DPP v Hughes

JurisdictionIreland
JudgeMr. Justice Fennelly
Judgment Date29 November 2012
Neutral Citation[2012] IECCA 85
Docket NumberRecord No.: 120/20012,[C.C.A. No. 120 of 2012]
CourtCourt of Criminal Appeal
Date29 November 2012

[2012] IECCA 85

THE COURT OF CRIMINAL APPEAL

Fennelly J., de Valera J., Michael White J.

Record No.: 120/20012

Between
THE PEOPLE AT THE SUIT OF THE DIRECTOR OF PUBLIC PROSECUTIONS
Prosecutor/Respondent
And
JOHN HUGHES
Appellant

Criminal law - Tax fraud - Sentence - Proportionality - Rehabilitation - Punishment - Deterrence - Mitigating factors - Delay in sentencing - Taxes Consolidation Act 1997 - Finance Act 1999 - Finance Act 2002

Facts: The appellant was charged with four counts of failure to pay VAT totalling €226,718 contrary to s. 1078(2)(i) and (3)(b) of the Taxes Consolidation Act 1997 as amended by s. 211 of the Finance Act 1999 and two counts of failure to lodge a genuine VAT return contrary to s. 1078(2)(ii)(g) and (3) of the Taxes Consolidation Act 1997 as amended by s. 211 of the Finance Act 1999 and s. 133(a) of the Finance Act 2002. He pleaded guilty and was charged to four years imprisonment. The sentence was appealed on the ground of proportionality in balancing the objectives of deterrence and punishment against rehabilitation as well as giving proper weight to the mitigating factors. It was also appealed on the ground that the trial had been substantially delayed through no fault of the appellant and that if he had have been convicted in a more expedient fashion, he would have been sentenced at a time when the punishment for a crime of this type was considerably more lenient.

The appellant had been able to make payments to cover the full tax liability as well as over €400,000 in fines and interest leaving a balance owed of €110,000 which he was unable to pay though he had offered the €50,000 bail monies when the trial had finished. He was a man of good character with no previous criminal convictions who had observed the conditions of his bail, made an early plea and shown remorse for his actions. The trial judge had accepted these points in mitigation and agreed that the appellant reoffending was unlikely in the circumstances. Nevertheless, a custodial sentence was considered necessary in the circumstances due to the seriousness of the offence and to act as a deterrent against other would-be offenders. The trial judge had further pointed out that he felt too many offenders charged with tax evasion came before the court and believed they could simply repay the balance and avoid a custodial sentence.

Held by Fennelly J that it was not open to the court to vary the appellant's sentence unless it was found that the trial judge had erred in applying a principle. It was correct to say that the punitive and deterrent element in sentencing should be balanced against the rehabilitative. In the present case, it was found that the trial judge had balanced these factors and indeed had accepted the mitigating factors before him. He had made mention of the substantial repayments paid by the appellant and it was clear to him that it was unlikely that there would be any further offending of that type. However, it was held that the trial judge had erred in principle by suggesting that offenders charged with tax evasion felt they could simply repay the balance owed and avoid a custodial sentence. The repayment of monies to a victim could be considered a mitigating factor depending on the circumstances but it depended very much on the circumstances of the case whether that was enough to avoid a custodial sentence or not.

It was further held that the delay in the present case was not significant and there was no evidence put forward that would convince the court that the change in sentencing over that time was substantial. However, on the basis of the trial judge's disregard for the mitigating factor of repayments made by appellant, it was found that the sentence was excessive. The sentence of four years imprisonment on each count to be served concurrently was reduced to two years for each on the same basis.

Mr. Justice Fennelly
JUDGMENT of the Court of Criminal Appeal delivered by Mr. Justice Fennelly on the 29th day of November 2012.
1

This is an appeal against the severity of sentences of four years imprisonment imposed on the appellant by his Honour Judge Nolan in Dublin Circuit Court on 22nd March 2012.

2

The appellant had pleaded guilty to six counts on an indictment. The pleas were accepted by the Director on the basis that they were entered in respect of sample counts on that indictment. The offences all related to the failure to make returns in respect of or to pay value added tax (hereinafter “VAT”) contrary to Section 1078 of the Taxes Consolidation Act 1997, as amended.

