POME’E v INLAND REVENUE DEPARTMENT [2022] NZHC 2354

POME'E v INLAND REVENUE DEPARTMENT [2022] NZHC 2354 [14 September 2022]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECRI-2022-404-000197[2022] NZHC 2354BETWEEN SIONE NA'ANIUMOTU POME'EAppellantAND INLAND REVENUE DEPARTMENTRespondentHearing: 12 September 2022Appearances: S Moore for AppellantR McDonald for RespondentJudgment: 14 September 2022JUDGMENT OF VENNING JThis judgment was delivered by me on 14 September 2022 at 11.45 amRegistrar/Deputy RegistrarDateSolicitors: Ewart & Ewart Solicitors, AucklandKayes Fletcher Walker Ltd, Manukau, AucklandCounsel: S Moore, Auckland[1] Sione Pome'e pleaded guilty to 66 charges of evading or attempting to evadethe assessment or payment of PAYE and other deductions in breach of the TaxAdministration Act 1994 (the TAA), and two charges of aiding and abetting Pome'eEngineering Services Limited (Pome'e Engineering) to knowingly apply or permit theapplication of an amount of a deduction or withholding of tax for a purpose other thanin payment to the Commissioner of Inland Revenue (the Commissioner) pursuant tos 148 and 143A(1)(d) of the TAA.[2] On 12 May 2022 in the District Court at Manukau Judge G J Wagner sentencedMr Pome'e to 27 months imprisonment.1 Mr Pome'e appeals the sentence.Background[3] I take the background primarily from the summary in the Judge's sentencingnotes, which is based on the summary of facts to which Mr Pome'e pleaded guilty.[4] Mr Pome'e was the sole director and shareholder of Pome'e Engineering.Pome'e Engineering provided labour to the construction industry. It paid net wagesto its employees from shortly after its incorporation in 2012 until it was placed intoliquidation on 12 July 2019.[5] Pome'e Engineering was required to file monthly employer schedules and toaccount to the Commissioner for the PAYE and various student loan and KiwiSaverdeductions which were payable by the 20th of the following month.[6] The offending occurred over a total of 68 monthly PAYE tax periods betweenNovember 2012 and July 2019. For nearly all the relevant monthly periods, therequired tax returns were filed but the tax was not paid. In addition, almost all of theemployer schedules filed understated the amounts to be paid.1 Commissioner of Inland Revenue v Pome'e [2022] NZDC 8579.[7] Through Mr Pome'e's offending, Pome'e Engineering evaded payment to theCommissioner of a total of $1,699,011.21 and applied withholding deductions of$164,995.93 other than in payment to the Commissioner. The total amount involvedin the offending was $1,864,007.14.[8] Of that sum, $491,275.74 had been recovered or paid from Mr Pome'evoluntarily. Of the $491,275.74, $125,000 had been taken pursuant to a deductionnotice under s 157 of the TAA. The liquidators of the company provided a further netpayment $223,974.41.[9] In summary, of the $1,864,007.14, the total outstanding at the date ofsentencing was $1,148,756.99. Mr Pome'e or entities associated with him hadvoluntarily paid back $366,275.74 while $348,974.41 could be said to have beeninvoluntarily recovered, either from the liquidators or pursuant to the s 157 notice.[10] During the nearly seven years of offending, the Inland Revenue Department(IRD) sent numerous statements of account and letters to Pome'e Engineeringregarding the default and failure to pay. Mr Pome'e was personally informed of theseriousness of non-payment and consequences. Despite that the offending continued.[11] When spoken to about the offending Mr Pome'e admitted using the funds forsignificant personal spending and applying some for other family members.Approximately $1 million was transferred to a joint account in the name of Mr Pome'eand his uncle K Pauuvale, and otherwise used for overseas travel and spending,personal shopping including at high-end retail stores, various loans or gifts to himself,employees and others. The spending included a $109,995 loan or gift for a motorvehicle, a gift of $85,000 to Charles Pome'e, and over $25,000 was transferred toJamaican Money Market for Mr Pome'e's nephew's music career.District Court sentence[12] After discussing the purposes and principles of the Sentencing Act 2002, andhaving regard to the cases cited to her, the Judge took as a start point for imprisonmentfour years, six months, consistent with the starting point given in her sentenceindication. The Judge then allowed Mr Pome'e a full discount of 25 per cent for theguilty pleas, a further five per cent for personal factors as disclosed in a s 27 report,five per cent for good character, and a further 15 per cent to take account of the totalreparation that had been made.