PEPA v MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2019] NZHC 704

PEPA v MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT [2019] NZHC 704 [5 April 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECRI-2019-404-039[2019] NZHC 704BETWEEN FALEAKO PEPAAppellantAND MINISTRY OF BUSINESS, INNOVATIONAND EMPLOYMENTRespondentHearing: 1 April 2019Counsel: J Grainger for AppellantJ T Parry for RespondentJudgment: 5 April 2019JUDGMENT OF BREWER JThis judgment was delivered by me on 5 April 2019 at 3:00 pmRegistrar/Deputy RegistrarSolicitors:Public Defence Service (Auckland) for AppellantMeredith Connell (Auckland) for RespondentIntroduction[1] On 30 January 2019, Judge AC Roberts sentenced Mr Pepa to three months'community detention and 140 hours' community work on two charges of failing tocomply with a notice given under s 261 of the Companies Act 1993 (the Act).1 TheJudge also awarded costs in favour of the Ministry of Business, Innovation andEmployment (the prosecutor) in the sum of $2,000. Mr Pepa appeals the sentence asmanifestly excessive and the costs order as wrong.Background[2] Mr Pepa incorporated GI Construction Ltd on 17 March 2014 as his vehiclefor a construction business. He was the company's sole director and shareholder.[3] The company did not prosper. On 1 September 2017 it was placed intoliquidation. A liquidator was appointed.[4] The Act provides for the appointment of liquidators and specifies their duties,rights and powers. The principal duty of a liquidator is to protect or take possessionof the assets of the company and distribute any surplus assets to those entitled toreceive them.2[5] The Act confers powers to enable the liquidator to perform its duties. One suchpower is to require, by notice in writing, a director or shareholder of the company toattend on the liquidator and deliver any books, records or documents of the companyin their possession or control.3 It is an offence to fail to comply with such a notice.4The maximum penalty is imprisonment for a term not exceeding two years or a finenot exceeding $50,000.5[6] In this case, the liquidator served two notices on Mr Pepa on 9 October 2017.The first notice required Mr Pepa to attend on the liquidator on 6 November 2017 at1 Ministry of Business Innovation and Employment v Pepa [2019] NZDC 2521.2 Companies Act 1993, s 253.3 Section 261.4 Section 261(6A).5 Section 373(3)(a).11:00 am to be examined regarding the business, accounts and affairs of the company.The second notice required Mr Pepa to deliver to the liquidator, at the same time, allbooks, records and other documents or papers in his custody or control in relation tothe company.[7] Mr Pepa did not attend on the liquidator and did not deliver any documents.He was, therefore, in breach of both notices.[8] The liquidator referred the matter to the Companies Office Integrity andEnforcement Team (IET). On 14 November 2017, IET sent Mr Pepa an email settingout the liquidator's allegation that Mr Pepa had breached the two notices.[9] On 22 November 2017, Mr Pepa contacted IET and said he had missed theappointment because he had written the wrong date in his diary. Mr Pepa said hewanted to reschedule the examination. IET advised Mr Pepa to contact the liquidatorto request a new appointment.[10] Mr Pepa did contact the liquidator and a new appointment was made for1 December 2017. Again, Mr Pepa failed to keep the appointment and failed to deliverany documents. The liquidator again complained to IET.[11] On 5 December 2017, IET invited Mr Pepa to attend a voluntary interview atthe Companies Office on 19 December 2017 to discuss why he had failed to complywith the notices. Mr Pepa did not go to the Companies Office. The charges werebrought subsequently.[12] Mr Pepa's first appearance on the charges was on 24 April 2018. He enteredpleas of guilty at a subsequent appearance on 1 June 2018.The appeal[13] The nub of the appeal against sentence is that community detention was outsidethe range of penalties available to Judge Roberts, and the sentence should have beenone of community work. Counsel submits the Judge failed to consider Mr Pepa'spersonal mitigating circumstances, particularly his previous good character. It is alsosubmitted the Judge should have taken into account that Mr Pepa was diagnosed withdepression which contributed to his offending. Further, counsel submits the Judgeerred in apparently deciding a sentence of intensive supervision was not applicable toMr Pepa and instead imposing community detention on top of a sentence ofcommunity work.[14] I will address the appeal against sentence before turning to the appeal againstthe costs order.Appeal against sentence[15] My task on an appeal against sentence is to ascertain whether an error has beenmade such that a different sentence should be imposed.[16] Judge Roberts identified the salient facts of the offending and had particularregard to the pre-sentence report. That report made reference to Mr Pepa currentlyworking for his wife's construction company and relying on his friends to support himin order to provide for his family. He was described as under considerable personalstress because of the events leading up to the collapse of his company. The reportadvised that Mr Pepa's doctor confirmed Mr Pepa had been diagnosed with depressionduring his period of financial hardship. The report writer considered a rehabilitativesentence of intensive supervision should be imposed as well as a sentence ofcommunity detention. These sentences would provide for oversight of Mr Pepa whileallowing him to continue working for his wife's company.