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Wang v R [2016] NZCA 56 (10 March 2016)

Last Updated: 17 March 2016

JUDGMENT OF THE COURT

1. The appeal by Jianbin Wang against sentence is dismissed.
2. The appeal by Fenglan Liu against conviction is allowed.

100. The convictions entered in the District Court on all charges against Fenglan Liu are quashed and verdicts of acquittal are entered.

4. There is no order for a retrial.

____________________________________________________________________

REASONS OF THE COURT

(Given by Stevens J)

Table of Contents

Para No
Introduction [1]
Wang appeal background [5]
Sentencing process [10]
The disputed facts hearing [12]
Challenge on appeal [16]
Analysis [20]
The three specific challenges [28]

Ruling 1 [29]

Ruling 4 [33]

Standard of proof of aggravating factor [36]

Overview [38]
Result [39]
Appeal by Ms Liu background [40]
The charges against Ms Liu [44]

The prosecution case [46]
Judge’s findings on knowledge and intention [51]
Appellate review [54]
Our analysis [56]

Submissions for Ms Liu [56]

Factual assessment [57]
Result [76]

Introduction

[1] Top International Trading Ltd (TITL) is a company that operated three retail stores under the name Best 4 Less in New Plymouth, Waitara and Whanganui. For several years TITL under-reported its earnings to the Commissioner of Inland Revenue (the Commissioner), resulting in the evasion of both income tax and goods and services tax (GST). In 2015 TITL pleaded guilty to 16 counts of knowingly providing false information to evade the assessment or payment of GST and income tax.
[2] Mr Wang is the director and sole shareholder of TTIL. He was the person behind the tax evasion. He pleaded guilty to a number of charges of being party to the offending of TITL, and was sentenced by Judge Roberts in the New Plymouth District Court to three years and nine months’ imprisonment.^[1] Mr Wang disputes the amount of tax that was evaded. He unsuccessfully challenged the Commissioner’s assessment at a disputed facts hearing,^[2] and does so again on appeal. The primary submission is that the correct lesser amount of tax would support a reduced level of sentence.
[3] Fenglan Lui is the wife of Mr Wang. Although not a director or shareholder of TITL, she was also charged as a party to the company’s tax evasion. She was found guilty by Judge Roberts of a total of 16 charges.^[3] Ms Liu managed one of the three stores, and brought the cash takings from that store home each night. The business of TITL was managed from the family home. She appeals her convictions primarily on the basis that the Judge was incorrect to conclude she had knowledge of what was happening, but also that there was no evidence of aiding or a duty to prevent the offending.
[4] We will address each appeal separately.

Wang appeal background

[5] Mr Wang and Ms Liu arrived from China with their two children in late 2002. TITL was incorporated in 2003, with Mr Wang as the sole director and shareholder. It operated three stores selling generally low cost items. Mr Wang ran the business from the family home in New Plymouth. Accounts for the business were sent to the home address. The cash generated by each of the three stores was collected at the family home. In the case of the Waitara store, the cash and other records (including Eftpos details) were brought home by Ms Liu. In the case of the New Plymouth and Whanganui stores, the cash and other transaction details were brought home by either Mr Wang or by an employee from the relevant store.
[6] Between 2008 to 2011 the sales of TITL were significantly underreported to the Inland Revenue Department (IRD) in the income tax and GST returns filed by a tax agent on behalf of TITL. In June 2012 the IRD commenced an investigation. Initially it sought information from the company accountant and later, banking information. The investigators noted that Mr Wang was receiving Working for Families tax credits because of the income declarations to the IRD. An examination of affairs of TITL for the period between 2008 and 2011 disclosed but a modest income, averaging, for the four year period, a figure slightly in excess of $31,000 per annum. Investigators noted the movement of cash and monies within various bank accounts. Extremely low cash bankings were shown. The IRD was also alerted to travel movements of family members between Auckland and Hong Kong.
[7] In early 2013, investigators from IRD conducted searches of the business premises and the private home of Mr Wang and Ms Liu. Around $16,000 in cash and USB drives containing what is described as the “Mandarin cash books” were located in a satchel that Ms Liu was seeking to remove from the home. The Mandarin cash books were found to detail the full sales records of TITL. An assessment by IRD investigators showed the total amount of GST and income tax evaded was around $1.133 million. When Working for Families tax credits were factored in, the total tax evaded was calculated to be $1.184 million.
[8] In terms of the preparation of the accounts of TITL and the filing of returns to the IRD, Mr Wang himself undertook these functions with assistance from a tax accountant, Mr Kin Pan Chan. He collated the financial information relevant to the preparation of the accounts of TITL and forwarded this information to Mr Chan. Mr Chan told both IRD and the Court that he only ever dealt with Mr Wang concerning the accounts of TITL.
[9] Whilst on bail for the above offending, between April and September 2013, Mr Wang evaded further tax by selling the three businesses and their private property and transmitting the proceeds to a bank account in their homeland China. He also extracted money from ATMs and banks, resulting in a total of $479,600 in tax being evaded during this time.

Sentencing process

[10] In July 2013, Mr Wang sought a sentencing indication in respect of the GST and income tax offending.^[4] The Judge identified the aggravating features of that offending as: the premeditation involved in the offending, the time span of roughly five years of offending, and the extent of the GST and tax losses. With reference to other cases, the Judge gave an indication of a starting point of four and a half years’ imprisonment.
[11] By the time of the sentencing hearing in November 2015, the Commissioner had laid 21 additional tax evasion charges. Mr Wang also pleaded guilty to these charges. Viewed in totality, the Judge described this as “offending on a grand scale with significant tax avoidance resulting”.^[5] To take into account the tax evasion offending that occurred while Mr Wang was on bail, the Judge applied an uplift of six months to the starting point given in the sentencing indication, resulting in a starting point of five years’ imprisonment. The Judge applied a full 25 per cent discount for the guilty pleas, as proposed in the sentencing indication, leading to an end sentence for Mr Wang of three years, nine months’ imprisonment.

