Commissioner of Iniand Revenue v. Inland Revenue Board of Review and Another
Read the full judgment text of HCMP 1504/1988 on BabelCite. This High Court CFI judgment was delivered on 31 October 1990.
1. By a summons dated 2nd May 1990, the Commissioner of Inland Revenue (the Commissioner) seeks an order under section 69(4) of the Inland Revenue Ordinance Cap. 112 which provides that:
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HCMP001504/1988 H E A D N O T E Inland Revenue - Case Stated - S. 69(4) Cap. 112 - Abuse of process/res judicata - whether Commissioner entitled to have Case Stated amended - content and form of Case Stated IN THE SUPREME COURT OF HONG KONG HIGH COURT INLAND REVENUE APPEAL NO. 10 OF 1989 ___________ BETWEEN
__________ Coram: The Hon. Mr. Justice Kaplan in Chambers Dates of Hearing: 28 September, 1 October and 2 October 1990 Date of Delivery of Judgment: 31 October 1990 ______________ J U D G M E N T ______________ 1. By a summons dated 2nd May 1990, the Commissioner of Inland Revenue (the Commissioner) seeks an order under section 69(4) of the Inland Revenue Ordinance Cap. 112 which provides that:
2. Section 69(1) provides that the Board's decision shall be final:
3. The amendments sought to the Board's stated case have the effect of including as part of the case (1) a statement of agreed facts, (2) a set of appendices thereto, (3) a chronology of events, (4) 2 statements of the Hong Kong Society of Accountants, (5) 2 letters between the Revenue and W.H. Sum & Co in May 1982. 4. The summons also seeks the incorporation into the stated case of the transcript of evidence of two out of the four witnesses who gave evidence before the Board, namely Mr. Peter Wrangham of the Hong Kong Bank and Mr. Canning Fok of Cheung Kong. 5. In addition to the above matters the Commissioner takes issue with the very question posed by the Board. 6. The Board's question of law is as follows:
7. The Commissioner seeks in place of the above question the following 8 questions although it has been conceded on his behalf that the third question subsumes the first two:
8. In summary, Aspiration says that the case as stated is a free standing document and that it is not necessary to burden it, and the court, by incorporating other documents or transcripts. The Board's decision is 30 pages long. It summarizes the transaction and evidence given and it makes findings of facts and comes to a conclusion. Its conclusion is based on those findings. Aspiration agree that if the Commissioner can show that the conclusion does not follow from the facts found then the Commissioner will succeed. What they object to most strongly is the Commissioner going through all the evidence in the case and pointing out other factors which he contends go the other way. To do that, they say, is to usurp the Board's fact finding role which is to be final. Barnett J. dealing with litigation between these parties put it graphically (and correctly so say Aspiration) when he said:
9. Not so, said Mr. Rosenberg for the Commissioner. The Commissioner complains that the Board has not got to grips with the Commissioner's case before them. 10. No tribunal, he says, could have come to that conclusion on the totality of the evidence. The Commissioner cannot make good this submission without being able to refer to all the evidence and documents which were before the Boards. The Commissioner wishes to launch an all out attack on the Boards approach to the issue before them and for this he needs all the material which was before the Board. 11. Mr. John Gardiner Q.C. for Aspiration says that the Commissioner's submission is fundamentally flawed as it fails to appreciate the limited function of the court in considering a case stated. To allow in the transcript would result in an attack on the findings which are sacrosanct unless the Commissioner can bring the matter within the principles of Edwards v. Bairstow (1958) A.C. 14. 12. Additionally Mr. Gardiner Q.C. says that this application is an abuse of process because the matter has been fully canvassed in the 30 page Judgment of Barnett J. and the appeal therefrom was dismissed by consent in the Court of Appeal. To understand the factual basis for this submission, a chronology is essential.
