Jersey Unreported Judgments

Taxation - procedural direction sought by the appellant for conduct of appeal against notice issued by the respondent.

[2013]JRC205A

Royal Court

(Samedi)

21 October 2013

Advocate J. Harvey-Hills for the Appellant.

The Solicitor-General for the Respondent.

judgment

the commissioner:

1.        The Comptroller applies to expedite the hearing of this appeal by APEF Management Company 5 Limited, ("APEF") under Article 14(1)(c) of the Taxation (Exchange of Information with Third Countries)(Jersey) Regulations 2008 ("the Regulations"), against the terms of a notice issued by the Comptroller pursuant to the terms of the Regulations on 9^th September, 2013. 

2.        The Notice of Appeal was served on 2^nd October, 2013, and, pursuant to Rule 15(2)(4) of the Royal Court Rules 2004, the 9^th December, 2013, half a day, was fixed for the hearing of the appeal.  I am informed that at the date fixing appointment Advocate Harvey-Hills for APEF argued that in light of the complexity of the issues any hearing would require 4 days but Advocate White for the Comptroller was under strict instructions to have the matter heard as soon possible, as the French Authorities had threatened to place Jersey on the black list at the end of the year as a result of this appeal and others against notices issued by the Comptroller further to requests from the French Authorities; hence the fixing of half a day on 9^th December, 2013, which on any analysis is quite inadequate, in my view, to enable this appeal to be properly disposed of bearing in mind, following Volaw Trust & Corporate Services Limited and Mr B Larsen-v-Income Tax [2013] JRC 095, that the appeal involves a hearing de novo. 

3.        On 11^th October, 2013, Advocate White, for the Comptroller, wrote to the Bailiff's Judicial Secretary seeking an urgent hearing of a summons for the expedited hearing of the appeal saying this:-

"The urgency for the hearing of the enclosed summons and for the making of the application relates to the public interest of the unusual circumstances of this case. 

As you will be aware Jersey has been told by France it will be placed on a list of uncooperative jurisdictions (so called "blacklisting") with effect from the beginning of 2014.  The consequences of such a listing are real and potentially severe.  The French will apply an automatic substantial (75%) withholding tax to a wide range of French investments held by Jersey entities.  The consequences of this will be, so we understand, that businesses who have such assets are seeking to relocate that business out of the island and new business is being diverted to competing jurisdictions.  We are aware of a number of businesses making contingency arrangements to that end which, we anticipate, will be brought in to effect well before the year end, possibly in November, unless they can be assured that the listing will not occur. 

Whilst impossible to quantify, the potential damage to the Jersey economy and to tax revenues arising from the general loss of business, both directly and indirectly through the general impact on the Island's reputation is very severe. 

The decision to place Jersey on a list of uncooperative jurisdictions for the purpose of Article 238-0A of the Code general des impôts has been justified by the French authorities on the basis that the requests made under the Tax Information Exchange Agreement with Jersey (which entered into force on 11^th October, 2010,) have not resulted in the French authority having the information necessary to apply the French fiscal legislation [our emphasis].  The tax information subject to this Appeal is a request that remains outstanding and is regarded as significant by the French authorities and forms part of the basis for Jersey still to be treated as uncooperative.

Accordingly, the Respondent seeks the opportunity to argue that the Court should treat this matter as a "cause de brièveté" and fix a timetable to enable the matter to be dealt with at first instance within a very short delay."

4.        The application was supported by an affidavit sworn by Mr Dermot Moynihan, the director of Financial Services for the States of Jersey, on 6^th October, 2013, explaining the blacklisting decision, its link with the appeals and the effects of the blacklisting. 

5.        Advocate Harvey-Hills, in a very lengthy skeleton argument, did not accept the consequences of blacklisting as put forward on behalf of the Comptroller and its link with this appeal.  He questions what steps were being taken by the Jersey Authorities to challenge the actions of the French Authorities and pointed out that if the appeal succeeds the issue of blacklisting will remain, as it would appear that the French Authorities would not be mollified by anything other than full compliance with their requests.  If the appeal fails then APEF has a right of appeal to the Jersey Court of Appeal and potentially from there to the Privy Council, all of which will take the matter well into next year, however much the process is expedited. 

