HONK BARGES LTD & ORS v R [2019] NZCA 157

HONK BARGES LTD & ORS v R [2019] NZCA 157 [15 May 2019]ORDER PROHIBITING PUBLICATION OF THE NAME, ADDRESS,OCCUPATION OR IDENTIFYING PARTICULARS OF X PURSUANT TOS 200 CRIMINAL PROCEDURE ACT 2011.ORDER PROHIBITING PUBLICATION OF NAME, ADDRESS,OCCUPATION OR IDENTIFYING PARTICULARS OF Y AND Y LTDPURSUANT TO S 202 CRIMINAL PROCEDURE ACT 2011.NOTE: HIGH COURT ORDER IN [2018] NZHC 2094 PROHBITINGPUBLICATION OF ANY REPORT OR ACCOUNT OF ALL OR PART OF THEEVIDENCE MADE IN SUPPORT OF OR IN OPPOSITION TO THEAPPLICATIONS FOR NAME SUPPRESSION REMAINS IN FORCE.IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA620/2018[2019] NZCA 157BETWEEN HONK BARGES LIMITED,HONK MARINE LIMITED ANDDAVID ANDREW TAUBERAppellantsAND THE QUEENRespondentCA683/2018BETWEEN PAUL NIGEL WEBBAppellantAND THE QUEENRespondentHearing: 4-5 March 2019Court: Cooper, Mallon and Wylie JJCounsel: M T Lennard and E J Watt for Appellants in CA620/2018Appellant in CA683/2018 in personJ C Pike QC and J V Angelson for RespondentJudgment: 18 April 2019 at 3 pmReasons: 15 May 2019JUDGMENT OF THE COURTA The appeals against conviction by Honk Barges Ltd, Honk Marine Ltd,Mr Tauber and Mr Webb are dismissed.B The appeal against sentence by Mr Webb is dismissed.C Order prohibiting publication of name, address, occupation or identifyingparticulars of X pursuant to s 200 Criminal Procedure Act 2011.D Order prohibiting publication of name, address, occupation or identifyingparticulars of Y and Y Ltd pursuant to s 202 Criminal Procedure Act 2011.____________________________________________________________________REASONS OF THE COURT(Given by Wylie J)Table of ContentsIntroduction [2]Overview [5]The High Court's decision [12]The charges and the arguments presented [13]The parties [16]The ASFL loans [17]Was false information provided to the IRD? [18]a) S1 and S2 — ASFL loan of $3.625 million [18]b) S3 — ASFL loan of $3 million [39]c) JU — loan of $2.65 million [51]Knowledge and intention — verdicts [65]The appeals [67]Analysis [72]HML's, HBL's and Mr Tauber's appeal [72]Was it necessary for the Crown to prove sham beyond reasonable doubt? [72]Was it necessary for the Crown to prove that Mr Lau, LCL and PFDC werenominees? [95]Peters J's analysis of the evidence [105]Were HAL and HBL associated? [145]Mr Webb's appeal [151]Result [155]GLOSSARY (in alphabetical order)AMS Australian Mooring Services LtdASFL Asian Syndicate Finance LtdBRML Basin Ridge Management LtdCDC Pty Coastal Dredging and Construction Pty LtdDalmarine Dalmarine Pty LtdHAL Honk Aviation LtdHBL Honk Barges LtdHML Honk Marine LtdIRD Inland Revenue DepartmentJU Jack Up — a floating hydraulic platformLCL Lau Contracting LtdMarine Group HBL, HML, WML and Coastal Dredging and ConstructionLtdPFDC Panama Fishing and Dredging CorporationPFDL Panama Fishing and Dredging LtdRavestein Ravestein BVS1 Soundcem 1, a motorised split hopper bargeS2 Soundcem 2, a motorised split hopper bargeS3 Soundcem 3, a motorised split hopper bargeWestpac Westpac Banking Corporation LtdWML Westpark Marina LtdMr X Mr X has name suppressionMr Y Mr Y has name suppression[1] A results judgment in this appeal was given on 18 April 2019.1 We now set outour reasons for that judgment.1 Honk Barges Ltd v R [2019] NZCA 125.Introduction[2] On 23 July 2018, after a Judge-alone trial in the High Court at Auckland,Peters J found:2(a) HML guilty of four charges of tax evasion;(b) HBL guilty of five charges of tax evasion;(c) Mr Tauber guilty of each of the nine charges — eight as a principaloffender along with either HML or HBL, and one as a party to offendingby HBL;(d) Mr Webb not guilty of six of the charges, but guilty of three, all as aparty — two together with HML, Mr Tauber and a co-defendant, Mr X,and one together with HBL, Mr Tauber and Mr X; and(e) Mr X not guilty of three of the charges, but guilty, as a party, of onecharge together with HML and Mr Tauber, of two charges together withHML, Mr Tauber and Mr Webb, of another two charges together withHBL and Mr Tauber, and of one charge together with HBL, Mr Tauberand Mr Webb.[3] On 11 October 2018, HML was fined $100,000, HBL $125,000, Mr Tauberwas sentenced to three years and three months' imprisonment, Mr Webb tonine months' home detention and 400 hours' community work and Mr X to12 months' home detention and 400 hours' community work.3[4] HML, HBL and Mr Tauber appeal their convictions. They initially appealedthe sentences imposed on them as well, but that appeal has since been abandoned.Mr Webb appeals both his convictions and the sentence imposed on him. There is noappeal by Mr X.2 The verdicts were given and the convictions entered on 23 July 2018. The reasons for the verdictswere delivered on 27 July 2018 — R v Honk Barges Ltd [2018] NZHC 1890.3 R v Honk Barges Ltd [2018] NZHC 2663.Overview[5] All of the charges were laid pursuant to ss 143B(1)(c) and (f) and 148(1) ofthe Tax Administration Act 1994.[6] Charges 1–4 arose because of deductions that HML claimed in each of itsincome tax returns filed with the IRD for the years ended 31 March 2007 through to31 March 2010 (inclusive).[7] Deductions were claimed for interest accrued in HML's accounts on loans saidto have been made to HML by ASFL. The loans were of $3.625 million in July 2006,$3 million in September 2007 and $2.65 million in September 2008. Charge 1concerned the interest deduction claimed on the initial loan of $3.625 million in the2007 return, charge 2 the interest deductions claimed on that loan and on the furtherloan of $3 million in the 2008 return, and charges 3 and 4, the interest deductionsclaimed on all three loans in the 2009 and 2010 returns respectively.[8] Charges 5–9 concerned deductions that HBL claimed in each of its income taxreturns in the years ended 31 March 2007 through to 31 March 2011 (inclusive) fordepreciation of motorised split hopper barges known respectively S1, S2 and S3(together "the barges").[9] In its tax return for the year ended 31 March 2007, HBL claimed depreciationon S1 and S2. Both had been acquired in the course of the same transaction duringthat tax year. S3 was acquired in the year ended 31 March 2008 and HBL claimeddepreciation for all three barges in that year and subsequently.[10] Another barge or floating platform, referred to as JU because it could be"jacked up" above the surface of the sea, was purchased in 2008. The Judge foundthat the September 2008 ASFL loan was linked to the acquisition of JU but no issueas to its depreciation arose as it was purchased by an Australian subsidiary of HML,CDC Pty, and JU was not the subject of any depreciation claim by HBL.44 R v Honk Barges Ltd, above n 2, at [17].[11] The various transactions which resulted in the deductions claimed were notparticularly sophisticated. They were summarised, in simplified form, by the Judgeas follows:[27] The deductions claimed were in respect of three separate transactionswhich followed a similar format [28] Mr Webb would negotiate to purchase an asset for $x from an arm'slength third party [29] The sale from the third party would be made to an intermediarypurchaser advised to the third party. That intermediary was generally"fronted" by a Mr Lau [30] HBL or, in the case of [JU], CDC Pty, would agree in writing topurchase the asset from the intermediary at a price much greater than $x, say$7x in the case of the barges. [JU] was more modest.[31] ASFL would make a loan to HML, on the face of it tied to theacquisition of the asset [from the intermediary]. HML would lend the fundsto HBL or CDC Pty who in turn would pay the purchase price ostensibly dueto the intermediary or at the intermediary's direction. Those funds would thenbe transferred [back] to ASFL.[32] HBL would depreciate the asset at the purchase price stated in theagreement with the intermediary, and HML would claim a deduction ofinterest on ASFL's loan.The High Court's decision[12] Many of the facts are not in dispute, the argument being rather about theinferences to be drawn. We have therefore recorded the Judge's factual findingsrelatively fully.The charges and the arguments presented[13] The Judge began by setting out the sections under which the charges were laid.She summarised the elements which the Crown was required to prove, both as againsta principal offender and as against a party.5 The Judge then gave a broad overview ofthe transactions the subject of the charges — much as noted above. She alsosummarised the principal arguments advanced at the trial as follows:6[33] The Crown's case is that the deductions claimed were false becausethe funds paid to the intermediary were not to purchase the asset(s) but rather5 At [5]–[7].6 At [33]–[34].comprised the original purchase price of $x and a sum to repay the loan thatASFL had only just made to HML. the Crown says the cost of the asset toHBL was $x, HML did not incur interest on ASFL's loan after the date ofrepayment, and the claims to the deductions in the returns were false.[34] The defendants submitted that the Crown has not proved, and cannotprove, beyond reasonable doubt that the claims to the deductions were false.Rather, the defendants submitted that it is clear on the evidence that thetransactions that took place were in accordance with, and in satisfaction of,the terms of the written agreements between the parties, hence the deductionswere properly claimed. In a nutshell the defendants' case, and particularly thecompanies' and Mr Tauber's, was that HML and HBL were always short offunds, that [Mr] Y would step in and purchase the assets that they wished tobuy, and that [Mr] Y would only part with those assets for a very substantialincrease in price and on condition he lend the finance, these being terms towhich they would have no option but to agree. [14] The Judge recorded submissions — in particular from Mr Lennard, whoappeared both at the trial and before us for HML, HBL and Mr Tauber — to the effectthat the Crown could not prove the offending unless it also proved that the agreementspursuant to which HBL and CDC Pty purported to acquire the assets from the Lauconnected intermediaries were shams.7 The Judge focused on the sections underwhich the charges were laid and expressed the view that whether the returns were falsedepended largely on the payments made and their purpose.8 She considered that, ifshe was sure on the evidence that the charges were proved, issues of sham did notarise. She said that the agreements between the parties were evidence, but notdeterminative, of the facts. The Judge did, however, go on to say that, while she didnot find it necessary to determine whether any particular agreements were shams, therewere compelling reasons to "argue" that the agreements, particularly in relation to thetransactions regarding S3 and JU, were shams.9[15] The Judge also noted that the Crown relied on s YB 21 of the Income Tax Act2007 (and the predecessor provision in the 2004 legislation) and asserted that Mr Lauat all times acted as a nominee for the defendant companies.10 It was the Crown's casethat s YB 21 meant that Mr Lau should be "looked through", or ignored, for taxpurposes. The Judge considered that she did not need to consider this issue either,given the view she took of the evidence, but again noted that there were compelling7 At [37].8 At [38].9 At [40].10 At [41].arguments that the intermediary purchasers on each transaction were acting asnominees, because their role was to hold the assets pending their onward transfer.11The parties[16] The Judge discussed the various parties and other relevant entities. She foundthat:12(a) Mr Tauber was previously a partner in Ernst & Young, specialising ingiving tax advice. He established the Honk group of companies.(b) Mr Webb was Mr Tauber's business partner.(c) Mr X was a chartered accountant employed by Mr Y and other entitiesassociated with Mr Y. Mr X and Mr Tauber became acquainted throughtheir connection with Mr Y. Mr X did not have day to day involvementin the affairs of any of the Honk companies. He was, however, the taxagent for HML, HBL and WML. He prepared their financialstatements.(d) HML was incorporated by Mr Tauber in mid-2003 to acquire all theshares in WML (the owner of the Westpark Marina in West Auckland).HML funded the purchase by borrowing $7.2 million from Westpac and$5 million from Mr Y. The shares in HML were held by entitiesassociated with Mr Tauber and Mr X. Although Mr Y was not ashareholder, it was expected that he might become one, by virtue of theterms on which the $5 million loan had been made. The Judge acceptedthat given that likelihood, and the size of his investment, Mr Y had avery real interest in HML's financial affairs.(e) HBL was initially a subsidiary of WML. HML became the owner ofthe shares in HBL in April 2007.11 At [41].12 At [68]–[94].