Ren Rong t/a Wah Yung Engineering Co v. Inland Revenue Board of Review

HCAL 917/2021

[2022] HKCFI 2816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO 917 OF 2021

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BETWEEN

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Before:  Hon Wilson Chan J in Court

Date of Hearing:  4 August 2022

Date of Judgment:  15 September 2022

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J U D G M E N T

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A.  INTRODUCTION

1.This application for leave to apply for judicial review (the “Application”)  concerns the decision of the Inland Revenue Board of Review (the “Board”)  dated 27 April 2021 (“Decision”)  refusing to grant an extension of time to the applicant to appeal out of time against the determination of the Commissioner of Inland Revenue (the “Commissioner”)  on 6 July 2020 (“Determination”).  The applicant lodged her notice of appeal (“Notice of Appeal”)  (dated 3 November 2020)  on 4 November 2020, ie outside the 1-month appeal period (“Appeal Period”), due to her own mistaken belief that all the government departments were closed due to the COVID-19 pandemic and that she may lodge the Notice of Appeal when the pandemic is over.

B.  BACKGROUND FACTS

2.The background facts of this case are not in dispute and can be summarised as follows.

3.On 8 July 2020, the Commissioner delivered by registered mail a notice to the applicant, that her objection to additional assessment was dismissed and the additional assessment had been determined as contained in the attached Determination.

4.On 8 August 2020, the applicant’s 1-month Appeal Period against the Determination fell due.

5.On 4 November 2020, the applicant lodged her Notice of Appeal with the Board, which stated her causes of delay.

6.On 23 February 2021, the applicant’s application for extension of time to appeal against the Determination was heard by the Board (the “Hearing”).

7.On 27 April 2021, the Board issued the Decision, refusing to grant an extension of time to the applicant for giving notice of appeal under section 66(1A)  of the Inland Revenue Ordinance, Cap 112 (“IRO”).

C.  RELEVANT LEGAL PRINCIPLES

8.The Board is a creature of statute, so it has no inherent jurisdiction such as to extend time for appealing.  Any powers that the Board has must come from the statute.  (see Chan Min Ching (t/a Chan Siu Wah Herbalist Clinic)  v Commissioner of Inland Revenue [1999] 2 HKC 848 per Yuen J (as she then was)  at 851B)

9.Section 66(1A)  of the IRO provides the mechanism on how the Board may exercise its discretion to allow an appeal out of time:

“If the Board is satisfied that an appellant was prevented by illness or absence from Hong Kong or other reasonable cause from giving notice of appeal in accordance with subsection (1)(a), the Board may extend for such period as it thinks fit the time within which notice of appeal may be given under subsection (1).” (Emphasis added)

10.The burden was on the applicant to demonstrate to the Board that she had been prevented from lodging the Notice of Appeal in time by one or more matters mentioned in section 66(1A)  of the IRO.  Absent a qualifying reason (illness, absence from Hong Kong, or some other reasonable cause)  which prevented the filing of such notice, the Board of Review has no power to extend time.  (see Excelter Investment Ltd v Inland Revenue Board of Review [2021] HKCA 1049 at §§23-25)

11.In Chow Kwong Fai v Commissioner of Inland Revenue [2005] 4 HKLRD 687, Woo VP in dismissing the appeal of the taxpayer held the following on the interpretation on Section 66(1A)  of the IRO at §20:

“In my opinion, while a liberal interpretation must be given to the word ‘prevented’ used in s.66(1A), it should best be understood to bear the meaning of the term ‘未能’ in the Chinese language version of the subsection (referred to in D176/98 cited above). The term means ‘unable to’. The choice of this meaning not only has the advantage of reconciling the versions in the two languages, if any reconciliation is needed, but also provides a less stringent test than the word ‘prevent’. On the other hand, ‘unable to’ imposes a higher threshold than a mere excuse and would appear to give proper effect to the rigour of time limit imposed by a taxation statute. …” (Emphasis added)

12.Any unilateral mistakes made by the taxpayer, for example, misunderstanding of requirements for a valid appeal, cannot be properly described as a reasonable cause which prevented the taxpayer from lodging the notice of appeal within time.  (Chow Kwong Fai (ibid)  at §45)

13.As for this leave application, it is well-established that the applicant needs to satisfy the court that there is a reasonably arguable claim which enjoys realistic prospects of success: Po Fun Chan v Winnie Cheung (2007)  10 HKCFAR 676.

D.   DISCUSSION

14.Counsel for the applicant has put forward two main lines of arguments:

(1)  The applicant did raise COVID-19 as a reasonable cause which had prevented her from filing the Notice of Appeal within time (§21 of the applicant’s Skeleton Argument); and

(2)  The Board failed to properly address the issues of the applicant’s pre-occupation with maintaining her business and her daughters, and the impact of COVID-19 on her (§§24-30 of the applicant’s Skeleton Argument).

15.In my view, the applicant’s contentions lack focus and wholly ignore the substance of the Decision.

16.At paragraphs 9 and 23 of the Decision, the Board stated as follows:

“9. The following is a summary of the testimony given by the Appellant and her husband to the Board:

(a)  Both the Appellant and her husband agreed with the relevant facts mentioned above.

