HCIA000006/1990
Inland Revenue Appeal No. 6 of 1990
IN THE SUPREME COURT OF HONG KONG
APPELLATE JURISDICTION
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BETWEEN
Li Kam Ming trading as Ming Kee Shipping Service Co.
Appellant
AND
Commissioner of Inland Revenue
Respondent
Coram: The Hon. Mr. Justice Barnett in Chambers
Date of Hearing: 3 December 1990
Date of Delivery of Judgment: 11 December 1990
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JUDGMENT
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(Inland Revenue Ordinance, s. 64(2) - transmittal of case stated to High Court within 14 days - mandatory provision ).
1. Following an unsuccessful appeal to the Board of Review, the appellant in accordance with s. 69(1) of the Inland Revenue Ordinance Cap. 112 (the Ordinance) applied requiring the Board to state a case. The application was made by the appellant's solicitors in their letter dated 16th May 1990 with which was submitted a draft case and the fee of $450. That letter was under reference PF/11747/90/WH. The clerk to the Board acknowledged the application by letter of the same date.
2. By letter dated 2nd July, Mr. Ng Chak Chuen, an Assessor of the Inland Revenue Department, advised the solicitors that the draft case was not acceptable and enclosed a copy of his draft which he had sent to the Board on 26th June. Mr. Ng's letter quoted the same solicitors' reference.
3. Mr. Yu Chung On Ricky, the solicitor handling the case for the appellant, then waited for the signed and dated case from the Board so as to file it in the High Court. On about 5th September, he received a call from the Inland Revenue Department enquiring if the case had been filed. He was further informed that the original Case Stated had been sent to the appellant.
4. On 6th September, Mr. Yu wrote to the Board asking for "another set of Case Stated" so it could be filed without delay. That letter was under reference RY/3130/90/WH. On 11th September, Mr. Yu was advised on the telephone by the clerk of the Board that the Board declined to issue a fresh Case Stated.
5. On 12th September, the appellant, who had been asked so to do by his solicitors, located the original Case Stated and sent it to Mr. Yu. On 14th September, Mr. Yu wrote to the Board complaining that the case had been sent to the appellant rather than the solicitors representing him and advising the Board that 12th September was being treated as the official date of receipt of the case. By letter of the same date, the case was transmitted to this Court. Both letters were under the "RY" reference.
6. The covering letter dated 16th July, sent by the Board to the appellant revealed that it had been copied to the solicitors under the "PF" reference, with a photocopy attached for reference. Mr. Yu then located that copy "unattended in an abandoned file namely PF/11747/90/WH". He went on to explain what. had happened in his affirmation filed in these proceedings: -
"22.
I would like to explain this situation. Normally when the letter does not address to us directly but only the copy is sent to us, it is our common understanding that we are not required to take any action out the same are only for our reference. Hence the staff in receipt of this letter. might have just inadvertently placed the documents for record purpose in the abandoned file PF/11747/90/WH. This is the file by which this case was firstly dealt with. Subsequently, we have opened another file RY/3130/90/WH to continue processing of this case. Unfortunately and/or mistakenly, no one had transferred this letter to the new file. No one had brought it to my attention. It is a genuine clerical slip.
23.
By reason of the aforesaid, it is my submission that even though the original Case Stated was sent to the appellant on or about the 16th day of July 1990 i.e. some day around the date of signing of the Case Stated, the appellant did not pay any attention to this document as he might have thought this matter would be attended by his Solicitors. The appellant has also not contacted me for this. Hence the appellant's neglect in filing the Case Stated is quite understandable and justified for the allowance of this Honourable Court.
24.
I also humbly submit that the failure on the part of the appellant's solicitors to file the Case Stated was a questio of genuine misunderstanding and clerical slip. Firstly, the Board of Review had posted the original documents to the appellant directly which has misled the appellant's solicitor's attention as all correspondence, past and subsequent, were addressed to the appellant's Solicitors directly. Secondly, arising from this, it is a genuine clerical slip on the part of the appellant's solicitors as the staff concerned had been misled and failed to briny me to the attention of the copy Case Stated. Thirdly, because of the quoting of the reference PF/11747/90/WH instead of RY/3130/90/WH, the clerk who received the copy Case Stated had mistakenly misplaced the same in the wrong file and did not bring it to my attention. I am therefore totally unaware of the incoming of this copy Case Stated. In view of the aforesaid I could not at the right time advise the appellant to pass the original Case Stated to us to transmit to the High Court.