(f) HML, WML, HBL and a subsidiary of HBL's (Coastal Dredging andConstruction Ltd) were associated persons. WML, HBL and CoastalDredging and Construction Ltd were trading and were profitable.HML always recorded a loss. The Judge referred to these fourcompanies jointly as the "marine group".(g) Mr Tauber and Mr X were directors of WML, HML and HBL at allmaterial times. Mr X's role was to protect Mr Y's interests. Mr Webbwas a director of WML and HBL from 30 May 2007 and of HML from26 February 2008. Mr X resigned his directorships in December 2010and Mr Webb in July 2013.(h) Mr Y was a wealthy New Zealander living offshore.13 He was not aNew Zealand resident. He was Mr Tauber's client and Mr X'semployer.14(i) ASFL, which made the loans to HML, was an entity controlled byMr Y. It was incorporated in the British Virgin Islands in January 2004as part of a wider structure that Mr Tauber had recommended to Mr Yfor tax and estate planning purposes. It had a variety of businessinterests, including its interests in HML.(j) Another company associated with one of the impugned transactions,PFDC, was also registered in the British Virgin Islands. It was alsoassociated with Mr Y.(k) Mr Lau initially worked for Mr Tauber at Ernst & Young, but he wasbased in Hong Kong at all relevant times. The Judge considered that,on the evidence, Mr Lau did what he was asked to do, when he wasasked to do it. The Judge also noted that Mr Lau wore a number ofhats. By way of example, he was the settlor of a trust that formed part13 At [29].14 We were told from the bar that Mr Y was interviewed by the IRD in relation to the matters in issueat the trial but that he died in 2015 prior to the trial commencing. The transcripts of the interviewswere not adduced in evidence before the Judge. Nor have we seen them.of a structure that Mr Tauber devised for Mr Y. Banking documentsrecorded that Mr Lau was a director and shareholder of PFDC.Further, Mr Lau had an agreement with another company owned orcontrolled by Mr Tauber — BRML — to provide business expertise tothat company. The Judge noted that one of the issues at trial waswhether Mr Lau acted at Mr Y's direction or at Mr Tauber's direction.She was satisfied that Mr Lau acted at Mr Tauber's (and Mr Webb's)direction, although probably not exclusively. The Judge acknowledgedthat Mr Lau executed various documents on behalf of some of Mr Y'sentities, but noted that there was no evidence of any directcommunications between Mr Lau and Mr Y.(l) Mr Leith worked for Mr Tauber and Mr Webb from 2004 until the endof 2007, and even thereafter had some involvement with thetransactions in issue.15 He gave evidence for the Crown. The Judgeaccepted that he was sometimes confused and that he had limited recallof relevant details.16 She nevertheless considered that he gave hisevidence honestly and that it was helpful to explain some of thedocuments and to put matters in context.17The ASFL loans[17] The Judge then turned to discuss the ASFL loans. She found as follows:18(a) A loan of $5 million was made by ASFL to HML to enable it to purchaseWML. This was initially recorded in an agreement between Pak YauAssociates Ltd (a nominee for Mr Y that Mr Tauber had arranged) aslender, HML as borrower and Mr Tauber as guarantor. The partiessubsequently redocumented the agreement after ASFL wasincorporated, largely on the same terms. Although the fresh agreementwas dated 30 September 2003, there was no evidence as to when it was15 At [58].16 At [60] and [62].17 At [60]–[63].18 At [95]–[108].in fact executed. The agreement must have been backdated (in commonwith a number of other documents at issue in the trial) because ASFLwas not incorporated until January 2004. Under the fresh agreement,the $5 million loan was to be repaid on 30 September 2008 and HMLwas to pay interest monthly on the principal. HML was also requiredto pay "mezzanine" fees and interest, fixed at 10 per cent, calculatedand compounding monthly. HML did not pay these mezzanine sums.Rather, they were accrued and deductions were claimed.Under the agreement, HML had the option to convert the mezzanineobligations into share capital. It was also a term of the agreement thatHML and its subsidiaries were prohibited from further borrowingwithout Mr Y's consent. The Judge noted, however, that HML andHBL did borrow large sums from Westpac and that there was noevidence that they ever requested Mr Y's consent in advance.(b) The advance of $3.625 million from ASFL to HML in respect of S1 andS2 was recorded in a document dated 1 July 2006, but again, on theevidence, it could not have been executed on that day. The agreementprovided that HML was to pay interest on the advance at 15 per centcompounding monthly.(c) There was a similar loan agreement recording the advance of $3 millionfrom ASFL to HML made in September 2007 but dated 1 August 2007in respect of S3.(d) There was no separate documentation put in place in respect of the loanof $2.65 million from ASFL to HML made in September 2008 inrespect of JU.(e) In September 2008, the parties executed a fresh agreement purportingto encompass all advances, which was to supersede all prioragreements. The fresh agreement conferred on HML the same optionpermitting it to convert accrued interest on the loans into equity.Was false information provided to the IRD?a) S1 and S2 — ASFL loan of $3.625 million19[18] The Westpark Marina was affected by siltation and, as a result, Mr Webb andMr Leith, who was employed to manage various Honk entities, discussed how theissue could best be resolved. They decided to explore the possibility of purchasingdredging equipment.[19] In mid-October 2005, Mr Webb went to Fremantle and negotiated the purchaseof S1 and S2 from their Australian owner, Dalmarine. The sale was evidenced by billsof sale. There were two sets, both dated 16 October 2005. They recorded that thepurchase price was AUD 220,000 per barge. Mr Webb executed both sets ofdocuments. The buyer was required to pay AUD 10,000 per barge as a deposit andthe balance of AUD 210,000 per barge on 26 October 2005.[20] The AUD 10,000 per barge deposits (total AUD 20,000) were paid byMr Tauber's company, BRML.[21] The buyer on the first set of the bills of sale was shown as Lau Contractors Ltd.The registered office given was the same address that HML and another Honk entity— HAL — used as their registered offices. The second set of bills of sale said that thepurchaser was LCL at an address in Hong Kong that seems to have been associatedwith ASFL. The Judge recorded that there was no explanation in the evidence for thedifference in the contracting entities, and noted that, to compound matters, neither LauContractors Ltd nor LCL existed on 16 October 2005. The Judge noted that Mr Laudid eventually incorporate a company called Top Believe Holdings Ltd in the BritishVirgin Islands in July 2008, which later became LCL at Mr Webb's suggestion.[22] The Judge accepted the Crown's submission that there was no evidence thatanyone other than "Honk people" were involved in arranging the purchases fromDalmarine. In particular, she noted that there was no evidence of any communications19 At [109]–[180].with Mr Lau or Mr Y about the acquisitions, the prices to be paid, the transfer of fundsor the settlement date.[23] The Judge found that on 26 October 2005, Dalmarine sent an invoice toMr Webb for the balance of the purchase price owing for S1 and S2 — AUD 420,000.Later that day another company called AMS, which seemed to have had an ownershipinterest in Dalmarine, gave Mr Webb instructions as to how the purchase price was tobe broken down and directing where each payment was to be made. Mr Webb copiedthe emails from AMS to Mr X, and suggested that "Lau arrange to pay the 2 AUDtransfers by Friday", together with part of the moneys required to be spent to make S1and S2 seaworthy and tow them to New Zealand. The Judge considered that by "Lau",Mr Webb meant Mr Y. Mr Webb also said that HAL would pay that portion of thepurchase price which AMS required to be paid to a New Zealand account, and thebalance of the monies required to make S1 and S2 seaworthy and to have them towedto New Zealand.[24] The Judge noted that there was no (other) evidence before her as to how HALcame to be involved in the transaction.[25] The Judge then turned to Mr X's reply to Mr Webb. Mr X stated that he hadasked "Hong Kong" (which the Judge again considered to be a reference to Mr Y) topay what was required, and that once all costs were known, it would be good to sendLau (Mr Y) a settlement statement showing how the purchase had been funded.Mr Webb said in response that he agreed, that he would sort out the security withMr X, and that things would need to be "a little more locked down", so that Mr Xcould be confident that "we" (who the Judge considered to be the Honk parties) "havesome hurt in".[26] The Judge found that on 28 October 2005, Mr Y paid AUD 220,000 andAUD 110,000 in accordance with AMS's instructions, and that Mr Leith, atMr Webb's instigation, arranged for WML to pay the New Zealand equivalent ofAUD 90,000 (the balance owing), also in accordance with AMS's instructions.The Judge considered that at this point, legal title passed to Mr Lau, and that, on apro rata basis, Mr Y had paid 75 per cent of the purchase price for S1 and S2, andBRML/WML had paid the other 25 per cent.[27] The Crown was asserting that Mr Lau was holding S1 and S2 forthe marine group,20 and that Mr Y's AUD 330,000 payment for S1 and S2 was a loanto one or more of the marine group companies. HML, HBL and Mr Tauber werearguing that this was not proved to the requisite standard, and that the only view thatcould be taken of the evidence was that Mr Lau was holding S1 and S2 for Mr Y.[28] The Judge concluded that Mr Lau was holding S1 and S2 for the marine groupand that the monies paid by Mr Y were an advance. The Judge relied on a number ofpieces of evidence in reaching this conclusion, namely:(a) Mr Webb, both before and after the transaction, made variousstatements to third parties to the effect that "we" have purchased S1 andS2.(b) There was no evidence, with the exception of one statement, of Mr Ytaking any interest in S1 and S2.(c) The marine group spent substantial sums on S1 and S2 in making themseaworthy and in having them towed to Auckland.(d) Events after the bills of sale demonstrated that Mr Webb at leastbelieved that Mr Lau was holding S1 and S2 for the marine group, andfurther that the purchase price was AUD 220,000 per barge.(e) HAL leased S1 and S2 to a third party.(f) It was not until some time thereafter that agreements were executed toeffect a transfer of S1 and S2 from Mr Lau (trading as Lau Contracting)to HAL, and then from HAL to HBL.20 WML, HML, HBL and Coastal Dredging and Construction Ltd — see above at [16(f)].[29] The Judge then turned to the acquisition of S1 and S2 by HBL. She noted thatin mid-June 2006, Mr Lau, trading as Lau Contracting, agreed to sell S1 and S2 toHAL, and that HAL agreed to sell S1 and S2 to HBL. The purchase price in each casewas $2 million per barge.[30] The Judge acknowledged that the two barges had been valued byFerrier Hodgson at $3.25 million each, which was based on certain assumptions as tothe cashflow that each could generate. The Judge considered that the valuation maywell have been correct and that there was no dispute that the barges were profitableassets. She noted that the valuation was provided to Westpac, which then offered HBLa facility of $2 million which HBL drew down on 30 June 2006. The Judge noted thevaluation, and a submission advanced on behalf of HML, HBL and Mr Tauber to theeffect that the evidence suggested that the vendor of S1 and S2, Dalmarine, had itselfacquired S1 and S2 from a third party for only AUD 30,000 per barge. The Judgeaccepted these points, but nevertheless observed that the purchase price fromLau Contracting to HAL, and from HAL to HBL, was "a very hefty and substantialincrease in the price",21 in the order of 700 per cent. She also noted that between themBRML and WML had already paid 25 per cent of the purchase price.[31] The Judge then turned to the cashflow. She noted that no money was paid toHAL and that, much later, after the transactions were completed,Maritime New Zealand was told that HAL had assigned its contract to HBL, and thatHBL had "gross settled" the purchase.[32] The payments that the parties made were summarised by the Judge asfollows:2221 At [151].22 At [154] (footnotes omitted).