13. One point has to be clarified at the outset. Although by the Board's ruling dated 18 April 1986 the Board refused to state a case, this refusal was to state a case in the form requested by the Commissioner. It is clear, on all the evidence before me, that the Board were prepared to state a case which raised what was, in their opinion, a proper question of law. What they were not prepared to do, as is perfectly clear from the transcript, was to state a case which raised the question 'whether on the whole of the evidence' their decision was correct. They thought it proper to limit the question to 'on the facts found by us'. 14. This is all made clear by certain exchanges between Mr. Feenstra for the Commissioner and Mr. Henry Litton Q.C. the Chairman of the Board. (p.220 Core bundle)
15. At p. 224 in the Core Bundle there is another exchange which goes as follows:
16. A little later in the transcript Mr. Gardiner cited Roskill L.J. in Ransom v. Higgs 50 T.C. 1 where at p. 45 he said:
17. Mr. Gardiner Q.C. made it clear that on the case as drafted by the Board, the Commissioner is able to argue that the Board's decision was Edwards v. Bairstow unreasonable - that is, on the facts as found by the Board, no reasonable tribunal properly directed could have come to the conclusion reached. However, as to Mr. Feenstra's wide submissions he said then, and he said to me, that if the Commissioner wishes to argue that there were no facts before the Board to justify a finding then the Commissioner should identify the finding so challenged. Secondly, if it is to be argued that a particular finding was completely contrary to the evidence then again it should be identified. Mr. Litton Q.C. replied to this by saying:
18. Mr. Gardiner agreed with that proposition and said his clients would accept it. However Mr. Feenstra for the Commissioner declined to identify any finding which was not supported by the evidence or was completely contrary to it. Abuse of process\res judicata 19. I have gone into this hearing in a little detail because it is important in relation to the abuse of process or res judicata argument advanced before me by Mr. Gardiner. He submits that this application to amend the case is an abuse of process in that it was the subject matter of the hearing before Barnett J. who decided the matter adverse to the Commissioner. The Commissioner appealed against this decision and by consent his appeal was dismissed. It is clear, said Mr. Gardiner, that the issue before Barnett J. and hence the Court of Appeal, was not whether the Commissioner should state a case but whether he should state a case in the form designed by the Commissioner. The Board had always agreed to state a case and had produced a draft. What they would not do was to state it in the very wide terms sought by the Commissioner because they did not feel that raised a proper question of law. 20. Mr. Gardiner relies very heavily upon the actual relief sought by the Commissioner in the judicial review proceedings. He sought an order of mandamus requiring the Board to state a case to include the 3 questions the subject matter of this hearing. Mr. Gardiner says that if the appeal had continued the very question at issue would have been whether the Commissioner was entitled to require the Board to state a case raising his questions rather than those posed by the Board itself. That argument was decided adverse to the Commissioner by Barnett J. and the appeal having been dismissed, this issue is now res Judicata alternatively it would be an abuse of process to allow it to be reopened before me. 21. Mr. Rosenberg for the Commissioner, not surprisingly, takes issue with this argument. He says that the purpose of the judicial review proceedings was to force the Board of Review to state a case they having refused to do so. Once the Board agreed to do so (in the Court of Appeal) the Commissioner got what he wanted and had no reason whatever to go on. The Commissioner had the comfort that if the case stated was not satisfactory to him, he could always apply under section 69(4) as he has in fact done. 22. I cannot put on the undisputed facts before me the gloss for which Mr. Rosenberg contends. I have read all the material placed before me and I am quite satisfied that the issue before Barnett J. and before the Court of Appeal was exactly the same as before me as far as the 3 questions were concerned. I attach to this judgment, the judgment of Barnett J. a perusal of which will make the point crystal clear. He has also referred to a number of authorities most of which were also cited to me and no useful purpose can be served by a repetition of them in this judgment. In that regard, the 2 judgments ought to be read together. 23. The note to Order 18 r. 19 (p. 339 1991 Annual Practice) states:
24. In Stephenson v. Garnett (not Garrett as appears at p. 339 of the Annual Practice) a Plaintiff who had been successful in a county court agreed to accept a lesser sum than the judgment on the representation as to poverty made by the Defendant. Subsequently the Plaintiff alleged that the Defendant had misrepresented his financial position and at a hearing of evidence, the county court judge found that there had been a misrepresentation and ordered payment of the balance of the judgment. The Defendant then brought an action in the High Court for a declaration that he had been released from the judgment debt. A strong Court of Appeal held that as the question raised in this action was identical with that decided by the county court judge on the interlocutory application, the action ought to be stayed as frivolous and vexatious and an abuse of the process of the court. 25. A.L. Smith L.J. did not rest his decision on res judicata of which he was not satisfied. At p. 682 he said:
26. Earlier on the same page, the learned Lord Justice had pointed out that it was difficult to say that an interlocutory application the subject matter of the hearing in the county court could found a plea of res judicata to the action to enforce the convenant in the deed. It is frequently difficult to apply the principle of res judicata to interlocutory hearings but this is where the inherent jurisdiction of the court to prevent an abuse of its process comes into play as it did most emphatically in that case. 27. I was also referred to Yat Tung Co. v. Dao Hang Bank 1975 A.C. 581. That was another case where the Privy Council in agreeing with the Hong Kong Court of Appeal stated at p.590 that although it was difficult on the facts of the case to bring in the doctrine of res judicata, nevertheless:
28. Lord Kilbrandon giving the decision of the Board immediately went on to refer to the classic passage of Wigram V.C. in Henderson v. Henderson (1843) 3 Hare 100,115 where he said;
29. In Greennalgh v. mallard (1974) 2 AER 255 & 297 Sommervell L.J. expended a little on the passage just quoted from Wigram V.C. He said:
30. These passages make it clear to my mind that it matters not what Mr. Feenstra or the Commissioner thought would be the position following the dismissal by consent of the Commissioner's appeal. The fact remains that had not the appeal been dismissed by consent, the Commissioner would have been forced to traverse the very matters traversed before me (and Barnett J.) or else he would have had to accept the question of law which the Board had always been prepared to state and not the ones which he then sought and continues before me to seek. Although the judicial review application did not relate specifically to the transcript of evidence and the other documents the subject matter of the summons before me, it is clear to me that the issue is the same. The transcript of evidence goes hand in hand with the phrase used in the Commissioner's question (3) "on the whole of the evidence". 31. To use the phrase of Lord Shaw in Hoystead v. Commissioner of Taxation (1928) A.C. 155 & 171 "the present point was one which if taken went to the root of the matter on the prior occasion". 32. I have come to the very firm conclusion that this application is an abuse of the process of this court and I propose to dismiss this summons. Parties must appreciate that when they are before the court and fail to take a point which was open to them at that stage, subsequent hearings or applications involving the same issue may well be held to be an abuse of process. I accept that shutting out a litigant from arguing a point should only be exercised (in the words of the Privy Council in Yat Tung) "after a scrupulous examination of all the circumstances". I have conducted such an examination of the circumstances, with considerable assistance from both counsel, and I can find nothing in the way of "special circumstances" to justify the Commissioner having a second bite at the cherry. 33. However, lest I be held wrong in this conclusion, I must go on to decide whether, in the exercise of my discretion, I would have granted the relief sought under this summons or any part of it. 34. I do not propose to go into this matter at great length because it will involve repeating much of what Barnett J. said with which I respectfully agree. 35. I, too, am satisfied that the Commissioner's application before me is wholly misconceived. It fails to take into account the sacrosanct nature of the Board's fact finding role given exclusively to the Board by the legislature. 36. On the case as stated by the Board it is permissible for the Commissioner to argue, on the principle of Edwards v. Bairstow, that the Board's decision is erroneous in law because the conclusion does not follow from the findings. For that purpose one does not need the transcript because the Board has set out its findings and the court can judge for itself whether the conclusions are supported by the findings of fact. 37. It was clear to Barnett J., and it is clear to me, that the Commissioner wishes to go further than raise an Edwards v. Bairstow question for this court. Mr. Rosenberg before me was as candid as Mr. Feenstra was before Barnett J. in making it clear that the Commissioner wishes to argue that the findings of fact were wrong or that other findings of fact should have been made. Mr. Rosenberg took me at great length to the documents in evidence to show for example that there was other material to which the Board did not refer and which, he says, should have led them to a different conclusion. However, he has not gone so far as to say that there was no evidence before the Board to justify their findings only that there was other material which did not so justify. This is as naked an attack on the fact finding function of the Board as can be imagined. 38. If the Commissioner wishes to contend that any particular finding of fact was unsupported by the evidence then he should have identified it. However, neither Mr. Feenstra nor Mr. Rosenberg has been prepared to put the Commissioner's case that way but have relied on a somewhat nebulous unspecified challenge to the findings of fact which I cannot find as permissible. I need only refer back to the very helpful passage I have already quoted from Roskill L.J. in Ransom v. Higgs which I should add was approved by Lord Simon of Glaisdale when the matter went to the House of Lords. 39. Provided that there is some evidence upon which the findings of the tribunal are based it matters not that there was other evidence going the other way. This was made clear by a graphic illustration given by Upjonn L.J. (as he then was) in Tersons v. Stevenage (1963) 2 Lloyds 333 at 366:
40. In this case the Board has set out their findings in the case. These were the findings which they adjudged to be relevant. The Commissioner can attack the decision on Edwards v. Bairstow grounds but what he cannot do is to invite the court to second guess the Board's finding of fact. I am afraid that this is what is being sought to be done in this case. 41. I was also referred to a recent decision of Scott J. in Consolidated Goldfields v. Inland Revenue Commissioners (1990) STC 357. This was an application to remit a case stated for further findings of fact to be made by the Commissioners. Before setting out the principles he discerned from the cases he referred to Lord Denning in Way v. Underdown (1974) STC 11, 49 T.C 215 where at p. 13 he said:
42. The principles Scott J. gleaned from the cases appears at p. 361 where he said this:
43. I respectfully agree with this analysis. 44. Although initially I was sympathetic to the request to annex the statement of facts, appendices and chronology to the case stated, the more I listened to Mr. Rosenberg the more I appreciated the reason why the Commissioner was anxious to refer to these documents. It was simply to attempt to undermine the findings of fact of the Board in circumstances which do not fit into the decided case law on this topic. The situation is a fortiori with regard to the transcript of evidence of Mr. Wrangham and Mr. Fok. 45. I hope the Commissioner will not be disappointed that I have not gone into the detail of his criticisms of the Board's decision which were gone into at some length by Mr. Rosenberg. The simple fact remains that the Commissioner cannot get this application off the ground in the light of the way in which he has presented his case to the court thus far. It follows therefore that on the basis of all the material before me, I would have refused to grant the relief sought even if I had not been satisfied that this application was an abuse to the process of this court. 46. I cannot leave this case without expressing surprise at the way in which the Commissioner has conducted this litigation subsequent to the adverse finding of the Board of Review. I can well understand that every litigant who loses a case concerning HK$55m is far from pleased. The Commissioner has a public duty to collect revenue which is properly due. He carries out that duty with singular efficiency. I can well understand his disappointment and dissatisfaction with the Board's decision. It is little comfort to the Commissioner for me to say that had the matter been before me on a first instance basis I may well have decided the matter the other way. That is neither here nor there. The legislature has entrusted these cases to a Board of Review made up of people with considerable experience in matters of taxation. The Chairman in this case is both experienced and distinguished. The role of the High Court is limited to considering stated cases on questions of law and not of fact. The Commissioner has tried extremely hard to elevate his dissatisfaction with the result into a point of law. I find it regrettable that further taxpayers money has been expended on an exercise which in my judgment (and on all the cases cited) was bound to fail as indeed it does. This summons is therefore dismissed. 47. Mr. Gardiner Q.C. has indicated that in the event of this summons being dismissed, he would wish to be heard on the question of costs and I will therefore hear Counsel on the matter when a convenient time can be arranged.
