HO KWOK TAI v. COLLECTOR OF STAMP REVENUE

CACV 52/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 52 OF 2016

(ON APPEAL FROM HCAL 49/2015)

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J U D G M E N T

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Hon Chow J (giving the judgment of the court):

introduction

1. In February 2013, the Government announced a new round of stamp duty measures with a view to addressing what the Government considered to be an overheated property market in Hong Kong showing signs of excessive exuberance.  Very broadly stated, the Government proposed to double across the board the rates of the then existing ad valorem stamp duty (“ADV”) on instruments relating to the sale and purchase of both residential and non-residential properties in Hong Kong subject to a number of specified exceptions, one of which related to the situation where a Hong Kong permanent resident, being the owner of an existing residential property, purchased a new residential property and then disposed of his original property within a short period of time.

2. The present appeal concerns the ambit or scope of the aforesaid exception.  In particular, the issue in this appeal is whether a Hong Kong permanent resident who owned two (or more) residential properties is entitled to a refund of half of the stamp duty, commonly referred to as “Double Ad Valorem Duty”, that he has paid in relation to the purchase of a new property if he disposed of all the properties that he owned at the time of the acquisition of the new property within a specified statutory period, there being no dispute that if he owned only one residential property and disposed of it in like circumstances, he would be entitled to a refund.  The answer to this issue depends on the true construction of Section 29DF(2)(b) of the Stamp Duty Ordinance, Cap 117 (“the Ordinance”).

Basic facts

3. The relevant facts of this case are not in dispute, and have been fully set out in the written Judgment of Deputy High Court Judge Keith dated 18 February 2016.  The following brief summary suffices for the purpose of the present appeal.

4. The applicant (“Mr Ho”) and his wife were formerly the registered joint owners of two residential properties in Tsing Yi (“Property 1” and “Property 2”) which they purchased in 1995 and 2006 respectively.

5. In 2013, Mr Ho and his wife decided to purchase a new, larger, residential property in view of the arrival of their second child.  They intended to finance the purchase of the new property by selling their two existing properties.  At that time, Mr Ho, his wife and their first child were living in Property 2, while Property 1 was being occupied by Mr Ho’s wife’s brother rent-free.

6. On 12 June 2013, Mr Ho entered into a provisional agreement (“the Provisional Agreement”) for the purchase of a new property in Ma Wan (“Property 3”).

7. On 15 June 2013, Mr Ho and his wife entered into a provisional agreement for the sale of Property 2.

8. On 25 June 2013, Mr Ho entered into a formal agreement for the purchase of Property 3 (“the Formal Agreement”).  On 28 June 2013, the Formal Agreement was stamped and HK$273,750 was paid by Mr Ho as ad valorem stamp duty on that instrument.

9. On 8 August, 2013, Mr Ho and his wife entered into a provisional agreement for the sale of Property 1.

10. On 15 August 2013 and 23 September 2013, Mr Ho and his wife assigned Property 2 and Property 1 to the respective purchasers.

11. On 7 October 2013, Property 3 was assigned to Mr Ho pursuant to the Formal Agreement.

12. On 25 July 2014, the Stamp Duty (Amendment) (No 2) Ordinance 2014 was enacted.  On 20 August 2014, Mr Ho paid the sum of HK$273,750 as additional ad valorem stamp duty (“the Additional AVD”) on the Formal Agreement.

13. On 6 November 2014, Mr Ho applied for a refund of the Additional AVD.  The application was rejected by the Collector of Stamp Revenue (“the Collector”) by a letter dated 15 January 2015 on the ground that the refund was only available to a Hong Kong permanent resident who disposed of “his or her only other residential property” upon proof that the original residential property was disposed of within 6 months after the date of assignment of the new property.  The Collector considered that, since Mr Ho was the beneficial owner of more than one residential property as at the date of acquisition of the new property, he was not entitled to a refund of the Additional AVD.

14. On 13 April 2015, Mr Ho sought leave to apply for judicial review of the Collector’s decision on a number of grounds.  Leave to apply for judicial review was granted by Anthony Chan J limited to 3 particular grounds, namely:-

(1)  the Collector erred in law by mis-interpreting Section 29DF of the Ordinance;

(2)  the Collector mis-applied Section 29DF in any event; and

(3)  frustration of Mr Ho’s legitimate expectation that he could receive a refund of the Additional AVD.

15. In what follows, unless the context indicates otherwise, references to Sections shall be references to the sections of Ordinance.

JUDGMENT OF DEPUTY HIGH COURT JUDGE KEITH

16. The substantive application for judicial review came before Deputy High Court Judge Keith on 6 January 2016.  In a reserved judgment handed down on 18 February 2016 (“Judgement”), the learned Judge found in favour of Mr Ho on the construction of Section 29DF, in particular sub‑paragraph (2)(b) thereof, but rejected his argument on the issue of legitimate expectation.  In order to adequately explain the learned Judge’s reasoning in respect of his construction of Section 29DF(2)(b), it will be necessary to examine in greater detail the meaning and inter-relationship of a number of provisions in the Ordinance, which we shall do later in this judgment.

