[1] Mr Lance James appeals against a sentence of two years imprisonment imposed upon him in the District Court at Wellington following his conviction on a total of 19 offences under the Tax Administration Act 1994.
[2] Mr James' counsel, Mr Davie, accepts that the sentence of two years imprisonment was within the available range. But he submits that the Court should have imposed home detention. The only issue is whether the Judge erred in sentencing Mr James to a term of imprisonment.

Facts

[3] There is now no material contest about the facts.
[4] Mr James' offending fell into two discrete categories. The first comprised eight counts of knowingly failing to file tax returns intending to evade the assessment or payment of tax. He was found guilty of these offences following a summary trial before Judge Tuohy. Each count related to a particular year within the eight tax years extending from 31 March 1998 to 31 March 2005 inclusive (he was acquitted on a further charge of failing to file a return for the year ending 31 March 2006).
[5] The Judge was satisfied that Mr James "earned reasonably substantial income" during the eight year period. The amount of tax notionally evaded was $174,206. This figure was estimated following Mr James' submission of returns years late. Mr James has since paid $147,328. The balance owing is $26,877 excluding penalties and interest.
[6] Judge Tuohy found that Mr James used his evaded tax payments to provide "a very comfortable lifestyle" for himself and his family; and that some of the money was applied towards building an "expensive home". The Judge was hesitant to describe the nature of Mr James' offending as theft. But we are satisfied that it could not colloquially be described in any other way.
[7] The second category of charges was of aiding or abetting four companies which Mr James controlled to knowingly apply PAYE deductions other than in payment to the Commissioner. The 11 offences occurred between 1 November 2007 and 31 May 2008. Mr James pleaded guilty at trial. Judge Tuohy found that the total amount of PAYE diverted for Mr James' purposes was $181,978, of which $141,360 remains outstanding. All four companies are now in liquidation and there is no prospect of recovering unpaid tax.
[8] In the period of this offending a property development undertaken by Mr James encountered financial difficulties. To maintain the solvency of his companies, Mr James elected to divert PAYE deductions payable to employees to meeting other debts. Judge Tuohy was satisfied that Mr James had the money available to meet his obligations to the Commissioner; he simply elected to use the monies held on trust for his own benefit. We agree with the Judge's characterisation of this offending as "straight theft from the community".

Sentence

[9] Judge Tuohy identified the principal purposes applicable to Mr James' sentence as accountability, denunciation and deterrence. He placed particular weight on the last two, saying this:

[21] ... An effective tax system which is seen to be applying to everyone according to his financial position is essential to the proper functioning of the state and of society. It is also essential to the level of trust and confidence which citizens have in their state and its institutions. Nothing is more corrosive of that than the sight of people apparently earning high income and evading payment of tax.

[10] The Judge declined to grant home detention for two distinct and independent reasons. First, he was satisfied that the requirements of deterrence and denunciation of this type of offending - that is, tax evasion and effectively failing to account for PAYE deductions - would not be satisfied by a sentence of home detention. Second, he was satisfied that Mr James' house, which was valuable and was about to be placed on the market for sale, was acquired partly with the proceeds of evaded income tax. He emphasised, however, that each of these grounds stood alone.
[11] Judge Tuohy dismissed an offer of reparation as improbable and unrealistic.

Decision

[12] In support of the appeal Mr Davie canvasses what he submits are various mitigating features relating to Mr James' offending. Among them are the ill health suffered by Mr James' wife in 2002 and the failure of a third party to settle on a purchase of his property development in 2007. However, it is unnecessary to consider this submission further. We agree with Judge Tuohy that these factors do not mitigate Mr James' offending and, in any event, the length of the prison sentence, if appropriate, is not in issue.
[13] Mr Davie in written submissions raises, rather faintly, the mitigating prospect of reparation. However, he acknowledges that a judgment for $1m has been entered against Mr James. In our view this event validates Judge Tuohy's dismissal of the option of a reparation based sentence.
[14] Mr Davie's substantive challenge to the sentence is mounted on two fronts. First, he says Judge Tuohy erred in concluding that Mr James had applied some of the evaded tax payment to the cost of constructing a family home where he proposed to serve home detention. That was because, Mr Davie says, it was Mrs James who funded acquisition of the land and development of the house from borrowing after the offending finished in 2005. In any event, Mr Davie says an alternative address is available to serve a sentence of home detention.
[15] It is unnecessary to address this submission in detail. This was one of the two strictly independent grounds for the Judge's decision to decline home detention. We do note, however, our satisfaction that Mr James' financial position did improve significantly with the benefit of evaded tax money, placing him in a much better position to effectively guarantee borrowings to develop his residential property from 2005 onwards.
[16] Second, Mr Davie submits that a sentence of home detention could have adequately satisfied the principles of deterrence and denunciation. He relies on this Court's decision in R v Iosefa, confirming that the standalone sentence of home detention introduced in 2007 provides a real alternative to imprisonment because the principles of deterrence and denunciation are inherent within it.[1] Mr Davie says that home detention is a safe and effective alternative to imprisonment for low risk offenders such as Mr James who now expresses insight and remorse. The overriding legislative objective, Mr Davie says, is to keep offenders in the community and promote rehabilitation.
[17] We record that an appeal against a refusal to grant home detention does not provide an opportunity to revisit or review the merits. The question is whether Judge Tuohy erred in exercising his sentencing discretion: that is, did he apply an incorrect principle, give insufficient or excessive weight to a particular factor, or was he plainly wrong? Ms Guy Kidd for the Crown properly accepts that home detention can satisfy the objectives of deterrence and denunciation, but to a degree. We are satisfied, in accordance with earlier authority in this Court, that the decision about whether home detention will meet those objectives in a particular case is a strictly evaluative exercise.[2] It is a matter of judgment for the sentencing Judge to determine whether home detention is an adequate response to the seriousness of the offending.
[18] Judge Tuohy was uniquely placed to assess these factors. He had conducted the trial of the first set of charges lasting four days. He delivered a full judgment. He was particularly familiar with all the circumstances of Mr James' offending. He had a proper evidential foundation for concluding it was of a very serious nature - it was sustained, motivated by greed, in breach of trust and confidence, and constituted theft of large amounts from the community.
[19] Judge Tuohy was not satisfied that a sentence of home detention would adequately denounce and deter someone like Mr James who had offended on such a scale and duration. He concluded that a term of imprisonment was the only appropriate sentencing response to what he regarded as serious offending straddling two discrete periods and striking at the heart of the proper function of the state and society. Mr Davie has not identified any error by the Judge in reaching that conclusion which might justify our interference.

Result

[20] In the result we are not persuaded that Judge Tuohy erred in imposing a sentence of two years imprisonment instead of a term of home detention. Mr James' appeal is dismissed.

Solicitors:
Treadwells, Wellington, for Appellant
Crown Law Office, Wellington, for Respondent

[1] R v Iosefa [2008] NZCA 453.
[2] R v D [2008] NZCA 254 at [66].

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.nzlii.org/nz/cases/NZCA/2010/206.html