Representation: Mr. George Rosenberg, S.C.C. for the Commissioner Mr. John Gardiner, Q.C. and Mr. J.J. Swaine instructed by Woo, Kwan, Lee & Lo To be part of the Judgment as referred to at pages 12 & 13 1988 M.P. 1504 IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS ------------------
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--------------- Coram: Hon. Barnett J. in Court Dates of hearing: 12th - 13th December 1988 Date of delivery of judgment: 23rd December 1988 ----------------------- J U D G M E N T ------------------------ 48. On 11th August 1987, the Board made a decision which was adverse to the Commissioner. By letter dated 9th September 1987, the Commissioner, in accordance with the provisions of section 69(1) of the Inland Revenue Ordinance, Cap. 112, applied to the Board to state a case. Section 69 reads :-
49. Subsections (6) and (7) are not relevant. 50. In his letter, the Commissioner required the Board to state a case for the opinion of the High Court on three questions of law which were :-
51. I shall refer to these questions respectively as the first, second and third questions. 52. In January 1988, the Commissioner produced a draft Case Stated for consideration by the 2nd respondent's solicitors. The draft proposed that there should be included a transcript of the evidence of two of the witnesses who gave evidence before the Board, together with documents which were proved or admitted. The case also proposed four questions of law for the opinion of the Court, which were :-
Question (iv) is identical to the 3rd question. 53. By letter dated 1st February, the 2nd respondent's solicitors objected to the inclusion in the Case Stated of the documents and transcript of evidence and also to the questions which had been posed. They proposed, instead, that the Case Stated should incorporate the Board's decision and that the documents should be available for the Court at the hearing if required. They also proposed one point of law based upon the Commissioner's first question, which read :-
54. The Commissioner's first reaction was that he agreed to the draft proposed by the 2nd respondent's solicitors but proposed to identify and extract certain parts of the evidence for inclusion in the Case Stated. In the event, the Commissioner found that he could not extract the relevant evidence from the transcript and put forward a revised draft Case Stated which would include a transcript of all the evidence and which re-posed the 3rd question. 55. By letter dated 14th April 1988, the Clerk to the Board wrote to the Commissioner advising him that the first, second and third questions raised by the Commissioner, which included the one question in his final draft Case Stated, had not been sufficiently understood by the Board to enable them to draft the Case. Accordingly, the Board proposed to give the Commissioner an opportunity of satisfying the Board that the 3rd and remaining question was a proper question of law for the opinion of the Court. 56. On 18th April, the Commissioner and the 2nd respondent, each by counsel, appeared before the Board. The Commissioner contended that of his three questions, the first and second were subsumed in the third, which, he maintained, was a proper question of law for consideration by the Court. He indicated that it involved a challange as to findings of fact by the Board, but that it was not necessary for the purpose of the Case Stated to identify the findings which were being challenged. He said that it was proper to place before the Court, for consideration, the whole of the evidence which was before the Board in order to "test the temperature of the water and see whether the court can come to a separate and different conclusion". 57. In a reserved ruling dated 18th May, the Board accepted that it is proper to impeach findings of fact by the Board on the basis that there was no evidence which could have supported such findings, or to impeach the Board's failure to find as facts, matters upon which the evidence pointed only one way. The Board further accepted that in order to demonstrate that there was no evidence to support a particular finding of fact, it might be necessary to include the whole of the evidence adduced before the Board. Before such a course could be countenanced, however, the Board took the view that it would be necessary to identify the findings of fact which were impeached to enable the Board to state a case. In the circumstances, the Board declined to state a case upon the basis of the Commissioner's letter dated 9th September 1987. 58. By way of an application for judicial review, the Commissioner now seeks to have quashed the Board's ruling dated 18th May, and an Order of Mandamus directing the Board to state a case for the opinion of the High Court upon the three questions of law contained in his letter date 9th September 1987. 59. For the Commissioner, Mr Feenstra submitted that the three questions are questions of law, that the Board has a statutory duty to state a case when an application is made under section 69(1) and that the Board has no discretion to decline to state a case when such an application has been made. The Board and the 2nd respondent accepted the second submission, but disagreed with the first and third. 60. With regard to the first question, Mr Feenstra said that the issue which the Board decided, namely, that on the facts which it considered relevant, the profits were not taxable under section 14 of the Inland Revenue Ordinance, involved the construction of that section. Whether an Ordinance has been correctly interpreted is a question of law. Further, it is a question of law whether the Board properly applied the law to the facts found, or as they ought to have been found on the whole of the evidence. 61. There was, I think, no dispute about those contentions. 62. Mr Feenstra said that it was not necessary for him to give further details or particulars of what facts or other points were being challenged. For this proposition, he relied upon C.I.R. v. International Wood Products Limited [1971] H.K.T.C. 551. In that case, Blair-Kerr, Ag. C.J., after reviewing the "questions of law" on which he had been asked to express an opinion, said at p. 571 :-
