WONG WING WAH v. COLLECTOR OF STAMP REVENUE

CACV 13/2021

[2022] HKCA 132

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 13 OF 2021

(ON APPEAL FROM HCAL NO 1479 OF 2020)

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REASONS FOR JUDGMENT

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Hon Kwan VP (giving the Reasons for Judgment of the Court):

1.  This is the appeal of Madam Wong Wing Wah (“Madam Wong”) against the judgment of Chow J (as he then was) on 6 January 2021 ([2021] 1 HKLRD 649; “the Judgment”), by which the judge refused to extend time for her to apply for leave to seek judicial review and dismissed her application for leave to apply for judicial review. The judge took the view that the intended application for judicial review is not reasonably arguable and has no realistic prospect of success.

2.  The Collector of Stamp Revenue (“the Collector”) is the putative respondent. The decision in respect of which relief is sought is the Collector’s assessment of stamp duty (“the Assessment”) in respect of a provisional agreement for sale and purchase (“the Agreement”) of a property in Kwun Tong Road purchased by Madam Wong as trustee for Wong Tak Hung (“Mr Wong”). Both Madam Wong and Mr Wong are Hong Kong permanent residents (“HKPRs”). The Assessment was made on the basis that Buyer’s Stamp Duty (“BSD”) was chargeable^[1].

3.  Two issues are raised in the intended application for judicial review: (1) whether the imposition of BSD on all residential properties by section 29CB of the Stamp Duty Ordinance, Cap 117 (“the Ordinance”) engages the right to acquisition of property protected under Articles 6 and/or 105 of the Basic Law (“BL 6” and “BL 105”)^[2]; and (2) if the answer to (1) is in the affirmative, whether the restriction or interference with such rights is proportional.

4.  The judge found that the imposition of BSD has satisfied all the four stages or steps of the proportionality test^[3]. In light of this conclusion, it was unnecessary to consider the anterior question if Madam Wong’s right to acquisition of property protected by BL 6 and/or BL 105 is engaged. If it were necessary to do so, he would find that such right is not engaged.

5.  We agree with the judge’s views and dismissed the appeal at the conclusion of the hearing with costs to the putative respondent, with a certificate for two counsel. These are the reasons for our judgment.

Background to the application for judicial review

6.  We take the relevant background matters from the Judgment and the decision of HH Judge Kent Yee in DCSA 97/2016 on 8 January 2020 (“the Decision”)^[4].

“[3] On 18 January 2013, Madam Wong signed the Agreement to purchase the Property at a consideration of HK$7,181,585. The Property is a residential property within the meaning of s.29A(1) of the Ordinance.

[4] The Agreement was stamped with ad valorem stamp duty of $269,310 under the then prevailing head 1(1A)(i) in the First Schedule to the Ordinance on 6 February 2013. Madam Wong raised no issue with the amount of ad valorem stamp duty payable on the Agreement.

[5] On 29 January 2013, Madam Wong executed a trust deed (the Deed) in which she declared, among other matters, that the Property did belong to one Mr Wong. She merely held the Property for Mr Wong, who had paid and would pay all monies relating to the purchase and maintenance of the Property.

[6] On 21 February 2013, Madam Wong entered into a formal agreement for sale and purchase of the Property by incorporating the terms of the Agreement. The sale was completed on 30 April 2013.

[7] The HKSAR Government announced on 26 October 2012 proposed measures to address the overheated residential property market and sought to introduce, among other things, the Buyer’s Stamp Duty (BSD) by amending the Ordinance through Stamp Duty (Amendment) Bill 2012 (the Bill) which was subsequently published in the Gazette on 28 December 2012^[5].

[8] In or about June 2016, Messrs Philip T F Wong & Co, the former solicitors for Madam Wong, supplied documentary evidence to prove the financial contribution of Mr Wong to the acquisition of the Property. The Collector, as a result, adjudicated that the Deed should not be chargeable with any stamp duty by virtue of s.27(5) of the Ordinance due to the lack of any beneficial interest thereby transferred.

[9] However, the Collector concluded that the Agreement was chargeable with BSD by virtue of s.29CB(1) of the Ordinance and the exemption under s.29CB(2)(a) of the Ordinance was not applicable because Madam Wong was not acting on her own behalf under the Agreement, but as trustee for and on behalf of Mr Wong.

[10] Section 29CB(1) of the Ordinance provides,

‘(1) Subject to the other provisions of this section, head 1(1C) in the First Schedule applies to a chargeable agreement for sale of any residential property executed on or after 27 October 2012.

(2) A chargeable agreement for sale is not chargeable with buyer’s stamp duty under head 1(1C) in the First Schedule if it is shown to the satisfaction of the Collector —

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

[11] On 7 June 2016, under s.13(3)(b) of the Ordinance, the Collector raised the Assessment in respect of the Agreement to HK$1,077,238 ($7,181,585 x 15%) with BSD being chargeable. Madam Wong has paid the said amount in full pending her appeal.

[12] Madam Wong has filed an affirmation of Peter Fu to support her appeal. There, it is deposed to that Mr Wong is in fact a Hong Kong permanent resident (HKPR). The Collector takes no issue with this assertion …”^[6].

