THE CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS TRUST BOARD v CIR [2019] NZHC 52 [1 February 2019]

THE CHURCH OF JESUS CHRIST OF LATTER-DAY SAINTS TRUST BOARD v CIR [2019] NZHC 52[1 February 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-001650[2019] NZHC 52BETWEEN THE CHURCH OF JESUS CHRIST OFLATTER-DAY SAINTS TRUST BOARDPlaintiffAND COMMISSIONER OF INLANDREVENUEDefendantCIV-2017-404-001559BETWEEN PAUL ROSS COWARDPlaintiffAND COMMISSIONER OF INLANDREVENUEDefendantHearing: 25 June 2018Appearances: W Akel, N Bland and K Teague for the PlaintiffsH Ebersohn and C Kern for the DefendantJudgment: 1 February 2019JUDGMENT OF HINTON JThis judgment was delivered by me on 1 February 2019 at 4.30 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarCounsel/Solicitors:William Akel, Special Counsel, AucklandSimpson Grierson, AucklandCrown Law and Inland Revenue – Litigation Management, Wellington[1] The issue to be determined in this case is whether donations made to the TrustBoard of the Church of Jesus Christ of Latter-Day Saints by a missionary, their familyand others, in connection with the missionary's application, are charitable gifts unders LD 1 of the Income Tax Act 2007.[2] The Church (referring to the international body) is based in Salt Lake City,Utah, but has a world-wide presence, including in New Zealand. One of its moreprominent activities is sending young men and women to proselytise in differentcountries to obtain converts to the Church's mission. Young members of the Churchin New Zealand apply to be missionaries overseas. When they do so, they commit topaying or raising a "standard amount" towards supporting the Church's missionarywork. The issue is over the deductibility of these payments. This money is not paidtowards their mission overseas, but rather towards funding expenses of othermissionaries in New Zealand. The missionaries sent overseas from New Zealand havetheir expenses paid by the country where they proselytise.[3] This judgment addresses two proceedings, which were heard together, bothinvolving the Commissioner of Inland Revenue as defendant.[4] The plaintiff in the first proceeding is the Trust Board of the Church of JesusChrist of Latter-Day Saints (the Trust). It is established by a Private Act of Parliament:the Church of Jesus Christ of Latter-Day Saints Trust Board Empowering Act 1957.The Act sets out the terms on which the Trust operates, including the purposes forwhich it holds its assets on trust. From now, when I refer to the Trust, I refer to thisentity. When I refer to "the Church", I refer to the Church as a whole, not just theNew Zealand "branch", as it were.[5] The first proceeding raises the broad question of whether the Trust can issuedonation statements to any of the categories of people making the relevant payments.[6] The plaintiff in the second proceeding is Mr Coward, a member of the Church.His daughter was a missionary for the Church. Mr Coward made the standardpayments for his daughter's application. This proceeding relates to whether the Trustcan issue a donation statement for those payments.[7] The precise issue I must determine is whether the payments associated with amissionary's application, made to the Trust by the following classes of people, are giftsunder s LD 1, so entitling the donor to a tax credit:(a) a missionary;(b) a parent or legal guardian of a missionary;1(c) grandparents of a missionary;(d) siblings of a missionary;(e) a more distant relative of a missionary, such as a cousin, uncle or aunt;and(f) a church member unrelated to the missionary, such as a friend of amissionary or a member of the missionary's local ward.[8] It is accepted that the payments comply with s LD1(1) in all respects, exceptas to their being gifts.[9] The Commissioner, as a matter of practice, has allowed all claims for thesepayments up until 2015. Since 2015, the Commissioner has disallowed claims by amissionary and their immediate family, but not (to date) by more remote family, ormembers of the local ward, or stake.2[10] Neither party takes issue over the form of the proceedings, or the jurisdictionof the Court to make the declarations sought. And both parties consider it would be ofassistance to have answers to the wider questions posed in the first proceeding, ratherthan the narrow question of the status of payments made by Mr Coward.1 Being the issue in Mr Coward's proceeding.2 A stake is the local district of the Church, and a ward is a subset of a stake.Background[11] For the purpose of these proceedings, the parties have helpfully been able toagree on a set of facts upon which I am to determine the issues.The Church's missionary programme[12] Young people in each country apply to be missionaries,3 and submit to aprocess concluding with a determination by the First Presidency in Salt Lake City,Utah, as to their "worthiness". Usually they will be sent to a designated countryoverseas, for 18–24 months' mission service.[13] There are approximately 70,000 young church members currently undertakingproselyting missionary service around the world. New Zealand has close to300 church members undertaking such service overseas. Approximately450 missionaries from various countries are undertaking such service in New Zealand.[14] The Church pays for a missionary's costs of travel, in-location travel costs inconnection with the mission, and basic accommodation and food costs. The Churchalso pays other essential expenses, such as personal grooming items, laundry, cleaningsupplies, haircuts, and postage for weekly letters to family. All other expenses arecovered by the missionary.[15] For missionaries from New Zealand, these essential costs are met by therelevant Church-related entity in the country where the mission takes place. The Trustdoes not pay any of the missionary expenses for people travelling from New Zealand,but pays for missionaries who come here.Payments to support a mission[16] It is an important principle within the Church that missionary service involvespersonal sacrifice. For this reason, it is expected that missionaries and their familiesshould financially sacrifice to pay for a mission.3 Specifically, single men aged 18–25 and single women aged 19–39.[17] Because of the principle of sacrifice, as part of their application, a missionaryis expected to commit to raising a "standard amount" fixed by the Church. Thisamount should come from a missionary and their family. If that is not possible, amissionary should seek assistance from their ward. At the time Mr Coward's daughterwas called to service, the amount was $475 per month, or NZ$5,700 per annum.Mr Coward paid the full amount in response to his daughter's call to service.[18] In an application, the applicant is required to list the funds available per monthfrom several specified sources: the applicant, his or her family, and his or her localward. An applicant must then specify the total to be paid per month, and the currency.This will ideally meet or exceed the standard amount set in New Zealand.[19] The standard amount is not paid to the missionary, nor does it bear any directrelation to the actual costs incurred in relation to that missionary. The Church sets aninternational "equalised contribution" amount for missionaries whose home wards arein "designated countries". That is set by estimating the average cost to the Church ofproselyting missionary service undertaken by missionaries throughout the world,expressed as a monthly cost figure. New Zealand is not a "designated country". Thestandard amount in New Zealand is an assessment made by the Area President, takinginto account the equalised contribution set by the Church internationally and thecircumstances in New Zealand.[20] If a missionary does not raise the standard amount sought, the local bishop willencourage the particular missionary and their family to consider contributing more. Ifthis is not possible, the bishop may invite members of the ward to contribute. It is alsopossible to have assistance from the General Missionary Fund, which is controlled bythe Church, not the Trust. The plaintiffs say this is a notional fund only, and moneyattributed to it is normally only used to effectively "top up" regional Ward MissionaryFunds as needed, rather than helping individual missionaries with their fund-raising.