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Last Updated: 21 September 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2012-404-209 [2012] NZHC 2275
BETWEEN CHANDAR PRAKASH Appellant
AND THE COMMISSIONER OF INLAND REVENUE
Respondent
Hearing: 20 August 2012
Counsel: F C Deliu for the Appellant
W Fotherby and D Anath for the Respondent
Judgment: 5 September 2012
RESERVED JUDGMENT OF ELLIS J
This judgment was delivered by me on 5 September 2012 at 12 noon, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors: Crown Solicitors, PO Box 2218, Auckland 1140
F C Deliu, PO Box 68559, Auckland
PRAKASH V COMMISSIONER OF INLAND REVENUE HC AK CRI-2012-404-209 [5 September 2012]
[1] Mr Chandar Prakash appeals against a sentence of 22 months’ imprisonment imposed on 18 June 2012 by Judge Cunningham in the Auckland District Court following his plea of guilty to one count of tax evasion under s 143B of the Tax Administration Act 1994 (the TAA). Mr Prakash had originally faced 35 similar charges, but the indictment was amended to a single representative charge at the (first) sentencing hearing with his consent. The agreed amount of tax (GST and income tax) evaded was almost $171,000.
[2] Mr Prakash’s guilty plea was entered following a sentencing indication given by Judge Cunningham on 14 March 2012.
[3] Because of the nature of the arguments advanced by Mr Deliu on appeal, it is necessary to set out the background in some detail.
Facts of the offending
[4] Based on the Commissioner’s summary of facts, the offending occurred between 31 May 2001 and 31 March 2006 inclusive. During this period Mr Prakash was a sole trader, working as a draftsman and architect. He kept no business records and fraudulently used a de-registered GST number when invoicing and charging his clients. He failed to file GST or income tax returns, despite knowing his tax obligations. During the same time-frame Mr Prakash borrowed from banks on the basis that he was receiving a yearly income of around $150,000.
[5] The summary of facts also referred to:
(a) the receipt by Mr Prakash and his wife of the unemployment benefit between 1996 and 2004;
(b) the fact that Mr Prakash had made no voluntary payments towards his tax debt; and
(c) the fact that he continued (in 2008) to be in default in filing his tax returns.
Judge Cunningham’s sentencing indication
[6] In indicating her view of an appropriate starting point for Mr Prakash’s offending, Judge Cunningham regarded the sustained period over which the offending occurred and the significance of the loss to the community as relevant aggravating factors. Then she said:[1]
What was going on over this period of time is that Mr Prakash was working as a draftsperson and at the same time for the last couple of years he and his wife were in receipt of family assistance. Information in the summary of fact [sic] indicates that the amounts obtained by way of family assistance were about $18,000. That is something I will come back to shortly. ...
[7] The reference here to Mr Prakash’s receipt of family assistance appears to have come from the submissions prepared by counsel for the Commissioner for the hearing, in which he said:
4.16 The Commissioner submits that certain aspects personal to Mr
Prakash, relating to this offending, merit an uplift to any end sentence:
(a) Should this matter come to trial, the Commissioner will lead evidence that at the time of the alleged offending, Mr Prakash claimed a family-assistance benefit from Work and Income New Zealand to which he was not entitled. Moreover, he took no steps to pay off a student loan, despite falling above the threshold at which repayments are required. In total, the sums in issue here are around
$20,000. It is unlikely that any discrete prosecution will be taken in respect of these sums.
[8] The submissions then went on:
(b) On 20 August 2009, Mr Prakash was adjudicated bankrupt, and all of his overdue debts up to the year ending 31 March 2007 were written off.
(c) At the present date, Mr Prakash has outstanding income tax returns for the tax years ending 31 March 2008 to 31 March 2011.
(d) The Commissioner laid charges in this matter in August
2009. Shortly after, Mr Prakash was granted permission to travel to
Fiji for business purposes. He then failed to appear at a plea inquiry
hearing on 9 September 2009, and did not return to New Zealand until July 2011, at which time he was arrested.
4.17 Taken in the round, the Commissioner submits that this demonstrates a past and continuing disregard for his financial obligations, not reflected in the starting point reached above, and thus deserving of an uplift of 6 months.