17. In consequence of his conclusion on the construction of Section 29DF(2)(b), the learned Judge considered that Mr Ho had satisfied all the conditions which would entitle him to a refund of the Additional AVD.  The Judge therefore made an order dated 18 February 2016 (“the Order”) allowing Mr Ho’s application for judicial review and directing the Collector to refund the Additional AVD to him. 

Notice of appeal

18. By a Notice of Appeal dated 15 Mach 2016, the Collector appealed against the Order, contending that the learned Judge erred in his construction of Section 29DF(2)(b) and wrongly held that Mr Ho had met the condition in that provision.

19. Mr Ho has not filed any respondent’s notice.  Accordingly, the issue of legitimate expectation has fallen away, leaving the true construction of Section 29DF(2)(b) as the only issue to be considered in this appeal.

Proper approach to statutory interpretation

20. The proper approach to statutory interpretation in this jurisdiction is well settled.  Nowadays, the court adopts a purposive approach to statutory interpretation.  In Moulin Global Eyecare Trading Ltd (in liquidation) v Commissioner of Inland Revenue [2012] 2 HKLRD 911, Kwan JA (with whom Fok JA and Lam J, as they then were, agreed) set out the proper approach at paragraphs 31 and 32 of her judgment, as follows:-

“31. The principles for statutory interpretation are well established. The modern approach is to adopt a purposive approach interpretation and the context of a statutory provision should be taken in its widest sense (HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 at paras 11 to 14). The statute shall receive such fair, large and liberal construction as will best ensure the attainment of its object (Interpretation and General Clauses Ordinance, Cap 1, section 19). The relevant provisions of the legislation should be read together and in the context of the whole statute as a purposive unity in its appropriate legal and social setting; it is necessary to identify the interpretativeconsiderations involved and, if they conflict, to weigh and balance them (Medical Council of Hong Kong v Chow Siu Shek (2000) 3 HKCFAR 144 at 154B to C).

32. The use of extrinsic materials is for a limited purpose, it is to enable the court to understand the factual context in which the statute was enacted and the mischief at which the statute was aimed, and not for the purpose of construing the words of the statute (Director of Lands v Yin Shuen Enterprises Ltd & Anr (2003) 6 HKCFAR 1 at paras 21 and 22). The purpose of a statutory provision may be evident from the provision itself, the recommendation of a report, the explanatory memorandum to the bill, or a statement in the Legislative Council by the responsible government official relating to the bill (Cheung Kwun Yin, supra at para 14).”

21. It is also now well settled that the court should have regard to the context and purpose of the legislation whenever any issue of construction of a statute arises.  They are relevant to a proper understanding of the statute in the first instance, and not merely at some later stage when it is thought that there is some ambiguity in the statute which has to be resolved.  That this is the correct approach has recently been reiterated by the Court of Appeal in Good Mark Industrial Limited v Commissioner of Inland Revenue [2015] 2 HKLRD 16.  After referring to the above passages in the judgment of Kwan JA in Moulin, Cheung JA (with whom Yuen and Chu JJA agreed) went on to state at paragraph 4.2 as follows:-

“In addition it is necessary to point out that the underlying theme of the purposive approach is that the context and purpose should be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity may be thought to arise: per Sir Anthony Mason NPJ in HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 paragraph 63 and reaffirmed in Vallejos Evangeline Banao v Commissioner of Registration & Another [2013] 2 HKLRD 533 at paragraph 77.”

22. These having been said, it is important to bear in mind that, notwithstanding the court’s readiness to consider the context and purpose of the legislation in any interpretative exercise, the court’s task is still to ascertain the intention of the legislature “as expressed in the language of the statute”, and not “the legislative intent on its own”.  In HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568, the following was stated by Li CJ:-

“11. In interpreting a statute, the court’s task is to ascertain the intention of the legislature as expressed in the language of the statute. This is of course an objective exercise. The court is not engaged in an exercise of ascertaining the legislative intent on its own. As Lord Reid pointed out in Black-Clawson International Ltd v Papierwerke Waldhof – Aschaffenburg AG [1975] AC 591 at 613G.

‘We often say that we are looking for the intention of Parliament, but that is not quite accurate. We are seeking the meaning of the words which Parliament used.’

12. The modern approach is to adopt a purposive interpretation. The statutory language is construed, having regard to its context and purpose. Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning. Context and purpose are considered when interpreting the words used and not only when an ambiguity may be thought to arise.”

23. The importance of focusing on the actual words used in the statute in any interpretative exercise was also highlighted by Ma CJ in his judgment in Leung Chun Ying v Ho Chun Yan Albert (2013) 16 HKCFAR 517, at paragraph 12:-

“As has been reiterated recently by this Court, the proper starting point in statutory interpretation, as well as constitutional and contractual interpretation, is to look at the relevant words or provisions having regard to their context and purpose.”