The disputed facts hearing

[12] When Mr Wang pleaded guilty prior to trial he disputed the extent of the tax shortfall contended by the Commissioner. The disputed facts hearing took place at the same time as the trial of Ms Liu. The Judge’s decision on the issue of the extent of the losses from Mr Wang’s offending was given as part of his oral judgment on the criminal liability of Ms Liu.^[6]
[13] The point of contention stemmed from the calculation of the gross profit of TITL, given the extensive underreporting of sales. The Commissioner had initially calculated a gross profit percentage for the years in question at between 62 to 75 per cent. For sentencing purposes, the Commissioner reduced the figures by adopting the lowest number in this range, 62 per cent. This resulted in an amount of unpaid tax of $1.133 million. Mr Wang submitted that the gross profit percentage adopted by the Commissioner was unrealistic and inappropriate. He claimed a 41 per cent calculation was more accurate,^[7] thus leading to a lower figure for the total tax evaded.
[14] In calculating the outstanding amount of GST and income tax owing, the Commissioner relied on the “Mandarin cash books” created for the business. These were seen as an accurate and reliable indication of the gross profit, given the general correlation between the cash books and receipts, till reports and Eftpos entries. Mr Wang, however, claimed the Mandarin cash books were inflated by him as they were created for the purpose of showing prospective buyers the viability of the business. They were not an accurate statement of the cash sales or the gross profit. Mr Wang called evidence from an expert witness, Tina Payne, whose opinion was based on certain benchmarks (created and used by the IRD as guidance) as to what profit might be expected in a given industry. She opined that a 41 per cent gross profit more accurately reflected what would be found in a business of this type and size.
[15] Judge Roberts rejected the approach of Ms Paine as “quite unrealistic”.^[8] He found it was an “inescapable conclusion” that the Mandarin cash books were an accurate reflection of the income generated by the TITL business.^[9] Any alternative assessment would be based on conjecture, given the absence of any records to substantiate cash stock expenditure contended for by Mr Wang.^[10] The Judge also rejected Mr Wang’s claim that the Mandarin cash books were created for the purpose of showing prospective purchasers of the business.^[11] As a result the Judge upheld the Commissioner’s approach to the assessment and calculation of GST and tax evaded. The Judge added he was “satisfied thus to the requisite standard that the [Commissioner’s] assessments and conclusions in relation to those figures are proper”.^[12] Thus sentencing was to proceed on the basis of the tax evasion amount assessed by the Commissioner.

Challenge on appeal

[16] Mr Wang appeals against sentence on the grounds that it was manifestly excessive due to the Judge’s incorrect factual findings at the disputed facts hearing. Mr Wang submits these errors were caused by incorrect decisions made by the Judge when addressing the amount of tax outstanding during the disputed facts hearing. Namely, he says the Judge erred in:

• (a) ruling inadmissible the financial records of a witness, Anna Liu;^[13]
• (b) determining that a witness called by the Commissioner could not be questioned on “similar business evidence”;^[14] and
• (c) not stating that the burden of proof for an aggravating fact in a disputed facts hearing is beyond reasonable doubt.^[15]

[17] On appeal Mr Hannam, for Mr Wang, repeated the submission that an annual gross profit figure of 62 per cent used by the Commissioner was unrealistic. In his written submissions Mr Hannam relied on Ms Payne’s evidence supporting an alternative figure of 42 per cent.^[16] He submitted: “a much lower unpaid tax figure was calculated by Ms Payne with a conclusion that IRD arrived at a tax figure $320,640 too high”. This would have produced a total figure for unpaid GST and income tax of approximately $813,000.
[18] At the appeal hearing Mr Hannam put the matter differently by relying on other exhibits previously presented by Ms Payne.^[17] He submits a greater allowance than $320,640 could be justified, but acknowledges the ultimate figure for GST and tax evaded (leaving aside the offending whilst on bail) would need to be recalculated by the Commissioner. The two exhibits, TP3 and TP4, show a comparison between gross profit calculated at 62 per cent ($3,034,164), 51 per cent^[18] ($2,506,835) and 41 per cent^[19] ($2,015,299). The difference between the highest and lowest figures is around $1 million. But we emphasise that further calculations would be necessary before the relevant GST and tax evaded figures are known.
[19] In response, Ms Carter, for the Commissioner, submits the precise quantum of tax evaded would not have made a material difference to the sentence imposed. Ms Carter points to the difference of around $300,000 mentioned in Mr Hannam’s written submissions. She submits that, even if the loss figures were further adjusted in reliance on the exhibits produced by Ms Payne, any resulting change in quantum would not require an alteration in sentence.

Analysis

[20] Before addressing the three specific points raised by Mr Wang, we make some general observations about the correctness of the sentence. The Judge’s unchallenged finding was that this was offending “on a grand scale”.^[20] The aggravating factors relating to the offending include the length of time (five years) over which the fraud was committed, the different types of tax involved (GST, income tax and Working for Families tax credits), the premeditated nature of the offending involving a “systemic process”,^[21] the breach of trust through defrauding the public purse of different types of tax and tax credit, the personal benefit to Mr Wang and his wife, and the offending comprising further tax evasion whilst Mr Wang was on bail. To these aggravating factors must be added the level of tax evaded.
[21] As to the assessment of the appropriate level of loss of GST and income tax, the object for the purposes of sentencing is not to determine the precise liability of the company (TITL) to pay tax, but rather to assess the criminal culpability of Mr Wang for the offending. We agree with Ms Carter’s submission that this must necessarily be a broad-brush exercise, not least because in cases of this type the precise scale of the offending will often be elusive. In any event, the amount of tax evaded is only one of many available aggravating factors. It is therefore difficult to develop a tariff or guideline for the purposes of major fraud sentencing. As this Court said in R v Varjan:^[22]

Culpability is to be assessed by reference to the circumstances and such factors as the nature of the offending, its magnitude and sophistication; the type, circumstances and number of victims; the motivation for the offending; the amounts involved; the losses; the period over which the offending occurred; the seriousness of breaches of trust involved; and the impact on victims.

