Land Concept Ltd v. Collector of Stamp Revenue

DCSA 9/2012, 42-4/2013, 111/2016

[2021] HKDC 1025

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 9 OF 2012

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

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

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 42 OF 2013

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

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

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 43 OF 2013

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

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

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 44 OF 2013

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

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

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO 111 OF 2016

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

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

Before: Deputy District Judge Zabrina Lau

Date of Written Submissions: 18 May 2021

Date of Decision: 1 September 2021

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

DECISION ON COSTS[1]

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

Introduction

1.By a decision dated 4 June 2021 (“Decision”), I ruled in favour of the Collector in respect of both of the questions submitted to the court for determination in these five stamp duty appeals.  I also directed the parties to file and exchange their respective written submissions on costs.  This is my decision on costs.

Parties’ submissions

2.During the hearing of the appeals on 18 May 2021, Mr Joseph Lee for the appellants indicated that the appellants had previously overpaid certain amounts of stamp duties (see paragraph 40 of the Decision) and there should have been a refund to the appellants in the amounts as set out in paragraph 44(4) of the Decision in any event.  Mr Lee contended that the appellants should be entitled to “compensation” due to the loss of interest arising from the delay in the refund of such excess stamp duties and that any costs that would be ordered in favour of the Collector should be deducted by one-third. 

3.As evinced by the costs submissions later filed by the appellants, their position appears to be somewhat different.  If I understand it correctly, in those submissions what the appellants are seeking to argue is that the appellants had duly paid the stamp duties calculated on the basis of a higher valuation of the four subject properties adopted by the Collector.  In the appeals, however, the Collector relied on a lower valuation which resulted in lower ad valorem stamp duties and the excess stamp duties paid by the appellants ought to have been refunded regardless of the outcome of the appeals.  The appellants argue that since the Collector has failed to make any refund even up to the hearing date of the appeals, such conduct should be taken into account for the purpose of RDC Order 65 rule 5(2), which includes the consideration of “whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim” and such conduct covers conduct before, as well as during, the proceedings.  The appellants therefore propose that the Collector be awarded costs on a party and party basis subject to a reduction of 33% by reason of the aforesaid conduct and alleged exaggeration.

4.There is no dispute that the Collector is required to make a refund of the excess stamp duties paid by the appellants even though the court holds in the Collector’s favour in respect of all the questions submitted to the court.  The Collector’s submissions, however, are focused on whether the appellants are entitled to make a claim for interest on the refund.  The Collector’s position is that the appellants are not entitled to make such as claim as a matter of law, as the present appeals are not claims for a debt or damages which may attract an award of interest.  Rather, as the Collector points out, the appeals were made under section 14 of the SDO which provides for an exhaustive procedure pursuant to which a taxpayer may challenge an assessment and recover overpaid stamp duty and such a procedure precludes a claim for interest on the overpaid stamp duty, cf Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70.

5.After filing its submissions, the Collector drew the court’s attention to a recent decision in Nomura Funds Ireland Plc v The Collector of Stamp Revenue [2021] HKCA 1040 (unreported, CACV 338/2019, 21 July 2021), where the appellant succeeded in its appeal against the Collector’s stamp duty assessment, yet the Court of Appeal refused appellant’s application for an award of interest on the refund to be made by the Collector.

6.The appellants in these cases, however, submit that Nomura has little bearing on their costs application, as they did not raise the issue of interest in their submissions on costs.

Discussion

7.Having considered the parties’ submissions, I have come to the view the it would not be appropriate to order any reduction of costs to be awarded to the Collector.  My reasons are as follows.

8.First, although the appellants frame its case by reference to Order 65 rule 5(2), if I accept the appellants’ contention and reduce the Collector’s costs by a certain percentage because the Collector has not made the refund, the practical effect of such an order would be compensating the appellants for having been deprived of the use of the funds.  That would, in substance, be tantamount to awarding interest on the refund (albeit in the form of a reduction in the amount of costs payable to the Collector) which would go against the spirit and principle of the Court of Appeal’s decision in Nomura, a decision which is binding on me.  

9.Secondly, leaving aside the ruling in Nomura, I am unable to see how the issue of refund is relevant to the Collector’s conduct of the proceedings or whether its claim was exaggerated. It is not suggested that more costs had been incurred (let alone unnecessarily incurred) as a result of the lack of refund prior to the hearing date.  It is also not the case that the amounts due to be refunded formed part of the Collector’s claim in these appeals. 

10.Thirdly, even if one assumes that the present appeals were distinguishable from Nomura on the basis that the Collector would have to make the refund regardless of the outcome of the appeals (whereas in Nomura the refunds were only payable if the appellant succeeded), I remain of the view that no reduction should be made on the Collector’s costs to be recoverable.  This is because, under section 14(1A) of the SDO, the appellants could withhold the payment of stamp duties and opt for providing a form of security which is interest bearing to protect their effective out-of-pocket position: see Nomura at §61(2).  However, the appellants did not make any such application but chose to pay the stamp duties.  The Collector should not be responsible for compensating the appellants for making such a choice.

11.Finally, while the court has a wide discretion in respect of costs, the general rule is that costs should follow the event.  There is no other reason why costs should not follow the event in the present appeals.  The appellants have not discharged the burden of persuading the court to depart from the general rule: Hong Kong Civil Procedures 2021,§62/3/3.

12.For the above reasons, I make an order that the appellants should pay the costs of the Collector, to be taxed if not agreed. 

Mr Joseph Lee, of Joseph C.T. Lee & Co, for the Appellants

Miss Minnie Wong, of Department of Justice, for the Respondent and

Miss Karen Chan, instructed by Department of Justice, for the Respondent