24. Hence, notwithstanding the now well established purposive and contextual approach to statutory interpretation, the court cannot attribute to a statutory provision a meaning which the language, understood in the light of its context and purpose, cannot bear.  As Fok PJ stated in T v Commissioner of Police (2014) 17 HKCFAR 593, at paragraph 195:-

“Nevertheless, the object of the exercise is to ascertain the legislative intent of the language of the statute and, in this regard, a court cannot attribute to a statutory provision a meaning which the language, understood in the light of its context and statutory purpose, cannot bear: see HKSAR v Lam Kwong Wai at §63 and China Field Ltd v Appeal Tribunal (Buildings) (No.2) (2009) 12 HKCFAR 342 at §36.”

25. In the same judgment, at paragraph 222, Fok PJ referred to the following observation of Lord Millet in China Field Ltd v Appeal Tribunal (Buildings) (No 2) (2009) 12 HKCFAR 342, at paragraph 36:-

“There can be no quarrel with the principle that statutory provisions should be given a purposive interpretation, but there has been a distressing development by the courts which allows them to distort or even ignore the plain meaning of the text and construe the statute in whatever manner achieves a result which they consider desirable. It cannot be said too often that this is not permissible. Purposive construction means only that statutory provisions are to be interpreted to give effect to the intention of the legislature, and that intention must be ascertained by a proper application of the interpretative process. This does not permit the Court to attribute to a statutory provision a meaning which the language of the statute, understood in the light of its context and the statutory purpose, is incapable of bearing.”

26. To the same effect is the following observation of Lord Neuberger NPJ in T v Commissioner of Police, at paragraph 278:-

“The issue is one of statutory interpretation, and I agree with Ribeiro PJ and Fok PJ that the statutory language must be interpreted in the light of its context and purpose, as laid down in the cases to which he refers in paras 48 and 194 of their respective judgments. However, as Fok PJ says in para 195, that should not be seen as a judicial licence to ignore or refuse to give effect to the words which the legislature has chosen to use: when construing an Ordinance, the court is an interpreter not a legislator. When considering what is sometimes referred to as a purposive approach, it is salutary to bear in mind what was said by Lord Millett NPJ in China Field Ltd v Appeal Tribunal (Buildings) (No 2) (2009) 12 HFCFAR 342, para 36, quoted by Fok PJ at para 222 of his judgment.”

Statutory context and purpose

27. As stated in the Explanatory Memorandum to the Stamp Duty (Amendment) Bill 2013, the main object of the Bill is to amend the Stamp Duty Ordinance to increase the stamp duty on certain instruments dealing with immovable property and to make agreements for sale of non-residential property chargeable with stamp duty.

28. The general background to the Stamp Duty (Amendment) Bill 2013 (which later became the Stamp Duty (No 2) Ordinance 2014 in July 2014) is set out in a Legislative Council Brief prepared by the Financial Services and Treasury Bureau when the Bill was introduced into the Legislative Council on 17 April 2013, as follows:-

“2. In October 2012, the Government introduced enhanced Special Stamp Duty (SSD) and Buyer’s Stamp Duty (BSD) to address the overheated residential property market. The two measures have effectively reduced short-term resale by speculators and the purchase of residential properties by buyers who are not HKPRs. The upward momentum in flat prices was temporarily arrested and transactions plunged sharply in November and December 2012.

3. However, on entering 2013, there were renewed signs of exuberance in the residential property market amidst a low interest rate and abundant liquidity environment. The residential property market is apparently moving further away from economic fundamentals, with heightened risk of a property market bubble. Meanwhile, there were also signs of overheating in the non-residential property market, as evidenced by soaring prices throughout 2012 along with hectic trading activities in respect of retail, office and flatted factory space.

4. Against such backdrop, we see the need to introduce further demand-side measures to dampen local demand for residential and non-residential properties, targeting all persons except HKPRs buying residential properties but who do not own any residential property in Hong Kong on the date of acquisition. Having consulted the Executive Council on 22 February 2013, the Government announced on the same day the new demand-side management measures as set out in paragraph 1(a) to (c) above.

5. By further managing the demand for residential properties and combating short-term resale activities in respect of non-residential properties, we hope that the proposed new measures will help narrow the supply-demand gap, and hence contribute to the stable development of our property market.”

29. In the Legislative Council Brief, it is also mentioned that, subject to a number of specified exceptions, the enhanced stamp duty rates would be applicable to all transactions.  One of the specified exceptions relates to the situation where:-

“the purchaser(s)/transferee(s) is/are Hong Kong Permanent Residents (HKPRs) who is/are not beneficial owner(s) of any other residential property in Hong Kong on the date of acquisition (which means the date when the first chargeable agreement or conveyance is executed, if there is more than one such instrument)”[1].

