Tse Sum Ping v. The Collector of Stamp Revenue

DCSA 2/2020

[2021] HKDC 1250

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

STAMP APPEAL NO. 2 OF 2020

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Coram:  His Honour Judge H. Au-Yeung (Paper Disposal)

Date of the Appellant’s Written Submissions:  24 May 2021

Date of the Respondent’s Written Submissions:  21 June 2021

Date of the Appellant’s Written Submissions in Reply: 12 July 2021

Date of Decision:  30 September 2021

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DECISION

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THE APPEAL

1.By a Notice of Appeal filed on 3 March 2020, the appellant appealed against an assessment made by the Collector of Stamp Revenue (“the Collector”) on 6 February 2020 of HK$17,988,773 being buyer’s stamp duty (“BSD”) payable under sections 4 and 29CB and Head 1(1C) of the First Schedule to the Stamp Duty Ordinance (Cap.117) (“SDO”) (“the Assessment”) in respect of an agreement for the sale and purchase dated 24 October 2013 (“the Agreement”) of certain residential properties in Hong Kong, namely: (1) Flat B, 20/F; (2) Flat C, 20/F; (3) Flat D, 20/F; (4) Flat A, 26/F; and (5) Flat B, 27/F, each of Zone 2 (T20-2) (also known as Ocean Sky) of Phase VI Residential Development in Tower 20 of The Cullinan, No.1 Austin Road West, Kowloon, Hong Kong (individually, “Flat 20B”, “Flat 20C”, “Flat 20D”, “Flat 26A” and “Flat 27B”;collectively, “the Properties”).

2.By consent, the appeal herein is disposed of on paper.

THE CASE STATED

3.As accepted by Mr Mariani for the appellant, the timeline and factual background of this appeal have in substance been set out in the case stated by the Collector dated 17 November 2020 (“the Case Stated”).  I will therefore first of all refer to some of the more relevant parts of the Case Stated as follows.

The terms of the sale and purchase

4.On 6 October 2013, Sun Hung Kei Real Estate Agency Limited (“SHK Agency”) issued a price list of the properties at Phase VI of The Cullinan, in which it was provided that:

(1)  The purchaser shall pay a preliminary deposit equivalent to 5% of the purchase price upon the signing of the preliminary agreement for sale and purchase.

(2)  Where the purchaser completes the sale and purchase of the property within 150 days after the date of signing of the preliminary agreement for sale and purchase, the purchase shall be entitled to an Early Completion Cash Rebate (“Early Completion Rebate”), which is equivalent to 9% of the purchase price.

(3)  If the purchaser has obtained a transitional loan from the designated financing company, the Early Completion Rebate will first be paid to the said company for repayment of any outstanding amount of transitional loan, and any balance will then be paid to the purchaser.

(4)  If the preliminary agreement for sale and purchase is signed on or before 31 October 2013, the purchaser shall be entitled to a special cash rebate which is equivalent to 70% of the total amount of stamp duty chargeable on the agreement for sale and purchase and paid by the purchaser (“Special Rebate”).

5.By a preliminary agreement for sale and purchase dated 12 October 2013 (“the Preliminary Agreement”), the appellant agreed to purchase the Properties at a total consideration of $119,925,150 (“the Total Purchase Price”).  According to the Preliminary Agreement, the Total Purchase Price would be payable as follows:

(1)  $5,996,257.50 shall be paid upon the signing of the Preliminary Agreement;

(2)  $5,996,257.50 shall be paid upon the signing of the Agreement;

(3)  $5,996,257.50 shall be paid on or before 26 November 2013;

(4)  $5,996,257.50 shall be paid on or before 11 March 2014; and

(5)  $95,940,120 shall be paid on or before 1 December 2015.

Parties related to this appeal

6.At all relevant times, the appellant was a holder of Hong Kong Permanent Identity Card.  She was 27 years old when the Agreement was entered into in 2013.  According to her tax return, her salary as an audit accountant for the period between 1 April 2013 and 21 September 2013 was in the total sum of $114,495.

7.The appellant’s mother is Madam Chan Fung Chi (“Madam Chan”).

8.According to the annual return filed on 11 January 2014 of a company known as Easyman Limited, Madam Chan and Mr Ng Lap Seng (“Mr Ng”) were the directors and shareholders of the said company. The appellant became a director and a shareholder of Easyman Limited on 14 October 2016 and 18 October 2016 respectively.

9.Mr Nocom Hermoso (“Mr Nocom”) and Madam Ng Fei Lan (“Madam Ng”) are husband and wife.  Ms Nocom Viviana, Ms Nocom Jahden and Mr Nocom Malvin are their children.  Madam Wong Yuen Ling (“Madam Wong”) is the mother of Mr Nocom, whereas Mr Ng and Madam Pun Nun Ho (“Madam Pun”) are the parents-in-law of Mr Nocom.

10.Mr Ho Chiu Ying (“Mr Ho”) and Madam Lin Hui Hong (“Madam Lin”) are husband and wife.  Ms He Xueying, Ms He Xueshi and Mr Ho Qiqiang Eason are their children.

11.According to the account opening mandate of Join Benefit Limited (“JBL”) with the Bank of China (Hong Kong) Limited (“BOC”) dated 7 August 2013, the business address and correspondence address of JBL were as same as that of Easyman Limited, and its ultimate owner and control person was Ms He Xueying. 

12.San Kin Yip Holdings Company Limited (“SKY Limited”) was a company of which Mr Nocom, Madam Ng, Mr Ng, Madam Pun and another person known as Ng Kei Lin were directors.  SKY Limited’s registered office was the same as Easyman Limited’s address and the business address and correspondence address of JBL. 

13.A chart setting out the relationship among the aforesaid parties can be found at the Annexure of this Judgment.

Stamp Duty

14.Based on the Total Purchase Price, the Agreement was charged with ad valorem stamp duty of $5,096,819 under the then prevailing head 1(1A)(k) in the First Schedule to the SDO on 31 October 2013.  Pursuant to section 71 of the SDO, additional stamp duty of $5,096,819 was paid in respect of the Agreement on 5 September 2014.

15.On 28 February 2014, the Stamp Duty (Amendment) Ordinance 2014 was published in the Gazette.  Pursuant to this amendment, section 29CB was added to the SDO which provided that BSD would be applicable to an agreement for sale of any residential property executed on or after 27 October 2012 subject to certain exceptions.  Section 29CB(2) of the SDO provides that such an agreement is not chargeable with BSD if it is shown to the satisfaction of the Collector that the purchaser or each of the purchasers under the agreement is a Hong Kong permanent resident (“HKPR”) acting on his or her own behalf.

Information and documents provided by the appellant

16.Following the enactment of the said Amendment Ordinance, the appellant’s solicitors submitted a supplemental information form together with a statutory declaration dated 5 March 2014 (“the Statutory Declaration”) made by the appellant to apply for exemption from BSD in respect of the Agreement.   In the Statutory Declaration, the appellant declared that she was a HKPR and she acquired the Properties on her own behalf. 

17.By a letter dated 5 December 2017, the respondent requested the appellant to provide information and documents in relation to the sources of finance for the acquisition of the Properties and the usage of the Properties, and a confirmation on whether any trust arrangement had been executed in connection with the acquisition and usage of the Properties.

18.On 28 March 2018, the appellant’s former solicitors wrote to the Collector and enclosed the appellant’s reply dated 28 March 2018 (“the Reply”) with certain supporting documents.  According to the information and documents provided:

(1)The Purchase Price of the Properties and the stamp duty payable on the Agreement were financed as follows:

Date of advance / Loan draw down	Date of payment	Party	Nature of payment	Amount (HKD)
11/10/2013	11/10/2013	Madam Chan	Preliminary deposit 5%	5,996,257.50
19/10/2013	19/10/2013	Loan from JBL	Further deposit 5%	5,996,257.50
19/10/2013	19/10/2013	Loan from JBL	30% of stamp duty	3,058,096.00
-	-	Honour Finance Co. Ltd	70% of stamp duty	7,135,547.00
20/11/2013	20/11/2013	Madam Chan	Further deposit 5%	5,996,257.50
19/12/2013	11/3/2014	Loan from JBL	Balance of payment	3,000,000.00
23/1/2014	11/3/2014	Loan from JBL	Balance of payment	800,000.00
6/3/2014	11/3/2014	Loan from JBL	Balance of payment	51,253,940.50
11/3/2014	11/3/2014	Madam Chan	Balance of payment	11,696,059.50
-	11/3/2014	Appellant	Balance of payment	437,854.84
11/3/2014	11/3/2014	Mortgage loan from BOC	Balance of payment	35,000,000.00
			Total:	130,370,270.34

(2)The loan from JBL was made verbally between Mr Ho on behalf of JBL, and Madam Chan and the appellant.  The appellant would repay the loan upon the disposal of any of the Properties.  In exchange, Mr Ho and his family members were permitted to stay in Flat 27B.  Whenever the appellant sold any of the Properties, she would use the proceeds to repay partially and reduce the principal of the outstanding loan.  Flat 27B would not be sold until the outstanding loan has been repaid in full by the appellant. No interest was to be charged by Mr Ho on the loan. 

