WONG WING WAH v. THE COLLECTOR OF STAMP REVENUE

DCMP 3454/2017

[2018] HKDC 286

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 3454 OF 2017

----------------------

----------------------

----------------------

----------------------

JUDGMENT

----------------------

INTRODUCTION

1.  On 14 December 2017, Madam Wong Wing Wah (“Madam Wong”) commenced these proceedings by an originating summons (“the OS”)^[1] seeking the following reliefs:-

(a)   an extension of time under s 14(5B) of the Stamp Duty Ordinance (“SDO”) for filing and serving her notice of appeal against the notices of stamp duty assessment respectively dated 4 August 2017 and 17 August 2017;

(b)   leave under s 14(1B) of the SDO to allow the appeals to be brought on the security of bank guarantees provided by Madam Wong for the respective sums of HK$752,164 and HK$885,903, or part of such sums, within 14 days from the date of the order.  

2.  The application is opposed by the Collector of Stamp Duty (“the Collector”).

The facts

3.  I would first set out the facts which are not in dispute.

4.  On 30 November 2012, Madam Wong entered into a sale and purchase agreement (“SPA A”), by which Madam Wong agreed to purchase a property known as Apartment No 2, 1^st Floor, Kai Tak Mansion, No 53 Kwun Tong Road, Kowloon (“Property A”).

5.  On the same date, Madam Wong executed a trust deed (“Trust Deed A”), in which Madam Wong declared that she held Property A on trust for a Wong Tak Hung (“TH Wong”).

6.  On 23 January 2013, Madam Wong entered into a sale and purchase agreement (“SPA B”), by which Madam Wong agreed to purchase a property known as Apartment No 10, 2^nd Floor, Kai Tak Mansion Block 2, No 53A Kwun Tong Road, Kowloon (“Property B”).

7.  On 29 January 2013, Madam Wong executed a trust deed (“Trust Deed B”), in which Madam Wong declared that she held Property B on trust for TH Wong.

8.  On 12 April 2013, assignment for Property B in favour of Madam Wong was executed.

9.  On 30 October 2013, assignment for Property A in favour of Madam Wong was executed.

10.  In about 2013, Madam Wong began to have some health concerns.  On 31 July 2017, Madam Wong’s doctor advised her to undergo a surgery.  In August 2017, Madam Wong was considering whether she should have the surgery as advised and was struggling on this.  She was suffering from pain at that time and was taking medicines.  Eventually, Madam Wong decided to have the surgery.

11.  On 4 August 2017, the Collector issued a notice of assessment concerning Property A (“Notice A”) to Madam Wong, in which the Collector informed Madam Wong that in accordance with s 13(3)(b) of the SDO, the Collector was of the view that SPA A was chargeable with a Buyer’s Stamp Duty of HK$752,164, and the Collector demanded for immediate payment of the same.  Notice A was sent to an office in Cheung Sha Wan, and a copy of which was sent to Messrs T F Wong & Co. (“TFWC”), the solicitors acting for Madam Wong at that time. 

12.  On 17 August 2017, the Collector issued a notice of assessment concerning Property B (“Notice B”) to Madam Wong, in which the Collector informed Madam Wong that in accordance with s 13(3)(b) of the SDO, the Collector was of the view that SPA B was chargeable with a Buyer’s Stamp Duty of HK$885,903, and the Collector demanded for immediate payment of the same.  Notice B was sent to a residential address in Yau Tong, and a copy of which was sent to TFWC.

13.  On 1 September 2017, TFWC wrote to the Collector and raised matters concerning Property A.  In that letter, TFWC said:-

“ We refer to a Notice of Stamp Duty Assessment and Demand for Payment (copy attached) issued by you to our client, Ms Wong Wing Wah, on 4/8/2017, which was copied to us for our reference.

Our client wishes to appeal against the assessment and provide bank guarantee for payment of the stamp duty assessed. We are instructed to firstly apply for an extension of time to lodge her Notice of Appeal with the District Court.

Kindly provide us with a sample of the guarantee so that our client may proceed with her intended application for leave to lodge her Notice of Appeal out of time as soon as possible.

Your assistance in this matter will be appreciated.”

14.  On 4 September 2017, Madam Wong was admitted to hospital.  On 5 September 2017, Madam Wong underwent the surgery.

15.  On 6 September 2017, the Collector replied to TFWC’s letter dated 1 September 2017 and said:-

“   I refer to your letter dated 1 September 2017 which was received by the Stamp Office (“this Office”) on 5 September 2017.