30. As further elucidation of this exception, it is stated in the Legislative Council Brief that:-

“12. … A HKPR who has signed a chargeable agreement for sale for the disposal of his/her old residential property before acquiring a new residential property would not be regarded as the beneficial owner of his/her old residential property and hence would only be charged the old AVD rates for the acquisition of the new residential property…

15. As set out in paragraph 12 above, HKPRs who have disposed of all their old residential properties before acquiring a new residential property (“先賣後買”) would be charged the old AVD rates. As for HKPR purchasers/transferees who acquire a new residential property before disposing of their original one (must be their only other residential property) (“先買後賣”), they have to pay stamp duty on the instrument for the newly acquired property at the enhanced AVD rates (applicable instrument) in the first instance. Yet, the Bill proposes to provide for a refund mechanism, whereby after the disposal of the old property is completed, IRD will refund, on application by the HKPR purchasers/transferees within two years from the date of the applicable instrument, the stamp duty for the difference between the enhanced and the old AVD rates on the newly acquired property, on the condition that the agreement to dispose of their old property was entered into within six months from the date of the applicable instrument[2].”

31. In other words:-

(1)  a Hong Kong permanent resident who disposes of all his existing residential properties before acquiring a new residential property would only need to pay AVD at the old rates in relation to the acquisition of the new property (“the sell-first-buy-later exception”); and

(2)  a Hong Kong permanent resident who acquires a new residential property before disposing of his original residential property within a specified period would be entitled to a partial refund of the AVD (charged at the enhanced rates) paid in relation to the acquisition of the new property such that he would, effectively, be put in the same position as (1) above (“the buy-first-sell-later exception”).

32. The policy reason behind these exceptions is explained in paragraph 9 of the Legislative Council Brief, as follows:-

“Having regard to the Government’s prevailing policy of according priority to the housing needs of HKPRs, we are mindful that any new measures to address the overheated property market should not impose undue financial burden on HKPRs who aspire to be homeowners.”

33. Although the policy reason behind these exceptions is to accord priority to the housing needs of Hong Kong permanent residents and that Hong Kong permanent residents who aspire to be homeowners should not be subject to undue financial burden, it is important to bear in mind that the precise scope of the exceptions is a matter for the legislature, and the court’s task is to ascertain the relevant legislative intent as expressed in the language of the statute.

Proper construction of Section 29DF(2)(b)

34. The statutory provision which entitles a Hong Kong permanent resident who acquires a new residential property before disposing of his original residential property within a specified statutory period to a partial refund of the enhanced AVD paid in relation to the acquisition of the new property, ie the buy-first-sell-later exception, is to be found in Section 29DF, which provides as follows:-

“(1) In this section -

applicable instrument means an instrument -

(a) under which a residential property … is acquired; and

(b) on which stamp duty had been paid according to Scale 1 of head 1(1) [3], or Scale 1 of head 1(1A) [4], in the First Schedule;

original property, in relation to a person who acquires a subject property under an applicable instrument, means another residential property … of which the person is a beneficial owner on the date of that acquisition;

specified amount means -

(a) for an applicable instrument on which stamp duty had been paid according to Scale 1[5] of head 1(1)in the First Schedule - an amount equal to the difference between the stamp duty paid and the stamp duty that would have been payable on that instrument if it were chargeable under Scale 2[6] of head 1(1) in the First Schedule in accordance with Division 2; or

(b) for an applicable instrument on which stamp duty had been paid according to Scale 1 of head 1(1A)in the First Schedule - an amount equal to the difference between the stamp duty paid and the stamp duty that would have been payable on that instrument if it were chargeable under Scale 2 of head 1(1A) in the First Schedule in accordance with Division 3;

subject property means the residential property … acquired under an applicable instrument.

(2) The Collector may, on an application made by a person (applicant) who had paid stamp duty on an applicable instrument, refund to the applicant the specified amount if –

(a) subsection (3) or (4) applies to the disposal of an original property of the applicant; and

(b) had the original property been disposed of before the subject property was acquired, the applicable instrument would have been chargeable with stamp duty under Scale 2 of head 1(1), or Scale 2 of head 1(1A), in the First Schedule.

(3) This subsection applies to the disposal of an original property of the applicant if –

(a) it is shown to the satisfaction of the Collector that the original property is disposed of by the applicant under an agreement for sale that is made within the period specified in subsection (5);

(b) it is shown to the satisfaction of the Collector that the original property is transferred or divested from the applicant under a conveyance on sale executed in conformity with that agreement; and

(c) the application for refund is made by the applicant not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later.

(4) This subsection applies to the disposal of an original property of the applicant if –

(a) it is shown to the satisfaction of the Collector that the original property is transferred or divested from the applicant under a conveyance on sale within the period specified in subsection (5); and

(b) the application for refund is made by the applicant not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later.

(5) For subsections (3)(a) and (4)(a), the following period is specified –

(a) if the applicable instrument is a conveyance on sale - 6 months after the date of that instrument; or

(b) if the applicable instrument is an agreement for sale - 6 months after the date of the conveyance on sale executed in conformity with the agreement for sale.”

35. Where, as in the present case, the applicable instrument is an agreement for sale on which stamp duty had been paid according to Scale 1 of head 1(1A), there are 2 conditions prescribed by Section 29DF(2) which must be satisfied before an applicant can obtain a refund of the specified amount:-

(1)  subsection (3) applies to the disposal of an original property of the applicant (Section 29DF(2)(a)); and

(2)  had the original property been disposed of before the subject property was acquired, the applicable instrument would have been chargeable with stamp duty under Scale 2 of head 1(1A) in the First Schedule (Section 29DF(2)(b)).

