United States of America v Womack
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 08 April 2016 |
| Court | Grand Court (Cayman Islands) |
| Date | 08 April 2016 |
(Smellie, C.J.)
J. Austin-Smith for the applicants;
I. Huskisson and C. Richter for the respondent;
J. Wilson, Solicitor General and R. Sharma for the Attorney General as amicus curiae;
T. Salako, Crown Counsel for the Director of Public Prosecutions as amicus curiae.
(1) Ansbacher (Cayman) Ltd., In re, 2001 CILR 214, considered.
(2) Bertoli v. Malone, 1990–91 CILR 58; on appeal, noted at 1992–93 CILR N–1, distinguished.
(3) Cayman Islands Tax Information Auth. v. M.H. Invs. Ltd., 2015 (2) CILR 52, referred to.
(4) Codelco, In re, 1999 CILR 42, considered.
(5) H, In re, 1996 CILR 237, considered.
(6) Huntington v. Attrill, [1893] A.C 150; (1893), 62 L.J.P.C. 44; 68 L.T. 326, referred to.
(7) India (Govt.) v. Taylor, [1955] A.C. 491; [1955] 2 W.L.R. 303; [1955] 1 All E.R. 292, referred to.
(8) Norway”s (State of) Application (Nos. 1 & 2), In re, [1990] 1 A.C. 723; [1989] 2 W.L.R. 458; [1989] 1 All E.R. 745, considered.
Confidential Relationships (Preservation) Law (2009 Revision), s.3: The relevant terms of this section are set out at para. 11.
s.4: The relevant terms of this section are set out at para. 7.
s.5(1): The relevant terms of this sub-section are set out at para. 12.
Tax Information Authority Law (2014 Revision), s.8: The relevant terms of this section are set out at para. 26.
First Schedule, Agreement between the Government of the United States of America and the Government of the Cayman Islands, for the exchange of information relating to taxes, art. 2: The relevant terms of this article are set out at para. 64.
art. 5(3): The relevant terms of this paragraph are set out at para. 29.
art. 10: The relevant terms of this article are set out at para. 41.
Cayman Islands Constitution Order 2009 (S.I. 2009/1379), Second Schedule, s.7(1): The relevant terms of this sub-section are set out at para. 32.
Taxation—exchange of tax information—disclosure to foreign authority—Tax Information Authority Law proper basis for compulsory disclosure of confidential information for foreign criminal tax proceedings—fiduciary”s application under Confidential Relationships (Preservation) Law (2009 Revision), s.4 for permission to testify in foreign tax proceedings (disclosing confidential information) refused as circumvents procedural safeguards in Tax Information Authority Law
Taxation—exchange of tax information—disclosure to foreign authority—notice of request under Tax Information Authority Law for testimony normally to be given to subject
The applicants applied under s.4 of the Confidential Relationships (Preservation) Law for permission to give evidence in criminal tax proceedings overseas.
The applicants were current or former officers or employees of Willis Management (Cayman) Ltd. (‘Willis Cayman’), a professional services firm. They had provided fiduciary services to the respondent, a U.S. citizen, and in doing so became aware of confidential information regarding her financial affairs. The U.S. authorities commenced criminal tax proceedings against the respondent in Missouri, alleging that she opened a number of bank accounts and established a series of nominee companies in the Cayman Islands to conceal a portion of her income from the IRS.
Two of the applicants continued to reside in the Cayman Islands, one lived in the United States and had been subpoenaed by the US court, and the other applicant lived in Ireland. The applicants wished to testify in the U.S. proceedings to comply with Willis Cayman”s obligations as a ‘good corporate citizen’ and presumably to avoid sanctions that might be imposed for failure to disclose information. As they had acquired the
information in the course of a professional fiduciary relationship, it was protected from unauthorized disclosure.
The Tax Information Authority Law (2014 Revision), Schedule 1 set out the Agreement between the Government of the United States of America and the Government of the Cayman Islands for the exchange of information relating to taxes (‘the Treaty’). It provided a specific mechanism and process for the execution of requests from the United States for the disclosure of confidential information for use as evidence in tax proceedings or investigations. Section 8 of the Law set out certain requirements and procedural safeguards where a person was required to testify, including the judge”s discretionary power to direct that notice of the proceedings be given to the taxpayer.
