CHEN AN v. COLLECTOR OF STAMP REVENUE

DCSA 17/2015

[2019] HKDC 83

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 17 OF 2015

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DECISION

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INTRODUCTION

1.  This is an appeal brought by the appellant, Madam Chen An (“the appellant”) against the Collector of Stamp Revenue (“the respondent”) for the refusal to grant an ad valorem stamp duty (“AVSD”) refund on her newly purchased property. 

BACKGROUND

2.  The subject matter of the appeal was related to the stamp duty assessment levied by the respondent on 31 July 2015 in respect of the sales and purchase agreement (“the SPA”) dated 22 September 2014 for the appellant’s then newly acquired property situated at G/F, 1/F, 2/F and Roof of Block E15 of TMT 222, No 222 Tai Mei Tuk, Tai Po, New Territories, Hong Kong (“the Property”), pursuant to sections 14 and 29DF of the Stamp Duty Ordinance, Cap 117 (“the Ordinance”).

Chronology

3.  The following events have been agreed by the parties and are not in dispute.

4.  In February 2007, the appellant and her husband migrated to Hong Kong from the Mainland under the Quality Migrant Admissions Scheme to make it as their permanent home.

5.  In September 2013, the appellant purchased her first residential property in Hong Kong which was situated in Tai Wai, Shatin, New Territories (“the Tai Wai Flat”).

6.  In early 2014, the appellant and her husband wished to move to a more rural area and viewed the Property for the first time, with a growing interest to purchase it as their new home.   

7.  On 13 February 2014, the appellant has had ordinarily resided in Hong Kong for over 7 years and was eligible to become a Hong Kong permanent resident (“HKPR”) on that day.

8.  In May 2014, the appellant made enquiries to the Immigration Department (“ID”) in regard to her eligibility for a HKPR identity card.

9.  In early August 2014, ID sent a notice to the appellant to attend a verification appointment at its office on 10 September 2014.

10.  On 10 September 2014:-

(i)   At 3:00 pm, the appellant duly attended the scheduled appointment and a Notice of Application Result for Verification of Eligibility for Permanent Identity Card (“the Notice”) was issued to the appellant;

(ii)   At 3:45 pm, the officer at ID informed the appellant that all the time-slots for identity card collection on that day had been taken up.  Thus, she signed up for collection of her HKPR identity card at the Kwun Tong Registration of Persons Office on 18 September 2014;

(iii)   At 6:00 pm, the appellant entered into a preliminary sale and purchase agreement (“the Preliminary SPA”) for the purchase of the Property for a consideration of HK$15,000,000 with the applicable stamp duty at $1,125,000 under Scale 1(i) of head 1(1A) in the First Schedule of the Ordinance (See: §29BA).

11.  On 18 September 2014, the appellant collected her HKPR identity card from the Kwun Tong ROP Office as scheduled.

12.  On 22 September 2014, the appellant entered into the formal SPA for the purchase of the Property and duly paid the relevant stamp duty.

13.  On 27 January 2015, the appellant applied for a partial AVSD refund pursuant to section 29DF of the Ordinance.

14.  On 18 May 2015, the respondent refused the application on the basis that the appellant did not satisfy the requirement of a HKPR status, more specifically, by holding a HKPR identity card pursuant to §29A of the Ordinance.

DISCUSSION

Issues in Dispute

15.  This case involves the interpretation of sections 14, 29A, 29BB and 29DF of the Ordinance. 

16.  It revolves around the following 2 main legal questions:-

(i)   Was the appellant a verified HKPR at the time when entering the Preliminary SPA for the Property?

(ii)   Under section 29A(1) of the Ordinance, what is the true meaning of the word “hold” as intended by the Legislature?

17.  In turn, the questions for the opinion of the court as stated in §18 of the “Stated Case” prepared by the respondent are as follows:

(i)   Whether the SPA is chargeable with AVSD in the amount as assessed by the respondent; and

(ii)   If not, with what amount of stamp duty it is chargeable.

18.  Bearing in mind the above questions, the central issue therefore turns on the true and proper statutory interpretation of the word “hold” within the provision in accordance with the legislative intent behind it.

Discussions of the issues involved

19.  In my view, the above issues/questions can be discussed under the following headings:

(A)   relevant statutory provisions;

(B)   principles of statutory interpretation; and

(C)   application to our present case.

(A)   Relevant statutory provisions

20.  The following statutory provisions contained in the Ordinance are relevant to the dispute in this case.

21.  Section 14 gives the right to any person who is dissatisfied with the assessment:

“14. Appeal against assessment

(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.”