36. The first condition under Section 29DF(2)(a) requires proof that subsection (3) applies to the disposal of an original property of the applicant.  Subsection (3) itself requires proof of three matters to the satisfaction of the Collection, namely:-

(1)  the original property is disposed of by the applicant under an agreement for sale that is made within the period specified in subsection (5) (ie the period of 6 months after the date of the conveyance on sale executed in conformity with the agreement for sale);

(2)  the original property is transferred or divested from the applicant under a conveyance on sale executed in conformity with that agreement; and

(3)  the application for refund is made by the applicant not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later.

37. In so far as the second condition under Section 29DF(2)(b) is concerned, instead of requiring proof of certain specified matters, it requires a hypothetical scenario to be satisfied, namely, that had the applicant’s original property been disposed of prior to the acquisition of the new property, the applicable instrument would have been chargeable with stamp duty under the lower (Scale 2) ADV rates.

38. The construction issue which arises for consideration in the present appeal is whether the hypothetical scenario envisaged in Section 29DF(2)(b) can be satisfied in the situation where the applicant was the beneficial owner of more than one residential property at the time of the acquisition of the new property.  In order to answer this question, it is necessary to have regard to the provisions in Section 29BB of the Ordinance which deal with the situation where the purchaser buys a residential property for the first time, or has disposed of all his existing residential property/properties prior to entering into an agreement for the acquisition of a new one (ie the sell-first-buy-later exception).  Section 29BB states, so far as material, as follows:-

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

(a) the property concerned is residential property; and

(b) it is shown to the satisfaction of the Collector that subsection (2) or (3) applies to the agreement.

(2) This subsection applies to the agreement if, on the date of acquisition of the property[7] –

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

(b) that purchaser, or each of those purchasers, is not a beneficial owner of any other residential property in Hong Kong.”

39. Under Section 29BB, the important condition which a purchaser (being a Hong Kong permanent resident) must satisfy before he is exempted from having to pay stamp duty at the enhanced (Scale 1) ADV rates is that he “is not a beneficial owner of any other residential property in Hong Kong” on the date the acquisition of the new property (in other words, he must have disposed of all previously acquired residential properties in Hong Kong, if any, prior to the acquisition of the new property).

40. Coming back to the condition under Section 29DF(2)(b), it is clear, in our view, that the hypothetical scenario envisaged in that subsection cannot, generally, be satisfied in the situation where the applicant was the beneficial owner of two (or more) residential properties at the time of the acquisition of the new property and disposed of them within the specified statutory period. This is because, had one (or another) of his existing properties been disposed of prior to the acquisition of the new property, the applicable instrument (ie the agreement for sale pursuant to which the applicant acquired the new property) would still have been chargeable with stamp duty at the enhanced (Scale 1) ADV rates instead of the lower (Scale 2) ADV rates in view of the fact that he was, as a matter of fact, the owner of some other residential property or properties on the date of the acquisition of the new property.  Moreover, even if the applicant should dispose of all his existing properties within the specified statutory period, if each disposal of an existing property by the applicant is considered separately or individually, in the hypothetical scenario referred to in Section 29DF(2)(b) the applicable instrument would not have been chargeable with stamp duty at the lower (Scale 2) ADV rates, and thus the condition under Section 29DF(2)(b) could not be satisfied.

41. That the expression “original property” in Section 29DF is not intended to refer to more than one property is, in our view, clear from its statutory definition.  In English, that expression is defined to mean “another residential property … of which the person is a beneficial owner on the date of that acquisition”, and in Chinese, the expression “原物業 (original property)” is defined to mean:-

“就根據適用文書取得某標的物業的人而言，指符合以下說明的另一住宅物業…：該人於其取得該標的物業的日期，是該另一物業的實益擁有人”.

42. In our view, the Chinese words “另一” in the Chinese definition of the expression “原物業 (original property)” clearly indicate that the expression cannot refer to more than one property.

43. There is another reason why we consider that, under the statutory scheme contained in Section 29DF, it is not intended that a purchaser would be entitled to a partial refund of the enhanced ADV paid in relation to the acquisition of a new property in the situation where, on the date of the acquisition of the new property, he was the beneficial owner of two (or more) residential properties which he disposed of within the specified statutory period.  This is because, amongst the various requirements which the applicant has to satisfy in order to qualify for the refund, is a requirement that “the application for refund is made by the applicant not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later” [emphasis added] (see Section 29DF(3)(c)).  Thus, if the applicant was the beneficial owner of two (or more) residential properties which he disposed of after the date of the acquisition of the new property within the specified statutory period, and later conveyed them to his purchasers, there could be more than one date of the conveyance on sale under which the “original property” is transferred or divested.  In such a case, there would be difficulty in determining the precise timeframe for the applicant to make the application for refund.  Of course, this problem may not arise on the particular facts of a given case (because, for example, the application might have been made not later than 2 years after the date of the applicable instrument).  However, the time limit as prescribed in Section 29DF(3)(c) for the applicant to make an application for refund does, in our view, indicate a clear legislative intent that an applicant who was the beneficial owner of more than one residential property on the date of the acquisition of the new property is not entitled to a refund of the enhanced ADV paid in relation to the acquisition of the new property even if he disposed of all his existing residential properties within the specified statutory period.