(a) 30.06.06 Westpac HBL(b) 07.07.06 Mr Y ASFL(c) 11.07.06 HBL PFDC[23](d) ASFL HML(e) 12.07.06 HML HBL(f) PFDC ASFL[24](g) 13.07.06 ASFL HML(h) HBL PFDC(i) 14.07.06 HML Westpac25(j) 20.07.06 PFDC ASFL[33] The Judge summarised the Crown case — namely that the total of $4 millionthat HBL paid to PFDC, Mr Y's company, on 11 July 2016 and on 13 July 2016, wasnot to pay the purchase price under the heads of agreement, but rather was to repayASFL's advances to HML totalling $3.625 million, as well as the AUD 330,000,(together with interest), that Mr Y had paid Dalmarine on 28 October 2005. It wasthe appellants' case that this had not been proved to the requisite standard, and that theflow of funds was as provided for in the heads of agreement between Mr Lau and HALand between HAL and HBL.23 It is not clear how PFDC became involved. Mr Lennard from the bar asserted that "[t]he on-saleby Lau Contracting was completed by PFDC" without further explanation.24 The Judge found that only Mr Y was authorised to give instructions on PFDC's account, and thatthe relevant PFDC bank statement for the account recorded that the funds were transferred toASFL on Mr Y's instruction.25 To repay an existing short-term facility to HML granted in April 2006.$2 m$2.825 m$1 m$2.825 m$2.825 m$800,000$800,000$3 m$600,000$3.2 m[34] The Judge considered that key pieces of evidence in relation to this issue werea fax and a wiring diagram and notes which Mr X sent to Mr Tauber on 10 July 2006.These were set out by the Judge as follows:[158] Andrew,The first 2.825m is on its way down from Hong Kong to HML. Wewill need to do several internal transfers in NZ but first will send 4.0mup to PFDC, and another 800k will come down.All up HML will receive 3.625m in new loans down to NZ whichneeds to be added to the original 5m & will accrue interest at themezzanine rate?Please give me a call to discuss the diagram & also who & how we goabout making all the transfers, etc.[159] The wiring diagram, and [Mr] X's notes, are as follows:Process:- ASFL sends down 2.825 to Honk Marine as existing lender, whoadvances direct to Honk Barges – to top up 2m needed re purchaseprice, plus 500k to repay to Honk re delivery plus 200k to Westpark redelivery etc & retain 130k for repairs and other expenses (Note: HBLhave already paid WML 200k & Honk 250).- HBL pays purchase price to PFDC at 4m, original purchase priceplus interest repaid & balance of 3.625m lent down to HBL & HML.- HML uses 800k to repay Westpac 600k loan & puts balance of 200k(plus 50k repayment ex Honk) to WML. WML ends up with loanrepaid, GST funded & extra 250k = 1,050k injection.[35] The Crown focused on the payments shown by the two arrows from PFDC toASFL referring to "3,625,000" and "375,000 (355 + 20K i)" and the second note underthe heading "Process". It was the Crown's case that these references showed that the$4 million from HBL was applied to repay the monies outlaid by Mr Y/ASFL.For their part, HML, HBL and Mr Tauber disputed the Crown's construction of Mr X'swiring diagram and the note. They submitted that the diagram categorised HBL'spayment to PFDC as "4,000,000 purchase" and that Mr X had referred in the diagramand in the fax to the funds from ASFL as "new loans". It was argued that what PFDCdid with the money it received, and whether and why it transferred those funds toASFL, was a matter between PFDC and ASFL and of no concern to HML or HBL.[36] The Judge considered that the PFDC/ASFL arrows on the wiring diagram, andMr X's second note under the heading "Process" as to the purpose of the $4 millionpayment, were some evidence supporting the Crown's case. She did not, however,consider that these matters were conclusive.26[37] The Judge considered that another important piece of evidence was an emailfrom Mr X to Mr Tauber dated 11 July 2006. That email and the Judge's observationsabout it were as follows:[171] Andrew [Tauber]Revised your spreadsheet and did a rough reconciliation of where realcash has gone. Note that real costs re barges to get them here andoperational is 1.25m to date.[172] The $1.25 million to which [Mr] X referred is broken down on theattached, revised spreadsheet, which is headed "Bargescashflow".The relevant part reads:26 At [169].34 Reconciliation re Cashflows:35 Receipt ex Westpac 2,000,00036 Repayment ex Honk from 600k temp loan 50,00037 2,050,00038 Lau purchase price 375,00039 Honk re tow sundries 499,00040 Westpark repayment (used for GST) 200,00041 Honk Barges – bank fees, legals, sundries 25,00042 Honk Barges – Total Marine refurbishment 150,00043 Westpac temp loan repayment 600,00044 1,849,000[173] The costs in lines 38 to 42 sum to the $1.25 million to which [Mr] Xreferred. They plainly refer to the purchase price of the [S1 and S2] barges(or possibly a 75 per cent share) as being $375,000, and all costs of acquisitionand mobilisation being met from Westpac's advance of $2 million.[174] Another version of the spreadsheet adjusts the costs to a total of$1.325 million. The difference lies in the AU$90,000 WML paid to Dalmarineon 28 October 2005 and BRML's deposit, with some minor adjustments to theother sums.[175] Whatever the exact amount, however, it is clear that [Mr] X did notconsider that the purchase price of the [S1 and S2] barges to HBL was $4million and he informed Mr Tauber of this by his email and spreadsheet.(Footnotes omitted.)[38] The Judge concluded as follows:[177] I think the significance to be attached to [Mr] X's email andspreadsheet is as the Crown contends. [Mr] X was telling his fellowaccountant, Mr Tauber, that the real costs of acquiring S1 and S2 were$1.25 million. Those real costs did not include paying a purchase price of$4 million, and if the $4 million was not paid to PFDC on account of thepurchase price of the barges, then the only possible explanation is that it waspaid to repay Y's initial outlay and ASFL's recent loan to HML. [178] [Mr] X's wiring diagram and the notes to which I have referred;[Mr] X's reference the next day to the "real costs" of $1.25 million and hisbreakdown of those costs showing the $375,000 paid as "Lau purchase price";and the statements which Mr Webb made that the cost of the barges was"AU$220,000 each", are all compelling evidence in favour of the Crown case.Taking them into account, I am sure that the cost of S1 and S2 to HBL was not$4 million but AU$440,000 and that ASFL's loan of $3.625 million was repaidby 20 July 2006. It follows that I find that the claim to the deductionsaddressed by charges 1 to 5 were false.b) S3 — ASFL loan of $3 million27[39] HBL acquired S3 in the year ending 31 March 2008. Its claim for depreciationon S3 was made on the basis that its cost to HBL was $3,250,000. It was the Crown'scase that the cost of S3 to HBL was AUD 300,000, and that HBL's claim fordepreciation was accordingly false.[40] The Judge found that Mr Webb negotiated the sale/purchase of S3 fromDalmarine for AUD 300,000. Dalmarine was initially told that PFDL (assumed by allto be the same company as PFDC) would be the buyer. An agreement was then enteredinto between PFDL and HBL, by which HBL was to buy S3 for $3,250,000. Mr Webbexecuted this agreement on behalf of HBL. Mr Webb sent the agreement to Mr Tauberand Mr X, stating "we" had agreed with Lau to purchase the additional barge — S3.Mr Webb asked Mr Tauber to have Mr Lau execute the agreement. Mr Webb was alsoin communication with another entity which had assisted in the acquisition of S1 andS2. He told that entity that LCL (which still had not been incorporated) would bepurchasing S3. He asked the third party entity to prepare the release of a charge overS3. On 30 July 2007, Mr Webb executed an agreement for a towing company to haveS3 towed to Auckland, this time in the name of HBL. Subsequently it seems to havebeen decided that PFDL would be substituted as the purchaser.[41] The Judge concluded that all these steps were taken well before there was anyevidence that Mr Lau had been consulted about the purchase.28 She found that it wasonly on 30 July 2007 that Mr Tauber informed Mr Lau of what had occurred. At thesame time, Mr Tauber instructed Mr Lau what he was to do with the funds whichostensibly were to be PFDL's money.[42] The Judge also found the marine group had sufficient funding on hand for theacquisition, and that given this, there was no satisfactory explanation as to why HBLdid not just purchase S3 from Dalmarine itself.2927 At [181]–[224].28 At [190].29 At [197].[43] The Judge found that on 7 August 2007, HML transferred $300,000 toMr Lau's personal bank account in Hong Kong. HML drew those funds from itsexisting facility with Westpac. Two days later, WML paid Mr Lau a furtherAUD 10,000 — probably as his fee for assisting with the transaction.On 23 August 2007, Mr Tauber asked Mr Lau to transfer the $300,000 to an accountnominated by AMS on behalf of Dalmarine. Mr Lau did so. The invoice for thepurchase price was addressed to Honk Group Ltd, but there was still some confusionas to who the purchaser would be. The Judge considered that Mr Webb arranged theacquisition of S3 from Dalmarine, that Dalmarine understood that a company withwhich Mr Webb was associated would be buying the barge and that HML or HBL hadsufficient funds on hand or available to them to pay the purchase price but did not, andthat Mr Lau simply complied with the instructions he was given.30[44] Heads of agreement were entered into between PFDL and HBL and also dated7 August 2007. The heads of agreement provided for the sale of S3 by PFDL to HBLat $3.25 million, and for PFDL to give HBL possession of S3 that same day. The Judgenoted that this could not have been possible, as Dalmarine still had title at that date,and because S3 was still in Fremantle.31[45] The following payments were made:3230 At [203].31 At [205].32 At [212].03.09.07 ASFL HML04.09.07 HML HBL07.09.07 HBL PFDC07.09.07 HML ASFL13.09.07 PFDC ASFL[46] The Judge concluded that ASFL's advance to HML had to be treated as aloan.33 She considered that this was the only construction that could be placed on theadvance, given that it could not have been intended as a gift.[47] Again, the Crown relied on wiring diagrams, one prepared by Mr Tauber andthe other by Mr X, to prove that the payments from HBL to PFDC and from HML toASFL were intended to repay the loan to HML from ASFL. The Judge set out Mr X'sdiagram as follows:3433 At [213].34 At [216].$3 m$2.9 m$2,900,845$104,000$2,902,477.03[48] "AL" is Mr Lau.[49] The Judge took the following from the diagram:35(a) HML put Mr Lau in funds to pay Dalmarine AUD 300,000.(b) HBL was to pay PFDC $2,900,845.The Judge considered that this latter payment reflected the claimed purchase price ofS3 of $3,250,000, less the New Zealand dollar equivalent of the AUD 300,000 paid toMr Lau by HML, and the NZ dollar equivalent of what was said to be Mr Lau's fee,$11,330, paid by WML.[50] The Judge concluded as follows:[222] As a result of the transfer from PFDC to ASFL and HML's $104,000to ASFL, ASFL received $3,004,845 which the Crown calculates to be the $3million principal plus interest for four or five days at 14.7 per cent.[223] The question for me is whether I am sure that in the circumstances,and on the evidence to which I have referred, HBL's and HML's payments toPFDC and ASFL respectively were intended to repay ASFL's loan of $3million and that the purchase price for S3 was AU$300,000. In particular, Imust be sure that the Crown has excluded the possibility that the paymentsconstituted the purchase price pursuant to the agreement between PFDL andHBL.[224] I am sure that the purpose of the payments to which I have referred isas the Crown alleged. There can be no other construction of what occurred.It is simply implausible to suggest that HBL would agree to pay $3.25 millionfor an asset that it could acquire for AU$300,000. I am satisfied the claims tothe deductions were false. The consequence is that all information suppliedin HBL's subsequent returns was false.c) JU — loan of $2.65 million36[51] The Judge found that the deductions for interest that HML claimed in its returnsfor the years ended 31 March 2009 and 2010 included interest on an advance said tohave been made by ASFL to HML in September 2008 of $2.65 million.35 At [219]–[220].36 At [225]–[269].[52] JU was purchased in mid-2008 from an entity known as Ravestein. It agreedto sell JU to LCL for €2.5 million — approximately NZD 5,500,000 — in mid-2008.[53] The Judge found that Mr Webb located JU after making enquiries from aship broker. Mr Webb went to Holland in early July 2008 to meet representatives ofRavestein and the ship broker. Mr Webb undertook all the negotiations withRavestein. He agreed the purchase price and that it would be paid by instalments of€50,000, €450,000 and the final €2 million on completion. It was Mr Webb whoadvised the ship broker who was to be recorded as the buyer on the contract and onthe invoices issued for the instalments of the purchase price.[54] Ravestein invoiced the Honk group for the first €50,000 payment on 11 July2008. Mr Webb, however, asked Ravestein to address the invoice to LCL. He alsoasked Mr X and Mr Leith to arrange payment of the invoice. Mr Webb also madearrangements to have JU shipped to Perth.