WONG YU CHO ROLLY t/a MARCO POLO and CHINA OVERSEA TECHNICAL DEVELOPMENT v. INLAND REVENUE DEPARTMENT

HCAL 15/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 15 OF 2007

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J U D G M E N T

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1.  This application for Judicial Review arises out of a dispute between Mr Wong and the Inland Revenue Department.  

2.  Mr Wong directs his complaint to 4 particular matters.  They are:

(1)     an alleged wrongful assessment of taxation;

(2)     an allegation of trespass on 24 August 2001, on Mr Wong’s premises, against officers of the Inland Revenue Department;

(3)     the freezing of Mr Wong’s bank accounts in HSBC and the Hang Seng Bank, pursuant to s 76(1) Inland Revenue Ordinance, on 16 August 2004; and

(4)     an alleged failure on the part of the Inland Revenue Department to adhere to directions given by the District Court on 21 December 2006.

The Wrongful Taxation Assessment

3.  Mr Wong did not file tax returns for the years 1996-97 and 1997-98.  The Inland Revenue Department issued assessments for tax for those two financial years against Mr Wong and two businesses that he had, Marco Polo and China Overseas Technical Development. 

4.  A judgment of the District Court under DCCJ 4492/2004 delivered on 20 June 2005, given to me by Mr Wong, shows that although Mr Wong objected to the assessments, the objections were not valid, in the absence of tax returns.

5.  Mr Wong commenced proceedings against the Inland Revenue Department and by a counterclaim, the Inland Revenue Department sought from him the amount of the tax that was due.  A judgment by default on the counterclaim, for the tax assessed, was entered against Mr Wong on 20 June 2005, following a hearing at which Mr Wong represented himself.  The judge found that there was no defence to the Inland Revenue Department’s counterclaim for the tax due. 

6.  Mr Wong appealed against that decision to the Court of Appeal, and that matter was heard on 28 February 2006.  In a reserved judgment delivered on 7 March 2006, the Court of Appeal dismissed the appeal, and the judgment for the tax stood.

7.  In those circumstances, there is simply no basis upon which Mr Wong is entitled to apply for Judicial Review in relation to the taxation assessment.  The application for leave is refused.

The Trespass

8.  Mr Wong complains that on 24 August 2001, officers of the Inland Revenue Department trespassed into his premises.  He reported the incident to the police on the same day and has produced a copy of the notice of report.  It appears that the police investigated the matter would take no further action.

9.  In proceedings in the District Court, under No. DCCJ 5016/2005, Mr Wong has brought an action for damages for trespass against the Inland Revenue Department and the three officers concerned.  That action has not been concluded.  

10.  The circumstances of an alleged trespass is not a matter which is amenable to Judicial Review.  Mr Wong’s proper course is to bring proceedings against the Inland Revenue Department and the officers for damages for trespass.  This he has done.  Mr Wong must pursue his proceedings in the District Court for trespass to an appropriate conclusion.

11.  Leave to apply for Judicial Review in relation to the trespass is refused.

The s 76 Notices:

12.  On 16 August 2004, the Inland Revenue Department issued notices, pursuant to s 76(1) Inland Revenue Ordinance, to the HSBC and Hang Seng Bank which had the effect of freezing Mr Wong’s bank accounts pending payment of the outstanding tax, and requiring those banks to pay the sums due, if they held those sums to Mr Wong’s credit.  The Inland Revenue Department is perfectly entitled to take that step when taxes are overdue, and a person is likely to go overseas. 

13.  Other than a complaint that the decision to issue the notices had an adverse personal effect on him, and his general complaint as to his liability for the tax, Mr Wong gives no grounds why the decision of the Inland Revenue Department to issue the s 76 notices was wrong or unlawful.

14.  It is now 2½ years since those notices were issued.  A judicial review must be sought within 3 months of the decision, or the applicant must explain to the court why he has not previously brought the judicial review proceedings.

15.  The s 76 notices were lawfully based upon taxation assessments in respect of which judgment has been entered, and that judgment has been upheld on appeal.  There is no basis now to give Mr Wong leave for Judicial Review, so long after the notices were issued, or in circumstances where the judgment for the tax has been upheld on appeal.

The failure to act on the court’s directions:

16.  One of the six sets of proceedings issued in the District Court by Mr Wong was before the District Court on 21 December 2006.  Apparently in the course of proceedings, at the suggestion of the judge, the matter was adjourned to enable the parties to discuss a settlement.

17.  On 27 December 2006, Mr Wong wrote to the Inland Revenue Department making a proposal in settlement.  Mr Wong has not yet had a response to that proposal.  Mr Wong characterises the action of the judge in adjourning the matter as an instruction to the parties to settle the matter.  It is perfectly proper for a judge to express to parties a preliminary view of proceedings and to invite the parties to discuss settlement in the light of that view.  A judge cannot instruct parties, or direct them, to reach a settlement.

18.  Mr Wong’s proposal in settlement, coming as it did only 6 days after the matter was adjourned, was one which ought to have been subject of an immediate response by the Inland Revenue Department.  I cannot imagine any sensible reason why now, 2 months after the offer was made, the Inland Revenue Department could not have responded to it, either accepting it or rejecting it, or making a counter offer.

19.  It is not every decision by a decision maker which is amenable to Judicial Review.  The failure of the Inland Revenue Department to respond properly to Mr Wong’s offer to compromise the proceedings cannot yet be described as an exercise of discretion which finally decides or determines the outcome of the negotiations.

20.  That said, it is perfectly within the rights of the Inland Revenue Department to refuse to negotiate with Mr Wong.  They are quite entitled to reject Mr Wong’s offer and settlement and require that the matter be returned to the court and argued to an appropriate conclusion.  Whatever decision the Inland Revenue Department takes on Mr Wong’s offer in settlement, he is entitled to a prompt reply to his offer.

21.  While the failure of the Inland Revenue Department to reply might appropriately be the subject to the complaint to the Ombudsman, it is not a matter which can yet be subject to Judicial Review. 

22.  The Inland Revenue Department, having failed to respond to Mr Wong’s offer, his courses, seem to me, to be two-fold.

23.  First, he can complain to the Ombudsman about the failure of the Inland Revenue Department to respond.  Second, and even at the same time as any complaint to the Ombudsman, in the event of the failure to negotiate a settlement of the matter or the failure of the Inland Revenue Department to reply to him, Mr Wong can ask the District Court to resume the hearing.  It is then the duty of the judge to hear and conclude the matter if the parties are unable to reach and negotiate in settlement.

24.  There are no grounds upon which a Judicial Review might be brought in relation to the failure of the Inland Revenue Department to respond to Mr Wong’s offer and settlement.

25.  In order that the District Court and the Inland Revenue Department may be aware of the views that I have expressed in this judgment, both as to the view I take of the unacceptably dilatory attitude of the Inland Revenue Department in failing to respond properly to Mr Wong’s offer in settlement, and the duty of the judge to hear and determine the proceedings if a settlement cannot be reached, I direct that a copy of this judgment be forwarded to both.