R v Easton [2014] NZHC 522 (21 March 2014)

Last Updated: 28 March 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CRI-2011-041-001510 [2014] NZHC 522

THE QUEEN

v

STUART DAVID EASTON

Counsel: D R La Hood for Crown

C R Carruthers QC for Prisoner

Re-Sentence: 21 March 2014

_{NOTES ON RE-SENTENCE OF COLLINS J}

Introduction

[1] Mr Easton, on 12 July 2013 I convicted you on 22 charges of aiding and abetting three companies to knowingly fail to pay PAYE deductions to the Commissioner of Inland Revenue. This offending breached s 143A(1)(d) of the Tax Administration Act 1994.

[2] I determined that the amount of PAYE that was not paid to the Commissioner was $204,213.03.

[3] You were the managing director and principal shareholder of the three companies involved, each of which have been placed into liquidation.

[4] On 9 August 2013 I fined you $3,000 in relation to each count, and ordered you to pay court costs of $130 on each charge. I also asked you to pay reparation to

_{the Commissioner. However, in order to avoid the Commissioner receiving more in}

R v EASTON [2014] NZHC 522 [21 March 2014]

reparation than she was entitled to, I directed that the reparation order would not take effect until the liquidation of the three companies was completed.

[5] On 19 December 2013 the Court of Appeal determined that the combination of a fine and reparation was a manifestly inadequate response to the seriousness of your offending. The Court of Appeal also questioned whether the reparation order I made complied with s 36 of the Sentencing Act 2002. The Court of Appeal quashed your sentence and remitted your case back to me for re-sentencing. The Court of Appeal said that its judgment was not intended to preclude the possibility of home detention or a community-based sentence if I considered those options appropriate.

Sentencing reports

[6] I have had the benefit of three pre-sentence reports:

(1) The full pre-sentence report recommends you be sentenced to community work and reparation.

(2) The reparation report records that you accept that the total amount of reparation that remains unpaid is $199,292.98 and that there is no barrier to me ordering reparation of that sum on the basis that you will pay $7,500 every three months with the first payment to be made three months from today’s date.

(3) The third report advises that your home address is a suitable address for you to serve a sentence of community detention or home detention.

[7] In sentencing you, I shall:

(1) re-explain your offending;

(2) identify the starting point of your sentence;

(3) adjust the starting point to reflect mitigating factors;

(4) consider the options short of imprisonment; and

(5) explain your end sentence and the reasons for that sentence.

Your offending

[8] I have previously said the three companies to which the charges related, namely, East Quip Ltd (EQL), Hooked on Rigging Ltd (HORL) and Napier Equity Ltd (NEL), were part of the Easton Group which for many years was a successful and diverse business enterprise in the Hawke’s Bay. Other entities in the Easton Group include Galvanising (HB) Ltd, Hooked on Transport Ltd and Easton Property Trust.

[9] In 2007 the companies in the Easton Group began to experience significant financial challenges. I have explained those challenges in my reasons for verdict and I will not repeat the evidence which I relied upon when explaining the financial challenges faced by you and the companies.

[10] I am satisfied you genuinely believed you did all you thought you could at the time to keep the companies afloat. You did so because you wanted to ensure that you and your companies met their liabilities. To a large extent you succeeded as evidenced by the fact that you, your wife, and two of your companies paid in excess of $850,000 to the IRD.

[11] I am also aware that you and members of your family injected approximately

$2 million in capital into the companies. That sum appears to have been unsecured. You also offered to settle all outstanding debts to the Commissioner. I am informed the offer was $900,000. Likewise, you and your wife took significantly reduced drawings from the companies during the period of financial hardship faced by the Easton Group.

[12] However, I am also aware that you were fairly and clearly warned of your responsibilities to ensure PAYE was paid when you met Ms Lancaster on 24 April

2008. Notwithstanding that warning she gave you, during the following five months and later in July 2009, you consciously and knowingly allowed the companies to use

PAYE deductions as a short term measure to assist the companies’ liquidity crises. You knew that should not have occurred and that it was a serious criminal offence for you to have allowed the PAYE deductions in question to be misapplied.

