J. A. Clyde-Smith, Esq., Commissioner, sitting alone.
Taylor Fladgate & Yeatman Limited
Comptroller of Taxes, acting as competent authority for Jersey
IN THE MATTER OF AN APPLICATION FOR LEAVE TO APPLY FOR JUDICIAL REVIEW OF AN ADMINISTRATIVE DECISION BY THE COMPTROLLER OF TAXES UNDER REGULATION 14 OF THE TAXATION (EXCHANGE OF INFORMATION WITH THIRD COUNTRIES)(JERSEY) REGULATIONS 2008 (AS AMENDED) AND PART 16 OF THE ROYAL COURT RULES
Advocate M. H. D. Taylor for the Applicant.
Advocate G. G. P. White for the Respondent.
1. The applicant ("Taylor Fladgate") applies under Rule 16/2 of the Royal Court Rules 2004 for leave for the Judicial Review of an administrative decision by the respondent ("the Comptroller") to issue a notice to Taylor Fladgate dated 22nd November, 2013 ("the Notice") under Regulation 3 of the Taxation (Exchange of Information with Third Countries)(Jersey) Regulations 2008 (as amended) ("the Regulations"). Pursuant to Rule 16/2(4) I directed that the application for leave be listed for an oral hearing and that the Comptroller be given notice of that hearing.
2. The Comptroller (or where applicable the Deputy Comptroller), as the duly authorised representative of the Minister for Treasury and Resources, is the competent authority for Jersey for the purposes of the Regulations.
3. Taylor Fladgate, a Jersey incorporated company, is the 99.93% shareholder of the Fladgate Partnership SA, a Portuguese resident company, which in turn owns 100% of Quinta and Vineyard Bottlers - Vinhos SA ("QVB").
4. QVB is a Portuguese resident company engaged in the production of port and pays royalties to Taylor Fladgate for the use of certain trademarks owned by Taylor Fladgate, namely "Taylor's", "Fonseca Guimaraes", "Romariz" and "Skeffington". The amounts of those royalties have been and continue to be the subject of dispute between the Portuguese tax administration services and QVB.
5. Jersey entered into an agreement with the Portuguese Republic for the exchange of information relating to tax matters, which came into force on 9th November, 2011 ("the TIEA") which is in the form which is now familiar to the Court.
6. On 5th July, 2013, the Comptroller received a request from the competent authority in Portugal ("the Portuguese Competent Authority"). It was examining transfers between QVB and Taylor Fladgate and was seeking to establish the legal and beneficial ownership of Taylor Fladgate. The Deputy Comptroller pointed out to the Portuguese Competent Authority that the request referred to the tax years 2010 and 2011, before the TIEA came into force. The Portuguese Competent Authority acknowledged that the request did not fall within the scope of the TIEA and therefore submitted a revised request limited to the period 2012.
7. On 20th August 2013, the Deputy Comptroller issued a notice ("the first notice") to Taylor Fladgate pursuant to Regulation 3(1) of the Regulations (as then in force), seeking the following information:-
"a. Details of the legal and ultimate beneficial ownership of Taylor Fladgate, indicating the percentage of participation in the share capital, voting rights or rights to the income or the assets of the company.
b. Details of the periods of ownership (legal and/or beneficial) of Taylor Fladgate of the persons identified in 3A above, from 1st January 2012 to the present date, including details of any changes of ownership.
c. Details of the income and profits of Taylor Fladgate for the year ended 31st December 2012."
8. The persons under examination were listed as Taylor Fladgate and QVB. On the same day, the Deputy Comptroller wrote to QVB as the taxpayer, enclosing a copy of the first notice and a written summary of the reasons for the giving of the first notice.
9. Taylor Fladgate issued a notice of appeal on 9th September 2013. It filed evidence in support of its appeal, and in particular, an affidavit from Mr Antonio Jaime Carvalho Esteves dated 24th October, 2013. Mr Esteves is the lead tax partner of PricewaterhouseCoopers and Associados - Sociedade de Revisores Oficiais de Contas Lda. in Porto which had acted for QVB over a number of years. It seemed questionable to the Deputy Comptroller from that affidavit whether information as to the beneficial ownership of Taylor Fladgate was "foreseeably relevant" to the assessment and collection of taxes due by QVB, and that therefore the request was outside the scope of Article 1 of the TIEA and Regulation 1A of the Regulations.
