Commissioner of Inland Revenue v Pomee [2022] NZDC 8579 (12 May 2022)

Last Updated: 1 February 2023

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

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

CRI-2019-092-012903

[2022] NZDC 8579

COMMISSIONER OF INLAND REVENUE

Prosecutor v

SIONE NA'ANIUMOTU POMEE Defendant

Hearing:	12 May 2022
Appearances:	S Pinto for the Prosecutor H Leabourn for the Defendant
Judgment:	12 May 2022

NOTES OF JUDGE G J WAGNER ON SENTENCING

[1] Mr Pomee, you appear for sentence today on a number of charges under the Tax Administration Act 1994. Following the sentence indication I gave on 10 May last year, you plead guilty to 66 charges of evading or attempting to evade the assessment or payment of tax, namely pay as you earn (PAYE), student loan deductions and KiwiSaver deductions by another person, namely Pomee Engineering Services Limited, and two charges of aiding and abetting Pomee Engineering Services Limited to knowingly apply or permit the application of the amount of a deduction or withholding of tax made or deemed under a tax law for any purpose other than in payment to the Commissioner of Inland Revenue (the Commissioner).

COMMISSIONER OF INLAND REVENUE v SIONE NA'ANIUMOTU POMEE [2022] NZDC 8579 [12 May 2022]

[2] In terms of the summary of facts, you were the sole director and shareholder of Pomee Engineering Services Limited, a company which provided labour to the construction industry. The company paid net wages to its employees from shortly after its incorporation in 2012 until it was placed into liquidation on 12 July 2019.

[3] The company was required to file monthly employer schedules and to account to the Commissioner for the PAYE and various student loan and KiwiSaver deductions which were payable by the twentieth of the following month.

[4] The offending occurred over a total of 68 monthly PAYE tax periods between November 2012 and July 2019. For nearly all of the relevant monthly periods, the required tax returns were filed but the tax was not paid. In addition, almost all of the employer schedules filed understated the amounts to be paid.

[5] Through your offending, you enabled the company to evade payment to the Commissioner of a total of $1,699,011.21 and applied withholding deductions of

$164,995.93 other than in payment to the Commissioner. The total offending amount therefore is $1,864,007.14.

[6] Of that, $491,275.74 has been paid or recovered from you voluntarily. A further payment was made from the official assignee by the liquidators of the company of $225,986. Deducted from that was an order for costs in favour of the IRD of

$2,011.59, so that net payment is $223,974.41 which is to be applied to the company’s PAYE debt.

[7] Taking that amount and your voluntary reparation payment to date, the total repayment is $715,250.15 meaning that, as at today, the total outstanding is

$1,148,756.99.

[8] During the offending periods, numerous statements of account and letters were sent to the company by IRD about the defaults. You were personally informed of the seriousness of non-payment and the consequences, which of course you are now facing. You received education from IRD about your employer obligations. Despite all of this, your offending continued for sometime after.

[9] When interviewed, you acknowledged you were the person responsible for payment of PAYE, you authorised the PAYE payments, you sent your employees their hours of work and paid them. You were aware the deductions were not being paid and made the decision not to pay them despite the money being available. You admitted using the funds for significant personal spending and some for famili.

[10] An analysis of the company’s bank account showed the following diversion of funds instead of paying the deductions. First, approximately $1 million was transferred to a joint account in the name of yourself and [name deleted], overseas travel and spending, personal shopping including at high-end retail stores, various loans or gifts to yourself, employees and others including a $109,995 loan or gift for a motor vehicle and a gift of $85,000 to [another person], and finally over $25,000 transferred to Jamaican Money Market for your nephew’s music career.

[11] I had the benefit for the purpose of the sentence indication of submissions on behalf of the Commissioner dated 6 October 2020 and 10 May last year. The latter were in reply to the submissions from Mr Leabourn on your behalf dated 23 March 2021.

[12] In terms of the sentencing exercise, there are a number of purposes and principles set out in the relevant law, the Sentencing Act 2002, which I have to take into account when thinking about an appropriate sentence for you. They were accurately identified in both the Commissioner’s and Mr Leabourn’s submissions.

[13] I need to first hold you accountable for the harm you have caused, in this case in particular to the community. Secondly, to promote in you a sense of responsibility for your actions and acknowledgement of the harm that has been caused by those actions. Thirdly, to denounce your conduct and deter not just you but others in the community from committing the same or similar type of offending in the future and, fourthly, to provide reparation if it is appropriate and possible.

[14] As for the principles, I am required to look at the gravity or the seriousness of the offending. I need to take into account the desirability of consistency in sentencing

levels between similar cases. All the while, I have to impose what I consider to be the least restrictive sentence.

[15] In thinking about a sentence, I need to set a starting point. I do so by assessing the seriousness of your offending and your level of responsibility in that. That involves me taking into account a number of what we call aggravating factors. Those are things that make it worse in terms of the offending itself. Then I consider if there are any mitigating factors relating to the offending, so things I could reduce the starting point for.

