Rowley & Skinner v R

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeHarrison J
Judgment Date10 Jun 2015
Neutral Citation[2015] NZCA 233
Docket NumberCA572/2012

[2015] NZCA 233

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Ellen France P, Harrison and Stevens JJ

CA572/2012

CA573/2012

Between
David Ingram Rowley
Appellant
and
The Queen
Respondent
Between
Barrie James Skinner
Appellant
and
The Queen
Respondent
Counsel:

R Fairbrother QC for Appellant (CA572/2012)

R M Lithgow QC and N Levy for Appellant (CA573/2012)

D R La Hood and M J Ferrier for Respondent (CA572/2012 and CA573/2012)

Appeals against convictions and sentence — the defendants were found guilty at a judge alone trial of dishonestly using a document to obtain a pecuniary advantage, wilfully attempting to pervert the course of justice and knowingly providing false information to the IRD in their own income tax returns — the defendants were accountants — the Crown said that they had devised a fraudulent scheme by providing false invoices to their clients for goods or services which were never provided — when the IRD investigated, the defendants advised their clients to make voluntary disclosure statements under s19 Tax Administration Act 1994 (Inquiry by Commissioner) — judge concluded to this advice showed the defendants had guilty minds, which was inconsistent with their defence at trial that the underlying transactions were genuine — whether the judge had wrongly inferred guilt from the advice to clients to make voluntary disclosures — whether contrary to s32 Evidence Act 2006 (Fact-finder not to be invited to infer guilt from defendant's silence before trial) the Judge inferred guilt from by the defendants' failure to answer questions in the investigation — whether s109 Tax Administration Act 1994 (Disputable decisions deemed correct except in proceedings) meant that the defendants' returns were conclusive proof of their income and Crown was bound by the assessments.

Held: S and R's submission that the Judge had made incorrect inferences from their advice to clients failed for a number of reasons. Once the Judge had found as a fact that S and R advised clients to make voluntary disclosures, he was entitled to take that fact into account when inquiring whether a particular transaction was genuine. Both defendants asserted unequivocally at trial, as they had when originally advising TPS clients to enter into the underlying transactions, that the original claims were lawful and accordingly the expenditure was properly deductible.

However, when the IRD investigated the claims the defendants followed a different path: they advised many clients to accept without challenge a revised assessment to pay substantial amounts of tax without ever attempting to justify the validity of the original claim. The underlying inconsistency between these two lines of advice was telling to the credibility of S and R's assertions of an honest belief in the transactions. The Judge had a proper evidential basis for inferring that if the explanations given in evidence “held any water at the time” they would have featured somewhere within a voluntary disclosure statement.

Accepting but without deciding for the purposes of argument that s32 EA applied to a Judge alone sitting without a jury, the Judge was not drawing an adverse inference from failures by the defendants either to answer questions asked in the course of investigative questioning or to disclose a defence before trial. The passages from the decision cited by the appellants referred to S's advice to TPS clients, not to IRD investigators. There was no part of the Judge's reasoning that was based on a failure to answer questions by IRD investigators, who were in any event conducting inquiries for the purpose of obtaining information about the taxation liability of TPS' clients.

Furthermore, the adverse inference drawn by the Judge was not from failures in the investigative process to answer a question or disclose a defence. It was drawn from the inconsistency of the defendants' advice to clients during the IRD investigation and explanations for transactions given before and after that event. Section 32 was designed to protect the defendants' right to silence, described as a failure to disclose something, before and during trial. There could be no suggestion here that the Judge used silence as evidence of guilt. To the contrary, he gave adverse weight to statements made, to parties other than investigators before trial.

The appeals against conviction on the dishonest use charges failed.

In respect of the charges relating to knowing provision of false information, S and R were charged with knowingly providing false information to the IRD. The information was the amount quantified as income in various returns. The Crown's purpose in producing the returns at trial was not to call into question or challenge their accuracy. It was relying on the returns as evidence that the defendants had falsely declared income in a particular year. The returns were the tangible or objective benchmark against which falsity was to be measured – a failure to declare what each defendant knew was assessable income.

