YAU SUN YEE v. COLLECTOR OF STAMP REVENUE

HCAL 3514/2019

[2021] HKCFI 88

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST NO 3514 OF 2019

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J U D G M E N T

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INTRODUCTION

1.  This is an application for judicial review of the decision (“the Decision”) of the Collector of Stamp Revenue (“the Collector”) on 25 November 2019 refusing to refund a part of the ad valorem stamp duty paid by the Applicant on the agreement for sale and purchase (“the Purchase Agreement”) of Flat A, 10/F, Tower 1(1A), Wings at Sea, Phase IVA, Lohas Park, 1 Lohas Park Road, Tseung Kwan O, New Territories (“the Subject Property”) dated 31 October 2017.

2.  In this judgment, unless the context indicates otherwise, references to “Section” or “s” shall be to the Stamp Duty Ordinance, Cap 117 (“the Ordinance”).

BACKGROUND FACTS

3.  On 19 October 2017, the Applicant entered into a preliminary agreement for sale and purchase to acquire the Subject Property, then still under construction, at the price of the HK$14,683,700.

4.  At the time of the preliminary agreement, the Applicant was the beneficial owner of another residential property known as Flat A, 3/F, Block 9, Beverly Garden, 1 Tong Ming Street, Tseung Kwan O, Sai Kung, New Territories (“the Original Property”).

5.  On 31 October 2017, the Applicant entered into a formal agreement, ie the Purchase Agreement, for the purchase of the Subject Property.  Completion of the Purchase Agreement was to take place within 14 days after the date of the notification to the Applicant that the vendor was in a position to validly assign the Subject Property to him.

6.  On 8 November 2017, the Applicant paid ad valorem stamp duty of HK$1,101,278 (HK$14,683,700 x 7.5%) at the then prevailing rate under Scale 1 of Head 1(1A) in the First Schedule to the Ordinance.

7.  On 7 February 2018, after the enactment of the Stamp Duty (Amendment) Ordinance 2018, additional ad valorem stamp duty of HK$1,101,277 (HK$14,683,700 x 15% - HK$1,101,278) was paid on the Purchase Agreement pursuant to s 72.

8.  On 11 March 2019, the Applicant entered into an agreement for sale and purchase (“the Disposal Agreement”) to dispose of the Original Property.  Completion of the Disposal Agreement took place on 15 April 2019.

9.  Completion of the Purchase Agreement took place on 20 November 2019.

10.  On 25 November 2019, the Applicant went to the Stamp Office to apply for a partial refund of the ad valorem stamp duty paid on the Purchase Agreement.  The amount of the refund sought, defined in s 29DF(1) as the “specified amount”, was HK$1,651,916 (HK$14,683,700 x 15% - HK$14,683,700 x 3.75%).  His application was orally rejected by an officer of the Stamp Office over the counter on the ground that the application was not made within the applicable statutory time limit.  Pausing here, it may be noted that, under s 29DF(3)(c), an application for refund is required to be made by an applicant “not later than 2 years after the date of the applicable instrument[1], or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later”.  I shall examine the meaning and effect of s 29DF(3) later in this judgment when I consider the grounds of judicial review raised by the Applicant.

11.  In the “Note of Counter Interview” prepared by the officer dated 25 November 2019, the following was stated -

“[4]  In order to determine the validity of his refund application, I examined his case in detail and sought advice from my immediate supervisor Ms Choi (ASSO(A)2). We both agreed that the refund application should be rejected as it is not submitted within the specified time limit.

[5]  Mr. Yau was advised that under Section 29DF of the Ordinance, the refund application should be made to the Collector of Stamp Revenue within 2 years after the date of the agreement for sale and purchase for acquisition of the new residential property or within two months from the date of assignment for disposal of the original residential property, whichever is the later.

[6]  By applying the Ordinance, his application deadline should be within 2 years after the date of the Agreement for acquisition of the Subject Property (i.e. 30 October 2019) or within two months from the date of the Assignment for disposal of the Original Property (i.e. 14 June 2019), whichever is the later. Since Mr. Yau failed to submit the refund application on time, his application could not be entertained.

[7]  However, Mr. Yau argued that he had visited the Stamp Office twice previously. He was repeatedly informed that the refund application could be submitted after the assignment date of the Subject Property. In addition, neither his legal representative nor the estate agency told him the exact time limit of applying the partial refund of AVD.

[8]  I further explained that the footnote at the bottom of the IRSD125A stated the time limit of refund application clearly. He counterargued that the words stated in IRSD125A was not familiar to layman especially those who lacked legal knowledge.

