Minister of Finance v AP (formerly known as AA)

• Jurisdiction: Bermuda
• Judge: Hellman J
• Judgment Date: 23 March 2016
• Neutral Citation: [2016] SC Bda 30 Civ
• Docket Number: CIVIL JURISDICTION 2014: No. Ap of 2015
• Court: Supreme Court (Bermuda)
• Date: 23 March 2016

Between:

Minister Of Finance

Plaintiff

and

Ap (formerly known as Aa)

Defendant

[2016] SC (Bda) 30 Civ

CIVIL JURISDICTION 2014: No. Ap of 2015

In The Supreme Court of Bermuda

Application to set aside production order under International Cooperation (Tax Information Exchange Agreements) Act 2005 — whether material non-disclosure, and, if so, what should be its consequences — whether production order excessively broad — whether jurisdiction to order disclosure of privileged documents.

Mr Wayne L Brown, Assistant Financial Secretary, for the Plaintiff

Mr Steven White, Cox Hallett Wilkinson Limited, for the Defendant

RULING (REDACTED)

(In Chambers)

Introduction

1 By a summons dated 14 ^th October 2015 the Defendant seeks review of a production order (‘the Production Order’) obtained ex parte by the Plaintiff following an application made pursuant to section 5(2) of the International Cooperation (Tax Information Exchange Agreements) Act 2005 (‘the 2005 Act’). The Defendant wants the Production Order discharged or varied.

2 The Production Order was obtained pursuant to a request (‘the Request’) from the Government of the Republic of India (‘the Government of India’) to the Government of Bermuda which was received on 18 ^th August 2015. The applicable TIEA between the Government of India and the Government of Bermuda is dated 7 ^th October 2010 and entered into force on 3 ^rd November 2010 (‘the Agreement’).

3 By a cross-summons dated 16 ^th October 2015 the Plaintiff seeks an order, backed by a penal notice, that the Defendant comply with the Production Order to the extent that it has not already done so.

4 By an order dated 22 ^nd October 2015 the Court granted the Defendant leave to seek a review of the Production Order and ordered that the Plaintiff disclose to the Defendant the documents filed with the Court on the Plaintiff's ex parte application.

Statutory framework

The 2005 Act

5 The 2005 Act contains the statutory mechanism by which Bermuda gives effect to requests for mutual legal assistance made pursuant to tax information exchange agreements, or ‘TIEAs’, entered into by the Government of Bermuda.

6 Section 3(1) provides that the Plaintiff is the competent authority for Bermuda under the TIEAs. Section 3(2) provides that the Plaintiff may provide assistance to any requesting party according to the terms of the agreement with that party.

7 Section 4(1) provides that the Plaintiff may decline a request for assistance where there is provision in the applicable agreement for him to do so. Section 4(2) sets out a number of circumstances in which the Plaintiff may also decline a request for assistance. These include at section 4(2)(c) if the request pertains to information in the possession or control of a person other than the taxpayer that does not relate specifically to the tax affairs of the taxpayer; and at section 4(2)(d) if the information is protected from disclosure under the laws of Bermuda on the grounds of legal professional privilege.

8 Section 5(1) provides that where the Plaintiff has received a request in respect of which information from a person in Bermuda is required, the Financial Secretary may apply to the Supreme Court for a production order to be served upon the person referred to in the request directing him to deliver to the Plaintiff the information referred to in the request. Section 5(11) provides that for these purposes the Financial Secretary includes an Assistant Financial Secretary.

9 Section 5(2) provides that the Supreme Court may, if is satisfied that the conditions of the applicable TIEA are fulfilled, or alternatively that the Plaintiff's decision to honour a request is in the interest of Bermuda, make a production order requiring the person referred to in the request: (a) to deliver to the Plaintiff the information referred to in the request; or (b) to give the Plaintiff access to such information, within 21 days or, pursuant to section 5(3), such other period as the Court may specify.

