CHAHIL v R [2020] NZCA 436

CHAHIL v R [2020] NZCA 436 [18 September 2020]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA168/2020[2020] NZCA 436BETWEEN RUPINDER SINGH CHAHILAppellantAND THE QUEENRespondentHearing: 26 August 2020Court: Gilbert, Thomas and Dunningham JJCounsel: N Levy QC and A J D Bamford for AppellantB H Dickey for RespondentJudgment: 18 September 2020 at 2 pmJUDGMENT OF THE COURTThe appeal against sentence is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Gilbert J)Introduction[1] Mr Chahil appeals against his sentence of three years and two months'imprisonment for tax evasion and money laundering.1 He says he should have beensentenced to home detention.1 R v Chahil [2020] NZHC 317, (2020) 29 NZTC 24-061 [High Court judgment].[2] During the six-year period from 1 April 2008 to 31 March 2014 (the auditperiod), Mr Chahil controlled 17 companies that operated various restaurants knownas the Masala Restaurants. With only a few exceptions, the Masala companies did notfile any income tax returns during the audit period despite receiving at least55 reminder letters requesting these returns.2[3] On an approximately weekly basis, Mr Chahil and a co-offender instructedrestaurant managers to bring the cash takings to his home (or some other location asdirected) where it would be counted. Mr Chahil determined how much cash(described in the summary of facts as "[o]nly a small amount of the cash") would berecorded in the relevant company's accounts and instructed the respective managersto prepare false sales reports to reflect this. As well, Mr Chahil sometimes collectedcash directly from the restaurant tills. In this way, Mr Chahil causedthe Masala companies to file 115 GST returns which contained false sales figures.[4] Between 1 January 2012 and 23 April 2013, Mr Chahil delivered the cashcollected from the restaurants to Vijay Gupta, an accountant and business associate.Mr Gupta laundered the cash through various foreign exchange transactions and madeit available to Mr Chahil through various bank accounts.[5] The extent of the income tax shortfall is not known. The tax shortfall resultingfrom the false GST returns was $702,667. The total amount of funds the subject ofthe money laundering charges was stated in the summary of facts to be at least$524,185.[6] Mr Chahil was charged with tax evasion and money laundering in March 2017.On 8 October 2019, one day after his trial was scheduled to commence inthe High Court before a Judge sitting alone, Mr Chahil pleaded guilty to 43 charges asfollows:(a) 17 charges of knowingly not providing information to theCommissioner of Inland Revenue (the Commissioner) when required2 One company filed tax returns for 2009 and 2010, a second company filed a tax return for 2010and a third company filed a tax return for 2012. No other tax returns were filed by any Masalacompany for the six years of the audit period.to do so contrary to ss 148 and 143B(1)(b) and (f) of the TaxAdministration Act 1994 (TAA).(b) 17 charges of providing false information to the Commissioner to evadeGST, contrary to ss 148 and 143B(1)(c) and (f) of the TAA.(c) Nine charges of money laundering contrary to ss 66 and 243 ofthe Crimes Act 1961.[7] Mr Chahil was subsequently convicted and sentenced by Gault J to three yearsand two months' imprisonment and ordered to pay a fine of $50,000. This sentencewas arrived at in the following way:(a) Starting point for the tax evasion offending — three years and threemonths' imprisonment.(b) Uplift for money laundering — nine months.(c) Discount for time spent on home detention during the offending period— three months.3(d) Discount for guilty plea — seven months (15 per cent).(e) A fine of $50,000, being approximately $3,000 per charge on the17 lesser charges of knowingly not providing information tothe Commissioner.The appeal[8] Mr Chahil appeals against his sentence on three grounds:(a) The starting point on the tax evasion charges was too high. This is saidto be because the Judge failed to give adequate credit for the settlement3 High Court judgment, above n 1, at [45]–[47]. Mr Chahil spent six months on home detentionfrom 28 October 2016 for providing false or misleading information to Immigration New Zealand.in related proceedings under the Criminal Proceeds (Recovery) Act2009 which should have been regarded as "voluntary reparation relatedto" Mr Chahil.(b) The uplift for the money laundering charges was excessive. This is saidto be because dealing with the illegitimate proceeds of the GST evasionis inherent in the assessment of culpability on the GST evasion charges.Further, the sum laundered was significantly less than indicated.(c) The guilty plea discount should have been 20 per cent.[9] In summary, Mr Chahil says the starting point of three years, three months'imprisonment should have been reduced by nine months because of the settlement(bringing the starting point for tax evasion to 30 months). The uplift for moneylaundering should only have been three months (bringing the adjusted starting pointto 33 months). Allowing the three month credit for time spent on home detentionwould bring the indicative sentence to 30 months' imprisonment before considerationof the guilty plea discount. If the guilty plea discount was increased to 20 per cent(six months) and applied to this adjusted figure, this would result in an indicative endsentence of 24 months, enabling a sentence of home detention to be considered.Was the starting point for tax evasion too high?