[9]  Mr. Yau was told that he could still submit the completed IRSD125A and IRSD131C if he wished to pursue his claim.  Nonetheless, the Stamp Office would still maintain the view and a formal rejection letter would be delivered to him.  If he still disagreed, he could apply for a judicial review against our decision. He noted and he would consider my advice.”

APPLICATION FOR JUDICIAL REVIEW

12.  On 26 November 2019, the Applicant, then acting in person, filed a Form 86 to apply for leave to apply for judicial review of the Decision.  In the Form 86, the Applicant stated that he objected to the Decision, but did not state any ground on relief was sought.

13.  The Applicant’s grounds of complaint against the Decision can, however, be gleaned from his various affirmations.  In his affirmation dated 26 November 2019, the following is stated:

“本人原有物業在2019年4月15日售賣，新物業通過利嘉閣地產代理人王敬良在2017年10月19日簽訂樓花臨時賣買合約，在2019年11月20日正或式成交，本人在2019年五月份曾致電王敬良諮詢退稅事宜，王敬良曾致電和親自去退稅組諮詢退稅組人員嘅答覆話舊樓宇賣出兩個月內或新買樓宇成交後兩年兩者以較後者為准；本人在五月二十日親自上過稅務局諮詢，也獲得同樣答案。”

14.  Attached to the Applicant’s affirmation dated 9 December 2019 is a letter from the estate agent who acted for the Applicant in the purchase of the Subject Property dated 6 December 2019, in which the following is stated:

“本人 王敬良 …是尤新異先生買入第二層樓將軍澳康城晉海的地產代理人，由於尤新異購買的第二層樓晉海的印花稅款是由發展商新鴻基擔保通過其財務公司忠誠財務借出，在2019年5月份我諮詢晉海發展商說明業主賣咗 [第] 一層樓要退稅時，發展商回覆如果要申請退稅要先將借款還清，因退稅款只退落業主名下。由於樓宇未正式成交，並且發展商對買第一層樓和第二層樓的定義和折扣不同，如果業主買的是第二層樓發展商給的折扣是10.5%，第一層樓折扣是8%，故要先還清所借印花稅款，才可以辦理退稅並且當成業主買的是買第一層樓，要補回樓價2.5%。如成交後才辦理退稅就不會産生這種情況。

我在2019年五月份曾經上過印花稅退稅組諮詢過關於退稅事宜，當時稅務人員嘅答覆話舊樓宇賣出嘅兩個月內或新買嘅樓宇成交後兩年 (兩者以較後者為准) 申請即可。尤新異本人也曾經去過退稅組諮詢過也是得到同樣答案，基於呢幾種原因及為保障業主的最大利益，我建議業主尤新異先生成交後才申請退稅。”

15.  Finally, attached to the Applicant’s affirmation dated 10 March 2020 is a letter from the Applicant dated 5 February 2020, in which the following is stated:

“由於利嘉閣地產代理王敬良和我先後兩次去稅務局諮詢退税事宜，稅務人員口頭答覆話係 ‘購買咗第二層樓’ 後兩年內申請 (咁重要嘅事項印花稅處點解唔用紙張寫清楚所有申請條件派發給諮詢者，口頭上好容易產生誤導。或者馬上查閱税務電腦告知諮詢者最後退稅申請時間等申請注意事項) ，在我和地產代理的理解是 ‘購買咗第二層’ 即係 ‘第二層樓正式成交’ 。當時我只係簽咗買賣合約，交咗 15%訂金，因為在未成交之前買賣雙方都有機會毀約，所以在我們的理解稅務人員話 ‘買咗第二層’ 後即是 ‘第二層樓正式成交’ 後兩年內申請。”

16.  In short, the Applicant says that both he and his estate agent were told by the Stamp Office that the application for refund could be made within (i) 2 months after the sale of the Original Property, or (ii) 2 years after the date of completion of the purchase of the Subject Property, whichever was the later.  Further, it appears that the Applicant was advised, and decided, not to make the application for refund within 2 months after the sale of the Original Property, but to wait until after completion of the purchase of the Subject Property, because (according to the developer) an application for a refund of the ad valorem stamp duty made prior to the completion of the purchase of the Subject Property would have an adverse impact on the discount of the purchase price of the Subject Property offered by the developer to the Applicant.

17.  On 9 June 2020, the court granted the Applicant leave to apply for judicial review.

18.  In the Applicant’s Originating Summons dated 19 June 2020, the Applicant seeks the following relief:

(1)  a Declaration that the Collector erred in law by misinterpreting s 29DF;

(2)  a Declaration that the Collector misapplied s 29DF in any event;

(3)  a Declaration that the Collector frustrated the Applicant’s legitimate expectation that he could receive a partial refund of the ad valorem stamp duty in that the Collector orally refused his application without adopting proper procedure or proper consideration of his case;

(4)  an order quashing the Collector’s decision to refuse the Applicant’s application for a partial refund of the ad valorem stamp duty; and

(5)  an order that the statutory time period for the Applicant to lodge his application for a partial refund of the ad valorem stamp duty be extended for 14 days from the date of the court’s order.

