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Jersey Unreported Judgments |
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You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Triton Administration (Jersey) Limited v The Office of the Comptroller of Revenue [2023] JRC 023 (10 February 2023) URL: http://www.bailii.org/je/cases/UR/2023/2023_023.html Cite as: [2023] JRC 23, [2023] JRC 023 |
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Application for leave for Judicial Review
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Before : |
R. J. MacRae, Esq., Deputy Bailiff |
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Between |
Triton Administration (Jersey) Limited |
Applicant |
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And |
The Office of the Comptroller of Revenue |
Respondent |
Advocate M. W. Cook for the Applicant.
Advocate S. A. Meiklejohn for the Respondent.
judgment
the deputy bailiff:
1. On 29 September 2022, I ordered that the Applicant's application for leave for judicial review of the decision made by the Respondent on 13 September 2022 be listed for an oral inter partes hearing before a judge of the Royal Court for consideration as to whether or not leave should be granted.
2. At the end of the hearing on 24 January 2023, I gave my decision on the Applicant's application for leave with reasons to be provided in due course. This judgment contains those reasons.
3. By way of background, the Applicant provides administration services and a registered office to a Jersey company called Three Ampford Limited ("the Company").
4. The Applicant is part of a group which invests in companies across Europe. The Applicant is the Jersey based part of the Triton Group. It is regulated. The taxpayer, in this case Mr Leijonqvist ("the Taxpayer") was employed by a Triton Group company in, it seems, Sweden from 2009 to 2020.
5. The Company makes investments in certain Triton funds and the affidavit sworn on behalf of the Applicant by a director says that the Company 'has private equity investments which are commonly referred to as carried interest and co-investment'. Although the Court was not told exactly how many shareholders there are in the Company, the affidavit sworn on behalf of the Applicant says that 'senior executives have interest and will receive distributions as shareholders'. We were told that the Taxpayer was one of many shareholders in the Company.
6. The Notice issued by the Respondent on 13 September 2022 (which is considered further below) also refers to Addison Nominees Limited which is a company within the Triton Group through which the Taxpayer (and perhaps others) held their shares in the Company.
7. Shortly before the hearing, on 18 January 2023, an affidavit was sworn by Mr Rochefort on behalf of the Respondent which gives the background to the service of the Notice which is the subject matter of this judicial review. It would have been preferable for that affidavit to have been filed further in advance of the hearing, although the Court knows the pressures that the Respondent is under in terms of dealing with this and other matters and accepts that there is no rule of law or practice requiring the Respondent to file evidence before an application for leave for judicial review. However, supply of such a document will, and in this case did, satisfy the Applicant (in relation to one ground) and the Court (in relation to two further grounds) that most of the grounds upon which judicial review were sought did not have a realistic prospect of success.
8. As to the test, both parties were agreed, having regard to the relevant case law, that the Applicant needed to show that it had a realistic prospect of success in order to be granted leave on one or more grounds. (see Prahal v Comptroller of Taxes [2021] JRC 184 at paragraphs 4 and 5; and see Imperium Trustees (Jersey) Limited v JCA [2022] JRC 300 at paragraph 4.)
9. Mr Rochefort explains that the Jersey Competent Authority (which is also referred to as the Respondent for the purpose of these reasons) received a request for exchange of tax information from the Swedish Competent Authority on 21 June 2022, pursuant to the provisions of the Convention on Mutual Administration Assistance in Tax Matters (the "Convention").
10. The request stated that the Taxpayer was resident in Sweden and was under investigation by the Swedish Tax Agency (the "STA"). Mr Rochefort said 'The investigation is regarding [the Taxpayer's] taxable income and whether he received any income from Jersey for the 2018 calendar year'. The request stated that the Taxpayer was employed by a Swedish company - a Triton Group company which it is accepted that he did work for at the time. The request said that the Taxpayer reported that he owned shares in the Company in his Swedish tax returns, the Company being identified as a Jersey company. The request also identified that Addison Nominees Limited held the Taxpayer's shares in the Company on his behalf.
