COMMISSIONER OF INIAND REVENUE v. INLAND REVENUE BOARD OF REVIEW AND ANOTHER

H E A D N O T E

Inland Revenue - Case Stated - S. 69(4) Cap. 112 - Abuse of process/res judicata - whether Commissioner entitled to have Case Stated amended - content and form of Case Stated

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

INLAND REVENUE APPEAL NO. 10 OF 1989

______________

J U D G M E N T

______________

1. By a summons dated 2nd May 1990, the Commissioner of Inland Revenue (the Commissioner) seeks an order under section 69(4) of the Inland Revenue Ordinance Cap. 112 which provides that:

"Any judge of the High Court may cause a stated case to be sent back for amendment and thereupon the case shall be amended accordingly."

2. Section 69(1) provides that the Board's decision shall be final:

"Provided that either the appellant or the commissioner may make an application requiring the Board to state a case on a question of law for the opinion of the High Court."

3. The amendments sought to the Board's stated case have the effect of including as part of the case (1) a statement of agreed facts, (2) a set of appendices thereto, (3) a chronology of events, (4) 2 statements of the Hong Kong Society of Accountants, (5) 2 letters between the Revenue and W.H. Sum & Co in May 1982.

4. The summons also seeks the incorporation into the stated case of the transcript of evidence of two out of the four witnesses who gave evidence before the Board, namely Mr. Peter Wrangham of the Hong Kong Bank and Mr. Canning Fok of Cheung Kong.

5. In addition to the above matters the Commissioner takes issue with the very question posed by the Board.

6. The Board's question of law is as follows:

"Whether on the facts found by us and on the additional facts set out in paragraph 8 above, our conclusion that the shares in Boppardson constitute capital assets and accordingly the profit arising from the disposal of the same was not chargeable to Profits Tax was erroneous in law." (My underlining)

7. The Commissioner seeks in place of the above question the following 8 questions although it has been conceded on his behalf that the third question subsumes the first two:

"(1)     Whether the decision of the Board of Review was correct in law.

(2)     Whether the Board of Review applied correctly, the provisions of section 68(4) of the Inland Revenue Ordinance in holding that the onus of proof that the assessment was erroneous was satisfied by Aspiration Land Investment Limited.

(3)     Whether on the whole of the evidence before the Board of Review, the only proper conclusion was that the sum of $344,825,190 received by Aspiration Land Investment Limited was profit chargeable to tax in accordance with section 14 of the Inland Revenue Ordinance." (My underlining)

8. In summary, Aspiration says that the case as stated is a free standing document and that it is not necessary to burden it, and the court, by incorporating other documents or transcripts. The Board's decision is 30 pages long. It summarizes the transaction and evidence given and it makes findings of facts and comes to a conclusion. Its conclusion is based on those findings. Aspiration agree that if the Commissioner can show that the conclusion does not follow from the facts found then the Commissioner will succeed. What they object to most strongly is the Commissioner going through all the evidence in the case and pointing out other factors which he contends go the other way. To do that, they say, is to usurp the Board's fact finding role which is to be final. Barnett J. dealing with litigation between these parties put it graphically (and correctly so say Aspiration) when he said:

"What he (the Commissioner) wants is to go beating about the evidential undergrowth in the hope of flushing out some useful pieces of evidence that support his view."

9. Not so, said Mr. Rosenberg for the Commissioner. The Commissioner complains that the Board has not got to grips with the Commissioner's case before them.

10. No tribunal, he says, could have come to that conclusion on the totality of the evidence. The Commissioner cannot make good this submission without being able to refer to all the evidence and documents which were before the Boards. The Commissioner wishes to launch an all out attack on the Boards approach to the issue before them and for this he needs all the material which was before the Board.

11. Mr. John Gardiner Q.C. for Aspiration says that the Commissioner's submission is fundamentally flawed as it fails to appreciate the limited function of the court in considering a case stated. To allow in the transcript would result in an attack on the findings which are sacrosanct unless the Commissioner can bring the matter within the principles of Edwards v. Bairstow (1958) A.C. 14.

12. Additionally Mr. Gardiner Q.C. says that this application is an abuse of process because the matter has been fully canvassed in the 30 page Judgment of Barnett J. and the appeal therefrom was dismissed by consent in the Court of Appeal. To understand the factual basis for this submission, a chronology is essential.

1.     The transaction the subject matter of these proceedings occurred on the 18 September 1980.

2.     A tax assessment, in the sum of approximately $57m, was made on 27 April 1984.

3.     The Board's decision in favour of Aspiration was given on 11 August 1987 and the Commissioner sought a case stated by letter dated 9 September 1987.

5.     The Commissioner produced a draft case stated in June 1988 which was not accepted by Aspiration.

6.     On 18 April 1988 the Board heard full argument on the question and declined to state any case on the ground that the letter dated 9 September 1987 did not properly formulate a question of law.

7.     Deputy Judge Cruden gave leave to the Commissioner to apply for judicial review of the Board's refusal to state a case on 11 August 1988.

8.     Following hearings on 12 and 13 December 1988 Barnett J. dismissed the Commissioner's application for judicial review on 23 December 1988.

9.     The Commissioner appealed against Barnett J's decision by Notice of Appeal dated 6 March 1989.

10.     The appeal came before the Court of Appeal on 21 November 1989. Before the appeal was fully opened leading Counsel for the Board intimated that the Board would state a case on certain terms and these terms were incorporated into a consent order by which the appeal was dismissed. The terms were:

"The Board will state a case in a form which it judges to be correct. A draft of that case will be sent to the parties for comments but the final decision as to the form of the case will remain a matter for the Board without prejudice to the statutory powers under section 69(4) of the Inland Revenue Ordinance, Cap. 112."

11.     On 12 December 1989, the Board sent a draft case stated to the Commissioner for comments. By letter dated 20 December 1989, the Attorney General, for the Commissioner, requested amendments.

12.     On 21 December 1989, the Board signed a case stated substantially in the form of the draft case which included additional findings of fact in paragraph 8.

13.     On 2 May 1990 the Commissioner applied by summons to amend the case stated.

13. One point has to be clarified at the outset. Although by the Board's ruling dated 18 April 1986 the Board refused to state a case, this refusal was to state a case in the form requested by the Commissioner. It is clear, on all the evidence before me, that the Board were prepared to state a case which raised what was, in their opinion, a proper question of law. What they were not prepared to do, as is perfectly clear from the transcript, was to state a case which raised the question 'whether on the whole of the evidence' their decision was correct. They thought it proper to limit the question to 'on the facts found by us'.

14. This is all made clear by certain exchanges between Mr. Feenstra for the Commissioner and Mr. Henry Litton Q.C. the Chairman of the Board. (p.220 Core bundle)

"P.F.     But I say I say no because I am entitled at this stage to say, well, looking at all the evidence, ultimately whatever fact I take into account, because there are other instances, for example, where the Board has made no finding and on the basis of which the Commissioner's notes that is a relevant finding on the ..., and there was no evidence to the contrary. We want to (as) this fact was established by the Board but not found by the Board in its decision.

H.L.    Then I dare say every Board would probably commit that error in a sense, in the weighing process.

P.F.    No, it's not an error.

H.L.    Well, no. it has to be an error, hasn't it. Let's not mince words, Mr. Feenstra.

Because if it is not an error you can't have a case stated. Just identify that that is an error.

P.F.    What I am saying is that, you know, in my submission, it is not necessary for me at this stage to identify each one of those errors for the purposes of saying ... because ultimately the question for the High Court is whether on the whole of the evidence the conclusion of the Board is right or wrong.

    This is the ultimate ...

H.L.    Let us just get this down.

It is not necessary for me to identify the facts which we will ultimately challenge, we do say that the Board erred in law by either (a) not finding as facts matters upon which the evidence pointed only one way; or (b) finding as facts where there was no evidence.

P.F.    Yes.

H.L.    But somenow you don't need to identify those matters and you can simply have a rehearing before the High Court by throwing before the High Court the entirety of the evidence without stating in your application the case stated which of the findings are challenged.

P.F.    Yes, that's my submission."

15. At p. 224 in the Core Bundle there is another exchange which goes as follows:

"H.L.     You are saying.

We don't have to say at any stage, I suppose whether we challenge any of the findings of fact of the Board, some of which are in my favour, some of which are against one. I don't have to indicate at any stage whether we challenge any of those findings, what we ask is that the entirety of the evidence which has been gone over by a tribunal of fact over many days, is thrown at a new tribunal, the court, and whether, to test the temperature of the water and see whether the court can come to a separate and different conclusion.