[10] Ms Levy QC, for Mr Chahil, submits it is necessary to consider a chronologythat goes beyond the summary of facts to which Mr Chahil pleaded guilty on8 October 2019.[11] Ms Levy says that for the purposes of the related proceedings under theCriminal Proceeds (Recovery) Act, the expert evidence for the Commissioner ofPolice was that, in respect of 17 restaurants, $9.579 million in cash sales had beenunder-reported for GST purposes, and staff wages and other expenses had been paidin cash. The total estimated tax shortfall for the companies was $4.177 millioncomprising GST of $1.202 million, income tax of $756,000 and PAYE shortfall of$2.219 million. Mr Chahil was personally said to have received undeclared dividendincome of approximately $760,052 with a co-offender receiving a similar amount of$773,528. The total tax evaded by all Masala-related parties during the audit periodwas therefore calculated to be at least $5,710,580.[12] The criminal proceeds recovery proceedings included a claim in respect ofanother party where the tax shortfall was calculated to be $500,268. Taking accountof this claim and use of money interest of $1,948,115, the overall claim totalled$8,160,835.[13] The criminal proceeds recovery proceedings were settled by agreement andapproved by an order of the High Court on 28 February 2017, prior to the chargesbeing laid against Mr Chahil and his co-defendants.4 An assets forfeiture order wasmade by consent in respect of funds totalling $8 million. In making the order,Edwards J stated that the "settlement sum of $8 million represents almost all ofthe unlawful benefit said to have been derived from the tax evasion offending".5[14] Ms Levy says the sum of $8 million is roughly the same as the figure of$9.579 million referred to at [11] above, being the under-reported cash sales for GSTpurposes, and a GST shortfall of $1.2 million. However, Ms Levy says the criminalproceeds recovery proceedings did not provide a forum for determining the accuracyof the calculations. For the purposes of the subsequent criminal proceedings, Ms Levysays the same Crown expert concluded in her brief of evidence that total cash salesomitted by Masala related companies from the GST returns was $6.5 million,$3 million less than the $9.579 million calculation in the recovery proceedings.The GST evaded was calculated to be $800,000, compared to $1.2 million.[15] At sentencing in the High Court, Mr Bamford, for Mr Chahil, submitted that itcould be inferred from this that the settlement agreement and forfeiture order hadresulted in an over-recovery of the GST evaded by at least $400,000. Gault J rejectedthis submission but sentenced Mr Chahil on the basis that "most of the loss has beenrecouped from the Court's approval of the settlement".6 Ms Levy submits this wasa "gross understatement". As stated in the summary of facts, the GST evaded was4 Commissioner of Police v Investments Ltd [2017] NZHC 284.5 At [13].6 High Court judgment, above n 1, at [29].agreed at $702,667 (down from $1.2 million) and this amount "and more" must havebeen recovered by the settlement and forfeiture order.[16] We are not persuaded there is anything in this point. Gault J correctly acceptedfor the purposes of sentencing that the amount of GST evaded was as stated inthe summary of facts to which Mr Chahil had pleaded guilty — approximately$700,000. The Judge also correctly noted that the income tax shortfall was notquantified.7 That observation also accords with the summary of facts. Mr Chahil didnot seek a disputed facts hearing. The Judge was therefore obliged to sentence him onthe basis of the agreed summary of facts. The settlement between other parties inthe criminal proceeds recovery proceeding was not binding on Mr Chahil or the Crownin the criminal proceedings.[17] In any case, the Judge accepted that most of the loss from Mr Chahil'soffending had been recouped and he sentenced him on that basis. We do not acceptthe Judge's use of the word "most" can properly be characterised as a "grossunderstatement" on the facts before him. Rather, we consider it was a fair summaryof the position. It is unlikely that the precise loss will ever be known given Mr Chahil'sfraudulent activity spanned many years, the absence of reliable records and hispersistent failure to ensure income tax returns were filed by the 17 Masala companies.It must also be borne in mind that the Crown will have incurred significant costspursuing recovery of the evaded taxes.[18] Ms Levy's next point is that reparation, whatever its form or timing, isa mandatory consideration under s 10 of the Sentencing Act 2002. She submits itwould be wrong to reason that payments made after tax offending is discovered cannothave significant impact. Further, the settlement of arrears before criminal proceedingsare brought cannot render s 10 redundant.