Harre CJ
IN THE GR
ER OF THE CAYMAN ISLANDS
HO
LDEN AT
TOWN， GRAND CAYMAN
DN 1ST NO
D CO93
5-11-93
C 360 OF 1993
OF AN APPLICATION UNDER SECTION 3A OF THE
CONFIDENTIAL RELATIONSHIPS(PRESERVATION) LAW
OF BANKAMERICA TRUST & BANKING CORPORATION
(CAYMAN) LTD.
AND IN THE MATTER OF BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
JUDGMENT
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<p
The document appears to be a legal document discussing the legal actions taken by the Internal Revenue Service (IRS) against a bank in the United States. The text is fragmented and contains several typographical errors, making it challenging to extract clear information. Below is a transcription of the visible text, with an attempt to maintain the original structure and content as closely as possible:
**The legal action of the IRS against the Bank to the extent that the Bank can be compelled to produce documents in response to a subpoena issued to the Bank.**
The summons issued by the IRS was for the purpose of determining the United States tax liability of persons who transferred funds. Such a summons, which is known as a John Doe summons, does not identify the persons in respect of whose liability and those funds it can only be served on the authority of an order of the United States Court.
In January 1991, domestic records were produced to the IRS between 1988 and 1990. In October 1990, the IRS requested the Bank to produce foreign and domestic records underlying some 1500 transfers. The Bank had been called for.
Later in 1991, the IRS filed a motion in the United States District Court for the Northern District of California seeking to enforce its summons in relation to these transfers. At that stage, he only had documents concerning which agreement had not been reached with the Bank located in Hong Kong and no documents held by the salient Kin.
The relationship between the course of events in respect of the present proceedings, and I shall describe the salient Kin.
The position that it could not be required to produce the documents located in Hong Kong because of the application of the Hong Kong Confidentiality Laws. The IRS argued to the contrary that the District Court ordered that the Bank must produce documents notwithstanding Hong Kong law. In response to this, the Government of the United Kingdom issued a diplomatic note of protest to the United States. The Governments of Hong Kong and the United Kingdom issued special directions to the Bank.
This transcription is based on the visible text and does not include any invented content.
The document appears to be a legal brief or court document discussing the enforcement of a summons by the Internal Revenue Service (IRS) against a bank, with references to court decisions and legal arguments. Below is a transcription of the visible text, formatted with Markdown, HTML, and LaTeX as requested:
The Bank filed a motion with the District Court asking that the enforcement order be vacated or modified and undertook to pursue other venues by engaging a third party to produce the requested documents without violating Hong Kong Law.
In Koarch 1992, the District Court found that the actions of the Hong Kong government demonstrated their substantial interest in enforcing their confidentiality laws and differed in the circumstances, outweighing the IRS interest in obtaining its John Doe summons. In so doing, they applied the balance found in the Restatement (Third) of the Foreign Relations Law of the United States, Cap. 442 (1987). The Court accordingly ordered its order to eliminate the possibility that the Bank might be mentioned for failing to produce the Hong Kong bank records sought by the IRS but that the Bank must extend "all good faith efforts" to produce the records. It directed the Bank to file periodic status reports summarizing its efforts so that the courts could monitor the Bank's compliance.
The Bank first learned that the IRS was seeking under its summons documents located at the Cayman Trust on 22nd May 1991. It divided the summons to the District Court that the documents were protected by the closure by banking confidentiality laws but undertook to trace the documents where it had a consent to disclosure relevant customer of the bank.
It also on March 1992, that the IRS filed a second motion to enforce the summons, this time in relation to documents for electronic transfers from the Cayman Trust. The Bank opposed this, arguing that the District Court's ruling as to the Hong Kong documents applied equally to the documents located in the Cayman Islands. As such, the Bank argued that the documents were subject to the United Kingdom and the Cayman Islands' governments' rules. The Bank submitted a brief to the court opposing the IRS position. The brief focused on the following three main points:
This transcription captures the essence of the document, including the legal arguments and court decisions referenced.