11. These details were consistent with the evidence subsequently given on oath on behalf of the Applicant in these proceedings.
12. The Swedish request stated that their investigation 'revealed that the carried interest received by [the Taxpayer] from [the Company] should be taxed as earned income under Sweden's domestic tax laws'. Although under the third ground for judicial review the Applicant says that the term 'carried interest' is not understood by the Applicant it is a term, as set out above, referred to in the affidavit sworn on behalf of the Applicant. It was also a term notified to the Respondent by the STA and is a term, on the evidence, familiar to the Taxpayer. Importantly, Mr Rochefort says:
"The request stated that when asked by the STA about the carried interest, [the Taxpayer] replied that he was aware there was carried interest but did not know the amounts attributable to carried interest and he did not have the documents which would provide this information."
13. Mr Rochefort confirms that the period under investigation (2018) was covered by the Convention and states that the Respondent took the view that the information requested appeared to be 'foreseeably relevant' and in this respect he had regard to the 'international standard' as set out in the commentary to Article 26 of the Convention.
14. This is a matter that we were also referred to in the course of argument and is a document which has been referred to by the Royal Court in other cases.
15. In Imperium Trustees (Jersey) Limited v JCA [2022] JRC 300, to which the parties both referred in argument, under the title "The relevant legislation", the Court said:
16. Mr Rochefort does not set out in his affidavit precisely what information the STA requested but nonetheless does say that:
"It was clear to me that there was more than a reasonable possibility that the information sought under the request from the STA would be relevant to the administration or enforcement of the domestic laws of Sweden concerning the taxes covered by the Convention."
17. Before issuing the Notice, Mr Rochefort also independently confirmed that both the Company and Addison Nominees Limited were Jersey companies and the Respondent's data received under the Common Reporting System in respect of the 2018 tax year confirmed that the Taxpayer had received payment from the Company that year although the data did not specify the type of payment made to the Taxpayer. Accordingly, Mr Rochefort issued a notice on 5 August 2022 under Regulation 3 of the Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 ("the Regulations") requiring information be provided by the Applicant. A copy was, as required by the Regulations, sent to the Taxpayer on 5 August 2022.
18. Mourant was instructed and wrote to Mr Rochefort on 12 August 2022 raising various points and asking that the notice be withdrawn. In the letter from Mourant, it was said on behalf of the Applicant inter alia that the notice did not specify who the relevant taxpayer was. There was no obligation on behalf of the Comptroller to set out the name of the Taxpayer in the notice, although the notice did say in terms that 'Tax information in respect of [the Company] and / or in respect of [the Taxpayer]' was being sought. The Taxpayer was identified by name in the notice. Although it was not said that Mr Leijonqvist was the Taxpayer it was plain that he was and Mr Rochefort, on behalf of the Respondent, said in the first paragraph that he was in receipt of a request from the Competent Authority for Sweden. The Mourant letter went on to say that they 'assumed' that the Taxpayer was the individual named and raised a number of concerns, in particular Mourant said they understood that the tax assessment for the Taxpayer for 2018, the "period" defined in the notice, was now closed; that the Taxpayer had provided the information concerning that period to the STA and that the notice should be withdrawn pending the STA's response to these points. Apart from these points, Mourant also raised what they described as a 'couple of technical issues' which arose from the terms of the Notice, including the request at 3(e) to provide an 'explanation' which was said not to be a valid request when issued to a company rather than an individual. The notice was subsequently amended further to legal advice provided to the Respondent to address this requirement to a director of the Applicant rather than the Applicant itself.
19. In any event, the two issues of substance raised by the Applicant in the letter of 12 August 2022 were considered by the Respondent and led to the notice dated 5 August 2022 being withdrawn. On 16 August 2022, the Respondent notified Mourant that the notice was being withdrawn. Complaint is made that the Respondent's letter said:
"For the avoidance of doubt, in withdrawing of the Notice issued to your client the Jersey Competent Authority does not admit to any deficiency in the terms of the request from the requesting authority or on the face of the Notice itself. It is likely that any new Notice will be substantially similar to the now withdrawn Notice."
