Inland Revenue Department v Gallagher [2020] NZDC 15775 (6 August 2020)

Last Updated: 1 July 2022

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

IN THE DISTRICT COURT AT WAITAKERE I TE KŌTI-Ā-ROHE KI WAITĀKERE

CRI-2020-090-000251 [2020] NZDC 15775

INLAND REVENUE DEPARTMENT Prosecutor

v

LIAM SEAN JAMES GALLAGHER Defendant

Date of Ruling:	6 August 2020
Appearances:	B Ropati for the Prosecutor No appearance by or for the Defendant
Judgment:	6 August 2020

RULING OF JUDGE L TREMEWAN

[1] The defendant, Liam Sean James Gallagher, has been charged with six offences under s 143(1)(b) Tax Administration Act 1994, for failing to file income tax returns when required by tax law. In saying that, I note however that our prosecutor, Mr Ropati, has today sought leave of the Court to withdraw one of the six charges. That has happened and thus, Mr Gallagher now faces five remaining charges.

[2] Mr Gallagher is not present. He was originally served with the requisite advice pertaining to these charges and at the initial appearance, although advised that the matter would be called at 9.00 am, the record shows that the defendant arrived at 9.50 am, but was then given the next rescheduled hearing date and time. In the interim,

NEW ZEALAND POLICE v LIAM SEAN JAMES GALLAGHER [2020] NZDC 15775 [6 August 2020]

before matters could be determined, these proceedings have experienced delay caused by the COVID-19 restrictions.

[3] However, what is clear to the Court is that Mr Gallagher has been advised of subsequent dates of hearing, including today’s date, but has not appeared. There is no indication on the file to show that he has ever appeared since 26 February, nor is there is any information to suggest that he has made any inquiries with the Court about this matter or indeed with the Commissioner who prosecutes this matter.

[4] I also see that communications have been sent to what is understood to be [his residential address]. Certainly that was the address at which documents were served, in response to which he then came to Court. In other words, that appears to have been Mr Gallagher’s place of residence and that is the address to which communications have gone. The Court, in these circumstances, is satisfied that Mr Gallagher has had every opportunity to appear in relation to this matter but has elected not to so do.

[5] These are fineable only matters. There is no requirement on him to appear. In his absence it simply means that it is open to the Court to consider the evidence before it and deal with the matter as a formal proof prosecution where there is sufficiency of evidence.

[6] The Court understands from the information that it has received, including the sworn affidavits from Michelle Denise Johnson, a customer service officer employed by Inland Revenue who has had responsibility for these matters, and who is authorised to make the affidavits which have been adduced on behalf of the Commissioner, that in the income years relevantly now ending 2014 to 2018 inclusive, the defendant derived more than $200 of accessible income from self-employment that was not subject to PAYE rules. Accordingly, pursuant to s 33 Tax Administration Act the defendant was required to file income tax returns in respect of each period but has failed to do so.

[7] The Court gathers that the scenario is that previous to this, Mr Gallagher has filed a return or returns as required but then later in time failed to do so, alerting the system, so to speak, that in the absence of some explanation for this, an inquiry might

properly be made as to why that was the case, if indeed he was still in self-employment, as has proved to be the case.

[8] In fact, the Commissioner has been in contact over the course of this period with Mr Gallagher and with his accountants, and it seems there has been a ready admission that these returns have not been filed. On Mr Gallagher’s part, despite having received reminder notices on various relevant occasions, the situation has continued and his explanation (and this is all set out in the affidavit material) is essentially that he was aware of these matters, that he had been “slack” with his personal tax returns, wanted to get it sorted, knew the importance of it and would contact his accountant.

[9] On another occasion when contacted, he said he had caught up with his accountant, had another meeting scheduled and was keen and motivated to get things sorted. On another occasion he yet again said that the accountant was sorting matters out for his various entities before working on his own personal returns and was aware of the importance of it. Most recently, on 20 November 2018, he said that he was in the process of getting all the information together for his accountant, but had been busy.

[10] However, the defendant’s accountants, [company name deleted], whose staff as I have noted have also been spoken to, have advised that the defendant had not provided them with the necessary records, despite many attempts to get him to provide this documentation. On another occasion in October 2018 the accountants advised the accountant assigned to the defendant was overseas but that the system showed there had been difficulties in getting hold of the defendant.

[11] The Court gleans from all of this that it is not, for instance, a case of ill-health or some similar scenario; it is a case where the defendant has some entities from which he takes drawings for personal income, but there were delays at his end, described as “slackness” at one point, in getting the relevant material to his accountants so that he could meet his obligations. Also, he said he had been busy but was keen to get it all sorted. The accountants, as I have noted, at the same time, seem to attribute the issues to simply not having the relevant material from Mr Gallagher.

[12] Clearly, it is Mr Gallagher’s obligation, which he has conceded, and the situation has gone on clearly for now some years. In other words, the returns have still not been filed, let alone any arising obligations having been met.

[13] The evidence before the Court today also includes numerous banking documents which have been obtained in relation to the prosecution. It does appear on the face of these statements, Mr Gallagher has regularly been taking drawings, doubtless from his various entities, into his account as income.

[14] The Commissioner has gone through all of this information and I simply note for the record - though it is not required in terms of any orders that the Commissioner seeks - that the relevant deposits for the year ending 2014 add up to $15,500, for the year ending 2015, $86,797.02; the year ending 2016, $111,775.50; the year ending 2017, $103,361; and in 2018, $181, 275.57. It is noted that these are not insignificant amounts.

[15] The short point seems to be that Mr Gallagher is aware of his obligations to file returns and meet any arising obligations in that regard. He has conceded that, but he has failed to do so. He has not provided any sound basis for that failure and nor has he sought to be heard in relation to these proceedings. As I have already noted, the strict liability matters, absolute liability category 1 offences, attracting a maximum penalty of fine not exceeding $4000.

[16] I am advised that Mr Gallagher is a first offender and the Commissioner seeks in this particular case, findings that the charges have been proved, convictions to be entered and then a fine of between $200 to $400 per charge.

[17] In the Court’s view, there is an evidential basis for the charges laid and it finds the charges to be proved. These are matters that are important, because it is well accepted that the tax system with its arising obligations on all taxpayers and officials and upholding the tax system is important.

[18] In terms of setting a fine in addition to the convictions being entered, in the Court’s assessment a fine of $200 is warranted on CRNs ending 0067 and 0068, noting

that they are the first two years and the amounts of drawings were comparatively lower. However, a fine of $300 is warranted on CRNs ending 0069, 0071 and 0072, the reasoning there being it was further ongoing offending, perhaps aggravated by the longevity of offending by that time, but also the amount of the drawings were considerably more.

[19] The Court finds the charges proved, convictions are entered and the fines imposed as I have outlined. I make a direction that the Court registry advise Mr Gallagher of the orders of the Court today, as the Commissioner will also do.

Judge L Tremewan

District Court Judge

Date of authentication: 15/08/2020

In an electronic form, authenticated pursuant to Rule 2.2(2)(b) Criminal Procedure Rules 2012.