WONG SUET FOON SHIRLY v. COLLECTOR OF STAMP REVENUE

CACV 66/2020

[2021] HKCA 1090

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 66 OF 2020

(ON APPEAL FROM DCSA NO. 5 OF 2016)

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REASONS FOR JUDGMENT

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The Court:

A.  Introduction

1.  This is the appeal of Madam Wong Suet Foon Shirly (“the appellant”)  against the decision (“the Decision”)[1]  of His Honour Judge Andrew Li (“the Judge”)  given on 27 February 2019.  By the Decision, the Judge dismissed the appellant’s appeal against the assessment made by the Collector of Stamp Revenue (“the Collector”)  on the stamp duty chargeable on an assent executed by her as the administratrix upon the administration of her mother’s intestate estate.   

2.  The core issues in this appeal are (1)  whether an assent executed by an administratrix upon the administration of the estate in intestacy for the vesting and assigning of property disclaimed by some of the beneficiaries to the remaining beneficiaries is a conveyance operating as a voluntary disposition inter vivos and is chargeable with ad valorem stamp duty under section 27(1)  of the Stamp Duty Ordinance, Cap 117 (“the Ordinance”); and (2)  if so, whether the lower rate in Scale 2 of Head 1(1)  in the First Schedule of the Stamp Duty (Amendment)  (No. 2)  Ordinance 2014 (“the 2014 Amendment Ordinance”)  applies by reason of section 29AL of the Ordinance. 

3.  On 9 March 2020, Au JA granted leave to appeal against the Decision[2]. In light of the questions of law involved in this appeal and the fact that the appellant acts in person, Ms Bonnie Cheng was appointed as amicus curiae to assist the Court.

4.  At the hearing of the appeal, after hearing submissions, we allowed the appeal.  Our reasons appear below.

B.  The facts

5.  The relevant background facts, taken from the Case Stated of the Collector dated 15 December 2017 and the Decision at [2] to [15], are summarised below.

6.  Madam Ming Sum Yee (“the Deceased”)  died intestate on 20 February 2012.  Letters of administration in respect of her estate were issued in favour of the appellant on 4 June 2012.  The only persons entitled to the Deceased’s estate are her five surviving children, including the appellant.  They are:

(1)  Wong Yau Kung (“WYK”);

(2)  Wong Suet Mui Alice (“Alice”);

(3)  The appellant;

(4)  Wong Yau Leung (“WYL”); and

(5)  Wong Yau Shing (“WYS”).

7.  The Deceased was the registered owner of a property in Toa Yuen House, Chuk Yuen (North)  Estate, No. 8 Wing Chuk Street, Wong Tai Sin, Kowloon (“the Property”), which she acquired by an assignment dated 29 September 2010.  It was a purchase under the Tenants Purchase Scheme of the Hong Kong Housing Authority, which restricts, inter alia, alienation.

8.  To give effect to the grant and for the purpose of seeking approval of alienation by succession, the five surviving children, represented by the appellant, made enquiries to the Housing Authority and were given to understand (which subsequently turned out to be incorrect)  that only two children could become the succeeding owners of the Property under the Housing Authority’s rules or policy.

9.  In reliance on the above advice, the five surviving children entered into a Deed of Family Arrangement dated 3 May 2014 (“the Deed”)  under which it was agreed that WYK, WYL and WYS (“the 3 Siblings”)  would abandon, disclaim or renounce their rights and interests in the Property, leaving the Property to the appellant and Alice.  The material terms of the Deed provide as follows:

(1)  “This Deed shall bind the parties hereto and shall, in so far as and to the extent that this Deed is inconsistent with any law or rule of intestacy of Hong Kong governing distribution of the estate (including the Property)  of the Deceased, take effect in substitution and variation of any such intestacy law or rule”.  (Clause 1)

(2)  Each of the 3 Siblings “absolutely unconditionally and irrevocably waives disclaims and renounces all his rights title benefits interests claims and demands of and in the Property”.  (Clauses 2, 3 and 4)

(3)  The appellant and Alice “shall become the beneficial owners and as joint tenants of the Property”. (Clause 5)

(4)  All the five surviving children “agree to execute all and any assent, assignment, conveyance or deed necessary to carry into effect this Deed”.  (Clause 5)   

10.  The Deed was presented to the Inland Revenue Department (“IRD”)  for adjudication of any stamp duty on or about 9 May 2014. A stamp duty of HK$16,650 was assessed on it, which the appellant paid on 1 December 2015 under protest and objection.

11.  Pursuant to the Deed, and by a Deed of Assent dated 16 October 2014 (“the Assent”), the appellant, as the administratrix of the Deceased’s estate, assented to the vesting and assignment of the Property unto Alice and herself, in her personal capacity as one of the beneficiaries, as joint tenants.

12.  The Assent was presented to the IRD for adjudication of any stamp duty on about 21 October 2014.  On 1 December 2014, the IRD adjudicated that it was not chargeable with any duty.  No reason was given for this adjudication, but the Judge considered this was “probably due to the fact that stamp duty of the same amount had already been charged or imposed on the [Deed]”[3].

13.  By a letter dated 4 June 2015 to the appellant’s former solicitors, the IRD (acting for and on behalf of the Collector)  stated that:

(1)  The Deed and the Assent “operate as voluntary disposition(s)  inter vivos” to the extent that “the transfer(s)  of the Property is in excess of the transferees’ entitlement in the estate in accordance with the Intestates’ Estates Ordinance, and is/are chargeable with stamp duty as conveyance(s)  on sale by virtue of section 27(1)  of [the Ordinance]”.

(2)  Ad valorem stamp duty at Scale 1 of Head 1(1)  in the First Schedule of the 2014 Amendment Ordinance (i.e. the higher rate)  applied to both the Deed and the Assent, as these instruments were executed after 23 February 2013.  The 2014 Amendment Ordinance had retrospective effect commencing on 23 February 2013[4].

(3)  Further, as the appellant “assigned the [Property] to the beneficiaries in the capacity of the administrator of the [Deceased’s estate], not her own capacity”, the IRD did not accept that the transferor and the transferee were “closely related” for the purpose of section 29AL of the Ordinance (which provides for a lower rate under Scale 2 of Head 1(1)  in the First Schedule of the 2014 Amendment Ordinance).

(4)  The Property was valued by the Commissioner of Rating and Valuation at HK$1,850,000 as at the date of the Deed.  On the basis that 60% of the Property was in “in excess of the transferees’ entitlement in the estate” (as, but for the Deed, the appellant and Alice would have been entitled to only 40% of the Deceased’s estate), the IRD assessed the ad valorem stamp duty to be $16,650 (i.e. $1,850,000 × 60% × 1.5%).

14.  In spite of the appellant’s objection, on 28 December 2015, the Collector issued the assessment and charged the stamp duty of HK$16,650 on the Deed and the Assent.

15.  By two letters dated 18 April 2016 and 14 November 2017 respectively, the appellant objected to and appealed against the Collector’s assessment.

16.  On 15 December 2017, the Collector submitted to the District Court a Case Stated which raised two questions for determination as follows: 

(1)  Whether the Deed and the Assent are chargeable with ad valorem stamp duty; and

(2)  If so, with what amount of stamp duty they are chargeable.