20. As to the first sentence quoted above, I do not think that any legitimate complaint can be made in relation to that - the Respondent was simply effectively saying that the withdrawal of the notice was without prejudice. As to the second sentence, it might have been better if the word 'likely' was replaced with the word 'possible', but little turns on that.
21. Mr Rochefort then wrote to the STA, as he says in his affidavit, on 17 August 2022 asking for confirmation as to whether or not the 2018 tax year was still open for assessment and whether the Taxpayer had indeed provided all the information. The STA replied the following day confirming the tax year 2018 was still open for assessment and, in relation to the second request, the STA confirmed that Mr Rochefort could directly quote the following:
22. In the circumstances, the Respondent did all that it reasonably could and was entitled to be satisfied, as Mr Rochefort was, with the STA's response. However, there was an adjustment to some of the wording in the Notice in order to tie the request for information in relation to the Company more directly to the Taxpayer, as described by Mr Rochefort in his affidavit.
23. This led to issue of the Notice, subject of this application for leave, and a letter from the Respondent dated 13 September 2022 further to the letter from the Respondent dated 16 August 2022. In the letter, Mr Rochefort said that he had:
"...raised your points with the Swedish tax administration 'STA'. The STA have advised the following points:
The 2018 tax year is still open for assessment of [the Taxpayer's] taxes and
The STA has authorised me to share this portion of their request: "Mr Leijonqvist has replied that he knows that [the Company] has received carried interest and but that he has no knowledge about what proportion of [the Company's] income that consists of carried interest."
24. Mr Rochefort then added, inter alia:
"The Regulations do not oblige me to name the relevant taxpayer (which I now have) but I think it was quite easy to deduce its identity, as you did in your letter."
25. Crucially, so far as the Applicant is concerned, Mr Rochefort went on to say:
"I accept that some of the information in the documents may not relate to [the Taxpayer's] taxes. A suitable explanation on what your client wishes to redact will be required. The STA may come back at a later date and request the redacted information if they can explain its relevance to [the Taxpayer's] tax affairs."
26. Nonetheless, Mr Rochefort confirmed that:
"I am further satisfied to the foreseeable relevance of the request from the STA, and I will issue a new notice to your client."
27. Finally, Mr Rochefort said:
"I understand your client's concerns regarding the information requested, but I must emphasise that the taxpayer himself does not seem to have issue with Sweden requesting the information that he himself was unable to supply to the STA."
28. Noting that the Applicant did not, until recently, have sight of the Respondent's evidence, I now turn to the four grounds upon which leave for judicial review was originally sought.
29. The operative section of the Notice requires the provision of material as follows:
a. The Company's financial statements, annual accounts, and directors reports for the 2017-2018 and 2018-2019 fiscal years;
b. Dates, amounts and documentation of all income received by the Company between 1 January 2018 and 31 December 2018 (the "Period");
c. Dates, amounts and documentation of all distributions (for example: dividends, loan payments ... ) during the Period in respect of shares in the Company held by Addison Nominees Ltd as nominee or otherwise directly or indirectly for the benefit of the Individual including in any circumstances where shares in the Company are held for the benefit of a discretionary trust of which the Individual is an object with a right to be considered as potential recipient of benefit; including:
i. Information and documents regarding the amount/sales price for each transaction and how it was calculated;
ii. Information and documents specifying for each transaction the amount that is carried interest;
d. The Company's Net Asset Value Accounts for the Period;
e. All documents and records which explain and/or support the use of the terms "Your share of the proceeds" and "loan repayment" in the Appendix of a letter, dated 9 February 2018, sent to the Individual from the Company, and to the extent that in the view of the directors of Triton Administration (Jersey) Limited the documents or records it holds or controls do not sufficiently explain or evidence the same please provide a statement in writing from a director or other officer of Triton Administration (Jersey) Limited who holds the requisite knowledge to explain the same."
