WAN WAH SHING v. THE COLLECTOR OF STAMP REVENUE

DCMP2766/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 2766 OF 2005

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JUDGMENT

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Introduction

1.  This case starts with a sad note. The Applicant, Mr Wan Wah Shing also known as Mr Wan Wah Sing (“Mr Wan”), is an elderly gentleman of 78 years who recently discovered that he suffers from liver cancer. Mr Kwok, counsel for Mr Wan, informs the court the disease may be terminal.

2.  On 12^th August 2005, Mr Wan received two notices of assessment and demand dated 12^th August 2005 by The Collector of Stamp Revenue (the “Collector”) for stamp duty chargeable in respect of two assignments over two properties in the New Territories (the “Properties”). The stamp duty chargeable was assessed as HK$165,000.00 and HK$8,400.00 respectively.

3.  According to section 14(1) of the Stamp Duty Ordinance Cap.117 (the “Ordinance”), if Mr Wan wishes to appeal against the Collector’s assessments, he should lodge his appeal within one month from the date on which the assessments were made. The deadline fell on 12^th September 2005, but no appeal was brought.

4.  Mr Wan now applies for leave to appeal against the two assessments by the Collector out of time on the ground that he was prevented by illness or other reasonable cause from bringing the appeals within time. The present application is dated 14^th September 2005, so the delay is two days.

5.  Mr Wan also applies for postponement of payment of the stamp duty assessed on the ground that payment to the Collector will cause him hardship.

Background

6.  The background facts appear in Mr Wan’s affirmation filed in certain High Court legal proceedings (HCA1727/2004). In that case, Mr Wan sued a Lok Wai Kau and a Wan Shui Shek (the “Defendants”) to enforce his alleged rights in relation to the Properties.

7.  Mr Wan claimed that he and another person were the owners of six properties (including the Properties) in the New Territories. In 1995, he entered into an agreement with the Defendants, who were indigenous villagers of the New Territories, for mutual cooperation in the development of the six properties. Pursuant to the agreement, the Defendants and the other indigenous villagers they procured would become the owners of the six properties. Then in their names and capacity as indigenous villagers eligible under the New Territories Small House Policy, they would apply to the government for erection of small houses on the six properties. The small houses when erected would be partly for sale and partly for retention. The profits, the retained small houses (or storeys) or the Properties would be divided amongst the various parties in accordance with the agreement. The indigenous villagers procured by the Defendants would also be paid for making available their indigenous rights under the Small House Policy for the development.

8.  The above mutual cooperation development arrangements appear strikingly similar to the schemes which have been the subject of litigation in the courts (see Best Sheen Development Ltd v Official Receiver [2001] 1 HKLRD 866 and Chung Mui Teck & ors v Hang Tak Buddhist Hall Association Ltd & anor [2001] 2 HKLRD 471). However, Mr Kwok and Mr Ho, government counsel for the Collector, assured me that it is unnecessary for the purpose of the present application to consider the legality or the substantive effect of such arrangements. The above facts are pertinent insofar as they explain how the Collector’s assessments of stamp duty came about.

9.  To continue with Mr Wan’s version of the events, Mr Wan and his co-owner assigned the six New Territories properties to the Defendants and the indigenous villagers for the purported considerations provided for in the agreement but no money actually changed hands. The small houses were completed in 2002. According to Mr Wan, he exercised his rights under the agreement to demand the Defendants to transfer the Properties and vacant possession thereof to him. When they failed to comply with his demand, Mr Wan commenced legal proceedings in the High Court.

10.  By Master Hui’s order dated 28^th September 2004 in HCA1727/2004, it was declared that the Defendants held the Properties with a small house thereon in trust for Mr Wan and/or subject to Mr Wan’s interest and equities in the Properties. Master Hui made further consent orders of the same date inter alia that the Defendants do forthwith execute assignments of the Properties with the small house thereon to Mr Wan or his nominee at nil consideration.

11.  Consequently, the Defendants and Mr Wan executed two assignments dated 6^th December 2004 in respect of the Properties. The Collector’s notices of assessment and demand arose out of these two assignments.

12.  The Collector examined the documents submitted by Mr Wan’s former solicitors and on 17^th (later amended to 27^th) June 2005 informed them that the stamp duty chargeable on the two assignments were HK$165,000.00 and HK$8,400.00 respectively. The Collector noted that the Commissioner of Rating and Valuation had advised that the value of the Properties were respectively HK$5,500,000.00 and HK$280,000.00 as at 6^th December 2004.