25.
Furthermore, I humbly submit that the delay in filing of the Case Stated with the High Court does and will not cause any detriment to the Inland Revenue Department. Rather if the appellant is now barred from making the appeal because of the aforesaid misunderstanding, it is my humble submission that it will undoubtedly cause grave injustice to the appellant."
7. The appellant now applies for extension of the time for transmitting the case to this court under s. 69(2) of the Ordinance which reads:
"The stated case shall set forth the facts and the decision of the Board, and the party requiring it shall transmit the case, when stated and signed, to the High Court within 14 days after receiving the same."
8. The respondent, on the other hand, applies to have the appeal struck out, this Court not having jurisdiction because the Case Stated was not transmitted within 14 days after receipt of it by the appellant.
9. The issue I have to determine is whether s. 69(2) is mandatory or directory. If the latter, I shall have further to consider whether I should exercise my discretion in favour of the appellant.
10. For the appellant, Mr. Eddis referred me to a number of authorities which he said demonstrate that the courts tend to interpret tax provisions in relation to appeals in favour of the taxpayer. I am not sure that these cases do so demonstrate. Grainger v. Singer (1927) 2 K.B. 505 certainly revolved around s. 149(1)(d) of the Income Tax Act 1918 which reciuired a Case Stated to be transmitted to the High Court "within 7 days after receiving same". In all respects, that provision is the same as s. 69(2) apart from the time limit. Unfortunately, the argument in that case appears to have been premised upon the provision being mandatory, Rowlatt J. saying at p. 508:
"It is not disputed on behalf of the Crown that the requirement of the section is peremptory, and that if the time is not observed the appeal cannot be heard."
11. The only point decided, as far as I can see, was that sending the case to the tax office was good service on the Inspector who had by then moved on. The tax office was the proper place to which to send the case and was the Inspector's agent to receive it.
12. Veterinary Council v. Francis Corr
"At or before the time when he transmits the case to the High Court, the party requiring it shall sand notice in writing of the fact that the case has been stated on his application, together with a copy of the case, to the other party."
13. Apart from some rearrangement of the wording which is immaterial, that paragraph is identical to s. 69(2) of the Ordinance. The decision of the Irish Supreme Court depended on the interpretation of the words "At ... the time when ..." which it was agreed did not mean "at the same time". The Supreme Court held that a party must be allowed reasonable time in which to give notice. At first instance, it had been conceded by the taxpayer that the provision was mandatory. The Supreme Court did not address the point but, having determined that the provision had been complied with, allowed the appeal and held that the High Court had jurisdiction.
14. In R.v. Inspector of Taxes, ex parte Clarke (1974) 1 Q.B. 220, the Court of Appeal had to grapple with s. 64(1) of the Income Tax Act 1952:-
"Immediately after the determination of an appeal by the general commissioners, or by the special commissioners, the appellant or the surveyor, if dissatisfied with the determination as being erroneous in point of law, may declare his dissatisfaction to the commissioners who heard the appeal."
15. The Court of Appeal held that "immediately" should be construes as meaning "with all reasonable speed considering the circumstances of the case" and that the provisions of subsection (1) were directory.
16. In the course of his judgment, SalLmon L.J. said at p. 227:
"The question whether a statutory provision is imperative and mandatory in the modern sense of that work or merely directory has arisen again and again in the courts. The principles upon which that question should be decided are well established. The difficulty arises, as always, in applying them to the particular statutory provision under consideration. The principle is laid down - and it has been stated and restated in many other cases - very happily by Lord Pehzahce in Howard v. Bodington (1877) 2 P.D. 203, 210-211:
"There may be many provisions in Acts of Parliament which; although they are not strictly obeyed, yet do not appear to the court to be of that material importance to the subject matter to which they refer, as that the legislature could have intended that the non-observance of them should be followed by a total failure of the whole proceedings. On the other hand, there are some provisions in respect of which the court would take an opposite view, and would feel that they are matters which must be strictly obeyed, otherwise the whole proceedings that subsequently follow must come to an end. Now the question is, to which category does the provision in question in this case belong?"