(3)Repayment of the mortgage loan from BOC was supported by Madam Chan and Mr Ho.

(4)Flat 20B, Flat 20C and Flat 20D had been rented out whilst Flat 26A and Flat 27B were occupied by the appellant and Mr Ho’s family respectively.  All rental income was and would be received by the appellant.  Details of the tenancy were as follows:

Property	Tenant	Rental period
Flats 20B and 20C	Mr Nocom	1/1/2017-31/12/2018
Flat 20D	Sumitomo Mitsui Trust (Hong Kong) Limited	20/3/2017-19/3/2019

(5)The Properties were not under any trust arrangement.  There was no declaration of trust or similar legal documents executed in respect of the Properties.

(6)A sum of $1,200,000 was transferred from Mr Nocom’s bank account to the appellant’s bank account on 16 March 2018.

(7)According to the facilities letters issued by BOC on 20 February 2014, the appellant was required to place deposits of not less than $66,000,000 before the date of drawdown.

(8)The monthly repayments of the mortgage loans were as follows:

Properties	Monthly repayments (HKD)
Flat 20B	32,862.16
Flat 20C	18,256.76
Flat 20D	18,256.76
Flat 26A	25,559.46
Flat 27B	32,862.16
Total :	127,797.30

(9)According to 4 letters issued by BOC on 14 November 2016, the mortgage loans for Flats 20B, 20C, 26A and 27B had been fully settled.

Information gathered by the Collector

19.Honour Finance Co. Ltd. confirmed that the appellant had obtained a loan of $7,135,547 (“Transitional Loan”) in connection with the purchase of the Properties.  The Transitional Loan was drawn down on 24 October 2013 and had been fully repaid on 11 March 2014.

20.SHK Agency had provided a breakdown of the respective purchase price of each of the Properties as follows:

Properties	Purchase Price (HKD)
Flat 20B	30,458,900
Flat 20C	16,489,150
Flat 20D	16,518,600
Flat 26A	24,690,500
Flat 27B	31,768,000
Total:	119,925,150

21.Two cheques drawn by SHK Agency in favour of the appellant had been deposited into the appellant’s bank account at BOC as follows:

Dates of Cheques	Amount (HKD)
22/4/2014	7,225,491
13/11/2014	3,567,774

22.The above cheques represent payments of Early Completion Rebate and Special Rebate by SHK Agency to the appellant.

23.The appellant was entitled to Early Completion Rebate and Special Rebate in the sums of $10,793,264 and $3,567,774 respectively.  The total of amount of $14,361,038 was firstly applied to repay the Transitional Loan ($7,135,547) provided by Honour Finance Co. Ltd.  The balance of $7,225,491 was paid to the appellant by way of the above cheque dated 22 April 2014.

24.The appellant was entitled to another Special Rebate in the sum of $3,567,774 which was paid by cheque dated 13 November 2014 referred to above.

25.The appellant had drawn 2 cheques on her account with BOC as follows:

Dates of Cheques	Payees	Amounts (HKD)
5/5/2014	Madam Ng	2,828,620.00
17/12/2014	SKY Limited	1,396,704.50

26.The manager of The Cullinan stated that the following persons had applied for resident cards in respect of the Properties[1]:

Properties	Identities	Date of application	Nature of relationship declared
Flat 20B	Nocom Viviana	18/3/2014	Owner’s family member
	Ms Ng (Mr Nocom’s wife)	20/3/2014	Owner’s family member
	Mr Ng (Mr Nocom’s father-in-law)	20/3/2014	Owner’s family member
	Ms Pun (Mr Nocom’s mother-in-law)	24/3/2014	Owner’s family member
	Ms Wong (Mr Nocom’s mother)	24/3/2014	Owner’s family member
	Mr Nocom	9/4/2014	-
Flat 20C	Mr Nocom Malvin	24/3/2017	Owner’s family member
Flat 20D	Ms Lee Yen Chiao	6/12/2014 (cancelled on 1/1/2016)	Owner’s family member
	Cheung Chun Kit	29/3/2015	Owner’s family member
	Ms Helen Tong	22/6/2015 (cancelled on 3/3/2017)	Tenant
Flat 26A	Mr Tsang Chi Ming	13/7/2014	Owner’s family member
Flat 27B	Mr Ho, Madam Lin, Mr Nocom, Madam Ng, Madam Pun and Madam Chan	14/3/2014	Owner’s family members
	The Appellant	15/3/2014	Owner

27.CLP Power Hong Kong Limited stated that the registered users of electricity supply of the Properties were as follows[2]:

Properties	Start date	End date	Registered users
Flat 20B	27/3/2014	-	Mr Nocom
Flat 20C	27/3/2014	-	Mr Nocom
Flat 20D	27/3/2014	6/7/2015	Ms Lee Yen Chiao
Flat 20D	7/7/2015	2/9/2016	Ms Helen Tong
Flat 26A	27/3/2014	-	The appellant
Flat 27B	28/3/2014	23/12/2016	Mr Ho
Flat 27B	24/12/2016	-	He Qiqiang Eason

28.JBL’s account with BOC had, among others, the following transactions:

(1)Three sums were deposited into the account between the date of the Preliminary Agreement and that of the Assignment:

Dates of Cheques	From	Amounts (HKD)
18/10/2013	Mr Nocom	900,000
18/10/2013	Madam Wong	600,000
28/10/2013[3]	Mr Nocom	550,000

(2)On 11 October 2016, an amount of $50,000,000 was remitted by paid into the account by Companhia De Investmento Predial Ou (Nam Seng Limitada).[4]

(3)On 19 October 2016, JBL paid the appellant $30,000,000 by cheque.

29.According to various mortgage loans application forms dated 23 January 2014, JBL was stated to be the appellant’s employer, and the company’s industry and business nature was described as “Accounting/audit”.

30.Madam Chan also had 2 bank accounts with BOC. Between the date of the Preliminary Agreement and that of the Assignment, her accounts had been deposited with the following sums of money:

Dates	From	Amounts (HKD)
11/10/2013	Madam Pun	1,500,125
23/1/2014	Madam Pun	250,000
24/1/2014	Mr Ng	4,560,000

31.Madam Lin had purchased a flat at a development known as The Coronation (御金國峰) at a consideration of $23,981,000 on 11 January 2012.  On 6 March 2014, Madam Lin obtained a mortgage facility up to $10,000,000 from BOC and transferred a sum of the same amount to Madam Chan.  A handwritten note “按御金國峰借$10,000,000付天璽尾數” was marked on the bank advice.

The Collector’s stance

32.As the Collector was of the view that the appellant was not acting on her own behalf under the Agreement for the purposes of section 29CB(2) of the SDO, the Agreement was not exempted from BSD.  On 6 February 2020, the Collector issued the Assessment in respect of the Agreement under which $17,988,773 ($119,925,150 x 15%) was levied.

The appellant’s response to the draft case stated

33.In response to the Collector’s invitation for comments on the draft case stated, the appellant provided, among others, the following documents and information:

(1)Copy of a tenancy agreement dated 24 June 2015 between the appellant and Ms Helen Tong in respect of Flat 20D for 2 years from 1 July 2015;

(2)Copy of a tenancy agreement dated 17 March 2017 between the appellant and Sumitomo Mitsui Trust (Hong Kong) Limited in respect of Flat 20D for 2 years from 20 March 2017;

(3)Copy of a cheque dated 13 December 2013 in the sum of $2,050,000 drawn by JBL in favour of Madam Ng;

(4)Copy of a customer advice issued by Bank of China (Macau) on 11 October 2016 showing that a sum of $50,000,000 was remitted from Companhia De Investmento Predial Ou Nam Seng Limitade to JBL;

(5)On 13 December 2013, Madam Chan remitted a sum of $4,000,000 from her BOC account to Madam Pun’s account with Bank of China (Macau);

(6)In relation to the matters referred to in paragraph 31 above:

(i)    Madam Chan had transferred a sum of AU$300,000 to Ms He Xueshi on 4 February 2008;

(ii)   On 12 June 2009, a sum of $3,000,000 was transferred from Neson Investments Limited’s account to Madam Lin’s account;

(iii)  On 4 May 2012, two cashier orders totalling $6,000,000 were made payable to P. C. Woo & Co. Client’s Account – The Coronation. The fund of one of the cashier orders in the amount of $4,000,000 came from Madam Chan’s account.

