HOEBERECHTS v COMMISSIONER OF INLAND REVENUE [2023] NZCA 403

HOEBERECHTS v COMMISSIONER OF INLAND REVENUE [2023] NZCA 403 [28 August 2023]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA74/2023[2023] NZCA 403BETWEEN VERONICA HOEBERECHTSAppellantAND COMMISSIONER OF INLANDREVENUERespondentCourt: Gilbert and Courtney JJCounsel: Appellant in PersonKIS Naik-Leong for RespondentJudgment:(On the papers)28 August 2023 at 3.30 pmJUDGMENT OF THE COURTA The application for leave to appeal the High Court leave decision is declined.B We make no order as to costs.__________________________________________________________________REASONS OF THE COURT(Given by Courtney J)Introduction[1] In November 2017 the Accident Compensation Corporation (ACC) made alump sum payment to Ms Hoeberechts pursuant to an order of the District Court.The Commissioner of Inland Revenue treated the payment as having been receivedentirely in the tax year ending 31 March 2018 and liable to be taxed accordingly.Ms Hoeberechts challenged the assessment. She argued that because the paymentrelated to a three-year period for which the ACC had wrongly refused to acceptliability for a claim, the payment should be treated, for tax purposes, as accruing overthat period.[2] The Taxation Review Authority (TRA) dismissed Ms Hoeberechts' challenge.1The last day for appealing the TRA's decision was 1 November 2021. Ms Hoeberechtsfiled her notice of appeal, and an application for special leave extending the time toappeal, on 10 November 2021.2 Campbell J declined the application for special leaveon the ground that the proposed appeal was clearly hopeless (the extension decision).3Ms Hoeberechts applied unsuccessfully under s 56(3) of the Senior Courts Act 2016(SCA) for leave to appeal the extension decision (the leave decision).4[3] Ms Hoeberechts has applied to this Court for leave to appeal, apparently inrespect of the leave decision.5 The Commissioner opposes the application, proceedingon the basis that leave was required under s 56(5) of the SCA to appeal the extensiondecision. However, no appeal lies from a decision of the High Court refusing leave toappeal under s 56(3).6 Instead, the correct jurisdictional pathway is forMs Hoeberechts to appeal the extension decision, and she does not need leave to do so.BackgroundThe payment by ACC[4] Ms Hoeberechts suffered an injury in 2014 and made a claim for weeklycompensation under the Accident Compensation Act 2001. The ACC refusedher claim. Between 2014 and 2017 the Ministry of Social Development (MSD) paid1 Case 2/2021 [2021] NZTRA 3, (2021) 30 NZTC 6-001.2 High Court Rules 2016, r 20.4. The documents were initially filed on 8 November 2021 butwithout the necessary filing fee. They were accepted for filing for filing on 10 November 2021.The Commissioner was served on 11 November 2021.3 Hoeberechts v Commissioner of Inland Revenue [2022] NZHC 2200, (2022) 30 NZTC 25-021[Extension decision].4 Hoeberechts v Commissioner of Inland Revenue [2023] NZHC 1 [Leave decision].5 Ms Hoeberechts' application sought "special leave to appeal to the Court of Appeal on decision[2023] NZHC 1 (5 January 2023)".6 Crichton v Green [2018] NZCA 247 at [26]. In that case the applicant sought to appeal a decisionof the High Court refusing leave under s 60 of the Senior Courts Act 2016. However, given thesimilarities between the procedure prescribed in s 60(2) and that set out in s 56(3) and (5), thereasoning in Crichton applies equally to decisions of the High Court refusing leave under s 56(3).Ms Hoeberechts a taxable benefit. In 2017 the District Court ordered the ACC to payMs Hoeberechts $188,386.95 in arrears.[5] The ACC paid $38,386.65 to the MSD in respect of the taxable benefitpayments Ms Hoeberechts had received and treated the balance (approximately$150,000) as a PAYE payment. Because the Commissioner assessed the payment ashaving been received during the tax year ending 31 March 2018, the ACC paid tax toInland Revenue on that basis and paid the balance to Ms Hoeberechts.[6] The Commissioner's assessment resulted in an unusually high income for the2018 year. Had it been treated as accruing over the period from 2015 to 2018, asMs Hoeberechts contended for, the tax liability would have been lower. In dismissingMs Hoeberechts' arguments, the TRA concluded that the applicable statutoryprovisions7 and the relevant case law were clear that the payment was to be treated ashaving been received for tax purposes in the year in which it was paid.8The extension decision[7] In seeking an extension of time to appeal the TRA's decision, Ms Hoeberechtsexplained that her delay was caused by the COVID-19 restrictions in place at the time.The Judge accepted this explanation.9 He also accepted that the delay had not causedany prejudice to the Commissioner.10 However, although those factors favouredextending the time to appeal, the Judge concluded that the appeal could not