C.  The Judge’s decision

17.  The case came before the Judge on 12 September 2018.  The Collector’s position at the hearing was that only the Assent (but not the Deed)  was chargeable with stamp duty[5]. This was different from his previous position that both the Deed and the Assent were liable to be charged with the Scale 1 rates[6].

18.  By his decision dated 27 February 2019, the Judge dismissed the appeal.

19.  In respect of the first question, the Judge agreed with the Collector, and held that the Assent (but not the Deed)  is chargeable with ad valorem stamp duty on the 60% interest of the Property disclaimed by the 3 Siblings.  His reasons are that:

(1)  The Assent was a conveyance for the purpose of section 27(1)  of the Ordinance as it conveyed a substantial benefit to the appellant and Alice (i.e. the extra 60% of the beneficial interests which was in excessive of their original entitlement of 40% in aggregate under the applicable intestacy law).  In reaching this conclusion, the Judge relied on the District Court decision in So Kam Shing & So Kam Wai v The Collector of Stamp Revenue [2018] 2 HKLRD 1260, [2018] HKDC 503, at [21] to [26]; the Singaporean case of Tan Kay Thye v Commissioner of Stamp Duties [1991] 3 MLJ 150; as well as the English case of Baker v Commissioner of Inland Revenue [1924] AC 270 at 275-276[7].

(2)  The Judge rejected the appellant’s contention that no beneficial interest in the Property passed under the Assent.  He was of the view that the Assent operated as an assignment transferring the Property, together with all rights and interests (including beneficial interests)  in it, to the appellant and Alice pursuant to section 16(1)  of the Conveyancing and Property Ordinance, Cap. 219[8].

(3)  The Judge also rejected the appellant’s argument that the “conveyance” or “transfer” by way of the Assent was made under a trust[9].  Accordingly, section 27(5)  of the Ordinance did not apply.

20.  On the second question, the Judge held that section 29AL of the Ordinance did not apply, as the appellant, acting in her capacity as administratrix in executing the Assent, did not hold any interest over the estate of the Deceased which she could in her personal capacity transfer to herself and Alice[10].

21.  The appellant’s application for leave to appeal against the Decision was refused by the Judge.  The appellant’s renewed application to the Court of Appeal was granted by Au JA on 9 March 2020.

D.  The issues in this appeal

22.  In light of the submissions made by the appellant, Mr William Liu, who together with Mr Aaron Lam, appeared for the Collector, and Ms Cheng, the amicus curiae, the issues of the appeal can be stated as follows:

(1)  Whether the Assent amounts to a “conveyance of immovable property operating as a voluntary disposition inter vivos”, hence becomes chargeable with ad valorem stamp duty under section 27(1)  of the Ordinance. 

(2)  If so, whether the vesting and assignment of the Property by the appellant unto herself and Alice upon the administration of the estate and by way of the Assent is “a conveyance or transfer… made to a beneficiary by a trustee or other person in a fiduciary capacity under any trust, whether express or implied…” as provided in section 27(5)  of the Ordinance such that the Assent is not chargeable with ad valorem stamp duty.

(3)  If the Assent is chargeable, whether section 29AL of the Ordinance applies and the stamp duty payable should be assessed under Scale 2 of Head 1(1)  of the First Schedule (i.e. the lower rate).

E.  Issue (1): Is the Assent a conveyance of immovable property operating as a voluntary disposition inter vivos, hence chargeable with ad valorem stamp duty under section 27(1)?

E1.  The Deed operating as a disclaimer, not a conveyance or transfer

23.  Before dealing specifically with the issues, it is useful to first consider the position of the Deed.  As noted above (see [13] above), the Collector’s original position is that both the Deed and the Assent are chargeable with ad valorem stamp duty.  At the hearing before the Judge and also in this appeal, the Collector has revised his position and no longer contends that the Deed is chargeable with ad valorem stamp duty. His view is that the Deed operated as a disclaimer by the 3 Siblings of their expectant interest in the Property, and not as a conveyance or transfer of an immovable property[11].

24.  We agree with the Collector’s view that the Deed is not chargeable.  In the first place, clause 5 of the Deed (see [9(4)] above)  evidently contemplated that the execution of an assent to “carry into effect” the Deed.

25.  Secondly, it is well-established that until the residue has been ascertained, the expectant beneficiaries of an intestate estate only have an entitlement to a chose in action, or an inchoate right, to compel administration of the estate. They have no entitlement to any beneficial interests in an unadministered estate.  This principle was explained in the House of Lords’ decision in Dr Barnardo’s Homes v Special Income Tax Commissioners [1921] 2 A.C. 1 at 8 by Viscount Finlay as follows:

“It appears to me that the present case is really decided by the decision of this House in Lord Sudeley’s Case… It was pointed out in that case that the legatee of a share in a residue has no interest in any of the property of the testator until the residue has been ascertained. His right is to have the estate properly administered and applied for his benefit when the administration is complete…”

26.  This was further explained by Viscount Radcliffe in the subsequent House of Lords’ decision in Commissioner of Stamp Duties v Livingston [1965] AC 694 at 707B-G and 712B-E as follows:

“Essentially, there are trusts to preserve the assets, to deal properly with them, and to apply them in a due course of administration for the benefit of those interested according to that course, creditors, the death duty authorities, legatees of various sorts, and the residuary beneficiaries. They might just as well have been termed ‘duties in respect of the assets’ as trusts. What equity did not do was to recognise or create for residuary legatees a beneficial interest in the assets in the executor’s hands during the course of administration.” (at 707B-G, emphasis added)

“Where, it is asked, is the beneficial interest in those assets during the period of administration? It is not, ex hypothesi, in the executor: where else can it be but in the residuary legatee? This dilemma is founded on a fallacy, for it assumes mistakenly that for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and equitable. There is no need to make this assumption. When the whole right of property is in a person, as it is in an executor, there is no need to distinguish between the legal and equitable interest in that property, any more than there is for the property of a full beneficial owner. What matters is that the court will control the executor in the use of his rights over assets that come to him in that capacity; but it will do it by the enforcement of remedies which do not involve the admission or recognition of equitable rights of property in those assets. Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines.” (at 712B-E, emphasis added)

27.  The position is thus as summarised in Snell’s Equity (34^th ed)  at [33-002]:

“The ownership of the property of a deceased person between the death and the distribution sometimes gives rise to problems. Although personal representatives are in a fiduciary position, it is wrong to regard them as holding only the legal estate, with the beneficial interests in the beneficiaries. Not until there has been an assent can it be said with certainty whether or not a particular asset will be needed for the payment of debts or other liabilities; and until these have been discharged, it cannot be said what assets there will be in the residuary estate. Accordingly, the general rule is that no beneficiary can assert that he has any legal or equitable interest in any of the assets which are still unadministered. The beneficiary has merely a right ‘to have the estate duly administered by the personal representatives in accordance with the law’…” (emphasis added)

28.  These principles have been consistently applied in Hong Kong: see Kleinwort Benson (Hong Kong)  Trustees Ltd v Wong Foon Hang & Ors [1993] 1 HKC 649, at 657H-I; Foo Ying v Commissioner of Estate Duty [1989] 2 HKLR 376; Chung Wing On v Chung Wing Piu [2006] 3 HKC 546; Re Yuen Kiu Kwan [2009] 3 HKLRD 371; and Yeung Chok Ming v Yeung Chok Lam [2020] 4 HKC 91, [2020] HKCFI 480 at [37] to [39].

