Pome'e v Inland Revenue Department

[2022] NZHC 2354

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CRI-2022-404-000197

[2022] NZHC 2354

BETWEEN

SIONE NA’ANIUMOTU POME’E

Appellant

AND

INLAND REVENUE DEPARTMENT

Respondent

Hearing:

12 September 2022

Appearances:

S Moore for Appellant

R McDonald for Respondent

Judgment:

14 September 2022

JUDGMENT OF VENNING J

This judgment was delivered by me on 14 September 2022 at 11.45 am

Registrar/Deputy Registrar

Date……………

Solicitors:           Ewart & Ewart Solicitors, Auckland

Kayes Fletcher Walker Ltd, Manukau, Auckland

Counsel:            S Moore, Auckland

POME’E v INLAND REVENUE DEPARTMENT [2022] NZHC 2354 [14 September 2022]

[1]    Sione Pome’e pleaded guilty to 66 charges of evading or attempting to evade the assessment or payment of PAYE and other deductions in breach of the Tax Administration Act 1994 (the TAA), and two charges of aiding and abetting Pome’e Engineering Services Limited (Pome’e Engineering) to knowingly apply or permit the application of an amount of a deduction or withholding of tax for a purpose other than in payment to the Commissioner of Inland Revenue (the Commissioner) pursuant to s 148 and 143A(1)(d) of the TAA.

[2]    On 12 May 2022 in the District Court at Manukau Judge G J Wagner sentenced Mr Pome’e to 27 months imprisonment.1 Mr Pome’e appeals the sentence.

Background

[3]    I take the background primarily from the summary in the Judge’s sentencing notes, which is based on the summary of facts to which Mr Pome’e pleaded guilty.

[4]    Mr Pome’e was the sole director and shareholder of Pome’e Engineering. Pome’e Engineering provided labour to the construction industry. It paid net wages to its employees from shortly after its incorporation in 2012 until it was placed into liquidation on 12 July 2019.

[5]    Pome’e Engineering was required to file monthly employer schedules and to account to the Commissioner for the PAYE and various student loan and KiwiSaver deductions which were payable by the 20th of the following month.

[6]    The offending occurred over a total of 68 monthly PAYE tax periods between November 2012 and July 2019. For nearly all the relevant monthly periods, the required tax returns were filed but the tax was not paid. In addition, almost all of the employer schedules filed understated the amounts to be paid.

1      Commissioner of Inland Revenue v Pome’e [2022] NZDC 8579.

[7]    Through Mr Pome’e’s offending, Pome’e Engineering evaded payment to the Commissioner of a total of $1,699,011.21 and applied withholding deductions of

$164,995.93 other than in payment to the Commissioner. The total amount involved in the offending was $1,864,007.14.

[8]    Of that sum, $491,275.74 had been recovered or paid from Mr Pome’e voluntarily. Of the $491,275.74, $125,000 had been taken pursuant to a deduction notice under s 157 of the TAA. The liquidators of the company provided a further net payment $223,974.41.

[9]    In summary, of the $1,864,007.14, the total outstanding at the date of sentencing was $1,148,756.99. Mr Pome’e or entities associated with him had voluntarily paid back $366,275.74 while $348,974.41 could be said to have been involuntarily recovered, either from the liquidators or pursuant to the s 157 notice.

[10]   During the nearly seven years of offending, the Inland Revenue Department (IRD) sent numerous statements of account and letters to Pome’e Engineering regarding the default and failure to pay. Mr Pome’e was personally informed of the seriousness of non-payment and consequences. Despite that the offending continued.

[11]   When spoken to about the offending Mr Pome’e admitted using the funds for significant personal spending and applying some for other family members. Approximately $1 million was transferred to a joint account in the name of Mr Pome’e and his uncle K Pauuvale, and otherwise used for overseas travel and spending, personal shopping including at high-end retail stores, various loans or gifts to himself, employees and others. The spending included a $109,995 loan or gift for a motor vehicle, a gift of $85,000 to Charles Pome’e, and over $25,000 was transferred to Jamaican Money Market for Mr Pome’e’s nephew’s music career.

District Court sentence

[12]   After discussing the purposes and principles of the Sentencing Act 2002, and having regard to the cases cited to her, the Judge took as a start point for imprisonment four years, six months, consistent with the starting point given in her sentence indication. The Judge then allowed Mr Pome’e a full discount of 25 per cent for the

guilty pleas, a further five per cent for personal factors as disclosed in a s 27 report, five per cent for good character, and a further 15 per cent to take account of the total reparation that had been made.

