Inland Revenue Department v Bench [2017] NZDC 635 (17 January 2017)

Last Updated: 1 April 2017

_{EDITORIAL NOTE: NO SUPPRESSION APPLIED.}

IN THE DISTRICT COURT AT WAITAKERE

CRI-2016-090-002808 [2017] NZDC 635

INLAND REVENUE DEPARTMENT

Prosecutor

v

CLIVE STEPHEN WILLIAM BENCH

_Defendant

Hearing:	17 January 2017
Appearances:	K Lee for the Prosecutor A Low for the Defendant
Judgment:	17 January 2017

_{NOTES OF JUDGE B R PIDWELL ON SENTENCING}

[1] Clive Bench you appear for sentencing today having pleaded guilty on

17 March 2016 to three sets of charges laid under s 143B of the Tax Administration Act 1994. Specifically 21 charges of failing to provide information to the Commissioner of Inland Revenue with intent to evade the assessment or payment of tax laid under s 143B(1)(b) and (f). Fourteen charges of providing incomplete information to the Commissioner with intent to evade the assessment or payment of tax laid under 143B(1)(c) and (f) and three charges of providing incomplete information to the Commissioner to enable another person to obtain a refund or payment of tax in the knowledge that the other person was not lawfully entitled to the refund or payment laid under s 143B(1)(c) and (h).

[2] Those offences all carry a maximum prison term of five years in the alternative or addition to a $50,000 fine.

INLAND REVENUE DEPARTMENT v CLIVE STEPHEN WILLIAM BENCH [2017] NZDC [17

January 2017]

[3] You also have pleaded guilty to 40 charges under s 143A(1)(e) and 147 of the Act, for knowingly failing to deduct withholding tax as is required by the tax law. This offence is a fineable only offence with a maximum fine being $25,000 for the first offence and $50,000 for subsequent offending.

[4] In summary, the facts are that you were the sole director of Aquaguard Limited, a limited liability company from 31 July 2003 and the managing director of GoCon Limited since the 12 January 2010. The offending took place between 2005 and 2011. It occurred in your capacity as a director and managing director of those two companies. It involved you failing to account for payments made into bank accounts the companies had access to when filing GST returns, continuing to charge GST while not GST registered and failing to return that money, failing to deduct withholding tax from amounts paid to contractors and receiving income without filling income tax returns.

[5] Based on default assessments the estimated total of your offending resulted in a tax loss of $399,827.09. That is broken down as follows:

(a) GST totalling $74,907.09 as a result of the incomplete information provided by you in relation to Aquaguard for the period ended 31 July

2005, 30 November 2005, 31 March 2006 to 31 May 2007 inclusive,

30 September 2007, 30 November 2007 and 31 March 2008 to 30

September 2008 inclusive.

(b) GST totalling $77,792.79 as a result of failing to filing Aquaguard’s

GST returns for the period ended 31 March 2009, 31 May 2009 and

30 September 2009 to 31 March 2011 inclusive.

(c) Income tax totalling $200,219.13 as result of failing to file

Aquaguard’s income tax returns for the periods ended 31 March 2006,

31 March 2007 and 31 March 2009 to 31 March 2011 inclusive.

(d) Withholding tax totalling $32,573.60 as a result of failing to deduct withholding tax payments made by Aquaguard to a contractor for the

periods ended 30 November 2006 to 31 January 2010 inclusive and 31

March 2010.

(e) GST totalling $6602.32 as a result of failing to file Gocon’s GST

returns for the periods ended 31 March 2010 and 30 September 2010.

(f) Income tax totalling $7732.16 as a result of failing to file Gocon’s

income tax returns for the periods ended 31 March 2010 and 31

March 2011.

[6] By way of explanation you say that you were under immense stress over this period of time facing civil actions against you personally in relation to leaky homes. You simply buried your head in the sand, to use the words of your counsel, and the tax issues simply became too big for you to deal with, on top of everything else.

