R v Klintcharova

[2013] NZHC 2778

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CRI-2013-404-000213

CRI-2013-404-000214 [2013] NZHC 2778

THE QUEEN

v

DILIANA BORISOUA GUEORGUIE KLINTCHAROVA VLADIMIR BORISOV KLINTCHAROV

Hearing:                   22 October

Appearances:           H B Leabourn for the Appellants

J V Roach for the Crown

Judgment:                22 October 2013

ORAL JUDGMENT OF GILBERT J

R v DILIANA BORISOUA GUEORGUIE KLINTCHAROVA VLADIMIR BORISOV KLINTCHAROV [2013] NZHC 2778 [22 October 2013]

Introduction

[1]      Mr Klintcharov and Mrs Klintcharova pleaded guilty in the North Shore District Court to 17 charges of aiding and abetting their company, Eastern Star Universal Limited (now in liquidation), of evading or attempting to evade the assessment and payment of goods and services tax and income tax in breach of ss 143B(2) and 148(1) of the Tax Administration Act 1994. These offences carry a maximum penalty of five years’ imprisonment or a fine not exceeding $50,000 or both.   Judge P Sinclair sentenced both appellants to a term of six months’ home detention and ordered them each to pay reparation of $73,429.26.   They appeal against these sentences.

The facts

[2]      Eastern  Star  Universal  Limited  was  incorporated  in  March  1994  by  the appellants to operate a restaurant business.   They were 50-50 shareholders in the company  and  they  both  dealt  with  the  day  to  day  running  of  the  business. Mr Klintcharov worked as a chef and was the sole director.  Mrs Klintcharova tended to business administration and purchased the food.

[3]      The appellants used available cash and credit facilities to meet personal expenditure and to pay staff and other creditors in preference to ensuring that the company met its tax obligations.  From the time the business started in 1994 until it was  placed  in  liquidation  in  October  2011,  57  per  cent  of  GST  returns  and

71 per cent of income tax returns were not filed by due date.  The Inland Revenue Department sent the company 53 GST reminder notices and 24 income tax reminder notices   over   this   period.      On   eight   occasions,   the   Department   contacted Mr Klintcharov or the company’s tax agent concerning outstanding returns and tax payments.  Inland Revenue officers reminded Mr Klintcharov of his responsibility as a director of the company to ensure that outstanding returns were filed and tax paid in a timely manner.

[4]      Thirteen of the charges relate to the failure to file GST returns in the period from 31 March 2009 to 30 September 2011.   The other four charges relate to the

failure to file income tax returns for the financial years ended 31 March 2008 to

31 March 2011.  The unpaid GST amounted to $51,405.04 and the unpaid income tax totalled $95,453.48.   The total unpaid tax at the time the company went into liquidation was therefore $146,858.52.  This does not include use of money interest or penalties.

Sentence indication

[5]      The appellants sought a sentence indication in the District Court.  Detailed written submissions were filed.   Counsel for the informant, the Commissioner of Inland Revenue, submitted that the appropriate starting point was a 15 month term of imprisonment and that after considering relevant aggravating and mitigating factors an end sentence in the region of six months’ home detention should be imposed. Reparation was also sought.   Counsel for the appellants submitted that a lower starting point of nine to 12 months’ imprisonment should be adopted and that a suitable sentence would  be either home detention or community detention.   He submitted that four to six months’ community detention would be appropriate.  He did not resist an order for reparation but advised that the appellants had limited means and would need a realistic payment schedule.

[6]      Judge  Wilson   QC   presided   over   the   sentence   indication   hearing   on

6 June 2013.  He indicated that a non-custodial sentence of either home detention or community detention would be appropriate, depending on further information that would be available at sentencing.     The appellants accepted this indication and pleaded guilty to the charges.

Sentencing decision

[7]      Probation  reports  were  prepared.    The  probation  officer  recommended  a sentence  of  home  detention  and  reparation  for  Mrs  Klintcharova  given  the seriousness of the offending and the amount of money involved.  Another probation officer recommended that Mr Klintcharov be sentenced to community work and community detention.

[8]      Judge Sinclair considered that a sentence of home detention was required to meet  the  requirements  of  deterrence  and  denunciation  having  regard  to  the seriousness of the offending and the amount of money involved.  Her Honour also considered that community work was not a realistic option given the appellants’ work hours.

Grounds of appeal

[9]      The appellants’ grounds of appeal were refined in counsel’s submissions as

follows:

(a)       Judge Sinclair ought to have given the appellants the opportunity to reconsider their position before imposing sentence; and

(b)the sentence of home detention was inappropriate and a sentence of community detention should have been imposed.

Should the appellants have been given the opportunity to reconsider their position before a sentence of home detention was imposed?

[10]     The sentencing indication given by Judge Wilson QC was home detention or community detention.   In other words, he gave an indication that it would be appropriate to deal with the matter by way of a non-custodial sentence but he was not prepared to be more specific than that on the basis of the information then available.   The Judge’s  sentence indication was consistent with the submissions made by counsel for the appellants.   Although counsel submitted that community detention should be considered, he accepted that home detention would also be appropriate.

[11]     The appellants accepted this indication and entered guilty pleas.  In doing so they must have understood that they could expect a non-custodial sentence of either home detention or community detention.   Judge Sinclair did not depart from the indication that had been given.  I cannot see any basis for the appellants’ complaint

that they ought to have been given the opportunity to reconsider their position before such a sentence was imposed.

Was a sentence of home detention inappropriate?

[12]     As  noted, in  his detailed  written submissions  for the sentence indication hearing, counsel for the appellants submitted that a sentence of home detention or community detention would be appropriate:

Counsel supports the submission that a suitable sentence would be one of home detention or community detention.   Counsel submits further that community detention would be more appropriate as it would allow each of the two  defendants to continue  working and  to  support the family both emotionally and financially.

[13]      Despite this concession, counsel now contends that a sentence of home detention was not appropriate and should not have been imposed.  He submits that community detention should be substituted because this would allow the appellants to continue in their current employment, support their family and make reparation payments.

[14]     The informations were laid on 12 February 2013 before s 250 of the Criminal Procedure Act 2011, which deals with sentence appeals, came into force.  The appeal is therefore to be dealt  with pursuant to s 121(3) of the Summary Proceedings Act 1957.   This provision enables the High Court to quash or vary a sentence on various grounds including if it is clearly excessive or inappropriate.

[15]   The sentence imposed by Judge Sinclair was not clearly excessive or inappropriate.    The  Court  of Appeal  imposed  a  sentence  of  six  months’ home detention for arguably less serious offending in Zaheed v R.1    Mr Zaheed pleaded guilty to 15 charges of tax evasion relating to his failure to file PAYE and GST returns  for  his  kiwifruit  business  over  an  eight  month  period.  The  unpaid  tax including use of money interest and penalties amounted to $166,121 after taking into account offsetting tax credits and other payments.  The Court of Appeal overturned a

sentence of 19 months’ imprisonment for this offending and substituted a sentence of

1 Zaheed v R [2010] NZCA 573, (2011) 25 NZTC 20,018.

six months’ home detention.   However, this took into account that Mr Zaheed had already served three months of his term of imprisonment.

Conclusion

[16]     The sentence of home detention imposed by Judge Sinclair was appropriate and within an acceptable range.  It was in line with the sentence indication that had been given by Judge Wilson.  There was therefore no need for the Judge to give the appellants the opportunity to reconsider their position before she imposed sentence. Both grounds of the appeal must be dismissed.

Result

[17]     The appeals are dismissed.

M A Gilbert J