Pepa v Ministry of Business, Innovation and Employment
[2019] NZHC 704
•5 April 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI-2019-404-039
[2019] NZHC 704
BETWEEN FALEAKO PEPA
Appellant
AND
MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT
Respondent
Hearing: 1 April 2019 Counsel:
J Grainger for Appellant J T Parry for Respondent
Judgment:
5 April 2019
JUDGMENT OF BREWER J
This judgment was delivered by me on 5 April 2019 at 3:00 pm
Registrar/Deputy Registrar
Solicitors:
Public Defence Service (Auckland) for Appellant Meredith Connell (Auckland) for Respondent
PEPA v MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2019] NZHC 704 [5 April 2019]
Introduction
[1] On 30 January 2019, Judge AC Roberts sentenced Mr Pepa to three months’ community detention and 140 hours’ community work on two charges of failing to comply with a notice given under s 261 of the Companies Act 1993 (the Act).1 The Judge also awarded costs in favour of the Ministry of Business, Innovation and Employment (the prosecutor) in the sum of $2,000. Mr Pepa appeals the sentence as manifestly excessive and the costs order as wrong.
Background
[2] Mr Pepa incorporated GI Construction Ltd on 17 March 2014 as his vehicle for a construction business. He was the company’s sole director and shareholder.
[3] The company did not prosper. On 1 September 2017 it was placed into liquidation. A liquidator was appointed.
[4] The Act provides for the appointment of liquidators and specifies their duties, rights and powers. The principal duty of a liquidator is to protect or take possession of the assets of the company and distribute any surplus assets to those entitled to receive them.2
[5] The Act confers powers to enable the liquidator to perform its duties. One such power is to require, by notice in writing, a director or shareholder of the company to attend on the liquidator and deliver any books, records or documents of the company in their possession or control.3 It is an offence to fail to comply with such a notice.4 The maximum penalty is imprisonment for a term not exceeding two years or a fine not exceeding $50,000.5
[6] In this case, the liquidator served two notices on Mr Pepa on 9 October 2017. The first notice required Mr Pepa to attend on the liquidator on 6 November 2017 at
1 Ministry of Business Innovation and Employment v Pepa [2019] NZDC 2521.
2 Companies Act 1993, s 253.
3 Section 261.
4 Section 261(6A).
5 Section 373(3)(a).
11:00 am to be examined regarding the business, accounts and affairs of the company. The second notice required Mr Pepa to deliver to the liquidator, at the same time, all books, records and other documents or papers in his custody or control in relation to the company.
[7] Mr Pepa did not attend on the liquidator and did not deliver any documents. He was, therefore, in breach of both notices.
[8] The liquidator referred the matter to the Companies Office Integrity and Enforcement Team (IET). On 14 November 2017, IET sent Mr Pepa an email setting out the liquidator’s allegation that Mr Pepa had breached the two notices.
[9] On 22 November 2017, Mr Pepa contacted IET and said he had missed the appointment because he had written the wrong date in his diary. Mr Pepa said he wanted to reschedule the examination. IET advised Mr Pepa to contact the liquidator to request a new appointment.
[10] Mr Pepa did contact the liquidator and a new appointment was made for 1 December 2017. Again, Mr Pepa failed to keep the appointment and failed to deliver any documents. The liquidator again complained to IET.
[11] On 5 December 2017, IET invited Mr Pepa to attend a voluntary interview at the Companies Office on 19 December 2017 to discuss why he had failed to comply with the notices. Mr Pepa did not go to the Companies Office. The charges were brought subsequently.
[12] Mr Pepa’s first appearance on the charges was on 24 April 2018. He entered pleas of guilty at a subsequent appearance on 1 June 2018.
The appeal
[13] The nub of the appeal against sentence is that community detention was outside the range of penalties available to Judge Roberts, and the sentence should have been one of community work. Counsel submits the Judge failed to consider Mr Pepa’s personal mitigating circumstances, particularly his previous good character. It is also
submitted the Judge should have taken into account that Mr Pepa was diagnosed with depression which contributed to his offending. Further, counsel submits the Judge erred in apparently deciding a sentence of intensive supervision was not applicable to Mr Pepa and instead imposing community detention on top of a sentence of community work.
[14] I will address the appeal against sentence before turning to the appeal against the costs order.
Appeal against sentence
[15] My task on an appeal against sentence is to ascertain whether an error has been made such that a different sentence should be imposed.