[7] The company Aquaguard Limited is now in liquidation and Gocon Limited has been removed from the Company Register. On 14 April 2015 you were declared bankrupt. For the past year you have been employed as a contracts manager in the construction industry and are currently earning income. You are 58 years old and have no relevant previous convictions. The material on file prepared on your behalf shows you are well regarded by your colleagues and you are supported by your wife. Community Probation has assessed you as displaying a low risk of reoffending and low risk of harm.

[8] This sentencing process has been adjourned on two occasions to enable you to make inquiry and attempt to put your affairs in place to enable you to make a significant reparation contribution.

[9] Initially the matter came before me on 19 August last year and I adjourned the sentencing to give you the option to address reparation in some significant way and indicated that that issue would have a bearing on the outcome of your end sentence. When the matter was called again before me on 11 October 2016 there was an indication that the family trust which your wife is a trustee of, was making a

home available for sale and that a significant amount of money would be available from that to the IRD for purposes of reparation.

[10] I am required by the Sentencing Act 2002 to keep in mind a number of purposes and principles. Section 7 requires me to have regard of the need to hold you to be accountable for the harm that you have done to the victims of your offending and in the case the victim is society as a whole. Everyone in this country is obliged to pay taxes if they are working or are involved in a company and you failed to do that over a significant number of years to a significant amount.

[11] I need to promote in you a sense of responsibility for an acknowledgement of the money that was not put in the public purse at a time when everyone in this society has the need for taxes to be paid to enable this country to function. If I can, I need to provide reparation for that harm, and to denounce your conduct to deter not only you but other members of society from committing the same or similar offences again.

[12] In terms of s 8 principles I must take into account the gravity of your offending in regard to the seriousness of the types of offences committed by you. As indicated by the maximum penalty prescribed which is five year prison term, these charges are serious.

[13] I must consider the general desirability of consistency with the appropriate sentences available and I need to impose the least restrictive outcome that is appropriate in the circumstances. I must also take into account your personal circumstances.

[14] In terms of my approach to sentencing, there is consensus by both your counsel and the prosecution of the appropriate starting point and approach to sentencing. I agree with the prosecution submissions that the tax evasion charges are to be treated as the lead charges for sentencing purposes. They are the most serious charges and the 40 fine only charges I take into account when assessing the need for reparation.

[15] I need to firstly adopt an appropriate starting point and then consider whether there are any factors personal to you to demand an increase or decrease, then address your guilty pleas and if the end sentence available to you is under a two year prison term I need to consider whether home detention is available and the amount of reparation.

[16] I have the submissions from both prosecution and your counsel and do not intend to traverse for the purposes of this sentencing, the cases that have been referred to in those submissions but I acknowledge them. The reason that I do not consider I need to traverse the case law acknowledging that there is no tariff decision on tax evasion charges and other tax charges of this nature, is because there is essentially an agreement of the range available to this Court as dictated by higher authorities for a starting point. Your counsel acknowledges and accepts that the appropriate starting point in this case in regard to those authorities as submitted by the prosecution is between 24 and 30 months imprisonment.

[17] In determining whether I concur with that agreement I need to firstly consider the aggravating features of your offending, firstly the significant duration of your offending, namely six years. Secondly the moderate degree of premeditation. Your counsel submits that you never made an active decision to offend, rather that you simply turned a blind eye to your responsibilities when it all got too hard and that you were partly ignorant of your obligations in terms of tax. However in my view that does not mitigate your culpability. You have made an active choice to bury your head in the sand. You chose to hold these positions. I accept the prosecution’s submission that there is an element of breach of trust here because the integrity of this country’s tax system depends on voluntary compliance by people who use a structure of a company to pay taxes and you neglected your responsibilities in that regard. Thirdly, the extent of the loss to society as a whole is undoubtedly substantial, the amount is estimated as being just shy of $400,000. I acknowledge that you have now paid $20,000 back in October last year.

[18] I do acknowledge that you have made no personal pecuniary gain from this offending and you are now bankrupt and this reduces your culpability to some extent.