Questions for the opinion of the court

34.The questions submitted for the opinion of this court are:

(1)Whether the appellant was acting on her own behalf under the Agreement for the purposes of section 29CB(2) of the SDO;

(2)Whether the Agreement is chargeable with BSD; and

(3)If “yes”, with what amount of BSD the Agreement is chargeable.

35.As I pointed out in another Decision which I gave in this appeal, there cannot be any dispute that the crux of the matter is in relation to section 29CB(2) of the SDO which provides that:

“A chargeable agreement for sale is not chargeable with buyer’s stamp duty under head 1(1C) in the First Schedule if it is shown to the satisfaction of the Collector—

(1) that the purchaser, or each of the purchasers, under the agreement is a Hong Kong permanent resident acting on his or her own behalf;

(2) …

(3)  …”

(emphasis is mine)

36.The appellant was undoubtedly a HKPR in 2013. 

37.It is undisputed that the burden is on the appellant to satisfy the court that, on the balance of probabilities, she was acting on her own behalf when she entered into the Agreement.

38.I will now turn to consider whether the appellant has discharged her burden.

DISCUSSION

39.When considering whether the appellant entered into the Agreement on her own behalf, in my view, it is of utmost importance that the court should take into account the sources of funding of the acquisition.

40.It can be seen from the Case Stated that the appellant’s funds for acquiring the Properties came from 5 different sources:

(1)BOC;

(2)Honour Finance Co. Ltd.;

(3)JBL;

(4)Madam Chan; and

(5)Her own self.

41.I will look at these sources more closely in turn below.

BOC

42.The appellant had obtained 5 mortgages from BOC on 11 March 2014 for the following amounts to partly fund the acquisition of the Properties:

Properties	Mortgage amounts (HKD)
Flat 20B	9,000,000
Flat 20C	5,000,000
Flat 20D	5,000,000
Flat 26A	7,000,000
Flat 27B	9,000,000
	35,000,000

43.Mr Mariani pointed out that BOC was an independent third party from which the appellant had obtained the aforesaid mortgage loans at arm’s length.  It may be because of this that he did not say much further on these loans.

44.While I accept that BOC was indeed an independent third party, I do not think the analysis should stop there and then, for there are two other aspects to which I am of the view attention should be paid:

(1)The source of funding of $66,000,000 which the appellant was required to deposit with BOC before the drawdown; and

(2)The repayment of the mortgage loans.

Funding of $66,000,000

45.The requirement of placing deposits of not less than $66,000,000 before the date of drawdown was stipulated in all 5 mortgage loans facilities letters dated 20 February 2014 issued by BOC.  Without compliance with such a requirement, the mortgage loans would not be released by the bank.

46.As the mortgage loans had indeed been made available by BOC for the appellant, it can be safely assumed that the sum of not less than $66,000,000 must have been deposited into the appellant’s account with BOC.  Mr Mariani has not contended otherwise.

47.In my view, the court should take into account the source of such $66,000,000. 

48.However, the appellant had kept silence on where she had procured this large sum of money. 

Repayment of the mortgage loans

49.According to the Reply, repayment of the mortgage loans was supported by Madam Chan and Mr Ho.  However, the appellant did not further explain how they did it.

50.Upon investigation by the Collector, it was revealed that, upon the appellant’s receipt of a cheque of $30,000,000 from JBL on 19 October 2016, she had redeemed 4 out of 5 flats of the Properties on 11 November 2016.  In her affidavit, the appellant also admitted that she had “substituted the mortgage loan from BOC with a separate loan from JBL”.

51.It is therefore necessary to look more closely at this repayment.  I will do that when I consider the various loans granted by JBL to the appellant below.

52.On a separate note, Mr Mariani seemed to be suggesting that the fact that BOC had granted a large mortgage loan to the appellant supports her case that she had the financial ability to enter into the Agreement on her own behalf.  In Mr Mariani’s own words:

“There was an apparent error in [the appellant’s] mortgage application form in that whereas she herself is a CPA, the business of JBL was, plainly, not accounting or audit. That said, it is likewise apparent that BOC was satisfied with its due diligence of [the appellant’s] financial affairs and her ability to repay considerable sums of both interest and principal. BOC would not have agreed to extend a HK$35 million mortgage to [the appellant] unless she had at the time she made the mortgage application shown to the bank’s satisfaction that she had substantial assets and income.”[5] (Mr Mariani’s emphasis)

53.Pausing here, it is noted that the appellant had filled in, among other things, the following personal particulars in the BOC mortgage loan application forms dated 23 January 2014:

Current employer:	JBL
Company Industry & Business Nature:	Accounting / Audit
Occupation & Position:	Consultant
Job Nature:	Permanent
Start Date of Current Employment:	November 2013
Monthly Salary:	$200,000
Monthly income (e.g. bonus, commission, housing allowance, rental income, etc.):	-
Do the borrower(s) and/or the Guarantor(s) of this application have any outstanding indebtedness and/or contingent liabilities that they are liable in and outside Hong Kong (if applicable) secured by other property(ies)?	No
Do the borrower(s) and/or the Guarantor(s) of this application have any outstanding indebtedness and/or contingent liabilities that they are liable in and outside Hong Kong (if applicable) not secured by property(ies)?	No

54.As can be seen in the quotation above, Mr Mariani admitted that there was an “apparent error” in the mortgage application forms in that the business of JBL was not “accounting or audit”. 

55.It appears to me that that was not the only so-called “error”:

(1)As pointed out by Ms Cheung in paragraph 50 of her written submissions (to which Mr Mariani replied by virtue of paragraph 37 of his submissions quoted above), it had never been mentioned anywhere else (in particular, in the Reply and in the appellant’s affidavit filed in support of this appeal) that there was any employment relationship between the appellant and JBL.  On the other hand, it had been reported in the tax return for the 2013/14 year by the appellant that she had been employed by 九龍倉有限公司 as an Assistant Internal Audit Officer in the period between 26 November 2013 and 31 March 2014. This is contrary to what the appellant stated in the mortgage application forms. It should be noted that Mr Mariani did not give any answer to what Ms Cheung stated in this regard.

(2)The appellant alleged in the mortgage application forms that she was earning salary of $200,000 a month.  This, again, was contrary to what she reported in the said tax return, in which she only stated that she had earned salary in the total sum of $75,000 in the period between 26 November 2013 and 31 March 2014 (i.e. around $18,000 a month).  Further, it is noted that the appellant alleged in her affidavit that, as part of the terms of the loan agreement with JBL, she had undertaken to act as a company secretary and in-house accountant on a “highly subsidised basis” for various companies connected to Mr Ho.  The appellant has not made it clear as to whether the alleged monthly salary of $200,000 was related to such undertaking.  If it was not so related, then the representation of earning such high income in the mortgage application forms remains unexplained; on the other hand, if the appellant’s allegation is that such undertaking did relate to the monthly salary of $200,000, then this assertion does not make any sense to me, because if it was a term of the JBL loan agreement that the appellant had to undertake certain work for JBL, there is no reason why JBL had to pay the appellant for such work, not to mention such a high level of salary, bearing in mind that the appellant was only earning around $18,000 a month in her reported employment with 九龍倉有限公司at the time.

(3)According to the appellant’s affidavit, she had entered into a loan agreement in around October 2013 with JBL under which JBL had advanced her a loan on 19 October 2013 to pay the First Deposit and 30% of the ad valorem stamp duty.  The total amount of the First Deposit and the 30% ad valorem stamp duty was in the region of $9,000,000.  There is no evidence that such a loan had been repaid by the end of January 2014.  However, the appellant did not mention about such a loan when she filled in the BOC mortgage application forms dated 23 January 2014, which was just around 3 months after the aforesaid loans were advanced. 

56.BOC must have approved the appellant’s mortgage applications upon reliance on the information provided by the appellant.  It must be because of the importance of the information provided in the mortgage application forms that the appellant was required to make the following declaration at the end of those forms:

“I/We understand that by making any intentional or negligent misrepresentation(s) and/or providing false information or omitting to provide relevant information in connection with this application, I / we may incur civil and/or criminal liability. I / We have read the content of this Declaration and [agree] to the above […]”

57.The appellant had ticked the “agree” box in the Chinese version of the said declaration.