6.        It does seem curious to me how the French authorities can treat Jersey as uncooperative when APEF is exercising its right of appeal against a notice issued as recently as 9^th September, 2013, and bearing in mind that the agreement with France provides as follows under Article 1:-

"The rights and safeguards secured to persons by the laws or administrative practice of the requested Party remain applicable to the extent that they do not unduly prevent or delay effective exchange of information."

7.        This appeal has only just started and it is difficult to see how the exercise of such a right can be characterised as unduly preventing or delaying the effective exchange of information.  Even so, I have no reason to doubt that it is in the public interest for this appeal to be dealt with as soon as possible but as the Solicitor-General, for the Comptroller accepted, this cannot be at the expense of justice, see Volaw Trust Corporate Services Limited and Larsen-v-The Comptroller of Taxes [2012] JRC 133 at paragraph 3.  The appellant must be given the opportunity to prepare and argue its case fully, albeit that the public interest may require that opportunity to be set against a very tight timetable. 

8.        It is a feature of this case that the French taxpayer has not been informed of the notice pursuant to Regulation 3(6) and APEF has been required not to inform the taxpayer pursuant to Regulation 3(7), breach of which requirement constitutes a criminal offence.  This appeal is being held in public and therefore the existence of the notice is now in the public domain.  I have seen a copy of the letter written by Advocate Harvey-Hills to the Solicitor-General dated 18^th October, 2013, questioning how this requirement could properly have been imposed in the first place and, in any event, asking for the matter to be reconsidered.  I cannot comment upon the merits of the Comptroller's decision in this respect but the Solicitor-General acknowledged the risk that if the French taxpayer becomes aware of the notice and seeks to exercise his right of appeal, then there is the potential for this matter to be delayed on that account.  Furthermore a finding that this requirement has been improperly imposed could on its own lead to the notice being set aside when this appeal is heard. 

9.        Advocate Harvey-Hills informed me that in addition to appealing the notice APEF is intending to challenge by way of judicial review the validity of the Regulations themselves and in particular Regulation 3, as recently amended, on the grounds that they are contrary to the principles of natural justice and Articles 6 and 8 of the ECHR.  APEF wants time to prepare the application and if leave is granted it would make sense, Advocate Harvey-Hills suggested, for both matters to be heard together.  Advocate Harvey-Hills informs me that this is the first occasion that the Court will have considered Regulation 3, as amended, and that the legal issues are complex involving the proper consideration of regulations, the agreement with France, the relevant authorities including decisions from Singapore and Caymen and Articles 6, 8 and 18 of the ECHR.  In addition he says APEF will need to present evidence including expert evidence on French tax law, although in relation to this I note what Page, Commissioner, said in Volaw-v-Comptroller of Income Tax [2013] JRC 095 at paragraph 76:-

"It is no part of the Comptroller's function when deciding whether to issue a Regulation 3 notice in response to a request under the TIEA, or this Court's function on any appeal from such a decision, to resolve contentious issues of Norwegian tax law or to reach definitive conclusions about whether the person the subject of the request is or is not liable to Norwegian tax.  Indeed, in the ordinary way it is unlikely that the Comptroller would have expert evidence of Norwegian tax law in front of him at the time when he is called upon to make his decision (as happened here with Dr Matre's first affidavit, sworn on 11^th May, 2012,) and it would be impractical that he should be required to obtain such evidence and undertake a process of detailed evaluation before coming to a conclusion.  In the case of the present appeal it would, moreover, be wholly inappropriate for this court to presume to make findings on strongly disputed matters of substantive Norwegian tax law or the facts of the case under investigation, or to express definitive conclusions on questions of income tax liability, at the very time when these issues are the subject of a criminal prosecution in Norway concerning Mr Larsen.  Nor do we accept the proposition advanced by Mr Harvey-Hills and Mr Hoy that the Court must be satisfied that it is more likely than not that Mr Larsen has failed to comply with Norwegian tax law.  The Comptroller's task was, and ours now is, simply to ask whether the threshold criteria specified in paragraph (1) Regulation 3, carefully formulated as they have been, are satisfied."