29.  In the present case, it is common ground that no beneficial interests in the Property were vested before the Assent.  Applying the principles discussed above, upon the death of the Deceased, the five surviving children became the expectant beneficiaries of her intestate estate.  None of them could assert any legal or equitable interest in any of the assets forming part of the unadministered estate.  It follows that the 3 Siblings had nothing which they could convey or transfer by way of the Deed.  The Collector is therefore correct to take the view that no ad valorem stamp duty is chargeable on the Deed because no beneficial interests in the Property passed under it. 

E2.  Is the Assent chargeable with stamp duty under section 27(1)?

30.  We turn next to consider the position of the Assent under section 27(1)  of the Ordinance, which provides:

“Any conveyance of immovable property operating as a voluntary disposition inter vivos shall be chargeable with stamp duty as a conveyance on sale, with the substitution of the value of the property conveyed for the amount or value of the consideration for the sale.”

31.  The first point to note is that Mr Liu accepted that in an ordinary case (or what was referred to as an “ordinary assent”)  where a personal representative distributes a deceased’s estate in accordance with section 4 of the Intestates’ Estates Ordinance, Cap. 73 (“IEO”), being a testamentary disposition, it does not amount to a disposition inter vivos and does not attract stamp duty under section 27(1)  of the Ordinance.

32.  Applying the same reasoning, Mr Liu also accepted that if the assent in this case were to vest the Property unto the five surviving children in equal shares (i.e. 20% each)  in accordance with the relevant provisions in the IEO, then the assent would not be chargeable with ad valorem stamp duty.

33.  In her submission[12], Ms Cheng pointed out that an assent does not amount to a disposition inter vivos and is not chargeable with stamp duty under section 27(1)  of the Ordinance because:

(1)  A personal representative holds property in the estate in auter droit, that is in the right of another as the minister and dispenser of the goods of the dead: Williams, Mortimer & Sunnucks on Executors, Administrators and Probate (21^st ed)  at [35-09]; see also Cheng Tang Kam Yung v Tang Kam Cheung CACV 185/2013 (unreported, 23 December 2015)  at [22] to [23].

(2)  Further, a personal representative is the representative of the deceased for both realty and personalty and is placed in the stead of the deceased: Williams, Mortimer & Sunnucks on Executors, Administrators and Probate at [1-04], [1-07] and [1-08]; Union Bank of Australia v Harrison, Jones and Devlin Ltd (1910)  11 CLR 492 at 515; and Maddock v Registrar of Titles of the State of Victoria (1915)  19 CLR 681 at 693.

(3)  Accordingly, when transferring the property of the estate to an expectant beneficiary through an assent, a personal representative does not act in a personal capacity but represents the deceased.  This being the case, the transfer cannot be a disposition inter vivos.

34.  Mr Liu had no disagreement with the above analysis insofar as they are said of an ordinary assent.  He, however, argued that they are not applicable to the Assent, which vested the Property in two (instead of five)  surviving children, with each of whom receiving 50% (instead of 20%)  interest in the Property.  In his submission[13], the Assent consisted of two dispositions from the administratrix to the expectant beneficiaries.  The first is a disposition of the “original entitlement” of the appellant and Alice (i.e. an aggregate of 40% interest of the Property), which was a testamentary disposition upon death under the IEO and not a disposition inter vivos. The second is a disposition of the remaining 60% interest of the Property, to which the 3 Siblings were originally entitled and to which the appellant and Alice were not originally entitled. In respect of this second disposition, it was a deviation from the original testamentary disposition under IEO.  Since the IEO is intended to give effect to the presumed intention of the intestate as to who should be entitled to share in his estate after his death[14], a disposition deviating from it should be regarded as a disposition inter vivos.

35.  We do not accept Mr Liu’s argument for two reasons.  First, the reference to the “original entitlement” of the ultimate beneficiaries under the IEO presupposed that they had vested interests in the Property under the IEO.  However, there was no disposition under the IEO, which only provides for how a deceased’s intestate estate is to be distributed.  As said above and as Mr Liu also accepted, until the residue has been ascertained, the five surviving children did not have any legal or beneficial interests in the residuary estate of the Deceased, including the Property.  In the circumstances, what the 3 Siblings could at best be originally entitled to was only an expectation that they would receive 60% of the residuary estate after the administration of the Deceased’s estate was completed.  The expectation could not be the subject matter of a disposition that would attract ad valorem stamp duty.

36.  Second, the argument is incompatible with the general law as regards the effect of a disclaimer.  It is well established law that a beneficiary is free to refuse or renounce the gift to him, for the law cannot force a man to take an estate against his will.  As was said by Abbot CJ in the early case of Townson v Tickell (1819)  3 B & Ald. 31, [1814-23] All ER Rep 164[15]:

“The law certainly is not so absurd as to force a man to take an estate against his will. Prima facie, every estate, whether given by will or otherwise, is supposed to be beneficial to the party to whom it is so given. Of that, however, he is the best judge, and if it turns out that the party to whom the gift is made does not consider it beneficial, the law will certainly, by some mode or other, allow him to renounce or refuse the gift.”

37.  In Townson v Tickell, the Court also considered the effect of a renunciation, and held that if a devisee chose not to accept the estate devised to him, then the estate was never in him.  It was said by Bayley J that:

“… the law indeed presumes that the estate devised will be beneficial to the devisee, and that he will accept it, until there is proof to the contrary. Here is a renunciation by a most solemn act, viz, by deed; and by that he has said that he did not choose to accept that which is devised to him. It seems to be that the effect of that is that the estate never was in him at all. For I consider the devise to be nothing more than an offer which the devisee may accept or refuse, and if he refuses, he is in the same situation as if the offer never had been made…”

38.  Similar views were expressed by Holroyd and Best JJ, who also pointed out that the devisee must assent to the devise before any interest in the estate could pass to him.

39.  In the more recent case of In re Scott, Deceased [1975] 1 WLR 1260, the testatrix bequeathed the income from the residuary estate to her brother and sister during their joint lives in equal shares and to the survivor of them, and thereafter the capital and future income from the residuary estate to be held in trust for all or any of the children or child of her brother who should attain 21 or marry, and if there were no such child, then on trust for two named charities in equal shares.  The brother, who had no children, and the sister each executed deeds of disclaimer not only of any interest in the residue of the estate but also of any interest arising on intestacy.  It was held by Walton J that as both the members of the class of the brother and sister had disclaimed any interests they might be entitled to on intestacy, the residuary estate should be held on trust for the next following class of next of kin named in section 46(1)(v)  of the Administration of Estates Act 1925.

