Sir Michael Birt, Kt., sitting alone.
IN THE MATTER OF AN APPLICATION FOR JUDICIAL REVIEW BY BERGE GERDT LARSEN
AND IN THE MATTER OF AN APPLICATION FOR JUDICAL REVIEW BY (1) VOLAW TRUST & CORPORATE SERVICES LIMITED (2) NORTH EAST OIL LIMITED (3) LARSEN OIL AND GAS DRILLING LIMITED (4) NETWORK DRILLING LIMITED (5) INDEPENDENT OILFIELD RENTALS IOR LIMITED (6) PETROLIA DRILLING LLIMITED AND (7) OPS PERSONNAL SERVICES LIMITED
Advocate J. Harvey-Hills for Mr Larsen.
Advocate A. D. Hoy for Volaw Trust & Corporate Services Limited and the remaining Applicants.
1. I have before me two applications for leave to apply for judicial review. One is brought by Mr Larsen and the other is brought by Volaw Trust and Corporate Services Limited ("Volaw") and six other corporate entities whose affairs are administered by Volaw. The two applications are in very similar form and arise out of the same facts. Accordingly I shall not distinguish between them unless it is necessary to do so.
2. As well as seeking leave to apply for judicial review, the applicants also ask for interim relief by way of a stay of the decision sought to be judicially reviewed. After reading the papers, I indicated that I was willing to grant leave but that I required an ex parte oral hearing to take place on the issue of interim relief and the identity of the correct respondents. This occurred at 4pm on Thursday 20th November. At the conclusion of the hearing, I asked for further written submissions to be produced the following day and these were received during the course of Friday afternoon. I now give my decision on these two aspects.
3. On 21st October, 2014, the Deputy Comptroller of Taxes ("the Comptroller") issued nine notices ("the Notices") under Regulation 3 of the Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 ("the Regulations") to Volaw requiring disclosure of documents and records relating to the affairs of Mr Larsen and the six corporate entities. The Notices required supply of the documents within 30 days and it is agreed that that period expired on 21st November. There is therefore considerable urgency in deciding whether to grant a stay of the Notices by way of interim relief.
4. The applicants apply to judicially review the decision of the Comptroller to issue the Notices. They seek to quash the Notices and also seek a declaration that the Comptroller has no power to transfer any documents received pursuant to the Notices to the Norwegian Tax Authority (being the Authority at whose request the Comptroller issued the Notices). The applicants also seek a declaration that certain amendments to the Regulations which were contained in the Taxation (Exchange of Information with Third Countries) (Amendment No.7) (Jersey) Regulations 2013 ("the 2013 Amendment") were unlawful and should be quashed.
5. The grounds for seeking relief are set out in the application and it is not necessary for me to refer to them in detail for the purposes of this short judgment. Suffice it to say that, subject to the question of the proper respondents, I find that there is sufficient in the grounds to justify the granting of leave to apply for judicial review on all the grounds set out in the application.
6. The applicants ask for an order staying the Notices until resolution of the judicial review proceedings. This is not an unusual request and the Court will in judicial review proceedings very often stay the decision under challenge until the Court has decided whether the decision should be quashed. In effect, such an order preserves the status quo pending resolution of the dispute.
7. The difficulty in this case is that Regulation 14(3) - introduced by the 2013 Amendment - provides as follows:-
"(3) 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 limit 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."
8. On the face of it, that provision suggests that Volaw must provide the information to the Comptroller by the due date despite the fact that I am granting leave for judicial review proceedings to be brought. However, Advocate Harvey-Hills, supported by Advocate Hoy, states that the validity of Regulation 14(3) is being challenged in the judicial review proceedings and that accordingly I should grant a stay so as to hold the ring fairly between the parties pending resolution of that issue.
9. I would summarise (very briefly) the arguments made to support the challenge which is being mounted to Regulation 14(3) as follows:
(i) The States is a public authority and, when enacting subordinate legislation, must act in compliance with the European Convention on Human Rights 2000 ("the Convention"). The requirement to produce confidential documents and information to the Comptroller is an interference with the private life of the applicants under Article 8 of the Convention. That is so regardless of whether the information is subsequently provided to a third country or not.
(ii) Interference with a person's rights under Article 8 can only be justified if it is in accordance with law. This requires that it is compatible with the rule of law. A power which is unfettered and/or in relation to which there is no legal right of challenge is not compatible with the rule of law (see Gillan v UK (2010) 28B HRC 420 at para 77).
