A High Court judge has described as "very unfortunate" and "a little surprising" that a firm of the size of accountants KPMG had been unable to deal more promptly with a request last month for voluntary discovery of documents sought by the Revenue Commissioners for a court action.
The action centres on whether the sale of "a significant number" of Ryanair shares by Lorraine Kinsella, wife of Shane Ryan, the son of Ryanair founder Tony Ryan, is liable for Irish capital gains tax (CGT). KPMG had advised Ms Kinsella in relation to the sale.
Because KPMG had said it was unable to respond until this week to a request of October 23rd last from the Revenue to make discovery of documents in the case, there was now uncertainty whether the dispute between the Revenue and Ms Kinsella would be heard before Christmas, Mr Justice Kelly said. This delay, he stressed, was no fault of either Ms Kinsella or the Revenue.
The judge said he had made it clear some weeks ago that the Revenue would be free to seek non-party discovery of documents from KPMG. He noted KPMG has a policy, when asked to make discovery, not to produce the documents but rather a summary of documentation. This was not discovery in the proper sense but an edited version of documents, he said.
The judge said he had permitted the Revenue to bring a motion for discovery against KPMG if necessary. The Revenue, with "commendable speed", had written to KPMG on October 23rd last and asked the firm to make voluntary discovery of documents.
Solicitors for KPMG had responded on October 31st, stating that two employees dealing with the matter were abroad on annual leave, that they would not be back until yesterday and they would consider the Revenue request this week.
Earlier, the judge was told by David Barniville SC, for Ms Kinsella, that the Revenue was seeking extensive documentation.
In the proceedings, the Revenue Commissioners are disputing the claim by Ms Kinsella that the Ryanair share disposal of October 2003 is not liable for CGT.
Ms Kinsella, an Irish citizen and company director with an address at Elm Place, London, who married Shane Ryan in July 2002, claims the share disposal was not liable for CGT because at the time she was a tax resident in Italy. She also claims that, in 2002, prior to the share sale, KPMG had contacted the Revenue to get "confirmation" that the 1971 convention between Ireland and Italy for the avoidance of double taxation applied to Irish CGT and that the Revenue had provided such confirmation. Ms Kinsella said she, her husband and their advisers proceeded to structure the proposed share disposal in reliance on the Revenue confirmation that the convention applied to Irish CGT.
She established tax residency in Italy under Italian domestic law and established residency of Italy under the terms of the convention in June 2003. Her tax returns for the year 2003 were made on the basis that the convention applied to the share disposal of October 2003. However, in March 2006, the Revenue stated that, having considered legal advice, CGT was not covered under the convention.
