Ministry of Finance v IJK Ltd

• Jurisdiction: Bermuda
• Judgment Date: 10 November 2021
• Docket Number: Civil Jurisdiction 2020 No AA348
• Court: Supreme Court (Bermuda)

In the matter of the Request for Exchange of Information under the International Cooperation (Tax Information Exchange Agreements) Act 2005 (section 2) and the Convention on Mutual Administrative Assistance in Tax Maters in respect of the Agreement between Bermuda, United Kingdom and the Requesting Country, the Republic of India

Between:

Ministry of Finance

Applicant

and

IJK Limited

Respondent

[2021] Bda LR 93

Civil Jurisdiction 2020 No AA348

In The Supreme Court of Bermuda

Production order under TIEA — Whether ex parte application was appropriate — Fishing expedition — Whether Court was misled — Full and frank disclosure

The following cases were referred to in the judgment:

Ministry of Finance v DEF Ltd [2019] Bda LR 59

Tugashev v Orlov et al [2019] EWHC 2031

Minister of Finance v AP [2016] Bda LR 34

Minister of Finance v MNO [2017] Bda LR 143

Mr J Elkinson for the Applicant

Mr D Kessaram for the Repondent

RULING of Mussenden J

Introduction

1. The Respondent, IJK Limited (the “Respondent” or the “Company”), applies to discharge the Production Order granted by the Chief Justice on 4 March 2020 (the “2020 Production Order”). It was made on an ex parte application by the Minister of Finance (the “Minister”) under section 5 of the International Cooperation (Tax Information Exchange Agreements Act 2005 (“the 2005 Act”) and the Tax Information Exchange Agreement between Bermuda and the Government of the Republic of India (the “Bermuda-India TIEA”).

2. On 26 January 2021 this Court granted the Respondent a right of review of the 2020 Production Order on the following bases:

• (a) Ground 1 — The application for the 2020 Production Order should not have been heard ex parte; and

• (b) Ground 4 — The information sought in the 2020 Production Order is irrelevant to the tax investigation against the Respondent itself and in any event is oppressive and a fishing expedition. Further, on the evidence before the Court, there is concern that the information is sought for an impermissible, collateral purpose.

3. The right of review granted by the Court allowed the Respondent to obtain sight of the documents that comprised the ex parte application at which the Chief Justice made the 2020 Production Order.

4. It is useful to set out the various central documents and applications as follows:

• (a) The Minister received a request for information from the Government of India dated 27 December 2018 (the “Request”).

• (b) An application was made in February 2019 (the “2019 Application”) which resulted in a Production Order dated 22 February 2019 (the “2019 Production Order”), which was subsequently discontinued by the Minister on 1 April 2019.

• (c) An application was made in March 2020 (the “2020 Application”) which resulted in the 2020 Production Order dated 4 March 2020.

The 2020 Production Order

5. The 2020 Production Order ordered that the Respondent produce the following information to the Minister:

• i. Lists of assets (both current and non-current) of the Company along with location of the assets for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• ii. Information of all the employees of the Company, together with their location of work, country of residence, nationality and payroll expense (including salary, bonus, pension and other benefits) for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• iii. Total payroll expense of the Company for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• iv. The location and name of country of residence of senior management (such as Managing Director, Chief Executive Officer, Chief Financial Officer, Heads of Division or Departments) and their direct support staff for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• v. The total income from transactions where both purchase and sale of goods is from/to its associated enterprises for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• vi. The income by way of royalty, dividend, capital gains, interest or rental income earned for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• vii. The total sales and other income for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• viii. The location of board of directors' meetings and names of persons who attended the meeting. If the meeting was conducted by circular resolution then the location of parties involved for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• ix. Copies of minutes of meetings and board resolutions for all board of directors' meetings for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• x. The location of shareholders' meetings and the names of persons who attended the meetings. If the meeting was conducted by proxy vote, then the location of parties involved and the entity to which proxy vote was given for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• xi. Copies of minutes of meeting for all shareholders' meetings for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• xii. Information in relation to delegation of authority of board members to any executive committee/promoter/shareholder for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• xiii. Information in regards the person(s) who is/are funding releasing/cheque signing authority in fiscal year 2015–16.

• xiv. The address of the principal place of business of the Company in fiscal year 2015–16.

• xv. The address of the headquarters of the Company in fiscal year 2015–16.

• xvi. Copies of all documents submitted by the Company to the Bermuda Government for incorporation.

• xvii. The names of beneficial shareholder(s) of the Company.

• xviii. Copies of Return of Income filed by the Company in Bermuda for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• xix. Information on all bank accounts of the Company with bank account number, bank branch and authorized signatory name and country of location.

• xx. Copies of bank statements of the bank accounts (as above) for fiscal year 2013–14, fiscal year 2014–15 and fiscal year 2015–16.

• xxi. Identify the location(s) of all server(s) of the Company and/or ‘a network centre’ of the Company in fiscal year 2015–16.

The Documents in support of the Ex Parte 2020 Application

6. The documents in support of the ex parte 2020 Application consisted of the following:

• i. Letter from the Consultant and Senior Exchange of Information Officer, Ministry of Finance – Treaty Unit (the “Consultant”) dated 26 February 2020 to the Registrar of the Supreme Court;

• ii. The Minute of the Minister dated 26 February 2020;

• iii. Ex Parte Originating Summons for a Production Order;

• iv. Affidavit of the said Consultant sworn on 26 February 2020 (the “Consultant's Affidavit”);

• v. Exhibit to the Consultant's Affidavit consisting of the following documents:

  • (a) A letter from the Competent Authority of India dated 27 December 2018 (the “Covering Letter”);

  • (b) Part II of Form A – the Request for Information from Bermuda;

  • (c) Affidavit of Senior Corporate Counsel of the Company, sworn on 28 February 2019 (the “RHR Affidavit”) and its exhibits which comprised the following:

    • 1. The 2019 Production Order as made against RGL on 22 February 2019.

    • 2. Affidavit of RHR sworn on 27 July 2018;

    • 3. Second Affidavit of RHR sworn on 23 August 2018;

    • 4. Summons of the Company dated 6 March 2019 for the grant of a right of review of the 2019 Production Order;

    • 5. Notice of Discontinuance dated 1 April 2019 in respect of the 2019 Production Order.

Relevant provisions to the 2005 Act

7. The Chief Justice set out the relevant provisions of the 2005 Act in Ministry of Finance v DEF Ltd[2019] Bda LR 59. Both parties cited this case in their submissions.

“The preamble to the 2005 Act states that it is expedient to make general provision for the implementation of tax information agreements entered into by the Government of Bermuda with other jurisdictions and to enable the Minister to provide assistance to the competent authorities of such jurisdictions under such agreement.

Section 5 of the 2005 Act deals with issuing of Production Orders by the Supreme Court. Section 5(1) provides that where the Minister has received a request in respect of which information from the person in Bermuda is required, the Minister may apply to the Supreme Court for the Production Order to be served upon the person referred to in the request, directing them to deliver to the Minister the information referred to in the request.

Section 5(2) provides that 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 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 of making request of the Production Order.

Section 5(5) provides that an application for a Production Order under this section may be made ex parte to a judge in Chambers and shall be in camera.

Section 5(6) deals with challenge to the Production Order and the issue of disclosure of the material relied upon by the Supreme Court when it made the ex parte Production Order. Section 5(6) provides that 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.

Section 5(6A) provides that a person served with a Production Order under subsection (1) who wishes to view the documents filed with the Court on the application for the Production Order (a) shall not be entitled as against the Minister to disclosure of such...