[13] In fixing the further discount at 15 per cent for reparation the Judge noted itwas anticipated a further $200,000 was likely to be paid. The Judge declined to makeany further reduction for remorse. In the circumstances, while the deductions totalled50 per cent, when that was applied to the starting point of four years, six months, theJudge was left with the end sentence of two years, three months, so that home detentionwas not an available consideration.The appeal[14] Mr Pome'e appeals his sentence. He alleges that the Judge fell into error in thefollowing ways:(a) the starting point was too high. The Judge should have followed thestarting points from Court of Appeal or High Court authority rather thanthe District Court case the Judge particularly relied on;(b) the Judge was wrong to group all reparations (involuntary andvoluntary) together;(c) the Judge erred in not giving a credit for remorse; and(d) s 16 of the Sentencing Act was triggered and home detention shouldhave been considered; and[15] Overall the submission for Mr Pome'e is that the correct starting point shouldhave been between three years, three months to somewhat less than four years. Buteven if the starting point taken by the Judge was correct it should have been reducedby a further 12 per cent for the involuntary reparations and the loss figure re-adjusted.Next, a further additional discount of five to 10 per cent should have been providedfor remorse so that the ultimate end sentence would be less than two years. Homedetention was an appropriate sentence.The Commissioner's response[16] The Commissioner opposes the appeal. The Commissioner submits the endsentence was not manifestly excessive, in particular:(a) the starting point was within range; and(b) the discounts were appropriate, particularly in light of the fact thefurther $200,000 reparation that the Judge anticipated would be paidhas not been paid.Principles[17] As an appeal against sentence the Court must allow the appeal if satisfied thatif, for any reason, there is an error in the sentence imposed and a different sentenceshould be imposed. Otherwise the Court must dismiss the appeal.2[18] The question is whether the end sentence imposed is manifestly excessive. Thefocus is on the sentence imposed rather than the process by which it was reached. TheCourt will not intervene where the end sentence is within a range that can be justifiedby sentencing principles.3The basis for sentencing[19] At the outset of the appeal, Mr Moore sought to challenge the factual basis forthe sentence imposed in the District Court. He suggested that PAYE may not havebeen applicable to portions of the quantum. He suggested the unpaid tax may be upto $200,000 less than in the summary.[20] I indicated to Mr Moore that at this appeal hearing I was not prepared to revisitor relitigate the basis of the agreed facts which Mr Pome'e had pleaded guilty to, andupon which he was sentenced. It is not open for an appellant to challenge the factualsummary in an agreed statement of facts on an appeal.2 Criminal Procedure Act 2011, s 250.3 Tutakangahau v R [2014] NZCA 279 at [32]–[36], [2014] 3 NZLR 482; and Toko v R [2017]NZCA 460 at [19].[21] If Mr Pome'e wished to challenge the basis in the summary of facts theappropriate process was to follow the process for a disputed fact hearing. As the Courtof Appeal said in Pokai v R:4[30] In developing this argument, counsel for Ms Black sought to rely uponfactual material that did not form part of the summary of facts. This includedmaterial that counsel had received from the police during the disclosureprocess. We do not propose to have regard to that material for presentpurposes. This Court has made it clear in cases such as R v Apostolakis and Rv Whiunui that, in cases where counsel have reached agreement regarding thefactual summary on which a guilty plea is to be entered, sentencing mustproceed on the basis of that summary. Any appeal against sentence mustsimilarly be decided having regard to the facts contained the summary.[22] The point was repeated by the Court of Appeal in Chahil v R:5[16] We are not persuaded there is anything in this point. Gault J correctlyaccepted for the purposes of sentencing that the amount of GST evaded wasas stated in the summary of facts to which Mr Chahil had pleaded guilty —approximately $700,000. The Judge also correctly noted that the income taxshortfall was not quantified. 7 That observation also accords with the summaryof facts. Mr Chahil did not seek a disputed facts hearing. The Judge wastherefore obliged to sentence him on the basis of the agreed summary of facts.The settlement between other parties in the criminal proceeds recoveryproceeding was not binding on Mr Chahil or the Crown in the criminalproceedings.[23] In Mr Pome'e's case the sentence indication was given in May 2021 andaccepted that month. The sentence hearing was then adjourned on several occasionsbefore it was dealt with on 12 May this year. Mr Pome'e and his advisers have hadample time to address any disputed basis for sentencing. In fact, there was a mistakein the summary that was before the Judge for the sentence indication, as the Judgenoted at [6] of the sentence indication.6 But an amended summary was filed when theguilty plea was entered later in May 2021, which correctly reflected the charges MrPome'e pleaded guilty to, and recorded the correct total amount of avoided tax.Finally, I note the figures in the summary were primarily based on returns submittedby Mr Pome'e.4 Pokai v R [2014] NZCA 356 (footnotes omitted). See also Herlund v R [2021] NZCA 71.5 Chahil v R [2020] NZCA 436.6 Commissioner of Inland Revenue v Pome'e DC Manukau CRI-2019-092-012903, 10 May 2021.Starting point[24] The appellant makes two principal points in relation to the starting point. Firsthe submits the starting point was too high and the Judge erred by relying on DistrictCourt authorities rather than Court of Appeal or High Court authority. Next, hesubmits that the Judge should have taken the involuntary reparation amount intoaccount when fixing the starting point for sentence.