Henderson v R [2016] NZCA 431 (10 October 2016)

Last Updated: 21 October 2016

IN THE COURT OF APPEAL OF NEW ZEALAND
CA688/2015 [2016] NZCA 431
BETWEEN	DAVID IAN HENDERSON Appellant
AND	THE QUEEN Respondent

Hearing:	31 August 2016
Court:	Kós P, Mallon and Whata JJ
Counsel:	J R Rapley for Appellant I R Murray and L K Worthing for Respondent
Judgment:	10 October 2016 at 10 am

JUDGMENT OF THE COURT

The appeal against conviction is dismissed.
____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

[1] Mr Henderson was the sole director of Dweller Ltd, a company that ran hotel accommodation. Dweller did not pay PAYE on its employees’ wages to the Inland Revenue Department (IRD) for the months of April–October 2010. After a Judgealone trial before Judge MacAskill in the Christchurch District Court, Mr Henderson was convicted on seven counts of aiding and abetting Dweller to knowingly apply deemed PAYE deductions for purposes other than payment to the IRD.
[2] Mr Henderson appeals against conviction on the sole ground that Judge MacAskill acted with apparent bias at the trial, giving rise to an unfair trial.

Background

[3] In March 2010 Dweller (through its sole director Mr Henderson) agreed to take on the staff of a related company in receivership. Dweller became registered for PAYE. It was responsible for producing a schedule of PAYE deductions each month and paying PAYE to the IRD on or before the 20th of the following month.
[4] Dweller had limited direct sources of income. It was reliant on other businesses in the group to pay utility bills, wages and PAYE. It paid expenses including PAYE for March 2010, sourced from Sol Management Ltd. Sol Management was another company controlled by Mr Henderson.
[5] Dweller’s payroll operator filed PAYE returns and monthly schedules to the IRD from April 2010 onward, but substantial amounts of PAYE remained unpaid.
[6] The IRD wrote to Mr Henderson on 22 June 2010 advising PAYE was overdue for April and May. Mr Henderson responded by proposing to settle the debt by weekly payments. That arrangement was rejected. The IRD sent further letters about unpaid PAYE.
[7] Throughout this period, Mr Henderson made the decisions about which creditors of Dweller’s to pay or not pay. He would authorise payment from Sol Management to Dweller of enough money to pay wages. But not enough to pay PAYE as it fell due.
[8] On 11 August 2010 the IRD served a statutory demand on Dweller for payment of the outstanding PAYE. A deduction notice was soon issued on Dweller’s bank account. Some arrears were recovered by those means. In response, Dweller stopped using its bank account to pay wages, as they would be diverted to the IRD pursuant to the deduction notice. Dweller paid its staff wages direct from Sol Management’s account. In July and August, Mr Henderson directed Dweller’s payroll operator to pay amounts due to Dweller’s creditors other than the IRD.
[9] The Crown claimed this constituted the offence of aiding and abetting the knowing application of deemed PAYE deductions for purposes other than payment to the IRD because:^[1]

• (a) Dweller deducted PAYE from wages of its employees;
• (b) but knowingly failed to pay those PAYE deductions to the IRD by the relevant due dates; and
• (c) Mr Henderson aided and abetted Dweller: he knew it was not paying PAYE deductions to the IRD, and intentionally assisted Dweller to apply those deductions elsewhere.

The appeal

[10] Mr Henderson’s submission on appeal is that observations made by the Judge during the course of the trial would taken as a whole indicate to a fair-minded lay observer that the Judge had predetermined guilt.
[11] The Crown submitted that read in context the observations do not make out apparent bias. In particular because the Judge adjourned the trial three times solely to give Mr Henderson an opportunity to refine his defence, and thereby bent over backwards to be fair to him. A Judge who had predetermined guilt would not have done that.
[12] This was a difficult trial. Mr Henderson was self-represented in its first phase, represented in its second phase, and self-represented again in its third phase. It is clear to us that Mr Henderson became focussed on technical arguments in his defence and did not really engage with the substance of the prosecution case. The Judge adjourned the trial twice to enable Mr Henderson to refocus on the merits of the prosecution case in cross-examination. As a result the trial was effectively heard in three main phases over the course of ten months. We observe that the Judge’s observations need to be considered in this context.
[13] We express our particular appreciation to Mr Rapley for the focus he brought to the appeal from the time he was instructed (which was relatively late), and which resulted in a series of unmeritorious appeal points being abandoned. We express our appreciation to Crown counsel also.
[14] The trial (and the complaints about the Judge’s observations) are best analysed in the three phases of the trial. But before undertaking that analysis we traverse briefly the relevant law.

Law

[15] The test for apparent bias is whether a fair-minded lay observer might reasonably apprehend that the Judge might not bring an impartial mind to the resolution of the question the Judge is required to decide.^[2] The fair-minded lay observer is not legally trained but understands the Court process and is aware of the judicial oath to act impartially.^[3] The observer is neither unduly sensitive nor suspicious nor complacent about what may influence a Judge’s decision.^[4] In Saxmere Co Ltd v Wool Board Disestablishment Co Ltd, Blanchard J cited this observation from Lord Hope in Helow v Secretary of State of the Home Department:^[5]

... before she takes a balanced approach to any information she is given, [the observer] will take the trouble to inform herself of all matters that are relevant. She is the sort of person who takes the trouble to read the text and articles as well as the headlines. She is able to put whatever she has read or seen into its overall social, political or geographical context. She is fairminded, so she will appreciate that the context forms an important part of the material which she must consider before passing judgment.

