CHAN YIU WING v. COMMISSIONER OF INLAND REVENUE

HCAL 858/2018

[2019] HKCFI 301

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 858 OF 2018

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D E C I S I O N

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INTRODUCITON

1.  This is an application for leave to apply for judicial review of a determination dated 18 April 2018 (“the 2018 Determination”) made by the Commissioner of Inland Revenue (“the Commissioner”) confirming the Property Tax Assessment for the year of assessment 2013/14 under Charge Number 5-8067022-14-4 dated 18 November 2014 (“the 2013/14 Property Tax Assessment”) issued to the Applicant.

2.  For reasons which I shall explain in this decision, the application for leave to apply for judicial review is dismissed.

3.  In what follows, unless the context indicates otherwise, references to Sections shall be to the Inland Revenue Ordinance, Cap 112 (“the Ordinance”).

BASIC FACTS

4.  The Applicant is a retired civil servant, joining the Government in 1977 under the old pension scheme.  He used to work as an assessor of the Inland Revenue Department (“the IRD”) until his retirement in 2007.

5.  The Applicant and his wife (Madam Yan) have 3 children, born in 1987, 1992 and 1996 respectively.

6.  The Applicant and Madam Yan applied for emigration to Australia in 1989.  In due course, they were granted Australian Permanent Resident Class 155 Visas.  They first landed in Australia as immigrants in 1990.  Ms Yan then moved to Australia in 1992, and returned to Hong Kong in May 1994 after acquiring her Australian citizenship.  In the meantime, the Applicant continued to live and work in Hong Kong.

7.  The Applicant commenced his pre-retirement leave on 16 October 2006.  His official retirement date was 16 April 2007.  On 14 October 2006, the Saturday immediately before his pre-retirement leave, the Applicant and Madam Yan left Hong Kong to live in Australia.

8.  The couple’s eldest child went to Australia to further her studies in 2003, followed by their two younger children in 2006. The 3 children have since been living in Australia.

9.  During the years of assessment 2007/08 to 2015/16, the Applicant and Madam Yan spent most of their time outside Hong Kong. They came back to Hong Kong a few times each year, with a period of stay of between 3 and 23 days on each occasion.  Whenever he came back to Hong Kong, he would stay in the same residence (of which he was a joint-tenant) which he used to stay prior to leaving Hong Kong in 2006.  Full particulars of their periods of absence from Hong Kong are set out in 2 tables under paragraph 4 of the Affirmation of Dickson Lo.  In summary:

Year of assessment	Number of days that Applicant was absent from Hong Kong	Number of days that Madam Yan was absent from Hong Kong
2006/07	165	179
2007/08	343	338
2008/09	336	351
2009/10	330	353
2010/11	336	350
2011/12	328	355
2012/13	325	356
2013/14	327	355
2014/15	326	347
2015/16	305	338

10.  Specifically, in relation to the year of assessment 2013/14:

(1)  the Applicant came back to Hong Kong twice, and spent a total of 38 days in Hong Kong; and

(2)  Madam Yan came back to Hong Kong once, and spent a total of 10 days in Hong Kong.

11.  The Applicant and Madam Yan have since 31 December 1996 been the registered joint tenants of a property known as Flat H, 10/F, Ngan Sing Mansion, Sing Fai Terrace, No 1 Tai Fung Avenue, Taikoo Shing, Hong Kong (“the Property”).  For the years of assessment 2006/07 to 2014/15, the couple reported to the Commissioner the rental income that they received from letting out the Property, and indicated that they wished to elect for personal assessment.  The relevant version of Section 41(1) of the Ordinance, prior to its amendment by the Inland Revenue (Amendment) (No 9) Ordinance 2018, provides as follows:

“Subject to subsection (1A), an individual –

(a) of or above the age of 18 years, or under that age if both his or her parents are dead; and

(b) who is or, if he or she is married, whose spouse is either a permanent or temporary resident,

may elect for personal assessment on his or her total income in accordance with this Part.”

12.  Section 41(4) further provides that, for the purpose of that section:

(1)  “permanent resident” means “an individual who ordinarily resides in Hong Kong”; and

(2)  “temporary resident” means “an individual who stays in Hong Kong for a period or a number of periods amounting to more than 180 days during the year of assessment in respect of which the election is made or for a period or periods amounting to more than 300 days in 2 consecutive years of assessment one of which is the year of assessment in respect of which the election is made”.