22.  Section 29DF provides the refund mechanism designed as an exemption for all HKPRs who are keen to become homeowners.  Instead of paying the current Scale 1 stamp duty rate via the Double Stamp Duty policy, they can apply to the respondent for a refund in order to qualify for the Scale 2 rates, thereby refunding half of their Double Stamp Duty (“DSD”) payment to the equivalent of a Scale 2 rate payment:

“29DF. Partial refund of ad valorem stamp duty on disposal of residential property in certain circumstances

(1) In this section ––

………….

(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) or (4) 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(1), or Scale 2 of head 1(1A), in the First Schedule.” [emphasis added]

23.  Section 29BB outlines the requirements to be fulfilled in order to qualify for section 29DF’s refund scheme. In this instance, subsection (2) applies to the appellant:

“29BB. Certain agreements for sale of residential property to Hong Kong permanent residents chargeable with ad valorem stamp duty at Scale 2 rates

(1) An agreement for sale is chargeable with stamp duty under Scale 2 of head 1(1A) in the First Schedule 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 the agreement.

(2) This subsection applies to the agreement if, on the date of acquisition of the property––

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

(b) that purchaser, or each of those purchasers, is not a beneficial owner of any other residential property in Hong Kong.”

24.  Finally, section 29A sets out the definition of a HKPR for the purposes of interpretation as needed for other sections ie §29BB:

“29A. Interpretation and application of Part IIIA

(1) In this Part and the First Schedule––

……………

Hong Kong permanent resident (香港永久性居民) means a person––

(a) who holds a valid permanent identity card; or

(b) who does not hold a valid permanent identity card but––

(i) is, under regulation 25(e) of the Registration of Persons Regulations (Cap.177 sub. Leg. A), not required to register or apply for the issue of an identity card or for the renewal of an identity card under the Registration of Persons Ordinance (Cap. 177) and those Regulations; and

(ii)   is entitled to be issued with a permanent identity card if he or she makes an application to the registration officer as defined by section 1A(1) of that Ordinance for that purpose;” [emphasis added]

25.  The purpose of these provisions in the Ordinance has been succinctly stated by Hon. Anthony Chan J in Feng Hongyan v The Collector of Stamp Revenue of the Government of Hong Kong SAR [2018] HKCFI 1079 at §§ 14-15:-

“14. The relevant statutory provisions were part of the amendments introduced into the Ordinance for the purpose of cooling the overheated real property market. The following is a thumb nail sketch of the scheme introduced by the amendments insofar as they are relevant for the present purpose.

15. For the purpose of cooling the property market, higher AVD was imposed to deter, eg, speculation. An exception was made in respect of Hong Kong residents who did not own any real property, and for those who did, they might be able to apply for a refund of the increased AVD paid for the purchase of the second property if they disposed of their first property in a manner which satisfied the requirements under the Ordinance.”

(B)   Principles of statutory interpretation

26.  The following is a summary of the established principles on statutory interpretation which are not disputed by the parties.

27.  The Interpretation and General Clauses Ordinance as contained in Part O of Volume 2 of the Hong Kong Civil Procedure 2019 (White Book) outlines the following trite principles:

(i)   O1/19/14-16: Interpretations should ‘be fair, large and liberal’ and that ‘extreme literalism’ is rejected (See: The Medical Council of Hong Kong v David Chow Siu Shek (2000) 3 HKCFAR 144.)

(ii)   O1/19/17-19: They should be ‘purposive’ and ‘context and purpose’ should be regarded with words having ‘their natural and ordinary meaning’ (See: Hong Kong Special Administrative Region v Cheung Kwun Yin (張冠賢) (2009) 12 HKCFAR 568, [11].)

(iii)   O1/19/27A: The court should aim to arrive at an interpretation that, as far as the wording of the legislative provision in question will allow, will accord with such common sense and which can be easily applied.  [emphasis added]

28.  Mr Forest Fong, counsel for the appellant, also made reference to Kwan JA’s judgment in Moulin Global Eyecare Trading Limited v The Commissioner of Inland Revenue [2012] 2 HKLRD 911:

“31. The principles for statutory interpretation are well established. The modern approach is to adopt a purposive approach interpretation and the context of a statutory provision should be taken in its widest sense. The statute shall receive such fair, large and liberal construction as will best ensure the attainment of its object. The relevant provisions of the legislation should be read together and in the context of the whole statue as a purposive unity in its appropriate legal and social setting; it is necessary to identify the interpretative considerations involved and, if they conflict, to weigh and balance them.

