Barron v Commissioner of Inland Revenue [2014] NZHC 2249 (17 September 2014)

Last Updated: 25 September 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CRI 2014-409-000074 [2014] NZHC 2249

GRAEME ALEXANDER BARRON Appellant

v

COMMISSIONER OF INLAND REVENUE Respondent

Hearing:	4 September 2014
Counsel:	D Matthews for Appellant MAJ Elliott for Respondent
Judgment:	17 September 2014

_{JUDGMENT OF WHATA J}

[1] Mr Barron was convicted on 36 charges of knowingly failing to provide a GST return with intent to evade the assessment and/or payment of tax, and six charges of knowingly failing to provide an income tax return with intent to evade the assessment and/or payment of tax. He was sentenced to a term of imprisonment of one year four months and two weeks. Mr Barron appeals his sentence on the basis that he was eligible for and should have been subject to home detention.

Basis for appeal

[2] The basis of the appeal can be reduced to the following core propositions:

(a) The Judge erred in assuming that the offence category lies beyond a sentence of home detention;

BARRON v COMMISSIONER OF INLAND REVENUE [2014] NZHC 2249 [17 September 2014]

(b) The lack of an ability to make reparation was not a factor relevant to whether or not a sentence of home detention is appropriate;

(c) The Judge placed undue weight on previous convictions;

(d) The Judge erred in concluding that the need for deterrence and accountability ruled out a sentence of home detention.

Background

[3] Mr Barron is not new to tax related offending. He has convictions for failing to furnish tax returns as follows:

(a) 1993: 11 charges in relation to GST returns and three in relation to income tax returns.

(b) 1994: nine charges in relation to GST returns and two in relation to income tax returns.

(c) 1996: four charges in relation to GST returns and one in relation to income tax returns.

(d) 1997: six charges in relation to income tax returns.

[4] Mr Barron was also convicted on 37 charges of using documents for pecuniary gain in 1998.

[5] The Judge described the current offending as follows:¹

[4] The 42 charges you face now carry a maximum penalty each of five years’ imprisonment. That marks the seriousness with which Parliament views such offending. Taken in totality, I have to regard the gravity of your offending as well up the scale. It was sustained, continuous offending over a period of six years. It comprised 42 dishonest omissions, involved $73,000 odd of revenue lost to the state and, given that I am now informed that you are the subject of bankruptcy proceedings before the High Court which you are in no position to defend, there is effectively no prospect of reparation.

¹ Inland Revenue Department v Barron DC Christchurch CRI 2014-009-1495, 31 July 2014.

[6] The Judge then adopted a starting point for sentence of 18 months imprisonment. He considered that Mr Barron’s actions constituted “a repeated gross breach of trust”. The Judge found that premeditation was clearly an apparent factor. In terms of aggravating features he took into account previous convictions and added an uplift of four months imprisonment. The Judge then concluded:

[8] In terms of mitigation, you have entered prompt guilty pleas and I give you the maximum reduction available, which would reduce it by five and a half months to 16 and a half months’ imprisonment. As that is less than two years, I must consider whether a community-based sentence is an appropriate alternative. After careful consideration, the answer I must give is that it is not. Given the scale and extent of your offending, your total inability to make reparation and your previous history of similar offending, I must conclude that nothing short of imprisonment would meet the need for deterrence and to hold you sufficiently accountable for the harm that you have done to the victims in this case, which is all of us, the community.

Argument

[7] Mr Matthews does not challenge the term of imprisonment. Rather, Mr Matthews maintains that the Judge erred in reaching the conclusion that a sentence of imprisonment “must” be imposed. Mr Matthews helpfully essayed various cases where home detention was imposed for what he considers to be comparable or worse offending. I will come to them below. The short point made by Mr Matthews is that home detention for this type of offending appears orthodox and the Judge erred in assuming that the offence category lies beyond the sentence of home detention.

[8] Specific reference is made to the decision of Simon France J in Walker v Ministry of Social Development.² That case dealt with benefit fraud but Mr Matthews submits that it is analogous to the present case and the following observation by Simon France J is relevant here:³

[10] ... The implication is that the nature of the offending presently being considered – sustained fraud over a number of years causing losses in the low six figures – does not of itself tell against home detention. In my view there must be some added feature that tips the scale otherwise precedent and consistency dictate the outcome.

² _{Walker v Ministry of Social Development [2014] NZHC 1386.}

³ At [10].