40.  On the effect of a disclaimer, Walton J applied Townson v Tickell and held (at 1271C)  that the disclaimed part of the estate remained as part of the estate of the deceased:

“Disclaimer is a refusal to accept an interest. As the old Year Books had it, nobody can put an estate upon another in spite of his teeth, and here Col. Scott and Miss Scott have shown their teeth by executing the deeds of disclaimer. Now, what effect does it have? It seems to me that it leaves the executor of the will still holding the interest attempted to be disposed of under the statute, and still holding it as part of the estate of the deceased. If somebody refuses to accept a slice of the estate of the deceased, then it still remains, in my judgment, part of the estate of the deceased.”

41.  Walton J also held (at 1270D-H)  that if some but not all of the members of a class entitled to intestacy disclaimed, the remaining members of the class would take the whole interest between them.  In coming to this view, he referred to the decision in In re Callaway, Callaway v Treasury Solicitor [1956] Ch. 559.  In that case, a testatrix, who had only one son and one daughter, appointed her daughter sole executrix and gave to her the whole of her estate absolutely.  The daughter murdered her and committed suicide.  The son applied for a declaration that, on the true construction of the Administration of Estates Act 1925 and in the events which had happened, he was beneficially entitled to the estate of the testatrix to the exclusion of any interest of the Crown therein as bona vacantia. Vaisey J granted the application, holding that he took under the intestacy and was beneficially entitled to the whole estate of his mother as next of kin to the exclusion of any beneficial interest of the Crown therein. 

42.  As to the position where all the members of a class entitled under intestacy had disclaimed, which was the question before him, Walton J held (at 1271D-F)  that the class would have to be left out of consideration, and the residuary estate would be held on trust for the next following class of next-of-kin named in section 46(1)(v)  of the Administration of Estates Act 1925 (which corresponds to section 4(8)  of the IEO).  It was pointed out (at 1271G-H)  that “[t]he effect of a disclaimer is not to throw the property on to the scrap heap, but to refuse to accept it in the first place, leaving the ownership with the people or the interest, or the estate, or whatever, from which it was derived in the first place.”  For this reason, the suggestion that it should go to the Crown as bona vacantia was rejected.

43.  The decision of Re Scott, Deceased illustrates that following a disclaimer, the disclaiming beneficiaries would simply be left out of consideration in the administration of the estate.  The disclaimed slice of the estate of the deceased would remain as part of the deceased’s estate, and the remaining members within the same class as the disclaiming beneficiaries, or if all members of that class have disclaimed, then the next of kin down the line, would take the whole interest between them.

44.  The effect of a disclaimer was also considered by the Supreme Court of South Australia in two cases.  The first is In the Estate of Simmons (deceased) (1990)  56 SASR 1, in which a bachelor without issue died intestate survived by his parents and one brother.  The parents executed a deed disclaiming all their rights to share in his estate.  Applying Townson v Tickell, Legoe J held that the effect of a disclaimer is not to divest the person disclaiming of the property disclaimed, but to prevent it from vesting in him.  After considering the authorities including Re Callaway and Re Scott, Deceased, Legoe J held that the parents having disclaimed, the estate devolved upon the surviving brother who was next entitled.  He stated (at 14)  that:

“These cases appear to support the proposition that where there is a single ‘lapse’ of an interest under an intestacy, whether occasioned by disqualification under the rule of public policy or by disclaimer, the interest does not go to the Crown bona vacantia, but devolves upon other members of that beneficiary class as if the disqualified or disclaiming person were non-existent.”

45.  The second case is Probert v Commissioner of State Taxation (1998)  72 SASR 48, in which the testator died having bequeathed the net residue of his estate to his sister and niece in equal shares.  The sister executed a deed of disclaimer prior to the grant of probate.  The Commissioner of State Taxation assessed ad valorem stamp duty on the deed on the basis that it constituted a conveyance, within the meaning of section 60 of the Stamp Duties Act 1923 (South Australia), which operated as a voluntary disposition inter vivos of her half interest in the residuary estate of the testator under section 71(3)(b)  of the same Act. The sister challenged the assessment.

46.  Olsson J upheld the challenge. He rejected the Commissioner’s argument after considering Townson v Tickell, Re Scott, Deceased and In the Estate of Simmons (deceased), and held (at [37] and [38])  that:

“… The sole effect of the disclaimer, as and when it took effect, was to divest the disclaimer of the right to call upon the executor, upon assuming the mantle of trustee, to execute the trust in her favour in accordance with the will of the testator. There was no assignment in favour of anyone, because the effect of the disclaimer was to avoid any potential vesting of benefit in the disclaimer as if such a benefit never existed. The disclaimer, as and when it occurred, did not (and could not)  vest any property or any interest in property in any other person. You cannot assure to or vest in someone else that which has never vested in you. The mere fact that, following the disclaimer, Ms Hannaford became solely entitled to the residuary estate, when that estate was ascertained at some future date, was no more than an indirect legal incident of the disclaimer. The disclaimer itself did not effect the assuring to or vesting of any property, as such, in anyone.”

“The whole notion of a conveyance, which is reflected in the provisions in s 71(3)(b), envisages an act whereby one party executes an instrument which directly or indirectly vests real or personal property, in which the conveying party has a legal or equitable interest, to another. The Deed in the instant case did not do that. As I have said, it simply prevented a potential equitable interest in net residue, when ultimately ascertained, vesting in the appellant, as if she had never been named as a beneficiary. What repercussive effect flowed from that was incidental. There was no conveyance of property in the common law or statutory sense.”

47.  Ms Cheng also referred us to two Malaysian High Court decisions.  The first is Ch’ng Cheng Siew v Pemungut Duti Setem [2016] 1 AMR 557 at [21] to [24] which reviewed and applied the decisions in Townson v Tickell and Re Scott, Deceased.  The second the recent decision of Lee Koy Eng v Pemungut Duti Setem [2020] 7 AMR 296 at [18] to [22] which affirmed Ch’ng Cheng Siew v Pemungut Duti Setem.  We note Mr Liu’s submission that the law on this subject in Malaysia is not settled[16] and there was no discussion in the two cases on whether the transfers involved constituted conveyances or transfers, or deemed conveyances or transfers, operating as voluntary dispositions inter vivos under section 16 of the Malaysian Stamp Act 1949 (the equivalent of our section 27).

48.  The common theme of the line of cases mentioned above is that if an expectant beneficiary disclaims his interest, the administrator should simply leave him out of the consideration in the administration of the estate as if the person was non-existent or had never been named as a beneficiary.  The administrator should then distribute the estate to the remaining beneficiaries in accordance with the relevant law on intestacy.

49.  On these principles, the Deed in the present case, operating as a disclaimer, was to divest the 3 Siblings of their right to call upon the administratrix to distribute the Property in their favour, and to prevent any interests in the Property from being vested unto them.  There was no conveyance or transfer of interests in the Property.  The whole interests in the Property had remained with the Deceased’s estate throughout.  When the appellant, acting as the administratrix, came to distribute the Property in accordance with the IEO, she was acting in line with the above principles in leaving the 3 Siblings out of consideration as if they were never beneficiaries under the IEO.  She correctly distributed the estate, which comprised the Property, between herself and Alice as the only remaining beneficiaries under the IEO.

