Jersey Unreported Judgments

Taxation - costs sought on indemnity basis regarding Comptroller's summons dated 7th February, 2014, and costs on standard basis regarding application for leave up to 21st January, 2014.

[2014]JRC219

Royal Court

(Samedi)

11 November 2014

IN THE MATTER OF AN APPLICATION 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.

judgment

the commissioner:

1.        On 26^th August, 2014, I heard argument on costs arising out of the unsuccessful application by the applicant ("Taylor Fladgate") for leave for the judicial review of an administrative decision by the respondent ("the Comptroller") to issue a notice to Taylor Fladgate dated 22^nd November, 2013, ("the Notice") under Regulation 3 of the Taxation (Exchange of Information with Third Countries)(Jersey) Regulations 2008 as amended ("the Regulations"). 

2.        The application was refused for the reasons set out in my judgment of 12^th March, 2014, (Taylor Fladgate and Yeatman Ltd-v-Comptroller of Taxes [2014] JRC 064) ("the judgment").  The judgment sets out the background which I will not repeat here save to this extent.  As explained in the judgment, there had been a previous notice issued by the Comptroller ("the First Notice") which, following receipt of an affidavit from Mr Esteves, the tax partner of Pricewaterhouse Coopers and Associdados - Sociedade de Revisores Officiais de Contas Lda. in Porto, the Comptroller had withdrawn.  In doing so, the Comptroller agreed to pay the costs of Taylor Fladgate on the standard basis of its appeal against the issuing of the First Notice.  The Comptroller then issued the Notice which was the subject of the application for judicial review.  In the meantime, the Regulations had been amended, removing the previous right of appeal and restricting the taxpayer or a person subject to a third party notice to judicial review. 

3.        In his skeleton argument and in correspondence Mr Taylor, for Taylor Fladgate, made extensive criticisms of the conduct of the Comptroller and his advisers alleging that there was a lack of engagement and candour on their part.  They had conducted themselves, he said, in an opaque manner refusing to respond to correspondence all of which had increased costs. 

4.        The Comptroller responded by filing a second affidavit by Mr Andrew Cousins, the Deputy Comptroller of Taxes, in which he draws attention to the prevailing international standards, in particular in relation to confidentiality.  It is helpful to set out paragraphs 7 - 9 of his affidavit:-

"7.       Exhibited to the 21st January Affidavit as Exhibit AC1/2 is the OECD Model Agreement on the exchange of Information on Tax Matters (the "OECD Model TIEA") and commentary thereto.  Paragraphs 94-97 of the commentary address Article 8 of the OECD Model TIEA on confidentiality.  These begin with a statement that:

'Ensuring that adequate protection is provided to information received from another Contracting Party is essential to any exchange of information instrument [in] relation to tax matters.  Exchange of information for tax matters must always be coupled with stringent safeguards to ensure that the information is only used for the purposes specified in Article 1 of the Agreement.'

8.        Exhibited as Exhibit AC1/10 was the update to Article 26 of the OECD Model Tax Convention (on exchange of information) and its commentary.  In the commentary to paragraph 2 of Article 26, the scope of confidentiality is addressed as follows:

'Hence, the confidentiality rules cover, for instance, competent authority letters, including the letter requesting information.  At the same time, it is understood that the requested State can disclose the minimum information contained in a competent authority letter (but not the letter itself) necessary for the requested State to be able to obtain or provide the requested information to the requesting State, without frustrating the efforts of the requesting State.  If, however, court proceedings or the like under the domestic laws of the requested State necessitate the disclosure of the competent authority letter itself, the competent authority of the requested State may disclose such a letter unless the requesting State otherwise specifies.'

9.        As I sit, as part of the Jersey delegation, in the Peer Review Group of the Global Forum, and have served and continue to serve as an assessor of other jurisdictions in this forum, as well as having experienced the assessment of the Jersey Competent Authority's own performance when Jersey's turn came to be assessed in the same forum, I am acutely aware of how the requirement of confidentiality is understood to apply to the disclosure of information contained in a competent authority letter.  The minimum information necessary to be able to obtain or provide the requested information is held by the Global Forum to mean just that, a list of questions containing only sufficient information to allow the adequate answering of the questions.  It is not considered that sufficient information should be supplied to allow the recipient of the Notice to decide whether it is appropriate to respond to the Notice.  Failure to observe such confidentiality requirements attracts censure from the Global Forum. ..."