“5. By a Notice of Appeal dated 6 July 2016, Madam Wong brought an appeal against the Assessment pursuant to s.14 of the Ordinance.

6. On 30 June 2017, a Case Stated was signed by the Collector for the purpose of the appeal^[7].

7. The sole ground of the appeal, as advanced by Mr Lam^[8] on behalf of Madam Wong before the learned Judge, was:

“whether s.29CB(2)(a) of the Ordinance is against the Basic Law and hence unconstitutional in that it allows BSD to be levied on agreements even executed by a HKPR buyer as a nominee/trustee for a genuine HKPR buyer. Mr Lam argues that this provision infringes the constitutional rights to acquire property under Articles 6 and 105 of the Basic Law. The gravamen of his complaint is that the provision contravenes the stated objectives of the BSD and unjustifiably and disproportionally imposes a restriction on a HKPR buyer’s right to acquire property through a conventional and legitimate asset protection arrangement by way of trust. (see §13 of the Decision)”

8. On 8 January 2020, the learned Judge dismissed Madam Wong’s appeal, essentially on the basis that the Government’s right to levy tax (including stamp duty) under BL 108^[9] cannot be restricted or circumscribed by the rights protected under BL 6 and BL 105 (see §§30, 31 and 37 of the Decision). In coming to that conclusion, the learned Judge relied upon the judgment of the Court of Appeal in Weson Investment Ltd v Commissioner of Inland Revenue [2007] 2 HKLRD 567, as did HH Judge Andrew Li in another stamp duty appeal raising the same issue (Wong Chak Sin v Collector of Stamp Revenue [2016] 1 HKLRD 981).

9. On 15 May 2020, the learned Judge dismissed Madam Wong’s application for leave to appeal the Decision^[10].

10. On 27 May 2020, Madam Wong applied to the Court of Appeal for leave to appeal the Decision.

11. At the hearing of the application for leave to appeal on 6 July 2020, the question was raised as to whether Madam Wong’s constitutional challenge to the Assessment should have been made in an application for judicial review, instead of in an appeal by way of case stated. As I understand it, the Court of Appeal^[11] was of the view that judicial review was the appropriate, or more appropriate, procedure, and made the following order:

“The Application^[12] be adjourned pending for the Appellant to apply for Judicial Review on condition that the Appellant should file the Judicial Review leave application within 28 days from the date hereof.”

12. On 14 July 2020, Madam Wong made the present application for leave to apply for judicial review. In the Form 86, Madam Wong argues that BSD as applied to a HKPR trustee purchasing for a HKPR beneficiary “restricts the constitutionally protected right to acquire property under [BL 6 and BL 105] without justification and/or [is] disproportionate to the legitimate aim of the BSD, despite the HKSARG’s authority to legislate on tax as provided under [BL 108]” (see §9 of the Form 86).”^[13]

7.  The judge assumed in Madam Wong’s favour that her challenge to the Assessment could, and properly should, be made by way of judicial review, having regard to the aforesaid order of the Court of Appeal. He cautioned that the Judgment should not be read as a relaxation of the principle that judicial review should normally be regarded as a remedy of last resort, and should not be used where there is an available statutory appeal procedure, save in exceptional circumstances. He treated the present application as an exceptional case for this purpose^[14].

8.  The judge also noted that “there have recently been 11 similar applications for judicial review lodged with the High Court (HCAL 2155 to 2165/2020)^[15]. In each of them, a HKPR trustee apparently purchased a residential property for [Mr Wong], save that in one case (HCAL 2163/2020) the beneficial owner was a person called Fan Lai Chun. The court does not have information as regards the purpose(s) behind these trust arrangements and shall not speculate into those matters. It seems clear, however, that there are demands in the Hong Kong housing market by HKPR buyers seeking to purchase residential properties through HKPR trustees.”^[16]

Background to the Bill and section 29CB of the Ordinance

9.  The Government proposals in October 2012 comprised enhancements to the existing SSD and the introduction of BSD, with the major exemption from BSD being where the purchaser or transferee of a residential property is an HKPR acting on his or her own behalf in acquiring the property. The relevant background giving rise to the proposals, the implications and the justifications thereof may be readily discerned from these documents: the Legislative Council Brief on the Bill prepared by the Transport and Housing Bureau dated December 2012 (“the LegCo Brief”); the Administration’s response to the issues raised at the meeting of the Bills Committee on the Bill held on 18 February 2013 dated April 2013 (“the Administration’s Response”)^[17]; the report of the Bills Committee dated 14 February 2014 (“Bills Committee Report”)^[18]; and the press release dated 26 October 2012 (“the Press Release”)^[19].

10.  The background and justification of the Government measures in October 2012 were stated in the LegCo Brief:

“2. In the midst of a continuously exuberant state in the residential property market, arising from a tight supply of flats, extremely low interest rates and influx of capital from overseas, it is apparent that the property residential market is out of step with the real economy. Property prices are rising beyond the affordability of the general public and the risk of a property bubble has increased substantially.