The document discusses the inconsistency between the International Law and Comity and the balance of relevant factors in favor of the substantial interests of the Governments of the United Kingdom and the Cayman Islands in enforcing the Cayman Islands Government Confidential Relationships (Preservation) Law. It highlights the ongoing and successful cooperation between the Cayman Islands and the United States in criminal prosecution and investigations. The document mentions that the IRS had heard in the District Court an 11th March 1992 motion before it was heard in the United States. On the basis of these and other documents, the IRS is seeking the production of documents located in the Cayman Islands.
The document also notes that the TRS has mailed letters to its customers whose records are current, seeking consent to produce their records and has not produced to the IRS any documents. If at the Cayman Trust for customers who have not given their consent to produce their records, the TRS had intended to refile its motion to enforce its summons. The document further states that the District Court was to grant the motion the bank could be ER 550 to substantial penalties for non-compliance. It has made the application to the Grand Court in an effort to find a resolution to the matter and to discharge its obligation under United States Law to take all good faith efforts to secure production of the documents.
The document concludes by mentioning that the arguments of the bank in favor of disclosure are threefold: first, they involve consideration of the common law rule in Tournit v. National Provincial and Union Bank of England Ltd. (1923).
The document discusses the application of the Confidential Relationships (Preservation) Law, specifically section 3 (2) (b) (v), which provides an exemption for banks in certain legal proceedings. The text references the case of Attorney-General v Bank of Nova Scotia and others (1985) CILR, where Lord Justice Atkin introduced the concept of the "Tournier rule" to protect confidential information in banking contexts. The document also mentions the need to consider common law principles and the equivalent exception to the Tournier rule, as well as the importance of not anticipating reasons for the exemption in another matter. The text concludes by acknowledging the complexities and challenges in applying these legal principles, particularly in the context of banking and confidential information.
su.
restrain 79
6
order was granted.
into
1302, where t 18
er was made ex parte under s7 of the Bankers' Books
1Evidence to a
on Barclays Bank Ltd at its head office in London
1
requiring the Court of Appeal to inspect and take copies of
an account maintained by an Isle of Man company with Barclays Bank's
branch in Ireland.
An application for a similar order had
previously been made to the court of the Isle of Man and had been
refused. discf Court of Appeal set aside the inspection order. In
the words. the Denning MR
lict at b
and ch
urts is
order thurs to me that the court here ought not in
r dischfere in respect of the books of the branch
of Man in regard to the customers of
nflictch. Any order in respect of the
curitn the Isle of Man - if they will make such
ought not to be made by these
otherwise there would be danger of a
of jurisdictions between the High Court
v Gr the courts of the Isle of Man. That is a
which we must always avoid. It seems
that although this court has jurisdiction to
produce the books, in
Se head office here to produce the books, in
tion it should not be done.".
rticul
anks ar
man was applied in Mackinnon v Donaldson, Lufkin and
Jenrette we rega
Corpn. (1986) 1 All ER 653, which was referred to
by Sir Jon gulaterfield in the Bank of Nova Scotia case, by way of an
observation of some of the principles set out in the judgment of
Hoffman J to ill appropriate and supported the approach adopted in Bank
of Nova Scotia.
One such principle was the following
and to exercise the court's jurisdiction with
to the sovereignty of others is
di
are in a special position because there
concerned not only with their own
but with that of their customers. They
it
by the law of the country where the
is kept. That duty is in some countries
orcoined by criminal sanctions and sometimes by
he provide information for the purposes of
collegal proceedings. If every country
to require that bank to produce documents
to accounts kept in any other such
such
acBa
banks would be in the unhappy position of
reduco
fo
rewh
1
7
o
)
rned tapply the greatest pressure".
Having relowile to the Bank of Nova Scotia case. I can respectfully
adopt the sit
3 (2 ng from the judgment of Summerfield CJ on the scope
of section) La
o1(b) (v) of the Confidential Relationships
(Preservappena
cordan
lationine
p one wh
woformatu ation this provision does not contemplate
stone, there the bank discloses confidential
erovision to a foreign court, e.g. in answer to a
In cape with the provisions of the Confidential
be w the ships (Preservation) Law, in order to
ideni consule the legislature give a bank, and a bank
ake en shat latitude to undermine the operation of
terial? No reasonable construction of the
now tirth this case the first defendant is not a
relent any proceedings (except these) in relation
r." msubject matter with which this application
nfidenten, either here or abroad, but it has
aide by, with a subpoena to produce some of the
e] with which this application is concerned.