50.  Thus analysed, there is no logical distinction between the Assent and an “ordinary” assent.  It is a transfer from the appellant, as the administratrix representing the Deceased, to herself and Alice as the only expectant beneficiaries who did not disclaim the gift.  As with an “ordinary assent”, the appellant, in her capacity as the administratrix, was acting in accordance with the rules of intestacy under the IEO when she distributed the whole of the Property to herself and Alice.  There was no conveyance or transfer of interest of the Property to the 3 Siblings because they had disclaimed by the Deed, the effect of which was that the appellant and Alice became the only remaining beneficiaries entitled to the estate.  There is no proper basis to regard the Assent as effecting two dispositions of 40% and 60% interest of the Property. 

51.  In our view, the present situation is no different from where an expectant beneficiary has died before the estate is administered and distribution could be made to him.  The administrator would simply leave him out of consideration and distribute the estate to the remaining beneficiaries.  It is not the Collector’s position that this would amount to a disposition inter vivos.  It is difficult to see why, in the present case, there should be a distinction between the 40% and the 60% interest in the Property.  By the Assent, 100% of the Property was vested unto the appellant and Alice.  This was one disposition, not two dispositions.  Nor can it be said that the vesting of 100% of the Property to the appellant and Alice was a deviation from the original testamentary disposition under the IEO. The presumed testamentary intention of the Deceased is that which is presumed in accordance with the law.

52.  Mr Liu was unable to refer to any authorities that directly support his case that where some beneficiaries disclaim their expectant interests under the IEO, as a result of which the remaining beneficiaries receive a larger share of a deceased’s estate, the assent effecting such distribution to the remaining beneficiaries is chargeable with ad valorem stamp duty.  He sought to draw assistance from the Singaporean case, Tan Kay Thye & Ors v Commissioner of Stamp Duties which was also cited by the Judge (at [48] of the Decision). 

53.  In Tan Kay Thye, the deceased died intestate leaving two properties.  His first wife (and her children)  and his secondary wife (and her children)  entered into family arrangement to partition the properties.  In order to compensate for the disparity in the value of the properties, the secondary wife made an equality payment to the first wife.  The High Court of Singapore found that the net effect of the family arrangement was that the first wife and her children obtained a substantial benefit, which was more than what they would have obtained without the family arrangement.  As such, the deed of assent was held to be chargeable with stamp duty under section 16 of the Singaporean Stamp Duties Act (Cap 312, 1985 Ed), which provided for voluntary conveyance inter vivos.

54.  As counsel fairly acknowledged, the issue of whether the assent in question amounted to a disposition inter vivos was not argued in that case.  The court and the parties proceeded on the basis that it was a disposition inter vivos, and there was no analysis when the court said that (at 157)  on the undisputed evidence, there was no doubt that the assent was a voluntary disposition inter vivos.  We do not consider Tan Kay Thye advances the Collector’s position, as the case does not shed any light on the issue of whether an assent such as the Assent in the present case amounts to a disposition inter vivos.

55.  Tan Kay Thye was cited in So Kam Shing v Collector of Stamp Revenue at [25], which was followed by the Judge (see [47] of the Decision).  In So Kam Shing, which is an appeal against stamp duty assessment, the court, relying on Tan Kay Thye, held that the deed of family arrangement and the assent, pursuant to which two of the beneficiaries obtained a share in the deceased’s estate in excess of the interest to which they were entitled under intestacy, amounted to a voluntary disposition inter vivos under section 27(4)  of the SDO.  For the reasons explained above, we do not agree that the deed of family arrangement and the assent would amount to a disposition inter vivos or that Tan Kay Thye supports such a holding.  In our view, So Kam Shing was incorrectly decided.

56.  By way of a related note, Tan Kay Thye was also considered and applied in Ngai Sau Ying v Collector of Stamp Revenue [2019] HKCA 1104 at [64].  However, that case concerns division of matrimonial properties between a divorced couple pursuant to an order of the Family Court, which is a different context from intestacy as we are facing in the present case.

57.  Mr Liu cited a passage in Encyclopaedia of Hong Kong Taxation Vol 1 Stamp Duty at [257] which states:

“Where a deceased’s estate is divided up in accordance with a family arrangement this will normally involve a partition and no duty will be attracted by virtue of section 25(7). However, if one member of the family receives a larger share than that member is entitled to under the deceased’s will or under the rules of intestacy (whether by way of an agreement such as a deed of family arrangement or otherwise)  the instrument vesting the relevant property unto the ultimate beneficiary/beneficiaries will operate as a conveyance on sale in so far as any immovable property is involved and, by inference, a transfer of beneficial interest or a sale and purchase, as the case may be, as regards any Hong Kong stock involved (see Tan Kay Thye v CSD (Singapore)  (1991)  1 MSTC 7144, So Kam Shing and So Kam Wai v CSR [2019] 3 HKC 1, [2018] HKDC 503 (DC)  and Wong Suet Foon Shirly v CSR [2019] 2 HKLRD 227, [2019] HKCU 751, [2019] HKDC 268 (DC)). The chargeable amount is the ‘excess entitlement’, that is the value of property conveyed or otherwise transferred to a person in excess of his rights under the will of the deceased or the rules of intestacy.”

58.  It can be readily seen that the propositions stated in this passage are based entirely on Tan Kay Thye, So Kam Shing and the Judge’s decision, which we have in the discussions above pointed out do not support the case advanced by the Collector.  We do not think any assistance can be derived from this passage.

59.  It is also Mr Liu’s submission that it cannot be right that all assents executed by personal representatives cannot be inter vivos; otherwise even an assent involving a transfer of property to a third party not named in the will or under the IEO would not be chargeable with stamp duty.  This, he argued, would lead to a loophole for avoidance of tax.

60.  We do not agree.  First, the present case does not involve a transfer to a person not in accordance with the rules under the IEO.  Second, it is unclear what scenario was being contemplated.  If it was about an administrator transferring a property to a third party not named in a will or not under the IEO by way of a sale with a view to, for example, realising the property to satisfy claims or for distribution, then we agree with Ms Cheng that it would be a conveyance on sale of property and would be covered by section 4 of the Ordinance.  Section 27 of the Ordinance, which concerns voluntary dispositions would have no application in such a situation.

61.  For the above reasons, we conclude that the Assent is not chargeable with ad valorem stamp duty under section 27(1) of the Ordinance.

E3.  Whether the deeming provision in section 27(4)  applies?

62.  We then consider whether the Assent is nevertheless deemed to be a conveyance or transfer operating as a voluntary disposition inter vivos under section 27(4) of the Ordinance, which provides:

“Any conveyance or transfer (not being a disposition made in favour of a purchaser or incumbrancer or other person in good faith and for valuable consideration)  shall for the purposes of this Ordinance be deemed to be a conveyance or transfer operating as a voluntary disposition inter vivos, and (except where marriage is the consideration)  the consideration for any conveyance or transfer shall not for this purpose be deemed to be valuable consideration where the Collector is of opinion that by reason of the inadequacy of the sum paid as consideration or other circumstances the conveyance or transfer confers a substantial benefit on the person to whom the property is conveyed or transferred.”