[25] In Mehmood v R a core tax of $1 million was evaded. (The Inland RevenueDepartment's (IRD's) claim actually totalled $3.4 million with interest and penalties).7The offending involved 144 false returns over a period of five and a half years.[26] The Court's focus for the starting point was on the core loss of $1 million ratherthan the higher figure inflated by interest and penalties. The Court simply noted thefour year starting point involved no error, noting the three offences Mr Mehmood hadpleaded guilty to each attracted a five year maximum sentence and the offending wasover a period of five and a half years, and involved understating income tax, PAYEand GST.8[27] In the present case, Mr Pome'e's offending extended over six years, eightmonths and at $1,864,007 in total the sum involved in core tax not paid was almostdouble that of Mr Mehmood.[28] In Chahil v R around $700,00 in GST was evaded.9 In addition there was anincome shortfall. Mr Chahil and the co-offender also instructed managers of the 17restaurants he controlled to deliver cash to his home and only a small amount wasrecorded and accounted for. The Court confirmed he had pleaded guilty toapproximately $700,000. Three years, three months' imprisonment was adopted withan uplift of nine months applied to reflect a further charge of money laundering, whichinvolved Mr Chahil delivering in excess of $500,000 to an accountant and businessassociate to be laundered. Judge Wagner referred to Cahill but did not consider ithelpful as she noted there were other elements (the money laundering) and again the7 Mehmood v R [2015] NZCA 338.8 At [26]–[27].9 Chahil v R, above n 5.starting point was not the focus of the appeal. I agree with the way Judge Wagnerdealt with Chahil.[29] I consider Judge Wagner was correct to focus on other cases involving offencesrelated to breaches of the TAA even though they were District Court authorities.[30] The Judge particularly referred to Lasek v R.10 Mr Lasek was sentenced on 44charges for failing to account for $1.377 million for PAYE and other tax, eight furtheroffences for similar offending, which amounted to $140,000. The total amount was$1.517 million. Judge O'Driscoll adopted the starting point of four years, ninemonths' imprisonment.[31] I have also considered the other cases referred to by counsel, includingCommissioner of Inland Revenue v Mills, Commissioner of Inland Revenue v Cree,and Department of Inland Revenue v Kumar.11 In Mills the Court took a starting pointof three years where the offender failed to file returns over a nine year period. Theoffending totalled $996,000. In Cree the Court took a starting point of four years, sixmonths. The amount involved was $1.1 million across 26 returns. In Kumar the Courttook a starting point of four and a half years' imprisonment for offending involvingabout $830,000 over six years. While those were all District Court authorities, theyare more directly relevant in terms of the general desirability of consistency withappropriate sentencing levels in respect of similar offending.[32] Next, in the Court of Appeal authority of Wang v R, Mr Wang was convictedof 16 counts of tax evasion.12 The total evaded was $1.133 million. While the Judgehad indicated a start point of four and a half years, he adjusted that to five years to takeaccount of offending while on bail. The Court of Appeal observed the Judge couldhave taken a higher starting point.[33] Further, as Mr McDonald submitted, the Court of Appeal has confirmed thefocus is on culpability. Culpability is to be assessed by the circumstances and the10 Inland Revenue Department v Lasek [2018] NZDC 7473.11 Commissioner of Inland Revenue v Mills [2018] NZDC 2274; Commissioner of Inland Revenuev Cree [2019] NZDC 1475; and Department of Inland Revenue v Kumar [2018] NZDC 4405.12 Wang v R [2016] NZCA 56.nature of offending, its magnitude and sophistication, the type, circumstances andnumber of victims, motivation for the offending, the amounts involved, the losses, theperiod over which the offending occurred, and the seriousness of the breaches oftrust.13[34] In summary, having regard to relevant authorities, the maximum sentence, thenumber of charges, the amount of core tax evaded, and the personal advantage takenby Mr Pome'e of the tax debt, four years, six months was well open to the Judge as astarting point for sentence.Involuntary/voluntary reparation[35] Mr Moore's second challenge to the starting point is the way the Judge dealtwith the differences between voluntary and involuntary reparation payments. TheJudge had effectively added the two together and applied the total reparation (bothvoluntary and involuntary) as a mitigating factor.