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Hutchison International Ltd v Collector Of Stamp Revenue

Judgment Cited authorities 2 Cited in Precedent Map Related
Vincent
Judgment Date28 September 1978
CourtDistrict Court (Hong Kong)
Judgement NumberDCSA4/1977
Subject MatterStamp Duty Appeal
DCSA000004/1977 HUTCHISON INTERNATIONAL LTD v. COLLECTOR OF STAMP REVENUE

DCSA000004/1977

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

APPELLATE JURISDICTION

STAMP APPEAL NO. 3 OF 1977

BETWEEN
HUTCHISON INTERNATIONAL LTD. Appellant
and
COLLECTOR OF STAMP REVENUE Respondent

IN THE MATTER OF SECTION 18 of the Stamp Ordinance, Cap.117

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

APPELLATE JURISDICTION

STAMP APPEAL NO. 4 OF 1977

BETWEEN
HUTCHISON INTERNATIONAL LTD. Appellant
and
COLLECTOR OF STAMP REVENUE Respondent

IN THE MATTER OF SECTION 18 of the Stamp Ordinance, Cap.117

Coram: H.H. Judge LIU, Q.C. in Court

Date of Judgment: 28th September, 1978.

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JUDGMENT

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1. By a Deed of Guarantee dated 14th June 1976, the appellant guaranteed to the Mass Transit Railway Corporation the due execution of a building contract No. 212 and of any consequential agreement entered pursuant thereto and undertook to be responsible to the Mass Transit Railway Corporation as surety for its contractor for the payment of all losses, damages, costs, charges, and expenses which might become due and payable by such contractor in default or breach. The liability of the appellant under the said Deed of Guarantee was limited to the building contract price of $43,217,539.40.

2. By a Deed of Indemnity dated 14th January 1977, one Hutchison-Boag Ltd. agreed to hold the appellant indemnified against all claims which might be made against the appellant under the said Deed of Guarantee.

3. On the 17th January 1977, the said Deed of Guarantee and the said Deed of Indemnity were duly presented to the Respondent, Collector of Stamp Revenue, for adjudication as to the respective amounts of stamp duty chargeable. Being of the opinion that each of the said deeds was a bond to secure the payment of money, the Respondent assessed the stamp duty therefor under the now repealed Head 14(1) in the Schedule to the Stamp Duty Ordinance, Cap. 117, at the rate of twenty cents for every hundred dollars or part thereof. In each of the said deeds, the ceiling of liability was $43,217,539.40, and therefore in each case, the stamp duty as assessed amounted to $86,435.20.

4. The then Head 14(1) related to "BOND to secure the payment or repayment of money".

5. The appellant duly caused to be paid the said stamp duties and served on the Respondent notices of appeal in accordance with S. 18(1) of the Stamp Duty Ordinance requiring the Respondent to state and sign a case in respect to both the said Deed of Guarantee and the said Deed of Indemnity. The case stated for the assessment of Stamp Duty with which the said Deed of Guarantee was chargeable is the subject-matter in Stamp Appeal No. 3, and a case was stated in Stamp Appeal No. 4 for the assessment of Stamp duty with which the said Deed of Indemnity was chargeable.

6. There were common questions of law and facts in both appeals which were, by consent, heard at one and the same time.

7. The appellant conceded both instruments as a deed each chargeable with stamp duty of $20.00. The bone of contention was whether any of these deeds is a bond. Mr. Horton, counsel for Appellant in both appeals, relied heavily on the time-honoured definition of a "bond" as given in Blackstone's commentaries,(1) Halsbury's Laws of England(2) and the Encyclopaedia of Forms and Precedents(3):

"A bond is an instrument under seal whereby one person binds himself to another for the payment of a specified sum of money either immediately or at a fixed future date."

8. Leaving no stone unturned, counsel drew my attention to the very fact that this definition was cited with approval by the Full Court in World Magnate Shipping Limited v. The Collector of Stamp Revenue(4).