[13]   In fixing the further discount at 15 per cent for reparation the Judge noted it was anticipated a further $200,000 was likely to be paid. The Judge declined to make any further reduction for remorse. In the circumstances, while the deductions totalled 50 per cent, when that was applied to the starting point of four years, six months, the Judge was left with the end sentence of two years, three months, so that home detention was not an available consideration.

The appeal

[14]   Mr Pome’e appeals his sentence. He alleges that the Judge fell into error in the following ways:

(a)the starting point was too high. The Judge should have followed the starting points from Court of Appeal or High Court authority rather than the District Court case the Judge particularly relied on;

(b)the Judge was wrong to group all reparations (involuntary and voluntary) together;

(c)the Judge erred in not giving a credit for remorse; and

(d)s 16 of the Sentencing Act was triggered and home detention should have been considered; and

[15]   Overall the submission for Mr Pome’e is that the correct starting point should have been between three years, three months to somewhat less than four years. But even if the starting point taken by the Judge was correct it should have been reduced by a further 12 per cent for the involuntary reparations and the loss figure re-adjusted. Next, a further additional discount of five to 10 per cent should have been provided for remorse so that the ultimate end sentence would be less than two years. Home detention was an appropriate sentence.

The Commissioner’s response

[16]   The Commissioner opposes the appeal. The Commissioner submits the end sentence was not manifestly excessive, in particular:

(a)the starting point was within range; and

(b)the discounts were appropriate, particularly in light of the fact the further $200,000 reparation that the Judge anticipated would be paid has not been paid.

Principles

[17]   As an appeal against sentence the Court must allow the appeal if satisfied that if, for any reason, there is an error in the sentence imposed and a different sentence should be imposed. Otherwise the Court must dismiss the appeal.2

[18]   The question is whether the end sentence imposed is manifestly excessive. The focus is on the sentence imposed rather than the process by which it was reached. The Court will not intervene where the end sentence is within a range that can be justified by sentencing principles.3

The basis for sentencing

[19]   At the outset of the appeal, Mr Moore sought to challenge the factual basis for the sentence imposed in the District Court. He suggested that PAYE may not have been applicable to portions of the quantum. He suggested the unpaid tax may be up to $200,000 less than in the summary.

[20]   I indicated to Mr Moore that at this appeal hearing I was not prepared to revisit or relitigate the basis of the agreed facts which Mr Pome’e had pleaded guilty to, and upon which he was sentenced. It is not open for an appellant to challenge the factual summary in an agreed statement of facts on an appeal.

2      Criminal Procedure Act 2011, s 250.

3      Tutakangahau v R [2014] NZCA 279 at [32]–[36], [2014] 3 NZLR 482; and Toko v R [2017]

NZCA 460 at [19].

[21]   If Mr Pome’e wished to challenge the basis in the summary of facts the appropriate process was to follow the process for a disputed fact hearing. As the Court of Appeal said in Pokai v R:4

[30] In developing this argument, counsel for Ms Black sought to rely upon factual material that did not form part of the summary of facts. This included material that counsel had received from the police during the disclosure process. We do not propose to have regard to that material for present purposes. This Court has made it clear in cases such as R v Apostolakis and R v Whiunui that, in cases where counsel have reached agreement regarding the factual summary on which a guilty plea is to be entered, sentencing must proceed on the basis of that summary. Any appeal against sentence must similarly be decided having regard to the facts contained the summary.

[22]The point was repeated by the Court of Appeal in Chahil v R:5

[16] 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.

[23]   In Mr Pome’e’s case the sentence indication was given in May 2021 and accepted that month. The sentence hearing was then adjourned on several occasions before it was dealt with on 12 May this year. Mr Pome’e and his advisers have had ample time to address any disputed basis for sentencing. In fact, there was a mistake in the summary that was before the Judge for the sentence indication, as the Judge noted at [6] of the sentence indication.6 But an amended summary was filed when the guilty plea was entered later in May 2021, which correctly reflected the charges Mr Pome’e pleaded guilty to, and recorded the correct total amount of avoided tax. Finally, I note the figures in the summary were primarily based on returns submitted by Mr Pome’e.

