Tonks v The Queen
[2011] NZCA 252
•3 June 2011
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA749/2010 [2011] NZCA 252 |
| BETWEEN MARK BRENDON TONKS |
| AND THE QUEEN |
| Hearing: 24 May 2011 |
| Court: Randerson, Gendall and Allan JJ |
| Counsel: Appellant in person (with Mr G Israel as McKenzie Friend) |
| Judgment: 3 June 2011 at 3.30 p.m. |
JUDGMENT OF THE COURT
The appeal is dismissed.
____________________________________________________________________
REASONS OF THE COURT
(Given by Gendall J)
The appellant was found guilty by a jury in the District Court at Christchurch of seven counts under s 143B of the Tax Administration Act 1994 (the Act) relating to his personal income tax returns for the taxation years ending 31 March 2004 and 31 March 2005.
Counts 1 and 2 alleged that the appellant failed to provide tax returns for the years ending 31 March 2004 and 31 March 2005 when he knew he was required to do so by a tax law and did so intending to evade the payment of tax.
Count 3 alleged he knowingly provided false, incomplete or misleading information to the Commissioner of Inland Revenue on 25 June 2007, intending to evade the assessment or payment of tax.
Counts 4 and 5 alleged that he knowingly failed to provide to the Commissioner (on 2 July 2007 and 16 July 2007) information required of him by a tax law by notices issued to him under s 17 of the Act, intending to evade the assessment or payment of tax by his building company (Prophet Industries Ltd) and himself.
Counts 6 and 7 alleged that in June 2008 he knowingly provided to the Commissioner false income tax returns for the years ending 31 March 2004 and 31 March 2005, intending to evade the assessment or payment of tax by himself. Those counts refer to him omitting the amount of income of $63,676.05 (Count 6) and $85,944.01 (Count 7).
Grounds of appeal
As best we can summarise them, the appellant’s grounds of appeal are:
· The Crown did not prove beyond reasonable doubt that he acted knowingly and with the intention of evading the assessment or payment of tax.
· The Crown did not produce evidence of his company’s amended tax returns which he maintained justified the personal tax returns he ultimately filed.
· He was subjected to double jeopardy in relation to Counts 6 and 7.
· Various other grounds involving the Wages Protection Act 1983; the Employment Relations Act 2000; and the Contracts (Privity) Act 1982.
Background facts
The appellant was the managing director of his small company, Prophet Industries Ltd, which conducted building operations between 2003 and 2006. The company’s accountant, Mrs M J Varnam, prepared accounts, PAYE and GST returns, and financial statements for the company for the years 2004 and 2005. She was not engaged by the appellant to prepare individual tax returns for him.
The company made a profit for the years ending 2004 and 2005. It was discussed between Mrs Varnam and the appellant whether the profit should be retained by the company so that it paid tax at the company rate. The appellant chose to have the profit distributed to him. But he did not wish to pay tax on it. Mrs Varnam’s evidence was that he had ideas on income tax which differed from her own. He did not believe that a person should have to pay income tax. Her evidence was that he asked the payments to be described as “reward” but she refused to do so. She said to him that it was “not ethical or legal”. Her evidence was that it was the appellant’s view that he was entitled to be rewarded for his efforts, was not a “slave” and was perfectly entitled to that reward without having to pay income tax. She said that she advised him that he would have to pay the income tax personally and asked whether he would wish her to prepare that tax return. He declined.
In June 2005 the appellant signed shareholder resolutions for the company, which provided for the year ended 31 March 2004:
... the following remuneration paid or credited to the shareholder’s current accounts be approved:
Mark Brendon Tonks Salary $65,717.00
And for the year ended 31 March 2005:
Mark Tonks Salary $90,673.61
The appellant did not file tax returns nor pay any income tax in respect of those payments. Financial statements for Prophet Industries Ltd were not completed by Mrs Varnam in 2006, because the appellant contended she should have referred to the payments as “reward” in the financial statements, rather than being “shareholders salary”.
In April 2007 the IRD, through its investigator Mr R G Dillon, commenced an investigation as to why the appellant had not filed personal returns specifying shareholder employee income from Prophet Industries Ltd, namely $65,717.00 (for 2004) and $90,673.61 (for 2005). Income tax on that remuneration would have been $16,899.63 and $26,632.86 respectively. When requested to make financial records of the company available, the appellant declined. In a later conversation with Mr Dillon on 16 April 2007 the appellant said, in effect, that he did not believe in personal taxation. Audit notices were reissued on 9 May 2007 and Mr Dillon requested that the appellant attend an interview on 27 May 2007 bringing with him financial records for both himself and Prophet Industries Ltd. The appellant declined to attend the interview.