19.  The Applicant also states, in the Originating Summons, that the grounds of the application for judicial review are:

(1)  under the Ordinance, there is no appeal procedure to which the Applicant can have recourse against the Collector’s refusal of his application for a partial refund of the ad valorem stamp duty;

(2)  the context and purpose of the Ordinance; and

(3)  there is no obvious reason why the Applicant would willfully disregard the statutory time period for him to lodge his application for a partial refund of the ad valorem stamp duty.

20.  At the hearing on 5 January 2021, Ms Wong (on behalf of the Applicant) confirmed that the Applicant would not rely on the ground of legitimate expectation in the present application.  Accordingly, this ground will not be further considered in this judgment.

21.  Ms Wong’s principal argument in support of the application is that the time limit for making an application for refund under s 29DF(3)(c) has no application to the scenario, as in the present case, where the “original property” is disposed of after the acquisition but before the conveyance of the “subject property”.  Ms Wong did not say, in her Skeleton Submissions dated 23 December 2020, what would be the applicable time limit in such scenario.  When asked by the court at the hearing, Ms Wong submitted that, in such scenario, there was no time limit, or no definite time limit, for making the refund application, although she qualified her submission by adding that it should be made within a “reasonable time” after the date of conveyance of the “subject property”.

22.  Ms Wong argues, alternatively, that the application for refund, which was made only 5 days after the date of conveyance of the Subject Property, was within time; in the further alternative, the Collector had a discretion to entertain an application for refund made out of time and ought to have exercised such discretion in favour of the Applicant in the present case.

THE APPLICATION DEADLINE UNDER S 29DF

23.  Whether the deadline for making an application for refund under s 29DF(3)(c) is applicable to the circumstances of the Applicant’s case depends on the true construction of s 29DF(3).

24.  The court’s approach to the construction of a statute is now well settled.  For the present purpose, I need go no further than the recent pronouncement on this topic by Ma CJ and Cheung PJ (as he then was) in Chan Ka Lam v The Country and Marine Parks Authority [2020] HKCFA 33:

“[26] The principles of statutory construction are well established. Words are construed in their context and purpose. They are given their natural and ordinary meaning with context and purpose to be considered alongside the express wording from the start, and not merely at some later stage when an ambiguity is thought to arise.

[27] It is, however, important to emphasise that a purposive and contextual interpretation does not mean that one can disregard the actual words used in a statute.  To the contrary, the court is to ascertain the intention of the legislature as expressed in the language of the statute.  One cannot give a provision a meaning which the language of the statute, understood in the light of its context and purpose, cannot bear.”

25.  In order to understand the context and purpose of s 29DF, it is necessary first to refer to some basic provisions in the Ordinance relating to the charging of ad valorem stamp duty on agreements for sale of residential property under Division 3 of Part IIIA of the Ordinance.

26.  The starting point is s 29BA(a), which provides that, subject to certain specified exceptions, an agreement for sale is chargeable with stamp duty under Part 1 of Scale 1 of Head 1(1A) in the First Schedule (“Scale 1 - Part 1”) if the property concerned is residential property.  Where an agreement for sale is chargeable with stamp duty under Scale 1 - Part 1, the amount of stamp duty is calculated at the flat rate of 15% of the amount or value of the consideration under that agreement[2].

27.  However, lower rates of stamp duty are applicable in relation to certain agreements for sale of residential property where the purchaser is a Hong Kong permanent resident (“HKPR”) and is not, at the time of acquisition, a beneficial owner of any other residential property in Hong Kong:

(1)  Under s 29BB(1), an agreement for sale is chargeable with stamp duty under Scale 2 of Head 1(1A) in the First Schedule (“Scale 2”) if (a) the property concerned is a single residential property, and (b) it is shown to the satisfaction of the Collector that subsection (2) or (3) applies to that agreement.

(2)  Subsection (2) of s 29BB relates to the situation where, on the date of acquisition of the property, (a) the purchaser, or each of the purchasers, under the agreement is a HKPR acting on his or her own behalf; and (b) the purchaser, or each of those purchasers, is not a beneficial owner of any other residential property in Hong Kong.

(3)  For this purpose, a HKPR who has entered into an agreement to dispose of his original residential property before entering into an agreement to acquire a new residential property is regarded as not being a beneficial owner of the old property on the date of acquisition of the new property.

