Re Braswell and Gero Vita International Inc. 2000 Civil Jur. No. 59

• Jurisdiction: Bermuda
• Judgment Date: 18 May 2001
• Date: 18 May 2001
• Docket Number: Civil Jurisdiction No. 59 of 2000
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Meerabux, J

Civil Jurisdiction No. 59 of 2000

Re Braswell and Gero Vita International Inc

Mr. J. Goudie Q.C. and Mr. J. Elkinson for the Applicants

Mr. P. Perinchief for the Minister of Finance

Bermuda Trust Co Ltd v Minister of Finance

Solsky v RUNK (1979) 105 DLR (3d) 745

Descoteaux v MierzwinskiUNK (1982) 141 DLR (3d) 590

R v Derby Magistrates' CourtELR [1996] AC 487

Paragon Finance plc v FreshfieldsWLR [1999] 1 WLR 1183

General Mediterranean Holdings SA v PatelWLR [2000] 1 WLR 272

Minister of Home Affairs v FisherELR [1980] AC 16

Cmpbell v UKHRC (1992) 15 EHRR 137

Niemietz v GermanyHRC (1992) 16 EHRR 97

Foxley v UK [2000] BHRC 571

Miranda v Arizona (1966) 384 US 436

Mohamed v The STateELR [1999] 2 AC 111

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R v Crown Court at Lewes, ex parte HillUNK (1990) 93 Cr App R 60

R v Acton Crown Court, ex parte Layton [1993] Cr LR 458

Bertoli v Malone [1992] LRC (Const) 960

R v Horseferry Road Magistrates' Court, ex parte BennettELR [1994] 1 AC 42

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R v Cox and RailtonELR (1884) 14 QBD 153

Kuruma v ReginamELR [1955] AC 197

Calcraft v GuestELR [1989] 1 QB 759

R v TomkinsUNK (1977) 67 Cr App R 181

Fubler v Attorney General of Bermuda

Locabail International Finance Ltd v Manios and Transways (Chartering) SA 1988 Civil Appeal No. 4

Re Glencore Grain Limited 1996 Civil Jur. No. 215

USA—Bermuda Tax Convention Act 1986

European Convention for the Protection of Human Rights and Fundamental Freedoms (1953)

Confidentiality of Bank Documents — Tax Convention — Legal Professional Privilege

JUDGMENT

PRELIMINARY

The matter to be tried by this Court is the following preliminary issue, namely—

‘Whether the fact that any material used by or relied upon by the requesting authority in making a request for information under the Bermuda Tax Convention Act 1986 was obtained by persons in breach of confidence and/or privilege has any effect as to the validity of the Minister's decision to issue a Notice to deliver up information in reliance on the contents of any such Request.’

FACTUAL BACKGROUND

On the 6 January 2000 the Minister of Finance (‘the Minister’) signed and issued Notices to Deliver Up Information (‘the Notices’) stated to be under the U.S.A.—Bermuda Tax Convention Act 1986 (‘the Act’). The Notices were served upon Hemisphere Management Limited, the Bank of N.T. Butterfield & Son Ltd. and The Bank of Bermuda Limited (‘the Institutions’) on a date or dates presently unknown to the Applicants, Almon Brasswell, Gero Vita International Inc. and G.B. Data Systems Inc. A copy of the Notice served on Hemisphere Management Limited was attached to the Originating Summons and is exhibited in the affidavit of Michael L. Cossel, sworn on the 15 February 2000.

At paragraph 1.5 of the Notices the taxpayers in respect of whom the information sought is stated to relate to are the following:

• (a) Almon Glenn Braswell;

• (b) Gero Vita International Inc., and

• (c) G.B. Data Systems Inc.

They are stated in paragraph 1.7 of the Notice to be residents of the United States. Almon Braswell is an individual United States taxpayer and businessman who has developed businesses in the fields of alternative natural health remedies.

Gero Vita International Inc. and G. B. Data Systems Inc., corporate taxpayers, are companies incorporated in the United States. They have been involved in the manufacture, distribution and sale of alternative natural health and life enhancing products.

The Notices direct the Institutions to deliver up to the Minister all such information as is within the Institutions' knowledge, custody or control in relation to the individual and/or corporate taxpayers mentioned above. The U.S. Government seeks the documents and information set out hereunder.