63. Mr Feenstra therefore contended that, by identifying findings of fact, he would not be submitting questions of law but rather grounds of appeal. 64. Mr Feenstra further argued that the Board could not find that the first question was not a question of law or that no question of law arose in its decision. Therefore, the Commissioner was entitled to have a Case Stated on this question alone. Mr Feenstra referred to C.I.R. v. Rico International Ltd. [1965] H.K.T.C. 229. This was an appeal from the decision of a judge sitting in appellate jurisdiction on a Case Stated under section 69. At page 268, Blair-Kerr J. said :-
65. I note that there is a difference in the phraseology of the English and Hong Kong legislation. I do not, however, consider it material. The legislation "is to the same effect". 66. On the basis of this authority, Mr Feenstra said that it is permissible to raise a question of law in a wide form and that an applicant is entitled to have the High Court determine any question of law arising on the Case Stated. I am unable to accept a proposition in such wide terms. I accept, and indeed I am bound by that authority, that once the Court is seized of a Case Stated, it must, subject to any necessary adjournment, deal with any point of law arising out of the Case Stated. There must first, however, be a Case Stated before the Court. That situation is brought about by compliance with section 67, that is to say the formulation of a question of law and the preparation of a Case Stated. Until a satisfactory question has been identified so as to trigger the preparation of the case, it is not, in my judgment, permissible for the applicant simply to say that there must be a point of law which will arise for consideration by the High Court. 67. In The Attorney General v. Leung Chi-kin [1974] H.K.L.R. 269, Huggins, J. delivering the decision of the Full Court said at p. 272 :-
68. That statement of the law was approved by Macdougall J. in Chinachem Investment Co. Ltd. v. Commissioner of Inland Revenue. On appeal from the judge's decision to the Court of Appeal (Civil Appeal 1986, No. 116), Sir Alan Huggins, V.-P. said :-
69. In relation to Young Chi-kin, Mr Feenstra pointed out that the case related to appeals by way of Case Stated from a magistrate. He said that it is wrong to equate the decision of a magistrate in a criminal case with the complex factual and legal issues which are commonly argued before the Board. He said that there is a greater risk of error in findings of fact by the Board in such cases. I accept that there is a difference between the two types of case. Nonetheless, the guidelines laid down in Young's case and accepted in Chinachem do offer useful guidance, which, in my view, should be followed if possible. The cases also emphasise that the case stated is the Board's responsibility. Thus, if it is to provide a satisfactory case for the Court, it must know about what precisely it is stating a case. 70. In Ransom v. Higgs [1973]1 W.L.R. 1180, Roskill L.J. after reciting a number of conclusions or inferences of fact contained in the special case, at p.1204 said :-
71. In the light of these dicta of the most persuasive authority, I am not prepared to accept that an applicant for a case stated may rely on a question of law which is imprecise or ambiguous and which gives the Board no clear idea of what material must be marshalled in their case. 72. Mr Feenstra maintained that the second question is also a question of law. He recognised that the Board expressly stated where the onus lay, i.e. on the taxpayer. He maintained, however, that the evidence before the Board may have been such that the court could consider that on the proper application of the onus of proof, certain inferences of fact were not properly made by the Board and insupportable. In plain terms, if there was evidence going either way, it could not be said that, on the balance of probabilities, the taxpayer had proved its case. 73. In my view, this is a thinly disguised attack upon the fact-finding function of the Board. Unless there was no evidence to support a finding of primary fact, or unless the primary facts could not support an inference found by the Board, whether the onus was discharged was a question of degree which depends upon the evaluation by the tribunal of fact. 74. To impugn the Board's evaluation would be to undermine the whole purpose of the Board as a fact-finding tribunal. Unless the Commissioner can identify findings of fact for which there is no evidence or inferences which are wholly unsupportable and thus wrong in law, this question is untenable. I do not regard the second question as a question of law. 75. According to Mr Feenstra, the third question is taken from the wellknown passage of Lord Radcliffe's judgment in Edwards (Inspector of Taxes) v. Bairstow & Anr. (1956) A.C. 14, where he said at p.36 :-
