IRSS Nominees (30) Limited v Commissioner of Inland Revenue [2014] WSSC 59 (23 May 2014)

SUPREME COURT OF SAMOA

IRRS Nominees (30) Limited, Hua Wang Bank Berhad v Commissioner of Inland Revenue and Chief Executive Officer [2014] WSSC 59

Case name:
IRRS Nominees (30) Limited, Hua Wang Bank Berhad v Commissioner of Inland Revenue and Chief Executive Officer

Citation: [2014] WSSC 59

Decision date: 23 May 2014

Parties:
IRRS NOMINEES (30) LIMITED an international company incorporated in Samoa under the International Companies Act 1987. First Applicant A N D HUA WANG BANK BERHAD an international company incorporated in Samoa under the International Companies Act 1987 and a licensed Bank. Second Applicant A N D COMMISSIONER OF INLAND REVENUE/CHIEF EXECUTIVE OFFICER of the Ministry of Revenue. Respondent

Hearing date(s): 23 May 2014

File number(s):

Jurisdiction: CIVIL

Place of delivery: MULINUU

Judge(s): CHIEF JUSTICE PATU FALEFATU MAKA SAPOLU

On appeal from:

Order:

Representation:
R Drake for the first and second applicants
S Ainuu and S Faamausili for respondent

Catchwords:
interim declaration, coercive order, tax litigation, interlocutory ex parte motion, statutory authority

Words and phrases:

Legislation cited:
Income Tax Assessment Act 1997
Judicial Review of Administrative Action by de Smith
Judicature Amendment Act 1972 (NZ)
Liability of the Crown (2000) 3rd ed
Samoa Tax Information Exchange Act 2012. s.7(1) (a) (iv)
The Declaratory Judgment (2nd ed, 1993).

Cases cited:
Drake & Co v Commissioner of Inland Revenue [1997] WSSC 25
NHS Trust v T [2004] EWHC 1279
International General Electric v C & E Commissioners [1962] Ch 784,
Riverside Mental Health Trust v Fox [1994] 1 FLR 614
St George’s Health Care NHS Trust v S [1998] 2 FLR 728

Summary of decision:

IN THE SUPREME COURT OF SAMOA
HELD AT MULINUU

FILE NO: MISC 412/14

IN THE MATTER: of an Agreement between the Government of Australia AND the Government of Samoa on the Exchange of Information is respect of taxes.

BETWEEN

IRRS NOMINEES (30) LIMITED an international company incorporated in Samoa under the International Companies Act 1987.

First Applicant

A N D

HUA WANG BANK BERHAD an international company incorporated in Samoa under the International Companies Act 1987 and a licensed Bank.

Second Applicant

A N D

COMMISSIONER OF INLAND REVENUE/CHIEF EXECUTIVE OFFICER of the Ministry of Revenue.

Respondent

Counsel:
R Drake for the first and second applicants
S Ainuu and S Faamausili for respondent

Hearing: 23 May 2014
Judgment: 23 May 2014
Reasons for Judgment: 18 June 2014

REASONS FOR JUDGMENT

Introduction

1. These were interlocutory proceedings brought by the first and second applicants by way of an ex parte motion seeking an interim declaration against the respondent, the chief executive officer of the Ministry of Revenue, that she ought to withdraw, cancel or withhold the Information Request that she had issued on behalf of the Australian Taxation Office on Asiaciti Trust Samoa Ltd as the resident agent in Samoa of the first and second applicants. The terms of the interim declaration sought by the applicants are clearly mandatory and seek a coercive order. They require that the respondent “ought to withdraw, cancel or withhold” the Information Request she had issued on the applicants resident agent in Samoa. It is also debatable whether the respondent had issued the Information Request on behalf of the Australian Taxation Office which suggests that she was acting as an agent for the Australian Taxation Office or whether she was simply performing her duties under the Samoa Tax Information Exchange Act 2012.
2. Apart from the interlocutory ex parte motion for an interim declaration, it appears from the written submissions of counsel for the applicants that the applicants have also filed a motion for judicial review. I have not been able to find from the material before the Court a separate motion for judicial review. What counsel for the applicants has done is to include in the interlocutory ex parte motion for an interim declaration an application for a declaration and certiorari. This is inappropriate and confusing. There should have been a separate interlocutory ex parte motion for an interim declaration and a separate motion for judicial review seeking a declaration and certiorari and setting out the grounds for which review was being sought.
3. In any event, I ordered that the ex parte motion for an interim declaration be served on the respondent. Following service of the motion, counsel appeared on behalf of the respondent and filed a notice of opposition to the applicants motion. I then dealt with the applicants motion for an interim declaration and the respondent’s notice of opposition thereto in chambers on 23 May 2014. After hearing submissions from counsel which had been conveniently reduced to writing, I decided to deny the applicants interlocutory motion for an interim declaration. I indicated to counsel on both sides that if any of them wants reasons for the decision I have reached then advise through the registrar. Only counsel for the applicants has requested reasons. These are therefore the reasons for my decision.

