THE COMMISSIONER OF INLAND REVENUE v PARORE [2021] NZHC 420

THE COMMISSIONER OF INLAND REVENUE v PARORE [2021] NZHC 420 [8 March 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECRI-2020-404-418[2021] NZHC 420BETWEEN THE COMMISSIONER OF INLANDREVENUEAppellantAND RICHARD ALLEN PARORERespondentHearing: 14 December 2020 (further written submissions: 29 January, and16 and 23 February, 2021)Appearances: N H Malarao and J V Angelson for the appellantD P Weaver for the respondentJudgment: 8 March 2021JUDGMENT OF JAGOSE JThis judgment was delivered by me on 8 March 2021 at 3.00pm.Registrar/Deputy RegistrarCounsel/Solicitors:D P Weaver, Barrister, TaurangaMeredith Connell, AucklandBurley Castle Hawkins Law, TaurangaInland Revenue Department – Legal Services (Manukau)[1] The Commissioner of Inland Revenue seeks leave to appeal the 24 August2020 judgment of Judge D F Clarkson in the District Court at Auckland,1 dismissingseven of 13 charges of GST evasion brought against Mr Parore under s 143B(2) of theTax Administration Act 1994. If leave is granted, I am to determine the appeal.Decision under appeal[2] Section 143B(2) provides "[a] person who evades or attempts to evade theassessment or payment of tax by the person or another person under a tax law commitsan offence against this Act."[3] As trial judge — on conclusion of the Commissioner's evidence, and onMr Parore's application — the Judge ruled there was no case for Mr Parore to answeron the seven charges, as "there is insufficient evidence to prove the intention to evade,or that non-payment occurred for reasons other than oversight or confusion".2[4] The Judge recorded the Commissioner's acceptance she must prove thedefendant, knowing of obligations to be assessed for or to pay tax, had acted or failedto act, with effect to evade the tax's assessment or payment, intentionally.3[5] Mr Parore, a GST-registered real estate agent, was adjudicated bankrupt on2 April 2009, remaining an "incapacitated person" for GST purposes4 until 10 October2014 when discharged from bankruptcy. He continued to work after adjudication, andto file GST returns with the Commissioner (albeit under his original GST registration,and not that operative since his adjudication on the Official Assignee's standardapplication to cancel and replace the former).[6] In late 2011, on belated receipt of his statement of affairs, the Official Assigneerequired Mr Parore to apply for self-employment status. He did not do so, butcoincidentally ceased filing GST returns. The Commissioner issued defaultassessments for 2012–2017 in relation to Mr Parore's new GST registration, and1 Commissioner of Inland Revenue v Parore [2020] NZDC 16363.2 At [52]–[53], referring to s 147(4)(b) of the Criminal Procedure Act 2011.3 At [5]–[6], and [9].4 Goods and Services Tax Act 1985 (the "GST Act"), s 58.accepted Mr Parore's proposed adjustments outside the bankruptcy period. But theparties remained in dispute about tax obligations during that period: whether they fellon Mr Parore, or on the Official Assignee as his specified agent in terms of s 58 of theGST Act. The dismissed charges relate to the seven six-monthly GST returns due forthe period from return cessation to bankruptcy discharge.[7] The Judge found:5 the situation was entirely unclear. Firstly, Mr Parore obviously thought hewas under a continuing obligation to file GST returns but because he was notreceiving the forms for a manual return previously made by him he adaptedold ones until they ran out. This coincided with his first[,] it seems, interactionwith the OA. From that time, it seems impossible to infer a clear intention toevade the payment of GST, which is what is required to establish the chargesunder consideration.The Judge continued to identify other indicia of Mr Parore's lack of culpable intention— the uncertainty over the application of s 58, Mr Parore's due payment of incometax, and the uncertainty he had received either the Commissioner's notice of his newGST registration or the Official Assignee's standard direction he file a statement ofaffairs on adjudication — to conclude "[w]ithout positive evidence of intention toevade it seems impossible to infer the intention argued for in the face of suchconfusion over obligations."6[8] The Commissioner seeks to argue on appeal the Judge misapplied s 147(4)(b)of the Criminal Procedure Act 2011 (enabling dismissal on ground of no case toanswer, the judge-alone equivalent to s 147(4)(c)'s "as a matter of law, a properlydirected jury could not reasonably convict the defendant"), and disregarded evidenceof Mr Parore's knowledge and intention.7Leave to appeal[9] The Commissioner may seek leave to appeal "on a question of law againsta ruling by the trial court",8 which question must arise "in the determination of the5 At [45].6 At [51].7 Mr Parore brought the s 147 application exclusively on the ground s 58 of the GST Act waseffective to exclude his liability under s 143B(2) of the Tax Administration Act 1994. The Judgecame to no conclusion on s 58's operation. I therefore do