Sanford Yung Yung-tao v. Commissioner of Inland Revenue

CACV000070/1977

Coram: Roberts, C.J., Cons & O'Connor, JJ.

Date of Judgment: 17 July 1979

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JUDGMENT

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Roberts, C.J.:

1. This is an appeal against an order of Briggs, C.J. dated 28th October, 1977, in which he reversed a determination of the Board of Review.

2. The facts as found by the Board of Review were that the appellant (whom we shall refer to hereafter as 'the taxpayer') purchased ten tickets, each for a price of $300, for a Gala Premiere of a film, which had been arranged to raise funds for the purposes of the Community Chest. Tickets were also available at $20 and $10 for that performance.

3. The following day the same film was shown to members of the general public at prices of $7, $5 and $3.70.

4. The taxpayer attended the Gala Premiere with other persons, whom he invited to it as his guests.

5. The point which we have to decide is whether or not the $3,000 paid by the taxpayer was an allowable deduction under section 42B(1)(e) of the Inland Revenue Ordinance (Cap. 112).

6. This section permits a taxpayer to claim as an allowance the aggregate of "approved charitable donations". The phrase "approved charitable donation" is defined in section 2 of Cap. 112 as meaning "a donation of money to any charitable institution or trust of a public character which is exempt from tax under section 88 or to the Government for charitable purposes."

7. It is common ground that the Community Chest is "a charitable institution or trust of a public character" within the meaning of section 2. Therefore, was the $3,000 paid by the taxpayer for tickets to the Gala Premiere, a "donation" within the meaning of section 42B(1)(e)?

8. Counsel for the appellant submitted that the Board of Review is the final tribunal for the assessment of facts and that it would be wrong for this court to interfere with any of its findings of fact, save in very limited circumstances. He relied on Edwards (Inspector of Taxes) v. Bairstow⁽¹⁾. At page 29, Viscount Simonds said, in relation to an appeal from the Income Tax Commissioners of England :

"For it is universally conceded that, though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarized by saying that the court should take that course if it appears that the commissioner have acted without any evidence or upon a view of the facts which could not reasonably be entertained."

9. It is clear, therefore, that it would be improper for us to review the findings of fact of the Board save to the limited degree permissible in accordance with the authority I have quoted.

10. This means that we must accept their finding that the object of the taxpayer in paying the $3,000 was to make a donation to the Chest through the Gala Premiere and that anyone who paid $300 for a ticket in those circumstances must be taken to have been predominantly and substantially motivated by an altruistic object.

11. The Board then commented that the mere fact that a taxpayer obtained some return for a payment made to an approved charity did not per se disenable it from being a donation.

12. In our view, however, the last finding was not one of fact but of law.

13. In Ransom v. Higgs⁽²⁾, Lord Simon, at page 1618 commented as follows :

"The meaning of a word or phrase in an Act of Parliament is a question of law not fact; even though the law may then declare that the word or phrase has no statutory meaning beyond its common acceptance and that it is a question of fact whether the circumstances fall within such meaning (Cozens v. Brutus (1973) A.C. 854). But many words and phrases in English have many shades of meaning and are capable of embracing a great diversity of circumstances. So the interpretation of the language of an Act of Parliament often involves declaring that certain conduct must as a matter of law fall within the statutory language (as was the actual decision in Edwards v. Bairstow); that other conduct must as a matter of law fall outside the statutory language; but that whether yet a third category of conduct falls within the statutory language or outside it depends on the evaluation of such conduct by the tribunal of fact. This last question is often appropriately described as one of 'fact and degree'."

14. Our attention has been particularly drawn to Brutus v. Cozens⁽³⁾, in which the appellant was charged with using insulting behaviour whereby a breach of the peace was likely to be occasioned, contrary to section 5 of the Public Order Act 1936.

15. The House of Lords held that the justices' decision that the appellant's behaviour had not been insulting was one of fact.

16. Lord Reid commented at page 861:

"The meaning of an ordinary word of the English language is not a question of law. The proper construction of a statute is a question of law."

17. We take this to mean (leaving aside the difficult question of what is an "ordinary" word) that where a word appears in a statute, its construction is a matter of law.

18. If it is construed as having its popular meaning, it will be for the tribunal of fact to decide whether that meaning covers the particular circumstances before it. It seems to us that the first sentence in the excerpt from Ransom v. Higgs⁽²⁾ quoted above indicates that this was the view taken of the effect of Brutus v. Cozens by the House of Lords.

19. In our view the interpretation of the word "donation" in section 42B(1)(e), is a matter of construction of a statute and thus a question of law which we are entitled to re-examine. Having done so, we would accept the facts as found by the Board of Review and see whether or not these fall outside the meaning of the word "donation" as we interpret that word.

20. Counsel for the appellant commented that Briggs, C.J. was in error in equating a "donation" with a "gift". We do not think that this is a valid criticism.

21. In the interpretation of words which appear in a statute it is not only good sense but good law that a court may seek to determine the meaning of a word by comparing it with the meaning attributed to it, and to other words or phrases which are synonymous or similar, in dictionaries and other works of reference.

22. The Shorter Oxford Dictionary defines a "donation" as a gift. It defines a "gift" as "a transfer of property in a thing voluntarily and without any valuable consideration".

23. If this is a correct approach, therefore, it will be necessary to decide whether the right to occupy the seats was a valuable consideration, and counsel for the appellant argued that a donation did not cease to be a donation merely because there was some degree of incidental advantage to the donor.

