Shortt v Commissioner of Inland Revenue [2018] NZHC 1139 (12 October 2018)

Last Updated: 24 October 2018

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CRI-2018-419-34 [2018] NZHC 1139

BETWEEN	PHILLIP ROBERT SHORTT Appellant
AND	THE COMMISSIONER OF INLAND REVENUE Respondent

Hearing:	12 October 2018
Counsel:	R Weir for Appellant M L Dillon for Respondent
Judgment:	12 October 2018

_{JUDGMENT OF BREWER J}

Solicitors:

Almao Douch (Hamilton) for Respondent

SHORTT v THE COMMISSIONER OF INLAND REVENUE [2018] NZHC 1139 [12 October 2018]

Introduction

[1] Mr Shortt was convicted by Judge DM Wilson QC on 12 February 2018¹ on

19 charges of knowingly filing false GST returns to enable companies he controlled to obtain GST refunds in the knowledge that the companies were not entitled to the refunds.² Each of these convictions made Mr Shortt liable to imprisonment for a maximum of five years and/or a fine of $50,000.

[2] Mr Shortt was convicted also of three charges of aiding and abetting a fourth company in knowingly applying or permitting PAYE tax deductions for a purpose other than payment to the Commissioner of Inland Revenue.³ Each of these convictions also made Mr Shortt liable to imprisonment for a maximum period of five years and/or a fine of $50,000.

[3] The convictions followed a Judge-alone trial at which Mr Shortt did not give evidence.

[4] On 23 May 2018, Judge Wilson sentenced Mr Shortt to home detention for a period of 10 months and ordered him to perform 200 hours of community work.⁴

[5] Mr Shortt now appeals his convictions and his sentence.

Appeal against conviction

[6] Mr Weir for Mr Shortt focuses the appeal against convictions on “a very narrow ground that goes to the heart of the fair trial process”. Judge Wilson considered the failure of Mr Shortt to give evidence enabled him, in reliance on Police v Trompert,⁵ to draw negative inferences against Mr Shortt. Judge Wilson raised this matter during counsel’s oral submissions on 1 February 2018 after the conclusion of the evidential

_{phase of the trial. He granted leave to counsel to file written submissions on the point.}

¹ CIR v Shortt [2018] NZDC 2350.

² Tax Administration Act 1994, s 143B(1)(c) and (h).

³ Tax Administration Act 1994, ss 148 and 143A(1)(d).

⁴ CIR v Shortt [2018] NZDC 10394.

⁵ Police v Trompert [1985] 1 NZLR 357 (CA).

[7] In his written judgment, Judge Wilson did not mention Trompert in relation to the PAYE charges (which he dealt with first). In relation to the GST charges, at [102] of a judgment containing [108] paragraphs, the Judge said:

(f) Mr Shortt provided no additional information at any time supporting the invoices. He provided none during the hearing when, following Trompert, an explanation might have been expected in response to a largely uncontested prosecution case.

[8] That is the only mention of Trompert in relation to the GST charges and the Judge does not say what, if any, adverse inferences he drew in reliance upon Trompert and the failure to give an explanation.

[9] Mr Weir submits that in terms of fair trial principles, a Judge should only exercise the discretion referred to in Trompert after the Judge has decided a prima facie case has been established, or the Judge, during the course of the trial, indicates he or she is considering exercising the discretion. Mr Weir concludes:

15. It is submitted that the fundamental unfairness in this case is that the Trompert rule was exercised after the close of the defence case, in circumstances where none of the steps that the appellant took in firm were unlawful or contrary to IRD policy and it was accepted that the appellant was engaged on behalf of the companies in some form of business activity. The learned District Court Judge expressed the issue as whether the work done justified the invoices, where it was for the Commissioner to prove beyond reasonable doubt that the invoices were false or misleading.

[10] In Mr Weir’s further submission, in a case where affirmative explanations had been given for conduct in interviews with the Inland Revenue Department, drawing negative inferences of a Trompert kind unfairly poisoned the Judge’s mind against

Mr Shortt.

[11] I must determine this appeal pursuant to s 232 of the Criminal Procedure Act

2011. I must allow the appeal if I am satisfied the Judge erred in his assessment of the evidence to such an extent that a miscarriage of justice has occurred or, for any other reason, a miscarriage of justice has occurred.

[12] Section 232(4) provides:

... miscarriage of justice means any error, irregularity, or occurrence in or in relation to or affecting the trial that—

(a) has created a real risk that the outcome of the trial was affected; or

(b) has resulted in an unfair trial or a trial that was a nullity.

[13] I accept that where a trial Judge forms the view that a failure by a defendant to give evidence in the circumstances of the particular case might lead the Judge to draw an inference or inferences adverse to the defendant, then it is best to advise counsel of that. This would give counsel for the defendant notice of potential peril and might lead to a decision to call the defendant. But it all depends upon the facts of the case and the point at which the Judge forms the view that a negative inference might be drawn.

[14] In this case, notice was given to counsel only during the final submissions and leave was given by the Judge for written submissions addressing the point to be filed. I note there was no application for the case to be re-opened so Mr Shortt could give evidence.

