Suckling v R
| Jurisdiction | New Zealand |
| Judge | Ellis J |
| Judgment Date | 10 May 2016 |
| Neutral Citation | [2016] NZCA 187 |
| Docket Number | CA468/2015 |
| Court | Court of Appeal |
| Date | 10 May 2016 |
[2016] NZCA 187
French, Simon France and Ellis JJ
CA468/2015
IN THE COURT OF APPEAL OF NEW ZEALAND
Appeal against conviction and sentence imposed in the District Court following conviction on five charges of knowingly providing misleading income tax returns and 10 charges of evading the assessment or payment of GST — the appellant was sentenced to one year's imprisonment, with leave to apply for home detention — the Inland Revenue Department claimed that the appellant had been using Trusts to avoid the payment of tax – the appellant had initiated the disputes process under s109 Tax Administration Act 1994 (TAA) to disputes the Commissioner's assessments – he argued that until this process was complete, s109 acted as a bar to the criminal proceedings against him or alternatively precluded the use of the assessments in any criminal proceeding – leave had been granted by the Supreme Court in another case to argue the s109 point – whether s109 TAA precluded the determination of the criminal charges — whether the start date of a sentence of imprisonment should be deferred under s100(1) Sentencing Act 2002 (start date of sentence of imprisonment) for up to two months on humanitarian grounds.
Appellant in person
P D Marshall for Respondent
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A The appeals against conviction and sentence are dismissed.
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B The commencement of Mr Suckling's sentence of imprisonment is to be deferred until the earlier of:
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(a) the determination of any application under s 80I of the Sentencing Act 2002 to the District Court for cancellation of that sentence and substitution of a sentence of home detention; or
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(b) two months from the date of this judgment.
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C Mr Suckling is granted bail on the following conditions:
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(a) he is to reside at 2 Grand Oaks Drive, Palmerston North; and
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(b) on the date that either:
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(i) his application under s 80I of the Sentencing Act is declined; or
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(ii) if no such application is made or remains undetermined, at the expiry of the two month period —
he is to surrender himself to the prison manager at Manawatu Prison.
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REASONS OF THE COURT
(Given by Ellis J)
Following a trial before Judge Atkins QC and a jury in the Palmerston North District Court, Mr Morris Suckling was found guilty of five charges of knowingly providing misleading income tax returns and 10 charges of evading the assessment or payment of GST. He was sentenced by Judge Lynch to one year's imprisonment, with leave to apply for home detention. 1 He now appeals against both conviction and sentence.
In one form or another, Mr Suckling has operated a seed-treating business from the late 1990s onwards. Initially, he did so through a company, Top Crop Seed Treating Ltd (TCSTL), which was registered for income tax and GST. TCSTL was wholly owned by Mr Suckling and his wife, Christine Suckling.
In 2006, Mr Suckling and TCSTL were audited by Inland Revenue (IR). IR found TCSTL had been invoiced for services provided by Mr Suckling to the company. The invoices were issued by Mr Suckling on behalf of an entity called the Bamen Trust. TCSTL paid the amounts invoiced into a bank account operated by Mr Suckling and his wife, and claimed those amounts (which were described as “subcontractor payments”) as deductions for income tax purposes.
The Bamen Trust was not registered with IR and did not account for the income it received from TCSTL, which, between 2002 and 2006, totalled $283,880. The Commissioner of IR issued default assessments in relation to this income. Mr and Mrs Suckling disputed those assessments on behalf of the Trust. During the ensuing disputes process, Mr Suckling maintained the amounts received represented “the reward for Morris's labour” and were not taxable. IR's position was that the “rewards” received constituted taxable income.
The outcome of the disputes process was that Mr Suckling was found liable for the tax on the amounts received. The resulting tax debt led to his bankruptcy; he was so adjudicated on 21 September 2011.
According to advice provided to IR by Mr Suckling in May 2009, TCSTL ceased to operate from April 2007, due to his health problems. 2 But Mr Suckling nonetheless continued to operate a seed-treating business on his own account under the name Top Crop Seed Treating (TCST).
IR again formed the view that Mr Suckling received income from the TCST business he did not declare and that he also failed to file GST returns as required. In May 2013 the Commissioner registered Mr Suckling for GST and issued assessment notices for income tax and GST to Mr Suckling personally in relation to TCST's business activities between 2007 and 2012. The GST owing for the period 1 April 2007 to 31 March 2012 was assessed at $29,631.38 and the income tax owing for the period 1 April 2006 to 31 March 2011 was assessed at $76,587.13.
