HO KIN TAI AND ANOTHER v. COLLECTOR OF STAMP REVENUE

DCSA 325/2019

[2025] HKDC 1757

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO. 325 OF 2019

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DECISION

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1.  This is an appeal brought by the 1^st Appellant and his son, the 2^nd Appellant pursuant to section 14(1) against the Notice of Assessment and Demand issued by the Collector of Stamp Revenue (“CSR”) dated 2 May 2019.

Legislation background

2.  In February 2013, the Government announced new stamp duty measures in an attempt to cool down the perceived overheating property market by, inter alia, doubling the prevailing ad valorem stamp duty (“AVD”) of sale of residential and non-residential properties in Hong Kong but with exception available to Hong Kong permanent resident whose circumstances satisfied certain criteria.

3.  On 25 July 2014, the Stamp Duty (Amendment) (No. 2) Ordinance 2014 (“Amendment Ordinance”) was enacted. Under this, an agreement for sale and purchase of a residential property on or after 23 February 2013 is chargeable with AVD at Scale 1 rates (i.e. at double the previous AVD rate) with certain exceptions, as follows.

4.  Under section 29BB subsection (1), the AVD for an agreement for sale is chargeable at Scale 2 rates (i.e. at a lower rate) if :

a)  the property concerned is residential property;

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

5.  Under subsection (2) (which is the subsection relevant to the current case):

This subsection applied to the agreement if, on the date of acquisition of the property-

(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.

6.  Secondly, the Amended Ordinance provided a partial refund mechanism under section 29DF in certain circumstances defined under subsection (1), inter alia, as follows.

7.  The “applicable instrument”:

“means an instrument…under which a residential property…is acquired…on which stamp duty has been paid according to Scale 1…”

8.  The “original property”:

“in relation to a person who acquires a subject property under an applicable instrument, means another residential property (my underlining)…of which the person is a beneficial owner on the date of that acquisition”.

9.  The “subject property”:

“means the residential property…acquired under an applicable instrument.”

10.  Section 29DF then provides the partial refund mechanism as follows:

(2) The Collector may, on 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 (my underlining) been disposed of before the subject property was acquired, the applicable instrument would have been chargeable with stamp duty under Scale 2…

(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);

…

(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.

….

(5) For subsection (3)(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.

11.  Subsection (5) was subsequently amended with an extension to 12 months but this would not concern the current case.

Background of the case

12.  There is no dispute that both appellants are Hong Kong permanent residents and the subject property, Flat B, 9^th Floor of Tower 1, One West Kowloon (“Subject Property”) is a residential property.

13.  The 1^st Appellant was formerly the owner of a residential property at Flat G, 59 Floor, Tower 6 Vision City, No. 1 Yeung Uk Road, Tsuen Wan (“the 1^st Property”) which he jointly owned with his wife, Ms. Pak Yuk Fong Elsie (“Ms. Pak”), as joint tenant.

14.  The 2^nd Appellant was formerly the owner of another residential property at Flat B, 16/F, Kam Fung Court, No. 18 Tai Uk Street, Tsuen Wan (“the 2^nd Property“) which he jointly owner with his moth, Ms. Pak, as joint tenant.

15.  On 12 April 2013, the 1^st and 2^nd Appellants entered into a provisional agreement for sale and purchase of the Subject Property, as joint tenants, at a consideration of HK$9,818,000.

16.  On 16 April 2013, the 1^st and 2^nd Appellants entered into the agreement for the purchase of the Subject Property (“the Agreement”).

17.  On 6 May 2013, as the Amendment Ordinance has not been enacted, the Agreement was stamped and AVD of HK$368,175 was paid according to the prevailing rate.

18.  On 31 May 2013, the 1^st Appellant and Ms. Pak entered into an agreement for the sale of the 1^st Property to a third party purchaser, and the actual assignment was dated 2 August 2013.

19.  On 29 June 2013, the 2^nd Appellant and Ms. Pak entered into an agreement for the sale of the 2^nd Property to Ms. Pak, and the actual assignment was dated 26 July 2013.

20.  On 1 April 2014, the Subject Property was assigned to the 1^st and 2^nd Appellants.

21.  After the enactment of the Amended Ordinance, CSR informed the Appellants on 15 February 2017 that the Agreement was chargeable with AVD at Scale 1 and section 29DF was not applicable (following the decision of Ho Kwok Tai v Collector of Stamp Revenue [2016] 5 HKLRD 713) so they were required to pay additional AVD of HK$368,175.

22.  The Appellants disputed this and on 2 May 2019, the CSR issued the Notice of Assessment and Demand demanding payment of HK$368,175.

23.  The Appellants brought this appeal.

24.  The additional AVD remained outstanding upon an order of H.H. Andrew Li’s decision dated 27 September 2019 on account of “undue hardship” which “would effectively kill off the appeal before they can bring the case for proper adjudication in front of the court”.