P.F.    That is what I submit we are entitled to do because the Judge of the High Court will have to determine whether on the whole of the evidence including this finding that might have been made or this finding on which there is no evidence as we say it comes to that conclusion."

16. A little later in the transcript Mr. Gardiner cited Roskill L.J. in Ransom v. Higgs 50 T.C. 1 where at p. 45 he said:

"The principles laid down in these cases are well established, and nothing said in Edwards v. Bairstow(1) which was considered by this Court in Tersons Ltd. v. Stevenage Development Corporation, contradicts them. If it is desired to contend on the hearing of a Special Case that there was no evidence to justify a particular conclusion of fact, then a party must ask for the Case to include the question whether there was any evidence to justify such a conclusion. If he does not do so then that question is not before the Court, because the Court does not know what evidence was called before the tribunal of fact, and if that question is not before the Court then the conclusion sought to be complained of can only be attacked if other findings in the Case make it perverse or manifestly wrong in law. That clearly is not so in the present case. The Special Commissioners heard evidence: see para 5(16) of the Case. We do not know what that evidence was. Very properly, it is not exhibited to the Special Case. The Special Commissioners were not asked to exhibit that evidence nor indeed fully to summarise it.

In Revenue cases the parties have the advantage denied to parties in commercial arbitrations, of seeing a draft of the Special Case in advance. There should therefore be no practical difficulty in seeking the statement of the requisite question of law, if necessary as an additional question, whether there was any evidence to justify a particular conclusion at which the Special Commissioners proposed to arrive. This was not done in the present case."

17. Mr. Gardiner Q.C. made it clear that on the case as drafted by the Board, the Commissioner is able to argue that the Board's decision was Edwards v. Bairstow unreasonable - that is, on the facts as found by the Board, no reasonable tribunal properly directed could have come to the conclusion reached. However, as to Mr. Feenstra's wide submissions he said then, and he said to me, that if the Commissioner wishes to argue that there were no facts before the Board to justify a finding then the Commissioner should identify the finding so challenged. Secondly, if it is to be argued that a particular finding was completely contrary to the evidence then again it should be identified. Mr. Litton Q.C. replied to this by saying:

"And then the court can be asked, upon these additional findings which the Board ought to have made (and the evidence pointed to only one direction) had the Board made those additional findings of fact, and properly directing itself on the law could it have come to that conclusion. Would have been perfectly proper."

18. Mr. Gardiner agreed with that proposition and said his clients would accept it. However Mr. Feenstra for the Commissioner declined to identify any finding which was not supported by the evidence or was completely contrary to it.

Abuse of process\res judicata

19. I have gone into this hearing in a little detail because it is important in relation to the abuse of process or res judicata argument advanced before me by Mr. Gardiner. He submits that this application to amend the case is an abuse of process in that it was the subject matter of the hearing before Barnett J. who decided the matter adverse to the Commissioner. The Commissioner appealed against this decision and by consent his appeal was dismissed. It is clear, said Mr. Gardiner, that the issue before Barnett J. and hence the Court of Appeal, was not whether the Commissioner should state a case but whether he should state a case in the form designed by the Commissioner. The Board had always agreed to state a case and had produced a draft. What they would not do was to state it in the very wide terms sought by the Commissioner because they did not feel that raised a proper question of law.

20. Mr. Gardiner relies very heavily upon the actual relief sought by the Commissioner in the judicial review proceedings. He sought an order of mandamus requiring the Board to state a case to include the 3 questions the subject matter of this hearing. Mr. Gardiner says that if the appeal had continued the very question at issue would have been whether the Commissioner was entitled to require the Board to state a case raising his questions rather than those posed by the Board itself. That argument was decided adverse to the Commissioner by Barnett J. and the appeal having been dismissed, this issue is now res Judicata alternatively it would be an abuse of process to allow it to be reopened before me.

21. Mr. Rosenberg for the Commissioner, not surprisingly, takes issue with this argument. He says that the purpose of the judicial review proceedings was to force the Board of Review to state a case they having refused to do so. Once the Board agreed to do so (in the Court of Appeal) the Commissioner got what he wanted and had no reason whatever to go on. The Commissioner had the comfort that if the case stated was not satisfactory to him, he could always apply under section 69(4) as he has in fact done.

22. I cannot put on the undisputed facts before me the gloss for which Mr. Rosenberg contends. I have read all the material placed before me and I am quite satisfied that the issue before Barnett J. and before the Court of Appeal was exactly the same as before me as far as the 3 questions were concerned. I attach to this judgment, the judgment of Barnett J. a perusal of which will make the point crystal clear. He has also referred to a number of authorities most of which were also cited to me and no useful purpose can be served by a repetition of them in this judgment. In that regard, the 2 judgments ought to be read together.

23. The note to Order 18 r. 19 (p. 339 1991 Annual Practice) states:

"It is an abuse of the process of law for a suitor to litigate again over an identical question which has already been decided against him even though the matter is not strictly res judicata (Stephenson v. Garrett (sic) (1898) 1 Q.B. 677."

24. In Stephenson v. Garnett (not Garrett as appears at p. 339 of the Annual Practice) a Plaintiff who had been successful in a county court agreed to accept a lesser sum than the judgment on the representation as to poverty made by the Defendant. Subsequently the Plaintiff alleged that the Defendant had misrepresented his financial position and at a hearing of evidence, the county court judge found that there had been a misrepresentation and ordered payment of the balance of the judgment. The Defendant then brought an action in the High Court for a declaration that he had been released from the judgment debt. A strong Court of Appeal held that as the question raised in this action was identical with that decided by the county court judge on the interlocutory application, the action ought to be stayed as frivolous and vexatious and an abuse of the process of the court.

25. A.L. Smith L.J. did not rest his decision on res judicata of which he was not satisfied. At p. 682 he said:

"I put my decision on the ground that the identical question raised in the action was raised before the county court judge ... and was heard and determined by him. The county court judge had jurisdiction to hear and determine the question upon that application and it is perfectly clear from the evidence before him that the question there was the same as that now raised in this action, namely, whether the deed of release was obtained by fraud. The Plaintiff was present at the hearing before the county court judge and had every opportunity of putting forward his case."

At p. 682 Collins L.J. said:

"The judge heard the evidence and adjudicated upon the question raised. The very same question which he raised in this action was decided by the judge and that lets in the inherent jurisdiction of the High Court ... to stay the action as frivolous and vexatious and an abuse of the process of the court."

26. Earlier on the same page, the learned Lord Justice had pointed out that it was difficult to say that an interlocutory application the subject matter of the hearing in the county court could found a plea of res judicata to the action to enforce the convenant in the deed. It is frequently difficult to apply the principle of res judicata to interlocutory hearings but this is where the inherent jurisdiction of the court to prevent an abuse of its process comes into play as it did most emphatically in that case.

27. I was also referred to Yat Tung Co. v. Dao Hang Bank 1975 A.C. 581. That was another case where the Privy Council in agreeing with the Hong Kong Court of Appeal stated at p.590 that although it was difficult on the facts of the case to bring in the doctrine of res judicata, nevertheless:

"... there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings."

28. Lord Kilbrandon giving the decision of the Board immediately went on to refer to the classic passage of Wigram V.C. in Henderson v. Henderson (1843) 3 Hare 100,115 where he said;

"... where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."

29. In Greennalgh v. mallard (1974) 2 AER 255 & 297 Sommervell L.J. expended a little on the passage just quoted from Wigram V.C. He said:

"... res judicata for this purpose is not confined to the issue which the court is actually asked to decide but ... it covers issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them."

30. These passages make it clear to my mind that it matters not what Mr. Feenstra or the Commissioner thought would be the position following the dismissal by consent of the Commissioner's appeal. The fact remains that had not the appeal been dismissed by consent, the Commissioner would have been forced to traverse the very matters traversed before me (and Barnett J.) or else he would have had to accept the question of law which the Board had always been prepared to state and not the ones which he then sought and continues before me to seek. Although the judicial review application did not relate specifically to the transcript of evidence and the other documents the subject matter of the summons before me, it is clear to me that the issue is the same. The transcript of evidence goes hand in hand with the phrase used in the Commissioner's question (3) "on the whole of the evidence".