5.        Consistent with those standards, the Comptroller had limited disclosure of the information received from the Portuguese competent authority to the minimum necessary, as set out in the Notice and it was only after judicial review proceedings had been commenced that Mr Cousins set out in his first affidavit of 21^st January, 2014, the detailed information received from the Portuguese competent authority on 8^th November, 2013. 

6.        Taylor Fladgate, like any other third party in receipt of such a notice, was anxious for information and no doubt frustrated by the perceived lack of response on the part of the Comptroller, but I do not accept the criticisms made of the Comptroller and his advisers, whose conduct was appropriately governed by the prevailing international standards in relation to confidentiality. 

7.        Mr White, for the Comptroller, seeks his costs on the standard basis of and incidental to the application on the straightforward basis that costs should follow the event.  The application was unsuccessful, the Court finding (at paragraph 61 of the judgment) that there was no real prospect of Taylor Fladgate succeeding on any of the grounds put forward for judicial review.   

8.        Mr Taylor seeks:-

(i)        Taylor Fladgate's costs on the indemnity basis in relation to the Comptroller's summons dated 7^th February, 2014, seeking to adduce new evidence, and

(ii)       Taylor Fladgate's costs on the standard basis in respect of the application for leave up to 21^st January, 2014, when the first affidavit of Mr Cousins was filed, with the parties thereafter bearing their own costs. 

9.        Taking first the summons of the Comptroller seeking to adduce new evidence, that failed for the reasons set out in paragraphs 22 and 23 of the judgment.  Mr White had conceded that applying the principles applicable on judicial review, the application would fail and this was an application for judicial review.  In my view, Taylor Fladgate should have the costs of and incidental to that application but on the standard basis.  I see no grounds for justifying costs on the indemnity basis. 

10.      Turning to the application for leave itself, Mr White said that the Notice was an entirely new matter, quite distinct from the First Notice.  I do not accept this.  Taylor Fladgate had substantive arguments for challenging the First Notice as made clear in paragraph 55 of the judgment.  The Notice emanated from the same authority, seeking essentially the same information.  Taylor Fladgate was understandably wary.  When it received the Notice, it was not aware of the detailed information that the Portuguese competent authority had supplied to the Comptroller on 8^th November, 2013, and it only had fourteen days in which to apply for judicial review.  It therefore applied for judicial review without the benefit of an explanation and in the context of an earlier clearly flawed application by the same authority. 

11.      The position changed, however, when the first affidavit of Mr Cousins dated 21^st January, 2013, was filed, which contained the detailed response of the Portuguese competent authority.  It was essentially on the basis of that evidence that the application for leave failed.  There is merit in Mr White's contention that in continuing with its application after the filing of that affidavit, Taylor Fladgate was acting unreasonably.  Accordingly, I determine that Taylor Fladgate should pay the costs of the Comptroller of and incidental to the application for leave with effect from the date upon which it received the first affidavit of Mr Cousins dated 21^st January, 2014, to the date of the judgment. 

12.      Turning finally to the costs incurred in relation to the issue of costs from the date of the judgment up to and including the hearing on costs, both parties have been successful to some extent and I therefore determine that there should be no order for costs. 

13.      In summary:-

(i)        The Comptroller will pay Taylor Fladgate its costs on the standard basis of and incidental to the summons of 7^th February, 2014, seeking to adduce new evidence. 

(ii)       Taylor Fladgate will pay to the Comptroller the costs on the standard basis of and incidental to the application for leave for judicial review from the date that Taylor Fladgate received the first affidavit of Mr Cousins dated 21^st January, 2014, to the date of the judgment. 

14.      In respect of these two orders, costs are to be taxed if not agreed.  

Authorities

Taylor Fladgate and Yeatman Ltd-v-Comptroller of Taxes [2014] JRC 064.