[55] The final form of the contract for sale was sent to Mr Webb on 17 July 2008.Top Believe Holdings Ltd was shown as the purchaser, this being the company whichMr Lau had incorporated on 2 July 2008. Mr Lau later changed the name of thiscompany to LCL at Mr Webb's suggestion. Mr Webb emailed the contract to Mr Lau,copying in Mr X, also on 17 July 2008. He asked Mr Lau to arrange to have thecontract executed, and to send it back to him by email. Once the contract had beensigned, the second instalment of €450,000 was invoiced. HBL paid that sum toRavestein on 11 August 2008.[56] After she had reviewed all the emails and other documentation, the Judgeconcluded that LCL was the purchaser in name only. She noted that it paid none ofthe instalments due on account of the purchase price, and that there was no evidencethat it had any communications with the vendor.37[57] Also in July 2008, Mr Webb sent emails to Mr X and Mr Leith, suggesting that"we jack via Hong Kong barge at Euro 4m". The Judge found that this was a clear37 At [243].reference to the deliberate inflating of the purchase price of JU.38 She also found thatMr Webb, a few days later, emailed Mr X and Mr Leith, suggesting that "the jack finalprice" should be NZD 8,000,000. She found that Mr Webb subsequently drafted andarranged execution of a sale and purchase agreement for JU from LCL to HBL for$8 million (excluding GST), but that it was then decided that CDC Pty should ownJU. This change was made but the price of $8 million remained. The Judge noted thatthe price was determined without any reference to Mr Lau or Mr Y.39[58] The Judge found that Westpac was told that JU would be bought for $8 millionand, on 4 September 2008, it offered HML a new facility of $6.9 million. Amongstother things, this amount was to fund 50 per cent of the $8 million said to be due forJU. It was a term of the loan offer that HML make an equity contribution of$2,604,000 to the purchase.[59] The Judge found that the transfer of funds was as follows:40(a) 16.09.08 ASFL HML(b) 19.09.08 HML LCL(c) 23.09.08 LCL ASFL(d) 02.10.08 Westpac HML(e) 22.10.08 HML Ravestein41[60] The Judge found that ASFL transferred $2.65 million to HML without puttingin place any loan agreement to record the advance or the terms on which it was made.The Judge considered that Westpac's requirement for an equity contribution of$2,604,000 by HML to the purchase was the likely explanation for the ASFL payment,38 At [245].39 At [247].40 At [252] (footnote omitted).41 The NZ$ equivalent of the €2 million HML paid to Ravestein on 22 October 2008 was$4,149,377.59.$2.65 m$2.66 m$5.5 m€2 m$2.67 mand she considered that ASFL's transfer of the funds to HML had to be treated as aloan.42[61] The Judge referred to an email from Mr X to Mr Tauber, and to a wiringdiagram prepared by Mr X as follows:[256] Diagram as discussed, probably easier to go through on phone Alsoattached spreadsheet re ASFL loan (NZD 2.6m = AUD 2.1m) to giveyou an idea of the deductions if its channeled direct to CDC PTY inAUD. I hadn't solved whether the ASFL loan went to HML or toCDC Pty direct as there is Aussie with holding tax and NZ AIL toconsider....[257] The wiring diagram is as follows:[258] These two notes appear at the top of the page:ASFL take 2nd charge over all HBL & CDC assets re protection excreditors, customers, and commercial credibility.LCL retain 10k expenses. ASFL recover 20k re guarantee fee, beingLCL 10k and 5k costs ... + 5k i on 2.65m for 5 days.[62] The Judge also referred to an email from Mr X of 17 September 2008 to MessrsTauber, Webb and Leith which relevantly stated as follows:42 At [253]–[254].[262] ...Attached is new schedule showing financing and paymentsre [JU] Platform and suggested letter from Lau confirmingsame, this will need to be signed by Anthony [Lau].... the additional loan ex ASFL arrived in the HML accountovernight of 2.65m.... a payment needs to be made by Westpac tomorrow for2,670,000 to [LCL]. I do not have bank details but we needto ensure they are correct and have a Swift code so there isno delay. Will you organise Scott [Leith] and ensureWestpac is happy this [satisfies their] loan facilitycondition?An additional funding payment needs to be made by HonkBarges to HML of 20k to fund the shortfall in the transfer.[263] The wiring diagram is as follows:[63] The Judge commented as follows:[265] This diagram also shows that the payment from HML to LCL wascharacterised as being on account of [JU], which plainly points in favour ofthe defendants.[266] Despite this, I am satisfied that the payment from LCL to ASFL of$2.66 million, calculated as it was to include interest, must have been intendedto repay ASFL's loan.[267] The right-hand side of the diagram shows the payments to Ravestein,the final instalment of which derived from Westpac. The loan from ASFL toHML must have been to satisfy Westpac that the equity contribution it requiredwas made. The instalment due to LCL was calculated to return ASFL's fundsvia LCL. That effected repayment of the loan.[64] The Judge was satisfied beyond reasonable doubt that HML's payment to LCLwas intended to and did repay ASFL's loan of $2.65 million. Accordingly, she foundthat HML's claim to deduct interest incurred on ASFL's $2.65 million loan beyond23 September 2008 was false.43Knowledge and intention — verdicts44[65] The Judge was satisfied that the Crown had proved beyond reasonable doubtthat each of the appellants knew that the information in the tax returns was false at thetime it was provided to the Commissioner. She found that both Mr Tauber and Mr Xwere fully involved in the various transactions. She was also satisfied that theknowledge and intention that Mr Tauber and Mr X possessed fell to be attributed tothe corporate appellants. Accordingly, the Judge found the companies guilty of theoffending with which they were charged.[66] The Judge also found Mr Tauber guilty as a principal offender on all chargesother than one (where Mr Tauber did not sign the declaration required in the return tothe Commissioner). She found that Mr Tauber did execute HBL's financial statementsfor that year and accordingly found him liable as a party to that charge. She wassatisfied that Mr X was not a principal offender because he did not provide informationto the Commissioner. She was, however, satisfied that Mr X was a party to theoffending the subject of charges 1, 2, 3, 5, 6, and 7, because he aided and abetted thatoffending, and that Mr Webb was a party to the offending the subject of charges 2, 3and 6, again because he aided and abetted that offending.The appeals[67] The appeals against conviction are brought pursuant to s 232 ofthe Criminal Procedure Act 2011. Relevantly this Court must allow the appeals if weare satisfied that the Judge erred in her assessment of the evidence to such an extent43 At [268]–[269].44 At [270]–[309].that a miscarriage of justice has occurred, or that a miscarriage of justice has occurredfor any other reason.45[68] The case on behalf of HML, HBL and Mr Tauber was summarised byMr Lennard as follows:(a) The Judge misdirected herself as to the law in three areas:(i) sham;(ii) nominees; and(iii) what he called "the implications of not being associated".(b) Because of these errors, the Judge erred in her analysis of importantfactual issues, and she did not consider the evidence and availableinferences either properly or at all.(c) If the Judge had considered the factual issues and evidence properly,she could not have found HML, HBL and Mr Tauber guilty as charged.(d) This Court should substitute its own view for the Judge's view, andacquit HML, HBL and Mr Tauber, rather than order a retrial.[69] Mr Webb's appeal against conviction can be summarised succinctly. He wasfound guilty as a secondary party and he argued that should the appeal by HML, HBLand Mr Tauber succeed, he could not be guilty of aiding and abetting them as theprincipal offenders.[70] The Crown's case was a little more diffuse. Mr Pike QC, appearing onthe Crown's behalf, did not seek to engage to any great extent in the applicable law.Rather, he relied heavily on the judgment given by the Judge and argued that the factsin this case were overwhelming. He submitted that they pointed ineluctably to the45 Criminal Procedure Act 2011, s 232(2)(b)–(c).provision of false or misleading information to the IRD, and to knowledge of thatfalsity by the key participants.[71] We turn to consider each of the arguments made for HML, HBL and Mr Tauber,albeit in a slightly different order. We then address Mr Webb's appeal againstconviction and his appeal against sentence.AnalysisHML's, HBL's and Mr Tauber's appealWas it necessary for the Crown to prove sham beyond reasonable doubt?[72] HML, HBL and Mr Tauber, submitted that the Judge, in the circumstances ofthis case, could not properly find the charges proved without first finding that theunderlying transactions were shams. As Mr Lennard acknowledged, this was theirprimary argument. It was submitted that unless the underlying transactions wereshams, they were valid for tax purposes and effective to generate the deductionsclaimed. If so, it was argued, no offences had been committed.[73] As noted above,46 the Judge considered that she did not need to decide whetherthe agreements between the parties were shams. Rather, she took the view thatwhether the returns filed with the IRD were false depended largely on the paymentsmade and their purpose. She nevertheless thought there were compelling grounds toargue that the underlying transactions and the documents recording them were shams,in particular those relating to S3 and JU.[74] We are not persuaded by the argument advanced on behalf of HML, HBL andMr Tauber. Rather, we consider that the Judge was correct to approach the case in theway in which she did. We have reached this conclusion for the following reasons.[75] The matter came before the High Court by way of criminal charges laidpursuant to ss 143B(1)(c) and (f) and 148(1) of the Tax Administration Act.Relevantly, s 143B(1)(c) and (f) provides as follows:46 At [14].143B Evasion or similar offence(1) A person commits an offence against this Act if the person—(c) knowingly provides false or misleading information(including tax returns ) to the Commissioner in respectof a tax law or a matter or thing relating to a tax law and does so —(f) intending to evade the assessment or payment of tax by theperson or any other person under a tax law [76] The Judge found that, to prove the charge created by the section against aprincipal offender, the Crown had to establish beyond reasonable doubt that:47(a) The defendant provided information to the IRD.(b) The information was false or misleading.(c) The defendant knew that the information was false or misleading.(d) The information was in respect of a tax law or matter or thing relatingto tax.(e) The defendant intended to evade the assessment or payment of taxunder a tax law.The Judge noted that there was no dispute as to (a) and (d), and that it was the elementsin (b), (c) and (e) which HML, HBL and Mr Tauber denied.48[77] That this was the case was confirmed by Mr Lennard in the course of thehearing before us.[78] In our judgment, the Judge accurately stated the elements of the offence createdby the section.49 It does not on its face require the Crown to prove beyond reasonable47 R v Honk Barges Ltd, above n 2, at [5].48 At [6].49 And see R v Rowley [2012] NZHC 1198, (2012) 25 NZTC 20-127 at [23]–[26].doubt that the underlying transactions, and the documents recording them, wereshams.[79] Where, as here, tax returns have been filed with the IRD, the focus is likely tobe on elements (b), (c) and (e), namely whether the information provided to the IRDwas false or misleading (part of the actus reus of the offence) and whether thedefendant knew of the falsity and intended to evade the payment of tax (the mens reaof the offence).[80] In all but exceptional cases, it is only the actus reus and the mens rea of anoffence (the elements of the offence) which the Crown has to prove beyond reasonabledoubt.50 Evidence of other circumstances may help establish either the actus reus orthe mens rea of the offence, but such evidence does not, of itself, have to be proved toany particular standard.51 Rather, it is part of the narrative the fact finder can turn toin drawing an inference or in reaching a conclusion. It is only "the totality of thatnarrative to which the formula 'beyond reasonable doubt' applies".52[81] We accept that there may be exceptional cases where, even though proof of acollateral circumstance is not an element of the offence charged, the circumstance isnevertheless of such significance that the Crown must also prove it beyond reasonabledoubt.53 There must, however, be some exceptional reason particular to the case tojustify such a course.54[82] We do not consider that there was any exceptional reason in the present caserequiring the Crown to prove that the documents evidencing the various transactionswere shams.