63.  Mr Liu submitted that the deeming effect of section 27(4)  applies when, by reason of inadequate consideration or other circumstances, the conveyance or transfer confers a substantial benefit on the person to whom the property is conveyed or transferred[17].  For the meaning of conferment of substantial benefit, he referred to Baker v Inland Revenue Commissioners at 275-276, which was applied in Tan Kay Thye at 156D-H and So Kam Shing at [24] (both of which, as noted above, did not consider whether the assent in question amounted to a disposition inter vivos).

64.  We note firstly that it is not the Collector’s position that all assents that confer a substantial benefit on the person to whom the property is conveyed or transferred should be deemed to be dispositions inter vivos and become chargeable under section 27(1)  of the Ordinance.  The Collector’s position is only that an assent which deviates from the testamentary disposition of the Deceased under the IEO should be deemed as a disposition inter vivos.

65.  We have, for the reasons set out in E2 above, found that the Assent did not amount to a deviation from the testamentary disposition of the Deceased under the IEO.  The core basis of the Collector’s argument in respect of the application of section 27(4)  of the Ordinance to the Assent therefore falls away.

66.  Further and in any event, we agree with Ms Cheng[18] that section 27(4)  does not operate to deem an assent which is not a disposition inter vivos to be a disposition inter vivos.  This is so notwithstanding the broad wording of the first half of section 27(4), which states “Any conveyance or transfer (not being a disposition made in favour of a purchaser or incumbrancer or other person in good faith and for valuable consideration)  shall for the purposes of this Ordinance be deemed to be a conveyance or transfer operating as a voluntary disposition inter vivos …”.  On the face of it, this may seem broad enough to cover the Assent (and indeed any assent)  which is a conveyance or transfer. 

67.  However, one must have regard to the legislative intention.  As stated in Bennion on Statutory Interpretation (7^th ed) at p 463 at section 17.8, “[t]he intention of a deeming provision, in laying down a hypothesis, is that the hypothesis shall be carried as far as necessary to achieve the legislative purpose, but no further”.  The same point was made by Ribeiro PJ in Collector of Stamp Revenue v Arrowtown Assets Ltd (2003)  6 HKCFAR 517 at [15], when His Lordship referred to Lord Wilberforce’s dicta in W T Ramsay Ltd v Inland Revenue Commissioners [1982] AC 300:

“15. Lord Wilberforce acknowledged the need for such purposive interpretation, stating:

A subject is only to be taxed upon clear words, not upon ‘intendment’ or upon ‘equity’ of an Act.  Any taxing Act of Parliament is to be construed in accordance with this principle. What are ‘clear words’ is to be ascertained upon normal principles: these do not confine the courts to literal interpretation.  There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded …”

68.  In respect of section 27(4), its legislative purpose is to prevent evasion of duty by the use of inadequate consideration or other circumstances.  As explained by Lord Wilberforce in Lap Shun Textiles Industrial Co Ltd v Collector of Stamp Revenue [1976] AC 530 at 533C-F:

“It is reasonably clear what section 27 was intended to achieve. In the first place it charges voluntary conveyances, i.e., conveyances for which no valuable consideration is given, with ad valorem duty based on the value of the property conveyed. In the second place it prevents evasion of this duty by presenting what may in substance be a voluntary disposition as a conveyance for valuable consideration through insertion of a nominal consideration, or an inadequate consideration. The question is whether in addition to these objectives it achieves another, namely the charging on a value basis of conveyances on sale where the consideration is inadequate. The question whether this was intended cannot be answered a priori; it can only be answered upon a consideration of what subsection (4), fairly construed as a whole, can be found to achieve.

As to this, their Lordships are in no doubt: the subsection is clear and lacking in ambiguity. Having, in the initial parenthesis, excepted from its grasp dispositions in good faith and for valuable consideration, it continues in the second limb to remove from this exception certain particular cases. One such case is composed of the following elements: (i)  inadequacy of consideration, (ii)  the opinion of the collector that by reason of this inadequacy a substantial benefit is, by the conveyance or transfer, conferred on the transferee. Another such case, not directly relevant to the present case, depend upon the existence of ‘other circumstances’ instead of inadequacy of consideration.” (emphasis added)

69.  In our view, the present case is far removed from what the deeming provision in section 27(4)  sets out to catch.  We do not consider that it is the legislative intention of section 27(4) to deem an assent like the Assent in the present case, which is not a disposition inter vivos, to be a disposition inter vivos rendering it chargeable with ad valorem stamp duty. 

70.  Further, if indeed it is the intention of the legislature that assents by personal representatives should be deemed as dispositions inter vivos by operation of section 27(4)  and should generally be chargeable with ad valorem stamp duty, it is difficult to understand why dispositions are required to be inter vivos in section 27(1).  The inclusion of inter vivos in section 27(1)  is a clear indication that assents are not intended to be dutiable.

71.  For these reasons, we are of the view that section 27(4) only applies to a conveyance or transfer for consideration, but the consideration is deemed not to be valuable consideration because, by reason of inadequacy of the consideration paid or other circumstances, a substantial benefit is conferred on the person to whom the property is conveyed or transferred.  In short, it is to deem a conveyance or transfer with valuable (but inadequate) consideration, which as a matter of law is not voluntary, to be voluntary.  It is not intended to deem a conveyance which is not inter vivos to be inter vivos. 

72.  Accordingly, as the Assent is not an inter vivos disposition, we hold that section 27(4)  does not apply so as to make it chargeable with ad valorem stamp duty under section 27(1)  of the Ordinance.

E4.  Conclusion

73.  For the reasons set out above, we have concluded that the Assent is not chargeable with ad valorem stamp duty under section 27(1) and/or section 27(4) of the Ordinance.  On this basis, we have allowed the appellant’s appeal.

74.  It is therefore not necessary for us to determine the remaining two issues as to the applicability of the exemption under section 27(5), and the applicability of section 29AL(2)  which provides for a lower rate under Scale 2 of Head 1(1)  in the First Schedule.  However, given the comprehensive submissions we had received from Mr Liu and Ms Cheng on these issues, we would briefly indicate our views below.

F.  Issue (2): Does the section 27(5)  exemption applies?

75.  Section 27(5) of the Ordinance reads as follows:

“Nothing in this section shall apply to a conveyance or transfer made for nominal consideration for the purpose of securing the repayment of an advance or loan or made for effectuating the appointment of a new trustee, whether the trust is expressed or implied, or under which no beneficial interest passes in the property conveyed or transferred, or made to a beneficiary by a trustee or other person in a fiduciary capacity under any trust, whether expressed or implied, and this subsection shall have effect only if the circumstances exempting the conveyance or transfer from charge under this section are set forth in the conveyance or transfer.”

76.  The issue is whether the conveyance or transfer by way of the Assent was “made to a beneficiary by a trustee or other person in a fiduciary capacity under any trust, whether expressed or implied”, which is what had been referred to as “exemption (4)” by the Collector (“the Trustee-Beneficiary Exemption”).