(b)  They only received primary education and did not fully understand the content of the Determination and the matters set out in the Letter.

(c)  Due to the COVID-19 pandemic, they mistakenly believed that government departments were closed. They planned to submit the notice of appeal and related documents after the government department resumes public services.

(d)  Generally speaking, any company documents or correspondence received by the Appellant will be passed to her husband for handling.

(e)  The Appellant and Mr Mok stated that their education level was primary school education, and they did not understand the Letter and the Determination very well. Mr Mok said that since he did not quite understand the content of the Letter and the Determination, he put it aside and did not handle it immediately.

(f)  In or about October 2020, he received the tax bill from the Inland Revenue Department, demanding the Appellant for the remaining tax receivable. He then sensed the seriousness of the situation, and realized that he had to deal with the relevant tax appeal immediately.

…

23. The Appellant explained that due to the COVID-19 pandemic, she and her husband mistakenly thought that the government departments were closed, they therefore planned to file the notice of appeal or apply for an extension of time for appeal after the government departments resumed public services.” (Emphasis added)

17.At the hearing before this court, counsel for the applicant raised no dispute as to the factual accuracy of the matters set out at paragraphs 9 and 23 of the Decision.

18.At paragraph 25 of the Decision, the Board went on to state that:

“25. Upon the Board’s enquiry, both the Appellant and Mr Mok admitted that they did not call the Board’s Secretariat to check whether they were in service. They just misunderstood that the government departments were closed during the pandemic and therefore did not submit the notice of appeal within the statutory period.” (Emphasis added)

19.It is apparent from the Decision that the applicant was given ample opportunities to explain to the Board any difficulty that she might face during the COVID-19 pandemic that prevented her from filing the Notice of Appeal in time:

(1)  During the oral testimony before the Board, the applicant and her husband claimed that they thought all the Government departments were closed (誤以為政府部門不辦公)  due to the pandemic and they planned to submit their Notice of Appeal and relevant documents only after resumption of service by the Government departments.  Besides, since they only had primary level education and did not understand the contents of the Determination and its cover letter, they decided to put them aside.  They only realized the seriousness of the matter when they received a notice from the Inland Revenue Department in October 2020 chasing for outstanding tax.  (§9 of the Decision)

(2)  The applicant testified that she was not ill, hospitalized or away from Hong Kong between 8 July 2020 and 8 August 2020.  (§22 of the Decision)

(3)  Upon inquiry of the Board, the applicant and her husband both admitted that they did not call the Board’s Secretariat to check whether they were in service.  (§25 of the Decision)

20.Since the applicant was not sick, hospitalized or away from Hong Kong at the material time, the applicant could only rely on “other reasonable cause” to apply to appeal out of time under section 66(1A)  of the IRO.

21.The applicant’s excuse for her delay is thus plain and simple: it is only her wrong assumption that all the government departments were closed due to the pandemic and she could lodge her Notice of Appeal when the pandemic is over.  This is nothing but a unilateral mistake on her part, which cannot be properly described as a reasonable cause preventing her from lodging the Notice of Appeal within time.

22.The Board was perfectly entitled in its fact finding process to conclude, with good reasons and common sense, that the applicant and her husband were able but failed to (as distinct from “unable to”)  lodge the Notice of Appeal in time due to their ignorance, the reasons being:

(1)  The cover letter enclosing the Determination (which was in Chinese)  expressly explained to the applicant how and when she may lodge an appeal to the Board, with the address, office hours and contact information of the Board listed therein.  (§24 of the Decision)

(2)  The applicant could have called the Board’s Secretariat to make inquiry, whereupon she would know that the Board’s Secretariat was still in service during the pandemic.  (§26 of the Decision)

(3)  The applicant and her husband could have asked for help from their friends, staff or a tax representative if they did not understand the contents of the Determination and its cover letter, but they chose not to do so.  (§27 of the Decision)

23.I agree that such assessment was made with proper and detailed inquiry on the claimed difficulty that the applicant faced in preparing her notice of appeal during the COVID-19 pandemic, which cannot be faulted in any public law sense.  As such, it is not unlawful or irrational at all for the Board to conclude, based on the materials before it and with adequate reasons, that the applicant has failed to put forward “other reasonable cause” to justify her substantial delay, and therefore the Board had no reason or basis to extend time under the IRO.

E.  CONCLUSION

24.For the reasons stated above, the applicant’s Application is dismissed.

25.In the present case, the hearing of the Application was conducted inter partes.  The assistance provided to the court by Mr Tong acting for the Putative Interested Party has been helpful.  I order that the costs of the Application (including all costs reserved, if any)  be paid by the applicant to the Putative Interested Party, such costs are to be taxed if not agreed.

26.The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.

27.Lastly, I thank Ms Lok and Mr Tong for their helpful assistance in this matter.

Ms Jenny Lok, instructed by Messrs C W Heung & Partners, for the applicant

Mr Andrew Tong, Senior Government Counsel (Acting) of the Department of Justice, for the Putative Interested Party