Chahil v The Queen
[2020] NZCA 436
•18 September 2020 at 2 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA168/2020 [2020] NZCA 436 |
| BETWEEN | RUPINDER SINGH CHAHIL |
| AND | THE QUEEN |
| Hearing: | 26 August 2020 |
Court: | Gilbert, Thomas and Dunningham JJ |
Counsel: | N Levy QC and A J D Bamford for Appellant |
Judgment: | 18 September 2020 at 2 pm |
JUDGMENT OF THE COURT
The appeal against sentence is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Gilbert J)
Introduction
Mr Chahil appeals against his sentence of three years and two months’ imprisonment for tax evasion and money laundering.[1] He says he should have been sentenced to home detention.
[1]R v Chahil [2020] NZHC 317, (2020) 29 NZTC 24-061 [High Court judgment].
During the six-year period from 1 April 2008 to 31 March 2014 (the audit period), Mr Chahil controlled 17 companies that operated various restaurants known as the Masala Restaurants. With only a few exceptions, the Masala companies did not file any income tax returns during the audit period despite receiving at least 55 reminder letters requesting these returns.[2]
[2]One company filed tax returns for 2009 and 2010, a second company filed a tax return for 2010 and a third company filed a tax return for 2012. No other tax returns were filed by any Masala company for the six years of the audit period.
On an approximately weekly basis, Mr Chahil and a co-offender instructed restaurant managers to bring the cash takings to his home (or some other location as directed) where it would be counted. Mr Chahil determined how much cash (described in the summary of facts as “[o]nly a small amount of the cash”) would be recorded in the relevant company’s accounts and instructed the respective managers to prepare false sales reports to reflect this. As well, Mr Chahil sometimes collected cash directly from the restaurant tills. In this way, Mr Chahil caused the Masala companies to file 115 GST returns which contained false sales figures.
Between 1 January 2012 and 23 April 2013, Mr Chahil delivered the cash collected from the restaurants to Vijay Gupta, an accountant and business associate. Mr Gupta laundered the cash through various foreign exchange transactions and made it available to Mr Chahil through various bank accounts.
The extent of the income tax shortfall is not known. The tax shortfall resulting from the false GST returns was $702,667. The total amount of funds the subject of the money laundering charges was stated in the summary of facts to be at least $524,185.
Mr Chahil was charged with tax evasion and money laundering in March 2017. On 8 October 2019, one day after his trial was scheduled to commence in the High Court before a Judge sitting alone, Mr Chahil pleaded guilty to 43 charges as follows:
(a)17 charges of knowingly not providing information to the Commissioner of Inland Revenue (the Commissioner) when required to do so contrary to ss 148 and 143B(1)(b) and (f) of the Tax Administration Act 1994 (TAA).
(b)17 charges of providing false information to the Commissioner to evade GST, contrary to ss 148 and 143B(1)(c) and (f) of the TAA.
(c)Nine charges of money laundering contrary to ss 66 and 243 of the Crimes Act 1961.
Mr Chahil was subsequently convicted and sentenced by Gault J to three years and two months’ imprisonment and ordered to pay a fine of $50,000. This sentence was arrived at in the following way:
(a)Starting point for the tax evasion offending — three years and three months’ imprisonment.
(b)Uplift for money laundering — nine months.
(c)Discount for time spent on home detention during the offending period — three months.[3]
(d)Discount for guilty plea — seven months (15 per cent).
(e)A fine of $50,000, being approximately $3,000 per charge on the 17 lesser charges of knowingly not providing information to the Commissioner.
The appeal
[3]High Court judgment, above n 1, at [45]–[47]. Mr Chahil spent six months on home detention from 28 October 2016 for providing false or misleading information to Immigration New Zealand.
Mr Chahil appeals against his sentence on three grounds:
(a)The starting point on the tax evasion charges was too high. This is said to be because the Judge failed to give adequate credit for the settlement in related proceedings under the Criminal Proceeds (Recovery) Act 2009 which should have been regarded as “voluntary reparation related to” Mr Chahil.
(b)The uplift for the money laundering charges was excessive. This is said to be because dealing with the illegitimate proceeds of the GST evasion is inherent in the assessment of culpability on the GST evasion charges. Further, the sum laundered was significantly less than indicated.
(c)The guilty plea discount should have been 20 per cent.