not address it.8 Criminal Procedure Act 2011, s 296(2).charge (including, without limitation, the dismissal of the charge under section 147)".9 Plainly, that is the context for the question sought to be raised on appeal: theJudge's decision has resulted in dismissal of the seven charges,10 of which Mr Paroreis deemed acquitted.11[10] The threshold for leave then is if it is to be argued "the Judge made an error oflaw or was plainly wrong in dismissing the charges".12 By "error of law" is meant:13a) a misdirection of law apparent in the decision;b) oversight of a relevant matter or consideration of an irrelevant matter; orc) a factual finding unsupported by any evidence or an omission to draw aninference of fact which is the only reasonably possible one on theevidence.An 'error of law' "may also arise when a decision is plainly wrong".14[11] The proposed appeal necessarily engages a question of law: "[a]t theconclusion of the prosecution's case what has to be decided remains a question of lawonly."15 Although, for Mr Parore, David Weaver seeks to characterise the proposedappeal as an impermissible attack on the Judge's factual findings, that is a prematurecriticism. The Judge's decision itself is of a question of law, which the Commissionerseeks to impugn.[12] As leave nonetheless is required for the appeal, I have residual discretion torefuse it. That residual discretion imposes no burden on any party. I am not particularlyassisted by factors taken into account in considering leave to appeal in other contexts.Here, the Commissioner has no other appeal right, and no countervailing factor is9 Section 296(3).10 See Lyttle v R [2019] NZCA 329 at [32].11 Criminal Procedure Act, s 147(6).12 Solicitor-General v McKay [2020] NZCA 676 at [42].13 R v Cleaver [2020] NZCA 397 at [12], citing R v Taulapapa [2018] NZCA 414 at [17] (citing R vSmyth [2017] NZCA 530 at [8] (citing Brown v R [2015] NZCA 325, (2015) 30 FRNZ 471 at[16])).14 R v Cleaver, above n 13, at [12], citing R v Malu [2017] NZCA 546 at [10(c)] and CommerceCommission v Shukla HC Auckland CRI-2007-404-229, 21 November 2007 at [3].15 Haw Tua Tau v Public Prosecutor [1982] AC 136 (PC) at 151, as cited (obiter) in S v Vector Ltd[2020] NZSC 97 at [125].raised sufficient to deny her challenge. I see no reason to refuse leave. Leave isgranted.Substantive appeal[13] The Judge's decision at the close of the prosecution case is as to "evidentialsufficiency": a 'prima facie case' there is evidence sufficient to justify trial, which isto "be interpreted as consistently as possible across all the contexts in which it isused".16 The decision is:17 whether there is some evidence (not inherently incredible) which, if hewere to accept it as accurate, would establish each essential element in thealleged offence. If such evidence as respects any of those essential elementsis lacking, then, and then only, is he justified in finding 'that no case againstthe accused has been made out'That is to say, if there is evidence capable of supporting the essential elements;particularly where inferences are to be drawn, "[t]he court should not decide on suchan application or submission whether the relevant inference should be drawn".18[14] The question on this appeal thus is if the Judge's conclusions "it seemsimpossible to infer" the requisite intention are as to evidential sufficiency, or evidentialsubstance. The latter would be in error. Unless the evidence is insufficient, a judge isto keep an open mind on its substance until after hearing from counsel on the wholeof the case. The issue under s 147 is "if the evidence is adequate, with the question ofits acceptance being considered on the whole of the case ".19[15] Although put in terms of 'impossibility', the Judge clearly was assessing thesubstance of the evidence. She expressly identified the materiality of the evidence asto Mr Parore's payment of income tax, his continued filing using old forms, his mailing16 S v Vector Ltd, above n 15, at [121]–[122], endorsing R v Flyger [2001] 2 NZLR 721 (CA).17 Haw Tua Tau v Public Prosecutor, above n 15, at 151.18 R v Flyger, above n 16, at [18], endorsing R v Adams HC Auckland T240/91, 8 October 1992 at 4(emphasis in original).19 R v Flyger, above n 16, at [22]. Similarly, in Haw Tua Tau v Public Prosecutor, above n 15, at152:[H]e must call upon the accused to enter upon his defence, and as decider of fact must keep anopen mind as to the accuracy of any of the prosecution's witnesses until the defence hastendered such evidence, if any, by the accused or other witnesses as it may want to call andcounsel on both sides have addressed to the judge such arguments and comments on theevidence as they may wish to advance.and residential addresses, and his contact with the Official Assignee.20 She explained,for example, "[t]he delayed filing is more supportive of these documents not havingbeen received by Mr Parore than of an inference that he was evading obligations insome way."21[16] The Judge thus acknowledged the evidence was capable of supporting theCommissioner's contended inferences, even while she would weight it otherwise. Shedoes not mean the evidence could not support the inferences. Her references to'impossibility' are not literal. Although she ultimately found "there is insufficientevidence to prove the intention to evade, or that non-payment occurred for reasonsother than oversight or confusion",22 that was to draw substantive inferences, ratherthan to find the evidence incapable of supporting them. The Judge's finding of"insufficient evidence" is not a finding as to evidential sufficiency but of evidentialsubstance.