Richard Paul Forlee, M. A. v. Commissioner of Inland Revenue

HCIA 1/2019

[2020] HKCFI 868

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INLAND REVENUE APPEAL NO. 1 OF 2019

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BETWEEN

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J U D G M E N T

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A. Introduction

1.By summons dated 31^st May 2019, the Applicant seeks leave to appeal against decision D2/19 of the Inland Revenue Board of Review (the “Board”) dated 3 May 2019 (the “Decision”).

2.In the Decision, the Board dismissed the Applicant’s appeal against the determination of the Deputy Commissioner of Inland Revenue dated 9 July 2018 raising salaries tax on the Applicant for the years 2015/16 and 2016/17 on certain share awards and dividends received on those shares under section 8 of the Inland Revenue Ordinance (Cap. 112) (the “Ordinance”).

3.Section 8(1) of the Ordinance provides that:

“Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from Hong Kong from the following sources … (a) any office or employment of profit…”.

4.Section 8(1) is supplemented by section 11B, which provides that “[t]he assessable income of a person in any year of assessment shall be the aggregate amount of income accruing to him from all sources in that year of assessment.”

5.Section 11D(b) provides that, for the purposes of section 11B, “income accrues to a person when he becomes entitled to claim payment thereof”.

B.  Background

6.The following background is taken from the Agreed Facts submitted by the Applicant and the Commissioner to the Board.

7.The Applicant had been employed by Investec Bank Plc from 2002 until 30 June 2014 outside Hong Kong. From 1 July 2014 onwards he was employed by Investec Capital Markets Ltd in Hong Kong. Both employers were companies within the Investec Group (the “Group”).

8.On each of 29 May 2012, 4 June 2013 and 27 May 2014 (the “Award Dates”), the Applicant was awarded forfeitable shares (the “EVA Shares”) under the Group’s share incentive plan (the “Plan”). Each award provided that the relevant shares were to be transferred to and held by Investec Plc Jersey 1 Trust (the “Nominee”), and were to be released to the Applicant in yearly tranches between 29 May 2012 and 27 May 2017 (the “Release Dates”).

9.Rule 4.1 of the Plan provided that the Applicant had “all the rights of a shareholder in respect of the EVA Shares from the Award Dates, subject to the provisions of the Plan”. In particular, he had the right to demand payment of all dividends declared on the EVA Shares and the right to direct the Nominee as to how to vote in relation to the EVA Shares.

10.Rule 4.2 provided that the Applicant could not transfer, assign or dispose of the EVA Shares or any rights in respect of them prior to the Release Dates, except on his death or with permission of the Committee (as defined in Rule 1.1 of the Plan).

11.Rule 5.1 to 5.3 provided that the Applicant would immediately forfeit the EVA Shares if he ceased to be an employee for any reason before the Release Dates, except in the case of disability or death or with permission of the Committee.

12.Appendix 1 of each of the award letters stated that each tranche of the EVA Shares would cease to be subject to forfeiture on their respective Release Dates, but the EVA Shares would then be retained by the Nominee for a further specified period of time (the “Retention Period”). The Applicant was not entitled to transfer or dispose of the released tranches of EVA Shares before the expiry of the relevant Retention Periods.

13.Appendix 2 of each of the award letters stated that the EVA Shares were subject to clawback or performance adjustment, and that Investec Bank Plc had the right to reduce the value of the awards before the Release Dates in certain specified circumstances.

14.The Assessor raised salaries tax assessments for the years of assessment 2015/16 and 2016/17 including in its computation of salaries tax (i) the value of the EVA Shares released to the Applicant during those years and (ii) the dividends paid to the Applicant during those years in respect of the EVA Shares which had been granted but had not yet been released to the Applicant (the “Dividends”).

15.The Applicant objected to the inclusion of the EVA Shares and the Dividends in the assessments and these objections were dismissed by the Deputy Commissioner of Inland Revenue in its Determination. The Applicant appealed to the Board.

16.In the Decision, after referring to the facts and the provisions of the Plan, the Board observed that the EVA Shares were held by the Nominee on behalf of the Applicant subject to the rules of the Plan until the end of the Retention Period, and that it was only on the Release Dates that the EVA Shares ceased to be subject to forfeiture and only at the end of the relevant Retention Period that the respective tranche of the EVA Shares became free of any restrictions under the Plan.

17.The Board considered that those tranches of EVA Shares that ceased to be subject to forfeiture in the years 2015/16 and 2016/17 only became so as a result of the Applicant’s continued employment with a member of the Group in Hong Kong. It found that the EVA Shares only accrued to the Applicant on the respective Release Dates as he only became entitled to their value at that point.

