Ministry of Finance v Ger

• Jurisdiction: Bermuda
• Judge: Hargun
• Judgment Date: 21 August 2019
• Neutral Citation: [2019] SC Bda 53 Civ
• Docket Number: CIVIL JURISDICTION
• Court: Supreme Court (Bermuda)
• Date: 21 August 2019

[2019] SC (Bda) 53 Civ

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. AA195a

Between:

Ministry of Finance

Appellant

and

GER

Respondent

Appearances:

Mrs Shakira Dill-Francois, Deputy Solicitor General of The Attorney General's Chambers, for the Appellant

Mr Jordan Knight, Appleby (Bermuda) Limited, for the Respondent

Civil practice and procedure - Application by respondents seeking an order that the respondent be granted a right of review pursuant to section 5(6B) of the International Cooperation (Tax Information Exchange Agreements) Act, 2005 and appellant be ordered to disclose to respondent all documents filed with the court on the application pursuant to section 5(2) of the 2005 Act that resulted in the granting of the Protection Orders — Whether there was an arguable case of material non-disclosure.

RULING

Introduction

1 This is the hearing of the application by the Respondent in relation to these two actions seeking an order that the Respondent be granted a right of review pursuant to section 5(6B) of the International Cooperation (Tax Information Exchange Agreements) Act 2005 (the “2005 Act”); and that the Minister of Finance (the “Minister”) be ordered to disclose to the Respondent all documents filed with the Court on the application pursuant to section 5(2) of the 2005 Act that resulted in the granting of the Production Orders in proceedings 2019 number AA 195 and AA 195A.

2 These two requests for exchange of information under the 2005 Act are made by the Government of the Federal Republic of Germany pursuant to an Agreement between the Government of Bermuda and Government of Germany. The information requested by the Government of Germany relates to taxpayers who are each subject of investigations by the tax authorities in Germany (paragraph 6 of Mr Knight's First Affidavit).

3 The original Orders required production of eight categories of information and/or documents. For purposes of this application, the original request has been reduced by the Minister to just one category numbered 8 and in the original Production Orders that category was described as follows:

“Was or is [the tax payer] invested in other companies or trusts based in the Bermudas or [were they] a beneficiary of such companies or trusts.”

4 The First Affidavit of Mr Wayne Brown, the Assistant Financial Secretary, Treaties, now makes it clear that the Minister has agreed to vary both Production Orders such that only the information in relation to category 8 on both Orders is required to the extent that it concerns trusts (paragraph 6). Accordingly, the only information required under both Production Orders is answer to the question whether the taxpayer in question “was or is a beneficiary of trusts based in Bermuda”.

5 In argument, counsel for the Minister made it clear that the Production Orders merely sought information which was in the possession of the Respondent and did not require the Respondent to carry out any investigation to find out the true position. Counsel for the Minister agreed that for purposes of answering this question, the relevant information would be in the possession of the Respondent if it was information known to the directors and officers of the Respondent. This would include information which was known to the Assistant Secretary [of the Respondent], who has sworn three affidavits in these proceedings on behalf of the Respondent. Accordingly, the answer to the remaining question in the Production Orders can simply be answered by reference to the current knowledge of each of the directors and officers of the Respondent.

6 I agree with Mr Knight's submission that at this stage all he has to show is that he has an arguable case for seeking a review. In support of this application, Mr Knight relied upon section 4(2)(b) which provides that the Minister may also decline a request for assistance 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. Mr Knight argues that as the Production Orders do not specify any time periods and as a consequence, this request potentially may be seeking information which is more than six years prior to the tax period in respect of which the request is made. Counsel for the Minister accepted this contention and agreed to limit the period, for purposes of answering this question, to within the six year period calculated from the tax period in relation to which the information is sought. Counsel for the Minister advised that the relevant tax year for which the information is required is 2013 and accordingly that the Court should amend the order so that the answer to the question posed by question 8 is limited to the period 2007 to present.

7 I agree that having regard to the terms of section 4(2)(b), the Production Orders should be amended so that question 8 seeks information from the Respondent “during the period 2007 to the present was or is [the taxpayer] a beneficiary of trusts based in Bermuda”. In my view this amendment avoids any potential breach of section 4(2)(b) of the 2005 Act.

8 Mr Knight also complains that this request for information from the Government of Germany is a fishing exercise and he says that such fishing exercises are not allowed under the 2005 Act. He relies upon Hellman J's decision in Minister of Finance v AAA Group Ltd [2016] SC Bda 75 Civ, where Hellman J described fishing expeditions as “speculative requests that have no apparent nexus to an open enquiry investigation”. I disagree that the information sought in category 8 can properly be described as “ fishing expeditions”. The factual position is that [the] taxpayers are subject of investigations by the tax authorities in Germany. In relation to those investigations, the Respondent has already confirmed to the tax authorities in Germany, by letter dated 23 July, 2018 that neither of these taxpayers “(i) are currently or have ever been members of the [Respondent]; (ii) would be, upon a partial or complete dissolution of the [Respondent], entitled to income or capital distributions from the [Respondent]; and (iii) has currently or have ever had in the past a direct or indirect interest (shares, voting rights of the assets) in the [Respondent]”. Having regard to the information provided so far by the Respondent, it is understandable that the tax authorities in Germany may ask whether the Respondent is aware that the taxpayers may be beneficiaries of other trusts based in Bermuda. In the context of an open and existing tax investigation such a request cannot properly be characterised as a fishing expedition.

9 Finally, Mr Knight complains that the Production Orders may be...