United States of America Plaintiff v Verna Cheryl Womack Defendant
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Anthony Smellie |
| Judgment Date | 08 April 2016 |
| Judgment citation (vLex) | [2016] CIGC J0408-1 |
| Docket Number | FSD. CAUSE NO. 196 OF 2015 ASCJ FSD. CAUSE NO. 198 OF 2015 ASCJ FSD. CAUSE NO. 199 OF 2015 ASCJ |
| Court | Grand Court (Cayman Islands) |
| Date | 08 April 2016 |
In the Matter of Four Consolidated Applications Under the Confidential Relationships (Preservation) Law (the “CR(P)L”).
And in the Matter of the Proceedings Pending in the U.S. District Court for the Western District of Missouri
IN CHAMBERS
The Hon. Anthony Smellie, CHIEF JUSTICE
Applications under Section 4 of the Confidential Relationships (Preservation) Law (the “CR(P)L”) for directions for the giving of evidence in foreign criminal tax proceedings — whether such applications are to be allowed given the existence of treaty arrangements specifically for the obtaining of such evidence — examination of the inter-relationships between the CR(P)L, the Tax Information Exchange Treaty and Law and other legislative schemes in pari materia.
These are consolidated applications by which four Applicants seek directions under section 4 of the Confidential Relationships (Preservation) Law (the “CR(P)L”), respectively to allow each of them to give evidence in proceedings now pending before the United States District Court for the Western District of Missouri (“the Missouri Court”).
The Applicants have been informed that criminal tax proceedings have been commenced by the United States Department of Justice in the Missouri Court against the defendant Ms. Womack, a United States citizen and a former client of the Applicants (as will be explained below), and in which the indictment alleges, among other things1, that she:
“…opened a series of bank accounts and organized a series of nominee companies and trusts in the Cayman Islands to conceal a portion of her income from the IRS. At all times, WOMACK exercised control over the nominee companies and trusts, and they were maintained for her financial benefit”.
The Applicants are current or former officers or employees of Willis Management (Cayman) (“Willis Cayman”) Ltd, a professional services firm with affiliates in other countries and specializing in captive insurance management. Ms. Womack, either in person or through entities which she controlled, was provided with professional fiduciary services by the Applicants, through Willis Cayman. It was in the course of that relationship that the Applicants came into possession of confidential information
about Ms. Womack's affairs: the information that would inform the evidence which they now intend to give.The information having been acquired in the course of a professional confidential relationship, it is protected from unauthorized disclosure by the CR(P)L, which prescribes a criminal sanction for breach.
In the absence of authorization by way of Ms. Womack's consent as their “principal” as she is deemed to be by the CR(P)L2, the Applicants have been advised to seek authorization by way of directions of the Court under section 4. Hence these applications.
The Applicants do not dispute the confidentiality of the information nor the existence of the duties of confidence owed to Ms. Womack. Rather, despite those duties and in order to ground their applications, they assert variously:
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(1) In the case of Mr. Ryan Ogden: that he now resides in the United States and having been served with a subpoena to testify before the Missouri Court, would be liable to penalty if he fails to comply and so is bound to comply. Further, that as he would be acting in breach of the CR(P)L if he testifies without Ms. Womack's consent and without directions from this Court allowing him to do so, he is obliged to make his application under section 4 of the CR(P)L before complying with the subpoena.
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(2) In the case of Mr. Timothy Byrne: that while he now resides in Ireland and so is not amenable to compulsion by the Missouri Court, he intends nonetheless to testify before it and so can properly bring his application under section 4 of the
CR(P)L for directions. In Ireland he is employed with another Willis Group affiliate and so he “consider(s) it as part of Willis' obligations as a good corporate citizen to assist the U.S. Authorities by providing evidence as a witness where there are allegations of criminal offences”. -
(3) In the case of Mr. James Owen who continues to reside and work for Willis Cayman in the Cayman Islands; he points to the fact that he has already been required by the Cayman Islands Tax Information Authority Law (the “TIAL”) by notice issued by the TIAL Authority, to disclose documentary information about Ms. Womack's affairs and has already done so. Further, that as he has been made aware that he is needed by the U.S. Authorities as a witness in the proceedings against Ms. Womack, he too regards it as part of Willis'“good corporate citizen obligations” to assist the U.S. Authorities by giving evidence;
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(4) In the case of Mr. Stephen Gray who also continues to reside in and work here for Willis Cayman; he too has already disclosed information as required by the TIAL Authority and has been informed that he is needed by the U.S. Authorities as a witness in the proceedings against Ms. Womack and intends to comply.
