RE WONG TUNG KIN

HCMP26 OF 1988

HEADNOTE

Administrative law - judicial review - inland revenue investigation - alleged promise to compound offence - subsequent decision to prosecute - whether reviewable - interference by court with the criminal process.

IN THE HIGH COURT OF JUSTICE

HONG KONG

MISCELLANEOUS PROCEEDINGS NO. 26 OF 1988

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JUDGMENT

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1. On January 11th this year Mr. Justice Mayo gave leave to the Applicant to move for a Judicial Review. On the 14th of March, he varied his Order and the matter now comes before me by virtue of a Summons under O.42 r.6 to set aside the relief which is now sought in the Notice of Notion.

2. The Applicant seeks a variety of declarations against the Commissioner of Inland Revenue.

3. The facts of this matter fall within a relatively small compass. The Applicant is Dr. WONG Tung-kin, a qualified doctor and he practises in the New Territories. In about 1985, Inland Revenue Officers began to investigate his tax position; certain correspondence took place between the parties and there were a number of interviews between the Inland Revenue Officers and the Applicant.

4. The full background is set out in his affidavit, and I do not repeat it, but basically what was happening was that the Inland Revenue Department as, they were entitled, were seeking to discover whether the taxpayer, this doctor, had given a full and accurate statement of his income so that his profit tax assessment could properly be made. This application arises out of what is said to be representations made by an officer of the Inland Revenue Department, on the 31st of October 1985; in the course of a visit to the Inland Revenue Department, the doctor says that he was told by an officer, Mr. Ng Pak Shing, that, if he co-operated with the Inland Revenue, he would not be prosecuted. For the purposes of this Summons I will come to my conclusions based on the premise that what is set out in that affidavit is true, although it is only right to point out that the Inland Revenue officer concerned disputes it. I confess I find the Applicant's assertion surprising; it is the duty of every citizen to co-operate with the Inland Revenue. All persons may have to pay tax and all persons who run businesses pay profits tax, and there is an obligation on every citizen in Hong Kong always to co-operate with the Inland Revenue. Nevertheless it is said that the Court should interfere in a criminal prosecution because this doctor says that he was asked to co-operate, and if he did co-operate, he would not be prosecuted. He says he did co-operate, but now he is being prosecuted. A summons was issued before the Tsuen Wan Magistrates' Court; it has been adjourned on a number of occasions, and the prosecution has now been transferred to the District Court.

STATUTORY PROVISIONS

5. These are found in the Inland Revenue Ordinance; Part XIV deals with penalties and offences. Section 80 of the Ordinance creates an offence for a taxpayer failing to make proper returns. Section 80(5) permits the Commissioner to compound any offence under the Section. This provision which is found not only in Hong Kong legislation but in other legislation throughout the world is a special provision given to an Inland Revenue Department when they unearth tax evasions; they are permitted to "compound" the offence, which means that the defaulting taxpayer is allowed to avoid a prosecution by paying a sum of money relative to his particular criminality.

6. Section 82 deals with fraudulent evasion of tax. The Applicant has been charged under this Section.

7. Section 82(2), contains a similar provision with regard to the compounding of any offence so that the Commissioner, although the taxpayer may have committed a serious offence, nevertheless still has a residual discretion whether or not in the appropriate circumstances to compound that offence. This can occur even during the course of a criminal prosecution right up until the moment before judgment is pronounced.

8. Section 82(a) was added to the Ordinance and gives power to the Income Tax Commissioners to extract additional tax by virtue of a penalty if no prosecution is brought either under Section 80 or Section 82.

9. Might I say at the outset of this case that I am very grateful to counsel for their very clear and concise submissions which have been put before me. From Mr. Swaine's point of view, it is obviously an important matter. His client is a medical practitioner facing a serious charge with regard to the fraudulent evasion of tax; Mr. Strawbridge who appears for the Commissioner and the Attorney General, also submits this is an important matter because the court is being asked to interfere in the criminal process and for those reasons I give judgment in open court.

