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Lee Yee Shing Jacky And Another v Board Of Review (Inland Revenue Ordinance) And Another

Judgment Cited authorities 23 Cited in Precedent Map Related
Vincent
Judgment Date22 February 2011
Year2011
Judgement NumberHCAL40/2008
Subject MatterConstitutional and Administrative Law Proceedings
CourtHigh Court (Hong Kong)
HCAL40A/2008 LEE YEE SHING JACKY AND ANOTHER v. BOARD OF REVIEW (INLAND REVENUE ORDINANCE) AND ANOTHER

HCAL 40/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 40 OF 2008

____________

BETWEEN
LEE YEE SHING JACKY 1st Applicant
YEUNG YUK CHING 2nd Applicant

and
BOARD OF REVIEW 1st Respondent
(INLAND REVENUE ORDINANCE)
COMMISSIONER OF INLAND REVENUE 2nd Respondent
____________

Before: Hon Lam J in Court

Date of Hearing: 18 January 2011

Date of Judgment: 22 February 2011

______________

J U D G M E N T

______________

1. This case has a rather long history. The Applicants are taxpayers who were assessed by the Commissioner of Inland Revenue in respect of their tax liabilities for several tax years: from 1993/94 to 1997/98. The assessments were made after due consideration of the representations made by the tax representative of the Applicants. The reasons for the assessment and the material considered by the Commissioner were fully set out in a written determination by the Deputy Commissioner of 3 November 2003[1]. After the assessments were issued, the Applicants appealed against the same to the Board of Review. The appeal was heard in July 2004 and the Board gave its decision in writing on 6 December 2004. The main issue in the appeal was whether losses sustained by Mr Lee from some share and securities transactions should be deducted from their total income. The appeal was dismissed.

2. The Applicants were not satisfied with the outcome. They further appealed by way of case stated to the Court of First Instance in HCIA 11 of 2005. In the Case Stated dated 29 September 2005, two questions of law were raised. By the time when the matter was heard in the Court of First Instance, it was agreed that only one of them needed to be addressed. The question was framed as follows in the Case Stated,

“Whether, as a matter of law, and on the facts found, we are entitled to reject the Taxpayers’ contention that Mr Lee Yee-Shing Jacky was carrying on business and trading in securities and future index activities within the meaning of Section 14 of the Inland Revenue Ordinance and that therefore the losses sustained by such business and trade carried on by Mr Lee during each of the years of assessment from 1993/94 to 1997/98 were properly deductible in the computation of the tax liabilities of the Appellant under Personal Assessment for the relevant years.”

3. The appeal was heard by Burrell J in March 2006 and His Lordship answered the question in the affirmative. The appeal was accordingly dismissed on 29 March 2006. The Applicants then appealed to the Court of Appeal in CACV 180 of 2006 and that appeal was dismissed on 14 February 2007. The Applicants further appealed to the Court of Final Appeal. On 31 January 2008, the Court of Final Appeal dismissed the appeal in FACV 14 of 2007[2].

4. Having exhausted the statutory appeal channel, the Applicants now seek to challenge the appeal procedure by way of judicial review. After hearing submissions from the Applicants and the putative respondents, A Cheung J granted leave on 20 April 2009[3]. It is contended on their behalf that the case stated procedure wrongly restricted their right of access to the court and as such unconstitutional.

5. The relief sought, as set out in a draft submitted to the court by Mr Dykes SC during the hearing on 18 January 2011, are in the following terms,

“(1) A declaration to declare that the provisions of the Inland Revenue Ordinance Cap. 112 [“the Ordinance”], as they relate to appeals by way of appeal to the Board of Review and further appeals therefrom, in particular the Case Stated on questions of law from the Inland Revenue Board of Review as provided in Section 69 of the ordinance, are unconstitutional, null and void and of no effect, for breach of Article 35 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China.

(2) A declaration that an order of Certiorari to quash the Case Stated by the Inland revenue Board of Review dated 29 September 2005 in B/R 124/03.

(3) A declaration to declare that, in fulfillment of the constitutional guarantees contained in article 35 of the Basic Law, notice of appeal to the Board of Review by the Applicants shall be treated as notice of appeal directing at the Court of First Instance in the manner as set out in Sections 65 to 67 of the Ordinance as blue penciled.”

