SAME FAST LTD v. INLAND REVENUE BOARD OF REVIEW

HCAL 122/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 122 OF 2006

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J U D G M E N T

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I.  Introduction

1.  Same Fast appealed to the Board of Review against an assessment and additional assessment to profits tax by the Commissioner of Inland Revenue.  It failed in its appeal.

2.  Same Fast then applied to the Board to state a case for consideration by the High Court.  It supplied draft questions (subsequently amended) for approval by the Board.

3.  On 25 August 2006 the Board refused to state a case based on Same Fast's amended questions.  The Board rejected the questions because in its view “the questions posed ... are not proper questions of law in that they seek to re-open factual issues of the case”.

4.  Same Fast now seeks judicial review of the Board's refusal.

II.      DISCUSSION

5.  Same Fast put forward 14 questions for the Board to state as a case.  They are appended to this Judgment.

6.  It will be noticed that the questions are prolix and argumentative.  They are not easy to understand. 

7.  The 1st Question alone runs for some 18 single space A4 pages.  It comprises 48 sub-paragraphs, some with sub-sub-paragraphs. 

8.  Various questions have multiple parts.  For example, the 5^th Question incorporates 5 sub-questions, the second of which in turn raises 15 sub-sub-questions.  The 9th Question raises 4 sub-questions, each of some length.  The 13th Question raises 3 sub-questions, again each of some length.

9.  As a general remark, I am bound to say that I find the questions to be embarrassing as a whole.  Simply on account of their wordiness and opacity, Same Fast's questions do not appear to me at all appropriate for a case stated.

10.  Having pointed out the length of the 1st Question, the Board said of that question:

“12.     … The 48 subparagraphs relate to matters or evidence of which [Same Fast] asserted that the Board ought to have found them as primary fact.  These matters or evidence are termed by [Same Fast] as 'Proved Facts' in the application.  In the 1st question of law, [Same Fast] is in effect challenging the Board's findings of fact.  Thus, we are of the view that it is not a proper question of law for the opinion of the CFI [Court of First Instance].  As Barnett J said in CIR v. Inland Revenue Board of Review and Another [1989] 2 HKLR 40, at page 58:-

‘... the Board need only give a general indication of the evidence relied on in reaching any finding of primary fact.  Assuming that the Board are able to indicate the existence of such evidence, that is the end of the matter.  The Court is not permitted to re[-e]valuate that or any other evidence to see whether it might have made a different finding.’ ”

11.  I agree with the Board.

12.  The 1st Question is essentially asserting that, contrary to its actual findings, the Board ought to have found that Same Fast had proved “facts”.  Those “facts” are tendentiously labelled by the 1st Question as “Proved Facts”.  In reality, the Board did not find the Proved Facts as established.

13.  In effect, then, Same Fast is contending that the Board ought to have entirely accepted its version of events, as opposed to the facts which the Board actually found.

14.  The 1st Question therefore strikes me (as it must have the Board) as a blatant attempt to ask a massive question of fact.

15.  Of the 2nd, 3rd, 4th, 5th, 9th, 10th and 11th Questions, the Board said:-

“13.     .... They are also not proper questions of law for the opinion of the CFI because those questions were posed on the basis that the Proved Facts were the facts of this case.  As said previously, the Proved Facts are not the facts found by the Board upon which the Decision was reached.  They are matters which, [Same Fast] believes, ought to have been found as facts by the Board.”

“17.     Again, the 9th, 10th and 11th questions are posed on the basis of the Proved Facts, and are consequently not proper questions of law for the opinion of the CFI.”

16.  I agree with the Board.

17.  The relevant questions ask whether, taking account of the Proved Facts (among other matters), the Board came to the right conclusion.  It follows that the questions are inviting a reassessment of the Board’s findings of fact.

18.  On the 6th, 7th and 8th questions, the Board first observed that they concern Inland Revenue Ordinance (Cap.112) (IRO) s.70A (power of assessor to correct errors).

19.  The Board then continued:

“15.     In the 6th question, [Same Fast] stated that ‘... notwithstanding the Board had satisfied that [Same Fast’s] former tax representative had made an error or mistake in [Same Fast’s] tax return on 31st July 1996 by submitting that the gain on the realization of Shop Premises and Office Premises was derived as a result of a change of intention to trading (“the Error”).’  It appears from this statement that [Same Fast] has taken an erroneous view that the Board has made a positive finding that [Same Fast’s] former tax representative had made an error or mistake.  What in fact was said is that ‘the approach and attitude favoured by [Same Fast] do not lend credence to its claim of having received wrong advice from the Representatives by reason of which the sale proceeds were mistakenly offered for assessment.’

16.      The 6th, 7th and 8th questions are posed by [Same Fast] on the wrong premises that the Board has made a positive finding that [Same Fast’s] former tax representative had made an error or mistake.  Thus, these questions are not proper questions of law.”

20.  I agree with the Board.

21.  The 6th, 7th and 8th Questions are based on a wrong premise, namely, that the Board had made a finding which it in fact never made.  The Board actually found against Same Fast’s assertion of an error on the part of its tax representative.

22.  Accordingly, the 3 questions cannot be valid ones for a case stated.  I should also add that I am unable in any event to understand the 7th Question as currently worded.

23.  In respect of the 12th and 13th Questions, the Board noted that they related to project management and bank guarantee fees allegedly incurred by Same Fast. 

24.  The Board then said:

“19.     In the 12th and 13th questions, [Same Fast] similarly posed the questions on the basis of the Proved Facts.  We take the view that these questions seek to re-open the factual issues determined by the Board.  Thus, we do not think that they are proper questions of law to be put to the CFI.”

25.  For the reason explained above in connection with other questions referring to the Proved Facts, I agree with the Board.

26.  The 14th Question reads as follows:

“Whether, as a matter of law, upon the true construction of Cap.112 in particular ss. 16(1) and 17(1) thereof and the burden of proof, the Board was correct in law in holding, as she did in paragraph 46 of her Decision, that the Project Management Fee ($22,500,000) and the Bank Guarantee Fee ($8,850,000) had to be actually incurred or paid out by [Same Fast] before they were deductible under the section 16(1) of the Inland Revenue Ordinance (Cap.112)?”

27.  IRO ss. 16(1) and 17 concern the deduction of outgoings and expenses “to the extent to which they are incurred during the basis period for that year of assessment ... in the production of profits”.

28.  The Board refused to state a case on the 14th Question because “we have difficulty in understanding it as it now stands”.

29.  I suffer from the same difficulty.  On the face of the question, it is hard to see how alleged fees can be deducted before they are incurred as asserted by the 14th Question.

30.  Mr. C. T. Lee (appearing for Same Fast) suggests that the 14th Question raises the possibility that “expense incurred is not confined to a disbursement, and include a sum which there is an obligation to pay”.  But that is not what the 14th Question as presently drafted asks.

31.  Indeed, it seems to me that the question as apparently intended by Mr. Lee goes against the Board’s finding (at para.46 of its Decision of 16 January 2006) of a lack of evidence that project management and bank guarantee fees were incurred, whether as mere liabilities or actual expenses.

32.  In the circumstances, I cannot fault the Board’s refusal to state a case on the 14th Question.

II.      CONCLUSION

33.  The Board acted reasonably in refusing the application to state a case.  Its decision was admirably concise and to the point.

34.  The judicial review fails.  Same Fast’s application is dismissed.  I shall hear the parties on costs.

Annexure