(iii) As a result of the amendments to the Regulations brought in by the 2013 Amendment, the power of the Comptroller is in effect unfettered. Regulation 3 provides no grounds against which the Comptroller's decision can be objectively measured. It provides simply that a notice may be issued "... where the competent authority for Jersey decides to respond to a request concerning a taxpayer ...". The effect of Regulation 14(3) is that the documents must be produced and therefore the person's Article 8 rights interfered with, notwithstanding any legal challenge. The interference is therefore above legal scrutiny in circumstances where there are not even any clearly defined criteria for the issue of a notice in the first place. Such an unfettered power is not compatible with the rule of law and amounts to an unlawful interference with Article 8 rights. The States have therefore acted unlawfully as described in Article 7(4)(a) of the Human Rights (Jersey) Law 2000 and, in accordance with Article 9(1)(b) of that Law, the Court may quash the Regulations or the relevant parts thereof.
10. In my judgment, the arguments raised by the applicants on this aspect - as on the other matters relied upon in the application - are sufficient to justify the granting of leave to apply for judicial review.
11. The question then arises as to whether, given that the validity of Regulation 14(3) is being challenged, I have power to stay the Notices despite the terms of Regulation 14(3). That in turn raises the question of whether the Court may effectively suspend the operation of a provision of subordinate legislation the validity of which is being challenged.
12. In Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry  AC 295 the question was whether an application by the Secretary of State for an injunction to enforce subordinate legislation should carry with it the usual undertaking in damages in circumstances where the validity of the legislation was being challenged. The House of Lords held that the Secretary of State did not need to provide an undertaking in damages. In passing, however, their Lordships had something to say about the presumption of validity of subordinate legislation. Thus Lord Diplock said at 366:-
"The instant case is not one where the appellants contend that what they are threatening to do would not be a contravention of the order .... . Different considerations would apply to that. Their only answer to the application for an interim injunction to enforce the order against them is that they intend to challenge its validity. It is not disputed that they have locus standi to do so, but this does not absolve them from their obligation to obey the order while the presumption in favour of its validity prevails - as it must so long as there has been no final judgment in the action to the contrary.
So in this type of law enforcement action if the only defence is an attack on the validity of the statutory instrument sought to be enforced the ordinary position of the parties as respects the grant of interim injunctions is reversed. The duty of the Crown to see that the law declared by the statutory instrument is obeyed is not suspended by the commencement of proceedings in which the validity of the instrument is challenged. Prima facie the Crown is entitled as of right to an interim injunction to enforce obedience to it. To displace this right or to fetter it by the imposition of conditions it is for the defendant to show a strong prima facie case that the statutory instrument is ultra vires."
13. The issue was also considered in R v Secretary of State for Transport ex parte Factortame Limited (No.2)  1 AC 603. Lord Goff of Chieveley, in a speech with which all their Lordships agreed, said this at 674:-
"I myself am of the opinion that in these cases, as in others, the discretion conferred upon the court cannot be fettered by a rule; I respectfully doubt whether there is any rule that, in cases such as these, a party challenging the validity of a law must - to resist an application for an interim injunction against him, or to obtain an interim injunction restraining the enforcement of the law - show a strong prima facie case that the law is invalid. It is impossible to foresee what cases may yet come before the court; I cannot dismiss from my mind the possibility (no doubt remote) that such a party may suffer such serious and irreparable harm in the event of the law being enforced against him, that it may be just or convenient to restrain its enforcement by an interim injunction even though so heavy a burden has not been discharged by him. In the end, the matter is one for the discretion of the court, taking into account all the circumstances of the case. Even so, the court should not restrain a public authority by interim injunction from enforcing an apparently authentic law unless it is satisfied, having regard to all the circumstances, that the challenge to the validity of the law is, prima facie, so firmly based as to justify so exceptional a course being taken." [emphasis added]
14. Given the context of the Factortame case, which was concerned with a provision said to be inconsistent with EC law, there may be a question as to whether Lord Goff's remarks are confined to legislation which is said to be invalid because it breaches Community law. However, his words are expressed in general terms and appear to have been understood to be of general effect. See for example De Smith's Judicial Review 6th edition at 18 - 015.
15. I proceed therefore on the basis that the Court has jurisdiction to restrain the effect of Regulation 14(3) if satisfied that the criteria outlined by Lord Goff are satisfied. The Court therefore has jurisdiction to grant a stay on enforcement of the Notices. Nevertheless, in my discretion, I declined to grant the interim relief requested on this occasion and would summarise my reasons for so concluding as follows:-
(i) Whilst I have agreed that there is sufficient in the arguments that Regulation 14(3) is unlawful (as being a provision which does not comply with Article 8 of the Convention) to justify the granting of leave to apply for judicial review, I do not categorise those arguments as amounting to a 'strong prima facie case' or as so 'firmly based' as to justify suspending the provision pending the challenge to it. I do not feel therefore that the facts of this case justify my taking the exceptional course of action envisaged in Hoffmann-La Roche and Factortame.
