Thongskul v The the Queen

[2022] NZHC 1493

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CRI-2017-085-2498

[2022] NZHC 1493

IN THE MATTER OF

an application under s 38A of the Sentencing Act 2002

BETWEEN

CHANARATT THONGSKUL

Applicant

AND

THE QUEEN

Respondent

Hearing:

7 – 8 December 2021 with further written submissions on 15, 16

and 24 December 2021

Counsel:

M T Lennard and J McVay for the Applicant

T G Bain and D R La Hood for the Respondent

Judgment:

27 June 2022

JUDGMENT OF PALMER J

Solicitors:

Jacobs Florentine, Palmerston North Crown Solicitor, Wellington

THONGSKUL v R [2022] NZHC 1493 [27 June 2022]

Summary

[1]    In October 2019, Mr Chanaratt Thongskul was sentenced to two years and eight months’ imprisonment and to pay reparations of $900,000 for tax evasion. He paid $500,000 of that by selling his house. He was going to pay the rest out of ongoing profits from his businesses.   But, as a result of directions by the Parole Board,      Mr Thongskul sold his network of Thai restaurants. He applies for cancellation of the remaining reparations of $400,000. The Crown opposes that.

[2]    I am satisfied there has been a significant change in Mr Thongskul’s circumstances and that he can no longer afford the outstanding reparations. There is no evidence that he has significant wealth, assets or income. Enforcement of the original sentence is unlikely to be effective. I am not satisfied that the resources of the extended family are or should be available to pay the reparations. Mr Thongskul responsibly agrees that he would still able to pay something if he obtains employment. However, by the time of the hearing, he was still unemployed and he has a criminal history. Whether he gets a job is speculative. I consider the statutory purpose of the reparations regime is best served here by simply cancelling the outstanding reparations. I do not disturb the sentence of imprisonment. I decline to award costs against the Crown.

What happened?

[3]    On 2 October 2019, Simon France J sentenced four siblings who ran a chain of Thai restaurants and who pleaded guilty to charges of aiding and abetting their companies’ false GST and income tax returns and their own false personal tax returns.1 As a general comment, the Judge accepted the defendants are “hardworking people who are generally law-abiding, but who have admitted to cheating the revenue, and thereby society in general”.2 Another sibling was sentenced separately.3

[4]    Mr Thongskul, then aged 52 and a New Zealand citizen, was sentenced for six representative charges covering 124 returns and seven years, for evading $950,000 of

1      R v Kampeng [2019] NZHC 2500.

2 At [10].

3      R v Thongskul [2019] NZHC 2499.

tax. He was sentenced to two years and eight months’ imprisonment and to pay

$900,000 in reparations to the Commissioner of Inland Revenue. The Judge stated that the amount of reparations ordered for the four defendants was determined “according to each defendant’s realistic capacity to pay”.4 He also stated it was “plain that personally they cannot meet the commitments” and accepted the money would be “provided by the family” which he considered views such financial matters as a collective issue.5

[5]    The Judge made a discount to the sentence of imprisonment of 15 per cent because of the reparations. $500,000 was to be paid in several lump sums before the end of May 2021, financed in part by from the proceeds of sale of his family home. That was paid. The remaining $400,000 was to be paid in monthly instalments of

$16,500, commencing two months after Mr Thongskul’s release from prison. Mr Thongskul expected to finance the monthly instalments from the ongoing profits of his businesses.

[6]    On 26 August 2020, the Parole Board considered Mr Thongskul remained at undue risk of reoffending and that it was vital to assessing his risk that he provide a statutory declaration that he has no direct or indirect interest in any business.6  On   17 September 2020, the Board was satisfied that Mr Thongskul would have no direct or indirect involvement in any of what were previously his businesses.7 It imposed conditions on his parole, relevantly:8

(2)Not to be involved in the handling of money, provision of advice or management of the financial accounts or transactions, of any person or entity, unless you have the prior written approval of a Probation Officer.

(3)Not to engage in any employment or have any role in the affairs of any business, trust, company or other entity, unless you have the prior written approval of a Probation Officer.

(4)Not to give financial or business advice to any person or entity unless you have the prior written approval of a Probation Officer.

4      R v Kampeng, above n 1, at [17].

5 At [18].

6 Decision of the Parole Board: Chanaratt Thongskul, 26 August 2020, at [3].

7 Decision of the Parole Board: Chanaratt Thongskul, 17 September 2020, at [3].

8 At [6].

(5)To obtain the written approval of a Probation Officer before starting or changing your position and/or place of employment (including voluntary and unpaid work). To notify a Probation Officer if you leave your position of employment.

[7]    Quite how those conditions were expected to be consistent with ongoing fulfilment of the reparation sentence is unclear. However, on 30 September 2020,  Mr Thongskul was released on parole.9 Mr Thongskul’s companies, Tangratt Ltd, Siam Foods Ltd and Tangpanithan Ltd, sold their businesses, consisting of Thai restaurants in Hamilton, Whanganui, Lower Hutt and Napier. The first two were sold to a relative, Tawanrach Thongskul and the latter two to a nephew, Trin Sunathvanichkul. The companies subsequently ceased trading.