   Section 14(1) of the Stamp Duty Ordinance (“the Ordinance”) provides that an appeal has to be lodged within 1 month from the date of assessment or within such further period as the court may allow under section 14(5B), by a notice served on the Registrar of the District Court and upon payment of the stamp duty assessed unless the Collector of Stamp Revenue (“the Collector”) allows payment of the whole or part of the stamp duty assessed to be postponed under section 14(1A) or the District Court orders otherwise under section 14(1B) of the Ordinance.

   Section 14(1A)(a) of the Ordinance stipulates that an application for postponing payment of stamp duty pending appeal by the person liable for payment of the stamp duty assessed has to be received by the Collector within 14 days from the date of the assessment.

   In the present case, your application for postponing payment of stamp duty was received by the Collector more than 14 days after the date of the assessment. Therefore, I regret that your application is not accepted.  Unless the District Court allows the appeal to be brought without payment of stamp duty in full by order, the outstanding Buyer’s Stamp Duty (“BSD”) has to be settled immediately in any event.

   Since the BSD was not paid before the statutory time limit (31 March 2014), penalty for late stamping will be imposed under Section 9 of the Ordinance.  The Purchaser will be informed of the amount of penalty after settlement of the BSD.”

16.  On 9 September 2017, Madam Wong was discharged from the hospital.  Madam Wong was given sick leave until 17 November 2017.

17.  On 14 December 2017, Madam Wong issued the OS.

The principles

18.  SDO, s 14 provides:-

“(1) Any person who is dissatisfied with the assessment of the Collector under section 13 or 47L may—

(a) within a period of 1 month from the date on which the assessment is made or within such further period as the court may allow under subsection (5B);

(b) subject to any order of the court under subsection (1B), on payment of the stamp duty in conformity therewith or, where payment of the stamp duty or any part thereof is allowed to be postponed under subsection (1A), on payment of the part (if any) of the stamp duty the payment of which is not thus allowed to be postponed; and

(c) by notice served on the Registrar, appeal against the assessment to the court and may for that purpose require the Collector to state and sign a case setting forth the question upon which his opinion was required and the assessment made by him.

(1A) Where—

(a) an application in writing made for the purposes of this subsection by the person liable for payment of the stamp duty payable under an assessment of the Collector under section 13 or 47L is received by the Collector within 14 days from the date on which the assessment is made;

(b) the person has stated in the application that he proposes to bring an appeal against the assessment under subsection (1); and

(c) security to the satisfaction of the Collector has been given for the payment of the stamp duty that will, by reason of the exercise of the power by the Collector under this subsection, be postponed,

the Collector may, by notice in writing served on the person, allow payment of the stamp duty payable under the assessment to be postponed for such period, to such extent and on such terms as the Collector may think fit.

(1B) Where the court, on an application made by the person intending to serve a notice under subsection (1), is satisfied that it would impose hardship on the person to require him to pay the stamp duty or the part of the stamp duty, as the case may be, under subsection (1)(b), it may by order allow the appeal to which the notice relates to be brought—

(a) without payment of the stamp duty or the part of the stamp duty, as the case may be, under subsection (1)(b), or only on payment of such part of the stamp duty or the part of the stamp duty, as the case may be, as the court may consider reasonable in the circumstances of the case; and

(b) (b)on security being given to the satisfaction of the court for the payment of the stamp duty or the part of the stamp duty, as the case may be, that would, apart from this subsection, have to be paid before the appeal can be brought under subsection (1).

…………

(5B) Where the court, on an application made by a person who is dissatisfied with an assessment of the Collector under section 13 or 47L, is satisfied that the person was prevented by illness or absence from Hong Kong or other reasonable cause from bringing an appeal within a period of 1 month from the date on which the assessment is made in accordance with subsection (1), the court may by order allow the appeal to be brought within such further period as it may consider appropriate.” (Emphasis added)

19.  Accordingly, in order to succeed, Madam Wong has to persuade this court both the discretion under s 14(1B) and the discretion under s 14(5B) of the SDO should be exercised in her favour.

20.  In respect of the discretion under s 14(5B) of the SDO, HH Judge Marlene Ng has laid down a three-stage test in Wan Wah Shing v Collector of Stamp Revenue^[2]:-

(a)   Firstly, the court has to be satisfied that the applicant seeking an extension of time suffered from illness, had been absent from Hong Kong or had any other reasonable cause.

(b)   Secondly, the applicant has to show that one or more than one of the aforesaid three factors prevented him from bringing an appeal within the statutory time limit.

(c)   Even if the above two criteria were satisfied, the court has a residual discretion on whether to grant an extension of time.

I respectfully agree and would adopt this three-stage test.

