John David Ariel (as trustee in bankruptcy of Simon Halabi) v Simon Halabi (as executor of the estate of X deceased)

JurisdictionJersey
CourtRoyal Court
JudgeSir Michael Birt,Jurats Crill,Ramsden,Birt
Judgment Date10 January 2018
Neutral Citation[2018] JRC 6A
Date10 January 2018

[2018] JRC 6A

Royal Court

(Samedi)

Before:

Sir Michael Birt, Commissioner, and Jurats Crill and Ramsden.

Between
John David Ariel (as trustee in bankruptcy of Simon Halabi)
Representor
and
Simon Halabi (as executor of the estate of X deceased)
First Respondent
Her Majesty's Revenue and Customs
Second Respondent

Advocate W. A. F Redgrave for the Representor.

Advocate J. Harvey-Hills for the First Respondent.

Advocate D. P. Le Maistre for the Second Respondent

Authorities

Bankruptcy (Désastre) (Jersey) Law 1990.

Trusts (Jersey) Law 1984.

Re M Trust, 2012(2) JLR 51.

British Motor Syndicate Limited v Taylor & Son [1900] 1 Ch 577.

Arbuckle Smith & Co Limited v Greenock Corporation [1960] 1 All ER 568.

Sans Souci Limited v VRL Services Limited [2012] UKPC 6.

R (Ingenious Media PLC) v Revenue and Customs Commissioners [2016] 1 WLR 4164.

Re AG (Manchester) Limited (in liquidation) [2005] JRC 035D.

Dicey Morris and Collins, The Conflict of Laws (15th edition).

Government of India v Taylor [1955] AC 491.

Re Tucker 1987 JLR 473.

Re the State of Norway (Nos 1 and 2) [1990] 1 AC 723.

R (on the application of Jimenez) v the First Tier Tribunal (Tax Chamber) [2017] EWHC 2585 (Admin).

R (Derrin Bros Properties Limited) v First Tier Tribunal (Tax Chamber) [2016] 1 WLR 2423.

Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008.

Bank of Crete SA v Koskotas (No 2) [1992] 1 WLR 919.

EMI Records Limited v Spillane [1986] 1 WLR 967.

Investigation of Fraud (Jersey) Law 1991.

Volaw Trust and Corporate Services Ltd and Larsen v Comptroller of Taxes [2013] (2) JLR 499

Trust — application by the Representor for directions concerning the compliance with an information notice.

THE COMMISSIONER:
1

This is an application by the representor in his capacity as trustee in bankruptcy of Simon Halabi (“Mr Halabi”) for directions as to whether compliance with an information notice issued to him by the Second Respondent (“HMRC”) in England requiring the production of documents which he obtained in Jersey would amount to a breach of the orders of this Court whereby he obtained such documents and, if so, whether this Court should now grant him leave to comply with the information notice.

2

The application raises difficult issues as to the approach of this Court when it authorises documents and/or information (which, to avoid repetition we shall refer to as ‘material’) to be supplied for a specific purpose but the person in receipt of that material is then subject to measures in his home jurisdiction requiring the supply of such material for a different purpose which this Court did not have in mind when it granted the authorisation.

Factual background
3

Mr Halabi was declared bankrupt on 30 th March, 2010, by order of the High Court of England and Wales. On 9 th April, 2010, Geoffrey Carton-Kelly was appointed as trustee in bankruptcy of Mr Halabi's estate by the High Court. As happens automatically, Mr Halabi was discharged from bankruptcy on 30 th March, 2011, but the trustee in bankruptcy continues to administer the estate.

4

As part of his duties, the trustee in bankruptcy was required to take control of and realise the assets of Mr Halabi located in England and Wales and other jurisdictions for the benefit of his creditors. Mr Carton-Kelly ascertained that Mr Halabi had financial interests in Jersey and accordingly procured a letter of request from the High Court requesting this Court to exercise its jurisdiction pursuant to Article 49 of the Bankruptcy (Désastre) (Jersey) Law 1990 (“the Bankruptcy Law”) so as to recognise Mr Carton-Kelly's appointment and give him appropriate powers to be exercised in Jersey.

5

Mr Carton-Kelly's application came before this Court on 26 th October, 2012, on an ex parte basis. The Court made an order (“the Recognition Order”) recognising the appointment and giving the trustee in bankruptcy authority to exercise in Jersey all the powers that he was entitled to exercise in England and Wales to the extent that they would not be contrary to Jersey law. The Recognition Order went on to confer specific authority to obtain material from a number of named parties in relation to various trusts and other entities.

