Court of Appeal says omission to act can be aiding or abetting

Summary

The taxpayer appealed against a High Court decision that a director of a company had aided or abetted the company to commit a tax offence (section 148 of the Tax Administration Act). The Court of Appeal upheld the High Court decision and confirmed that an omission by a director to do an act can mean that the director aided the company to offend.

Impact of decision

The decision confirms that the absence of the word "omission" from section 148 of the Tax Administration Act ("TAA") does not preclude the Commissioner from charging a director or any other with an offence when they have "omitted" to do an act required of them. The Commissioner can also charge an employee, officer or agent of a company under section 148 of the TAA even though section 147 is a specific section relating to employees, officers or agents of a company.

Facts

The Appellant was the sole director of a company which was charged with a number of offences under section 143A of the TAA.  The charges related to using PAYE deductions for purposes other than payment to the Commissioner. The responsibility for paying the PAYE deductions to the Commissioner on behalf of the company lay with the Appellant. The Appellant was charged under section 148 of the TAA as a person who aided or abetted another to commit an offence against the Act.

In the District Court, the company was found guilty of the offences charged. The Appellant was found not guilty. The Judge held that the prosecution had not proved that the Appellant had actively assisted the company to commit the offences.

The Commissioner appealed to the High Court by way of case stated, the questions of law being posed by the Judge being:

• Was I wrong in concluding in the circumstances of this case that section 148 of the TAA 1994 requires the informant to prove that the defendant actively assisted the company in its offending?
• Was the only conclusion available to me that the sole director Neil George Evans was also guilty of the offences as a party?

In a decision dated 2 July 2008, Wylie J allowed the appeal. The Appellant then appealed to the Court of Appeal.

The Appellant's main grounds for appealing were that because he did not write out a cheque for the PAYE he had committed an "omission" and that an "omission" was not an act but rather a failure to act, therefore he could not aid or abet.

He argued that section 147 of the TAA 1994 (which relates to offences by employees, agents or officers of a body corporate) has specific reference to an offence if an "omission" occurs because of them.

He also argued that sections 66 of the Crimes Act 1961 is similar to section 148 of the TAA in that it relates to parties to an offence. However the Crimes Act section captures "omissions" whereas section 148 of the TAA does not.

The Commissioner argued that the language within section 148 was wide enough for the "omission" to act to be within the "aiding or abetting" part of the offence.

Decision

MacKenzie J giving the decision of the Court held:

Section 147 applies to a limited category of offences (committed by a body corporate) and to a limited category of persons (employees, agents or officers of the body corporate). Section 148 is a more general application and the liability it imposes may arise from the conduct of any other person. There is no necessary nexus between the two persons beyond that which creates the conduct constituting a breach of the section. Section 148 is expressly linked to all other offence provisions including section 147. The two sections are not mutually exclusive.

Section 148 in its use of the terms "aids, abets, incites" creates a secondary liability akin to that created by section 66(1)(b), (c) and (d) of the Crimes Act 1961. Both concepts of doing and omitting an act fall within the ordinary concepts of the word "aids". The concept of aiding is expanded on in section 66(1)(b) to apply to a person who "does or omits for the purpose of aiding". The view that section 66(1)(b) is not intended to expand the ordinary meaning of the term "aids" is consistent with section 66 being a codification of the common law concept. Section 148 of the TAA is not intended to limit the scope of "aiding" by excluding passive conduct, or an omission to act. The court also considered it worthy of note that the offence with which the company was charged (section 143A) was an act of "commission" not "omission".

Aiding does not include every omission by a person who is aware of, and has the capacity to intervene, in offending by another, R v Coney (1882) 8 QBD 534. The question to be asked is whether an omission to act is that of a passive spectator amounting only to non interference to prevent a crime or whether it crosses the line so as to be an omission for the purpose of aiding the commission of the offence? That is a question of fact. The Appellant in taking the step of paying other creditors provided active assistance to the company in the commission of the offence.

In relation to whether or not both the principal and the company can be liable for the same offence the court found that the director's state of mind can constitute the necessary mens rea for both the liability of the company and the accessory liability of the director, Fleming v Ellicott [1961] NZLR 106 and CIR v Leslie (1985) 7 NZTC 5,101 (HC).

On the second issue of failing to act when a legal duty is imposed to act, the court found that, it is not in general terms necessary to establish a legal duty to intervene on the part of a bystander before any failure to intervene gives rise to accessory liability, Coney. The duties of a director to act may be relevant to a decision of whether or not they "aided or abetted" but is not decisive of it.