Evans v Commissioner of Inland Revenue
[2009] NZCA 251
•17 June 2009
IN THE COURT OF APPEAL OF NEW ZEALAND
CA625/2008
[2009] NZCA 251NEIL GEORGE EVANS
v
COMMISSIONER OF INLAND REVENUE
Hearing:21 April 2009
Court:O'Regan, Hugh Williams and MacKenzie JJ
Counsel:R J Katz QC and J W Turner for Appellant
M J Ruffin and M M Burr for Respondent
Judgment:17 June 2009 at 11.30 am
JUDGMENT OF THE COURT
The appeal is dismissed.
REASONS OF THE COURT
(Given by MacKenzie J)
Table of Contents
Para No
Introduction [1]
Issues [4]
Facts [6]
The legislation [7]
The judgments [12]
(a) Omission to act [14]
(b) Companies Act duties [15]
The first issue – accessory liability for an omission to act [16]
(a) Submissions [16]
(b) Discussion [22]
The second issue – duty to act [29]
(a) Submissions [39]
(b) Discussion [44]
Result [46]Introduction
[1] Ace Toolmakers Limited (“Ace”) faced a number of charges under s 143A of the Tax Administration Act 1994 (“the Act”) of failing to pay PAYE deductions to the Commissioner of Inland Revenue. The appellant, who is the sole director of Ace, faced charges under s 148 of the Act of aiding and abetting the company to commit the offences. The informations alleged that he:
…aided and abetted [Ace] to commit... offences against section 143A(1)(d) of the Tax Administration Act 1994 in that the company through its director knowingly applied or permitted the application of a PAYE deduction made or deemed made as required to by Part B of the Income Tax Act 2004 for another purpose other than in payment to the Commissioner…
[2] In a reserved judgment delivered on 20 August 2007, Judge L J Ryan found the company guilty of the offences. He held that the prosecution had not proved that the appellant, as sole director, actively assisted the company to commit the offences and dismissed the charges against him. The respondent appealed by way of case stated to the High Court, and the following questions of law were posed by the Judge:
(a)Was I wrong in concluding in the circumstances of this case, that s 148 of the Tax Administration Act 1994 requires the informant to prove that the defendant actively assisted the company in its offending?
(b)Was the only conclusion available to me that the sole director Neil George Evans was also guilty of the offences as a party?
[3] In a reserved judgment delivered on 2 July 2008, Wylie J allowed the appeal. He answered both questions in the affirmative. Mr Evans sought leave to appeal to this Court, and leave was granted by Wylie J on 5 September 2008. The question of law for this Court was stated in these terms at [4]:
Can a director who is a sole director of a company and by whose conduct the company is convicted of an offence under s 143A(1)(d) of the Tax Administration Act 1994 (“the Act”) also be convicted of an offence under s 148(1) of the Act in circumstances where the conduct is helping or assisting, or is it a necessary requirement that the individual charged deliberately assisted the primary offender, and where no charge is brought against him/her under s 147(1) of the Act?
Issues
[4] The question posed for consideration by this Court and the way the appeal was argued before us make it necessary to deal with two broad issues. These are:
(a)Whether, and in what circumstances, an omission to act might give rise to accessory liability under s 148 of the Act;
(b)Whether a sole director of a company can be liable under s 148 because of a failure to act when he or she had a duty to do so under the Companies Act 1993.
[5] Before we address those issues, we briefly summarise the facts, the applicable legislation and the judgments of the District Court and the High Court.
Facts
[6] The relevant facts as they appear in the case stated may be briefly summarised. Ace was incorporated on 25 March 1994, and the appellant has always been the sole director. The company is registered for PAYE and is required to file an employer monthly schedule and pay to the Commissioner the PAYE deducted from employees’ wages and salaries. The employer monthly schedules were initially signed by the appellant on behalf of the company, but subsequently that was done by an accountant. The appellant was the only person who had cheque signing and drawing rights on the company’s bank account. He was in control of the bank account and was the only person who decided how to spend the money in that account. The appellant knew that PAYE was supposed to be paid on the 20th of the month following the month of payment of the wages to employees. The company deducted PAYE from the wages of its employees. The amounts deducted were not paid by the company to the Commissioner in the relevant periods. By virtue of the deeming provision in s 4A(2) of the Act, they were deemed to have been applied for a purpose other than in payment to the Commissioner.