10. It appeared more likely to the Deputy Comptroller that the taxpayer subject to the request was not to be identified with QVB but with the as yet unidentified Portuguese resident beneficial owners of Taylor Fladgate.
11. The Deputy Comptroller sought clarification of the request from the Portuguese Competent Authority. His email to the Portuguese Competent Authority of 30th October, 2013 was in the following terms:-
"Thank you very much for your promised assistance.
Specifically, I realise that I may have misunderstood the original request as the parties under examination (the taxpayers on whom the possible liability may fall) were not clear to me.
Initially I thought that the Portuguese company QVB should be considered the taxpayer and that tax adjustments would be made on the company. However, on reading the submissions of the appellants and reconsidering the wording of the request, I now recognise that perhaps the taxpayer is more accurately to be identified as a class of individuals or corporate entities, the beneficial owners of the Jersey company, TFY [Taylor Fladgate], who may be resident in Portugal.
Can you confirm whether the taxpayer under examination is to be correctly identified as QVB or a class of Portuguese owners of TFY, or both?
If the latter, I need to counter the argument that the request represents a "fishing expedition". I have been pointed to the commentary on Article 26 of the OECD Model Tax Treaty: where a request relates to "... a group of taxpayers not individually identified, it will often be more difficult to establish that the request is not a fishing expedition, as the requesting State cannot point to an on-going investigation into the affairs of a particular taxpayer which in most cases would by itself dispel the notion of the request being random or speculative. In such cases it is necessary that the requesting State provide a detailed description of the group and the specific facts and circumstances that have led to the request, an explanation of an applicable law and why there is reason to believe that the taxpayers in the group for whom the information is requested have been non-compliant with that law supported by a clear factual basis. It further requires a showing that the requested information would assist in determining compliance by the taxpayers in the group".
If I am now correct in estimating that in this request the real persons under investigation who will potentially be liable to tax are the potential Portuguese owners of TFY, it will assist me enormously if you can provide the corresponding information identified in the commentary, specifically:
1) a detailed description of the group
2) the specific facts and circumstances that have led to the request
3) an explanation of the applicable law
4) why there is reason to believe that the taxpayers in the group for whom the information is requested have been non-compliant with that law
5) a showing that the requested information would assist in determining compliance by the taxpayers in the group.
Based on your response, I may consider that it is best to issue an amended Notice to the Jersey company. I should like to do that, if it is appropriate, at the end of next week, 8th November. Therefore any clarification that you can provide in this respect before then will be very much appreciated."
12. The Portuguese Competent Authority responded on 8th November, 2013 with a detailed analysis in response to the Deputy Comptroller's request supplementing the original letter of request in which it described an ongoing investigation, listed by name the group of taxpayers who will be potentially taxed following the ongoing investigation and addressing the other questions where he had sought clarification.
13. On 22nd November, 2013, and following consideration of that further information, the Comptroller withdrew the first notice and issued the Notice (which is the subject of this application) under Regulation 3(1) of the Regulations which had now been amended. The Notice lists the persons under examination as "the beneficial owners of Taylor Fladgate & Yeatman Limited resident in Portugal" and Taylor Fladgate.
14. On 6th November, 2013, the Regulations were amended. The threshold in Regulation 3(1) was now reduced to the following:-
"3 Provision by other persons of tax information about taxpayer
(1) Where the competent authority for Jersey decides to respond to a request concerning a taxpayer, the competent authority for Jersey shall require a third party, being a person other than the taxpayer, to provide to the competent authority for Jersey all such tax information that the competent authority for Jersey requires for that purpose."
15. Regulation 3(3) now provides:-
"(3) Where a third party notice does not name the taxpayer to whom it relates, it must provide an account number or other identification for the tax information required."