[9] After considering the sentences imposed in other similar tax evasion cases
Judge Cunningham said:[2]
... I determine the starting point here of two years and three months. It is a lesser amount of money than in any of the other cases and were it not for the following matter I would have adopted a starting point of two years. I have added the three months because of the application for and receipt of family assistance. There is an officer for the Department present in Court who has advised that these were joint applications, but even were they not Mr Prakash would have known how much his wife was receiving. If I am wrong about that and evidence can be presented to the Court that persuades me that he knew nothing about it, then I would remove that three months from the starting point.
[10] The Judge then went on to note that Mr Prakash had left New Zealand immediately after the commencement of bankruptcy proceedings but said:
In my view that is not so relevant as the fact that he left knowing that he had these active criminal charges before the Court.
[11] Ultimately, Judge Cunningham indicated that she would be inclined to give a
15 per cent discount for Mr Prakash’s guilty plea which, by virtue of his absence from New Zealand, was entered two years after the charges were originally laid. That would yield a final sentence of one year and 10 months’ imprisonment. The Judge did not rule out a further discount for remorse, although she believed it would be difficult for Mr Prakash to persuade the Court that he was truly sorry for his actions. The Judge expressly left the issue of home detention for determination after
she had seen the pre-sentence report.
First sentencing hearing: 25 May 2012
[12] As I have said, Mr Prakash pleaded guilty immediately after receiving the sentencing indication. As I understand it, he was then scheduled to be sentenced on
25 May. The pre-sentence report dated 24 May 2012 recommended a sentence of imprisonment. It seems that shortly before the hearing an Inland Revenue officer also filed what was called an “affidavit ... in lieu of victim impact statement”. The deponent began by saying:
3. I wish to set out below the IRD’S view of Mr Prakash’s offending,
so that it may be taken into account at the sentencing hearing.
4. On or about April 2006, I was instructed to conduct an audit of Chandar Prakash. Inland Revenue had obtained copies of tax invoices issued by Mr Prakash to his clients for architectural drawings. The tax invoices were dated approximately 6 years after he has deregistered himself for GST. Exhibit 1 to 8 is copies of tax invoices issued by the defendant.
5. Mr Prakash was deregistered for GST on 31 January 1996.
6. For the tax years ending 31 March 2002 to 31 March 2006, Mr Prakash and his spouse, Aneet Kaur, were in receipt of the unemployed benefits and family support payments from Work and Income New Zealand (now known as Community Link).
7. For the tax years ending 31 March 2002 to 31 March 2006, Mr Prakash did not declare his business income and did not return the output tax on GST that he has charged and collected from his clients.
...
[13] She repeated her evidence about Mr Prakash’s receipt of the unemployment
benefit and family assistance later in her affidavit. Then she said:
23. Because of Mr Prakash’s absence from New Zealand during the court proceedings and his frequent changes of legal counsel, the Inland Revenue has wasted a significant amount of court time and costs.
...
27. From the commencement of the audit in April 2006 to date, Mr Prakash made no attempt to enter into any arrangement with Inland Revenue in regard to repayment of his tax debts.
28. Mr Prakash has made no voluntary payments towards repayments of his income tax, GST, family assistance and student loan debts, but instead applied the funds towards the purchase of the following:
a. Property located at 182 Ireland Road, Panmure in January 2006 for
$440,000.00 (refer to exhibit 9)
c. 2007 Mazda CX7 Station Wagon 5 door registration DUD793 in
March 2007 for $50,818.00 (refer to exhibit 11).
LOSS TO THE INLAND REVENUE
29. Mr Prakash was adjudicated bankrupt on 20 August 2009.
30. A total of $1,066,175.94 (including late payments and use of money interest) of his tax debts was written off (Student loan: $41,481.38, GST
$194,156.95, income tax: $830,537.61).
OTHER GOVERNMENT AGENCIES ACC
31. Inland Revenue provides information to ACC Corporation which is in turn used to assess and collect ACC premiums.
32. Mr Prakash’s failure to file GST and income tax returns and declare his business income has enabled him to avoid paying the correct ACC premiums.
...
FAMILY ASSISTANCE (AKA FAMILY SUPPORT OR FAMILY TAX CREDITS)
...
43. On 15 March 2000 Inland Revenue received Mr Prakash and Ms Kaur’s family assistance application form for the periods from 1 April 2000 to 31 March 2001.
44. Mr Prakash and Ms Kaur did not disclose their true income and therefore have received family assistance payment as shown on Table 3 below:
Table 3
Tax Year Family Assistance Exhibit
31/03/02 $3,896.80 24
31/03/2003 $4,029.00 25
31/03/2004 $632.00 26
$8,557.80
...