31. To use the phrase of Lord Shaw in Hoystead v. Commissioner of Taxation (1928) A.C. 155 & 171 "the present point was one which if taken went to the root of the matter on the prior occasion".

32. I have come to the very firm conclusion that this application is an abuse of the process of this court and I propose to dismiss this summons. Parties must appreciate that when they are before the court and fail to take a point which was open to them at that stage, subsequent hearings or applications involving the same issue may well be held to be an abuse of process. I accept that shutting out a litigant from arguing a point should only be exercised (in the words of the Privy Council in Yat Tung) "after a scrupulous examination of all the circumstances". I have conducted such an examination of the circumstances, with considerable assistance from both counsel, and I can find nothing in the way of "special circumstances" to justify the Commissioner having a second bite at the cherry.

33. However, lest I be held wrong in this conclusion, I must go on to decide whether, in the exercise of my discretion, I would have granted the relief sought under this summons or any part of it.

34. I do not propose to go into this matter at great length because it will involve repeating much of what Barnett J. said with which I respectfully agree.

35. I, too, am satisfied that the Commissioner's application before me is wholly misconceived. It fails to take into account the sacrosanct nature of the Board's fact finding role given exclusively to the Board by the legislature.

36. On the case as stated by the Board it is permissible for the Commissioner to argue, on the principle of Edwards v. Bairstow, that the Board's decision is erroneous in law because the conclusion does not follow from the findings. For that purpose one does not need the transcript because the Board has set out its findings and the court can judge for itself whether the conclusions are supported by the findings of fact.

37. It was clear to Barnett J., and it is clear to me, that the Commissioner wishes to go further than raise an Edwards v. Bairstow question for this court. Mr. Rosenberg before me was as candid as Mr. Feenstra was before Barnett J. in making it clear that the Commissioner wishes to argue that the findings of fact were wrong or that other findings of fact should have been made. Mr. Rosenberg took me at great length to the documents in evidence to show for example that there was other material to which the Board did not refer and which, he says, should have led them to a different conclusion. However, he has not gone so far as to say that there was no evidence before the Board to justify their findings only that there was other material which did not so justify. This is as naked an attack on the fact finding function of the Board as can be imagined.

38. If the Commissioner wishes to contend that any particular finding of fact was unsupported by the evidence then he should have identified it. However, neither Mr. Feenstra nor Mr. Rosenberg has been prepared to put the Commissioner's case that way but have relied on a somewhat nebulous unspecified challenge to the findings of fact which I cannot find as permissible. I need only refer back to the very helpful passage I have already quoted from Roskill L.J. in Ransom v. Higgs which I should add was approved by Lord Simon of Glaisdale when the matter went to the House of Lords.

39. Provided that there is some evidence upon which the findings of the tribunal are based it matters not that there was other evidence going the other way. This was made clear by a graphic illustration given by Upjonn L.J. (as he then was) in Tersons v. Stevenage (1963) 2 Lloyds 333 at 366:

"When an arbitrator is preparing to state a case raising the question whether there was evidence upon which he reached a certain conclusion of fact, he must in principle proceed in exactly the same way as when he is preparing a case stated to raise some other question of law. He must set out the relevant facts, but the facts, when his conclusion of fact is so questioned, must consist of the evidence on which he relies to support his conclusion. When he is setting out this evidence, he must remember that he is bound only to set out the evidence on which he relies to support his conclusion. He is not bound to set out the whole of the evidence for and against the conclusion of fact which he has reached. Indeed, strictly it is wrong for him to set out the evidence tending to show that his conclusion was wrong, for it is irrelevant. The Court is not concerned with his finding of fact, the Court is concerned only to see that there is evidence to support his finding. If there is, then the arbitrator's decision is final. Thus, an arbitrator could perfectly properly state: "The evidence of Mr. Smith was to the following effect' (setting it out, "and I accepted it". It is then quite immaterial that there were 20 witnesses who gave evidence in a contrary sense. with all respect to Mr. Dunn's argument to the contrary. it is, in my judgment, the arbitrator's duty to state the effect of the evidence which he accepted, and not to set out question and answer in a transcript, or even his own note. That this must be so is, I think, clear when one considers that very few witnesses, however honest, give evidence in chief which is not to some extent affected by cross examination, and if all that the arbitrator does is to set out some questions and answers, the Court is left with the task of evaluating that evidence, and deciding what is its effect. That is the very task that the parties have committed exclusively to the arbitrator. Consequently it is his duty to evaluate the evidence himself, and therefore to set out in summary form the effect or the evidence on his mind. It is wrong to leave that task to the Court which, furthermore, has not seen or heard the witnesses, and therefore is denied the right of assessing it properly.

At p. 367 Upjonn L.J. added this:

"An arbitrator's award is, in my judgment, in the same position, save that the material before the Court is not the evidence that was before the Jury, but the facts as stated by the arbirtrator in his award.

If those facts as stated in the award disclose a state of affairs in which it is proper to say that there is no evidence to support the arbitrator's determination, or that the evidence is inconsistent with, and contradictory of, the determination, or that the determination is one in which the only true and reasonable conclusion contradicts the determination (all of which propound the same test) there is an error of law on the face of the award.

If however, an arbitrator states a case for the opinion of the Court raising the question whether there was evidence on which he could reach his conclusion, there is this important difference. The test propounded in Edwards (Inspector of Taxes) v. Bairstow and Another, sup., is applied only to the evidence which the arbitrator sets out to support his conclusion, and the Court is not at liberty to inquire into other evidence or other facts."

40. In this case the Board has set out their findings in the case. These were the findings which they adjudged to be relevant. The Commissioner can attack the decision on Edwards v. Bairstow grounds but what he cannot do is to invite the court to second guess the Board's finding of fact. I am afraid that this is what is being sought to be done in this case.

41. I was also referred to a recent decision of Scott J. in Consolidated Goldfields v. Inland Revenue Commissioners (1990) STC 357. This was an application to remit a case stated for further findings of fact to be made by the Commissioners. Before setting out the principles he discerned from the cases he referred to Lord Denning in Way v. Underdown (1974) STC 11, 49 T.C 215 where at p. 13 he said:

"Now a case can only be stated on a point of law. When a party applies for a case to be stated, he should specify the point of law on which the decision of the High Court is required. In this case the question of law on the Sch E assessments was simply said to be "whether the decision was in accordance with the evidence". That is not a point of law at all. It was not a proper matter for the High Court at all."

42. The principles Scott J. gleaned from the cases appears at p. 361 where he said this:

"(1) The findings of fact are for the commissioners. They cannot be instructed to find facts, nor as to the manner in which they express their findings.

(2) The parties are entitled to expect that the commissioners will in the case stated make findings covering the matters which are relevant to the arguments adduced or intended to be adduced on appeal.

(3) If a request is made for a case stated to be remitted for additional findings to be made or to be considered, the applicant must, in my opinion, show that the desired findings are (a) material to some tenable argument, (b) at least reasonably open on the evidence that has been adduced, and (c) not inconsistent with the finding or findings that have already been made. I would add this. In my opinion the commissioners must be protected from nit-picking. If the case stated is full and fair, in that its findings broadly cover the territory desired to be dealt with by the proposed additional findings, the court should I think be slow to send the case back, particularly so if it appears that the Special Commissioners have had the proposed findings in mind when settling the final form of the case stated."

43. I respectfully agree with this analysis.

44. Although initially I was sympathetic to the request to annex the statement of facts, appendices and chronology to the case stated, the more I listened to Mr. Rosenberg the more I appreciated the reason why the Commissioner was anxious to refer to these documents. It was simply to attempt to undermine the findings of fact of the Board in circumstances which do not fit into the decided case law on this topic. The situation is a fortiori with regard to the transcript of evidence of Mr. Wrangham and Mr. Fok.

45. I hope the Commissioner will not be disappointed that I have not gone into the detail of his criticisms of the Board's decision which were gone into at some length by Mr. Rosenberg. The simple fact remains that the Commissioner cannot get this application off the ground in the light of the way in which he has presented his case to the court thus far. It follows therefore that on the basis of all the material before me, I would have refused to grant the relief sought even if I had not been satisfied that this application was an abuse to the process of this court.

