JOHN WILEY & SONS UK2 LLP AND ANOTHER v. THE COLLECTOR OF STAMP REVENUE

DCSA 2/2021

[2022] HKDC 1078

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 2 OF 2021

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DECISION

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1.  Having directed that the respondent’s application for leave to appeal against my judgment herein dated 15 July 2022 (“the Judgment”) be disposed of on paper, and having considered the parties’ respective written submissions, this is my decision.

2.  I will continue to adopt the same abbreviations and nomenclatures used in the Judgment.

3.  It is trite that under section 63A(2) of the District Court Ordinance Cap 336, leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard.

4.  In the draft Notice of Appeal, the respondent raises 4 proposed grounds of appeal.

5.  Ground 1 essentially complains that I erred in placing excessive emphasis on the ordinary and natural meaning. The key idea, I understand, is the placing of excessive emphasis which relegates context and purpose into second place. In the Judgment, this court has duly considered the purpose of s.45 as opined by high authorities, and have also duly considered the context advocated, but have rejected those contexts put forth by the Collector, and concluded that the purpose of s.45 is served by the ordinary and natural meaning of the term “issued share capital”. Thus, I do not think the Collector has a reasonable prospect of success over this complaint.

6.  It is also complained under Ground 1 that this court should not “bifurcated it into “issued” and “share capital”” in arriving at the interpretation. As I have mentioned in the Judgment, it seemed to me that the key premise the Collector was working on was that the term was to be interpreted as a term of art. However, when being asked in the hearing the Collector expressly disowned that premise. The term not being a term of art, I do not see how one errs by interpreting the term through the process of first ascertaining the meaning of the components of the term. I conclude that this complaint has no reasonable prospect of success.

7.  Ground 2 in gist complains that I erred in not applying the “correct context”. It is said that I failed to consider (a) other sub-sections, namely, 45(4)(c), 45(5A) and 45(7) in s.45 – and therefore, the need to prevent abuse (“Context A”), and (b) “the context of company law upon which the concept of “issued share capital” existed at the time of the statutory enactment” (“Context B”); and that I have wrongly considered the context that (c) “it is common place that a group of associated bodies corporate would consist of members that are bodies corporate incorporated under foreign law” (“Context C”) in that there was no evidence proffered to prove it.

8.  Context C is a given, bearing in mind the indisputable fact that Hong Kong is a leading international commercial city attracting and having the presence and stationing of many multi-national conglomerates and undertakings.

9.  Regarding Context A, as have been orally canvassed in the hearing of the appeal, s.45(4) provides that s.45 shall not apply unless it is shown to the satisfaction of the Collector that certain states of affairs do not exist; while s.45(5A) requires the transferor and transferee, after having claimed the relief and during the 2-year period after the relevant instrument was executed, to notify the Collector within 30 days after the bodies corporate ceased to be associated within the meaning of s.45(2), failing which a penalty would be imposed under s.45(7). It is not submitted in the hearing or now as to how the interpretation held in the Judgment would adversely affect the working of s.45(4). Regarding the working of s.45(5A), while if the “issued share capital” has to be registered and its information “transparent” (in the sense that it is easily ascertainable by a public search), it might make easier administratively the job of the Collector to monitor the compliance of s.45(5A). Such administrative convenience should not be elevated to, and is far from being qualified as, a “context” for the purpose of construing the term “issued share capital” so as to read into it those requirements to afford the Collector the convenience desired.

10.  Regarding Context B, I have dealt in detail in the Judgment with, and have there given the reasons why I rejected, the Collector’s arguments that the term should carry with it all these implications and connotations as in the context of company law, among which reasons were my views and analyses on the legislative history of s.45 as set out in paragraphs 43 to 49 of the Judgment. It is not complained in the Notice of Appeal that such views or analyses were wrong.

11.  There is no reasonable prospect of success for Ground 2.

12.  Ground 3, as I understand it, complains that there “is also an equally important purpose, namely, to prevent corporate bodies from setting up arrangements with the purpose of claiming tax relief”. With respect, I fail to understand, and do not agree, that such is one of the legislative purposes of s.45. The legislative purpose, as I find it, has been explained in Escoigne Properties Ltd v. IRC [1958] AC 549, Shop and Store Developments Ltd v IRC [1967] 1 AC 472 and Collector of Stamp Revenue v Arrowtown Assets Ltd [2004] 1 HKLRD 77 (see paragraphs 30 and 31 of the Judgment). The fact that there are sub-sections in s.45 to, among others, ensure that the relief is excluded where certain states of affairs exist (under s.45(4)) or provide for the withdrawal of the relief and then payment of the otherwise chargeable stamp duty when the requisite association ceased within 2 years (under s.45(5A) does not make “prevention” the legislative purpose of s.45. These measures are merely ancillary to the provision of the relief. Ground 3 has no reasonable prospect of success.

13.  Ground 4 says that “an LLP, apparently being a loosely controlled and non-transparent (non-registrable) beneficial interest, is not commensurate with the qualities found in “issued share capital” as required in the context and purpose of section 45” (my emphasis). The Collector has been contesting that by the term “issued share capital”, the legislature thereby intended to be imported and embedded (subtly) the requirements of a vague set of “qualities” or “attributes” or the Entire Process. I have dealt with this in the Judgment and above. I do not think this Ground has any reasonable prospect of success.

14.  Thus, I would refuse leave under the limb that there is a reasonable prospect of success.

15.  The Collector urges that leave should be granted under the second limb, emphasizing that the point of statutory interpretation is a novel one, and that a decision from a higher court would be to the public advantage.

16.  It seems to me that to grant leave under this limb, more, other than that the point is novel, need to be shown to demonstrate that it would be to the public advantage, such as, that it is a difficult and complex point, that the question is one of general principle or that it is a question of general importance. Looking at the matter in the round, I am not sufficiently convinced that the present case meets the threshold, and take the view that whether leave ought to be given under this limb should be better decided by the Court of Appeal.

17.  In the premises, I dismiss the Collector’s application, with an order nisi, that costs be to the appellants.