R v Kumar [2019] NZHC 82 (5 February 2019)

Last Updated: 19 September 2019

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CRI-2018-441-37 [2019] NZHC 82

THE QUEEN

v

RAKESH KUMAR

Hearing:	5 February 2019
Counsel:	M Mitchell for Crown S Jefferson for Defendant
Judgment:	5 February 2019

ORAL JUDGMENT OF CHURCHMAN J

Introduction

[1] On 14 November 2018, Mr Kumar was sentenced by Judge Courtney in the Hastings District Court¹ in respect of three representative charges of tax evasion.² He was sentenced to two and a half years’ imprisonment.

[2] Mr Kumar appeals on the basis that the sentence imposed was manifestly excessive, arguing, through his counsel Mr Jefferson, that if a lower starting point had been adopted along with more generous discounts, the end sentence would have been within the jurisdiction of a sentence of home detention, which, it is submitted, would have been more appropriate in the circumstances.

¹ Department of Inland Revenue v Kumar [2018] NZDC 24405.

2. Tax Administration Act 1994, s 143B(2); maximum penalty five years’ imprisonment and/or a fine of $50,000.

R v KUMAR [2019] NZHC 82 [5 February 2019]

[3] The appeal is opposed on the basis that there has been no error in the sentencing process and that the end sentence is within the range properly available to the District Court.

Factual background

[4] Mr Kumar is the director and a shareholder in a number of companies. Between 2010 and 2016, these companies returned substantial losses for income tax and GST purposes. Cash sales went undeclared, employees were paid under the table, and rental payments were not properly returned. Over this period, Mr Kumar received substantial amounts of cash deposits into his bank accounts, as did some of his family members, from sources that have not been adequately explained.

[5] Inland Revenue’s analysis indicates that, for the tax years 1 April 2009– 31 March 2016, Mr Kumar evaded the assessment of approximately $800,000 of tax on businesses he operated, along with personal income tax.

District Court decision

[6] The sentencing Judge, referring to the pre-sentence report, noted that Mr Kumar took little responsibility for his actions, saying that the businesses were run by other people and he trusted them to run the day-to-day operations, although he had pleaded guilty and repaid some of the money.³

[7] The Judge stated that he believed reparation should be encouraged and reflected in the sentence, allowing a reduction of 15 per cent in recognition of, what he described as, the “significant effort towards reparation, with the possibility of further reparation”.⁴

[8] While the Judge noted that “some Courts have suggested that extended offending over a long period of time may extinguish good character”, he gave Mr Kumar a credit for good character, allowing a 10 per cent reduction.⁵

³ Department of Inland Revenue v Kumar, above n 1, at [3]-[4].

⁴ At [18].

⁵ At [19].

[9] Despite a delay in guilty pleas, which would normally result in less of a credit for entering such a plea, Mr Kumar was given 10 months credit which, with rounding, actually worked out to be a credit of 11 months.⁶

[10] A starting point of four years and six months’ imprisonment was adopted.⁷ Once the discounts were imposed, the Judge arrived at an end sentence of 30 months’ imprisonment.⁸ This meant that home detention was not available, although the Judge said that “had it even been available I would not have considered it appropriate in this case”.⁹ That observation reflects similar observations made by other Courts in circumstances involving substantial amounts of tax evasion on a sophisticated scale.

Approach to appeal

[11] An appeal against sentence is an appeal against a discretion and must only be allowed if the Court is satisfied that, for any reason, there was an error in the sentence imposed and a different sentence should have been imposed.¹⁰ The focus is on the final sentence and whether that was within the available range, rather than the exact process by which it was reached.¹¹

Starting point

[12] Counsel for Mr Kumar, Mr Jefferson, submits that, in adopting the starting point, the Judge relied primarily on the Court of Appeal decision in Wang v R.¹² He argues that case can, however, be distinguished, as it dealt with tax evasion of
$1.184 million and had the additional feature of fraudulently claiming Working for Families tax credits. He notes that the Court of Appeal assessed the case as “offending on a grand scale”, was premeditated involving a “systemic process” of underreporting, involved significant offending whilst on bail, and the withdrawal and removal offshore of a significant amount of cash. Mr Jefferson submits that, in contrast, the present

⁶ At [20].