[17] The Judge therefore erred in law.Consequences[18] Under s 300(1) of the Criminal Procedure Act, I must determine the appeal by:(a) confirming the ruling appealed against; or(b) doing any of the following if the court considers the ruling is erroneousand, in the case of the person's conviction or acquittal or of a direction bya court to stay the prosecution or to dismiss the charge under section 147,also resulted in a miscarriage of justice:(i) setting aside the conviction and entering an acquittal, if the person hasbeen convicted; or(ii) directing a new trial, in any case; or(c) varying or substituting the sentence or remitting the sentence to thesentencing court with directions, if the decision relates to sentence and thecourt thinks the decision is erroneous; or(d) remitting the matter to the trial court in accordance with the opinion of theappeal court; or(e) making any other order that the court considers justice requires.20 Commissioner of Inland Revenue v Parore, above n 1, at [47]–[50].21 At [50].22 At [52].[19] For the Commissioner, Nick Malarao sought initially I direct a new trial;subsequently, as the Judge "remains seized of the matter", I remit the matter to theJudge for disposition in accordance with my opinion. The latter course is not obviouslyavailable in the circumstances. On the seven charges' dismissal, Mr Parore is deemedacquitted of them,23 meaning the Judge has disposed of those charges. On thosecharges, he no longer "is to be tried"; there is no trial court to which the matter maybe remitted.24 That the balance of the original 13 charges is outstanding is no answer.[20] Because the Judge's ruling was to dismiss the seven charges under s 147, theformer course would require I consider the ruling also resulted in "a miscarriage ofjustice". By analogy with the statutory phrase's earlier definition in connection withappeals against conviction, that means something has occurred in relation to trial tocreate a real risk — a reasonable possibility — against a more favourable outcome forthe Commissioner.25 While not every error will amount to a miscarriage of justice andthe threshold is high,26 the analogy is consistent with s 300's predecessor'srequirement of "substantial wrong or miscarriage of justice": "the appellate court tobe satisfied that the error was one highly material to verdict, so that the integrity ofverdict is undermined by it".27[21] Given the misfiring of Mr Parore's s 147 application (brought on grounds ofs 58's operation),28 and notwithstanding s 105's default streamlined procedure (bywhich neither party may make submissions on the facts or address the evidence), theintegrity of Mr Parore's acquittal is undermined by summary determination of theCommissioner's case. That summary determination put paid to any more favourableoutcome for the Commissioner, such as may have been available either by referenceto s 58 or in considering "the whole of the case".29 The Judge's error resulted ina miscarriage of justice.23 Criminal Procedure Act 2011, s 147(6).24 Section 5, definition of "trial court".25 Section 232(4); Misa v R [2019] NZSC 134 at [38]–[48], citing R v Sungsuwan [2005] NZSC 57,[2006] 1 NZLR 730 at [110], R v Matenga [2009] NZSC 18, [2009] 3 NZLR 145, and Wiley v R[2016] NZCA 28, [2016] 3 NZLR 1.26 Otis v Police [2019] NZCA 231 at [4], citing McAllister v R [2014] NZCA 175, [2014] 2 NZLR764 at [38].27 R v Gwaze [2010] NZSC 52, [2010] 3 NZLR 734 at [61], concerning the repealed s 382 of theCrimes Act 1961.28 See above n 7.29 R v Flyger, above n 16, at [22], and see above n 19.[22] Nonetheless, as "it would be problematic to allow the [Commissioner] a secondgo at presenting a case that was unsuccessful":30 it would make more sense for the matter to be remitted for the DistrictCourt to reconsider its assessment of the evidence as it stands, as there was nochallenge made to the collection of the evidence, only the Judge's conclusions.I can balance those considerations in reliance on s 300(1)(e).Result[23] The appeal is upheld. Under s 300(1)(b)(ii) and (e), I direct a new trial of thedismissed charges — on the prosecution evidence heard by the Judge (Mr Parorehaving elected not to give or call evidence), and either party's submissions (includingon the facts or addressing the evidence as the Judge may allow) — in conjunction withthe Judge's conclusion of trial on the other charges faced by Mr Parore.—Jagose J30 R v Tallentire [2019] NZHC 1749 at [11], citing R v Gao [2015] NZHC 810.