58.Having taken the above into account, I am of the view that BOC’s approval of the appellant’s mortgage applications cannot assist the appellant, because on the face of it the picture painted by the appellant in the mortgage application forms on her financial ability was stronger than the fact.   

59.I should also add that even if there were no such “errors” in the BOC mortgage application forms as identified above, this court would have to exercise its independent judgment on the question laid before the court, and is in no way bound by the bank’s decision to grant the appellant the mortgage loans.

Honour Finance Co. Ltd

60.The appellant borrowed around $7.1 million from Honour Finance Co. Ltd. to pay off 70% of the ad valorem stamp duty.  The Collector accepted that this “looks like a legitimate normal loan, and nothing arises from that”[6].

JBL

61.The appellant alleged that JBL had lent her various sums of money pursuant to an oral loan agreement for the purpose of paying part of the ad valorem stamp duty, part of the balance of the Total Purchase Price, and redeeming 4 out of the 5 mortgages.  The total amount of loans was $94,108,294.

62.It may be helpful to recap at this point that:

(1)The ultimate owner and control person of JBL was Ms He Xueying;

(2)Ms He Xueying was one of the three children of Mr Ho and Madam Lin.

63.The appellant explained in her affidavit, among other things, that:

“18. Mr Ho and his family were willing to provide loan finance to me via JBL on such terms as aforesaid because they are longstanding family friends of mine and of Ms Chan. Indeed, Ms Chan had previously advanced loan finance of approximately HK$6 million to Ms Lin (Mr Ho’s wife) to enable her to purchase her property at the Coronation (a development in Hong Kong) in May 2012, when she was at that time unable to obtain mortgage finance for the same […]

19. Furthermore, Ms Chan had also advanced: (1) AU$300,000 (approximately HK$2.12 million at the exchange rates then prevailing) in 2008 to Ms He […]; and (2) HK$3 million to Ms Lin in 2009 […]. For those reasons, it was much easier for me to deal with JBL and Mr Ho’s family than it would have been for me to contract alternative finance arrangements with a conventional financial institution. Mr Ho considered he owed our family a favour for the loans we had previously advanced to his family, and he was accordingly well-disposed to reciprocate.

[…]

23. On 19 October 2016, JBL advanced to me a further loan of HK$30 million under the JBL Loan Agreement to discharge the BOC-HK mortgage loans in relation to Flats 20B, 20C, 26A and 27B […]. In effect, that meant that I substituted the mortgage loan from BOC-HK with a separate loan from JBL. I opted for this course of financing because, as noted above, Ms He was and still is a long-term friend of mine; accordingly, JBL could offer more favourable loan terms than those of BOC-HK under a commercial mortgage. This was a commercial decision on my part to save on loan finance costs.

[…]

25. For all the loans from JBL to finance the purchase of the Properties, the JBL Loan Agreement provided that:

a. if I sold any of the Properties, I would apply the proceeds to reduce the principal of the outstanding loans;

b. in consideration for the loans, Mr Ho and members of his family would be permitted to reside in Flat 27B;

c. Flat 27B would not be sold until the outstanding loans have been repaid in full by me;

d. no interest was to be charged with respect to the loans; and

e. I would undertake to act as company secretary and in-house accountant on a highly subsidised basis for various companies connected to Mr Ho.

26. It should therefore be apparent that JBL agreed to forego any interest with respect to the principal of the JBL Loan in consideration for a grant to Mr Ho and his family of a right to reside in Flat 27B.  They in effect resided there as licencees, as there was no formal tenancy or lease agreement between them and me.  By my computations, commercial interest on a loan of HK$30 million would, broadly speaking, have been comparable to a market rent for Flat 27B; however, the advantage of having JBL as lender was that I had, in Mr Ho and his family, a guaranteed tenant for Flat 27B, thereby mitigating the risk of a lack of cash-flow to finance any monthly interest payments that would otherwise have been payable if the apartment were to fall vacant.  Taken in the round, I concluded that this arrangement was the most prudent and commercially convenient solution.” 

64.Ms Cheung for the Collector submitted that the appellant’s case regarding JBL defies common sense, and “no right-minded, reasonable man would ever believe that the appellant could have sourced funds from JBL in the ways she alleged”[7]. I totally agree.

65.Mr Mariani had reminded this court that the arrangements involved very wealthy people.  This was what he said in his submissions:

“The Collector has said that the arrangements for funding the acquisition of the Properties as [the appellant] has explained them were incredible, or otherwise contrary to good commercial sense. That assertion, however, omits due consideration of context. That which is a reasonable financial arrangement for a family resident on the Peak may be extravagant for a family in Sham Shui Po. In the instant case, there is nothing inherently unusual in that fact that significant sums of money changed hands between very wealthy persons who knew each other well, and who were accustomed to transacting business together.”[8]

66.Mr Mariani is certainly right to say that we have to consider the factual matters before the court in the right context, and indeed, having done so, I do not think I can accept the appellant’s assertions, for she is asking this court to believe that:

(1)JBL (or Mr Ho) had agreed to lend her around $94,000,000 on the basis of an oral agreement, in the absence of even a simple written agreement recording the loan;

(2)The reasons why Mr Ho had agreed to lend such a large sum of money to her were that they were long-term family friends, and Madam Chan had advanced a total of around $5.12 million to Mr Ho’s family members back in 2008 and 2009.

67.By any standard, $94,000,000 is not a small amount. However, as pointed out by Ms Cheung, the loans were allegedly not supported by any security or any backing of proprietary right or interest.  It is simply incredible.

68.In paragraph 19 of the appellant’s affidavit quoted above, the appellant alleged that her mother had advanced 2 sums of money to Mr Ho’s family members back in 2008 and 2009 respectively.   She then further explained in paragraph 22 thereof:

“I would clarify that as regards the sums shown to have been advanced to me by Ms Chan in paragraph 25(a) of the Case Stated, HK$10 million of the sum I received from her on 11 March 2014 was in reality indirectly derived from Ms Lin, who paid that sum to Ms Chan in substance to repay her for the advances mentioned in paragraph 19 above […]. Ms Chan then transferred this sum to me as a gift.”

69.Was this $10,000,000 really a repayment by Madam Lin to Madam Chan as alleged?  I do not accept that it was the case.

70.To recap, Madam Lin obtained a mortgage facility on 6 March 2014 for up to $10,000,000 from BOC and transferred a sum of the same amount to Madam Chan.  A handwritten note “按御金國峰借$10,000,000付天璽尾數” was marked on the bank advice.  The wordings clearly show that Madam Lin was not making a repayment to Madam Chan, but was making a payment towards the purchase price in a transaction in respect of The Cullinan.  Further, the total loan amount and the repayment amount (around $5,120,000 and $10,000,000) simply do not match.

71.Moreover, the appellant’s explanation as to the logic of the further loan of $30,000,000 in paragraph 26 of her affidavit (as quoted in paragraph 63 above) actually does not stand scrutiny.  She stated that Mr Ho and his family was willing to forego interest on the principal of the loans so as to exchange for a right to reside in Flat 27B, and that the commercial interest on a loan of $30,000,000 would have been comparable to the market rent for Flat 27B.  However, it is evident that Mr Ho and his wife Madam Lin had applied for resident cards on as early as 14 March 2014 (3 days after the date of the Assignment of the Properties).  Mr Ho had also become a registered user of electricity for Flat 27B since 28 March 2014.  In other words, Mr Ho had at least been given the permission to reside in Flat 27B long before the further loan of $30,000,000 was made in October 2016.  Hence, I do not accept that the grant of the right to reside has anything to do with the making of the further loan of $30,000,000 as alleged.

72.The weakness of the appellant’s case is also exposed by the fact that she had failed to state clearly what the terms of the alleged oral agreement are.  In this regard, Ms Cheung submitted that:

“What is more, the Appellant has now added a new term as appears in para.25e of her Affidavit [where she stated that ‘I would undertake to act as company secretary and in-house accountant on a highly subsidised basis for various companies connected to Mr Ho.’]. This addition is significant in the sense that evidently the Appellant was making up an agreement along the way when her case was suspect. If this substantial agreement really existed at all, it is hard to imagine that the Appellant would have missed this para.25e term in her Reply on 28 March 2018, which was submitted to the Respondent via her then solicitors. As pointed out in the above, the addition of this term in para.25e is an obvious post-Reply attempt to cover the highly suspicious statement in the BOC mortgage application form dated 23 January 2014 that the JBL was the employer of the appellant (which status was not reported in the Appellant’s tax returns and inconsistent with her case in her Reply dated 28 March 2018) and that JBL’s industry and business was ‘accounting/audit’.”