10 Section 5(6) provides that a person served with a production order under section 5(1) who is aggrieved by its service may seek review of the order within 21 days of its service. Section 5(6B) provides that the Court shall decide whether to grant the person a right of review. Section 5(6A) provides that a person served with a production order who wishes to view the documents filed with the Court on the application for the production order shall not be entitled as against the Plaintiff to disclosure of such documents until he has been granted a right of review under section 5(6B) and the Court has directed disclosure of such documents as it considers appropriate for the purposes of the review.

The Agreement

11 Article 1 of the Agreement sets out the object and scope of the Agreement.

‘The competent authorities of the Contracting Parties shall provide assistance through exchange of information that is relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by the Agreement. Such information shall include information that is relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters. Information shall be exchanged in accordance with the provisions of this Agreement. The rights and safeguards secured to persons by the laws or administrative practice of the requested Party remain applicable to the extent that they do not unduly prevent or delay effective exchange of the information

12 Article 4(2) of the Agreement glosses the meaning of ‘relevant’.

‘The term “relevant” wherever used in the Agreement with respect to information, shall be interpreted in a manner that ensures that information will be considered relevant notwithstanding that a definite assessment of the pertinence of the information to an on-going investigation could only be made following the receipt of the information.’

13 There are a number of carve-outs to the Agreement. Eg:

• (1) Article 5(5) provides that the Contracting Parties are not obligated to provide ownership information with respect inter alia to publicly traded companies unless such information can be obtained without giving rise to disproportionate difficulties.

• (2) Article 7(1) provides that the competent authority of the requested Party may decline to assist inter alia (a) where the request is not made in conformity with the Agreement; or (b) where the requesting Party has not pursued all means available in its own territory to obtain the information, except where recourse to such means would give rise to disproportionate difficulty.

• (3) Article 7(2)(ii) provides that the Agreement shall not impose on a contracting party the obligation to obtain or provide information which would reveal confidential communications between a client and an attorney, solicitor or other admitted legal representative where such communications are: (a) produced for the purposes of seeking or providing legal advice, or (b) produced for the purposes of use in existing or contemplated legal proceedings.

14 Article 9 of the Agreement deals with confidentiality. It provides inter alia that any information received by a Contracting Party under the Agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities are to use such information only for these purposes.

15 Article 12 of the Agreement provides that the Agreement shall have effect: (a) with respect to criminal tax matters, on the date on which it enters into force, ie 3 November 2010; and (b) with respect to other matters, for taxable periods beginning on or after that date, or where there is no taxable period, for all charges to tax arising on or after that date.

The Request

16 The Request relates to the tax affairs of two Indian nationals resident in Mumbai: Mr B and Mr C (‘the Subjects’). The tax purposes for which the information is requested are stated to be (i) determination, assessment and collection of taxes, and (ii) investigation or prosecution of tax matters. As to prosecution, the Request states that it is believed that the availability of the requested information would assist the Government of India in launching a criminal prosecution against the Subjects for a wilful attempt to evade taxes and related offences as prescribed in the Indian Income Tax Act 1961. A reply is stated to be urgent as a relevant limitation period expires on 31 ^st March 2016. Information is sought for the period 1 ^st April 1999 to 31 ^st March 2015. The Request states that the information in the possession of the Indian Income-tax authorities clearly indicates that the Subjects had been actively engaged in setting up the Defendant.

17 Annexure A to the Request sets out the relevant background:

‘ 1. As per the information available with the Indian tax authorities, [the Subjects] are holding some accounts, either directly or indirectly including beneficially, with [Bank D], Geneva, Switzerland (Herein after referred to as [Bank D]) or have a beneficial ownership / legal relationship with persons located / registered in India / outside India, having accounts with [Bank D].

2 The Indian tax authorities, in the course of their inquiries, have found that the income arising out of such banking or other transactions is not reported to Indian income-tax authorities as required under the Indian Income Tax Act, 1961. During the course of further investigations carried out by the Indian Income Tax Department, the subjects denied having any accounts in...