16. Significantly, the previous right of appeal under Regulation 14 was removed, leaving Judicial Review as the only remedy available to either the taxpayer or a person subject to a third party notice to challenge a decision of the Comptroller under the Regulations. Furthermore, Regulation 14(2) now restricts the right to Judicial Review as follows:-
"(2) An application for Judicial Review may not be made on any of the following grounds -
(a) that the competent authority for Jersey has not provided the third party notice to a taxpayer within the time limits specified in Regulation 3(4);
(b) that the competent authority for Jersey has not provided the third party notice to the taxpayer on a ground mentioned in Regulation 3(5);
(c) that the competent authority for Jersey has prohibited a third party from disclosing the third party notice to the taxpayer, or any information relating to the notice to the taxpayer on a ground mentioned in Regulation 3(5); or
(d) that the competent authority for Jersey has required tax information to be authenticated in a manner that is not required for the purposes of Regulation 1OB (3)."
17. Regulation 14(3) now provides:-
"Despite any application for Judicial Review being made -
(a) a taxpayer or a third party shall provide the competent authority for Jersey the information requested in the notice served under Regulation 2 or 3, as the case may be, within the time limits specified in the notice; but
(b) the competent authority for Jersey shall not provide to the competent authority for the third country the tax information obtained under these Regulations unless -
(i) the application is dismissed,
(ii) the application is withdrawn or discontinued, or
(iii) the competent authority for Jersey is permitted to do so by the Royal Court."
18. Regulation 14(4) confirms that "in all other respects the Royal Court shall apply the principles applicable on an application for Judicial Review."
19. Under Regulation 14A an appeal from a decision of the Royal Court on a Judicial Review lies directly to the Privy Council and only with the leave of the Privy Council.
20. Accordingly, on receipt of the Notice, the only remedy available to Taylor Fladgate to challenge the decision of the Comptroller to issue the Notice, lay in an application for leave to judicially review that decision which application was filed on 3rd December 2013 within the time limit of fourteen days prescribed by Regulation 14(1)(b). In filing that application, Taylor Fladgate was unaware of the detailed information provided by the Portuguese Competent Authority to the Deputy Comptroller on 8th November 2013.
21. In broad terms, the grounds for a Judicial Review are those identified by the Royal Court in Planning & Environment Committee v Lesquende Ltd  JLR 1, i.e. the GCHQ Trilogy. The GCHQ Trilogy is to be found in the speech of Lord Diplock in the well-known case of Council of Civil Service Unions v Minister for Civil Service  3 All ER 935 at 950 - 951:-
"My Lords, I see no reason why simply because a decision-making power is derived from a common law and not a statutory source it should for that reason only be immune from Judicial Review. Judicial review has I think developed to a stage today when, without reiterating any analysis of the steps by which the development has come about, one can conveniently classify under three heads the grounds on which administrative action is subject to control by Judicial Review. The first ground I would call 'illegality,' the second 'irrationality' and the third 'procedural impropriety.' That is not to say that further development on a case by case basis may not in course of time add further grounds. I have in mind particularly the possible adoption in the future of the principle of 'proportionality' which is recognised in the administrative law of several of our fellow members of the European Economic Community; but to dispose of the instant case the three already well-established heads that I have mentioned will suffice.
By 'illegality' as a ground for Judicial Review I mean that the decision-maker must understand correctly the law that regulates his decision-making power and must give effect to it. Whether he has or not is par excellence a justiciable question to be decided, in the event of dispute, by those persons, the judges, by whom the judicial power of the state is exercisable.
By 'irrationality' I mean what can by now be succinctly referred to as 'Wednesbury unreasonableness' (see Associated Provincial Picture Houses Ltd v Wednesbury Corp.  2 All ER 680,  1 KB 223). It applies to a decision which is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at. Whether a decision falls within this category is a question that judges by their training and experience should be well equipped to answer, or else there would be something badly wrong with our judicial system. To justify the court's exercise of this role, resort I think is today no longer needed to Viscount Radcliffe's ingenious explanation in Edwards (Inspector of Taxes) v Bairstow  3 All ER 48,  AC 14 of irrationality as a ground for a court's reversal of a decision by ascribing it to an inferred though unidentifiable mistake of law by the decision-maker. 'Irrationality' by now can stand on its own feet as an accepted ground on which a decision may be attacked by Judicial Review.
I have described the third head as 'procedure impropriety' rather than failure to observe basic rules of natural justice or failure to act with procedural fairness towards the person who will be affected by the decision. This is because susceptibility to Judicial Review under this head covers also failure by an administrative tribunal to observe procedure rules that are expressly laid down in the legislative instrument by which its jurisdiction is conferred, even where such failure does not involve any denial of natural justice."
