R v Easton

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHeath J
Judgment Date19 December 2013
Neutral Citation[2013] NZCA 677
Date19 December 2013
Docket NumberCA595/2013

[2013] NZCA 677

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Randerson, Heath and Asher JJ

CA595/2013

The Queen
Appellant
and
Stuart David Easton
Respondent
Counsel:

M F Laracy and A R van Echten for Appellant

C R Carruthers QC and R P Harley for Respondent

Solicitor-General's appeal against sentence — the respondent was found guilty on 22 charges of aiding and abetting three companies that knowingly failed to pay PAYE deductions to the Commissioner of Inland Revenue — amount in issue was $200,000 — respondent had used PAYE as short term capital to shore up failing businesses by choosing to pay other creditors over Commissioner — respondent was fined $66,000 and ordered to pay reparation of $140,000 — reparation order was effectively suspended until after liquidation of the three companies — Judge also refused to order sentencing report although Crown indicated it was seeking custodial sentence — whether failure to order a sentencing report removed a custodial sentence and home detention from the suite of options available to Judge — whether by reference to comparator cases a term of imprisonment should have been imposed — whether there had been jurisdiction to suspend the orders under s36 Sentencing Act 2002 (Payment conditions of sentence of reparation).

The issues were: whether the sentencing process was flawed as the Judge's failure to request a sentencing report removed a custodial sentence and home detention from the suite of options available to him; whether by reference to comparator cases a term of imprisonment should have been imposed; and whether there had been jurisdiction to suspend the orders under s36 Sentencing Act 2002 (SA) (Payment conditions of sentence of reparation).

Held: The sentencing process was not so flawed that appellate intervention was justified on that basis alone. Instead of indicating a provisional view on sentencing before the verdicts were formally pronounced in court, it might have been preferable for the Judge to hear from counsel on sentencing options at the time verdicts were delivered. While the Judge's approach had the effect of removing a sentence of imprisonment or home detention from consideration, the decision not to seek a pre-sentence report was made after hearing from counsel.

The maximum penalty for E's offending was a term of imprisonment of five years and a fine not exceeding $50,000. The relevant aggravating factors of offending were:

  • 1. premeditation, in D's deliberate decision not to account for PAYE;

  • 2. E's decision to do so after receiving a warning that it would be a criminal act;

  • 3. the duration of offending;

  • 4. the amount of loss caused to the Commissioner by the misapplication of PAYE moneys; and

  • 5. the use of funds held on trust for the Commissioner for private purposes of the individual companies in financial difficulties.

The mitigating factors which the Judge appeared to regard as justifying ‘a lenient approach to sentencing’ had to be viewed in context and balanced against the negative consequences. E had misapplied funds that, if not paid, were claimable as a preferential debt in an insolvent liquidation. The fact that some of those moneys were used to pay creditors of lesser priority meant that the Commissioner was less likely to receive payment in full from a liquidation. This could not be seen as a mitigating factor notwithstanding E had viewed this as a short term measure.

There was no doubt E's motive was to save the three companies and protect employees but those motives did not justify the offending. In the end, all of this was done at the expense of the Commissioner by deliberate choice with full knowledge of the serious consequences. In truth, the only mitigating factor justifying a reduction from the starting point was that E was of prior good character.

This type of offending ordinarily attracted a sentence of imprisonment. On the facts a starting point of at least one year was justified. A fine, even coupled with reparation sentence, would not to reflect the gravity of the offending or meet the sentencing goals of denunciation, deterrence and accountability.

It was questionable whether the reparation order made by the Judge complied with s36 SA, as this section did not specifically provide that suspension for an order could be for an indefinite period. Unless the court made a specific order as to payment conditions of the type to which s36(1) referred, the reparation had to be paid in one lump sum as provided by s36(2).

The Judge placed too much emphasis on s32(3), which required the Court to “take into account” other rights and remedies available to a person who had suffered loss at the hands of the offender. In the way in which the Judge had constructed the reparation order, he seemed to have regarded the need to ascertain the outcome of the liquidation process as a pre-condition to enforcement of the reparation order. In fact, all that was required was to “take into account” the availability of that recovery option. Another means by which the problem could have been solved was to order reparation to be paid on the basis that E would be subrogated to the rights of the Commissioner (whether as to preferential or unsecured status) in the liquidations. That approach would have put the risk of non-payment on E.

The combined sentence of a fine and reparation was manifestly inadequate to respond to E's serious offending.

Application for leave to appeal granted and appeal allowed. Sentences set aside and sentencing remitted to the HC.

JUDGMENT OF THE COURT
  • A The Solicitor-General's application for leave to appeal against sentence is granted.

  • B The appeal is allowed.

  • C The sentences imposed by the High Court are set aside.

  • D Sentencing is remitted to the High Court to be reimposed in a manner consistent with this judgment.

