Toilolo v Ministry of Business, Innovation and Employment
[2018] NZHC 592
•29 March 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CRI-2017-404-000463
[2018] NZHC 592
BETWEEN TIMOTHY TOILOLO
Appellant
AND
MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT
Respondent
Hearing: 13 March 2018 Appearances:
R Hucker and J Tomlinson for the Appellant L Radich for the Respondent
Judgment:
29 March 2018
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Thursday, 29 March 2018 at 3:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Counsel/Solicitors:
Hucker Associates, Auckland
Kayes Fletcher Walker Ltd (Office of the Crown Solicitor at Manukau), Auckland
TOILOLO v MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2018] NZHC 592 [29 March 2018]
Introduction
[1] On 11 July 2017, Timothy Toilolo pleaded guilty to two charges under the Insolvency Act 2006, of being an undischarged bankrupt:
(a)taking part in the management or control of a business by virtue of being self-employed without the consent of the Assignee or the Court; and
(b)being employed by a relative, namely his daughter, Olivetta Fetulima, without the consent of the Assignee or the Court.
[2] On 16 November 2017, Judge Earwaker declined Mr Toilolo’s application for a discharge without conviction and instead convicted and fined him $450 plus $120 Court costs on each charge.1
[3] He now appeals on the basis that the Judge was wrong to decline his application for a discharge without conviction.
Factual background
[4] Mr Toilolo was an accountant practising under the name Toilolo & Co Accountants, from an address at 171 Great South Road, Manurewa. On 7 July 2014, Mr Toilolo was adjudicated bankrupt on the application of the Westpac Bank for a debt of $186,594.03.
[5] Having been adjudicated bankrupt, Mr Toilolo was prohibited by s 149 of the Insolvency Act from carrying on the management or control of any business or being employed by a company owned, managed or controlled by a relative of the bankrupt without the consent of the Assignee or the Court.
[6] In breach of the prohibition under s 149, Mr Toilolo continued to undertake accountancy services for a Mr Richard Gray until 7 August 2014. The services consisted of filing Mr Gray’s Goods and Services Tax (GST) return with the Inland
1 Ministry of Business, Innovation and Employment v Toilolo [2017] NZDC 29716.
Revenue Department (IRD), receiving funds in his personal account from Mr Gray of the GST amount payable to the IRD and making payment of GST to the IRD on behalf of Mr Gray.
[7] Mr Toilolo thereafter commenced employment with SCF Central Business Limited, a company of which his daughter was the sole director and shareholder. This was also in breach of s 149 of the Insolvency Act.
[8] Mr Toilolo’s work for the company included advising clients on their financial needs, filing tax returns and completing other accountancy functions as required by clients. One of those clients was Mr Gray.
[9] The registered office of the company was 171 Great South Road, the address from which Mr Toilolo had previously practised as Toilolo & Co Accountants. A sign for Toilolo & Co Accountants remained outside the premises. The company used the email address [email protected].
[10] Mr Toilolo made application to the Assignee for permission to be self- employed under the oversight of another accountant in November 2014. It was declined. He then subsequently made application to the Assignee for permission to be employed by a relative in May 2015. It too was declined.
District Court decision
[11] After reciting the facts of the offences, Judge Earwaker referred to the affidavits filed on behalf of Mr Toilolo, which set out various explanations relating to matters such as the sign outside the premises and the operation of the company’s bank account. The Judge identified the three-step process required for the evaluation of an application for a discharge without conviction and then proceeded to consider each step in turn.
[12] The Judge noted that no loss had resulted from the offending, but considered that Mr Toilolo’s action had been deliberate as he had been well aware of his obligations as a bankrupt. He therefore assessed the gravity of Mr Toilolo’s offending as low to moderate.
[13] As to the direct and indirect consequences of a conviction, the Judge noted that two major matters had been put forward as a consequence. The first was the potential impact on Mr Toilolo’s ambition to practise as a lawyer. The second was that Mr Toilolo would have to resign as a pastor of the Papatoetoe congregation of the Samoan Assembly of God Church if convicted.