44. It follows from the above analysis that the general interpretative aid laid down in Section 7(2) of the Interpretation and General Clauses Ordinance, Cap 1 (namely, “Words and expressions in the singular include the plural and words and expressions in the plural include the singular”) should not be applied to the interpretation of the expression “original property” in Section 29DF because a contrary intention appears from the context of that section.

CONDITIONS FOR REFUND NOT SATISFIED

45. Applying the definitions in Section 29DF(1) to the facts of the present case:-

(1)  the Formal Agreement would be the “applicable instrument”;

(2)  Property 3 would be the “subject property”; and

(3)  the Additional AVD (in the sum of HK$273,750) would be the “specified amount”, being the difference between (a) the stamp duty on the Formal Agreement paid according to Scale 1 of head 1(1A) in the First Schedule and (b) the stamp duty that would have been payable on that instrument if it were chargeable under Scale 2 of head 1(1A) in the First Schedule.

46. The condition under Section 29DF(2)(b) for partial refund of the Additional ADV cannot be satisfied in the present case, because:-

(1)  had Property 2 been disposed of prior to the acquisition of Property 3 (on 12 June 2013), the Formal Agreement would not have been chargeable with stamp duty under the lower (Scale 2) ADV rates but would have chargeable with stamp duty under the enhanced (Scale 1) ADV rates, in view of the fact that Mr Ho was, on the date of the acquisition of Property 3, a beneficial owner of Property 1 (which he and his wife only disposed of on 8 August 2013); and

(2)  similarly, had Property 1 been disposed of prior to the acquisition of Property 3 (on 12 June 2013), the Formal Agreement would not have been chargeable with stamp duty under the lower (Scale 2) ADV rates but would have chargeable with stamp duty under the enhanced (Scale 1) ADV rates, in view of the fact that Mr Ho was on the date of the Provisional Agreement a beneficial owner of Property 2 (which he and his wife only disposed of on 15 June 2013).

47. It follows that, in our view, Mr Ho is not entitled to a partial refund of the Additional AVD under Section 29DF, and the Collector’s decision made on 15 January 2015 rejecting his application for refund is correct as a matter of law.

The Judge’s reasoning

48. The Judge’s reasoning for his construction of Section 29DF(2)(b) is encapsulated in the following passages in the Judgment:-

“18. The argument advanced by Mr Fung goes like this. If the purchaser has only one residential property in Hong Kong and disposes of that property before the acquisition of the new property, he would not be ‘a beneficial owner of any other residential property in Hong Kong’ on the date of his acquisition of the new property. In that event, duty would be chargeable at the old rate on the conveyance on sale under section 29AJ or on the agreement for sale under section 29BB. That is to be contrasted with what the position would be if the purchaser has more than one residential property in Hong Kong and disposes of only one of those properties before the acquisition of the new property. He would in that case be ‘a beneficial owner of [some] other residential property in Hong Kong’ on the date of his acquisition of the new property. In that event, duty would not be chargeable at the old rate, but at the new rate.

19. This distinction is said to show that the premise which underlies the assumption which section 29DF(2)(b) requires to be made — namely that the purchaser had acquired his new residential property after disposing of his previous one — is that the purchaser’s previous residential property was his only residential property at the time. It is conceded that this cannot be found in the definition of ‘original property’ in section 29DF(1), but the Collector’s case is that it is to be derived from a proper construction of section 29DF(2)(b) when considered in the light of sections 29AJ and 29BB.

20. I pay tribute to the ingenuity of this argument, but its fallacy lies in Mr Fung’s choice of his second scenario which, together with the first, gives rise to what is said to be the premise which underlies the assumption which section 29DF(2)(b) requires to be made. In the first scenario, the purchaser has only one residential property which he disposes of before he acquires the new property. What that has to be compared with is the scenario where the purchaser has more than one residential property (let us say two), and disposes of both of those properties before he acquires the new property. In that event, he would not be ‘a beneficial owner of any other property in Hong Kong’ on the date of his acquisition of the new property. The sleight of hand at the heart of Mr Fung’s argument was the choice of one particular scenario (in which the owner of two residential properties sold only one of them) whereas his choice of another scenario (in which the owner of two residential properties sold both of them) would have produced an entirely different result. Mr Fung engineered the result he wanted by the particular scenario he chose. The fact is that there is no assumption which section 29DF(2)(b) requires to be made about the number of residential properties the purchaser has, provided that he sells them all before acquiring his new residential property.