21.  S 14(5B) of the SDO was added into the SDO in 1998, and the wording of which is essentially following the wording of s 66(1A) of the Inland Revenue Ordinance (“IRO”).  Accordingly, I am of the view that authorities on the true meaning of s 66(1A) of IRO would shed light on s 14(5B) of the SDO.

22.  In Chow Kwong Fai v CIR^[3], the Court of Appeal held that the true meaning of “prevented” in s 66(1A) of the IRO was “unable to”, which was less stringent than the word “prevent” but imposed a higher threshold than a mere excuse.  In that case, Woo VP said:-

‘20. In my opinion, while a liberal interpretation must be given to the word “prevented” used in s 66(1A), it should best be understood to bear the meaning of the term “未能” in the Chinese language version of the subsection (referred to in D176/98 cited above). The term means “unable to”. The choice of this meaning not only has the advantage of reconciling the versions in the two languages, if any reconciliation is needed, but also provides a less stringent test than the word “prevent”. On the other hand, “unable to” imposes a higher threshold than a mere excuse and would appear to give proper effect to the rigour of time limit imposed by a taxation statute. The rationale for the stringent time limit for raising tax objections and appeals was described in Case U175, 87 ATC 1007. Tang J had in the judgment under appeal cited quite extensively from that case. I will thus refer only to one short passage:

“It seems that the need for taxation revenue to flow in predictable amounts according to projections as to cash flow have considered to be such that dispute as to the claims made by the community upon individuals for payment of tax have been treated as quite unlike any other classes of dispute within the community.”

……

23. Reverting to the term “prevent” in s 66(1A), I consider that the interpretation that I attempted in para 20 above has given full effect to s 19 of the Interpretation and General Clauses Ordinance.’

23.  In my view, the Court of Appeal’s decision in Chow Kwong Fai is also applicable in construing s 14(5B) of the SDO.  In my view, the meaning of the word “prevented” in s 14(5B) of the SDO is same as the meaning of the same word in s 66(1A) of the IRO.  Accordingly, an applicant seeking a time extension under s 14(5B) of the SDO has to show that he was unable to lodge an appeal within the statutory time limit due to illness, absence from Hong Kong or other reasonable cause.  The threshold is less stringent than the literal meaning of being prevented from doing so, but is a higher threshold than a mere excuse.

24.  In respect of s 14(1B) of the SDO, in the Wan Wah Shing case, HH Judge Marlene Ng held that in order to meet the factors set out in that subsection, the applicant had to satisfy the court that payment of stamp duty assessed would impose hardship on him, that the non-payment of the stamp duty assessed was reasonable in all the circumstances of the case and that security to the court’s satisfaction was given for the duty to be postponed.  It would be necessary for the court to recognise and take into account a party’s subjective stance in forming an objective view in all the circumstances of the case as to whether hardship was made out.  The onus was on the party asserting hardship to establish the same. I respectfully agree.

25.  Further, in relation to the “hardship” in s 14(1B) of the SDO, in Cheng Yung Ching v CIR^[4], DDJ Winnie Tsui (as she then was) held that “inconvenience is not hardship”.  I agree.

26.  With these principles in mind, I turn to analyze the submissions made by the parties.

S 14(5B) of the SDO

27.  Mr Bruce Lau, counsel for Madam Wong, submits that time extension should be granted to Madam Wong under s 14(5B) of the SDO, for Madam Wong was prevented by illness to lodge the appeals during the 1-month statutory time limit.

28.  Ms Edith Tam, counsel for the Collector, is neutral on this issue.

29.  Notice A and Notice B were issued on 4 August 2017 and 17 August 2017 respectively.  Accordingly, the 1-month statutory time limit prescribed in s 14(1)(a) of the SDO for lodging the appeals would expire in early September 2017.  In August 2017, Madam Wong was struggling on whether she should have the surgery as suggested by her doctor.  Also, she was taking medicines due to her physical conditions at that time.  She underwent the operation on 5 September 2017. After the surgery, Madam Wong had sick leave until 17 November 2017.  I am satisfied that Madam Wong was suffering from illness from August to mid November in 2017. 

30.  The next issue is whether Madam Wong was prevented by the illness to lodge the 2 appeals within the statutory time limit.

31.  In respect of Notice A, as shown by TFWC’s letter dated 1 September 2017, Madam Wong was able to give instructions to TFWC before 1 September 2017 and on the basis of those instructions, TFWC wrote to the Collector on 1 September 2017. Although Madam Wong was suffering from illness in August 2017, she has retained solicitors to handle the matters concerning Notice A and has given instructions to her solicitors on those matters.  I am not satisfied that Madam Wong was unable to lodge an appeal against the assessment in Notice A due to her illness.  In my judgment, Madam Wong has not demonstrated that she was prevented by illness to lodge an appeal against the assessment in Notice A within the 1-month period.