⁷ At [17].

⁸ At [20].

⁹ At [20].

¹⁰ Tutakangahau v R [2014] NZCA 279.

11. Ripia v R [2011] NZCA 101 at [15]; Larkin v Ministry of Social Development [2015] NZHC 680 at [26].

¹² Wang v R [2016] NZCA 56.

case involved Mr Kumar failing to ensure as a director that the companies involved operated properly and lawfully, and that, when challenged, he immediately accepted the offending, pleaded guilty, and made significant and ongoing attempts to make amends. Mr Jefferson argues that the Judge erred in imposing the same starting point as in Wang, even though the Court of Appeal had considered four and a half years lenient, as the materially different factors warranted a lesser starting point, he submitted, of four years’ imprisonment. He also brings to the Court’s attention the case of Department of Inland Revenue v Sood, in which a four and a half year starting point was adopted for the evasion of $1,519,619 of GST and PAYE.¹³

[13] The Crown, through Ms Mitchell, submits that it was appropriate for the Judge to draw guidance from Wang, given the Court’s remarks to the effect that numerical measures of the tax evaded are not decisive in an assessment of the gravity of such offending.¹⁴ It also notes that there are a number of aspects to the offending which confirm the view that Mr Kumar had actual knowledge of the deliberate and systemic underreporting of cash sales, making it unrealistic for him to maintain that this was offending by omission only.

[14] The Crown further points out that the other authorities referred to by the Judge further support the position that the sentence was within the available range. The first of those cases was Police v Williams, where false returns had been filed and staff paid in cash, resulting in evaded tax of $489,000 over seven years.¹⁵ The other case, Inland Revenue Department v Isherwood, concerned $603,000 of evaded tax over roughly six years; a starting point of five years’ imprisonment was deemed appropriate.¹⁶

[15] As the Crown has noted, the Court of Appeal in Wang stated that “the culpability of the offending should be assessed by reference to the overall scale of the offending and not so much the precise value of the money involved”.¹⁷ The amount of tax evaded in this case is not the issue so much as the systematic evasion of tax over a period of some seven years. It is my view that the starting points adopted in the

¹³ Department of Inland Revenue v Sood DC Tauranga CRI-2006-070-2154, 1 June 2006.

¹⁴ Department of Inland Revenue v Kumar, above n 1, at [15].

¹⁵ Police v Williams [2016] NZDC 4725.

¹⁶ Inland Revenue Department v Isherwood [2016] NZDC 21726.

¹⁷ Wang, above n 12, at [15].

cases referred to by the Judge indicate that the four and a half years starting point adopted was within the range available and the Judge made no error in regards to this aspect of the sentence.

Reparation

[16] Turning now to the question of reparation.

[17] This is a matter which has assumed some prominence in both the written submissions of counsel and in his oral submissions to me this afternoon. Mr Jefferson confirmed that notwithstanding some efforts made by the appellant, currently only 42 per cent of reparation has actually been paid.

[18] Under s 10(1) of the Sentencing Act 2000, a sentencing court must take into account an offer or measure to make amends. The Judge, acknowledging that there had been a significant effort towards reparation, with the possibility of further reparation, allowed a discount of 15 per cent.¹⁸ He did so in reliance on R v Ching which involved repayment of $166,000.¹⁹ No order was made for reparation in respect of the outstanding balance as it was unclear whether Mr Kumar had the resources to pay that sum.