Background

4. The submissions of counsel for the applicants and the other documents filed on behalf of the applicants show that there is currently a tax litigation between two Australian citizens, to whom I would refer for present purposes as Mr R and Mrs R, and the Australia Taxation Office. This tax litigation is before a forum in Australia called the Administrative Appeals Tribunal. The relevant issue before that forum for present purposes is whether the beneficial interest of Mr R and Mrs R in a certain superannuation fund should be included in the assessment of their personal tax liability for the period of 1 June 2000 to 30 June 2010 in terms of Australian tax law.
5. The trustee of the said superannuation fund for the period from 1 July 2010 to date is the first applicant. Mr R and Mrs R are beneficiaries of the fund. They migrated from Australia in June 2010 and have been residing overseas ever since. The second applicant is suspected by the Australian Taxation Office of holding assets in Samoa since 1 July 2010 on trust for the benefit of Mr R.
6. As it appears from the respondent’s letter of 4 February 2013 annexed as MRD1 to the affidavit of 24 April 2014 of Mr Drake, the local solicitor for the applicants and Mr R and Mrs R, the Information Request from the Australian Taxation Office to the respondent was concerned with a tax investigation into the tax affairs of certain Australian citizens including Mr and Mrs R. The Information Request was made pursuant to article 5 of Tax Information Exchange Agreement made between Australia and Samoa. This Agreement is dated 16 December 2009.
7. The respondent, as shown from her affidavit of 8 May 2014, was satisfied that the Information Request from the Australian Taxation Office was in compliance with the provisions of the said Tax Information Exchange Agreement. She was also satisfied that the information sought in the Information Request was in compliance with ss.5 and 7 as well as Schedule 2 of the Samoa Tax Information Exchange Act 2012. The respondent therefore requested Asiaciti Trust Samoa Ltd, which is the resident agent in Samoa for the applicants, to provide certain information pursuant s.7(1) (a) (iv) of the Act. By letter dated 7 February 2014, the local solicitor for the applicants wrote to the respondent to withdraw her request for information to Asiaciti Trust Samoa Ltd. The respondent has refused to do so. Thus, this matter has come before this Court for an interim declaration.
8. In her written submissions, counsel for the applicants seeks to rely on the affidavit of Mr Thomas Hyde Page, the Australian lawyer for Mr and Mrs R, and in particular para 16 of that affidavit where it states:

“Under Australian law, tax is imposed on the basis of residence or source (sections 6-5 and 6-10 Income Tax Assessment Act 1997). A taxpayer who is not an Australian resident can only be liable to Australian tax on income that the taxpayer derives from Australian sources. In other words if [Mr R and Mrs R] ceased being Australian residents prior to the commencement of the 2011 income year, they cannot be liable to Australian tax on income they derive in Samoa”.