30. The first ground was that the Respondent acted unlawfully in demanding information relevant to the year 2018. The foundation for this allegation was the Applicant's understanding (not evidenced independently) that the tax assessment for the Taxpayer for 2018 was closed and could not be re-opened. However, the Applicant acknowledges that the Respondent has considered this point with the STA and that, in the circumstances, the Court should not look behind this assertion from the STA. It is not for this Court, as the previous authorities have stated, to conduct a 'mini trial' in relation to issues of foreign law. Nor is it the obligation of the Comptroller to resolve such matters. The Comptroller is entitled to accept explanations from the competent authority in the requesting country at face value. Accordingly, the Applicant confirmed that it did not pursue this ground. If this point is to be considered further it needs to be, as the Applicant accepts, properly addressed in Sweden.
31. Counsel for the Applicant described this as his 'primary ground'. It was argued that the scope of the Notice, particularly at 3(a), 3(b) and 3(d), is too broad and seeks information which does not relate to the Taxpayer. Both parties agreed that the passages contained at paragraph 17 of the judgment in Imperium (above) were an accurate representation of the law. Counsel for the Applicant also made reference to paragraph 25 of the judgment in that case where the Court said:
32. Heavy reliance was placed upon Mr Rochefort's acceptance that some of the documents sought may not relate to the Taxpayer. It was said that this concession meant that some of the requested information was not foreseeably relevant to the Taxpayer, did not constitute tax information and was therefore outside the scope of the Respondent's powers. It was argued that on this basis, the Respondent could not have rationally concluded that the information was reasonably required, and the Respondent simply had no power to seek it. It was said that it was not good enough for the Respondent to say that the Applicant / its advisors could redact material that was irrelevant as that shifted the burden upon them to identify what information was foreseeably relevant and to guard the interests of third parties. Counsel for the Applicant said that there may legitimately be instances where documents are foreseeably relevant which may happen to refer to third parties and, in those circumstances, those advising the recipient of the Notice may need to carry out redactions of such documents to protect the confidentiality of irrelevant material. However, it was said that there needs to be a balance struck and it was not appropriate for the Comptroller to effectively delegate the role of assessing relevance to the Applicant. In an extreme case, it could lead to the Applicant being able to redact substantial quantities of material. It was said that this problem may have been avoided had the Comptroller sent a Notice in draft to the Applicant prior to finalising the Notice which, it was said, was formerly the practice. Although the Respondent is under no obligation to carry out such a process, there may in certain circumstances be merit in such a suggestion. It would not have been difficult to word the Notice so as to ensure that the material sought at 3(a), 3(b) and 3(d) which, prima facie, are very wide ranging, should be limited to matters relevant to the Taxpayer by wording the request in different terms. The Applicant argued that it was possible that much, or indeed all, of the material requested at 3(a), 3(b) and 3(d) was irrelevant to the Taxpayer.
33. It was accepted that the wording of the Notice at 3(c) and 3(e) properly identified material that may have been foreseeably relevant to the STA's investigation in relation to the affairs of the Taxpayer.
34. It was further accepted on behalf of the Applicant that a notice would not be invalidated merely by virtue of the fact that the Respondent receives further material justifying the service of such a notice from the requesting authority some time after the notice had been served.