[21] The continuation and completion of a missionary's service is not affected bywhether or not any these payments have been paid by those who committed to do so.[22] I am advised that in New Zealand, the standard amount is either invariably, oralmost invariably, entered in the application form and paid, typically by the missionaryor their immediate family.Ward Missionary Fund Payments[23] The payments made in support of a missionary are termed "Ward MissionaryFund", or "WMF" payments. This is terminology used by the Church internationally,and the Trust. The Church guidelines, extracts of which are reproduced below,contemplate that these payments go into a separate fund in each country, to be used tosupport missionaries from other countries who are proselyting in that country. Thearrangement is effectively a global "tit for tat" arrangement. None of these WMFpayments are refundable, even if the missionary is unable to complete the full term oftheir mission. Once a WMF payment has been made, the funds belong to the relevantChurch-entity for use in its discretion. This is made clear in the form when theprospective missionary makes their application.[24] In New Zealand, there is no separate "Ward Missionary Fund". All WMFpayments go into a general account held by the Trust. This is the same account it usesto receive grants and tithes from the members in New Zealand. The Trust applies thefunds in this account for the Church's work in New Zealand, as the Trust sees fit. Thisbeing said, the Trust does keep records of the amount of WMF payments it receives,and to which missionary's call to service the payments can be attributed.[25] The Trust does not remit any funds overseas. Its expenses outweigh its income.It relies on substantial grants from the Church for assistance to meet the costs ofmissionaries serving their missions in New Zealand, as well as to run its missionarytraining centre in Manukau. Further, under the terms of the Empowering Act referredto above, it may only apply its funds for the purposes of the Church in New Zealand.4[26] The parties have produced relevant extracts from documents received by anapplicant, and from the Stake Presidents and Bishops 2010 Handbook. The Handbookis not publicly available, nor is it available to applicants.4 Church of Jesus Christ of Latter-Day Saints Trust Board Empowering Act 1957, s 7(i).[27] The following are extracts from documents provided to a prospectivemissionary:(a) The Request for Supplementary Financial Assistance form, which ispart of the application, provides:A major principle of missionary service is sacrifice. Missionaries andtheir families should pay all mission expenses. If assistance is needed,local quorums, wards or stakes should be asked to provide it.Assistance may be requested from the General Missionary Fund onlyafter families and local Church organisations have provided all theycan.Every missionary requesting assistance from the General MissionaryFund must have some funds committed from local sources.(b) The Education and Service of Missionary Candidate form,which is part of the application, includes the following:Source of funds: Indicate how much money (in your local currency)will be contributed per month in support of your mission from thesources below.(c) The General Instructions Checklist, which forms part of theapplication pack, states:Those responsible for providing your financial support should makesure that the required amount is donated to the ward or branchmissionary fund each month.[28] These are extracts from the Handbook, which are not available to a prospectivemissionary, and are used to inform the decision-maker as to whether to recommend aperson for a mission:(a) The Church's Handbook 1 – Stake Presidents and Bishops 2010provides:The primary responsibility to provide financial support for amissionary lies with the individual and the family. Generally,missionaries should not rely on people outside of their family forfinancial support.Missionaries and their families should make appropriate sacrifices toprovide financial support for a mission. It is better for a person todelay a mission for a time and earn money towards his or her supportthan to rely entirely on others. However, worthy missionaries shouldnot be prevented from serving missions solely for financial reasonswhen they and their families have sacrificed according to theircapabilities.(b) The criteria to obtain support from the General Missionary Fundinclude:The missionary, parents, other family members, and ward and stakemembers are contributing according to the guidelines established bythe Area Presidency. (Using these guidelines, stake presidents andbishops work with missionary candidates and their families toestablish a specific financial support commitment, based onappropriate sacrifice by the missionary and the family.)(c) The Bishops and Branch President's Checklist for a missionaryapplication provides:Do not request assistance from the General Missionary Fund until themissionary, the family, and the ward or branch and stake or districthave committed themselves to provide all the financial support theycan.The issue[29] Section LD 1 is in the following terms:LD 1 Tax credits for charitable or other public benefit giftsAmount of creditA person who makes a charitable or other public benefit gift in a tax year andwho meets the requirements of section 41A of the Tax Administration Act1994 has a tax credit for the tax year equal to the amount calculated using theformula in subsection (2).[30] The issue in this case is whether the payments made to the Trust by the classesof people described above are "gifts". The Commissioner accepts that the paymentscomply with s LD 1 in all other respects.[31] The plaintiffs say the WMF payments are gifts because they are gratuitouspayments that are made by Church members to the Trust to support the Church'scharitable work. They are dispositions of property without consideration.[32] The Commissioner says that the WMF payments are made to meet the costs ofthat missionary's mission, and are not gifts because they are not gratuitously made tothe Trust. The Commissioner says they are payments made so that the Church willpay the essential personal expenses of the missionary while on a mission.[33] I am, therefore, required to determine whether WMF payments to the Trust,paid in response to a particular missionary's call to service are "gifts".[34] The burden is on the plaintiffs.What is a "gift"?[35] An apparently easy question does not have such an easy answer.[36] The word "gift" is not defined in the Income Tax Act 2007.[37] Furthermore, attempts to define a "gift" for purposes of the Act seem to bemore exclusive than inclusive.[38] While I endeavoured to have counsel agree on a definition, or at least anapproach to defining the word "gift", they were reluctant to do that.[39] Both parties were agreed, however, that the "ordinary meaning" of "gift"should be significant.[40] The Concise Oxford English Dictionary defines "gift" as including a "thinggiven willingly to someone without payment; a present ".5[41] Both counsel also referred to and relied on the Court of Appeal decision ofMills v Dowdall, which I am advised is the leading authority in New Zealand on themeaning of "gift".6 Cooke J, as he then was, said that a gift was something trulygratuitous, although it was possible that nominal or small considerations may notprevent a transaction being classed as a gift.7[42] Although relying on Mills v Dowdall, Mr Ebersohn for the Commissioner,made the point, which I accept, that the Court of Appeal did not need to go further intheir consideration of what constituted a gift because it was a very different case tothis one. It was not a case about deductibility of a gift under the Act. The Court was5 The Concise Oxford English Dictionary (12th ed, Oxford University Press, New York, 2011).6 Mills v Dowdall [1983] NZLR 154 (CA).7 At 156.considering the very different question of the meaning of "gift" under theMatrimonial Property Act 1976, where gifted property was in general the separateproperty of the recipient spouse.