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The Queen v/s Apineru Kerenise Malu

    CA No. 212 of 2017

    Decided On, 29 November 2017

    At, Court of Appeal of New Zealand


    For the Appellant: P.D. Marshall, J.A. Eng, Advocates. For the Respondent: S.K. Green, Advocate.

Judgment Text


(Given by Gilbert J)


[1] Apineru Malu was the sole director and shareholder of a company through which he provided marketing consultancy services. For nearly four and a half years, from June 2010 to October 2014, Mr Malu failed to file any income tax or GST returns and he evaded payment of over $178,000 in tax.

[2] Mr Malu admitted his offending and subsequently filed the necessary returns. He attempted to sell family land in Samoa to enable him to pay part of the debt. He pleaded guilty in the District Court at Wellington to three representative charges of knowingly failing to file tax returns and tax evasion contrary to s 143B(1)(b) and (f) of the Tax Administration Act 1994. The maximum penalty for each of these offences is a term of five years’ imprisonment and a fine of $50,000.[1]

[3] This offending arose in the context of Mr Malu being left with a very substantial debt to pay following his father’s death in Samoa. As the oldest son, Mr Malu was then made a matai (family chief) and expected to assume a leadership role in place of his father. He succumbed to the cultural and financial burdens that were placed on him and he failed to meet his tax obligations in consequence. Mr Malu stated in an affidavit filed for the purposes of sentencing that he is 'deeply ashamed' and wants to be able to keep working so he can repay his debt to the Commissioner of Inland Revenue and continue to provide for his family.

[4] Mr Malu has been employed since January 2016 in a senior role in the state sector. He is supporting his mother and four dependent children, all of whom live with him. He also has responsibility to support his extended family including his three sisters and his aunt who live in Samoa. Mr Malu disclosed his offending to the chief executive of his employer and was told that a conviction would make his continued employment untenable.

[5] Judge Bruce Davidson was satisfied that if a conviction was entered it was 'almost inevitable' that Mr Malu would lose his employment.[2] The Judge considered that Mr Malu’s future career prospects would also be seriously damaged.[3] This would result in the loss of any prospect of Mr Malu being able to make significant reparation.[4] It would also cause 'significant collateral damage' to Mr Malu’s mother and his four dependent children. The Judge considered that although the offending was 'moderately serious'[5] these consequences would be out of all proportion to the gravity of the offending in all of the circumstances.[6]

[6] The Judge therefore took what he described as the 'rare step' of indicating that he would discharge Mr Malu without conviction so long as Mr Malu completed 220 hours’ voluntary community work and saved $6,000 to make partial reparation.[7] The Judge deferred making these orders for a period of six months to allow time for Mr Malu to complete the community work and save the initial reparation amount.[8] The Judge indicated that he would order further reparation when the final orders were made.[9]

[7] Mr Malu duly completed the community work and saved $6,200 by the time of his next court appearance on 28 March 2017. The Judge accordingly discharged Mr Malu without conviction and ordered him to pay $26,200 in reparation, the first $6,200 to be paid immediately and the balance at a rate of $250 per fortnight.[10]

Application for leave to appeal

[8] The Crown applies for leave to appeal on the following grounds:

(a) Did the Judge err in assessing the gravity of the offending?

(b) Did the Judge err in assessing the direct and indirect consequences of conviction?

(c) Did the Judge err in finding that the direct and indirect consequences of conviction would be out of all proportion to the gravity of the offences?

[9] For the reasons given in R v Smyth, which was heard at the same time as this appeal, we accept that a prosecutor can apply for leave to appeal on questions of law against a decision granting a discharge without conviction pursuant to s 296 of the Criminal Procedure Act 2011.[11]

[10] As this Court confirmed in Brown v R, there are three types of errors that will qualify as a question of law in this context:[12]

(a) A misdirection of law.

(b) Failing to take into account a relevant consideration or taking into account an irrelevant consideration.