Crown submissions

[9] Mr Elliot submits, in short, that the Judge took into account all relevant considerations, and did not have regard to an irrelevant consideration (namely, the lack of ability to make reparation). It is also submitted that the Judge was entitled to take into account previous convictions. He also submits that the need for deterrence and accountability were relevant considerations and it was open to the Judge to consider that imprisonment was necessary.

[10] Mr Elliot does not dispute that in many like cases a sentence of home detention was imposed. Nevertheless he maintains that the imposition of a term of imprisonment was available to the Judge. He also submits that the Judge did not find that he was obliged to impose imprisonment. Rather the Judge was simply compelled in the circumstances to impose such a sentence.

Assessment

[11] Section 250 of the Criminal Procedure Act 2011 provides that I must allow an appeal if I am satisfied that for any reason there is an error in the sentence imposed on conviction and a different sentence should be imposed.

[12] Error simply means material error and may include a sentence which is manifestly excessive, wrong in principle or flawed on its face.⁴

[13] An interesting aspect of this case is that the Commissioner of Inland Revenue submitted that home detention or imprisonment would be a suitable sentence. This submission followed from a detailed canvas of similar offending where a sentence of home detention or community based sentence was imposed. It is difficult in light of this canvas, supplemented by Mr Matthew’s survey, to accept that “nothing short of imprisonment would meet the need for deterrence and to hold [Mr Barron] sufficiently accountable for the harm that [he has] done to the victims in this case,

_{which is all of us, the community.”}

⁴ Tutakangahau v R [2014] NZCA 279.

[14] Counsel in joint supplementary submissions also submitted that benefit fraud and tax evasion fall into the same broad genus and so the sentencing approaches developed in one are relevant to the other. But while both types of offending involved fraud against the State (so the starting point might be similar), the personal circumstances of the individual offenders are likely to be different. In any event, the point of principle made by Simon France J resonates here – namely and in short, similar offending should receive broadly similar sentences. Accordingly, I have decided to take a closer look at the approach to sentencing in the current context given the long list of authorities cited to me suggesting that something less than imprisonment is appropriate.

[15] Returning first to the central facts for context; Mr Barron evaded paying

$31,097.04 in GST and failed to pay income tax of $42,337.59, over a five year period resulting in 36 charges of knowingly failing to provide a GST return and six charges of knowingly failing to provide an income tax return. He has 30 convictions for similar offending spanning the period 1993 to 1997. He is not in a position to pay any reparation, though I understand his counsel to be saying that he will be in a better position to do so if a sentence of home detention is imposed.

[16] In terms of the case law cited by CIR and Mr Matthews, the present offending involved comparable or less evasion.⁵ However, the appellate authorities cited by Mr Matthews have some distinguishing features personal to the offender. In

_{R v Easton}⁶_{, the Judge was confronted with the prospect of business closure and the}

⁵ Compare: Commissioner of Inland Revenue v Haggie DC Tauranga CRI-2001-070-

756431, 22 September 2010 - $50,000 evaded – 12 months imprisonment and reparation of $50,394; Commissioner of Inland Revenue v Kamal DC Wellington CRI-2012-085-8280, 15 February 2013 - $55,738 evaded – three months home detention and 150 hours community service; Commissioner of Inland Revenue v Brown DC Palmerston North, 29 October 2013 - $65,000 evaded – five months home detention; Commissioner of Inland Revenue v Lucy DC Waitakere CRI-2010-

090-6299, 23 September 2011 - $71,039 evaded – four months home detention and

150 hours community work; Inland Revenue Department v Rasekh DC Tauranga CRI-2004-070-6285, 5 July 2010 - $78,454 evaded – eight and a half months home detention and 300 hours community work; Inland Revenue Department v O’Neil DC Wellington CRI-2010-085-6888, 1 December 2011 - $100,000 evaded – six

months’ community detention and 80 hours community work and reparation of

$7,500.