77.  The Collector’s position is that this exemption does not apply to the Assent.  It is principally because all interest in the Property was vested by the Assent and there is no trust relationship (express or implied)  between the appellant as administratrix and herself and Alice as beneficiaries[19]. While accepting that personal representatives owe fiduciary duties to the expectant beneficiaries and are subject to the Trustee Ordinance, Cap. 29, the Collector submitted that there is a distinction between the office of a personal representative and that of an actual trustee: Probate Practice in Hong Kong (3^rd ed)  at [10.071] to [10.091]; Snell’s Equity at [21-048] to [21-054]; and Professor Sherrin’s article “Aut Ovis Aut Capra: Personal Representative or Trustee?” (1995) 25(2) HKLJ 239 at 250 and 253.

78.  Ms Cheng agreed with the Collector’s submissions on this issue, referring also to Ayerst v C & K (Construction)  Ltd [1976] AC 167 at 178A-C and Williams, Mortimer & Sunnucks on Executors, Administrators and Probate at [76-02].  She further submitted[20] that an assent is necessary to effect the transition in capacity from a personal representative to a trustee, relying on Re King’s Will Trusts [1964] Ch 542 at 548 and Kleinwort Benson (Hong Kong) Trustees Ltd v Wong Foon Hang & Ors, supra, at 660.

79.  We agree there is a distinction between the office of the personal representative and that of a trustee.  Among other differences, a “true” trustee holds the legal title of a property on behalf of a “true” beneficiary who is entitled to the beneficial interests in the property.  In contrast, as explained above, the expectant beneficiary of an estate is not entitled to any beneficial interests in the estate until the residue of the estate is ascertained: see In re Hayes’ Will Trusts [1971] 1 WLR 758 at 764G-H; and Williams, Mortimer & Sunnucks on Executors, Administrators and Probate at [76-02]

80.  Lord Diplock explained why an estate is not a trust, and why a personal representative is not a trustee, in Ayerst v C & K (Construction)  Ltd [1976] AC 167 at 178A-C as follows:

“No one would suggest that an executor, who was not also a legatee, was beneficial owner as well as legal owner of any of the property which was in the full ownership of the deceased before his death. He could not enjoy the fruits of it himself or dispose of it for his own benefit. Yet because an estate while still in course of administration was incapable of satisfying the technical requirement of a ‘trust’ in equity that there had to be specific subjects identifiable as the trust fund, it was impossible to identify, at any rate in the case of residuary legatees, a person or persons in whom the beneficial ownership in any particular property forming part of the estate was vested.”

81.  Notwithstanding the above, it is well-established that the relationship between a personal representative and expectant beneficiaries could be transformed into one between a trustee and beneficiaries.  In Eaton v Daines [1894] WN 32, which concerned the validity of the executors’ appointment of new trustees of a will, Kekewich J held that since at the time of the appointment the estate had been cleared of payment of debts and funeral and testamentary expenses, “[t]he trust property remained in the executor, and it must be taken that there had been a passage from the office of executor to that of trustee”.  As such, there was power to appoint new trustees of the will, and the deed of appointment was good. 

82.  Similarly, in Re Cockburn’s Will Trusts [1957] Ch 438, at 439, Danckwerts J held that the administrators having cleared the estate and completed the administration are in a position to appoint new trustees of the will.  It was because “[w]hether persons are executors or administrators, once they have completed the administration in due course, they become trustees holding for the beneficiaries either on an intestacy or under the terms of the will, and are bound to carry out the duties of trustees, though in the case of personal representatives they cannot be compelled to go on indefinitely acting as trustees and are entitled to appoint new trustees in their place …”  See also the case of In re Ponder [1921] 2 Ch 59, referred to in Re Cockburn’s Will Trusts at 440, which followed Eaton v Daines.

83.  It may be argued that Eaton v Daines, In re Ponder and Re Cockburn’s Will Trusts are consistent with Lord Diplock’s dicta in Ayerst v C & K (Construction)  Ltd (see [80] above).  Once the administration has been completed and the residue has been ascertained, the main objection to an estate being a trust (i.e. the lack of a specific identifiable subject)  ceases to exist.  Further, as the only remaining task of the personal representative at that stage is to distribute the residuary estate to the beneficiaries, the nature of his/her role and responsibilities is akin to that of a bare trustee holding assets for beneficiaries absolutely entitled thereto. 

84.  This brings us to a consideration of Ms Cheng’s submission, which was shared by the Collector, that an assent is necessary to effect the transition in capacity from a personal representative to a trustee. Both Ms Cheng and Mr Liu referred to Re King’s Will Trusts, in which it was argued that where a personal representative was also entitled in some other capacity, for example, as trustee of the will, he might come to hold the estate in that capacity without any written assent.  Pennycuick J (as he then was)  rejected the argument, and held that a written assent is necessary to vest a legal estate in land from a personal representative unto himself/herself as trustee, after considering section 36(4)  of the Administration of Estates Act 1925 (the English equivalent of section 66(3)[21] of the Probate and Administration Ordinance, Cap. 10 (“the PAO”)).

85.  Re King’s Will Trusts was followed by Rhind J in Kleinwort Benson (Hong Kong)  Trustees v Wong Foon Hang.  In that case, the issue was whether the plaintiff, who had completed the administration of the testator’s estate, without executing a written assent, changed its capacity from a personal representative to a trustee in respect of the real property it was holding.  While noting that Re King’s Will Trusts has been criticised for overlooking a long line of cases which should have led to a different conclusion[22], Rhind J took the view the case had resonances of what was said in the House of Lord’s decision in Attenborough v Solomon [1913] AC 76 about the common law position (at 658-660). Applying Re King’s Will Trusts, he held that since there had to be a divesting of title of the property from the personal representative in that capacity and a re-vesting in the same person but in the different capacity of trustee, the assent fell within section 66(3)  of the PAO and must be in writing. 

86.  In Re Edward’s Will Trusts [1982] Ch 30, at 40F-G, the English Court of Appeal after considering Re King’s Will Trusts held that an assent to the vesting of beneficial interest need not be in writing and may be inferred from conduct. It may be argued that implicit in its decision, the English Court of Appeal accepted that an assent was required and the beneficial interest did not just pass upon the completion of administration of an estate.  That an assent (whether in writing or implied)  is necessary for the passing of beneficial interests is also supported by Snell’s Equity at [2-102], [21-020] and [33-002], and Probate Practice in Hong Kong at [10.049], [10.053] and [10.88].  

87.  On the other hand, the Eaton v Daines, In re Ponder and Re Cockburn’s Will Trusts line of authorities may be read as supporting the proposition that once the administration is complete the personal representative becomes a trustee of the net residue for the persons beneficially interested: see Williams, Mortimer & Sunnucks on Executors, Administrators and Probate at [76-02].  A similar view was also taken in The Annotated Ordinance of Hong Kong – Intestates’ Estates Ordinance (Cap. 73) at [9.01] and [9.02].

88.  It should also be noted that Re King’s Will Trusts concerned the vesting of legal estate by a personal representative unto himself as trustee.  It did not address directly the present issue of whether an assent is necessary for the passing of beneficial interests to the expectant beneficiaries.  While no legal estate is vested unto the personal representative as trustee, once a personal representative has parted with the beneficial interests in the property and passed the beneficial interests to the beneficiaries, he (albeit still acting as a personal representative)  would merely hold the legal title on behalf of the beneficiaries and would become a “trustee” in this sense.  It may be argued that having regard to the broad wording of the Trustee-Beneficiary Exemption under section 27(5) (i.e. “made to a beneficiary by a trustee or other person in a fiduciary capacity under any trust, whether expressed or implied”), a conveyance or transfer by such a “trustee” comes within the exemption.