In summary, Mr Chahil says the starting point of three years, three months’ imprisonment should have been reduced by nine months because of the settlement (bringing the starting point for tax evasion to 30 months). The uplift for money laundering should only have been three months (bringing the adjusted starting point to 33 months). Allowing the three month credit for time spent on home detention would bring the indicative sentence to 30 months’ imprisonment before consideration of the guilty plea discount. If the guilty plea discount was increased to 20 per cent (six months) and applied to this adjusted figure, this would result in an indicative end sentence of 24 months, enabling a sentence of home detention to be considered.
Was the starting point for tax evasion too high?
Ms Levy QC, for Mr Chahil, submits it is necessary to consider a chronology that goes beyond the summary of facts to which Mr Chahil pleaded guilty on 8 October 2019.
Ms Levy says that for the purposes of the related proceedings under the Criminal Proceeds (Recovery) Act, the expert evidence for the Commissioner of Police was that, in respect of 17 restaurants, $9.579 million in cash sales had been under-reported for GST purposes, and staff wages and other expenses had been paid in cash. The total estimated tax shortfall for the companies was $4.177 million comprising GST of $1.202 million, income tax of $756,000 and PAYE shortfall of $2.219 million. Mr Chahil was personally said to have received undeclared dividend income of approximately $760,052 with a co‑offender receiving a similar amount of $773,528. The total tax evaded by all Masala-related parties during the audit period was therefore calculated to be at least $5,710,580.
The criminal proceeds recovery proceedings included a claim in respect of another party where the tax shortfall was calculated to be $500,268. Taking account of this claim and use of money interest of $1,948,115, the overall claim totalled $8,160,835.
The criminal proceeds recovery proceedings were settled by agreement and approved by an order of the High Court on 28 February 2017, prior to the charges being laid against Mr Chahil and his co-defendants.[4] An assets forfeiture order was made by consent in respect of funds totalling $8 million. In making the order, Edwards J stated that the “settlement sum of $8 million represents almost all of the unlawful benefit said to have been derived from the tax evasion offending”.[5]
[4]Commissioner of Police v Investments Ltd [2017] NZHC 284.
[5]At [13].
Ms Levy says the sum of $8 million is roughly the same as the figure of $9.579 million referred to at [11] above, being the under-reported cash sales for GST purposes, and a GST shortfall of $1.2 million. However, Ms Levy says the criminal proceeds recovery proceedings did not provide a forum for determining the accuracy of the calculations. For the purposes of the subsequent criminal proceedings, Ms Levy says the same Crown expert concluded in her brief of evidence that total cash sales omitted by Masala related companies from the GST returns was $6.5 million, $3 million less than the $9.579 million calculation in the recovery proceedings. The GST evaded was calculated to be $800,000, compared to $1.2 million.
At sentencing in the High Court, Mr Bamford, for Mr Chahil, submitted that it could be inferred from this that the settlement agreement and forfeiture order had resulted in an over-recovery of the GST evaded by at least $400,000. Gault J rejected this submission but sentenced Mr Chahil on the basis that “most of the loss has been recouped from the Court’s approval of the settlement”.[6] Ms Levy submits this was a “gross understatement”. As stated in the summary of facts, the GST evaded was agreed at $702,667 (down from $1.2 million) and this amount “and more” must have been recovered by the settlement and forfeiture order.
[6]High Court judgment, above n 1, at [29].
We are not persuaded there is anything in this point. Gault J correctly accepted for the purposes of sentencing that the amount of GST evaded was as stated in the summary of facts to which Mr Chahil had pleaded guilty — approximately $700,000. The Judge also correctly noted that the income tax shortfall was not quantified.[7] That observation also accords with the summary of facts. Mr Chahil did not seek a disputed facts hearing. The Judge was therefore obliged to sentence him on the basis of the agreed summary of facts. The settlement between other parties in the criminal proceeds recovery proceeding was not binding on Mr Chahil or the Crown in the criminal proceedings.
[7]At [26].
In any case, the Judge accepted that most of the loss from Mr Chahil’s offending had been recouped and he sentenced him on that basis. We do not accept the Judge’s use of the word “most” can properly be characterised as a “gross understatement” on the facts before him. Rather, we consider it was a fair summary of the position. It is unlikely that the precise loss will ever be known given Mr Chahil’s fraudulent activity spanned many years, the absence of reliable records and his persistent failure to ensure income tax returns were filed by the 17 Masala companies. It must also be borne in mind that the Crown will have incurred significant costs pursuing recovery of the evaded taxes.