[19] We accept these submissions. Section 10(1) requires the Court at sentencingto take into account: any offer of amends by or on behalf of the offender to the victim;any agreement between the offender and the victim as to how the offender may remedythe wrong; the response of the offender or his family to the offending; any measures7 At [26].taken or proposed to be taken by the offender or his family to make compensation orto apologise or otherwise make good the harm that has been caused; and any remedialaction taken or proposed to be taken by the offender.[20] However, the circumstances here do not fit neatly within s 10(1). Mr Chahilwas an undischarged bankrupt at the time the assets were initially restrained in thecriminal proceeds recovery proceedings on 9 December 2015. His personal assetswere not restrained. He was never a party to those proceedings, nor were any ofthe Masala companies. Moreover, there is no evidence of any involvement byMr Chahil in reaching the settlement. It would therefore be something of a stretch tosay that he should be treated as having made any offer of amends or as having enteredinto an agreement to remedy the losses he caused. The most that can be said is thatsuch an agreement was reached by others in relation to their assets enabling recoveryof most of the losses.[21] There is no doubt that the recovery must be factored into the sentencingexercise. Ms Levy acknowledged that in the present case, the recovery is relevant tothe assessment of the starting point. We agree with that. This Court addressedthe issue directly in R v Patterson, another case where the Crown had seizedthe proceeds of the criminal offending. Chambers J, writing for the Court, said this:8[41] There are several ways in which this issue can be addressed.Perhaps the most logical approach is to acknowledge "involuntary" recoveryof money stolen in the starting point analysis and "voluntary" reparation as amitigating factor — taking care, of course, not to double-count. We havealready indicated that fraud offending where no recovery is achieved is "moreserious" than fraud offending with complete recovery, if only because inthe latter case the victims' loss is transitory and not permanent. The offendergets some credit for that in the starting point adopted, but not much. Not muchbecause the offender's culpability is not significantly reduced: he or she is stilla fraudster and would not have voluntarily returned the money or thing stolenbut for being caught. Such a credit in the starting point has been taken intoaccount in our decision to uphold the judge's nine and a half year startingpoint.[42] "Voluntary" reparation is quite different. Where an offender exhibitsgenuine remorse and has done his or her best to atone financially for the fraud,whether by selling assets or borrowing or promising to make recompense byinstalments from future earnings, credit is appropriate as a mitigating factor.The reparation is material evidence of remorse, a factor recognised in s 9(2)(f)8 R v Patterson [2008] NZCA 75.of the Sentencing Act. The present case does not exhibit reparation or remorseof this character.[22] Gault J followed this approach:9[29] I accept that fraud offending where no recovery is achieved is "moreserious" than fraud offending with complete recovery, if only because inthe latter case the victims' loss is transitory and not permanent. In this contextI cannot take into account what Mr Bamford submits defence experts wouldhave said at trial about recoupment of tax lost, which the Crown does [not]accept — and Mr Bamford accepted this morning is of marginal relevance atsentencing. But it is fair to infer that most of the loss has been recouped fromthe Court's approval of the settlement, even though you were not a party tothe settlement and your personal assets were not forfeited. But there is adistinction between voluntary and involuntary recovery of money. It isappropriate to acknowledge "involuntary" recovery of money in the startingpoint analysis and "voluntary" reparation as a personal mitigating factor —taking care not to double-count.[30] However, in this case I consider the effect of the criminal proceedssettlement is modest. I accept, given the connection to the Masala relatedcompanies, through the separate holding companies, it is possible that yourfamily had some beneficial interests in the properties forfeited. But even so,your culpability is not significantly reduced given you would not havevoluntarily returned the money if you had not been caught.(Footnotes omitted.)[23] We cannot see any error in that analysis which, as can be seen, is entirelyconsistent with this Court's judgment in R v Patterson. In summary, we do not acceptMs Levy's submission that the Judge ought to have allowed a nine month deductionfrom the starting point "for this putting the matter right, particularly giventhe significant overpayment". We have already explained why we rejectthe significant overpayment thesis. Mr Chahil is not entitled to significant credit for"putting the matter right". On the evidence available, he had little, if anything, to dowith it.