[16] We add that it follows from these observations that the fair-minded lay observer is one who stays the course. He or she sees and hears the whole hearing, and does not cherry pick or take isolated observations out of context.^[6] As Kirby J noted in Johnson v Johnson: ^[7]

Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context.

In the context of a difficult trial that point bears remembrance.

[17] Adverse rulings by a Judge made over the course of a trial will seldom demonstrate apparent bias. As the Court of Appeal said in Muir v Commissioner of Inland Revenue:^[8]

... there are occasions when a judge’s prior rulings might lead a reasonable person to question whether he would remain impartial in any subsequent proceedings. That said, this could be relevant to the question of judicial bias only in the rarest of circumstances.

... Every judicial ruling on an arguable point necessarily disfavours someone — Judges upset at least half of the people all of the time — and every ruling issued during a proceeding may thus give rise to an appearance of partiality in a broad sense to whoever is disfavoured by the ruling.

[18] A Judge also may give forthright and robust indications of his or her tentative views. A Judge need not remain “as inscrutable as the Sphinx” until the moment he or she passes judgment.^[9] Tentative, even indicative, views are helpful: parties may then address the Judge with a view to persuading him or her to a different view. For that reason it is generally better that parties hear such views from the Judge.^[10] They do not on their own indicate prejudgment. But the Judge must not go so far as to give an impermissible indication of prejudgment.^[11]
[19] It may also be observed that in cases involving lay litigants, a trial Judge has a responsibility to ensure that litigants inexperienced in trial procedure do not spend time on irrelevant matters in a manner wasteful of the resources of the Court.^[12] The fact that a Judge undertakes that duty robustly is not to be misconceived as prejudgment. If done fairly overall, it is not. It is responsible trial management, undertaken in the overall interests of justice.

Pre-trial matters

[20] There were a number of pre-trial matters: the replacement of charges laid summarily with charges laid indictably, transfers from Christchurch to Queenstown to Invercargill and then back to Christchurch, and other things. Mr Henderson applied for a discharge under s 347 of the Crimes Act 1961. That application was made on the ground Mr Henderson could not be convicted because charges were not being pursued against Dweller. Judge MacAskill declined the application because there was no need for Dweller to be convicted to pursue secondary liability. Although this is not directly relevant to the appeal, it was the start of a pattern of Mr Henderson raising technical arguments in his defence.

Trial phase one — November 2014

[21] The Judge-alone trial commenced then on 10 November 2014. Mr Henderson was self-represented. The Crown opened its case by calling three witnesses and adducing a hearsay statement from Dweller’s payroll officer. Mr Henderson did not cross-examine the witnesses at all. The Crown closed.
[22] Mr Henderson held a single egg in his hand and he proceeded to place it in the Court’s basket.
[23] Mr Henderson applied a second time for a s 347 discharge. He argued he could not be convicted because the indictment alleged he committed an offence on the 21st day of the relevant months, but the actual date of any offending was the 20th of the month because that was the last day for payment of PAYE.
[24] In the course of argument on this point, Mr Henderson suggested the Court would not have jurisdiction to amend the charges. The Judge said:

Well, Mr Henderson, I’m not going to waste time hearing argument about their seeking an amendment to an existing charge and that’s the way it is.

[25] The Judge declined the s 347 application immediately after hearing argument. He accepted the Crown’s argument that criminal liability accrued on the 21st of the month because it was at that point that PAYE was unpaid. The Judge also said that even if Mr Henderson was correct, the date was not an essential element of the charge.
[26] In his written reasons given subsequently, the Judge summarised Mr Henderson’s argument, which he said was “not without merit”. (We interpolate that suggesting an argument has some merit is not inconsistent with rejecting an argument.) After explaining why he had rejected the argument, the Judge said:

I do not discount the possibly [sic] that the Court may yet intervene to amend the counts to preclude the raising of sterile arguments of this kind.

And that he was of the opinion:

... that the defendant had made a deliberate decision to adopt the tactic of waiting until the close of the Crown’s case and then challenging it upon the basis that there was no evidence of any culpable conduct on his part on the 21st of each month. The defendant had presumably concluded that there was no other reasonably arguable defence available to him, a conclusion which was not obviously wrong. Unfortunately for him, this tactic proved to have been misconceived although, according to him, he had received legal advice that supported his argument.

[27] The Crown very responsibly expressed concern about the fairness of the trial given Mr Henderson’s strategy had failed him. The Judge inquired whether Mr Henderson wished now to apply to crossexamine the Crown witnesses and adduce evidence, despite his strategy not to do so. Mr Henderson responded affirmatively.
[28] So an adjournment was granted until 5 May 2015, some six months subsequent. In his written reasons the Judge observed:

It appeared that [Mr Henderson] was seeking to pass through the door kindly opened to him by the Crown and that he would require time to develop his case. Given the Crown’s stance on the matter, which was no doubt calculated to minimise the risk of a mistrial, I decided not to enquire further and that it would be more expedient to restore to the defendant the right to crossexamine the Crown witnesses.

