Commissioner of Inland Revenue v Parore

[2021] NZHC 420

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2020-404-418

[2021] NZHC 420

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Appellant

AND

RICHARD ALLEN PARORE

Respondent

Hearing:

14 December 2020 (further written submissions: 29 January, and

16 and 23 February, 2021)

Appearances:

N H Malarao and J V Angelson for the appellant D P Weaver for the respondent

Judgment:

8 March 2021

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 8 March 2021 at 3.00pm.

………………………… Registrar/Deputy Registrar

Counsel/Solicitors:

D P Weaver, Barrister, Tauranga Meredith Connell, Auckland

Burley Castle Hawkins Law, Tauranga

Inland Revenue Department – Legal Services (Manukau)

THE COMMISSIONER OF INLAND REVENUE v PARORE [2021] NZHC 420 [8 March 2021]

[1]    The Commissioner of Inland Revenue seeks leave to appeal the 24 August 2020 judgment of Judge D F Clarkson in the District Court at Auckland,1 dismissing seven of 13 charges of GST evasion brought against Mr Parore under s 143B(2) of the Tax Administration Act 1994. If leave is granted, I am to determine the appeal.

Decision under appeal

[2]    Section 143B(2) provides “[a] person who evades or attempts to evade the assessment or payment of tax by the person or another person under a tax law commits an offence against this Act.”

[3]    As trial judge — on conclusion of the Commissioner’s evidence,  and on    Mr Parore’s application — the Judge ruled there was no case for Mr Parore to answer on the seven charges, as “there is insufficient evidence to prove the intention to evade, or that non-payment occurred for reasons other than oversight or confusion”.2

[4]    The Judge recorded the Commissioner’s acceptance she must prove the defendant, knowing of obligations to be assessed for or to pay tax, had acted or failed to act, with effect to evade the tax’s assessment or payment, intentionally.3

[5]    Mr Parore, a GST-registered real estate agent, was adjudicated bankrupt on   2 April 2009, remaining an “incapacitated person” for GST purposes4 until 10 October 2014 when discharged from bankruptcy. He continued to work after adjudication, and to file GST returns with the Commissioner (albeit under his original GST registration, and not that operative since his adjudication on the Official Assignee’s standard application to cancel and replace the former).

[6]    In late 2011, on belated receipt of his statement of affairs, the Official Assignee required Mr Parore to apply for self-employment status. He did not do so, but coincidentally ceased filing GST returns. The Commissioner issued default assessments for 2012–2017 in relation to Mr Parore’s new GST registration, and

1      Commissioner of Inland Revenue v Parore [2020] NZDC 16363.

2      At [52]–[53], referring to s 147(4)(b) of the Criminal Procedure Act 2011.

3 At [5]–[6], and [9].

4      Goods and Services Tax Act 1985 (the “GST Act”), s 58.

accepted Mr Parore’s proposed adjustments outside the bankruptcy period. But the parties remained in dispute about tax obligations during that period: whether they fell on Mr Parore, or on the Official Assignee as his specified agent in terms of s 58 of the GST Act. The dismissed charges relate to the seven six-monthly GST returns due for the period from return cessation to bankruptcy discharge.

[7]The Judge found:5

… the situation was entirely unclear. Firstly, Mr Parore obviously thought he was under a continuing obligation to file GST returns but because he was not receiving the forms for a manual return previously made by him he adapted old ones until they ran out. This coincided with his first[,] it seems, interaction with the OA. From that time, it seems impossible to infer a clear intention to evade the payment of GST, which is what is required to establish the charges under consideration.

The Judge continued to identify other indicia of Mr Parore’s lack of culpable intention

— the uncertainty over the application of s 58, Mr Parore’s due payment of income tax, and the uncertainty he had received either the Commissioner’s notice of his new GST registration or the Official Assignee’s standard direction he file a statement of affairs on adjudication — to conclude “[w]ithout positive evidence of intention to evade … it seems impossible to infer the intention argued for in the face of such confusion over obligations.”6

[8]    The Commissioner seeks to argue on appeal the Judge misapplied s 147(4)(b) of the Criminal Procedure Act 2011 (enabling dismissal on ground of no case to answer, the judge-alone equivalent to s 147(4)(c)’s “as a matter of law, a properly directed jury could not reasonably convict the defendant”), and disregarded evidence of Mr Parore’s knowledge and intention.7

Leave to appeal

[9]    The Commissioner may seek leave to appeal “on a question of law against     a ruling by the trial court”,8 which question must arise “in the determination of the

5 At [45].

6 At [51].

7      Mr Parore brought the s 147 application exclusively on the ground s 58 of the GST Act was effective to exclude his liability under s 143B(2) of the Tax Administration Act 1994. The Judge came to no conclusion on s 58’s operation. I therefore do not address it.