46. I cannot leave this case without expressing surprise at the way in which the Commissioner has conducted this litigation subsequent to the adverse finding of the Board of Review. I can well understand that every litigant who loses a case concerning HK$55m is far from pleased. The Commissioner has a public duty to collect revenue which is properly due. He carries out that duty with singular efficiency. I can well understand his disappointment and dissatisfaction with the Board's decision. It is little comfort to the Commissioner for me to say that had the matter been before me on a first instance basis I may well have decided the matter the other way. That is neither here nor there. The legislature has entrusted these cases to a Board of Review made up of people with considerable experience in matters of taxation. The Chairman in this case is both experienced and distinguished. The role of the High Court is limited to considering stated cases on questions of law and not of fact. The Commissioner has tried extremely hard to elevate his dissatisfaction with the result into a point of law. I find it regrettable that further taxpayers money has been expended on an exercise which in my judgment (and on all the cases cited) was bound to fail as indeed it does. This summons is therefore dismissed.

47. Mr. Gardiner Q.C. has indicated that in the event of this summons being dismissed, he would wish to be heard on the question of costs and I will therefore hear Counsel on the matter when a convenient time can be arranged.

Representation:

Mr. George Rosenberg, S.C.C. for the Commissioner

Mr. John Gardiner, Q.C. and Mr. J.J. Swaine instructed by Woo, Kwan, Lee & Lo

To be part of the Judgment as referred to at pages 12 & 13

1988 M.P. 1504

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

------------------

--------------------

BETWEEN

---------------

Coram: Hon. Barnett J. in Court

Dates of hearing: 12th - 13th December 1988

Date of delivery of judgment: 23rd December 1988

-----------------------

J U D G M E N T

------------------------

48. On 11th August 1987, the Board made a decision which was adverse to the Commissioner. By letter dated 9th September 1987, the Commissioner, in accordance with the provisions of section 69(1) of the Inland Revenue Ordinance, Cap. 112, applied to the Board to state a case. Section 69 reads :-

"69. (1) The decision of the Board shall be final:

    Provided that either the appellant or the Commissioner may make an application requiring the Board to state a case on a question of law for the opinion of the High Court. Such application shall not be entertained unless it is made in writing and delivered to the clerk to the Board, together with a fee of $400, within 1 month of the date of the Board's decision. If the decision of the Board shall be notified to the Commissioner or to the appellant in writing, the date of the decision, for the purposes of determining the period within which either of such persons may require a case to be stated, shall be the date of the communication by which the decision is notified to him.

(2)     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.

(3)     At or before the time when he transmits the stated case to the High Court, the party requiring it shall send to the other party notice in writing of the fact that the case has been stated on his application and shall supply him with a copy of the stated case.

(4)     Any judge of the High Court may cause a stated case to be sent back for amendment and thereupon the case shall be amended accordingly.

(5)     Any judge of the High Court shall hear and determine any question of law arising on the stated case and may in accordance with the decision of the court upon such question confirm, reduce, increase or annul the assessment determined by the Board, or may remit the case to the Board with the opinion of the court thereon. Where a case is so remitted by the court, the Board shall revise the assessment as the opinion of the court may require."

49. Subsections (6) and (7) are not relevant.

50. In his letter, the Commissioner required the Board to state a case for the opinion of the High Court on three questions of law which were :-

"(i)     Whether the decision of the Board on the appeal of Aspiration Land Investment Limited against the assessment to Profits Tax for 1980/1 was correct in law.

(ii)     Whether the Board applied correctly the provision of section 68(4) of the Inland Revenue Ordinance in holding that the onus of proof that the assessment was erroneous was satisfied by Aspiration Land Investment Ltd.

(iii)     Whether on the whole of the evidence before the Board the only proper conclusion was that the sum of $344,825,190 received by Aspiration Land Investment Ltd. was profit chargeable to tax in accordance with Section 14 of the Inland Revenue Ordinance."

51. I shall refer to these questions respectively as the first, second and third questions.

52. In January 1988, the Commissioner produced a draft Case Stated for consideration by the 2nd respondent's solicitors. The draft proposed that there should be included a transcript of the evidence of two of the witnesses who gave evidence before the Board, together with documents which were proved or admitted. The case also proposed four questions of law for the opinion of the Court, which were :-

"(i)     Whether, as a matter of law and on the facts found by them, it was open to the Board of Review to hold that the shares in Boppardson were the capital assets of Aspiration at the time when Boppardson was formed and/or acquired;

(ii)     Whether there is any or sufficient evidence upon which it was open to the Board of Review to hold that the land exchange entitlemants ("Latters B") were transferred from Hoi Tuen to Boppardson for the purpose of tendering for Shatin Town Lot No. 143; and

(iii)     (a)      Whether as a matter of law and on the facts found by them, it was open to the Board of Review to hold that the shares in Boppardson were acquired and disposed of by Aspiration in the course of trade or by way of an Adventure in the nature of trade;

(b)     Whether the Board of Review was correct in law and on the facts before them in failing to apply the principle enunciated in Associated London Properties Ltd v. Henriksen 26 T.C. 46;

(iv)     Whether on the whole of the evidence before the Board of Review the only proper conclusion was that the sum of $344,825,190 received by Aspiration was profit chargeable to tax in accordance with section 14 of the Inland Revenue Ordinance."

Question (iv) is identical to the 3rd question.

53. By letter dated 1st February, the 2nd respondent's solicitors objected to the inclusion in the Case Stated of the documents and transcript of evidence and also to the questions which had been posed. They proposed, instead, that the Case Stated should incorporate the Board's decision and that the documents should be available for the Court at the hearing if required. They also proposed one point of law based upon the Commissioner's first question, which read :-

"Whether on the facts found by us, it was open to the Board of Review, as a matter of law, to hold that the shares in Boppardson constituted capital assets with the consequence that the profit arising from the acquisition and disposal of the same was not chargeable to profits tax."

54. The Commissioner's first reaction was that he agreed to the draft proposed by the 2nd respondent's solicitors but proposed to identify and extract certain parts of the evidence for inclusion in the Case Stated. In the event, the Commissioner found that he could not extract the relevant evidence from the transcript and put forward a revised draft Case Stated which would include a transcript of all the evidence and which re-posed the 3rd question.

55. By letter dated 14th April 1988, the Clerk to the Board wrote to the Commissioner advising him that the first, second and third questions raised by the Commissioner, which included the one question in his final draft Case Stated, had not been sufficiently understood by the Board to enable them to draft the Case. Accordingly, the Board proposed to give the Commissioner an opportunity of satisfying the Board that the 3rd and remaining question was a proper question of law for the opinion of the Court.

56. On 18th April, the Commissioner and the 2nd respondent, each by counsel, appeared before the Board. The Commissioner contended that of his three questions, the first and second were subsumed in the third, which, he maintained, was a proper question of law for consideration by the Court. He indicated that it involved a challange as to findings of fact by the Board, but that it was not necessary for the purpose of the Case Stated to identify the findings which were being challenged. He said that it was proper to place before the Court, for consideration, the whole of the evidence which was before the Board in order to "test the temperature of the water and see whether the court can come to a separate and different conclusion".

57. In a reserved ruling dated 18th May, the Board accepted that it is proper to impeach findings of fact by the Board on the basis that there was no evidence which could have supported such findings, or to impeach the Board's failure to find as facts, matters upon which the evidence pointed only one way. The Board further accepted that in order to demonstrate that there was no evidence to support a particular finding of fact, it might be necessary to include the whole of the evidence adduced before the Board. Before such a course could be countenanced, however, the Board took the view that it would be necessary to identify the findings of fact which were impeached to enable the Board to state a case. In the circumstances, the Board declined to state a case upon the basis of the Commissioner's letter dated 9th September 1987.

58. By way of an application for judicial review, the Commissioner now seeks to have quashed the Board's ruling dated 18th May, and an Order of Mandamus directing the Board to state a case for the opinion of the High Court upon the three questions of law contained in his letter date 9th September 1987.

59. For the Commissioner, Mr Feenstra submitted that the three questions are questions of law, that the Board has a statutory duty to state a case when an application is made under section 69(1) and that the Board has no discretion to decline to state a case when such an application has been made. The Board and the 2nd respondent accepted the second submission, but disagreed with the first and third.

60. With regard to the first question, Mr Feenstra said that the issue which the Board decided, namely, that on the facts which it considered relevant, the profits were not taxable under section 14 of the Inland Revenue Ordinance, involved the construction of that section. Whether an Ordinance has been correctly interpreted is a question of law. Further, it is a question of law whether the Board properly applied the law to the facts found, or as they ought to have been found on the whole of the evidence.