[16] Judge Roberts identified the salient facts of the offending and had particular regard to the pre-sentence report. That report made reference to Mr Pepa currently working for his wife’s construction company and relying on his friends to support him in order to provide for his family. He was described as under considerable personal stress because of the events leading up to the collapse of his company. The report advised that Mr Pepa’s doctor confirmed Mr Pepa had been diagnosed with depression during his period of financial hardship. The report writer considered a rehabilitative sentence of intensive supervision should be imposed as well as a sentence of community detention. These sentences would provide for oversight of Mr Pepa while allowing him to continue working for his wife’s company.
[17] Judge Roberts recorded that Mr Grainger, for Mr Pepa, did not accept either sentence was suitable. Mr Grainger submitted Mr Pepa did not require assistance or oversight. As to community detention, the Judge recorded the submission that Mr Pepa’s family issues made it unsuitable.
[18] Judge Roberts reviewed a number of cases where prosecutions for the same offence had resulted in sentences of community work.
[19] Although the Judge did not explicitly say so, I infer from the sentencing notes he accepted the prosecution’s submission that Mr Pepa’s case is the most serious of its
kind to be brought before the Courts so far. That is because Mr Pepa has failed to mitigate his offending either by interacting with the liquidator or producing any documents at all.
[20]The Judge concluded:
[12] I, too, would be of the view that a prison sentence would indeed be appropriate. I would not pitch as high as the informant’s solicitor and more realistically settle on a start of 12 months’ imprisonment. Allowing a concession for a plea, there would be an end sentence of nine months’ imprisonment. That is to indicate the gravity of the offending.
[13] This was not a matter of oversight. The defendant has been brought quite undone with his fatuous explanations for failing to attend; brought undone by subsequent failures on his part. Notwithstanding the submissions made me, notwithstanding the issues that a monitored sentence will create in relation to this man being able to visit his ill mother in Tonga, I consider the minimum sentence that I could possibly impose here would be one of community detention.
[14] Given that intensive supervision, as counsel submits, is of no great significance or relevance as to a sentence of supervision standalone, I am going to impose additionally a sentence of community work.
[21] I accept Judge Roberts did not specifically provide a sentence discount for Mr Pepa’s personal circumstances. He may or may not have taken them into account in commuting the sentence from imprisonment to community-based detention and work. Ultimately, I am concerned with whether the final sentence is manifestly excessive rather than the route by which the Judge reached it. I will take Mr Pepa’s personal circumstances into account when I make that assessment.
[22] I do not accept Mr Grainger’s submission the Judge erred in failing to give credit for “the fact that [Mr Pepa’s] depression contributed towards his offending”. There is no evidence that this depression contributed towards the failure to comply with the notices. There is only the report of the doctor’s opinion that Mr Pepa suffered from depression as well as a comment in a letter dated 20 September 2018 from Mt Wellington Integrated Health Centre stating that Mr Pepa became seriously depressed and was reluctant to seek help.
[23] The Courts have recognised that depression can clinically be linked to offending. But for a discount there must be evidence of causation, and here there is none.
[24] I do not find Judge Roberts erred by imposing a sentence of community work instead of intensive supervision. I do not accept Mr Grainger’s submission the Judge imposed a punitive sentence because he found a rehabilitative sentence unnecessary. As I read the Judge’s notes, he first accepted submissions that a sentence of intensive supervision was unnecessary and then, looking at the overall offending, judged a combined sentence of community detention and community work to be appropriate.
[25] Notwithstanding my findings, I must still step back and assess whether the sentence Judge Roberts imposed was manifestly excessive.
[26] First, I can gain little assistance from the sentences handed down in the other cases to which I was referred.6 The fact situations are different, and the reasoning laid out is not really applicable to my task. I have to go back to first principles.
[27] The liquidator’s role in ensuring the orderly winding up of a failed company’s affairs is an important one. The financial failure of a company can cause great financial damage to a range of people, including creditors. Without the liquidation process mandated by the Act there would be considerable scope for financial chaos and unfairness. Parliament has accordingly made failure to comply with a notice issued by a liquidator pursuant to s 261 of the Act an offence punishable by up to two years’ imprisonment.
[28] Mr Parry for the prosecutor submits that a major aggravating factor is Mr Pepa having alleged there were debts owed to the company of $370,000 from two entities, Arrow International and DFS.7 It is submitted this is evidence of a tangible detriment to creditors:
6 Ministry of Business, Innovation and Employment v Boakes [2015] NZDC 10750; Prasad v Ministry of Economic Development HC Auckland CRI-2009-404-1, 30 July 2009; and Dallimore v Ministry of Economic Development HC Auckland CRI-20080404-26, 22 July 2008.
7 The allegations are contained in an unsworn affidavit filed and served by Mr Pepa in support of a signalled application for discharge without conviction which did not proceed.