[22] On the issue of the value of property involved, the discussion in the Supreme Court leave judgment Andrews v R is apposite.^[23] A sentence of six years’ imprisonment with a minimum period of imprisonment of three years had been imposed on the appellant on three charges of receiving, one of conspiracy to receive and one of burglary. In his sentence appeal, Mr Andrews had challenged the value of property involved and had written to the sentencing Court requesting a disputed facts hearing. One was not held. The Supreme Court refused leave to appeal. The Court noted Mr Andrews was represented at sentencing and the application for a disputed facts hearing had not been pursued by counsel. The Court added:^[24]

... What was important for sentencing purposes was not the precise value of the property involved but rather the overall scope and significance of his offending, which was considerable to say the least. As well, there were other aggravating factors, not least the commission of the burglary while on bail and just before his scheduled trial.

[23] Given these observations about the relative value of property involved, we consider it is incumbent on a sentencing Judge, when a disputed facts hearing is sought, to assess at an early stage whether a disputed facts hearing is really necessary. If, as in Andrews v R, the precise value of the property would have made no difference, it should not fall on the criminal justice system to hold a hearing where modest and non-material differences are explored in great detail, at considerable cost to all those involved.
[24] It is also relevant to refer to the principles to be applied where a disputed facts hearing is resolved against the defendant. The inevitable result is that he or she does not fully accept responsibility for the extent of the offending and the guilty pleas do not carry with them the same entitlement to the full savings in terms of reduction in public expenditure and demand on state resources. It is well settled that such amount may reduce the credit otherwise due to the defendant. Thus, as this Court found in Nathan v R, the effect of a disputed fact hearing where the disputed facts are resolved completely or largely in favour of the Crown may require the sentencing Court to revaluate the appropriate discount for the guilty plea.^[25] A reassessment of the reduction must take into account factors such as the delay caused by the disputed fact hearing, the length of the hearing, and the number of witnesses.^[26]
[25] Drawing the threads together, while the differences between the annual gross profit figures of TITL contended for lie between 62 and 41 per cent, we do not consider the difference to be material in the circumstances of the sentencing of Mr Wang. Here, a range of other aggravating factors combine amply to support the Judge’s finding that this was offending on a very significant scale. On the figures initially relied upon by Mr Hannam in his written submissions, the total losses to Inland Revenue could fairly, taking a middle course between the opposing views, be said to be approximately around $1 million. That is substantial on any measure.
[26] We see no proper basis for relying on the exhibits (TP3 and TP4) produced by Ms Payne. Her approach had been rejected by the Judge and that conclusion was plainly available to him. But, even using the lower figure of 41 per cent annual gross profit advanced by Mr Wang, the amounts of GST and income tax involved remain substantial. Further, there is no basis for setting aside the Judge’s finding that the Mandarin cash books are an “accurate reflection” of the income generated by the business.^[27]
[27] Accordingly we conclude that, while the level of tax evaded is relevant and important, given the other aggravating factors applying to culpability, the level of gross profit margin contended for by Mr Wang would have made no material difference on sentence. The appeal against sentence can be dismissed on that basis alone. We also add that, as the disputed facts hearing was resolved completely in favour of the Commissioner, it is surprising that Mr Wang received the full 25 per cent discount for his guilty pleas.

The three specific challenges

[28] Given the above conclusions we can deal briefly with the three matters raised by Mr Wang. Mr Wang challenged two of the Judge’s evidential rulings in the course of the disputed facts hearing, namely Rulings 1 and 4.

Ruling 1

[29] In Ruling 1, the Judge ruled inadmissible financial records that Mr Wang sought to produce in cross-examination through the Crown witness, Anna Liu.^[28] Ms Liu was a former employee of TITL. She had purchased the Whanganui store from Mr Wang after the IRD investigation had commenced. The accounts Mr Wang sought to produce related to the partial financial year from 13 May 2013 to 31 March 2014.
[30] With respect to Ruling 1, it is not disputed that the witness Ms Liu was unable to give any direct evidence about the gross profit of the business of TITL at the time she worked for Mr Wang. She stated she had “never seen their accounts and [she had] never known how much sales they have made”. It follows that the most that could be made of any evidence about the operation of the Whanganui outlet between May 2013 and March 2014 was that the gross profit margin during this period was lower than that calculated by the Commissioner for previous years and, by implication, this undermined the Commissioner’s case.
[31] We have no doubt this evidence was not relevant and was properly ruled inadmissible by the Judge. We are satisfied that there are simply too many unknown variables that render the comparison of no real utility. In particular, there was no evidence as to the level of stock at the time Ms Liu purchased the business and how this might have impacted on the gross profit as between the two separate business operations. There was also insufficient evidence to have enabled a comparison between the price paid for stock by Ms Liu as compared with prices paid by Mr Wang. In any event, Ms Liu was operating one outlet, whereas Mr Wang had been operating three, giving rise to different economic implications including purchasing discounts available for economies of scale. Moreover, a close examination of comparative economic conditions would have been necessary. At the time Ms Liu operated the store it seems there had been a decline in the business of that outlet, rendering any comparison inappropriate.
[32] For the above reasons, we are satisfied that the Judge was correct in Ruling 1 to exclude the evidence of Ms Liu’s financial records as a basis of comparison on the issue of the gross profit margin of TITL.