8      Criminal Procedure Act 2011, s 296(2).

charge (including, without limitation, … the dismissal of the charge under section 147

…)”.9 Plainly, that is the context for the question sought to be raised on appeal: the Judge’s decision has resulted in dismissal of the seven charges,10 of which Mr Parore is deemed acquitted.11

[10]   The threshold for leave then is if it is to be argued “the Judge made an error of law or was plainly wrong in dismissing the charges”.12 By “error of law” is meant:13

a)   a misdirection of law apparent in the decision;

b)   oversight of a relevant matter or consideration of an irrelevant matter; or

c)   a factual finding unsupported by any evidence or an omission to draw an inference of fact which is the only reasonably possible one on the evidence.

An ‘error of law’ “may also arise when a decision is plainly wrong”.14

[11]   The proposed appeal necessarily engages a question of law: “[a]t the conclusion of the prosecution’s case what has to be decided remains a question of law only.”15 Although, for Mr Parore, David Weaver seeks to characterise the proposed appeal as an impermissible attack on the Judge’s factual findings, that is a premature criticism. The Judge’s decision itself is of a question of law, which the Commissioner seeks to impugn.

[12]   As leave nonetheless is required for the appeal, I have residual discretion to refuse it. That residual discretion imposes no burden on any party. I am not particularly assisted by factors taken into account in considering leave to appeal in other contexts. Here, the Commissioner has no other appeal right, and no countervailing factor is

9      Section 296(3).

10     See Lyttle v R [2019] NZCA 329 at [32].

11     Criminal Procedure Act, s 147(6).

12     Solicitor-General v McKay [2020] NZCA 676 at [42].

13 R v Cleaver [2020] NZCA 397 at [12], citing R v Taulapapa [2018] NZCA 414 at [17] (citing R v Smyth [2017] NZCA 530 at [8] (citing Brown v R [2015] NZCA 325, (2015) 30 FRNZ 471 at [16])).

14 R v Cleaver, above n 13, at [12], citing R v Malu [2017] NZCA 546 at [10(c)] and Commerce Commission v Shukla HC Auckland CRI-2007-404-229, 21 November 2007 at [3].

15 Haw Tua Tau v Public Prosecutor [1982] AC 136 (PC) at 151, as cited (obiter) in S v Vector Ltd

[2020] NZSC 97 at [125].

raised sufficient to deny her challenge. I see no reason to refuse leave. Leave is granted.

Substantive appeal

[13]   The Judge’s decision at the close of the prosecution case is as to “evidential sufficiency”: a ‘prima facie case’ there is evidence sufficient to justify trial, which is to “be interpreted as consistently as possible across all the contexts in which it is used”.16 The decision is:17

… whether there is some evidence (not inherently incredible) which, if he were to accept it as accurate, would establish each essential element in the alleged offence. If such evidence as respects any of those essential elements is lacking, then, and then only, is he justified in finding ‘that no case against the accused has been made out’…

That is to say, if there is evidence capable of supporting the essential elements; particularly where inferences are to be drawn, “[t]he court should not decide on such an application or submission whether the relevant inference should be drawn”.18

[14]   The question on this appeal thus is if the Judge’s conclusions “it seems impossible to infer” the requisite intention are as to evidential sufficiency, or evidential substance. The latter would be in error. Unless the evidence is insufficient, a judge is to keep an open mind on its substance until after hearing from counsel on the whole of the case. The issue under s 147 is “if the evidence is adequate, with the question of its acceptance being considered … on the whole of the case …”.19

[15]   Although put in terms of ‘impossibility’, the Judge clearly was assessing the substance of the evidence. She expressly identified the materiality of the evidence as to Mr Parore’s payment of income tax, his continued filing using old forms, his mailing

16 S v Vector Ltd, above n 15, at [121]–[122], endorsing R v Flyger [2001] 2 NZLR 721 (CA).

17 Haw Tua Tau v Public Prosecutor, above n 15, at 151.

18 R v Flyger, above n 16, at [18], endorsing R v Adams HC Auckland T240/91, 8 October 1992 at 4 (emphasis in original).

19 R v Flyger, above n 16, at [22]. Similarly, in Haw Tua Tau  v Public Prosecutor, above n 15, at 152:

[H]e must call upon the accused to enter upon his defence, and as decider of fact must keep an open mind as to the accuracy of any of the prosecution’s witnesses until the defence has tendered such evidence, if any, by the accused or other witnesses as it may want to call and counsel on both sides have addressed to the judge such arguments and comments on the evidence as they may wish to advance.

and residential addresses, and his contact with the Official Assignee.20 She explained, for example, “[t]he delayed filing is more supportive of these documents not having been received by Mr Parore than of an inference that he was evading obligations in some way.”21

[16]   The Judge thus acknowledged the evidence was capable of supporting the Commissioner’s contended inferences, even while she would weight it otherwise. She does not mean the evidence could not support the inferences. Her references to ‘impossibility’ are not literal. Although she ultimately found “there is insufficient evidence to prove the intention to evade, or that non-payment occurred for reasons other than oversight or confusion”,22 that was to draw substantive inferences, rather than to find the evidence incapable of supporting them. The Judge’s finding of “insufficient evidence” is not a finding as to evidential sufficiency but of evidential substance.