Attached to the draft is a copy of the relevant sections with the offending parts blue-penciled.

6. It would appear that draft relief (2) is seeking an order of certiorari quashing the Case Stated instead of seeking a declaration, see paragraph (1) of the Originating Summons. Whilst paragraphs (1) and (2) of the draft relief had already been set out in the Originating Summons, paragraph (3) was not. Thus, Mr Yuen SC (appearing for the 2nd Respondent) urged this court to hear him further on the proposed blue‑pencilling of the Ordinance if the court were to conclude that such exercise should be undertaken. I bear this in mind but as it shall emerge there is no need to embark on such exercise.

7. Stripped of the niceties as to the form of relief in the context of judicial review, in a nutshell the Applicants invited this court to hold that the previous appeal by way of case stated to be a nullity and to order that his appeal be heard afresh by the Court of First Instance.

8. I further note that there is a departure in the proposed draft from the prayer in the Originating Summons. In the latter, paragraphs (3) and (4) seek to have an appeal from the decision of the Board of Review to the Court of First Instance on both facts and law. Thus, the premise was that the legality of the decision of the Board of Review was not challenged. However, in the draft relief handed up during the hearing, the new paragraph appears to proceed on the basis that the appeal would be heard by the Court of First Instance in lieu of the Board of Review. Implicitly, it seems the Applicants are seeking to have the decision of the Board of Review quashed as well. That would accord with my understanding of Mr Dykes’ oral submission that (instead of blue penciling of the sections to such extensive manner as set out in the draft submitted) it would be constitutionally compliant if Section 67 was changed to give a taxpayer a right to choose to appeal to the Court of First Instance (even without the consent of the Commissioner) instead of an appeal to the Board of Review.

9. The purpose of setting the draft relief in this judgment is to explain what the Applicants are trying to achieve by this judicial review. Implicitly, they are saying what had been done in the case stated appeal is null and void. It is however not clear to me whether they are saying that the orders as to costs made at the various stages in such proceedings are null and void as well.

10. At the outset, it should be clearly stated that the challenge by the Applicants is a systemic challenge. There is no specific allegation by the Applicants as to how and in what manner in which their appeal has been prejudiced due to their inability to have an appeal on facts or how their presentation of their appeal had been prejudiced by the Case Stated procedure. They said they were not obliged to show that they would have succeeded on their appeal if it were not circumscribed by the Case Stated procedure. Thus, they are content to base their present challenge purely on legal submissions concerning the inconsistency between Article 35 of the Basic Law and Section 69 of the Ordinance.

11. With such preamble, I shall now turn to the existing regime for challenging a tax assessment before I discuss the Applicants’ legal arguments on the unconstitutionality of such regime.

The existing tax appeal regime

12. I shall start with the relevant statutory provisions. The procedures for a taxpayer to raise objection to an assessment and to appeal against the determination of the Commissioner are set out in Part XI of the Ordinance. In the Affidavit of the Chief Assessor, the practice and procedure available to a taxpayer to challenge an assessment are explained at paragraphs 4 to 11. First, the taxpayer may object by notice in writing under Section 64 of the Ordinance. The assessment would be considered by the Commissioner in the light of the objections. Section 64(2) to (4) set out how the Commissioner shall deal with the objections including his power to investigate into the facts pertaining to the objections. If the Commissioner agrees with the objections, he is required by Section 64(3) to make the necessary adjustment. If he disagrees with the objections, under Section 64(4), he shall give his determination in writing together with the reasons for the same and a statement of facts upon which the determination was arrived at.

13. The next tier is appeal against a determination under Section 64(4) to the Board of Review in accordance with Section 66. The appeal is commenced by the giving of a notice of appeal to the Board and a statement of the grounds of appeal (Section 66(1) of the Ordinance). There is no limitation as to the nature of the grounds of appeal. In other words, it can be an appeal on facts as well as an appeal on law.

14. Section 65 deals with the constitution of the Board. The panel is made up of a chairman and 10 deputy chairmen and they shall be persons with legal training and experience. As it is, according to the affidavit of the Chief Assessor, there is a chairman and 7 deputy chairmen. The chairman and 3 deputy chairmen are senior counsel. The remaining 4 deputy chairmen are experienced solicitors.

15. In addition, the panel shall have not more than 150 other members...

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