Ruling 4

[33] In Ruling 4, the Judge refused to permit questioning of the Crown witness and officer in charge, Rochelle Bouterey, in relation to facts underlying a document to be produced as Exhibit 30B.^[2] The exhibit involved a comparison between the as returned financial performance of TITL and the as returned financial performance of another, apparently similar business. The prosecutor elected not to adduce this exhibit in the light of Ruling 1.^[29]
[34] With respect to Ruling 4, there are again a wide range of unknown variables that render a comparison with any other business of doubtful relevance. The same considerations as applied to the relevance of the evidence in Ruling 1 apply to the questioning here. In any event, some of the similar businesses used in Exhibit 30B, which was not introduced, had gross profit margins of between 42 per cent and 61 per cent. On this basis, if a similar business operating in a similar area can achieve a gross profit of 61 per cent in two consecutive financial years, it is unrealistic to contend that Mr Wang’s business could not have achieved a gross profit margin of 62 per cent. This is so particularly when that figure is calculated from actual business records of TITL kept by Mr Wang in the Mandarin cash books.
[35] For the above reasons we are satisfied that the Judge made no error in Ruling 4 in precluding questioning of Ms Bouterey about comparative information contained in the exhibit.

Standard of proof of aggravating factor

[36] The only remaining ground concerns the Judge’s reference in the final paragraph of his oral judgment concerning the disputed fact findings that he was satisfied “to the requisite standard” that the Commissioner’s assessments and conclusions regarding tax evaded were correct.^[30] Mr Hannam submits the Judge ought to have referred specifically to the standard being satisfied beyond reasonable doubt, as this is the standard referred to in s 24(2)(c) of the Sentencing Act 2002 for any disputed aggravating factor.
[37] We see no merit in this challenge. While it would have been preferable for the Judge to have mentioned the precise words used in the section, his shorthand reference to “the requisite standard” was just that. There is no suggestion whatsoever that the Judge was confused by the applicable standard of proof. For example, no mention was made in the judgment to the standard of proof being on the balance of probabilities. The Judge was plainly aware that he was engaged in a disputed facts hearing pursuant to s 24 of the Sentencing Act. He was clearly addressing an aggravating factor claimed by the Commissioner and challenged by Mr Wang. The Judge was applying the provisions of that section. This ground of appeal therefore fails.

Overview

[38] The further grounds that we have considered and rejected provide additional reasons for dismissing the appeal against sentence by Mr Wang. Mr Hannam acknowledged, in our view quite properly, that if his challenge based on these alleged errors failed, then the sentence appeal would have no prospects of success. We would only add that we consider the sentence imposed by the Judge on Mr Wang was lenient. The Judge would have been within the available range if he had chosen a higher starting point, particularly in light of the seriously aggravating feature of the offending whilst on bail. Moreover, the discount for the guilty pleas (to which we have already referred) could well have been set at a much lower figure, thereby resulting in a higher sentence.

Result

[39] Mr Wang’s appeal against sentence is dismissed.

Appeal by Ms Liu background

[40] Ms Liu shared the family home in New Plymouth with her husband. Ms Liu has limited spoken English and the evidence at trial suggested she could not read or write English. As already mentioned, she ran the Waitara store and assisted at the other two stores when Mr Wang was away. She was neither a shareholder nor an office holder in TITL.
[41] There is no suggestion Ms Liu provided any information, financial or otherwise, to the tax accountant. Further, there is no evidence that she had any knowledge of the information that was being provided by Mr Wang to the tax accountant. Similarly, there is no evidence that the tax accountant had any dealings with Ms Liu in respect of any aspect of the business affairs of TITL.
[42] We have referred earlier to the sum of $16,000 in cash and the USB drives found in a satchel in Ms Liu’s possession at the time of the search of the family home. IRD officers were attending the house to execute a search warrant. Ms Liu was about to leave the house to open the Waitara store. Instead, she went to the couple’s bedroom. The Judge describes what happened:^[31]

... Ms Liu was in possession then, emerging from the bedroom with the satchel or probably the most significant items [the Commissioner] relies on to establish its case:

• The USB sticks and the spreadsheets subsequently disclosed thereon; and
• The cash, in excess of $16,000 in cash.

In evidence Wang claimed to have asked Liu, in dialect, to bring him the satchel in question. That overture did not appear to be noticed or heard by any other person there present. It begs the question, why would he seek possession at that point alert as he was to the investigators’ focus on, amongst other things, cash. He certainly did not proffer disclosure that there was cash and cash to that extent within the bag.

[43] This behaviour was a key part of the prosecution case and was regarded by the Judge as particularly telling. It formed part of his reasons for finding Ms Liu guilty.

The charges against Ms Liu

[44] Ms Liu faced a total of 37 charges. She was convicted of 16 of those charges, which comprise two relevant groups:

• Counts 2, 4, 6, 8, 10, 12 and 14. These were charges where the case against Ms Liu involved an omission. As the Judge described the prosecution allegation, these counts are “founded on [Ms Liu’s] failure to act offering no opposition or dissent to the offending [of TITL] with the purpose of encouraging that offending”.^[32]
• Counts 16, 18, 20, 22, 24, 26, 28, 30 and 32. Here the prosecution case was based on an allegation Ms Liu was a party to offending by TITL because she “aided by act”.^[33]

[45] Ms Liu was found not guilty of the remaining 21 charges.^[34]