(ii) I do not consider that the prejudice which would be suffered by the applicants as a result of refusing a stay is sufficient to justify such an exceptional step. I was informed at the hearing that Volaw has done the necessary work to comply with the Notices and, subject only to production of an index which was not possible at this stage, Volaw would be in a position to supply the documents by close of business on 21st November in accordance with the requirement of the Notices. There would therefore be no prejudice in terms of carrying out extensive work which would not be necessary if the judicial review was successful.
(iii) The only prejudice which would occur if the judicial review is successful is that the Comptroller will have had possession of the documents from now until that decision but he would then have to return them. This case is not concerned with any question of Jersey tax and the documents are therefore of no intrinsic value to the Comptroller. Because of the provisions of Regulation 14(3)(b) he may not send the documents on to the Norwegian Tax Authority. Whilst therefore there will have been an interference with the applicants' Article 8 rights, it will not have led to any substantial prejudicial consequences to them.
16. Advocate Harvey-Hills submitted that there was a risk of irremedial prejudice. He referred to the case of Hua Wang Berhard v Commissioner of Taxation (2013) FCA 120, a decision of the Federal Court of Australia. In that case the Cayman Islands Tax Information Authority ("CITIA") had supplied documents to the Commissioner of Taxation in Australia and had consented to the use of those documents in proceedings in Australia. Subsequently, the Grand Court of the Cayman Islands had quashed that decision and ordered CITIA to write to the Commissioner seeking his undertaking not to divulge the documents in court proceedings in Australia and demanding the immediate destruction or return of the documents. The Commissioner had refused to comply with that request. The Federal Court ruled that, despite the decision of the Cayman Grand Court, it was permissible to use the documents in the case before the Australian court, which concerned the taxation liabilities of certain Australian entities. Advocate Harvey-Hills submitted that, should the Comptroller pass the documents in this case to the Norwegian Tax Authority, a similar situation might arise and there would be irremedial prejudice as it would be impossible to recover the documents. He pointed to the fact that, in an earlier Notice in relation to many of the same parties, the Comptroller had forwarded the documents received pursuant to that Notice to the Norwegian Tax Authority over the objections of Volaw.
17. However, it seems to me that the position in relation to these Notices is very different. In the case of the earlier Notice, there was nothing to prevent the Comptroller from forwarding the documents, the various appeals having been dismissed and an application for judicial review having been refused. Conversely, in the present case, the Comptroller is subject to Regulation 14(3)(b) which states specifically that he may not forward the documents at this stage. I consider therefore that there is no realistic risk of his doing so. I am confident that he would not do so deliberately and I do not consider the risk of administrative error to be sufficient to be of real concern. No doubt the Comptroller will put in place suitable administrative measures to ensure that Rule 14(3)(b) is respected. Should he fail to do so, that would no doubt be taken into account by this Court in any future hearing.
18. For these reasons, I do not consider that the position is such that I should take the exceptional step of making an order which effectively negates the provisions of Regulation 14(3).
19. The applicants seek to join as respondents the Comptroller, the States and the Chief Minister.
20. The relief which they seek is the quashing of the Notices, a declaration that the Comptroller has no power to transfer documents received under the Notices to the Norwegian Tax Authority and a quashing of those parts of the Regulations which are unlawful, together with a declaration that there is a right of appeal from the Royal Court to the Court of Appeal notwithstanding that the Regulations provide that the only appeal lies to the Judicial Committee of the Privy Council.
21. It is necessary that the Comptroller should be joined because it is his decision to issue the Notices and his decision which is under challenge. Similarly, it is proper that the States be joined because it is the States which made the Regulations as subordinate legislation pursuant to the power conferred on them by Article 2 of the Taxation (Implementation) (Jersey) Law 2004 and the lawfulness of those Regulations is being challenged.
22. However, I cannot see that it is necessary or proper to join the Chief Minister as a respondent. There is no decision of his which is subject to challenge. Advocates Harvey-Hills and Hoy submit that it is appropriate to convene the Chief Minister because it was he who placed the Regulations before the States and invited the States to enact them. But it seems to me that that is beside the point. The Regulations were made by the States and accordingly it is the States which should be the party to the judicial review proceedings.
23. I therefore grant leave to the applicants to bring proceedings for judicial review in accordance with the applications, subject only to deleting the Chief Minister as a respondent. There will therefore be two respondents, the Comptroller and the States.
Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008.
Taxation (Exchange of Information with Third Countries) (Amendment No.7) (Jersey) Regulations 2013.
European Convention on Human Rights 2000.
Gillan v UK (2010) 28B HRC 420.
Human Rights (Jersey) Law 2000.
Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry  AC 295.
De Smith's Judicial Review 6th Edition.
Hua Wang Berhard v Commissioner of Taxation (2013) FCA 120.
Taxation (Implementation) (Jersey) Law 2004.