TSE SUM PING v. THE COLLECTOR OF STAMP REVENUE

DCSA 2/2020

[2021] HKDC 379

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO. 2 OF 2020

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DECISION

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THE APPLICATION

1.  By Notice of Appeal filed on 3 March 2020, the appellant appealed against an assessment made by the Collector of Stamp Revenue (“the Collector”) on 6 February 2020 of HK$17,988,773 being buyer’s stamp duty (“BSD”) payable under sections 4 and 29CB and Head 1(1C) of the First Schedule to the Stamp Duty Ordinance (Cap.117) (“SDO”) (“the Assessment”) in respect of an agreement for the sale and purchase dated 24 October 2013 (“the Agreement”) of certain residential properties in Hong Kong, namely: (1) Flat B, 20/F; (2) Flat C, 20/F; (3) Flat D, 20/F; (4) Flat A, 26/F; and (5) Flat B, 27/F, each of Zone 2 (T20-2) (also known as Ocean Sky) of Phase VI Residential Development in Tower 20 of the Cullinan, No.1 Austin Road West, Kowloon, Hong Kong (individually, “Flat 20B”, “Flat 20C”, “Flat 20D”, “Flat 26A” and “Flat 27B”;collectively, “the Properties”).

2.  Pursuant to section 14(2) of the SDO, the Collector stated and signed a case dated 17 November 2020 (“the Case Stated”) for the purpose of this appeal.

3.  At the request of the appellant, a direction hearing was held on 1 February 2021, at which the appellant applied, among other things, for an order that the Collector shall revise the Case Stated.

4.  By consent, the appellant’s aforesaid application is disposed of on paper.

THE COURT’S JURISDICTION TO ORDER AMENDMENT

5.  At the direction hearing, this court raised the question of whether the court has jurisdiction in granting the order applied for by the appellant, for the SDO is totally silent on this matter, and it has no provision which is similar to the old section 69(4)[1] of the Inland Revenue Ordinance (Cap.112) which empowered a judge of the Court of First Instance to send the Case Stated back to the Board of Review for amendment.

6.  In their respective submissions, parties agree that the court has jurisdiction to order the Collector to amend the Case Stated, though their routes in coming to this conclusion are different.

7.  The appellant submitted that the court has jurisdiction because:

(1)     The court should have such jurisdiction by default and “under first principles of civil procedure”[2], so as to enable it to understand the issue in dispute;

(2)     There being no express provision in the SDO that ousts the jurisdiction of the court, it should have power to do in a stamp appeal something similar to what it is empowered to do in a general civil case, as “the Case stated is, technically speaking, a pleading for the purposes of the application of standard rules of civil procedure”[3];

(3)     “It would be perverse for the SDO to vest original jurisdiction in stamp duty appeals in the District Court, but, and by omission rather than by express words, simultaneously to deprive it of such case management powers as would properly enable it to exercise advisory and adjudicatory functions vested in it by the statute”[4];

(4)     In the absence of clear words to the contrary, the court should have jurisdiction to procure that it be able to exercise that function effectively and in the interest of justice, having regards to the procedural fairness to the appellant.

8.  Mr Mariani for the appellant also cited the case of Commissioner of Stamps v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453 in support, and submitted that it was held by the High Court of Australia that the jurisdiction of the Supreme Court of South Australia (the court which heard the stamp duty appeal) was not fettered by the terms of the statutory provisions governing the case stated procedure, and that the court may exercise its case management powers as it sees fit in order to adjudicate the dispute, including the power to direct a party to provide further and better particulars, or otherwise amend its pleadings.

9.  I agree with Ms Cheung for the Collector that the above Australian authority cannot assist the appellant because the case turned largely on the legislative framework on which the appeal was based. More importantly, I think, as pointed out by Ms Cheung, the question which was raised by this court could be answered simply by reference to Order 20 rule 8(1) of the Rules of the District Court (Cap.336H) (“RDC”)[5]. 