10.      The Solicitor-General submitted that it was clear from the skeleton argument that APEF had been in correspondence with the Comptroller and knew its case already.  The key issue was whether the information requested was foreseeably relevant to the administration and enforcement of French tax laws.  Their experts are already known to them.  It may be inconvenient, he said, but with hard work there was no reason why this appeal could not be expedited to be heard within a week or so. 

11.      The procedure is governed by Rule 15/2 and 3 of the Royal Court Rules and under Rule 1/5 I have the power to abridge time.  The Comptroller has filed his affidavit pursuant to Rule 15/3(1) on 17th October, 2013, some 15 days after the notice of appeal was served.  The Solicitor-General was pressing for a timetable that would enable the appeal to be heard on 28th October, only 11 days later, because it had been intimated that there was Court availability for that one day.  Again I would express the view that 1 day would be insufficient for the hearing of this appeal.  Rule 15/3(2) allows APEF 21 days to file its affidavit which would take us to the 7th November; even if that 21 days is abridged it is clear that with the other necessary procedural steps the 28th October is not practicable.  It is my understanding that the Court will do its best to arrange a hearing as soon as practicable after the procedure which I am now going to lay down is completed and the parties will be informed of the date. 

12.      In general terms I conclude as follows.  Firstly that it is in the public interest of this Island for this appeal to be heard expeditiously.  Secondly, that this cannot be at the expense of justice; APEF must have the opportunity to prepare and argue its case fully.  Thirdly, that I should set the timetable for this appeal and not alter that timetable in order to facilitate a possible application for judicial review for which leave is, of course, required. 

13.      I considered carefully whether to abridge the 21 days of the Rules to allow APEF to prepare and file its case to say 14 days, but I have decided not to do so, so as to give APEF time to prepare and argue its case fully.  It must be appreciated by APEF that I have done so on the basis that the timetable I lay down will not be delayed by further applications.  If any interlocutory issues do arise that require the determination of the Court before the hearing of this appeal then they must be brought and dealt with within that 21 day period.  Subject to any adjustments suggested by Counsel the timetable will therefore be as follows:-

(i)        APEF will file its affidavit, pursuant to Rule 15/3(2) on or before 7^th November, 2013.  It shall have leave, in addition, to file at the same time an affidavit or report of a single expert on French law. 

(ii)       The Comptroller may file an affidavit in reply on or before 14^th November, 2013, again with leave to file an affidavit or report of a single expert on French law.  I express the view that it would be, I think, helpful for the Court to have a reply. 

(iii)      Pursuant to Rule 15/3(4) APEF shall file its skeleton arguments and authorities on or before 21^st November, 2013, and the Comptroller on or before 25^th November, 2013.  Those dates span a weekend. 

(iv)      The parties will be notified of the date of the hearing which will commence not earlier than 27^th November, 2013, but it may well follow very soon thereafter. 

14.      It is difficult for me to estimate the duration of the hearing but out of an abundance of caution, and to avoid the matter being part heard, and bearing in mind its importance to the Island, I would suggest that 4 days be reserved.  Thus in all, from the beginning of the service of the notice of appeal, this appeal will be ready to be heard within 8 weeks, 2 of which were taken up by the Comptroller in filing his own affidavit.  In the context of the issues raised by the appeal I regard this as tight a timeframe as is commensurate with ensuring that justice is done.  It would be my intention to maintain that timetable in so far as I am properly and fairly able to do so. 

15.      Advocate Harvey-Hills sought leave at this stage for the cross-examination of the Comptroller.  As made clear in Practice Direction RC 05/25 administrative appeals are to be dealt with primarily by means of affidavit evidence and leave to cross-examine will only be granted in exceptional circumstances.  Any application to cross-examine the Comptroller, or indeed any of the deponents or experts, must be made in accordance with that Practice Direction. 

16.      And finally there will, of course, be liberty to apply. 

Authorities

Taxation (Exchange of Information with Third Countries)(Jersey) Regulations 2008.

Royal Court Rules 2004.

European Convention on Human Rights 2000

Volaw Trust & Corporate Services Limited and Mr B Larsen-v-Income Tax [2013] JRC 095.

Volaw Trust Corporate Services Limited and Larsen-v-The Comptroller of Taxes [2012] JRC 133.