Submission

[29] Mr Rapley submitted the comments by the Judge in this phase of the trial give rise to a “perception of an impermissible indication of prejudgment”, especially the comments:

• (a) quoted above at [26] about Mr Henderson adopting tactics; and
• (b) that it was “not obviously wrong” for Mr Henderson to conclude he had no defence available. In the latter case the Judge had not yet heard crossexamination of the Crown witnesses; and
• (c) quoted at [28] above about the “door kindly opened” by the Crown, which suggested the Judge would not have granted an adjournment but for the Crown’s concern about the fairness of the trial.

[30] The Crown submitted the Judge was only doing what was reasonable to keep Mr Henderson to relevant matters, and his s 347 ruling concerned a narrow issue and does not show predetermination of the ultimate question of guilt.

Discussion

[31] This exchange does not show apparent bias in our view.
[32] First, it needs to be observed that the Judge need not have granted Mr Henderson the indulgence of re-opening the case. He had elected to place his forensic egg in a single basket. He had elected not to cross-examine. But the Judge did not take the firm line he might have. Perhaps recognising Mr Henderson’s disadvantages as a litigant in person, he granted an indulgence, a significant adjournment, as an opportunity to reopen the trial.
[33] Secondly, the Judge was here commenting on the apparent lack of a defence case at that point in the trial, and drawing an inference why Mr Henderson was raising a weak and purely technical defence. We do not consider it necessarily follows the Judge had determined definitively that Mr Henderson had no other defences. Why would he have granted an adjournment if that were so? To conclude the Judge thought Mr Henderson had no defence at all when no crossexamination had even been attempted would be unreasonable.
[34] Thirdly, the Judge then allowing an adjournment for the sake of fairness would suggest he was open to consider other defences if devised and presented (which so far they had not). A fair-minded observer would also draw that inference.
[35] Finally, the Judge’s comment about Mr Henderson passing through the door opened by the Crown merely reflects the reality that what had been granted was an indulgence and that the Crown had not only not opposed it but effectively initiated it. It was proper for the Judge to honestly reflect on whether an adjournment was warranted in light of the Crown position, rather than automatically grant it. A fairminded observer would not be concerned at this juncture.
[36] No apparent bias is demonstrated at this stage.

Trial phase two — May 2015

5 May 2015

[37] The prosecution reopened its case on 5 May. The case in effect restarted. Mr Henderson now had counsel, Mr Butler. In summary the prosecution contended that Mr Henderson made the decisions as to which creditors of Dweller would be paid (“the creditor preference theory”). But the prosecution expanded on this by stating that it could rely on Mr Henderson’s acts as director of Dweller to establish both commission of the offence by Dweller and secondary liability by Mr Henderson:

Put simply, an officer of a company who by his or her actions causes a corporate entity to commit an offence will by the same actions be liable as a party if ... he or she acts deliberately intending the prohibited consequence.

We note that in our view an observer would not thereafter have understood the prosecution case to be limited to a pure creditor preference theory, and would have appreciated what we will refer to as the broader “heart and mind” theory that Mr Henderson could be liable simply by being in control of a company not paying PAYE.

[38] The evidence-in-chief was to a degree focussed on the extent to which Dweller paid other creditors ahead of the IRD. The observer would have seen this theory as the portal to establishing that Mr Henderson had control over how Dweller applied the deemed PAYE deductions. The following exchange between the prosecutor and Mr Patel, Dweller’s payroll officer, is illustrative:

Q Whose decision was that that the PAYE not be paid?

1. Yeah, I don’t know if it was a decision for someone to say, “Right we’re not paying the PAYE today”. I don’t recall anyone actually saying that to me.
17. Whose decision was it which creditors would be paid over this period?

A That would be Dave [Henderson].

[39] The Judge’s only substantive intervention in the evidence was when Mr Butler sought to cross-examine a Mr Godden on whether an email sent by Mr Henderson on 6 May 2010 was an instruction “to prefer one creditor over the other”. The Judge indicated that question was too broad and unhelpful, and Mr Butler rephrased the question to the Judge’s satisfaction.
[40] The defence did not call any witnesses.
[41] The Crown then closed on a similar basis to the opening. The written closing referred to the theory that the same actions that cause the company to commit the offence are those that establish party liability. The prosecutor summarised evidence that Mr Henderson (and therefore Dweller) knew PAYE deductions were being misapplied.
[42] The prosecutor also made a submission that Mr Henderson could be liable by omitting to take steps to ensure future deductions would be paid to the IRD, on the basis of evidence that Mr Henderson placed just enough money in Dweller’s bank account from other sources to pay wages and some expenses but not PAYE. This submission was apparently in response to the defence’s written closing submissions, filed earlier that day, in which Mr Butler argued Mr Henderson could not be liable because Sol Management had made payments to staff and so Dweller did not have an obligation to deduct PAYE.
[43] After the prosecution closing, the Judge asked questions of the prosecutor about the provision in the Tax Administration Act 1994 deeming a failure to pay PAYE to the IRD as a payment for other purposes.^[13] The questions focused on whether those deeming provisions could apply to establish party liability. This seemed to be in response to the submission about liability for an omission. The Judge was thinking aloud about the routes to liability in a particular hypothetical. The Judge asked:

17. I just want to keep this in the abstract. Assuming that you had to rely on the deeming provision which gets the prosecution around the problem about this application —

A Yes.

