Judge allows ATO to use disputed papers [despite Cayman ruling]
By Susannah Moran From The Australian
The Australian Taxation Office [ATO] has won the right to use controversial financial documents in a long-running Wickenby case, despite a Cayman Islands ruling that the documents should not have been given to the Australian authorities and should not be used in Australian court proceedings.
Yesterday, an Australian Federal Court judge allowed an application by the tax office to use the documents in its pursuit of a $30 million tax case, despite the judgment of the Cayman Islands Grand Court handed down several weeks ago.
The court in the British Caribbean territory said the tax office had breached the agreement between Australia and the Caymans, which was put in place in 2010 to assist with the provision of otherwise confidential information in tax cases, for tax periods beginning on July 1, 2010. In his ruling, judge Charles Quin directed the Cayman Islands Tax Information Authority to immediately write to Australian authorities and demand the return or destruction of the documents the tax office intended to rely on.
The tax office received the letter but decided to defy the demands. “The commissioner has not given the suggested undertaking, does not propose to return the documents and, to the contrary, now seeks to tender them,” Federal Court judge Nye Perram said in a decision handed down yesterday. Justice Perram said tendering the documents in the Australian proceedings “might be an offence under the laws of the Cayman Islands” but he allowed it.
In the Cayman Islands, two companies, MH Investments and JA Investments, brought the case against CITIA, the body that deals with requests of the tax office in Australia. The Caymans court heard that the two Caymans companies are the ultimate owners of the four entities being pursued in the Australian courts for $30m that the tax office says is due for gains made on share trades. The entities are a Samoan-licensed bank called Hua Wang Bank Berhad, British companies Chemical Trustee and Derrin Brothers Properties, and the Bahamas-based Bywater Investments.
The tax office uncovered the trades after an investigation into Sydney accountant Vanda Gould in September 2009, and it believes he is linked to these offshore entities. Mr Gould has denied any wrongdoing.
In August 2010, the tax office issued notices of assessment for the years 2000 to 2007 and the bill has reached $30m, which the tax office is seeking to enforce.
In relation to one request, the ATO, after having received documents, then asked CITIA if it could use them in its case in Australia. “Notwithstanding the terms of the Tax Information Exchange Agreement entered into between our two countries, it would assist the ATO if you permit the use of the Nominee Agreements in respect of tax periods prior to 1st July 2010,” an ATO officer wrote.
CITIA replied saying it had no objection to this but Justice Quin ruled there was no legal authority for this and that a judge should have been approached to rule on the issue. “It is clear from the Tax Information Agreement that it does not apply to taxable periods on or before the 1st July 2010, and it must have been clear to the ATO when it asked (CITIA) for this consent,” Justice Quin said in his judgment.
He ruled in favour of the two Cayman Islands companies and said the documents given to the ATO were confidential and should be returned or destroyed.
When the tax office sought to tender the documents in question, the companies targeted by the ATO argued the Cayman Islands judgment should be relied on and that the documents were improperly obtained.
Justice Perram said that the tax office had “validly” requested the material under the information exchange agreement.
“That the Grand Court has quashed that decision is a matter of domestic law and can have no effect upon the lawfulness of the ATO’s receipt of that material,” the judge said.
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