32. The use of extrinsic materials is for a limited purpose, it is to enable the court to understand the factual context in which the statute was enacted and the mischief at which the statute was aimed, and not for the purpose of construing the words of the statute (Director of Lands v Yin Shuen Enterprises Ltd & Anr (2003) 6 HKCFAR 1 21-22). The purpose of a statutory provision may be evident from the provision itself, the recommendation of a report, the explanatory memorandum to the bill, or a statement in the Legislative Council by the responsible government official relating to the bill (Cheung Kwun Yin, at para. 14).”

29.  The widely accepted principles of purposive statutory interpretation is also highlighted in Ho Kwok Tai v Collector of Stamp Revenue [2016] 5 HKLRD which was referred to by Mr. Fong in his submissions:

“21. It is also now well settled that the court should have regard to the context and purpose of the legislation whatever any issue of construction of a statute arises. They are relevant to a proper understanding of the statute in the first instance, and not merely at some later stage when it is thought that there is some ambiguity in the statute which has to be resolved. That this is the correct approach has recently been reiterated by the Court of Appeal in Good Mark Industrial Ltd v Commissioner of Inland Revenue [2015] 2 HKLRD 16. After referring to the above passages in the judgment of Kwan JA in Moulin, Cheung JA (with whom Yuen and Chu JJA agreed) went on to state at paragraph 4.2 as follows:

In addition it is necessary to point out that the underlying theme of the purposive approach is that the context and purpose should be considered in the first instance, especially in the case of general words, and not merely at some later stage when ambiguity may be thought to arise: per Sir Anthony Mason NPJ in HKSAR v Lam Kwong Wai (2006) 9 HKCFAR 574 paragraph 63 and reaffirmed in Vallejos Evangeline Banao v Commissioner of Registration & Another [2013] 2 HKLRD 533 at paragraph 77.”

30.  And in Town Planning Board v Society for the Protection of the Harbour Ltd (2004) 7 HKCFAR 1:-

“A purposive approach should be adopted. In construing a statute, the courts should adopt an interpretation which is consistent with and gives effect to the legislative purpose. An interpretation which is inconsistent with and does not serve that purpose should be avoided.”

31.  In addition to the above authorities relied on by Mr Fong, Ms Katherine Chan, government counsel for the respondent, highlighted the following limitations of purposive interpretation.

32.  While O1/19/14-16 of the White Book outlines that interpretations should “be fair, large and liberal”and that extreme literalism should be rejected, it continues on to say that “this does not mean that the clear language of a provision can be and strained to mean something that it cannot bear.”  In O1/19/27, “the primacy of text should be observed” as a limit to the purposive approach.  It does not “empower the court to distort or even ignore the plain meaning of the text and construe the statute in whatever manner achieves a result which they consider desirable” citing Fok PJ in T v Commissioner of Police (2014) 17 HKCFAR 593, at §195:-

“195. Nevertheless, the object of the exercise is to ascertain the legislative intent of the language of the statute and, in this regard, a court cannot attribute to a statutory provision a meaning which the language, understood in the light of its context and statutory purpose, cannot bear.”

33.  Furthermore, as pointed out in Ho Kwok Tai v Collector of Stamp Revenue [2016] 5 HKLRD 713:

‘22. These having been said, it is important to bear in mind that notwithstanding the court's readiness to consider the context and purpose of the legislation in any interpretative exercise, the court's task is still to ascertain the intention of the legislature “as expressed in the language of the statute”, and not “the legislative intent on its own”. In HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568, the following was stated by Li CJ:

…

12. The modern approach is to adopt a purposive interpretation. The statutory language is construed, having regard to its context and purpose. Words are given their natural and ordinary meaning unless the context or purpose points to a different meaning. Context and purpose are considered when interpreting the words used and not only when an ambiguity may be thought to arise.”

(C)   Application to our present case

34.  The application of the law in this case requires applying the relevant statutory provisions to the legal issues involved, bearing in mind the principles of statutory interpretation discussed above. As such, I consider it is appropriate to pose the following questions:

(a)   What do the provisions of the Ordinance require of the appellant?

(b)   Did the appellant qualify for the DSD refund mechanism in accordance with the Ordinance?

(c)   What should be the appropriate application of statutory interpretation principles in this case?

(a)  What do the provisions require of the appellant?