13.  On 15^th July 2005, Mr Wan’s former solicitors made written representations to the Collector, arguing that the two assignments made pursuant to the court orders should not be chargeable with stamp duty.  They submitted that the two assignments were not conveyances on sale or agreements for sale and sought an adjudication by the Collector.

14.  The Collector in his reply dated 21^st July 2005 said Mr Wan was not the sole owner of the Properties in the first place. The Properties were assigned to the developer or “ting” for development so their ownership changed at that juncture. The subject assignments involved a further change of ownership from the developer or “ting” to Mr Wan. The Collector therefore opined that the assignments were chargeable to stamp duty under Head 1(1) to the First Schedule of the Ordinance.

Leave to appeal out of time

(a) The statutory provision

15.  Section 14(5B) of the Ordinance provides as follows :

“

(5B)

Where the court, on an application made by a person who is dissatisfied with an assessment of the Collector under section 13, 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.”

(b) The law

16.  H H Judge C B Chan in Diamond Dragon Finance Company v The Collector of Stamp Revenue DCSA4/2004 (unreported, 2^nd April 2004) dealt with an application for extension of time to appeal under section 14(5B) of the Ordinance. By analogy, the learned judge cited the case of Bangkok Capital Antique Co Ltd v Collector of Stamp Revenue [1984] HKC 16 (which case was concerned with section 14(2) of the Ordinance) and section 66(1A) of the Inland Revenue Ordinance Cap.112, which had almost the same wording as section 14(5B) of the Ordinance. She concluded that the time limit in section 14(1) of the Ordinance must be strictly adhered to and the statutory allowance for extension of time under section 14(5B) should be strictly construed.

17.  Both Mr Kwok and Mr Ho agree that in determining whether extension of time for appeal should be granted under section 14(5B) of the Ordinance, there is a three-step approach. First, the court has to be satisfied that the intended appellant suffers from illness, has been absent from Hong Kong or has any other reasonable cause. Secondly, the intended appellant 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. Thirdly, even if the above two criteria are satisfied, the court has a residual discretion on whether to grant an extension of time. This is apparent from the phrase “the court may by order allow the appeal to be brought within such further period as it may consider appropriate” (my emphasis).

18.  Mr Kwok submits that the residual discretion is fettered by “guidelines” although he readily accepts that they are not expressly provided for in the statute. However, he urges that in the exercise of its residual discretion, the court should consider the wording of the sub-section, namely, the factors of illness, absence from Hong Kong and other reasonable cause.

19.  I am not with Mr Kwok on this argument. On a plain reading of section 14(5B) of the Ordinance and bearing in mind the three-step approach referred to above, the court has to be firstly satisfied that the intended appellant, say, suffers from illness that prevented him from bringing the appeal within time before it can proceed to exercise its residual discretion whether to extend time for appeal or not. It will be meaninglessly repetitive if in the exercise of its residual discretion the court is fettered by the same consideration of, say, whether the intended appellant’s illness prevented him from bringing an appeal within time. In my view, the court’s residual discretion is unfettered but it must be exercised judicially in all the circumstances of the case.

20.  Both Mr Kwok and Mr Ho accept that the court is not concerned with the potential substantive merits of the intended appeal when considering whether extension of time should be granted under section 14(5B) of the Ordinance. At first, Mr Ho puts in a caveat to this concession by saying that Mr Wan should satisfy the court that he comes “with clean hands”. In the end, Mr Ho agrees that such argument requires a demonstration of “clean hands” in relation to the reasons for the extension of time rather than to the substantive merits of the intended appeal. This is implicit from an analogous Inland Revenue Board of Review Decision on section 66 of the Inland Revenue Ordinance Cap.112 cited in [20704.1] of the Encyclopaedia of Hong Kong Taxation – Hong Kong Taxation 4 and in the Diamond Dragon Finance Company case as follows :

“

(3)

'Time limits are imposed and must be observed. Anyone seeking to obtain the exercise of the discretion of a legal tribunal must demonstrate that they are "with clean hands" and that there are good reasons for the extension of time': D 3/91 5 IRBRD 537.”

(c) The grounds

21.  The affirmation of Mr Wan’s granddaughter sets out the grounds for seeking leave to appeal out of time.

22.  Mr Wan’s health deteriorated substantially in the last few months. He was diagnosed to suffer from liver cancer on/about 17^th August 2005, that is, a few days after the Collector’s notices of assessment and demand were issued. The diagnosis is confirmed by a medical report from the Prince of Wales Hospital, which refers to “hepatocellular carcinoma with bone metastasis” and which also states that palliative radiotherapy was done. Mr Wan had an appointment with the hospital’s Liver Clinic for 9^th September 2005. There is a handwritten notation on the appointment slip that the appointment was cancelled, but Mr Ho fairly acknowledges that this does not detract from the seriousness of Mr Wan’s illness.

