Court name
Supreme Court of Turks and Caicos Islands
Case number
CL 192 of 2010

The Attorney General v. Emerald Cay Ltd. and Others (CL 192 of 2010) [2012] TCASC 1 (30 January 2012);

Law report citations
Media neutral citation
[2012] TCASC 1
Coram
Goldsbrough, CJ

IN THE SUPREME COURT OF THE TURKS AND CAICOS ISLANDS

BETWEEN

The Honourable Attorney General  Plaintiff

and

Emerald Cay Limited         1st Defendant

Worldwide Commercial Properties Limited    2nd Defendant

Timothy Blixseth 3rd Defendant

Andrew Hawes     4th Defendant

For the Plaintiff Mr Philips QC and with him Mr Patterson and Miss Astwood Dorset

For the 1st and 2nd Defendants          Mr Prudhoe

Date of hearing    Tuesday 29 and 30 November 2011

Date of decision   30 January 2012

Before Goldsbrough CJ

JUDGMENT

1.             On 21 June 2011 judgment was entered for the Plaintiff with an assessment of quantum to follow. Judgment was entered on the basis that “at least three of the additional agreements (the Option Agreement, the Consultancy Agreement and the Works Agreement) were fraudulent devices to hide the true consideration being paid”.

2.             The essence of this civil claim is the transfer of land from Worldwide Commercial Properties Limited ("WCPL") to Emerald Cay Limited (''ECL”) and the question whether stamp duty payable thereon was deliberately and fraudulently underpaid. There is a further claim seeking damages the unlawful means conspiracy as against all four defendants which is not the subject of this assessment hearing. In respect of that matter unconditional leave to defend had previously been granted but as of 27 June 2011 that claim as against the 1st and 2nd defendants has been withdrawn.2

1paragraph 28 of the Judgment of Mr. Justice Martin of 21 June 2011 in this matter.

3.             In his summary judgment the judge considered the five agreements making up this transaction which were the Agreement for Sale, the Option Agreement, the Consultancy Agreement, the Works Agreement and the Installation Agreement. Details of each of these agreements can be found beginning at paragraph 15 of his judgment. His findings indicate that there is no need for assessment as regards the Option, Consultancy and Works Agreements those being fraudulent and an attempt to evade foe payment of stamp duty to a total of $11 million. His findings in that regard are best found at paragraph 30 when he deals with an interim payment application.

4.             In skeleton submissions for foe Plaintiff It became clear that the Plaintiff adopts a similar interpretation of foe summary judgment, and this is acknowledged, although not conceded in foe skeleton arguments for the 1st and 2nd defendant.

5.             At this hearing it was made clear by the Court, in the light of the above, that evidence was to be principally confined to the value of stamp duty evaded by those two agreements that is the Sale and Installation Agreements. It is clear, in my view, that this is the effect of the earlier judgment. It does not, in my view, amount to a premature assessment but recognizes that there is no material on which any argument could properly be presented as regards those three agreements.

6.             Given that decision this hearing considered evidence on the values that could be given to foe two agreements, principally relating to the value of chattels and whether items should be regarded as moveable or fixtures. The evidence for the Plaintiff at this hearing came from two witnesses in addition to the evidence already filed in the matter. The evidence for the 1st and 2nd defendants came from two witnesses whose testimony was received by video link in addition to evidence previously filed in these proceedings.

2Skeleton argument of Mr. Prudhoe filed 28 November 2011 paragraph 11.

7.             Prior to determining value, a decision is required as to whether any particular chattel should be regarded as a moveable or a fixture. In submissions for the defendants the question as to the lack of any previous judgment within this jurisdiction on fixtures and fittings was raised. No suitable local authority on this question was placed before the court by either party. Given that lack of previous authority this court is content to adopt the same test as is applied in other common law jurisdictions and which is best set out in Megarry & Wade, The Law of Real Property 7th Edition paragraph 23-005. Thus “…. a chattel attached to the land or a building on it in some substantial manner, e.g. by nails or screws, will prints facie be a fixture even if it would not be difficult to remove it.”

8.             It appears clear that in other jurisdictions there are administrative and other guidelines available when assessing transactional values for stamp duty purposes. None of these rules, it appears to me, affect the basic rule as to what may or may not be considered a fixture but reflect a desire on the port of the Executive to obviate the need for a direct consideration in each case of individual items. Thus a rule of practice that a 'just and reasonable apportionment’ as between the dutiable and non-dutiable value i.e. the land and its fixtures and the moveable chattels does no more than permit a general rule of thumb to avoid a detailed scrutiny which is both time consuming and expensive. There is no such rule of thumb in this jurisdiction and so when the matter arises the later course must be adopted, that of the detailed scrutiny.