[83] No exceptional reason as such was advanced by HML, HBL and Mr Tauber.Rather, it was argued that the tax treatment of transactions between taxpayers depends50 Woolmington v Director of Public Prosecutions [1935] AC 462 (HL).51 The Judge so found — R v Honk Barges Ltd, above n 2, at [52].52 Thomas v The Queen [1972] NZLR 34 (CA) at 38 per North P; and see R v Puttick (1985) 1 CRNZ644 (CA) at 647; R v Guo [2009] NZCA 612 at [49]; and Shepherd v The Queen (1990) 170 CLR573.53 Thomas v The Queen, above n 52, at 41.54 Milner v R [2015] NZSC 38, (2015) 27 CRNZ 412 at [8].on the application of tax law to the legal rights and obligations created by thetransactional documents, and that the only exceptions to this arise where there areeither tax avoidance arrangements, or the documents are shams. Here, it was said,the Crown did not allege tax avoidance, but that it had, in pre-trial memoranda, advisedthat it would be seeking to prove that the transactions and the documents evidencingthem were shams. It was said that there was no evidential basis on which a findingthat the documents were shams could be made. It was also put to us that there is nohalfway house between a sham transaction and the characterisation of a transactionaccording to the nature of the legal arrangements entered into and carried out for taxpurposes, and that the tax consequences of a transaction fall to be determinedaccording to the legal rights and obligations created by the transactional documents,and not the economic consequences to the parties. It was argued that the transactionsin issue in this case existed, and that this was not a case where nothing had happenedand a false claim had been made in a factual vacuum. Rather, it was said that this caseinvolved real money and real assets, that S1, S2, S3 and JU changed hands for value,and that money was advanced by ASFL for this purpose.[84] We deal first with the assertion that the Crown, in pre-trial memoranda,committed itself to proving that the transactions were shams. We do not consider thatthis was the case. There were various memoranda filed. Two in particular areimportant in relation to this argument — the first dated 20 April 2018 and the seconddated 22 April 2018. These memoranda sought to explain the Crown's position asfollows:(a) The Crown would be seeking to explain its case without reference to,what it called, "the civil law constructs of sham and tax avoidance".(b) The Crown only needed to prove the elements of the charge.(c) The Crown did not need to establish completed tax evasion by meansof sham or tax avoidance as a matter of law; it did, however, intend toprove the offending alleged by proving facts "which would, or could,amount in law to sham".(d) The Crown did not allege that the appellants' dealings amount to taxavoidance.In our view, the Crown in these memoranda made its position clear. It did not commititself to proving beyond reasonable doubt that the transactions were shams.While the Crown in its closing submissions did submit that the tax returns were false,inter alia, because the transactions were shams, that was only one of the argumentspresented.[85] Secondly, we do not consider that the authorities relied on by HML, HBL andMr Tauber support the other propositions advanced on their behalf as clearly as wassuggested.[86] We accept that the fact that arrangements are made with the purpose or effectof obtaining a tax advantage does not of itself mean that the arrangements are a sham.55Rather, a sham, in the taxation context, is an arrangement designed to lead the taxationauthorities to view the documentation as representing what the parties have agreedwhen it does not in fact record their true agreement.56 The purpose is to obtain a morefavourable taxation outcome than that which would have eventuated if documentsreflecting the true nature of the parties' transaction had been submitted to the revenueauthorities.57[87] This does not, however, compel the conclusion that sham must be provedwhenever a person is charged with providing false information to the IRD with theintention of evading the assessment or payment of tax.[88] The primary authorities relied by HML, HBL and Mr Tauber for theproposition that the tax treatment of transactions between taxpayers depends on theapplication of tax law to the rights and obligations created by the transactionaldocuments, were Re Securitibank Ltd (No 2),58 Marac Life Assurance Ltd v55 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2008] NZSC 115, [2009]2 NZLR 289.56 At [33].57 At [33]; and see NZI Bank Ltd v Euro-National Corp Ltd [1992] 3 NZLR 528 (CA) at 539.58 Re Securitibank Ltd (No 2) [1978] 2 NZLR 136 (CA) at 167–168.Commissioner of Inland Revenue,59 and Mills v Dowdall.60 HML, HBL and Mr Tauberrelied on passages from the judgments given by Richardson J in each of the cases.We note as follows:(a) Each was a civil case. Securitibank involved the application of the nowrepealed Moneylenders Act 1908 to bills of exchange offered by one ofthe parties to that case. What was in issue was whether or not that partywas a money lender as defined in the statute. Marac concerned short-term life insurance cover (or life bonds) and the issue was whether ornot the bonds were policies of life insurance for tax purposes. Mills vDowdall was concerned with whether the way in which shares and ahouse property had been dealt with between parties created a gift, orwhether title had passed in return for a binding financial obligation.None of the cases was decided in the criminal context.(b) In none of the cases was it suggested that the documents evidencing thetransactions in issue were shams. It was not an issue which wasrequired to be decided in any of the judgments and they do not directlyaddress that issue.(c) In each case, the Court accepted that, where documents have beendrawn up to define the relationship of persons involved in a particulartransaction, the true nature of the transaction has to be ascertained bycareful consideration of the legal arrangements entered into and carriedout.61 It was further held that the courts must give consideration to allof the documents in order to determine the true nature of therelationship, and that if a transaction is embodied in a number ofinterrelated agreements, all agreements must be considered together,and that one may be read to explain others.62 What is crucial is theascertainment of the legal rights and duties which are actually created59 Marac Life Assurance Ltd v Commissioner of Inland Revenue [1986] 1 NZLR 694 (CA) at 706.60 Mills v Dowdall [1983] NZLR 154 (CA) at 159.61 Re Securitibank Ltd (No 2), above n 58, at 167; Mills v Dowdall, above n 60, at 159; and MaracLife Assurance Ltd v Commissioner of Inland Revenue, above n 59, at 706.62 Re Securitibank Ltd (No 2), above n 58, at 167–168 and 172–173.by the transaction into which the parties have entered. The surroundingcircumstances can be taken into account in characterising thetransaction — not to deny or contradict the written agreements, but inorder to understand the setting in which they were made and to construeit against that factual background having regard to the genesis andobjectively the aim of the transaction.63In our view none of the cases are authority for the bald and ultimately sterilepropositions asserted for HML, HBL and Mr Tauber.[89] We note the approach discussed by Cooke J in Mills v Dowdall, where heobserved as follows:64If, by prior arrangement with the transferee or otherwise, a transfer of propertyfor a stated consideration were accompanied by an immediate forgiveness bydeed of the entire debt, I do not think that the Court would have to shut itseyes to reality. It would not be precluded from holding that the two elementsin the transaction were so linked that they should be treated as inseparable;that the transferee was intended never to incur any real liability; and that intruth the property was given to him. The approach just mentioned can be supported by the reasoning of theHouse of Lords in WT Ramsay Ltd v Inland Revenue Commissioners [1982]AC 300 that case was concerned with tax avoidance schemes, ready-madeand self-cancelling, whereby equivalent gains and losses were created and atthe end of a planned series of operations the taxpayer's position was preciselyas at the beginning except for the fees and expenses. The documents were notshams, for they did not give the appearance of creating legal rights andobligations different from the actual legal rights and obligations whichthe parties intended to create. But the House held that for fiscal purposes, andeven without any provision such as s 99 of the New Zealand Income Tax Act1976, the matter could be approached in a broader way, explained as followsin the leading speech of Lord Wilberforce at pp 323-324:Given that a document or transaction is genuine, the court cannot go behind it tosome supposed underlying substance. This is the well known principle ofInland Revenue Commissioners v Duke of Westminster [1936] AC 1. This is acardinal principle but it must not be overstated or overextended. While obliging thecourt to accept documents or transactions, found to be genuine, as such, it does notcompel the court to look at a document or a transaction in blinkers, isolated fromany context to which it properly belongs. If it can be seen that a document ortransaction was intended to have effect as part of a nexus or series of transactions,or as an ingredient of a wider transaction intended as a whole, there is nothing inthe doctrine to prevent it being so regarded: to do so is not to prefer form tosubstance, or substance to form. It is the task of the court to ascertain the legalnature of any transaction to which it is sought to attach a tax or a tax consequence63 Marac Life Assurance Ltd v Commissioner of Inland Revenue, above n 59, at 706.64 Mills v Dowdall, above n 60, at 157.and if that emerges from a series or combination of transactions, intended to operateas such, it is that series or combination which may be regarded.I see no reason why that approach would have to be confined to tax cases. [90] Lord Wilberforce's observations in Ramsay, cited by Cooke J, have frequentlybeen cited with approval in the United Kingdom.65 It has been said that the trueprinciple of the decision in Ramsay is that the fiscal consequences of a pre-ordainedseries of transactions, intended to operate as such, are generally to be ascertained byconsidering the result of the series as a whole, and not by dissecting the scheme andconsidering each individual transaction separately.66 It has also been observed that thescheme in Ramsay was such that any intelligent layman would conclude that it wasnot designed to achieve any substantial effect in the real world, and that the stepsdesigned to manufacture a tax deductible loss were purely formal in character.67[91] The Ramsay decision has been cited with approval in this country although notdirectly for the principles referred to in this judgment.68 Although it has to be treatedwith some caution given differences between the tax regimes in the United Kingdomand in New Zealand, it remains helpful.69 We consider that the Ramsay approach, andthe approach taken by Cooke J in Mills v Dowdall, drawing on Ramsay, is apposite inthe present case.[92] As the Judge noted, information is false if it is inaccurate or incorrect.70The detailed factual analysis that she undertook was, in large part, directed to thiselement of the offences alleged. She considered the available evidence in relation toeach charge and concluded, in each case, that the information provided in the taxreturns to support the deductions claimed was false and misleading.71 In approachingthe case as she did, the Judge was, in effect, declining to shut her eyes to the reality asshe saw it. She did not regard herself as shut out by what Mr Pike referred to in his65 Furniss (Inspector of Taxes) v Dawson [1984] AC 474 (HL); Moodie v Inland RevenueCommissioners [1993] 1 WLR 266 (HL); Inland Revenue Commissioners v Fitzwilliam [1993]1 WLR 1189 (HL); Inland Revenue Commissioners v McGuckian [1997] 1 WLR 991 (HL); InlandRevenue Commissioners v Scottish Provident Institution [2004] UKHL 52, [2004] 1 WLR 3172;and UBS AG v Revenue and Customs Commissioners [2016] UKSC 13, [2016] 1 WLR 1005.66 Furniss (Inspector of Taxes) v Dawson, above n 65, at 512.67 At 517.68 Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue, above n 55, at [2] and [5].69 At [110].70 R v Honk Barges Ltd, above n 2, at [5(b)] citing R v Gill [1999] 19 NZTC 15,526 (CA).71 At [178], [224] and [269].submissions as "the paper veil created by apparent contractual arrangements". On herview of the facts, she was not required to undertake an analysis of what Mr Y or theentities controlled by him may have intended. Nor was she required to considerwhether or not the contractual arrangements entered into created legal rights andobligations. Rather she focused on whether the deductions claimed in reliance on thearrangements put in place falsely represented the actual position between the parties.