35.  To answer Question (a) above, one must go through sections 29DF, 29BB and 29A respectively.  

36.  Starting with section 29DF(2), the provisions state that ‘The Collector may […] refund the applicant […] if (a) subsection (3) or (4) 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(1), or Scale 2 of head 1(1A), in the First Schedule. Subsections (3) and (4) state that detail requirements must be met regarding the disposal of an original property to which the appellant did meet. Hence, the next step is to satisfy subsection 2(b)’s requirement under s 29DF.

37.  In order to do this, the appellant must satisfy the conditions found in section 29BB.

38.  Subsection (1) outlines the following two conditions for “An agreement for sale [is] chargeable with stamp duty under Scale 2 of heading 1(1A) in the First Schedule”: (a) the property is “a single residential property”; and (b) that “subsection (2) or (3) applies” (note: only subsection (2) is relevant in this case).

39.  Subsection (2) states that on the date of acquisition of the property: “(a) the purchaser […] is a Hong Kong permanent resident acting on his or her own behalf; and (b) that purchaser, or each of those purchasers, is not a beneficial owner of any other residential property in Hong Kong.”

40.  It is not disputed by the parties that the appellant’s Tai Wai Flat was a single residential property, hence subsection (a) is satisfied.

41.  Thus, one moves to subsection (2).  While the Appellant has satisfied condition (b), namely, the Tai Wai Flat was sold off within one month after she bought the Property and was not a beneficial owner, the appellant must also satisfy condition (a), ie “the purchaser … under the agreement is a Hong Kong permanent resident acting on his or her own behalf.” [emphasis added]

42.  Pursuant to section 29A of the Ordinance, HKPR has been defined as someone who “holds a valid permanent identity card” or does not hold a valid permanent identity card but would be able to register for one given the exception of being “aged, blind or infirm” under regulation 25(e) of the Registration of Persons Regulations, Cap.177 sub. Leg. A. It does not refer to a status or a process of verification.

(b)  Did the Appellant satisfy 29A?

43.  According to the chronological order of events, the appellant attended the HKPR verification appointment at 3:00 pm on 10 September 2014.  She was verified by the Immigration Officer but was informed at 3:45 pm that she would not be able to collect her new identity card immediately due to all the appointment slots available on that day had been taken up already.  At 6:00 pm on the same day, she entered into the Preliminary SPA for the Property.  It therefore cannot be disputed that, at that point in time, she did not have physical possession of her HKPR identity card.  Thus, prima facie the appellant has not satisfied the requirements of §29A.    

44.  The only remaining question is whether there is an interpretation of §29A which somehow may allow the appellant to be qualified for the refund.

(c)  Statutory interpretation that is in compliance with the legislative intent

45.  I do not have any disagreement with Mr Fong on his submissions regarding the principles of statutory interpretation.  The authorities he relies on serve as a good reminder of how purposive interpretation can offer clear meaning aided with context and purpose.  However, in this case, I prefer the respondent’s submission that words should be given their “natural and ordinary meaning” and that the simple word of “hold” cannot be construed or extended to bear meaning that is not logical or possible.  In my view, to singularly focus on the word “hold” and attach the strained interpretation that the appellant is now asking the court to adopt, irrespective of the wording that follow, would be isolating the word “hold” itself and taking it out of context.  In my judgment, it will unnecessary extending the meaning of the word in a way that it was not supposed to and certainly not intended by the legislature.

46.  Simply put, the provision of section 29A seems to me clear, plain and simple.  A HKPR as defined in the provision is one “who holds a permanent identity card.”  As the appellant did not physical hold her HKPR identity card on the date of the purchase of the Property, she cannot satisfy the requirement under that section.

47.  While extrinsic materials, such as the Financial Secretary's statement, matters stated in the appellant's affirmation and the LegCo briefs/reports, can be (and have been) taken into consideration in the evaluation process, in my judgment, they do not assist the appellant in getting round the plain wording used by the legislature in this case.  In my judgment, there is simply no justifiable excuse for the appellant not being in physical possession of the HKPR identity card should she wanted to take advantage of the refund scheme.  In this case, the appellant is not questioning the DSD policy scheme and its justification or disputing her own ability to resell the Tai Wai Flat. In order to qualify for the refund scheme, all she was simply required to do is to become a holder of a HKPR identity card.  In my judgment, the plain reading of the section does not permit her to simply obtain the HKPR status or verify as a HKPR on the date of the purchase. She needs to be in physical possession of such an identity card on the relevant date.  