24. He first argued that this was the necessary interpretation of the phrase "approved charitable donation" on the ground that fund raising schemes of this kind were well known in Hong Kong at the time the legislature introduced the exemption and must therefore have intended to include such schemes within its ambit. We see no merit in this argument.

25. Counsel based his second argument on English cases which referred to voluntary contributions. In O'Sullivan v. English Folk Dance Society⁽⁴⁾, the question was whether the privileges accorded to members of a Society by virtue of their annual payments, were such as to make their subscriptions other than "voluntary contributions".

26. At page 923, Lord Evershed commented as follows :

"Every member of a learned and scientific society gets in the ordinary course .... some privileges: for example, the receipt of the publications of the society. In truth, to my mind, the question is one of substance and degree, and for this purpose I am content to adopt the language of my brother Jenkins in Metropolitan Borough of Battersea v. British Iron and Steel Research Association ((1949) 1 K.B. 434). Jenkins, L.J. said :

27. Lord Evershed added that he was not prepared to accept the view that a subscription ceases to be voluntary merely because a subscriber might obtain some privilege which is said to have a monetary value.

28. Counsel for the respondent relied on the Australian case of The Commissioner of Taxation of the Commonwealth of Australia v. McPhail⁽⁵⁾. The High Court of Australia held that to constitute a "gift" within section 78(1)(a) of the Australian Income Tax Assessment Act, the property transferred must have been transferred voluntarily, and not as a result of a contractual obligation to transfer it, and that no advantage of a material character must have been received by the taxpayer in return.

29. Owen, J. delivering the judgment of the court, commented on p.116 as follows

"But it is, I think, clear that to constitute a 'gift', it must appear that the property transferred was transferred voluntarily and not as the result of a contractual obligation to transfer it and that no advantage of a material character was received by the transferor by way of return."

30. This decision has been followed in a number of Australian cases, among them Cyprus Mines Corporation v. Federal Commissioner of Taxation⁽⁶⁾.

31. The English Courts and the Australian Courts seem to have adopted a different approach in deciding whether a particular payment is a gift or a voluntary contribution, both of which terms are, in our view, sufficiently similar both to one another and to the word "donation" to be of assistance to us in this appeal.

32. The English cases suggest that there should be some attempt to evaluate the benefit derived by the doner and that if the benefit received is insubstantial in relation to the payment made, it may still be a gift.

33. The Australian cases seem to take a narrower view and to be to the effect that any advantage of a material character will prevent a payment from being a gift.

34. During the hearing of the appeal we referred to an analogy, mentioned by Briggs, C,J. namely, the sale of a poppy. We do not feel that we could support his view that a poppy handed over in return for a donation of money was a receipt for the payment of that money. Those who attend war memorial services in November of each year would be greatly surprised to learn that they were wearing receipts in their buttonholes!

35. Counsel for the respondent was asked whether the handing over of a poppy with an intrinsic value of a dollar in return for a donation of say $500 would prevent that payment from being a "donation".

36. He said that in his view the de minimis principle applied, but argued that anything more than a minute return, such as would be covered by the de minimis principle, would have converted the payment from a donation to a purchase.

37. Mr. Litton conceded that the taxpayer did receive some material advantage, though he argued that it was insignificant when compared with the price paid.

38. It is clear from an examination of the Ordinance that there is no provision for apportioning a donation - i.e. labelling (say) $250 out of the $300 paid for a ticket as charitable, so as to attract tax relief, and labelling the other $50 as attributable to some material advantage secured by the taxpayer.

39. This does not, however, mean that there should not be an "apportionment" at the earlier stage on the lines of O'Sullivan's case⁽⁴⁾.

40. We are thus presented with two choices. If we followed the English authority, we would probably come to the conclusion that the benefits accruing to the taxpayer were incidental advantages such as would not take away from the payment its characteristic of being a donation. If we followed the Australian cases, we would have to find that no advantage of a material character was received by the taxpayer in return for his payment, otherwise it would cease to be a donation.

41. The legislation in Australia is very similar to our own. In addition the test applied there is more likely to lead to a general certainty of decision than its counterpart in England. For these reasons we prefer the Australian approach. We express no opinion as to whether the fact that a payment to an approved institution is in pursuance of a contractual obligation is in itself sufficient to deprive that payment of its donatory character. But we are satisfied that this is the consequence whenever any advantage of a material character is received in return. We therefore consider that the Board of Review stated the law too widely when they found that the mere fact that the taxpayer obtained some return for his payment did not per se disenable it from being a donation.

42. It is beyond doubt that the principal object of the taxpayer was to give money to the Community Chest and that the purchase of the tickets must have been incidental to his primary motive.

43. Nevertheless, we find that the purchase of the cinema seats was an advantage of a material nature such as to take the transaction as a whole outside the definition of "donation" in section 42B(1)(e) and the appeal against Briggs, C.J.'s order is dismissed with costs.

Representation:

Litton, Q.C. & A. Li (Hastings & Co.) for appellant

Barlow & W. Leung for respondent

(1) (1956) A.C. 14 (CH).

(2) (1974) 1 W.L.R. 1594.

(3) (1973) A.C. 854 (HL).

(4) (1955) 1 W.L.R. 907 (CA).

(5) (117 C.L.R. 111 (H.C. of A.))

(6) (9 A.T.R. 33 (SCWA))