Minister of Finance v AAA Group Ltd and WX

• Jurisdiction: Bermuda
• Judge: Hellman J
• Judgment Date: 01 July 2016
• Neutral Citation: [2016] SC Bda 75 Civ
• Date: 01 July 2016
• Docket Number: Civil Jurisdiction 2016 No AA1,CIVIL JURISDICTION 2016: No. AA1
• Court: Supreme Court (Bermuda)

Between:

In the matter of a request for exchange of information under the International Cooperation (Tax Information Exchange Agreements) Act 2005

Minister of Finance

Plaintiff

and

(1) AAA Group Limited

(2) WX as the former Liquidator of

AAA Private Trust Company Limited

Defendants

[2016] SC (Bda) 75 Civ

CIVIL JURISDICTION 2016: No. AA1

In The Supreme Court of Bermuda

Application to set aside production order under International Cooperation (Tax Information Exchange Agreements) Act 2005 — whether Constitution engaged so as to give rise to duty of heightened scrutiny — whether material non-disclosure — whether production orders too wide — whether committal proceedings lie for breach of production order

Mr Jeffrey Elkinson, Conyers Dill & Pearman Limited, for the Plaintiff

Mr Keith Robinson and Mr Henry Tucker, Appleby (Bermuda) Limited, for the Defendants

REDACTED JUDGMENT

(In Chambers)

Introduction

1 In this ruling I shall refer to the various parties and entities mentioned as follows:

• (1) The Plaintiff, the Minister of Finance, as ‘the Minister’.

• (2) The requesting State, the Kingdom of Sweden, as ‘Sweden’.

• (3) The investigating agency, the Swedish Tax Board, as ‘STB’.

• (4) The Defendants collectively as ‘AAA’.

• (5) The First Defendant, AAA Group Limited, as ‘AAA Group’.

• (6) AAA Private Trust Company Limited as ‘AAA PT’.

• (7) The Second Defendant, WX as the former liquidator of AAA PT, as ‘the Liquidator’.

2 By summonses dated 2 ^nd March 2016 AAA seek review of two production orders (‘the Production Orders’) dated 4 ^th February 2016. They were made by the Court ex parte on an application by the Minister, which was made on 2 ^nd February 2016 pursuant to: (i) section 5(2) of the International Cooperation (Tax Information Exchange Agreements) Act 2005 (‘the 2005 Act’); and (ii) a request (‘the Request’) dated 3 December 2015 made under the Tax Information Exchange Agreement or ‘TIEA’ between Sweden and Bermuda which was concluded on 16 ^th April 2009 (‘the Agreement’).

3 By orders dated 24 ^th March 2016 the Court granted AAA leave to seek a review of the Production Orders and ordered that the Minister disclose to AAA the documents filed with the Court on the Minister's ex parte application.

Statutory framework The 2005 Act

4 The 2005 Act contains the statutory mechanism by which Bermuda gives effect to requests for mutual legal assistance made pursuant to TIEAs entered into by the Government of Bermuda.

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

6 Section 4(1) provides that the Minister ‘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 Minister ‘ may’ also decline a request for assistance. These include at section 4(2)(a) if the information relates to a period that is more than six years prior to the tax period in respect of which the request is made; and at 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.

7 I am satisfied that in this particular statutory context ‘may’ means ‘may’ not ‘shall’. Thus the grounds for declining a request for assistance set out in section 4 are discretionary. The Minister is not obliged to decline a request where there are grounds for him to do so. I shall return to this point later in the judgment when I come to consider what role, if any, the Constitution plays in the construction of section 4.

8 Section 5(1) provides that where the Minister 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 Minister 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 it is satisfied that the conditions of the applicable TIEA are fulfilled, or alternatively that the Minister'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 Minister the information referred to in the request; or (b) to give the Minister 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 upon such application 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 Minister 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.

11 Section 9(1) provides that where a person is required by a production order to produce information to the Minister, and contravenes the order without reasonable excuse, the person is guilty of an offence. Section 9(4) provides that an offence under this section is triable summarily and that the offender is liable on conviction to a fine not exceeding $10,000, imprisonment for a term not exceeding six months, or to both.

The Agreement

12 Article 1.1 of the Agreement sets out the object and scope of the Agreement.

‘The competent authorities of the Parties shall provide assistance through exchange of information that is relevant to the administration or enforcement of the domestic laws of the 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 and shall be treated as confidential in the manner provided in Article 8.’

13 Article 4.2 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.’

14 Article 5.5 provides in material part:

‘This Agreement does not create an obligation on the Parties to obtain or provide:

…

(b) information relating to a period more than six years prior to the tax period under consideration;

(c) information unless the applicant Party has pursued all means available in its own Party to obtain the information, except those that would give rise to disproportionate difficulties;

(d) information in the possession of or obtainable by a person other than the taxpayer that does not directly relate to the taxpayer.’

15 Article 5.7 provides:

‘If information is requested that relates to a person that is not a resident, nor a national, in one or other of the Parties, it shall also be established to the satisfaction of the competent authority of the requested Party that such information is necessary for the proper administration and enforcement of the fiscal laws of the applicant Party.’

16 Article 5.8 provides in material part:

‘ The competent authority of the applicant Party shall provide the following information to the competent authority of the requested Party when making a request for information under this Agreement to demonstrate the relevance of the information sought to the request:

…..

(c) to the extent known, the name and address of any person believed to be in possession of or able to obtain the information requested;

…..

(e) a statement that the applicant Party has pursued all means available in its own Party to obtain the information, except those which would give rise to disproportionate difficulties;

and to the fullest extent possible:

…..

(g) the tax purposes for which the information is sought and why it is relevant to the determination of the tax liability of a taxpayer under the laws of the applicant Party;’.

17 Article 5.6 provides:

‘ Where the applicant Party requests information with respect to a matter which does not constitute serious tax evasion, a senior official of its competent authority shall certify that the request is relevant to, and necessary for, the determination of the tax liability of the taxpayer under the laws of the applicant Party.’

18 Article 1(q) defines ‘serious tax evasion’ to mean:

‘… willfully, with dishonest intent to defraud the public revenue, evading or attempting to evade any tax liability where an affirmative act or omission constituting an evasion or attempted evasion has occurred. The tax liability must be of a significant or substantial amount, either as an absolute amount or in relation to an annual tax liability, and the conduct involved must either constitute a systematic effort or pattern of activity designed or tending to conceal pertinent facts from or provide inaccurate facts to the tax authorities of either Party, or constitute falsifying or concealing identity. The competent authorities shall agree on the scope and extent of matters falling within this...