17. — what is your position so far as Mr Henderson is concerned then, if he’s not involved or implicated in as it were the misapplication of the funds? How does he aid or abet the company in that context? I recall, just to give this some perspective, Mr Henderson saying the last time something along the lines, “Well the deeming provision affects the company but it doesn’t affect persons who are charged as parties, secondary parties.” So how does he aid and abet in that sort of situation? I’d just like to get that clear in my mind as to what your position is.

[44] The prosecutor’s submission in response was Mr Henderson could be liable for aiding or abetting by directing what funds came in to the company and to whom they were paid with the knowledge that the IRD was owed money for PAYE.
[45] The Judge then expanded upon that submission by suggesting the deeming provision did not necessarily turn on control of the cash. The Judge said:

Yes well I think, what I’m asking you to do is to assume that the company is liable but not because they had money that they could have used and diverted somewhere else but simply because they didn’t, they’re caught by the deeming provision and nothing more, in that situation how do you become an aider and abetter if you never had the money? Let’s just say, cast it into a simple proposition, let’s just assume there is one situation where a company, in the abstract, a company gets enough money to pay the net wages and salaries, never has enough to pay the tax but it’s caught by the deeming provision because it prepares the accounts as Mr Patel did and shows the deductions which in fact were never paid. Now if the principal of the company is involved in all of that what is it that you pin on him as the aiding and abetting? ...

[46] The prosecutor responded that the secondary party could be liable by continuing to operate the company and employing staff knowing there could be no payment of PAYE due to insufficient cash flow. That would constitute the conscious decision to establish liability.
[47] The Judge then articulated a similar understanding of the position:

I wonder whether it’s something like this though, he doesn’t have to do everything, he doesn’t have to be involved in every step of the process does he? Is it the fact that he, is it enough that he aids and abets by arranging for them to be paid net of tax because he only has to participate, abetting I suppose, it might be easier when I think about it, he abets by arranging for the company to be, put itself in this situation.

[48] The Judge then explained why he preferred to describe this situation as “abetting”. He said “abetting” meant something like condoning a situation “where it provides encouragement and support”, and that it could therefore be enough for the party to do something that “as it were condones the offence”. The Judge said “He might be aiding as well.”
[49] The Judge’s final remark was:

Yes the more I think about it the more attractive I find the possible route out of it for the prosecution is the abetting part of it, that might be the answer.

[50] Mr Butler then closed. He referred to the argument about the dates on the indictment that had previously been made in the s 347 application in November 2014. The Judge did not interrupt, but later asked a few questions to clarify matters. Nothing said by the Judge during or following the defence closing on 5 May strikes us as particularly negative towards Mr Henderson.
[51] Part of the audio recording of that afternoon is missing and was unable to be transcribed. We presume Mr Butler raised the point that he had prepared the case on the assumption the Crown case was based on the creditor preference theory, and the Judge indicated in response the Crown case was not so confined.^[14]

6 May 2015

[52] Overnight the Judge decided to amend the indictment in response to Mr Butler’s submission the afternoon before on dates in the indictment. The Judge discussed the precise wording of the amendment with the prosecutor. He said:

I’m not ruling that the, I don’t propose to rule that the Crown were wrong with respect to the current date I merely am going to put it beyond doubt as to what this case is about and it seemed to me that it was more appropriate to have a period stated, not just to overcome the sterile arguments, the sterile technical arguments that have been advanced by the defence but also because it seems to me that if Mr Henderson has any liability it’s because of what he did during that period.

[53] The Judge then said to the prosecutor “we don’t have to be specific about it as long as we cover the period.” This was in relation to what the commencement date of the alleged offending in the indictment should be.
[54] The Judge then heard from Mr Butler on the proposed amendment to the indictment. Mr Butler immediately said his instructions were to seek an adjournment to review the Judge’s reasons for amending the indictment. The Judge said he could not see how Mr Henderson was prejudiced by the proposed amendment, in light of the earlier s 347 decision. The Judge granted a five-minute break for Mr Butler to take instructions on how Mr Henderson was prejudiced and whether he would seek an adjournment.
[55] After that short break, Mr Butler then indicated he would continue his closing. The Judge inquired whether Mr Butler was pursuing the request for an adjournment. He said “Come to the point Mr Butler, what’s the prejudice, why do you need the adjournment, what is it that you would do over the adjournment?” The discussion at that point became somewhat circuitous, and it seems Mr Butler and the Judge were not on the same page as to whether the Court had decisively rejected an application for adjournment. Mr Butler said he was unable to determine whether Mr Henderson was prejudiced by the amendment. The Judge responded:

17. I’m astonished by that. How long do you need to work out whether he’s prejudiced or not, Mr Butler?
1. Well Your Honour I’ve made an application for an adjournment. It hasn’t been accepted —
17. No you’re wrong about that. I haven’t refused the adjournment. I’m merely engaging you in the issues that you need to address.
1. Right I apologise, I apologise. I thought that had been made clear. I can only advance what I’ve already advanced Your Honour.
17. You’re not able to advance any argument as to prejudice?
1. Not presently.