73.Mr Mariani answered Ms Cheung’s submissions as follows:

“As the JBL Loans were concluded by way of an oral agreement, it should not be surprising that the terms thereof were more fluid and general than would be the case in a written agreement.”[9] (emphasis is mine)

74.With greatest respect to Mr Mariani, this submission is totally unacceptable.  In my view, the appellant was making up her evidence along the way.  It should be noted that she was legally represented at the time when the Reply was sent, and such a Reply was indeed sent by her solicitors to the Collector.  Given there were only a few terms in the alleged oral agreement, I do not believe that an important term such as that included in paragraph 25e of her affidavit could have been omitted if it really existed.

75.Ms Cheung for the Collector had asked further questions in her submissions:

“If the undefined ‘family members’ ever want to cease to reside in Flat 27B, what can they do (their entitlements) when they (and JBL for that matter) have no proprietary right in the Properties? They cannot rent out the flats; they cannot call back the loan; and they cannot sell the flats. There is nothing they can virtually fall back on. Would anyone ever enter into such an agreement in the real world?”

76.In addition to the above, I would also ask: when was the loan supposed to be repayable if Flat 27B was not sold at all?

77.In my view, the appellant’s assertion on the alleged JBL oral loan agreement is simply incredible.  I am not satisfied that it is more likely than not that there was really a loan agreement as alleged.

Mr Nocom’s family and SKY Limited

The appellant’s case

78.By a letter dated 5 December 2017, the Collector requested the appellant to provide information, among other matters, on the source of finance in her purchase of the Properties and the usage of the Properties.

79.In the Reply, the appellant alleged that Flat 20B and Flat 20C had been rented to Mr Nocom by a tenancy agreement dated 1 April 2017 for the period between 1 January 2017 and 31 December 2018.

Various transfers made by Mr Nocom’s family – general comments

80.It is evident that members from Mr Nocom’s family had transferred various sums of money to Madam Chan and JBL from October 2013 to January 2014 as follows:

Dates	From	To	Amounts (HKD)
11/10/2013	Madam Pun	Madam Chan	1,500,125
18/10/2013	Mr Nocom	JBL	900,000
18/10/2013	Madam Wong	JBL	600,000
28/10/2013	Mr Nocom	JBL	550,000
23/1/2014	Madam Pun	Madam Chan	250,000
24/1/2014	Mr Ng	Madam Chan	4,560,000

81.It should be noted that the Total Purchase Price of the Properties and ad valorem stamp duty were paid on the following dates:

Date of advance / Loan draw down	Date of payment	Party	Nature of payment	Amount (HKD)
11/10/2013	11/10/2013	Madam Chan	Preliminary deposit 5%	5,996,257.50
19/10/2013	19/10/2013	Loan from JBL	Further deposit 5%	5,996,257.50
19/10/2013	19/10/2013	Loan from JBL	30% of stamp duty	3,058,096.00
-	-	Honour Finance Co. Ltd	70% of stamp duty	7,135,547.00
20/11/2013	20/11/2013	Madam Chan	Further deposit 5%	5,996,257.50
19/12/2013	11/3/2014	Loan from JBL	Balance of payment	3,000,000.00
23/1/2014	11/3/2014	Loan from JBL	Balance of payment	800,000.00
6/3/2014	11/3/2014	Loan from JBL	Balance of payment	51,253,940.50
11/3/2014	11/3/2014	Madam Chan	Balance of payment	11,696,059.50
-	11/3/2014	Appellant	Balance of payment	437,854.84
11/3/2014	11/3/2014	Mortgage loan from BOC	Balance of payment	35,000,000.00
			Total:	130,370,270.34

82.Coincidentally, the various payments made by members of Mr Nocom’s family were transferred in the period within which the instalments of the Total Purchase Price and the said stamp duty were paid (i.e. between 11 October 2013 and 11 March 2014).  There are also other coincidences, to which I will refer below.

Transfer on 11 October 2013

83.On 11 October 2013, Madam Pun (mother-in-law of Mr Nocom) transferred $1,500,125 to Madam Chan.

84.Coincidentally, Madam Chan had paid 5% preliminary deposit in the sum of $5,996,257.50 on the same day.

85.$1,500,125 is 25.01% of $5,996,257.50. 

86.On the other hand, according to SHK Agency, the purchase price of Flat 20B is $30,458,900, which is 25.39% of the Total Purchase Price in the sum of $119,925.150. 

87.The appellant explained in her affidavit that Madam Pun had transferred $1,500,125 to Madam Chan because while Madam Pun was not in Hong Kong at that point of time, she would like to acquire a property here.  It was alleged that Madam Pun therefore requested Madam Chan to issue a bank draft on her behalf, and it was for this purpose that Madam Pun transferred the sum of $1,500,125 to Madam Chan.  I will bear this explanation in mind when I assess the credibility of the appellant’s case.

Transfers on 18 October 2013 by Mr Nocom and Madam Wong

88.On 18 October 2013, Mr Nocom and Madam Wong (Mr Nocom’s mother) had transferred $900,000 and $600,000 respectively to JBL, in other words, a total sum of $1,500,000 was paid by Mr Nocom and his mother to JBL.

89.Coincidentally, JBL had paid 5% First Deposit in the sum of $5,996,257.50 on the following day (19 October 2013).

90.$1,500,000 is 25.01% of $5,996,257.50.  As mentioned above, the purchase price of Flat 20B is 25.39% of the Total Purchase Price.

91.As aforesaid, according to the explanation of the appellant, JBL had allegedly agreed to advance her a loan to pay the First Deposit and 30% of the ad valorem stamp duty.  She said further in her affidavit:

“I was nevertheless informed that the advance from JBL would not arrive on or before the due date to pay the First Deposit on 19 October 2013. Accordingly, I asked Mr Ng’s family assist, as the Ng family had also been close family friends for over 20 years. Mr Nocom (the husband of Ms Ng and Mr Ng’s son-in-law) transferred HK$900,000 and HK$600,000 respectively to JBL on 18 October 2013 by way of short-term bridging finance […]. JBL then repaid that advance to Mr Ng on 13 December 2013, together with the repayment of a separate and unrelated sum of $550,000 on account of, I understand, a personal loan between Mr Ng and Mr Ho that was advanced by Mr Ng to Mr Ho on 29 October 2013 […]”[10]

92.This explanation is totally incredible which I would not accept.

93.If the shortfall of the loan was just $1,500,000, why did the appellant have to ask for assistance from an outsider (albeit a good friend) rather than from her mother?  As Mr Mariani put it in paragraph 53 of his reply submissions, Madam Chan was “a woman with substantial means and business concerns”.  There is no doubt that the appellant knew it (as she also described her mother as a person who “has been active in property development and investment in Macau since the 1990s, and has in that regard been highly successful”)[11]. Indeed, according to the appellant’s own case, Madam Chan had made a gift to her by paying $5,996,257.50 on 11 October 2013, another $5,996,257.50 on 20 November 2014 and $11,696,059.50 on 11 March 2014 towards the Total Purchase Price for her.  It is inherently improbable that the appellant would not have turned to her mother as opposed to a non-family member at once if she needed cash.

94.Furthermore, even if for some reasons the appellant had to ask for assistance from Mr Nocom, there was no explanation as to why Mr Nocom could not pay the appellant directly.  There was no need for the monies to go through JBL at all.

Payment on 28 October 2013

95.On 28 October 2013, Mr Nocom paid $550,000 to JBL.

96.The appellant alleged that this was a separate and unrelated loan advanced by Mr Ng (Mr Nocom’s father-in-law) to Mr Ho.

97.What raises one’s eyebrow is that the words “Purchase of 20BC” were written at the back of the cheque issued by Mr Nocom.  It is noted that Flat 20B and Flat 20C are indeed the flats which have been occupied by Mr Nocom’s family.

98.In my view, such wordings directly contradict the appellant’s case.

Transfer on 23 January 2014

99.On 23 January 2014, Madam Pun (mother-in-law of Mr Nocom) transferred $250,000 to Madam Chan.