22. The Comptroller applied to adduce additional evidence beyond that which was before him when the Notice was issued. That additional evidence comprised:-
(i) the information provided by Taylor Fladgate as to its beneficial ownership pursuant to the Notice as required by Regulation 14(3) (but currently withheld from the Portuguese Competent Authority) and
(ii) information provided by the Jersey Companies Registry to the Comptroller as to the beneficial ownership of the parent company of Taylor Fladgate pursuant to a separate notice issued to the Jersey Companies Registry in respect of that parent company.
23. Mr White for the Comptroller submitted that this evidence was "truly dispositive" within the meaning of the test promulgated by the Court of Appeal in Volaw and another v Office of the Comptroller of Taxes  JCA 239 at paragraph 54 and as applied by the Royal Court in APEF Management Company 5 Limited v Comptroller of Taxes  JRC 262. However, the Court of Appeal, in promulgating that test, was dealing with the nature and extent of the right of appeal that existed under the Regulations before the November amendment, paragraph 54 of the Court of Appeal's judgment coming under the heading of "The Appeal". That right of appeal had now been abolished and Regulation 14(4) of the Regulations expressly provides that save as set out in Regulation 14, the Court shall apply the principles applicable on an application for Judicial Review. Mr White accepted that applying those principles, his application would fail (see Judicial Review Handbook 6th edition by Michael Fordham at paragraph 17.2.6/7). The application was therefore refused.
24. Both counsel relied on the decision of Sir Philip Bailhache, Bailiff, in Yates v Minister of Planning and Environment  JRC 167 where he said at paragraph 1:-
"In order to obtain leave the applicants have to show that they have an arguable case that a ground for seeking Judicial Review exists which merits a full investigation at a full oral hearing with all the parties and all the relevant evidence."
25. No authority was cited, but it is clear that this statement is derived from English law to which the Jersey Courts look for guidance in this field. Fordham, at paragraph 21.1.7 refers to Sharma v Antoine  UKPC 57 at 14(4):-
"The Court will refuse [permission] to claim Judicial Review unless satisfied that there is an arguable ground for Judicial Review having a realistic prospect of success and not subject to a discretionary bar such as a delay or an alternative remedy."
26. De Smith Seventh Edition at paragraph 16-050 states "The most commonly given reason for refusing permission is that the claim is unarguable. The test ought to be broadly similar to that governing applications for summary judgment in other types of claim, namely that there is "no real prospect of succeeding on the claim or issue."
27. In considering the application for leave, I had the following evidence, namely an affidavit from Ian Keith Cuming, a director of Taylor Fladgate, dated 3rd December, 2013 which exhibited evidence from Taylor Fladgate's appeal of the previous notice, and included an affidavit from Mr Adrian Bridge, a director of QVB, dated 23rd October, 2013, an affidavit from Ian Keith Cuming dated 23rd October, 2013, the affidavit from Mr Esteves dated 24th October, 2013; and two affidavits from the Deputy Comptroller dated 4th October, 2013 and 21st January, 2014. Both parties had filed skeleton arguments and authorities which they informed me set out their cases in full both in relation to the application for leave and application proper. Mr Taylor for Taylor Fladgate conceded that following sight of the Deputy Comptroller's affidavit of 21st January, 2014 and in particular the detailed information provided by the Portuguese Competent Authority on the 8th November, 2013, the issues had narrowed substantially.
28. It was common ground between the parties that the decision to which the application refers was made by a public body and was capable of Judicial Review, that Taylor Fladgate had standing and sufficient interest in the matter, that there had been no delay and that there were no alternative remedies available to Taylor Fladgate. Accordingly, the issue was whether Taylor Fladgate had an arguable case with a realistic prospect of success.
29. Mr Taylor put forward a number of grounds which I take in turn. The first ground was that the Comptroller "had acted illegally and/or irrationally and/or unreasonably in issuing the Notice which is materially flawed as it fails to identify an ongoing investigation in respect of a specific taxpayer sufficiently as required by the Regulations".