[36] In R v Patterson the Court of Appeal noted that, where an offender had beenrequired to pay back funds or funds were taken the Court could give some credit byreducing the starting point to reflect the fact the harm suffered by the victim had beenreduced which lessened the overall seriousness of the offending.14 However suchcredit was said to be:15 Not much because the offender's culpability is not significantly reduced:he or she is still a fraudster and would not have voluntarily returned the moneyor thing stolen but for being caught.[37] On the other hand, voluntary reparation is appropriately considered at themitigating stage, having regard to s 10 and s 9(2)(f).[38] In Mr Pome'e's case there were involuntary recoveries of $348,974.41 andvoluntary recoveries of $366,275.74. But it would make little difference to the endsentence if the involuntary reparation was dealt with in accordance with the Patterson13 R v Varjan CA97/03, 26 June 2003 at [22].14 R v Patterson [2008] NZCA 75. See also Zhang v R [2022] NZCA 267.15 At [41].approach.16 No more than four months would have been appropriate as an allowancefor the involuntary payments given the way the Court of Appeal has treated suchpayments. If there was a modest reduction in the starting point from four years, sixmonths by four months (seven and a half per cent approximately) to four years twomonths, then a lesser reduction of say 10 per cent would have been appropriate for thevoluntary reparation. Applying the other deductions allowed by Judge Wagner thatwould lead to an effective end sentence of 27½ months.[39] There is a further point in relation to the reparation issue. That is, that inincreasing the allowance for reparation from the 10 per cent indicated in the sentenceindication to 15 per cent, the Judge anticipated that a further $200,000 would be paid.It was not. Mr Moore suggested that it might still be available if the appeal wasallowed but apart from the vagueness of the proposal (with no criticism of counselintended) it would be inappropriate to grant an appeal on such a conditional basis.Remorse[40] Mr Moore next submitted that a further allowance should have been made forremorse. He argued remorse was demonstrated by the voluntary reparation whichincluded proceeds from sale of the family home and was also referred to in the s 27and pre-sentence (PAC) reports.[41] It was open to the Judge to accept that any remorse was effectively hindsightand effectively self-serving given the situation Mr Pome'e was in. The PAC reportnoted Mr Pome'e said he was remorseful but then went on to note he put forward aconsistent rationale that centred around what he described as having an obligation ofresponsibility to maintain some level of financial remuneration for his staff. Further,the suggestion of remorse does not address the $1 million transfer to the joint accountwith his uncle or the personal spending.[42] In cases such as this the Court often considers remorse is exemplified and takeninto account in fixing the allowance for reparation. In this case, as noted, the Judge16 R v Patterson, above n 14.provided an increased amount from 10 per cent to 15 per cent in sentence for reparationwhich was more than sufficient to provide for any remorse.[43] While counsel did not focus on the s 27 report, it could be said the Judge wasgenerous in allowing a five per cent reduction based on that report. The report is clearthat Mr Pome'e had a loving and supportive family with good values. His situation isquite different to the exemplar in Zhang v R where the Court of Appeal referred toexamples of social, cultural or economic disadvantage with a demonstrablerelationship to the offence supporting a reduction.17 Despite the author's view that MrPome'e felt obligated to look after his family, that would not support a reduction. Thecombined 10 per cent for the s 27 report and good character might be regarded asgenerous.Section 16 and home detention[44] In his written submissions Mr Moore argued for home detention by referenceto Fairbrother v R.18 However at the outset of the hearing he accepted that given thedecision of Nassery v R,19 that argument was not available. The concession wasappropriate. Fairbrother is distinguishable in any event because in that case the endsentence was two years so that home detention was available. In fact the Courtaccepted the Judge had made an error and the sentence should have been one year, 10months' imprisonment. In the present case, however, the end sentence was above twoyears so that home detention was not an option.20Summary[45] In summary, it is not open at this stage for the appellant to challenge the factsin the summary of facts, particularly the figures upon which he was sentenced. Next,the starting point was within range. Even if the starting point could have been reducedfor the involuntary payments in accordance with the approach in Patterson, at the endof the day it would make no difference inasmuch as any such allowance would lead toan adjustment to the reduction available for the amount voluntarily paid. The17 Zhang v R [2019] NZCA 507, [2019] 3 NZLR 648.18 Fairbrother v R [2013] NZCA 340.19 Nassery v R [2022] NZCA 213; [2022] NZSC 97.20 Sentencing Act 2002, s 15A.allowances of 10 per cent in total for personal issues and good character were perhapsgenerous.[46] The appellant fails to satisfy the Court that the end sentence imposed wasmanifestly excessive.Result[47] The appeal is dismissed.__________________________Venning J