61. There was, I think, no dispute about those contentions.

62. Mr Feenstra said that it was not necessary for him to give further details or particulars of what facts or other points were being challenged. For this proposition, he relied upon C.I.R. v. International Wood Products Limited [1971] H.K.T.C. 551. In that case, Blair-Kerr, Ag. C.J., after reviewing the "questions of law" on which he had been asked to express an opinion, said at p. 571 :-

"Clearly these so-called 'questions of law' are, for the most part, nothing more than grounds of appeal."

63. Mr Feenstra therefore contended that, by identifying findings of fact, he would not be submitting questions of law but rather grounds of appeal.

64. Mr Feenstra further argued that the Board could not find that the first question was not a question of law or that no question of law arose in its decision. Therefore, the Commissioner was entitled to have a Case Stated on this question alone. Mr Feenstra referred to C.I.R. v. Rico International Ltd. [1965] H.K.T.C. 229. This was an appeal from the decision of a judge sitting in appellate jurisdiction on a Case Stated under section 69. At page 268, Blair-Kerr J. said :-

"Counsel for the appellants objected to submissions (b) and (c) on the ground that they raised new points of law which should have been expressly raised in the case stated; counsel did not seek an adjournment on the ground that he was taken by surprise; he put his objection on the footing that, as the Commissioner had not asked the Board to include these points of law in their case, it was not open to him to raise them at this stage. Before the learned judge the appellants did not take the point that the case stated raised no point of law.

Appeals from decisions of the Board of Review are regulated by section 69 of the Ordinance which reads in part :-

(69)(1)     'The decision of the Board shall be final; Provided that either the appellant or the Commissioner may make an application requiring the Board to state a case on a question of law for the opinion of the Supreme Court;

(2)     The stated case shall set forth the facts and the decision of the Board .....

(3) .....

(4) .....

(5)     Any judge of the Supreme Court shall hear and determine any question of law arising on the stated case .....'

The phraseology used in the Income Tax Acts 1918 and 1952 is to the same effect. Under section 149 of the former Act, the appellant, if dissatisfied with the determination of the Commissioners as being erroneous in point of law, may require them to state and sign a case which shall set forth the facts and the determination of the Commissioners; and under section 149(2)(a) :-

'The High Court shall hear and determine any questions of law arising on the case.'

In other words, in both the English and Hong Kong enactments the case stated must include the facts and the determination; but not necessarily agreed points of law. The effect of the decisions appears to be summarised in Simon's Income Tax (2nd Ed.) Vol. 1 at p.280, where the learned author says :-

'The Court will give effect to any point of law arising on the facts stated in the case; but when it is sought to raise a question which was not raised before the tribunal below and this depends upon further evidence being taken, the Court will refuse to give effect to the point so sought to be raised.'

Of course, while it may be legally unobjectionable for the Board to frame one question in terms sufficiently general to include any question of law which could arise on the facts and on their determination, it is also desirable that whenever possible they should be asked to say on what particular questions of law the opinion of the judge is being sought. However, section 69(5) is in the same terms as the corresponding English provision; and it would appear that the judge not only may, but is under a duty to, hear and determine 'any question of law arising on the case stated' (which need only include the facts and the determination) provided, of course, it is open to counsel to argue the point on the facts as found. The position in tax appeals appears to be different from that which obtains in appeals under section 103 of the Magistrates Ordinance.

In my view, the fact that the Board were not asked to, and did not, include the specific questions of law raised before this court and before the learned judge, is not fatal to this appeal."

65. I note that there is a difference in the phraseology of the English and Hong Kong legislation. I do not, however, consider it material. The legislation "is to the same effect".

66. On the basis of this authority, Mr Feenstra said that it is permissible to raise a question of law in a wide form and that an applicant is entitled to have the High Court determine any question of law arising on the Case Stated. I am unable to accept a proposition in such wide terms. I accept, and indeed I am bound by that authority, that once the Court is seized of a Case Stated, it must, subject to any necessary adjournment, deal with any point of law arising out of the Case Stated. There must first, however, be a Case Stated before the Court. That situation is brought about by compliance with section 67, that is to say the formulation of a question of law and the preparation of a Case Stated. Until a satisfactory question has been identified so as to trigger the preparation of the case, it is not, in my judgment, permissible for the applicant simply to say that there must be a point of law which will arise for consideration by the High Court.

67. In The Attorney General v. Leung Chi-kin [1974] H.K.L.R. 269, Huggins, J. delivering the decision of the Full Court said at p. 272 :-

"The basic requirements of a case stated are that it should be complete in itself and should not have any annexure unless it is essential to the decision of the appeal that such annexure should be before the Court. In particular the magistrate's judgment should not normally be exhibited and it is not desirable as a general rule, although it may not always be wrong, for the notes of evidence to be annexed even if the Court is asked to decide whether there was evidence on which the magistrate could properly come to his conclusion : Hickton v. Hodgson (1914)78 J.P. 93. The case stated should contain in numbered paragraphs -

(a)     the material findings of fact or, where appropriate, a statement that no finding was made upon an issue which is alleged to be material. The evidence should not be set out unless it is the appellant's contention that the magistrate ruled wrongly that there was or was not a case to answer or that there was no evidence to support one or more of the findings of fact: Mills v. Boddy (1950)94 Sol.J. 371. The facts should include 'the primary facts based upon (the magistrate's) estimation of the truthfulness or otherwise of the witnesses who appeared before him and any facts deduced by him from the primary facts as so found': Attorney General v. Munro-Smith (1961) H.K.L.R. 209, 211;

(b)     the contentions of law of each party upon each of the issues referred for the opinion of the Court;

(c)     a statement of the decision of the magistrate on those issues. Normally extensive quotations from the judgment will be unnecessary and should therefore be avoided;

(d)     the questions the Court is asked to answer. They should be stated clearly and concisely and care should be taken to ensure that the questions are not wider than is warranted by the facts. A case stated is not to be used as a device for obtaining the opinion of the Court upon questions which did not form the basis of the magistrate's decision, and, even where a point did form part of the basis of his decision, if it was not taken at the trial the Court will now allow it to be argued on appeal unless it is one which no evidence could alter: Kates v. Jeffery (1914)3 K.B. 160."

68. That statement of the law was approved by Macdougall J. in Chinachem Investment Co. Ltd. v. Commissioner of Inland Revenue. On appeal from the judge's decision to the Court of Appeal (Civil Appeal 1986, No. 116), Sir Alan Huggins, V.-P. said :-

"There was much discussion before us and before the judge as to the form of the Case Stated and the procedure for settling it. It has never ceased to amaze me how much argument this simple and straightforward process engenders. A properly drafted Case Stated is the most satisfactory process of all for deciding a question of law, for it concentrates attention on the essentials of the case, but it does require those concerned to marshall and state with precision the issues, the facts (and, where necessary, the evidence), the arguments and, finally, the conclusions attacked. Criticism was directed at the Board of Review for failing to produce an acceptable case. In my view that criticism was almost entirely misdirected. Whatever may be the present practice in England, the established practice in Hong Kong is that where parties are professionally represented they shall draft the Case Stated and submit it to the tribunal. The reason is obvious: the parties know better than anyone else what points they wish to take on the appeal, what findings of fact they wish to contend are relevant to those points and what arguments they advanced. The tribunal has the final responsibility for stating the Case and is not bound by the draft submitted to it. It can, therefore, after consulting the parties, alter the draft if it is inaccurate or incomplete. Even if the drafting were to be done by the tribunal itself, it would be the duty of the parties to apply for any necessary amendment. As I have often said before, there may be cases where it is impossible adequately to state the Case without annexing one or more documents, but such cases are few and far between. The documents may even include a transcript of evidence, but that is to be avoided if possible, because such a transcript inevitably contains unessential matter which it is the object of the process to exclude. Thus, where the issue on appeal is whether there was any evidence to support a finding of fact, a transcript of all the evidence may be a necessary annexure, but a transcript is not to be annexed where what is required is a statement of the facts found or assumed or where with proper diligence a precis of the material evidence can be included in the Case Stated itself. I appreciate that in the present case it is urged that the facts should have been found and not assumed, but that is a different matter (which I shall deal with in an appropriate part of the judgment) involving a criticism of the Board's Determination and not of the Case Stated.

The Case as ultimately stated include no less than 513 pages, amongst which were the Commissioner's determination and copies of some law reports. On any view those were not documents which it was proper to annex. In the event, as was to be anticipated, only about a score of the pages of exhibits were even referred to on the appeal.