9.             Then before turning to the evidence on that question it is necessary to deal with a submission made by the 1st and 2nd defendants concerning preparation for the assessment hearing. It was submitted that the directions order made 27 June 2011 in some way indicates a shift in the burden of proof. The larger question here is whether since the evidence lies primarily within their knowledge, the defendants being required to file their evidence on values before the plaintiff is indicative that the burden of proving their claim has been shifted from the plaintiff to the defendants. I do not agree that this is the case given the subject matter and the primary source of the evidence. The cost of the materials and chattels used in the building and finishing of this property is first known to the defendants and it is more readily available (or should be) to them rather than the plaintiff. Cost and effort could be saved by the defendants filing that material first and the plaintiff merely having to determine after sight of it whether it represents a scenario they can accept or whether they need to produce their own material in opposition. It does not represent a shift in the burden of proof. That burden remains with the plaintiff on the balance of probabilities.

10.          In evidence before the court is a list of chattels covered by the Sale Agreement (mainly items of furniture and of white goods) and items covered by the Installation Agreement (mainly entertainment, fitness and security equipment). Evidence on these lists, for values and whether individual items should property be regarded as fixtures, came from the witnesses Shaw and James. The content of the lists is not in issue.

11.          Shaw had been employed as the Project Manager and his evidence was based on his knowledge of the project from that perspective and from documents that bad been in his possession (temporarily removed from him but made available for this hearing). Some of his evidence was based on his own recollection of the project, from memory rather than documents. He demonstrated a clear understanding of the test to determine fixtures or fittings and of all individuals concerned with providing evidence to the court in this matter was best placed to make that assessment.

12.          James had nothing to do with the project or the Turks and Caicos Islands prior to being invited as an expert to provide a valuation of the chattels. His experience does not extend to this jurisdiction nor did he hold himself out as having any expertise in the market here, his experience being limited to the London market.

13.          Taking into account his patent expertise, not overlooking that he was regarded as capable of being the project manager by the 1st and 2nd defendant and considering the effect of his evidence after cross-examination, I accept as correct Shaw’s assessment of those items that should be regarded as fixed and those that should properly be considered as moveable chattels.

14.          I then turn to the list of valuations given in evidence by James and note the effect that cross examinations has on that evidence. It is clear from his evidence that James is not overly concerned with retail prices paid for goods, nor has he considered the effect of foe importation and payment of stamp duty on any of these goods into the jurisdiction. It is a matter of which judicial notice may be taken that on arrival except where exempt, duty is payable on the goods imported. The point made by the 1st and 2nd defendants through counsel is that this should be taken to increase the value of the goods. It undoubtedly increases the cost of the goods, but there is no evidence before the court that it has a corresponding effect on the value of the goods.

15.          During cross examination James offered to reconsider a small number of values and by the following day had produced an amended schedule containing a small number of changes. No change was substantial. His valuation of the goods in the two lists, from the Sales agreement and the Installation Agreement, were on the basis of the open market in London. The question be was answering when he undertook this exercise is what price would these goods fetch if sold on the open market at auction in London? He did not attempt to ascertain what any of the goods costs or what the landed costs were, simply what the goods would fetch at auction.

16.          There is some evidence of what the purchasers were invoiced for in relation to some of the goods. Most of the invoiced prices were substantially higher than foe value said to be obtainable on the open market at auction. There was no evidence before the court from either party of what the goods may fetch on an open market auction within the jurisdiction. Absent that evidence, indeed absent any evidence of such a market here, it is difficult to accept that there is anything better available on which to base any finding.

17.          On behalf of the defendants Blixseth gave evidence of a contract for security equipment which be maintained had a face value of in excess of one million dollars. He had no further evidence of that and had not previously referred to it in filed material. In cross examination he said that if “I am pretty sure that we can prove that” and "We can retrieve that document if we need to”. It has not been retrieved nor is it in evidence which rather suggests that cither it does not exist or the defendants are so little concerned with this bearing that they deem it unnecessary to produce documents to support their contentions.

18.          Blixseth also gave evidence of a present case elsewhere against a person who he had dealt with to purchase this asset and felt that on full discovery in that case he would be in a better position to give further evidence in this case. In particular he was not prepared to agree that the purpose of all of the agreements was to evade tax. He did agree that the structure was dictated by the person he was suing elsewhere but not that its purpose was to evade tax. He did agree that he got no value out of the Consultancy Agreement save empty promises.

19.          Whilst the question of what evidence they wish to produce always remains within the province of the parties, when party determines that they will not trouble themselves to produce relevant material, for example as in this case a contract with a face value of in excess of one million dollars, they should not be taken by surprise if adverse comment is made about that non production. Again it is not a question of shifting the onus but of a party producing some tangible material that can support what they seek to say in evidence. It is true to say that the Supreme Court is by no means the final court but the Court of Appeal and whatever may be available thereafter are not Tribunals where material should be available to the Court for the first time. It may be worth litigants bearing in mind that in matters begun in the Supreme Court the trial court is the Supreme Court and should be treated as such, not a first step to the Appellate process.

20.          On the basis of the available evidence before this court I accept that the items appearing in the document entitled Schedule of Plaintiff's Claim, in its final version, as noted by me in red on its face, are either moveable or fixed as set out and should have the value in dollars as appears in the final column to the right edge of the page. The total value of moveable assets to be deducted from the total value of $28 million is $111,511.