4      Pokai v R [2014] NZCA 356 (footnotes omitted). See also Herlund v R [2021] NZCA 71.

5      Chahil v R [2020] NZCA 436.

6      Commissioner of Inland Revenue v Pome’e DC Manukau CRI-2019-092-012903, 10 May 2021.

Starting point

[24]   The appellant makes two principal points in relation to the starting point. First he submits the starting point was too high and the Judge erred by relying on District Court authorities rather than Court of Appeal or High Court authority. Next, he submits that the Judge should have taken the involuntary reparation amount into account when fixing the starting point for sentence.

[25]   In Mehmood v R a core tax of $1 million was evaded. (The Inland Revenue Department’s (IRD’s) claim actually totalled $3.4 million with interest and penalties).7 The offending involved 144 false returns over a period of five and a half years.

[26]   The Court’s focus for the starting point was on the core loss of $1 million rather than the higher figure inflated by interest and penalties. The Court simply noted the four year starting point involved no error, noting the three offences Mr Mehmood had pleaded guilty to each attracted a five year maximum sentence and the offending was over a period of five and a half years, and involved understating income tax, PAYE and GST.8

[27]   In the present case, Mr Pome’e’s offending extended over six years, eight months and at $1,864,007 in total the sum involved in core tax not paid was almost double that of Mr Mehmood.

[28]   In Chahil v R around $700,00 in GST was evaded.9 In addition there was an income shortfall. Mr Chahil and the co-offender also instructed managers of the 17 restaurants he controlled to deliver cash to his home and only a small amount was recorded and accounted for. The Court confirmed he had pleaded guilty to approximately $700,000. Three years, three months’ imprisonment was adopted with an uplift of nine months applied to reflect a further charge of money laundering, which involved Mr Chahil delivering in excess of $500,000 to an accountant and business associate to be laundered. Judge Wagner referred to Cahill but did not consider it helpful as she noted there were other elements (the money laundering) and again the

7      Mehmood v R [2015] NZCA 338.

8      At [26]–[27].

9      Chahil v R, above n 5.

starting point was not the focus of the appeal. I agree with the way Judge Wagner dealt with Chahil.

[29]   I consider Judge Wagner was correct to focus on other cases involving offences related to breaches of the TAA even though they were District Court authorities.

[30]   The Judge particularly referred to Lasek v R.10 Mr Lasek was sentenced on 44 charges for failing to account for $1.377 million for PAYE and other tax, eight further offences for similar offending, which amounted to $140,000. The total amount was

$1.517 million. Judge O’Driscoll adopted the starting point of four years, nine months’ imprisonment.

[31]   I have also considered the other cases referred to by counsel, including Commissioner of Inland Revenue v Mills, Commissioner of Inland Revenue v Cree, and Department of Inland Revenue v Kumar.11 In Mills the Court took a starting point of three years where the offender failed to file returns over a nine year period. The offending totalled $996,000. In Cree the Court took a starting point of four years, six months. The amount involved was $1.1 million across 26 returns. In Kumar the Court took a starting point of four and a half years’ imprisonment for offending involving about $830,000 over six years. While those were all District Court authorities, they are more directly relevant in terms of the general desirability of consistency with appropriate sentencing levels in respect of similar offending.

[32]   Next, in the Court of Appeal authority of Wang v R, Mr Wang was convicted of 16 counts of tax evasion.12 The total evaded was $1.133 million. While the Judge had indicated a start point of four and a half years, he adjusted that to five years to take account of offending while on bail. The Court of Appeal observed the Judge could have taken a higher starting point.

[33]   Further, as Mr McDonald submitted, the Court of Appeal has confirmed the focus is on culpability. Culpability is to be assessed by the circumstances and the

10     Inland Revenue Department v Lasek [2018] NZDC 7473.

11     Commissioner of Inland Revenue v Mills [2018] NZDC 2274; Commissioner of Inland Revenue v Cree [2019] NZDC 1475; and Department of Inland Revenue v Kumar [2018] NZDC 4405.

12     Wang v R [2016] NZCA 56.

nature of offending, its magnitude and sophistication, the type, circumstances and number of victims, motivation for the offending, the amounts involved, the losses, the period over which the offending occurred, and the seriousness of the breaches of trust.13

[34]   In summary, having regard to relevant authorities, the maximum sentence, the number of charges, the amount of core tax evaded, and the personal advantage taken by Mr Pome’e of the tax debt, four years, six months was well open to the Judge as a starting point for sentence.

Involuntary/voluntary reparation

[35]   Mr Moore’s second challenge to the starting point is the way the Judge dealt with the differences between voluntary and involuntary reparation payments. The Judge had effectively added the two together and applied the total reparation (both voluntary and involuntary) as a mitigating factor.