100.In an attempt to explain what had happened, the appellant had the following to say:

“as regards the HK$250,000 paid by Ms Chan to Ms Pun on 23 January 2014, this was on account of a dividend due to Ms Pun declared by a company incorporated in Macau in which both Ms Chan and Ms Pun were indirectly interested as shareholders: Sociedade de Investimentos Choi Pou Limitada, of which one-third of the issued share capital was held by another company incorporated in Macau, Companhia de Investimento Imobiliario San Hang Tai Limitada, of which, in turn, each of Ms Pun and Ms Chan owed 50 per cent of the issued share capital. The payment to Ms Pun was therefore her apportionment of the said dividend by virtue of her shareholder in the latter company – true copies of the relevant documentation evidencing the relationship between the various companies, the declaration of the said dividend, and the consequent remission of funds are now produced and shown to me marked TSP-9”[12]

101.I totally do not understand how this explanation could assist the appellant, for the subject payment made on 23 January 2014 was made by Madam Pun to Madam Chan, but not the other way round as explained by the appellant.  Indeed, the cheque which was exhibited as part of TSP-9 was a cheque drawn and signed by Madam Pun, payable to Madam Chan.

102.I have considered whether the appellant had mistakenly (and unintentionally) said that the payment was made by Madam Chan to Madam Pun when what she in fact meant was a payment made by Madam Pun to Madam Chan.  However, even in such a case, in my view, it would not assist the appellant.  This is because:

(1)The $500,000 dividend must have been paid to the company which was the registered shareholder in the first place.  There was no explanation as to why such a company could not issue 2 cheques of $250,000 each payable to Madam Chan and Madam Pun respectively;

(2)Even if for some unexplained reasons the entirety of $500,000 had to be paid to Madam Pun by the shareholder company first (and for Madam Pun to pay $250,000 subsequently to Madam Chan), it should not be difficult for the appellant to obtain evidence to prove Madam Pun’s receipt of $500,000.  However, the appellant did not put forward any proof as such.

Transfer on 24 January 2014

103.On 24 January 2014, Mr Ng (Mr Nocom’s father-in-law) transferred $4,560,000 to Madam Chan.

104.The appellant explained that this transfer was made by Mr Ng to Madam Chan for her to forward such a sum to 2 accounts in Macau held by Mr Ng and a company respectively.  I accept this explanation because this is supported by the bank transfer records.

The alleged tenancy agreement

105.It may be recalled that, by the Reply, the appellant informed the Collector that Flat 20B and Flat 20C had been rented out to Mr Nocom from 1 January 2017 to 31 December 2018.

106.The appellant had further offered the following explanation in respect of the occupation of Flat 20B and Flat 20C as follows in her affidavit:

“[…] Flats 20B, 20C and 20D have been designated for rental purposes. I refer to Annexures M2-1, M2-2, AB and AC for copies of tenancy agreements with some (sic) the tenants of those three flats. Currently, the said flats are occupied by the following tenants:

a. Flat 20B is occupied by Mr Nocom, Ms Ng, Ms Nocom Viviana, Ms Nocom Jahden, and Mr Nocom Malvin;

b. Flat 20C is occupied by Ms Wong (i.e. Mr Nocom’s mother); and

c. […].”[13]

107.Ms Cheung for the Collector submitted that it is suspicious that the alleged tenancy agreement was made up in response to the Collector’s enquiry raised in late 2017.  I accept Ms Cheung’s submission for the following reasons:

(1)While Mr Nocom allegedly only became a tenant on 1 January 2017, it is evident that his family had occupied (or at least had been permitted to occupy) Flat 20B and Flat 20C very soon after the completion of the transaction of the Properties, as it is undeniable, among other things (see further below), that Mr Nocom’s daughter, Ms Nocom Viviana, had applied for a resident card in respect of Flat 20B on 18 March 2014, which was just 7 days after the date of the Assignment of the Properties.  Mr Nocom’s wife and his father-in-law made applications for resident cards two days later on 20 March 2014.  His mother and his mother-in-law then followed suit on 24 March 2014.  I wonder how come they would have made such applications 2 years 9 months before the tenancy agreement came into effect.

(2)It should also be noted that all Mr Nocom’s family members mentioned above had represented to the management office of The Cullinan to be “Owner’s family member” in their application forms for resident cards.  The appellant explained that they held themselves out as members of her family “for reasons of convenience only, so that they could obtain access cards prior to the execution of the formal tenancy agreement on 1 April 2017”[14].  This explanation is not accepted.  First of all, there is clearly an option of “Tenant’s family member” in the application form which Mr Nocom’s family members could have ticked.  Furthermore, there is no evidence (and it is not apparent in the resident card application form) that the application for resident cards had to be submitted together with a tenancy agreement if the application was a tenant or a tenant’s family member.  After all, the application had to be endorsed by the owner of the flat concerned.  I really cannot see how “convenient” it was if Mr Nocom’s family members made the representations as they did.

(3)It is evident that Mr Nocom had been registered as a user with the Water Supplies Department and CLP Power Hong Kong Limited in relation to Flat 20B with effect from 14 March 2014 and 27 March 2014 respectively.  His wife had also become a registered user with the Water Supplies Department in relation to Flat 20C starting from 14 March 2014.

(4)Mr Mariani submitted that the mere acquisition of resident cards does not imply actual occupation.  He further pointed out that consistent residential occupation of Flat 20B and Flat 20C only began, at the earliest, in around mid-2016.  In my view, these submissions do not assist the appellant at all.  Even if Mr Nocom did not occupy Flat 20B and Flat 20C consistently back in 2014 – 2015 as alleged, the applications for resident cards and registration as registered users of utilities would go a long way in contradicting any suggestion that Mr Nocom’s family had only occupied Flat 20B and 20C on the strength of the tenancy agreement which allegedly only came into effect on 1 January 2017.  

(5)Put it in another way, it is undeniable that Mr Nocom’s family had been permitted to use both Flat 20B and 20C since very shortly after the completion of the purchase.  Even if the appellant’s case on tenancy agreement is accepted, there is still absolutely no explanation as to why the permission to occupy had been granted free of charge for 2 years and 9 months.  The appellant asserted in paragraph 37 of her affidavit that “Mr Nocom and his family have at all material times occupied Flat 20B as tenants paying commercial rent”.  However, this cannot be the truth, because it is evident that there had been consistent usage of electricity since no later than 27 August 2014[15]. It defies common sense and commercial sense to suggest that a tenant would only be required to pay rent when there is consistent occupation of the rented flat.

(6)By virtue of the Reply, the appellant had produced a customer credit advice dated 16 March 2018 which shows that a sum of $1,200,000 was paid by Mr Nocom to the appellant on that day as “2017 Ocean Sky 20B and 20C Rental”.  According to the subject tenancy agreement, the monthly rental was stated to be $100,000 and it seems that the agreement also provided that the rental would be paid on an annual basis.  Bearing in mind that there was an agreed rent-free period between 1 January 2017 and 31 March 2017, the rental payable for year 2017 should only be $900,000, which should be payable by the end of December 2017[16]. However, such a payment was not made until 18 March 2018, which coincidentally was just 10 days before the day when the Reply was sent to the Collector in which the allegation about the tenancy agreement was made.

(7)Perhaps the most forceful argument in casting doubt on the appellant’s case that Mr Nocom was a tenant is in relation to two payments made by the appellant.  It may be recalled that out of the conveyancing transaction with SHK Agency in respect of the Properties, the appellant was entitled to both Early Completion Rebate and Special Rebate.  As a result, the appellant had received 2 cheques in the sum of $7,225,491 and $3,567,774 by cheques dated 22 April 2014 and 13 November 2014 respectively.  It is evident that the appellant then drawn 2 cheques on her account with BOC as follows:

Dates of Cheques	Payees	Amounts (HKD)
5/5/2014	Madam Ng (Mr Nocom’s wife)	2,828,620.00
17/12/2014	SKY Limited (owned by Mr Nocom’s parents-in-law, and of which Mr Nocom was one of the directors)	1,396,704.50

As pointed out by Ms Cheung, $2,828,620.00 is 39.147789% of $7,225,491 which the appellant received by cheque dated 22 April 2014 whereas $1,396,704.50 is 39.147785% of $3,567,774 which the appellant received by cheque dated 13 November 2014.  Coincidentally, the purchase price of Flat 20B and 20C in the total sum of $46,948,050 ($30,458,900 + $16,489,150) is also 39.147793% of the Total Purchase Price ($119,925,150)[17]. In my view, it is more likely than not that the appellant was, by virtue of the 2 cheques dated 5 May 2014 and 17 December 2014 respectively, paying Mr Nocom’s family the share of rebate in relation to Flat 20B and Flat 20C.  Why did the appellant do that if she had entered into the Agreement on her own behalf?  She was supposed not obliged to share the rebate with anybody.