[14] After referring to a number of previous cases the Judge said he was not persuaded that the consequences of a conviction as identified were out of all proportion to the gravity of the offending. A conviction would not prevent Mr Toilolo practising as a lawyer. As to his resignation as a pastor, the Judge noted that Mr Toilolo did not earn a living from the role and was well aware of the consequences for his work with the church when he breached s 149 of the Insolvency Act.
[15] The Judge considered that there needed to be a deterrent which would be reflected in a conviction so refused the application for a discharge without conviction. Instead, he convicted and fined Mr Toilolo $450 with $120 Court costs on each charge.
Discussion
[16] Section 106 of the Sentencing Act 2002 gives the Court a discretion to discharge an offender without conviction. Section 107 provides that the discretion cannot be exercised unless the direct and indirect consequences of a conviction would be out of all proportion to the gravity of the offence. Section 107 therefore requires the Court to take a three-step approach in considering:
(a)The gravity of the offence.
(b)The direct and indirect consequences of the conviction.
(c)Whether those consequences are out of all proportion to the gravity of the offence.
[17] If the s 107 threshold is satisfied then the Court will go on to consider whether to exercise its discretion under s 106 to discharge an offender without conviction. The proportionality test under s 107 is a question of fact requiring judicial assessment.
General rights of appeal apply and an appellate court should undertake the evaluation of the s 107 factors afresh.2
Gravity of the offence
[18] Counsel submits that the Judge was wrong to assess the offending as being in the low to moderate range and made an error of law in distinguishing this case from cases where a discharge without conviction had been granted. With respect, I am of the view that the Judge’s assessment was one that was open to him. The offending continued in one form or another for over a year and was properly characterised by the Judge as deliberate. The Judge stated:3
You continued once being bankrupt to operate as an accountant, particularly for one client through to August 2014 and then knowing full well of your obligations went to work for your daughter in order to, in my view, continue practising as an accountant.
[19] The Judge acknowledged and accepted the Crown concession that the gravity of the offending was towards the lower end of the spectrum, but it was not a one-off offence which may be assessed as low gravity.
[20] Counsel also submits that the Judge erred in failing to recognise that rehabilitation was the primary factor to be considered in sentencing of this nature and over emphasised the role of deterrence when no loss was suffered.
[21] Section 7(2) of the Sentencing Act makes it plain however that, subject to the general principles in s 8 which must be taken into account, Judges are left with the discretion to determine which purpose or purposes should be given precedence according to the overall circumstances of the individual case.
[22] Although no loss was suffered, public policy considerations of sentencing under the Insolvency Act should recognise the purpose of the prohibitions on carrying on business and being employed by a relative without the consent of the Assignee is to protect the public from the actions of someone who has in the recent past
2 R v Hughes [2008] NZCA 546, [2009] 3 NZLR 222 at [11].
3 Ministry of Business, Innovation and Employment v Toilolo [2017] NZDC 29716 at [14].
demonstratively failed to manage their financial affairs and because they have been unable to pay their creditors, have thereby become bankrupt.
[23] Mr Toilolo both carried on business himself without consent and was employed by his daughter without consent together for over a year. From the summary of facts, it is evident that Mr Toilolo was directly involved in the business owned by his daughter and that the company used Mr Toilolo’s email address and operated from the same physical address as Mr Toilolo’s business. Mr Toilolo also met with clients and was a joint signatory on the company’s bank account. I am of the view therefore that Mr Toilolo did not act solely or principally at the direction of his daughter.
Consequences of conviction
[24] Counsel submits the Judge made an error of law in failing to properly assess the extent to which there were consequences for Mr Toilolo’s future employment. Mr Toilolo was at the time of sentencing employed as a law clerk with Woodroffe Lawyers. Following his discharge from bankruptcy on 22 August 2017, Mr Toilolo lodged an application with the New Zealand Law Society to be enrolled as a barrister and solicitor. Mr Toilolo’s application was, however, put on hold until he had been sentenced. However, as part of his application to the Law Society, Mr Toilolo had disclosed that he had pleaded guilty to two charges and that he was seeking a discharge without conviction on both charges.