10.  Order 1 rule 2(1) of the RDC states that:

“Subject to this rule, these Rules shall have effect in relation to all proceedings in the Court.”[6]

11.  The proceedings herein are not excluded by the other part of Order 1 rule 2 of the RDC.  Hence, there is no doubt that the RDC is applicable to these proceedings.

12.  Order 20 rule 8(1) of the RDC provides that:

“For the purpose of determining the real question in controversy between the parties to any proceedings, or of correcting any defect or error in any proceedings, the Court may at any stage of the proceedings and whether of its own motion or on the application of any party to the proceedings order a pleading or any other document in the proceedings to be amended on such terms as to costs or otherwise as may be just and in such manner (if any) as it may direct.” (emphasis added)

13.  While I do not agree with Mr Mariani that the Case Stated is a pleading, I am of the view that it falls within the category of “any other document in the proceedings”.

14.  I am therefore satisfied that this court has jurisdiction to make the order applied for by the appellant.

ADEQUACY OF THE CASE STATED

The legal principles

15.  On the adequacy of the content of case stated, Mr Mariani has drawn this court’s attention to the authority of CIR v Inland Revenue Board of Review & Another [1989] 2 HKLR 40, in which what Huggins J (as he then was) stated in Attorney General v Leung Chi-kin [1974] HKLR 269 was referred to:

“The basic requirements of a case stated are that it should be complete in itself and should not have any annexure unless it is essential to the decision of the appeal that such annexure should be before the court…The case stated should contain in numbered paragraphs –

(a) the material findings of factor where appropriate, a statement that no finding was made upon an issue which is alleged to be material…

(b) the contentions of law of each party upon each of the issues referred for the opinion of the court;

(c) a statement of the decision…

(d) the questions the court is asked to answer.  They should be stated clearly and concisely and care should be taken to ensure that the questions are not wider than is warranted by the facts…”

16.  As pointed out by Barnett J in CIR (supra), the above statement of law was approved by Macdougall J in Chinachem Investment Co. Ltd. v. Commissioner of Inland Revenue.  On appeal from the learned Judge’s decision to the Court of Appeal (CACV 116/1986, unreported, 16 April 1987), Sir Alan Huggins VP said:

“There was much discussion before us and before the judge as to the form of the case stated and the procedure for settling it. It has never ceased to amaze me how much argument this simple and straightforward process engenders. A properly drafted case stated is the most satisfactory process of all for deciding a question of law, for it concentrates attention on the essentials of the case, but it does require those concerned to marshall and state with precision the issues, the facts (and, where necessary, the evidence), the arguments and finally, the conclusions attacked…”

17.  It is undisputed by Ms Cheung that the above principles are applicable herein. 

The Case Stated

18.  In a gist, the Case Stated provided, among other things, the following background and information:

(1)     By virtue of the Agreement, the appellant had purchased 5 residential flats in Tower 20 of The Cullinan at a total consideration of HK$119,925,150 (“the Purchase Price”);

(2)     Pursuant to section 29CB of the SDO, BSD would be payable in respect of an agreement for sale of any residential property executed on or after 27 October 2012 subject to certain exceptions.  Section 29CB(2) of the SDO further stipulates that such an agreement is not chargeable with BSD if it is shown to the satisfaction of the Collector that the purchaser or each of the purchasers under the agreement is a Hong Kong permanent resident (“HKPR”) acting on his or her own behalf;

(3)     The appellant was 27 years of age in 2013.  According to her tax returns, she earned a total of HK$189,495, HK$236,160, and HK$259,560 in the 2013-2014, 2014-2015 and 2015-2016 financial years respectively from her employments in the accounting field;

(4)     The background of certain alleged related parties;

(5)     The appellant had submitted, among other things, her statutory declaration, declaring that she was a HKPR and that she acquired the Properties on her own behalf, in support of her application for exemption from BSD;

(6)     The Collector had requested the appellant to provide, among other things, information and documents in relation to the sources of finance for the acquisition of the Properties and the usage of the Properties;