[56] The Judge then gave reasons orally for refusing an adjournment at that point. He reiterated that he thought the argument about dates would have been dropped in light of his November s 347 decision, and that he was acting to keep the trial on course. But in fact, as we shall explain, the Judge subsequently relented and granted a second adjournment.
[57] After delivering his decision refusing the adjournment, Mr Butler continued his closing address. After a few minutes Mr Butler said the defence had been prepared on the basis that Mr Henderson needed to confront the creditor preference theory. The Judge interrupted:

... yesterday as you’ve correctly noted I indicated that the Court would be considering a broader basis of liability and I did that because that’s what I will be doing and the purpose of telling you that was so that if you considered the defence was prejudiced in any way you could apply for an adjournment. Now you ought to have witnesses re-called or whatever the case may be. You seem to be advancing an argument here that the Court should consider only the basis upon which the Crown, you say, advanced its case. Well that’s really in complete contradiction to what I was telling you last night. It’s not going to happen Mr Butler. If you, you need to confront the fact that the Court will be considering not only the narrower basis of liability based on creditor preference but on the broader activities of Mr Henderson as appears from the evidence and I will consider whether or not that assists the Crown case but there’s no point at this moment in advancing arguments that you’ve narrowed your cross-examination and so on when I’ve given you and continue to give you, at least from this point, the opportunity to say, well, we’ve been prejudiced, we didn’t apprehend that the case was being run on that basis, we want the witnesses back. Now you haven’t made that application so this is a final opportunity for you to make it. If the essence of this is that you’re claiming prejudice we’ll overcome the prejudice. I told you last night I will give you the opportunity to overcome any prejudice but if you’re not making that application then this is going nowhere.

[58] In the discussion that followed the Judge said the Crown had presented a “broader case” which he was not going to ignore. The Judge went on to make the following statements, which were highlighted particularly by Mr Rapley in his submissions before us:

17. I’m just alerting you to that because there’s little point in trying to set this up for an appeal —

A That’s not —

17. — by ignoring the opportunity that I’m giving you. All of this is going on the record Mr Butler, make no mistake.
1. Of course I make no mistake about that Your Honour and that’s not what I’m doing. What I’m doing is responding to the case that I thought that I had to meet and then Your Honour and I had a discussion yesterday evening or afternoon about a broader basis for liability and I’m responding to that legally.
17. As long as you understand that if you are planning, Mr Henderson thinks he can go on appeal and say that he was prejudiced because the Court held against him — and I’m being predictive here and prophesising what might happen — the case that he actually had to meet or rather the basis of the legal liability found against him was broader than that advanced by the Crown he’s mistaken because you have the opportunity right now to overcome any disadvantage. You’ve had it since last night.

[59] The Judge then inquired whether Mr Butler wished to apply for an adjournment. The following exchange occurred:

17. ... What I want to know is if you say that you are prejudiced—
1. Yes.
17. Well first of all prejudice only becomes relevant if you are applying for an adjournment. So far you haven’t applied for an adjournment upon this ground. Are you applying for an adjournment on this ground? Don’t muck me around. Tell me whether you’re applying for an adjournment on this ground?
1. Your Honour I wouldn’t try and muck you around. That’s not what I’m here to do.
17. Well that’s the impact your approach is having Mr Butler, let me be plain.

[60] After a five-minute adjournment, Mr Butler indicated his instructions were to apply for an adjournment in light of the broader heart and mind theory. Mr Butler said he would seek particulars from the Crown of what acts or omissions Mr Henderson would need to meet. The Judge said that submission was a “nonsense” and indicated that the case Mr Butler would need to respond to was:

... the acts ... proved by the evidence. That’s the case you have to meet Mr Butler. You’re not going to be required to face any further evidence than that. As a matter of argument I indicated to you yesterday that it is Mr Henderson’s broad involvement in the affairs of Dweller Ltd as proved or as evidenced by the evidence given by the witnesses as to his role in deciding who would be paid and when ...

[61] Mr Butler then explained how he had approached cross-examination narrowly in light of his understanding the Crown case was the narrow “creditor preference” theory and would need to recall the witnesses. The Judge was receptive to this argument and indicated he would grant the adjournment. The Judge said to Mr Butler that “the case that you have to meet is the case that the Crown has proved” and that he did not consider “a dramatic review of the defence case need[ed] to take place”.

8 May 2015

[62] The Judge then issued a minute on 8 May 2015 that dealt with three topics.
[63] First, he gave written reasons for amending the indictment. He referred to his previous decision in November 2014 declining the s 347 application, noting that Mr Butler’s closing argument on 5 May had sought to revive the argument about the dates in the indictment. The Judge repeated his view that the argument was unmeritorious. He said there was no prejudice to Mr Henderson by amending the indictment, which was necessary to avoid a distraction that was “causing a misuse of the Court’s time”. The Judge said he wanted to “eliminate sterile and unmeritorious technical arguments”.
[64] Secondly, the Judge commented on Mr Butler’s opposition to the Judge considering the case on the “heart and mind” theory rather than the “creditor preference” theory. He referred to this dismissively as the defence “spin” on the Crown case and that it was a “defence tactic that crossed the line into illegitimacy.” e noted the Crown’s opening did not limit Mr Henderson’s alleged culpability to preferring other creditors, and that this position was reflected in the Judge’s minute given to counsel in November 2014. The broader “heart and mind” theory was therefore open for the Crown to pursue. The Judge said:

The evidence tended to implicate the defendant as the “heart and mind” of Dweller Ltd with respect to the payment of salaries and wages and the failure to account for PAYE. The evidence indicated that the employees acted under his direction. His involvement could result, not only in a finding that Dweller Ltd had committed the primary offences, but also give rise to a liability on his part as an aider and abetter, even if the specific allegations regarding creditor preference were not made out.