76. In that case, the facts found were not disputed. The only issue was whether those facts supported the Commissioners' conclusion that there was no adventure in the nature of trade. The House of Lords determined that the facts found did not support that conclusion. 77. Nonetheless, Mr Feenstra contended that if the findings of fact are challenged, the Commissioner is entitled to frame his question of law on the basis of the third description used by Lord Radcliffe. He pointed out that, in any event, Lord Radcliffe spoke of evidence. 78. For the 2nd respondent, Mr Gardiner contended that this passage must be looked at in the context of the case. Lord Radcliffe was not referring to evidence in the sense of the raw material from which facts are found, but rather to the facts which had been found by the Commissioners. I accept that contention. It is quite clear that Lord Radcliffe was not talking about evidence in the general sense. 79. Nonetheless, Mr Feenstra maintained that the third question is a question of law, that the Commissioner is entitled to frame the question as he sees fit, and is entitled to have it determined by the court by virtue of his right of appeal under section 69. 80. This question is, as Mr Feenstra described it to the Board, the ultimate question. On the face of it, it could involve an attack on the Board's findings of fact, or, accepting those findings, an attack upon the conclusion from the findings. If the latter attack only is involved then, undoubtedly, it is an Edwards v. Bairstow question of law. However, Mr Feenstra made it plain to the Board, and has made it plain to me, that findings of fact are under attack. Indeed, Mr Feenstra has now placed all his cards on the table and admits that the Board is under attack in respect of facts found, in respect of facts not found but which should have been found, in respect of inferences drawn and generally for misdirection. He did, and does, not consider it necessary to particularise which individual matters are impugned. 81. In Ransom v. Higgs (1974)1 W.L.R. 1594, Lord Simon of Glaisdale said at p. 1618 :-
82. In reliance upon that passage, Mr Feenstra contended that an applicant is entitled to take his case to the Court for a determination as to whether conduct inexorably falls within statutory language or outside it, or whether it is a matter of fact and degree which depends entirely upon a tribunal's evaluation and determination. The Court, he said, should not be obstructed from determining on which side of the line conduct falls. 83. For the Board, Mr Chang maintained that the position adopted by the Commissioner amounts to an abuse of the Case Stated procedure and that the Board properly declined to state a case on the "ultimate question". He said that if Mr Feenstra is right in insisting that the Commissioner is entitled on a Case Stated to frame a question in such a general manner, he is effectively requiring the court to rehear the whole review on paper, without the benefit of hearing the witnesses. Thus, the losing party before the Board could, on every occasion, appeal to the court, hoping that it would come to a different conclusion, whether or not there was a bona fide challenge on a question of law which the Court ought to be asked to answer. 84. Mr Chang said that a tax appeal should be dealt with expeditiously so that the Board's decision should, in general, be final and conclusive, save where a question of law is clearly identified. Further, if the Commissioner's contention is correct, the taxpayer will be put at risk of having his business affairs disclosed in an open hearing before the Court in every case. This would defeat the policy of secrecy which lies behind the in-camera hearing required before the Board in accordance with section 68(5) of the Inland Revenue Ordinance. 85. Mr Chang maintained that the Court should not be burdened with the rehearing of the whole matter on paper every time an appeal is made against the Board's decision. He drew my attention to the judgment of Pearson L.J. in Tersons Ltd. v. Stevenage Development Corporation where at p. 370 he said :-
86. Mr Feenstra pointed out that that case dealt with an appeal from an arbitrator. He contended that the Board should be equated with a jury, in which case an appellate court has a revising function to see whether there was any evidence in support of any conclusion found by the jury and whether its verdict can stand as being one which reasonable man might have come to; see Mechanical and General Inventions Co. Ltd. and Lehwess v. Austin and The Austin Motor Company Limited (1935) A.C. 346. 87. I am unable to accept that contention. It is clear to me that the positions of arbitrator and Board are wholly analogous. They are fact-finding tribunals whose decisions are intended to be final, subject only to review upon an alleged error of law. The only difference which I can discern is that while parties submit voluntarily to arbitration, a taxpayer is compelled by statute to go to the Board if he wishes to contest a determination by the Commissioner. 88. Mr Chang also reminded me of the criticism voiced by the Court of Appeal in Chinachem to which I have already referred. 89. Mr Chang submitted that if the Board is right to decline to state a case where it clearly appears that the procedure is being abused, the problems which he has pointed out can be held in check and the procedure made to perform its proper statutory function. He said that unlike the judicial review procedure, which is the subject of the present hearing, no leave has to be obtained from the Court before the hearing of a Case Stated. Once a case is stated, the Court will have to hear it (although, of course, the Case Stated may be remitted for amendment). The Board, therefore, provides a useful preliminary check and ensures that only genuine questions reach the court. 