9. I must say I cannot rely on para 16 of Mr Hyde’s affidavit. In the first place, the above citation states that a non-resident Australian “can only be liable to Australian tax on income that the taxpayer derives from Australian source”. This does not explain what is meant by “income” that is “derived” by an Australian “from Australian sources”. Thus, even if Mr and Mrs R had migrated from Australia in June 2010 and have been residing overseas ever since, the superannuation fund in question was apparently established in Australia. It is therefore debatable whether any income derived in Samoa by Mr and Mrs R pursuant to the said superannuation fund is income derived by an Australian “from Australian sources”. The term “resident” also has a special meaning in private international law. It is not explained whether, if private international law applies to this case, Mr R and Mrs R are still “resident” in Australia for the purpose of Australian tax law in relation to the said superannuation fund. Secondly, Mr Hyde in para 11 of his affidavit relies on a legal opinion purported to be that of Ms Juliet Levy, who seems to be an Australian barrister, given in an unsigned and unsworn affidavit. I must say this unsigned and unsworn affidavit is totally unacceptable.

Declaration

10. The status of a declaration at common law was comprehensively stated in Judicial Review of Administrative Action (1995) by de Smith, Woolf and Jowell 5th ed, para 18-001, p.735, where the learned authors stated:

“A declaratory judgment is a formal statement by the Court pronouncing upon the existence or non-existence of a legal state of affairs. It declares what a legal position is and what are the rights of the parties. A declaratory judgment is to be contrasted with an executory, in other words, coercive judgment which can be enforced by the Courts. In the case of an executory judgment, the Courts determine the respective rights of the parties and then order the defendant to act in a certain way, for example, to pay damages or to refrain from interfering with the plaintiff’s rights. If the order is disregarded, it can be enforced by official action, usually by levying execution against the defendant’s property or by imprisoning him for contempt of Court. A declaratory judgment, on the other hand, pronounces upon the existence of a legal relationship but does not contain any order which can be enforced against the defendant. The Court may, for example, declare that the plaintiff is a British subject or that notice served upon him by a public body is invalid and of no effect. The declaration pronounces on what is the legal position.”

11. It is therefore clear from the above passage from Judicial Review of Administrative Action by de Smith, Woolf and Jowell (supra) that at common law a declaratory judgment or declaration pronounces on what is the legal position; it does not order a party to act in a certain way.
12. In Liability of the Crown (2000) 3rd ed by PW Hogg and PJ Monahan 3rd ed, para 2.3(a), p.26, the learned authors stated:

“A declaration is a judgment that declares the law applicable to the parties but does not include any coercive order. See generally Zamir and Woolf, The Declaratory Judgment (2nd ed, 1993). Breach of a declaration is not a contempt of Court and does not attract any other penalty. The deficiency in the remedy is sometimes cured by accompanying a declaration with coercive relief such as damages or an injunction or specific performance, but this is not necessary. The Court has the power to make a declaration ‘whether or not any consequential relief is or could be claimed’.

“Ironically, the absence of coercive relief has made the declaration an extraordinarily useful public law remedy, because the plaintiff need not make out a ‘cause of action’ in the traditional sense of facts that would entitle the plaintiff to coercive relief. Thus, the declaration is commonly used as a remedy for unlawful administrative action and for unconstitutional statutes. In such cases, the plaintiff is usually unable to establish the commission of a tort or other actionable breach of duty. Of course, a plaintiff must have a sufficient interest in the matter to be accorded standing to sue”.

Interim declaration

13. If at common law a declaration does not include a coercive order or provide for coercive relief, then an interim declaration would be the same. It would be a contradiction in terms for an interim declaration to include a coercive order when a declaration does not. This common law position may, of course, be changed by statute. Samoa has not enacted such a statute.
14. In Drake & Co v Commissioner of Inland Revenue [1997] WSSC 25, this Court held that it has jurisdiction to grant an interim declaration against the Government or its servants and officers under the Government Proceedings Act 1974. But the Court cautioned that the jurisdiction must be sparingly exercised and its exercise must be reasonably necessary to preserve the position of the applicant until the hearing of the substantive proceedings. It was not held in Drake & Co v Commissioner of Inland Revenue that an interim declaration is a remedy which can include a coercive order or provide for coercive relief. That would be a significant departure from the position at common law with regard to the role of a declaration. English constitutional history has shown that the relationship between the judiciary and the executive arm of government is a sensitive one.
15. The position taken in Drake & Co v Commissioner of Inland Revenue [1997] WSSC 25 with regard to the existence of an interim declaration under Samoan law is in line with developments in other jurisdiction. In New Zealand, after prolonged debate whether the Courts have jurisdiction to grant an interim declaration, Parliament in 1977 enacted s.8 of the Judicature Amendment Act 1972 which expressly confers jurisdiction on the Courts to issue an interim declaration against the Crown. This includes jurisdiction to issue an interim declaration of a coercive nature. Section 8(2) of the Act provides:

“(2) Where the Crown is the respondent (or one of the respondents) to the application for review, the Court shall not have power to make an order against the Crown under paragraph (a) or paragraph (b) of this section; but, instead, in any such case the Court may, by interim order, -

(a) Declare that the Crown ought not to take any further action that is or would be consequential on the exercise of the statutory power.
(b) Declare that the Crown ought not to institute or continue with any proceedings, civil or criminal, in connection with any matter to which the application for review relates”.

16. Section 8(2) of the Judicature Amendment Act 1972 (NZ) represents a clear departure from the common law position that a declaration does not order a party to act in a certain way: see Judicial Review of Administrative Action (1995) by de Smith, Woolf and Jowell 5th ed, para 18-001, p.735; Liability of the Crown (2000) by P W Hogg and PJ Monahan 3rd ed, para 2.3 (a), p.26. Samoa does not have a statutory provision similar to s.8(2) of the New Zealand Act.
17. In England, the position with regard to interim declarations has also been changed by statute. This was, for example, explained in NHS Trust v T [2004] EWHC 1279 where Justice Charles said at paras 33-36:

“33. The judgment of the Court of Appeal in St George’s Health Care NHS Trust v S [1998] 2 FLR 728 makes it clear that as the law then stood an interim declaration was not something known to the law and was not something that could be granted by the Court (see, in particular, [1998] 2 FLR at 755E where the Court said:

“Because a declaratory order does have effect, between the parties to the proceedings in which it was made, as a conclusive definition of their legal rights, it should only be made as a final order. The notion of an interim declaration is (as Diplock LJ said in International General Electric v C & E Commissioners [1962] Ch 784, 790) a contradiction in terms. That was recognised by this Court, in the context of authority for medical intervention, in Riverside Mental Health Trust v Fox [1994] 1 FLR 614’”

“34. In the Riverside case referred to in that passage the declaratory order has been made ex parte and authorised feeding under sedation. The order provided that the matter should be heard inter parties at a later date and it was held that this provision made it an interim declaration and thus an order the Judge had had no jurisdiction to make.

“35. When I raised the issue of jurisdiction to make an interim declaration the solicitor – advocate for the Official Solicitor drew my attention to Part 25.1 (1) (b) of the CPR which is in the following terms:

“ ‘Orders for interim remedies

“ ‘25.1 (1) The Court may grant the following interim remedies -

“ ‘(a) An interim injunction;

“ ‘(b) An interim declaration;

“ ‘(c)...’

“36. It follows from the introduction by the CPR of the power to grant an interim declaration that such relief can no longer be said to be ‘unknown to the law’ and can no longer be said to be a ‘contradiction in terms’. That said, a number of the conceptual difficulties referred to in the earlier authorities and which found the conclusions reached therein on the approach to the grant of, and the effect of, declarations remains.”

18. It is therefore clear that in New Zealand and England the legislature has acted and confer on the Courts jurisdiction to grant interim declarations against the Crown. This was after many years of uncertainty on the part of the Courts whether it has such jurisdiction. The decision in Drake & Co v Commissioner of Inland Revenue [1997] WSSC 25 that the Samoan Supreme Court has jurisdiction to grant interim declarations against the Government or its servants is in line with those developments in New Zealand and England. However, this Court in that case did not go so far as to say that the jurisdiction to grant an interim declaration against the Government or a servant of the Government can include a coercive order.
19. In the absence of any submissions from counsel for the applicants for this Court to go to that extent in the absence of statutory authority, I am not prepared to take that step which will represent a significant departure from the common law position with regard to the role of a declaration.

Conclusion

20. For the foregoing reasons, the applicants interlocutory motion for an interim declaration which includes a coercive order is denied.
    

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CHIEF JUSTICE