(8)I do not believe the appellant’s bare assertion that the two cheques dated 5 May 2014 and 17 December 2014 respectively were drawn at the direction of Mr Ho for the discharge of Mr Ho’s indebtedness owed to Mr Ng.  In any event, even if what the appellant’s said[18] is accepted, it is still a piece of evidence showing that the appellant was sharing the rebate with JBL. 

(9)The appellant’s case that the payments to JBL were repayment to JBL is not accepted either, because on her own case, she would only be obliged to repay JBL upon the sale of the Properties.

108.By reasons of the aforesaid, the appellant’s case in relation to Mr Nocom’s relationship with Flat 20B and 20C is not accepted.

Madam Chan

109.On the face of it, Madam Chan had paid $23,688,574.5 towards the Total Purchase Price.  She has also been paying the monthly instalments of the BOC mortgage loan(s)[19].

110.Mr Mariani asked this court to take into account the “notorious fact that it is not unusual for a parent, especially in Hong Kong – with its prohibitive property prices and societal context of Confucian family values – to provide financial assistance to adult children to enable them to acquire property”[20]. In my view, if what he said is a notorious fact, it is equally notorious that parents would use the name(s) of their adult children to purchase properties (or vice versa) for one reason or another, and avoidance of BSD is not the only reason for doing so.  Indeed, the courts have seen many litigations in which the issue on beneficial ownership involving parents and children has been brought up.  At the end of the day, the courts have to decide on the matter on the basis of the available evidence.

111.When deciding on this matter, the court has to take all the factual circumstances into account.  In the present case, as I have analysed above, Madam Chan had been very heavily involved in the financial arrangement on the purchase of the Properties.  Admittedly, Mr Ng (Mr Nocom’s parent-in-law) and Mr Ho were and still are close long-term business associates of Madam Chan[21], and it is evident that both of them were also heavily involved in the transaction. 

112.In addition, this court should also consider the credibility of the appellant in the light of its rejection of much of her evidence as discussed above.

113.Bearing in mind the above matters, I do not accept that the appellant has proved on the balance of probabilities that Madam Chan had given her the monies as a gift.

114.Mr Mariani suggested that “the assertion by a revenue authority of a purchase price resulting trust between third parties as a basis for an assessment to tax is, to the best of [his] knowledge, unprecedented in Hong Kong”, and that “the implications of a finding by the Court of a resulting trust in favour of Ms Chan (or any other person) would extend far beyond the charge to BSD.  It would in effect amount to a deprivation of property that [the appellant] would own exclusively at common law”. 

115.These arguments, with greatest respect, are misconceived.  Firstly, as emphasized time and again, the issue herein is only whether the appellant had discharged her burden in establishing that she was acting on her own behalf when she entered into the Agreement.  Secondly, if the appellant was telling the truth that Madam Chan all along was minded to give the “Family Financing”[22] to her as a gift, then the theoretical difficulty caused by this Judgment which Mr Mariani suggested would not affect Madam Chan (or any other so-called close family friends) or the appellant at all, because this Judgment would not force Madam Chan (or any other person) to make a claim against the appellant.  Thirdly, in any event, Madam Chan is not a party to these proceedings.  She is not estopped from raising any issues which have been raised in this Judgment in any future litigation involving her. 

116.I should also add that the appellant’s submissions on presumption of advancement and resulting trust, etc. are all misplaced, for this is not a litigation between the appellant and Madam Chan (and, for this matter, JBL and/or Mr Nocom).

The appellant’s own fund

117.Mr Mariani submitted that the appellant is an experienced real estate investor, and in around early 2013, she decided to diversify her property portfolio away from Macau by acquiring property in Hong Kong.  Insofar as it is his submissions that the appellant was already a very experienced investor when the Agreement herein was entered into, I have no hesitation in rejecting such an assertion.  In her affidavit filed in support of this appeal, she stated that she was one of the shareholders of Companhia de Investimento e Fomento Predial San Man I, Limitada (“SMI”) which in turn held 5 properties in Macau.  However, it is evident that she became a shareholder, coincidentally, only 1 day before she entered into the Preliminary Agreement.

118.Apart from that, another property (other than the Properties) which was directly registered under the appellant’s name was a shop in Macau of which the appellant held 50% share.  While she alleged that she had received dividend and rental income of around $1.5 million per annum from this property, she had not produced any evidence in support of this assertion.  This was not mentioned in the BOC mortgage application forms dated 23 January 2014 either.

119.While the appellant alleged in her affidavit that she also jointly owned a flat at a development known as “The Arch” with her mother, she did not put forward any evidence to show how she made such an acquisition, which, according to the land search record, costed her and her mother $15,680,000 back in August 2008.  In paragraph 7 of her affidavit, she stated that “The aggregate market value of [her] interest in the aforementioned properties in 2013 would, broadly, have been in the region of HK$90 million and [by the time of the affidavit in May 2021] likely considerably more than that”.  What the appellant did not elaborate further was that actually she had transferred her share in the said property at The Arch to her mother by an Assignment dated 5 March 2014 at a consideration of $9,900,000.

120.In assessing the appellant’s financial ability, regard must also be had to the fact that she was only earning a monthly salary of around $18,000 at the material time, as reflected in her tax return for the year 2013/14.

The appellant’s other arguments

121.Mr Mariani submitted that since Madam Chan was at all material times also a HKPR, it was inherently improbable that:

“she would use [the appellant] for stamp duty planning purposes as a de facto nominee to acquire property for her own benefit when she could just as easily have avoided BSD by acquiring the Properties (or any one of them) in her own name. By the same token, it is not clear why JBL, which was managed and controlled by Mr Ho, who was, likewise, a HKPR would elect to ask [the appellant] to purchase Hong Kong residential property on behalf of the company, when he could readily have done so himself in his own name and not, thereby incurred any liability to BSD.”[23]

122.A similar argument had also been made in respect of Mr Nocom:

“Finally, there is no obvious motivation for Mr Nocom to have ‘used’ [the appellant] to acquire Flat 20B and Flat 20C to avoid BSD, as the Collector alleges, because both he and his wife, Ms Ng, were at all material times HKPRs who would thus have been exempt from BSD by virtue of s.29CB(2) had they acquired those Properties in their own name.”[24]

123.While these matters are indeed factors which this court would take into account, I do not think these are enough to persuade this court that the appellant was indeed entering into the Agreement on her own behalf, for, in my view, the facts of this case are so obvious that there can only be one possible conclusion.  Madam Chan, Mr Ho and Mr Nocom should know the best the reason(s) why the Properties had been acquired in such a way, even if the appellant’s name was not used for avoiding BSD.

124.Mr Mariani then submitted that as there was no trust deed or other instrument in writing, any alleged express trust over the Properties must be invalid by virtue of sections 5 to 6 of the Conveyancing and property Ordinance (Cap.219).  The short answer to this argument is that, even if there was no valid express trust in law:

(1)that does not alter the fact that the appellant had entered into the Agreement on another person/others’ behalf; and

(2)there is nothing which stops the legal owner and the beneficial owner from treating it as if the trust was valid.

125.The appellant further argued that since no trust deed had been entered into, there was no express trust as such.  On the other hand, he said that it could not be the intention of the legislature to require the duty-payer to satisfy the Collector at the time of purchase that there was no reasonable prospect of an implied trust being identified at some point in the future, and that it could not be the intention of the legislature to vest in the Collector the authority to imply a resulting trust or a constructive trust extra-judicially and without direct evidence of the intention of the person in whose favour it is asserted a trust should be implied.  He stated that it would be absurd to require “the duty-payer to prove to the satisfaction of the Collector for the purposes of section 29CB(2) that a person transferring purchase monies to him had a specific, subjective intention with respect to that transfer.  Logically, that is a question for the asset contributor to answer, and not the purchaser”[25].

126.He then went as far as to say that:

“If, as I submit is the better view, the BSD regime does not apply to implied trusts, but only to express trusts that should – in the absence of any instrument evidencing a valid trust of land – be sufficient to dispose of this appeal in the appellant’s favour.”

127.I will deal with Mr Mariani’s argument on evidence further below.

128.As far as his other arguments mentioned above are concerned, with greatest respect, I hold the view that they are totally misconceived and should be rejected:

(1)It cannot be the intention of the legislature that the liability to pay BSD can be easily avoided/evaded by the buyer on record and the fund contributor behind by refraining from signing (or disclosing) any trust document;

(2)The law does not “require the duty-payer to satisfy the Collector at the time of purchase that there was no reasonable prospect of an implied trust being identified at some point in the future” at all.  If the Collector (or the court, as the case may be) is not satisfied that the legal owner was “acting on his own behalf” at the time of the purchase, that would in substance mean that the Collector (or the court, as the case may be) is of the view that the legal owner was not the beneficial owner or sole beneficial owner at all in the first place.  However, as pointed out above, as the asset contributor is not involved in the tax proceedings, there is no question of issue estoppel anyway.