(c) Making a factual finding that is unsupported by any evidence or failing to draw an inference of fact which is the only one reasonably possible on the evidence - often referred to as 'plainly wrong'.

[11] The three questions formulated by the Crown are more suitable for consideration in the context of a general appeal, which this is not. However, as will become apparent, the Crown raises arguable questions of law under each of the three categories. The leave application is not opposed. As the Judge acknowledged, it is unusual, if not unprecedented, for a person to be discharged without conviction for offending of this type and scale.[13] We are satisfied that it is appropriate to grant leave to appeal but this can only be to the extent that the proposed appeal raises arguable errors of law.

Ground 1 - did the Judge err in assessing the gravity of the offending?

[12] The Judge took into account the scale of the offending, describing it as 'a substantial fraud' on the public purse over a period of nearly five years and involving $178,000.[14] Noting that each charge carried a maximum penalty of five years’ imprisonment, the Judge considered that a conventional starting point would be around two years and three months’ imprisonment.

[13] However, the Judge concluded that the gravity of the offending was 'significantly mitigated' and should be assessed as only 'moderately serious':

[14] Mitigating features include your pleas of guilty, the fact that you are a virtual first offender, well regarded by others, capable of excellent employment. You are remorseful and you have explained how you got into the hole that led to this offending. The other mitigating feature is that the returns have been filed.


[20] ... I have already mentioned in considering the question of gravity, a conventional starting point and notional end sentence. Unquestionably that gravity is significantly mitigated by the features I already have mentioned and which I will not go over again. So, in summary, it has to be said that this is a moderately serious example of such offending.

[14] Mr Marshall acknowledges that the guilty pleas, previous good character and remorse are orthodox mitigating features that can properly be taken into account.[15] However, he submits that neither the belated filing of the tax returns nor Mr Malu’s employment capability can mitigate the gravity of the offending.

[15] As to the former, Mr Marshall relies on this Court’s decision in R v Easton.[16] In that case, Mr Easton made a conscious decision to withhold payment of substantial amounts due for PAYE and use the money to pay other creditors in order to keep trading. The Court stated that although Mr Easton and his associated interests made other payments of tax during the relevant period, this was simply meeting a legal obligation and accordingly was nothing more than the absence of an aggravating factor.[17] It could not be viewed as mitigating the particular offending.

[16] Easton is distinguishable from the present case. We consider the fact that Mr Malu did belatedly complete and file the relevant tax returns can be viewed as mitigating the offences of failing to file the returns. It was part of the process Mr Malu embarked on in an effort to make amends for his offending. By filing the necessary returns he was able to determine his liability and take steps to make repayments. The Judge was entitled to take this into account as a mitigating factor.

[17] Mr Marshall is arguably on firmer ground in contending that Mr Malu’s employment capability does not mitigate the gravity of his offending. However, it appears that the Judge referred to this as part of his assessment of Mr Malu’s otherwise good character. This is clear from its juxtaposition with the Judge’s observations that Mr Malu was a 'virtual first offender' and 'well regarded by others'.[18] We see no error in taking his good character into account.

[18] The answer to this question is 'no'. We are not persuaded that the Judge made any error of law in assessing the gravity of the offending.

Ground 2 - did the Judge err in assessing the direct and indirect consequences of conviction?

[19] Mr Marshall submits that the Judge made three errors of law when assessing the direct and indirect consequences of a conviction for Mr Malu. First, he submits that there was no sufficient evidential foundation for the Judge’s conclusion that it was 'almost inevitable' that Mr Malu would lose his job if convicted. Second, Mr Marshall submits that the Judge erred in failing to have regard to the fact that Mr Malu only obtained his current employment in January 2016, more than a year after the charges were laid against him. Third, he submits that the Judge failed to have regard to Mr Malu’s demonstrated ability to earn an income in business on his own account. In consequence of these alleged errors, Mr Marshall submits that the Judge significantly overstated the likely direct and indirect consequences of convictions being entered.