13.  Since there was no dispute that neither the Applicant nor Madam Yan could satisfy the criteria for “temporary resident”, the Applicant’s entitlement to elect for personal assessment depended on whether he or Madam Yan was a “permanent resident”, and that in turn depended on whether he or Madam Yan was ordinarily resident in Hong Kong at the material time.

14.  The Commissioner considered that the Applicant and Madam Yan were not eligible to elect for personal assessment for the years of assessment 2008/09 to 2014/15 as neither the Applicant nor Madam Yan was permanent or temporary resident in Hong Kong.  Accordingly, the Commissioner raised Property Tax Assessments for the years of assessment 2008/09 to 2014/15 on the couple in respect of their reported rental income from letting out the Property, and rejected their election for personal assessment for those years.

15.  The Applicant objected to the Property Tax Assessments for the years of assessment 2008/09 to 2013/14 on the ground that he was eligible to elect for personal assessment.  He did not, however, object to the Property Tax Assessment for the year of assessment 2014/15.  The Commissioner confirmed the Property Tax Assessments for the years of assessment 2008/09 to 2013/14 by the following determinations:

Years of assessment	Date of assessment	Date of determination confirming assessment
2008/09	3 May 2010	29 November 2010 (“the 2010 Determination”)
2009/10 2010/11 2011/12 2012/13	9 June 2011 7 March 2014 28 February 2014 28 February 2014	28 November 2014 (“the 2014 Determination”)
2013/14	18 November 2014*	18 April 2018 (“the 2018 Determination”)

* In the Assessor’s Notes in the 2013/14 Property Tax Assessment dated 18 November 2014, it is stated that “property tax is demanded as he/she is not eligible to elect personal assessment”.

16.  The Applicant appealed against the 2010 Determination and the 2014 Determination to the Board of Review (“the Board”), but did not appeal against the 2018 Determination to the Board.  The Board dismissed the Applicant’s appeals, holding that the Applicant was not ordinarily resident in Hong Kong for the years of assessment from 2008/09 to 2012/13.  The Applicant’s subsequent applications to the Board to state a case on a question of law for the opinion of the Court of First Instance were rejected by the Board on the ground that the questions proposed by him were not proper questions of law:

Determination	Board’s decision dismissing appeal	Board’s decision dismissing application to state case
2010 Determination	Case No D41/12 dated 7 December 2012 (“the 2012 Board Decision”)	The 2013 Refusal to State Case Decision dated 29 May 2013
2014 Determination	Case No D11/15 dated 2 September 2015 (“the 2015 Board Decision”)	The 2016 Refusal to State Case Decision dated 29 January 2016

17.  On 12 May 2016, the Applicant applied for leave to apply for judicial review of the 2014 Determination, the 2015 Board Decision and the 2016 Refusal to State Case Decision (HCAL 86/2016).  On 12 September 2016, G Lam J dismissed the application for extension of time, and the application for leave to apply for judicial review.  In the relevant Form CALL-1 (“the HCAL 86 Call-1 Form”), the learned judge:

(1)  held that the application for judicial review of the 2014 Determination and the 2015 Board Decision were plainly misconceived because there existed statutory procedures for appeal against such decisions;

(2)  rejected the Applicant’s argument that the Commissioner had no power to confirm, under Section 64, a decision not to allow personal assessment, and the Board likewise had no power to review the Commissioner’s decision not to allow person assessment; and

(3)  held that the application for judicial review of the 2016 Case Stated Decision was not reasonably arguable.

18.  On 10 November 2016, the Applicant wrote to the Commissioner purportedly applying to elect for personal assessment for the years of assessment 2013/14 and 2014/15.  On 29 November 2016, the Commissioner replied to the Applicant stating, amongst other things, that:

(1)  as previously notified, the Applicant’s objection against the 2013/14 Property Tax Assessment on the ground that he was eligible to elect for personal assessment for that year was being processed by the Appeals Section of the IRD; and

(2)  in respect of the Applicant’s election for personal assessment for the year of assessment 2014/15, it had been rejected when the relevant Salaries Tax Assessment was issued on 14 October 2016, on the ground that both the Applicant and his wife were neither temporary nor permanent resident in Hong Kong at the material time (“the 2016 Decision”).