Had the liquidator known of these alleged debts, they would have been in a position to investigate them and possibly recoup money for the benefit of creditors. The amount allegedly owed to the company is nearly double the amount claimed in the liquidation ($188,149.77).
[29] In my view, for offending of this type to have culpability going towards the maximum sentence it would require self-serving or otherwise improper reasons for failing to comply with a notice. Such reasons could include the desire to conceal damaging information or malice towards creditors or others connected with the company. Offending being linked causally to loss to creditors or others because the liquidator is prevented from doing its duty would similarly be aggravating.
[30] In this case, Mr Pepa had been through the traumatic and debilitating experience of seeing his company fall into financial ruin. The material, particularly the letter from the Mt Wellington Integrated Health Centre, makes clear he is a hardworking man who felt very badly about what had happened, particularly since he and his family fell into poverty as a result.
[31] Mr Pepa became resistant to having anything more to do with the company. He did not go to the first appointment with the liquidator, but he was sufficiently alarmed by the first contact with IET to respond to it and to make a second appointment with the liquidator. In his unsworn affidavit he said he missed the first meeting out of error and did not go to the rescheduled meeting because he could not find relevant documents and did not believe he would be able to help the liquidator. He said (although the liquidator has no record of it) that he did eventually go to the liquidator’s premises on 1 December 2017 but was too late. As to the voluntary meeting, Mr Pepa said he had recently started his new job and did not want to risk losing it by going to the meeting.
[32] In the round, Mr Pepa was not ill-intentioned but has nonetheless offended despite being given every chance to comply with the notices. He has not mitigated his offending by voluntarily going to the liquidator and delivering company documents. By his own words, there is the potential for claims to be pursued by the liquidator for the benefit of creditors.
[33] I place this offending as being towards the middle of the sentencing range. A starting point of 10 to 12 months’ imprisonment is indicated.
[34] Mr Pepa’s personal factors undoubtedly mean the sentence should be commuted to a community-based sentence. Given the failure to take any mitigating steps to address his offending through meeting the liquidator and/or providing documents, I cannot say it would be outside the sentencing range to impose a sentence of community detention and additionally community work.
[35] I find the sentence of three months’ community detention plus 140 hours community work is well within range. The appeal against sentence will be dismissed.
Appeal against the costs order
[36] Judge Roberts gives no reason for the selection of $2,000 as the amount of a costs order in favour of the Ministry.
[37] The Court has discretion under the Costs in Criminal Cases Act 1967 to order a convicted defendant to pay such costs “as it thinks just and reasonable” towards the prosecution.8 To exercise the discretion the Court must first be satisfied it has jurisdiction to do so, and that its residual discretion to order payment should be exercised in the particular circumstances.9 This requires taking account of all the relevant circumstances of the case.10
[38] The Court of Appeal in Balfour v Balfour considered the likely relevant factors in making a determination as to whether an order would be just and reasonable “the nature of the charges; the complexity of the trial; the time spent on the case; the conduct of the parties; the extent of the success of the prosecution; the sentence imposed; the defendant’s financial position; and whether the defendant was legally aided.”11
8 Section 4.
9 Barr v New Zealand Police [2009] NZSC 109, [2010] 2 NZLR 1 at [22]; and Balfour v Balfour
[2013] NZCA 429 at [135].
10 Balfour v Balfour at [135].
11 Balfour v Balfour [2013] NZCA 429 at [135].
[39] Mr Pepa is in a parlous financial position and was legally aided. He pleaded guilty to the charges at an early stage. Given the Judge did not lay out his reasoning for ordering costs, I cannot presume he turned his mind to these features, or any others, before doing so. I find there is no just and reasonable basis for awarding costs against Mr Pepa.
[40] If there was a basis for awarding costs, the Costs in Criminal Cases Regulations 1987 sets maximum scales of costs that may be ordered to be paid under the Costs in Criminal Cases Act.12 The Court may exceed these maximums only where it is satisfied that a greater payment is desirable due to the special difficulty, complexity, or importance of the case.13 This is not an exceptional case. The maximum available to be imposed under the regulations would be $621 plus disbursements (which are not particularised in the Crown’s submissions).14 Given Mr Pepa’s financial straits, I would not consider imposing these costs justified either.
Result
[41] The appeal against sentence is dismissed. Judge Roberts’s sentence is confirmed.
[42] The appeal against the costs order is allowed. Judge Roberts’s costs order is quashed. There is no order of costs against Mr Pepa.
Brewer J
12 At r 3.
13 Costs in Criminal Cases Act 1967, s 13(3).
14 By reference to Costs in Criminal Cases Act 1987, sch 1.
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