18.The Board noted that while there were restrictions on the disposal and transfer of the EVA Shares during the Retention Period, these were of limited scope and duration so as not to affect their conclusion that the EVA Shares vested on the Release Dates.

19.As for the Dividends, the Board considered that the Applicant’s entitlement to be paid the Dividends arose not only because of the award of the EVA Shares but because the EVA Shares had not been forfeited or reduced in the interim, and that one reason for this was because he continued to be employed by a member of the Group in Hong Kong.

20.As a result, the Board concluded that both the EVA Shares and the Dividends constituted income from the Applicant’s employment and were therefore subject to salaries tax pursuant to section 8 of the Ordinance.

21.The Applicant seeks leave to appeal on two proposed questions, namely:

“Upon the true construction of Part 3 of the Ordinance and in particular sections 8(1), 9 and 11B–11D thereof and in the light of the facts agreed and found by the Board of Review:-

‘(1)  Was each of the pre-July 2014 awards to the Taxpayer of EVA Shares and/or the dividends that later accrued upon them, income arising in or derived from the Taxpayer’s employment in Hong Kong during the 2015/16 and 2016/17 years of assessment?

(2)  Did the Board err in law in concluding that the EVA Shares only vested with the Taxpayer (and thereby “accrued” to him) on the post-June 2014 dates when they were released from the risk or contingency of possible forfeiture?’”

C.  Principles

22.The relevant principles are trite. Appeals against decisions made by the Board are governed by section 69 of the Ordinance. For present purposes, the relevant provision is section 69(3)(e), which provides that leave to appeal must not be granted unless the Court of First Instance is satisfied that a question of law is involved in the proposed appeal, and (i) the proposed appeal has a reasonable prospect of success; or (ii) there is some other reason in the interests of justice why the proposed appeal should be heard.

23.The principles applicable to appeals under section 69 were recently explained by Chow J in China Mobile Hong Kong Co Ltd v Commissioner for Inland Revenue [2018] 2 HKLRD 146 at §30 as follows:

(a)  The right of appeal under section 69 is not unqualified and absolute. Any proposed question of law must be proper and satisfy a “qualitative” aspect.

(b)  A question may superficially appear to be a question of law, but if it is general and vague and does not identify the issues to be argued, it is inadequate.

(c)  Phrasing the ultimate conclusion of the Board in the form of a question does not turn it into a proper question of law.

(d)  It is also not a proper question of law if the framed question fails to identify precisely the point of law involved or any specific legal error or question.

(e)  Whether or not a proposed question is a proper question of law depends on the circumstances of the case.

24.In his written submissions, Mr Barlow SC, who appeared on behalf of the Applicant, submitted that a question is either a question of law or it is not a question of law and suggested that “the concept does not admit of degrees or of qualifying or limiting adjectives (such as “a proper question of law”)”. 

25.I do not accept this submission. I agree with Chow J’s analysis in China Mobile that the requirement that an applicant identify and state a proper question of law implicitly remains notwithstanding the change of the appeal regime under section 69 of the Ordinance from a case stated procedure to an ordinary appeal procedure. In any event, while Chow J’s judgment is not strictly binding on me, a judge ought to follow decisions of other judges of co-ordinate jurisdiction unless he is convinced that the other judge was wrong: Kan Fat-tat v Kan Yin-tat [1987] HKLR 516, 527D per Robert Tang QC (as he then was).

26.I further bear in mind that where the issue challenged by the applicant is a finding of fact, it will only amount to an error of law where (a) the decision was based on a finding of fact or inference from the facts which was perverse or irrational; (b) there was no evidence to support the decision; (c) the decision was made by reference to irrelevant factors; or (d) the decision was made without regard to relevant factors: Kwong Mile Services Ltd v CIR (2004) 7 HKCFAR 275 §§31–33 (Bokhary PJ).

