Ministry of Finance v E, F, H and O

• Jurisdiction: Bermuda
• Judgment Date: 30 May 2014
• Date: 30 May 2014
• Docket Number: Civil JurisdictionJurisdiction2014NosE, F, H and O
• Court: Supreme Court (Bermuda)

[2014] Bda LR 54

In The Supreme Court of Bermuda

Civil JurisdictionJurisdiction2014NosE, F, H and O

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

Between:

Ministry of Finance

Plaintiff

and

E, F, H and O

Defendants

Mr D Kessaram, Mr L Rochester and Mr W Brown for the Plaintiff

Mr J Elkinson for the Defendant

The following cases were referred to in the judgment:

Lewis & Ness v Minister of FinanceBDLR [2004] Bda LR 66

Crown Forest Industries Ltd v CanadaUNK [1995] 2 SCR 802; 125 DLR (4th) 485

Minister of Finance v Bunge LtdBDLR [2013] Bda LR 83

R (BskyB) Ltd v Central Criminal CourtELR [2012] QB 785

Al Rawi v Security ServiceELR [2012] 1 AC 531

Volaw Trust and Corporate Services Ltd v The Officer for the Comptroller of Taxes [2013] JCA 239

Ben Nevis (Holdings) Ltd v Commissioners for HM Revenue and CustomsUNK [2013] EWCA Civ 578

Spread Trustee Co Ltd v HutchisonELR [2012] AC 194

Wilson v First County Trust Ltd (No 2)ELR [2004] 1 AC 816

Phillips v EyreELR (1870) LR 6 QB 1

R (Naik) v Secretary of State for the Home DepartmentUNK [2011] EWCA Civ 1546

Tax Information Exchange Agreement — Application to vary production orders — Change in procedure — Disclosure — Retrospective effect of treaty — Practice

RULING of Hellman, J

Introduction

1. Nation States have a legitimate interest in collecting all the taxes to which they are lawfully entitled. Taxpayers have a legitimate interest in paying no more in tax than they are lawfully required to pay. Mutual legal assistance has a role to play in assisting States to gather the information necessary to assess the tax due from taxpayers, collect it, and prosecute taxpayers who are alleged to have committed tax offences.

2. To this end, the Government of Bermuda has entered into a number of tax information exchange agreements (‘TIEAs’) with other jurisdictions and enacted legislation to enable requests made pursuant to those agreements to be given effect here. Requests from the United States are dealt with under the USA – Bermuda Tax Convention Act 1986 (‘the 1986 Act’). Requests from other States are dealt with under the International Cooperation (Tax Information Exchange Agreements) Act 2005 (‘the 2005 Act’).

3. The 2005 Act was recently amended. Previously, the Minister of Finance (‘the Minister’) would issue a written notice requiring the production of information from the person on whom the notice was served. That person could challenge the decision to issue the notice or the terms of the notice by way of judicial review.

4. Under the recent amendments, which came into force on 12th December 2013, the Financial Secretary or Assistant Financial Secretary makes an application for a production order to the Court. If the application is successful the Court will make a production order. The party served with the order can then apply to the Court to set it aside or vary its terms.

5. That is what has happened in the instant case. The Defendants in both actions apply to set aside or vary production orders which I made earlier this year. Because some of the issues raised are common to both actions, the applications were heard together and I am issuing one ruling with respect to them both.

The 2005 Act

6. It will be helpful to set out those provisions of the 2005 Act which have a bearing on the instant applications.

7. Section 2 is headed ‘Interpretation’. It includes a definition of ‘information’ as meaning:

‘… any fact, statement or record in any form whatsoever that is relevant or material to tax administration or enforcement’

8. Section 3 is headed ‘Duties of the Minister’. It provides at (1) that the Minister is the competent authority for Bermuda under the TIEAs and at (2) that:

‘The Minister may provide assistance to any requesting party according to the terms of the agreement with that party.’

9. Section 4 is headed ‘Grounds for declining a request for assistance’. As the heading suggests, it sets out the grounds on which the Minister may decline a request for assistance.

10. Section 5 is headed ‘Production Orders’. It provides in material part:

‘(1) 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.

(2) The Supreme Court may, if on such an application it is satisfied that conditions of the applicable agreement relating to a request are fulfilled or where the court is satisfied with the Minister's decision to honour a request 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 of the making of the production order.

(3) The period to be specified in a production order shall be 21 days unless it appears to the court, or the Financial Secretary satisfies the court, that a longer or shorter period would be appropriate in the particular circumstances of the production order.

(4) Where a request so stipulates and the production order makes such requirement, information sought shall be in the form of—

(a) depositions of witnesses, disclosed on oath; or

(b) original documents or copies of original documents, certified or authenticated by a Notary Public.

(5) An application for a production order under this section may be made ex parte to a judge in Chambers and shall be in camera.

(6) A person served with a production order under subsection (1) who is aggrieved by the service of the order may seek review of the order within 21 days of the date of the service of the order.

(7) Rules of court may make provision—

(a) for the discharge, variation and review of production orders; and

(c) for proceedings in relation to such orders.

…

(11) For purposes of this section the Financial Secretary includes an Assistant Financial Secretary.’

11. Section 6 is headed ‘Statutory duty to provide information’. It provides that a person on whom a production order has been served under section 5 shall provide the information specified in the production order to the Minister within the period specified in the order. However a person is not required to comply with a request for information if the information is not within the person's possession or control.

12. Order 120 of the Rules of the Supreme Court 1985, which was made pursuant to section 5(7) of the 2005 Act, provides rules for obtaining evidence for TIEAs. Of particular relevance is Order 120/2, headed ‘Application for production order or other relief’, which includes the following provisions:

‘(1) An application for a production order under section 5 of the Acts shall, with the necessary modifications, be made by an ex parte originating summons with respect to which no appearance is required and shall be supported by an affidavit.

(2) There must be exhibited to the affidavit the request in pursuance of which the application is made and, if the request is not in the English language, an English translation thereof shall also be exhibited.’

13. Bermuda is presumed to legislate in accordance with its treaty obligations. When construing the 2005 Act it is therefore permissible to take into account the terms of the applicable TIEAs and the model conventions and official commentaries which provide their legal context. See, for example, the decisions of the Court of Appeal in Lewis & Ness v Minister of FinanceBDLR[2004] Bda LR 66 at para 31(applicable treaty) and the Supreme Court of Canada in Crown Forest Industries Ltd v CanadaUNK[1995] 2 SCR 802, 125 DLR (4th) 485 at para 44 (model conventions and official commentaries).

Disclosure

14. The extent to which the Minister is required to disclose a request to the person required to provide information under it has been a historic battleground. See the decisions of the Court of Appeal under the 1986 Act in Lewis & Ness v Minister of FinanceBDLR[2004] Bda LR 66, and under the 2005 Act prior to the recent amendments in Minister of Finance v Bunge LtdBDLR[2013] Bda LR 83. It arose again at an interlocutory hearing in the instant cases.

15. I ruled that any document disclosed to the court on the hearing of an application for a production order must also be disclosed to the other parties. The Divisional Court so held in R (BskyB Ltd) v Central Criminal CourtELR[2012]...