RE CHUN YUET BUN

HEAD NOTE

Judicial Review - Role of Court in controlling administrative decisions - Inland Revenue Ordinance (Cap. 112) - Reasoning in 1979 Court of Appeal decision no longer applicable to judicial review.

IN THE HIGH COURT OF JUSTICE

HONG KONG

H.C.M.P. 1104 OF 1987

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JUDGMENT

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1. This is an application by Chun Yuet Bun for judicial review arising out of a decision of the Commissioner of Inland Revenue on the 9th of April of this year refusing to accept the Applicant's objection to an estimated assessment of Profits Tax as being out of time. Leave was given by Mr. Justice Mayo on the 16th of June of this year. This matter raises some important points with regard to the role of the Commissioner of Inland Revenue insofar as his administrative functions are concerned and as to the control which the Court should have over those functions. There has been a decision of the Court of Appeal of Hong Kong given in 1979 with regard to what appears to be a similar matter. This is the case of Lam Ying Bor Investment Co. v. Commissioner of Inland Revenue (1979) HKLR 1098⁽¹⁾ I would like to say at the outset, with the greatest respect, that I do not accept the reasoning in that case. It has been overtaken by a number of important decisions on judicial review in the House of Lords in England which, of course, are now binding upon me and although the decision given by the Court of Appeal in 1979 is obviously correct on the facts, the reasoning behind it in my judgment should not now be followed.

2. It is important to recognise that the role of the Court in judicial review is but of a limited nature. The purpose of judicial review "is to ensure that the individual is given fair treatment by the authority to which he has been subjected and it is no part of that purpose to substitute the opinion of the judiciary or of individual judges for that of the authority constituted by law to decide the matters in question"...... per Lord Hailshan in the case of Evans in 1982.⁽²⁾ The Court does not act as a Court of Appeal; the Court should not interfere with the exercise of any power or discretion which has been conferred on the body, unless it is being exercised in a way which is not within its jurisdiction, or clearly is wholly unreasonable in accordance with the principles of the Wednesbury case.⁽³⁾

3. The Applicant carries on business at a variety of addresses mainly as an electrical retailer and supplier and for a number of years he has had considerable problems with his profits tax. On 1st April 1986, a return should have been furnished by this taxpayer with regard to his profits for the year 1985 - 1986. He did not furnish a return; I am not told why not and the revenue, as they were entitled to, sent him an estimated assessment; this was on the 18th of December 1986 and served upon him. By virtue of the ordinance to which I will refer in a moment, he is permitted to lodge an objection within one month; the date for that objection expired on January 17th 1987. On February 27th a notice of surcharge was issued to the taxpayer demanding payment of some $535,000.00 odd. On the 1st of April, some time after he received the notice of surcharge, he raised an objection; the Commissioner refused to accept the objection on the 9th of April. The Applicant then came before Mr. Justice Mayo seeking leave supported by an Affidavit which merely asserted he had not read the notice of assessment.

4. It is necessary to set out the statutory provisions which govern this matter. These are contained in the Inland Revenue Ordinance (Cap. 112) 'Part X deals with assessments and under Section 59, the assessor has power to make assessments. In this case, as no return was made for the year 1985 to 1986, the assessor had power to make an estimated assessment (S59(3)). The provisions for service of notices are found in Section 58 and with regard to this matter, that is a notice of assessment, by virtue of the proviso to Section 58(2), such notice must be served personally or be sent by registered post to such place as is found in subsection (2). There is no doubt at all and it is conceded, that this notice was properly served on the 18th December 1986 in accordance with the Ordinance. The provision which gives rise to this application is found in Section 64:

The Affirmation filed by the Applicant states that he never personally saw the assessment. Mr. Whaley, on behalf of the Crown accepts in this Court that for the purpose of this application and, when it came before the Commissioner, the facts which the Applicant sets out are accurate. Speaking for myself, having regard to all of the papers in this case, I would have thought that the Commissioner could have come to the view that the facts were completely wrong. Nevertheless, I examine this application in the light of the explanation given by the Applicant, namely that he had not personally seen the notice of assessment and the late objection was caused by his inadvertence, or as he also said perhaps by someone's negligence or fault. Mr. Chain who has argued the matter with great skill appears to base his application for judicial review really on two of the well-known grounds, either that there was in some way some excess of jurisdiction by the Commissioner, alternatively that it was a Wednesbury type unreasonable decision. As I have already indicated, it is not the role of the Court to act in an Appellate capacity, but to examine the process of decision and to say whether or not the decision is flawed in some way. There is no doubt at all on the papers before me, that the Commissioner did consider the application which was made to him. He examined it and he was not satisfied that the proviso obtained, because he did not consider that the matters set forward were a reasonable cause which prevented the taxpayer from objecting. There does not appear to me to be any possibility of argument that the Commissioner has acted other than within his jurisdiction. Really the point raised by Mr. Chain is that it is unfair to his client, because he now has to pay a large sum of half a million or so in tax and it may be that the accurate assessment is a lesser figure. In order to have any chance of success, Mr. Chain must point to some flaw in the decision making process. Has the Commissioner considered all the relevant matters placed before him? Has he taken into account an irrelevant matter? Is it an irrational decision?

5. The only evidence placed before the Commissioner was the letter from the taxpayer giving his reasons for late objection. This the Commissioner considered. He clearly examined all relevant matters. I can also not see any irrelevant matters he considered. If, for example, the Commissioner had said - "Because of your earlier tax problems and your previous late submissions, I shall not grant you an extension - then Mr. Chain would have the beginnings of a case.

6. What appears to have given rise to leave being granted, is the decision of the Court of Appeal in Lam Ying Bor.⁽¹⁾ This may also have influenced the Commissioner in the way in which he reaches his decision under section 64. This was an appeal from the Full Bench on an application for certiorari and the Court of Appeal "reluctantly" considered that a company which neglected its affairs for some three months was guilty of such negligence that it could have no reasonable cause for failing to give notice of objection within the prescribed period. Further, the Court appeared to approve the approach of the Full Bench that the word "prevent" should be equated with "should be excused".

7. With the greatest respect, the reasoning in that decision is not now applicable in judicial review. It is not for the Court to decide the degrees of negligence which might disentitle a taxpayer to submit a late objection, nor to substitute its view of the facts for that of the Commissioner. Further, although this is an Ordinance which should be construed liberally, the word "prevent" is a simple English word and I see no reason for trying to substitute another. The Commissioner's duty is to consider the reasons put forward by the taxpayer for the late objection and then ask himself this question. Is it owing to (a) absence from Hong Kong, or (b) sickness, or (c) some other reasonable cause that the taxpayer was prevented from giving the prescribed notice?

8. The Government has entrusted the Commissioner with this responsibility and it is not for the Court to seek to interfere with it unless the decision making process is in some way flawed. Furthermore, it is not for the Court to set any standard, or guide lines for the Commissioner to follow, nor to infer that although three months late objection is too long, a lesser period may amount to a "reasonable cause". A short period of late objection may add weight to the explanation proferred by the taxpayer, but the Commissioner may still not consider it a "reasonable cause".

9. The Commissioner must always act fairly in the exercise of his powers and consider all matters, but it is for him and him alone to make a decision. I do not have to weigh up the facts and say whether or not they fall within the proviso, otherwise I would be conferring upon myself the power which the Ordinance gives to the Commissioner.

10. The only matter which has caused me some concern is the notification of the decision by a Stereotyped Letter which contains no reasons. Although this is an impersonal method, I accept that no reasons have to be given for the decision. Nevertheless, there may be instances where a more personal approach dealing with the points made should be adopted. This matter is essentially within the discretion of the Commissioner and he must choose the appropriate method of notification, but I trust that the Commissioner will bear in mind that the average taxpayer will not be so disgruntled if he is left in no doubt that his particular reasons have been fully considered.

11. I can find no flaw in the decision making process of the Commissioner and the decision is clearly not so unreasonable as to justify the Court interfering.

12. This application is therefore dismissed.

(1)    (1979) HKLR 1098.

(2)    (1982) 1 WLR 1155.

(3)    (1948) 1KB 223