XCHRX QUAN BING KAY, DEREK v. COMMISSIONER OF INLAND REVENUE

HCAL32/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMINISTRATIVE LAW PROCEEDINGS NO. 32 OF 1998

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J U D G M E N T

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1. This is an application for leave to bring a decision of the Board of Review under review in this court. When the papers were submitted initially seeking that leave, they came before Stone J, who on 28 May this year, ordered that there be an oral hearing. Mr WU now appears today to present the applicant's case at that oral hearing.

2. The principal relief sought by the applicant is an order that the Board of Review state a case on a question of law for the opinion of this court under section 69(1) of the Inland Revenue Ordinance.

3. What happened in this matter is stated in the original decision of the Board of Review given on 23 October 1997. The Board recites that the background to the matter is that the applicant is a solicitor and he practised from January 1990 until he ceased practice in 1993. He failed to file a tax return for the year of assessment 1992/1993 within the stipulated time.

4. On 1 February 1994 the assessor raised and assessed the person as, of course, he is entitled to do in the absence of a return. That seemed to spur the applicant into action and he objected to this assessment and filed a return, which then came before the revenue department again.

5. The main bone of contention between the applicant and the Inland Revenue Commissioner was a management fee levied by Cheergo Management Limited. The applicant was asked by the commissioner for details of the management fee, and the Board records that despite repeated requests the appellant failed to furnish the information requested. So the assessor revised the assessment and disallowed the management fee and assessed tax. The applicant then appealed against that decision and it came before the Board of Review, as I have said.

6. The hearing was on 20 September 1997. On the day before, the applicant submitted a letter and a set of accounts for Cheergo Management Limited. The Board of Revenue in its reasons says that, at the hearing, the applicant had said that his letter was late, but he was prepared to be fair to the Revenue and invited the Revenue to consider an adjournment. The Revenue did not want that.

7. The Board recalls that, apart from this letter I have mentioned - including the set of accounts - the applicant placed no further evidence before the Board. The substance of the Board's decision then reads this way:

"We dismissed the Appellant's appeal at the hearing on 20th September. The onus is on him to demonstrate by credible evidence that the assessment is erroneous. The Revenue had repeatedly pressed the Appellant for information before 20th July 1995. None was forthcoming from the Appellant. The materials before us consisted of the bare assertion embodied in his belated letter and the account for Cheergo prepared 'For management information purpose only'. We are not prepared to accept such evidence. The Appellant had wholly failed to discharge his onus."

8. Following this, the applicant asked the Board to state a case for the opinion of this court. The matter then came before the Board of Review and it gave a decision dated 27 February this year. It records that the questions proposed by the applicant included:

"a. whether the Board erred in law in not accepting his evidence presented at the hearing;

b. whether the Appellant is entitled to deduct management fees in the sum of $6,854,220 - or any part thereof in arriving at his assessable profits for 1992/93 year of assessment;

c. whether the Commissioner of Inland Revenue has the duty to investigate the evidence provided or identified by the Appellant before shifting any onus to the Appellant to satisfy the Board; and

d. whether the Board erred in law in ruling that the Appellant failed to discharge the onus of proof required by Section 68(4) of the Inland Revenue Ordinance."

9. The section I have just referred to - section 68(4) - says:

"The onus of proving that the assessment appealed against is excessive or incorrect shall be on the appellant."

In this decision before referred to, the decision of Barnett J in the Commissioner of Inland Revenue v Inland Revenue Board of Review and Another, in which the judge there said that, although the Board has a duty to state a case when requested to do so, nevertheless it has an equal duty or power to scrutinise that request to ensure that there is indeed a question of law that is fair to be stated for the opinion of the High Court.

The decision concludes by saying:

"We are of the view that, given the basis of our Decision summarised above, the questions proposed by the Appellant are not proper questions for consideration by the Court of First Instance. We therefore decline to state a case for its consideration."

10. It is indeed, in my view, very difficult to see any possible question of law that could be formulated for the opinion of this court. Mr WU points out that, in the decision of Barnett J to which I have referred, the case-stated procedure had proceeded further than in this case. Mr WU says, in essence, how can the Board of Review say there is no question of law when the case has not yet been formulated. I do not accept that argument as valid. The Board know well what the facts of the case are which would be contained in any case, and their job here was to consider whether, in the light of a case that could be stated on those facts, there was any possible question of law that was fit for consideration by this court.

11. As I said, it is perfectly clear - as the Board of Review clearly appreciated - that the onus is on the applicant to show that the assessment was excessive or incorrect and, as the Board of Review pointed out, all that the applicant did in this case was, the very day before the hearing, to present a letter, which I have read, and which frankly I do not understand. I know the Board did not comment on the letter, but I have no doubt that it came to the same conclusion as I have. It was a very difficult letter to understand as to just what the applicant is saying. For example, he says that Cheergo is an integral secretarial division of his firm. Yet Cheergo is, of course, a separate corporate entity. He says that Cheergo in fact did not issue bills for services rendered, and it is difficult to understand why this is the case. It is, however, not necessary to go into this in any detail - the facts are for the Board. The Board have the letter before it, considered it, and did not accept it. It also had the set of accounts which were annexed to the letter and, as the Board itself says, these are clearly marked "for management information purposes only".

12. The inference to draw from that is that whoever drew these accounts is not giving to anybody other than management any assurance that there is anything in this account which could be relied upon by any third party. Otherwise there is no point in making an annotation on that - and that is no doubt what the Board of Review was talking about in taking into consideration that it should not accept what is adduced by the applicant.

13. I have no doubt that the Board also had in mind that the applicant here is a qualified, experienced solicitor. He knew perfectly well that before he got to the hearing the accounts of Cheergo were essentially in dispute, and he not only ignores the requests from the Revenue for further information about it, but when he gets to the hearing he produces nothing more than a confusing letter and a set of accounts which say, on the face of them, that Revenue or anybody else should not rely upon them. It should have been no surprise to the applicant that, on what he presented to the Board, they would find that he had not discharged the onus.

14. Mr WU has suggested that there could be a formulation of the question of law on the basis, as I understand it, that the Board has an inquisitorial role to play, and if an applicant produced evidence, documents, for information, which - on the face of it - deserve further investigation, it was then a duty on the Board to so investigate it. I do not accept that as any possible question of law involved there. The legislation makes it perfectly clear that it is for an applicant, such as this one, to prove his case. It is not for him to throw at the Board some evidence and then say to the Board, "Over to you. Now you investigate the matter and you satisfy yourself that the assessment is excessive or incorrect." That would be quite contrary to what section 68(4) says in squarely placing the onus on the applicant in a case such as this.

15. So, like the Board, I am quite unable to see any basis upon which any question of law could be formulated arising out of this matter. Mr WU has pointed out the obvious, that of course at this stage the hurdle that the applicant has to overcome is a pretty low one. I am not considering now whether there should be a review of the decision and whether it should or should not be set aside but whether or not the appellant should come to court on an inter-partes basis to argue it. I have only got to be satisfied that it has some kind of case that is fit for argument.

16. I cannot be satisfied of that. I cannot see any basis upon which an application for review of the Board's decision could possibly succeed. The Board of Review was obviously correct, and there is no basis at all upon which its decision could be challenged. With the best will in the world, I do not think any counsel could sit down seriously with these documents before him and formulate a concise arguable point of law that arises from this matter.

17. Accordingly, I find that the applicant has put up no kind of case at all justifying leave and I refuse to grant leave.