The legislation
[7] We set out the relevant parts of the Act. The primary offence provision is s 143A:
(1) A person commits an offence against this Act if the person—
(a) Knowingly does not keep the books and documents required to be kept by a tax law; or
(b) Knowingly does not provide information (including tax returns and tax forms) to the Commissioner or any other person when required to do so by a tax law; or
(c) Knowingly provides altered, false, incomplete, or misleading information (including tax returns and tax forms) to the Commissioner or any other person in respect of a tax law or a matter or thing relating to a tax law; or
(d) Knowingly applies or permits the application of the amount of a deduction or withholding of tax made or deemed made under a tax law for any purpose other than in payment to the Commissioner; or
(e) Knowingly does not make a deduction or withholding of tax required to be made by a tax law; or
(f) Knowingly issues 2 tax invoices (as defined in the Goods and Services Tax Act 1985) in respect of the same taxable supply.
[8] The relevant offence here is that under subs (1)(d). The application of a deduction for another purpose is the subject of a deeming provision in s 4A(2), which relevantly provides:
(2) For the purposes of this Act—
…
(b)an amount of tax is deemed to be withheld when payment is made of the net amount of a PAYE income payment:
…
(c)The amount withheld or deducted described in … paragraph (b) … is deemed to have been applied for a purpose other than in payment to the Commissioner if the amount is not paid to the Commissioner by the relevant due date:
…
[9] Where a body corporate commits an offence against the Act, s 147 provides for liability to be imposed on an employee, agent, or officer of the body corporate in the circumstances set out in subs (1):
(1) An employee, agent, or officer of a body corporate commits an offence against this Act if—
(a) The body corporate commits an offence against this Act (the principal offence); and
(b) The principal offence—
(i)Was caused by an act done or carried out by, or by an omission of, or through knowledge attributable to, the employee, agent, or officer; or
(ii)evasion committed by the employee, agent, or officer.
[10] Section 148 imposes a more general accessory liability, in these terms:
(1) A person who aids, abets, incites, or conspires with another person to commit an offence (the principal offence) against this Act also commits an offence against this Act.
(2) A person convicted of an offence of aiding, abetting, inciting, or conspiring under subsection (1) is liable for up to the same maximum fine or term of imprisonment, or both, that could apply to a person who commits the principal offence.
[11] There are two relevant procedural distinctions between ss 147 and 148:
(a)Under s 150, an information under s 148, but not s 147, may charge any number of offences founded on the same set of facts or which form part of a series of offences of the same or a similar character.
(b)Under s 150A, an information for an offence against s 148, but not s 147, may be laid within ten years after the year in which the offence was committed. For an offence under s 147, the six month time limit in s 14 of the Summary Proceedings Act 1957 applies.
The judgments
(a) District Court
[12] Judge Ryan found that Ace, through its sole director, was aware of the fact that it was not accounting to the Commissioner as it was bound to do for each monthly deduction from salaries and wages. He found that the statutory defence in s 143A(3) of the Act, namely, that the failure to account was due to accident or other cause beyond the control of the company, was not established. Judge Ryan found that the appellant could have been charged under s 148 as an employee or officer of the company. He held that there is a significant difference between ss 147 and 148, in that under s 147 an officer of a company may be guilty of the principal offence committed by the company by an act or omission whereas in s 148 there is no reference to an omission. He held that the effect of this difference is to require the informant relying on s 148 to prove beyond reasonable doubt that the defendant actively assisted the company in its offending. He held that by omitting to sign cheques and file returns the defendant was not actively assisting the company. He therefore found offence of aiding and abetting not established.
(b) High Court
[13] In the High Court, Wylie J noted Judge Ryan’s findings that each of the elements of the offence by the company were proved beyond reasonable doubt and that the company had failed to establish the statutory defence available under s 143A(3). He dealt with the two issues which we have formulated above at [4] in the following way.