27.The observations of G Lam J in CIR v Right Margin Ltd [2017] 5 HKLRD 398 at §10 are also pertinent:

“It is well-established that attacks on findings of fact only raise questions of law in very limited circumstances, such as where it is said there is no evidence at all to support the finding. The extent to which a particular piece of evidence should be accepted or rejected, and the weight to be given to it, are matters for the Board and not the court. […] In this context, the cautionary notes sounded by Evans LJ in Georgiou v Customs and Excise Commissioners [1996] STC 463, 476 are well worth bearing in mind:

‘It is right, in my judgment, to strike two cautionary notes at this stage. There is a well-recognised need for caution in permitting challenges to findings of fact on the ground that they raise this kind of question of law. That is well seen in arbitration cases and in many others. It is all too easy for a so-called question of law to become no more than a disguised attack on findings of fact which must be accepted by the courts. As this case demonstrates, it is all too easy for the appeals procedure to the High Court to be misused in this way. Secondly, the nature of the factual inquiry which an appellate court can and does undertake in a proper case is essentially different from the decision-making process which is undertaken by the tribunal of fact. The question is not, has the party upon whom rests the burden of proof established on the balance of probabilities the facts upon which he relies, but, was there evidence before the tribunal which was sufficient to support the finding which it made? In other words, was the finding one which the tribunal was entitled to make? Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was not so entitled.’”

(emphasis added)

D.  Question 2

28.The bulk of the Applicant’s submissions were directed towards this proposed Question. Furthermore, as will become apparent below, the viability of Applicant’s proposed Question 1 largely depends on that of Question 2. It is therefore prudent to deal with Question 2 first.

29.The Applicant’s challenge under this heading focuses on when the EVA Shares “accrued” to the Applicant for purposes of section 11B of the Ordinance. As set out above, section 11D(b) explains that income “accrues” for purposes of section 11B when he becomes entitled to claim payment thereof.

30.The crux of the Applicant’s submission is essentially that the Board should have focused on the substantial rights the Applicant enjoyed in relation to the EVA Shares from the Award Dates and discounted the risk of the EVA Shares being forfeited to find that he became entitled to claim payment thereof on the Award Dates.

31.It seems to me, however, that this question of when the Applicant became entitled to claim the EVA Shares is necessarily one of fact to be determined by reference to all the relevant features of the Plan as well as the applicant’s evidence of how the Plan operated. It requires balancing (i) the fact that the Applicant had the right to receive ordinary dividends payable on the EVA Shares and exercise voting rights in relation to the EVA Shares in the period between the Award Dates and the Release Dates pursuant to Rule 4.1 of the Plan against (ii) the restrictions on alienation and possibility of forfeiture in Rules 4.2 and 5.1 to 5.3 of the Plan. It also requires consideration of the Applicant’s testimony that (iii) he would have put his entitlement to the unreleased shares at risk if he left employment before the Release Dates but that (iv) to his knowledge the EVA Shares were seldom forfeited upon an employee’s resignation.

32.The Board embarked on this very inquiry in its Decision to find that the effect of the Plan was that the Applicant had no entitlement to the unreleased tranches of the Shares prior to the Release Dates. It properly construed the Plan (indeed the Applicant does not suggest otherwise) and attached minimal weight to the Applicant’s own testimony of his subjective understanding of the Plan.

33.As a result, it cannot be said that the Board misdirected itself in determining when the Applicant became entitled to the EVA Shares i.e. that it took into account irrelevant considerations or failed to take into account relevant considerations. What the Applicant challenges, instead, is the significance which the Board attached to each of the various elements, and this is not a proper question of law: Right Margin §10 (supra).

34.Nor do I think that it can be said that the Board’s conclusion was perverse or irrational or “contrary to the true and only reasonable one”, such that an appellate court is duty-bound to substitute the correct conclusion for the one reached by Board: Kwong Mile §37.

35.For all these reasons, I do not think that Question 2 is a proper question of law. In any event, however, I do not think that Question 2 is reasonably arguable.

36.Mr Barlow SC submitted that the Board confused the receipt of the EVA Shares with the alienability of the EVA Shares following receipt in determining when the EVA Shares accrued. He relied on three English decisions, namely Weight v Salmon (1935) 19 TC 174, Ede v Wilson (1945) 26 TC 381 and Abbott v Philbin [1961] AC 352 in support of his contention that the Board ought to have found despite there being restrictions on the Applicant’s ability to deal with and dispose of the shares.

37.Mr Barlow SC further submitted the Board’s finding that the EVA Shares accrued on the Release Dates in light of the restrictions on alienability between the Award Dates and the Release Dates was “illogical”, given that the EVA Shares were still subject to certain restrictions on sale during the Retention Period.

38.I do not accept these submissions. It is plain from the Decision that the decisive factor underlying the Board’s finding that the EVA Shares accrued on the Release Dates was that they ceased to be subject to forfeiture on those dates. The restrictions on alienability were merely one other feature of the Plan considered by the Board.