(4)  Where an agreement for sale is chargeable with stamp under Scale 2, the amount of stamp duty is calculated at rates between HK$100 and 4.25% depending on the amount or value of the consideration under that agreement.  In particular, where the amount or value of the consideration exceeds $6,720,000 but does not exceed $20,000,000 (as in the present case), the amount of stamp duty is calculated at the rate of 3.75%.

28.  The purpose of s 29BB was explained in the Legislative Council Brief on Stamp Duty (Amendment) Bill 2013, TsyB R 183/700-6/5/0 (C), dated April 2013 (“the LegCo Brief”) prepared by the Financial Services and Treasury Bureau, at §9:

“Having regard to the Government’s prevailing policy of according priority to the housing needs of HKPRs, we are mindful that any new measures[3] to address the overheated property market should not impose undue financial burden on HKPRs who aspire to be homeowners.”

29.  In addition, it was recognized that some HKPRs might acquire a new residential property before disposing of their original one, and it was decided that the lower rates under Scale 2 should also be available to those HKPR purchasers by means of a refund mechanism provided that certain conditions were met: see §15 of the LegCo Brief:

“As set out in paragraph 12 above, HKPRs who have disposed of all their old residential properties before acquiring a new residential property (‘先賣後買’) would be charged the old AVD rates. As for HKPR purchasers/transferees who acquire a new residential property before disposing of their original one (must be their only other residential property) (‘先買後賣’), they have to pay stamp duty on the instrument for the newly acquired property at the enhanced AVD rates (applicable instrument) in the first instance. Yet, the Bill proposes to provide for a refund mechanism, whereby after the disposal of the old property is completed, IRD will refund, on application by the HKPR purchasers/transferees within two years from the date of the applicable instrument, the stamp duty for the difference between the enhanced and the old AVD rates on the newly acquired property, on the condition that the agreement to dispose of their old property was entered into within six months from the date of the applicable instrument[4].”

30.  The purpose of the refund mechanism was stated in the Report of the Bills Committee on Stamp Duty (Amendment) Bill 2013, LC Paper No CB(1)1703/13-14, dated 2 July 2014 (“the Bills Committee Report”), at §32:

“The proposed section 29DF stipulates that a HKPR, having entered into an agreement for sale and purchase to dispose of his/her original and only other residential property in Hong Kong within six months from the date of acquiring a new residential property, can apply to the IRD, within two years from the date of the instrument in acquiring the new residential property, for the refund of AVD of an amount equal to the difference between payments according to the old and new rates on the newly acquired property. The refund mechanism for HKPR purchasers/transferees having acquired a new residential property before disposing of their original property is to cater for the replacement needs of HKPRs having regard to the fact that one may own more than one residential property during the transitional period in the process of acquiring a new property for replacement of the original one.” [emphasis added]

31.  The refund mechanism is given effect by Section 29DF which, so far as relevant, provides as follows:

“Partial refund of ad valorem stamp duty on disposal of residential property in certain circumstances

(1)  In this section -

applicable instrument (適用文書) means an instrument-

(a)  under which a residential property (whether or not together with a car parking space permitted for the parking of 1 motor vehicle) is acquired; and

(b)  on which stamp duty had been paid according to … Scale 1 of head 1(1A), in the First Schedule;

original property (原物業), in relation to a person who acquires a subject property under an applicable instrument, means another residential property (whether or not together with a car parking space permitted for the parking of 1 motor vehicle) of which the person is a beneficial owner on the date of that acquisition;

specified amount (指明款項) means -

…

(b)  for an applicable instrument on which stamp duty had been paid according to Scale 1 of head 1(1A) in the First Schedule - an amount equal to the difference between the stamp duty paid and the stamp duty that would have been payable on that instrument if it were chargeable under Scale 2 of head 1(1A) in the First Schedule in accordance with Division 3;

subject property (標的物業) means the residential property, or the residential property and car parking space, acquired under an applicable instrument.

(2)  The Collector may, on an application made by a person (applicant) who had paid stamp duty on an applicable instrument, refund to the applicant the specified amount if -

(a)  subsection (3) … applies to the disposal of an original property of the applicant; and

(b)  had the original property been disposed of before the subject property was acquired, the applicable instrument would have been chargeable with stamp duty under … Scale 2 of head 1(1A), in the First Schedule.

(3)  This subsection applies to the disposal of an original property of the applicant if -

(a)  it is shown to the satisfaction of the Collector that the original property is disposed of by the applicant under an agreement for sale that is made within the period specified in subsection (5);

(b)  it is shown to the satisfaction of the Collector that the original property is transferred or divested from the applicant under a conveyance on sale executed in conformity with that agreement; and

(c)  the application for refund is made by the applicant not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later.

