Tax information exchange agreements

| 18/10/2013

My attention has been drawn to two very important news items, one in the issue of the Cayman News Service dated the 9th October 2013 headed "ATO (Australia Tax Office) ignores Cayman Court", and the other one in the Compass News Paper of Friday the 11th October 2013 headed "Australia defies Cayman court ruling".

Both news media should be congratulated on the speed with which they have brought to the attention of the public in two well written and factually correct articles the facts surrounding this unfortunate and disturbing matter. These two articles should be read very carefully  by the general public, the Government of the Cayman Islands and our Legal Department and immediate steps should be taken by the appropriate authorities to prevent the action that has been taken by the Australian court  from ever happening again either by that Court or any other court.

The Australian Court has acted in relation to a judgment of our Cayman Court in a very important matter in a manner that I do not think our Cayman Court  would have acted in relation to a judgment of an Australian Court. In acting as it did the Australian Court has disregarded the well known principle Of International Judicial Comity, which is that courtesy and recognition of the judgment of one foreign Court is usually extended to such judgment by another foreign Court. This is especially to be observed when the two courts belong to states which both have Her Majesty  the Queen as their Head.
In relation to the principle of International Judicial Comity Australia should remind itself of the classic approachto this principle by Lord Denning in Rio Tinto Inc. Corporation v Westinghouse Electric Corporation 1978 A.C at page 560 where he said, "It is the duty and pleasure of the English Court  to do all it can to assist the foreign Court just as the English Court would expect the foreign court to help in like circumstances."

Our courts over the years have frequently acted in compliance with this dictum of this great English Judge and Jurist and I am disappointed to observe that an Australian Court has chosen to disregard it in this matter.

The Australian Court has instead chosen to disregard and defy a judgment of a Judge of our Cayman  Court in which he held that four requests for documents and information made to our Cayman Islands Tax Information Authority (the CITIA) bythe Australian Tax Office (ATO) and granted by our CITIA were wrongly and illegally granted and that the documents sent to the ATO pursuant to those requests ought never to have been sent, should not therefore be used and should be returned to the CITIA or destroyed.

The Australian Court has permitted the ATO to disregard the request of the CITIA either to return the documents sent to them or  to destroy them and have permitted and sanctioned their use  as evidence in Australian proceedings despite the Judgment of our Cayman Court and even before the judgment of our Court by Quin J. has been adjudicated upon by our Court of Appeal in which Court I understand that an appeal by the CITIA against the judgment of Quin J is pending. This is an especially troubling ruling by the Australian Court for the Cayman Islands.

The Cayman Court in its judgment came to the conclusion  that the CITIA had acted wrongly, illegally and in breach of the provisions of the agreement and the law governing the agreement and granted to the Applicant Companies all the relief that they claimed against the CITIA.

It is this important judgment of our Court that has been disregarded and defied by a judgment of the Australian Court and pursuant to which the ATO has refused to  comply with the requests made to it in the letter written to it by the CITIA following the judgment of the Grand Court in the Judicial Review proceedings.

I think that in the circumstances that have arisen  the first step to be taken is for both our Government and Her Majesty's Government to  strongly protest to the Australian Government about the refusal of its Court to extend the usual International Judicial Comity to the Cayman Islands judgment and about the fact that its Court has decided to disregard and defy the Judgment of our Court whilst it is still binding and has not yet been adjudicated upon by our Appeal Court.     

I will make some other suggestions which might serve to prevent a similar situation from arising in the future but it is important to realize that if nothing is done the confidence of persons who do and wish to business here  will be seriously affected and they will no longer regard the Cayman Islands as a place where they can expect to see the judgments of Cayman Courts followed and respected by foreign Courts and also where they can expect to receive fair and equitable treatment from bodies like the CITIA according to the rule of Law.

In this matter it is clear from Quin J's judgment that it was the unlawful decisions made by the CITIA and its failure to follow clear and specific provisions in the Tax agreement  and the TIA Law that has given rise to the situation whereby the ATO has received and is in possession of Documents which was produced for it by the illegal and wrongful actions of the CITIA and which has enabled the ATO and the Australian Court to say that despite the fact that this is material that was obtained illegally and in breach of Cayman Law they are entitled to use it  and to disregard and defy the judgment of our Court to the contrary and  which must be regarded as a binding judgment until it is reversed by our Court of Appeal.