10. Mr. Justice Mayo gave leave having listened to submissions by Mr. Swaine and being referred to the Ordinance and some authorities. I confess I always find it somewhat embarassing having to sit as though I were a Court of Appeal on another brother Judge's decision. It must, however, be remembered that leave was given by the Judge 'ex-parte'. Although obviously Mr. Swaine brought to the attention of the Judge all relevant matters, nevertheless the Judge does not have the benefit of hearing detailed submissions from the other side. I therefore approach any summons to set aside leave for a Judicial Review with a certain amount of hesitation, because normally the Judge has gone through his own checklist to satisfy himself that the matter which is before him is in reality amenable to Judicial Review. He leaves the merits of the case to the Judge hearing the actual application. If, however, the application is doomed to failure, then I can intervene and set it aside. That has been recognized for some time and recently restated by the Court of Appeal in England in R v. Secretary of State ex p. Herbage (No. 2)⁽¹⁾.

11. It has been pointed out to me that the relief was varied in March and therefore if an application to set aside was to be made, it should have been made at that time. In my judgment, there is obvious force in the submissions Mr. Swaine makes, and, it would have been better had the application to set aside been made in March whether to Mr. Justice Mayo or to another Judge. I find it somewhat unfortunate that this matter has dragged on for some time. However, although it is somewhat regrettable that the Attorney General did not move with more speed than he has, nevertheless the matter is before the Court and has been fully and properly argued, and, in my judgment, I should deal with it.

12. Mr. Justice Mayo was persuaded in January to make an order that the application for Judicial Review be heard in chambers. This was latter varied on the 14th of March. Might I say, as I have said on a number of occasions before that justice should be conducted in the open. Members of the public are entitled to come into court and the press are entitled to be admitted to court. It is a retrograde step, if any incursion is made into the principle of open justice; there are but a limited category of exceptions, when a case is not heard in public such as matters of national security, or concerning children when sensitive material may be aired before the court without the glare of publicity. In my judgment, however it does not matter that the application for Judicial Review causes embarrassment, or inconvenience. Those are factors which should not in any shape or form influence the Judge and, any restriction on public access to the Courts should be scrupulously avoided. I was pleased to see that on the 14th of March Mr. Justice Mayo reversed the order he made.

13. I then turn to what is behind this application. First, it is said that the promise to compound permits this court to intervene and to declare that the Commissioner was acting in some way unlawfully because he has now decided to prosecute. It is not quite clear from the papers whether the prosecution is brought by the Attorney General, as Mr. Strawbridge says, or by the Commissioner. I do not consider it necessary to make a definitive decision. It appears the prosecution was initiated by, at any rate, the Commissioner of Inland Revenue; Section 84(1) says:

"No prosecution in respect of an offence under Section 80 or 82 may be commenced except at the instances of or with the sanction of the Commissioner."

Mr. Swaine submits that as it was the Commissioner who, through his officers, had promised that if this doctor co-operated there would be no prosecution, this court should now interfere by declaring that he has acted unlawfully and stop the prosecution.

14. In my judgment, these courts do not interfere with the criminal process when it is brought by a public officer, whether by the Attorney General or the Commissioner of Inland Revenue. The legislation has entrusted the criminal prosecution to public officers and this court should not influence or interfere with the criminal process. I have set out the relevant authorities in a recent decision The Queen v. The Attorney General ex-parte TANG Yee-chun.⁽²⁾ One matter the court, however, must bear in mind is whether or not a citizen who appears to have been given unfair treatment has any safeguard. In the case I referred to, safeguard was given by the entrustment of the preferment of a voluntary bill ofindictment to a High Court Judge. As far as this application is concerned, adequate safeguards are provided by the Court before whom the person appears, in this case the District Court. If, for example, evidence is obtained by a promise or inducement, then it may be, on challenge, ruled inadmissable. It is the Judge who makes that decision. Mr. Swaine submits that what happened here strikes at the root of this prosecution and it is wholly unjust for his client to face trial. In my judgment, anadequate safeguard is provided to the Defendant, because he is entitled to make submissions prior to the indictment even being put. He could submit that the prosecution was so oppressive as to amount to an abuse of the court, or that the Commissioner had in reality exercised his discretion to compound. These arematters for the trial court to consider which is master of its own process - see R v. Derby Justices p. Brooks⁽³⁾ and other authorities cited therein.