The prosecution case

[46] The prosecution case against Ms Liu was based on party liability under s 148 of the Tax Administration Act 1994 and s 66(1) of the Crimes Act 1961. The case was not put as one of joint enterprise liability. The Commissioner alleged Ms Liu provided assistance or encouragement to the offending by TITL by act or omission, with the necessary knowledge and intention, and was thereby liable as a party to the offending. The prosecution case emphasised the fact that the offending was, in effect, a course of conduct that continued unabated over the course of five income tax years. The prosecutor submitted Ms Liu did not need to be actually present at the time the offence was committed, or when Mr Wang provided the false information to the company’s tax agent in anticipation that it would be used to prepare the company’s tax returns. In fact, Mr Wang himself was not present when the offence was ultimately committed, given that in each case the offence did not occur until the tax agent subsequently filed TITL’s tax returns.
[47] In closing the case for the Commissioner, the prosecutor drew a distinction between those charges where omissions by Ms Liu were relied on and those where acts were alleged.^[35] This approach was followed because the direct evidence of Ms Liu’s day-to-day involvement in running the Waitara store came mainly from witnesses who were not employed by the business until the period to which the second set of charges applied.
[48] On appeal, Ms Carter submits it was perhaps artificial for the prosecutor to divide the charges into those relating to the earlier period (where the Commissioner could only rely on Ms Liu’s “omission” to act) and the later charges that relied on Ms Liu’s positive actions. Ms Carter argued the evidence was that Ms Liu was actively involved in running the affairs of TITL throughout. On that basis it was open to the Judge to conclude, as he did, that Ms Liu and Mr Wang were jointly involved in running TITL.^[36]
[49] We discern a distinct lack of clarity with some of the charges against Ms Liu. For example, it is not clear what omission is alleged against Ms Liu and why in law that omission might be legally culpable. However it is not necessary at this point to address those, as the primary focus was on her knowledge of the offending by TITL. It was common ground that a key ingredient of every charge the Crown needed to prove was that Ms Liu knew of the filing of false returns for the purpose of evading tax. The next step would be to identify the culpable conduct or omissions that linked her to the tax evasion, but first knowledge of that offending had to be shown. This issue was the focus of Ms Liu’s appeal.
[50] At trial, the Crown sought to prove Ms Liu’s knowledge by a process of inference from a number of factors, helpfully listed by the Judge in the following summary:^[37]

[41] In relation to these charges the informant contends a credible and reliable evidence base to make out the charges is there ready and available. Specifically, the informant asks the Court to have regard to:

• The relationship as between Wang and Liu;
• Their respective roles within the day-to-day business activities;
• Liu’s remuneration;
• The joint nature of the respective financial obligations of Wang and Liu;
• The money movement through joint accounts inconsistent with declared income;
• The extent of travel expenditure, again inconsistent with declared income;
• The collective cash expenditure inconsistent with declared income;
• Liu’s role within the business and its connection to cash within the family home;
• Her behaviour at the point of warrant execution;
• The location of relevant documentation throughout the home at the point of search;
• The irregular completion of cash books at the Waitara store;
• The trip to the dump and the claim of the $30,000.

Judge’s findings on knowledge and intention

[51] The key findings from the oral judgment made on the knowledge and intention elements of the charges are as follows:

[66] The reality I determine to be Wang and Liu were inextricably linked in the advancement of a long term process. Wang may have been the primary mover but advantage was afforded Liu. She for her part made the cash tallies and she for her part delivered the tallied cash direct to Wang. She was on notice that the monies were not to be banked. The house property was the business base, the property to which cash was taken and stored pending dissipation.

[52] The Judge also found:

[63] The basis of these factors and additionally those referred to referred to the Court by the informant there is ample evidence from which to infer that Liu was indeed alert to Wang’s disregard of his obligations and that from the outset alert to his criminal intent. While Wang has claimed in evidence that Liu was in fact unaware of his offending I find on the whole his evidence does not have the ring of truth about it and further that he has gone of his way to provide this Court with evidence that is both incredible and unbelievable when he seeks to distance Liu from his acknowledged offending.

[64] If that were not enough there is the issue about cash book completion. As to now, the informant submits, two people were in fact responsible for the store cash tallies and the figures ultimately recorded within the spreadsheets. Right from the very first page the Waitara figures are rounded, so often confined to the dollar calculation only. The other entries for cash go into decimal points. It would be nonsense to claim otherwise. The person continuously working the Waitara store was the defendant Liu. This evidence alone might not point unequivocally to the conclusion the informant would have the Court conclude that Liu too had a role in the preparation and completion of part of the spreadsheets but at the very least it does have her completing an exercise that is reflected within those spreadsheets. It does have her tallying cash each day when she well and truly understands that it is not destined for the bank, why otherwise would tallies be necessary. It was necessary because a record was needed and had to be kept, in the event of sale on the open market, in the event of a need to demonstrate what the true business viability issues were reference would need to be made to that document and not those documents provided the informant.

...

[67] The unavoidable conclusion is that Liu was well and truly on notice as to what Wang was doing and his dealings with the informant given those other factors the informant’s counsel has laboured in his written submissions. The lifestyle that flowed was a comfortable one and from an early point it was clear Wang and Liu lived beyond their income. It is indeed an outrage that the Working for Families tax credit was afforded these people given their true situation. That fact should have had them both well and truly on notice that their activities had at least then come to the attention of the informant.

[53] These findings are central to the Judge’s conclusion on proof of Ms Liu’s knowledge of offending by TITL and her intention to aid TITL in that offending. There appear to be no other passages in the judgment where the Judge deals directly with proof of the key ingredients of knowledge and intention. The Judge refers in general terms to Ms Liu’s knowledge about what Mr Wang was doing. He posits an equal involvement in the offending. Yet there is no finding that Ms Liu knew specifically that false returns were being filed. The element of intention to aid is not mentioned, other than when the Judge sets out the elements of the offence.