Ms Levy’s next point is that reparation, whatever its form or timing, is a mandatory consideration under s 10 of the Sentencing Act 2002. She submits it would be wrong to reason that payments made after tax offending is discovered cannot have significant impact. Further, the settlement of arrears before criminal proceedings are brought cannot render s 10 redundant.
We accept these submissions. Section 10(1) requires the Court at sentencing to take into account: any offer of amends by or on behalf of the offender to the victim; any agreement between the offender and the victim as to how the offender may remedy the wrong; the response of the offender or his family to the offending; any measures taken or proposed to be taken by the offender or his family to make compensation or to apologise or otherwise make good the harm that has been caused; and any remedial action taken or proposed to be taken by the offender.
However, the circumstances here do not fit neatly within s 10(1). Mr Chahil was an undischarged bankrupt at the time the assets were initially restrained in the criminal proceeds recovery proceedings on 9 December 2015. His personal assets were not restrained. He was never a party to those proceedings, nor were any of the Masala companies. Moreover, there is no evidence of any involvement by Mr Chahil in reaching the settlement. It would therefore be something of a stretch to say that he should be treated as having made any offer of amends or as having entered into an agreement to remedy the losses he caused. The most that can be said is that such an agreement was reached by others in relation to their assets enabling recovery of most of the losses.
There is no doubt that the recovery must be factored into the sentencing exercise. Ms Levy acknowledged that in the present case, the recovery is relevant to the assessment of the starting point. We agree with that. This Court addressed the issue directly in R v Patterson, another case where the Crown had seized the proceeds of the criminal offending. Chambers J, writing for the Court, said this:[8]
[41] There are several ways in which this issue can be addressed. Perhaps the most logical approach is to acknowledge “involuntary” recovery of money stolen in the starting point analysis and “voluntary” reparation as a mitigating factor — taking care, of course, not to double-count. We have already indicated that fraud offending where no recovery is achieved is “more serious” than fraud offending with complete recovery, if only because in the latter case the victims’ loss is transitory and not permanent. The offender gets some credit for that in the starting point adopted, but not much. Not much because the offender’s culpability is not significantly reduced: he or she is still a fraudster and would not have voluntarily returned the money or thing stolen but for being caught. Such a credit in the starting point has been taken into account in our decision to uphold the judge’s nine and a half year starting point.
[42] “Voluntary” reparation is quite different. Where an offender exhibits genuine remorse and has done his or her best to atone financially for the fraud, whether by selling assets or borrowing or promising to make recompense by instalments from future earnings, credit is appropriate as a mitigating factor. The reparation is material evidence of remorse, a factor recognised in s 9(2)(f) of the Sentencing Act. The present case does not exhibit reparation or remorse of this character.
[8]R v Patterson [2008] NZCA 75.
Gault J followed this approach:[9]
[29] I accept that fraud offending where no recovery is achieved is “more serious” than fraud offending with complete recovery, if only because in the latter case the victims’ loss is transitory and not permanent. In this context I cannot take into account what Mr Bamford submits defence experts would have said at trial about recoupment of tax lost, which the Crown does [not] accept — and Mr Bamford accepted this morning is of marginal relevance at sentencing. But it is fair to infer that most of the loss has been recouped from the Court’s approval of the settlement, even though you were not a party to the settlement and your personal assets were not forfeited. But there is a distinction between voluntary and involuntary recovery of money. It is appropriate to acknowledge “involuntary” recovery of money in the starting point analysis and “voluntary” reparation as a personal mitigating factor — taking care not to double-count.
[30] However, in this case I consider the effect of the criminal proceeds settlement is modest. I accept, given the connection to the Masala related companies, through the separate holding companies, it is possible that your family had some beneficial interests in the properties forfeited. But even so, your culpability is not significantly reduced given you would not have voluntarily returned the money if you had not been caught.
(Footnotes omitted.)
[9]High Court judgment, above n 1.
We cannot see any error in that analysis which, as can be seen, is entirely consistent with this Court’s judgment in R v Patterson. In summary, we do not accept Ms Levy’s submission that the Judge ought to have allowed a nine month deduction from the starting point “for this putting the matter right, particularly given the significant overpayment”. We have already explained why we reject the significant overpayment thesis. Mr Chahil is not entitled to significant credit for “putting the matter right”. On the evidence available, he had little, if anything, to do with it.
The same starting point was adopted for Mr Chahil as was adopted by Moore J for Mr Chahil’s co-offender, “J”.[10] Moore J considered J’s culpability was lower than that of Mr Chahil and Mr Gupta.[11] The sentence imposed on J was upheld on appeal to this Court.[12] We are satisfied the same starting point adopted by Gault J for Mr Chahil was within the appropriate range.