The Appellants’ grounds for appeal

25.  Only the 1^st Appellant submitted a Written Submission and a Reply Submission. The 2^nd Appellant did not attend the hearing and presumably would rely on the submissions of the 1^st Appellant.

Refund mechanism as a shield

26.  Firstly, it is of note that the Appellants did not argue that section 29BB should apply to the current case. This section is clearly not applicable given that on the date of acquisition, both Appellants were, as a matter of (undisputed) fact, beneficial owners of other residential properties.

27.  Instead, the Appellants’ argument concerns section 29DF.

28.  In short, the 1^st Appellant submitted that Ho Kwok Tai should be distinguishable and thus the refund mechanism under section 29DF should apply to this case, otherwise it would create an unfair and unreasonable situation which would be against the purpose of the refund mechanism. And since the Appellants have already paid AVD according to Scale 2, they would not need to pay further.

29.  I am of the view that, right off the bat, this line of argument cannot get off the ground.

30.  Section 29DF is a “partial refund” mechanism. The “applicable instrument“ as defined is one:

“on which stamp duty has been paid according to Scale 1…”

31.  Thus, even if the court were to accept all the Appellants’ arguments that they should, in theory, be entitled to a partial refund, this mechanism would not be available to the Appellants given that they have never paid AVD according to Scale 1 in the first place.

32.  In other words, the Agreement is not an “applicable instrument” defined under section 29DF: there cannot be a “refund” if the “fund” has not been paid.

33.  Of course, the Appellants have not shown the court where in the Amended Ordinance that provides that the mere availability of a partial refund may be used as a shield against having to pay AVD fully upfront at Scale 1: there is no such provision.

34.  As such, the appeal is bound to fail even at the first hurdle.

Definition of “original property”

35.  Further, even on the assumption that the Appellants have already paid AVD at Scale 1, I do not agree that Ho Kwok Tai can be distinguishable and not applicable to the current case.

36.  Ho Kwok Tai examined the scope of the partial refund mechanism when there was only one purchaser holding two “original properties” on the date of the acquisition of the “subject property”.

37.  It was held that the hypothetical scenario envisaged on Section 29DF(2)(b) (namely, had the “original property” been disposed of before the “subject property” was acquired, the applicable instrument would have been chargeable with AVD at Scale 2) was not applicable to situations when the purchaser was the beneficial owner of more than one residential properties.

38.  The reasoning of the Court of Appeal was stated under paragraph 40 of the Judgment:

“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 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 be 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) AVD rates, and thus the condition under Section 29DF(2)(b) could not be satisfied.”

39.  In Wang Weichen and Zhao Bingqing v Collector of Stamp Revenue [2021] HKCFI 224, which concerned with the scope of the refund mechanism when there were two purchasers (as tenants-in-common of the “subject property”) with each on date of acquisition a beneficial owner of a different “original property”, Hon Chow J considered that the same reasoning to be equally applicable (paragraph 38 of the Judgment):

“…had one (or another) of those properties held by the two purchasers been dispose of before the subject property was acquired, the agreement for sale would still have been chargeable with stamps duty under Scale 1, not Scale 2, because the condition in s 29BB(2)(b) (namely, the purchaser, or each of the purchasers, is not beneficial owner of any other residential property in Hong Kong) could not be met.”

40.  Indeed, Ho Kwok Tai (at paragraph 41 of the Judgment) stated that:

“…the expression of “original property” in Section 29DF is not intended to refer to more than one property“.

41.  The 1^st Appellant attempted to dispute this.

42.  He argued (paragraph 45 of the Written Submission) that according to the general interpretative aid laid down in Section 7(2) of the Interpretation and General Clauses Ordinance, Cap. 1 (i.e. “Words and expressions in the singular include the plural and words and expressions in the plural include the singular”) should apply to the definition of “original property” in Section 29DF.

43.  Such an argument has been analysed at lengths in Ho Kwok Tai and the Court of Appeal held that (paragraphs 41 to 44 of the Judgment) Section 7(2) Cap 1 should not be applied to the interpretation of “original property” in Section 29DF.

44.  In summary, the reasoning of the Court of Appeal was as follows:

(a)  the wordings “another residential property” in English and “另一住宅物業” in Chinese “clearly indicate that the expression cannot refer to more than one property”;

(b)  the time limit for application for refund was “not later than 2 years after 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 later”, so if “original property” could mean multiple properties, there would be more than one date of such conveyance on sale and thus would cause difficulties in deciding the time limit.

45.  This was followed in Wang Weichen and it was held that since the two purchasers were each a beneficial owner of another, different, residential property on the date of the acquisition of the “subject property”, Section 29DF has no application.