However the effect of Quin J's judgment as it stands, and until it is reversed either partially or entirely by the Court of Appeal, is that the CITIA is responsible  for creating the  embarrassing  and possibly very costly position in which Cayman now finds itself.

My other recommendations:

I respectfully suggest  that provisions  be inserted into the TIA Law by way of amendment thereto to require the CITIA before it supplies any information or documentation or gives its consent to any use of Documents which it proposes to supply in response to a request, to make an application to a Judge of the Grand Court  to sanction and approve the action that it proposes to take to the requests that have been made to it by the requesting party

This will enable the Court to consider and sanction and approve all the steps that the CITIA has taken in relation to a request and to verify that the CITIA has properly complied  with the Law and the provisions of the Tax agreement in respect of which the application to the Court is made.

Judicial supervision of the CITIA is both desirable and needed. Such a procedural step will I am sure be welcomed by the persons who do or intend to do business here and will restore and enhance their confidence in the Cayman Islands. It should also be a step that would be welcomed by the CITIA.

I do urge our authorities to take steps along the lines of the suggestions that I have made in this letter.

I certainly think that the public  would like to know :-

How many requests  for information have the CITIA received?

How many of such requests has the CITIA responded to  by supplying information and documentation?

How many times has the CITIA applied to the Court for directions under the provisions of section 21(2) which deals with the restriction on the use of information and provides that before consent is given for the use thereof that he CITIA should apply to a Judge for directions ?

Is it the practice of the CITIA to serve section 17 (1) notices on persons or entities who are the subjects of a request or requests as required by the provisions of this section? ? If yes how many such notices have been served by the CITIA?

Has the CITIA ever refused a request? and if so on how many occasions?

The CITIA is a body entrusted with very important  functions  and also to make very important decisions after following the provisions of the Law and the Tax Agreement and it is my hope that it will provide answers to the above questions.

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  1. Anonymous says:

    The rules on Admissibility of Evidence vary greatly by nation.  Important to understand that even stolen evidence is admissible in many worldwide courts.  CIMA, CITIA and other Cayman authority staff need to fully comprehend their legal responsibilities in providing information under each relevant TIEA.  As helpful and eager as we may want to be to cooperate with overseas tax inquiries, offering additional information that could open the authority to liabilities in the tens of millions of dollars is not going to work out well for us, particularly after an admission that we screwed up.  Hopefully our regulatory apparatus will adapt from this event by polishing their internal controls as we move further into this post-secrecy era.

    • Anonymous says:

      Or they could "move further into this post-secrecy era" by not imposing these ridiculous barriers to the provision of information, thus avoid the risk of liability completely.

  2. of lawyers and davey jones says:

    So who is holding Assad's money? We talk about gangs in Cayman and no one seems to notice or much care that when, for example, HSBC was found money laundering for the frickin Mexican Mafia, some of the most brutal and evil in the world, that all of this has consequences for Cayman as a whole. The Cayman Islands have not been their brother's keeper on an international scale for a very long time and theproverbial chickens are coming home to roost for the Cayman Islands. Let the Australians get all the info on their tax cheats along with all other countries. Cayman has bad karma because of the financial industry, and while it is true that it made people rich and all too powerful locally and it is now integral to our economy, there is ultimately a dire price to be paid for protecting the scum of this world all the while pontificating about Christianity yet being as hollow as a chocolate Easter bunny and hypocricy personified. I dare any supposed preacher to engageme in debate on that one, let alone some pompous lawyer. Can anyone say morally and ethically bankrupt? In the long run it is undeniable and inevitable that the litany of cheats, thieves, demonic corporate entities, international crime syndicates, ponzi schemers etc ad nauseum will leave and have left a residue which has and will continue to wreak havoc upon the Cayman Islands in a tangential yet just as destructive as forthright way. 

    • Anonymous says:

      Anyone who worked in the financial services industry in the 20th cenutry at any senior level in Cayman knew that their wealth came from tax cheats and money launderers. 

      • Will Ya Listen! says:

        As did New York, London, Geneva and Hong Kong (to name a few). The difference is they are still doing it in the 21st Century. 

        The Banking industry of the World reeks of cronyism, deceit and outright criminal manipulation – Cayman looks pretty good in comparison.

        I never read of a  Cayman bank needing a bail out. Had they done so they certainly wouldn't have used the cash to pay bonuses to the people who, knowlingly, mismanaged it in the first place.