(i) Omission to act
[14] Wylie J addressed the argument that the aiding and abetting provisions in s 148 are limited to situations where there is proof that a defendant has knowingly and actively assisted the principal offender. He said that the concepts of aiding and abetting are of long standing at common law and an integral part of the Crimes Act 1961, in s 66. He noted that that section expressly extends to omissions in the context of “aiding”. He stated that both at common law and in the context of the Crimes Act the essence of aiding and abetting is intentional help, but that where the accused has legal and factual power of control over the activity concerned and in that sense is more than a passive bystander, non-intervention can amount to aiding and abetting. He reviewed a number of authorities and noted that those support the proposition that a person could aid if he or she knew the elements of the offence being committed by the principal offender and either gave assistance or omitted to take action when he or she could have done so. He held that the District Court Judge was wrong in law when he concluded that s 148 of the Act required the Commissioner to prove that Mr Evans “actively assisted the company in its offending”. He held that liability for aiding is not confined to active assistance and accordingly answered in the affirmative the first question in the case stated, set out in [2](a) above.
(ii) Companies Act duties
[15] Wylie J dealt briefly with the second issue described in [4] above, when addressing the second question in the case stated, set out in [2](b) above. He held that even if, contrary to his view, the failure to pay the Commissioner was characterised as an omission, Mr Evans was under a duty to ensure insofar as he could that Ace complied with its tax obligations. He referred in particular to ss 131, 133, 136 and 137 of the Companies Act. He held that had Mr Evans complied with his various duties as a director of Ace, any “omission” in payment of the amounts deducted from employees’ wages to the Commissioner would not have occurred. He accordingly held, in answer to the second question, that the only conclusion available to the District Court Judge was that Mr Evans, as sole director of Ace, was also guilty of the offences as a party. He allowed the appeal and remitted the case to the District Court.
The first issue – accessory liability for an omission to act
(a) Submissions
[16] Mr Katz QC for the appellant addressed two possibilities as to the way in which aiding and abetting might arise: mere inactivity and failing to act when under a duty to act. As to the first, mere inactivity or standing by when the offence is committed, he submitted that ss 147 and 148 are independent and discrete provisions and are directed towards and capture different factual scenarios as the actus reus. He submitted that s 147(1)(b) requires a link between the act, omission or knowledge on the part of the agent, and the commission of the principal offence by the company, in that the act, omission or knowledge on the part of the agent must cause or result in the company committing the principal offence. He submitted that provided that causal link is established, an act, omission or knowledge will suffice to render the employee, agent, or officer liable. He submitted that, in contrast, s 148 is directed at conduct which is positive, in that such conduct need not result in or be directly causative of the primary offence, but does require some positive action. Mere inactivity, passivity, standing aside, or being blind or casually indifferent to the consequences, is not conduct engaged by s 148. Rather that is what s 147 is there for.
[17] Mr Katz submitted that the accessorial liability provisions in s 148 are comparable with those in s 66 of the Crimes Act, with one very important difference. Section 66(1)(b) captures acts or omissions which are engaged in for the purpose of aiding the primary offender. Mr Katz submitted that none of Cooper v Ministry of Transport [1991] 2 NZLR 693 at 698 (HC), Ashton v Police [1964] NZLR 429 (SC), or Commissioner of Inland Revenue v Gold [1956] NZLR 442 (SC), which were relied upon by Wylie J, were cases in which a director of a one person company simply stood by or failed or omitted to take positive action. He submitted that the closest authority is Commissioner of Inland Revenue v Leslie (1985) 7 NZTC 5,101 (HC) where Barker J, following Fleming v Ellicott [1961] NZLR 106 and the South Australian decision of R v Goodall (1975) 11 SASR 94 (SC), held that a director of a one person company could be personally liable for aiding and abetting a company to commit an offence under the Income Tax Act 1976. Counsel, however, emphasised Barker J’s observation that each case must be taken on its own particular facts.