[43] Both counsel argue that I should look at the substance and reality of what hastaken place, rather than the form. I note, though, as again pointed out by Mr Ebersohn,that in Mills v Dowdall the Court actually focused on the form of the transaction ratherthan the substance, at least in terms of the judgment of Richardson J.8 In any event,nothing turns on this. Counsel agree that I should consider the substance of thetransaction in this context, and I accept that is correct.[44] They both, however, submit for very different "substances".[45] The need to not apply a rigid test, but rather consider the substance of the wholeset of circumstances was discussed by Deane J in the Federal Court of Australia'sjudgment in Leary v Federal Commissioner of Taxation.9 In determining whetherthere was a gift, Deane J stated: The solution to the problem whether a transfer of property constitutes a giftfor the purposes of s 78(1)(a) is not to be found by any rigid test or description,but has to be derived from many aspects of the whole set of circumstancessome of which may point in one direction, some in the other. Oneconsideration may point so clearly that it dominates other and vaguerindications in the contrary direction. It is a common sense appreciation of allthe guiding features which must provide the ultimate answer. In the obviouscase that lies away from the boundary, it will be easy to decide whether or nota particular transfer is a gift. The line of distinction between what does andwhat does not constitute a gift may, however, prove difficult to draw in theborderline case and conflicting considerations may produce a situation wherethe answer turns on questions of emphasis and degree. A Court required toresolve the question is entitled to look to the substance or reality of the wholeof the relevant transaction [46] The facts in Leary are not comparable to the present case. The transactionthere was clearly not a gift. It was clearly a sham. This was one of the "obvious cases"referred to by Deane J. The taxpayer borrowed money from a finance company, whichhe used to make a "donation" to a charity. The charity passed 98.8 per cent of the8 Mills v Dowdall [1983] NZLR 154 (CA) at 159–160.9 Leary v Federal Commissioner of Taxation (1980) 32 ALR 221 (FCA). See also Re Klopper vFederal Commissioner of Taxation (1996) 96 ATC 2,020 (AAT).money it received from the taxpayer back to the finance company, keeping the balancefor itself. When the finance company received the money from the charity, iteffectively wrote-off that amount of the taxpayer's loan.[47] Mr Ebersohn also referred me to another Australian case, Re Klopper, wherepayments were made to a charity to effectively meet an indemnity obligation on thepart of the donor, arising out of the America's Cup.10 Like Leary, the circumstanceswere glaringly such that there was no gift.[48] The High Court of Australia considered the definition of "gift" in FederalCommissioner of Taxation v McPhail:11But it is, I think, clear that to constitute a "gift", it must appear that the propertytransferred was transferred voluntarily and not as the result of a contractualobligation to transfer it and that no advantage of a material character wasreceived by the transferor by way of return(emphasis added)[49] McPhail involved a payor who paid $15 to his child's school's building fund,in return for which the payor received a discount of approximately $14 on his son'sschool fees, and did not have to pay a further $3 "special charge". The Court foundthat this was not a gift, because the payor had received a material advantage in return.[50] The same test referred to in McPhail was applied in Hodges v FederalCommissioner of Taxation.12 I agree with the Commissioner that Hodges is in materialrespects similar to the current proceeding. The taxpayer was a member of a work partywhich donated time and skill to carrying out projects in developing countries that wereapproved by Australia's aid programme, AusAID. Members of the work partycontributed the value of their airfares, food, and accommodation by paying the aidorganisation APEX, and they claimed income tax deductions for the amounts theypaid. APEX also received from AusAID A$3 for every A$1 APEX raised for itsprojects. Work party member contributions to APEX therefore attracted publicrevenue/tax benefits for both the work members and APEX. The amounts paid by the10 Re Klopper v Federal Commissioner of Taxation (1996) 96 ATC 2,020 (AAT).11 Federal Commissioner of Taxation v McPhail (1968) 117 CLR 111 at 116.12 Hodges v Federal Commissioner of Taxation (1997) 97 ATC 2158 (Administrative AppealsTribunal).taxpayer were held not to be gifts. The Court took into account that money was paidto APEX to ensure the taxpayer was allowed to take part in the project; the taxpayer'sknowledge that the money would be applied to off-set his expenses, and that thetaxpayer placed value on his participation in the project and was prepared to pay forit.[51] There is also helpful authority from Canada that discusses the definition of gift:R v Zandstra, R v Friedberg, and Coleman v R.13[52] In R v Zandstra, parents pledged amounts to enable a Christian school to beable to operate. In the 1967-1968 proposed annual budget, the parents' pledges wereprojected to be $390 each. The evidence from the parents was that the school operatedon the basis that members would pay what they could, based on their own consciencesand ability to pay. They said it was a moral rather than a legal or contractual obligation.Heald J nonetheless found that the payments made by the parents were not paymentsmade without consideration and could not therefore be considered gifts. He said:14The rationale of the McPhail case applies equally here. Even accepting theevidence of the defendants in these cases that subject payments were voluntaryand not pursuant to a contractual obligation, it seems clear that each parenthere received a consideration, i.e. the Christian education of his children.[53] These cases make it clear that the lack of a contractual obligation does notnecessarily lead to qualification as a gift. The cases seem to turn more on whetherthere is a corresponding benefit or not.[54] In R v Friedberg, the Federal Court of Appeal discussed the definition of "gift"under the Canadian equivalent to our LD 1. The facts of the case are not analogous tothe present, but the Court identified three elements for a payment to constitute a gift:15(a) property owned by the donor;(b) a voluntary transfer of that property to the donee; and13 R v Zandstra [1974] 2 FC 254; Friedberg v R (1991) 92 DTC 6031 (FCA); and Coleman v R[2010] 3 CTC 2311 (TCC).14 R v Zandstra [1974] 2 FC 254 at [19]–[22].15 Friedberg v R (1991) 92 DTC 6031 (FCA) at 6032.(c) no benefit or consideration flowing to the donor.[55] In Coleman, a case which also has some similarities to the present, in order toqualify for financial assistance to attend particular Christian colleges and universities,students were required to raise "donations" for the relevant Christian charity.Donations were not refundable, and not all students who raised money qualified forassistance. Five to 10 per cent did not. The amount of the bursary or scholarship astudent was entitled to receive was determined having regard to, among other things,the amount of funds a student raised, tuition and other fees, the cost of books, andliving costs. Students, their parents, and family, were advised how much funding theywould need to raise in "donations" in order to receive the maximum amount offinancial assistance. Payments were made by parents and grandparents. They did nothave any control over the charity's use of their donation, but they knew within reasonwhat the charity would do, if they made the "donations".