6. R v Easton [2014] NZHC 522. This decision followed a referral back by the Court of Appeal; see R v Easton [2013] NZCA 677.

loss of 75 jobs in reaching the conclusion that 80 hours community work and four months community detention was appropriate. Reparation was also ordered in the sum of $199,292.98 being the full amount outstanding. In Zaheed v R,⁷ the sentencing judge did not adhere to the sentence indication standard and the defendant had served the equivalent of six months imprisonment. This led the Court of Appeal to then conclude that a sentence of home detention was appropriate. Commissioner of Inland Revenue v Dempsey⁸ involved an appeal against community detention together with reparation of $39,300 as manifestly inadequate as compared to home detention (rather than the proposition that imprisonment was manifestly excessive). Similarly R v Klintcharov,⁹ involved an appeal against a sentence of home detention as being manifestly inadequate, against a backdrop where a sentencing indication of home detention had been given and then immediately followed by guilty pleas.

[17] A closer look at District Court authority also reveals a similar approach. For example in R v Smith¹⁰ the amount evaded was $247,000 spanning offending over a

10 year period. But major factors in imposing a sentence of home detention included that Mr Smith had already paid $108,867, was 66 years old and with a heart condition.

[18] Having now examined the authorities relied upon by counsel, they fall short of establishing a principle that home detention is the preferable sentence for this type of offending. Rather they illustrate that home detention should be carefully considered when dealing with tax evasion of the scale and kind currently before me. Further, the appellate authorities signal that particular features of the offending and personal circumstances have a significant influence on the appropriateness of home detention.

_{[19] The Court of Appeal R v Easton also had this to say:}¹¹

⁷ _{Zaheed v R [2010] NZCA 573.}

⁸ _{Commissioner of Inland Revenue v Dempsey HC Wellington CRI 2010-485-89, 5 October 2010.}

⁹ _{R v Klintcharov [2014] NZHC 2778.}

¹⁰ _{R v Smith DC Wellington CRI 2007-032-5070, 11 November 2009.}

¹¹ R v Easton [2013] NZCA 677 at [36].

[36] As the Judge acknowledged, this type of offending ordinarily attracts a sentence of imprisonment. R v Allan (in which an appeal against sentence of one year’s imprisonment in respect of a core GST debt of $51,407.70 was abandoned), James v R (in which a sentence of two years’ imprisonment was upheld in respect of “notionally evaded” tax of $174,206, of which $147,328 has been repaid) and R v Smith (in which an end sentence of two years and six months imprisonment was upheld in respect of a PAYE debt of at least

$570,000) are illustrations. The need for deterrent sentences was emphasised by Harrison J, for this Court, in James. His Honour expressed agreement with the District Court Judge’s “characterisation of [such] offending as ‘straight theft from the community’”.

[20] While it does not appear that the Court of Appeal had the same canvas of cases tabled before me, it cannot be said that home detention is the norm for tax evasion.

[21] Turning then to the Judge’s approach to sentencing, I think we need to be careful on appeal not to read too much into the Judge’s precise phraseology. Judges often express themselves in direct terms to drive home the message. I think that is what Judge Couch was trying to do when he said that he “must conclude that nothing short of imprisonment” will satisfy the sentencing principles. Indeed he was expressing a conclusion after having weighed the various factors, not expressing a principle of sentencing that tax evasion of this type must result in imprisonment.

[22] I also consider that Judge Couch had regard to key principles of sentencing and formed a judgment that in the circumstances of the offending, and in light of Mr Barron’s previous convictions, a sentence of imprisonment was necessary.¹²

Furthermore, I do not accept that an inability or refusal to make reparation is an irrelevant consideration. The Judge was entitled to weigh positive and negative factors when imposing sentence and the type of sentence. The preparedness and capacity to make reparation goes to the extent of the repair to the harm done, the extent of remorse, and the suitability of the offender in terms of a community based sentence. And it is relatively clear that the Judge concluded that imprisonment, not

_{home detention, is the proportionate response to the offending and to the offender.}

¹² It is not recorded in the judgment that the Judge had regard to the principle that the least restrictive sentence is to be preferred. But this apparent omission was not a ground of appeal. In any event it is highly unlikely that this principle would not have been taken into account.

[23] Accordingly, it was within the discretion of the sentencing Judge to determine what the appropriate balance of considerations means in terms of sentence. While it may be available to me to come to a different conclusion on the same facts, I am not satisfied that the Judge below has erred in the sense used at s 250. For the foregoing reasons, there being no material error, I am not prepared to alter sentence.

[24] Before concluding I wish to commend Mr Matthews and Mr Elliott for their helpful and thorough submissions.

[25] The appeal is dismissed.

Solicitors:

Public Defence Service, Christchurch

Raymond Donnelly & Co, Christchurch