The Hongkong and Shanghai Banking Corporation v. Attorney General

Case No.CACV 109/1981

Court

Court of Appeal

Date31 Mar 1982

Judge—

Case Document

100%

CACV000109/1981

Commissioner of Inland Revenue held entitled to serve notice under s.76 of Inland Revenue Ordinance (Cap. 112) requiring a bank to pay money to him from a joint account which is, to be used to satisfy tax liability of one only of the account holders.

IN THE COURT OF APPEAL	Appellate Jurisdiction
	No. 109 of 1981 (Civil)

BETWEEN

The Hongkong and Shanghai Banking Corporation

Appellant
(Plaintiff)

AND

The Attorney General

Respondent
(Defendant)

_____________

Coram: Leonard V. P., Zimmern J. A. and Power, J.

Date: 31 March 1982

__________

JUDGMENT

__________

Power, J. :

1. This is an appeal against the decision of Mr. Justice Bewley in which he held that, for the purpose of satisfying the tax liability of the taxpayer alone, a notice under Section 76 of the Inland Revenue Ordinance (Cap. 112) could be used by the Commissioner of Inland Revenue to require a bank to pay to the Commissioner the credit balance in a joint account maintained by the tax payer and another person. The facts were that Mr. Yen Ah Chun (the tax payer) maintained a joint saving account with Miss Yiu Heng Yuet (the other account holder) at the Hong Kong and Shanghai Banking Corporation (the appellant bank). This account was governed by a mandate signed by the account holders and the appellant bank in which the account holders agreed that any liability incurred by them to the appellant bank should be joint and several. There was nothing in the mandate as regards the nature of the appellant bank's liability to the account holders. The mandate was dated the 17th October 1979. We were informed that the account had been in operation prior to that date. It was accepted by the appellant bank that the common law rule, that a promise could not be mad to two or more persons jointly and severally, was changed in June of 1979 by Section 28 of the Law Amendment & Reform (Consolidation) Ordinance. This section provides that agreements to pay money shall be joint and several unless a contrary intention is expressed. It was not suggested, in the present case, that any contrary intention had been expressed and it was common ground that the liability of the appellant bank to the account holders was joint and several. It seemed also to be common ground that this necessarily meant that 3 promises flowed from the appellant bank - one to each of the account holders and a further promise to both account holders.

2. On the 16th January, 1980, the Commissioner of Inland Revenue issued a notice under Section 76 of the Inland Revenue Ordinance seeking to obtain $96 from the joint account that being the amount owed by the tax payer to the Commissioner. The appellant maintained, in a letter of 24th April, 1980, that it was not required by the notice to make any payment to the Commissioner both because it had no authority from the tax payer so to do and because this was a joint account. The appellant then sought a declaration that it was not so obliged and it was from Mr. Justice Bewley's decision refusing to grant that declaration that an appeal was brought to this Court.

3. Mr. Li who appeared for the appellant bank cited a number of cases which he submitted indicated that the section must be strictly construed. He argued that this was clearly so as the power it conferred was a wide one which would not only have serious consequences to the recipient of a notice who failed, for whatever reason, to comply with its provisions but which overrode both the common law property rights of the taxpayer and the contractual rights of the banker and the other account holder. He submitted that such rights could only be held to be so infringed if there were clear words requiring that this be so. He submitted that if there was any ambiguity then it must be resolved so as to avoid such consequences both to the taxpayer and to third parties.

4. Section 76 reads as follows :

"	(1)	Where tax payable by a person is in default, or a person charged to tax has quitted the Colony or in the opinion of the Commissioner is likely to quit the Colony without paying all the tax charged to him, and it appears to the Commissioner to be probable that any other person (hereinafter in this subsection referred to as "the third party") -
		(a)	owes or is about to pay money to such person (hereinafter in this subsection referred to as "the taxpayer"); or
		(b)	holds money for or on account of the taxpayer; or
		(c)	holds money on account of some other person for payment to the taxpayer; or
		(d)	had authority from some other person to pay money to the taxpayer,
		The Commissioner may give the third party notice in writing (a copy of which shall be sent by post to the taxpayer requiring him to pay such moneys not exceeding the amount of tax in default or charged, as the case may be, to the officer named in the notice. The notice shall apply to all such moneys which are in the third party's hands or due from him or about to be paid by at the date of receipt of such notice or which came into his hands or become due from him or about to be paid by him at any time within a period of 30 days thereafter.
	(2)	Any person who has made any payment in pursuance of this section shall be deemed to have acted under the authority of the person by whom the tax payable or on whom it was charged and of all other persons concerned, and is hereby indemnified in respect of such payment against all proceedings civil or criminal notwithstanding the provisions of any written law, contract or agreement.
	(3)	Any person to whom notice has been given under subsection (1) who is unable to comply therewith shall within 14 days of the expiration of the period of 30 days from the date of receipt of such notice give notice in writing to the Commissioner acquainting him with the facts.
	(4)	Any person to whom a notice has been given under subsection (1) who could have complied therewith but failed to do so within 14 days after the expiration of the period referred to in subsection (1), shall be personally liable for the whole of the tax which he was required to pay, and such tax may be recovered from him by all means provided in this Ordinance for the recovery of tax from a person who has made default in payment.

I will illustrate the thrust of the argument placed before us by Mr. Li by dealing with what he said with regard to Section I (a). He submitted, when dealing with this section, that if the question was asked. "Does the bank owe money to the taxpayer?" The answer, bearing in mind the 3 promises made by the bank, would have to be "No, it owes money to the taxpayer and to another person and it owes this money jointly and severally". He submitted that the section could only be held to have the unequivocal application contended for by the respondents where the correct answer to the question posed was a simple and unqualified "Yes." He submitted that, as no such answer could be given the words used did not clearly indicate that the section was meant to apply to a joint account. He submitted that if the legislature had intended to permit the Commissioner to require the payment to him of monies in a joint account then the legislation could easily have been drafted so as to make it plain that this was its intention.

5. He finally submitted that, when interpreting the section, the overall intention of the Inland Revenue Ordinance, which is to obtain from persons monies which they owe as tax, must be borne in mind and that, given this intention, the legislature could never have intended that the section be used to obtain money from third parties for the payment of the tax owed by another.

6. The argument of Mr. Barlow, who appeared for the Crown, was simple. He submitted that the relationship between a bank and an account holder was that of debtor and creditor. (Hart v. Sangst (1957) 2 All E. R. 208). He submitted that, whatever might have been the position before June 1979, it was now clear that, where the parties did not expressly state that the liability of a person owing money to others was to be joint only, than that liability was both joint and several. He submitted that Section 76 had clear application to such an account because there existed a debtor who owed money to a creditor i.e. to each of the 2 account holders. He submitted both that the words of Section 76 were clear and that they had clear application to the instant case. He submitted that the canons of statutory construction referred to by Mr. Li only came into play where there was ambiguity and that they had no application to the present case as the words were manifestly clear.

7. Having looked carefully at Section 76 we are persuaded of the correctness of this submission. We are satisfied that the words are clear and indicate without ambiguity that Where a person owes money to another or holds money on account of another then he must comply with a notice served upon him under the section. By virtue of Section 28 of the Law Amendment & Reform Consolidation Ordinance, the liability of the appellant bank is both joint and several and it does, therefore, both owe money to the taxpayer and hold money on account of the taxpayer and it must comply with the notice served upon it by the Commissioner of Inland Revenue.

(N. P. Power)
Judge of the High Court

Representation:

Mr. Andrew Li (J. S. M.) for Appellant

Mr. B. Barlow for Attorney General/Respondent.