(5)  For subsections (3)(a) …, the following period is specified -

…

(b)  if the applicable instrument is an agreement for sale - 12 months after the date of the conveyance on sale executed in conformity with the agreement for sale.”

32.  It can be seen that, where the applicable instrument is an agreement for sale on which ad valorem stamp duty has been paid under Scale 1, there are two deadlines to be met by a HKPR purchaser who wishes to obtain a partial refund of the stamp duty under s 29DF:

(1)  the original property must be disposed of by the purchaser under an agreement for sale that is made within “12 months after the date of the conveyance on sale executed in conformity with the [applicable instrument]” by virtue of s 29DF(3)(a) and (5)(b) (“the Disposal Deadline”); and

(2)  the application for refund must be made by the purchaser “not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later” by virtue of s 29DF(3)(c) (“the Application Deadline”).

33.  In the present case:

(1)  The “applicable instrument” was the Purchase Agreement in respect of the Subject Property dated 31 October 2017.

(2)  The conveyance on sale under which the Original Property was transferred or divested was dated 15 April 2019.

(3)  Accordingly, the Application Deadline fell on 31 October 2019, being the later of (i) 2 years after the date of the applicable instrument (ie 31 October 2019), or (ii) 2 months after the date of the conveyance on sale under which the Original Property was transferred or divested (ie 15 June 2019).

(4)  The application for refund was made on 25 November 2019.

(5)  Prima facie, the Application Deadline under s 29DF had passed by the time that the Applicant made the application for refund.

34.  Ms Wong submits, however, that s 29DF is intended to apply only to the situation where a person sells his original property within 12 months after the date of the conveyance of the new property.  In this case, however, the Applicant sold his original property before the date of the conveyance of the new property.  As such, the Application Deadline under s 29DF(3)(c) has no application to his case.  In support of this argument, Ms Wong makes 3 main points.

35.  First, she argues that the Disposal Deadline provided for under s 29DF(3)(a) and (5)(b), upon its natural and ordinary reading, envisages that the agreement for sale of original property (“disposal agreement”) would be made during the period of 12 months commencing on the date of the conveyance on sale executed in conformity with the agreement for sale of the subject property (“acquisition agreement”), and hence s 29DF is intended to apply to that scenario only.  There is some superficial attraction to this argument if one reads s 29DF(3)(a) and (5)(b) in a strict and literal sense.  However, the preferable way of reading those subsections, in order to give reasonable sense to them, is that, to qualify for refund, the disposal agreement could be made at any time during the period from (a) the date of the acquisition agreement to (b) 12 months after the date of the conveyance on sale executed in conformity with the acquisition agreement.  This is because s 29DF is intended to benefit those HKPRs who acquire a new residential property before disposing of their original one (“先買後賣”) (as mentioned in §15 of the Legco Brief), or to “cater for the replacement needs of HKPRs” (as mentioned in §32 of the Bills Committee Report).  There is no sensible reason why the right to apply for refund should exclude cases where the disposal agreement is made during the period between the date of the acquisition agreement and the date of completion of the acquisition agreement.

36.  This matter was in fact considered by Deputy High Court Judge Keith in Ho Kwok Tai v Collector of Stamp Revenue, HCAL 49/2015 (18 February 2016), at §§13-14 (the learned Judge’s view on this matter was not affected by the judgment of the Court of Appeal [2016] 5 HKLRD 713):

“[13] Mr Fung told me at the hearing that the Collector also accepted that Mr Ho had met the condition in section 29DF(2)(a). In the course of writing this judgment, I became sceptical about whether that concession had been rightly made. My concern was this. Since the applicable instrument was the formal agreement for the purchase of the flat in Ma Wan dated 25 June 2013, the relevant period of the two periods specified in section 29DF(5) was the period specified in section 29DF(5)(b). Since the flat in Ma Wan was conveyed to Mr Ho on 7 October 2013, it looked to me as if the specified period was 7 October 2013 to 7 April 2014. Therefore, if section 29DF(3) was to apply to the disposal of the two flats in Tsing Yi, they had to have been disposed of under agreements for sale made within the period between 7 October 2013 and 7 April 2014, if Mr Ho was to be entitled to a refund. In fact, they were disposed of before then, namely under provisional agreements for sale dated 15 June 2013 and 8 August 2013. Similarly, if section 29DF(4) was to apply to the disposal of the two flats in Tsing Yi, they had to have been conveyed by Mr Ho between 7 October 2013 and 7 April 2014, if Mr Ho was to be entitled to a refund. In fact, they were conveyed before then, namely on 15 August 2013 and 23 September 2013. I set this concern out in a note I sent to the parties.