30. Under this ground Mr Taylor submitted that Regulation 3 of the Regulations required the taxpayers to be identified in the Notice and, where known, notice given to them within seven days. Although there was no requirement under the Regulations to specify an ongoing investigation, there was a requirement (which Mr White conceded) for there to be an ongoing investigation for the purposes of the TIEA. The ongoing investigation as described by the Portuguese Competent Authority appeared to Mr Taylor to be no more than an examination of two websites in relation to the history of Taylor Fladgate which the Portuguese Competent Authority had used to identify the Portuguese resident individuals they suspected of being beneficial owners of Taylor Fladgate and who had not submitted income statements in relation to that interest.
31. In his affidavit Mr Cuming had said that to the best of his knowledge, information and belief no request or enquiries had been made of any of Taylor Fladgate's owners or any group company being resident or not in Portugal in respect of the 2012 tax year for the purpose of any Portuguese tax assessment
32. The second ground of appeal was that the Comptroller "had acted illegally in issuing a Notice in relation to a request which appears to be a fishing expedition and therefore outside the scope of the TIEA and Regulations; and/or irrationally and/or unreasonably in issuing the Notice by failing to take into account the relevant guidelines and requirements as stipulated in the Regulations, the TIEA and the OECD Model Tax Convention".
33. Under this ground Mr Taylor submitted that the Deputy Comptroller appeared to have gone out of his way to assist the Portuguese Competent Authority in producing a request that would be compliant with the TIEA and therefore enable him to issue the Notice under the Regulations. His firm had highlighted the deficiencies in the request and the potential for it to be an improper fishing expedition on the part of the Portuguese Competent Authority. The Deputy Comptroller had written to the Portuguese Competent Authority on 24th October, 2013 suggesting that "If you are able to provide some additional background information it will further improve our chances of success".
34. The Deputy Comptroller had made repeated references to an ongoing investigation and he argued that the wealth of information and evidence supplied by Taylor Fladgate in the appeal against the first notice should have put the Deputy Comptroller on enquiry as to the conduct of the Portuguese Competent Authority and their motives behind the request. The Deputy Comptroller, he said, did not make any attempt to raise further questions or attempt to verify the nature of the investigation.
35. Whilst the Portuguese Competent Authority had confirmed that there was an ongoing investigation, that they had pursued all means possible in their domestic jurisdiction and that the information would be obtainable in their domestic jurisdiction were it available there, these confirmations were all standard statements subject to a "tick-box" method questioned by the Court in APEF v Comptroller of Taxes at paragraph 56. In particular, the Comptroller should not have relied on these confirmations but made further enquiries to verify that the material requested would be used for its intended purpose.
36. The third ground was that the Comptroller "had acted irrationally and/or unreasonably in issuing the Notice by failing to take into account relevant facts and considerations provided and made available to the Comptroller by Taylor Fladgate. Such information ought to have put the Comptroller on a heightened sense of enquiry on receipt of the request".
37. Under this ground Mr Taylor submitted that the errors in the initial request as to the tax years, the information given by Mr Esteves as to the ongoing tax litigation between the Portuguese tax administration services and QVB and the apparent lack of any approach to the beneficial owners in respect of any investigation for 2012 should have led the Comptroller to take a more considered approach and conduct a more thorough investigation of the request and the reasons behind it. There was, he said, no way to guarantee that the information that the Portuguese Competent Authority would obtain from this request would only be used for the tax assessments specified in the request. For it to be used for any other purpose would be an abuse of process.
38. The fourth ground was that the Comptroller "had acted illegally in issuing a Notice in relation to a request which appears to be a fishing expedition and therefore outside the scope of the TIEA and Regulations; and/or irrationally and/or unreasonably in issuing the Notice by failing to take into account the relevant guidelines and requirements as stipulated in the Regulations, the TIEA and the OECD Model Tax Convention".
39. This appears to be a repetition of the second ground but in any event Mr Taylor submitted that whilst the Portuguese Competent Authority had confirmed that it had pursued all means available in its own territory to obtain the information requested except those that would give rise to disproportionate difficulties and that the information requested was impossible to obtain by other means, no requests had been made of QVB or the beneficial owners of Taylor Fladgate who were unaware of any investigation ongoing. It appeared odd to Mr Taylor that the Comptroller had not queried this information or at least enquired why the Portuguese Competent Authority had not approached taxpayers resident in its jurisdiction to attempt to obtain this information in the first instance. The failure to do so, he said, lent support to the argument that there was in fact no ongoing investigation and that in all likelihood the information is being requested for an ulterior purpose, one that is outside the scope of the TIEA.