On 26 June 2013 Mr Suckling initiated the statutory disputes process under pt 8A of the Tax Administration Act 1994 (TAA) by issuing a notice of proposed adjustment (NOPA). In it, he maintained the Commissioner's assessments were based on transaction records from bank accounts with which he had no connection. He said: 3
The funds in question were given in consideration of the labour of a man, and not for any activity of the above Estate, yet none of the alleged “income” has been attributed to the man.
The bank accounts in question were opened in the name of trusts, yet none of the alleged “income” has been attributed to any trust.
He also disputed the Commissioner's power to register “the Estate” for GST without consent.
Criminal charges against Mr Suckling were laid in August 2013.
On 22 August 2013 the Commissioner issued a notice of response (NOR) rejecting Mr Suckling's NOPA. On 21 October 2013 Mr Suckling responded to this by letter in which he said TCST was a trust with which he had no association. He also advised, however, that he had “consulted” with the directors of the corporate trustee of TCST, who had advised that:
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(a) they were prepared to accept GST should have been collected and accounted for;
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(b) they were willing to consider “any reasonable request” that the trust account for funds received into its bank account for the purposes of income tax; and
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(c) the actual figures in the NOR were not in dispute.
On 4 April 2014 IR received an application for an Inland Revenue Department (IRD) number from a trust entity called Top Crop Seed Treating (the Trust). The application was signed by Mrs Suckling. The Trustee was said to be TCST Ltd. 4 The Trust was duly allocated an IRD number.
On 8 May 2014 the Trust registered for GST with a trade name of TCST Limited.
On 12 May 2014 Mrs Suckling wrote to IR asking for the Trust's GST registration to be backdated to 1 April 2007. Mrs Suckling subsequently filed GST returns on behalf of the Trust for the back-dated period. These returns resulted in refunds accidentally being paid to the Trust until an account halt was put in place by IR.
On 6 October 2014 income tax returns for the financial years 2008 to 2014 were lodged on behalf of the Trust. The returns showed income received by the Trust in the same amount as had been assessed to Mr Suckling but recorded that all the income each year had been distributed to a beneficiary of the Trust, the Sapphire Trust (Sapphire). Mrs Suckling subsequently advised that as Sapphire was domiciled in Panama it was not required to account in New Zealand for tax on the income it had received. 5
It is important to record at the outset that Mr Suckling represented himself throughout in relation to the criminal proceedings. At various stages of the process both Judge Lynch and Judge Atkins expressed concern about this and urged Mr Suckling to obtain representation or to seek legal advice. On each occasion Mr Suckling advised either that he was content to represent himself or that he would seek or had sought advice.
In September 2014 Mr Suckling sought to have the charges against him dismissed pursuant to s 147 of the Criminal Procedure Act 2011 (the CPA) on the grounds that:
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(a) the District Court lacked jurisdiction because Mr Suckling had challenged his tax liability under the TAA disputes process; and
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(b) there was no evidence of mens rea or knowledge on his part in relation to the charges and that liability for the tax lay with another party.
The s 147 application was heard and rejected by Judge Lynch in a carefully reasoned decision dated 19 September 2014. 6
For the first ground, Mr Suckling relied upon s 109 of the TAA, which provides:
Except in objection proceedings under Part 8 or a challenge under Part 8A,—
(a) no disputable decision may be disputed in a court or in any proceedings on any ground whatsoever; and
(b) every disputable decision and, where relevant, all of its particulars are deemed to be, and are to be taken as being, correct in all respects.
Mr Suckling said that, because he had initiated the disputes process in relation to the correctness of the Commissioner's assessments, 7 s 109 meant the Commissioner could not properly rely on them in the criminal prosecution. He said if his position in the disputes process (that no tax was owed) was upheld it followed that no tax could have been evaded. 8
The second ground was summarised by Judge Lynch as follows:
[27] Mr Suckling contends that the Crown will be unable to prove an intention on his part to evade the payment of income tax or GST and that his Notice of proposed adjustment … “conclusively establishes” his belief that any tax liability falls on the Trust, not him.
After considering the relevant authorities (which we discuss later below) the Judge said (inter...
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