   The substantive appeal to this Court is against a decision of the TRA in which Ms Hoeberechts challenged the basis upon which the Commissioner of Inland Revenue treats lump sum payments made by the Accident Compensation Corporation (ACC) for weekly compensation in arrears. Ms Hoeberechts had disputed her entitlement to weekly compensation she was due from the ACC. After some years she succeeded in an appeal to the District Court. After the District Court decision, the ACC paid a lump sum in arrears. In the TRA Ms Hoeberechts contended that the payment from the ACC should be treated for tax purposes as having been derived on an accruals basis and spread over the income years to which the payment related, rather than on a  cash  basis  as  assessed  by  the  Commissioner.  The  TRA  dismissed  Ms Hoeberechts’ challenge and confirmed that the tax assessments had been made correctly.

[16]   The appeal is filed by Ms Hoeberechts as an individual, and on her own behalf. In that regard she seeks relief for herself including a re-assessment of the relevant tax years and a ‘refund’ of the tax she believes she has overpaid. However, she also asserts that the issue she seeks to address affects numerous persons other than herself saying:

I would also seek relief for other long-term claimants who have been, are, or will be in the same position as I am and ask that either the Minister of Revenue changes the legislation in urgency (with retrospective application) or the Commissioner writes a Public Ruling that allows the one-sum partial or full

payments of weekly compensation, paid late by the Corporation, to be spread over the years from the date of the claimant’s incapacitating injury, which is usually the date that the weekly compensation entitlement begins to accrue.

[17]   In the review application, Ms Hoeberechts provides information to support her assertion that the appeal is of significant and genuine public interest. She refers to an Official Information request to the ACC, made by an independent journalist in early 2021, which disclosed that the number of claimants receiving a retrospective one-sum payment of back-dated weekly compensation entitlement each year is in the region of 1,200 to 1,500 persons. On this basis, Ms Hoeberechts says that the outcome of her current appeal could be of immense interest to other claimants. She also refers to a number of other news articles which appear to criticise the taxation regime governing back-dated lump sum ACC payments. One such article suggests that:

... all that is required is a small amendment to the tax code allowing a special tax category where the tax is deducted at a rate no different to if the weekly compensation was paid on time. Tax could then be deducted based on when it was owed rather than when it was paid.

[18]   Various supporting documents are also attached to the fee waiver application, including a decision of the TRA dated 23 February 1988 and an excerpt from the 2009/2010 Report of the Ombudsman.

[19]   Of particular relevance is the following statement in the Report of the Ombudsman:

It seems unfair that recipients of lump sum payments have to pay tax on those payments in the year of receipt, when the lump sums relate to back payments extending over two or more years. This means they are taxed at the highest marginal tax rate, whereas if they could spread the lump sum over the tax years to which the payments relate, then in most cases the incidence of tax would be lower. The unfortunate tax consequences for a claimant in those circumstances have been acknowledged by the Tax Review Authority and the Accident Compensation Corporation. We understand that ACC has raised this issue with its Minister and await with interest his consideration of the matter.

[20]   I am satisfied that Ms Hoeberechts’ proceeding concerns a matter of public interest which is of significant interest to a significant section of the public. I accept that a significant number of people are affected by the tax treatment of lump sum payments by the ACC.

[21]   However, as long as the tax treatment of ACC lump sum payments is consistent with current legislation, the courts cannot intervene. Only Parliament may change legislation. As the journalist Ms Hoeberechts cites in her review application points out, the remedy affected persons seek is a change to the legislation. For this reason, I do not consider that Ms Hoeberechts’ current proceeding is properly in the public interest for the purposes of the Regulations.

[22]   The Registrar was correct to refuse the request on the basis that the requirements of reg 18(2)(b)(i) had not been met.

Is the proceeding unlikely to proceed if the fee is not refunded?

[23]   The application form requires the applicant to tick a number of boxes to confirm their understanding of the application process. At step 5, the applicant must answer the following question, using the tick boxes provided:

If this application for the fee to be waived is refused, would you move forward with the proceeding?

oYes. I would start or continue with the proceeding anyway.

oNo. If this application is refused, I would stop or discontinue with this proceeding.

[24]   If an applicant ticks ‘No’, they are then asked to “List the reasons why [they] would not move forward with the proceeding if the fee is not waived”.

[25]Ms Hoeberechts ticked the ‘Yes’ box.

[26]    At step 6, the applicant is required to check a box to confirm the following statement:

If this application is declined then I understand I must pay the fee immediately.

[27]Immediately below this tick box, the form states as follows:

If you don’t pay the fee immediately, the proceeding will stop and the court may recover the fee as a ‘debt’.

However, you can apply to have the ‘declined’ decision reviewed.

[28]    Ms Hoeberechts duly ticked the box. She also paid the fee within the requisite timeframe. She then applied to have the ‘declined’ decision reviewed in accordance with the information provided on the back page of the fee waiver application.

[29]   In Environmental Defence Society Incorporated v Otago Regional Council,6 Associate Judge Lester found that, although the issue raised met the public interest criteria, the applicant was unable to meet this limb of the test on the basis that they had ticked the ‘Yes’ box on the form, indicating that they would continue with the proceeding regardless of whether or not the fee was waived.7 The application for review was accordingly declined.

[30]   The position in this case is that Ms Hoeberechts has similarly ticked the ‘Yes’ box. In addition, Ms Hoeberechts’ persistence in pursuing her case is evident in the documents she has provided and her notice of appeal which runs to 67 paragraphs. All of this separately indicates she will continue this proceeding even if the filing fee is not waived.

[31]   The requirements of reg 18(2)(b)(ii) have not been met. This is an additional reason for dismissing the review application.

Result

[32]   The application for review is dismissed. I confirm the decision of the Deputy Registrar to decline Ms Hoeberechts’ application for a fee waiver.

Gordon J

6      Environmental Defence Society Incorporated v Otago Regional Council [2019] NZHC 189 [18 February 2019]. See also Chen v Auckland Weihao Investment Ltd Inc [2021] NZHC 3196 and Re Gifford (a review of the Registrar’s decision) [2021] NZHC 1773.

7 At [17].