40. Mr Taylor finally summarised the arguable case in this way.
(i) The Portuguese Competent Authority has not been questioned and the Comptroller has made no attempt to establish what ongoing investigation exists. Of concern is the fact that there are cases pending in the Portuguese courts in respect of previous tax years between the Portuguese tax administration services and QVB and the information requested may well be used in these matters.
(ii) The Comptroller has been put on enquiry as to the conduct of the Portuguese Competent Authority and the litigation in Portugal. The Portuguese Competent Authority had made no attempt to make any enquiries in Portugal of QVB or the names listed by the Portuguese Competent authority concerning the information sought in the request - this is a fundamental requirement under the TIEA. The Comptroller ought therefore to have taken additional steps to verify or investigate the deficiencies and problems highlighted by Taylor Fladgate.
(iii) The Comptroller has, rather than investigate matters independently and objectively, attempted to assist the Portuguese Competent Authority with their requests.
41. In essence, as can be seen, Mr Taylor argues, that for the reasons put forward as above the Comptroller should have further and independently investigated the reasons behind the request for information.
42. The duty of the Comptroller under the Regulations was clearly enunciated by the Court of Appeal in Volaw v Comptroller of Taxes between paragraphs 19-32. Having considered both Acturus Properties Limited and 47 others v The Attorney General  JLR 43 and Re Kaplan  JLR 88, the Court of Appeal concluded, in the context of the Regulations in their original form which required the Comptroller to have reasonable grounds for the belief specified in Regulation 3(1):-
"We do not construe Kaplan as significantly modifying the Acturus approach. Both cases emphasise that the decision-maker (in Acturus the Attorney-General, in Kaplan the Court) must consider whether there are reasonable grounds for the belief required. It is not, however, for a decision-maker to question the correctness of the material provided to it from outside the jurisdiction, as long as it is properly evaluated after, it may be, some probing for the purposes of clarification."
43. Having considered whether the default position as indicated in these two cases must be modified by public law principles of fairness or by the ECHR, the Court of Appeal went on to say at paragraph 32:-
"However, it does not seem to us possible to read into the Comptroller's decision making process a need to hold a mini-trial. The Comptroller has neither the power nor the facility to provide one. As long as he has reasonable grounds for his belief or opinion on the material before him, he is empowered to act on that belief or opinion. Although the analogy is not exact, it seems to us that the situation confronting the Comptroller when faced with such representations is not un-akin to that which confronts a Court when it has to consider whether a putative Respondent's affidavit is sufficient to prevent what would otherwise be the grant of permission to apply for Judicial Review. In the familiar phase such affidavit would have to constitute a "knock-out blow" to have such effect. [CF: Sharma v Browne-Antoine  1 WLR 780 at 14-6, p.789] Fordham: Judicial Review 6th ed ("Fordham") 21.1.7(c), p.230. So too the representations would have to undermine what would otherwise be the Comptroller's reasonable belief or opinion before he could be inhibited from further action."
44. The Deputy Comptroller's probing and thus clarification of the request from the Portuguese Competent Authority is entirely consistent with his duties under the Regulations as enunciated by the Court of Appeal in Volaw v Comptroller of Taxes and having done so, and after evaluating the very detailed response he received from the Portuguese Competent Authority, it is not for the Comptroller, short of a "knock out blow", to question the correctness of the confirmations provided to him by the Portuguese Competent Authority that:-
(i) there is an investigation involving the individuals resident in Portugal who were named by the Portuguese Competent Authority and who it suspects may be beneficial owners of Taylor Fladgate;
(ii) as required by Article 5.5(i) of the TIEA it had pursued all means available in its own territory to obtain the information save those that would give rise to disproportionate difficulties; and
(iii) as required by Article 5.1 of the TIEA, it was unable to obtain the information requested by other means in its own territory, except where recourse to such means would give rise to disproportionate difficulty.