In later exchanges between the appellant and Mr Dillon, the appellant said that the IRD had not convinced him that it had legal authority to audit company returns, request records or interview him. So a formal statutory notice under s 17 of the Tax Administration Act 1994 was issued on 8 June 2007 to the appellant. It requested the relevant records of Prophet Industries Ltd and the appellant’s personal bank statements from 1 April 2003 until 31 March 2007. The appellant then gave to the inspector a document dated 25 June 2007, which he had signed but it was otherwise blank and contained no information.
The appellant then wrote to the IRD on 28 June 2007. In it he said that upon payment by the IRD of a fee for the providing of the information which he said was of a “purely commercial nature”, the investigator would be entitled to the information requested. He went on to say:
Further, should you refuse to pay the bill, but nevertheless order me to furnish the information, you will be taken as agreeing to be held personally liable for the full amount of the bill immediately upon receipt of the requested information. This letter may be shown to a court as conclusive proof of this fact.
A further notice was issued requiring the provision of information and advising the appellant that the inspector would call at his home on 2 July 2007 to collect these records. When he arrived the appellant told him he did not have any records. He provided the inspector with a document described as a “Truth Declaration”, being a document comprising 16 paragraphs dated 16 July 2007. It is said to be in relation to the orders for information that had been sought on 2 July 2007. It is somewhat prolix but essentially records that the appellant claims “right to liberty and full and absolute ownership of property” and that it was his “understanding that the labour is worthy of his hire and reward”. Such a reward was not income and could not be treated as such without his consent and that it is his “understanding that there is no one who has a lawful claim against me in this matter”.
In one paragraph of that statement he records that:
It is my intent to fulfil the order [provide information] subject only to prior payment of my bill of NZ$2 million attached hereto, irrespective of who pays it, and, [t]hat it is my intent in return for this consideration to provide you with all requested information which I have in my knowledge, possession and control as at the date such consideration is received ...
The account is a formally typewritten document described as an “Invoice” and “Bill To [Inland Revenue Department”] being “total amount ($2 million) to be paid for the fulfilment of your order to provide requested information, as per your letter dated 2 July 2007”.
Thereafter, despite several refusals, the appellant eventually filed personal income tax returns for the years 2004 and 2005. This was not done until 27 June 2008. Those are the returns which led to Counts 6 and 7 in the indictment. In those returns the appellant declared that his income for the years was $2,040.95 and $4,729.95 respectively. When he was asked by Mr Dillon at the later interview on 19 August 2008 why he had not returned the true sums in excess of $65,000 and $90,000, the appellant’s answer was that he “had been advised to return something”.
On 24 February 2009 warrants were executed at the appellant’s home pursuant to the Act and records relating to his personal activities and those of Prophet Industries Ltd were seized. He made comments to the officers who then attended to the effect that he believed in a society free of government intervention and was hoping to frustrate the government to such extent that his tax issues would “go away”.
Whilst Counts 6 and 7 referred to omitting to record income of $63,676.05 and $85,944.01 respectively, which are slightly less than the amounts of the undisclosed shareholder’s salary, no doubt arose from the figures contained in the company’s return to the Companies Office as being the shareholder income actually received, and the difference was immaterial for the purpose of the trial.
Trial process
At trial the appellant represented himself, with the assistance of a McKenzie Friend. He cross-examined a number of witnesses. After the Crown closed its case the appellant sought dismissal of some of the charges pursuant to s 347 of the Crimes Act 1961, although he framed his application as a “motion to dismiss”. Judge Neave dealt with this in his ruling of 6 October 2010.[1] He then, as is apparent from the transcript of a chambers discussion, advised the appellant that he had the right to give evidence and to advise the jury whether he wished to do so or not. The appellant elected not to give or call evidence. He advanced his defence of honesty of belief and purpose in his closing address.
[1] R v Tonks DC Christchurch CRI-2009-009-13089, 6 October 2010.
No criticism could be made of the way in which the trial proceeded. The Judge gave considerable assistance to the appellant and he was treated fairly throughout the trial. No objection or criticism can be made of the summing-up of the Judge. His Honour correctly identified the elements required in respect of each of the counts, the evidence that existed as it related to each of them, and he carefully dealt with the submissions of both Crown counsel and the appellant.
At a comparatively early stage in his summing-up the Judge identified the crucial issue of honest belief, saying to the jury:[2]
On the other hand, the defendant says, “Well regardless of what you think about this belief and regardless of whether it’s true or not and regardless of whether I now know something different from what I knew then, I nonetheless held this belief honestly and genuinely”. And, of course, as a matter of law an honest belief can be an unreasonable one. Quite clearly the less reasonable the belief the less likely you are to conclude that it’s an honest belief particularly the more intelligent the person holding that belief. But that’s a question of fact for you to determine whether or not he did honestly and genuinely hold this belief and, as I say, whether it is reasonable doesn’t determine it’s honest in terms of a straight equation. It’s a factor you will take into account in deciding whether you accept it as an honest belief.