6

Paragraph 9 of the Recognition Order was in the following terms:-

“Save with the leave of this Court, the Representor shall only use the information or documents so produced for the purposes of the administration of the estate in bankruptcy of Mr Halabi, in whichever jurisdiction, under the direction of the High Court.”

7

The Representor was appointed to replace Mr Carton-Kelly as trustee in bankruptcy of Mr Halabi with effect from 30 th April, 2013. He has therefore stepped into the shoes of the former trustee in bankruptcy and remains in that position. We shall for convenience use the expression ‘the Trustee’ to cover both Mr Carton-Kelly and the Representor unless there is need to distinguish between them.

8

On 22 nd November, 2013, pursuant to a consent order (“the Consent Order”), the Trustee was joined to proceedings under Article 51 of the Trusts (Jersey) Law 1984 brought by the trustees of the A Trust. Paragraph 1 of the schedule to the Consent Order required the trustees of the A Trust to provide to the Trustee all pleadings, acts of court, affidavits, documentary evidence, skeleton arguments and bundles filed in connection with the proceedings (redacted to remove certain confidential information) but such provision was subject to the following restriction:-

“Provided always that such disclosure shall not be used for any purpose other than the Representation and shall not be disclosed to any third parties, other than to the parties' legal advisors, and in particular shall not be disclosed to any of the Defendants in the Actions described in paragraph 4 below.”

At paragraph 9, the Consent Order also conferred a specific liberty to apply.

9

The Trustee had sought to be joined to the representation of the trustees on the basis that the estate in bankruptcy was a substantial creditor of the A Trust.

10

The Trustee duly received material from certain parties pursuant to the Recognition Order and he also received material pursuant to the Consent Order (together “the Jersey Orders”).

11

On 9 th May, 2017, the First-Tier Tribunal (Tax Chamber) (“FTT”) in London approved the issue of an information notice by HMRC which required the Trustee to produce to HMRC, amongst other things, all documents and information which it had received pursuant to the Recognition Order and the Consent Order (referred to in the information notice as ‘the Jersey Documents’).

12

The Trustee is concerned that compliance with the information notice would require him to act in breach of the Recognition Order and/or the Consent Order. He therefore brings the present representation seeking the Court's leave under the Recognition Order to comply with the information notice and seeking a variation of the Consent Order to like effect if the Court considers that he would otherwise be in breach of either order.

13

The Trustee's representation was served on all those from whom material was obtained pursuant to the Recognition Order and upon all the parties to the Consent Order. All of those who provided material pursuant to the Recognition Order have not participated in the hearing and are apparently content to rest on the wisdom of the Court. In relation to the Consent Order, X was one of the parties to the Consent Order and her estate is the only party which has played any part in these proceedings, the others apparently being content to rest on the wisdom of the Court. Mr Halabi is the named executor of the estate of X.

14

The representation was originally due to be heard on 4 th August, 2017, but, having been informed that Advocate Harvey-Hills proposed to raise certain issues of principle on behalf of X's estate and that the Trustee proposed to remain neutral, HMRC applied for leave to intervene and be joined to the proceedings. This was granted by the Court on 4 th August and directions were given for the filing of evidence and skeleton arguments.

The English position in more detail
15

Schedule 36 of the Finance Act 2008 confers certain information gathering powers upon HMRC. Paragraph 2 of the Schedule provides that HMRC may serve an information notice on a third party seeking provision of information or the production of documents if the information or document is reasonably required for the purpose of checking the tax position of another person whose identity is known to HMRC (“the taxpayer”). Such a notice may only be given with the prior approval of the FTT unless the taxpayer consents. There is no appeal against an information notice which has been approved by the FTT.

16

If a recipient of an information notice fails to comply with it, he is liable to a penalty of £300 and thereafter to a daily penalty of £60 for so long as the failure continues. Liability to the penalty does not arise if the person satisfies HMRC that there is a reasonable excuse for the failure and there is a right of appeal from the decision of HMRC to the FTT on that issue.

17

According to the affidavit sworn by Natalie Ball on behalf of HMRC, they are engaged in checking the tax position of Mr Halabi. She asserts that HMRC believes that information which pre-dates the bankruptcy is required to establish Mr Halabi's present tax position as well as his past tax position. HMRC believes that information about the various trusts in Jersey is relevant to Mr Halabi's tax position. By letter dated 30 th June 2014, HMRC invited Mr Halabi to consent to provide information directly or to consent to the Trustee providing the information but he declined to do so. It was in those circumstances that HMRC sought approval from the FTT for the service of an information notice on the Trustee.

18

The Trustee made written...

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