[19] The fundamental point of Mr Jefferson’s submissions this afternoon was that the 15 per cent discount for reparation was inadequate and he has submitted that one of at least 20 per cent should have been applied. He relies on the case of Commissioner of Inland Revenue v Naisbitt in which a discount of 21 per cent was given for reparation, although I note that in that case an order for reparation in full of almost
$140,000 had been made.²⁰

[20] The Crown notes that, at the time of sentencing, the reparation paid amounted to some 42 per cent of the total value of the offending and, while it is suggested that the full amount may yet be repaid, this has not yet happened despite Mr Kumar having had access to substantial financial resources since 2014 when he first had notice of the

¹⁸ Department of Inland Revenue v Kumar, above n 1, at [18].

¹⁹ R v Ching [2015] NZDC 11672.

²⁰ Commissioner of Inland Revenue v Naisbitt [2017] NZDC 25304.

Commissioner’s knowledge of his offending. Mr Jefferson, on behalf of Mr Kumar, took some issue with this. However, he acknowledged that at least as long as 2014, Mr Kumar was put on notice that he may well have some substantial liability in respect of taxation issues in the future.

[21] The Crown submits that a discount of 15 per cent, comparable to that granted in cases where full reparation has been made, was generous, particularly given the fact that a sentence in which partial reparation payment resulted in no discrete discount has been upheld.²¹

[22] It is my view that, in the circumstances of this case, where only partial reparation has been made, a discount of 15 per cent was reasonably generous and well within the range open to the sentencing Judge. No error has been made in this aspect of the sentence under appeal.

Discount for remorse

[23] Mr Jefferson submits that, in giving no discrete discount for remorse, the Judge appears to have adopted the Pre-sentence Report writer’s assumption that, because Mr Kumar explained that he had others attending to the running of the business, he took little responsibility for his actions and attributed blame to others. He argues that this is clearly at odds with the early guilty pleas and the significant voluntary measures taken to make amends. Mr Jefferson contends that reparation is material evidence of remorse, as noted in R v Patterson, and the further actions taken to market property for sale, he says, is further evidence of Mr Kumar’s remorse.²² He submits that a discount of a least 10 per cent for remorse should have been applied.

[24] The Crown submits that, in circumstances where the appellant has sought to distance himself from and minimise his role in the offending, the Judge was wholly entitled not to consider that a discrete discount for remorse was required. It is further submitted that any such remorse was adequately accounted for by the generous discounts granted for other factors, such as allowing a full 25 per cent discount for the

²¹ Bench v Commissioner of Inland Revenue [2017] NZHC 355.

²² R v Patterson [2008] NZCA 75.

guilty plea, despite guilty pleas not being entered until almost eight months after Mr Kumar’s first appearance, and allowing 10 per cent for previous good character, despite his previous convictions for receiving and considering that this was repetitive offending over a number of years.

[25] Considering all these matters, it is my view that allowing a full 25 per cent discount, the maximum generally allocated in respect of a guilty plea, for those guilty pleas, was more than adequate recognition of remorse in the circumstances of this case and that the Judge was not required to give an additional discrete discount. I invited Mr Jefferson to point me to the specific evidence of remorse other than the plea of guilty and the partial payments towards reparation that the Judge may have overlooked and he was unable to do so. I am satisfied that there is no other evidence of remorse that the Judge could, or should, have had regard to.

Conclusion

[26] It is my view that the sentencing Judge arrived at a starting point that was within the range available to him. The discounts of 25 per cent for the guilty pleas, 15 per cent for reparation, and 10 per cent for previous good character were appropriate, (and if anything, quite generous) and also provided adequate recognition of Mr Kumar’s level of remorse.

[27] In the circumstances, the sentence imposed of two and a half years’ imprisonment cannot be said to be manifestly excessive. Given that this end sentence is not within the jurisdiction for consideration of home detention, it is not necessary to determine whether the sentencing Judge was correct to conclude that home detention would have been inadequate to reflect the gravity of Mr Kumar’s offending. But even if I had held that the overall sentence was excessive, it is unlikely that home detention would have been substituted for offending of this scale which continued over such a period of time.
[28] For the reasons given above, this appeal is dismissed.

Churchman J

Solicitors:

Scott Jefferson, Barrister, Napier for Appellant Crown Solicitor’s Office, Napier for Respondent