[24] The same starting point was adopted for Mr Chahil as was adopted by Moore Jfor Mr Chahil's co-offender, "J".10 Moore J considered J's culpability was lower thanthat of Mr Chahil and Mr Gupta.11 The sentence imposed on J was upheld on appeal9 High Court judgment, above n 1.10 At [35] (footnotes omitted). J has permanent name suppression.11 R v [J] [2018] NZHC 981.to this Court.12 We are satisfied the same starting point adopted by Gault J forMr Chahil was within the appropriate range.Was the nine-month uplift for money laundering too high?[25] Gault J noted the observations of this Court in R v Wallace that sentences formoney laundering should bear a relationship to the sentence imposed for the principaloffending — "[t]he more serious the principal offending, the more seriousthe laundering".13 The Judge also observed that the extent of the money launderingoperation and the offender's involvement in it were important considerations.14The Judge noted that the laundering covered a period of 14 months from 15 February2012 to 23 April 2013 and involved at least $524,000. The Judge describedthe laundering as a "sophisticated operation" involving numerous bank accounts andinternational jurisdictions.15 However, the Judge accepted Mr Chahil's role was todeliver the proceeds rather than participate in the machination of the transactions.Balanced against this, Mr Chahil was described as the "driving force" behindthe laundering operations which were to conceal the tax evasion for his gain.16The Judge said he would have adopted a starting point of at least two years andsix months' imprisonment if he were sentencing on the money laundering chargesalone.17 Taking these matters into account, the Judge considered a nine-month upliftfor the money laundering charges was appropriate.18[26] Ms Levy submits that the general principle that laundering should be viewedas proportionate to the seriousness of the principal offending does not apply wherethe principal offender is simply dealing with the proceeds of that offending. In suchcases, this use is inherent in the principal offending. R v Wallace and Zhang v R bothinvolved sentencing of offenders whose involvement was confined to the moneylaundering, not the principal offending. In R v Wallace, this Court followedthe English Court of Criminal Appeal in R v Greenwood which held that those who12 [J] v R [2018] NZCA 408.13 R v Wallace CA 415/98, 16 December 1998 at 8–9; applied in Zhang v R [2010] NZCA 481 at[10].14 High Court judgment, above n 1, at [40].15 At [41].16 At [42].17 At [43].18 At [44].launder money for drug dealers are nearly as culpable as those who participate inthe drug dealing.19 In Zhang v R, this Court applied the same reasoning.20 Ms Zhangwas described as the "washerwoman" of the profits from the drug deals arranged byher partner.21[27] However, Mr Chahil did not simply use the proceeds of his offending. He wasactively engaged in arranging for the money to be laundered in order to concealthe source of these funds, all for his own benefit. Ms Levy accepts there had to be anuplift. The only contest is whether nine months was excessive in all the circumstances.[28] Ms Levy submits an uplift of three months would have been sufficient.She contends that, of the $524,000 laundered, only about $56,000 could be attributedto GST evaded.[29] We do not accept these submissions. The agreed summary of facts states thatthe total amount of funds the subject of the money laundering transactions carried outby Mr Chahil and Mr Gupta were "at least" $524,184.94. Contrary to Ms Levy'ssubmission, a more than nominal uplift was required to reflect the serious and quiteseparate money laundering offending which Mr Chahil engaged in over a lengthyperiod. The uplift of nine months was entirely appropriate in all the circumstances.Further, in assessing the appropriateness of the adjusted starting point, we note thatMr Chahil was perhaps fortunate to receive a three-month discount for the fact he wassentenced to six months' home detention from 28 October 2016 for his quite separateoffending of providing false and misleading information to Immigration New Zealand.Was the guilty plea discount inadequate?[30] Ms Levy submits the Judge should have allowed a 20 per cent discount forMr Chahil's guilty plea. She says the defence evidence assisted the resolution ofa number of issues and some of the charges were downgraded to charges that couldonly be dealt with by way of a fine.19 R v Wallace, above n 13, at 3; referring to R v Greenwood (1954) 16 Cr App R (S) 614 at 615–616.20 Zhang v R, above n 13, at [10].21 At [1].[31] The charges were laid on 15 March 2017. This was after the criminal recoveryproceedings had been resolved. The Crown case was strong. The guilty pleas werenot entered until 8 October 2019. That was to have been the second day of the trial.A 15 per cent discount for such late guilty pleas can hardly be described as inadequate.[32] Standing back and assessing the sentence overall, we are satisfied it was withinthe appropriate range, particularly having regard to the duration and extent ofthe offending and Mr Chahil's high level of culpability.Result[33] The appeal against sentence is dismissed.Solicitors:Bamford Law, Nelson for AppellantCrown Solicitor, Auckland for Respondent