3. In view of the above, having consulted the Executive Council on 26 October 2012, the Financial Secretary announced on the same day the new demand-side management measures, i.e. the enhancement to the SSD and introduction of the BSD. The objectives of these measures are to prevent even further exuberance in the housing market which may pose significant risks to our macro economic and financial sector stability; to ensure the healthy and stable development of the residential property market which is crucial to the sustainable development of Hong Kong as a whole; and to accord priority to HKPR buyers over non-HKPR buyers under the current market situation.” (Emphasis supplied.)

11.  Thus, the objectives sought to be attained by the aforesaid measures were:

(1)“to prevent even further exuberance in the housing market which may pose significant risks to our macro economic and financial sector stability”;

(2)“to ensure the healthy and stable development of the residential property market which is crucial to the sustainable development of Hong Kong as a whole”; and

(3)“to accord priority to HKPR buyers over non-HKPR buyers under the current market situation”.

12.  The economic implications of the Government proposals were clearly set out in Annex C to the LegCo Brief:

“3. The enhancement of SSD would further increase the cost of speculation and it is expected that a significant portion of such transactions would vanish, especially resale cases at the shorter end. The BSD should be effective in reducing demand from non-HKPR buyers, thereby according priority to meeting the housing needs of HKPRs under the current tight demand/supply balance in the housing market. Taken together, the proposals should help forestall a further build up of exuberance in the property market in the midst of global liquidity glut and exceptionally low interest rates, thereby safeguarding overall macroeconomic and financial stability of Hong Kong.” (Emphasis supplied.)

13.  Further explanation of the objectives of BSD was given in the Administration’s Response. Among the issues raised by the Law Society of Hong Kong and the responses of the Administration were the following:

“Issue raised:

3. According to the Bill, where the purchaser for the [Stamp Duty Ordinance] purpose is a non-HKPR, BSD will apply regardless of beneficial ownership. That is not correct as the stamp duty law consistently looks to the beneficial ownership for all other purposes. A HKPR should not be disadvantaged for using legitimate asset protection arrangement to hold his property, where the arrangement is made transparent to the Stamp Office. The proposed BSD treatment will only make the arrangements and exemptions become complicated, which is contrary to a stated government policy of wanting more trust work to Hong Kong.”

“The Administration’s responses:

• The objective of BSD is to accord priority in addressing the home ownership needs of HKPR buyers under the current tight supply situation in the residential property market. In pursuance of this policy objective, it is proposed that subject to the exemptions provided under the Bill, no acquisition of residential property can be exempted from the BSD unless the buyer is a HKPR acting on his/her own behalf.

• For a HKPR who is a minor or a mentally incapacitated person, due to the lack of capacity to enter into legally binding agreements, he or she must in practice require another person to act on his or her own behalf. The Bill proposes that the trustee or guardian of such a minor or mentally incapacitated person should be exempted from the BSD solely for the purpose of protecting the rights of a minor or mentally incapacitated person as a HKPR.”

“Issue raised:

15. It is a common practice in Hong Kong for investment purchasers to own properties through a corporate entity in order to maximize tax advantages. The Administration should consider an exemption for corporate entities which invest in property where all the shareholders are HKPRs acting on his/her behalf and maintain only one class of shares.”

“The Administration’s responses:

• Applying BSD to all companies is in line with and is essential to achieve the policy objectives of cooling down the property market and to accord priority to HKPRs in addressing their home ownership needs. As such, all companies, regardless of whether the shareholder(s) or director(s) is/are HKPR(s), should be subject to the BSD. We do not consider it appropriate to exempt company buyers from the BSD on grounds that it is a ‘common practice for investment purchasers to own properties through a corporate entity to maximise tax advantages’ as suggested. …

• We are also concerned about the impact of exempting companies from the BSD on the effectiveness of the various demand-side management measures which the Administration has introduced. The enhanced SSD, the introduction of the BSD and the increase in the ad valorem stamp duty rates (AVD) target at different demands of different buyers. These measures are interrelated and work collectively to achieve the objectives of combating speculations and managing demand. …

• In view of the above, we consider it inappropriate to exempt companies from the BSD simply on the basis that their shareholders are HKPRs.”

(Emphasis supplied.)

14.  In response to the concerns raised by the Hong Kong Conveyancing & Property Law Association Limited at Issue No. 21 that BSD might infringe BL 105, the Administration repeated its statements about the objectives of the BSD:

“The objectives of the BSD are to accord priority to HKPR buyers over non-HKPR buyers under the current tight supply situation; prevent even further exuberance in the housing market which may pose significant risks to our macro economic and financial sector stability; and to ensure the healthy and stable development of the residential property market which is crucial to the sustainable development of Hong Kong as a whole. The proposed exemption for HKPR buyers pursues the legitimate aim of meeting the housing needs of HKPRs who have a close connection with Hong Kong. …”

15.  The aims of BSD and the proposed exemption were explained once again in the Bills Committee Report:

“17. On exempting HKPRs from the BSD, the Administration has explained that as land and property in Hong Kong are finite in supply, meeting the home ownership needs of HKPRs should come first in view of the current tight housing situation. The BSD aims to reduce the non-HKPR demand for residential properties (including demand from foreign investments) by increasing the transaction costs of all residential property acquisitions except those involving HKPRs and other specified situations that are exempted. It pursues the legitimate aim of according priority to meeting the home ownership needs of HKPRs who have a close connection with Hong Kong. It is no more than what is necessary to accomplish the policy objectives to address the irrational market exuberance in recent years. Further extending the scope of exemption would dilute the policy intent and undermine the effectiveness of the BSD.” (Emphasis supplied.)