23.  Mr Wan’s granddaughter says that Mr Wan’s illness severely impaired his ability to proceed with the intended appeal within time. She explains that after Mr Wan was informed of the diagnosis, his “priority went to making his will and seeking medical attention in time”. He had to rest at home and could not travel to his solicitors’ office in Central or even maintain lengthy telephone conversations with his solicitors. Instead, Mr Wan’s solicitor had to go to his home in Sai Kung several times to explain to and analyse for him the circumstances and merits of the intended appeal, but sometimes he was so ill that he could not even discuss with his solicitor at his home. Mr Wan’s granddaughter had to assist him in liaising with his solicitors.

(d) The analysis

24.  The case of Diamond Dragon Finance Company illustrates what is insufficient to satisfy the criteria specified in section 14(5B) of the Ordinance. The learned judge held that “indecision, concerns about legal fees and costs implications, length of time taken by legal advisors and counsel” were not enough to suggest that the appellant was prevented from filing an appeal. The situation of laches and delay by the appellant and its legal advisors and counsel were held not to be reasonable causes.

25.  Mr Ho submits that all along Mr Wan has the benefit of legal representation by solicitors. The documents before the court show that three firms of solicitors have successively acted for him. It is suggested that his solicitor Ms Jenny Chow has acted for him continuously when she left the second firm of solicitors to join the third firm. Mr Ho argues that Mr Wan must have known in June 2005 (ie before he was diagnosed with cancer) through his former solicitors that the Collector opined that stamp duty was chargeable on the two assignments.

26.  Mr Ho also complains that the brevity of Mr Wan’s medical report does not show how debilitating his disease is or how extensively his medical treatment diminishes his well-being. Mr Ho submits that even if Mr Wan has been in a weakened state, he is not by reason of his illness kept incommunicado from his lawyers. It is suggested that the fact that he could not go to his solicitors’ office or speak at length to his solicitors by telephone is neither here nor there because his solicitor did travel to his Sai Kung home to meet with and advise him. Furthermore, his granddaughter was available to act as liasion.

27.  Mr Ho says that, more importantly, Mr Wan was able to give instructions for the preparation of his will. He suggests that the decision to make a will must have come about only in August 2005 after the diagnosis of cancer. This, Mr Ho submits, illustrates that Mr Wan could have given instructions to his solicitors about the intended appeal. Instead, he chose to give priority to the preparation of his will whilst putting aside consideration of the intended appeal.

28.  There is no doubt that Mr Wan is severely ill. In my view, the question therefore turns on whether such illness prevented him from bringing the appeal within time. Although the available medical information is limited, liver cancer (possibly terminal but definitely complicated by bone metastasis) is plainly a grave illness. It is not speculation but common sense that such grave illness as well as radiotherapy (even palliative radiotherapy) administered will aggressively erode the strength and well-being of any patient, let alone one who is 78 years old. This observation corresponds with his granddaughter’s evidence that Mr Wan’s health deteriorated significantly in the last few months and is also consistent with his need for considerable rest at home and his weakened and limited ability to handle his legal affairs.

29.  Whilst it is true that Mr Wan has been legally represented all along and may have been aware prior to the diagnosis of cancer that the Collector intended to charge stamp duty on the two assignments, it is clear that the issue of appeal against the assessments did not become a live one until mid-August 2005 when he was diagnosed with cancer and his health deteriorated.

30.  Mr Ho relies strongly on the fact that Mr Wan gave priority to preparing his will. But there is no evidence to suggest that the preparation of his will is a complex matter or that it will tax Mr Wan’s mental and physical abilities much more than making a considered decision to appeal against the Collector’s assessments. The fact that Mr Wan is able to spend some effort on preparing his will may suggest that he is to a certain degree accessible to his solicitors, but it does not necessarily follow that, despite his illness and the adverse consequences of the disease on his health, he is therefore also able to receive and consider his solicitors’ advice on the Collector’s assessments and on the merits, timeframe, other ramifications and costs of or associated with the intended appeal and then come to a considered decision whether to appeal within time.

31.  Looking at the matter in the round, I do not consider that it is a situation of Mr Wan diverting his energies to other matters or laches or ignorance of his own rights. I am satisfied that Mr Wan was prevented from illness that amounts to a reasonable cause from bringing an appeal within the statutory time limit.

32.  Although the court has a residual discretion, I see no persuasive reason for not exercising it in favour of Mr Wan. There is no suggestion that his illness is not genuine or that he has been less than frank with his reasons for the extension of time.