[2]R v Tonks DC Christchurch CRI 2009-009-13089, 7 October 2010 at [24].
The Judge emphasised to the jury that the Crown was required to prove to its satisfaction that there was no honest belief held by the appellant that he was not required to pay tax. The Judge emphasised that the appellant did not have to prove anything. Those remarks related to Counts 1 and 2 for failing to file tax returns. The Judge made it clear that the Crown had to:[3]
prove that he knew there was a tax law which obliged him to file an income tax return ... [and it was not done] so that Mr Tonks would avoid being assessed for tax or having to pay tax.
[3] At [27] – [28].
Likewise, the Judge accurately described the elements that the Crown had to prove in respect of Counts 3, 4, and 5, namely that the appellant received the s 17 notices requiring information, that he knowingly provided false information (Count 3) and failed to provide information (Counts 4 and 5) in all cases with the intention that he avoid being assessed for tax or having to pay tax. The Judge’s summing-up made it clear that the jury needed to be satisfied that the appellant’s actions or failures were made as deliberate intentional decisions, were not accidental and were made with the necessary intent to avoid tax obligations.
Lastly, when dealing with Counts 6 and 7 the Judge made it clear that a crucial issue was whether the Crown had proven the appellant had provided false tax returns with the intention of avoiding payment of tax. He specifically drew to the jury’s attention the appellant’s point that the Crown had not produced the company’s amended tax returns which the appellant said supported the accuracy of his personal tax returns for the tax years in question.
The Judge was fair to the appellant, and even favourable to him, when in the course of his summing-up he said:[4]
... in terms of this exercise in trying to determine whether the criminal liability for filing these amended returns claiming expenses you will have to be satisfied beyond reasonable doubt that the combined effect of these returns was false. It will be for you to determine whether or not you are satisfied that on the information you have it’s proven beyond reasonable doubt that they are incorrect and known to be incorrect. It is possible you may think that the evidence on this is a bit sketchy and without someone having had a proper audit of the whole series of accounts it’s now really difficult for you to say one way or the other whether or not these particular returns were false. That will be a matter for you.
[4] At [54].
He made it clear the argument that had been advanced to the jury, namely:[5]
All in all the defence argument here is, look you simply can’t be satisfied exactly what the situation is in respect of these returns and it’s the Crown’s job to prove that they’re false, it’s not my job, Mr Tonks says, quite rightly, to prove that they are true and I think this is a case, this particular aspect is one where the burden of proof may well be very significant from your point of view.
[5] At [57].
The Judge then referred to submissions made by the Crown in respect of these matters and the Crown’s proposition that the jury could be satisfied that the combined package of returns was not genuine and was false given the dramatic difference in the amounts originally allocated to him as shareholder’s salary and the amounts ultimately returned by him as personal income. But the Judge made it clear that the jury had to be satisfied that the returns were not only false but the appellant knew that to be the case and deliberately submitted the false material.
Written question trails were provided by the Judge for the assistance of the jury. They make it abundantly clear that the requirement was that the Crown had to satisfy the jury beyond reasonable doubt of the essential ingredients of each count before convictions could be entered.
Essentially, the jury task was to determine questions of fact and whether it was satisfied to the required standard that the elements of each offence had been proven. Despite the careful warnings of the Judge, the jury convicted on all counts as it was entitled to do.
Discussion
Section 143B of the Act relevantly provides:
143B Evasion or similar offence
(1) A person commits an offence against this Act if the person—
...
(b) Knowingly does not provide information (including tax returns and tax forms) to the Commissioner or any other person when required to do so by a tax law; or
(c) Knowingly provides altered, false, incomplete, or misleading information (including tax returns and tax forms) to the Commissioner or any other person in respect of a tax law or a matter or thing relating to a tax law; or
...
and does so—
(f) Intending to evade the assessment or payment of tax by the person or any other person under a tax law; or
....
In the present case, there was little dispute about the actus reus for the respective offences. These were:
· For Counts 1 and 2, failing to provide tax returns for the two tax years in question.
· For Count 3, providing false, incomplete or misleading information to the Commissioner when required to do so by a tax law.
· For Counts 4 and 5, failing to provide information to the Commissioner when required to do so by a tax law.
· For Counts 6 and 7, it was accepted that income tax returns were provided to the Commissioner for the relevant tax years but the allegation they contained false information was disputed.