[56] Miller J adopted the Friedberg definition of a gift.16 He found that the firsttwo elements were satisfied (property owned by the donor, transferred voluntarily).The issue was with the third element, whether there was benefit or considerationflowing to the donor. His Honour went further, after a review of other cases (includingZandstra), and adopted three propositions relevant to whether the donor received abenefit:17(a) The benefit to the donor need not arise as a result of meeting a legalobligation.(b) Anticipation of a benefit may be sufficient to deny a gift.(c) There must be a connection or link between the donor's payment andthe benefit. The cases refer to a "link" or "hand-in-hand" or "directlyrelated".16 Coleman v R [2010] 3 CTC 2311 (TCC) at [36].17 At [42].[57] Earlier, Miller J said, and I agree, that the author of Canadian Taxation ofCharities and Donations succinctly identified the conundrum presented by a case suchas the present:18The fact of the matter is that most, if not all, donors to charities get somebenefits or advantages from making a contribution. Also, linked to that factoris the undeniable truth that people are more likely to make a contribution to acharity which is doing something they approve of, or which may eventuallybe of benefit to them or to their friends or family, even if the benefit simply isto make their locality a better place to live.One distinction, of course, is that the benefit is not direct enough to disqualifythe gift, but this in turn is a subjective test.While there will be some obvious cases where there is clearly a quid pro quobetween a donor and a charity and no receipt can be issued, there remain manygrey areas where individual decisions will have to be made.[58] That quote, it seems to me, is particularly apposite to consideration of whetherthere is a benefit to the donor.[59] Miller J said that the first step of identifying a personal benefit is not an onerousone and I agree it was not on the Coleman facts. The full passage from the judgmentis as follows:[47] The first step of identifying a personal benefit will not be an onerousone: it must be distinguished from pure moral benefit. In the case of Curlett vMinister of National Revenue, the donor of funds to the Salvation Army (to beused specifically for two people in need of help) received no personal benefit,but did receive a moral benefit. As intimated in Burns, pure moral benefit willnot be sufficient to vitiate a gift. Where the only benefit from a donation isfor pure moral benefit, it is unnecessary to proceed to the second stage ofenquiry, as by its nature there is no substantive personal link between adonation and the resulting pure moral benefit. We give to the Haitian ReliefFund to benefit those in need: there is no personal element to the benefit.[60] I should add here, I agree with Cooke J in Mills that there does not have to be"no" personal benefit for there to be a "gift", but rather no material personal benefit.19That is consistent with the passages from the judgment of Miller J cited above.[61] His Honour concluded that objectively the parents and grandparents'overriding intent was to fund the family member's Christian education. There was a18 At [34].19 Mills v Dowdall [1983] NZLR 154 (CA) at 156.clear benefit received by the donors. The parents and grandparents all saw real benefitin a Christian education. It was the children who directly benefited, but the parentsand grandparents also benefited by significantly reducing the responsibility of payingtuition and other university-related expenses directly to their children or to theuniversity. And there was a connection between the donors' payment and that benefit.Although the charity was not contractually bound to provide a bursary, Miller J foundit was sufficient that the donors had good reason to anticipate receiving a benefit, andmade the payments on this basis. The payments were not, therefore, gifts.[62] In the United States, the primary focus appears to be on whether the paymentwas truly gratuitous in the sense of what the payor anticipated to be received in return.In Winters v Commissioner of Internal Revenue, the payments were made to a fundthat was established and maintained by a church to which the taxpayers belonged.20The fund was used to support schools at which the taxpayers' children were enrolled.Neither the church nor the association that operated the schools required the taxpayersto pay tuition fees. Nor were the taxpayers under any compulsion to contribute to thechurch or the fund. They were, however, encouraged to contribute, and signed pledgecards indicating the amount they expected to pay. The United States Court of Appeal,Second Circuit, considering the substance of the transactions, held that these paymentswere not gifts. Judge Hayes said:21Clearly here, the parent taxpayers both anticipated and received substantialbenefits from their payments; the payments did not come from a "detachedand disinterested generosity". Commissioner of Internal Revenue vDuberstein, supra. Instead, the record shows that the taxpayers' paymentswere made with the anticipation of economic benefit. The record indicatesthat the appellants realized that they had to pay in order to keep the schools inoperation and that the amount of their contributions to the education fund wasdetermined, at least to some extent, by what they believed to be the cost ofeducating their children.[63] Finally, to conclude my discussion of the case law, I return to New Zealandand the Taxation Review Authority's decision in Case J76.22 That case involved ataxpayer who assisted a number of disadvantaged children, who were no relation tohim, by paying their school fees. In return, the school provided the children with food,20 Winters v Commissioner of Internal Revenue 468 F 2d 778 (2nd Cir 1972).21 At 781.22 Case J76 (1987) 9 NZTC 1451 (TRA).board and education. The taxpayer claimed these payments as donations to acharitable institution, as he personally received no benefit from the payments. TheAuthority held, however, that the payments were not gifts. This was because thepayment gave rise to a contractual obligation on the part of the school to educate thechildren. In other words, the benefit to the taxpayer was the contractual right to insiston performance.[64] Considering these cases, I adopt the following propositions on the meaning of"gift". I consider Coleman to be particularly relevant, because the Court wasconsidering "gift" in a tax context, the case has some factual similarities to the present,and both parties accepted it was a key decision in terms of principle.(a) For there to be a gift, there must be a voluntary transfer of propertyowned by the donor to the donee.23(b) There can be no material benefit flowing to the donor as a result of thedonation.24(c) However, a minor benefit or consideration will likely not be sufficientto vitiate the gift.25 Neither will a "purely moral" benefit.26(d) In examining whether the donor receives a benefit, the followingconsiderations are relevant:27(i) The benefit to the donor need not arise as a result of meeting alegal obligation.(ii) Anticipation of a benefit may be sufficient to deny a gift.23 Federal Commissioner of Taxation v McPhail (1968) 117 CLR 111 at 116; and Friedberg v R(1991) 92 DTC 6031 (FCA) at 6032.24 McPhail; Friedberg v R; and Coleman v R [2010] 3 CTC 2311 (TCC).25 Mills v Dowdall [1983] NZLR 154 (CA) at 156.26 Coleman v R [2010] 3 CTC 2311 (TCC) at [47].27 At [42].(iii) There must be a connection or link between the donor'spayment and the benefit. The cases refer to a "link" or"hand-in-hand" or "directly related".