(7)     The appellant replied to the Collector and stated, among other things, that:

(i)     the purchase price of the Properties and the stamp duty payable on the Agreement were financed by her mother, various loans from a company known as JBL, loans granted by the financing company designated by the developer of the Properties, and mortgage loans from Bank of China (HK);

(ii)     the loan from JBL was made verbally, and there was an agreement with JBL which provided that the appellant would repay the loan upon the disposal of any of the Properties; that, in exchange, the father of the main shareholder of JBL (“Mr Ho”) and his family members were permitted at stay in Flat 27B; and that no interest was payable for the loan;

(iii)     repayment of the mortgage loans from Bank of China (HK) was supported by the appellant’s mother and Mr Ho;

(iv)     Flat 20B, Flat 20C and Flat 20D had been rented out whilst Flat 26A and Flat 27B were occupied by the appellant and Mr Ho’s family respectively; and

(v)     The Properties were not under any trust arrangement.  There was no declaration of trust or similar legal documents executed in respect of the Properties;

(8)     A number of documents had been provided by the appellant in support of her explanations and the details of which had been set out in the Case Stated;

(9)     The Collector had also gathered information and documents (concerning, among other things, certain transitional loans obtained by the appellant, the method for payment of the purchase price adopted, the cash rebate entitled by the appellant in relation to the transactions, applications for resident cards in respect of the Properties, registered users of various utilities in relation to the Properties, and various bank transactions) and the details of which had been set out in the Case Stated;

(10)     The Collector’s view that the appellant was not acting on her own behalf under the Agreement for the purposes of section 29CB(2) of the SDO and therefore the Agreement was not exempted from BSD;

(11)     The communication between the appellant’s solicitors and the Collector on the drafting of the Case Stated;

(12)     The question for the opinion of the court.

The appellant’s complaints on the inadequacy of the Case Stated

19.  The appellant’s arguments may be summarised as follows:

(1)     “[T]he case of law in the Case Stated as issued by the Collector is manifestly vague, inadequate, and as currently drafted is inconsistent with general principles of procedural fairness by virtue of failing to identify a suitably specific question of fact and law for the Court’s determination in the substantive appeal”[7];

(2)     “The only substantive submission of law contained in the Case Stated is as follows (at paragraph [37] of the Case Stated):

‘Respondent was of the view that the Appellant was not acting on her own behalf under the Agreement for the purposes of section 29CB(2) of the Ordinance and therefore, the Agreement was not exempted from BSD.’

That conclusion is unsupported by analysis of any description specifying: (1) on what factual basis it was made; (2) on whose behalf (if not her own) the Collector alleges that Ms Tse was acting with respect to the acquisition of the Properties; (3) in which capacity Ms Tse was allegedly acting with respect to the said person or persons”[8];

(3)     The appellant is not in a position to understand what substantive case of law she must answer in order to succeed in her appeal;

(4)     The Collector had failed to discharge his primary duty to give reasons for his decision;

(5)     As the appellant had sworn a statutory declaration that she was acting on her own behalf in acquiring the Properties, the Collector must set out in some detail the basis for him not to accept the same, because in effect the Collection is making a very serious allegation that the appellant had made a false statement potentially amounting to perjury.

20.  The appellant therefore requested the court to order the Collector to redraft paragraph 37 of the Case Stated along the following line:

“In view of [Collector to list the Annexures evidencing the matters of fact and/or law on which the Collector relied in arriving at his substantive conclusion on the application of s.29CB(2) of the SDO, explaining by reference to each such Annexure what specific proposition(s) of fact or law that Annexure is alleged to evidence], the Respondent concluded that Ms Tse was acting on behalf of [state the full name(s) of the person(s) on whose behalf the Collector considers Ms Tse was acting] with respect to the Agreement and that she was so acting in the capacity of [state the specific capacity, such as trustee, in which it is alleged that Ms Tse was acting]. The Respondent was therefore of the view that the Appellant was not acting on her own behalf under the agreement for the purposes of section 29CDB(2) (sic) of the Ordinance and therefore, the Agreement was not exempted from BSD”[9]

Discussion

21.  To decide on whether the Case Stated is adequate or not, it is important to bear in mind the question which the court has to answer in this appeal. 

