Rangitawa v Commissioner of Inland Revenue
[2016] NZHC 444
•15 March 2016
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CRI-2016-470-3 [2016] NZHC 444
BETWEEN LANCE BENJAMIN RANGITAWA
Appellant
AND
COMMISSIONER OF INLAND REVENUE
Respondent
Hearing: 14 March 2016 Counsel:
J Owers for Appellant
D Phillips and C Russell for RespondentJudgment:
15 March 2016
JUDGMENT OF BREWER J
This judgment was delivered by me on 15 March 2016 at 3:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors: Public Defence Service (Tauranga) for Appellant
Inland Revenue (Hamilton) for Respondent
RANGITAWA v COMMISSIONER OF INLAND REVENUE [2016] NZHC 444 [15 March 2016]
Introduction
[1] On 14 December 2015 in the District Court at Tauranga, Mr Rangitawa pleaded guilty to 26 charges of aiding and abetting a business, DriveHire Ltd, in applying deductions or withholding of tax, for any purpose other than in payment to the Commissioner of Inland Revenue.1 Those offences carry maximum penalties of five years’ imprisonment, a fine of $50,000 or both.
[2] On 4 February 2016 in the District Court at Tauranga, Judge PS Rollo
sentenced Mr Rangitawa to 14 months’ imprisonment.2
[3] Mr Rangitawa appeals his sentence of imprisonment. He appeals on the basis that it is manifestly excessive and that the Judge should have commuted his sentence of imprisonment to home detention.
Facts
[4] Mr Rangitawa established a company, DriveHire Ltd, which provided truck drivers for hire on a casual basis. Mr Rangitawa was the sole director and shareholder of the company. Initially, Mr Rangitawa was the only driver employed by DriveHire Ltd but the business grew rapidly and at one point the company employed 28 drivers. The company was placed into liquidation by the Tauranga High Court on 24 August 2015.
[5] The company was required to withhold and deduct PAYE from wages, and pay those deductions to the Commissioner of Inland Revenue (CIR) by the 20th of the month following the payment of wages.
[6] Mr Rangitawa deducted the required PAYE from his employees’ wages and filed the PAYE returns with the CIR recording those deductions. At no stage between June 2013 and August 2015, however, did Mr Rangitawa actually pay the money he owed to the CIR. This was despite the CIR contacting Mr Rangitawa on
many occasions to inquire about the outstanding payments. Indeed, on two
1 Tax Administration Act 1994, ss 148 and 143(1)(d).
2 Commissioner of Inland Revenue v Rangitawa [2016] NZDC 1755.
occasions the CIR agreed, at Mr Rangitawa’s request, to payment by instalment. But no payments were made. Instead, the deducted funds were used to pay business creditors and for Mr Rangitawa’s personal benefit.
[7] The total amount misapplied was $120,504.64 excluding penalties and interest. No reparation is possible.
Judge Rollo’s decision
[8] Judge Rollo considered that by making the PAYE deductions and completing the returns to the CIR, Mr Rangitawa clearly demonstrated an understanding of his legal obligations.3 The Judge considered, therefore, that in failing to actually pay the
CIR, Mr Rangitawa had deliberately misapplied the tax deductions.4
[9] The Judge considered the scale of offending to be broadly similar to the offending in CIR v Dempsey,5 R v Adams6 and James v R.7 He considered those authorities to support a starting point of 18 months’ imprisonment.
[10] Before addressing the aggravating and mitigating factors personal to Mr Rangitawa, the Judge considered whether home detention would meet the need to deter others from committing the same or similar offences. As I will discuss later in detail, he decided it would not.
[11] The Judge then considered the aggravating and mitigating factors personal to Mr Rangitawa. The Judge did not consider Mr Rangitawa’s previous convictions for dishonesty offences to justify an uplift.8 But neither could he claim good character. His convictions are for driving, dishonesty, drugs and violence – albeit all of a relatively minor nature.
[12] In relation to mitigating factors, Judge Rollo allowed a 20 per cent discount
to take into account Mr Rangitawa’s guilty plea. He considered the prosecution case
3 At [12].
4 At [16].
5 Commissioner of Inland Revenue v Dempsey HC Wellington CRI-2010-485-89, 5 October 2010.
6 R v Adams CA313/05, 12 April 2006.
7 James v R [2010] NZCA 206.
8 Mr Rangitawa was convicted in 2009 for shoplifting and in 2002 for receiving.
to be extremely strong. The Judge also allowed a minor reduction to take into account Mr Rangitawa’s remorse and the fact that Mr Rangitawa had, to his credit, sought to establish a successful business from the ground up.
