The Commissioner of Inland Revenue v. Tak Wing Investment Co. Ltd.

DCCJ012990/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 12990 OF 2000

Coram: H H Judge Carlson in Chambers

Date of Judgment: 7 February 2001

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R U L I N G

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1. This is a finely balanced application to adjourn the hearing of today's two summonses.

2. The background to the matter is that this is an action brought by The Commissioner of Inland Revenue ("the Commissioner") for payment by the defendants, ("the taxpayers"), of two assessments for tax dated in 1999 amounting to over $96 million, so a very substantial claim indeed.

3. The writ is for that amount and the taxpayer has entered a defence which falls into two parts:

i) there is a denial of liability;

and

ii) there is a defence of estoppel which has been raised against The Commissioner.

4. The Commissioner today seeks to strike out that defence under Order 18, Rule 19 of the Rules of the District Court on the basis that the defence does not disclose a reasonable defence.

5. There is also a summons which has been taken out, rather late in the day, by the taxpayer for a stay of these proceedings. The basis of that summons is that at the moment there are ongoing negotiations between The Commissioner and the taxpayer as to the settlement of these outstanding assessments and I have seen correspondence which relates to that matter. There is also an internal appeal procedure which is provided for by the Inland Revenue Ordinance and that is also ongoing.

6. In fact, only yesterday an application for judicial review was heard by Seagrott J. That was an application that was made out of time and it sought, amongst other things, an order of Prohibition directed to this court preventing the court from hearing the Commissioner's claim whilst the internal appeal procedure and negotiations were proceeding. That application for leave to bring proceedings for judicial review was refused by Seagrott J. I have seen his judgment which is dated yesterday. The learned judge refused it, firstly on the grounds that it had been made too late and that there was no good reason to extend the time and secondly, on the merits, the judge taking the view that this sort of application was not a proper one for judicial review.

7. Mr Sakhrani who appears for the taxpayer today has asked me to adjourn the hearing of these summonses on the basis that it is the intention of the taxpayer to appeal to the Court of Appeal against Mr Seagrott J's refusal.

8. This application for an adjournment is, quite reasonably, opposed by Mr Herbert Li who appears for The Commissioner today. Mr Li takes the view that the prospect of successfully appealing Seagrott J's order must be very slim indeed. Secondly, he submits that by virtue of the fact that the application for judicial review was made so late, it is entirely the fault of the taxpayer that he finds himself in the position of having to apply for an adjournment today and the fact that there has been this delay is something that I should also hold against the taxpayer. He also takes the more general point that the action itself is one which has very strong prospects of success. He draws attention in particular to section 75(4) of the Inland Revenue Ordinance which clearly shows that the scope for manoeuvre by the taxpayer in this action is very limited and he says that matters should now take their course.

9. I think these are very powerful submissions, but I have come to the view in what, as I say, is a very finely balanced application for an adjournment, that I should exercise my discretion in favour of the taxpayer and allow the adjournment but on very stringent basis.

10. Firstly, this of course is a very large claim and that is something that I ought to take into account. Secondly, if there is going to be a delay, as there must by virtue of the adjournment, that delay should be kept to an absolute minimum and I shall see to that because I shall adjourn this matter on the following terms:

11. Firstly, this hearing is adjourned to Saturday, 3 March at 9.30 before me on terms that the defendants firstly; lodge their Notice of Appeal against the decision of Seagrott J dated 6 February 2001 in case No. HCAL 189 of 2001, no later than 4 pm on 8 February, that is 4 pm tomorrow.

12. Secondly, that the defendants shall use their best endeavours to have the appeal heard by 1 March this year.

13. Thirdly, and quite clearly there can be no argument about this, the costs of and occasioned by this adjournment shall be paid by the defendants to the plaintiffs in any event and be taxed, as I indicated, on a slightly more severe basis which is on a common fund basis, and those costs are to be paid forthwith. Certificate for counsel.

Representation:

Mr H Li, instructed by Department of Justice, for the Plaintiff

Mr S Sakhrani, instructed by Messrs Stephenson Harwood & Lo, for the Defendant