Then Lord Penzance goes on to quote an extract from the speech of Lord Campbell L.C. in Liverpool Borough Bank v. Turner (1860) 30 L.J.Ch. 379, 380, 381, in which Lord Campbell said:
"No universal rule can be laid down for the construction of statutes, as to whether mandatory enactments shall be considered directory only or obligatory, with an implied nullification for disobedience. It is the duty of courts of justice to try to get at the real intention of the legislature, by carefully attending to the whole scope of the statute to be construed.""
17. How should that principle be applied here? In Valleybright Ltd. (in liquidation) v. Richardson (1985) STC 70, Scott J. dealt with the point in relation to s. 56(4) of the Taxes Management Act 970 which reads:
"The case shall set forth the facts and the determination of the Commissioners, and the party requiring it shall transmit the case, when stated and signed, to the High Court, within thirty days after receiving the same."
18. In my judgment, there is no material difference from s. 69(2) apart from the time limit.
19. After referring to the pessages in Clarke which I have already cites Scott J. said at p. 73:
"I must therefore consider the nature of sub-s (4) and ask myself whether its terms are merely directory or whether they are imperative and mandatory. In my judgment they are the latter, and I am brought to this conclusion by considering the consequences if that were not so. The framework of s. 56 does not provide for any notice of the intended appeal to be given to the respondent until the transmission of the case by the appellant to the High Court (see sub-s(5)). If sub-s(4) were directory only, it would be open to an appellant; be it the Crown or the taxpayer, to obtain a case stated from the commissioners and then sit on it until some future indefinite date when it might suit the appellant to bring the appeal forward. If the requirements of sub-s(4) were directory only, failure to comply could not deprive the appellant of his statutory right to appeal (see tae reasoning of Salmon L.J. in the Fresnwell case)."
(I interpolate that the Fresnwell case is the Clarke case.)
"Both counsel for the Crown and counsel for the taxpayer company submitted that the jurisdiction of the High Court did not arise until the case had been transmitted by the appellant to the High Court; so until that happened there would be nothing for the court to briny on for hearing or to dismiss for delay. Counsel for the taxpayer company accepted that if sub-s(4) were directory only, it would be open to an appellant to keep an appeal in abeyance indefinitely by refraining from transmitting the case stated to the High Court, and that there would be nothing a respondent could do to resolve the uncertainty that such tactics would produce. These possible consequences of treating sub-s (4) as directory confirm, in my judgment, that it ought not to be so treated.
Subsection (1) was regarded by the Court of Appeal as of trivial significance. There is every reason to treat a statutory requirement of that character as directory only. But sub-s(4) is in my view of real significance. Compliance with it is the event which gives the High Court jurisdiction. Compliance with it is to be preceded or accompanied by the first formal notice to the respondent of the appeal. Its nature suggests that it should be treated as imperative and mandatory: the consequences of not so treating it suggest the same."
20. He then went on to cite Grainger and Veterinary Council as authorities in support but, in my view. They do not assist as the point now in issue was not argued in those cases.
21. Mr. Eddis urges me not to follow Scott J. He drew my attention to further remarks of Salmon L.J. in Clarke at p. 229:
"In the Divisional Court Ashworth J. said ([1971] 2 Q.B. 640, 650) dealing with the requirement to give immediate notice of dissatisfaction:
"Accordingly, from that point of view it seems to me that this is a matter which is essentially a matter as between the dissatisfied party and the commissioners; it is not mandatory in the sense that it is a requirement such as was visualised in the passage quoted from Howard v. Bodington (1877) 2 P.D. 203. This is a matter which affects the two parties to whom I have referred, and approaching the matter in that way I can see no difficulty in saying that the commissioners are at least entitled to say so long as they get their application for the case stated within 30 days, they can dispense with the notice of dissatisfaction being immediate."
