Ministry of Business, Innovation and Employment v Toilolo [2017] NZDC 29716 (16 November 2017)

Last Updated: 13 December 2018

EDITORIAL NOTE: CHANGES MADE TO THIS JUDGMENT APPEAR IN [SQUARE BRACKETS].

IN THE DISTRICT COURT AT MANUKAU

CRI-2016-092-007628 [2017] NZDC 29716

MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT

Prosecutor

v

TIMOTHY TOILOLO

_Defendant

Hearing:	16 November 2017
Appearances:	F Gourlay for the Prosecutor R Hucker for the Defendant
Judgment:	16 November 2017

_{NOTES OF JUDGE R J EARWAKER ON SENTENCING}

[1] Mr Toilolo, you have pleaded guilty to one charge of being a bankrupt person entering a business by being self-employed and a second charge of being a bankrupt person entering a business by being employed by a relative.

[2] Both those charges carry a maximum penalty of two years’ imprisonment. You have applied to be discharged without conviction pursuant to s 106

Sentencing Act 2002. The Ministry of Business, Innovation and Employment oppose that application.

[3] I have now considered the written submissions and the affidavits filed in support and the written submissions filed in opposition and also considered the oral submissions that have been made this morning.

MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT v TIMOTHY TOILOLO [2017] NZDC

29716 [16 November 2017]

[4] The relevant facts are that you operated a business as an accountant but then were adjudged bankrupt on 7 July 2014. This occurred on application by the [Bank].

[5] Following being adjudged bankrupt you continued to work as a self-employed accountant, principally for [one client], in contravention of the Act.

[6] In August 2014 you went to work for your daughter in a company called [name deleted] which was a company incorporated in March of 2014. The sole director and shareholder of that company was your daughter. The registered office of that company was [address deleted] which was the location advertised as [name deleted]. An email address located on line for that business was said to be [email address deleted].

[7] The sign [business name deleted] remained outside the premises. An employee of the Ministry of Business, Innovation and Employment did contact the number located on line for [business name deleted] Accountants and the phone was answered by a person who introduced the firm as [the daughter’s company’s name deleted]. She confirmed that it was also the office of [business name deleted] Accountants and that you were meeting with a client.

[8] Now, while employed by your daughter, you, without notifying the Ministry, on 11 November 2014, applied to be self-employed. Clearly, at that time you were aware of your obligations as a bankrupt. That application was declined subsequently in March 2015 but between 9 and 12 February 2015 you requested permission from the Official Assignee to travel overseas on behalf of [the client]. It was apparent from the request that you were still acting as [the client’s] accountant. You were advised that you did not have authority to be self-employed in this way. As I say, the sign continued to be outside of the premises, the sign of [business name deleted] Accountants. Bank statements which were subsequently received showed that you continued to receive payments from [the client] and were employed by him until around 7 August 2014.

[9] When questioned about your involvement with [the daughter’s company] you said it was your daughter’s business and she was undergoing training to be an accountant. The bank statements for [the daughter’s company], received in September

2015, showed that you were a joint signatory of that account. The statements also showed payments from [the client] between August 2014 and August 2015 into the account and withdrawals from the account in the Auckland area including times when your daughter was known to be in Australia.

[10] In May of 2015 you had sought permission to work for a relative which was declined in July of 2015. In August 2015 you then went to work as a law clerk for a firm, you having completed your legal studies.

[11] I have considered the affidavits which have been filed on your behalf, which explain some of these matters, one of them relating to the sign which remained outside [address deleted]. On the one hand your affidavit says that it was an oversight and yet on the other hand the affidavit says that because of the height of the signs they were too expensive for you to remove which is a contradictory explanation. In terms of the withdrawal of the payments from the account while your daughter was away, the affidavit that you filed indicates that your wife also had a company, a [details deleted] business which operated the same bank account and those withdrawals may have been, your affidavit says, for the [details deleted] business transactions undertaken by your wife.

[12] So, they are the facts that have been accepted in which the sentencing is to proceed. In considering your application for a discharge without conviction, the Court is required to consider the three-step process which is set out in the well-known Court of Appeal decision of Z v R.1 First, the Court must consider the gravity of the offence including all of the aggravating and mitigating factors relating to the offending and to you the offender.