Appellate review

[54] There is no dispute as to the approach to be taken by this Court on a conviction appeal in a Judge alone trial. As was said in Jeffries v R:^[38]

[93] It has long been established that the verdict of a judge sitting alone is to be treated for appeal purposes as the equivalent of the verdict of a jury and may be challenged on the grounds that it is unreasonable or cannot be supported having regard to the evidence. Section 385(1)(a) applies equally to a judge alone trial. This Court on appeal is not authorised to retry the case on the facts.^[39]

[94] In R v Slavich this Court considered whether an appellant who has been tried by judge alone is in a better position on appeal than he or she would have been had the facts been found by a jury.^[40] The Court noted that this was an issue the permanent court might need to consider at some stage.^[41] Without giving a definitive answer, the Court said that, probably, an appellant gets the advantage of a “fuller” appeal if his or her trial has been before a judge alone who has delivered full reasons, citing the decision of the Supreme Court of Canada in R v Biniaris.^[42]

[95] However, the statutory ground of appeal under s 385(1)(a) remains the same irrespective of whether the appellant is tried by a judge sitting alone or by judge and jury. The court on appeal does not retry the appellants on the facts. The test to be applied is as stated in Owen.

[55] The reference to R v Owen^[43] relates to the Supreme Court’s endorsement of the following aspects of the decision of this Court in R v Munro:^[44]

• (a) The appellant court is performing a review function, not one of substituting its own view of the evidence.
• (b) Appellate review of the evidence must give appropriate weight to such advantages as the jury may have had over the appellate court. Assessment of the honesty and reliability of the witnesses is a classic example.
• (c) The weight to be given to individual pieces of evidence is essentially a jury function.
• (d) Reasonable minds may disagree on matters of fact.
• (e) Under our judicial system the body charged with finding the facts is the jury. Appellate courts should not lightly interfere in this area.
• (f) An appellant who invokes s 385(1)(a) must recognise that the appellate court is not conducting a retrial on the written record. The appellant must articulate clearly and precisely in what respect or respects the verdict is said to be unreasonable and why, after making proper allowance for the points made above, the verdict should nevertheless be set aside.

Our analysis

Submissions for Ms Liu

[56] For Ms Liu, Ms Hughes QC submits the Commissioner failed to establish at trial that Ms Liu had the requisite knowledge of the offending by TITL. Ms Hughes also submits the Judge’s reasons for the verdict overlooked a number of important factual aspects. For example, with respect to the relationship between Mr Wang and Ms Liu, it is true they occupied the same home and all business and banking correspondence was directed to that home. Yet the unchallenged evidence was that Ms Liu could not read English and there is no evidence to suggest that she ever opened or otherwise handled correspondence (particularly relating to bank accounts) coming to the house. Furthermore, she never met the tax accountant and she was not a director or shareholder of TITL. But for the fact she occupied the same house as Mr Wang, her role at the Waitara store was, in essence, no different to the employees who oversaw the Whanganui and New Plymouth stores.

Factual assessment

[57] The starting point is that Ms Liu is not an officer of TITL. Neither is she a shareholder in TITL. She therefore had no statutory or other duties or obligations in respect of the affairs of TITL. On the other hand, as the Judge accepted, Mr Wang was a director and shareholder of the company and was “effectively the alter ego of TITL”.^[45] Ms Liu’s role in the business involved responsibility for the management and day-to-day operation of the business outlet at Waitara. In this respect she was like other staff employed by the company who helped to run the other two stores.
[58] As the Judge found, Ms Liu’s responsibilities included the collection of stock, cashing up, checking of takings from the Waitara store and delivery of cash to New Plymouth, ultimately to Mr Wang. Sometimes, if Mr Wang was away Ms Liu performed tasks that Mr Wang would otherwise have performed at the New Plymouth store.^[46]
[59] There is no evidence Ms Liu had any involvement in the preparation of the accounts of TITL or in the filing of the tax returns of the company with the IRD. Neither is there any evidence that she discussed these aspects of the business with Mr Wang. Similarly there is no evidence that she had any role whatsoever in preparing information for inclusion in the accounts of TITL or in the forwarding of the accounts of TITL to the tax accountant or to the IRD itself.
[60] As Ms Hughes submits, underpinning all of the charges against Ms Liu is the allegation that she had knowledge of the offending by TITL: that Ms Liu knew that GST and income tax was being evaded by TITL through the filing of false returns. Given of the lack of any specific findings by the Judge on these crucial elements, we consider that any inference of knowledge of offending by TITL and an intention by Ms Liu to aid this offending cannot reasonably be drawn from the available evidence. It is true that aspects such as the relationship between Mr Wang and Ms Liu and the existence of large amounts of cash held at their home give rise to suspicions. However, we are not satisfied that the evidence relied on by the prosecution (referred to at [50] above), and the findings of the Judge in respect of that evidence, amount to proof of these critical elements of the charges beyond reasonable doubt.
[61] In particular the finding that Ms Liu was “well and truly on notice as to what Mr Wang was doing and his dealings with the [IRD]”^[47] cannot be sustained. As we have said, there is no evidence Ms Liu had any dealings with the tax accountant or with the IRD. It was Mr Wang who had the dealings with the tax accountant and Ms Liu had no role whatsoever in the preparation of any information regarding the GST or tax returns of TITL or the supply of such information to the tax accountant.
[62] At trial the prosecution placed considerable reliance on the behaviour of Ms Liu at the point of search by IRD officers of the family home.^[48] Ms Liu was present when the officers arrived. This event and Ms Liu’s role in it led the Judge to make the following findings:^[49]

[80] ... I am in no doubt at all Liu well knew and understood the significance of the bag and its contents. She knew and understood its contents were significant to the inquiry that was at that point underway.