vi with a subpoena requiring the disclosure of
it w thattial information pursuant to s.3A(2) (b) (v) are in any
adop! any final order that emerges. I do not
e ob the provisions of s.3A(2) (b) (v) are in any
and th want to the circumstances disclosed so
ould pi
In my vieng lea dplies also in the present case. If s.3(2) (b) (v)
were extes, on matters of enforcement process emanating from another
jurisdict the could allow all the carefully crafted safeguards in
section 31 bypassed completely. At that point, and in the
light of s isbusly intended relationship between section
3(2) (b) (v) that rule in Tournier it is, I think, appropriate to
refer to e.t what was said by Leggatt J in XAG. It had been
argued the the basis of Tournier obedience to the foreign
subpoena be revall over the duty of secrecy, because the bank had
a genuine fab itimate interest of its own to obey the subpoena
since it pre"O ned pursuant to the law the country to which it was
subject apawoin esistiear of being held in contempt was genuine and not
unreasonandwacois
io Coma
abWhoint, Leggat J said this
sh A
nd an
a th
bl at
wa )
8
om that to say that the protection which the bank
appears to me to be different in character
which was contemplated in the Tournier
Be to be decided as an exercise of discretion under
the circumstances before the court were
the matter whdiction raised.
1
This cases col
are turning to that, I will refer briefly to another
matter whdiction raised.
)
in anceded that in England the High Court can have
jurisdictit ag Ena fiscal matter under the Evidence (Proceedings in
other Juris a 1989ns) Act 1975. See Re State of Norway's ABPllication
(No.2). cond2 WLR 458. I do not think that case takes me any
further tidenti
The state of Norway was following the procedure
set out in tlish statute, which gave effect to a negotiated
creaty. revert wholly different situation where a foreign state
seeks everionally to enforce one of its own orders in the face
of the coa ere itality laws of another country. The cases to which I
have already and red indicate the unwillingness of English courts to
do this. see
the
hel
until me, then, to the exercise of my discretion. If the
application tofused, the Bank will be placed, without blame, in a
position not evert may suffer very substantial penalties. It may not
come to t ch havit would be quite wrong for me to speculate on what
course anjudi tion court might take. It is appropriate however, to
acknowled my the decision of this court is known, as indicating a
reluctance in postponing its enforcement
proceedin
the decision of this court is known, as indicating a
reluctance in
action that would be directly contrary to Cayman
law. Nefr
ss the Bank remains in jeopardy, in spite of the
efforts to
be made on its behalf in argument before me.
is A. be ruled out that other banks might find themselves
in the san icy position, but on the other hand the preservation
of confidwh ad is a cornerstone of their business.
In
ha
on nfigment the preservation of this confidentiality and
the confime e it on which the economy of the Cayman Islands so
en ve
It gs
hi
deIn
9
substanti
e sum
lles out
weighs the interests of the IRS in enforcing
its John
ly rons.
The summons itself lacks reference to any
specific idea
the subject of IRS investigation. Its clear
purpose is to iden
tify individuals for such investigation. That is
“fishing” purpose, in my view, that feature is in itself an unreasonable
exercise by non-titled extraterritorial jurisdiction. Moreover, there
is evident that the Bank has already been able to assist the IRS
substantially relate its records within the United States. It has not
been shown that the information sought is of
vital interest to the investigation. Moreover, there is now in place
the Mutual Legal Assistance Treaty between the United States and the Cayman Islands, whereby
confidential as to may be pierced, but only in carefully defined
circumstances I amici curiae
presented also, the arguments
of the Government of the United Kingdom and the Cayman
Islands are not relevant and it would be otiose for me to refer to them
in any event. They will in any event be considered by the United
States Court, have, of course, studied them carefully. Moreover,
certain of the arguments which I have considered in relation to the
summons the applicability of the exception under s.3(2)
(b) (v) are in my judgment, relevant to the exercise of my
discretion. 3A.
It be quite wrong, in my judgment, in the light of all
the factors which I have referred, for me to authorise disclosure
to IRS in accordance with section 3A subsection (3) of
the Confidential Relationships (Preservation) Law is that this
evidence tw al be given.
5th November 1993
Chief Justice