Foley v R
| Jurisdiction | New Zealand |
| Judge | Goddard,Downs JJ |
| Judgment Date | 19 September 2023 |
| Neutral Citation | [2023] NZCA 456 |
| Court | Court of Appeal |
| Docket Number | CA396/2022 |
[2023] NZCA 456
IN THE COURT OF APPEAL OF NEW ZEALAND
I TE KŌTI PĪRA O AOTEAROA
Court: Goddard, Whata and Downs JJ
CA396/2022
S M Kilian for Appellant
J A A Mara for Respondent
Criminal Sentence — appeal against a sentence of 2 years 8 months imprisonment for aiding and abetting companies to withhold tax — appropriate discounts for employment opportunity, reparation offer and health conditions Tax — Tax Administration Act 1994
The appeal was allowed. The sentence imposed in the DC was set aside. The proceeding was remitted to the DC for sentencing.
-
A Leave is granted to both parties to adduce further evidence on appeal.
-
B The appeal is allowed.
-
C The sentence imposed in the District Court is set aside.
-
D The proceeding is remitted to the District Court for sentencing.
-
E Any matters that arise in relation to bail pending sentencing are to be determined by the District Court.
(Given by Goddard and Downs JJ)
Mr Foley was convicted in the District Court of 28 charges of aiding and abetting two companies to withhold Pay As You Earn (PAYE) tax, pursuant to ss 143A(1)(d) and 148 of the Tax Administration Act 1994. The companies had failed to pay PAYE tax of $356,132.18 over a period of approximately two and a half years. Mr Foley was sentenced to two years and eight months' imprisonment. 1 He appeals against that sentence.
Mr Foley is a qualified builder. He was a shareholder and director of two construction companies: HPTP (2014) Limited (HPTP) and Point to Point Construction Limited (Point to Point). He was the effective controller of both companies. Mr Foley decided which creditors would be paid, and which would not, when the companies encountered cash flow difficulties. He chose to pay employees and suppliers in preference to paying PAYE amounts owing to the Inland Revenue Department (IRD). The ultimate PAYE deficit was, as already mentioned, $356,132.18. HPTP was placed in voluntary liquidation on 23 January 2017. Point to Point was placed in liquidation on 9 June 2017.
Mr Foley says he established the companies because of his concern about the large number of unemployed people in New Zealand. He believed a number of those people had potential to work in construction. His companies created opportunities for these individuals, helping them develop a set of practical skills and become employable. At its peak the companies had 89 employees: Mr Foley considers that one of the reasons the business failed is that it grew too fast because he was anxious to help people. He says he spent a significant amount of his time working for the companies coaching, counselling and mentoring individuals with a troubled background.
The period of offending was 31 December 2014 to 31 December 2016 (in respect of HPTP) and 28 February 2017 to 30 April 2017 (in respect of Point to Point).
There were multiple delays in bringing the charges against Mr Foley on for trial, for various reasons not attributable to him, including the Covid-19 pandemic. The trial eventually took place in mid-2021. A conviction was entered on 2 July 2021. Sentencing took place more than a year later on 29 July 2022.
Mr Foley has no previous convictions.
Mr Foley had been a director of other failed companies which went into liquidation with unpaid debts including tax debts. He was adjudicated bankrupt in August 2001, and again in 2018. In 2006 he was prohibited from acting as a director of a company for two years and nine months on the grounds that he had been a director of three companies that went into liquidation. 2
Judge Gibson began by outlining the circumstances of the offending. He noted that no payments had been made in respect of the unpaid PAYE, and up to the date of sentencing there had been little prospect of recovery of any of those monies as Mr Foley had been adjudicated bankrupt in respect of other debts owed to IRD. 3
The Judge then considered the starting point for the sentence. As the Judge noted, there is no guideline for this type of offending. 4
Mr Dalton, who appeared for Mr Foley in the District Court, submitted that the starting point should be two and a half years. The Crown sought a higher starting point. The Judge adopted a starting point of three years' imprisonment. He said (emphasis added):
[12] Deterrence must be a factor in sentencing and the starting point needs to be a sentence of imprisonment. The appropriate starting point having regard to the premeditated nature of this offending and the manipulation that the defendant engaged in with the Inland Revenue Department and the fact that he was not exactly inexperienced in this type of offending means that a starting point of three years' imprisonment is appropriate, having regard to the period of offending and the quantum of loss.