16.  The Bill initially provided for exemptions from BSD for a purchaser or transferee acting as a trustee or guardian for an HKPR who is a minor or a mentally incapacitated person. When it was scrutinized by the Bills Committee, a number of members expressed concern that the minor exemption might be abused thereby undermining the effectiveness of BSD. After deliberation, the minor exemption was removed from the Bill to safeguard the effectiveness of BSD, after taking into account that the housing needs of minors would not be prejudiced per se. The mentally incapacitated person exemption was retained, as mentally incapacitated persons who are adults have a right to choose their place of residence and with whom they live and should have greater need to acquire residential properties than minors^[20]. The major exemption from BSD remains the situation where the purchaser or transferee of a residential property is an HKPR acting on his or her own behalf, as provided in section 29CB(2)(a) of the Ordinance.

This appeal

17.  Mr Lam repeated his contentions before Chow J that BSD as applied in this instance disproportionately restricts the right of Madam Wong to acquire property under BL 105 and is unconstitutional. He submitted that the two issues raised in the intended application for judicial review mentioned at the outset of this judgment should be answered in favour of Madam Wong, or at the very least, should be regarded as reasonably arguable with a realistic prospect of success.

18.  Mr Lam pointed out that the constitutional issue raised is of general importance, as the judge has recognised^[21]. He argued it was wrong for the judge to find there was substantial delay of more than 46 months in issuing the leave application for judicial review and there was no good explanation for the delay^[22]. He contended that the three-month time limit should run only from 6 July 2020 when the Court of Appeal made the order adjourning the application for leave to appeal against the Decision for Madam Wong to file the leave application for judicial review within 28 days of the order. As the judge has misdirected himself on the merits of the issues raised as well as the delay, the exercise of his discretion in refusing to extend time is vitiated and the appeal court should exercise the discretion afresh.

19.  In respect of the two issues in the intended judicial review, instead of considering the proportionality issue first as the judge has done, we will consider first the issue whether the right to acquire property protected under BL 105 is engaged in this instance^[23], as it is more logical to deal with this first in that the proportionality test would only arise if the right under BL 105 is engaged.

If the right to acquisition of property under BL 105 is engaged

20.  The judge stated his views on this briefly as he concluded that the proportionality test is satisfied even if the right under BL 105 is engaged^[24]. He considered the Court of Appeal decision in Weson Investment Ltd v Commissioner of Inland Revenue directly relevant and it is binding on him. He rejected Mr Lam’s submissions that Weson is distinguishable because it concerns the right to compensation for lawful deprivation of property whereas the present case concerns the right to acquire property, and that Weson has been “impliedly overruled” by the Court of Final Appeal in Hysan Development Co Ltd v Town Planning Board (2016) 19 HKCFAR 372. As for the contention that Weson is wrongly decided, the judge did not deal with it as it is a matter for the higher courts. In short, if it were necessary to do so, the judge would find that Madam Wong’s rights under BL 6 and 105 are not engaged in this instance.

21.  Mr Lam repeated the submissions before us. For good measure, he argued that Weson should be departed from as it is “plainly wrong”.

22.  The taxpayer in Weson raised an objection to the assessment for profits tax and paid the full amount assessed pending final determination of the objection. It received a refund of the tax overpaid when its appeal succeeded and the assessment was set aside, but the Commissioner of Inland Revenue rejected the taxpayer’s claim of interest. The taxpayer argued that BL 6 and 105 applied and it had been deprived of the capital used to pay the tax refunded without compensation for loss of use.

23.  Rogers VP held that BL 105 “has no application to legitimate taxation”, which is governed under BL 108. “When the Government imposes tax on the individual, of necessity it deprives the individual of his property without any right to compensation. The two articles are … mutually exclusive.” (§18) Le Pichon JA agreed with the judgment of Rogers VP (§89).

24.  Tang VP (as he then was) gave a separate judgment and shared the same view that BL 105 has no application to that case, in that BL 108 governs the power of the Government to tax “so that a payment which turned out not to have been payable because of a successful objection or appeal is nevertheless covered by BL 108.” (§§79 to 81) He did not believe “a genuine attempt to tax, even though it ultimately turned out to be wrong, amounted to lawful expropriation under BL 105”. (§82) Pertinently, Tang VP said in §85:

“Mr Mok [counsel for the taxpayer] submitted that BL 105 and 108 should be read in the same way^[25]. In other words, the court must strike a fair balance, so that there must be a reasonable relationship of proportionality between the means employed and the aims pursued. … I do not believe it is right to read BL 105 and 108, as if the right of the HKSARG to tax has to strike such a fair balance. Rather, I am of the view that unless the taxation scheme cannot be regarded as genuine, but was in fact a disguised expropriation of property, BL 105 has no application. And the court has no power to intervene. …”