[18] Mr Katz further submitted that, for Goodall to apply, a director must be found to have controlled the company, and that control must be directly linked to the conduct said to be aiding and abetting. Counsel submitted that although the District Court Judge made findings including that the appellant was the only person with cheque signing authority, the Judge stopped short of finding that the appellant controlled the company to the extent necessary to fall within the Goodall dictum. Counsel noted that Wylie J also relied upon R v Gill (1999) 19 NZTC 15,526 (CA). He submitted that Gill requires the accessory to know of the commission of the primary offence and intend to participate in the primary offending by deliberately giving assistance. The findings of fact by the District Court Judge, counsel submitted, do not include any findings of control or deliberation sufficient to constitute wilful encouragement as there was in Gill.
[19] Counsel further submitted that there was nothing in the case stated upon which Wylie J could ground his statement that Mr Evans helped or assisted Ace in committing the offences because he made the decisions each month not to send the PAYE to the Commissioner and indeed went further and preferred other creditors. Mr Katz submitted that even if the director of a one person company can, in certain circumstances, be held capable of aiding and abetting the company of which he or she is the sole director, mere inactivity or casual indifference is not enough to constitute aiding and abetting under s 148. He submitted, again in reliance on Gill, that something more is required under s 148 than the mere fact of knowledge, help, or assistance, and that that something more is deliberation – the overt act of intentionally assisting the primary offender, by wilful encouragement. He submitted that the proposition that actual assistance or encouragement by the secondary offender of the principal offender is required for aiding and abetting is supported by Larkins v Police [1987] 2 NZLR 282 (HC) and R v Schriek [1997] 2 NZLR 139 at 147 to 150 (CA).
[20] Mr Katz further submitted that it is clear that the secondary offender must intend that the primary offence be committed. He submitted that Wylie J did not refer to either wilful encouragement, actual encouragement, or intentional encouragement, and so did not apply to the facts, as found by the District Court Judge, the law as stated in Schriek and other cases, but instead applied a lesser and incorrect test. He submitted that the findings of the District Court Judge, and the conclusions of Wylie J based on those findings, do not constitute deliberate action or wilful encouragement as s 148 requires.
[21] Mr Ruffin for the respondent drew attention to the limitations on the use of s 147 which we have noted at [11]. He acknowledged that the wording of s 148 does not specifically refer to aiding by omission but submitted that the language used is wide enough to cover “omissions to act” within “abetting”. He submitted that s 66 of the Crimes Act could be invoked as a party provision in these circumstances. He submitted that under s 148 liability for aiding is not confined to acts of assistance, and that where one who has the duty and the right and the ability to control or influence the actions of another deliberately refrains from exercising that duty and right, that person’s inactivity can be construed by the wrongdoer as encouragement or approval or a countenancing of those wrongful acts. Aiding in that way still requires intentional encouragement on the part of the person described as inactive. Counsel referred to R v Witika [1993] 2 NZLR 424 (CA), R v Brough CA507/96 27 February 1997 and Schriek.
(b) Discussion
[22] The question for consideration is whether, and in what circumstances, an omission to act might give rise to accessory liability under s 148.
[23] Section 147 applies to a limited category of offences (offences committed by a body corporate) and to a limited category of persons (employees, agents and officers of the body corporate). The section is a reflection of the reality that a body corporate, an artificial legal person, can act only through the human agency of its employees, agents, and officers. The purpose of s 147 is to impose on the human agent, as well as the corporate entity, liability for the acts of the corporate entity performed through that agent.
[24] Section 148 is of more general application. It applies to offences committed by any person, and the liability which it imposes may arise from the conduct of any other person. There is no necessary nexus between those two persons, beyond that created by the conduct relied upon as constituting a breach of the section. Section 148 is expressly linked to all other offence provisions (including s 147) by the terms of subs (1). The two sections are therefore not mutually exclusive.
[25] We find nothing in the statutory scheme which would suggest an intention to exclude from s 148 conduct which constitutes an offence under s 147. Conduct which falls within the scope of s 147, by a person who falls within the scope of that section, may also constitute a breach of s 148.