Starting point

[13] As noted by the Court of Appeal, and by the Crown, convictions for offending of this case frequently result in sentences of imprisonment. In this case the starting point is a sentence of 12 months’ imprisonment.¹

Adjustments to starting point

[14] In my assessment, in all other respects you are a person of very good character who found yourself facing significant business challenges. You lacked the ability to manage those challenges and opted for a course of action that ultimately resulted in you being convicted of the 22 charges in respect of which I must now re- sentence you. I accept, however, that you acted in the way you did because you believed that you were taking short-term measures to try and save the companies. Nevertheless, what you did was wrong and constituted serious criminal offending.

[15] Consistent with the authorities which bind me, I reduce the starting point of

12 months’ imprisonment to nine months’ imprisonment to reflect your otherwise

good character.²

Alternatives to imprisonment

[16] The Court of Appeal recognised that a sentence of imprisonment was not mandatory in your case and that home detention or community-based sentences might be considered appropriate.³

[17] In my assessment, sentencing you to prison is not necessary or appropriate. I

have reached this conclusion primarily because when I assessed you when you were giving your evidence I reached the conclusion that you were not likely to offend in

¹ _{R v Easton [2013] NZCA 677 at [37].}

² _{R v Finlay [2007] NZCA 553; Davidson v R [2011] NZCA 356.}

³ R v Easton, above n 1, at [47].

this way again. I am also very confident that the process that you have gone through of being prosecuted, standing trial and now sentencing, has been a very salutary experience for you.

[18] I am also mindful of the fact that you are the driving force behind the remaining Easton companies and that a sentence of imprisonment or home detention is likely to place the viability of those businesses in jeopardy. That would have very unfortunate consequences for you, your family, and the approximately 75 people employed by your companies. As the author of the full pre-sentence report notes, if your businesses fail that will “... not serve the Commissioner, the community or [you] and [your] family well”.

[19] In determining alternatives to imprisonment I have opted for a combination of community detention and community work. I have concluded that these sentences adequately satisfy the key objectives of sentencing you. In particular, I have concluded that a combination of community detention and community work will:

(1) hold you accountable for your offending;⁴

(2) promote an acknowledgement of your offending;⁵

(3) denounce your conduct;⁶

(4) deter others from committing the same or similar offences;⁷ and

(5) be the least restrictive outcome that is appropriate in the circumstances of your case.⁸

[20] In my assessment, a sentence of 80 hours’ community work appropriately reflects the sentencing principles that I have articulated.

⁴ _{Sentencing Act 2002, s 7(1)(a).}

⁵ _{Section 7(1)(b).}

⁶ _{Section 7(1)(e).}

⁷ _{Section 7(1)(f).}

⁸ Section 8(g).

[21] In addition, I believe that a sentence of four months’ community detention must also be imposed. I am aware the sentence of community detention has been discussed with you by the probation service and that you are aware of what that sentence entails. You will be required to serve a sentence of community detention at your home. You are required to reside at your home from 8.00 pm to 5.00 am Monday to Friday. This curfew is to commence on Monday 24 March 2014.

Reparation

[22] In view of the approach which the Court of Appeal took to the issue of reparation I shall order the payment by way of reparation of the full amount that is currently outstanding, namely $199,292.98. That sum is to be paid by instalments comprising $7,500 every three months, with the first instalment to be paid three months from today’s date.⁹

[23] I have always wanted to try and ensure that if the Commissioner receives, through the liquidation of the three companies, moneys which reflects all or part of the sum that you are required to pay by way of reparation, then there is an opportunity to review the reparation order which I have just made. The Court of Appeal suggested I order reparation be paid on the basis that you be subrogated to the rights of the Commissioner in the liquidation of the three companies. Like Mr La Hood I am not certain if that is possible under s 36 of the Sentencing Act. All I can do is urge that if the Commissioner receives in the liquidation process moneys that reflect some or all of the amount that I have ordered be paid by reparation, then you be subrogated to the Commissioner.

_{[24] You may now stand down.}

Solicitors:

Crown Solicitor, Wellington

Lawson Robinson Ltd, Napier for Prisoner

D B Collins J

⁹ Sentencing Act 2002, s 36(1)(a).