In respect of Hemisphere, ‘All records of Hemisphere Management Limited pertaining to Deleon Global Trading Ltd., G.B. Data Systems Inc., Gero Vita International Inc., Sonoran Investments Ltd., Ryan Investments Ltd., and any other entities managed by Hemisphere Management Limited for the benefit of Almon Glenn Braswell, G.B. Data Systems Inc., Gero Vita International Inc. from the period 1^st January 1994 to the present.’ and ‘All records of Deleon Global Trading Ltd. pertaining to Almon Glenn Braswell, G.B. Data Systems Inc., Gero Vita International Inc., Sonoran Investments Ltd., Ryan Investments Ltd., and any other entities managed by Deleon Global Trading Ltd., for the benefit of Almon Glenn Braswell, G.B. Data Systems Inc., Gero Vita International Inc. for the period 1^st January 1994 to the present …’

In respect of the Bank of N.T. Butterfield & Son Ltd., ‘The records of all accounts at the Bank of N.T. Butterfield & Son Ltd. for the period beginning 1^st January 1994 to the present held in the name of or for the benefit of Almon Glenn Braswell, Deleon Global Trading Ltd., Sonoran Investments Ltd., Ryan Investments Ltd. and any other entities managed or controlled by Hemisphere Management Limited for the benefit of Almon Glenn Braswell or G.B. Data Systems Inc., and in particular those accounts known as:

Account # 808550H0208

Account # 808550H0100

Account # 808550H0109’

A number of the Companies from whom records are sought are not U.S. taxpayers and/or resident in the United States.

In respect of The Bank of Bermuda Limited, ‘The records of all accounts at the Bank of Bermuda Limited for the period beginning 1^st January 1994 to the present held in the name of or for the benefit of Almon Glenn Braswell, Deleon Global Trading Ltd., Sonoran Investments Ltd., Ryan Investments Ltd. and any other entities managed or controlled by Hemisphere Management Limited for the benefit of Almon Glenn Braswell or G.B. Data Systems Inc., and in particular those accounts known as:

Account# 1010–030368

Account # 1010–025371 (in the name of Sonoran Investments Ltd.,)

Account # 4966 9602 7272 2377’

The Notices were served consequent upon a request in writing (‘the request’) dated 22 September 1999 made to the Minister by the Internal Revenue Service (‘the IRS’) of the Department of the Treasury of the USA purportedly pursuant to section 4 of the Act, Article 5 of the Schedule 1 thereto (‘the Convention’), and Schedule 2 thereto (‘the Notes’). The request is in respect of the records of accounts held in the name of or for the benefit of, inter alia, Sonoran Investments Limited (‘Sonoran’) and Ryan Investments Limited (‘Ryan’).

The request states that—

• 1. Sonoran is a company believed to be incorporated in the Cayman Islands and is neither a resident of the United States nor of Bermuda;

• 2. Ryan is a company believed to be incorporated outside of Bermuda and is neither a resident of the United States nor of Bermuda;

• 3. Pertinent information relating to this request is as stated therein; and

• 4. The information before United States investigators was from former senior officials of Gero Vita International Inc.

The Applicants by Originating Summons dated 16 April 2000 sought the following:

• (a) an Order of Certiorari setting aside the Notices served by the Minister upon the Institutions purportedly pursuant to section 5 of the Act; and

• (b) a Declaration that the Notices do not comply with the Act, upon the grounds set forth in the Statement of Facts attached to the Originating Summons.

The grounds upon which the Notices do not comply with the Act are that—

• 1. the request was not signed by the designated official, contrary to section 4(2) of the Act;

• 2. the request did not contain the particulars required by section 4(3) of the Act;

• 3. the Notices themselves are deficient; and

• 4. the records which are the subject of the request and the Notices have been requested by the IRS on the basis of information that—

  • (a) was illegally obtained, and

  • (b) is the subject of legal privilege.

On 3 July 2000 Assistant Justice Storr ordered the 4^th of the abovementioned grounds to be tried as a preliminary issue. In his written outline of argument on behalf of the Minister, the then Solicitor General at paragraph 6 thereof has stated thus:

‘6. Consequently, on the date fixed for the return of the Originating Summons, being the first hearing Counsel for the Respondent sought an Order that allegation (4) be dealt with in a two stage process, if necessary. In the first stage the Respondent would admit all the facts relating to the investigation in the United States, namely paragraphs 18–24 inclusive for the purposes of arguing the legal issue as to whether those facts give rise to the relief prayed for in the Originating Summons ……..’.

Hence, the assumed facts for the purposes of the preliminary issue are set out in paragraphs 18 to 24 (inclusive) of the Statement of Facts. They are as follows:

• ‘18. The investigation which is presently being conducted into Mr. Braswell is based upon allegations made by two former employees of G.B. Data Systems Inc., namely Mr. Theodore Ponich and Mr. Michael O'Neil, both of whose engagement by G.B. Data Systems Inc. was terminated on or about the 6^th January 1999.

• 19. Mr. Ponich had enjoyed a position of some seniority whilst engaged by G.B. Data and was the custodian of privileged and confidential documents conferred upon him for the purposes of safekeeping. The day after Mr. Ponich's employment was terminated, he and his wife began reviewing privileged and confidential information belonging to G.B. Data Systems Inc. with the sole purpose of acquiring...