[20] Mr Marshall acknowledges that it was open to the Judge to conclude that it was likely that convictions would result in Mr Malu losing his job. However, he argues that the evidence did not justify the Judge’s conclusion that this was 'almost inevitable'.

[21] For this to amount to an error of law, we would need to be persuaded that there was no evidence to support the Judge’s conclusion. That is not the case. Mr Malu’s unchallenged evidence was that he was advised by his chief executive that a conviction would undermine the high level of trust placed in the company by the organisations it works with. He says he was told that a conviction would place his employment 'in jeopardy'. He was also told that 'a conviction [would] end [his] employment', making it 'impossible'. It is understandable that the chief executive was not willing to pre-empt the employment processes that would need to be followed by stating categorically in an affidavit that Mr Malu would be automatically dismissed if convicted. The Judge was therefore correct to stop short of concluding that dismissal was inevitable but in our view he was entitled to conclude on the evidence that dismissal would almost inevitably follow if Mr Malu were convicted. The Judge considered that a public sector employer faced with an employee convicted of such offending would have little option other than to terminate his employment.[19] This was an available inference on the evidence. It cannot be said that there was no evidence to support it.

[22] We are not persuaded that there is anything in Mr Marshall’s next point, namely that the Judge failed to take into account that Mr Malu obtained his current employment in January 2016 which was more than a year after the charges were laid. Mr Marshall says that this demonstrates that Mr Malu was able to obtain and retain employment despite the charges. However, Mr Malu’s employer was not aware of the offending at the time he was employed. Mr Malu made his disclosure after talking to his lawyer when he was considering pleading guilty to the charges. The Judge was well aware that Mr Malu has been able to retain his employment despite his disclosure. Nevertheless, the Judge was satisfied that Mr Malu would almost inevitably lose that employment if he were to be convicted. This was not because the employer has reservations about Mr Malu’s ability to carry out his role but because of the reputational risk to the organisation of continuing to employ him if convictions are entered.

[23] We accept that where the alleged consequence of a conviction is loss of employment a court will need to scrutinise carefully whether that consequence flows from the conviction or from the underlying admitted conduct. A conviction will often be inconsequential to an employer’s evaluation of an employee’s suitability because it is the underlying conduct that would normally be relevant. However, for the reasons given, this is not such a case. The evidence is that the employer’s concern does not relate to Mr Malu’s ability to fulfil his employment obligations but is instead the risk of adverse client perception if he were to remain employed after convictions are entered.

[24] Mr Marshall also argues that the risk of losing employment gained after the charges were laid is less serious than the risk of losing a long-term position. That may be so, but it is not relevant. The Judge was required to consider the consequences of a conviction for Mr Malu. The direct consequence was expected to be the loss of his current employment and 'future career prospects'.[20] The indirect consequences identified by the Judge would all flow from that.

[25] Mr Marshall’s third and related submission is that the Judge failed to consider Mr Malu’s demonstrated ability to earn an income in business on his own account. We disagree. The Judge made the following factual findings as to the likely direct and indirect consequences of a conviction:[21]

If convicted you will lose your job. If your job is lost, your future career prospects are lost. Lost also is the prospect of any significant reparation. But with significant collateral damage for your mother and children.

[26] It is implicit that the Judge was satisfied that although Mr Malu had previously been able to earn an income while working on his own account, this would not be a realistic future career prospect if convictions were entered. There was evidence to support that conclusion. Mr Malu stated in his affidavit that '[s]tarting from scratch outside the public sector [he would] find it difficult to see where [he] would get employment'. It appears from his evidence that, while he was self-employed, a significant part of his work was in the same public sector area as his current employment. Further, it seems that Mr Malu was unsuited to working on his own account. He said that at times he found it a 'real struggle' coping with the administrative side of the business without the institutional support he had been used to. He also said that he had difficulty getting work and maintaining a consistent income when the economy slowed.