[26] Because the two sections are separate and directed towards different situations, we think that little assistance is to be derived, in interpreting s 148, from the wording of s 147. The basis of liability under each section is so different as to make any comparison of the wording unhelpful in determining the true scope of each section. For this reason, we attach little importance to one point upon which considerable reliance was placed by the appellant, namely the presence in s 147 and the absence in s 148 of reference to an omission.
[27] Section 148, in its use of the terms “aids, abets, incites” creates a secondary liability akin to that created by s 66(1)(b), (c) and (d) of the Crimes Act, though the wording is more abbreviated. Section 66(1)(b) specifically refers to an omission, while s 148 does not. We do not attach to that difference in wording the significance which counsel for the appellant urges upon us. We consider that both of the concepts (doing an act and omitting an act) fall within the ordinary meaning of the term “aids”, even though only s 66(1)(b) expressly uses those words. The concept of aiding is expanded on in s 66(1)(b), to apply to a person who “does or omits an act for the purpose of aiding”. That provision deals more fully with the concept of aiding than does s 148. In doing so, s 66(1)(b) expressly addresses matters which fall within the ordinary meaning of the word “aids”, and does not provide an artificial and expanded definition of that word. The view that s 66(1)(b) is not intended to expand the ordinary meaning of the term “aids” is consistent with s 66 being a codification of the common law concept. For these reasons, we consider that s 148 is not intended to limit the scope of “aiding” by excluding passive conduct, or an omission to act.
[28] That is not to say, and s 66(1)(b) does not say, that aiding includes every omission by a person who is aware of, and has the capacity to intervene in, offending by another. That is clear from the dictum of Hawkins J in R v Coney (1882) 8 QBD 534 at 557 – 558, relied upon by counsel for the appellant:
In my opinion, to constitute an aider and abettor some active steps must be taken by word, or action, with the intent to instigate the principal, or principals. Encouragement does not of necessity amount to aiding and abetting, it may be intentional or unintentional, a man may unwittingly encourage another in fact by his presence, by misinterpreted words, or gestures, or by his silence, on [sic] non-interference, or he may encourage intentionally by expressions, gestures, or actions intended to signify approval. In the latter case he aids and abets, in the former he does not. It is no criminal offence to stand by, a mere passive spectator of a crime, even of a murder. Non-interference to prevent a crime is not itself a crime. But the fact that a person was voluntarily and purposely present witnessing the commission of a crime, and offered no opposition to it, though he might reasonably be expected to prevent and had the power so to do, or at least to express his dissent, might under some circumstances, afford cogent evidence upon which a jury would be justified in finding that he wilfully encouraged and so aided and abetted. But it would be purely a question for the jury whether he did so or not.
[29] The question is whether an omission to act is that of a passive spectator amounting only to non-interference to prevent the crime (which does not constitute aiding), or whether it crosses the line so as to be an omission for the purpose of aiding the commission of the offence (in the words of s 66) or to give help, support, or assistance (to adopt the dictionary meaning of the verb “aid”). That is a question of fact to be determined in the particular case.
[30] The various authorities relied upon by counsel for the appellant are examples of the process of determining, on the specific facts, on which side of the line between passive observation and active assistance or encouragement the particular omission to act falls. In this case, there are relevant factual findings by Judge Ryan. Mr Evans was the company’s sole director. Only he had access to the funds in the company’s bank accounts. He was the only person who had cheque signing or drawing rights, and the only person who decided how the company’s money was spent. He maintained sufficient overview of the company’s financial position to know that its priorities were to meet its rent, fixed outgoings and wages and salaries. He paid those other creditors. Judge Ryan also found that the appellant was very much aware that Ace was not accounting to the Commissioner as it was bound to do. Those findings clearly establish that he was the only person whose actions could have led to the company performing its obligations to pay the deductions to the Commissioner. These deductions are held on a statutory trust, as Mr Evans must have known, and, month by month, his decision to have Ace use them for other purposes made him increasingly liable as an accessory.
[31] The question is whether, in the light of those factual findings, the appellant’s omission to take action can be said to have aided the company in the failure to make the payment which, pursuant to the deeming provision in s 4A, constituted the actus reus of the company’s offence.