CURRENT FURTHER OFFENDING
46. The Inland Revenue audit and current prosecution proceeding have not deterred Mr Prakash from further offending.
47. For the income tax year ending 31 March 2007, Mr Prakash failed to declare all of his self-employed income in his income tax and GST returns. He has not made any payment toward this year income tax debts or forwarded to the Inland Revenue the GST output tax which he has charged and collected from his clients.
48. Mr Prakash has not filed his tax returns for the tax year ending 31
March 2009, 31 March 2009, 31 March 2010 and 31 March 2011 as required by the Tax Administration Act 1994.
49. Mr Prakash continues to be non-compliant and has yet to declare the income which he has earned in Fiji for the year ending 31 March
2009, 31 March 2010 and 31 March 2011.
Child Support obligations
50. In April 2010, Ms Kaur applied for the domestic purpose benefit from Work and Income New Zealand. This made Mr Prakash liable for child support payment.
51. To date the defendant has not made any child support payments and he has evaded child support payments by not declaring his true income.
52. Mr Prakash currently owes the Commissioner of Inland Revenue a sum of $10,372.15 for overdue child support payments (refer to exhibit 27-28).
[14] Judge Cunningham did not, however, sentence Mr Prakash on 25 May. Rather, she adjourned the matter in order that further information could be obtained. Her notes on the record of hearing sheet say:
1. Clarify benefit/work situation ...
2. Reparation report.
3. Probation to update report on possibility of working on home detention.
Second sentencing hearing: 18 June 2012
[15] On Friday 15 June two addenda to the pre-sentence report were filed. One was an electronic monitoring report that simply said that “the recommendation of imprisonment within the principal report dated 24 May 2012 endures.”
[16] The other dealt with reparation and Mr Prakash’s ability to work if sentenced to home detention. As regards the reparation issue, it noted that “Mr Praksah states that he earns $720 per week and is willing to pay reparation of $10,000 at $20 per week”. As regards the ability to work issue, it said that Mr Prakash told the report writer that he had been employed by Mr Mahabair of NZ Building Projects since
26 March 2012. But the writer said that she had been unable to speak with Mr Mahabair because she was told that he was out of the country and would not return until 18 June. It also records Mr Prakash’s advice that the nature of his job might require him to work on site and a sentence of home detention was “therefore problematical”.
[17] Also on 15 June, the Inland Revenue officer filed a further affidavit in which she:
(a) set out Inland Revenue’s position that Mr Prakash was required, but had failed, to pay tax on income he had received in Fiji between 2009 and 2011;
(b) said that Mr Mahabair was a long-standing friend of Mr Prakash and that further investigation following Mr Prakash’s advice that he had begun work at NZ Building and Project in March 2012 was at odds with Mr Prakash’s advice to WINZ that he had started work on
23 April 2012 and meant that he had been wrongly receiving the unemployment benefit during March and April 2012; and
(c) Commented (adversely) on one of the explanations Mr Prakash had given by the Probation Officer for not paying tax during the period in question.
[18] At the sentencing hearing on Monday 18 June, Judge Cunningham reiterated her view that the significant financial loss to the Inland Revenue, and therefore the wider community, was an aggravating feature of Mr Prakash’s offending. She noted that the pre-sentence report writer observed a lack of remorse and accountability in Mr Prakash, and she said that this observation accorded with her own impression.
The Judge noted that Mr Prakash was not in a position to pay reparation as he had been declared bankrupt and was in arrears with child support. Similarly, she said that on the material before her it did not appear that he would be able to work while on home detention, because his job entailed visits off-site.
[19] She imposed a final sentence of imprisonment of one year and 10 months’ which precisely accorded with her sentencing indication (including the three month uplift for the family assistance matter).
Basis for appeal
[20] Mr Deliu submitted that Judge Cunningham’s sentence was in error because
she:
(a) took into account irrelevant considerations;
(b) failed to take into account relevant mitigating factors; and
(c) believed that Mr Prakash was not remorseful for his offending.
[21] He also submitted that the Judge wrongly rejected home detention as the appropriate disposition.