possiblysucceed, essentially for the reasons given by the TRA.11 He therefore exercised hisdiscretion against extending the time to appeal.The leave decision[8] The Judge considered that the extension decision was made on an interlocutoryapplication and s 56(3) of the SCA therefore required Ms Hoeberechts to obtain leaveto appeal it.12 Ms Hoeberechts argued that she did not need leave because — contrary7 Income Tax Act 2007, s BD3(2).8 Case 2/2021, above n 1, at [24]–[31].9 Extension decision, above n 3, at [18].10 At [19].11 At [20] and [48].12 Leave decision, above n 4, at [3].to her previous understanding — she had filed her appeal within the requisite periodand had therefore never required an extension of time. For this, she relied on r 1.18of the High Court Rules 2016, arguing that the Court registry had been closed for filingas a result of COVID-19 restrictions and the time for filing did not run until the registrywas open. Alternatively, she argued that leave should be granted under s 56(3).[9] The Judge rejected the first argument. He considered that, because documentscould be filed electronically or by post under the Protocol for Alert Level 3 then inplace,13 the closure of the registry's public counter did not affect the obligation to filedocuments within the required time.14 In any event, regardless of whether the registrywas closed or not, Ms Hoeberechts was still obliged to serve the notice of appeal onthe Commissioner within the requisite time and had not done so.15[10] The Judge then considered whether leave should be granted under s 56(3) onthe basis of whether there was an arguable error of law and whether the asserted errorwas of sufficient importance (either generally or to Ms Hoeberechts) to warrant thecost and delay of the appeal.16 The Judge did not accept that there was any arguableerror in the extension decision; he regarded Ms Hoeberechts' arguments as to both theinterpretation of the relevant statutory provisions and the relevance of the long line ofappellate cases on which the Judge had relied as untenable.17 He accepted that theasserted error was of significant importance both to Ms Hoeberechts and to others whohad received backdated payments from the ACC and been taxed at a higher rate thanwould have been the case had the ACC paid on time.18 However, the Judge had nodoubt that the Commissioner's treatment of the payment was in accordance withthe Income Tax Act 2007 and that any change to the position would requireintervention by Parliament. He therefore declined to grant leave for Ms Hoeberechtsto appeal the extension decision.1913 Issued by the Chief High Court Judge on 28 February 2021.14 Leave decision, above n 4, at [20].15 At [19].16 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [17]; Tomar v Tomar[2021] NZCA 419 at [7]; and Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9] and[14].17 Leave decision, above n 4, at [40]–[47].18 At [48].19 At [49].The correct jurisdictional pathway[11] Section 56(1) of the SCA provides a right of appeal from any "judgment,decree, or order of the High Court". However, where the order or decision is made onan interlocutory application, the right to appeal is constrained by s 56(3) and (5),which provide:(3) No appeal, except an appeal under subsection (4), lies from any orderor decision of the High Court made on an interlocutory application inrespect of any civil proceeding unless leave to appeal to the Court ofAppeal is given by the High Court on application made within20 working days after the date of that order or decision or within anyfurther time that the High Court may allow.(5) If the High Court refuses leave to appeal under subsection (3),the Court of Appeal may grant that leave on application made tothe Court of Appeal within 20 working days after the date of therefusal of leave by the High Court.[12] Section 4(1) of the SCA defines an "interlocutory application" as follows:interlocutory application—(a) means any application to the High Court in any civil proceedings orcriminal proceedings, or intended civil proceedings or intendedcriminal proceedings for—(i) an order or a direction relating to a matter of procedure; or(ii) in the case of civil proceedings, for some relief ancillary tothat claimed in a pleading; and(b) includes an application to review an order made, or a direction given,on any application to which paragraph (a) applies[13] Rule 20.4(4) of the High Court Rules requires an application to the High Courtfor an extension of time to bring an appeal to that Court to be made by an interlocutoryapplication. However, "interlocutory application" is only defined in theHigh Court Rules as "an application made in accordance with rule 7.19 or 7.41", bothof which are concerned only with the manner in which the application is made, ratherthat its substantive nature.20 For present purposes, it is the definition in s 4(1) ofthe SCA that is relevant. For the reasons we come to next, an application that is, in20 Rule 1.3(1).form, made in accordance with the requirements for an interlocutory application in theHigh Court Rules may nevertheless not be an interlocutory application in substancewithin the meaning of the SCA.