25.  Rogers VP and Tang VP quoted from the joint judgment of the majority in the High Court of Australia (Mason CJ, Brennan J, Deane J and Gaudron J) in Australian Tape Manufacturers Association Ltd & Ors v The Commonwealth of Australia (1993) 176 CLR 480 at 508 and 509 to 510, which they found helpful:

“A law which is in truth a law imposing taxation escapes the requirement of s. 51(xxxi) of the Constitution that an ‘acquisition of property ... for any purpose in respect of which the Parliament has power to make laws’ be ‘on just terms’. The reason that this is so is that the relationship between the legislative powers conferred by s. 51(ii) and s. 51(xxxi) of the Constitution^[26] necessarily involves antinomy between what constitutes ‘taxation’ (for the purposes of s. 51(ii)) and what constitutes an ‘acquisition of property’ (for the purposes of s. 51(xxxi)): of its nature, "taxation" presupposes the absence of the kind of direct quid pro quo involved in the ‘just terms’ prescribed by s. 51(xxxi). …

The answer to the question whether a legislative imposition of an obligation to pay money involves an ‘acquisition of property’ for the purposes of s. 51(xxxi) of the Constitution must depend upon the context in which the obligation is imposed. If, for example, a law did no more than provide that a particular named person was under an obligation to pay to the Commonwealth an amount of money equal to the total value of all his or her property, the law would effect an acquisition of property for the purposes of s. 51(xxxi), notwithstanding the fact that it imposed merely an obligation to pay money and did not directly expropriate specific notes or coins. … Section 51(xxxi)'s guarantee of just terms is not to be avoided by ‘a circuitous device to acquire indirectly the substance of a proprietary interest’. In a case where an obligation to make a payment is imposed as genuine taxation, as a penalty for proscribed conduct, as compensation for a wrong done or damages for an injury inflicted, or as a genuine adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity, it is unlikely that there will be any question of an ‘acquisition of property’ within s. 51(xxxi) of the Constitution. On the other hand, the mere fact that what is imposed is an obligation to make a payment or to hand over property will not suffice to avoid s. 51(xxxi)'s guarantee of ‘just terms’ if the direct expropriation of the money or other property itself would have been within the terms of the sub-section. Were it otherwise, the guarantee of the section would be reduced to a hollow facade.”

26.  Having regard to the above statements, Rogers VP did not think the question of proportionality has to be considered in the context of the case as well as the provisions of the Inland Revenue Ordinance, Cap 112. (§26) Tang VP rejected the submission there had been an expropriation of the taxpayer’s property. “In other words, the Commissioner was not seeking to take away the property of the taxpayer, but to recover that which was due to the Commissioner.” (§87)

27.  Mr Lam submitted that Weson is distinguishable in that it only concerned the second limb in BL 105, being the “right to compensation for lawful deprivation of … property”, and the first limb being “the right of individuals and legal persons to the acquisition … of property” was not in issue. The Court of Appeal had reasoned it is logically impossible that the right to compensation for lawful deprivation would be engaged, for otherwise the government’s right to tax would be rendered meaningless. On this reasoning, only the right to compensation for lawful deprivation of property would be regarded as “mutually exclusive” or an “antimony” to legitimate taxation. For the concept of mutual exclusivity or antimony to apply to the right to acquisition of property, the reasoning of the Court of Appeal must be extended, as was recognised by Chow J in §32(2) of the Judgment.

28.  We agree with the judge that although a distinction may theoretically be drawn in that there are two limbs in the relevant part of BL 105 and they provide for the protection of two different rights, the reasoning of the Court of Appeal can properly be extended such that the right to acquisition of property is equally not engaged when the Government exercises the power to levy tax under BL 108. There is no good reason to make a differentiation and confine the reasoning – that legitimate taxation by its very nature operates in an opposite direction to the protection of private property rights – to the second limb. This reasoning applies with equal force to the first limb. The theoretical distinction drawn by Mr Lam is not valid. As HH Judge Kent Yee rightly observed in the Decision at §29, “this distinction is without a difference”. We do not think Weson is properly distinguishable.

29.  Insofar as Mr Lam took the position there is no mutual exclusiveness or antimony between BL 108 and the first limb of BL 105 (because he contended that Weson is distinguishable), we find this somewhat strange, as pointed out by Mr William Liu for the putative respondent^[27], because it is Madam Wong’s case that BSD (which is a form of taxation) would limit her right to acquisition of property.

30.  Mr Lam argued that Weson was impliedly overruled by the Court of Final Appeal in Hysan Development Co Ltd v Town Planning Board. He contended that it was held in Hysan that the proportionality analysis should apply to the rights under BL 105 “without qualification” and Weson was not mentioned in the judgment although it was cited to the Court of Final Appeal. He further submitted that the “implied antimony” approach has not been adopted in subsequent decisions of the Court of Final Appeal (Kong Yunming v Director of Social Welfare (2013) 16 HKCFAR 950; and Hysan) where a fundamental right was arguably restricted by another provision in the Basic Law and the proportionality test was applied. In Kong Yunming, it was the right to social welfare under BL 36 versus the right of the Government to formulate policies on the development and improvement of the social welfare system under BL 145. In Hysan, it was the right to property under BL 6 and 105 versus the right to town planning under BL 7.