Was the nine-month uplift for money laundering too high?
[10]At [35] (footnotes omitted). J has permanent name suppression.
[11]R v [J] [2018] NZHC 981.
[12][J] v R [2018] NZCA 408.
Gault J noted the observations of this Court in R v Wallace that sentences for money laundering should bear a relationship to the sentence imposed for the principal offending — “[t]he more serious the principal offending, the more serious the laundering”.[13] The Judge also observed that the extent of the money laundering operation and the offender’s involvement in it were important considerations.[14] The Judge noted that the laundering covered a period of 14 months from 15 February 2012 to 23 April 2013 and involved at least $524,000. The Judge described the laundering as a “sophisticated operation” involving numerous bank accounts and international jurisdictions.[15] However, the Judge accepted Mr Chahil’s role was to deliver the proceeds rather than participate in the machination of the transactions. Balanced against this, Mr Chahil was described as the “driving force” behind the laundering operations which were to conceal the tax evasion for his gain.[16] The Judge said he would have adopted a starting point of at least two years and six months’ imprisonment if he were sentencing on the money laundering charges alone.[17] Taking these matters into account, the Judge considered a nine-month uplift for the money laundering charges was appropriate.[18]
[13]R v Wallace CA 415/98, 16 December 1998 at 8–9; applied in Zhang v R [2010] NZCA 481 at [10].
[14]High Court judgment, above n 1, at [40].
[15]At [41].
[16]At [42].
[17]At [43].
[18]At [44].
Ms Levy submits that the general principle that laundering should be viewed as proportionate to the seriousness of the principal offending does not apply where the principal offender is simply dealing with the proceeds of that offending. In such cases, this use is inherent in the principal offending. R v Wallace and Zhang v R both involved sentencing of offenders whose involvement was confined to the money laundering, not the principal offending. In R v Wallace, this Court followed the English Court of Criminal Appeal in R v Greenwood which held that those who launder money for drug dealers are nearly as culpable as those who participate in the drug dealing.[19] In Zhang v R, this Court applied the same reasoning.[20] Ms Zhang was described as the “washerwoman” of the profits from the drug deals arranged by her partner.[21]
[19]R v Wallace, above n 13, at 3; referring to R v Greenwood (1954) 16 Cr App R (S) 614 at 615–616.
[20]Zhang v R, above n 13, at [10].
[21]At [1].
However, Mr Chahil did not simply use the proceeds of his offending. He was actively engaged in arranging for the money to be laundered in order to conceal the source of these funds, all for his own benefit. Ms Levy accepts there had to be an uplift. The only contest is whether nine months was excessive in all the circumstances.
Ms Levy submits an uplift of three months would have been sufficient. She contends that, of the $524,000 laundered, only about $56,000 could be attributed to GST evaded.
We do not accept these submissions. The agreed summary of facts states that the total amount of funds the subject of the money laundering transactions carried out by Mr Chahil and Mr Gupta were “at least” $524,184.94. Contrary to Ms Levy’s submission, a more than nominal uplift was required to reflect the serious and quite separate money laundering offending which Mr Chahil engaged in over a lengthy period. The uplift of nine months was entirely appropriate in all the circumstances. Further, in assessing the appropriateness of the adjusted starting point, we note that Mr Chahil was perhaps fortunate to receive a three-month discount for the fact he was sentenced to six months’ home detention from 28 October 2016 for his quite separate offending of providing false and misleading information to Immigration New Zealand.
Was the guilty plea discount inadequate?
Ms Levy submits the Judge should have allowed a 20 per cent discount for Mr Chahil’s guilty plea. She says the defence evidence assisted the resolution of a number of issues and some of the charges were downgraded to charges that could only be dealt with by way of a fine.
The charges were laid on 15 March 2017. This was after the criminal recovery proceedings had been resolved. The Crown case was strong. The guilty pleas were not entered until 8 October 2019. That was to have been the second day of the trial. A 15 per cent discount for such late guilty pleas can hardly be described as inadequate.
Standing back and assessing the sentence overall, we are satisfied it was within the appropriate range, particularly having regard to the duration and extent of the offending and Mr Chahil’s high level of culpability.
Result
The appeal against sentence is dismissed.
Solicitors:
Bamford Law, Nelson for Appellant
Crown Solicitor, Auckland for Respondent
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