Heath Brian Zarin v. The Commissioner of Inland Revenue

CACV 75/2020 & CACV 366/2021
( Heard together)

[2022] HKCA 656

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS 75 OF 2020 AND 366 OF 2021

(ON APPEAL FROM HCIA NO 4 OF 2019)

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(Heard together)

Before:  Hon Kwan VP, Yuen JA and Barma JA in Court

Dates of Written Submissions:  12 and 25 April 2022

Date of Decision on Costs:  6 May 2022

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DECISION ON COSTS

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Hon Kwan VP (giving the Decision on Costs of the Court):

1.On 16 March 2022, we handed down our judgment dismissing these two appeals brought by the Commissioner of Inland Revenue (“CIR”).

2.In respect of the leave application heard by Coleman J in December 2019, he awarded 75% of the costs to the CIR in any event as he granted leave to appeal to the Taxpayer only in respect of Sum D (which is relatively inconsequential financially and the arguments on this were shorter and less complex) and refused leave for all other sums (Sums A, B1, B2 and C)[1]. Leave to appeal in respect of Sums B2 and C was granted by Yuen JA in March 2020. By two judgments in March 2020 and June 2021, Coleman J allowed the Taxpayer’s appeal from the Board of Review’s decision in respect of Sums D, B2 and C. By our judgment in March 2022, we dismissed the two appeals of the CIR in respect of Sums D, B2 and C.

3.In light of our dismissal of the appeals and that the Taxpayer is successful in overturning the Board’s decision in respect of Sums D, B2 and C, the CIR accepted that on principle the costs order of Coleman J in respect of the leave application (“Leave Costs Order”) ought to be varied.

4.In §63 of our judgment, we made an order nisi to vary the Leave Costs Order and ordered that two-thirds of those costs should be awarded to the Taxpayer.

5.On 29 March 2022, the CIR issued a summons to vary that costs order nisi such that each party should bear its own costs.

6.The CIR drew our attention to the fact that in June 2021, when the Taxpayer succeeded in his appeals before Coleman J, the Taxpayer sought to vary the Leave Costs Order by applying to the judge on 30 June 2021 and seeking 75% of the costs of the leave application. This was opposed by the CIR by letter dated 5 July 2021, contending that the Leave Costs Order should not be disturbed, alternatively each party should bear its own costs. Having reviewed the correspondence, Coleman J declined to vary the Leave Costs Order on 5 July 2021.

7.The arguments advanced by the CIR in July 2021 are basically the same as those in the present submissions of Ms Kay Seto and Ms Carmen Siu. In short, they took the following points:

(1)  The CIR was successful in resisting the leave application on Ground 1 (which relates to Sums A and B1) and the decision of the Board in respect of these sums is not disturbed. So the CIR should be entitled to the costs in respect of this ground in any event.

(2)  Ground 1 is one of the more complex grounds and more financially substantial. Further, the Taxpayer initially argued that Ground 1 applied not only to Sums A and B1 but also to Sums B2 and C. A fair proportion of the costs attributable to Ground 1 should be at least 50%. And this would “put the parties in a ‘tie’ in terms of their respective ultimate success”.

(3)  In respect of Ground 2 (which relates to Sums B2 and C), the Taxpayer’s argument before the judge was narrowly framed, based on suggested internal contradiction and logical fallacy of the Board’s decision. It was correct for the judge to refuse leave on Ground 2 given the arguments then advanced. The Taxpayer has since proceeded on a “somewhat different basis”. This court should take this into account in determining the proper costs order before the judge.

8.We decline to vary the order nisi. The Taxpayer has succeeded ultimately on two out of the three grounds for which he sought leave to appeal. In depriving him of one-third of the costs of the leave application, we have given recognition to the fact that he had failed to obtain leave for Ground 1. We do not agree it would fair to apportion 50% of the costs to Ground 1.

9.As for Ground 2, we agree with Mr Mariani that it was merely a matter of putting different emphasis in the drafting and presentation when this ground was pursued after the Taxpayer had failed to obtain leave before the judge. The ground was “articulated in a slightly different way than before the judge, but no objection to this has been taken by those representing the Revenue”[2]. There is no sufficient basis to deprive the Taxpayer of the costs in respect of Ground 2, in which he has ultimately succeeded.

10.We dismiss the summons taken out in each appeal to vary the order nisi. We order the CIR to pay the Taxpayer’s costs in each summons.

Mr Stefano Mariani, Solicitor Advocate of Deacons, for the Appellant (Respondent)

Ms Kay Seto and Ms Carmen Siu, Senior Government Counsel, instructed by the Department of Justice, for the Respondent (Appellant)