The Ministry of Finance v DEF Ltd

• Jurisdiction: Bermuda
• Judge: Chief Justice Hargun,Hargun
• Judgment Date: 31 July 2019
• Neutral Citation: [2019] SC Bda 47 Civ
• Date: 31 July 2019
• Docket Number: CIVIL JURISDICTION 2019: No. AA193,CIVIL JURISDICTION
• Court: Supreme Court (Bermuda)

[2019] SC (Bda) 47 Civ

In The Supreme Court of Bermuda

Before:

Hon. Chief Justice Hargun

CIVIL JURISDICTION

2019: No. AA193

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 Matters in Respect of the Agreement Between Bermuda; United Kingdom and Requesting Country, Kingdom of Sweden

Between:

The Ministry of Finance

Plaintiff

and

DEF Ltd

Respondents

Appearances:

Mr Jeffrey Elkinson, Conyers Dill & Pearman, for the Minister of Finance

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

Civil practice and procedure - Application to grant the right of review under section 5(6B) and for disclosure of documents used at the ex parte hearing under section 5(6A) — Test to be applied in considering whether a party should have been granted a right of review under section 5(6B) — Whether the party seeking disclosure of the ex parte documents made an application under section 5(6) of the International Cooperation (Tax Information Exchange Agreements) Act, 2005 the Court should grant a right of review if the order to produce certain information to the Minister of Finance — Whether it was appropriate for the ex parte document (or any part of them) to be disclosed to the recipient of the Production Order.

RULING

Introduction

1 By an ex parte Production Order dated 15 April 2019 the Court, pursuant to section 5(2) of the International Cooperation (Tax Information Exchange Agreements) Act 2005 (“the 2005 Act”), ordered that DEF Ltd (“the Respondents”) produce the following information to the Minister of Finance (“the Minister”):

• (1) In relation to the affairs of the Respondents for the years 2015 – 2018:

  • (a) Annual Financial Statements;

  • (b) Trial Balances and/or balance sheets and income statements from the accounts;

  • (c) Complete general ledgers from the accounts;

  • (d) Copies of 6 numbered accounts of the Respondents for the calendar years 2015, 2016, 2017 and 2018;

  • (e) Any other bank accounts not mentioned above that are associated with the Respondents; and

  • (f) Bank account information for a numbered account relating to Northern Trust International Banking Corporation.

• (2) In relation to the affairs of AHYF Ltd:

  • (a) The Annual Financial Statements for the period 2014 – 2016;

  • (b) Trial Balances and/or balance sheets and income statements from the accounts for the period 2014 – 2016;

  • (c) Complete general ledgers from the accounts for the period 2015 – 2016; and

  • (d) Copies of statements for bank accounts for the period 2015 – 2016.

Relevant provisions of the 2005 Act

2 The Preamble to the 2005 Act states that it is expedient to make general provision for the implementation of a tax information exchange 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 agreements.

3 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 and to deliver to the Minister the information referred to in the request.

4 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.

5 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.

6 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.

7 Section 5(6A) provides that a person served with the 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 documents until the person has been granted a right of review under subsection (6B) and that the Court has directed disclosure of such documents as it considers appropriate for the purposes of the review; and (b) shall not (notwithstanding anything to the contrary contained in the Supreme Court Records Act 1955) be permitted to view such documents on the court file until such a right of review has been granted and the Court has directed disclosure of the documents.

8 Section 5(6B) deals with the determination of the right of review. It provides that upon the application under subsection (6) having been filed with the court, the Court shall decide whether to grant the person a right of review.

9 Section 4 deals with the grounds for declining a request for assistance. Section 4(2) provides that the Minister may decline a request for assistance if:

• (a) the information relates to a period that is more than six years prior to the tax in respect of which the request is made;

• (b) the request pertains to information in the possession or control of the person other than the taxpayer that does not relate specifically to the tax affairs of the taxpayer;

• (c) the information is protected from disclosure under the laws of Bermuda on the grounds of legal professional privilege;

• (d) the requesting party would not be able to obtain the information (i) under its own laws for the purposes of the administration or enforcement of its tax laws; or (ii) in response to a valid request from the Minister under the agreement;

• (e) the disclosure of the information would be contrary to public policy; or

• (f) the Minister is not satisfied that the requesting party will keep the information confidential and will not disclose it to any person other than (i) a person or authority in its own jurisdiction for the purposes of the administration and enforcement of its tax laws; or (ii) a person employed or authorised by the government of the requesting party to oversee data protection.

Historical position under the 2005 Act

10 In order to appreciate the provisions of section 5(6), dealing with the ability of the aggrieved party to obtain full disclosure of the material reviewed by the Supreme Court when making the ex parte Production Order, it is instructive to understand the historical context and rationale of the current provisions.

11 As noted by Hellman J in Ministry of Finance v E,F,H,O [2014] Bda LR 54, [14], the extent to which the Minister is required to disclose a request to the person required to provide information under it as being a historic battleground. He referred to the decisions of the Court of Appeal under the 1986 act in Lewis & Ness v Minister of Finance [2004] Bda LR 66, and under the 2005 Act in Minister of Finance v Bunge Ltd [2013] Bda LR 83. It is evident that there have been a number of legislative changes to section 5(6) of the 2005 Act all designed to prevent disclosure of documentary material sought only, as Mr Elkinson put it, for “fishing” purposes.

12 Prior to December 2013, the legislative framework under the 2005 Act provided that the Minister was the competent authority for Bermuda under the relevant agreements and that the Minister may provide assistance to any requesting party according to the terms of the agreement with that party (section 3). It was the Minister who could, by notice in writing served on any person in Bermuda, require the person to provide any information that the Minister may require with respect to a request for assistance by a requesting party. The Supreme Court played no role at this stage in issuing Production Orders.

13 In the Minister of Finance v Bunge Ltd [2013] Bda LR, the Court of Appeal considered the obligations Minister to provide disclosure on whom the notice to produce was served and stated the position to be as follows:

• “i. on the true construction of section 5(1) of the 2005 Act, the person on whom the notice is served is entitled to see, and the Minister is bound to produce, the terms of the Request, so far as they are relevant to the notice that is given. Hence the Judge's qualified ruling “so much of the Request as is necessary to show that the statutory requirements for the Request have been complied with, but redacted to exclude any sensitive material” (judgment para.39), with which we agree. Without production of the terms of the Request, the person cannot know that the notice is valid;

• ii. the “principle of justice and fairness” applied in Lewis & Ness both supports the above construction of the 2005 Act and provides an independent ground for requiring production of the terms of the Request in a particular case;”

14 Following the Bunge case, the 2005 Act was amended and the amendments came into force on 12 December 2013 under which the Financial Secretary or Assistant Financial Secretary may make an application for a Production Order to the Supreme 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 aside or vary its...