The Commissioner of Inland Revenue v. Carpe Diem Publications Ltd

DCTC 4335/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

TAX CLAIM NO. 4335 OF 2007

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Date of Hearing:  29^th April 2008

Date of Delivery of Decision:  29^th April 2008

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DECISION

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1.On 30^th January 2008, the Master:

(a)  dismissed the Defendant’s application to dismiss the claim; and

(b)  allowed the Plaintiff’s application to strike out the defence and entered judgment against the Defendant.

2.The Defendant appealed against the Master’s order and, by a written decision handed down on 20^th March 2008, I dismissed the appeal.

3.This is the Defendant’s application for leave to appeal against my decision.

4.In order to obtain leave to appeal, the Defendant as appellant must show that it has an arguable case with reasonable chances of success on appeal.  This test was adopted by Leong CJHC in Ma Bik Yung v. Ko Chuen, HCMP 4303/1999 from the following judgment in Smith v. Cosworth Casting Processes Ltd [1997] WLR 1538:

“1. The court will only refuse leave if satisfied that the applicant has no realistic prospect of succeeding on the appeal.  This test is not meant to be any different from that which is sometimes used, which is that the applicant has no arguable case.  Why however this court has decided to adopt the former phrase is because the use of the word ‘realistic’ makes it clear that a fanciful prospect or an unrealistic argument is not sufficient.

2.   The court can grant the application even if it is not so satisfied.  There can be many reasons for granting leave if the court is not satisfied that the appeal has any prospect of success.  For example, the issue may be one which the court considers should in the public interest be examined by this court or, to be more specific, this court may take the view that the case raises an issue where the law requires clarifying.”

5.Mr. Durrant, a director of the Defendant, orally submitted the following grounds of appeal:

(1)        The Plaintiff’s application to strike out the defence and to enter judgment is premised upon the fact that there is an appeal process open to the Defendant to challenge the assessment.  However, the Plaintiff has failed to disclose to the court that the Defendant did appeal against the assessment but such appeal was rejected by the Plaintiff.  Hence, there is in fact no means for the Defendant to challenge the assessment and the whole basis of the Plaintiff’s application is gone.

(2)        The Plaintiff is unwilling to go for trial for fear that a trial will expose (i) the fact that there is no evidence in support of the Plaintiff’s claim; and (ii) the negligence and misfeasance of the Plaintiff’s staffs.

(3)        The Plaintiff is not interested in the actual fact of this case.   After it had been suggested to the Defendant that it could redo the audit for 2003/04, the Defendant proposed a timetable to re-audit its accounts but the same was rejected by the Plaintiff.  The Plaintiff’s act of denying the Defendant a forum to question the conduct of the Plaintiff’s staffs amounts to extortion and threats with menaces.

(4)        Both the Defendant’s application and the Plaintiff’s application were argued together at the last hearing.  In so doing, the Defendant was deprived of an opportunity to question the reasoning behind the Plaintiff’s application.

6.In my view, none of the grounds submitted by Mr. Durrant has any merit.

(1)        The court was informed of the fact that the Defendant had tried to object to the assessment by its letter dated 1^st February 2007 but the same was rejected by the Inland Revenue Department: see items 8 & 9 in the chronology exhibited in the Plaintiff’s affirmation.  I specifically dealt with this argument in paragraphs 18 and 40 to 41 of my decision.  As I pointed out in paragraph 42, which was reiterated by the government counsel representing the Plaintiff at both hearings, it is still open to the Defendant to submit an objection for the Plaintiff’s consideration under s.64(1)(a) of the Inland Revenue Ordinance (“IRO”).

(2)        The second and third points were also dealt with at the last hearing.  First, I explained in paragraphs 50 to 54 of my decision why I considered that the defence should be struck out.  All depended on the pleadings and no evidence was admissible under O.18, r.19(2) of  the Rules of the District Court.  Secondly, I explained in paragraphs 22 to 33 why I considered the s.75(3) certificate constituted conclusive evidence on the amount of tax payable by the Defendant.  Thirdly, I ruled in paragraphs 47 to 48 that there was no duty on the part of the Plaintiff or her staff to assist the Defendant.  Quite to the contrary, it was the Defendant’s responsibility as a tax payer to furnish a return and to submit full information under s.51 of the IRO.

(3)        The Defendant was the appellant at the last hearing.  As such, the Defendant had the right as well as the obligation to open the appeal even though it was the Plaintiff who had applied to strike out the defence.  Both parties had been given ample opportunity to make full submissions. 

7.Lastly, Mr. Durrant agues that the Defendant should be granted leave because this appeal raises an issue of public interest.  I do not agree.  This case is fact sensitive in the sense that the decision on the Defendant’s original application was premised on the evidence filed by the parties and the decision on the Plaintiff’s original application was based on the defence filed by the Defendant.  The end result affects the Defendant only.  I do not see how the Defendant can elevate its defence in this action into a matter of public interest.

8.The Defendant has failed to show an arguable case with reasonable chances of success on appeal.  I also do not consider that leave should be granted on the public interest ground.  The Defendant’s leave application is therefore refused.

(Discussion amongst Court and Parties on costs)

9.Costs normally follow the event.  I order the Defendant to pay to the Plaintiff the costs of this application, to be taxed if not agreed.

Representation:

Miss Cecilia Siu, Government Counsel of Department of Justice, for the Plaintiff

The Defendant:  represented by its director, appearing in person