[8]    Mr Thongskul has not been employed since he left prison. His sentence expired at the beginning of this month. He lives on the income of his wife and daughter. Because the remaining $400,000 in reparations was to be paid out of the income from Mr Thongskul’s businesses, and he sold those businesses, he has not paid the reparations. He applies to cancel the outstanding reparations.

Law of cancelling reparations

[9]    Section 12 of the Sentencing Act 2002 (the Act) empowers a Court to order reparation “unless it is satisfied that the sentence or order would result in undue hardship for the offender or the dependents of the offender, or that any other special circumstances would make it inappropriate”. Under s 33, if a Court considers reparation may be appropriate it may order a reparation report including in relation to the financial capacity of the offender and the maximum amount they are likely to be able to pay. Under s 35, if the offender has insufficient means to pay the total value of the loss, the Court may sentence the offender to make reparation for any amount less than that value or pay by instalments or both.

[10]Section 38A(1) of the Act provides:

38A     Cancellation of sentence of reparation

(1)A court may, on an application under subsection (2) or (3) or on its own initiative,—

9 At [5].

(a)cancel a sentence of reparation; or

(b)cancel a sentence of reparation and substitute any other sentence (including another sentence of reparation) that could have been imposed on the offender at the time when the offender was convicted of the offence for which the sentence was imposed.

(2)An offender who is subject to a sentence of reparation or a Registrar may apply in accordance with section 72 for an order under subsection

(1) on the ground that the reparation is unaffordable because the offender’s financial position has changed significantly since the sentence was imposed.

…

(4)The court may make an order under subsection (1) (whether on application or on its own initiative) only if—

(a)the person to whom the offender is required to pay the reparation—

(i)has been informed and has been given the opportunity to be heard about the matter; or

…

(b)the court is satisfied that—

(i)the ground in subsection (2) or (3) has been established; and

(ii)enforcement of the original sentence of reparation under Part 3 of the Summary Proceedings Act 1957 (or, if applicable, under section 19 of the Crimes Act 1961) is unlikely to be effective.

(5)If the court is considering a substitute sentence,—

(a)the court must take the following matters into account:

(i)the amount of the original sentence of reparation that has been paid and the amount outstanding:

(ii)any other sentences or orders imposed on the offender for the offending for which the original reparation was imposed and the extent to which the reparation was taken into account in imposing those sentences or orders; and

…

(6)If the court cancels a sentence of reparation, the amount of reparation outstanding is deemed to be remitted from the date the order is made or any other date that the court may specify.

Submissions

[11]   Mr Lennard, for Mr Thongskul, submits that Mr Thongskul’s financial circumstances have changed. Reparations that were achievable at the time of sentence, are no longer achievable. He submits the prison sentence should not be revisited because Mr Thongskul has served the sentence and has paid over half of the reparations. He has done the best he can. Any reduction in the discount to imprisonment would therefore be minimal and amount to tinkering with the original sentence.

[12]   Mr Bain, for the Crown, submits the Court cannot be satisfied, viewing the evidence with scepticism because of the nature of the offending, that the reparation payment would be unaffordable. Rather, Mr Thongskul likely has control over assets that are not registered in his name because the family as a whole would meet the reparation obligation. For example, Ms Jaquetta Thongskul could sell her house. Other family members did not give evidence. For the same reason, he submits the Court cannot be satisfied that enforcement of the original sentence of reparation is unlikely to be effective. Mr Bain submits that if the outstanding reparations are cancelled, the Court should impose a further term of at least three months’ imprisonment.

Should reparations be cancelled?

[13]At the hearing, the Crown sought to show that:

(a)Mr Thongskul’s business were sold to relatives at below market value;

(b)Mr Thongskul has had access to significant funds since he was sentenced; and

(c)Mr Thongskul is using his daughter, Jaquetta Thongskul, to conceal assets and income, including the house in her name in which he lives.

[14]   Mr Thongskul had an interpreter at the hearing. The following witnesses provided affidavits and were cross-examined:

(a)For Mr Thongskul: Jaquetta Thongskul; Mr Thongskul himself; and Trin Sunathvanichkul.

(b)For the Crown: Alex Harvey and Rochelle Bouterey, both Customer Compliance Specialists at Inland Revenue.

[15]   Mr Lennard objected to aspects of Ms Bouterey’s evidence about the valuation of Mr Thongskul’s businesses as opinion evidence and objected to evidence being given from the bar in the Crown submissions. I agree with Mr Lennard that some of Ms Bouterey’s evidence is opinion evidence and inadmissible, and that the Crown may not give evidence from the bar. Neither point makes a difference to my conclusions.

[16]I am not satisfied the evidence supports the Crown’s allegations:

(a)The sale of Mr Thongskul’s businesses largely went to pay their GST and PAYE obligations.10 Deposits he received between 1 September 2019 and 25 May 2021 were used to pay reparations, to pay business debts, and to pay wages or dividends. There is no reliable evidence, beyond speculation, that Mr Thongskul has access to significant assets or income.