21. I return, then, to the issue which section 29DF(2)(b) addresses - namely whether the duty would have been chargeable at the old rate if, contrary to what in fact happened, Mr Ho had acquired the flat in Ma Wan after disposing of the two flats in Tsing Yi.  In this context, ‘acquired’ refers, of course, to his agreement to purchase the flat in Ma Wan because it was that agreement rather than the subsequent conveyance on sale on which duty was chargeable. The effect of section 29BB is that duty would have been chargeable at the old rate on that scenario because Mr Ho would not on the date of that agreement have been the beneficial owner of any other residential property in Hong Kong.  It follows that an analysis of the statutory provisions shows that the condition in section 29DF(2)(b) had been met by Mr Ho, and subject to two important arguments advanced by Mr Fung, he was entitled to a refund of part of the duty he had paid, being the difference between the old rate of duty and the new rate.”

49. It would appear from the above passages that the learned Judge considered that where the purchaser had more than one residential property on the date of acquisition, the correct approach in considering whether the hypothetical scenario under Section 29DF(2)(b) is satisfied is to look at all his existing properties collectively and ask whether, had all of them been disposed of before the new property was acquired, the applicable instrument relating to the acquisition of the new property would have been chargeable with stamp duty under the lower (Scale 2) ADV rates.

50. With respect, there is no sound basis to support the approach that, for the purpose of considering whether the hypothetical scenario under Section 29DF(2)(b) is satisfied, the disposal of the applicant’s existing properties should be looked at collectively instead of individually.

51. Furthermore, if the correct approach were to look at the disposal of the applicant’s existing properties collectively for the purpose of Section 29DF(2)(b), the same approach should be adopted for the purpose of Section 29DF(3)(c) when considering to the time limit for an application for refund to be made.  As earlier mentioned, under that subsection, the time limit is “not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later”.  The approach of looking at the two existing properties collectively would simply be unworkable if the conveyances on sale under which the two properties were transferred or divested took place on two different dates.

Extrinsic materials

52. In the present appeal, each party has sought to rely on certain extrinsic materials in support of his construction of Section 29DF.  We do not find the extrinsic materials relied upon to be of assistance in arriving at the true construction of Section 29DF.  We consider the legislative intent to be clear, upon consideration of the section as a whole and subsection (2)(b) in particular, that a partial refund of the stamp duty paid at the enhanced ADV rates on the relevant applicable instrument is not available to a purchaser who beneficially owned more than one residential property on the date of the acquisition of the new residential property.  We do not therefore propose to examine the extrinsic materials in any detail, but would merely make the following brief comments.

53. First, there are no doubt passages in the extrinsic materials which can be read as supporting the construction that either party may wish to put upon Section 29DF. In our view, subject to the possible exception under the Pepper v Hart principles (which we shall briefly discuss below), generally speaking extrinsic materials may be used only for the purpose of identifying the relevant statutory background, context or purpose, but they may not be used to directly derive, control, or change the meaning and effect of the statutory language used by the legislature.

54. Second, Ms Lau (counsel for Mr Ho) has placed some considerable reliance on a statement made by the Financial Secretary in his internet blog dated 24 February 2013 in support of her construction of Section 29DF.  We do not consider the statement in the Financial Secretary’s internet blog to be of assistance in arriving at the true construction of Section 29DF in the present case.  If it is sought to be relied upon as throwing light on the relevant statutory background, context or purpose, there are far more appropriate materials such as the Explanatory Memorandum and the Legislative Council Brief mentioned above.  On the other hand, if it is sought to go further and use that statement in direct support of the contention that a purchaser is (or should be) entitled to a refund under Section 29DF in the situation where he owned more than one residential property on the date of the acquisition of the new property and he disposed of all of them within the specific statutory period and ended up with only one residential property, for the reason stated in paragraph 53 above we do not consider that to be a proper use of extrinsic materials.

55. Third, the Collector, on the other hand, has sought to rely on a statement made by the Secretary for Financial Services and the Treasury when he moved the second reading of the Stamp Duty (Amendment) Bill 2013 at the Legislative Council 2013 on 17 April 2013.  The statement of the Secretary for Financial Services and the Treasury was originally delivered in Cantonese in the Legislative Council, and an official English transaction of that statement has been set out in paragraph 25 of the Judgment.  While we do not necessarily agree with the learned Judge’s reading of that statement (having regard to the original Chinese version), we do not consider that much reliance can in any event be placed on it in view of the fact that the Secretary for Financial Services and the Treasury was there merely giving an example of a situation in which a Hong Kong permanent resident would be entitled to a refund.  In our view, that statement by the Secretary for Financial Services and the Treasury cannot be read as being intended to be exhaustive of all situations in which a refund would be available. 

56. Fourth, in view of the Collector’s reliance on the aforesaid statement by the Secretary for Financial Services and the Treasury in the Legislative Council before the learned Judge, there was some discussion in the Judgment on the conditions which must be satisfied before ministerial statements in legislative assemblies may be admitted for the purpose of construction of a statute as laid down in the judgment of the House of Lords in Pepper v Hart [1993] AC 593, as well as the purpose for which, or extent to which, such statements may be used assuming that the necessary conditions for admissibility have been met.

57. As pointed out by Li CJ in Cheung Kwun Yin (at paragraphs 15 to 16 of his judgment), there is a distinction between (i) using statements made by officials of the Government in the Legislative Council to “identify the purpose of the statutory provision”, which undoubtedly is permissible, and (ii) using such statements “to ascertain the meaning of the statutory words”, which stands in a fundamentally different position.  The Chief Justice further pointed out (at paragraph 17 of his judgment) that it is an open question whether and to what extent the approach in Pepper v Hart is applicable in Hong Kong.