[15] It is possible to think of finely balanced cases where inferences drawn by the trial Judge on a failure by a defendant to give evidence could be critical to the Judge finding a charge proved. In such a case, where the Judge early during the course of the trial formed the view that negative inferences might be drawn, and with cogent submissions on how the defendant might have changed the conduct of his defence if the Judge’s intention had been known, an appellate Court might find a miscarriage of justice has occurred. But, in general, I accept Mr Dillon’s submission:

17.4 Question arising: Does unfairness to a defendant arise if a prima facie case is not confirmed to the defendant by a trial Judge, and the defendant is not warned that an adverse inference may be drawn from silence, before the defendant is asked to decide whether to give evidence? Respondent’s position: No. Trompert inferences are

‘naturally drawn’ and from silence in the face of facts that call for explanation. The risk that they may be drawn is obvious and requires

no specific judicial warning. Such warning would amount to legal

advice given from the bench, and somewhat problematic for that reason. It is sufficient for the defendant to have an opportunity to take legal advice before deciding whether to give evidence. Such advice could include an assessment of the strength of the prosecution case and the possibility that a Trompert inference may be drawn.

[16] This was not a finely balanced case. In my view, the evidence against

Mr Shortt was overwhelming. On the GST charges, it was quite clear that Mr Shortt, who is very knowledgeable about tax affairs, set up shell companies to which he then billed exorbitant amounts for his personal services which really did not amount to anything. The companies, through his agency, claimed GST refunds from the Commissioner of Inland Revenue in respect of these invoices. Mr Shortt used the money so obtained for his own purposes.

[17] The PAYE charges were equally straightforward. Mr Shortt controlled the dealings of the company in question with the Inland Revenue Department. PAYE was deducted but never returned.

[18] Mr Weir does not suggest the Judge’s findings on the evidence were not available to him. He submits simply that if the Judge had not drawn Trompert inferences, he might not have made the findings he did. I cannot accept that submission on the facts of this case and how the Judge decided the factual issues.

[19] There is no miscarriage of justice. The appeal against convictions is dismissed.

Appeal against sentence

[20] As I have said, the sentence was 10 months’ home detention and 200 hours of community work.

[21] I may allow Mr Shortt’s appeal against sentence only if I am satisfied that Judge Wilson made an error in imposing his sentence such that a different sentence should be imposed.

[22] The law is plain that I should only intervene and substitute my view of what the sentence should be if I find Judge Wilson’s sentence to have been manifestly excessive and not justified by the relevant sentencing principles.

[23] In this case, Judge Wilson found a term of imprisonment in the range of 24 to

36 months to be appropriate as a starting point. Mr Weir agrees that that was the appropriate range. However, Mr Weir submits that Judge Wilson erred in his

identification of what Mr Weir submits are aggravating features. He points to this paragraph in the Judge’s sentencing notes:

[5] I have given thought as to whether, notwithstanding the fact that an alternative to imprisonment might be considered, that it was an adequate

response to the persistence of your offending over a period of time. This offending was marked by you using your skills as an accountant to your own benefit. You also chose to attempt to bully the officials who were enquiring into your behaviour. You asserted matters that were not true in order to cover your offending. So, this was determined offending over a period of time by a man who, at least in his own mind, was an expert in the field of tax law, and certainly that is how you presented yourself. So, you manipulated the system to your own benefit. That type of behaviour is aggravating.

[24] Mr Weir’s submission is that the matters referred to by Judge Wilson are inherent in the charges. All that happened here was that Mr Shortt took a stated position as to tax liability in dispute with the Commissioner of Inland Revenue.

Mr Weir submits he was entitled to take a different position to the Commissioner, and the fact that the Judge ultimately found criminal liability for the position taken by

Mr Shortt is not grounds for an aggravating feature. Mr Weir puts it that this would be akin to treating a not guilty plea as an aggravating feature.

[25] Finally, Mr Weir submits that the Judge did not take into account Mr Shortt’s previous good character. Mr Shortt has no previous convictions.⁶

[26] Mr Dillon submits that it is the final sentence that must be considered, not the process by which it was reached. In Mr Dillon’s submission, the end sentence is unexceptional and cannot be characterised as manifestly excessive. It is accepted by

Mr Dillon that the Judge did not take specific notice of Mr Shortt’s previous good character. However, neither did the Judge say anything at all in the sentencing notes about the PAYE charges. The Judge focused on the GST charges.

[27] First, I do not accept Mr Weir’s submission that the matters which the Judge referred to in [5] as quoted above amount to penalising a defendant for entering a plea of not guilty. The Judge’s comments focused on the culpability of the offending by a

_{person who used his particular skills to assert matters that were not true in order to}

⁶ Mr Weir accepted he could not rely on another ground put forward initially, namely the state of

Mr Shortt’s health.

cover up offending. The Judge was entitled to decide that this was determined offending.

[28] I have looked at the sentencing authorities and I agree that the starting point range identified by Judge Wilson is appropriate. Here, the Judge went to the lowest point of the starting range and ended with a sentence of home detention of 10 months’ duration. This is the equivalent of a sentence of 20 months’ imprisonment. I accept that the sums of money concerned are, in the scheme of things, not great. The total amount of PAYE unreturned was $11,857.91. In respect of the three companies to which Mr Shortt returned invoices and then caused the companies to claim GST refunds, the amounts are as follows:

• Company 1: $14,442.50 claimed of which $4,502.55 paid

• Company 2: $28,652.01 claimed of which $13,378 paid

• Company 3: $3,320.87 claimed of which $948.42 paid

[29] As Judge Wilson noted, there was no prospect of reparation.

[30] I note also that the Judge appears to have not considered the PAYE charges as justifying any specific uplift. In my view, they could be considered the more serious charges.

[31] Taking everything into account, I do not find the end sentence to be manifestly excessive. Indeed, I find it to be an appropriate sentence, wandering towards the lenient end of the available range.

_{[32] The appeal against sentence is dismissed.}

Brewer J