[14]      Mr Fung helpfully articulated the basis of the concession in his response to that note.  He agreed that the specified period for the purpose of both sections 29DF(5)(a) and 29DF(5)(b) ended on 7 April 2014, as that was six months after the date on which the flat in Ma Wan had been conveyed to Mr Ho.  However, what the Collector was conceding was that the specified period began, not on 7 October 2013 as I had thought, but on the date of ‘the applicable instrument’, ie the date of the formal agreement for Mr Ho’s purchase of the flat in Ma Wan, which was 25 June 2013.  I accept that that is a preferable reading of the section — not so much because that is what the language of the section dictates (indeed, I think that a more natural reading of the statutory language is the way I had originally read it) — but rather because it accords with the legislative intention, which as I have said was to exempt buyers from the new rate of duty if they dispose of their original property even after they have agreed to purchase their new one, provided that they do so relatively quickly.”

37.  Second, Ms Wong argues that s 29DF fails to cater for the situation where there is a long completion period under an acquisition agreement, which is possible in the case of a sale of a flat in an uncompleted development.  In this regard, Ms Wong refers to the discussion at §33 of the Bills Committee Report:

“Considering that property acquisition is a major decision involving a substantial amount of money, the Chairman and a majority of members hold a strong view that the prescribed ‘six-month’ period is too short for purchasers/transferees having acquired a new residential property to dispose of their only other property at a reasonable price in view of the current sluggish property market. The Chairman, Hon WONG Ting-kwong, Hon LEUNG Che-cheung, Hon Tony TSE, and Hon James TO are gravely concerned that the short timeframe cannot cater for the actual needs of those changing properties by acquiring uncompleted flats before disposing of their original one, rendering them unable to benefit from the refund mechanism. Given that the presale period of individual projects under the Consent Scheme may be up to 30 months in advance of the anticipated completion date, buyers of long-term uncompleted flats may not be able to file their AVD refund applications to IRD within two years from the date of the instrument for acquiring the new property. In addition, even if an owner holds more than one residential property for a long time during the process of replacement, the new properties, being an uncompleted flat, does not provide immediate accommodation. In order to obtain a refund, these purchasers may have to sell their existing flat with six months and rent a place while waiting for the completion of the newly acquired pre-sale flat. Sharing a similar view, Hon Abraham SHEK, Hon Tommy CHEUNG and Hon James TIEN point out that the Bill has in effect discouraged the replacement of properties by uncompleted flats. Members strongly urge the Administration to extend the proposed six-month timeframe for divesting the original property to 12 months for the purpose of refunding the doubled AVD…”

38.  It seems clear that the Bills Committee’s concerns related to the short timeframe of 6 months (calculated from the date of the acquisition agreement) allowed for the disposal of the original property under the original s 29DF(3)(a) of the Stamp Duty (Amendment) Bill 2013 which it was thought might cause difficulty to some buyers of long-term uncompleted flats, and it was suggested that the timeframe should be extended to 12 months.  In this regard, it may be noted that in the 2013 Bill:

(1)  the Disposal Deadline under the s 29DF(3)(a) was “6 months after the date of the applicable instrument”; and

(2)  there was only one limb in the Application Deadline under s 29DF(3)(c), namely, “2 years after the date of the applicable instrument”.

39.  With a view to meeting the above concerns expressed by the Bills Committee, the Government proposed various amendments to the 2013 Bill, as explained in §39 of the Bills Committee Report:

“After having fully considered members' views, the Administration indicates that with regard to the policy objective and legislative intent of the Bill and under the principle of not undermining the effectiveness of the measures, it will relax the ‘six-month’ timeframe for owners who have acquired a new residential property to dispose of their original one. The Administration proposes to move CSAs specifying that the ‘six-month’ timeframe under the current arrangement in the Bill would be adjusted to commence from the conveyance on sale instead of the agreement for sale and purchase of the newly acquired property. While maintaining the two-year application timeframe after the execution of an agreement for sale and purchase of the newly acquired property, a new clause will be proposed to allow application for stamp duty refund of an amount equal to the difference between the new and the old AVD rates be made within two months from the conveyance on sale of the original residential property or two years after the execution of an agreement for sale and purchase of the newly acquired property, whichever is the later. The Administration considers the proposed arrangements can strike the right balance between safeguarding the effectiveness of the measures and addressing the replacement needs of both owners who acquire existing stocks and uncompleted flats, and would enable buyers changing properties, including those who acquire uncompleted flats, to apply for refund after completion of transactions. The Administration has stressed that the modified proposal does not represent any relaxation by the Government on the existing demand-side management measures and the Government is determined to uphold the existing policy in order to safeguard the healthy and stable development of the property market.”

