THONGSKUL v R [2022] NZHC 1493

THONGSKUL v R [2022] NZHC 1493 [27 June 2022]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECRI-2017-085-2498[2022] NZHC 1493IN THE MATTER OF an application under s 38A of the SentencingAct 2002BETWEEN CHANARATT THONGSKULApplicantAND THE QUEENRespondentHearing: 7 – 8 December 2021 with further written submissions on 15, 16and 24 December 2021Counsel: M T Lennard and J McVay for the ApplicantT G Bain and D R La Hood for the RespondentJudgment: 27 June 2022JUDGMENT OF PALMER JSolicitors:Jacobs Florentine, Palmerston NorthCrown Solicitor, WellingtonSummary[1] In October 2019, Mr Chanaratt Thongskul was sentenced to two years andeight months' imprisonment and to pay reparations of $900,000 for tax evasion. Hepaid $500,000 of that by selling his house. He was going to pay the rest out of ongoingprofits 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 theremaining reparations of $400,000. The Crown opposes that.[2] I am satisfied there has been a significant change in Mr Thongskul'scircumstances and that he can no longer afford the outstanding reparations. There isno evidence that he has significant wealth, assets or income. Enforcement of theoriginal sentence is unlikely to be effective. I am not satisfied that the resources of theextended family are or should be available to pay the reparations. Mr Thongskulresponsibly 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 criminalhistory. Whether he gets a job is speculative. I consider the statutory purpose of thereparations regime is best served here by simply cancelling the outstandingreparations. I do not disturb the sentence of imprisonment. I decline to award costsagainst the Crown.What happened?[3] On 2 October 2019, Simon France J sentenced four siblings who ran a chain ofThai restaurants and who pleaded guilty to charges of aiding and abetting theircompanies' false GST and income tax returns and their own false personal tax returns.1As a general comment, the Judge accepted the defendants are "hardworking peoplewho are generally law-abiding, but who have admitted to cheating the revenue, andthereby society in general".2 Another sibling was sentenced separately.3[4] Mr Thongskul, then aged 52 and a New Zealand citizen, was sentenced for sixrepresentative charges covering 124 returns and seven years, for evading $950,000 of1 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 statedthat 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 "plainthat personally they cannot meet the commitments" and accepted the money would be"provided by the family" which he considered views such financial matters as acollective issue.5[5] The Judge made a discount to the sentence of imprisonment of 15 per centbecause of the reparations. $500,000 was to be paid in several lump sums before theend 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. MrThongskul expected to finance the monthly instalments from the ongoing profits ofhis businesses.[6] On 26 August 2020, the Parole Board considered Mr Thongskul remained atundue risk of reoffending and that it was vital to assessing his risk that he provide astatutory declaration that he has no direct or indirect interest in any business.6 On17 September 2020, the Board was satisfied that Mr Thongskul would have no director indirect involvement in any of what were previously his businesses.7 It imposedconditions on his parole, relevantly:8(2) Not to be involved in the handling of money, provision of advice ormanagement of the financial accounts or transactions, of any personor entity, unless you have the prior written approval of a ProbationOfficer.(3) Not to engage in any employment or have any role in the affairs ofany business, trust, company or other entity, unless you have the priorwritten approval of a Probation Officer.(4) Not to give financial or business advice to any person or entity unlessyou 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 startingor changing your position and/or place of employment (includingvoluntary and unpaid work). To notify a Probation Officer if youleave your position of employment.[7] Quite how those conditions were expected to be consistent with ongoingfulfilment 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 Thairestaurants in Hamilton, Whanganui, Lower Hutt and Napier. The first two were soldto a relative, Tawanrach Thongskul and the latter two to a nephew, TrinSunathvanichkul. The companies subsequently ceased trading.[8] Mr Thongskul has not been employed since he left prison. His sentenceexpired at the beginning of this month. He lives on the income of his wife anddaughter. Because the remaining $400,000 in reparations was to be paid out of theincome from Mr Thongskul's businesses, and he sold those businesses, he has not paidthe 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 orderreparation "unless it is satisfied that the sentence or order would result in unduehardship for the offender or the dependents of the offender, or that any other specialcircumstances would make it inappropriate". Under s 33, if a Court considersreparation may be appropriate it may order a reparation report including in relation tothe financial capacity of the offender and the maximum amount they are likely to beable to pay. Under s 35, if the offender has insufficient means to pay the total valueof the loss, the Court may sentence the offender to make reparation for any amountless 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 itsown initiative,—9 At [5].(a) cancel a sentence of reparation; or(b) cancel a sentence of reparation and substitute any othersentence (including another sentence of reparation) that couldhave been imposed on the offender at the time when theoffender was convicted of the offence for which the sentencewas imposed.(2) An offender who is subject to a sentence of reparation or a Registrarmay apply in accordance with section 72 for an order under subsection(1) on the ground that the reparation is unaffordable because theoffender's financial position has changed significantly since thesentence was imposed.(4) The court may make an order under subsection (1) (whether onapplication or on its own initiative) only if—(a) the person to whom the offender is required to pay thereparation—(i) has been informed and has been given the opportunityto be heard about the matter; or(b) the court is satisfied that—(i) the ground in subsection (2) or (3) has beenestablished; and(ii) enforcement of the original sentence of reparationunder Part 3 of the Summary Proceedings Act 1957(or, if applicable, under section 19 of the Crimes Act1961) 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 thathas been paid and the amount outstanding:(ii) any other sentences or orders imposed on the offenderfor the offending for which the original reparationwas imposed and the extent to which the reparationwas taken into account in imposing those sentencesor orders; and(6) If the court cancels a sentence of reparation, the amount of reparationoutstanding is deemed to be remitted from the date the order is madeor any other date that the court may specify.Submissions[11] Mr Lennard, for Mr Thongskul, submits that Mr Thongskul's financialcircumstances have changed. Reparations that were achievable at the time of sentence,are no longer achievable. He submits the prison sentence should not be revisitedbecause Mr Thongskul has served the sentence and has paid over half of thereparations. He has done the best he can. Any reduction in the discount toimprisonment would therefore be minimal and amount to tinkering with the originalsentence.