89.  Further, section 9 of the IEO provides that

“Subject to his rights and powers for the purposes of administration, the personal representative of any person dying intestate shall be a trustee for the persons beneficially entitled under this Ordinance in respect of the residuary estate of the deceased unless it appears from the will, if any, of the deceased that he is to take the residuary estate beneficially.”

90.  Mr Liu acknowledged the apparent effect of section 9 of making the personal representative of any person dying intestate a “trustee’, but argued that such a “trustee’ is not a trustee in the “continuing beneficial trust” sense.  Ms Cheng further submitted that in light of Re King’s Will Trust and Kleinwort Benson (Hong Kong)  Trustees v Wong Foon Hang, section 9 of the IEO would only operate to vest a real property in the residuary estate on the personal representative as trustee when there has been a written assent in compliance with section 66(3)  of the PAO.  On a plain reading of the provision, however, section 9 imposes no requirement that an assent (whether in writing or implied)  has to be made after the completion of the administration in order to make the transition from being a personal representative to being a trustee.

91.  It is not necessary for us to decide whether section 9 of the IEO operates to change the relationship into one of trustee and beneficiary upon the completion of the administration, an interpretation which may be regarded as consistent with the Eaton v Daines, Re Ponder and Re Cockburn’s Will Trusts line of authorities.  It is also not necessary to come to a definitive view on whether an assent is required to pass the beneficial interest in the estate to the beneficiaries.

92.  On the materials before us, there is no evidence as to whether the administration of the Deceased’s estate had been completed before the Assent.  It is in fact common ground that no beneficial interests in the Property were vested before the Assent.  On this basis, we would agree that the Trustee-Beneficiary Exemption, hence section 27(5)  would not apply if the Assent was chargeable under section 27(1).

G.  Issue (3): Does section 29AL apply?

93.  The third issue concerns the applicable scale of rates.  Section 29AL of the Ordinance provides that:

“(1)  A conveyance on sale is chargeable with stamp duty under Scale 2 of head 1(1) in the First Schedule if –

(a)  the property concerned is a residential property; and

(b)  it is shown to the satisfaction of the Collector that subsection (2) applies to the conveyance.

(2)  This subsection applies to the conveyance if, on the date of acquisition of the property –

(a)  the transferee, or each of the transferees, under the conveyance is closely related to the transferor, or to each of the transferors, under the conveyance;

(b)  where there is more than one transferee under the conveyance, the transferees are also closely related; and

(c)  that transferee, or each of those transferees, is acting on his or her own behalf.

(3)  For the purpose of subsection 2(a), if a transferor is acting in the transaction as a trustee for another person, that other person is treated as the transferor in place of the trustee.”

94.  The Collector argued that section 29AL does not apply[23]. First, it was submitted the appellant executed the Assent in her capacity as the administratrix of the Deceased’s estate, and an administratrix and the beneficiaries are not “closely related” under section 29AD of the Ordinance. It was also said that as an administratrix is not a trustee, section 29AL(3)  is not applicable.  Moreover, it is contended that while the appellant and Alice are sisters, the appellant did not transfer the Property in her personal capacity and should not be regarded as such.  This is because, if the appellant were to be treated as transferring the interest in the Property “from herself to herself”, an anomaly would be created in that: (i)  a transaction “from oneself to oneself” is not covered by the definition of “closely related persons” under section 29AD of the Ordinance; and (ii)  while one part of the vesting of interest (i.e. the part from the appellant to the appellant)  is not covered, the other part (i.e. from the appellant to Alice)  is so covered.

95.  Ms Cheng, while agreeing that the appellant was acting in her capacity as the administratrix of the Deceased’s estate and not in her personal capacity[24], considered that one should have regard to the substance of the office of a personal representative[25]. Relying on the authorities mentioned in paragraph 33 above,  she pointed out that since a personal representative represented and stepped into the shoes of the deceased in administering the estate, it would be inappropriate to speak of the office of a personal representative as if it had an independent capacity other than representing the deceased.  Properly considered, when a personal representative made a conveyance or transfer, it was the deceased, whom the personal representative represented that should be regarded as the transferor.  In the premises, as the transferees in the present case are the daughters of the Deceased (who was the transferor), and are sisters themselves, the Assent was between closely related persons within the meaning of sections 29AD and 29AL(2).  It follows that ad valorem stamp duty should only be charged under Scale 2 of Head 1(1)  of the First Schedule.

96.  In our view, there is force in Ms Cheng’s interpretation of section 29AL and her submission that the Collector should have regard to the fact that a personal representative represents and steps into the shoes of the deceased in administering the estate.  We do not agree that section 29AL(3), which provides an exception for trustee, has the effect of excluding all other situations where a person, who is not a trustee, acts on behalf of another person in making a conveyance or transfer.

97.  Ms Cheng further drew our attention to the legislative background and intention of the Stamp Duty (Amendment)  Bill 2013 which introduced the higher scale of rates[26]. The increase in ad valorem stamp duty was designed to “address the overheated property market” and to “reinforce management of demand for residential properties and forestall the shifting of speculation and investment demand from the residential property market to the non-residential property market”[27]. Exemption was specifically provided for transfers of residential property between closely related persons[28].

98.  Having considered the legislative background, we do not believe the legislature had intended that Scale 1 rates should apply to the situation where (as in the present case)  an administratrix transfers property of the estate to the transferee beneficiaries in accordance with the IEO.  As pointed out by Ms Cheng, levying a higher scale of ad valorem stamp duty in such a situation would not address the mischief of an overheated property market caused by speculation and investment demands.  Further, it would be absurd if a person could enjoy Scale 2 rates in conveying residential property to his/her close relatives during his/her lifetime, but would have to pay Scale 1 rates when his/her personal representative made such a transfer, either in accordance with a will or the IEO, after his/her death.

99.  Contrary to Mr Liu’s submission, we do not consider any significance can be attached to the fact there is nothing in the legislative materials to indicate that double ad valorem stamp duty “is to exclude the vesting of excess entitlement in the interest of the estate unto an ultimate beneficiary”. If anything, the omission would tend to support our view that the increase in ad valorem stamp duty was not intended to apply to situations like the present in the first place.

100.  For the above reasons, we are of the view that even if the Assent is chargeable with ad valorem stamp duty and section 27(5)  does not apply, the lower rates under Scale 2 of Head 1(1)  in the First Schedule should be charged by virtue of section 29AL.

H.  Disposition

101.  For all the above reasons, we have allowed the appeal.  The Judge’s order of 27 February 2019 is set aside.  The stamp duty paid by the appellant shall be repaid to her by the Collector.

102.  Costs should follow the event.  The costs of this appeal, including the costs of the application for leave to appeal before the Judge or in CAMP 137 of 2019, and the costs of the action below (together with a certificate for counsel)  be paid by the Collector to the appellant, to be taxed if not agreed.

103.  We are also grateful to the valuable assistance rendered by Ms Cheng as amicus.