31.  We do not agree with the above submissions. Neither Hysan nor Kong Yunming had anything to do with the Government’s right to levy tax in BL 108. There is no basis to support the contention that Weson was impliedly overruled by the Court of Final Appeal merely because a different approach was adopted in Kong Yun Ming or Hysan to resolve what may seem to be a conflict between certain provisions in the Basic Law. As rightly submitted by Mr Liu, there is no intrinsic and necessary mutual exclusivity between the provisions in the Basic Law relied on by the applicants in Kong Yun Ming and Hysan and those provisions relied on by the Government. Furthermore, in Hysan at §42, the Court of Final Appeal expressly left open the question whether, and if so, in what way, BL 6 and 105 are engaged on a challenge to the constitutionality of the empowering statute, as opposed to challenges made in the case under discussion to decisions taken by an executive authority pursuant to statutory machinery.

32.  In Kwok Cheuk Kin v Director of Lands [2021] HKCFA 38, the court considered the relationship between BL 40 (protecting the lawful traditional rights and interests of indigenous inhabitants of the New Territories) and two anti-discrimination provisions in BL 25 (all Hong Kong residents shall be equal before the law) and BL 39 (the provisions of the International Covenant on Civil and Political Rights as applied to Hong Kong shall remain in force and the rights and freedoms enjoyed by Hong Kong residents shall not be restricted unless as prescribed by law). Applying the principles of statutory interpretation that legislative instruments must be read as a coherent whole and the specific prevails over the general, it was held that BL 40 is the dominant provision and it qualifies and limits the application of the anti-discrimination provisions, not the other way round. (§§43, 44)

33.  We agree with Mr Liu that a similar approach should apply to the interplay between BL 105 and 108, which are placed in the same section (Section 1: Public Finance, Monetary Affairs, Trade, Industry and Commerce) of the same chapter (Chapter V: Economy) of the Basic Law. The provisions in the same section should be read as a coherent whole. BL 108 is a specific provision dealing with the power of the Government to levy taxation. BL 105 is a general provision on the protection of property rights. For BL 108 to be operative, BL 105 should not be read in a comprehensive sense but must be construed as having been qualified and limited by BL 108. As held in Weson, BL 105 has no application to legitimate taxation which is governed under BL 108.

34.  We turn to the arguments that Weson was “plainly wrong” and should not be followed by this court. Before we do so, it is pertinent to note that the “plainly wrong” test laid down in A Solicitor v Law Society of Hong Kong (2008) 11 HKCFAR 117 at §§45 to 50 sets a very high threshold. Where the arguments whether the previous decision is wrong are “finely balanced”, the Court of Appeal’s mere preference for the view that it is wrong would plainly be insufficient to justify departure from it. And even where the Court of Appeal is satisfied that the arguments against its previous decision are “more substantial and cogent” than the contrary arguments, this would still be insufficient. It is only where the Court of Appeal is convinced that the contentions against its previous decision are “so compelling that it can be demonstrated to be plainly wrong” that the test is satisfied.

35.  We are not persuaded that the “plainly wrong” test is satisfied in this instance to justify a departure from Weson, in light of our analysis on the interplay of BL 105 and 108. It does not appear to us that the contrary arguments could even be regarded as “finely balanced” or “more substantial and cogent” in contrast with the reasoning in Weson. We will deal with the contrary arguments advanced by Mr Lam succinctly.

36.  Mr Lam relied heavily on the judgment of Ackermann J in the Constitutional Court of South Africa in First National Bank SA Limited t/a Wesbank v The Commissioner for the South African Revenue Services & Anr [2002] ZACC 5, in support of his proposition that in jurisdictions where there is an express constitutional right to property, it is generally accepted that such right imposes limits on the government’s power to levy tax.

37.  He also prayed in aid the jurisprudence of the European Court of Human Rights in relation to Article 1 of Protocol No. 1 of the European Convention of Human Rights in The National & Provincial Building Society & Ors v United Kingdom and NKM v Hungary (2016) 62 EHRR 33. He contended that the Court of Appeal in Weson was wrong to be influenced by the reasoning in Australian Tape Manufacturers Association Ltd & Ors v The Commonwealth of Australia and should have followedinstead the European Court in that the structure and language of the provisions in the Basic Law are closer to the European Convention than the provisions in the Australian Constitution.

38.  In First National Bank SA Limited at §97, Ackermann J cautioned that “comparative law cannot, by simplistic transference, determine the proper approach” to a provision in a constitution for protecting property rights “that has its own context, formulation and history”, as “the formulation of property rights and their institutional framework differ, often widely, from legal system to system”. The constitutional challenge in that case concerned the right to compensation upon deprivation of property, not the right to acquisition of property – a distinction that Mr Lam emphasised should be made in his attempt to distinguish Weson. Further, the case did not deal with apparently conflicting provisions in the constitution, but with the question of statutory provisions in customs and excise legislation that deprived an owner of property for someone else’s customs debt. The court considered that “If the deprivation is not arbitrary, the section 25(1) right [in the Constitution in South Africa, that no one may be deprived of property except in terms of law of general application and no law may permit arbitrary deprivation of property] is not limited and the question of justification under section 36 [of the Constitution]^[28] does not arise.” (§70)

39.  We do not think the context and formulation of the protected right considered in First National Bank SA Limited are sufficiently close or comparable to the provisions of the Basic Law. It would not be appropriate to apply by “simplistic transference” the approach and statements in that case.