[13] The end sentence was, as I have said, 14 months’ imprisonment.
Issues on appeal
[14] Mr Rangitawa submits the sentence is manifestly excessive because: (a) The culpability of his offending was overstated;
(b) Insufficient credit was given for his guilty pleas; and
(c) Home detention was appropriate.
[15] The CIR opposes the appeal. The CIR submits that the end sentence imposed by Judge Rollo was not manifestly excessive because:
(a) The Judge correctly characterised the offending as serious;
(b) The starting point of 18 months’ imprisonment was appropriate; and
(c) The Judge did not err in imposing a 20 per cent discount for
Mr Rangitawa’s guilty pleas.
The CIR submits also that the Judge did not err in declining to exercise his discretion in favour of commuting the sentence from one of imprisonment to one of home detention.
Approach to appeal
[16] An appeal against sentence must be allowed if the Court is satisfied there has been an error in the sentence imposed for any reason and that a different sentence
should be imposed.9 The principles behind the law are well established. A sentence will be manifestly excessive if it is substantially or significantly more severe than it ought to have been having regard to the seriousness of the offending and the culpability of the offender.10
[17] In deciding whether a sentence is manifestly excessive, the focus is principally on the effective end sentence rather than the process by which the sentence is reached.11 The High Court will not intervene where the sentence is within a range that can be properly justified by accepted principles.
[18] Relevant to this case, an appeal against a refusal to grant home detention does not provide an opportunity to revisit or review the merits.12 The question is whether the Judge applied an incorrect principle, gave insufficient or excessive weight to a particular factor, or was plainly wrong.13 The decision about whether home detention will adequately respond to the seriousness of the offending is an evaluative exercise for the sentencing Judge.14
Starting point
Culpability
[19] Counsel for Mr Rangitawa, Mr Owers, submits that the Judge adopted a manifestly excessive starting point by overstating the culpability of the offending with respect to the aggravating features of the offending.
[20] In support of this submission, Mr Owers refers extensively to James v R and to CIR v Dempsey. He contends that there is a scale of offending between the case of CIR v Dempsey and the case of James v R. At the lower end of the scale is Dempsey which involved offending that Ronald Young J described as “bumbling incompetence”. At the higher end of the scale is the case of James which involved
the deliberate evasion of significant quantities of tax over an eight-year period.
9 Sentencing Act 2002, s 250.
10 At [33], [35].
11 Ripia v R [2011] NZCA 101 at [15].
12 James v R at [17].
13 James v R at [17].
14 R v D [2008] NZCA 254 at [66].
[21] Having referred to this scale, Mr Owers submits that the offending in James was significantly more culpable than the present offending and that Mr Rangitawa’s culpability is much closer to that in Dempsey.
[22] Having reviewed these authorities I am satisfied that the starting point adopted by Judge Rollo was well within the available range.
[23] The major problem with Mr Owers’s analysis is that Ronald Young J said in Dempsey that the offending – that of “bumbling incompetence” – could have justified a start sentence of around 18 months’ imprisonment given the facts of the case and the circumstances facing the offender.15 It is inherent in Mr Owers’s own submission that the offending in the present case was more culpable than that in Dempsey. It is difficult to see, therefore, any force in Mr Owers’s submissions that the starting point adopted by the Judge was manifestly excessive.
[24] I note also that Ronald Young J expressly denied Dempsey any precedential weight. He said:16
I want to make this plain: neither the Decision in the District Court nor this decision has any precedential value. It is entirely dependent on its own special facts.
Dempsey simply does not support the submission that the starting point adopted by
Judge Rollo was manifestly excessive.
[25] Moreover, the case of James v R does not provide much assistance to the present exercise. In that case, counsel for Mr James accepted that the end sentence of two years’ imposed by the sentencing judge was within the available range. The only issue on appeal was whether the sentence should have been commuted to one of home detention. On this basis, the Court of Appeal did not comment on the sentence start point. Accordingly, the fact that there are differences between the offending in James and the offending in the present case does not support lowering the starting point.
[26] I am satisfied, on first principles, that the starting point of 18 months’ imprisonment adopted by the Judge in this case was not excessive. The maximum sentence for each offence is five years’ imprisonment. Dishonest intention is not required. There are 26 offences. They relate to a significant sum of money. I agree with Judge Rollo that Mr Rangitawa’s culpability lies not in misunderstanding or incompetence but in his multiple decisions to keep the money for his own purposes.