[22] Mr Prakash filed an affidavit in support of the appeal in which he expresses remorse and speaks of the difficulties his incarceration is causing him and his family. As I understand it the purpose of this affidavit is:
(a) to fortify the submission that Judge Cunningham’s refusal to accept that Mr Prakash was truly remorseful constituted an error of fact;
(b) to demonstrate that there are exceptional circumstances pertaining to Mr Prakash and his family which should have been (or should now be) taken into account in sentencing and, in particular, in determining whether home detention is appropriate.
[23] Of these contentions, it was the first that was pursued with the most vigour before me. Although Mr Deliu described it as an issue of “Prosecutorial Misconduct”, his essential submission was that certain material had “improperly” been put before the Judge by counsel for the Commissioner, was not relevant to Mr Prakash’s sentence, and had wrongly been taken into account by her. He referred in particular to the evidence about:
(a) family assistance that had been fraudulently obtained by the Mr and
Mrs Prakash;
(b) Mr Prakash’s bankruptcy;
(c) overdue child support owed by Mr Prakash; (d) details of Mr Prakash’s unpaid student loan;
(e) Mr Prakash’s lack of cooperation with Inland Revenue and continued
failure to fulfil his tax obligations; and
(f) Mr Prakash’s repeated changing of counsel.
[24] He said that as a result of these matters being before the Court, the Judge was left “with a sour impression of the appellant which would naturally have led to him being punished not for his crime but for some other irrelevant matters”.
[25] Conversely, Mr Deliu submitted that the Judge had “failed to give credit where credit was due” because she did not give a discount for Mr Prakash’s lack of previous criminal convictions and had ignored the fact that he had been assessed as having a low risk of reoffending in the pre-sentence report.
Discussion
[26] I have little difficulty in rejecting the submission that Judge Cunningham wrongly failed to take account of Mr Prakash’s absence of previous criminal convictions and the assessment that he was a low reoffending risk.
[27] First, absence of prior convictions is, of course, not synonymous with previous good character (which is required to be taken into account by s 9(2)(g) of the Sentencing Act 2002). Even to the extent there is an overlap, the reality here was that Mr Prakash’s offending began in 2001 and continued over a considerable period of time.
[28] Secondly, the report writer’s assessment of Mr Prakash’s low risk of recidivism is at odds with the evidence about his continued non-compliance (a matter I shall come back to), his lack of insight into his offending, and the view Judge Cunningham took about Mr Prakash’s lack of genuine remorse.
[29] Thirdly, I can discern no error in the Judge’s approach to that (remorse) issue. On the material before her she was more than entitled to form the view that she did. Nor do I consider that Mr Prakash’s later affidavit would cause me to depart from that conclusion. All it shows is that Mr Prakash very much regrets the position that he now finds himself in and that being in prison is trying for him. The “extraordinary” circumstances that Mr Deliu says are disclosed in the affidavit are the ordinary (albeit unpleasant) consequences of being incarcerated. And it is difficult for Mr Prakash tenably now to point to the hardships associated with being apart from his family given that he voluntarily left them all in New Zealand between
2009 and 2011, when he chose not to return from Fiji.
[30] But I am unable to dismiss quite so readily Mr Deliu’s submission that some of the material put before the Court might have had an unfair “tainting” effect in terms of Mr Prakash’s sentence. It was not immediately clear to me precisely why much of the material contained in the Inland Revenue affidavits was put before the Court. The idea that either the Commissioner or Inland Revenue was presenting as the “victim” of Mr Prakash’s offending was potentially troubling. After reviewing the material I have set out above, it is difficult not to be left with the impression that there was a degree of “overkill” on Inland Revenue’s part in identifying the potentially aggravating features of Mr Prakash’s behaviour over the last 10 years. Mr Deliu is correct in his submission that a number of the aggravating factors identified go well beyond the facts that go to the elements of the offence to which Mr Prakash pleaded guilty.
[31] Notwithstanding my initial concerns, however, I accept Mr Fotherby’s submission that much of the additional material placed before Judge Cunningham was in fact relevant to the sentencing exercise.[3] In particular:
(a) the fact of Mr Prakash’s bankruptcy and that he owes further debts to the Crown seem relevant to his ability to pay reparation. Moreover, Judge Cunningham’s sentencing notes make it clear that it was only in that limited context that she took those matters into account;
(b) the historic failure by Mr Prakash to file tax returns or to declare any income (ie the offending for which he was sentenced) enabled him to:
(i) wrongly obtain family assistance,
(ii) wrongly obtain the unemployment benefit;
(iii) avoid meeting the threshold that would have triggered repayments being required on his student loan; and
(iv) pay the wrong ACC premiums.
