Registration appeal and tax challenge proceedings consolidated
2014 case note – consolidation of registration appeal and tax challenge proceedings – High Court Rules, Charities Registration Board.
The National Council of Women of New Zealand Incorporated (NCWNZ) applied, among other things, for an order that its appeal against a decision of the Charities Registration Board ("the Charities Board") not to backdate its registration be consolidated with its tax challenge of income tax assessments made by the Commissioner of Inland Revenue ("the Commissioner") for the period that NCWNZ was deregistered as a charity. Clifford J granted the order on the basis that both the appeal and the tax challenge arose out of the same facts and circumstances, and both involved related interpretational issues.
The NCWNZ is a charitable organisation established in 1896.
On 4 June 2009, following the enactment of the Charities Act 2005, NCWNZ was registered as a charitable entity by the Charities Commission as of 30 June 2008 ("the registration decision").
On 22 July 2010, the Charities Commission revoked the registration decision with effect from 19 August 2010.
On 10 September 2012, NCWNZ applied to the Charities Board, the successor to the Charities Commission, for reregistration as a charitable entity. NCWNZ asked that its reregistration be backdated to the date of deregistration, namely 19 August 2010.
On 15 April 2013, NCWNZ was reregistered with effect from 10 September 2012, not 19 August 2010 as requested. The Charities Board refused to backdate NCWNZ's registration.
The Commissioner assessed NCWNZ for income tax for the period that it was not registered as a charitable entity, namely 19 August 2010 to 10 September 2012. NCWNZ has challenged the assessments ("the tax challenge").
NCWNZ has also appealed the Charities Board's decision not to backdate its registration ("the appeal").
The only issue in this proceeding that concerns the Commissioner is the issue of consolidation. The other issues relate only to the appeal.
Clifford J referred to rule 10.12 of the High Court Rules regarding consolidation of proceedings. The factors he considered relevant included the savings in time, cost and judicial resources, the need to remove the risk of inconsistent decisions, the potential shortcut of consolidation at trial, and the care required to avoid confusion through multiplicity of parties and issues.
His Honour stated that the appeal and the tax challenge arose essentially out of the same facts and circumstances. He accepted that, on the one hand, because NCWNZ was a charity, there was a real public interest in limiting NCWNZ's exposure to the costs of two separate proceedings. However, he also accepted, on the other hand, that if NCWNZ was successful in the appeal, the tax challenge would be rendered moot and the Commissioner would not be required to participate at all.
On balance, his Honour found that it was appropriate that the appeal and the tax challenge (to the extent that it involves the question of interpretation of section CW 41(5)(b) of the Income Tax Act 2007, the provision in issue in the tax challenge) be heard together. However, he did not consider that formal consolidation was necessary because hearing the appeal and the tax challenge at the same time would promote the efficient use of everyone's resources.
High Court Rules