The HC found that the evidence showed that the appellants simply helped themselves to distributions from the TPS trust account without bothering with the niceties of advance and repayment, or any formal documentation. None of the entities which declared invoice receipts as income ever paid tax of any substance. The Judge's rejection of these explanations is unsurprising, and consistent with his general rejection of the defendants' evidence as lacking credibility.

The Judge had a proper factual basis for applying sCB 32. His conclusion that the defendants were bound to declare as income the sums retained from payments by TPS clients was available. In terms of sCB 32(1), there was ample evidence that the money initially retained by TPS from the invoice payments was property obtained without claim of right and was within their possession or control. The amount retained was the defendants' income.

S and R implemented and operated the scheme through third party entities which they directed or controlled. Once the proceeds were received by those entities, R and S had “obtain[ed] possession or control of property”. They were then personally obliged under sCB 32 to account for the funds as their income.

Appeal against conviction on the charges of providing false information failed.

Sentence:

The focus was on the end sentence imposed for the totality of R's offending, not with its individual elements. It was well within range on that approach. However, even if the sentence was approached according to its discrete components, the Judge could properly have adopted a starting point of eight years alone for the dishonest use charges. The revenue originally lost was around $3 million, although most was later recovered. The personal benefit for S and R was about $2.3 million.

While the scheme was crude, it was nevertheless elaborate. It involved an abuse of the defendants' status as tax agents with the IRD by virtue of which they enjoyed special privileges and dispensations; and the impact of their offending was profound and widespread, exposing TPS clients to statutory investigations with penal consequences and financial hardship as they were required to rearrange their affairs to satisfy income reassessments. It was fraud practiced on a cynical and widespread scale which merited a very substantial term of imprisonment.

When R's associated offending was taken into account the sentence could be seen as generous. R's actions were a separate and deliberate attempt to interfere with the course of justice.

Appeals dismissed.

JUDGMENT OF THE COURT

A The application for leave to adduce new evidence is declined.

B The appeal against conviction and sentence in CA572/2012 is dismissed. C The appeal against conviction in CA573/2012 is dismissed.

REASONS OF THE COURT

(Given by Harrison J)

Contents

Introduction

[1]

Background

[7]

Trial

[13]

Dishonestly using a document

[15]

Legal elements

[15]

High Court

[19]

Appeal

[37]

(a) Voluntary disclosure statements

[37]

(i) Submission

[37]

(ii) Decision

[42]

(b) Section 32 of the Evidence Act 2006

[53]

(i) Submission

[53]

(ii) Decision

[57]

Attempting to pervert the course of justice

[60]

Knowing provision of false information

[65]

High Court

[65]

Appeal

[67]

(a) Section 109 Tax Administration Act 1994

[67]

(i) Submission

[67]

(ii) Decision

[70]

(b) Defendants' liability to tax

[74]

Sentence

[83]

Result

[90]

Introduction
1

Messrs Barrie Skinner and David Rowley ran a tax consultancy practice in Wellington called Tax Planning Services Ltd (TPS). As a result of an investigation by the Inland Revenue Department (the IRD) 1 into TPS' affairs, the Crown charged both men with multiple counts of dishonesty offending. It alleged that they had jointly devised and assisted in implementing a fraudulent scheme by providing false invoices to TPS' clients. Those clients later claimed the payments as expenditure in returns filed for the purpose of reducing income tax and GST liability. In consideration, Messrs Skinner and Rowley retained a fixed share of the false expenses.

2

Following a trial in the High Court at Wellington, 2 Kós J found Messrs Skinner and Rowley guilty of 80 and 75 counts respectively of a total of 89 counts of dishonestly using a document to obtain a pecuniary advantage; 3 seven joint counts of wilfully attempting to pervert the course of justice; 4 and five separate counts of knowingly providing false information to the IRD in their own income tax returns. 5

3

Kós J convicted Messrs Skinner and Rowley and sentenced them to imprisonment for terms of eight and a half years and eight years respectively. 6 Both appeal against their convictions. However, only Mr Rowley appeals against his sentence.

4

Mr Skinner appeals against conviction on the dishonesty and...

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