Those matters, and the resulting wider loss to the Revenue, are the direct result of Mr Prakash’s offending. They are thus legitimate considerations on sentencing.[4]
(c) Mr Prakash’s continued lack of cooperation with Inland Revenue and his continued failure to meet his tax obligations are also arguably relevant to the issue of remorse and to the prospects of his rehabilitation.
[32] That said, care does need to be taken in presenting these sorts of matters to a sentencing Court. In particular (and notwithstanding what I have said at [31](b) and
[31](c) above), allegations of other offending in respect of which no charges have been laid and no convictions entered must be regarded with circumspection.
[33] For the reasons given below, however, I do not consider that Mr Prakash was prejudiced by the reference to such matters in this case.
[34] First, s 24(2) of the Sentencing Act sets out the procedure to be followed if the Crown wishes to rely on an aggravating fact that is disputed at sentencing. That procedure was followed in Mr Prakash’s case in relation to the family assistance issue; Judge Cunningham clearly signalled in her sentencing indication what effect it would have on sentencing and said that Mr Prakash should file evidence if he wished to dispute it. He did not do so.
[35] Secondly, because of the sentencing course taken by Judge Cunningham, Mr Prakash had the opportunity to dispute any of the other aggravating matters referred to in the Inland Revenue affidavits. Most were clearly signalled by the Crown at the time of the sentencing indication and were then dealt with in detail in the 25 May affidavit. Although I accept Mr Deliu’s submission that Mr Prakash did not have the opportunity to respond to the 15 June affidavit, it contained very little, if anything, of any additional substance. And no issue with the affidavit was taken by his counsel at the time.
[36] Thirdly, and more significantly, Judge Cunningham’s final sentence was in complete accord with the sentence she had indicated at the earlier hearing. There is therefore no reason to conclude that she placed any weight on any further matters that had been brought to her attention in the meantime. Even without taking into account those aggravating matters, it is clear from other cases involving offending of
this kind that Mr Prakash’s final sentence was well within range. [5] To the extent it
can be said that there was any error here, it cannot be regarded as a vitiating one.[6]
[37] That leaves only the issue of whether Judge Cunningham was plainly wrong in exercising her discretion to decline home detention. It is trite law that appellate courts are likely to defer to the sentencing Judge’s assessment in that respect and will not lightly interfere.[7]
[38] In James, the Court of Appeal held that there was no basis on which it could interfere with the District Court’s refusal to impose home detention on very similar facts to the present.[8] Similarly, I am unable to disagree with Judge Cunningham’s view that the principles of deterrence and denunciation for this type of offending cannot be met by a sentence of home detention. Although Mr Deliu submitted that such a sentence disregards the equally important principles of rehabilitation and reintegration, I have already expressed my reservation about their applicability in Mr Prakash’s case. What I (like Judge Cunningham) perceive to be his lack of
genuine remorse, his absence of insight into his offending, his lack of co-operation and the fact that he has made no attempts to repay any of the tax that he owes, are all supportive of that conclusion.
[39] The appeal is dismissed accordingly.
[1] Prakash v Commissioner for Inland Revenue DC Auckland CRI-2012-004-004420, 14 March 2012, at [6].
[2] At [11].
[3] Although certain other minor matters referred to in the affidavits (such as the allegation that Mr Prakash repeatedly changed counsel) are not in my view relevant, there is nothing to suggest that they influenced Judge Cunningham in any way.
[4] Sentencing Act 2002, s 9(1)(d).
[5] Inland Revenue Department v Clemm (2005) 22 NZTC 19,495 (HC); R v Smith (2009) 24 NZTC
23,004 (CA); Eade v Police (2009) 24 NZTC 23,785 (HC); James v R (2010) 24 NZTC 24,271 (CA);
Commissioner of Inland Revenue v Dempsey (2011) 25 NZTC 20,001 (HC).
[6] Yorston v Police HC Auckland, CRI-2010-404-164, 14 September 2010.
[7] Polyanszky v R [2011] NZCA 4 at [13] citing R v D [2008] NZCA 254 at [66]; Otufangavalu v R
[2010] NZCA 585 and Murphy v R [2010] NZCA 567.
[8] James (supra note 3) at [10] and [19].
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