KING CROWN DECORATION & CONSTRUCTION LTD v. THE COLLECTOR OF STAMP REVENUE

DCSA 14/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO. 14 OF 2009

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REASONS FOR DECISION

1.  King Crown, the Appellant, applies for extension of time for its appeal against the assessment of stamp duty in respect of the property in question in Stanley, Hong Kong.  The Collector, the Respondent, opposes the application.

2.  At the end of the hearing, I dismissed the application.  Here are my reasons in detail.

Background

3.  By an agreement dated 4 March 2008, King Crown purchased the property in question at the consideration of HK$2,000,000.  An initial stamp duty of HK$100 was paid based on the stated consideration.  The Collector considered that that was undervalued.  On 31 August 2009, the Collector issued to King Crown a notice of stamp duty assessment together with a demand for payment of further stamp duty.

4.  Section 14(1) of the Stamp Duty Ordinance, Cap.117 provides that any appeal against the notice of assessment must be taken out by way of notice of appeal within 1 month from the date on which the assessment is made or within such further period as the court may allow under section 14(5B).

5.  In the present case, the deadline was 30 September 2009.  King Crown filed its notice of appeal on 6 October 2009 and is therefore out of time for slightly less than a week.

Section 14

6.  In the light of the arguments advanced, I find it necessary to spell out various subsections of section 14 of the Ordinance:

“(1)        Any person who is dissatisfied with the assessment of the Collector under section 13 may –

(a)      within a period of 1 month from the date on which the assessment is made or within such further period as the court may allow under subsection (5B);

(b)     subject to any order of the court under subsection (1B), on payment of the stamp duty in conformity therewith or, where payment of the stamp duty or any part thereof is allowed to be postponed under subsection (1A), on payment of the part (if any) of the stamp duty the payment of which is not thus allowed to be postponed; and

(c)      by notice served on the Registrar, appeal against the assessment to the court and may for that purpose require the Collector to state and sign a case setting forth the question upon which his opinion was required and the assessment made by him.

(1A)       Where –

(a)      an application in writing made for the purposes of this subsection by the person liable for payment of the stamp duty payable under an assessment of the Collector under section 13 is received by the Collector within 14 days from the date on which the assessment is made;

(b)     the person has stated in the application that he proposes to bring an appeal against the assessment under subsection (1); and

(c)      security to the satisfaction of the Collector has been given for the payment of the stamp duty that will, by reason of the exercise of the power by the Collector under this subsection, be postponed,

the Collector may, by notice in writing served on the person, allow payment of the stamp duty payable under the assessment to be postponed for such period, to such extent and on such terms as the Collector may think fit.

(1B)        Where the court, on an application made by the person intending to serve a notice under subsection (1), is satisfied that it would impose hardship on the person to require him to pay the stamp duty or the part of the stamp duty, as the case, may be, under subsection (1)(b), it may by order allow the appeal to which the notice relates to be brought –

(a)      without payment of the stamp duty or the part of the stamp duty, as the case may be, under subsection (1)(b), or only on payment of such part of the stamp duty or the part of the stamp duty, as the case may be, as the court may consider reasonable in the circumstances of the case; and

(b)     on security being given to the satisfaction of the court for the payment of the stamp duty or the part of the stamp duty, as the case may be, that would, apart from this subsection, have to be paid before the appeal can be brought under subsection (1).

……

(5B) Where the court, on an application made by a person who is dissatisfied with an assessment of the Collector under section 13, is satisfied that the person was prevented by illness or absence from Hong Kong or other reasonable cause from bringing an appeal within a period of 1 month from the date on which the assessment is made in accordance with subsection (1), the court may by order allow the appeal to be brought within such further period as it may consider appropriate.”

      [emphasis added]

7.  The time limit in section 14(1) must be strictly adhered to.  In the present context, the court is not considering the exercise of the discretion to grant an extension of time generally pursuant to O.3, r.5 of the Rules of the District Court: see Diamond Dragon Finance Company v The Collector of Stamp Revenue, DCSA 4/2004 (2 April 2004) at paras.8 and 14.

8.  I approach the application of subsection (5B) the same way as set out in Wan Wah Shing v The Collector of Stamp Revenue [2005] 4 HKLRD 674 at 679D-F:

(1)  The court has to be satisfied that the intended appellant suffers from illness, has been absent from Hong Kong or has any other reasonable cause.

(2)  The intended appellant has to show that one or more than one of the aforesaid factors prevented him from bringing an appeal within time.

(3)  Even if the above 2 criteria are satisfied, the court has an unfettered discretion on whether to grant the extension of time.

Grounds of the application

9.  Mr Cheung, director of King Crown, has filed 2 affirmations in support of the application.  Mr Cheung is also the senior partner of the solicitors’ firm representing King Crown.  He actually appeared as the solicitor for King Crown at the hearing.

10.  There are mainly the following grounds of application:

(1)  King Crown does not carry on any business except for holding properties.  Mr Cheung was and is the sole signatory of the Appellant’s cheques.  He is 60 years old and semi-retired.

(2)  Mr Cheung was absent from Hong Kong the whole month of September 2009 except for a certain period of time on the 18^th and the 23^rd.