40.  Eventually, in Ord No 14 of 2014 as enacted by the Legislative Council:

(1)  the Disposal Deadline was extended to 6 months after the date of “the conveyance on sale” executed in conformity with the applicable instrument, instead of 6 months after the date of “the applicable instrument”; and

(2)  the Application Deadline was relaxed to “not later than 2 years after the date of the applicable instrument, or not later than 2 months after the date of the conveyance on sale under which the original property is transferred or divested, whichever is the later”.

41.  From the above legislative history of s 29DF, Ms Wong’s suggestion that s 29DF fails to cater for the situation of a long completion period under an acquisition agreement is incorrect.  It may be argued that the relevant amendments did not go far enough, but that is not a valid ground to hold that s 29DF only applies to the situation where a person sells his original property within 12 months after the date of the conveyance of the new property, but not where he sells the original property before the date of the conveyance of the new property.

42.  Third, Ms Wong argues that the time limit for making an application for refund under s 29DF(3)(c) should allow a purchaser to make the application after the purchase of the subject property has been completed because various things may happen which prevent completion from taking place and it would impose an unreasonable requirement on the purchaser to make the application for refund before completion of the purchase of the subject property.  It should be noted, however, that there is no requirement on a purchaser seeking a partial refund of stamp duty under s 29DF to make the application prior to completion of the purchase of the subject property.  He may do so within the period of 2 months after the date of the conveyance on sale under which his original property is transferred or divested, and the relevant disposal agreement may be entered into within the period of 12 months after the date of the conveyance of the subject property to him.  There may, of course, be cases where the purchaser, because of his personal or financial circumstances, would need to dispose of his original property prior to the completion of the purchase of the subject property.  However, the true interpretation of a tax statute cannot be affected by the fact that there may be individual cases where a different interpretation would or could lead to what one may consider to be a fairer result.  It has been said that “there is no equity about a tax, as by nature it is ‘inequitable’ …” (Wong Tai Wai v Commissioner of Inland Revenue (unreported, HCIA No 2 of 2003, 15 September 200-3), at §8 per Deputy High Court Judge To).  In Feng Hongyan v Collector of Stamp Revenue [2018] 2 HKLRD 1471, Anthony Chan J also stated as follows:

“[34]  Mr Chang had also referred the court to Cape Brandy Syndicate v IRC [1921] 1 KB 64 at 71 where it was held that: ‘… in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.’

[35]  With respect, I agree that there is no room for the court to look behind the clear words of a statute and try to construe them in such a way to achieve what it perceives to be a fair or fairer result.  That is a matter within the exclusive province of the legislature.”

43.  In all, I am of the view that s 29DF is applicable not only to the situation where the person seeking refund disposes of the original property after the date of the conveyance of the subject property, but also to the situation where he disposes of the original property after the date of the acquisition but before the date of the conveyance of the subject property.  In either situation, the person seeking refund is required to make the application for refund within the time limit laid down in s 29DF(3)(c). I pause to observe that if, as submitted by Ms Wong, s 29DF is not intended to apply, and has no application, to the Applicant’s situation, there would be no legal basis on which he can apply for a partial refund of the stamp duty paid on the Purchase Agreement.

APPLICATION OF SECTION 29DF TO THE FACTS OF THE PRESENT CASE

44.  The next question is whether the Applicant failed to comply with the time limit for making the application for refund laid down in s 29DF(3)(c), and, if the answer is “yes”, the consequence of such failure.  This court recently considered the question of the nature of a statutory requirement as to time and the consequence of a non-compliance with such requirement in Cheung Shui Kam v The Registrar of Companies [2020] HKCFI 2947:

“[31]  … The question is what is the consequence of a non-compliance with this statutory requirement as to time. The conventional approach where there has been non-compliance with a time or other procedural requirement laid down by statute for the commencement or prosecution of proceedings is to seek to ascertain whether the requirement which has not been complied with should be categorized as ‘directory’ or ‘mandatory’. This approach has been criticized as concentrating too much ‘on labels’ (see Re Au Kwok Hung [2001] 1 HKLRD 169, at 173J). The modern approach for determining the consequence of such non-compliance is to treat the matter as one of statutory construction, and the court’s task is to ascertain what the legislature intends to be the consequence of the non-compliance (see FH v WB [2019] 5 HKC 99, at §§65-66 per Au-Yueng J). In R v Secretary of State for the Home Department, ex p Jeyeanthan [2001] 1 WLR 354 at 362D-E, Lord Woolf identified three relevant questions which the court should consider:

‘(1)  Is the statutory requirement fulfilled if there has been substantial compliance with the requirement and, if so, has there been substantial compliance in the case in issue even though there has not been strict compliance? (The substantial compliance question.)