[13] As I already have mentioned, KiwiSaver deductions were not made, student loan repayments were not made, child support payments were not made from the companies controlled by the defendant so the losses were felt not only by the revenue but by the defendant's employees who he was purporting to want to help. The breach of trust is also reasonably significant as PAYE is essentially held on trust for the revenue.
The Judge then considered what discounts should be applied to that starting point.
No discount was allowed for remorse, as the Judge considered that Mr Foley was not remorseful in light of the period of offending and his past conduct. 5
The Judge then addressed whether there should be a discount for good character. He considered that the matters that could be taken into account included “the conduct in relation to bankruptcies, not paying taxes, trading while insolvent which are all reflected in his past history.” 6 The Judge said that normally for a man of 54 years of age and of good character with no previous convictions a discount of up to 15 per cent would be available. Some recognition could be given to Mr Foley because he set the businesses up to try to assist other people, “but that to a great extent is overtaken by his past conduct in relation to other matters and so the good character discount to me would seem … to be only modest”. 7 The Judge allowed a 5 per cent discount for good character. 8
The Judge reviewed the s 27 report that had been obtained, describing Mr Foley's background and personal circumstances. The Judge noted that there was some violence during his childhood and some dysfunctionality with his family, but did not consider that there was any nexus between those matters and the offending. Accordingly no discount was awarded for those matters. 9
The Judge allowed a discount of 5 per cent for Mr Foley's poor health in recent years, and for the poor health of his wife. 10
At the sentencing the Judge had been handed an unsigned employment agreement purportedly between Mr Foley and an entity known as the Kaimanawa Development Trust (Trust). It was suggested by Mr Foley that he would be capable of earning, if able to be employed, $140,000 per annum from which he could make some payments towards the unsatisfied PAYE debt. 11 The Judge appears to have discounted this last-minute indication of an ability and willingness to provide reparations: he did not consider whether there should be any order for reparations, or any discount for willingness to provide reparations.
The total discount accepted by the Judge was 10 per cent. The end sentence was thus two years and eight months' imprisonment. 12
In order to accommodate a medical appointment that Mr Foley had shortly after sentencing, the Judge deferred the start date for the sentence for 28 days. Bail was granted for that 28 day period. Mr Foley remains on bail pending determination of this appeal. 13
Mr Kilian, who appeared for Mr Foley, submitted that the sentence imposed was manifestly excessive for four reasons:
-
(a) The three year starting point adopted was excessive, by reference to similar cases. He submitted that an appropriate starting point would have been between two and two and a half years.
-
(b) The Judge erred in declining to apply a discount for the factors outlined in the s 27 report, as well as prior good character.
-
(c) The Judge erred in failing to take into account the employment opportunity identified by Mr Foley, and the reparation offer made by him in relation to the unpaid tax.
-
(d) The Judge granted an insufficient discount for Mr Foley's health conditions.
The starting point for a sentence is set by reference to the characteristics of the offending for which the defendant is being sentenced. It takes into account aggravating and mitigating features of that offending. Any aggravating and mitigating factors personal to the offender are then taken into account at the next stage. 14
In determining the starting point of three years, the Judge appears to have taken into account Mr Foley's previous conduct as a director of insolvent companies that failed to meet tax liabilities, and his disqualification as a director. Hence the reference to Mr Foley being “not exactly inexperienced in this type of offending”. 15
There are three difficulties with this observation. First, Mr Foley's previous conduct should not have been taken into account when determining an appropriate starting point: the focus should have been on the offending for which he was being sentenced. Second, that previous conduct was not the subject of any convictions: it was not open to the Judge, on the limited material available to him, to conclude that Mr Foley's previous conduct had involved “offending” of this or any other kind. Third, Mr Foley's previous conduct as a director of failed companies was...
To continue reading
Request your trial