[19] Each of the cases that have been referred to me by counsel namely R v Smith1, Zaheed v R2, James v R3, Tahaafe v Commissioner of Inland Revenue4 and Jukich v R5 have slightly different amounts and scenarios and that is why there is no tariff decision for offending of this nature. I note the position of counsel of the range being between 24 months and 30 months imprisonment is agreed in considering the sentences reached in those decisions. Having assessed the gravity of your offending

and in particular the amount and the length of time of the offending, I consider that the appropriate starting point for you is 28 months imprisonment. I consider your offending to be serious, it shares broad similarities to the offending in R v Smith, Jukich v R and James v R although I do consider the gravity of the offending in this case to be less serious than Smith and Jukich with premeditation and deceit levels being somewhat less as well as the extent of the loss. The offending nevertheless is serious and in my view your culpability is high.

[20] I now turn to the aggravating and mitigating features relating to you as the offender and any personal factors which may warrant an uplift or a discount. I do not consider there are any aggravating features personal to you that warrant an uplift. You have no previous offending for this type of offending and the references supplied on your behalf indicate you are well regarded and you were facing difficulties over this time. You are remorseful for this offending and have made attempts to try and access funds to make a reparation offer but at this point in time there is nothing concrete forthcoming. I acknowledge your attempts to pay reparation and will address that in the next step of my sentencing process.

[21] You are entitled to credit for your guilty pleas which I acknowledge were at the earliest possible stage and that you have cooperated fully with the prosecuting authority throughout which has spared the Court significant time and expense in

_{terms of trial time. Accordingly you will receive the required discount for that.}

1 _{R v Smith [2008] NZCA 371.}

2 _{Zaheed v R [2010] NZCA 573.}

3 _{James v R [2010] NZCA 206.}

4 _{Tahaafe v Commissioner of Inland Revenue HC Auckland CRI-2009-404-102, 10 July 2009.}

5 Jukich v R [2012] NZHC 231.

[22] In terms of my calculation of your sentence, if I have a starting point of

28 months I give you a discount for your good character and personal issues in the circumstances of the offending of three months which takes me to 25 months, and give you a discount for a guilty plea of six months which takes me to an end result of

19 months imprisonment. As that figure is under two years I am obliged to consider the appropriateness of a home detention sentence as a way of serving that sentence.

[23] I have indicated previously that the issue of reparation in my mind is a significant factor in the appropriateness of home detention in these circumstances. To date I have not been satisfied that you are able to make any significant contribution to reparation. You have paid $20,000 and you have provided your counsel with further funds of $1400 which she has provided and undertaken to this Court to hand over in the form of a trust account cheque immediately. That total reparation of $21,400. Attempts have been made by your wife to pay further amounts on your behalf and the sum of $120,000 has been offered in the past. I have not been provided with any documentation to verify that that is available. I have heard from Ms Low today that the sale of the house which is held in trust which your wife is a trustee and beneficiary has not proceeded as expected. She has made attempts to borrow against the trust property and due to your circumstances and perhaps her’s, I am not sure, she has had to go to secondary lending. That has not been confirmed as of today and although there have been promises and I have heard promises for the past six months, I am not satisfied that you are able to make any meaningful contribution to the reparation amount that is sought by the Commissioner which is in the full amount of $380,000 in round figures.

[24] Despite an offer and despite promises, I am not satisfied that that reparation can be paid. Due to the level of offending, and the inability to pay meaningful reparation, I do not consider that home detention is the appropriate outcome for you today. It does not meet the gravity of the offending. In those circumstances I proceed to sentence you as follows.

[25] In relation to the fineable only charges you are convicted on each and sentenced to pay reparation in the total amount of $21,400. That is made up of the

$20,000 that has already been paid and the $1400 to be provided on your counsel’s

undertaking, that to be paid by 20 January 2017.

[26] In relation to each of the other charges you are convicted and sentenced to imprisonment for 19 months, concurrent. No special conditions. Standard release conditions for six months. You may stand down.

B R Pidwell.

District Court Judge