  • E Mr Easton is remanded at large for sentence on a date to be fixed by the Registrar of the High Court.

REASONS OF THE COURT

(Given by Heath J)

The appeal
1

Following a trial in the High Court at Wellington in early July 2013, Collins J (sitting alone) found Mr Easton guilty on 22 charges of aiding and abetting three companies that knowingly failed to pay PAYE deductions to the Commissioner of Inland Revenue (the Commissioner) 1 The amount in issue was just under $200,000 2 Mr Easton was sentenced on 9 August 2013. He was fined $3000 on each charge (a total of $66,000) and was ordered to pay reparation of $140000to the Commissioner. Execution of the reparation order was effectively suspended until after liquidation of the three companies had been completed, so that the amount of any distributions to be made to the Commissioner could be determined. Leave was reserved to Mr Easton to apply to reduce the amount of reparation ordered, if the Commissioner were to receive more than $60000 by way of dividend 3

2

The Solicitor-General seeks leave to appeal against the sentence imposed 4 On his behalf, Ms Laracy submitted that the sentence was both manifestly inadequate, and wrong in principle. As a result of directions made by French J on 16 October 2013, the application for leave and the appeal itself were heard together.

Background facts 5
3

Mr Easton and his wife owned and managed six companies and entities (the Group). The Commissioner's investigations into the Group began in 2007. Mr Easton, in evidence, described the Group as being in “dire straits” around that time. At a meeting held on 24 April 2008, Ms Lancaster, an employee of the Inland Revenue Department, explained to Mr and Mrs Easton and Mr Taylor, the Group's tax adviser and external accountant, that it was a criminal offence not to pay over PAYE deductions to the Commissioner, that amounts deducted from wages were the

property of the Commissioner and not the employer and that if a prosecution were taken, the maximum penalty was five years imprisonment and/or a fine of $50,000. Collins J found that this was a “very clear warning” about the nature of PAYE deductions and the consequences of non-payment 6 The offending began only one month later, in May 2008 7
4

The PAYE charges related to three of six entities within the Group: East Quip Ltd, Hooked on Rigging Ltd and Napier Equity Ltd. Mr Easton was the sole director and controlling mind of each. The remaining entities are Galvanising (HB) Ltd, Hooked on Transport Ltd and the trustees of the Easton Property Trust 8 Mr Easton is a substantial shareholder in each of these two companies and a trustee of the Trust. The three companies were alleged to have knowingly failed to pay PAYE deductions to the Commissioner.

5

Of the 22 charges brought against Mr Easton 9

  • (a) Six arose out of the failure of East Quip to pay PAYE on identified dates between 20 June 2008 and 20 September 2008.

  • (b) Seven arose out of the failure of Hooked on Rigging to pay PAYE on identified dates between 20 June 2008 and 20 September 2008.

  • (c) Nine arose out of the failure of Napier Equity to pay PAYE on dates between 20 May 2008 and 5 July 2009.

The duration of the offending was just over one year and two months, between May 2008 and July 2009.

6

The Judge found that the companies deducted PAYE from employee wages and salaries on each of the occasions to which the 22 charges related 10 East Quip failed to account for $43,56869; Hooked on Rigging for $83,70481; and Napier

Equity for $61,287. Although the total of those sums is $188,56050 11 the Judge recorded in his sentencing remarks that the Commissioner contended that the total amount of PAYE that remained outstanding was $199,29298. 12
7

In the period between 2007 and 2009 entities within the Group were trading poorly. This led to “a significant escalation in the Group's inability to pay creditors”. By February 2009, the Group’’ indebtedness totalled $105 million, of which $266,5272 had been outstanding for three months or more 13 The Judge found that, to...

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3 cases
  • R v Malu
    • New Zealand
    • Court of Appeal
    • 29 November 2017
    ...offender and may also take into account personal mitigating factors: Shailer v R [2017] NZCA 38, [2017] 2 NZLR 629 at [45]. R v Easton [2013] NZCA 677, (2013) 26 NZTC At [35]. embarked on in an effort to make amends for his offending. By filing the necessary returns he was able to determine......
  • Sellers v Commissioner of Inland Revenue
    • New Zealand
    • High Court
    • 5 February 2016
    ...difficult to see that Mr Sellers has ground for complaint. He has avoided the normal sanction (namely imprisonment or home 1 R v Easton [2013] NZCA 677. detention), seemingly because of the lower quantum of money involved. That is legitimate factor but alternatively the period of offending,......
  • Mehmood v R
    • New Zealand
    • Court of Appeal
    • 29 July 2015
    ...be similar to this case. [30] The issue whether the discounts he then gave were manifestly inadequate is quite distinct. 4 5 R v Easton [2013] NZCA 677. R v Goh DC Auckland CRI-2009-004-7241, 20 October 2011. The Judge seems to have to Goh v Commissioner of Inland Revenue [2011] NZCA 344 in......

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