39.It follows that the contention that the Board’s conclusion was “illogical” is not reasonably arguable: given its focus on the risk of forfeiture of the EVA Shares prior to the Release Dates there is no inconsistency in its finding that they accrued to the Applicant notwithstanding certain limitations on the Applicant’s right to deal with the EVA Shares until the expiry of the Retention Period.

40.I do not think that the cases cited by Mr Barlow SC take the matter much further.

(a)  Weight v Salmon concerned an allotment of shares to a taxpayer at par value by his employer the market value of which was considerably higher. Lord Atkin held that the taxpayer received an “immediate profit in the nature of money’s worth” which was therefore chargeable to income tax under the Income Tax Act 1918: see p. 193. However, there is no suggestion that the shares in that case was defeasible or contingent on the occurrence a future event. In fact, his Lordship remarked that the shares he received “had no clog whatever and he was entitled to go on the market and sell those shares”. Weight is therefore wholly distinguishable from the present case.

(b)  Ede v Wilson similarly concerned an allotment of shares to a taxpayer by his employer at nominal value. The taxpayer undertook not to dispose of the shares without the permission of the directors of the company. The Court found that the shares fell to be taxed on the basis that the taxpayer received an advantage which could be turned into money, on the basis that the taxpayer could nonetheless have sold the shares in breach of the undertaking, albeit at a lesser price in light of the restriction. Again, however, this case is distinguishable since the shares concerned were not at any point subject to the risk of forfeiture.

(c)  In Abbott v Philbin, the taxpayer was granted an option to purchase shares within 10 years from the date of the grant. The terms of the option provided that it was non-transferable and would expire if the taxpayer died or retired within the 10 years. A majority in the House of Lords held that the option was to be taxed at the moment it was granted rather than when it was exercised, as the grant of the option was of its nature something which could immediately be “turned into pecuniary account”. But that was because, as Viscount Simmonds observed, the company had “vested” in him a right to have the shares allotted which he could exercise at any time, albeit one subject to a condition subsequent: p. 368. Both Viscount Simonds and Lord Reid expressly contrasted the facts of Abbott with Weight v Salmon (where income tax only became chargeable upon the allotment of shares), since in Weight the taxpayer had never been granted any “enforceable right” to be allotted shares, and instead the board had merely “expressed their willingness to entertain an application for shares”: pp. 368, 375.

(d)  I consider the present case is similarly distinguishable from Abbott. While the Applicant was allowed to exercise certain rights in respect of the unreleased tranches of the EVA Shares prior to the Release Date, it cannot be said that he had any entitlement or enforceable right to receive the value of the shares themselves prior to the Release Dates as the taxpayer in Abbott did in relation to the option. Instead, any such right of the Applicant was subject to the condition precedent that he remained in continued employment with the Group until the Release Date or was exempted from such by the Committee. As a result, I do not see how Abbott v Philbin can assist the Applicant.

41.In any event, I consider that the Board’s finding that the EVA Shares only accrued when they were released to the Applicant is entirely consistent with the reasoning of the Court of Appeal in CIR v Elliott [2007] 1 HKLRD 297 and Poon Cho Ming John v CIR [2018] 5 HKC 233.

42.In Elliott, the taxpayer was employed under a remuneration package under which he was allotted 5 million ‘incentive units’ by his employer and entitled to receive further units depending on the progress of certain projects. The units gave the taxpayer certain rights to receive income which were contingent on the taxpayer remaining in employment for five years. Five months into his employment, the taxpayer was forced to resign, and the parties entered into a Termination Agreement which compensated the taxpayer for, inter alia, the loss of his rights in relation to the existing incentive units and his right to be allotted further units.

43.The parties were agreed that the compensation payable for the loss of the future units was not chargeable to salaries tax. Le Pichon JA held that the compensation attributable to the existing ‘incentive units’ was not taxable either, on the basis that they were not an “accrued quantified entitlement” but was rather contingent on his continued employment: §§24–26.

44.In Poon Cho Ming John, the taxpayer was awarded certain tranches of share options by his employer which vested over a period of time. The grant letters provided that the options would only be granted to him if the taxpayer remained as an employee of the firm, but that the employer could at its absolute discretion accelerate the vesting date for a certain part of the unvested options if the taxpayer’s employment was terminated. Subsequently, the taxpayer and the employer entered into a separation agreement whereby the employer agreed to accelerate the vesting date of certain stock options. The Court of Appeal held that these gains attributable to the acceleration of the stock options were not income “from employment” chargeable to salaries tax, a conclusion upheld by the Court of Final Appeal ([2019] HKCFA 38).