129.Mr Mariani had also, in my view, tried to twist the meaning of what Counsel for the Collector submitted on proprietary right in her written submissions.  He alleged that the Collector “has conceded that JBL did not acquire a proprietary right or interest in any of the Properties” in the light of the following submissions made by Ms Cheung in response to the appellant’s affidavit which stated (in paragraph 17 thereof) that JBL had lent her a loan of around 9 million for the purpose of paying off a deposit of 5% of the Total Purchase Price and 30% of stamp duty:

“As submitted in the above, it is against all commercial and common sense that a company would have entered into an oral agreement to advance a loan to the extent of HK$64,108,294 (not to say the HK$30,000,000 ‘further loan’ subsequently to redeem the mortgage in 2016). Furthermore, this ‘loan agreement’ is without security or any backing of proprietary right or interest […]”

130.It is apparent to me that Ms Cheung was referring to the appellant’s case that JBL did not acquire any proprietary right or interest in any of the Properties, rather than conceding anything.

131.A similar problem arises in relation to Mr Mariani’s repeated argument that “the Collector has conceded that there was no trust relationship between [the appellant] and any other party with respect to the Properties”[26]. However, as a matter of fact, what Ms Cheung was saying was that:

“8. On behalf of the Appellant, her solicitor has submitted extensively on the laws of constructive and resulting trust, and express and implied trust. With due respect, this approach is irrelevant and unhelpful for the Court to decide the issues in dispute.

9. It is not the Appellant’s case that she was acting under any trust relationship, and the [Collector] never posed any question of trust to the Appellant in the enquiry. The situation was simply that the [Collector] could not be satisfied that the Appellant was acting on her own behalf on the facts and circumstances available for his consideration.

10. The [Collector]’s refusal to exempt the Appellant from BSD was not based on a finding that the Appellant was acting as a trustee for any of the specified parties involved in acquiring the Properties.  In any event, the [Collector] did not have to form a view on entrustment in arriving at his decision.  The Ordinance simply does not require him to do so.”

132.The Collector’s stance, in my view, is clear. He had never made any concession as Mr Mariani alleged. 

133.Lastly, it is noted that the appellant had made a point repeatedly, namely, that she could only say what her intention was when she entered into the Agreement, and it was not for her to give evidence on behalf of others.  For example:

(1)“It cannot have been in the contemplation of the Legislature that a purchaser, as duty-payer, should be required to satisfy the Collector as to the state of mind of another person (i.e., a transferor of property in whose favour the law might imply a trust) to ascertain his own liability to BSD”[27] (Mr Mariani’s emphasis);

(2)“Further, implied trusts are trusts implied by the courts: the Legislature cannot have intended to vest in the Collector the authority to imply a resulting trust or a constructive trust, extra-judicially and without direct evidence of the intention of the person in whose favour it is asserted a trust should be implied.  That is not the function of a revenue raising authority and would have the absurd and invidious implication of requiring the duty-payer to prove to the satisfaction of the Collector for the purposes of section 29CB(2) that a person transferring purchase monies to him had a specific, subjective intention with respect to that transfer.  Logically, that is a question for the asset contributor to answer, and not the purchaser”[28];

(3)“Ms Chan’s subjective intention in the matter of the Family Financing is therefore of paramount importance because if, as [the appellant] averred, Ms Chan intended to provide the Family Financing by way of gift to [the appellant] that would necessarily mean that she intended to part unconditionally with all her interest in those funds and that she would, thereby, not have acquired any beneficial interest in the Properties by virtue of her contribution to the purchase price […] it would be highly unusual and, more to the point, procedurally objectionable, for the Collector to seek at this stage, and without prior indication that this was his view, to impute a specific intention to Ms Chan when Ms Chan is living and apparently of sound mind, and would have thus been the appropriate person to give evidence as to whether she had the requisite animus donandi at the time she provided [the appellant] with the Family Financing […]”[29];

(4)“For essentially the same reasons as I have set out in the matter of the Family Financing above, it should not be open to the Collector at this stage to impute a state of mind to JBL with respect to the money it advanced by way of loan to [the appellant], when such evidence, to the extent it were relevant to these proceedings, should properly be given by the board of directors of JBL”[30];

(5)“As a preliminary observation on the matter of evidence, [the appellant] can only give evidence from her certain knowledge on how the funds to acquire the Properties came to her, personally.  Her knowledge of the transactions antecedent to the financing she received from Ms Chan and JBL to which she was not party was, by its very nature, second-hand.  By the same token, her understanding of the intention and state of mind of the aforesaid parties is likewise, a matter of impression”[31];

(6)“[The appellant] is not in a position to adduce any evidence as to the corporate decision-making of JBL, as she has never been either a director or a shareholder of that company.  [The appellant] is similarly not in a position to speculate on JBL’s motives or business strategy […]”[32];

(7)“[…] Although [the appellant] is not in a position to comment on what third parties may have written on a cheque for a transaction to which she was not a party, the fact that the HK$550,000 advance may have been earmarked by JBL to fund the JBL Loans was, presumably, a matter for JBL to decide”[33];

(8)“As I have previously submitted, the exemption from BSD in s.29CB(2) is framed in terms of the duty-payer satisfying the Collector at the time the relevant agreement for sale is submitted for stamping that a given state of affairs obtains – that is, that the duty-payer is acting on his own behalf.   Logically, the duty-payer can for those purposes only satisfy the Collector as to his own state of mind by reference to information and evidence that he has available. [The appellant] is, outside of her own inquiries, the outcome of which she has already set out in her affidavit, unable to comment on the state of mind of any other person, or on transactions to which she was not party, and of which she has no first-hand knowledge.  She cannot reasonably be expected to provide direct evidence of transactions between third parties for the purposes of satisfying either the Collector or the Court”[34] (Mr Mariani’s emphasis); and

(9)“The Legislature could not have intended that a duty-payer be required to provide extensive information relating to matters not within his knowledge or control as a condition precedent to satisfying the Collector (or, indeed, a court) that he was acting on his own behalf with respect to the acquisition of a property.  Those are third party matters that are irrelevant to the capacity in which the duty-payer himself executed the relevant agreement for sale”[35] (Mr Mariani’s emphasis).

134.The short answer to Mr Mariani’s argument is that it is the clear intention of the Legislature to impose a burden on the tax-payer (i.e. the appellant in the present case) to satisfy the Collector (or the court, as the case may be) that the tax-payer entered into the agreement concerned on her own behalf.  She has to adduce whatever evidence that is conducive to achieving this purpose.  On the other hand, the law and procedure do not prohibit the tax-payer from adducing evidence from other parties other than the tax-payer herself.  As a matter of fact, in the present case, the appellant has indeed exhibited documents concerning other people/companies on matters which she was not directly involved.  I am therefore puzzled as to why Mr Mariani made the arguments as he did.  If for whatever reasons the appellant had decided not to ask the so-called “third-parties” to make affidavit in support of her case, that is her own decision, and it is not open to her to complain as Mr Mariani did on her behalf.  This is particularly so in the present case, in which many of the parties concerned are said to be long-time close family friends; and in the case of JBL, the owners behind JBL are said to be those who were willing to lend the appellant $94,000,000 on a purely oral basis.  It would be strange if they would be unwilling to assist the appellant in giving evidence in support of her case if they knew that such evidence would be useful in helping her save BSD in the sum of $17,988,773.

CONCLUSION

135.Considering all the above matters in the round, I am not satisfied that the appellant has proved on the balance of probabilities that she entered into the Agreement on her own behalf. 

136.I therefore dismiss the appellant’s appeal and answer the questions posed for the opinion of the court as follows:

(1)I am not satisfied that the appellant was acting on her own behalf under the Agreement for the purposes of section 29CB(2) of the SDO;

(2)The Agreement is chargeable with BSD;

(3)The BSD chargeable in relation to the Agreement is in the sum of $17,988,773 ($119,925,150 x 15%).

COSTS

137.I make a cost order nisi that the appellant shall bear the Collector’s costs of the appeal, with certificate for counsel, to be taxed if not agreed.

138.The above order nisi shall become absolute in the absence of application to vary (which shall be made by letter, if any) within 14 days hereof.  Any application to vary the costs order nisi shall be dealt with on paper.

Mr Stefano Mariani of Deacons for the appellant

Ms Diana Cheung, instructed by the Department of Justice, for the respondent

Annexure