48.  I do not for one moment doubt that the appellant did try her best to comply with the requirements under the law and in fact showed a great deal of enthusiasm as well as circumspection in the process.  As argued by Mr Fong, who referred to §§21-29 of the appellant’s affirmation, she was aware of the Financial Secretary’s announcement and took note of the Immigration Officer's following statement: “Miss Chen, you must understand the importance and effect of this signatory process. After signing these papers, you will then regard yourself as a HKPR since all previous conditions of stay would be invalidated and you become entitled to the all the rights and encumbered by all the duties of a HKPR. There is no going back.”  I accept that it is, as the officer from the ID had repeatedly impressed upon her, a no-return point, ie she would become a HKPR after signing that document. However, the act itself could not, in my view, get round the plain wording of the provision.  The fact remains that she was not a holder of a HKPR identity card.  In my judgment, had the legislature intended that any HKPR who holds such status could be qualified for the refund scheme, they would have employed different wording in the section itself.  The fact that they use holding of the HKPR identity card as the defined criteria under this section in my view is quite understandable as it is by far the most simple and administratively perhaps the most efficient way for the authorities to ascertain the status of a person as each and every HKPR is, as a matter of law, entitled to obtain such an identity card.  

49.  At the end of his submissions, Mr Fong poses several rather ingenious hypothetical illustrations to argue this point.  In one of the scenarios, he uses an example of a HKPR who has lost his wallet with his identity card inside. He argues the person might have lost his identity card but not the status of a HKPR. In my view, while it is true that the owner would “no longer be in possession of the card”, there will be no difficulties for the authorities to verify that the person at the time of losing of the identity card as someone who was a “holder” of a valid card and entitled to that resident status.  

50.  Mr Fong further submits that, in relation to the policy, the LegCo's aim was not to try to subdivide HKPRs.  On the contrary, the primary purpose of an identity card is identification and that a person can demonstrate they hold the HKPR status without physically holding such a card.  However, such argument does not in my view assist the appellant’s case at all.  I consider that the justification of administrative convenience still stands: administrators and authorities need to know where to draw the line as to who is qualified for the scheme and who is not.  In my view, the legislature must have very good reason for drafting the provision in the way that as it did.  It is not for the court to speculate their reason of using holding the identity card as the defining criteria.  The court’s task is to simply interpret the provision according to the established principles.    

51.  Mr Fong further referred to the definition of a “HKPR identity card holder” contained in §3, Schedule 1 in the Ordinance and “PIC” in the Registration of the Person Ordinance (Cap 177) and submitted that those “wider” definitions should be taken into account.  In my view, such comparison with different sections contained in different or even the same legislation are meaningless as the criteria stated in §29A of the Ordinance is self-contained and there is no need for the court to refer to other statutes for interpretation at all.

52.  The issue perhaps can be answered very simply by a couple of questions that the court had rhetorically posed to the appellant’s counsel during the argument: “What was the appellant’s hurry?  Why could she not able to wait a few more days until she was in the physical possession of the HKPR identity card before entering the SPA?”  The appellant allegedly had purchased the Property for the purpose of celebrating and marking the occasion of becoming a HKPR and that she had believed she had taken all necessary steps to comply with the DSD policy rules.  I find that difficult to believe.  Had she bothered to check the wording contained in §29A, she would no doubt be able to find that the requirement is one of a person holding a HKPR identity card and not merely qualified or had been verified for that particular status.  I do not consider that the plain wording employed in the particular section could carry a different meaning at all.    

53.  Thus, while I have kept in mind the purposive approach of statutory interpretation, I remain unconvinced that the meaning of the word “hold” can be construed to carry a meaning which it cannot bear in this context.  I therefore find that the appellant has failed to satisfy the requirements under §29BB of the Ordinance in this case.

CONCLUSION

54.  While I am most sympathetic to the predicament the appellant has found herself in, I do not consider that the plain wording employed by the legislature as contained in the relevant provisions of the Ordinance can be interpreted in a way submitted by her counsel.  I therefore find that the appellant is not a holder of HKPR identity card as defined under section 29A. Further, I find that she could not rely on section 29BB to establish that she could satisfy the requirements stipulated under section 29DF(2)(b) of the Ordinance.  

55.  Hence, to conclude and in answer to the first question contained in the “Case Stated” filed by the respondent, namely, whether the SPA is chargeable with AVSD in the amount as assessed by the respondent, the answer must be a resounding ‘Yes’. 

56.  In the aforesaid circumstances, I would dismiss the appellant’s appeal with costs in favour of the respondent, such costs to be taxed if not agreed.