Postponement of payment of stamp duty

(a) The statutory provision

33.  Section 14(1B) of the Ordinance provides as follows :

“	(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;
		(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).”

34.  To meet the factors set out in the above sub-section, the intended appellant has to satisfy the court that payment of the stamp duty assessed or part thereof will impose hardship on him, that the non-payment of all or part of the stamp duty assessed is reasonable in all the circumstances of the case and that security to the court’s satisfaction is given for the portion of the stamp duty assessed payment of which is to be postponed.

35.  The primary question is whether the intended appellant suffers “hardship” if he is required to pay the stamp duty assessed immediately. Neither Mr Kwok nor Mr Ho cited any legal authority on the interpretation of “hardship”. In my view, it requires 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 is made out. The onus is, of course, on the party asserting hardship to establish the same.

36.  I can do no better than adopt the views of Lawton LJ in Rukat v Rukat [1975] 1 All ER 343, 351 set out below :

“One has to start, I think, by looking at the context in which the phrase “grave financial or other hardship” occurs. The word “hardship” is not a word of art. It follows that it must be construed by the courts in a common-sense way, and the meaning which is put upon the word “hardship” should be such as would meet with the approval of ordinary sensible people. In my judgment, the ordinary sensible man would take the view that there are two aspects of “hardship” - that which the sufferer from the hardship thinks he is suffering and that which a reasonable bystander with knowledge of all the facts would think he was suffering. That can be illustrated by a homely example. The rich gourmet who because of financial stringency has to drink vin ordinaire with his grouse may well think that he is suffering a hardship; but sensible people would say he was not.”

Omrod LJ also said at pp.352-353 as follows :

“Clearly …… each case must be looked at on its own facts, because the court is concerned with whether or not this respondent is going to suffer hardship, so to that extent it is subjective - subjective in the sense that it has to be looked at through the eyes of the respondent. But that does not mean to say that even when a perfectly truthful and perfectly sincere respondent gives evidence to the effect that he or she will suffer various kinds of hardship in consequence of the divorce the court is obliged to accept their ipse dixit.”

37.  Although Rukat’s case dealt with a contested divorce on the ground of “grave financial or other hardship” under section 4 of the Divorce Reform Act 1969, I have no hesitation in concluding that the above principles of interpretation are of broad application and applicable to the present case.

(b) The grounds

38.  On 12^th September 2005, Mr Wan through his solicitors sent a facsimile marked “urgent” to the Commissioner of Inland Revenue to seek a review of the decision to charge stamp duty under section 27(5) of the Ordinance and to extend the time for payment of the stamp duty assessed by one month.

39.  But on 13^th September 2005, the Collector replied by refusing to review or to extend time for payment. A penalty under section 9 of the Ordinance was levied.

40.  Mr Wan’s granddaughter in her affirmation claims that payment of all the stamp duty assessed will cause severe hardship on Mr Wan. His poor health requires him to spend a large sum of medical expenses. If payment of the stamp duty is not postponed, he will have to use his savings intended for medical expenses to pay the stamp duty assessed. It is asserted that his life will be at risk without the monies needed for the necessary medical attention.

41.  The bank statement of the “Premier” joint account of Mr Wan and his wife with the Hongkong and Shanghai Banking Corporation Ltd reveals a zero balance. But as at 13^th August 2005, the portfolio balance was HK$1,381,557.01. Yet the account details for the “HSBC Premier Savings” and “HSBC Premier Foreign Currency Savings” integrated accounts show balances of HK$911,721.67 and US$1,603.01 respectively, which in the aggregate appear to be less than HK$1,381,557.01. No explanation is forthcoming for such difference.

42.  The bank account balance was reduced to zero because Mr Wan transferred all his monies to his two daughters for fear that if he suddenly passes away, his monies will be frozen and his wife will be left without financial support. In 2001, Mr Wan’s wife was diagnosed to suffer from Alzheimer’s disease, so it is necessary for Mr Wan to keep some of his savings for both his own medical expenses and for his wife’s living expenses. No medical report on Mr Wan’s wife has been disclosed but there is an appointment slip for Mr Wan’s wife to attend the Psychogeriatric Team at Kowloon Hospital on 18^th October 2005.

(c) The analysis

43.  Mr Ho’s submissions have been sympathetic to Mr Wan’s serious medical condition. But ultimately the question is whether, if Mr Wan were to pay all or part of the stamp duty assessed, such payment amounts to such privation or detriment that is hard for Mr Wan to bear. Having considered the evidence before me, I am persuaded that Mr Ho is right when he says Mr Wan has not made out a case on hardship.

44.  I do not question the sincerity of Mr Wan’s granddaughter in making the assertions on Mr Wan’s behalf. But are the stated apprehensions real or likely?