All too often the Case Stated process is adopted in an attempt to raise as an issue of law what is in truth an issue of fact. Some of the questions posed for the consideration of the High Court show this to have been such a case. It is one thing to allege that a tribunal has found a fact which was unsupported by any evidence : that raises an issue of law. It is quite another thing to allege that a tribunal of fact has disregarded evidence or that the evidence 'did not substantiate' a finding."

69. In relation to Young Chi-kin, Mr Feenstra pointed out that the case related to appeals by way of Case Stated from a magistrate. He said that it is wrong to equate the decision of a magistrate in a criminal case with the complex factual and legal issues which are commonly argued before the Board. He said that there is a greater risk of error in findings of fact by the Board in such cases. I accept that there is a difference between the two types of case. Nonetheless, the guidelines laid down in Young's case and accepted in Chinachem do offer useful guidance, which, in my view, should be followed if possible. The cases also emphasise that the case stated is the Board's responsibility. Thus, if it is to provide a satisfactory case for the Court, it must know about what precisely it is stating a case.

70. In Ransom v. Higgs [1973]1 W.L.R. 1180, Roskill L.J. after reciting a number of conclusions or inferences of fact contained in the special case, at p.1204 said :-

"Mr Beattie argued that there was no evidence to justify these various conclusions or inferences of fact and it was therefore not only open to the court but it was the duty of the court to ignore these findings. Reliance was placed both by him and Mr Walton in this connection on the speeches in the House of Lords in Prendergast v. Cameron [1904] A.C. 549, 558, per Viscount Maughan, and in Edwards v. Bairstow [1956] A.C. 14, per Viscount Simonds at pp. 30-31 and Lord Radcliffe at pp. 33-36. But, as Mr MacCrindle pointed out, in both those cases their Lordships were concerned with findings, conclusions or inferences, whichever word be used, of a very different kind from those here sought to be challenged. In Edwards v. Bairstow, the special commissioners had, as the House of Lords ultimately held wrongly, reached a conclusion that the transaction there in question was not an adventure in the nature of trade which was quite contrary to the remainder of their findings. It was, in Lord Radcliffe's phrase, at p. 36 a 'determination, it is, obviously, erroneous in point of law' having regard to the facts found. .........

..... If it is desired to contend on the hearing of a special case that there was no evidence to justify a particular conclusion of fact, then a party must ask for the case to include the question whether there was any evidence to justify such a conclusion. If he does not do so, then that question is not before the court because the court does not know what evidence was called before the tribunal of fact, and if that question is not before the court, then the conclusion sought to be complained of can only be attacked if other findings in the case make it perverse or manifestly wrong in law. That clearly is not so in the present case. The special commissioners heard evidence; we do not know what that evidence was. Very properly it was not exhibited to the special case. The special commissioners were not asked to exhibit that evidence nor indeed fully to summarise it.

In revenue cases the parties have the advantage, denied to parties in commercial arbitrations, of seeing a draft of the special case in advance. There should therefore be no practical difficulty in seeking the statement of the requisite question of law, if necessary as an additional question, whether there was any evidence to justify a particular conclusion at which the special commissioners proposed to arrive."

71. In the light of these dicta of the most persuasive authority, I am not prepared to accept that an applicant for a case stated may rely on a question of law which is imprecise or ambiguous and which gives the Board no clear idea of what material must be marshalled in their case.

72. Mr Feenstra maintained that the second question is also a question of law. He recognised that the Board expressly stated where the onus lay, i.e. on the taxpayer. He maintained, however, that the evidence before the Board may have been such that the court could consider that on the proper application of the onus of proof, certain inferences of fact were not properly made by the Board and insupportable. In plain terms, if there was evidence going either way, it could not be said that, on the balance of probabilities, the taxpayer had proved its case.

73. In my view, this is a thinly disguised attack upon the fact-finding function of the Board. Unless there was no evidence to support a finding of primary fact, or unless the primary facts could not support an inference found by the Board, whether the onus was discharged was a question of degree which depends upon the evaluation by the tribunal of fact.

74. To impugn the Board's evaluation would be to undermine the whole purpose of the Board as a fact-finding tribunal. Unless the Commissioner can identify findings of fact for which there is no evidence or inferences which are wholly unsupportable and thus wrong in law, this question is untenable. I do not regard the second question as a question of law.

75. According to Mr Feenstra, the third question is taken from the wellknown passage of Lord Radcliffe's judgment in Edwards (Inspector of Taxes) v. Bairstow & Anr. (1956) A.C. 14, where he said at p.36 :-

"When the case comes before the court it is its duty to examine the determination having regard to its knowledge of the relevant law. If the case contains anything ex facie which is bad law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been some misconception of the law and that this has been responsible for the determination. So there, too, there has been error in point of law. I do not think that it much matters whether this state of affairs is described as one in which there is no evidence to support the determination or as one in which the evidence is inconsistent with and contradictory of the determination, or as one in which the true and only reasonable conclusion contradicts the determination. Rightly understood, each phrase propounds the same test. For my part, I prefer the last of the three, since I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves, and only to take their colour from the combination of circumstances in which they are found to occur."

76. In that case, the facts found were not disputed. The only issue was whether those facts supported the Commissioners' conclusion that there was no adventure in the nature of trade. The House of Lords determined that the facts found did not support that conclusion.

77. Nonetheless, Mr Feenstra contended that if the findings of fact are challenged, the Commissioner is entitled to frame his question of law on the basis of the third description used by Lord Radcliffe. He pointed out that, in any event, Lord Radcliffe spoke of evidence.

78. For the 2nd respondent, Mr Gardiner contended that this passage must be looked at in the context of the case. Lord Radcliffe was not referring to evidence in the sense of the raw material from which facts are found, but rather to the facts which had been found by the Commissioners. I accept that contention. It is quite clear that Lord Radcliffe was not talking about evidence in the general sense.

79. Nonetheless, Mr Feenstra maintained that the third question is a question of law, that the Commissioner is entitled to frame the question as he sees fit, and is entitled to have it determined by the court by virtue of his right of appeal under section 69.

80. This question is, as Mr Feenstra described it to the Board, the ultimate question. On the face of it, it could involve an attack on the Board's findings of fact, or, accepting those findings, an attack upon the conclusion from the findings. If the latter attack only is involved then, undoubtedly, it is an Edwards v. Bairstow question of law. However, Mr Feenstra made it plain to the Board, and has made it plain to me, that findings of fact are under attack. Indeed, Mr Feenstra has now placed all his cards on the table and admits that the Board is under attack in respect of facts found, in respect of facts not found but which should have been found, in respect of inferences drawn and generally for misdirection. He did, and does, not consider it necessary to particularise which individual matters are impugned.

81. In Ransom v. Higgs (1974)1 W.L.R. 1594, Lord Simon of Glaisdale said at p. 1618 :-

"But many words and phrases in English have many shades of meaning and are capable of embracing a great diversity of circumstance. So the interpretation of the language of an Act of Parliament often involves declaring that certain conduct must as a matter of law fall within the statutory language (as was the actual decision in Edwards v. Bairstow [1956] A.C. 14); that other conduct must as a matter of law fall outside the statutory language; but that whether yet a third category of conduct falls within the statutory language or outside it depends on the evaluation of such conduct by the tribunal of fact. This last question is often appropriately described as one of 'fact and degree'."

82. In reliance upon that passage, Mr Feenstra contended that an applicant is entitled to take his case to the Court for a determination as to whether conduct inexorably falls within statutory language or outside it, or whether it is a matter of fact and degree which depends entirely upon a tribunal's evaluation and determination. The Court, he said, should not be obstructed from determining on which side of the line conduct falls.

83. For the Board, Mr Chang maintained that the position adopted by the Commissioner amounts to an abuse of the Case Stated procedure and that the Board properly declined to state a case on the "ultimate question". He said that if Mr Feenstra is right in insisting that the Commissioner is entitled on a Case Stated to frame a question in such a general manner, he is effectively requiring the court to rehear the whole review on paper, without the benefit of hearing the witnesses. Thus, the losing party before the Board could, on every occasion, appeal to the court, hoping that it would come to a different conclusion, whether or not there was a bona fide challenge on a question of law which the Court ought to be asked to answer.