45. The Portuguese Competent Authority state clearly that there is an ongoing investigation. These are the actual words used and are not merely a tick in the box. As Mr White points out, the reference to the websites relates to the detailed description of the group of Portuguese resident taxpayers which the Deputy Comptroller required the Portuguese Competent Authority to provide in according with prevailing international standards as set out in the updated commentary to Article 26 of the OECD Model Tax Treaty.
46. The Portuguese Competent Authority in fact described the steps taken in the investigation where it says:-
"After consulting the Portuguese tax authority's database, we verified that the people mentioned in paragraph 4.1 of the letter did not declare, in the years 2010, 2011 and 2012, any income imputed under Article 19(3) of the RIS Code, although there are grounds to believe this regulation should be implemented, i.e. the entity of TAYLOR FLADGATE & YEATMAN is held in more than 25% or 10% according to the case, by those people."
47. Regulation 3(3) of the Regulations does not require that the taxpayers be named, but for them to be identified, and they are identified in the Notice as being the beneficial owners of Taylor Fladgate resident in Portugal. As to the contention put forward that they had not been notified, Regulation 14(2) expressly excludes the same as a ground of Judicial Review.
48. The contention that the request is a fishing expedition is unsustainable. As pointed out at paragraph 18 of APEF v Comptroller of Taxes the OECD commentary on Article 26 provides a useful definition of what is meant by fishing expeditions, namely, "speculative requests that have no apparent nexus to an open enquiry or investigation". In this case, there is a very clear nexus between the Portuguese resident persons the Portuguese Competent Authority are investigating (who they have named) and the Portuguese resident beneficial owners of Taylor Fladgate.
49. Standing back and by reference to the Regulations, I would summarise the matter in this way. It is not in dispute that the request for information has come from the competent authority in Portugal under a tax information agreement that on the face of the request and the information subsequently provided complies with the requirements of that agreement. The information sought is "tax information" as defined and relates to taxpayers who are the persons under investigation and the subject of the request. Pursuant to the amended Regulation 3(1), the Comptroller has decided to respond to that request.
50. Judicial review is sought by Taylor Fladgate on the ground that the Comptroller is under a duty to question the correctness of the material provided to him and this by way of an independent investigation or mini-trial of his own because (working from Mr Taylor's summary of the grounds for Judicial Review):-
(i) There is tax litigation between the Portuguese tax administration services and QVB and the information to be provided may be used in that litigation which would be an abuse.
(ii) The Portuguese Competent Authority have not, so Taylor Fladgate believe, made any enquiries in Portugal of either QVB or the suspected beneficial owners of Taylor Fladgate living in Portugal.
(iii) The Comptroller has attempted to assist the Portuguese Competent Authority with its request.
51. Taking the first of these, I struggle to see the relevance of the tax litigation with QVB. The information to be provided to the Portuguese Competent Authority is subject to the confidentiality provisions set out in Article 8 of the TIEA, which stipulates who the information can be provided to and the purposes to which the information can be put. There is simply no evidence to suggest that the Portuguese Competent Authority will breach its obligations under this Article.
52. Taking the second, assuming it is correct that the Portuguese Competent Authority have not made direct inquiries of the Portuguese residents it suspects to be beneficial owners, those persons have (as I understand it) in effect allegedly failed to declare that beneficial ownership. It seems somewhat naïve to suggest that in such circumstances the Portuguese Competent Authority should inquire of those persons whether they are beneficial owners and accept their responses. The only proportionate way of ascertaining as a matter of reliable fact whether they are beneficial owners (as opposed to just relying on what they might care to volunteer) may well be by requesting that information from Taylor Fladgate (and the Jersey Companies Registry) in Jersey where that information is actually held. In any event the Portuguese Competent Authority, which is the body conducting the investigation (not the Comptroller), have given the requisite confirmations in this respect.