(b)I accept the evidence of one of the purchasers, Trin Sunathvanichkul, that the value Mr Thongskul received for his restaurant business, in the context of the uncertain effect of Covid on the market at the time, was fair. Mr Sunathvanichkul gives every impression of having made hard- headed business decisions about what he was prepared to pay.

(c)Mr Thongkul’s daughter bought a section before her father’s trial and paid for a house to be built on it, largely with a loan from ANZ serviced by her wages. It is her house. She has received wages for working hard while also undertaking doctoral studies. She has received unexceptionable payments from her mother in lieu of rent, her uncle

10     English translation of the Affidavit of Chanaratt Thongskull, 29 September 2021, at [10]; and Affidavit of Rochelle Bouterey, 15 November 2021, at [26]–[28].

paid for one year of her university fees, and she received a loan from her brother. She has explained her transactions regarding vehicles. She has not received significant payments since her father was released from prison. She is an impressive and compelling witness. There is no evidence Mr Thongskul is using her to conceal assets or income.

(d)It is doubtful that the wider family, such as Mr Thongskul’s sister or the new owners of his former businesses would help Mr Thongskul out financially.11

[17]   The Crown has put Mr Thongskul to proof, as it is entitled to do. Mr Thongskul and his witnesses have risen to the challenge. The Crown was not able to make out its allegations.  I  am  satisfied   that   the   monthly   instalments   of   reparations   in Mr Thongskul’s sentence are now unaffordable. There is no evidence that he has significant wealth, assets or income. Enforcement of the original sentence is unlikely to be effective. Mr Thongksul’s financial position has changed significantly since the sentence was imposed, through the forced sale of his businesses resulting from the Parole Board’s decisions.

[18]   There was evidence of funds being shared within the family before the tax charges were brought. But there is no evidence that has continued to any significant extent. I see no good reason why Mr Thongskul’s daughter should be forced to sell her house now to fund an order made against Mr Thongskul in 2019 when his financial position was significantly different.

[19]   Mr Thongskul responsibly accepts that his living expenses are entirely met by his wife so, if he gets a minimum wage job, all his net earnings could go to reparation. On that basis, Mr Lennard submits Mr Thongskul could pay reparations of $30,000 each year for three years, assuming that Inland Revenue does not garnish his wages for his outstanding tax debt under s 167 of the Tax Administration Act 1994.

[20]   However, this offer depends on Mr Thongskul getting a job. By the date of the hearing, one year and three months after being released on parole, he was still

11     NOE 21/15–22/15 and 23/30 –24/7.

unemployed. And Mr Thongskul expects his criminal history will impede him from getting offers of employment. He cannot currently afford the outstanding reparations. Whether he gets a job is speculative. As things stand, I consider the statutory purpose of the reparations regime is best served here by simply cancelling the outstanding reparations.

[21]   I do not consider the sentence of imprisonment needs to be revisited. It has served its purpose. No useful purpose, let alone the purposes and principles of sentencing, would be served by sending Mr Thongskul back to prison for any period. He and his family should be able to get on with their lives.

Costs

[22]   Mr Lennard submits the Crown evidence was presented late, in chaotic fashion, and did not conform with the procedural or evidential requirements of producing individual exhibits or providing an index. He submits the lateness of the affidavits and wholly inadequate treatment of the exhibits led the Crown prosecutor to have insufficient time and opportunity to consider the evidence and, therefore, led them to make allegations which should not have been made. Ms Bouterey explained one lapse by agreeing that she assumed the defence team would “trawl through [her] 350 unreferenced pages” to confirm that a significant sum of money was paid by Mrs Thongskul towards her husband’s reparation.12 Mr Lennard submits the Crown’s approach imposed costs on the defence which would not otherwise have been incurred. He seeks solicitor-client costs for responding to the Crown allegations and affidavits, totalling $20,372.50 (GST excl), under s 364 of the Criminal Procedure Act 2011.

[23]   Mr La Hood submits there is no qualifying procedural failure to invoke the jurisdiction of s 364. No timeframes were prescribed, no judicial directions uncompiled with, no provision of the Act or regulations breached. Furthermore, it was reasonable for the Crown to proceed as it did, including by not opposing an adjournment when Mr Lennard raised concerns with the Crown evidence. There was no prejudice to Mr Thongskul and almost all of the claimed costs would have had to have been incurred by him anyway.

12     NOE 59/12.

[24]   The organisation of the Crown’s exhibits and aspects of the process was not optimal. But I do not consider it rises to the relatively high level of a “significant” “procedural failure” by the prosecution that invokes s 364. I decline to award costs.

Result

[25]   I grant the application. I cancel the sentence of reparation imposed by the High Court on 2 October 2019 and substitute a sentence of reparation of $500,000, which has been already paid. I do not disturb the sentence of imprisonment. I decline to award costs.

Palmer J