(e) The donor does not have to directly benefit from the donation, it isenough that the benefit is indirect, albeit it must be more than a puremoral benefit. For example, there will be a material benefit for a parentor grandparent in ensuring one's children are educated,28 or if onereceives a contractual right to insist on the donee's performance, as aresult of the payment.29[65] Having come to a workable framework, I will turn to analysing the currentfacts to determine whether the payments are gifts. However, before doing so, I mustaddress two further points: the administrative practice of the Commissioner regardinggifts, on which the plaintiffs place considerable emphasis, and the approach of otherjurisdictions to WMF payments to the Church.Relevance of administrative practices of the Inland Revenue[66] Mr Akel relies heavily on the administrative practices of Inland Revenue.In particular, he points to the specific guidance from Inland Revenue that paymentsdescribed as school fees or donations, paid to state schools by parents, which go intoa general fund30 are "gifts" for tax donation purposes. The argument is that thepayments here are analogous, having also been paid into a "general fund", and shouldtherefore be categorised as gifts, or that factor should carry considerable weight.[67] Mr Ebersohn makes three points in response. First, this example ofadministrative practice is too removed from the current set of facts to be a helpfulanalogy. Second, in any event, Inland Revenue's position in regard to schooldonations and their position in this case are both consistent with the law on donations.28 Coleman v R [2010] 3 CTC 2311 (TCC).29 Like in Case J76 (1987) 9 NZTC 1451 (TRA).30 General, in the sense the fund is used to support the school generally, rather than individualstudents.Third, Inland Revenue's administrative practices provide little, if any, assistance as anaid to statutory interpretation.[68] On the first point, in the context of education, Mr Ebersohn argues thatInland Revenue's stance is effectively a policy call. Under the Education Act, parentsare entitled to free education of their children.31 Payments made by parents aretherefore not viewed as being for the provision of enrolment in education. So, theyeffectively need to be treated as donations or gifts. Although it was not put this wayby Mr Ebersohn, it could be said that the right to free education creates in effect apresumption that moneys paid by parents to a public school are donations. This makesit an unhelpful analogy to the present case, argues Mr Ebersohn. I agree with thissubmission.[69] Secondly, Mr Ebersohn argues persuasively that, his first point aside, theInland Revenue's position on school donations, and to the payments in this case, arenot inconsistent. He points to the proviso in the Inland Revenue guidance thatpayments made by parents claimed as a donation must not be for tuition fees, schooltrips, or other specific disbursements.32 In terms of the definition of a gift, anotherway of putting this is that payments made in these circumstances cannot be on theunderstanding that there will be a benefit to a specific child in return. What theCommissioner is asserting in the present case is that there is a benefit being receivedin return. They submit, in effect, that the situation here is somewhat analogous topayments for specific school disbursements, which would not be deductible ascharitable gifts.[70] I agree for the above reasons that the administrative practice relied on byMr Akel is not applicable or relevant to the present case.[71] I also agree with Mr Ebersohn's third point that there must be limitedcircumstances in which administrative practices would be relevant to statutoryinterpretation. I do not consider it necessary to examine this point in detail. Here the31 Education Act 1989, s 3.32 Inland Revenue IR 3 Guide: Question 33 – Donations rebate (Inland Revenue, Wellington, 1999)at 58.administrative practice is so removed from the particular case that there is no need forme to develop the interpretation point further.[72] Further, at a number of points in the plaintiff's discussion, they argue variousother jurisdictions' approaches to gifts are "incompatible" with the approach inNew Zealand, because of our "well-settled" approach to gifts in the context of schooldonations. I do not agree: for the reasons above, I consider the position regardingschool donations in New Zealand to be peculiar to that context. I also make the pointthat the particular New Zealand administrative practice is only in respect of Stateschool fees/donations.Approach to missionary payments in other jurisdictions[73] The plaintiffs also seek to rely on administrative practices of tax authorities inother jurisdictions, and two United States cases in relation to missionary payments. Inmany instances, these seem to allow deductions for WMF or similar payments.[74] The defendant's position is that the practices of foreign tax authorities areunhelpful as a guide to interpreting New Zealand statutory provisions. I agree thatthey have very little authoritative weight. However, it is useful to see how otherjurisdictions deal with similar questions, especially where the law may be moredeveloped. This is especially the case where the foreign jurisdiction has a similarregime to New Zealand. I will briefly discuss the law in the jurisdictions cited to me.United States[75] In the United States, § 170(a) of the United States Revenue Code allows ataxpayer to claim a deduction for a "charitable contribution".33 "Charitablecontribution" is defined in §170(c) as "a contribution or gift to or for the use of "certain entities, of which the Church is one.[76] It seems that the practice of the Church in the United States, prior to 1992, wasfor supporters of missionaries to pay money to them directly. But in 1990, theUnited States Supreme Court in Davis v United States held that such "donations" were33 Internal Revenue Code, 26 USC § 170.not deductible under § 170, as they were not made "to or for the use of" the Church.34Subsequently, in 1992, the Church shifted to the "equalised funding program" referredto earlier, where donations were co-mingled for the use by, and at the discretion of, theChurch. Because of this, the Inland Revenue Service (IRS) began accepting paymentsto this fund (WMF payments) as tax deductible. For this point, the plaintiffs cite anIRS Revenue Ruling from 1962, where the IRS were asked whether contributions bya parent of a missionary to a fund earmarked to support missionaries in their workwere tax deductible under § 170.35 I produce the substance of the answer in full, as itis illuminating to the current discussion: unless the taxpayer's contributions to the fund are distinctly marked by himso that they may be used only for his son or are received by the fund pursuantto a commitment or understanding that they will be so used, they may bededucted by the taxpayer [77] This does seem to show that the IRS will accept WMF payments as deductible,at least in 1962. I am assured by the plaintiffs that this is still the case. The partieshave also produced a "Litigation Guideline Memorandum" by the IRS, which waspublished post Davis.36 It specifically considers the case of the Church's "equalisedfunding" regime. It concludes in the following way:Although not free from doubt, we have also concluded, that contributionsmade after December 31, 1990 [post Davis], under the "equalized fundingapproach" qualify for deduction under section 170 because the control test ofRev. Rul. 62-113, appears to be satisfied. Nevertheless, it is cautioned that anexamination of the Church has not been undertaken and that if an investigationshould uncover facts which affirmatively establish that the Church does notcontrol the expenditure of the donations or that a commitment orunderstanding exists at the time of contribution that the funds will be spent forthe benefit of a particular missionary, the opposite conclusion would bewarranted.[78] While the examination itself is similar to that I have to undertake here, the lawand focus of the examination appears materially different. The IRS guidance focuseson whether the moneys are "for the use of" the Church, rather than whether they aregifts, and focuses on who has control of the funds. Neither of these is particularly34 Davis v United States 495 US 472 (1990).35 Internal Revenue Service "Revenue Ruling 62-113" (1 January 1962).36 Internal Revenue Service "Litigation Guideline Memorandum: Re Mormon Missionary Cases"TL-34 (23 April 1993).material here. I therefore do not consider the guidance to be helpful in interpreting thedefinition of "gift" in New Zealand.