3

Four counts alleged that the appellant had failed to pay VAT contrary to contrary to s. 1078(2)(i) and (3)(b) of the Taxes Consolidation Act 1997 as amended by s. 211 of the Finance Act 1999. Two counts alleged that the appellant had failed to furnish a true and correct return of VAT contrary to s. 1078(2)(ii)(g) and (3) of the Taxes Consolidation Act 1997 as amended by s. 211 of the Finance Act 1999 and s. 133(a) of the Finance Act, 2002.

4

The relevant facts of the case are as follows. The offences to which the appellant pleaded guilty were committed between July 2003 and February 2006. The offences involved the importation of 119 used motor vehicles on which VAT was not paid. The total value of the vehicles sold was €1.27 million. The VAT due on the sale of those vehicles amounted to € 226,718. In order to have purchased the vehicles at a zero VAT rate the appellant needed to be able to use an Irish VAT number. The appellant fraudulently used the VAT number of the company “Rendon & Associates”, a trading company by which he had been previously employed in 2001. It should be noted that “Rendon & Associates” had no knowledge of the activity of the appellant or of his fraudulent use of their VAT number. The company had been wound down in 2002.

5

A Revenue investigation was commenced in November 2005. The appellant’s residence was searched, in his presence, pursuant to a search warrant on 14th November 2005 and documentation was found, including a number of invoices from a UK company. These purported to show sales in the UK to a John O’Sullivan of Rendon & Associates at a zero VAT rate. Extensive documentation relating to the purchase of sterling drafts for payment to the UK company was also found. All this pointed to the appellant’s involvement in the trading of second hand vehicles imported from the UK. Revenue subsequently, following a mutual assistance request, discovered that the appellant had sold a large number of these imported cars to licensed dealers at a VAT inclusive price.

6

Rendon & Associates was a legitimate trading company to which a VAT number had been properly issued, but the company had ceased to trade in or around 2002. It was not involved in the motor trade. The appellant had worked for the company between April and December 2001. Rendon & Associates at no stage authorised the use of its VAT number in connection with car-importation transactions at issue. The appellant had applied for a VAT registration number in 2002, but, at least he so maintains, none was issued because the Revenue did not think his projected level of trading would require registration. The Revenue investigation also extended to the companies which had purchased the vehicles imported by the appellant. It was established that they had been sold on the basis that the price included VAT, i.e., that VAT was being paid.

7

Following the Revenue search in November 2005, the appellant sold his house, where he lived with his partner and children in France, in May 2006 and downgraded to an apartment. He made full disclosure of his assets. He sold a site in France. The proceeds of sale, €220,000, were paid over to the Revenue. He had earlier paid a sum of €32,000. At the date of the Circuit Court hearing, it remained unclear what his total liabilities for tax, interest and penalties would be. The matter was still pending before the Appeal Commissioners.

8

In addition to these VAT defaults, the appellant had to reach a very substantial settlement with the Revenue in respect of unpaid income tax and capital gains tax for periods prior to that covered by the indictment. The settlement was in the sum of €795,000 composed of €278,000 for tax and approximately €516,000 for interest and penalties. A letter was produced from the Revenue, confirming that the appellant had paid €685,000 of that amount. He had made a plea to the Revenue that he was unable to pay the balance.

9

There was an element of complaint on behalf of the appellant that he had returned to live in France at a time when he had been dealing with the Revenue and, to their knowledge, had a solicitor acting for him, but that, nonetheless, the Revenue caused a European Arrest Warrant to be issued, without notice to him that there were any criminal charges and thus, without giving him an opportunity to return voluntarily to the jurisdiction. In the event, he spent some twenty nights in prison in France, pending his surrender under the warrant. Upon his return, he was released on bail by the Circuit Court and has, at all times, observed the terms of his bail. He has lodged the sum of €50,000 by way of bail and has told the Revenue that that sum is also available to discharge his liabilities.

10

In short, the unpaid VAT amounted to €226,718. The appellant has made payments amounting to €252,000 to the Revenue covering tax, interest and penalties. Bail money, in the amount of €50,000 had been lodged by the appellant and that sum had been also offered as a payment towards his Revenue liability.

Plea in mitigation

11

Counsel for the appellant made a comprehensive plea in mitigation.

12

Firstly, he dealt with the personal circumstances of the appellant. He had very little recollection of doing exams at school and left with very limited literacy skills. He has been diagnosed as dyslexic. He has been...

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