84. Mr Chang said that a tax appeal should be dealt with expeditiously so that the Board's decision should, in general, be final and conclusive, save where a question of law is clearly identified. Further, if the Commissioner's contention is correct, the taxpayer will be put at risk of having his business affairs disclosed in an open hearing before the Court in every case. This would defeat the policy of secrecy which lies behind the in-camera hearing required before the Board in accordance with section 68(5) of the Inland Revenue Ordinance.

85. Mr Chang maintained that the Court should not be burdened with the rehearing of the whole matter on paper every time an appeal is made against the Board's decision. He drew my attention to the judgment of Pearson L.J. in Tersons Ltd. v. Stevenage Development Corporation where at p. 370 he said :-

"We are concerned in this case with only one aspect of that jurisdiction, namely, the procedure under Sect. 21 of the Arbitration Act, 1950, of stating any question of law arising in the course of the reference, or an award, or part of an award, in the form of a special case for the decision of the High Court. The intention is that questions of law may be raised in this way for the decision of the High Court. ...........the procedure should be kept within its proper limits, confined to questions of law, and should not be extended so as to encroach upon the general finality of the arbitrator's decision as provided by Sect. 16 of the Arbitration Act, 1950. There is a danger of attempts being made to turn questions of fact into questions of law with a view to having them retried by the Court, with the result that all the objects sought to be attained by means of arbitration - decision by the tribunal chosen by the parties, and finality and quickness and cheapness would be defeated by protracted proceedings in the High Court arising out of the arbitration. I think that the special case procedure is meant to provide a simplified form of appeal, limited to questions of law and to be determined by reference only to the matters set out in the special case. That is the evidence statutory intention. It would be frustrated if there grew up a practice of stating a special case on questions whether there was any evidence to support this, that and the other findings of fact, and of appending to, and incorporating in the special case, a complete transcript of the evidence so that the Court, with the assistance of Counsel, would have to spend days and days going through the transcript and collecting evidence on this, that and the other points."

86. Mr Feenstra pointed out that that case dealt with an appeal from an arbitrator. He contended that the Board should be equated with a jury, in which case an appellate court has a revising function to see whether there was any evidence in support of any conclusion found by the jury and whether its verdict can stand as being one which reasonable man might have come to; see Mechanical and General Inventions Co. Ltd. and Lehwess v. Austin and The Austin Motor Company Limited (1935) A.C. 346.

87. I am unable to accept that contention. It is clear to me that the positions of arbitrator and Board are wholly analogous. They are fact-finding tribunals whose decisions are intended to be final, subject only to review upon an alleged error of law. The only difference which I can discern is that while parties submit voluntarily to arbitration, a taxpayer is compelled by statute to go to the Board if he wishes to contest a determination by the Commissioner.

88. Mr Chang also reminded me of the criticism voiced by the Court of Appeal in Chinachem to which I have already referred.

89. Mr Chang submitted that if the Board is right to decline to state a case where it clearly appears that the procedure is being abused, the problems which he has pointed out can be held in check and the procedure made to perform its proper statutory function. He said that unlike the judicial review procedure, which is the subject of the present hearing, no leave has to be obtained from the Court before the hearing of a Case Stated. Once a case is stated, the Court will have to hear it (although, of course, the Case Stated may be remitted for amendment). The Board, therefore, provides a useful preliminary check and ensures that only genuine questions reach the court.

90. That the Board has power to decline to state a case is, said Mr Chang, supported both by authority and principle. He pointed out that under section 69, it is the duty of the Board to state a case. The Board, therefore, has to be responslble for the form which the Case Stated eventually takes. The form which a Case Stated should take has been clearly indicated by the guidelines laid down in the Leung Chi-kin and Chinachem cases. The guidelines show that the Board, or any other tribunal, should not simply adopt a rubber stamp position, but take certain steps to ensure that the object of the procedure is achieved.

91. Mr Chang said that if the circumstances surrounding an application to state a case are such that the object of the procedure cannot be achieved, i.e. to deal expeditiously with a clearly identified point of law, the situation amounts to an abuse. In such circumstances, the Board or tribunal has both the power and the duty to decline to state a case as requested by the applicant. The Board can, and should, decline to state a case where the only question raised is, in substance, a question of fact and not a question of law; see R. v. Sheil (1884)50 LT 590. Where the question raised is one of law, but the question has been decided by the Board in accordance with a previous binding decision of an appellate court, the Board should decline to state a case; see R. v. Shiel (1900)82 LT 587. And where the question raised is one of law, but is obviously a bad point, a case should not be stated; see R. v. Special Commissioners of Income Tax, (In Re G. Fletcher) (1891)3 Tax Cases 280.

92. The Board should not, said Mr Chang, be put in a position where it has to search for, or speculate upon, points of law on which to state a case. It is incumbent upon the applicant clearly to identify the points of law which he wishes to raise. Failing such identification, the Board is entitled to decline to state a case.

93. Mr Feenstra said that the cases which I have just cited should be treated with care. He said that there has been a great development in the law as to when the courts will intervene with the decision of a tribunal in law. He drew my attention to Ashbridge Investments Limited v. Minister of Housing and Local Government [1965]1 W.L.R. 1320 where at p. 1326, Lord Denning M.R. said :-

"Seeing that that decision is entrusted to the Minister, we have to consider the power of the court to interfere with his decision. It is given in Schedule 4, para. 2. The court can only interfere on the ground that the Minister has gone outside the powers of the Act or that any requirement of the Act has not been complied with. Under this section it seems to me that the court can interfere with the Minister's decision if he has acted on no evidence; or if he has come to a conclusion to which on the evidence he could not reasonably come; or if he has given a wrong interpretation to the words of the statute; or if he has taken into consideration matters which he ought not to have taken into account, or vice versa; or has otherwise gone wrong in law. It is identical with the position when the court has power to interfere with the decision of a lower tribunal which has erred in point of law."

94. Mr Feenstra said that it is an error of law if a tribunal takes into consideration irrelevant matters or fails to take into consideration relevant matters. In dealing with such a question of law, the courts should give the question a wide and liberal interpretation.

95. I accept what Mr Feenstra says. Nonetheless I think the cases cited by Mr Chang to be good for the principle that the Board is not to be treated as a mere cipher.

96. Mr Gardiner emphasised the need to distinguish between evidence and fact. He said it is for the Board to evaluate evidence and to find facts based upon that evidence. The applicant cannot demand a case to be stated in respect of those facts and seek the court's re-evaluation of the evidence unless, of course, it is contended that there was no evidence from which a fact could be found. But, if it is contended that there was no evidence, the court's function is confined to considering whether there was evidence to support the finding of fact. In Tersons, Lord Upjohn said at p. 366:-

"When an arbitrator is preparing to state a case raising the question whether there was evidence upon which he reached a certain conclusion of fact, he must in principle proceed in exactly the same way as when he is preparing a case stated to raise some other question of law. He must set out the relevant facts, but the facts, when his conclusion of fact is so questioned, must consist of the evidence on which he relies to support his conclusion. When he is setting out this evidence, he must remember that he is bound only to set out the evidence on which he relies to support his conclusion. He is not bound to set out the whole of the evidence for and against the conclusion of fact which he has reached. Indeed, strictly it is wrong for him to set out the evidence tending to show that his conclusion was wrong, for it is irrelevant. The Court is not concerned with his finding of fact; the Court is concerned only to see that there is evidence to support his finding. If there is, then the arbitrator's decision is final. Thus, an arbitrator could perfectly properly state: 'The evidence of Mr Smith was to the following effect' (setting it out) 'and I accepted it'. It is then quite immaterial that there were 20 witnesses who gave evidence in a contrary sense. With all respect to Mr Dunn's argument to the contrary, it is, in my judgment, the arbitrator's duty to state the effect of the evidence which he accepted, and not to set out question and answer in a transcript, or even his own note. That this must be so is, I think, clear when one considers that very few witnesses, however honest, give evidence-in-chief which is not to some extent affected by cross-examination; and if all that the arbitrator does is to set out some questions and answers, the Court is left with the tank of evaluating that evidence, and deciding what is its effect. That is the very task that the parties have committed exclusively to the arbitrator. Consequently it is his duty to evaluate the evidence himself, and therefore to set out in summary form the effect of the evidence on his mind. It is wrong to leave that task to the Court which, furthermore, has not seen or heard the witnesses, and therefore is denied the right of assessing it properly.

The arbitrator can in a few simple cases, where it is easy and practicable, set out the evidence in the form of a transcript or his own note, but normally that will not be so."