53. Taking the third, consultation between the two authorities is expressly contemplated in the commentary to Article 26 of the OECD Model Tax Treaty. That commentary provides:-
"The competent authorities should consult in situations in which the content of the request, the circumstances that led to the request, or the foreseeable relevance of requested information are not clear to the requested State ... Where the requested State becomes aware of facts that call into question whether part of the information requested is foreseeably relevant, the competent authorities should consult and the requested State may ask the requesting State to clarify foreseeable relevance in the light of those facts....Where the requested State becomes aware of facts that call into question whether part of the information requested is foreseeably relevant, the competent authorities should consult and the requested State may ask the requesting State to clarify foreseeable relevance in the light of those facts"
54. It needs to be remembered that the Deputy Comptroller was acting in the context of the TIEA, an agreement between Jersey and Portugal, the purposes of which is the mutual provision of assistance through the exchange of tax information. The TIEA derived from Jersey's commitment to engage with the OECD and its efforts to address harmful tax practices. There really can be no criticism of the Deputy Comptroller's communications with the Portuguese Competent Authority.
55. In the light of the Court of Appeal's authoritative enunciation of the duties of the Comptroller under the Regulations in Volaw v Comptroller of Taxes, there can be no real prospect of this argument succeeding. Initially Taylor Fladgate did have a potential "knock out blow" in that it was not clear, after consideration of the affidavit of Mr Esteves, that the information sought was "foreseeably relevant". The representations contained in his affidavit were such as to potentially undermine the Comptroller's decision and inhibit him from further action. That and the other issues raised by the Deputy Comptroller were then addressed by the Portuguese Competent Authority very comprehensively, leading to the withdrawal of the first notice and the issuing of the Notice. When Taylor Fladgate filed its application for leave, it was not aware of the further information provided by the Portuguese Competent Authority, but the grounds it is now left with are woefully insufficient to justify the quashing of the Comptroller's decision. There is no "knock out blow" or representation that comes anywhere near undermining the Comptroller's decision. For the Court to find that these grounds were sufficient to quash the decision would be to set at naught the Court of Appeal's authoritative enunciation of the Comptroller's duties; effectively that the Comptroller is under a duty to question the correctness of the material before him.
56. I can see no prospect of the Court being persuaded on these frankly weak grounds to quash the decision and effectively require the Comptroller to conduct his own investigation into the investigation being conducted by the Portuguese Competent Authority or to hold his own mini trial.
57. Bringing the matter together by reference to the GCHQ Trilogy, Taylor Fladgate have no real prospect of arguing successfully that the Comptroller has acted illegally and that he has misunderstood the Regulations and his duties under them. He demonstrably has probed and evaluated the request and having done so, is not now under a duty on the grounds put forward to hold an independent investigation or mini-trial to test the correctness of the statements made to him.
58. In terms of "irrationality" or what is now referred to as Wednesbury unreasonableness, the threshold that had previously applied to Regulation 3(1) has now been removed, but even so, the Comptroller must still be required to make a rational assessment of the material before him before deciding whether or not to respond to the request. There can be no prospect of Taylor Fladgate successfully arguing that the decision of the Comptroller on the material before him to issue the Notice was irrational, namely so outrageous in its defiance of logic that no sensible person acting as the Competent Authority in Jersey who had applied his or her mind to the question to be decided could have arrived at it.
59. As to "procedural impropriety", the Court of Appeal in Volaw v Comptroller of Taxes, which decision was issued after the Notice, did hold at paragraph 31 that:-
"Elementary fairness does seem to us, prima facie, to require the Comptroller to give the person the chance to make representations so as to avoid, it may be, entering into the terrain of notices and the possibility of penal sanctions for non-compliance therewith Regulation 3."
60. No such notice was given prior to the issuing of either notice. Taylor Fladgate do not put this forward as a ground for Judicial Review and in my view, no unfairness results (which cannot be compensated for by an appropriate costs order) in that Taylor Fladgate were able to make representations and file evidence for its appeal against the issuing of the first notice. That material was taken into account by Deputy Comptroller and led to the withdrawal of the first notice and the issuing of the Notice which was the subject of this application.
61. In conclusion, there is no real prospect of Taylor Fladgate succeeding on any of the grounds put forward for Judicial Review and I therefore decline to grant leave.
Royal Court Rules 2004.
Taxation (Exchange of Information with Third Countries)(Jersey) Regulations 2008.
Planning & Environment Committee v Lesquende Ltd  JLR 1.
Judicial Review Handbook 6th edition by Michael Fordham.
De Smith Seventh Edition.