40.  Furthermore, Mr Liu drew our attention to a subsequent decision of the High Court in South Africa (Gauteng Division, Pretoria) in Pienaar Brothers (Pty) Ltd v Commissioner for the South African Revenue Service & Anr [2018] 3 LRC 48. In that case, Fabricius J held that the fact that a law creates a civil liability did not in itself constitute deprivation of property in the context of section 25(1) of the Constitution. If it were otherwise, every tax, levy, fee, fine, and administrative charge would constitute deprivations for the purposes of section 25(1). The applicant had to establish that the impugned provisions gave rise to a substantial interference with property rights that went beyond the normal restrictions on property use or enjoyment in a democratic society. (§§105 to 110)

41.  Nor do we think it helpful to the present analysis to have regard to the jurisprudence of the European Court. As pointed out by Rogers VP in Weson at §§23 and 24, Article 1 of Protocol No. 1 of the European Convention is a composite article and has to be read as such. The second paragraph of the article introduced the idea of “necessary” and the third paragraph provided for “a wide margin of appreciation” of a Contracting State. We do not agree with Mr Lam that the article bears a close resemblance to BL 105.

42.  For all the above reasons, we reject all the contentions of Mr Lam under this issue. We hold that the right of acquisition of property protected under BL 105 is not engaged in this instance.

If the test of proportionality is satisfied

43.  Having concluded that the right to acquisition of property under BL 105 is not engaged, it is not strictly necessary to consider whether the interference or restriction of that right has satisfied the test of proportionality. Nevertheless, we wish to state our conclusion on this issue as the answer is clear.

44.  The four steps of the proportionality test are: (1) whether the impugned measure pursues a legitimate aim; (2) if so, whether the impugned measure is rationally connected with advancing that aim; (3) whether the measure is no more than reasonably necessary for that purpose; and (4) whether a reasonable balance has been struck between the societal benefits of the encroachment and inroad into the constitutionally protected rights of the individual, asking in particular whether pursuit of the societal interest results in an unacceptably harsh burden on the individual.

45.  Mr Lam contended that steps (2) and (3) are not satisfied in this instance. As mentioned earlier, he did not argue in the court below that step (3) is not satisfied. We will exercise our discretion to permit him to argue step (3), in light of the fact that this was raised in Form 86 (at §26) and evidence had been adduced on both sides on that basis.

46.  Mr Lam’s contentions that step (2) is not satisfied is along these lines. He argued that the objective of BSD was to “accord priority to HKPR buyers over non-HKPR buyers under the current market situation” (LegCo Brief at §3) and submitted that BSD was imposed to manage demand “in a more nuanced manner by according priority to HKPRs whilst filtering out non-HKPRs”. He prayed in aid the Law Society’s submission at the Bills Committee stage that “the stamp duty law consistently looks to the beneficial ownership for all other purposes” and “A HKPR should not be disadvantaged for using legitimate asset protection arrangement to hold his property, where the arrangement is made transparent to the Stamp Office.” (Issue No. 3 as set out in the Administration’s Response) If BSD is applied to an HKPR trustee acting for an HKPR beneficial purchaser, the priority to be accorded to HKPRs over non-HKPR purchasers would be removed and imposing BSD would “defeat the very aim intended”. Levying BSD in that instance would not further the objective of BSD but merely undermine the benefits of “using legitimate asset protection arrangement” under a trust. The Government did not explain in the Administration’s Response to the issue raised by the Law Society why an exemption could not be created in the situation of an HKPR trustee acting for an HKPR beneficial owner.

47.  Mr Lam alleged that the judge has “side-stepped this defect of the BSD” by finding in §29 of the Judgment that BSD has “two separate and independent objectives”, namely “(i) according priority to HKPRs” and “(ii) regardless of whether priority to HKPRs would be deprived of, reducing market demand”. He complained that this was raised by the judge for the first time at the hearing and he did not have fair opportunity to reply. He argued it is not obvious that imposing BSD on an HKPR trustee purchasing on behalf of an HKPR beneficiary would reduce the overall market demand and this is a matter that ought to be established by evidence, citing Leung Kwok Hung v Commissioner of Correctional Services (2020) 23 HKCFAR 456 at §§51 to 52 and quoting from R (Lumsdon) v Legal Services Board [2016] AC 697 at §56 (“An economic or social justification [as opposed to a moral or political one] … may well be expected to be supported by evidence.”). He argued the fact that there are 11 similar applications for judicial review, ten of which involved Mr Wong as the beneficial owner, should be of little weight, as there is no evidence as to the circumstances of the trust arrangement in those 11 cases.