21.          Given the above finding, judgment is entered for unpaid stamp duty in total on $17,888,489 which at 9.75% will amount to $1,744,128. On that amount interest is awarded at 6% per annum from 15 August 2006 to the date of this judgment. (To the date of the hearing that amounted to $553,926 but I do not have a figure to date. That figure should be calculated and agreed by the parties and inserted into the final order.) Interest after judgement is ordered to be paid at 6% per annum.

22.          I then turn to tire question of construction of the relevant statute and whether penalties are payable in a case of an understamped, as opposed to an unstamped, document.

23.          Section 8 of the Stamp Duty Ordinance (in the 1998 Revision Chapter 157)3 provides for penalties to be imposed by the Collector when an instrument is not stamped within time or at all. Except where the stamping fells within two months of its due date, the penalty is prescribed as four times the amount of the stamp duty. I have not set out the whole section as it is already fully set out in the summary judgment.

24.          The question which arises, since this document was stamped within time but not at the value which it should have been, is whether the Ordinance provides for a penalty in those circumstances or whether an understamped document can avoid a penalty completely. As the learned judge said when entering summary judgment it would be odd if a party who fraudulently evaded stamp duty were not subject to penalties, but that depends upon the wording of the Ordinance.

3 Now Cap 19.05 in the present edition of the revised laws.

25.          This instrument has not yet been duly stamped. For according to the various definitions contained in the legislation duly stamped means stamped in respect of the stamp duty chargeable thereon. The applicable stamp duty can be found in Head 4 of Schedule 1 to the Ordinance. That stamp duty has not been paid even now. It has not been paid since the parties to it, their legal representatives included it seems, represented to the Collector a less than true value to the transaction. The transaction could, perhaps, be better described as part of a series of transactions, and the same legislation requires a declaration to that effect or the opposite.

26.          It is without doubt that a penal provision must be interpreted strictly and with the benefit going to the taxpayer rather than the Collector where there is any ambiguity or doubt. Yet there is no such ambiguity or doubt to be found here. It simply cannot be the case that fraudulent declaration as to value leading to an understamping does not attract a penalty when the true value of the stamping docs not take place within the period allowed for that to take place. If this transaction is to be stamped, and it must be, it can only be stamped now with the payment of the correct amount of duty, which this and the previous judgment now establishes and only then with a penalty four times the value of the duty payable as requested by the Collector.

27.          Whilst I am hesitant to express my interpretation of this Ordinance so briefly as might give the impression that it has not been fully considered, the alternative interpretations put forward by and on behalf of the defendants would lead to a conclusion that could be described as absurd. Literal interpretation of tax statutes is long gone. Lord Steyn sets out in a manner far more eloquently than I could hope to do in Inland Revenue Commissioners v McGuckian4 beginning at 999. He quoted Lord Wilberforce in W. T. Ramsay Ltd. v Inland Revenue Commissioners5 “What are the clear words?” and “There may be, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.” Lord Steyn continues, at 1000, "The new Ramsay principle [1982] was not invented on a juristic basis independent of statute. That would have been indefensible since a court has no power to amend a tax statute. The principle was developed as a matter of statutory construction.” He continues “The new development was not bared on a linguistic analysis of the meaning of particular words in a statute. It was founded on a broad purposive interpretation.”

4Inland Revenue Commissioners v McGuckian 1 WLR 991

28.          Applying that purposive interpretation as set out in McGuckian I am firmly of the view, even taking into account the importance of no imposition of taxes or penalties without the clearest of legislative intent, that section 8 of the Stamp Duty Ordinance provides in the circumstances of this case for a fourfold penalty on the amount of stamp duty correctly to be paid.

29.          Whilst not forming part of this decision owing to the way in which the matter came before me, it must be open to doubt as to whether some of the instruments forming part of this transaction where ever submitted to the Collector for stamping. If that is in fact the case, as one might expect since it was the case for the 1st and 2nd defendants that they were not part of the sale, then the understamping issue dealt with above would not even arise.

30.          I therefore enter judgment for the Plaintiff in that sum, being $6,976,512. When that figure is added to the earlier figures the total interest payable after judgment on a daily basis at 6% per annum can be calculated

5 W. T Ramsay Ltd. v Inland Revenue Commissioners [1982] AC 300.

31.          For the avoidance of doubt I enter judgment in favour of the Plaintiff in the following sums:

Stamp duty owed:               $1,744,128

Penalty on Stamp Duty      $6,976,512

Interest (on stamp duty owed) $571, 118

(being $553.916 as at 30 November with the balance arising between that date and date of delivery of judgment which figure may be revised at the instance of the parties if found to be in mathematical error

Total      $9 291 758 with interest after judgment until payment at 6% per annum.

Account may need to be taken of any amount paid in accordance with the order of the judge who made the interim payment order on 21 June 2011 which figure itself took account of some accumulated interest I am content for the parties to agree any mathematical calculation that may be necessary as a result of the two orders.

Goldsbrough CJ

30 January 2012