Guilty plea discount
[27] Mr Owers submits that the Judge did not give enough credit for the guilty plea. Mr Rangitawa:
(a) Made full admissions to the offending when interviewed by the Inland
Revenue Department on 12 June 2015.
(b)Intimated guilty pleas to all charge at his first appearance with assigned legal counsel on 7 December 2015.
(c) Pleaded guilty to all charges at his second appearance with assigned legal counsel on 14 December 2015.
[28] Mr Owers submits that these actions show a strong desire by Mr Rangitawa to resolve matters and take full responsibility for his actions. Mr Owers also submits these actions made it clear to both the prosecution and the Court at a very early stage that there would be no need for the expense of further Court hearings.
[29] On this basis, Mr Owers submits that a full 25 per cent discount should have been given.
[30] The Judge did not allow the full 25 per cent discount because the convictions were inevitable. Mr Rangitawa had produced wage slips for employees, deducted the PAYE and filed tax returns. He just did not pay the money.
[31] The Supreme Court decision in Hessell v R17 is the guiding authority regarding sentencing discounts for guilty pleas. The Court said:18
… the credit that is given must reflect all the circumstances in which the plea is entered, including whether it is truly to be regarded as an early or late plea and the strength of the prosecution case. Consideration of all the relevant circumstances will identify the extent of the true mitigatory effect of the plea.
(Emphasis added)
The Supreme Court has made it clear, therefore, that the assessment of a guilty plea discount is an evaluative exercise and that the strength of the prosecution case is a relevant consideration. Mr Rangitawa faced an unbeatable prosecution case. It was open to the Judge, therefore, to hold that the true mitigatory effect of the pleas warranted only a 20 per cent sentencing discount. I cannot disagree. Indeed, a lesser discount would have been within range.
[32] I conclude that the end sentence of 14 months’ imprisonment was not
manifestly excessive.
Home detention
[33] Judge Rollo was not satisfied that a sentence of home detention would adequately denounce and deter others from committing serious tax offences. The Judge saw the offending as very serious, occurring over a significant period of time and involving significant sums of money. In the Judge’s “clear view”, a sentence of home detention would not meet the need for deterrence. His Honour cited Court of Appeal authority on the manifest necessity for taxpayers to actually pay their taxes and said:
[15] The point I wish to make to you, Mr Rangitawa, is that our society depends on each member who is earning income to pay their fair share of tax for the benefit of all of us and you have spectacularly failed to do so in respect of this company. And by your plea, you have obviously knowingly done so, in that you had made all the deductions, you filed the returns, you had the correspondence and the meetings with Inland Revenue, yet you just did not pay the money that you were required to pay. I do not accept that you were rushed off your feet, such that you could not have engaged an
17 R v Hessell [2010] NZSC 135; [2011] 1 NZLR 607.
accountant or a bookkeeper or sought some assistance to meet your obligations. Just simply writing out the cheque and paying the money would have been a very good start.
[34] The Judge concluded:
[22] In your case, Mr Rangitawa, I see this as very serious offending over a significant period of time where, as I have said, you did everything that was required of you other than paying the money, and that this was not a case of bumbling neglect but one of wilfully declining to meet your obligations under the law. There should be a deterrent aspect to that, which home detention, in my clear view, would not meet. I do not think it is acceptable that somebody perpetuates such a loss on the revenue, over such a period of time, of other people’s money, and then receives a sentence of home detention, perhaps with community work, as an outcome.
[23] In this instance, I am satisfied that the least restrictive outcome is a sentence of imprisonment and that will make you accountable and responsible for what you have failed to do in this offending. Secondly, it sends a very strong message to all in the community that all must comply with the tax laws and pay their fair share, as determined according to law. There are avenues available at law to appeal decisions made by the Commissioner on tax issues at a number of levels and thereby, the concept of fairness can be preserved in a way which society accepts. You have breached your obligation and in my view it is appropriate that you pay a penalty for that.
[35] As I said earlier, there must have been an error by the Judge in reaching his conclusion before I am justified in intervening on appeal. Mr Owers submits that the Judge erred by giving insufficient weight to the denunciation and deterrence provided by a sentence of home detention. Mr Owers draws attention to the case of R v Iosefa which holds that a sentence of home detention “carries with it in considerable measure, principles of deterrence and denunciation”.19
[36] In my view, it was not enough for the Judge to decide that because Mr Rangitawa wilfully declined to meet his obligations under the law, home detention is insufficient to meet the needs of deterrence and denunciation. A more focused approach is necessary.
