European Pacific Group Ltd v KPMG Peat Marwick; KMPG v Davison ('Winebox Case')

• Jurisdiction: New Zealand
• Judgment Date: 29 August 1995
• Date: 29 August 1995
• Court: High Court (Cook Islands)

The Cook Islands, High Court.1

(Quilliam CJ)

European Pacific Group Limited and Others

and

KPMG Peat Marwick and Others

Jurisdiction Executive Conflict between legislation in two States Primacy of domestic legislation over foreign legislation Sovereign State Application for injunction against disclosure New Zealand Commission of Inquiry seeking disclosure by accountancy firm of financial affairs of international companies registered in the Cook Islands Disclosure prohibited under Cook Islands statute Whether Cook Islands statute prevails Comity Whether relevant matter for courts consideration The law of the Cook Islands

Summary: The facts:2The plaintiffs were two international companies and a trust company registered in the Cook Islands. The first defendant was a company, also registered in the Cook Islands, which had performed accountancy and audit functions for the plaintiffs. A Commission of Inquiry investigating alleged tax irregularities in New Zealand and constituted under the law of New Zealand had issued a notice requiring the defendants to produce documents relating to the plaintiffs affairs. Under the International Companies Act of the Cook Islands such disclosure was prohibited and could result in prosecution. The plaintiffs sought an injunction to prevent disclosure and threatened prosecution if the defendants complied with the Commission of Inquirys direction to produce documents. An interim injunction was granted pending the determination of the application for a permanent injunction.

Held:The application for a permanent injunction was granted.

The Cook Islands was a sovereign State with full internal self-government. The duty of the Court was therefore to apply the laws of the Cook Islands and not to regard the laws of the Cook Islands as subordinate to those of New Zealand. The language of the International Companies Act was explicit in its prohibition of disclosure, permitting disclosure only in very limited circumstances not applicable in the instant case. Whether comity required that some concession be made to facilitate the working of the Commission of Inquiry was a matter for the New Zealand and Cook Islands Governments to resolve and was not a matter for the consideration of the Court.

The following is the text of the judgment of the Court:

The Plaintiffs in this action are companies registered in the Cook Islands as international companies or, in the case of the third-named Plaintiff, as a trust company. Each is subject to the International Companies Act 198182 and the Trustee Companies Act 198182 as the case may be.

The First Defendant is a company registered in the Cook Islands which has until recently performed accounting and audit functions for the Plaintiffs. The remaining defendants are directors or employees of the First Defendant.

For convenience I refer to the Plaintiffs as European Pacific, and to the First Defendant as KPMG.

A Commission of Inquiry was established in New Zealand to inquire into Certain Matters Related to Taxation and this is generally referred to as the Winebox Inquiry. The Commission is investigating a...