[14] The leave decision was decided on the basis that the extension decision wasmade on an interlocutory application and any appeal was therefore subject to s 56(3).However, as we discuss next, this was not correct. The application to extend time wasnot, in substance, an interlocutory application and s 56(3) was not engaged. Instead,Ms Hoeberechts had an appeal as of right against the extension decision.[15] This Court has concluded previously, albeit in different contexts, that anapplication for an extension of time to appeal is not to be treated as an interlocutoryapplication. In Simes v Tennant, decided under s 66 of the Judicature Act 1908, it wassaid that:21 the application for extension of time to bring the appeal was a step whichhad to be taken as a precursor to bringing the appeal, rather than aninterlocutory step in the course of the hearing of it. We think that this meansthat the application for extension of time is an independent application to theHigh Court which is separate from the appeal itself (should an extension oftime be granted and the appeal be brought). It is not an interlocutory step inthe course of the hearing of the appeal because there is no appeal at the timethe application is considered by the Court.[16] The statutory context in which Simes was decided was different because theright to appeal under s 66 of the Judicature Act did not distinguish betweeninterlocutory and substantive decisions. Instead, there was a right to appeal "anyjudgment, decree, or order" of the High Court. A line of cases decided by this Courtunder s 66 of the Judicature Act distinguished between interlocutory decisions that hadsome substantive effect on rights and liabilities and those that did not. Only the formerwere regarded as ordinarily appealable as of right.22 In Siemer v Heron, theSupreme Court made it clear that this approach was not correct — the words"judgment, decree, or order" meant what they said and s 66 conferred a right of appeal21 Simes v Tennant (2005) 17 PRNZ 684 (CA) at [46].22 See for example Murphy v Murphy [1989] 1 NZLR 204 (CA); Association of Dispensing Opticiansof New Zealand Inc v Opticians Board [2000] 1 NZLR 158 (CA); and Attorney-General v Howard[2010] NZCA 58, [2011] 1 NZLR 58.against interlocutory decisions of all kinds made in the High Court unlessthe Judicature Act itself or a rule or order pursuant to that Act created a restriction.23[17] Simes was noted in Siemer v Heron as part of that line of cases.24 However,the rationale in Simes did not rest on the distinction between interlocutory decisionsthat affected a substantive right and those that did not. Rather, it was that a decisiondetermining an application for extension of time to appeal — whether granting orrefusing — was simply the precursor to the bringing of an appeal and not properlycharacterised as an interlocutory decision at all.25[18] Simes was applied without comment in TFD v JDN, though given thatthe appellant appeared in person and there was no appearance for the respondent, itmay be that the matter was not fully considered.26[19] The ongoing relevance of Simes was, however, specifically considered inOchibulu v Immigration and Protection Tribunal and, while not treated as materiallyhelpful in that case, its rationale was viewed as supportive of the approach taken.27The case concerned an application for an extension of time to apply for judicial reviewof a decision by the Minister of Immigration to reactivate Mr Ochibulu's liability fordeportation.28 Under s 247(1) of the Immigration Act 2009 Mr Ochibulu had a rightto bring judicial review proceedings in respect of the decision within 28 days of beingnotified of it, unless the High Court allowed further time. Mr Ochibulu was refusedan extension of time to bring the proceedings.29 He appealed. The Minister appliedfor a stay of the appeal on the ground that the High Court decision was made in relationto an interlocutory application and Mr Ochibulu required leave under s 56(3) ofthe SCA to bring the appeal.23 Siemer v Heron [2011] NZSC 133, [2012] 1 NZLR 309 at [31].24 At [26].25 Simes v Tennant, above n 21, at [4] and [46].26 TFD v JDN [2022] NZCA 503 at [2] and [23].27 Ochibulu v Immigration and Protection Tribunal [2021] NZCA 269 [Ochibulu (CA)] at [32]–[33].28 Mr Ochibulu had also sought leave to bring judicial review proceedings in respect of a decisionby the Immigration and Protection Tribunal to dismiss his appeal against deportation liability onhumanitarian grounds. That aspect of the decision is not relevant to the present issue.29 Ochibulu v Immigration and Protection Tribunal [2020] NZHC 792.