Moulin Global Eyecare Trading Ltd (in Liquidation) (Formerly Known As Moulin Optical Manufactory Ltd) v. The Commissioner of Inland Revenue

FACV No 5 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO5 OF 2013 (CIVIL)

(ON APPEAL FROM CACV No 64 of 2011)

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BETWEEN

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JUDGMENT ON COSTS

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Mr Justice Tang PJ, delivering the decision of the Court:

1.This matter concerns profits tax paid over the tax years 1998/1999 to 2003/2004, by the plaintiff company which has been ordered to be wound up on 5 June 2006. It was the plaintiff company’s claim that the profits for those years had been fraudulently inflated by its then management, some of whom have been convicted of charges including false accounting.  The court appointed liquidators of the plaintiff company sought to re-open the assessments and obtain a refund from the commissioner relying on s 64(1)(a) and s 70A of the Inland Revenue Ordinance Cap 112.  The commissioner refused to re-open any assessment or make any refund.  The liquidators commenced judicial review proceedings against the Commissioner’s refusal to do so, contending that the Commissioner had misunderstood those provisions.  They succeeded[1] before Reyes J, whose decision was however overturned on appeal.  Their appeal to this court was dismissed.  In dismissing the appeal, we made a costs order nisi against the plaintiff company.

2.The plaintiff company now seeks an order that there be no order as to costs in this court as well as the courts below.  It is said that we should depart from the usual rule that costs should follow the event because of exceptional circumstances.

3.Essentially, it is said that these proceedings satisfied the 3 criteria identified by the High Court of Australia in Oshlack v Richmond River Council (1998) CLR 72 , followed by Lam J (as he then was) in Chu Hoi Dick v Secretary for the Home Affairs [2007] 4 HKC 428, who said at para 29:

“(a) a litigant has properly brought proceedings to seek guidance from the court on a point of general public importance so that the litigation is for the benefit of the community as a whole to warrant the cost of litigation be borne by the public purse as costs incidental to good public administration; (b) the judicial decision has contributed to the proper understanding of the law in question; (c) the litigant has no private gain in the outcome.”

4.The plaintiff company also relied on, for comparative purposes, the approach of the English courts in the making of protective costs orders, to the effect that, irrespective of the outcome of the judicial review, there will be no order as to costs against the applicant or that any order would not exceed a stated sum.  The plaintiff company emphasised that the requirement that the applicant had “no private interest” in the outcome of the case has been applied flexibly in England.  Morgan v Hinton Organics (Wessex) Ltd [2009] EWCA Civ 107.

5.This is not a suitable case for consideration of how the criteria identified by Lam J may be satisfied.  Plainly, this is not a case where we should depart from the usual rule that costs should follow the event.  There can be no doubt that these proceedings were brought for the private interest of the plaintiff company.  Any benefit to the public as a result of the elucidation of the law is incidental. Nor is the fact that it is in liquidation or that there are court appointed liquidators to the point.  Suppose, notwithstanding the mismanagement of its former directors, the plaintiff had remained solvent and thus was not in liquidation, could it be said that the usual cost order would be inappropriate if it takes proceedings to facilitate the recovery of tax which it contended was wrongly paid? Nor is the fact that the liquidators were court appointed and have no personal interest in the outcome relevant. 

6.The order nisi is made absolute.

Written submissions by Mr Jason Karas of Lipman Karas, for the appellant

Written submissions by Mr Roger Beresford, instructed by the Department of Justice, for the respondent