[25] The Judge noted the concession made by counsel for Mr Toilolo that a conviction was not a bar to a provision of a certificate of good character by the New Zealand Law Society. Nonetheless, counsel was concerned that a conviction could potentially impact on Mr Toilolo’s future employment.
[26] The Judge noted that he was currently employed by Woodroffe Lawyers, a well-respected Auckland law firm, and made reference to a letter dated 1 May 2017 from Ms Olinda Woodroffe in which she said that Mr Toilolo had disclosed what had happened in his accountancy career and subsequent bankruptcy. Notwithstanding the difficulties faced by Mr Toilolo, Ms Woodroffe said she assessed his application in a positive manner and made a decision to employ him and give him a chance to start a new career in the legal profession. The Judge was therefore entitled to the view that a
conviction would not have a negative impact on Mr Toilolo continuing in his role as either a law clerk or solicitor employed by Woodroffe Lawyers.
[27] The Judge then noted that the other consequence identified was that Mr Toilolo would be required to resign as a pastor of the Papatoetoe congregation of the Samoan Assembly of God Church.
[28] In an affidavit sworn on 20 July 2017, Pastor Na’amanu stated that he had known Mr Toilolo for 26 years through church national conferences where he attended as a representative of the Papatoetoe Samoan Assembly of God Church, but also through his role as an accountant for the National Body, where he served with distinction until 2014. He records that Pastor Toilolo and his wife became ordained pastors only in 2013. He says that Pastor Toilolo and his wife had been loyal servants of God, not only to the people of the church, but those from other cultures when they are need of help and assistance.
[29] The Judge noted that the fact that a pastor had to be a person with no criminal record would have been well known to Mr Toilolo through his many years of work with the church. The Judge commented that the fact of resignation was a consequence which he would have been aware of when he committed the offending.
[30] It seems to me that although Mr Toilolo will have to resign as pastor if the convictions are upheld, his wife would be able to remain a pastor. Furthermore, Mr Toilolo would be able to continue with his good work for the church, as he had done for many years before he became a pastor. I am therefore of the view that the Judge did not seriously underestimate the impact of Mr Toilolo’s ability to remain a pastor of the Assembly of God Church. He still has the ability to remain of service to both the church and his community.
Balancing gravity of offence and consequences of conviction
[31] Counsel submits that the Judge failed to properly exercise the balancing exercise under s 107 as the gravity of the offending was overstated and the
consequences of a conviction unduly discounted. What the Judge did say is as follows:4
I am not persuaded that the consequences of a conviction as identified are out of all proportion to the gravity of the offending. In my view even taking into account the mitigating factors, this was deliberate offending and in my view needs to be marked with a conviction. The conviction will not in my view prevent Mr Toilolo practising as a lawyer. Clearly the Law Society will need to give consideration to the certificate which needs to be issued before he can so practice, but in my view that is something best left to the society rather than for me to usurp the decision.
Equally in terms of the consequence relating to the acting as a pastor in the church, while I accept it is a consequence it is not a factor where Mr Toilolo does earn his living from and it is a situation where he was well aware of the provisions of his own constitution when he carried out this activity and in my view there does need to be a deterrent aspect to this type of offending and in my view that is reflected in a conviction.
[32] I am of the view that, again, the Judge has properly exercised the balancing process. I have reached this conclusion in light of what the Court of Appeal said in R v Hughes.5 The gravity of the offending is not overstated and the consequences of a conviction not unduly discounted. Mr Toilolo remains employed by Woodroffe Lawyers and can continue to be involved in the affairs of his church and community. When seen in this light, the Judge’s decision cannot be faulted. The appeal is dismissed.
Woolford J
4 At [33]-[34].
5 R v Hughes [2008] NZCA 546, [2009] 3 NZLR 222.
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