[16] Taking all those into account, and I will talk more about that in the cases I compare your matter with shortly, I set a starting point. After I have set a starting point, I then look at any factors personal to you - again any aggravating factors, things that make it worse, or any personal mitigating factors.

[17] Returning to the starting point, first I note that the maximum penalty for the various offending is five years’ imprisonment or a fine of $50,000. Again, both the Commissioner and Mr Leabourn accurately identified in their submissions the aggravating factors of your offending.

[18] There is first, of course, the extent of the loss. At close to $1.9 million dollars, it is a very significant amount even in comparison to previous cases. Then there is the fact that the offending happened over a very long period of time, close to seven years. The offending was very much premeditated and deliberate. In this regard, I take into account that it continued despite attempts by the Commissioner to intervene for your benefit and hopefully put a stop to it.

[19] There is of course the breach of trust in cases of this type and the cases that have been referred to all refer to that particular aspect. The New Zealand tax system relies on the honesty of employers and others, so there is a breach of trust in not complying with your obligations as an employer. The breach of trust is not just to the community because the community did not have those funds available through the tax system but also towards your employees.

[20] I do not identify any mitigating features of the offending itself.

[21] Here I talk about the case law. There are quite a number of cases dealing with this type of offending, some with more similar factual scenarios than others. Counsel for the Commissioner referred to a number in his original submissions. Mr Leabourn responded to those last year and also brought to my attention two other cases which appeared on the face of it to perhaps be more favourable to you in terms of the starting point. Counsel for the Commissioner replied to those particular cases in their reply submissions.

[22] In considering those cases, I have identified those which I consider are similar and relevant in terms of the facts of your case - things such as the amount of money involved, the length of time, the type of tax that was not paid and the like. I also note the level of the Court at which those decisions were made. I acknowledge the two cases Mr Leabourn brought to my attention were Court of Appeal cases, whereas most of the cases referred to by the Commissioner were at District Court level.

[23] Having undertaken that careful comparison, I consider the facts of your case are most comparable with the decision referred to by the Commissioner of Inland Revenue Department v Lasek.1 It is certainly comparable in terms of the type of tax that was avoided, the amounts involved and also the period of time. Of course there are some differences, they are not identical, but I prefer to be guided by that case as opposed to the cases initially put forward by Mr Leabourn on your behalf of Mehmood v CIR in 2015 and Chahil v R in 2020, as I identify differences between the facts of your case and those cases. 2

[24] Both of those cases were on appeal from the District Court and, as I indicated, all the way to the Court of Appeal. In Mehmood there were quite different amounts involved and the starting point in that case, which was four years, was not the focus of the appeal. There were other aspects in that case that were primarily being appealed, although the starting point was considered. It was not the focus and was ultimately simply considered to be in range.

1 Inland Revenue Dept v Lasek [2018] NZDC 7473.

2 Mehmood v CIR [2015] NZCA 338; Chahil v R [2020] NZCA 436.

[25] Similarly with Chahil, there were other elements in that case not involved here such as money laundering and again the starting point was not the sole focus of the appeal. All the Court said with respect to the starting point was that at three years and three months it was within the appropriate range, so it was not a particularly directed comment on the starting point.

[26] As I say, I derive greater guidance from some of the cases referred to by the Commissioner in which the starting point was higher than those just referred to, and closer to the four and a half to five years the Commissioner submitted for the sentence indication should be imposed in your case.

[27] In the Lasek case, the starting point was four years and nine months. I do not consider the starting point in your case should be as high because there was an additional factor of the defendant in Lasek going so far as to start a whole new company and continue offending through that company.

[28] At this point, Mr Pomee, I am going to address the further submissions Mr Leabourn has made today. What I was told when the matter was last before me is you had an opportunity through your wife to make a further significant reparation payment. I do not need to get into the details of the transaction but, through a company and property transaction involving a sale of land, your wife anticipated and still anticipates receiving the sum of $200,000 which she would make available to you for reparation purposes.

[29] The matter was put off last time in the hope that that would come to fruition and by today that amount would have been paid. Unfortunately I found out just before sentencing, and your lawyer himself has only just found out, that that has not yet come to fruition. I am told that Mr Leabourn has provided to Ms Pinto proof that it is still very likely to happen and that the lawyer acting on the sale has given an undertaking that the $200,000 will be paid in reparation as soon as it is received.

[30] On that basis, Mr Leabourn submitted I should reconsider the starting point I gave at the sentence indication, which was four years and six months’ imprisonment. He referred to one of the many cases the Commissioner had referred to for the sentence

indication of Commissioner of Inland Revenue v Mills3. He submitted that the loss to the Commissioner in that case was $996,107 and I should compare that to what would, if the $200,000 was made available, be the net loss to the Commissioner in your case. Based on it being comparable, Mr Leabourn invited me to adjust my starting point to something akin to the starting point in Mills of three years’ imprisonment.

[31] However, there are other cases where there might similarly be a close comparison to the figure, one being Commissioner of Inland Revenue v Cree4 where the loss to the Commissioner was just over $1,000,000. The starting point in that case was four years and six months’ imprisonment, so quite a bit different to Mills.