[17]The Judge therefore erred in law.

Consequences

[18]Under s 300(1) of the Criminal Procedure Act, I must determine the appeal by:

(a)    confirming the ruling appealed against; or

(b)    doing any of the following if the court considers the ruling is erroneous and, in the case of the person’s conviction or acquittal or of a direction by a court to stay the prosecution or to dismiss the charge under section 147, also resulted in a miscarriage of justice:

(i)setting aside the conviction and entering an acquittal, if the person has been convicted; or

(ii)directing a new trial, in any case; or

(c)    varying or substituting the sentence or remitting the sentence to the sentencing court with directions, if the decision relates to sentence and the court thinks the decision is erroneous; or

(d)    remitting the matter to the trial court in accordance with the opinion of the appeal court; or

(e)    making any other order that the court considers justice requires.

20     Commissioner of Inland Revenue v Parore, above n 1, at [47]–[50].

21 At [50].

22 At [52].

[19]   For the Commissioner, Nick Malarao sought initially I direct a new trial; subsequently, as the Judge “remains seized of the matter”, I remit the matter to the Judge for disposition in accordance with my opinion. The latter course is not obviously available in the circumstances. On the seven charges’ dismissal, Mr Parore is deemed acquitted of them,23 meaning the Judge has disposed of those charges. On those charges, he no longer “is to be tried”; there is no trial court to which the matter may be remitted.24 That the balance of the original 13 charges is outstanding is no answer.

[20]   Because the Judge’s ruling was to dismiss the seven charges under s 147, the former course would require I consider the ruling also resulted in “a miscarriage of justice”. By analogy with the statutory phrase’s earlier definition in connection with appeals against conviction, that means something has occurred in relation to trial to create a real risk — a reasonable possibility — against a more favourable outcome for the Commissioner.25 While not every error will amount to a miscarriage of justice and the threshold is high,26 the analogy is consistent with s 300’s predecessor’s requirement of “substantial wrong or miscarriage of justice”: “the appellate court to be satisfied that the error was one highly material to verdict, so that the integrity of verdict is undermined by it”.27

[21]   Given the misfiring of Mr Parore’s s 147 application (brought on grounds of  s 58’s operation),28 and notwithstanding s 105’s default streamlined procedure (by which neither party may make submissions on the facts or address the evidence), the integrity of Mr Parore’s acquittal is undermined by summary determination of the Commissioner’s case. That summary determination put paid to any more favourable outcome for the Commissioner, such as may have been available either by reference to s 58 or in considering “the whole of the case”.29  The Judge’s  error resulted in      a miscarriage of justice.

23 Criminal Procedure Act 2011, s 147(6).

24     Section 5, definition of “trial court”.

25 Section 232(4); Misa v R [2019] NZSC 134 at [38]–[48], citing R v Sungsuwan [2005] NZSC 57, [2006] 1 NZLR 730 at [110], R v Matenga [2009] NZSC 18, [2009] 3 NZLR 145, and Wiley v R [2016] NZCA 28, [2016] 3 NZLR 1.

26     Otis v Police [2019] NZCA 231 at [4], citing McAllister v R [2014] NZCA 175, [2014] 2 NZLR 764 at [38].

27     R v Gwaze [2010] NZSC 52, [2010] 3 NZLR 734 at [61], concerning the repealed s 382 of the Crimes Act 1961.

28     See above n 7.

29     R v Flyger, above n 16, at [22], and see above n 19.

[22]   Nonetheless, as “it would be problematic to allow the [Commissioner] a second go at presenting a case that was unsuccessful”:30

… it would make more sense for the matter to be remitted for the District Court to reconsider its assessment of the evidence as it stands, as there was no challenge made to the collection of the evidence, only the Judge’s conclusions.

I can balance those considerations in reliance on s 300(1)(e).

Result

[23]   The appeal is upheld. Under s 300(1)(b)(ii) and (e), I direct a new trial of the dismissed charges — on the prosecution evidence heard by the Judge (Mr Parore having elected not to give or call evidence), and either party’s submissions (including on the facts or addressing the evidence as the Judge may allow) — in conjunction with the Judge’s conclusion of trial on the other charges faced by Mr Parore.

—Jagose J

30     R v Tallentire [2019] NZHC 1749 at [11], citing R v Gao [2015] NZHC 810.