[93] We are not persuaded the position taken by the Judge in relation to this issuewas in error. In our judgment, whether or not the transactions were shams was not anelement of the offences charged but rather was a circumstance going to proof of thefalsities alleged.[94] Even if we are wrong in this view, we would have been prepared to find thatthe transactions here in issue were shams. The Judge found that the transactionscomprised a series of interrelated agreements. Read together, the finding was open tothe Judge that they were shams. Their purpose was to create tax deductions, first byhiding the true cost of the barges to HML, and secondly by giving the impression thatinterest was owing on loans, said to have been incurred to finance the cost of thebarges, which were not in fact loans at all, but rather circular transactions which endedup with the monies lent being returned to the lender. It is trite law that a sham mustreflect the common intention of all of the parties to the impugned transaction,72 but inour view, it was not necessary to call Mr Lau, or Mr Y, to find out what their intentionwas. We would have been prepared to attribute the actions and knowledge of Mr X,and probably also Messrs Tauber and Lau, to Mr Y and ASFL. We note that:(a) Mr X was employed by and acting for and on behalf of Mr Y. It washis job to look after Mr Y's interests. He was a director of HML,HML's accountant and a minority shareholder in HML.(b) Mr Tauber was the architect of the transactions in issue. He was Mr Y'stax advisor.72 Snook v London and West Riding Investments Ltd [1967] 2 QB 786 (CA) at 802; and R v Quillan[2015] EWCA Crim 538, [2015] 1 WLR 4673 at [86].(c) Mr Lau had various roles in relation to Mr Y's business interests — forexample, he was a settlor of one of Mr Y's trusts, he was a signatoryfor ASFL from at least January 2004 to July 2013, and he was a directorand shareholder of PFDC.(d) ASFL and PFDC were entities directly controlled by Mr Y.If the actions and knowledge of Mr X, or of Messrs X, Tauber and Lau, are attributedto Mr Y and ASFL, then a finding of sham would clearly have been open on theJudge's factual findings. She would have had sufficient information on which to makefindings as to the common intention of all parties to the transactions. This would havebeen an alternative route to the convictions. It is not, however, a route she was requiredto take.Was it necessary for the Crown to prove that Mr Lau, LCL and PFDC were nominees?[95] The Crown argued at trial that Mr Lau acted as a nominee for HML and HBL.It relied on s YB 21 of the Income Tax Act, and argued that Mr Lau should be "lookedthrough" or ignored for tax purposes.[96] The Judge considered that it was unnecessary for her to deal with thisargument, given the view she took of the evidence.73 However, she went on to saythat, in her view, there were very compelling arguments that the intermediarypurchasers on each transaction, Mr Lau, LCL and PFDC respectively, were acting asnominees in terms of s YB 21, because their role was to hold the assets pending theironward transfer.74[97] HML, HBL and Mr Tauber argued that notwithstanding her observations,the Judge did in fact find Mr Lau, LCL and PFDC held the assets on behalf of HML,HBL and Mr Tauber. They noted that the Judge found that Mr Lau held S1 and S2 forthe marine group,75 and that LCL was the purchaser of JU in name only.76 While they73 R v Honk Barges Ltd, above n 2, at [41].74 At [41].75 At [122]–[123].76 At [243].accepted that the Judge did not expressly find that PFDC held S3 for HML or HBL, itwas nevertheless argued that the Judge did not properly consider the law relating tonominees, or determine whether, if her factual findings were correct, HML, HBL andMr Tauber knew of the nomination, and appreciated that, as a matter of tax law, thismeant that Mr Lau/LCL/PFDC should be ignored.[98] Section YB 21 provides as follows:YB 21 Transparency of nomineesTreatment of nominee(1) In this Act, unless the context otherwise requires, if a person holdssomething or does something as a nominee for another person, theother person holds or does that thing and the nominee is ignored.Who is a nominee?(2) A person holds or does something as a nominee for another person ifthe person acts on the other person's behalf. However, a trustee is anominee only if the trustee is a bare trustee.Nominal settlements(3) A person making a nominal settlement at the request of another personis treated for the purposes of this Act as a nominee in relation to thesettlement.[99] As can be seen, the section is very widely drafted.[100] Counsel were unable to refer us to any relevant authority, other thanthe High Court's decision in Union Corporate Services Ltd v Commissioner ofInland Revenue,77 where the Court ruled, in the GST context, againstthe Commissioner's assertion that an overseas subsidiary that had purchased and thenon-sold a vessel to its New Zealand parent company was acting as a nominee.This case did not, however, assist us. It did not deal with s YB 21, or indeed theposition of nominees directly. Further, there was a factual finding that theintermediary took title to the vessel beneficially, and that there was a "very good actualreason" for this.7877 Union Corporate Services Ltd v Commissioner of Inland Revenue (1997) 18 NZTC 13,151 (HC).78 At 13,155.[101] We accept that the Judge did not enter into any detailed discussion of what anominee is in the tax context, but we do not consider that she needed to do so.The Judge concluded that Mr Lau acted on instructions from Messrs Tauber and Webb,but probably not exclusively.79 For example, the Judge found Mr Lau executed thesale documents in respect of S3 on instruction from Messrs Webb and Tauber, whenhe must have known that Mr Webb had created the documents and that they recordeda sale from LCL, when no such entity then existed.80 On the Judge's various findings,Mr Lau and implicitly LCL, were part of an interrelated series of transactionsdesigned to deceive the IRD. So was PFDC which for some reason became involvedin the transfer of monies relating to S1 and S2 and which was also involved in the S3transaction.[102] Section YB 21 is so widely drafted that a finding that Mr Lau, LCL and PFDCwere nominees was clearly open to the Judge, given her other factual findings.We have no doubt that, had she considered it necessary to do so, the Judge would havefound that Mr Lau was acting as a nominee in the purchase/sale of S1 and S2, thatLCL acted as a nominee in the purchase/sale of JU, and that PFDC was acting as anominee in the purchase/sale of S3.[103] Knowledge of the nominee status of the intermediary, and of the potential taxconsequences, by HML, HBL and Mr Tauber was not required. Mr Lennard arguedthat the Judge could not, on the evidence, have found the requisite mens rea proven.This submission confuses the elements of the offences charged with the proof of othercollateral circumstances. Relevantly the Crown was only required to prove knowledgeof the falsities and of the intention to evade tax. It was not required to proveknowledge by the defendants of the tax consequences of Mr Lau, LCL and PFDCbeing nominees. In any event it is fanciful to suggest that experienced tax accountantslike Mr Tauber and Mr X would have been unaware of the consequences.[104] In our judgment, s YB 21 was an alternative route to the convictions that wasopen to the Judge, which she did not, and was not required, to take, given her view ofthe facts.79 R v Honk Barges Ltd, above n 2, at [93].80 At [190]–[192] and [195]–[196].Peters J's analysis of the evidence[105] HML, HBL and Mr Tauber submitted that the Judge, as a result of failing toapply the law correctly, failed to analyse the facts properly. Further, and independentof this submission, they argued that the Judge made serious errors in the fact-findingexercise which she did undertake, and that absent these errors, she could not havefound the charges proved, even on the approach to the law which she applied.[106] First, it was argued that the Judge failed to analyse whether the Crown hadproved beyond reasonable doubt that the transactions were shams, and that she did notundertake any analysis as to what the entities associated with Mr Y and Mr Y himselfmight have intended.[107] This part of the argument proceeded on the assumption that it was necessaryfor the Crown to prove that the transactions were shams. We have held above that thiswas not required. Accordingly, we do not consider that the Judge needed to analysewhether the transactions were shams or what the entities controlled by Mr Y, or indeedMr Y, might have intended.[108] We next turn to the submission that the Judge made serious errors in thefact-finding exercise which she undertook. It was submitted that the Judge failed todeal properly with:(a) the relevant relationships between the parties, and the chain ofcommand between the various individuals and entities involved;(b) inferences favourable to HML, HBL and Mr Tauber;(c) whether title passed in relation to S1 and S2;(d) whether HML and HBL had sufficient funds to acquire S3 themselves;(e) whether the ASFL loans were repaid;(f) the wiring diagrams and notes; and(g) an agreement entered into in September 2008 redocumenting the ASFLadvances.[109] In relation to the first argument, it was suggested that the reality was that thetransactions were part of the pre-existing business relationship between MessrsTauber, Webb and Mr Y, that they were a natural and attractive proposition for Mr Y,and a sensible, if not particularly palatable, proposition for HML, with tax advantagesfor it. It was said that the starting point was the advance made by Mr Y to HML toenable it to purchase the shares in WML. It was noted that Mr X became involved toprotect Mr Y's interests, that Mr Tauber was Mr Y's advisor, that ASFL and PFDCwere Mr Y's companies, that both companies were involved in substantial financialdealings apart from the transactions at issue in this appeal, and that Mr Lau acted forMr Y as a director of and trustee for some of Mr Y's entities, including those involvedin this case. It was submitted that the inference could be, and should have been, drawnthat Mr Y gave instructions to Mr X and to Mr Tauber, that Mr X also gave instructionsto Mr Tauber, and that Mr Tauber in turn instructed Mr Lau. It was submitted that thischain of command explained why there was no evidence at trial of any directcommunications between Mr Y and Mr Lau, and why Mr Tauber from time to timetold Mr Lau what to do.[110] The Judge made various factual findings about the parties and other entitiesand persons referred to in the narrative. We have summarised those findings above.81She went on to draw inferences as to the chain of command between the various partiesand the other entities. She did so by reference to the evidence which was adducedbefore her. She recited the factual background including the purchase of the shares inWML, the initial loan to HML of $5 million, and the terms of that loan.82 She recordedthat Mr Y personally funded 75 per cent of the purchase price of S1 and S2 fromDalmarine.83 She acknowledged that Mr Y had a very real interest in HML's financialaffairs.84 With the exception of an email dated 13 February 2006, which Mr X sent toMr Webb asking for an email "confirming barge happenings", apparently sent becauseMr Y had asked for an update, and a further email of 20 March 2006 in which Mr X81 At [16] above.82 At [74]–[75] and [95]–[102].83 At [121].84 R v Honk Barges Ltd, above n 2, at [76] and [102].told Mr Webb that Mr Y "said he had a possibility re tow" of the barges, (presumablyS1 and S2), the appellants were unable to point to any clear evidence that Mr Y tookany interest in the barges or in JU at all. Nor were they able to point to any evidenceof instructions being given by Mr Y to Mr Lau, Mr X and Mr Tauber. There was,however, ample evidence of Mr Lau acting on instructions from Mr Tauber. Similarly,the appellants were unable to point to any clear evidence to support the contention thatthe intermediaries in each transaction were, on Mr Y's instructions, only prepared toallow the entities to be on-sold to HBL at the inflated prices recorded in thedocumentation. Indeed, the opposite is true. Mr Leith, who was involved at the time,said that the supposed "stranglehold" that Mr Y had was "news to [him]". Mr Leithgave evidence that Mr Lau was acting on instructions from Mr Tauber.