[82] The evidence of Wang particularly on this point again, as he strives to provide exculpatory evidence for Liu’s benefit, is unconvincing in the extreme. It is as the informant submits, implausible.

[83] I am satisfied, given the behaviour attributed to Liu, that this was an attempt to ensure the contents were not to be left at the address if at all possible for discovery. Given too the evidence as to the state of the home, a property littered with business and personal documentation, the recovery of the important business documents (the spreadsheets and the USB sticks), Ms Liu was indeed well aware that discovery of the same would otherwise compromise the position of them both.

[84] The evidence of Liu’s behaviour and the nature of the material subsequently recovered I note as being pivotal. ...

[63] Ms Hughes accepts Ms Liu’s behaviour at this time was suspicious. But she submits, even if such behaviour gave rise to the above findings made by the Judge, they do not on their own establish the requisite knowledge on the part of Ms Liu, prior to the commission of the offences by TITL. The conduct does not establish knowledge of any offending by TITL and an intention to aid such offending.
[64] The passage from the oral judgment just quoted is an example of the Judge making a finding about Mr Wang’s evidence at trial negative to the case of Ms Liu.^[50] Another example is in relation to the topic ongoing financial obligations.^[51] The Judge referred to the fact Mr Wang had strived to provide Ms Liu with the benefit of a recital now claiming she was unaware of business records at the house, stating that “such a recital is unbelievable”.^[52]
[65] However, Ms Liu did not give evidence and we consider it is wrong to equate any lack of veracity on the part of Mr Wang to proof of knowledge of Ms Liu, and to use such findings in a manner adverse to Ms Liu. In any event, in the passage just referred to, the knowledge is expressed in general terms. It refers to Ms Liu’s awareness of “business records at the house”. We are satisfied that this cannot be equated with knowledge of the content of the financial statements of TITL, nor with the GST and tax returns filed by the tax accountant on behalf of TITL.
[66] Another illustration of this type of reasoning is at [63] of the oral judgment.^[53] Such rejection of Mr Wang’s exculpatory evidence, even if found to be “both incredible and unbelievable”, does not take the issue of proof against Ms Liu any distance at all. It was of course open to the Judge to reject in its entirety the evidence of Mr Wang. However, such rejection cannot on its own lead to proof of knowledge by Ms Liu of the offending by TITL and an intention on the part of Ms Liu to assist that offending. The prosecution needed to have provided independent evidence to support those ingredients of the charges, which they did not. Rejection of Mr Wang’s evidence on discrete topics (in the absence of proof of Ms Liu’s involvement in, and knowledge of, the preparation of the accounts of TITL and the supply of information to the tax accountant) does not assist the prosecution.
[67] We make the following further observations about the state of the evidence and the Judge’s findings (or lack of them). The Judge found that the bank statements were addressed to the family home and that “[t]he status of those accounts was there available to [Ms] Liu from the outset”.^[54] However, the evidence of the son, Chenwei (Kevin) Wang, was that Ms Liu could only speak a little English and understand some simple words. There was no suggestion Ms Liu could read or write English. The Judge did not make a finding whether or not Ms Liu could read English. He appears to have overlooked this important point.
[68] The bank statements were addressed to both Mr Wang and Ms Liu and came to their home address. Mr Wang’s evidence was that on no occasion did Ms Liu show any interest in the bank statements and did not look at them. He stated that the children would open the letters and tell him what it was, and may do the same if Ms Liu asked what it was. The Judge appears to have rejected this, although he does not explicitly say so. Mr Kevin Wang’s evidence was that he would translate things for his parents, such as bank statements or legal aid letters. He gave no specific evidence as to whether and on what occasions he may have translated any particular document for Ms Liu or what the bank information might have shown. We are satisfied there is therefore no evidence on which to base a finding that Ms Liu did open or handle correspondence relating to the bank accounts of TITL.
[69] On the question of Ms Liu’s remuneration, there is no evidence that Ms Liu knew what her declared income from TITL was. The Judge made no specific finding on this. He refers to the submissions of the prosecutor that Ms Liu would have been alert to her income as it was paid into the joint account, but does not make an actual finding whether he was satisfied she did know her remuneration. Ms Liu did not give evidence and, as noted, there was no evidence she knew the status or contents of the joint account, nor any evidence she dealt with tax matters relating to her employment by TITL.
[70] The prosecution submission that Ms Liu was involved in the creation of the Mandarin cash books, as the Waitara store featured different input methodology, is unsustainable. The Judge appears to have accepted that the only proof on this issue was that Ms Liu was involved in tallying the Waitara takings for inclusion in the Mandarin cash books. At best this only allows an inference that Ms Liu did an act that helped the creation of the spreadsheets, and does not prove who authored the cash books.
[71] In summary, we accept the submissions made by Ms Hughes that the mere fact of the marital relationship between Mr Wang and Ms Liu and the other matters relied upon by the Commissioner (summarised at [50] above) do not establish the knowledge and intention elements beyond a reasonable doubt. Moreover, the mere fact that there were relatively large amounts of cash in and around the home is not, on its own, proof of those ingredients. Ms Liu’s dealings with the joint bank account and other banking transactions is neutral, in the absence of proof of knowledge of the offending of TITL and an intention to assist that offending. Similarly, as we have found, the behaviour of Ms Liu at the point of search, while wholly inappropriate, is not necessarily proof of an intention predating the offending on the part of TITL on earlier occasions.
[72] It follows from the above that we conclude that the Judge erred in finding that the knowledge and intention elements of all charges were made out. We are satisfied that the evidence adduced by the Commissioner at trial did not amount to proof beyond a reasonable doubt of the required knowledge and intention elements for the charges brought against Ms Liu.
[73] As we discussed with Ms Carter at the hearing, much of the difficulty for the prosecution at trial stemmed from the nature of the charges brought at trial and the limited nature of the proof against Ms Liu. Had the charge been one of a conspiracy with Mr Wang to defraud the IRD, the situation may well have been different. However the structure of the charges relied upon gave rise to the need to adduce proof of the requisite knowledge and intention elements. It was also incumbent on the prosecution to prove the necessary acts or omissions on the part of Ms Liu said to aid in the commission of the offences by TITL. In the case of the charges involving omissions such proof is likely to be problematic in the absence of any duty on the part of the actor, as was the case with Ms Liu here.
[74] As noted earlier^[55] the prosecutor in closing the case for the Commissioner drew a distinction between charges involving omissions by Ms Liu and those where acts were alleged. It seems that the approach relied upon by the prosecutor had changed between the time when the case was opened and the application for a discharge under s 347 of the Crimes Act 1961 was made by Ms Liu after the close of the prosecution case.^[56] Despite this change of position the Judge seems, in his reasons for verdict, to have approached the matter globally, thus giving rise to the finding discussed above.^[57] We are by no means confident about the fairness involved in the way in which the case was advanced by the prosecutor at trial. However, because of our earlier findings on the knowledge and intention elements, there is no need for us to deal further with this aspect.
[75] Given that the appeal against conviction is successful, there is no need for us to consider Ms Liu’s appeal against sentence.