19.  On 8 February 2017, the Applicant applied for leave to apply for judicial review of the 2016 Decision, contending that the Commissioner wrongfully rejected his election for personal assessment for the years of assessment 2013/14 and 2014/15 (HCAL 31/2017).  On 29 March 2017, Au J (as he then was) dismissed the application for leave to apply for judicial review.  In the relevant Form CALL-1 (“the HCAL 31 Call-1 Form”), the learned judge:

(1)  held that the Applicant’s challenge to the 2016 Decision was, in substance and in fact, a challenge to the finding by the Board in the 2015 Board Decision that the Applicant was not a permanent resident in Hong Kong within the meaning of Section 41 as he was not ordinarily resident in Hong Kong at the relevant time, and the application was made out of time;

(2)  agreed with the reasons given by G Lam J to reject the Applicant’s previous application for leave to apply for judicial review in HCAL 86/2016; and

(3)  expressed the view that if the Applicant was dissatisfied with the decision of G Lam J, he should have appealed that decision to the Court of Appeal within time, and it was clearly an abuse of process for the Applicant to bring another judicial review seeking in effect to challenge the decision of G Lam J.

20.  On 17 May 2018, the Applicant made the present application for leave to apply for judicial review of the 2018 Determination. The Applicant did not set out the relief sought or the grounds on which relief is sought in the Form 86.  In a 105-page document called “Application” filed together with the Applicant’s affirmation dated 17 May 2018, the Applicant states that he is applying for:

(1)  an order of certiorari to quash the 2018 Determination;

(2)  an order of mandamus to compel the Commissioner to allow his election for personal assessment for the year of assessment 2013/14; and

(3)  an order of prohibition to prohibit the Commissioner from publishing the 2012 Board Decision and 2015 Board Decision.

DISCUSSION

21.  In my view, the proposed application for judicial review is plainly unarguable and has no realistic prospect of success.

22.  Three main grounds have been raised by the Applicant in support of his proposed application for judicial review of the 2018 Determination.  First, the Applicant argues that the Commissioner’s determination that he is not entitled to elect for personal assessment is void, because:

(1)  There is no authority under the Ordinance for the Commissioner to determine whether a person is eligible to elect for personal assessment.  Hence, the Commissioner’s determination which rejects his eligibility to elect for personal assessment is void.

(2)  There is also no provision in the Ordinance for a taxpayer to object to a decision by the Commissioner to reject an election for personal assessment.  The Commissioner is therefore wrong to regard his election for personal assessment as a ground of objection and in making the 2018 Determination.

(3)  Under Part 11 of the Ordinance, the burden of proof that an assessment is excessive rests on the objecting taxpayer.  It is not fair for a taxpayer who elects for personal assessment to have to prove that he/she was ordinarily resident in Hong Kong at the material time.

23.  As earlier mentioned, the Applicant, by a letter to the Commissioner dated 25 November 2014, expressly objected to the 2013/14 Property Tax Assessment on the ground that he had elected for personal assessment for the year of assessment 2013/2014.  It seems to me obvious that the Commissioner, in order to determine the validity of the Applicant’s objection, must have power to decide, and decide, whether the Applicant was eligible to elect for personal assessment.  As it was, the Commissioner decided that the Applicant and Madam Yan were not eligible to elect for personal assessment and confirmed the 2013/14 Property Tax Assessment.  I do not see how it can be argued that the Commissioner has no power to make such determination.

24.  The Applicant’s arguments referred to in paragraph 22(1) and (2) above were considered and rejected by G Lam J in his application for leave to apply for judicial review in HCAL 86/2016.  At paragraph 12 of the HCAL 86 Call-1 Form, the following is stated:

“The applicant argues that there is no power in the Ordinance for the Commissioner to confirm, under s. 64, a decision not to allow personal assessment and, equally, no power for the Board to review the Commissioner’s decision not to allow personal assessment, and therefore the proceedings were all ultra vires. I do not think that is the right way of looking at it. The IRD raised property tax assessments on the applicant. He objected to those assessments on the ground that he was eligible for personal assessment. If personal assessment was allowed, there should be a single assessment under s. 42A and no separate property tax assessments. Since the property tax assessments were objected to by the applicant, I see no reason why the Commissioner could not deal with his objection pursuant to s. 64, or why the Board could not under s. 66 deal with the Commissioner’s determination on his objection, in the process deciding, as they did, the question whether the applicant was entitled to elect for personal assessment. There is no relevant limit on the grounds of objection to the Commissioner under s. 64. As the Board stated in §6 of its 1^st Decision, this was explained to the applicant at the outset and he elected to pursue the appeal instead of seeking judicial review at that stage.”