[111] In our judgment, there was little or nothing to lead to the inferences whichMr Lennard says the Judge should have drawn and they were simply not a reasonablepossibility. Rather, there were the various pieces of evidence referred to by the Judgewhich supported her findings as to the relevant relationships, the chain of commandand the very limited role taken by Mr Y and the entities controlled by him. It isnoteworthy that HML, HBL and Mr Tauber did not on appeal seek to deny thesevarious pieces of evidence. An inference is simply a conclusion that is drawn fromestablished facts or from evidence that the fact finder has accepted is reliable. We cansee no proper basis on which to take issue with the inferences drawn by the Judge inregard to these matters.[112] Next, it was argued that the Judge failed to draw inferences favourable tothe defence, in particular when she commented that it was not apparent to her, on theevidence, that Mr Y did step in and purchase S1 and S2, or that there was any refusalon Mr Y's part to relinquish S1 and S2 at a reasonable price.85[113] Again, we can see no basis for this criticism. Mr Y had paid 75 per cent of thepurchase price of S1 and S2, but except as noted above, the appellants could not pointto any evidence suggesting that he stepped in to purchase S1 and S2 for himself or that85 At [34].he subsequently dictated the price at which they were on-sold. Indeed, as we havealready noted the evidence from Mr Leith was to the contrary.[114] HML, HBL and Mr Tauber argued that the Judge drew an inference as to thepassing of legal title to S1 and S2 on a wholly inadequate evidential basis. It wassubmitted that there was no evidence that any party regarded Mr Y's payment of75 per cent of the purchase price as an advance or loan to any other party, that anyoneconsidered that title had passed to HAL or HBL at any stage before June 2006, or that,at the time Mr Lau acquired the vessels from Dalmarine, there was any contemplationthat HAL or HBL would ever own the vessels at all.[115] We do not consider that the Judge erred in the inferences she drew. We haveconsidered some of the relevant and available evidence. We note as follows:(a) In the lead up to the purchases, Mr Webb made various statements tothird parties to the effect that "we" have purchased S1 and S2.86 Thiscan only have been a reference to one or other entities in the marinegroup.(b) Dalmarine issued an invoice for the balance of the purchase price toMr Webb on 26 October 2005.87(c) There was no clear evidence, with the exception of the two statementsattributed to Mr X noted above, of Mr Y taking any interest in eitherbarge.(d) Mr Webb arranged the inspection, refit and towing of S1 and S2 andthe marine group spent substantial sums on the barges in making themseaworthy and in having them towed to Auckland.(e) HAL was invoiced for the GST on the import of the barges atAUD 220,000 each.86 At [127]–[130].87 See above at [23].(f) On 1 April 2006, Mr Webb wrote to the NZ solicitors stating"Lau Contracting Ltd ((Honk Kong) us)) purchased a couple of Bargeslate last year".(g) Mr Webb arranged for the valuation of S1 and S2 fromFerrier Hodgson. The valuation dated 23 May 2006 recorded that"Honk" owned S1 and S2. That advice can only have come fromMr Webb.(h) That it was not until sometime later, in June or July 2006, thatagreements were executed to effect a transfer of S1 and S2 fromMr Lau, trading as "Lau Contracting" to HAL, and then from HAL toHBL.The Judge also considered various other events after the bills of sale, including theleasing arrangements which were put in place by HAL, the arrangements entered intowith Westpac, the agreements for sale and purchase between Lau Contracting andHAL and HAL and HBL, the cashflow and the various documents and wiring diagramswhich threw light on what had actually happened.[116] In our judgment, the Judge was entitled to draw the conclusions she drew, onthe evidence which had been adduced by the Crown and which she accepted.Moreover, she was clearly correct in the inferences she drew. There was nothing fromHML, HBL or Mr Tauber from which any alternative inference could be drawn.The Judge was entitled to conclude that the charges relating to S1 and S2 were provedbeyond reasonable doubt.[117] It was then submitted that the Judge erred when she found that HBL and HMLhad sufficient funds to acquire S3 themselves. It was argued that the Judge'sconclusion ignored the mobilisation costs for S3, which the Crown accepted were$822,964, that the evidence was clear that HML and HBL did not have anything likethat sum, and that they could not increase their borrowing under their existing bankingfacilities to provide for this sum. It was also noted that HML owed $5 million to Mr Yrelating to the purchase of the shares in WML, that this sum was due for repayment in2008, and that therefore they had no alternative but to deal with ASFL, and buy S3from PFDL on the terms set by Mr Y.[118] The Crown did acknowledge in its closing arguments that the mobilisationcosts for S3 were $822,964 and we accept that, on the evidence, HML and HBL couldnot themselves fund these costs. We do not, however, consider that these mattersundermine the Judge's conclusions. The Judge summarised the background eventsleading to the acquisition of S3.88 She concluded that, in the circumstances, there wasno satisfactory explanation as to why HBL would agree to pay $3.25 million for S3which was able to be acquired for AUD 300,000.89 The Judge also found that themarine group had sufficient funding on hand for the acquisition.90 It was not in disputethat HBL and other members of the marine group had sufficient funds on hand oravailable to pay $300,000 for S3. Indeed, the borrowing from ASFL was undertakenonly after HML had made the funds available to Mr Lau for the purchase of S3. TheJudge did refer to the mobilisation costs and noted that the amount of those costs wasnot disputed. The quantum of the mobilisation costs does not however explain whythe price for S3 was leveraged from AUD 300,000 to NZD 3,250,000. Nor does theargument make any commercial sense – why would a company unable to pay out orfund $822,964 unnecessarily incur a further debt of some $3 million and commit itselfto paying ASFL 15 per cent interest on that sum? The appellants were unable to pointto any clear evidence supporting the contention advanced on their behalf that they hadno alternative but to deal with ASFL and buy S3 on Mr Y's terms. Indeed, the evidencewas to the contrary. In our view, there was nothing to support the submission and therewas no proper basis on which the Judge could have inferred it. It was simply not areasonable possibility.[119] Next, it was argued that the Judge made a fundamental error when she assumedthat, because the wiring diagrams which she referred to in her judgment showed ASFLas having being paid by another entity associated with Mr Y, that meant thatthe "Honk entity" had in turn paid ASFL, and thereby discharged the HML liability.88 At [39]–[44] above.89 At [186].90 At [197] and [203].It was argued that this was a fundamental error, because the nature of a payment by apayer cannot be determined by the use to which the recipient puts the money.[120] In our view, this argument cannot succeed on the facts of this case.The transactions were pre-planned, undertaken in anticipation of the tax advantageswhich would flow, and with the intention that moneys lent would be repaid in shortorder. The backdating of documents, the use of legally non-existent entities, thebelated giving of instructions to intermediaries, and the circular money trails, all pointto preconceived dishonesty. It was not a situation where the nature of the paymentsmade fell to be determined only by what the recipient did with them.[121] It was also argued, in regard to S1 and S2, that the wiring diagrams and thenotes to which the Judge referred were equally supportive of innocence, and that thereference to "real costs" in the accompanying email of 11 July 200691 referred only tothe financial outlay that the Honk Group was incurring.[122] With respect to Mr Lennard, this argument underestimates the import of theemail, the wiring diagram and the notes92 and overstates the Judge's findings inrelation to them.[123] The wiring diagram for S1 and S2 does show that the monies advanced byASFL to HML went, first, to HBL, then to PFDC, and then back to ASFL. This wasimportant evidence, but the Judge did not consider that the wiring diagram, andMr X's note as to the purpose of the $4 million payment, were conclusive.93 Sherather considered that they were evidence which supported the Crown's case, and shewent on to consider other material, in particular the email from Mr X to Mr Tauberreferred to in [37] above and the accompanying spreadsheet.94[124] Mr Lennard suggested that these documents were simply Mr X's cashflowanalysis, as a director of HML, and as an accountant. We do not consider that thevarious documents can be explained away so easily. We agree with the Judge that, in91 Above at [37].92 Above at [34] and [37].93 At [169].94 At [170]–[177].effect, Mr X was telling his fellow accountant, Mr Tauber, that the "real costs" ofacquiring S1 and S2 were $1.25 million (the initial purchase price of both barges,together with their mobilisation costs).95 That is the clear and obvious meaning of thewords.[125] We have already dealt above at [117]–[118] with Mr Lennard's arguments inregard to the acquisition of S3, and, generally, at [119]–[120] in regard to the wiringdiagram referred to by the Judge in relation to that transaction.[126] In regard to JU, Mr Lennard argued that the wiring diagrams relied on by theJudge were not, and did not purport to be, a diagram of ownership or of obligationsassumed, and that they simply represented proposed money movements under theagreements then being negotiated and planned.[127] We do not consider that the Judge erred in her analysis of the JU acquisition.The Judge took into account a number of matters — including Mr Webb's role in theacquisition of JU, the contract between Ravestein and LCL, evidence given byMr Durnford-Slater (a shipbroker involved in the negotiations), emails from Mr Webbto Mr X and Mr Leith, dealings between HML and Westpac, the relevant paymentswhich were made, an email sent by Mr X to Mr Tauber dated 4 September 2008, theaccompanying wiring diagram, the further emails sent by Mr X to Messrs Tauber,Webb and Leith, and the further email and diagram sent by Mr X also toMessrs Tauber, Webb and Leith. The Judge accepted that some of the evidencepointed in favour of the defendants.96 Despite that, she was satisfied that the paymentmade by LCL to ASFL of $2.66 million, calculated as it was to include interest, musthave been intended to repay ASFL's loan to HML.97 We do not consider that the Judgerelied solely on the wiring diagrams, or that the ultimate inferences she drew as to JUwere in error.95 At [173] and [178].96 At [265].97 At [266].[128] Finally, in this regard, it was argued that the loans were re-documented in 2008,and that it was then recorded that the ASFL loans made in relation to S1, S2, S3 andJU were still outstanding.[129] A revolving credit facility was put in place between ASFL, HML, Mr Tauber,HBL and various other entities, which inter alia recorded that the total facility fromASFL included prior advances. It recorded the total amount of all advances made,with interest calculated on a daily basis at the rate of 18 per cent and compoundingmonthly. There was also a convertible note option agreement, giving HML, as theborrower, the option of converting mezzanine fees and premium interest into sharecapital.[130] We do not, however, consider that this document of itself advances matters farfrom the perspective of HML, HBL, and Mr Tauber. Repetition does not makesomething true, and the fact that the parties to the impugned transactions entered intofresh documentation purporting to record the advances and confirm their validity doesnot detract from the base evidence relied on by the Judge when she found that themoneys said to have been loaned went through a number of hands, but ended backwith ASFL.[131] Although there were other criticisms of the Judge's factual findings made inthe written submissions filed for the appellants, those criticisms were not advancedfurther in oral argument. We have considered those criticisms but they do not advancethe arguments we have already dealt with. Suffice to say we are not persuaded thatthe Judge made any material error in her factual analysis.[132] There are two additional matters we consider are relevant to the Judge's factualanalysis.