[79] The age of the IRS guidance also diminishes its relevance. The plaintiffs saythat the position is still effectively the same, but I do not know if that interpretationhas ever been challenged. This is the problem with relying on administrative practice:it is interesting to see how an authority deals with certain questions, but only the Courtsmay definitively interpret the law. For that reason, any administrative guidance orpractice is suspect unless it has been challenged and approved of by a competentjudicial body.[80] The plaintiffs also point to two older cases in the USA, which they submitassist them: Peace v Commissioner and Winn v Commissioner.37 These cases bothrelate to payments for missionaries of different churches.[81] Peace involved a taxpayer who donated to a common pool of funds, which wasused to support missionary work (of a different church). Donors to this pool typicallyspecified that their donation was for the support of particular missionaries. The IRSasserted the donations were not deductible because they were made for the support ofcertain individuals, rather than for the "use" of the church generally. Judge Dawson,of the Federal Court of Appeals, found, citing the Revenue Ruling referred to above,that the relevant test was whether the organisation has full control of the donated funds,and discretion as to their use. His Honour found on the facts of that case that thedonors knew and intended that their funds would go into a common pool to bedistributed only as the church itself determined. He therefore found for the taxpayer.[82] Winn involved a taxpayer who donated to the missionary work of a woman inSouth Korea. The relevant church raised money for her mission. Any money raisedwas transferred by the church to the missionary's personal account. However, in thiscase the taxpayer paid the funds directly to her account, rather than via the church, ashe did not want the church siphoning funds for other projects. The missionary was thetaxpayer's first cousin. The issue before the Court was whether these funds were37 Peace v Commissioner of Internal Revenue 43 TC 1 (1964); and Winn v Commissioner of InternalRevenue 595 F 2d 1060 (5th Cir 1979).donated for the use of the church. The Court held that the substance of the transactionwas a donation for the use of the church, effectively because the church would haveapplied the funds to the missionary's account anyway.[83] The same point that applies to the US guidance applies to these cases. In bothof these cases, the issue was whether the funds were for the use of the relevant church.As I have said, this is a different approach to that taken in this jurisdiction as to whethersomething is a "gift". They were not focussed on whether there was a gift, and moreparticularly, whether the taxpayers received a benefit from the donation.[84] The plaintiffs argue that these cases show that the US Courts consider itself-evident that payments to a general missionary fund, even if marked for a particularbeneficiary, are gifts. That may well be so, but again, it is unhelpful, because it doesnot tell me why. The cases do not discuss whether the donations were a gift. Theyseem to assume that is the case. It seems that because of the additional requirementof "use", the US Courts focus on that aspect. US law is not authoritative, but it is alsonot persuasive in these cases. Further, I note that decisions of US Courts are not overlyrelied upon in this jurisdiction, especially given the dissimilar donation regimes.[85] I note also that in Peace, there is no suggestion that the donor was related tothe particular missionaries. That further distinguishes it from the present case, at leastin so far as this case concerns payments by missionaries themselves, or their familymembers. I note that Winn did involve donations by a first cousin, but the Court didnot consider the significance of that relationship. Further, I find the outcome in Winnto be strange, given the guidance issued by the IRS and the decision in Peace, whichboth seem inconsistent with the result in Winn. It is also seemingly inconsistent withthe later decision in Davis.Canada[86] In Canada, s 118.1 of the Income Tax Act allows an individual to claim a taxcredit for an "eligible amount" of a "gift" to a "qualified donee".38 I have alreadydiscussed several cases from Canada, namely Friedberg, Zandstra, and Coleman.38 Income Tax Act RSC 1985 c 1 (5th supp), s 118.1.However, none of these consider payments by missionaries or their families. So, whilethese cases have been helpful on the law, they are not direct analogies to the currentfacts.[87] The plaintiffs do, however, contend that the Canadian Revenue Agency allowsWMF payments to be deductible, and it seems they submit that the New ZealandCourts should therefore do the same. They cite the Canadian Revenue Agency's(CRA) CRA Policy Commentary:39For example, where a missionary, who agrees to travel abroad on behalf of thecharity, agrees to make a gift to the charity to cover his/her airfare andaccommodations. The travel arrangements include a return ticket at theeconomy rate and accommodations at a bed and breakfast for two weeks.Since the amenities provided to the volunteer are reasonable and the purposeof the travel relates to the charity's work, the amount donated to the charity tocover the travel expenses can be considered as a gift to the charity andtherefore, receiptable.[88] The plaintiffs do not submit any further on the Canadian practice. As I havesaid, I do not regard administrative practices, in New Zealand and particularlyoverseas, by themselves, as particularly persuasive. While it is somewhat noteworthythat the CRA regards a payment to cover flights and two weeks' accommodation as adonation, I do not have their reasoning as to why. Without more, I do not find thisoverly helpful.United Kingdom[89] In the United Kingdom, under the "Gift Aid" provisions in Pt 8, Ch 2 of theIncome Tax Act 2007, a charity is able to reclaim the basic rate tax (20 per cent) thata donor has paid in respect of the donor's qualifying donation to the charity. Forexample, if a donor donates £100 to a charity through gift aid, the charity is able toclaim an extra £25. If a donor's income is high enough that they pay more than thebasic tax rate on their income, then the donor may also claim the difference (i.e. iftheir tax rate is 40 per cent, they may claim 20 per cent of their donation).39 Canadian Revenue Agency CRA Policy Commentary CPC-025: Expenses incurred by volunteers,26 February 2003.[90] In order to qualify for this tax concession, the payment made must be a "gift"to the charity. The definition of a gift seems similar to that in New Zealand.40[91] Section 416(7) of their Act provides that a "qualifying donation" is one whichdoes not have any benefits associated with it. An associated benefit is defined in s 417as a benefit received by the donor, or a person connected with the donor, inconsequence of the donor making the gift. Effectively, the definition of gift in the UKis similar to ours, albeit based in statute in this context. The plaintiffs put forward apublication by HM Revenue and Customs (HRMC) giving their view of payments insupport of missionaries:41HMRC takes the view that donations to cover the costs incurred by a charitysuch as a missionary society in supporting the relative of the donor, as amissionary, can qualify under the Gift Aid Scheme provided the missionarysociety is not merely channelling a donation to the donor's relative.[92] So, say the plaintiffs, WMF style payments are eligible for gift aid in theUnited Kingdom.