(2)  Is the non-compliance capable of being waived, and if so, has it, or can it and should it be waived in this particular case? (The discretionary question.) I treat the grant of an extension of time for compliance as a waiver.

(3)  If it is not capable of being waived or is not waived then what is the consequence of the non-compliance? (The consequences question.)’

The above approach was endorsed by the Court of Appeal in Re Au Kwok Hung [2001] 1 HKLRD 169, at 174, adding that the second and third questions could often be decided together.

[32]  In respect of the substantial compliance question, the Court of Appeal in Re Au Kwok Hung said that a requirement which consisted of ‘doing a particular act by a particular date’ could not be regarded as anything other than a requirement which has to be complied with strictly.  At 175B, the Court of Appeal pointedly observed: ‘Why should a requirement, which consists simply of doing something by date X, be regarded as having been complied with (albeit substantially) if it is only done by date Y?’  Further, as observed by Kwan J (as she then was) in Re Merck Sharp & Dohme Ltd [2002] 1 HKLRD 820, at §22: ‘in the normal situation, where a time-limit is laid down by statute and no power is given to extend it, the time-limit should be strictly observed without being dispensed with, unless the substantive requirement itself can be dispensed with altogether’…”

45.  I shall adopt the “modern” approach, and consider the 3 questions, ie the substantial compliance question, the discretionary question and the consequences question, in this case.

46.  In respect of the first (substantial compliance) question, it is clear from the judgment of the Court of Appeal in Re Au Kwok Hung and that of Kwan J (as she then was) in Re Merck Sharp & Dohme Ltd that generally speaking, there is no question of a substantial compliance with a statutory requirement as to time - the time requirement is either complied with or not complied with.  In this case, the time requirement for making an application for refund under s 29DF(3)(c) was not complied with.

47.  The second (discretionary) and third (consequences) questions can be taken with together.  In my view, the Collector has no discretion to extend, or waive, the time requirement for making an application for refund under s 29DF(3)(c), and a failure to make the application within time means that the right to apply for refund is lost, for the following reasons.

48.  First, the language of s 29DF(2) and (3) is plain.  The statutory requirements set out in those subsections, including the requirement as to the time of the application under s 29DF(3)(c), are “conditions” which must be fulfilled before the Collector has power to make a partial refund of stamp duty under s 29DF.

49.  Second, there is nothing in the Ordinance to suggest that the Collector has any power to extend, or waive, the Application Deadline under s 29DF(3)(c).  On the other hand, where the legislature intends that the Collector should have power to extend a time requirement under the Ordinance, such power is given expressly (see, for example, s 48(2)(a) in respect of an application for allowance for spoiled stamps and stamp certificates rendered unfit for the purpose intended which may be made within 2 years after certain specified events “or such further time as the Collector may determine …”).

50.  Third, the legislative history of s 29DF referred to in §§37 to 41 above shows that the Application Deadline, together with the Disposal Deadline, were extended or relaxed in order to address some perceived hardship or difficulties which a purchaser of an uncompleted flat might face where the acquisition agreement provided for a long completion period. It was considered that the proposed arrangements could “strike the right balance between safeguarding the effectiveness of the measures and addressing the replacement needs of both owners who acquire existing stocks and uncompleted flats, and would enable buyers changing properties, including those who acquire uncompleted flats, to apply for refund after completion of transactions” (see §39 of the Bills Committee Report).  In fact, there was also a proposal raised by a member of the Bills Committee (Mr Tony Tse) that the Application Deadline should be changed to within 2 years from the date of the conveyance on sale of the new property, instead of from the date of the agreement on sale.  However, that proposal was rejected by the Government (for reasons which are not relevant to the present discussion) and did not eventually become part of the law (see §§37 and 38 of the Bills Committee Report).  The legislative history of s 29DF indicates, in my view, a legislative intention that the time requirements under subsection (3) have to be complied with strictly, and that the Collector has no power to extend the relevant deadlines.

51.  Fourth, the general importance of finality and certainty in fiscal legislation (see Moulin Global Eyecare Trading Ltd v Commissioner of Inland Revenue at §74) lends support to the view that the Application Deadline under s 29DF(3)(c) is not capable of being extended, or waived, by the Collector.

52.  The above conclusion makes it unnecessary for me to consider Mr Liu’s alternative submission that even if the Collector has the discretion to extend, or waive, the Application Deadline, the factual context and circumstances of the present case do not warrant the exercise of such discretion in favour of the Applicant.  I would merely observe that in that scenario, the proper course to adopt would be to remit the application to the Collector for fresh consideration.

DISPOSITION

53.  The application for judicial review is dismissed, with costs to the Collector, to be taxed if not agreed, with certificate for one counsel.