[12] Mr Bain, for the Crown, submits the Court cannot be satisfied, viewing theevidence with scepticism because of the nature of the offending, that the reparationpayment would be unaffordable. Rather, Mr Thongskul likely has control over assetsthat are not registered in his name because the family as a whole would meet thereparation obligation. For example, Ms Jaquetta Thongskul could sell her house.Other family members did not give evidence. For the same reason, he submits theCourt cannot be satisfied that enforcement of the original sentence of reparation isunlikely to be effective. Mr Bain submits that if the outstanding reparations arecancelled, 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 wassentenced; and(c) Mr Thongskul is using his daughter, Jaquetta Thongskul, to concealassets and income, including the house in her name in which he lives.[14] Mr Thongskul had an interpreter at the hearing. The following witnessesprovided affidavits and were cross-examined:(a) For Mr Thongskul: Jaquetta Thongskul; Mr Thongskul himself; andTrin Sunathvanichkul.(b) For the Crown: Alex Harvey and Rochelle Bouterey, both CustomerCompliance Specialists at Inland Revenue.[15] Mr Lennard objected to aspects of Ms Bouterey's evidence about the valuationof Mr Thongskul's businesses as opinion evidence and objected to evidence beinggiven from the bar in the Crown submissions. I agree with Mr Lennard that some ofMs Bouterey's evidence is opinion evidence and inadmissible, and that the Crown maynot 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 GSTand PAYE obligations.10 Deposits he received between 1 September2019 and 25 May 2021 were used to pay reparations, to pay businessdebts, and to pay wages or dividends. There is no reliable evidence,beyond speculation, that Mr Thongskul has access to significant assetsor income.(b) I accept the evidence of one of the purchasers, Trin Sunathvanichkul,that the value Mr Thongskul received for his restaurant business, in thecontext of the uncertain effect of Covid on the market at the time, wasfair. 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 andpaid for a house to be built on it, largely with a loan from ANZ servicedby her wages. It is her house. She has received wages for working hardwhile also undertaking doctoral studies. She has receivedunexceptionable payments from her mother in lieu of rent, her uncle10 English translation of the Affidavit of Chanaratt Thongskull, 29 September 2021, at [10]; andAffidavit of Rochelle Bouterey, 15 November 2021, at [26]–[28].paid for one year of her university fees, and she received a loan fromher brother. She has explained her transactions regarding vehicles. Shehas not received significant payments since her father was releasedfrom prison. She is an impressive and compelling witness. There is noevidence 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 thenew owners of his former businesses would help Mr Thongskul outfinancially.11[17] The Crown has put Mr Thongskul to proof, as it is entitled to do. Mr Thongskuland his witnesses have risen to the challenge. The Crown was not able to make out itsallegations. I am satisfied that the monthly instalments of reparations inMr Thongskul's sentence are now unaffordable. There is no evidence that he hassignificant wealth, assets or income. Enforcement of the original sentence is unlikelyto be effective. Mr Thongksul's financial position has changed significantly since thesentence was imposed, through the forced sale of his businesses resulting from theParole Board's decisions.[18] There was evidence of funds being shared within the family before the taxcharges were brought. But there is no evidence that has continued to any significantextent. I see no good reason why Mr Thongskul's daughter should be forced to sellher house now to fund an order made against Mr Thongskul in 2019 when his financialposition was significantly different.[19] Mr Thongskul responsibly accepts that his living expenses are entirely met byhis 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 $30,000each year for three years, assuming that Inland Revenue does not garnish his wagesfor 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 thehearing, one year and three months after being released on parole, he was still11 NOE 21/15–22/15 and 23/30 –24/7.unemployed. And Mr Thongskul expects his criminal history will impede him fromgetting offers of employment. He cannot currently afford the outstanding reparations.Whether he gets a job is speculative. As things stand, I consider the statutory purposeof the reparations regime is best served here by simply cancelling the outstandingreparations.[21] I do not consider the sentence of imprisonment needs to be revisited. It hasserved its purpose. No useful purpose, let alone the purposes and principles ofsentencing, 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 producingindividual exhibits or providing an index. He submits the lateness of the affidavitsand wholly inadequate treatment of the exhibits led the Crown prosecutor to haveinsufficient time and opportunity to consider the evidence and, therefore, led them tomake allegations which should not have been made. Ms Bouterey explained one lapseby agreeing that she assumed the defence team would "trawl through [her] 350unreferenced pages" to confirm that a significant sum of money was paid by MrsThongskul towards her husband's reparation.12 Mr Lennard submits the Crown'sapproach 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 thejurisdiction of s 364. No timeframes were prescribed, no judicial directionsuncompiled with, no provision of the Act or regulations breached. Furthermore, it wasreasonable for the Crown to proceed as it did, including by not opposing anadjournment when Mr Lennard raised concerns with the Crown evidence. There wasno prejudice to Mr Thongskul and almost all of the claimed costs would have had tohave been incurred by him anyway.12 NOE 59/12.[24] The organisation of the Crown's exhibits and aspects of the process was notoptimal. 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 HighCourt on 2 October 2019 and substitute a sentence of reparation of $500,000, whichhas been already paid. I do not disturb the sentence of imprisonment. I decline toaward costs.Palmer J