[93] It is interesting that HMRC does not view accommodation and flights as abenefit. However, I have the same problem with this submission as I do with theCanadian practice: I have a conclusion, but no reasoning. Foreign administrativepractice will only be helpful in so far as their reasoning informs my own. Theirconclusions have no authoritative weight by themselves. The regime in the UK is alsodissimilar to ours, where the focus is more on charities receiving the benefit from adonation, than on the donor, and in addition, their regime is much more prescribed bystatute.Australia[94] In Australia, a taxpayer may claim a tax deduction for a gift to a "deductiblegift recipient".42 The Church is not, however, a "deductible gift recipient" in Australia.So there is no administrative guidance on WMF payments. It seems the Church40 See Halsbury's Laws of England (5th ed, 2014, online ed) Vol 52 Gifts at [201].41 HM Revenue and Customs "Charities Detailed Guidance Notes: Chapter 3 Gift Aid" (updated 26April 2016) Gov.uk<https://www.gov.uk/government/publications/charities-detailed-guidance-notes/chapter-3-gift-aid>.42 Income Tax Assessment Act 1997, division 30.consequently faces a bigger battle in Australia. There is Australian case law on thedefinition of gift, such as McPhail, but I have discussed this above.Conclusion on foreign jurisdictions[95] It does seem as though WMF payments are accepted as charitable donations inthe USA, Canada and the United Kingdom. However, I only have various guidelinesissued by their equivalents to our IRD. The plaintiffs assure me those payments areaccepted, and they are likely in the best position to know. I do proceed in theknowledge that competent, well-resourced tax authorities in other jurisdictions haveconcluded a person making a WMF-style payment does not benefit, and so they aredeductible gifts. This is certainly a point in favour of the plaintiffs. However, this canonly have limited relevance, given the plaintiffs cannot point to a case where this issuehas been expressly considered.[96] Administrative authorities like the IRD are not bound to give legal reasons fortheir conclusions. Such organisations can adopt administrative practices for all sortsof reasons that are irrelevant in a Court proceeding. For example, the cost of pursuingdonees, political pressure not to pursue the Church, or even just that no one has putmuch attention to the issue. I am not saying these are factors that are engaged, onlythat they could be, and I have no way of knowing. It is for this reason, as well asothers that I have already mentioned, that I find administrative practices mostlyunhelpful.Analysis[97] I turn now to analyse the current facts under the framework I came to above.43[98] In terms of the first element of a gift, it is arguable in the present case that thepayments, so far as made by the missionary, are not voluntary, at least not once theadmission form is signed and that on that basis alone, a payment by the missionary isnot a gift. However, the signing of the form itself is entirely voluntary. This is not a43 At [64].situation such as Leary and Re Klopper,44 where the payments were quite clearly notvoluntary. Also, I would not consider payments by parents or other donors to beinvoluntary, given the Church does not have any legal power to insist on payment.This is reinforced by the Church's statement that a lapse in payment by a missionaryor their family will not cause a mission to end.[99] I consider this case turns on the question of benefit or consideration to thedonor. So, I proceed on the basis the payments are all voluntary and turn to considerwhether there is a benefit to the different categories of donor.[100] I consider the question of benefit in two steps, in the following order:(a) Is there a sufficient link between the standard payments and thepayment of a missionary's essential expenses?(b) If so, is there a benefit to the different categories of donor as a result ofpayment of those expenses?[101] I note I am considering these factors in a different order than Miller J did inColeman. But I consider my approach better fits the present situation.Is there a link between the WMF payments and payment of the missionary expenses?[102] There is some overlap between questions of a sufficient link and individualbenefit.[103] Although Mr Akel's arguments were very thorough and persuasive, I haveconcluded that there is a clear link between the payments made as part of theapplication to be a missionary, and receipt by the missionary from the Church overseasof their essential expenses.44 Re Klopper v Federal Commissioner of Taxation (1996) 96 ATC 2,020 (AAT). Where paymentswere made to a charity to effectively meet an indemnity obligation on the part of the donor arisingout of the America's Cup.[104] Mr Akel points to a number of aspects which the plaintiffs say mean there isno clear link, including:(a) The fact that the funds paid to the Trust become the property of theTrust and are not refundable. (A related fact is that the Trust can usethe funds for any purpose it chooses.)(b) The funds paid to the Trust were in respect of "equalised contributions",or a similar type of target established by the Church, and not the actualamount the Church was required to pay for expenses.(c) The Trust cannot enforce payment on the pledges. Similarly, in somecircumstances, WMF payments may theoretically not be made.45[105] I do not consider that any of these matters affect what seems to be the clearsubstance of the arrangement. I find that the donors knew and anticipated that theirpaying money to the Trust would enable the missionary on behalf of whom they werepaying to go on their mission, and correspondingly to have their expenses paid by theChurch.[106] In my view, the substance of the transaction is that the missionary, his or herfamily and members of the ward are making payments to facilitate that missionarybeing able to travel and carry out their mission. There is no legal obligation on any ofthese parties, but there is a clear moral obligation on the Church, and a strongunderstanding on the part of the donors that their payments would enable a missionaryto go, and to have their expenses met. That is how the scheme operates in fact. Thefact the WMF payments cannot be traced through to the expenses, or are not the sameas the expenses, does not alter the link between the two.[107] I do not suggest that the arrangement is a sham or subterfuge, which was clearlythe case in Leary. If anything, the present case is even more marginal than a case likeColeman. I agree, however, with the Commissioner that there are close parallels interms of a factual comparison with Hodges. I note that the plaintiffs dispute that this45 Albeit, I was not provided with an instance where this occurred.case is analogous, saying in effect there was a much clearer link in Hodges betweenthe payment and the donor receiving a benefit than in this case. I accept the link wasstronger in Hodges, but I still regard the case as a close analogy. The plaintiffs alsoargue that Hodges was not necessarily correctly decided, but their arguments in thatrespect are effectively the same as they make in this case.[108] I agree with Mr Akel that the primary requirement for acceptance of amissionary is that the missionary must demonstrate worthiness, but that does notdetract from the very high level of expectation to which I have referred, and that in myview is sufficient to establish a link.Is there material benefit to the individual categories of donors?[109] The finding of a clear link alone is not sufficient to vitiate a gift. There stillhas to be some material benefit to the individual donor.(i) Benefit to the missionary[110] I take into account that a nominal benefit is not sufficient to vitiate a gift. Iaccept that here the missionary works hard and has little down-time. The mission isrigorous, as Mr Akel describes it. A missionary is expected to remain in the chosenforeign country for 18 months to two years. It is part of the agreed facts that they areexpected to work full-time, six days per week, in exchange for payment of very basicliving costs. There is no provision for any holiday. The amount paid obviously doesnot reflect the actual costs incurred by them, although it might do so in some countries.It clearly does not provide them with any income, despite their working full-time. Themissionary service is conducted in very restricted conditions and circumstances.