(3)  There has been postal delay so that the notice of assessment and demand for payment was not received until 11 September 2009.

(4)  Incidental to (3) above, there was financial hardship to King Crown in having to arrange to pay the further stamp duty within time as a condition precedent to the appeal.

Absence from Hong Kong

11.  Mr Cheung submitted that reference to a person under section 14 includes both a natural person and a body corporate.  This is not controversial.  However, he went further to effectively suggest that the absence of the director in sole control of a body corporate is tantamount to absence of the body corporate.

12.  I reject such suggestion.  The criteria set out in section 14(5B) had to operate to prevent the appellant from bringing the appeal within time, before the court’s discretion to extend the time can be invoked.  Any person who consciously makes use of a corporate vehicle is bound by the consequence of the body being a separate entity.  He cannot be heard to suggest that the corporate body could not operate because the persons in control of it choose to be absent from Hong Kong.

13.  Where the taxpayer is a corporation, the fact that the sole active director is ill and the remaining directors are either too old or too busy to attend to the corporation’s affairs has been held not to justify an extension of time for lodging an objection: see Lam Ying Bor Investment Co Ltd v CIR (1979) 1 HKTC 1098, cited in Diamond Dragon Finance Company (above).

14.  According to Mr Cheung’s second affirmation, it was due to his other commitments that he had to leave Hong Kong since August 2009.  However, Mr Cheung admitted that his company has already been informed of the Revenue’s intention to re-assess the stamp duty in respect of the property since late July 2008.  There was negotiation but that broke down eventually.  Even after he has become aware of the notice allegedly upon his return on 18 September 2009, he had to leave again on the same day until he returned again on 23 September 2009.  It was, and could only be, his concern to make the necessary arrangement to enable him as the sole active director to be absent from the company in Hong Kong in the circumstances.  Nothing prevented him from doing so.

15.  Further, the notice of assessment was sent to King Crown and Mr Cheung’s firm.  They share the same address.  The firm acknowledged receipt of the same on behalf of King Crown.  At all material times, King Crown was represented by Mr Cheung’s firm.  In the circumstances, it is surprising that Mr Cheung claimed that he was not made aware of the notice of assessment until he returned to Hong Kong on 18 September 2009.  Whether this was due to his lack of instruction to his firm or his firm’s inaction, it cannot be said that he or King Crown was prevented from bringing the appeal within time.

Postal delay

16.  In his first affirmation, Mr Cheung suggested that his company received the notice of assessment on 3 September 2009.  However in his second affirmation, Mr Cheung suggested that the notice was received on 11 September 2009.  He produced as exhibit a copy of the notice of assessment with its reverse side bearing the chop of Mr Cheung’s firm dated 11 September 2009.

17.  In his second affirmation, Mr Cheung suggested that the postal delay is by itself a cause for the court to exercise discretion to grant the extension of time.  I fail to see how this should be the case.  First, Mr Cheung did not explain in his second affirmation his different versions of the date when the notice of assessment was received.  In court, he sought to explain that this was a mistake in the first affirmation.  Secondly, he affirmed that the delay did not make any difference to him, as he did not return to Hong Kong in September until the 18^th.

18.  Whether one counts from 11 or 18 September 2009, there was still a period of 12 to 19 days before the deadline for appeal expired.  There was ample time to lodge the appeal.  However, Mr Cheung argued that the delay in the receipt of the notice of assessment has caused his company hardship in having to finance the payment of the further stamp duty as a condition to the appeal.

Financial hardship

19.  In his first affirmation, Mr Cheung actually confessed that with regret, he has negligently overlooked the prompt payment of the further stamp duty as a pre-condition of the appeal.  No financial difficulty or hardship was suggested at all.

20.  However, in his second affirmation, Mr Cheung suggested that it took time to arrange the necessary funds for payment the further stamp duty.  In court, Mr Cheung elaborated that the alleged postal delay has substantially reduced the time his company would have been able to utilise to raise the necessary finance to meet the payment condition.

21.  The answer to Mr Cheung’s argument can be found in sections 14(1A) and 14(1B).  Subsection (1A) (above) provides that a taxpayer who intends to appeal against the assessment may apply to the Collector in writing for the postponement of the payment of the stamp duty.

22.  Alternatively, subsection (1B) (above) confers on the court the discretion, upon application, to allow an appeal to be brought without payment of stamp duty or part of the stamp duty or on security being given to the satisfaction of the court for the payment of the stamp duty.

23.  King Crown has not made any application pursuant to either subsection.  I do not accept the argument with reference to the alleged financial hardship, whether as a result of any delay in receipt of the notice of assessment or not.

Conclusion

24.  In court, Mr Cheung expressed his personal sentiment about the possible harshness of the provisions of section 14 to a taxpayer.  This court is only concerned with the application of the provisions and, to the extent these provisions stipulate, the exercise of the discretion.  The delay of less than a week may not be substantial.  However, King Crown does not satisfy the criteria for invoking this court’s discretion under section 14(5B).  I am not satisfied that discretion should be exercised in its favour.

Order

25.  The application was therefore dismissed.  King Crown was ordered to pay the Collector’s costs occasioned by this application which was assessed summarily at HK$15,153 and payable within 14 days.