JOHN WILEY & SONS UK2 LLP AND ANOTHER v. THE COLLECTOR OF STAMP REVENUE

CACV 23/2023, [2024] HKCA 863

On Appeal From [2022] HKDC 716

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 23 OF 2023

(ON APPEAL FROM STAMP DUTY APPEAL NO 2 OF 2021)

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JUDGMENT

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Hon Chow JA (giving the Judgment of the Court):

1.  For the purpose of this judgment, unless the context indicates otherwise, the expressions and abbreviations as defined in the Court’s judgment dated 5 July 2024 (“the CA Judgment”) will be adopted.

2.  On 15 July 2022, H H Judge K C Chan gave a judgment (“the DC Judgment”) allowing the Duty-Payers’ appeal by way of case stated against the Collector’s refusal to grant stamp duty relief in respect of the Share Transfer under Section 45(2) of the Stamp Duty Ordinance, Cap 117.

3.  On 8 December 2023, this Court gave the CA Judgment allowing the Collector’s appeal against DC Judgment.

4.  The basic facts of this case and the Court’s reasons for allowing the Collector’s appeal are set out in the CA Judgment and will not be repeated here.

5.  By Notice of Motion dated 2 August 2024, the Duty-Payers apply for leave to appeal the CA Judgment to the Court of Final Appeal.  In the Notice of Motion, the Duty-Payers identify the following question (“the Proposed Question”) as being a question involved in the intended appeal which, by reason of its great general or public importance, ought to be submitted to the Court of Final Appeal for decision:

“On a true construction of s.45 of the Ordinance:

a. is the meaning of the words ‘body corporate’ confined to a company, so-called – that is, a corporation that is expressly designated a ‘company’ – or is it capable of extending to other kinds of body corporate, notwithstanding that they do not bear the nomenclature ‘company’, in this case, specifically, an LLP, which is a body corporate, although not a company, so-called; and

b. is the meaning of the words ‘issued share capital’ confined to ‘issued share capital’, so-called, or is it capable of extending to other kinds of participation interests – that is, a participation in a body corporate importing economic and management rights akin to those of ordinary shares in a company limited by shares – that are in substance analogous to ‘issued share capital’ as that notion is understood at Hong Kong corporate law, notwithstanding that they do not bear that specific nomenclature and, in this case, whether those words are capable of applying to a membership interest in an LLP, despite not bearing the specific label ‘issued share capital’?”

6.  Pursuant to paragraph 3 of Practice Direction 2.1, we determine the present application for leave to appeal on paper without an oral hearing.

7.  Under s 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance, Cap 484, an appeal shall lie to the Court of Final Appeal at the discretion of the Court of Appeal or the Court of Final Appeal in any civil cause or matter if, in the opinion of the Court of Appeal or the Court of Final Appeal (as the case may be), the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court of Final Appeal for decision.

8.  In support of the present application, the Duty-Payers refer to the fact that when Poon CJHC and Barma JA granted leave to appeal on 20 January 2023, it was stated that the proper construction of the words “issued share capital” in Section 45 raised a “novel and important question of law”, warranting determination by the Court of Appeal.  At §§12-23 of the “Skeleton Arguments on behalf of the Appellants” dated 16 August 2024, the Duty-Payers give 6 reasons why the Proposed Question meets the threshold of “great general or public importance”.  It is not necessary to set them out in this judgment.

9.  The Collector argues that leave to appeal should be refused for Sub-Question (a) because (1) it is a new point not previously raised, and (2) it is not reasonably arguable in any event.  The Collector submits that Sub-Question (a):

(1)  is a new point because the sole disputed issue between the parties concerned the proper construction of the term “issued share capital” in Section 45 and the proper construction of the term “body corporate” was not in issue; and

(2)  is not reasonably arguable because, amongst other matters, it asks the Court of Final Appeal to construe the term “body corporate” in a vacuum, independent from “issued share capital”.

10.  In respect of Sub-Question (b), the Collector submits that it does not meet the threshold of being reasonably arguable, for the reasons set out at §§11-23 of the “Skeleton Submissions of the Collector” dated 30 August 2024.

11.  This is not the occasion to re-visit the issue of the true construction of Section 45, or to consider in any depth the merits of the Duty-Payers’ intended appeal.  We are satisfied that the intended appeal raises a point of construction of Section 45 meeting the threshold of “great general or public importance” and is reasonably arguable, subject to 2 observations:

(1)  Although two sub-questions are set out under the Proposed Question, the Duty-Payers have confirmed that Sub-Questions (a) and (b) are not separate questions (or grounds of appeal)[1].  As correctly submitted by the Collector, the expression “body corporate” in Section 45 cannot be construed in a vacuum, independently from the concept of “issued share capital”.  Ultimately, the question which has to be answered in the present case is whether the 90% Issued Share Capital Association Requirement under Section 45 is satisfied as between HoldCo and LLP 2.  This in turn entails a consideration of the meaning of the expression “body corporate” alongside “issued share capital” in Section 45(2).

(2)  As framed, Sub-Questions (a) and (b) suggest that whether the 90% Issued Share Capital Association Requirement is satisfied depends on whether the relevant body corporates are called or given the nomenclature “company”, and whether the relevant interest held by one body corporate in another body corporate is called or given the nomenclature “issued share capital”.  This involves a mis-reading or misunderstanding of the CA Judgment.  As pointed out by the Collector, nowhere in the CA Judgment did the Court suggest that the test is one of label rather than substance[2].

12.  For the above reasons, we are prepared to grant leave to appeal in respect of the Proposed Question, as reformulated below:

“On a true construction of Section 45 of the Stamp Duty Ordinance (Cap 117):

a. is the meaning of the words ‘body corporate’ confined to a company, or is it capable of extending to other kinds of body corporate, and, specifically in this case, an LLP, which is a body corporate, although not a company; and

b. is the meaning of the words ‘issued share capital’ confined to ‘issued share capital’, or is it capable of extending to other kinds of participation interests – that is, a participation in a body corporate importing economic and management rights akin to those of ordinary shares in a company limited by shares – that are in substance analogous to ‘issued share capital’ as that notion is understood at Hong Kong corporate law, and, in this case, whether those words are capable of applying to a membership interest in an LLP?”

13.  The Duty-Payers invite the Court to grant unconditional leave to appeal.  This matter is governed by §2A of Practice Direction 2.3.  Any application for variation of the standard order in Schedule 1 to Practice Direction 2.3 should be made in accordance with §3 thereof.

14.  The costs of this application for leave to appeal shall be in the cause of the appeal.