R v Easton

[2013] NZHC 1683

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CRI-2011-041-001510 [2013] NZHC 1683

THE QUEEN

v

STUART DAVID EASTON

Counsel:

K S Grau and A H Instone for Crown

C R Carruthers QC and R P Harley for Prisoner

Sentence:

9 August 2013

NOTES ON SENTENCING OF COLLINS J

[1]  Mr Easton, as you know you are now to be sentenced on 22 counts of aiding and abetting three companies which knowingly failed to pay PAYE deductions to the Commissioner in 2008 and 2009.

[2]  All three companies were placed into liquidation in 2009.  The amount that was not paid as I determined it on the basis of the evidence at your trial was:

(1)East Quip Ltd  $ 50,416.61

(2)Hooked on Rigging Ltd  $ 90,216.77

(3)Napier Equity Ltd  $ 63,579.65

Total                $204,213.03

R v EASTON [2013] NZHC 1683 [9 August 2013]

I note, however, that the Crown says the amount of PAYE not paid by the three companies was slightly less than this combined figure. The Crown says the amount of PAYE that remains unpaid is $199,292.98.

[3] The three companies to which the charges relate were part of the Easton group which for many years was a successful and diverse business enterprise in the Hawke’s Bay.  Other entities in the Easton group included:

(1)Galvanising (HB) Ltd;

(2)Hooked on Transport Ltd; and

(3)Easton Property Trust.

[4] In 2007 the companies in the Easton group began to experience significant financial challenges. I have explained those challenges in the reasons for  my verdicts and I need not repeat the evidence which I primarily relied upon when explaining the financial challenges faced by you and the companies.

[5]     I am satisfied that you genuinely believed you did all you thought you could at the time to keep the companies afloat. You did so because you wanted to ensure that you and the companies met their liabilities. To a large extent you succeeded as evidenced by the fact that:

(1)Hooked on Transport Ltd met all of its tax liabilities.

(2)Galvanising (HB) paid $643,695 to the IRD.

(3)You paid $150,351 to the IRD.

(4)Mrs Easton paid $66,412 to the IRD.

[6]      I am also aware that you and members of your family injected approximately

$2 million in capital into the companies. That sum appears to have been unsecured. In addition, you and your companies offered to settle all outstanding debts to the

IRD. I am informed the offer was $900,000. Likewise, you and your wife took significantly reduced drawings from the companies during the period of the financial hardship faced by the Easton group.

[7] However, I am also very satisfied that you were fairly and clearly warned of your responsibilities to ensure PAYE was paid when you met with Ms Lancaster on 24 April 2008.  Notwithstanding that warning she gave you, during the following five months and later in July 2009 you consciously and knowingly allowed the companies to use PAYE deductions as a short term measure to assist the companies’ liquidity crises. You knew that should not have occurred and that it was a serious criminal offence for you to have allowed the PAYE deductions in question to be misapplied.

[8] In sentencing you I shall first focus upon the primary punishment and then deal with the question of reparation.

Primary punishment

[9] Those who are convicted of offences of this kind are frequently sentenced to imprisonment.1 However, I have concluded that in your case I can adopt a lenient approach to sentencing for the following reasons:

(1)You are a first offender, and you deserve credit for your otherwise good character.

(2)Your companies were caught in a financial crisis which you struggled to manage.

(3)You were intent on ensuring that you and your companies paid their debts.

(4)The misapplication of the PAYE was genuinely thought to be a short term measure.

1       See for example, James v R [2010] NZCA 206 and R v Allan [2009] NZCA 439.

(5)You and the remaining companies have paid significant sums to settle yours and the companies’ debts to IRD.

(6)The remaining companies and their employees are dependent upon you as you continue to be their “inspirational driving force”.

[10]     In  these  circumstances  I  believe  fines  will  achieve  the  purposes  and principles of the Sentencing Act 2002. In particular, I am satisfied fining you:

(1)	will hold you accountable;2
(2)	will promote in you a sense of responsibility for your offending;3
(3)	will denounce your conduct;4
(4)	should deter others from similar offending;5  and
(5)	is    the    least     restrictive     outcome     that    is     appropriate     in circumstances.6	the

[11] Mr Easton, you will be fined $3,000 in relation to each count meaning your total fine will be $66,000. You will be ordered to pay court costs of $130 on each count.

Reparation

[12] I now have had the benefit of submissions on the application of s 32 of the Sentencing Act 2002 to your circumstances.

[13] I am satisfied there was a “direct connection” between your conduct and the losses suffered by the IRD and that as a consequence I have the jurisdiction to impose a sentence of reparation under s 32(1) of the Sentencing Act 2002.7

2       Sentencing Act 2002, s 7(1).

3       Section 7(1)(b).

4       Section 7(1)(e).

5       Section 7(1)(f).

6       Section 8(g).

[14]  The primary challenge I face is in deciding how much reparation you should be required to pay.

[15] You have filed an affidavit in which you explain that the remaining companies in the Easton group appear to be doing well and that the net profit of the group for the 2013 financial year is expected to be close to $700,000.

[16] I fully appreciate that you are a separate legal entity from the Easton group of companies. You are, however, the controlling mind and will of those companies and I believe that it is appropriate for me to proceed on the basis that through the Easton group’s financial successes you will personally have the capacity to make a significant reparation payment.

[17]  Determining the amount of reparation that should be ordered is complicated by the fact that the IRD has still to be paid anything by the liquidators of the three companies in question and that IRD’s losses will be reduced by any payments ultimately received from the liquidators.

[18] In assessing the reparation that I will order, I am going to adopt a pragmatic approach and proceed on the basis that it is extremely unlikely IRD will receive more than one-third of the unpaid PAYE from the liquidation of the companies.

[19]    I have therefore determined that you should be ordered to pay reparation of

$140,000 in addition to the fines that I have imposed. However, the reparation sentence will not take effect until the process of liquidating East Quip  Ltd, Hooked on Rigging Ltd and Napier Equity Ltd is completed. If, at the end of that process IRD receives more than $60,000 from the liquidators, you may return to me to enable me to review the terms of the reparation order. This approach to the issue of reparation addresses the requirements of s 32(3) of the Sentencing Act 2002. My objective is to ensure that the IRD receives no more in reparation and through the liquidation process than is owed in outstanding PAYE.

7       Bruce Robertson (ed) Adams on Criminal Law – Sentencing (looseleaf ed, Brookers) at [SA32.02]; R v O’Rourke [1990] 1 NZLR 155 (CA) at 158; R v Graham [2012] NZHC 575 at [80].

Conclusion

[20]    Mr Easton, can you now please stand.

[21]  You are fined $3,000 in relation to each count and ordered to pay court costs of $130 on each charge.

[22] You are also ordered to pay $140,000 reparation to the IRD. The reparation order does not take effect until the completion of the liquidation of East Quip Ltd, Hooking on Rigging Ltd and Napier Equity Ltd.   If the IRD receives more than

$60,000 from that process leave is granted to you to return to enable me to consider varying the reparation orders that I have made.

[23]     You may now stand down.

D B Collins J

Solicitors:

Crown Solicitor, Wellington

Lawson Robinson Ltd, Napier for Prisoner