[65] Thirdly, the Judge explained why he had adjourned the trial once again. This was because Mr Butler persisted in responding to the narrow “creditor preference” theory. The Judge said “I was not convinced that the defence had in fact been prejudiced but, to avoid any risk of prejudice and any risk of an unfair trial, I granted an adjournment.”

Submissions

[66] Mr Rapley submitted that the “more attractive” wording by the Judge (see [49] above) was “not ideal”, and that a fair-minded lay observer, particularly one who had seen the events in November 2014, might conclude the Judge was struggling to find party liability for Mr Henderson and had concluded that the better route for the prosecution to rely on was abetting. However, Mr Rapley accepted that that of itself was probably of no moment, but caused concern when taken with earlier and subsequent events.
[67] Mr Rapley said the Judge’s amendment to the indictment and description of Mr Henderson’s argument as quite “sterile” (when earlier he had said that the argument about whether an offence could be committed on the 21st of the month was “not without merit”) might lead a reasonably informed and impartial observer to apprehend the Judge might not bring an impartial mind to resolution of the question as to guilt.
[68] Mr Rapley submitted that the Judge’s comment, quoted above at [53], that “we don’t have to be specific about it as long as we cover the period” might suggest to an observer that the prosecutor and Judge were working together to amend the indictment.
[69] Mr Rapley also focussed on the passage quoted at [64] above, which he characterised as effectively the verdict. The hearing had not concluded. The Judge’s comment was indicative of pre-determination of guilt.
[70] Mr Rapley submitted that reasonable and impartial lay observer, acknowledging all of the comments made at the May hearing, might wonder whether a future hearing before the same Judge would be pointless. The comments made by the Judge, taken in combination might reasonably give rise to the impression that there was a lack of neutrality by the Judge.
[71] Mr Rapley accepted that the procedural history and length of time the proceeding had taken were unfortunate, and that the adjournments have been frustrating. He accepted that indications of frustration at tactics adopted might well have been warranted, but submitted they should never be permitted to compromise the impartiality required of the Judge.
[72] In response, the Crown submitted the Judge’s assistance to the prosecution by indicating a “more attractive” route to liability via the abetting path was made in the abstract and does not show predetermination. The observer would understand that the indictment referred to s 148 of the Tax Administration Act and therefore either aiding or abetting would be open to the prosecution. The Judge’s amendment to the indictment evinces the Judge was acting to remove a defence that had already been rejected. The observer would have understood the Judge to be removing a non-issue.
[73] The Judge’s comments in relation to the creditor preference theory were attempts to get the defence to focus on the real issues in the trial as the Judge saw them, and are not indications of predetermination. Broadly, the Judge’s comments were not expressed in definitive terms and an observer would not have understood the Judge to be setting in concrete how he would consider the case. Overall, the Crown says that despite the Judge’s evident frustrations, the observer would not have perceived the Judge to be partial in the course of the May 2015 events.

Discussion

[74] Starting with the first day, nothing across the day’s exchange strikes us, when taken in context, as indicative of predetermination of guilt. In particular the Judge’s exploration of the prosecution theory was not inappropriate. His use of the word “attractive” (see [49] above) is capable of being misconstrued taken out of its context, but in context it is not. The discussion was in response to Mr Butler’s written submission, and the Judge did not come up with the entirety of the prosecution’s submission in response but rather teased out the submission in the course of discussion.
[75] As to the broader exchange at [43]–[49] above, an observer would understand the Judge to be ascertaining the prosecution’s position on a particular route to establishing liability if Dweller was deemed to have committed the offences by omission. The Judge perhaps assisted the prosecution by articulating his understanding. Judges do that all the time, clarifying what exactly the submission being made is. The judicial role is not merely reflective. It is primarily analytical. Submissions are tested — and in the testing sometimes improved. In our view the reasonable observer would not think this discussion of an abstract legal issue was unreasonable assistance to the prosecution. Nor would the observer understand the Judge to have predetermined guilt at this point. The more reasonable interpretation is the Judge was thinking aloud about what legal paths were available on the prosecution case to find guilt, not expressing predetermined views of how that legal analysis might apply to Mr Henderson.
[76] We turn now to the second day, 6 May 2015. First there is the decision to amend itself. In light of the Judge’s earlier s 347 decision we consider that course was unobjectionable. In our view a reasonable observer would have understood the Judge to be giving effect to his earlier s 347 decision rejecting the dates argument. Mr Butler’s attempt to re-open that argument was therefore sterile. Amending the indictment was not something that appears to have been necessary, but it was not prejudicial to Mr Henderson either given the s 347 decision already made.
[77] Secondly, we accept that the passage recorded at [53] above might suggest to someone hearing just that exchange that the Judge had rather teamed up with the prosecutor. But we do not think a reasonable, informed lay observer would reach that view, given the whole context. The amendment was being made for the limited purpose of closing off a possible technical flaw in the indictment in light of the earlier s 347 decision. The Judge heard from Mr Butler on the proposed amendment to the indictment. And he granted the defence a further adjournment.
[78] Thirdly, the observation “I’m astonished”, set out at [55], is robust, but in our view was not unreasonable. The prejudice, if any, should have been readily identifiable at the time. The reasonable observer would understand the Judge to be taking a robust approach to managing the trial, rather than predetermining guilt. And in particular the Judge’s willingness to engage on the issues and to consider granting the adjournment would suggest non-predisposition to find guilt.
[79] Fourthly, the passages at [57] to [60] above are the high water point for the appellant’s case. They all occurred within a few minutes. But we note:

• (a) Such comments by a Judge would not alarm an observer who had seen other Judge-alone trials and hearings. Firm directions by the presiding Judge designed to ensure the key issues are addressed are to be expected in such circumstances. An observer would understand why the Judge might have been getting frustrated, as the heart and mind theory had been made clear in the Crown opening and closing, in the Judge’s November minute, and by the Judge to Mr Butler the previous afternoon. In that context the particular expression of frustration was not inappropriate.
• (b) The Judge indicated the heart and mind theory was open to the Crown so as to enable Mr Butler to identify prejudice and apply for an adjournment. Quite properly, the Judge was anxious to ensure Mr Henderson had an opportunity to respond to the substance of the Crown theory.
• (c) The Judge’s comments about a possible appeal may indicate he had formed a preliminary view of guilt. It is unlikely an observer would think this was set in stone in light of the Judge’s comment about “prophesising what might happen”. And the Judge’s willingness to permit another adjournment suggests he was open to reconsidering the defence response to the broader heart and mind theory.
• (d) The observer would understand why the Judge felt he was being “mucked around” in light of the earlier exchange with Mr Butler about whether he was going to apply for an adjournment or indicate prejudice from the amendment to the indictment.^[15]
• (e) The Judge’s reference to events “proved” by the evidence was we accept unfortunate, but the Judge’s reference to a response being required by Mr Butler would indicate a merely preliminary and not final view that the underlying acts had indeed been proven.^[16]
• (f) The Judge ultimately decided to adjourn once more to enable Mr Butler to deal with the heart and mind theory. He said “This is not an exercise that I am anxious to embark upon but it needs to be done.” This shows the Judge putting fairness first, despite being frustrated about the apparent waste of Court time that had just occurred. The Judge indicated he was willing to consider “what inferences can be drawn from the proven evidence”, suggesting a preliminary view that the acts had been proved but a willingness to consider the legal implications. We do not consider an observer would characterise this as a perfunctory adjournment taken purely to appeal-proof the Judge’s decision. The Judge’s comments quoted above at [57] suggest an honest desire on the Judge’s part to hear a substantive response to the prosecution case.

[80] Finally, the Judge’s comments in his minute of 8 May are not indicative of bias. The use of the expressions “defence spin” and “tactic that crossed the line into illegitimacy” was unfortunate. That is not to be encouraged. But it is, first, understandable. In our view Mr Henderson’s counsel should have been in a position to respond to both limbs of the Crown case. The “heart and mind” theory was pursued in the Crown opening and closing and recorded in the Judge’s November minute. Furthermore, the Judge’s comments do not indicate guilt had been predetermined. The observer would have understood the broader Crown case and have appreciated the Judge has an oath to keep an open mind towards the overall question of guilt despite any adverse trial management findings he might make on the way. The Judge’s language quoted at [64] is couched tentatively. It simply is an expression of preliminary views. And the Judge’s subsequent conduct in allowing an adjournment for the sake of fairness indicates his continued openmindedness.
[81] For these reasons we do not find apparent basis established by the appellant in phase two of the trial.

Further adjournment — June 2015

[82] The trial was adjourned to recommence in June 2015, about a month later. Mr Butler requested leave to withdraw, which was granted on an indication by Mr Henderson that he would not seek any further adjournment.
[83] The trial did not resume in June due to ongoing issues.
[84] In a minute dated 29 June, the Judge again noted his provisional view the Crown case was not confined to a “creditor preference” theory and that he could approach secondary liability on a broader basis. He said, under a heading “Statement of Crown case in memorandum of 28 June 2014”:

The defendant’s argument that s 4A(2) [of the Tax Administration Act] does not affect the question of his criminal liability as secondary party is wrong. If the Crown proves that Dweller committed the offences as the principal party, the Crown has to prove only that the defendant aided or abetted it to do so. Liability for aiding or abetting is not contingent on proof that the PAYE deductions were actually made or that they were actually misapplied. Equally, the defendant cannot offer, as a defence, that the PAYE deductions were not made or that they were not misapplied because they were never represented by any funds. If the Crown proves, for example, that the defendant decided for Dweller, that the salaries and wages would be paid and that he knew that the PAYE deductions would not be paid to the Commissioner, that would be sufficient.⁵

⁵ The determinations made in this section are provisional. The issues are reserved for argument and final judgment.

(Footnote in original).