[13] Second, the Court must then identify the direct and indirect consequences of a conviction for the offender and, third, the Court must consider whether those consequences are out of all proportion to the gravity of the offence. If the Court determines that the consequences are out of all proportion, it must still consider whether it should exercise its residual discretion to grant a discharge, although it is

1 Z v R [2012] NZCA 599

accepted that it will be a rare case where a Court will refuse to grant a discharge in such circumstances.

[14] I now turn to consider the gravity of the offending. There are a number of aggravating features which are set out in the submissions of the Ministry relating to the offending. What is submitted to be aggravating is the premeditated nature of this offending. The way that I discussed it with counsel in the course of submissions was that in my view, this offending was deliberate. You continued once you became bankrupt to operate as an accountant, particularly for one client through to August

2014. Then, knowing full well of your obligations, went to work for your daughter in order to, in my view, continue practising as an accountant.

[15] You did not advise the Ministry that you were working for a relative and you continued to operate for, particularly the same client. Whilst working for your daughter you applied to be self-employed showing that you were well aware of the obligations placed upon you but even at that time you did not advise the Ministry that you were working for a relative as required. So in my view this was a deliberate pattern of offending on your part which did continue for over a year through to 2015.

[16] It is accepted by the Ministry that there was no loss resulting from your offending. It is also accepted there are no aggravating features personal to you and there are a number of mitigating factors including the fact you have no previous convictions and no loss has resulted as I have already said. You did plead guilty at an early opportunity and it appears from the pre-sentence report, which I have considered, that you are remorseful. However, the pre-sentence report does in my view seek to minimise your offending which is a matter which I do have some concern over.

[17] In my view given your background in the industry which is well demonstrated by your affidavits, you would have been very well aware of your obligations once bankruptcy was imposed.

[18] Taking into account the aggravating and mitigating factors I do assess the gravity of the offending on the low to moderate scale. The Crown do acknowledge the gravity is towards the lower end of the spectrum which I do accept. I would still

classify it as low to moderate given in my view the deliberate nature of the offending by someone who, in my view, would have known full well what his obligations were.

[19] I now look to the direct and indirect consequences of the conviction. Three matters have been put forward as a consequence. The first is the potential impact on you becoming a lawyer. You have spent several years studying to become a lawyer, it seems at the expense of your accounting practice according to the information which I have seen and the submissions and affidavit. You are currently working as a law clerk for a firm and have made an application to the Law Society to obtain a certificate of good character. Your aim is to ultimately practice as a lawyer in an employed role and to travel also as part of that role. It is accepted by Mr Hucker that a conviction is not a bar to a provision of a certificate of good character.

[20] There is also a concern expressed by you and Mr Hucker on your behalf that potentially a conviction could impact on employment, although I do note that you are currently employed by a law firm in full knowledge of these circumstances. It seems that the intention of that law firm is to continue to employ you once you have qualified, notwithstanding what has occurred here - that is how I interpret the letter dated 1 May

2017 in any event.

[21] I do not have any evidence before me that a conviction of this sort would impede any travel, nor that it would have a negative impact on client service continuing in your role as either a law clerk or a solicitor employed by the law firm you are currently working with.

[22] The other consequence identified is that you are currently and have been for many years a pastor of the [Church] and if convicted you will be required to resign as a pastor from the church. The affidavit material before me shows that, as part of the constitution of the church, a person who is a pastor must be a person of good standing and must be a person with no criminal record. An affidavit from a senior pastor indicates that you will be required to resign. That provision would have been well known to you Mr Toilolo through your many years of work with the church so in some ways that is a consequence which you would have been aware of which makes it more surprising that you committed the offending in the way that you did.

[23] What I am puzzled about is that in the pre-sentence report you state that you prefer to avoid a community work sentence due to your role as a pastor which to me suggests that it may not in fact be something that is a foregone conclusion that you will not be able to continue in this role.

[24] In response to the identified consequences, the prosecution submit that it is not the Court’s role to serve the [Church’s] position on the criteria its pastors must fulfil and made a reference to the decision of Kalavi v Ministry of Health.2, a decision of the High Court Auckland, 14 July 2011. That was a situation involving benefit fraud where both defendants had leadership positions within the church and the sentencing Judge did not consider the consequences in terms of the church to be out of all proportion to the gravity of the offending.