[111] This is not a situation where a person claiming a tax deduction travels overseasand performs a small amount of work for a charity, but predominantly has a holiday.[112] Many would consider a missionary does not "benefit" from being able to traveland live so barely in such circumstances. There is unquestionably much sacrificeinvolved. But the analysis needs to be at a higher level, and Mr Akel did not appearto argue strongly that there was no benefit to Ms Coward on the basis of the terms ofwork, rather on the basis that the payment received is only service-related, as opposedto the education cases.[113] I have to accept the Commissioner's argument that Ms Coward, and any otherindividual missionary, benefits from their essential expenses being paid, for similarreasons to the Court in Hodges where the payment received was service-related. Themissionary wanted to have the experience and knew to get that they needed to pay.[114] So, I further accept that any payment made by an individual missionary (notapplicable in the Coward case, but relevant to the second proceeding before me)benefits the missionary. The benefit of having travel, accommodation, food and otherpersonal expenses paid is not nominal.[115] I note here that Mr Ebersohn volunteered in oral submissions that travel costsmight be distinguished as not providing a benefit, on the basis the missionary has totravel to carry out the charitable work. He said that was not the case with other coststhat were clearly costs designed to benefit the missionary, being their basic living andrelated costs. I do not consider there is any distinction, and I note that Mr Akel didnot adopt this distinction.[116] I therefore find that payments by the missionary are not gifts.(ii) Benefit to parents and grandparents[117] Just as the missionary (who, while not a child, is still a relatively youngperson), benefits from the payment, so do their parents and grandparents.46 A paymentby a parent or a grandparent that benefits a "child" will generally also benefit thedonor. This is illustrated by Coleman, admittedly in relation to tuition and otheruniversity-related expenses, where parents and grandparents might be said to have agreater obligation, or responsibility, or direct interest. The present case is moremarginal, but I consider the same can be said here. While their primary aim may beto benefit the Church, the parents and grandparents also benefit by seeing their "child",who while no longer a child is still engaged in life education, being able to travel, live46 When I refer to parents and grandparents, I include legal guardians.overseas, and experience being a missionary abroad. That is a more than de minimisbenefit.[118] Payments by the parents (including Mr Coward), and grandparents, aretherefore not gifts.(iii) Benefit to other relatives or ward members[119] I consider that payments by other relatives are gifts because I do not considerthere is benefit to these people that goes beyond minor or immaterial. In this categoryof other relatives, I include siblings, cousins, aunts and uncles, and more distantrelations. This may seem somewhat arbitrary, and to an extent it is. But, in my view,siblings and cousins will not generally feel the same sense of obligation (or anyobligation) to assist an applicant, or to ensure their needs are met. Nor do they standto benefit from the fact the missionary benefits, other than in a minor way. Thesepayments, it seems to me, fall into the category of pure generosity, or provide the donorwith a "pure moral benefit".[120] I find the same is true of friends of the missionary, and of other members ofthe Church.[121] Mr Ebersohn did argue, with regard to these more removed parties, that evenif there is no material benefit to the payor, where a payment is clearly made on thebasis that a benefit is to be provided to an identified person, and the donee is placedunder an obligation to perform something, that payment is not a gift. Mr Ebersohngives two examples to illustrate this point.[122] Firstly, he posits the hypothetical example of a father who takes his children toa restaurant, and pays for their dinner. Mr Ebersohn argues, perhaps somewhatfacetiously, that the father is obviously not making a donation to the restaurant, eventhough he himself does not materially benefit. Secondly, he points to the decision inCase J76, which I discussed above. That case concerned a man generously paying forthe education of children that were not his own. The Judge in that case found this wasnot a gift, because the material benefit was the man's contractual right to insist on theschool's performance.[123] I am not persuaded by Mr Ebersohn's submissions on this issue. On his firstexample, leaving aside the fact that the father would benefit from seeing his child fed,the restaurant would be contractually obligated to deliver the food. A legal right toinsist on performance is a material benefit, as found in Case J76.[124] On the present facts, while a prospective missionary's friends, relatives andother members of the Church supporting him or her would likely be dismayed if themissionary did not go on the mission despite raising the funds, the donors would haveno legal right to insist the Church send the missionary, or refund them their money.This is made clear in the Church's materials on donations.[125] I do accept Mr Ebersohn's point that the Church may be under a strong moralobligation to send a beneficiary in such circumstances, and that a particular missionaryis almost guaranteed to go if they raise sufficient funds (and are otherwise "worthy").But this strong moral obligation is not, in my view, sufficient to create a materialbenefit to the donors.[126] I therefore do not consider in all of the circumstances that payments by thesefurther categories of donors are gifts.Conclusion[127] I have some sympathy with the plaintiffs' arguments in this case. I considerthe central issues to be very finely balanced. But, after considering all of the case lawand arguments put to me, I find that WMF payments by a missionary, and parents andgrandparents of a missionary are not gifts for the purposes of s LD 1. However, I findthat payments by other relatives of a missionary and other members of the Church aregifts, and so may attract a tax deduction under that section.[128] As such, my conclusions on the declarations sought are as follows.(a) In the matter of the Coward proceeding:(i) I find Mr Coward's payments to the Trust are not gifts, so theCommissioner's Disputable Decision disallowing Mr Coward'stax credit in respect of those payments is correct.(b) In the matter of the Trust's proceeding:(i) WMF payments to the Trust by the following classes of peopleare not gifts under s LD 1, and the Trust may not issue donationreceipts in respect of them:1. missionaries called to serve the Church;2. a parent or legal guardian of a missionary; and3. a grandparent of a missionary.(ii) But, WMF payments to the Trust by the following classes ofpeople are gifts under s LD 1, and the Trust may issue donationreceipts in respect of them:1. a sibling of a missionary;2. a more distant relative of a missionary, such as a cousin,uncle or aunt; and3. a Church member unrelated to the missionary, such as afriend of a missionary or a member from the missionary'slocal ward.Costs[129] My provisional view on costs is that they should lie where they fall. All partieshave enjoyed a measure of success, besides Mr Coward. However, my provisionalview is that answering Mr Coward's case would not have required much resourcesover and above those required to answer the Trust's case.[130] If the parties wish to, however, they may file memoranda on costs by 5.00 pmon Friday, 15 February 2019.--------------------------------------------Hinton J