22.  There cannot be any dispute that the crux of the matter is in relation to section 29CB(2) of the SDO which provides that:

“A chargeable agreement for sale is not chargeable with buyer’s stamp duty under head 1(1C) in the First Schedule if it is shown to the satisfaction of the Collector—

(a) that the purchaser, or each of the purchasers, under the agreement is a Hong Kong permanent resident acting on his or her own behalf;

(b) …

(c)     …”

(emphasis is mine)

23.  I do not understand why Mr Mariani would say that “the appellant is not in a position to understand what substantive case of law she must answer in order to succeed in her appeal”.  In his submission in reply, he even went as far as to assert that the appellant does not know “ with any precision against what she is called to argue, or what case she herself must prove”[10] in the appeal.  With greatest respect, this is a very bold assertion.  The question which the appellant has to answer is crystal clear: she has to argue and demonstrate to the satisfaction of the court that she was acting on her own behalf when she entered into the Agreement – that is the effect of section 29CB(2) of the SDO. 

24.  The wordings of section 29CB(2) of the SDO clearly show that the appellant has the burden to prove that she was acting on her own behalf.  Therefore, the Collector is not required to identify positively the person(s) for whom the appellant was alleged to be acting.

25.  The provision of the statutory declaration on the part of the appellant would not alter her burden of proof nor the Collector’s obligation in the way he prepared the Case Stated.

26.  Moreover, the Case Stated is not a “decision” as such.  The function of the Case Stated is to set out the relevant facts and the issue for the court to consider in this appeal. I am of the view that the Case Stated prepared by the Collector herein has fulfilled such a requirement.

ORDER

27.  For the reasons of the aforesaid, the appellant’s application is dismissed.

COSTS

28.  I make a cost order nisi that the appellant shall bear the Collector’s costs of this application.  Such costs shall be assessed summarily on paper pursuant to Order 62 rule 9A(1)(a) of the RDC.

29.  The above order nisi shall become absolute in the absence of application to vary within 14 days hereof.

30.  For the purpose of summary assessment:

(i)     The Collector shall lodge and serve his statement of costs (see Appendix A of PD 14.3) within 7 days after the costs order nisi above has been made absolute;

(ii)     The appellant shall lodge and serve her statement of objection within 7 days thereafter.

FURTHER DIRECTIONS

Examination of witness(es)

31.  At the direction hearing, Mr Mariani mentioned about examination and cross-examination of the appellant at the appeal.  In his written submission in reply, he further referred to “calling of witnesses of fact”[11].

32.  This being an appeal on Case Stated, it is my understanding that the appeal should be dealt with by way of argument only without hearing any oral evidence. 

33.  No direction has ever been sought on the adducing of oral evidence at the appeal.

34.  The above matter should be sorted out before this appeal is fixed for hearing.  Insofar as it is necessary, the appellant shall apply for the necessary directions within 28 days hereof.  If no further application for direction has to be made, the appellant shall inform this court as soon as possible, and upon which the appeal will be fixed for hearing. Pursuant to the parties’ agreement, 2 days will be reserved for the hearing of the appeal.

The appeal bundle

35.  At the direction hearing, Mr Mariani initially sought an order that the Collector do revise the annexures to the Case Stated so that it would only include those documents that are, according to Mr Mariani’s description, “immediately relevant”.

36.  After some exchanges between the Bench and the Bar table at the said hearing, it was agreed that the matter can be resolved by the parties putting their heads together and agreeing on what annexures should be included in the appeal bundle.  Annexures which are not necessary for the determination of this appeal should be omitted from the appeal bundle.  With this approach, the appellant agreed that she would not pursue her initial request for deletion of annexures from the Case Stated.  I therefore make no further order on this matter.