[36]   In R v Patterson the Court of Appeal noted that, where an offender had been required to pay back funds or funds were taken the Court could give some credit by reducing the starting point to reflect the fact the harm suffered by the victim had been reduced which lessened the overall seriousness of the offending.14 However such credit was said to be:15

… 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.

[37]   On the other hand, voluntary reparation is appropriately considered at the mitigating stage, having regard to s 10 and s 9(2)(f).

[38]   In Mr Pome’e’s case there were involuntary recoveries of $348,974.41 and voluntary recoveries of $366,275.74. But it would make little difference to the end sentence if the involuntary reparation was dealt with in accordance with the Patterson

13     R v Varjan CA97/03, 26 June 2003 at [22].

14     R v Patterson [2008] NZCA 75. See also Zhang v R [2022] NZCA 267.

15 At [41].

approach.16 No more than four months would have been appropriate as an allowance for the involuntary payments given the way the Court of Appeal has treated such payments. If there was a modest reduction in the starting point from four years, six months by four months (seven and a half per cent approximately) to four years two months, then a lesser reduction of say 10 per cent would have been appropriate for the voluntary reparation. Applying the other deductions allowed by Judge Wagner that would lead to an effective end sentence of 27½ months.

[39]   There is a further point in relation to the reparation issue. That is, that in increasing the allowance for reparation from the 10 per cent indicated in the sentence indication to 15 per cent, the Judge anticipated that a further $200,000 would be paid. It was not. Mr Moore suggested that it might still be available if the appeal was allowed but apart from the vagueness of the proposal (with no criticism of counsel intended) it would be inappropriate to grant an appeal on such a conditional basis.

Remorse

[40]   Mr Moore next submitted that a further allowance should have been made for remorse. He argued remorse was demonstrated by the voluntary reparation which included proceeds from sale of the family home and was also referred to in the s 27 and pre-sentence (PAC) reports.

[41]   It was open to the Judge to accept that any remorse was effectively hindsight and effectively self-serving given the situation Mr Pome’e was in. The PAC report noted Mr Pome’e said he was remorseful but then went on to note he put forward a consistent rationale that centred around what he described as having an obligation of responsibility to maintain some level of financial remuneration for his staff. Further, the suggestion of remorse does not address the $1 million transfer to the joint account with his uncle or the personal spending.

[42]   In cases such as this the Court often considers remorse is exemplified and taken into account in fixing the allowance for reparation. In this case, as noted, the Judge

16     R v Patterson, above n 14.

provided an increased amount from 10 per cent to 15 per cent in sentence for reparation which was more than sufficient to provide for any remorse.

[43]   While counsel did not focus on the s 27 report, it could be said the Judge was generous in allowing a five per cent reduction based on that report. The report is clear that Mr Pome’e had a loving and supportive family with good values. His situation is quite different to the exemplar in Zhang v R where the Court of Appeal referred to examples of social, cultural or economic disadvantage with a demonstrable relationship to the offence supporting a reduction.17 Despite the author’s view that Mr Pome’e felt obligated to look after his family, that would not support a reduction. The combined 10 per cent for the s 27 report and good character might be regarded as generous.

Section 16 and home detention

[44]   In his written submissions Mr Moore argued for home detention by reference to Fairbrother v R.18 However at the outset of the hearing he accepted that given the decision of Nassery v R,19 that argument was not available. The concession was appropriate. Fairbrother is distinguishable in any event because in that case the end sentence was two years so that home detention was available. In fact the Court accepted the Judge had made an error and the sentence should have been one year, 10 months’ imprisonment. In the present case, however, the end sentence was above two years so that home detention was not an option.20

Summary

[45]   In summary, it is not open at this stage for the appellant to challenge the facts in the summary of facts, particularly the figures upon which he was sentenced. Next, the starting point was within range. Even if the starting point could have been reduced for the involuntary payments in accordance with the approach in Patterson, at the end of the day it would make no difference inasmuch as any such allowance would lead to an adjustment to the reduction available for the amount voluntarily paid. The

17     Zhang v R [2019] NZCA 507, [2019] 3 NZLR 648.

18     Fairbrother v R [2013] NZCA 340.

19     Nassery v R [2022] NZCA 213; [2022] NZSC 97.

20     Sentencing Act 2002, s 15A.

allowances of 10 per cent in total for personal issues and good character were perhaps generous.

[46]   The appellant fails to satisfy the Court that the end sentence imposed was manifestly excessive.

Result

[47]The appeal is dismissed.

Venning J