[17] Judge Roberts recorded that Mr Grainger, for Mr Pepa, did not accept eithersentence was suitable. Mr Grainger submitted Mr Pepa did not require assistance oroversight. As to community detention, the Judge recorded the submission thatMr Pepa's family issues made it unsuitable.[18] Judge Roberts reviewed a number of cases where prosecutions for the sameoffence had resulted in sentences of community work.[19] Although the Judge did not explicitly say so, I infer from the sentencing noteshe accepted the prosecution's submission that Mr Pepa's case is the most serious of itskind to be brought before the Courts so far. That is because Mr Pepa has failed tomitigate his offending either by interacting with the liquidator or producing anydocuments at all.[20] The Judge concluded:[12] I, too, would be of the view that a prison sentence would indeed beappropriate. I would not pitch as high as the informant's solicitor and morerealistically settle on a start of 12 months' imprisonment. Allowing aconcession for a plea, there would be an end sentence of nine months'imprisonment. That is to indicate the gravity of the offending.[13] This was not a matter of oversight. The defendant has been broughtquite undone with his fatuous explanations for failing to attend; broughtundone by subsequent failures on his part. Notwithstanding the submissionsmade me, notwithstanding the issues that a monitored sentence will create inrelation to this man being able to visit his ill mother in Tonga, I consider theminimum sentence that I could possibly impose here would be one ofcommunity detention.[14] Given that intensive supervision, as counsel submits, is of no greatsignificance or relevance as to a sentence of supervision standalone, I amgoing to impose additionally a sentence of community work.[21] I accept Judge Roberts did not specifically provide a sentence discount forMr Pepa's personal circumstances. He may or may not have taken them into accountin commuting the sentence from imprisonment to community-based detention andwork. Ultimately, I am concerned with whether the final sentence is manifestlyexcessive rather than the route by which the Judge reached it. I will take Mr Pepa'spersonal circumstances into account when I make that assessment.[22] I do not accept Mr Grainger's submission the Judge erred in failing to givecredit for "the fact that [Mr Pepa's] depression contributed towards his offending".There is no evidence that this depression contributed towards the failure to complywith the notices. There is only the report of the doctor's opinion that Mr Pepa sufferedfrom depression as well as a comment in a letter dated 20 September 2018 fromMt Wellington Integrated Health Centre stating that Mr Pepa became seriouslydepressed and was reluctant to seek help.[23] The Courts have recognised that depression can clinically be linked tooffending. But for a discount there must be evidence of causation, and here there isnone.[24] I do not find Judge Roberts erred by imposing a sentence of community workinstead of intensive supervision. I do not accept Mr Grainger's submission the Judgeimposed a punitive sentence because he found a rehabilitative sentence unnecessary.As I read the Judge's notes, he first accepted submissions that a sentence of intensivesupervision was unnecessary and then, looking at the overall offending, judged acombined sentence of community detention and community work to be appropriate.[25] Notwithstanding my findings, I must still step back and assess whether thesentence Judge Roberts imposed was manifestly excessive.[26] First, I can gain little assistance from the sentences handed down in the othercases to which I was referred.6 The fact situations are different, and the reasoning laidout is not really applicable to my task. I have to go back to first principles.[27] The liquidator's role in ensuring the orderly winding up of a failed company'saffairs is an important one. The financial failure of a company can cause greatfinancial damage to a range of people, including creditors. Without the liquidationprocess mandated by the Act there would be considerable scope for financial chaosand unfairness. Parliament has accordingly made failure to comply with a noticeissued by a liquidator pursuant to s 261 of the Act an offence punishable by up to twoyears' imprisonment.[28] Mr Parry for the prosecutor submits that a major aggravating factor is Mr Pepahaving alleged there were debts owed to the company of $370,000 from two entities,Arrow International and DFS.7 It is submitted this is evidence of a tangible detrimentto creditors:6 Ministry of Business, Innovation and Employment v Boakes [2015] NZDC 10750; Prasad vMinistry of Economic Development HC Auckland CRI-2009-404-1, 30 July 2009; and Dallimorev Ministry of Economic Development HC Auckland CRI-20080404-26, 22 July 2008.7 The allegations are contained in an unsworn affidavit filed and served by Mr Pepa in support of asignalled application for discharge without conviction which did not proceed.Had the liquidator known of these alleged debts, they would have been in aposition to investigate them and possibly recoup money for the benefit ofcreditors. The amount allegedly owed to the company is nearly double theamount claimed in the liquidation ($188,149.77).