32.  In respect of Notice B, in her affirmation in support of the OS, Madam Wong said at paragraph 26:-

“…… it was sent to my home address. As a matter of fact, I probably overlooked it when it was sent to my home address, which, together with all other letters I then received in the whole month of August, were simply not opened and attended to by me, giving my then physical and mental conditions.”

33.  With respect, Madam Wong has shied away from one fact, ie a copy of Notice B has been sent to TFWC.  There is not a single word in Madam Wong’s affirmation on whether TFWC has mentioned Notice B to Madam Wong in August and September 2017, and whether TFWC has taken instructions from Madam Wong on matters concerning the assessment in Notice B in August and September 2017.

34.  As said in the above, Madam Wong was able to give instructions to TFWC on matters concerning the assessment in Notice A in August 2017 notwithstanding that she was suffering from illness at that time.  For this reason, Madam Wong would also be able to give instructions to her solicitors on matters concerning Notice B as well.  I am not satisfied that Madam Wong has produced any convincing evidence showing that she was prevented by illness to lodge an appeal against the assessment in Notice B within the 1-month period.

35.  By reason of the above, there is no ground to exercise the discretion under s 14(5B) of the SDO in favour of Madam Wong.

S 14(1B) of the SDO

36.  On s 14(1B) of the SDO, Mr Lau submits:-

(a)   The “hardship” in s 14(1B) of the SDO does not necessarily mean “financial hardship”.

(b)   It is all along the policy of the Collector as stated in the “Notes On Appeal Procedure” issued by the Inland Revenue Department that “In normal cases, a bank guarantee sufficient to cover the amount of stamp duty to be postponed will be acceptable….”.  The Collector refused the request in TFWC’s letter dated 1 September 2017 only on the ground that the request was made outside the 14-day period in s 14(1A) of the SDO.

(c)   Madam Wong was prevented by illness from lodging the appeals within the statutory time limit.  By the same reason, Madam Wong was prevented from providing bank guarantees in support of her intended appeals during the same period.

(d)   In these circumstances, if Madam Wong cannot lodge the intended appeals, hardship is created.

37.  Ms Tam submits:-

(a)   It is prescribed in s 14(1A) of the SDO that an application for postponement of payment of stamp duty has to be made to the Collector in writing and within 14 days from the date on which the assessment is made. In TFWC’s letter dated 1 September 2017, Madam Wong’s solicitors has not clearly indicated whether the letter serves as a written application for postponement of payment of stamp duty.  Even if the letter is treated as an application for postponement, the application was made beyond the 14-day period and hence the Collector could not accede to that request.  Further, that request only concerns Property A.  No similar request has ever been made in respect of Property B.

(b)   Madam Wong has provided no evidence in her affirmation on the “hardship” she would suffer if she has to pay the stamp duty in issue.  In the absence of evidence, it is impossible for the court to consider the financial status of Madam Wong and allow her application.

(c)   Further, Madam Wong is holding Property A and Property B on trust for TH Wong.  In Recital (A) of the Trust Deed A and in Recital (A) of Trust Deed B, it is stated that all monies relating to stamp duty will be paid by the beneficiary.  There is no evidence showing that TH Wong would not be able to pay the stamp duty in question.

38.  I have no hesitation in rejecting Mr Lau’s submissions.  In my view, the “hardship” in s 14(1B) of the SDO is hardship relating to the applicant’s financial situation, for the “hardship” in the subsection is the hardship imposed on the applicant if he is required to pay the stamp duty or part of the stamp duty.  If Mr Lau is right, the “hardship” in s 14(1B) would be same as the inability to lodge an appeal within the statutory time limit due to illness as mentioned in s 14(5B), and this would conflate s 14(1B) with s 14(5B). This cannot be right.

39.  I agree with Ms Tam and accept her submissions.  Accordingly, there is no ground to exercise the discretion under s 14(1B) of the SDO in favour of Madam Wong.

Originating summons in expedited form - only be used if prescribed under a written law

40.  Before leaving this judgment, I have to mention that it is incorrect for those representing Madam Wong to commence these proceedings by an originating summons in expedited form.

41.  Rules of the District Court (“RDC”), Order 7 rule 2 provides:-

“(1) Every originating summons (other than an ex parte summons) shall be in Form No 8 in Appendix A or, if so authorized or required, in Form No 10 in Appendix A, and every ex parte originating summons shall be in Form No 11 in Appendix A.