15. The only instance, in my judgment, where this Court in its supervisory role could interfere in the criminal process is when the conduct of the public official concerned, can be described as outrageous. I have dealt with this point in my earlier decision, and I have said with the greatest respect to Mr. Justice Cons and Mr. Justice Yang, as they then were, that their dicta in the case of Chan Sou-yat⁽⁴⁾ when they both considered "obiter" that the Court could intervene, if the Attorney General exercised his discretion in an unreasonable manner, does not appear to be correct in the light of more recent authorities.

16. In my judgment a Court can only intervene if the decision of the public official concerned is initially justiciable and secondly must be of such a nature as to be classfied as "outrageous". It is only in that very exceptional set of circumstances, that the Court would interfere.

17. I turn then to the other point, raised in this notice of Motion, that the refusal to compound was unlawful and therefore the Court can interfere.

18. On 23rd December 1987, solicitors acting for this doctor wrote a letter which is marked without prejudice, asking whether or not the Commissioners might impose additional tax under section 82(a) instead of a prosecution. As a prosecution had started the provisions of section 82(a) would not be applicable, but the Commissioner was asked to re-consider the matter and to exercise his power to compound under section 82(2). I should state that insofar as this doctor is concerned, nothing is to be taken in the course of this judgment as constituting any admission by him that he has committed an offence.

19. The answer to this letter comes on the 30th December 'W.T.K. 15'; it is very short letter and says Crown Counsel has discussed the matter with the officials of Inland Revenue and that this was not a case where the Commissioner would exercise his power under section 82(a). Nothing is said in that reply about the Commissioner's attitude to compounding the offence. It is only this aspect of the case which has caused me any concern.

20. The Commissioner has an unfettered discretion whether or not to compound an offence. He has to satisfy himself first that there is an offence, or at any rate a prima facie offence, and secondly, whether or not he should compound it. In my judgment, that decision is not a reviewable decision. It does not fall within the category of decisions set out in the speech of Lord Diplock in C.C.S.U. v Minister for Civil Service⁽⁵⁾. The Commissioner is under no duty to act judicially. He does not have to balance all the potentially conflicting issues. He does not have to ask the taxpayer what his views are before he reaches a conclusion. I have said before in Re Chan Yuet-bun⁽⁶⁾, that this Court does not sit in an appellate capacity, nor does it dictate what matters are or are not of importance in the exercise of such a discretion. These are matters essentially within the knowledge of those who run this important department of Government. They know, for example, whether there is a prevalence for a particular type of offence. They know the amount of tax which is avoided. They know the status of the person who makes the return, and his culpability. They know all the relevant circumstances which entitles them and them alone to exercise a discretion to compound. If this Court interferes with that discretion, it would be giving itself the power which the legislation has specifically entrusted to the Commissioner. He is entitled to have his own policies within his own department and he will weigh all the relevant facts and then make his own decision.

21. In my judgment, therefore, a decision to compound is not reviewable and this Court cannot grant a judicial review arising out of that. There is no obligation on the Commissioner to give reasons. The only matter which has caused me any concern in this case is that the letter of the 30th of December does not appear to answer the request made for the Revenue to consider the question of compounding the offence. It may be that it is implicit in the answer that the Revenue must have so considered it. Nevertheless, the request was formal and made by a firm of solicitors. In my judgment, although there may be no legal duty on an officer of the Crown to answer the matters, the taxpayer would expect the Government Department to provide one. The answer need not go into any detail nor seek to justify the conclusion which is made. In my judgment, the letter fails to give this doctor some answer to his request. Although, therefore, in my judgment, the decision to compound is not reviewable Mr. Strawbridge has given me this undertaking.

"The Commissioner of Inland Revenue undertakes that he will be prepared to re-consider the December 23rd letter and to advise the applicant on it and will be prepared to consider any additional matters the applicant may care to raise."

22. The Commissioner is under no duty to give a reasoned decision, but, I am sure he will take everything into account. Nothing I say in the course of this judgment should influence the Commissioner in the manner in which he exercises his discretion; it isessentially a matter for him having regard to all therelevant considerations.

                The conclusion I reach is that first, this Court cannot interfere in the criminal process and secondly, the decision which was made by the Commissioner is not a reviewable decision. With the greatest respect, therefore, to my brother Judge Mr. Justice Mayo, I consider he was wrong in granting leave. This is one of those category of cases which, in my judgment, is bound to fail 'inlimine'. It is an unarguable case. I therefore set aside the leave.