9. It was urged that proper emphasis should be placed on the words "the payment of a specified sum of money" and "at a fixed future date." Counsel submitted that at the date of each of these instruments, liability was contingent and the sum of money payable was neither fixed, definite, certain nor specified and that the future date on which liability might accrue was then unknown and thus not fixed. Counsel sought to derive support from standard forms of bond, particularly a guarantee bond in the case of building contracts. (5) In each of the precedent forms to which counsel referred, the sum payable by the obligor in the bond was prefixed and the obligation to pay was imminent but liable to be annulled by the performance or observance of a specified condition for which the bond was a guarantee. In other words, the impending obligation to pay would be defeated by the guaranteed performance or observance. The Court was also invited to peruse precedent forms of a single bond whereby the payment of a prefixed sum was not made defeasible at all. Counsel stated that his research on other precedent forms revealed no variations, though it was conceded that no particular form of words was necessary to create a bond. (6)

10. With tact and ability, the court was led through an article of Professor Simpson "The Penal Bond with Conditional Defeasance" (7) with a view to gaining an insight into the historical development of a bond for illustrating the appellant's contention that a prefixed sum in a bond is an indispensable and crucial pre-requisite.

11. Counsel's pleasant display of advocacy was somewhat arrested by The North of Scotland Bank, Limited v. The Commissioners of Inland Revenue. (8) Suffice it for me to say that the case of The Scotland Bank dealt with a letter of guarantee whereby the Bank was guaranteed a customer's contingent liabilities to the extent of $3,000; whilst the practice of the Inland Revenue had been to stamp such bank guarantees in Scotland as "agreements", on this occasion the Commissioners sought to charge it as a bond with ad valorem duty. The Court of Sessions held that the letter of guarantee was an "agreement" and was not chargeable as a bond. At page 154, Lord Clyde, the Lord President, observed:

" It is plain that the only particular in the heading 'mortgage, bond, debenture, covenant,' and so forth, under which it would be possible to bring this letter of guarantee, would be that of "bond". In one sense it is undoubtedly a "bond" for it binds the signatory, although only conditionally, to pay a sum of money not exceeding $3,000 to the Bank. A bond, in Scots law, is - broadly - neither more nor less than a written obligation to pay or perform; and a bond (in this broad sense) is none the less a bond although the granter does not consent to registration for execution. But no Scots lawyer, no Scottish bank, and no Scottish business man, would ever dream of calling a bank letter of guarantee a "bond", although - no doubt - it is such in the sense that it is a written obligation to pay money."
" The difficulty of finding a clear line of decision on such a question as this may be illustrated by reference to the definitions clause of the Transmission of Moveable Property (Scotland) Act, 1862, which refers to 'personal bonds for payment or performance, bonds of caution, bonds of guarantee, bonds of relief, bonds and assignations in security.' But while, on a very general and wide view of the matter, an informal letter of guarantee such as we are considering in this case might be regarded as the mercantile equivalent of a formal bond of caution or of a formal bond of guarantee, it is never designated as such in ordinary parlance, and neither lawyers nor business men know it by these names."

12. Counsel stressed that in the Scotland Bank's case, their lordships saw fit to adhere to the universally accepted notion of bank guarantees in Scotland and construed a letter of guarantee as an agreement. In these appeals, counsel invited me to take cognizance of the nature of these deeds as commonly understood. In reply, Mr. Barlow disclosed that all guarantees under seal had hitherto been stamped as a bond without exception and that the only one appeal against such adjudication was withdrawn. The introduction of judicial knowledge does not seem to be warranted by such disclosure, at least not in aid of the appellant.

13. The law in Scotland is decidedly dissimilar as can be seen in a passage dealing with the Scotland Bank's case in Sergeant & Sims on Stamp Duties (9) which highlights the difference in Scottish law in the matters of a guarantee bond:

"In Scotland an instrument may be chargeable as a deed notwithstanding that it has not been sealed. The affixing of a seal has no special significance in Scotland. Thus it is different in Scotland where common commercial documents as, e.g., guarantee of bank overdraft, are not regarded as bonds (North of Scotland Bank v. I.R.C., 1931 S.C.149)."

14. However, for the purpose of these appeals, the...

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