[20] This Court considered that an application for extension of time to bring judicialreview proceedings under s 247(1) of the Immigration Act was best characterised asan originating application rather than an interlocutory application, given that no otherproceedings were on foot and, depending on the outcome of the application, no otherproceedings might ever be on foot.30 The most appropriate procedural mechanism forapplying for an extension of time under s 247(1) would generally be to file anoriginating application.31 However, while a decision by the High Court dismissing anoriginating application so brought would be an order to which s 56(1) of the SCAapplied, it did not follow that s 56(3) applied. Such an application did not fall withineither limb of the definition of "interlocutory application" in s 4(1) so that a decisiondismissing the application was not a decision made on an interlocutory application andleave was not required under s 56(3).32[21] As we have noted, the High Court Rules require an application for extensionof time to appeal to be brought as an interlocutory application, which distinguishes theprocedural basis for the application in Ochibulu from the present case. However,the Court also considered the position would be the same if the proposed judicialreview proceedings had simply been filed outside the permitted period, together withan interlocutory application for an extension of time.33 The proposed judicial reviewproceedings could not be characterised as "intended civil proceedings" given that,depending on the outcome of the application, there may never be substantive judicialreview proceedings.34 The Court noted that, although Simes was not on all fours withMr Ochibulu's case, it nevertheless supported the approach being taken because it alsohad treated an application for an extension of time as an independent applicationseparate from the proposed appeal.35[22] We, likewise, find support in the Simes approach, notwithstanding the differentcontext. An application for an extension of time to bring an appeal that wouldotherwise be brought as of right is not an application brought "in any civil30 Ochibulu (CA), above n 27, at [23].31 High Court Rules, pt 19.32 Ochibulu (CA), above n 27, at [24]–[30].33 At [29].34 At [30].35 At [32].proceedings" because none exist. Nor is it brought in "intended civil proceedings"because if the application is declined, no proceedings will commence. Nor is it anapplication that seeks an order or direction relating to a matter of procedure nor forrelief ancillary to that claimed in a pleading. An application for an extension of timeto bring an appeal is, in fact, the antithesis of an interlocutory application.[23] Accordingly, Ms Hoeberechts has a right of appeal against the extensiondecision and does not need to seek leave from this Court to bring her appeal. However.through no fault of Ms Hoeberechts, the time for filing an appeal against the extensiondecision has long since elapsed.36 Ms Hoeberechts will need to file an interlocutoryapplication for an extension of time under r 29A of the Court of Appeal (Civil)Rules 2005. That application will be determined by reference to the principles inAlmond v Read.37 The ultimate question will be what the interests of justice requirein the particular circumstances of this case.38 The key considerations will be the lengthof the delay and the reasons for it. However, an extension of time may also be declinedwhere the proposed appeal is clearly hopeless and the lack of merit readily apparent.39[24] Given the views expressed by the High Court Judge and in the Commissioner'ssubmissions, it seems likely that an application for an extension will be opposed onthe ground that the proposed appeal is clearly hopeless. This is a high threshold.40However, we note that Ms Hoeberechts is faced with the High Court decision inHollis v Commissioner of Inland Revenue, which specifically addresses the positionof back-dated payments by the ACC,41 and her argument against the effect of Hollisseems to be premised on the Inland Revenue's Interpretation Statement IS 16/06,which deals specifically with income received for professional services.4236 Court of Appeal (Civil) Rules 2005, r 29(1AA)(b) and (1)(a). The deadline for filing an appealagainst the extension decision was 29 September 2022.37 Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.38 At [38].39 At [39(c)].40 Wislang v Attorney-General [2022] NZCA 341 at [12].41 Hollis v Commissioner of Inland Revenue (2010) 24 NZTC 23,967.42 Inland Revenue Income Tax – Timing – When is Income from Professional Services Derived?(Interpretation Statement 16/06, December 2016).Result[25] Ms Hoeberechts' application for leave to appeal the leave decision wasmisconceived and must be declined. However, the issue of jurisdiction was one thatthe Commissioner did not identify either. In the circumstances we make no orderfor costs.Solicitors:Crown Law Office, Wellington for Respondent