Joint tenants v tenants-in-common

46.  Further, the Appellants sought to argue that the current case was distinguishable from Wang Weichen in that they were joint tenants in the Subject Property.

47.  In Wang Weichen, the argument raised was that since the applicants were purchasers as tenants-in-common and not as joint tenants, each acquired “a separate and distinct 50% share” (although under one formal sale and purchase agreement) and “paid their respective share of the enhanced AVD” so entitled each to “a separate and distinct application under section 29DF”.

48.  This line of argument was rejected (paragraph 29 of the Judgment) in that “it is trite that stamp duty is a charge on instrument, not transaction” and the persons specified in the First Schedule shall be liable, or jointly and severally liable for the payment of the AVD on the chargeable instrument.

49.  The liability to pay AVD makes no distinction on whether the purchasers acquired the subject property as tenants-in-common or joint tenants.

50.  Indeed, as joint tenants, the Appellants will arguably have an even weaker case given that this (rejected) “each purchaser having equal shares to pay AVD” line of argument is not available to them.

Statutory interpretation using extrinsic materials

51.  Finally, the 1^st Appellant has at length (paragraphs 14 to 39, 78 to 79 of his Written Submission) referred to various extrinsic materials (like the relevant Legislative Council Brief) in support of his construction of the section 29DF. He suggested that the CSR’s understanding of this (which, as explained above, was based upon the judgments of Ho Kwok Tai and Wang Weichen, amongst others) was unreasonable and did not reflect the context and purpose of the legislation.

52.  Firstly, in Ho Kwok Tai, the Court of Appeal has discussed the proper approach to statutory interpretation and has, at great length, interpreted the statutory context and purpose of this legislation.

53.  In particular, it stated (paragraph 33 of the Judgment):

“Although the policy behind these exceptions is to accord priority to 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.”

54.  Further, it stated (paragraph 52 of the Judgment):

“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 assistances 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…”

55.  Thus, the same arguments has been raised before in Ho Kwok Tai and the issues have already been settled by the Court of Appeal.

Equity in a tax statute

56.  Further, the 1^st Appellant’s argument that such interpretation of a tax statute would create an unreasonable and unfair result has also been addressed in Yau Sun Yee v Collector of Stamp Revenue [2021] 1 HKLRD 786 (paragraph 42 of the Judgment):

“…the true interpretation of a tax statute cannot be affected by the fact that there may be individual cases where a different interpretation would or could lead to what one may consider to be a fairer result. It has been said that “there is no equity about a tax, as by nature it is ‘inequitable’…”

…

…there is no room for the court to look behind the clear words of a statute and try to construe them in such a way to achieve what it perceives to be a fair or fairer result. That is a matter within the exclusive province of the legislature.”

57.  Indeed, Hon Chow J made the same observation in Wang Weichen (paragraph 40 of the Judgment).

Alleged delay in the proceedings

58.  In passing, I note that the 1^st Appellant also suggested delay on part of the CSR (paragraphs 11 to 13 and 75 of the Written Submission).

59.  There appears to be dispute as to which party and what had caused this alleged delay. There are no detailed submissions either way and indeed, there is no point for the court to look into this: it has nothing to do with the interpretation of the statutory provisions. However, in general, it would be the Appellants’ duty to conduct their appeal timely and properly after lodging it with the Court on 29 May 2019.

60.  I further note that 1^st Appellant appears to be arguing that the case should be dismissed because of this alleged delay. I do not see the logic of him raising this: if the Appellants are of the view that the appeal should be dismissed, they would, in effect, be agreeing to pay up the additional AVD which has been outstanding for some 6 years.

Other considerations

61.  Finally, I have also heard submissions from the parties concerning the time needed for payment for the additional AVD should the court finds for CSR. The CSR has asked for payment within 14 days.

62.  The 1^st Appellant submitted that he has retired and could not borrow from a commercial bank, and it might take him 3-4 months to come up with the cash. On the other hand, the Respondent argued that this sum has been outstanding for some 6 years so it would be very unreasonable for the Appellants to ask for another 3-4 months.

63.  Under the circumstances, I think allowing for 42 days would be reasonable.

Order

64.  For the above reasons, the appeal should be dismissed and the court makes an order on the following terms:

a)  The Agreement is chargeable with AVD at Scale 1 rates;

b)  The assessment for additional AVD thereon be confirmed;

c)  This appeal be dismissed;

d)  The 1^st and 2^nd Appellants shall pay CSR the additional AVD of HK$368,175 within 42 days from the date of this Decision; and

e)  Costs of this appeal (including any costs reserved) be to CSR. If there is no agreement on costs, CSR shall lodge and serve a summary bill of costs within 28 days of this Decision and the Appellants shall lodge and serve a summary list of objections 28 days thereafter. The court will summarily assess costs by way of paper disposal.