[85] The Judge also dealt in his minute of 29 June with an application that he recuse himself, holding that nothing he had said would trouble a fair-minded and informed lay observer to suggest he had predetermined the matter.
[86] Mr Henderson had been provided with emails in the interim, and the trial was once again adjourned in order to give Mr Henderson time to examine them.

Submissions

[87] Mr Henderson submitted the statement quoted at [84] above indicates predetermination. The footnoted comment that the views were provisional does not absolve the Judge of bias in light of the previous statements that were not couched as provisional views.
[88] The Crown submitted the Judge’s observations are wholly in line with what an observer would expect from an impartial Judge during the course of trial.

Discussion

[89] The obvious answer is the Judge was indicating a provisional view and reserving the issues for final judgment, as is apparent from the footnote, which the observer would take as an honest reflection of the Judge’s state of mind. In addition, the Judge’s comments respond to just one technical aspect of the defence case, which the Judge had found to be unmeritorious. The Judge had encouraged the defence to respond in crossexamination to the “heart and mind” theory by allowing the adjournment in May. The observer would have understood the ultimate question of guilt to still be open in the Judge’s mind, in advance of the final phase of the trial.

Trial phase three — July/September 2015

[90] For completeness we simply relate the concluding steps in this trial. No appeal point is taken in relation to these events.
[91] Mr Henderson applied for non-party disclosure of further evidence. For reasons that no longer matter, that application was declined.
[92] The trial entered its final phase on 14 September 2015. The Crown recalled and examined its witnesses, who were cross-examined by Mr Henderson in person.
[93] The Judge then released his verdicts of guilty on all counts with written reasons on 24 September 2015.

Conclusion

[94] The reasonable observer watching the whole trial and reading the Judge’s minutes would not reasonably apprehend the Judge had become partial or predetermined the overall question of guilt. The Judge’s indications of provisional views were intended to encourage Mr Henderson (and once engaged his lawyer) to focus on the issues as the Judge saw them. This was necessary in light of the technical defences Mr Henderson sought to argue. It is appropriate for a Judge to guide the parties towards the real and substantive issues, especially in a Judge-alone trial with a lay litigant involved.
[95] The Judge’s overall tone towards Mr Henderson’s defence, if confined to some of the passages we have quoted, could be concerning. An observer, listening to some of his comments, in isolation, might perhaps have taken the view the Judge had predetermined guilt and was granting the adjournments unwillingly, in an attempt to appeal-proof his decision. But we here reinforce what we said above at [16]. The notional fair-minded lay observer stays the full course of trial. Once the whole hearing is considered and the context is appreciated — in particular difficulties created by Mr Henderson when unrepresented and later by the approach taken by counsel at the time he was represented — the overall tone is ver[17]different.¹⁷ The remarks objected to are isolated and in context do not create an impression of real unfairness or unwavering prejudgment. The Judge’s comments are adverse to technical aspects of Mr Henderson’s defence but do not predetermine the ultimate question of guilt. Viewed overall in the context of a difficult trial the narrative perceived by an observer would be the Judge was concerned with fairness to Mr Henderson, particularly in light of the misconceived defence originally relied on by the latter, adjourned trial on not one but (quite extraordinarily) two occasions to let him revise his submissions to respond to the substance of the prosecution allegations, and would have honestly reflected on the evidence presented at the final phase of trial when deliberating and preparing his reasons for the verdicts. At the same time, the Judge tested the respective cases advanced robustly, albeit in a manner which an inadequately informed observer might have thought conclusory.
[96] A reasonable lay observer observing the whole context would not reasonably apprehend that the Judge had failed to bring an impartial mind to the judicial task before him.

Result

[97] The appeal against conviction is dismissed.

Solicitors:
Crown Law Office, Wellington for Respondent

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^[1] Tax Administration Act 1994, ss 143A(1)(d) and 148(1).

^[2] Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 72, [2010] 1 NZLR 35 at [3].

^[3] At [105].

^[4] At [5].

^[5] At [5]; Helow v Secretary of State of the Home Department [2009] 2 All ER 1031 (HL) at [3].

^[6] Saxmere Co Ltd v Wool Board Disestablishment Co Ltd, above n 2, at [75] and [78]; Helow v Secretary of State of the Home Department, above n 5, at [2] and [6].

^[7] Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 at [53] (footnote omitted).

^[8] Muir v Commissioner of Inland Revenue [2007] NZCA 334; [2007] 3 NZLR 495 (CA) at [98]–[99].

^[9] Johnson v Johnson, above n 7, at [13].

^[10] At [46].

^[11] Antoun v R [2006] HCA 2, (2006) 224 ALR 51 (HCA) at [29] and [31].

^[12] Siemer v Heron [Recusal] [2011] NZSC 116, [2012] 1 NZLR 293 at [7].

^[13] Tax Administration Act 1994, s 4A(2),

^[14] This explains the Judge’s reference the next day to what he had told Mr Butler “last night”; see below at [57]. This is consistent with Mr Butler’s written submissions filed that day, which asserted the Crown case was “that the defendant knew that PAYE was not being paid and that he decided other creditors would be paid ahead of the PAYE being paid to the Commissioner.”

^[15] See above at [54]–[55].

^[16] See [60] above.

^[17] We mean no criticism of previous counsel in saying this. We simply record that the Judge's reaction is understandable in light of the approach taken.