[133] First, the Judge did not do so, but she could also have taken into account thatHML, HBL and Mr Tauber remained silent at their trial.[134] While the Crown had the burden of bringing evidence which prima faciaproved the actus rea and mens rea elements of the offences charged beyond reasonabledoubt, once it had done so, it was then for HML, HBL and Mr Tauber either to raise areasonable doubt about the evidence the Crown had brought, or to point to somefurther evidence which raised a doubt as to whether or not the Crown's evidence wassufficient to prove the elements of the offence to the required standard.98[135] Here, Mr Tauber did not give evidence. Nor did any representative of HML orHBL.[136] Section 33 of the Evidence Act 2006 provides that in a criminal proceeding, noperson other than the defendant, or the defendant's counsel or the Judge, may commenton the fact that the defendant did not give evidence at his or her trial.[137] It would have been open for the Judge to record that Mr Tauber did not giveevidence and that no representative from either of the defendant companies gaveevidence. She would have had to warn herself not to reason that, because no evidencewas given by any of the defendants, they or any one of them was therefore guilty.Nevertheless, in the circumstances of this case, the absence of defence evidence couldhave been taken into account by the Judge when she was considering whether to acceptall or part of the submissions advanced on behalf of HML, HBL and Mr Tauber.99[138] We also note that Mr Lau was not facing any charges. It was the appellants'case that Mr Lau was at all times acting for Mr Y, and that there was a propercommercial context explaining the transactions. It would have been open to HML,HBL and Mr Tauber to call Mr Lau. They would not thereby have exposed themselvesto cross-examination, but the evidence their submissions suggest Mr Lau would havegiven, may have provided an evidential basis for their arguments.[139] Section 33 is concerned only with the situation that can arise where a defendantdoes not give evidence or testify at his or her trial. The restrictions on a fact finder'sability to draw inferences from a defendant's failure to offer evidence through other98 And see AP Simester and WJ Brookbanks Principles of Criminal Law (5th ed, Thomson Reuters,Wellington, 2019) at [2.3].99 And see R v Gunthorp [2003] 2 NZLR 433 (CA) at [142]; R v Drain CA294/94, 11 October 1994at 3–5; Chen v R [2009] NZCA 445 at [153]–[154]; and R v Woodhouse CA117/06, 12 October2006 at [16]–[21].witnesses was considered by this court in R v Nobakht.100 In that case, Chambers Jobserved as follows:[88] The law is perhaps a little murky as to the inferences that can be drawnfrom the failure to call a material witness. What appears to be the current NewZealand position was enunciated in the lead judgment (delivered byGlazebrook J) in Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR731 (CA):[153] There is no rule [as to what inferences can be drawnfrom a party's failure to call material witnesses]. Rather, there is aprinciple of the law of evidence authorising (but not mandating) aparticular form of reasoning. The absence of evidence, including thefailure of a party to call a witness, in some circumstances may allowan inference that the missing evidence would not have helped aparty's case. In the case of a missing witness such an inference mayarise only when:(a) the party would be expected to call the witness (and this canbe so only when it is within the power of that party to producethe witness);(b) the evidence of that witness would explain or elucidate aparticular matter that is required to be explained or elucidated(including where a defendant has a tactical burden to produceevidence to counter that adduced by the other party); and(c) the absence of the witness is unexplained.[154] Where an explanation or elucidation is required to be given,an inference that the evidence would not have helped a party's caseis inevitably an inference that the evidence would have harmed it.The result of such an inference, however, is not to prove the oppositeparty's case but to strengthen the weight of evidence of the oppositeparty or to reduce the weight of evidence of the party who failed tocall the witness.[140] We acknowledge that the inference which could have been drawn by the Judgefrom the failure of HML, HBL and Mr Tauber to give or call evidence required cautionas it "rubs up against the fundamental right of an accused not to be compelled to be awitness, now enshrined in s 25(d) of the New Zealand Bill of Rights Act 1990".101We nevertheless consider that, in the particular circumstances of this case, the Judgewould have been entitled to take the failure to give or call evidence into account asweighing against the defence submissions advanced in regard to the chain of commandand the alleged commerciality of the transactions.100 R v Nobakht [2007] NZCA 488.101 At [91].[141] Finally, in this regard, there was a point raised by Mr Pike. He noted thatthe Judge did not consider propensity principles when considering the various charges.[142] There was significant similarity in the modus operandi adopted in regard toeach of the impugned transactions. They showed a tendency on behalf ofthe appellants to act in a certain way. Indeed, Mr Leith gave evidence that, in relationto S3, Messrs Tauber, Webb and X "had discussion along the lines of let's put in thatsame sort of jacked-up value structure". There was no obvious bar to this Courtconsidering this as propensity evidence and we agree with Mr Pike that it was open tothe Judge to adopt cross-propensity reasoning. She would of course have had toremind herself that each charge was the subject of a separate trial, and that separateconsideration of each, and separate verdicts, were required. Nevertheless, if sheconsidered that a pattern of conduct was established, or that the evidence demonstrateda propensity to act in a certain way, then she would have been entitled to use thatconclusion to assist her in deciding whether or not each particular charge was proved.[143] The fact that the Judge did not adopt cross-propensity reasoning does notundermine the consideration she gave to each individual charge. The common modusoperandi adopted by HML, HBL, Mr Tauber, Mr Webb and Mr X in relation to thevarious transactions does however provide support for the verdicts she reached inrelation to each charge.[144] In summary, we are not persuaded that there was any significant factual errormade by the Judge.Were HAL and HBL associated?[145] HML, HBL and Mr Tauber noted that the Judge recorded in her judgment thatthere was an issue at trial as to whether HAL and HBL were associated within themeaning of those words in the income tax legislation.102 The Judge noted that this wasrelevant to an argument by the Crown that the agreement between Lau Contracting onthe one hand and HAL on the other in relation to S1 and S2 was a sham. The Judgecommented that the argument did not assist the Crown unless there was evidence of102 At [153].association for tax purposes between HAL and HBL, and that there was no suchevidence.[146] HML, HBL and Mr Tauber argued that the Judge did not appreciate therelevance of this issue or of the consequential questions which, it was submitted, arosefor determination. It was argued that the relevance of the issue arose as follows:(a) The Crown case focused on "the reality" of the sale price in relation toS1 and S2 between Mr Lau (Lau Contracting) and HAL.(b) HAL did not depreciate either S1 or S2.(c) HBL acquired S1 and S2 for $4 million from HAL.(d) The Crown, relying on various provisions in the income tax legislation,argued that the cost of the barges to HBL, because of its associationwith HAL, fell to be treated as the lesser of the cost to it or the cost toHAL.(e) Unless HBL and HAL were associated, the sale price between HAL andMr Lau (Lau Contracting) was irrelevant, and HBL was entitled todepreciate S1 and S2 at the price it paid HAL for the barges.[147] Unfortunately, the Crown did not deal with this argument before us.[148] This argument related primarily to charge 5, although it also affected quantumin charges 6 to 9. Charge 5 related to the depreciation claimed by HBL in respect ofS1 and S2 in its income tax return for the year ended 31 March 2007.[149] It was the Crown case at trial that HBL acquired S1 and S2 at the price paid toDalmarine, and that the intermediary — HAL — was treated for tax purposes ashaving acquired the barges at that price pursuant to s YB 21. It was also submittedthat the agreement between HAL and HBL was, in all the circumstances, a deviceintended to facilitate the claim for depreciation deductions greater than that to whichHBL was entitled.[150] In our judgment, and for the reasons we have set out, it does not matter whetheror not HAL and HBL were associated within the meaning set out in the Income TaxActs 2004 and 2007, because HAL was a nominee which could be looked through fortax purposes. We have also explained that, in our view, the Judge was entitled to lookat the reality of the transaction, but that she was not required to go on and find, as anelement of the offence alleged in, inter alia, charge 5, that the transaction was a sham.Accordingly, we reject this ground of appeal as well.Mr Webb's appeal[151] The sole ground advanced by Mr Webb in support of his appeal againstconviction was that, should the appeal by HML, HBL and Mr Tauber succeed, thenhis appeal must also succeed, because he was found guilty as a party who had aidedand abetted the offending of HML, HBL and Mr Tauber. Given our conclusions inrelation to the appeal by HML, HBL and Mr Tauber, Mr Webb's appeal againstconviction cannot succeed.[152] In regard to his sentence appeal, Mr Webb argued, in effect, that thesentence imposed on him — nine months' home detention and 400 hours' communitywork — was manifestly excessive. He argued that the tax in issue attributable to theoffending was limited to approximately $220,000; he denied that he told outright liesto Maritime New Zealand. He argued that he did not receive a discount for remorse,but the Judge found that he was genuinely remorseful.[153] We do not accept Mr Webb's arguments. First, while the Judge noted that thequantifiable effect in monetary terms arising from the assistance given by Mr Webbwas some $220,000, she used that figure only when differentiating between MrWebb's culpability and the wider criminality which she found had occurred. TheJudge nevertheless considered that Mr Webb was fully involved in all the contrivedtransactions.103 Secondly, in relation to Maritime New Zealand, the Judge did notdirectly find that Mr Webb told lies to that entity. Rather, she said that he was fullyinvolved, not only in the contrived transactions, but in various other matters, including103 R v Honk Barges Ltd, above n 3, at [74] and [76].in what was said to Maritime New Zealand.104 Thirdly, the Judge did refer toMr Webb's remorse. She accepted that it was genuine, but she did not give Mr Webba specific discount for that remorse.105 It is implicit from the Judge's sentencing notesthat remorse was one of a number of factors she took into account in deciding toimpose a non-custodial sentence.[154] We do not consider that the sentence imposed can be said to be manifestlyexcessive, given Mr Webb's culpability in the dishonesty which occurred. If anything,the sentence was, in our judgment, lenient. The appeal against sentence cannotsucceed.Result[155] The appeals against conviction by Honk Barges Ltd, Honk Marine Ltd,Mr Tauber and Mr Webb are dismissed.[156] The appeal against sentence by Mr Webb is dismissed.[157] On 16 August 2018, the Judge made various suppression orders.106In particular, she suppressed Mr X's name, Mr Y's name and the name of one of hisassociated companies (Y Ltd). The Judge's orders were interim orders and they hadexpired before the appeal was heard. Nevertheless, the parties abided by thesuppression orders in their respective submissions and neither challenged the orderswhich had been made by the Judge.[158] We have considered the Judge's ruling of 16 August 2018. Insofar as we areaware, the reasons why those orders were made still subsist. On that basis, we aresatisfied that further suppression orders are appropriate.[159] We make an order prohibiting publication of name, address, occupation oridentifying particulars of X pursuant to s 200 of the Criminal Procedure Act 2011.104 At [74].105 At [78].106 R v Honk Barges Ltd [2018] NZHC 2094.[160] We make an order prohibiting publication of the name, address, occupation andidentifying particulars of Y and Y Ltd pursuant to s 202 of the Criminal ProcedureAct 2011.Solicitors:Crown Law Office, Wellington for Respondent