[37] In Zaheed v R,20 Judge Rollo gave a sentence indication of home detention and community work to Mr Zaheed where he had failed between 18 November 2008
and 31 July 2009 to file GST and PAYE returns. He knew he should have. The total
19 R v Iosefa [2008] NZCA 435 at [41].
amount owing, including penalties, was $407,356. By the time available funds had been recovered, including voluntary payments from Mr Zaheed, $166,121 was owing. Mr Zaheed offered a further $75,000 in reparation.
[38] So, Mr Zaheed had failed to file returns, had been caught, and had the wherewithal to make – and to offer further – substantial reparation. Judge Rollo indicated a sentence of eight months’ home detention plus 250 hours of community work.
[39] The issue for the Court of Appeal arose from sentencing when Judge Rollo was told that the further $75,000 reparation could not be paid as promised. So, the Judge imposed a sentence of 19 months’ imprisonment and ordered Mr Zaheed to pay reparation of $20,000. Among the aggravating factors he took into account were Mr Zaheed’s breach of trust and the Commissioner’s corresponding vulnerability (the failure to file returns and thus the Commissioner’s ignorance of the revenue which should be paid).
[40] The point on appeal became a technical one, having to do with the procedure to be followed when a sentence indication is departed from. However, the Court of Appeal said:21
… But we record our satisfaction that in the circumstances Judge Rollo was entitled to give primary weight to the requirements of deterrence, denunciation and accountability in imposing a term of imprisonment rather than home detention. We are not satisfied that the sentence was manifestly excessive and we would not have interfered on that ground.
[41] Ultimately, the Court of Appeal re-sentenced Mr Zaheed. It imposed a term
of six months’ home detention because:
(a) Mr Zaheed had paid $10,000 of the $20,000 ordered as reparation by
Judge Rollo.
(b) He had served three months of his sentence.
(c) Significantly, the Crown did not seek imprisonment. It recognised that there were material differences between Mr Zaheed’s case and that in James v R.22
(d) The sentencing process had miscarried.
[42] Mr Zaheed’s case has unique features. Cases often do. But the point is that those features resulted in a sentence of home detention. Mr Rangitawa’s case has the outstanding feature that he never tried to conceal his obligation to have his company pay the PAYE. He made the appropriate deductions and he made the appropriate returns. He just failed to pay the money. He engaged with the CIR, he made arrangements to pay by instalment, but he paid nothing. In effect, he stood beneath a spotlight of his own construction and announced his continuing fault.
[43] The charge is one of strict liability. The failure to pay is the culpable action. But, unlike Mr Zaheed, the failure was not made worse by a failure to file returns. And, unlike Mr James, there was no dishonesty.
[44] Judge Rollo did not know why Mr Rangitawa did not pay the PAYE. The affidavit filed by Mr Rangitawa on 2 February 2016 does not give an explanation. All the Judge had to go on was the statement in the Summary of Facts to the effect that Mr Rangitawa had admitted that he used the money to subsidise business and personal expenses. There was no evidence of lasting personal gain. No reparation is possible.
[45] It was uncontested that Mr Rangitawa had started a business as a neophyte; it had suddenly prospered beyond expectations, he had tried to do everything himself and, despite knowing he had to pay PAYE to the CIR, he did not.
[46] In these singular circumstances, I conclude that Judge Rollo erred in holding that a sentence of home detention would not adequately provide the deterrence and denunciation required.
Decision
[47] I have concluded that Mr Rangitawa should be sentenced to a period of home detention plus community work. I note that he has been in custody since 4 February
2016, a period I will take to be six weeks. On the usual “two for one basis”, I will
make allowance of three months.
[48] The appeal is allowed. Mr Rangitawa’s sentence of 14 months’ imprisonment is quashed. A sentence of four months’ home detention is substituted. In addition, Mr Rangitawa will perform 300 hours’ community work.
[49] The address at which the sentence of home detention is to be served is
31 Hampton Terrace, Tauranga. Mr Rangitawa is to go to the address immediately on release from prison and await the arrival there of a probation officer and security officer.
[50] The standard conditions will apply to Mr Rangitawa’s sentence of home
detention.
Brewer J