90. That the Board has power to decline to state a case is, said Mr Chang, supported both by authority and principle. He pointed out that under section 69, it is the duty of the Board to state a case. The Board, therefore, has to be responslble for the form which the Case Stated eventually takes. The form which a Case Stated should take has been clearly indicated by the guidelines laid down in the Leung Chi-kin and Chinachem cases. The guidelines show that the Board, or any other tribunal, should not simply adopt a rubber stamp position, but take certain steps to ensure that the object of the procedure is achieved. 91. Mr Chang said that if the circumstances surrounding an application to state a case are such that the object of the procedure cannot be achieved, i.e. to deal expeditiously with a clearly identified point of law, the situation amounts to an abuse. In such circumstances, the Board or tribunal has both the power and the duty to decline to state a case as requested by the applicant. The Board can, and should, decline to state a case where the only question raised is, in substance, a question of fact and not a question of law; see R. v. Sheil (1884)50 LT 590. Where the question raised is one of law, but the question has been decided by the Board in accordance with a previous binding decision of an appellate court, the Board should decline to state a case; see R. v. Shiel (1900)82 LT 587. And where the question raised is one of law, but is obviously a bad point, a case should not be stated; see R. v. Special Commissioners of Income Tax, (In Re G. Fletcher) (1891)3 Tax Cases 280. 92. The Board should not, said Mr Chang, be put in a position where it has to search for, or speculate upon, points of law on which to state a case. It is incumbent upon the applicant clearly to identify the points of law which he wishes to raise. Failing such identification, the Board is entitled to decline to state a case. 93. Mr Feenstra said that the cases which I have just cited should be treated with care. He said that there has been a great development in the law as to when the courts will intervene with the decision of a tribunal in law. He drew my attention to Ashbridge Investments Limited v. Minister of Housing and Local Government [1965]1 W.L.R. 1320 where at p. 1326, Lord Denning M.R. said :-
94. Mr Feenstra said that it is an error of law if a tribunal takes into consideration irrelevant matters or fails to take into consideration relevant matters. In dealing with such a question of law, the courts should give the question a wide and liberal interpretation. 95. I accept what Mr Feenstra says. Nonetheless I think the cases cited by Mr Chang to be good for the principle that the Board is not to be treated as a mere cipher. 96. Mr Gardiner emphasised the need to distinguish between evidence and fact. He said it is for the Board to evaluate evidence and to find facts based upon that evidence. The applicant cannot demand a case to be stated in respect of those facts and seek the court's re-evaluation of the evidence unless, of course, it is contended that there was no evidence from which a fact could be found. But, if it is contended that there was no evidence, the court's function is confined to considering whether there was evidence to support the finding of fact. In Tersons, Lord Upjohn said at p. 366:-
97. Mr Gardiner drew my attention to a number of cases distinguishing between matters of fact and law :
98. In the New Zealand Shipping case, Farwell, L.J. said at p. 567 :-
99. It seems to me clear that an applicant for a case stated must distinguish between matters of fact and law because, depending upon the nature of the attack, the case will have to be prepared very diffcrently. If a finding of primary fact is attacked, the case will have to identify the evidence relied on. If an inference or conclusion from primary facts found is attacked, the case will recite the facts found and not the evidence. 100. I fail to understand why the Commissioner cannot or will not identify the individual matters he wishes to challenge. In my judgment, it stems from a misunderstanding of the passages in Ransom v. Higgs and Edwards v. Bairstow to which I have already referred. 101. In my view, the dicta of Lord Simon in Ransom v. Higgs apply only to a situation where primary facts have been found by the tribunal and have been accepted. Those facts may admit of only one conclusion, in which case the court can overturn the decision of the tribunal if it has reached the wrong conclusion. If, however, the facts admit reasonably of either conclusion, the decision of the tribunal as the fact-finding body is left undisturbed. The Court does not, and cannot, seek to substitute its own view for that of the tribunal because that would be to interfere with matters of "fact and degree". 102. If an applicant seeks to challenge the findings of primary fact, however, a different situation arises. The court will only interfere with a tribunal's finding of primary fact if it is demonstrated that there was no evidence to support that finding. That is not a question of fact and degree. 103. The same considerations apply to the passage from Edwards v. Bairstow, Although Mr Feenstra tried to persuade me that when he used the word "evidence", Lord Radcliffe meant evidence as opposed to facts found, it is clear that the reference should have been to facts. The court will interfere with an inference drawn from primary facts, or with a conclusion drawn from a combination of primary fact and inference, if the true and only reasonable inference or conclusion was not the one reached by the tribunal. But where the primary facts themselves are disputed, it is necessary, as I said earlier, for the applicant to demonstrate that there was simply no evidence to support such a finding. 