      • Anonymous says:

        "How was your flight from Columbia?  What is in those suitcases the minders are carrying?  Cash?  Lovely cash?  This way sir".

      • Anonymous says:

        You speak for yourself. Quite an admission. 

  3. Anonymous says:

    Who cites Denning nowadays?  Listen carefully, that is the sound of a barrel being scraped.

    • Will Ya Listen! says:


      • Who cites Alfred Thompson "Tom" Denning, Baron Denning, OM, PC, DL, KC, commonly known as Lord Denning? The famed constructionist instead of the interpretationist? Is that your problem?  He was ahead of his time – and obviously yours.
        I doubt if you have ever met anyone who cites Lord Denning. To try and be smart about a signifcant quote  shows a callous and arrogant indifference to the opinion of one of the best legal minds in Cayman (or anywhere else). You demean the man and, of course, yourself  by doing that. You deserve the right to disagree, You do not, however,  have the right to be a pompous prat about it.
        You need to try and get out of the shallow end of the gene pool. Stick to traffic court meantime. 



      • Anonymous says:

        And your second bullet point was…..?

        • Anonymous says:

          Well spotted. It puzzled me as well. My comments left my computer properly aligned and then appeared on CNS as if they were one long sentence. 

          Perhaps Wikepedia and Google might help on the construction of paragraphs – rather that the interpretation of them. Ooops already discussed that in a different vein.

          Speaking of presentation did the man who wrote the silly reply about Denning mean to end his contribution with a coma? 

        • Anonymous says:

          The second bullet point was better than the first one.

      • Anonymous says:

        You're right, I have hardly met anyone who cites Lord Denning.  As for the ad hominem stuff, I'll leave to you:  Now you have mastered Wikipedia and Google, the world is your oyster,

      • Anonymous says:

        I did not see too many of his judgments being cited in the recent Supreme Court cases on the construction of contracts.  No-one cites him nowadays unless they are desperate, but I doubt you are in position to know that.  I doubt you cite anything anywhere.  Given the style adopted in your post, or the lack thereof, I certainly hope you don't.

  4. Anonymous says:

    Mr. Panton is the Minister with responsibility for the Tax Information Authority, and its screwups.  I don't believe that he would have been involved in creating the mess but he must ensure that it is cleaned up very quickly and that it cannot happen again.

    I am hoping that Minister Panton's commitments to transparency  and accountability will be put into effect with a full enquiry that will lead to the appropriate steps being taken, including heads rolling. If this fiasco resulted from incompetence in the civil service then the all the persons involved together with their supervisors of those persons have to go. The credibility of Cayman is at stake.

  5. Richard Wadd says:

       Mr Ramon Alberga (Q.C.), is a very learned gentleman who both commands and is worthy of the highest respect.

       However, his learned opinion it seems is (unfortunately) based upon the old virtues of Honour, Principle and Mutual respect, which sadly almost no longer existin the world of today.

       The "Error" here is as a result of both the Structure of the existing Proceedures for the handling of such requests from the CITIA, as well as an obvious deficiency in the Protocols that govorn the release of said information.

      To state that "Heads should Roll" goes beyond the obvious, however, a more sound approach would be to LEARN the lesson/s, rather than to seek out heads.

      IF the Protocols were sound and found to have been ignored, then 'let them roll'. HOwever, if (as it appears) this was caused by a deficiency in the "checks and balances" that should have been in place, then we must fix the problem 'post haste', and stop 'bitching' about who is to blame.

     A resulting Lawsuit IS inevitable. What is preventable is the number and frequency of them, and the COST in both financial terms, and (more importantly), the effect on our reputation.

      The name of the game now is "Damage Control".

    • Anonymous says:

      Do tell us what loss could be claimed in this lawsuit of which you speak.

  6. David_Marchant says:

    It's worth pointing out that nearly six weeks after this judgment was entered at the Grand Court of the Cayman Islands, it's still not available from the court. It's easy to form the opinion that the court is deliberately concealing it.

    The judgment was entered on September 13. Its existence only became public knowledge when Tony Travers blogged about it on the Mondaq information service. I read the blog, obtained a copy of the judgment from a private source and wrote about it later that day for OffshoreAlert. The local media in Cayman wrote about the judgments a few days later. I suspect they learned of it from OffshoreAlert and downloaded a copy of the judgment from our web-site.