[27] For these reasons we are not persuaded that the Judge made any error of law in assessing the likely direct and indirect consequences of a conviction.

Ground 3 - did the Judge err in finding that the direct and indirect consequences of conviction would be out of all proportion to the gravity of the offences?

[28] Mr Marshall submits that even if the Judge was correct to find that Mr Malu would inevitably lose his current job if convicted, this could not be regarded as out of all proportion to the gravity of the offence. He submits that it was not open to the Judge to make this finding and accordingly the jurisdictional threshold was not reached.

[29] Mr Marshall submits that tax evasion is always regarded as serious offending because it involves the intentional evasion of the assessment or payment of tax. The seriousness of the offending is reflected in the maximum penalty of five years’ imprisonment plus a fine. He says that Mr Malu’s offending approaches the upper end of the spectrum because of its prolonged nature and the amount of tax involved.

[30] We accept there is force in these submissions. Counsel were not able to refer us to any other case where a person has been discharged without conviction for tax evasion. Indeed, we were advised that the Crown has been unable to find any case where a defendant has even applied for a discharge without conviction for such offending.

[31] The experienced Judge acknowledged that in discharging Mr Malu without conviction, he was taking a 'rare step' which carried a 'significant risk of testing on appeal by the Crown'.[22] There can be no doubt that Mr Malu has received the benefit of a very generous sentencing outcome which was designed to enable him to keep working so that he could pay the outstanding tax and continue to support his family.

[32] While the outcome may be regarded as exceptional, we are unable to interfere with it absent an error of law. We have already found that the Judge made no error of law in reaching his factual findings as to the direct and indirect consequences of a conviction or the gravity of the offending. The disproportionality assessment called for under s 107 of the Sentencing Act 2002 requires an evaluative assessment of fact. The Judge did not misdirect himself as to the statutory test. We are unable to discern any error of law in his factual assessment. It was open to the Judge to find that Mr Malu losing his employment and future career prospects, and consequently his ability to repay the tax and support his family, would be out of all proportion to the gravity of his offending, taking into account all relevant circumstances. Because no error of law has been demonstrated, we are unable to intervene. Our response may

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have been different if the Crown had a right of general appeal against the decision to grant the discharge. [33] Finally, we wish to emphasise that this decision should not be interpreted as an endorsement of any suggestion that tax evasion is not serious offending. As this Court observed in James v R, tax evasion amounts to 'straight theft from the community'.[23] Sentences for such offending need to reflect this. However, we can understand why the Judge found that in the particular circumstances of this case Mr Malu’s offending was so significantly mitigated that it warranted the rare sentencing response of a discharge without conviction. Result [34] The application for leave to appeal is granted. [35] The appeal is dismissed. -------------------------------------- [1] Tax Administration Act 1994, s 143B(4). [2] R v Malu [2016] NZDC 14609 [Sentencing Remarks] at [25]–[26]. [3] At [30]. [4] At [30]. [5] At [30]. [6] At [17], [27] and [30]–[31]. [7] At [30]–[32]. [8] At [33]. [9] At [34]. [10] Police v Malu [2017] NZDC 8555 [Final Ruling] at [5]. [11] R v Smyth [2017] NZCA 530 at [7]. [12] Brown v R [2015] NZCA 325, (2015) 30 FRNZ 471 at [16]. [13] Sentencing Remarks, above n 2, at [30]. [14] At [15] and [20]. [15] The gravity of the offending includes the culpability of the offender and may also take into account personal mitigating factors: Shailer v R [2017] NZCA 38, [2017] 2 NZLR 629 at [45]. [16] R v Easton [2013] NZCA 677, (2013) 26 NZTC 21-057. [17] At [35]. [18] Sentencing Remarks, above n 2, at [14]. [19] At [25]. [20] At [30]. [21] At [30]. [22] At [30]. [23] James v R [2010] NZCA 206, (2010) 24 NZTC 24,271 at [8].