COMMISSIONER OF INLAND REVENUE v THE CHURCH OF JESUS CHRIST OF LATTER_x001e_DAY SAINTS TRUST BOARD [2020] NZSC 102

COMMISSIONER OF INLAND REVENUE v THE CHURCH OF JESUS CHRIST OF LATTER-DAYSAINTS TRUST BOARD [2020] NZSC 102 [30 September 2020]IN THE SUPREME COURT OF NEW ZEALANDI TE KŌTI MANA NUISC 38/2020[2020] NZSC 102BETWEEN COMMISSIONER OF INLANDREVENUEApplicantAND THE CHURCH OF JESUS CHRIST OFLATTER-DAY SAINTS TRUST BOARDFirst RespondentPAUL ROSS COWARDSecond RespondentHearing: 15 September 2020Court: O'Regan, Ellen France and Williams JJCounsel: H W Ebersohn and C M Kern for ApplicantR A Green and N B Bland for RespondentsJudgment: 30 September 2020JUDGMENT OF THE COURTA The application for leave to appeal is dismissed.B The applicant must pay costs of $4,500 plus usualdisbursements.____________________________________________________________________REASONS[1] This application for leave to appeal raises for consideration the requirementsof s LD 1 of the Income Tax Act 2007, which provides that a donor of "a charitable orother public benefit gift" is entitled to a tax credit.11 Income Tax Act 2007, s LD 1(1).[2] The case concerns payments made to the first respondent, The Church of JesusChrist of Latter-Day Saints Trust Board (the Board), an entity associated with TheChurch of Jesus Christ of Latter-Day Saints in New Zealand (the Church), by donorswho are, or are associated with, missionaries selected by the Church to proselytiseoverseas.[3] The Commissioner of Inland Revenue (the Commissioner) wishes to challengea decision of the Court of Appeal in which that Court found the payments in issue weregifts.2Background[4] The Church sends missionaries to proselytise in other countries on missionslasting between 18 and 24 months. The Church expects the missionaries, their familiesand other supporters to make sacrifices to support these missions. The missionary isexpected to live frugally while on a mission. Their New Zealand-based families andsupporters are expected to make donations to the Board in light of the mission, thoughthe recommended sum does not reflect actual cost. It is currently set by the Board atNZ$385 per month, but it fluctuates from time to time.[5] These donations are applied at the Board's discretion towards the New Zealandactivities of the Church. They are not in fact applied either directly or indirectlytowards the missionary work undertaken by the missionary overseas. Instead, thebasic travel and living expenses of the missionary are paid by the Church organisationof the country in which the missionary is serving (or, if the Church in the host countryis unable to meet those costs, then the Church in Salt Lake City meets them).[6] The link (or lack of link) between the payments made by donors and themission undertaken by the missionary is at the heart of the present dispute.[7] It was common ground that all of the payments under consideration had beenvoluntary, were not refunded, and, once received, could be applied by the Board at itssole discretion towards the activities of the Church and would not be applied directly2 Church of Jesus Christ of Latter-Day Saints Trust Board v Commissioner of Inland Revenue[2020] NZCA 143, (2020) 29 NZTC ¶24-066 (Cooper, Collins and Stevens JJ) [CA Judgment].or indirectly towards missionary work that the missionary performs overseas. So theseattributes of a gift were met.[8] However, the Commissioner's case was that, as the donors received a materialbenefit from the payments made to the Board, the payments did not meet therequirements of a gift.High Court[9] The High Court found that the requirements of s LD 1 for a gift were met inrelation to some payments, but not others.3 The High Court Judge held that paymentsmade by missionaries, their parents, their grandparents and their legal guardians werenot gifts in terms of s LD 1. These donors received a material benefit from themissionary undertaking missionary service.4 There was also a clear link between thepayment and this benefit (the activities of the missionary).5 Donors in this categorymade the payments to facilitate the missionary being able to travel and carry out theirmission. Although there was no legal obligation to make the payments to ensure thecandidate to be a missionary was accepted, there was a clear moral obligation on theChurch and a strong understanding on the part of donors that their payments wouldenable the missionary to go and to have their expenses met while on the mission.6[10] However, the High Court Judge held that other donors, including siblings,cousins and friends, did not receive any material benefit, so their payments were giftsin terms of s LD 1.7 They were therefore entitled to tax credits in respect of thesepayments.Court of Appeal[11] The Court of Appeal reversed the finding of the High Court in relation todonations by missionaries, their parents, grandparents and legal guardians. It held that3 Church of Jesus Christ of Latter-Day Saints Trust Board v Commissioner of Inland Revenue[2019] NZHC 52, (2019) 29 NZTC ¶24-000 (Hinton J) at [127]–[128].4 At [113]–[114] and [117].5 At [103].6 At [105]–[106].7 At [119]–[120].these donors received no more than a spiritual or moral benefit.8 Nor did the Courtconsider that there was a sufficient connection between the payments and any materialbenefit received.9 The payments were therefore gifts in terms of s LD 1. The Courtupheld the High Court finding in relation to donations by other donors. So all donorswere entitled to tax credits under s LD 1.10Grounds on which application is advanced[12] The Commissioner argues that leave should be granted because two issuesarise, both of which are points of public importance or of commercial significance.11[13] The first of these involves the approach taken by the Court of Appeal to theinterpretation of the Income Tax Act. The Commissioner argues that the Courtevaluated the link between the payments and the benefit based upon whether there wasa legal arrangement connecting the two. This, it is argued, involved an application ofthe Duke of Westminster doctrine.12 The Commissioner argues that the Court ofAppeal took an unduly legalistic approach to its assessment as to the nature of the linkbetween the payments and the alleged benefits, in contrast to the substance-basedapproach taken by the High Court.[14] The Commissioner wishes to argue on appeal that tax statutes should, like otherstatutes, be interpreted purposively, following the approach in s 5 of the InterpretationAct 1999. Although the Court of Appeal said that it would determine the meaning of"gift" by reference to the text and purpose of the legislation and then apply thatmeaning by considering all of the arrangements that were actually entered into andcarried out,13 the Commissioner argues that the Court did not, in fact, adopt apurposive interpretation.[15] We accept that the correct approach to the interpretation of tax statutes is amatter of public importance and commercial significance. But we are not persuaded8 CA judgment, above n 2, at [59]–[63].9 At [64]–[69].10 At [74]–[75].11 Senior Courts Act 2016, s 74(2)(a) and (c).12 The Commissioners of Inland Revenue v The Duke of Westminster [1936] AC 1 (HL) at 19–20 perLord Tomlin.13 See CA judgment, above n 2, at [28] and [54].that this is an appropriate case for that issue to be considered by this Court. First, it isnot clear to us that the Court of Appeal did, in fact, apply the Duke of Westminsterdoctrine. Second, the question at issue in this case, namely whether the alleged benefitderived by donors was such that it meant the payments should not be categorised asgifts, is an intensely fact-specific question, and the facts in this case are relativelyunusual. We are not satisfied that a matter of general and public importance arises.We do not therefore grant leave on this ground.[16] The second issue, which is really a subset of the first, is the meaning of theterm "gift" in the context of s LD 1. Again, we see the difference between theapproaches of the Court of Appeal and High Court as being matters relating to theinterpretation of the facts of the case, rather than matters of legal significance. We aretherefore not satisfied that the criteria for the granting of leave to appeal are met inrelation to this issue either.Result and costs[17] The application for leave to appeal is dismissed. The Commissioner must paythe respondents costs of $4,500 plus usual disbursements.Solicitors:Crown Law Office, Wellington for ApplicantSimpson Grierson, Auckland for Respondents