    Since then, out of curiosity, one of my researchers has looked for the judgment in the public records at the Grand Court on several occasions, most recently last week, but to no avail. For reasons known only to the court, the document is not being made publicly-available by the court, even though judgments are ordinarily public documents.

    Possibly an oversight on the part of the court but it doesn't look that way to me.

    • Anonymous says:

      I obtained a copy of it from the Court on 16 September.

      • Will Ya Listen! says:

        Let's the rest of us have a look at it.

        • David_Marchant says:

          A copy has been available on the OffshoreAlert since September 26. I was sent a copy by a private source. The document is not available from the court.

      • David_Marchant says:

        My researcher went to the court again yesterday … and it was still not publicly-available.

        Therefore, you are either lying or you were provided the document as a privilege which, by the way, would constitute corruption.

    • Anonymous says:

      Might be you have trouble because you have been so keen to avoid defending allegations made in your publications in the Grand Court?

      • David_Marchant says:

        Only one libel complaint has ever been filed against me and/or OffshoreAlert at the Grand Court of the Cayman Islands and … er … we defended it.

        So your comment has all the substance of a hole.

  7. Anonymous says:

    Since when has an issue like this been a basis to exclude available evidence in a common law jurisdiction?  This chain of events shows a weakness of these agreements, and not the weakness identified in the viewpoint.  The information needs to be available without date limitation in respect of any investigation which commences after the treaty has been agreed.  Otherwise secrecy jurisdiction will be complicit in aiding and abetting criminals.

  8. Anonymous says:


    Of people who have just disrespected Mr. Alberga clearly don’t know the man. The guy who appears to be a legal mind in his response regarding Comity would like to one day be a man of Mr . Alberga’s caliber as he is a renown professional and grand father of the legal fraternity and respected by all. So you just be careful when you speak in this manner about a man that all respect.

    The problem is that Australia courts like some Australians living in cayman have no respect for these Islands but unlike you all we respect other countries as it relates to court rulings.

    • Anonymous says:

      Maybe this is one of the 11 who could not get articles.  It would explain a lot.

      • Anonymous says:

        @10:27  I was neither the author of the post nor am I seeking articles but interesting that you would label Australians that way.


      • Anonymous says:

        @Anonymous 10:27, I am one of those 11 who couldn't get articles and I did not write the post, although based on my experience, I could agree with the sentiments.

        However maybe from your mockery of us you're probably one of incompetent attorneys who slipped through the cracks to get employment as an attorney here and probably couldn't teach anyone anything. 

  9. Anonymous says:

    Having read both the decisions of the Grand Court and the Australian court it is clear that the problem lies squarely with the decisions and conduct of the Tax Information Authority. Someone needs to be held to account for those decisions and actions. Perhaps the head of the Authority or the Chief Officer need to be fired. 

    I hope that Mr. Alberga or someone else submits Mr. Alberga's questions to the Tax Information Authority in the form of a Freedom of Information application so that the public can see whether the law is being complied with.

    I also hope that someone asks the Tax Information Authority to inform the public of the total legal costs that we the taxpayers of this country have been saddled with as a result of the Authority's decisions and actions and their (indefensible) decisions to defend their actions in court at our expense.

    As another commenter notes, this country is cutting down on border security because of lack of money. The mistakes made by the Tax Information Authority have likely cost us hundreds of thousands of dollars that we cannot afford to waste. I would rather that the Tax Information Authority follows the law so that the Marine Unit will have money to keep guns and drugs out of our country. I am one Caymanian that is tired of the civil service and the statutory authorities ignoring the law at our cost. Heads need to roll.

    Will you do anything Mr. Deputy Governor or will you allow this waste of money to be ignored like it has been for years?


  10. Knot S Smart says:

    Australian Courts are ignoring Cayman Court rulings?

    Next they will be sending Crocodile Dundee and an army of kangaroos to invade us – so we had better not mention the KC word – as in 'Kangaroo Court'…

  11. Anonymous says:

    The internal over exuberance that led to such information being released should be punished and a quasi judicial oversight body created to ensure that there is no repeat of this.

    That’s the cause of this, and that’s what needs to be addressed, and quickly.

  12. Anonymous says:

    The Cayman Courts need to do what the Australian Court has done, and that is to not respect any rulings of the Australian Courts. This will create an environment where the two parties need to sit and have a sensible discussion.

    So Smellie and Crew disregard everything that the Australian Courts send your way until further Notice.