45.Yuen JA reasoned that this gain was not one “which the Taxpayer was entitled at the relevant time under his contract of employment”, such that the purpose of the acceleration of the options by the employer was not to perform its obligations under the taxpayer’s contract of employment or to reward him for past services: §28. Her Ladyship further observed at §35 that:

“… it is irrelevant that the options were granted when the Taxpayer was employed. It is not the grant but the vesting that is of benefit to the employee. It is clear that at the time of termination, the Taxpayer did not have any accrued rights to the share options of tranches A - C as they simply had not vested.” (emphasis added)

46.On appeal to the Court of Final Appeal, Bokhary NPJ contrasted termination payments that were made in satisfaction of an employee’s existing rights under his employment contract, which constituted income “from employment” chargeable to salaries tax, with payments made in abrogation of his rights under the employment contract, which were not: §68. His Lordship agreed with the Court of Appeal that the gain fell on the non-taxability side of the line.

47.Implicit in the reasoning of both Yuen JA and Bokhary NPJ is the assumption that the value of the options in that case did not accrue to the taxpayer at the time they were granted. If that were the case, the gain received by the taxpayer represented by the options would have been in satisfaction of, and not in abrogation of, his rights under the employment contract and as such chargeable to salaries tax. Furthermore, the value of the options would also have been chargeable to salaries tax at the time they were granted, which is not in fact what did occur.

48.I of course recognise that each case must be considered on its own facts. That said, the clear and unequivocal manner in which the Court of Appeal and Court of Final Appeal dealt with the contingent benefits in Elliott and Poon Cho Ming John reinforces my view that the Applicant’s challenge to the Board’s finding that the value of the EVA Shares accrued on the Release Dates is not reasonably arguable.

E.  Question 1

49.Mr Brewer submitted that Question 1 is simply a reformulation of the ultimate conclusion of the Board in the form of a question, such that, following China Mobile, it is not a proper question of law.

50.In response, Mr Barlow SC submitted that questions of whether a transaction fell within the statutory language of a charging statute are necessarily questions of statutory construction and therefore questions of law.

51.Mr Barlow SC further observed that Question 1 is framed in the “traditional style for tax appeals” and cited various decisions of the courts in which no issue was taken with similarly formulated questions for appeal: Zeta Estates v CIR (2005) 7 HKTC 348, Canton Industries v CIR (2008) 7 HKTC 903, Shui On Credit v CIR (2008) 8 HKTC 381, CIR v Datatronic Ltd [2009] 4 HKC 518.

52.I am not entirely convinced by Mr Barlow SC’s submissions. As Chow J held in China Mobile, the proposed question of law should identify the issue to be decided with precision. Where an applicant simply reframes the ultimate conclusion of the Board as a question of law, I do not think that this is clear enough to identify the misdirection or legal error alleged to have been committed by the Board.

53.As for the cases cited by Mr Barlow SC in support of his submission, in none of them was there any argument as to whether the case stated by the Board was a proper question of law. It must be borne in mind that these cases were decided under the case stated procedure in the old section 69 of the Ordinance, such that there was little scrutiny of the formulation of the question in the appellate courts once the matter was certified by the Board as a proper question of law. These authorities are therefore of limited assistance to the Applicant.

54.However, I note that as Chow J observed in China Mobile, where a proposed question is reasonably arguable but is deficient because of a readily rectifiable technicality, the Court should not dismiss the leave application outright without giving the applicant an opportunity to amend its grounds of appeal.

55.I also note that in Heath Brian Zarin, while Coleman J expressed similar concerns about grounds of appeals formulated by phrasing the conclusion of the Board as a question, he was nonetheless prepared to accept Ground 1 in that case as framing a question of law. I am therefore inclined to give the Applicant the benefit of the doubt.

56.That said, I do not think that Question 1 is reasonably arguable either.

57.The Applicant’s primary argument under Question 1 is that his receipt of the EVA Shares was not income “from his employment in Hong Kong” for purposes of section 8 of the Ordinance because the EVA Shares accrued to the Applicant on the Award Dates, i.e. before he commenced his employment in Hong Kong.

58.On the basis that Applicant’s challenge against the Board’s determination of the date of accrual of the EVA Shares (i.e. Question 2 above) is not reasonably arguable, it follows that this argument must similarly fail.

59.The Applicant’s subsidiary contention is that the Board treated the EVA Shares as income “from employment” simply because the Applicant would not have received the sum in question but for his continuing employment, contrary to Fuchs v CIR (2011) 14 HKCFAR 74.