[25] In terms of the New Zealand Law Society, it is submitted by the Ministry that it has already been acknowledged that a conviction is not an absolute bar to an offender gaining entry to a profession or an occupation. It refers to the authorities where a statutory body screens applicants for admission to occupations where the risk to a person’s career is unlikely to justify a discharge as there is a public interest in the statutory body knowing about the conviction and exercising its discretion accordingly. It seems on this particular occasion the Law Society do know about the charges but they are awaiting the outcome of this decision prior to proceeding with the application for a certificate of good character.

[26] Reference was made to the decision of Vermeulen v New Zealand Police.3, a decision of Gendall J in the Wellington High Court, 11 March 2011 involving an appeal against conviction following a shoplifting conviction. That was also an appellant who was seeking a certificate of good character from the Law Society. In that decision Gendall J goes through the requirements in terms of the New Zealand Law Society and refers to the well-known decisions of New Zealand Police v C S,4

2 Kaulave v Ministry of Health, HC Auckland, CRI-2011-404-01204, 14 July 2011.

3 Vermeulen v New Zealand Police, HC Wellington, CRI-2010-485-000141, 11 March 2011

4 Police v C-S, HC Napier, CRI-2010-441-45, 14 February 2010.

R v Owen5 and Commissioner of Inland Revenue v Abdale.6. In that case, having referred to those authorities, Gendall J said at paragraph 33 .that:

In assessing possible consequences of a conviction Judge Gaskell was entitled to take into account that the Law Society scrutiny may well not lead to an adverse consequence and such scrutiny was one expected consequence of conviction.

[27] He did not elevate the consideration to one of inflexible policy. It is a consequence but not one out of all proportion to the gravity of the offence.

[28] I have also been referred to a number of decisions by Mr Hucker where discharges were granted and here I am referring to the decision of Merri v Ministry of Economic Development7, the Ministry of Economic Development v Henderson8 and Krasnigi v Official Assignee.9.

[29] Discharges were granted in those cases, however, all of those related to an undischarged bankrupt, leaving New Zealand without first obtaining consent of the Official Assignee. I do accept in the Krasnigi case there was a number of times and indeed ironically it was the number of times that he had left New Zealand that prompted Harrison J to grant the discharge without conviction.

[30] In my view, those cases are distinguishable from this case because here we have the active involvement of a defendant working in contravention of his obligations, firstly, as self-employed and secondly with a relative.

[31] I was also referred to the decision of Ministry of Business, Innovation and Employment v Lehman10 where a discharge without conviction was granted in the District Court but was overturned in the High Court.

5 R v Owen [2005], 2 NZLR 536 (HC)

6 Commissioner of Inland Revenue v Abdale [2009] DCR 584 (DC).

7Merrie v Ministry of Economic Development, HC Rotorua, CRI-2006-404-22, 25 September 2006

8 Ministry of Economic Development v Henderson [2012] DCR 861

9 Krasnigi v Official Assignee, HC Auckland, CRI-2007-404-12, 3 September 2007.

10 Ministry of Business, Innovation and Employment v Lehman [2017] NZHC 864

[32] Mr Hucker sought to distinguish that case as being one of more serious offending but in my view the principle still applies that the Court does need to carefully scrutinise these cases where the obligations are not complied with.

[33] I am not persuaded that the consequences of a conviction as identified are out of all proportion to the gravity of the offending. In my view even taking into account the mitigating factors, this was deliberate offending and needs to be marked with a conviction. The conviction will not in my view prevent Mr Toilolo practising as a lawyer. Clearly the Law Society will need to give consideration to the certificate which needs to be issued before he can so practice, but that is something best left to the society rather than for me to usurp the decision.

[34] Equally, in terms of the consequence relating to the acting as a pastor in the church, while I accept it is a consequence it is not a situation where Mr Toilolo earns his living from being a pastor and he was well aware of the provisions of his own constitution when he carried out this activity. In my view, there does need to be a deterrent aspect to this type of offending and that is reflected in a conviction.

[35] As to the penalty, I accept Mr Hucker’s submission that this can be dealt with by way of a fine, so in respect of each of the charges he will be fined $450 and $120

Court costs.

R J Earwaker

District Court Judge