[29] In my view, for offending of this type to have culpability going towards themaximum sentence it would require self-serving or otherwise improper reasons forfailing to comply with a notice. Such reasons could include the desire to concealdamaging information or malice towards creditors or others connected with thecompany. Offending being linked causally to loss to creditors or others because theliquidator is prevented from doing its duty would similarly be aggravating.[30] In this case, Mr Pepa had been through the traumatic and debilitatingexperience of seeing his company fall into financial ruin. The material, particularlythe letter from the Mt Wellington Integrated Health Centre, makes clear he is ahardworking man who felt very badly about what had happened, particularly since heand his family fell into poverty as a result.[31] Mr Pepa became resistant to having anything more to do with the company.He did not go to the first appointment with the liquidator, but he was sufficientlyalarmed by the first contact with IET to respond to it and to make a second appointmentwith the liquidator. In his unsworn affidavit he said he missed the first meeting out oferror and did not go to the rescheduled meeting because he could not find relevantdocuments and did not believe he would be able to help the liquidator. He said(although the liquidator has no record of it) that he did eventually go to the liquidator'spremises on 1 December 2017 but was too late. As to the voluntary meeting, Mr Pepasaid he had recently started his new job and did not want to risk losing it by going tothe meeting.[32] In the round, Mr Pepa was not ill-intentioned but has nonetheless offendeddespite being given every chance to comply with the notices. He has not mitigated hisoffending by voluntarily going to the liquidator and delivering company documents.By his own words, there is the potential for claims to be pursued by the liquidator forthe benefit of creditors.[33] I place this offending as being towards the middle of the sentencing range. Astarting point of 10 to 12 months' imprisonment is indicated.[34] Mr Pepa's personal factors undoubtedly mean the sentence should becommuted to a community-based sentence. Given the failure to take any mitigatingsteps to address his offending through meeting the liquidator and/or providingdocuments, I cannot say it would be outside the sentencing range to impose a sentenceof community detention and additionally community work.[35] I find the sentence of three months' community detention plus 140 hourscommunity work is well within range. The appeal against sentence will be dismissed.Appeal against the costs order[36] Judge Roberts gives no reason for the selection of $2,000 as the amount of acosts order in favour of the Ministry.[37] The Court has discretion under the Costs in Criminal Cases Act 1967 to ordera convicted defendant to pay such costs "as it thinks just and reasonable" towards theprosecution.8 To exercise the discretion the Court must first be satisfied it hasjurisdiction to do so, and that its residual discretion to order payment should beexercised in the particular circumstances.9 This requires taking account of all therelevant circumstances of the case.10[38] The Court of Appeal in Balfour v Balfour considered the likely relevant factorsin making a determination as to whether an order would be just and reasonable "thenature of the charges; the complexity of the trial; the time spent on the case; the conductof the parties; the extent of the success of the prosecution; the sentence imposed; thedefendant's financial position; and whether the defendant was legally aided."118 Section 4.9 Barr v New Zealand Police [2009] NZSC 109, [2010] 2 NZLR 1 at [22]; and Balfour v Balfour[2013] NZCA 429 at [135].10 Balfour v Balfour at [135].11 Balfour v Balfour [2013] NZCA 429 at [135].[39] Mr Pepa is in a parlous financial position and was legally aided. He pleadedguilty to the charges at an early stage. Given the Judge did not lay out his reasoningfor ordering costs, I cannot presume he turned his mind to these features, or any others,before doing so. I find there is no just and reasonable basis for awarding costs againstMr Pepa.[40] If there was a basis for awarding costs, the Costs in Criminal Cases Regulations1987 sets maximum scales of costs that may be ordered to be paid under the Costs inCriminal Cases Act.12 The Court may exceed these maximums only where it issatisfied that a greater payment is desirable due to the special difficulty, complexity,or importance of the case.13 This is not an exceptional case. The maximum availableto be imposed under the regulations would be $621 plus disbursements (which are notparticularised in the Crown's submissions).14 Given Mr Pepa's financial straits, Iwould not consider imposing these costs justified either.Result[41] The appeal against sentence is dismissed. Judge Roberts's sentence isconfirmed.[42] The appeal against the costs order is allowed. Judge Roberts's costs order isquashed. There is no order of costs against Mr Pepa.________________________________Brewer J12 At r 3.13 Costs in Criminal Cases Act 1967, s 13(3).14 By reference to Costs in Criminal Cases Act 1987, sch 1.