97. Mr Gardiner drew my attention to a number of cases distinguishing between matters of fact and law :

Caledonian Railway Company v. Banks 1 T.C. 487

New Zealand Shipping v. Shephens 5 T.C. 5S3

Smart v. I.R.C. 29 T.C. 338

Nello Simoni v. A/S M/S Straum (1949) 83 LI.R. 157

Faraday v. Carter 11 T.C. 565

Furniss v. Dawson [1984] A.C. 474

98. In the New Zealand Shipping case, Farwell, L.J. said at p. 567 :-

".....the Commissioners ought not to state either side out of Court by stating, under the guise of fact, that which is really law. Nor do I suppose for a moment that they would intentionally do it. If either side desired to urge to the Commissioners that there was no evidence to justify some particular finding which they were proposing to make, I think it is the duty of that party to ask the Commissioners to state, for the opinion of the Court, whether there is any such evidence as would justify such a finding. That would be a question of law, a question of evidence or no evidence, but if there is any evidence at all then it is for the Commissioners and not for the Court."

In Faraday v. Carter, Rowlatt, J. said at p. 572 :-

"In these cases the only jurisdiction which the Court has is to decide questions of law. The Court cannot entertain an appeal upon a question of fact and it cannot entertain what I may call an original jurisdiction upon questions of fact: that is to say, it is not within the power of the Commissioners to state the evidence for and against in the form of a summing up and then ask the Court to step into their place and to decide what is the true conclusion of fact. The Commissioners have not the power to do that, and the Court has not the power to do it if the Commissioners try to do it. I think it is now well understood - Lord Justice Pickford (as he then was) made it perfectly clear in the New Zealand case - that when the Commissioners set out all the facts it is in order that the Court may see whether there is any evidence to support their findings of fact or, if it is a question of a legal inference, whether the proper legal inference has been drawn, or whether they have gone wrong on any point of law; and very often it is a very right thing for the Commissioners themselves to set out the facts rather than to come to a conclusion which may be regarded as a conclusion of fact looked at in one way but which may have embedded in it a conclusion of law also. That is what was meant by Lord Justice Farwell when he deprecated stating people out of Court in the form of a finding of fact which was really a conclusion of law. That is the position."

99. It seems to me clear that an applicant for a case stated must distinguish between matters of fact and law because, depending upon the nature of the attack, the case will have to be prepared very diffcrently. If a finding of primary fact is attacked, the case will have to identify the evidence relied on. If an inference or conclusion from primary facts found is attacked, the case will recite the facts found and not the evidence.

100. I fail to understand why the Commissioner cannot or will not identify the individual matters he wishes to challenge. In my judgment, it stems from a misunderstanding of the passages in Ransom v. Higgs and Edwards v. Bairstow to which I have already referred.

101. In my view, the dicta of Lord Simon in Ransom v. Higgs apply only to a situation where primary facts have been found by the tribunal and have been accepted. Those facts may admit of only one conclusion, in which case the court can overturn the decision of the tribunal if it has reached the wrong conclusion. If, however, the facts admit reasonably of either conclusion, the decision of the tribunal as the fact-finding body is left undisturbed. The Court does not, and cannot, seek to substitute its own view for that of the tribunal because that would be to interfere with matters of "fact and degree".

102. If an applicant seeks to challenge the findings of primary fact, however, a different situation arises. The court will only interfere with a tribunal's finding of primary fact if it is demonstrated that there was no evidence to support that finding. That is not a question of fact and degree.

103. The same considerations apply to the passage from Edwards v. Bairstow, Although Mr Feenstra tried to persuade me that when he used the word "evidence", Lord Radcliffe meant evidence as opposed to facts found, it is clear that the reference should have been to facts. The court will interfere with an inference drawn from primary facts, or with a conclusion drawn from a combination of primary fact and inference, if the true and only reasonable inference or conclusion was not the one reached by the tribunal. But where the primary facts themselves are disputed, it is necessary, as I said earlier, for the applicant to demonstrate that there was simply no evidence to support such a finding.

104. Where, therefore, findings of primary fact are under attack, it is a misuse of the third test propounded by Lord Radcliffe to mount that attack. If a question of law such as the third question based upon the third test is permitted, the Board would appear to have no option but to attach the whole of the evidence, i.e. a transcript of any oral evidence, statements of witnesses and documents, to the Case Stated, for a review by the court. In my view, that cannot be right. Such a course is clearly rejected by the authorities to which I have already referred.

105. Further, if such a course is permissible, there would seem to be little point in setting up a Board of Review as a fact-finding body whose decision is intended to be final. It reduces the Board's function to one that is little more than secretarial, i.e. receiving and recording the evidence which it then transmits to the court for consideration and for a finding.

106. Mr Feenstra alse drew my attention to Richfield International Land and Investment Co. Ltd. v. C.I.R. Civil Appeal No. 59 of 1988 and C.I.R. v. Waylee Investments Limited, Inland Revenue Appeal No. 3 of 1988. Mr Feenstra said that in each case, general questions "whether there was evidence on which the Board could properly arrive at their decision", similar to his third question, had been asked. He said that no point was taken that the questions were improper. No point was taken. In Richfield, however, there was no dispute or challenge to the facts found. The dispute was whether the Board's conclusions from those facts were, in law, proper, i.e. an Edwards v. Bairstow question. In Waylee, recently decided by me, again there was no real challenge. The effective question, therefore, was "whether on the facts found, the Board could properly arrive at its decision", again an Edwards v. Bairstow question. Although some evidence in the transcript, which was a very short one, was considered, it was evidence which was not controversial.

107. The decision of a Board of Review is like a pyramid. At its base is a number of blocks consisting of primary facts found by the Board upon evidence presented to it. Above these is another line of blocks, consisting of inferences drawn from the primary facts. At the apex of the structure lies the Board's final conclusion based upon the primary facts and inferences.

108. The final conclusion may be attacked in three principal ways. First, it can be impugned upon the basis that the Board has misdirected itself, for example, upon the burden of proof, or by misinterpretation of a statute. Second, an inference or inferences or the final conclusion may be attacked upon the basis that the primary facts do not admit of an inference drawn from them, or that the primary facts or inferences, or a combination, do not admit of the final conclusion. Third, one or more findings of primary fact may be attacked upon the basis that there was no evidence upon which they could be found. Alternatively, it may be contended that the Board should have made findings of other relevant facts. If the applicant is successful in displacing any of the blocks below the final conclusion or is successful in inserting additional blocks of fact, the structure may be so distorted that the final conclusion must topple and will be set aside by the court.

109. After reviewing the authorities and carefully considering the arguments which have been addressed to me, I am satisfied of the following matters :-

1.     An applicant for a Case Stated must identify a question of law which it is proper for the High Court to consider.

2.     The Board of Review is under a statutory duty to state a case in respect of that question of law.

3.     The Board has a power to scrutinize the question of law to ensure that it is one which it is proper for the court to consider.

4.     If the Board is of the view that the point of law is not proper, it may decline to state a case.

5.     If an applicant wishes to attack findings of primary fact, he must identify those findings.

6.     Only in the most exceptional circumstances should a complete transcript of the evidence and the documents produced before the Board be attached to or incorporated in the Case Stated.

7.     Both an applicant and the Board should be astute to use "facts" and "evidence" correctly.

110. I have already dealt with the second question. The first and third questions are superficially questions of law but vague in the extreme and unsatisfactory. It was proper in the circumstances for the Board to query them. Enquiry revealed that it was findings of primary fact that were ander attack but the facts, the subject of that attack, were not specified.

111. In my judgment, these two questions do not admit of the preparation of a satisfactory Case Stated and are an embarrassment to the Board. In particular, the third question must, as it stands, require the Board to annex the whole of the evidence to the Case Stated. If the authorities to which I have referred are followed, 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-evaluate that or any other evidence to see whether it might have made a different finding.

112. It is clear that the Commissioner does not, understandably, like the Board's decision and hopes to upset it by launching an attack on a broad front with a view to an exhaustive examination of the evidence. What he wants is permission to go beating about the evidential undergrowth in the hope of flushing out some useful pieces of evidence that support his view, in total disregard of settled law that the Board's findings of primary fact, in so far as there is any evidence to support them, are sacrosanct. That is wholly impermissible.

113. In the circumstances, this application is dismissed. Subject to any representations which may be made within 14 days, costs to follow the event.