45.  The matter should be considered in context. Although Mr Wan’s current bank balance is zero, there is no issue that he beneficially owns the monies formerly standing in his and his wife’s joint bank account. This means he has about HK$1,300,000.00 or HK$920,000.00 (depending on the figure adopted for his former bank account balance) in cash. The stamp duty payable is slightly over HK$170,000.00.

46.  Despite the assertion that Mr Wan has to incur “a large sum of medical expenses”, there is no information at all about Mr Wan’s incurred or projected medical expenses. All that is known is that he seeks medical treatment from a public hospital. Although liver cancer is a serious disease which may require more frequent and intensive medical attention, the court cannot ignore the commonly known fact that public medical service is heavily subsidised by the government and is therefore much less costly than private medical care.

47.  I do not think it can be realistically suggested that the payment of stamp duty will leave Mr Wan financially incapable of seeking appropriate medical care. It appears that what is being suggested is that the payment will reduce his savings that may potentially be used for his medical expenses. But after payment of the stamp duty assessed, Mr Wan still has about HK$1,100,000.00 or HK$750,000.00 (depending on the figure adopted for his former account balance). Whilst Mr Wan may subjectively prefer to have a larger cushion for potential future medical expenses (which appears to be the essence of the argument), it can hardly be said objectively that there will be deprivation of medical care that is hard to bear (whether arising out of financial strain or stringency or otherwise) if the stamp duty is paid.

48.  I cannot begin to see any basis for the claim that Mr Wan’s life will be at risk when he has about HK$750,000.00 to HK$1,100,000.00 and is presently receiving medical treatment from the public sector.

49.  Mr Wan also prays in aid his need to support his ailing wife, saying that there will be hardship if his wife’s financial support is diminished. However, under this argument, the hardship that may be suffered is that of Mr Wan’s wife. As a preliminary consideration, it is doubtful whether hardship suffered by a person other than the intended appellant is relevant. Section 14(1B) of the Ordinance refers to “hardship on the person”, who is necessarily “the person intending to serve a notice under subsection (1)”. However, this point has not been argued and, in light of my conclusions below, ought properly be left for future determination.

50.  There is no evidence at all before me of the living expenses of Mr Wan’s wife. She is also receiving medical treatment from a public hospital. Whilst it is understandable that Mr Wan may subjectively wish to preserve his cash funds for his wife, it is not possible for me to conclude objectively that there is any real likelihood that after payment of the stamp duty assessed, Mr Wan’s remaining funds of about HK$750,000.00 to HK$1,100,000.00 will be inadequate for his wife’s daily living.

51.  Mr Ho asks me not to ignore the fact that Mr and Mrs Wan have immediate family, namely, two daughters who can be expected to support their parents as well. There is no evidence as to their financial circumstances and whether they are in fact currently making contributions to their parents. However, given that I am satisfied that even on Mr Wan’s own financial status there is no hardship, which is sufficient for disposing of Mr Wan’s application, I do not need to deal with these submissions.

52.  It is of interest to note that Mr Kwok informs the court from the bar table that if the court is minded to permit postponement of payment of the whole or part of the stamp duty assessed, Mr Wan is prepared to offer a bank guarantee as security for the postponed sum. Given that Mr Wan is 78 years old gentleman with a grave illness, no discernible assets to his name (Mr Kwok submits from the bar table that the assignments have not been registered in the Land Registry and Mr Wan’s interest in the Properties is subject to legal challenge by other parties in separate High Court proceedings) and no known income, I have expressed concern about his ability to provide a bank guarantee for it is common knowledge that banks do require adequate assurances for issuing bank guarantees. Mr Kwok is constrained to say that Mr Wan’s cash funds will have to be utilised to support the bank guarantee even if payment of the stamp duty is to be postponed. In such situation, given that such portion of Mr Wan’s funds for supporting the bank guarantee will be tied up in any event, it is difficult to envisage what portion of stamp duty should be postponed that is “reasonable in all the circumstances of the case”.

Conclusion

53.  In the circumstances, paragraph 1 of Mr Wan’s summons of 14^th September 2005 is dismissed. I also make the following orders :

(a)	leave be granted to Mr Wan to appeal against the two notices of assessment and demand by the Collector dated 12th August 2005 out of time; and
(b)	leave be granted to Mr Wan to issue the said appeal within 14 days from the date hereof.

54.  Mr Wan comes to the court for an indulgence and part of his application is dismissed. There is no reason why he should not bear the costs of the application. I make a costs order nisi that Mr Wan do pay to the Collector costs of the Originating Summons to be taxed if not agreed.