58. That issue was touched upon by Bokhary PJ in his judgment in PCCW-HKT Telephone Ltd v Telecommunications Authority (2005) 8 HKCFAR 337:-

“20. It has been clear at least since the decision of the Full Court in Elson-Vernon Knitters Ltd v. Sino-Indo-American Spinners Ltd [1972] HKLR 468 that the Objects and Reasons or Explanatory Memorandum annexed to a Bill is admissible for the purpose of ascertaining the mischief which the proposed statute was intended to remedy. Explanations given by Ministers when introducing a Bill are also admissible for that purpose. But to treat ministerial statements about the meaning and effect of proposed legislation as reflecting the will of the legislature would go beyond using such statements to ascertain the mischief against which a statute is aimed. Lord Millett NPJ, with whom the other members of this Court agreed, said this in Director of Lands v. Yin Shuen Enterprises Ltd (2003) 6 HKCFAR 1 at p.15 F-H:

‘Such evidence is admissible for a limited purpose only, to enable the Court to understand the factual context in which the statute was enacted and the mischief at which it was aimed. This is not the same as treating the statements of the executive about the meaning and effect of the statutory language as reflecting the will of the legislature. Within the permissible limits, however, the admissible evidence is not confined to the Explanatory Memorandum of Objects and Reasons, but must logically extend to explanations given by Ministers when introducing the Bill.’

21. Pepper v. Hart relaxed the rule excluding reference to Parliamentary materials as an aid to statutory construction. The relaxed rule is to be found in Lord Browne-Wilkinson’s speech at p.640 B-C. It permits reference to Parliamentary materials

‘where (a) legislation is ambiguous or obscure, or leads to an absurdity; (b) the material relied upon consists of one or more statements by a Minister or other promoter of the Bill together if necessary with such other Parliamentary material as is necessary to understand such statements and their effect; (c) the statements relied upon are clear.’

As it happens, a more modest relaxation than that would have been enough to permit reference to the Parliamentary materials there in question. At p.616G Lord Bridge of Harwich said that those materials raised

‘an acute question as to whether it could possibly be right to give effect to taxing legislation in such a way as to impose a tax which the Financial Secretary to the Treasury, during the passage of the Bill containing the relevant provision, had, in effect, assured the House of Commons it was not intended to impose.’

So relaxation could have been limited to ministerial assurances to the legislature that proposed legislation was not meant to create a particular impost.  I have no difficulty with that limited relaxation.  But more adventurous use of ministerial statements about the meaning and effect of proposed legislation would give rise to practical, conceptual and constitutional problems.  The practical problem was discussed by Lord Hoffmann in Robinson v. Secretary of State for Northern Ireland [2002] N1 390 at paras 39-40.  And the conceptual and constitutional ones were discussed by Lord Hobhouse of Woodborough in Robinson’s case at para. 65 and by Lord Nicholls of Birkenhead in Wilson v. First County Trusts Ltd (No.2) [2004] 1 AC 816 at p.841 B-F.”

59. In the present case, we do not consider it necessary to resolve the issue left open by the Chief Justice regarding the applicability of the Pepper v Hart principles in Hong Kong because we consider the meaning and effect of Section 29DF(2)(b) to be clear upon consideration of Section 29DF as a whole.  We would merely observe that the occasions on which it may become necessary to resort to Pepper v Hart should in any event be rare now that the court has generally permitted relevant statements made by Government officials in the Legislative Council to be used for the purpose of identifying the context and/or purpose of the legislation.

disposition

60. For the foregoing reasons, we allow the Collector’s appeal, set aside the Order, and dismiss Mr Ho’s application for judicial review of the Collector’s decision made on 15 January 2015.  We also order that the Collector shall have the costs of this appeal, as well as the costs of the application below, to be taxed if not agreed.

61. Lastly, it remains for us to thank counsel for the assistance that they have rendered to the court.

[1]  See paragraph (a)(i) under “Introduction” on the first page of the Legislative Council Brief.

[2]  In the Stamp Duty (No 2) Ordinance 2014 as eventually enacted, the timeframe for disposal of the old property in order to qualify for the refund was changed to within 6 months from the date of the conveyance on sale executed in conformity with the relevant agreement for sale on which stamp duty charged under the enhanced AVD rates had been paid.

[3]  Head 1(1) relates to conveyance on sale.

[4]  Head 1(1A) relates to agreement for sale.

[5]  Scale 1 rates relate to the enhanced ADV rates prescribed by the enactment of the Stamp Duty (No 2) Ordinance 2014.

[6]  Scale 2 rates relate to the lower ADV rates which were applicable prior to the enactment of the Stamp Duty (No 2) Ordinance 2014.

[7]  Under Section 29AE(2), if there is an agreement for sale, the date of acquisition would, subject to Sections 29AF and 29AG, be the date of the agreement.