The applicants submitted that (a) the court could make an order allowing disclosure pursuant to the Confidential Relationships (Preservation) Law, and there was no need to follow the procedure specified by the Tax Information Authority Law which first required a specific request from the American authorities for the applicants to give evidence; and (b) the applicants resident outside the Islands were not subject to the Tax Information Authority Law and therefore an order should be made pursuant to the Confidential Relationships (Preservation) Law allowing them to give evidence, particularly as the applicant resident in the United States had been served with a subpoena requiring him to testify.
The respondent submitted in reply that (a) the Tax Information Authority Law stipulated a specific procedure for the disclosure of confidential information in tax proceedings, which should not be circumvented by reliance on the Confidential Relationships (Preservation) Law; and (b) the overseas applicants were subject to the Tax Information Authority Law by virtue of art. 2 of the Treaty, and in any event could voluntarily submit to the jurisdiction of the court.
Held, dismissing the applications:
(1) The proper jurisdictional basis for the compulsory disclosure of confidential information in aid of foreign criminal tax proceedings was the Tax Information Authority Law. The applications pursuant to the Confidential Relationships (Preservation) Law (2009 Revision), s.4 would be refused as they would circumvent the requirements and safeguards of the Tax Information Authority Law, especially the provision in s.8 that where a request was made for live testimony in relation to a tax matter the requesting authority had to apply to a judge, who could exercise any powers that the Grand Court could exercise for the purpose of compelling testimony. Those powers included the discretionary power to direct that notice of the proceedings be given to the person affected by the request (the respondent) and that she could hear and cross-examine upon the evidence to be given against her. The requirements and procedural safeguards in s.8 were consonant with the procedure envisaged by the Treaty. The judge”s discretionary power under s.8 would be exercised in accordance with the requirements of fairness. Given that the information
sought to be given was confidential, that the respondent had a legal right to its confidentiality, that s.8 required a judicial determination of such rights and the constitutional right under s.7(1) of the Constitutional Bill of Rights to a fair hearing before that right could be determined, the default position was that notice of an application under the Tax Information Authority Law would be given to the person affected, who would be given a right to be heard. That was not an absolute right to a hearing but a right qualified by the judicial discretion to grant a hearing having regard in particular to any reasonable request by the requesting party that notice not be given (paras. 27–43).
(2) It could not be said that the applicants resident outside the Cayman Islands did not come under the jurisdiction of the Tax Information Authority Law. Article 2 of the Treaty provided that ‘a requested Party shall not be obligated to provide information that is neither held by its authorities nor in the possession or control of persons who are within its territorial jurisdiction.’ Where information was neither possessed nor controlled by an authority or person within the territorial jurisdiction of a requested party, the party would therefore not be obliged to provide the information under the Treaty. Where, however, the information was so possessed or controlled, there would be an obligation to provide it regardless of where the person possessing or controlling it might be residing at the time of the request or the nationality of that person. Therefore, if a proper request were to be made by the U.S. authorities for the non-resident applicants to give evidence of information that was still in their possession, or evidence that they could not be expected to give without access and reference to information under the control of Willis Cayman within the Islands, the Tax Information Authority would clearly be obliged to require them to do so, wherever they happened to reside. If such a request were made, the overseas applicants could simply submit to the jurisdiction of the court, as they had done in the present proceedings. They could then be directed and allowed to testify by reference to the information still within their control or the control of Willis Cayman in the Islands, in a manner to be regulated by the court. Indeed, it was impractical to suggest that any of the applicants could give accurate or credible evidence without access to information created in the context of the fiduciary relationship with the respondent which might well remain under Willis Cayman”s control. The position might be different with regard to the applicant resident in the United States, who was subject to a subpoena. If it were demonstrated that he could give evidence without recourse to confidential information held within the Islands by Willis Cayman, that would be a good practical basis for treating his...
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