[32] An argument similar to that advanced by the appellant here was raised in Fleming v Ellicott. That case involved a failure by a company to pay social security contributions to the Commissioner. Both the company and the managing director were charged. Barrowclough CJ said (at pp 108 and 109):
The third ground for dismissal of the informations was that the defendant was the managing director of the company which was the employer of the men from whose wages deductions were required to be made, that the company was primarily responsible for seeing that the sums deducted were not applied for a purpose other than payment of the charge created by the Social Security Act and that the defendant therefore could not be charged under s. 119 (2) of the Act as he had no power, other than by virtue of his employment as a servant of the company, to permit moneys belonging to the company to be applied for a purpose other than payment to the Inland Revenue Department. I confess I find it difficult to understand this argument and I think counsel experienced a similar difficulty.
…
But even if that which the present respondent did or omitted to do in this case in relation to the moneys deducted for social security contributions were done or omitted by him in his capacity as a servant, that would not necessarily prevent his acts or his neglect from being an offence against the statute. Granted that the company may have been guilty of the offences charged the respondent might also be guilty of abetting the commission of the offences and if so he would be a party to and guilty of those offences: s. 90 of the Crimes Act [[1908]] which is, of course, incorporated into the Summary Proceedings Act 1957. Whether or not the respondent was party to the offences can be determined only after hearing the evidence.
[33] The latter passage of that citation makes it clear that the fact that the company may be liable for the acts or neglects of the managing director did not mean that the managing director might not also be liable under the ordinary principles of party liability. The outcome of the appeal, remission to the Magistrate’s Court, necessarily followed, because the question is one of fact, and the informations had been dismissed before evidence had been heard. The earlier part of the citation suggests that an argument that the managing director did not have such a degree of control as to render him liable for aiding the company was unlikely to succeed.
[34] A similar situation arose in Commissioner of Inland Revenue v Leslie. That was an appeal to the High Court under the prior provisions in the Income Tax Act 1976 concerning payment of PAYE deductions. The respondent was the only director of a company which had failed to pay PAYE tax deductions. There, as here, the District Court Judge convicted the company as principal offender but acquitted the respondent as secondary party. As noted at 5,102 he did so on the basis that:
… it would be artificial for the Court to hold that there were two separate minds at work, one knowingly committing the offences and the other knowingly aiding and abetting the commission of the offences.
Barker J, in allowing the appeal, did not accept that proposition. He said at 5,103:
It seems to me, therefore, to be established from authority that it is possible in situations such as the present for the principal of a “one man” company (using that expression in the broad sense) and the company both to be liable under the criminal law for the same offence – one as a principal and one as a secondary party. Each case of course must be taken on its own particular facts.
[35] We consider that the proposition established by Fleming v Ellicott and Leslie, namely that both the principal and the company can be liable for the same offence, is correct. It is not necessary, to create a secondary liability for aiding, that there be a second mind at work. The director’s state of mind can constitute the necessary mens rea for both the liability of the company and the accessory liability of the director. With that necessary mens rea present, the director’s failure to take the steps which only he can take to have the company make the payment can constitute the necessary actus reus of both offences. On the facts as found here, Mr Evans was the only person who could have taken the steps necessary to ensure that the company met its obligation to pay the amount deducted to the Commissioner. His omission to take the appropriate steps to do that form the basis on which the company has committed the offence. On those facts, it is artificial and unrealistic to suggest that the appellant, by omitting to sign the cheque or other order which could provide the only means by which funds could have been taken from the company’s bank account to pay the Commissioner, has not aided the company in failing to make the payment.
[36] We do not consider that consciously failing to take steps to make payment, in breach of the statutory trust, by the only person with the ability to take those steps, can be described as mere inactivity or as casual indifference to the company’s offending. The circumstances here, on the facts as found, fall within those where a director can be held capable of aiding and abetting.
[37] Wylie J also held that the appellant’s conduct went beyond mere omissions. He noted that the appellant made the decision each month not to pay the PAYE to the Commissioner and he went further and preferred other creditors. Wylie J held that his decisions each month that the company should not account to the Commissioner for PAYE deducted from employees’ wages were not omissions. We agree with that assessment. In our view, the payments to other creditors provide evidence of the intention formed by the appellant to assist the company to pay those creditors ahead of the Commissioner and, accordingly, of his knowing participation in the company’s failure to pay.