Result

[76] The appeal against conviction is allowed.
[77] The convictions entered in the District Court on all charges against Ms Liu are quashed.
[78] The convictions entered in the District Court on all charges against Ms Liu are quashed and verdicts of acquittal are entered.^[58]

Solicitors:
Crown Law Office, Wellington for Respondent

^[1] R v Top International Trading Ltd & Ors DC New Plymouth CRI-2013-043-562, 26 November 2015 [Notes on Sentencing].

^[2] Pursuant to s 24 of the Sentencing Act 2002.

^[3] R v Top International Trading Ltd & Ors DC New Plymouth CRI-2013-043-562, 23 October 2015 [Oral judgment].

^[4] R v Top International Trading Limited & Ors DC New Plymouth CRI-2013-043-562, 1 July 2013.

^[5] Notes on sentencing, above n 1, at [76].

^[6] Oral judgment, above n 3.

^[7] Oral judgment, above n 3, at [133].

^[8] At [185].

^[9] At [193].

^[10] At [194].

^[11] At [191].

^[12] At [196].

^[13] R v Top International Trading Ltd & Ors DC New Plymouth CRI-2013-043-562, 25 March 2015 [Ruling 1].

^[14] R v Top International Trading Ltd & Ors DC New Plymouth CRI-2013-043-562, 31 March 2015 [Ruling 4].

^[15] As required by s 24(2)(c) of the Sentencing Act.

^[16] Set out by Ms Payne in a spreadsheet labelled TP2 (Exhibit H).

^[17] Spreadsheets labelled TP3 and TP4 (Exhibits I and J).

^[18] Using the highest benchmark gross profit ratio.

^[19] Using the median benchmark gross profit ratio.

^[20] Notes on sentencing, above n 1, at [76].

^[21] At [41].

^[22] R v Varjan CA97/03, 26 June 2003 at [22].

^[23] Andrews v R [2012] NZSC 41.

^[24] At [6].

^[25] Nathan v R [2011] NZCA 284 at [26]–[29]. See also Hessell v R [2010] NZSC 135, [2011] 1 NZLR 607 at [61].

^[26] At [28].
^[27] Oral judgment, above n 3, at [193].

^[28] Ruling 1, above n 13.

^[29] At [4].

^[30] Oral judgment, above n 3, at [196].

^[31] At [79]–[80].

^[32] At [2].

^[33] At [4].

^[34] At [96]–[127].

^[35] As well as in submissions opposing Ms Liu’s application for a discharge under s 347 of the Crimes Act 1961: R v Liu DC New Plymouth CRI-2013-043-562, 15 April 2015 [Ruling 5] at [79].

^[36] Oral judgment, above n 3, at [66].

^[37] Oral judgment, above n 3, at [41].

^[38] Jeffries v R [2013] NZCA 188.

^[39] R v Connell [1985] NZCA 34; [1985] 2 NZLR 233 (CA) at 237; R v Eide [2004] NZCA 215; (2004) 21 CRNZ 212 (CA) at 216; and Wenzel v R [2010] NZCA 501 at [39].

^[40] R v Slavich [2009] NZCA 188.

^[41] At [33].

^[42] R v Biniaris 2000 SCC 15, [2000] 1 SCR 381 at [37].

^[43] R v Owen [2007] NZSC 102, [2008] 2 NZLR 37.

^[44] R v Munro [2007] NZCA 510; [2008] 2 NZLR 87 (CA), as set out in R v Owen, above n 44, at [13].

^[45] Oral judgment, above n 3, at [44].

^[46] Ibid.

^[47] Oral judgment, above n 3, at [67].

^[48] Described at [42] above.

^[49] Oral judgment, above n 3, at [80]–[84].

^[50] Especially at [82].

^[51] Oral judgment, above n 3, at [49]–[50].

^[52] At [50].

^[53] Quoted at [52] above.

^[54] Oral judgment, above n 3, at [49].

^[55] At [47] above.

^[56] Ruling 5, above n 36.

^[57] At [51]–[53] above.

^[58] See Reid v R [1980] AC 343 (PC) at 350, cited with approval by this Court in R v Clapham [2008] NZCA 380 at [6] and R v E (CA308/06) [2007] NZCA 404, [2008] 3 NZLR 145 at [179].