104. Where, therefore, findings of primary fact are under attack, it is a misuse of the third test propounded by Lord Radcliffe to mount that attack. If a question of law such as the third question based upon the third test is permitted, the Board would appear to have no option but to attach the whole of the evidence, i.e. a transcript of any oral evidence, statements of witnesses and documents, to the Case Stated, for a review by the court. In my view, that cannot be right. Such a course is clearly rejected by the authorities to which I have already referred. 105. Further, if such a course is permissible, there would seem to be little point in setting up a Board of Review as a fact-finding body whose decision is intended to be final. It reduces the Board's function to one that is little more than secretarial, i.e. receiving and recording the evidence which it then transmits to the court for consideration and for a finding. 106. Mr Feenstra alse drew my attention to Richfield International Land and Investment Co. Ltd. v. C.I.R. Civil Appeal No. 59 of 1988 and C.I.R. v. Waylee Investments Limited, Inland Revenue Appeal No. 3 of 1988. Mr Feenstra said that in each case, general questions "whether there was evidence on which the Board could properly arrive at their decision", similar to his third question, had been asked. He said that no point was taken that the questions were improper. No point was taken. In Richfield, however, there was no dispute or challenge to the facts found. The dispute was whether the Board's conclusions from those facts were, in law, proper, i.e. an Edwards v. Bairstow question. In Waylee, recently decided by me, again there was no real challenge. The effective question, therefore, was "whether on the facts found, the Board could properly arrive at its decision", again an Edwards v. Bairstow question. Although some evidence in the transcript, which was a very short one, was considered, it was evidence which was not controversial. 107. The decision of a Board of Review is like a pyramid. At its base is a number of blocks consisting of primary facts found by the Board upon evidence presented to it. Above these is another line of blocks, consisting of inferences drawn from the primary facts. At the apex of the structure lies the Board's final conclusion based upon the primary facts and inferences. 108. The final conclusion may be attacked in three principal ways. First, it can be impugned upon the basis that the Board has misdirected itself, for example, upon the burden of proof, or by misinterpretation of a statute. Second, an inference or inferences or the final conclusion may be attacked upon the basis that the primary facts do not admit of an inference drawn from them, or that the primary facts or inferences, or a combination, do not admit of the final conclusion. Third, one or more findings of primary fact may be attacked upon the basis that there was no evidence upon which they could be found. Alternatively, it may be contended that the Board should have made findings of other relevant facts. If the applicant is successful in displacing any of the blocks below the final conclusion or is successful in inserting additional blocks of fact, the structure may be so distorted that the final conclusion must topple and will be set aside by the court. 109. After reviewing the authorities and carefully considering the arguments which have been addressed to me, I am satisfied of the following matters :-
110. I have already dealt with the second question. The first and third questions are superficially questions of law but vague in the extreme and unsatisfactory. It was proper in the circumstances for the Board to query them. Enquiry revealed that it was findings of primary fact that were ander attack but the facts, the subject of that attack, were not specified. 111. In my judgment, these two questions do not admit of the preparation of a satisfactory Case Stated and are an embarrassment to the Board. In particular, the third question must, as it stands, require the Board to annex the whole of the evidence to the Case Stated. If the authorities to which I have referred are followed, the Board need only give a general indication of the evidence relied on in reaching any finding of primary fact. Assuming that the Board are able to indicate the existence of such evidence, that is the end of the matter. The Court is not permitted to re-evaluate that or any other evidence to see whether it might have made a different finding. 112. It is clear that the Commissioner does not, understandably, like the Board's decision and hopes to upset it by launching an attack on a broad front with a view to an exhaustive examination of the evidence. What he wants is permission to go beating about the evidential undergrowth in the hope of flushing out some useful pieces of evidence that support his view, in total disregard of settled law that the Board's findings of primary fact, in so far as there is any evidence to support them, are sacrosanct. That is wholly impermissible. 113. In the circumstances, this application is dismissed. Subject to any representations which may be made within 14 days, costs to follow the event.
Representation: Mr Feenstra, C.C., Attorney General's Chambers, for the Appellant. Mr D. Chang, Q.C. & Mr J. Mok, M/s Allen & Overy for the 1st Respondent. Mr J. Gardiner, Q.C. & Mr J. Swaine, M/s. Woo, Kwan, Lee & Lo for 2nd Respondent. |