[38] It is worthy of note that the offence by the company is one of commission, not of omission. The offence in s 143A is of knowingly applying or permitting the application of funds for some other purpose than payment to the Commissioner. In this case, it was not necessary for the prosecution to establish the application for another purpose because the deeming provision in s 4A makes proof of failure to pay the Commissioner sufficient to establish this element of the offence. But there was evidence, even though not necessary to a finding of guilt on the part of the company, that the deductions had been applied for another purpose. Judge Ryan found that the appellant knew that the company’s priorities were to meet its rent, fixed outgoings and wages and salaries, which meant that the obligation to account to the Commissioner for source deductions was low on the list of priorities. The appellant, in taking the step of paying other creditors, provided active assistance to the company in the commission of the offence.
The second issue – duty to act
(a) Submissions
[39] The second issue set out in paragraph [4](b) above is whether a sole director can be liable under s 148 because of a failure to act when under a duty to do so under the Companies Act.
[40] Mr Katz acknowledged that liability under s 148 may arise by intentionally refraining from acting when under a duty to act. He referred to Coney and Witika. He submitted that this is not a case where the appellant was under any duty to take action and had a power of control over the primary offender so that the duty could be carried out, and that there was no such finding by the District Court Judge.
[41] Counsel noted that Wylie J found on the facts stated that the appellant, in his capacity as director, had a duty to intervene to ensure that the company complied with its tax obligations, by reference to the duties in ss 131 to 137 of the Companies Act. He submitted that these provisions are inapt to impose on a director of the company a statutory duty or power to intervene to prevent the company from breaching the Act, in that those duties are owed to the company, and that liability of that sort in this context is covered by s 147.
[42] Mr Katz further submitted that the Companies Act duties are owed to the company and may be enforced by a third party only in limited circumstances such as liquidation. He submitted that preferring or paying other creditors is a civil breach and does not give rise to criminal liability. He submitted that the duty not to carry on the business so as to create a substantial risk of serious loss to creditors is a duty owed to the company, not to a third party such as the Commissioner, and the Commissioner does not stand in the shoes of the company for the purposes of enforcing any duties under the Companies Act.
[43] Mr Ruffin submitted that s 167 of the Act imposes a fiduciary obligation on the company, and that the Companies Act duties are such that the appellant’s intentional omission to comply with these duties comes within s 148 of the Act.
(b) Discussion
[44] Because of the view we have reached on the first issue, we can deal briefly with this issue. It is not, in general terms, necessary to establish a legal duty to intervene on the part of a bystander before a failure to intervene may give rise to accessory liability. That is clear from the passage we have cited from Coney. The question is whether active assistance or encouragement has been provided. The duties incumbent on a director are relevant to that question, but they are not decisive of it. A director who is in unknowing breach of his duties would not, merely by reason of the breach, be guilty of aiding the company.
[45] But that is far removed from the facts here. In this case, the appellant was the only person with the ability to ensure that the company met its legal obligations. He owed a legal duty to the company to act in its best interests. He was aware that he was not taking a step to enable the company to perform an obligation which the law required. Those circumstances are sufficient to establish accessory liability under s 148. It is unnecessary to show a specific duty owed to the Commissioner before liability can arise.
Result
[46] The way in which the case was argued, with considerable focus on whether the appellant’s conduct is to be categorised as an omission, and whether an omission can give rise to accessory liability, makes the form of the question posed for this Court somewhat inappropriate. That question, formulated by the High Court following discussions with counsel at the hearing of the leave application, is set out at [3] above. We consider that the two questions posed in the case stated to the High Court, set out at [2] above, more accurately capture the essence of the issue to be decided. Both of those questions were answered in the affirmative by Wylie J. For the reasons we have given, we too would answer both questions in the affirmative. In these circumstances, the appropriate course is to dismiss the appeal.
Solicitors:
McVeagh Fleming, Auckland for Appellant
Crown Law Office, Wellington