35. It was argued on behalf of the Respondent that it may well be that a document disclosed may not amount to "tax information" because it is not information that has any possibility of proving relevant to the assessment of the particular Taxpayer subject of the request, but that does not of itself mean that such a document is outside the scope of the Respondent's powers to require the production of documentation that is foreseeably relevant. It was said that the Respondent's suggestion that material "might be relevant" was helpful and practical, and was not unreasonable, irrational or unlawful. Mr Rochefort's candid statement that certain material required to be produced under the Notice may not contain tax information relevant to the Taxpayer was not of itself sufficient for the Court to conclude that the Applicant had a realistic prospect of success on this issue. The Respondent cannot know the precise form and content of documents it had not seen and the Applicant's contention that the wording of the Notice should be in terms that prevented disclosure of documentation of material that had no reasonable prospect of being relevant to the tax affairs in Sweden of the Taxpayer was unreasonable in itself. Further, the Applicant had, subject to redactions, been able to comply with the terms of the Notice without difficulty.
36. There are merits in both competing arguments, but at this stage I merely need to be satisfied that the Applicant has a realistic prospect of success on this ground. I am so satisfied and accordingly granted leave to the Applicant for judicial review of the decision to issue the Notice to the extent that the Respondent may have acted unlawfully in seeking information under the Notice at paragraphs 3(a), 3(b) and 3(d) which may not have been or be foreseeably relevant to the Swedish Tax Authority's investigation into the Taxpayer, as alleged in ground 2. It may be useful when the substantive judicial review hearing takes place for the Court to be furnished with a fuller understanding of the make up of the shareholdings in the Company. The Applicant did not volunteer how many shareholders there were - the Court was simply told that the Taxpayer was the owner of a small number of shares. It would also be useful at that hearing for the Applicant, as well as the Respondent, to make submissions as to how, as the Applicant submitted, the Notice should have been better targeted and narrower in scope so as to tie it to information relevant to the investigation of the Taxpayer by the STA.
37. In the third ground, the Applicant argued that the Respondent's Notice was in terms which could not easily be understood and was therefore unreasonable. Accordingly, it was argued that the terms of the Notice were unclear and that the Applicant inferred that the Respondent replicated language from the STA's request - simply adopting references to terms which may have a meaning under Swedish law but which was not understood by the Applicant. The Applicant accepted that it had nonetheless been able to understand the Notice sufficiently well to make disclosure and provide the material due under the Notice to the Respondent. Various terms were specified in relation to which complaint was made. However, all these terms were considered by Mr Rochefort in his affidavit at paragraphs 48 to 56 inclusive. The term 'carried interest' was, as referred to above, something which was certainly understood by the Taxpayer and appears, from the correspondence, to have been understood by the Applicant too, notwithstanding its protestations made subsequently. What the Applicant says about the meaning (about which complaint is made), of such terms as 'net asset value accounts' and 'distributions' are, having regard to the contents of Mr Rochefort's affidavit, in my view, without merit.
38. The fourth ground is that the Respondent unreasonably failed to have regard to the extent to which information was available in Sweden. It is said that the Notice contravened the Convention in that it was plain from the terms of the Convention that the requested state may only provide assistance if the applicant state has pursued all reasonable measures available under its domestic laws. The Applicant said that it understood that the Taxpayer had already provided all relevant material in relation to the Company to the STA.
39. However, although not accepted by the Applicant in its skeleton argument, it was accepted at the hearing that the Comptroller had, as indicated in the August 2022 correspondence referred to above, pressed the STA on this issue and received a response to the effect that information was still outstanding. The Respondent was entitled to accept this statement from the STA. This was explained to the Applicant on 18 August 2022. Further, Mr Rochefort disclosed at paragraph 63 that, by letter dated 31 October 2022, the STA had further stated that it had no knowledge of how the Taxpayer's profit-share had been calculated and that the STA did not know the share of the income of the Company which was made up of 'carried interest'. In the circumstances, Mr Rochefort was entitled to conclude that he was 'confident in my belief that the STA has exhausted all potential domestic avenues in trying to obtain the information'.
40. Accordingly, leave for judicial review was refused in respect of grounds 1, 3 and 4, and in respect of the material already provided to the Respondent under paragraphs 3(c) and 3(e) of the Notice. This material may now be disclosed to the competent authority of the requesting state.
41. I gave further directions at the end of the hearing in order to bring on the substantive application for judicial review in the near future.