[32] Where I differ with Mr Leabourn is in accepting that the loss to the Commissioner of close to $1 million in your case, if the $200,000 is paid, is the figure I should take. In terms of the starting point, I consider the appropriate figure to take is the loss of approximately $1.9 million, not the net figure in terms of reparation payments already made and the potential/likely $200,000. Rather it is my view that I take that into account at the stage of personal factors that I could discount for. I note that was certainly the approach taken by the Judge in another case the Commissioner referred to of Dept of Inland Revenue v Kumar.5 Reparation payments made in that case were acknowledged in terms of a discount at the personal factors point, not in terms of the starting point.

[33] There is the additional issue as I pointed out to Mr Leabourn when he was making submissions that unfortunately the amount has not been paid yet. I acknowledge that is probably just a matter of terrible timing but, as at today, it has not been made and so the amount is not reduced by that further $200,000. In any event it probably, as I say, does not impact the starting point. For starting point purposes, I take the original loss of approximately $1.9 million.

[34] In conclusion then, Mr Pomee, in terms of the starting point, when I take the aggravating features present in relation to your offending and undertaking a

3 Commissioner of Inland Revenue v Mills [2018] NZDC 2274. 4 Commissioner of Inland Revenue v Cree [2019] NZDC 1475. 5 Dept of Inland Revenue v Kumar [2018] NZDC 24405.

comparison with the other cases, particularly Lasek, my starting point for your offending remains at four years and six months’ imprisonment.

[35] What I do now is turn to identify personal factors I can take into account, which is something I was not really able to do at the sentence indication.

[36] I do not identify any aggravating personal features. You only have one prior driving offence which is irrelevant for today’s purposes.

[37] In terms of mitigating features, first is the full 25 per cent discount for your guilty plea soon after my sentence indication.

[38] I of course have the benefit of a pre-sentence report dated 26 August but, additional to that and perhaps more importantly, you have provided to the Court a s 27 cultural report authored by [name of report writer deleted] dated 16 March this year.

[39] Like the pre-sentence report, it tells me about the positive upbringing you had in South Auckland in terms of family life, schooling et cetera. You are a proud Tongan. Religion was and is a big part of your life. So is music. You are happily married to your Samoan wife, [name deleted] and together you are raising three children. The support you have had throughout your life to date is reflected in the support you have from your famili here today.

[40] Growing up and into adulthood you were motivated, driven by a sense of obligation to provide and you worked hard to start a business and build that up to be successful. You focused on giving Pasifika people work.

[41] Being a cultural report, Ms Neilsen explains to me relevant aspects of your Tongan heritage and culture. As part of that, she tells me of the respect you have for your elders and how you will follow and obey your elders no matter the cost to you personally or to your immediate famili. She tells me about this not to justify your actions but to help me understand why you say you helped others, including your mostly Pasifika workers or your family members including your uncle and nephew,

even when you knew it was detrimental to and hurting the company, you personally, your wife and your famili.

[42] I acknowledge that as a relevant factor. However the difficulty I have, Mr Pomee, in giving it too much weight is that so much of the money you wrongfully diverted went to you personally and not mostly to help out employees or famili. For that reason, I am giving you a modest discount of five per cent.

[43] I turn now to consider the good character aspect. There is quite a difference across the cases as to how much a defendant has received as a discount for good character, if at all. Some Judges have said no matter how good your character, that is offset by the type and level of offending. Others have taken a different, softer view. I am prepared to give you a discount on this factor, albeit again a modest one, to reflect the significant work you undertook for this offending to better other Pasifika families and communities and your own family.

[44] Such was your contribution in Samoa that your wife’s village conferred on you, a Tongan man, a matai title and authority to wear a pe’a. I have referred to the fact that you gave many other Pasifika peoples employment and helped them out in their times of need. For this factor, I give a five per cent discount.

[45] I have considered remorse, and while I acknowledge you are remorseful, this is very much in hindsight and, given the length of time of the offending, I am not prepared to provide a discrete discount for that.

[46] Turning to reparation, I have noted already the close to $500,000 voluntary reparation payment and the further $223,000 by the liquidator. They are significant amounts, though having said that you are of course just paying back what you stole so it somewhat detracts from that.

[47] I did come in initially prepared to give you a 10 per cent discount for the reparation payments. However I am increasing that to 15 per cent for the further

$200,000 payment that is hopefully and likely to be paid.

[48] In terms of deductions then, the total of the deductions, including the 25 per cent for guilty plea, is 50 per cent. From the 54 months, which is four and a half years, and deducting that 50 per cent discount, my sentence today, Mr Pomee, is one of imprisonment and it is for a period of 27 months’ imprisonment.

[49] I acknowledge how devastating this will be for your famili, and despite the submissions of Mr Leabourn I did not get to 24 months. I do want to say however, in terms of all of the principles and the purposes and the least restrictive outcome, I consider in light of the gravity of the offending that a sentence of imprisonment is appropriate and inevitable. So that is my sentence, 27 months’ imprisonment.

Judge G Wagner

District Court Judge | Kaiwhakawā o te Kōti ā-Rohe

Date of authentication | Rā motuhēhēnga: 18/05/2022