25.  In HCAL 31/2017, Au J agreed with the decision of G Lam J (see paragraph (4) of the HCAL 31 Call-1 Form).  The reasoning of G Lam J also seems to me to be plainly correct.

26.  There is nothing unfair in requiring a taxpayer who wishes to elect for personal assessment to prove his entitlement to make such election, including in particular satisfaction of the residence requirement under Section 41.  After all, the taxpayer knows better than anyone else about the circumstances of his residence and whether he is a permanent or temporary resident in Hong Kong.

27.  In any event, as pointed out by G Lam J, if the Applicant was dissatisfied with the 2018 Determination, he could appeal that determination to the Board, and if he was not satisfied with the decision of the Board, he could seek leave to appeal the Board’s decision to the Court of First Instance under the Ordinance.  Judicial review is a remedy of last resort.  In paragraph 11 of the HCAL 86 Call-1 Form, G Lam J stated that “the application for judicial review … is … misconceived because there exist statutory procedures for appeal against [the 2014 Determination] and [the 2015 Board Decision], from which it follows that judicial review is not the appropriate course in the absence of some special circumstances of which I think there is none”.  On this ground alone, the Applicant’s present challenge to the 2018 Determination by way of judicial review is doomed to fail.

28.  The above conclusion makes it unnecessary to consider the Applicant’s second ground of judicial review, namely, that the Commissioner erred in law in the interpretation of “ordinary residence” in the 2018 Determination.  For the sake of completeness, I should mention that I have read and considered the 2018 Determination, and do not find that the Commissioner made any error of law.  The Commissioner applied the test of ordinary residence as established by the decision of the House of Lords in Ex p Shah [1983] 2 AC 309 to determine whether, on the facts, the Applicant was ordinarily resident in Hong Kong at the material time.  The Commissioner also considered that, in the absence of any material change in the Applicant’s factual position in the year of assessment 2013/14, he was bound by the Board’s finding in the 2015 Board Decision that the Applicant was not ordinarily resident in Hong Kong.  As pointed out by Lord Scarman at page 341b-c in Ex p Shah, in the context of judicial review, if the decision-maker gets the law right, whether a person is ordinarily resident in any particular place is question of fact for the decision-maker, not the court, to decide.  The Commissioner’s conclusion that the Applicant was not ordinarily resident in Hong Kong is a conclusion which was open to him to reach, and cannot be said to be irrational in the public law sense.  Accordingly, there is, in any event, no substantive merit in the Applicant’s challenge to the 2018 Determination.

29.  The Applicant’s third ground of judicial review is that it is “for the public interest as well as for the befit of the tax profession” to stop the Commissioner from publishing the 2012 Board Decision and 2015 Board Decision because, according to him, “publishing this kind of BRO cases, such as Applicant’s previous Board cases in Decision D24/15 and D41/12, would definitely mislead taxpayers in general as well as the tax profession as a whole”.  Quite apart from the fact the Applicant’s challenge to the 2015 Board Decision has been rejected by G Lam J in HCAL 86/2016, and this court does not consider that there is anything misleading in those decisions, it cannot sensibly be argued that a decision which may wrong or incorrect should be not published or reported.  This argument was previously raised by the Applicant in HCAL 86/2019 and rejected by G Lam J (see paragraph 19 of the HCAL 86 Call-1 Form).  In my view, the Applicant’s argument is so devoid of merits that it must be rejected.

DISPOSITION

30.  For the foregoing reasons, the present application for leave to apply for judicial review is dismissed.

31.  The principles governing an award of costs in an unsuccessful application for leave to apply for judicial review are well settled (see Leung Kwok Hung v President of the Legislative Council (No 2) (2014) 17 HKCFAR 841, at paragraph 17), and do not have to be repeated here.  I consider that the Commissioner should be entitled to be paid his costs in these proceedings, because:

(1)  the present application clearly lacks any merits;

(2)  the Commissioner attended the hearing at the invitation of the court and provided substantial and helpful assistance to the court;

(3)  the Applicant repeats and relies upon arguments which have already been rejected by G Lam J and Au J in his previous applications for leave to apply for judicial review; and

(4)  the Applicant has, effectively, had a hearing on the merits.

32.  I therefore make an order that the Applicant shall pay the Commissioner’s costs of this application, to be taxed if not agreed.