60.The passage complained of by Mr Barlow SC is the holding of the Board at §45 that “the [Applicant] was entitled to be paid the Dividends not only because of the relevant award of the EVA Shares but also because the EVA Shares award in question was not forfeited or reduced during the basis period and one of the reasons that was so was that he was in continuing employment in Hong Kong with a member of the Group” (emphasis added).

61.The relevant principles are clear. In Fuchs, Ribeiro PJ held that income chargeable to salaries tax under section 8(1) of the Ordinance encompasses all payments made “in return for acting as or being an employee” or “as a reward for past services or an inducement to enter into employment and provide future services”: §17. However, not every payment which an employee receives from his employer is necessarily income “from his employment”. It is not sufficient to qualify a payment as such income simply to say that the employee would not have received the sum in question if he had not been an employee: §16.

62.However, I do not think that it is reasonably arguable that the Board applied the wrong legal test. Reading the Decision, it is plain that the Board did not adopt an impermissible “but for” approach but rather considered that the vesting of the EVA Shares was part of the quid pro quo for the Applicant continuing to be employed with a member of the Group in Hong Kong. The Board’s conclusion at §43 was that:

“Those tranches of the EVA Shares that ceased to be subject to forfeiture in the years of assessment 2015/16 and 2016/17 necessarily became so due to the [Applicant’s] continuing employment with the Group in Hong Kong; those Shares became truly the Taxpayer’s as a result of his continuing employment in Hong Kong with a member of the Group.” (emphasis added)

63.The Applicant finally contends that the Dividends are not taxable in any event, because he received the Dividends in his capacity as registered shareholder independent of his employment. Mr Barlow SC submitted that taxing both the receipt of the EVA Shares and the Dividends would amount to “double taxation in the same way as taxing post-receipt interest earned from a bank on the deposit of an accrued gratuity would be”.

64.Firstly, having dismissed the Applicant’s challenge to the Board’s finding on when the EVA Shares accrued, it follows that the Applicant’s analogy with the “accrued gratuity” is inapt. On the basis the Applicant’s entitlement to the EVA Shares only accrued on the Release Dates, there is no objection to separately taxing the Dividends declared on unaccrued EVA Shares as long as this sum was a perquisite obtained “from employment”. Given that the Applicant’s right to receive dividends on the unaccrued EVA Shares was expressly subject to his continued employment with a member of the Group in Hong Kong, I do not think it is reasonably arguable that the Board erred in law in holding that the Dividends were indeed “from employment”.

65.Secondly, I consider that the Applicant’s argument is plainly unarguable insofar as it is founded on the capacity in which he received the Dividends. The authorities are clear that one must focus on substance of the payment and not merely its form: Fuchs §17, and also PA Holdings Ltd v Revenue and Customs Commissioners [2012] STC 582 at §33–37 specifically in the context of dividends. In any event, the Applicant’s assertion that he received the Dividends qua shareholder “independent of employment” proceeds on a false premise, given that as noted above his entitlement to the unaccrued EVA Shares was explicitly tied to his employment with the Group.

66.In the circumstances, Question 2 must be rejected as not being reasonably arguable.

F.  Leave on the Basis of Interests of Justice

67.The Applicant submits, nonetheless, that leave to appeal ought to be granted on the basis that the appeal ought to be heard in the interests of justice. In his written submissions, Mr Barlow SC argued that the proposed Questions raise issues of law concerning Part 3 of the Ordinance which are of public importance and which are likely to provide valuable guidance to the Board, the Inland Revenue Department, taxpayers and their professional advisors.

68.It may be true that, as counsel for the Applicant pointed out in his submissions before the Board, that this case raises issues which have so far not been the subject of determination by the Hong Kong courts and there is no direct Hong Kong authority on the matter.

69.However, it seems to me that this case is eminently capable of being dealt with on the basis of orthodox principles which the higher courts have affirmed time and time again. Furthermore, on the assumption that neither of the proposed questions are reasonably arguable, these considerations raised by the Applicant are arguably not themselves sufficiently weighty reasons in the interests of justice which justify granting leave in respect of either of the two Questions.

G.  Conclusions

70.I refuse leave in respect of both Questions. The application for leave to appeal is accordingly dismissed. I make an order nisi that the applicant do pay the Commissioner’s costs of this appeal, to be taxed if not agreed.

Mr Barrie Barlow SC, instructed by MinterEllison LLP, for the applicant

Mr John Brewer, instructed by the Department of Justice, for the respondent