    • Anonymous says:

      Do pray tell why anyone in Australia was subject to the jurisdiction of the Court in a manner that required an Australian Court to enforce it?

      • Anonymous says:

        Because its "Confidential Information" and a court of competent jurisdiction has declared that its release to the Party seeking to rely upon it was illegal.

        • Anonymous says:

          Have another go at answering the question.  Your first shot was embarrassing.

  13. Anonymous says:

    This viewpoint suffers from a number of legal errors, which ought to be addressed.  It would seem that Mr Alberga's comment is based upon media reports, rather than a review of the judgment itself.

    As to the first issue of comity, I entirely agree with the earlier poster, who observed that this is not a matter of comity, but rather a matter of admissibility of evidence under domestic law.  However, even accepting for a moment that comity has some relevance, it cannot have the effect of allowing the suppression of the evidence.

    Mr Alberga has cited the leading dictum of Lord Denning, and suggested that it ought to bind the conduct of the Australian courts.  While the Australian courts do recognise the doctrine of comity, it is through their own line of precedent, and it is somewhat naive to suggest that the judgments of the English courts are the final word on the subject.  In any event, both Lord Denning, and Australian authority make it clear that comity does not impose an absolute obligation to recognise the judgments of foreign courts.  It is always subject to the good governance of the state.

    Comity cannot be used as a de facto means of giving extra-territorial effect to the judgments of foreign courts. This point was made clear by Justice Perram when he rejected the taxpayers' suggestion that the evidence shouldbe excluded on this basis.

    Ultimately, this case rested upon the admissibility of properly gathered evidence.  The Australian Taxation Office made a request for information, pursuant to a treaty provision.  The request was met, and the ATO acted upon that information.  It was only after the information was provided that it became apparent that there was an error on the part of the Cayman authority.  This is not the responsibility of the ATO.  There was no impropriety on the part of the ATO in the gathering of the evidence, and therefore there can be no reasonable basis for its suppression.

    It seems thatthe ATO and the Australian Federal Court are very convenient scapegoats to deflect culpability away from the CITIA, whose administrative error has threatened the international perception of confidentiality of information in this offshore jurisdiction.

    • Anonymous says:

      The legal analysis in the main article was woeful.

    • Anonymous says:

      Well said!  CITIA's "administrative error" will cost the Cayman Islands millions and there is unlikely to be any demand for accountability from the responsible individuals in CITIA.  This cost associated with this 'administrative error' may explaing, in part, to Mr. Walton (RCIPS) may wonder why his budget for border protection has been cut.

      • Anonymous says:

        Why will it cost anyone anything?  Either there is criminal liability in Australia and you can't get compensation for your criminality or there isn't liability and there will be no loss.

        • Anonymous says:

          The Cayman court already ordered the government to pay the legal costs of the parties who's information was handed over outside of what the law and the agreement with Australia allowed. That will be hundreds of thousands for a start.

  14. Anonymous says:

    Nice to see the lawyers of the apparently new shiny friendly Cayman Islands trying to pass laws to help tax cheats.

  15. Anonymous says:

    Good points, Ramon. If all else fails, terminate the TIEA with Australia since it is not prepared to honour its terms.

    • Anonymous says:

      Yes terminating tax agreements is a viable step for secrecy jurisdictions.  No-one will object to that.

      • Anonymous says:

        Oh please stop with the made up terms like "secrecy jurisdictions". It's so Tax Justic Network.  

        • Anonymous says:

          You do know the whole point of the case was whether alleged tax cheats could keep vital inforrmation secret from tax authorities do you?

    • Anonymous says:

      It's not Australia who is not standing by the agreement. This is just another example of Cayman's continuing legal disarray at all levels.

  16. Anonymous says:

    Since the ATO did nothing wrong, it is not surprising that the Australian court accepted the evidence. Did I not read elsewhere that the individuals involved were charged with criminal tax evasion in Australia yesterday? Tax secrecy is not a viable business model for Cayman anymore.

    • Anonymous says:

      The charges were not because of the existence of the company itself. It was the way that the controller moved the funds back to Oz.

      Don't blame Cayman. Does Ford get blamed if a car that they manufactured is used to commit a crime?

  17. Anonymous says:

    This has nothing to do with comity, it is a simple matter of Australian evidence law.  Nice to see a practitioner seek to interfere with international tax treaties by seeking to impose a new requirement (and cost and delay) of a judicial approval.  Good luck trying to raise that amendment to the treaty.