48.  We have set out in some detail relevant extracts from the LegCo Brief, the Administration’s Response and the Bills Committee Report, which explained clearly the aims of BSD and the exemptions from BSD. It is quite simply incorrect that the Government did not explain in the Administration’s Response why an exemption should not be created in the situation of an HKPR trustee acting for an HKPR beneficial owner. Mr Lam’s reading as to the priority accorded to HKPR buyers over non-HKPR buyers is selective and misconceived. He did not have regard to the proper context of the objectives as explained in the LegCo papers.

49.  It should be noted that the proposed measures in October 2012 were introduced as a package, and “taken together”, they were meant to “help forestall a further build up of exuberance in the property market” (LegCo Brief, §3). It is wrong to single out according priority to HKPR buyers over non-HKPR buyers as the objective or an important objective sought to be achieved by imposing BSD, without regard to other objectives of the measures proposed. Nor did the judge regard according priority to HKPR buyers over non-HKPR buyers as a “separate and independent objective” from reducing market demand such that the objective of according priority should be considered separately regardless of any impact on the objective of reducing market demand, as Mr Lam would appear to have submitted.

50.  According priority to HKPR buyers over non-HKPR buyers must be considered in the proper context. As expressly stated and repeatedly emphasised in the LegCo papers, BSD was meant to reduce demand from non-HKPR buyers by increasing the transaction costs of residential property acquisitions and this in turn was to address the home ownership needs of HKPRs under the current tight supply situation in the residential property market (Annex C to the LegCo Brief, §3; Administration’s Response, responses to Issue No. 3, No. 15 and No. 21; Bills Committee Report, §17). The objective of according priority was not to facilitate the use of “legitimate asset protection arrangement” to hold property by an HKPR such as by means of a trust or through a corporate entity. Nor was it to maximise tax advantages of HKPR investment purchasers. The priority to be accorded was never meant to apply to the situation of an HKPR such as Mr Wong, whose purchases of ten residential properties in the name of an HKPR trustee in each instance were clearly not intended to address any housing needs of Mr Wong.

51.  To achieve the policy objectives of cooling down the residential property market and to accord priority to HKPRs in addressing their home ownership needs, the legislature decided not to extend the scope of exemption of BSD so as not to dilute the policy intent and deliberately confined the major exemption to the situation where the purchaser or transferee of a residential property is an HKPR acting on his or her own behalf. Hence, no exemption was granted to an HKPR acquiring a residential property through a trustee or a corporate entity, and the initial exemption to minors was removed at the Bills Committee stage for fear of abuse and to safeguard the effectiveness of BSD.

52.  The objectives of cooling down the residential property market and to accord priority to HKPRs in addressing their home ownership needs, which were meant to be taken together, are legitimate aims. It is self-evident that imposing BSD is rationally connected to the dual objectives. As stated by the Court of Final Appeal in Kwok Wing Hang v Chief Executive in Council (2020) 23 HKCFAR 518 at §105, whether a measure is rationally connected to an identified aim is largely “a matter of logic and common sense”. In this instance, the relationship between an increase of transaction costs and the continuous exuberant state of the residential property market is simple economics, and does not require evidence to prove a rational connection. It is a far cry from the situation in Leung Kwok Hung v Commissioner of Correctional Services,which concerned alleged conventional standards of appearance for men and women in society in relation to the length of hair. As stated in R (Lumsdon) v Legal Services Board at §56, “much may depend on the nature of the justification, and the extent to which it requires evidence to support it.”

53.  We have no doubt that BSD is rationally connected with advancing the legitimate aims. Step (2) of the proportionality test is clearly satisfied.

54.  In respect of step (3), Mr Liu submitted that on the spectrum of intensity of review, the “manifestly without reasonable foundation” test (instead of the “reasonable necessity” test) is applicable, as BSD relates to the Government’s socio-economic policy to which a wide margin of discretion should be applied (Hysan Development Co Ltd v Town Planning Board at §§101 to 104). Mr Lam did not take issue with this, though he contended that even applying the “manifestly without reasonable foundation” test, the imposition of BSD would be disproportionate because it contradicts the express policy of according priority to HKPRs, citing Kong Yunming v Director of Social Welfare at §143.

55.  We reject his submission. There is no contradiction of the policy of according priority to HKPRs, when this policy is properly understood as explained above. Mr Lam has misread the policy of according priority to HKPRs by construing it out of context. Quite clearly, the package of measures introduced in October 2012 including BSD would help curb the buying demand and achieve the dual objectives of cooling down the residential property market and addressing the home ownership needs of HKPRs. Rational connection to the legitimate aims is clearly made out and in no way could it be said that the measures proposed were manifestly without reasonable foundation. There is hardly any resemblance to the situation in Kong Yunming.

56.  Step (3) of the proportionality test is plainly established.

Conclusion

57.  For the reasons given above, we agree with the judge that the intended application for judicial review is not reasonably arguable and has no realistic prospect of success. It is not necessary to deal with the contentions of Mr Lam regarding delay save to say that we agree with the judge on this as well. As there was no basis to interfere with the judge’s exercise of discretion in refusing to extend time for leave to apply for judicial review, the appeal was dismissed with costs.