The main focus of the appellant’s defence at trial and on appeal was that the Crown had failed to prove beyond reasonable doubt the mens rea elements of the offending, namely that he knew he was required to pay tax or to provide relevant information and that he intended to evade the assessment or payment of tax. As noted, the appellant also disputed that the returns ultimately filed contained false information.
In approaching the assessment of the mental elements of the offending alleged, the jury was entitled to consider the whole of the evidence. The appellant frankly accepted that he had been obstructive in relation to the tax issues which arose but submitted that, rightly or wrongly, he genuinely and honestly believed that the payment of tax was voluntary and that he was not obliged to pay tax or to comply with the Commissioner’s requests for information with regard to his tax affairs.
The offending acts or omissions must be performed or omitted knowingly. This involves conscious or knowing conduct which goes beyond simply overlooking the making of tax payments and so inadvertently failing to make such payments .[6] Likewise any failure to provide information when requested would have to involve conscious or knowing conduct rather than an inadvertent failure. In relation to the concept of evasion, relevant are the remarks of McGregor J in Taylor v Attorney-General[7] endorsed by this Court in R v Dhillon:[8]
In my view the word “evade” associated with the expressions “attempts to evade” or “does any act with intent to evade” includes an element of intent, an intention to endeavour to avoid payment of tax known to be chargeable.
[6] R v Fepuleiai [2008] NZCA 339, (2008) NZTC 22,083 at [18].
[7]Taylor v Attorney-General [1963] NZLR 261(SC) at 262.
[8] R v Dhillon [2009] NZCA 597, (2010) 24 NZTC 24,030 at [19].
The short point is that a person can only evade that which he or she knows to be his or her obligation.
We accept the submissions made by Mr Ebersohn for the Crown that there was evidence upon which the jury was entitled to conclude that the appellant knew he was obliged to pay tax on his personal income and to provide information requested by the Commissioner. There was also material upon which the jury could find in relation to each of the counts in the indictment that he had the necessary intention to evade the assessment or payment of income tax.
First, Mrs Varnam’s evidence was explicit. She told him he had to pay tax on his personal income and file the relevant returns. Secondly, the formal notices issued under s 17 of the Act requiring him to provide information to the Commissioner could not have left him in any doubt as to his obligations. His trifling responses to these requests were reflective of his views about the payment of tax. The jury could readily have concluded that his views could not have been honestly and genuinely held.
Thirdly, there was evidence upon which the jury could have concluded, in relation to counts 6 and 7, that the personal income tax returns ultimately filed by the appellant were knowingly made falsely and with the necessary intention to evade the assessment or payment of tax. Mrs Varnam’s evidence was that she was instructed by the appellant to file amended returns for the company which dramatically altered the company’s profit for the tax years at issue. She was instructed that there were substantial payments made by the company to contractors which should have been claimed as expenses, thereby reducing the company’s profit. She told the Court that the appellant had generally been meticulous in providing all the necessary information, yet she had not received this information at the time the original company accounts and taxation returns were prepared. The effect of this adjustment was to reduce the taxable profit of the company and the appellant’s shareholder’s salary to a level far below the sums originally allocated to him in the company accounts and confirmed by resolution signed by the appellant.
The appellant submitted that the Crown should have produced the amended accounts for the company and should have audited the company’s accounts. We are not persuaded this was essential given Mrs Varnam’s evidence. We note too that there was no evidence that the amounts for shareholder’s salary allocated to the appellant have ever been reversed or amended, or that the appellant has agreed to repay to the company the salaries originally allocated and paid to him.
The argument based on double jeopardy cannot succeed. Counts 1 and 2 relate to the failure to provide income tax returns in the relevant tax years while counts 6 and 7 relate to the late provision of false tax returns for the same years. There is no element of double jeopardy involved.
Finally, we reject as meritless the arguments raised under the Wages Protection Act 1983, the Employment Relations Act 2000 and the Contracts (Privity) Act 1982. The appellant identified provisions under the Wages Protection Act requiring wages to be paid without deduction, cross-referencing this to the definition of “worker” in the Employment Relations Act. The argument under the Contracts (Privity) Act is difficult to follow but it has to do with a submission that income tax is tax upon the use of a bank account. We are satisfied that none of these arguments could possibly succeed. The payment of tax and the requirement to provide information when required by the Commissioner are specific and well understood mandatory statutory requirements.
In summary, none of the grounds of appeal raised is made out. The Judge correctly identified the essential elements of the offences and directed the jury accordingly. The verdicts were open on the evidence and there was no element of unfairness to the appellant.
For these reasons, the appeal against conviction is dismissed. If the appellant has not yet commenced or completed his sentence, he must now do so forthwith.
Solicitors:
Crown Law Office, Wellington for Respondent
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