That being the background to these four applications, it must be acknowledged that the Applicants do have standing to bring them in the purely technical sense under section 4 of the CR(P)L which provides, in parts relevant for present purposes, as follows:
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“4. (1) Whenever a person intends or is required to give in evidence in, or in connection with, any proceeding being tried, inquired into or determined by any court, tribunal or other authority (whether within or without the Islands) any confidential information within the meaning of this Law, he shall before so doing apply for directions and any adjournment necessary for that purpose may be granted.
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(2)….
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(3) Upon hearing an application under subsection (2), a Judge shall direct—
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(a) that the evidence be given;
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(b) that the evidence shall not be given; or
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(c) that the evidence be given subject to conditions which he may specify whereby the confidentiality of the information is safeguarded.
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(4) In order to safeguard the confidentiality of a statement, answer or testimony ordered to be given under subsection (3) (c), a Judge may order—
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(a) divulgence of the statement, answer or testimony to be restricted to certain named persons;
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(b) evidence to be taken in camera; and
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(c) reference to the names, addresses and descriptions of any particular persons to be by alphabetical letters, numbers or symbols representing such persons the key to which shall be restricted to persons named by him.
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(5) Every person receiving confidential information by operation of subsection (2) is as fully bound by this Law as if such information had been entrusted to him in confidence by a principal.
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(6) In considering what order to make under this section, a Judge shall have regard to—
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(a) whether such order would operate as a denial of the rights of any person in the enforcement of a just claim;
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(b) ….
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(c) in any criminal case, the requirements of the interests of justice.”
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Other provisions of the CR(P)L are also relevant to these applications as follows:
“By section2 “confidential information” includes “information concerning any property which the recipient thereof is not, otherwise than in the normal course of business, authorized by the principal to divulge ”.
As noted above, Ms. Womack as the Applicants' principal, has not authorized the divulgence of information concerning any property which is the subject of her fiduciary relationship with the Applicants nor, as also contemplated by this definition, is there any basis for finding that the Applicants are authorized to disclose it pursuant to section 3(2)(b)(i)“in the normal course of business”, (as to which see further below).
There is some suggestion in Mr. Austin-Smith's written arguments that the Applicants, as employees of Willis, might be availed of this exemption but this was not explained and there is no application made by Willis itself. I simply note in passing that were the Applicants so authorized, there would be no need for these applications under section 4.
For a proper understanding of how the CRP(L) operates some further provisions of section 3 must be noted, as follows:
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“3 (1) Subject to subsection (2), this Law has application to all confidential information with respect to business of a professional nature which arises in or is brought into the Islands and to all persons coming into possession of suchinformation at any time thereafter whether they be within the jurisdiction or thereout.
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(2) This Law has no application to the seeking, divulging or obtaining of confidential information —
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(a) in compliance with the directions of the Grand Court under section 4;
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(b) by or to —
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(i) any professional person acting in the normal course of business or with the consent, express or implied, of the relevant principal;
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(ii) to (vi)…..
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(c) in accordance with this or any other Law.”
And, finally for present purposes, section 5(1) provides:
“5 (1) Subject to section 3(2), whoever —
(a) being in possession of confidential information however obtained—
(i) divulges it; or
(ii) attempts, offers or threatens to divulge it; or
(b) willfully obtains or attempts to obtain confidential information is guilty of an offence and liable on summary conviction to a fine of five thousand dollars and to imprisonment for two years”
The combined effect of the foregoing provisions is that it would indeed be an offence for the Applicants to divulge Ms. Womack's confidential information irrespective of where the Applicants...
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