If Ashworth J. intended (which I very much doubt) to lay down in that passage that a failure by either party, the taxpayer or the Crown, to comply with a merely directory provision of section 64 put the Crown or the taxpayer (as the case may be) at the mercy of the commissioners so that it was in their discretion as to whether they would state a case, I entirely disagree with that view. I very much doubt, however, whether Ashworth J. meant to express it and I have even more doubt whether Lord Widgery C.J. meant to express it in the last few words of his judgment, which Mr. Marcus Jones, I think, seeks to rear in that way. Section 64 confers a right on the subject and on the Crown to appeal, and failure to comply with a merely directory provision in section by cannot in my judgment take that right away. It is not a matter for the discretion of the commissioners. If the appeal to the commissioners raises any point of law and it is very difficult to think of an appeal to the commissioners which would not do so - to my mind, providing that the taxpayer or the Crown (as the case may be) complies with the mandatory provisions of section 64, the commissioners are bound to state a case."
22. Mr. Eddis said that s. 69 of the Ordinance concerns rights of appeal and queried whether it would be correct for these rights peremptorily to be curtailed by a delay of, say, l day. He also pointed out that if, as Scott J. feared, an appellant delayed unreasonably in transmitting a case, the court would have no difficulty in rejecting an application to extend time, assuming the provision to be directory.
23. I am unable to agree. To the reasoning of Scott J., I would add, first, that the transmittal stage of the appeal procedure is purely mechanical. The Board's determination has already been thoroughly considered, a decision to appeal has been taken and the detailed work on the Case Stated has been carried out. Nothing remains to be done except transmit the case to the High Court to confer jurisdiction on the court and to set the appeal in motion.
24. Second, the Commissioner is hamstrung in taking action to recover any tax if the taxpayer can sit on the case. In general terms, there would be considerable prejudice to the revenue. Equally, the taxpayer when respondent will he anxious to know whether he needs to continue to make provision against possible tax liability, perhaps at considerable inconvenience and expense to his business.
25. I am satisfied that s. 69(2) is mandatory It has not been complied with. Prima facie, this court has no jurisidiction and the appeal should be struck out.
26. I must, therefore, turn to what Mr. Eddis terms his fallback argument which, summarised, is that the Board was wrong to send "the case" to the appellant; "the case" should have been sent to the appellant's agents, his solicitors; the copy case sent to the solicitors was not "the case" within the meaning of s. 69(2),consequently, time did not begin to run until the solicitors received "the case" from the appellant on 12th September; the transmittal on 14th September, therefore, was within time.
27. This argument might have a vestige of substance if nothing had been sent to the appellant and only a photocopy of the case to the solicitors (I accept Mr. Eddis' point that photocopies are not always reliable). It might have been better, perhaps, if the Board had sent "the case" (I understand this to mean a case actually dated and signed by the members of the Board as opposed to a photocopy) to the appellant's agents. But where the Board has sent "the case" to the party or principal and an apparently satisfactory copy to his agents, I am unable to accept that the appellant, as that party, did not receive it in the terns of s. 69(2) in the course of post from the Board and that time did not start to run.
28. For completeness, I should indicate how I would have exercised my discretion had I found s. 69(2) to be directory. Mr. Wu, for the respondent, fairly conceded that the commissioner has suffered no particular detriment or prejudice. On the other hand, I have the explanation for the delay vouchsafed by Mr. Yu. That explanation I find unsatisfactory. The procedure in Mr. Yu's office leaves something to be desired. Mr. Yu gives no explanation of when or why the file reference was changed. It is interesting to note that the suffix "WH" is common to both references and that the critical copy letter of 16th July to the solicitors contains a manuscript marking "WH" as do other letters received by the firm in the course of correspondence in this matter, indicating that that letter was channelled to the person dealing with the matter.
29. Further, there is no evidence from the appellant himself as to why he took no action on receiving the case. There is only speculation on the part of Mr. Yu in paragraph 23 of his affirmation.
30. In my judgment, there is no cogent or acceptable material on which I could properly have exercised my discretion in favour of the appellant.
31. Accordingly, the appellant's summons is dismissed and this appeal is struck out.
32. I make an order nisi for costs in favour of the respondent.
(N. J. Barnett)
Representation:
Mr. F. Eddis, Q.C. & Mr. D. Tang instructed by Tang Wong & Cheung for Appellant
Mr. A. Wu, S.C.C. of AG's Chambers for Respondent