(1A) Form No 8 in Appendix A is to be used in all cases except where another form is prescribed under a written law or there is no party on whom the summons is to be served.

(1B) Form No 10 in Appendix A is to be used if it is prescribed under a written law.

(1C) Form No 11 in Appendix A is to be used if there is no party on whom the summons is to be served.

(2) The party taking out an originating summons (other than an ex parte summons) shall be described as a plaintiff, and the other parties shall be described as defendants.”

42.  In the case of an originating summons in Form 8, no hearing date would be given when the plaintiff issues the originating summons.  The plaintiff has to make an appointment for fixing a hearing date in accordance with RDC Order 28 rule 2 after issuing the originating summons.  In the case of an originating summons in Form 10, a hearing date would immediately be given at the time of issue of the originating summons.  Thus Form 8 is called the general form, and Form 10 is called the expedited form.

43.  Practitioners have been repeatedly reminded to use the correct form when issuing an originating summons.

(a)   It has been clearly set out in Practice Direction 5.8, paragraph 1^[5], that:-

“Order 7 rule 2 of the Rules of the High Court which specifies the form of summons to be used must be complied with. Form 8 (the general form) will usually be appropriate. Form 10 (the expedited form) and Form 11 (the ex-parte form) are to be used only when they are authorised or required by the Rules or any statutory provision. Non-compliance may delay the proceedings or result in the summons being dismissed. It may also have costs consequences.”

(b)   Recently, in International Automotive Components Group SRO v Xuke Trading Ltd^[6] [2017] 3 HKC 137, DHCJ Paul Lam SC said:-

“2. The OS is in the expedited form (Form 10 in Appendix A, Rules of the High Court ('RHC’)). Under O 7 r 2(1B) of the RHC, such a form may only be used if it is prescribed under a written law. There is no such written law in the present context. The plaintiff should have used the general form (Form 8 in Appendix A, RHC) under O 7 r 2(1A). However, this mistake does not render the OS a nullity, and is a procedural irregularity only (Hong Kong Civil Procedure 2017, Vol 1, pp 101–102, §7/7/1; Hiew Fook Loi alias Yau Fuk Loi v Yau Wai Yin and another [2002] HKCU 1662 ; (HCMP 4272/2002, DHCJ A Cheung, 22 November 2002, unreported), §12). Mr D’Souza submitted that it is not uncommon for the expedited form to be used in similar claims (eg Wong Yuk Yu v ZH Hong Kong Trading Co Ltd [2017] HKCU 177, DCMP 3575/2016 (20 January 2017, unreported)). While it is understandable that victims of fraud must be eager to get an early hearing date for their court applications to enable them to recover their monies as soon as possible, the end does not justify the means. A deliberate and intentional failure to comply with rules of the court may, and should, not be condoned. In this case, Mr D’Souza explained to me that the use of the incorrect form was due to an oversight on the part of those instructing him, and was not an intentional act. In the circumstances, I am prepared to waive the procedural irregularity.”

44.  Very often, practitioners would use Form 10 instead of Form 8 when issuing an originating summons, while there is no written law justifying the use of the expedited form.  Using the correct form is not a mere technicality.  It is a requirement laid down in the law.  Further, incorrectly using Form 10 is in fact jumping the queue, getting a hearing date at an earlier time at the expense of the parties in other cases waiting in the queue for hearing dates.  This is not conducive to the interest of administration of justice.  The court must guard against this.  I take this opportunity to remind the practitioners again that the requirements laid down in Order 7 rule 2 must be observed and must be complied with.  As set out in Practice Direction 5.8, paragraph 1, “Non-compliance may delay the proceedings or result in the summons being dismissed. It may also have costs consequences.”

45.  There is no written law authorizing the use of the expedited form of the originating summons in making an application under s 14(1B) and s 14(5B) of the SDO.  Accordingly, those representing Madam Wong should not commence these proceedings by using the expedited form.  Further, in accordance with Order 7 rule 2(2), Madam Wong should be described as “plaintiff” and the Collector should be described as “defendant”.  Since I have ruled against Madam Wong on merits, I would not take further action in respect of these non-compliances.

Disposition

46.  For the reasons above, I dismiss the OS.

47.  Having heard submissions on costs, in my view, costs should follow the event.  I order that costs of these proceedings be to the Collector, with a certificate for counsel.  I summarily assess those costs at HK$22,274, which have to be paid by Madam Wong to the Collector forthwith.

48.  Lastly, it remains for me to thank Mr Lau and Ms Tam for the assistance rendered to the court.