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DCSA 45/2016

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[2018] HKDC 503 C

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IN THE DISTRICT COURT OF THE
E HONG KONG SPECIAL ADMINISTRATIVE REGION E
STAMP APPEAL NO 45 OF 2016
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In the matter of Section 14 of


H the Stamp Duty Ordinance, H
Cap 117
I I

J SO KAM SHING and SO KAM WAI Appellant J

and
K K
THE COLLECTOR OF STAMP REVENUE Respondent
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M M
Before: His Honour Judge MK Liu in Chambers (Open to public)
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Date of Hearing: 7 May 2018

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Date of Judgment: 10 May 2018 O

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Q
JUDGMENT Q
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R R

S INTRODUCTION S

T T
1. Stamp Duty Ordinance (“SDO”) s 10(2) provides:-
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“Every instrument chargeable with stamp duty containing or


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relating to several distinct matters shall be separately and
distinctly charged, as if it were a separate instrument, with stamp
D duty in respect of each of the matters.” (Emphasis added) D

E 2. The outcome of this appeal would turn on the true meaning of E

this statutory provision.


F F

G THE FACTS G

H H
3. I would first set out the facts in the case stated prepared by the
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Collector of Stamp Revenue (“the Collector”) which are not in dispute. I

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4. This is an appeal brought by Mr So Kam Shing (“KS”) and
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Mr So Kam Wai (“KW”) under SDO s 14 against a stamp duty assessment

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by the Collector issued on 6 May 2016 (“the Assessment”) in respect of a L
Deed of Family Arrangement (“DFA”) and a Deed of Assent (“the Assent”)
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both dated 6 August 2013 (together “the Deeds”).

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5. Mr So Yim Nam (“the Deceased”) passed away on 2
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September 2011. At the time of his death, the Deceased was the sole owner
P of a property known as Shop No 7 on G/F, Tin On House, Nos 78-84 & P

88-96 Shek Yam Road, Kwai Chung, New Territories (“the Property”).
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R 6. Letters of Administration in respect of the Deceased’s estate R

was granted to KS on 28 March 2013.


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T 7. According to the Affirmation made by KS on 7 February 2013, T

KS, KW and Ms So Kam Yee (‘the Sister”) are the lawful and natural
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children of the Deceased and the only persons entitled to have shares in the

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Deceased’s estate. C

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8. By entering into the DFA, KS, KW and the Sister agreed that

E the Property should be vested in KS in his personal capacity and KW as E


tenants-in-common in equal shares.
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G 9. KS, in the capacity of administrator of the Deceased’s estate, G

executed the Assent to vest the Property in KS in his personal capacity and
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KW as tenants-in-common in equal shares.
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10. The Property is a non-residential property within the meaning


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of SDO s 29A(1).
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11. On 16 August 2013, Messrs Lee Shing Fung & Co (“the


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Solicitors”) presented the Deeds to the Collector for adjudication of stamp
M duty pursuant to SDO s 13(1). M

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12. The Property was then valued by the Commissioner of Rating
O and Valuation (“the Commissioner”) at HK$17,800,000 as at the date of O

the Deeds.
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Q 13. By a letter dated 12 June 2015, the Collector informed the Q

Solicitors that the distribution of interests in the Property in excess of the


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entitlement of the beneficiaries under the intestacy (“the Excess
S Entitlement”) operated as a voluntary disposition inter vivos and was S

chargeable with ad valorem stamp duty (“AVD”) under SDO s 27. The
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computation of the Excess Entitlement and the AVD chargeable are as

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follows:- C

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Beneficiaries Entitlement under Distribution Increase/
E Intestates’ Estates according to the Decease E
Ordinance (Cap.73) Deeds in entitlement
F (“IEO”) F

G
HK$ HK$ HK$ G
st
1 Appellant (1/3) 5,933,334 (1/2) 8,900,000 +2,966,666
H H
2nd Appellant (1/3) 5,933,333 (1/2) 8,900,000 +2,966,667

I The Daughter (1/3) 5,933,333 NIL -5,933,333 I

17,800,000 17,800,000
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K Excess Entitlement HK$5,933,333 K

AVD chargeable (HK$5,933,333 x 6%) HK356,000


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M 14. KS and KW disagreed with the valuation of the Property as M

assessed by the Commissioner and further contended that AVD should be


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computed for each of them separately.
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15. The Commissioner subsequently advised that the valuation of


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1/3 share of the Property as at 6 August 2013 was HK$5,340,000.
Q Accordingly, the Collector issued a proposed assessment to the Solicitors Q

with the following details:-


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A A

B B
Beneficiaries Entitlement under Distribution Increase/
C IEO according to the Decease C
Deeds in entitlement
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HK$ HK$ HK$
E 1st Appellant (1/3) 5,340,000 (1/2) 8,010,000 +2,670,000 E

2nd Appellant (1/3) 5,340,000 (1/2) 8,010,000 +2,670,000


F F
The Daughter (1/3) 5,340,000 NIL -5,340,000
G 16,020,000 16,020,000 G

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Excess Entitlement HK$5,340,000


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AVD chargeable (HK$5,340,000 x 6%) HK$320,400
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K
16. In a letter from KS and KW dated 21 January 2016 to the K
Collector, KS and KW did not take issue with the revised valuation.
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However, KS and KW asserted that the effect of the Deeds was to transfer

M the entire entitlement of the Sister in the Property under intestacy of the M
Deceased to the two of them in equal shares and the stamp duty in respect
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of the Deeds should therefore be computed as follows:-
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($5,340,000 / 2 x 3%) + ($5,340,000 / 2 x 3%) = $160,200


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Q 17. The Collector maintained the view that the Deeds were Q

chargeable with AVD of $320,400.


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S 18. On 6 May 2016, the Collector, under SDO s 13(3)(b), issued S

the Assessment in respect of the Deeds as follows:-


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HK$

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AVD chargeable ($5,340,000 x 6%) C
under Scale 1(g) of head 1(1) in the First Schedule 320,400
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to SDO

E Less: Stamp Duty Paid 320,400 E

Stamp duty payable NIL


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G 19. On 25 May 2016, KS and KW filed a Notice of Appeal against G

the Assessment.
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I THE QUESTIONS I

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20. The questions submitted for the opinion of the Court in this
K appeal are as follows:- K

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(a) whether the Deeds are chargeable with stamp duty; and
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(b) if so, with what amount of stamp duty.


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O QUESTION 1 O

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21. KS and KW are not saying that the Deeds are not chargeable
Q with stamp duty. They are merely disputing the amount of stamp duty Q

chargeable. So, question 1 is not an issue between the parties. However,


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since this is a question in the case stated prepared by the Collector and
S submissions on this question have been made, I would give my opinion on S

the question.
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22. The starting point is to look at the following definitions in the

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SDO:- C

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(a) S 2 contains a definition of “conveyance”, which is as

E follows: E

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“conveyance ( 轉 易 契 ) means every instrument
(including a surrender) and every decree or order of any
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court whereby any immovable property is transferred to
or vested in any person.”
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(b) S 27(1) provides:


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J “Any conveyance of immovable property operating as a J


voluntary disposition inter vivos shall be chargeable with
stamp duty as a conveyance on sale, with the substitution
K of the value of the property conveyed for the amount or K
value of the consideration for the sale,”
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(c) S 27(4) provides:


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N “Any conveyance or transfer (not being a disposition N


made in favour of a purchaser or incumbrancer or other
person in good faith and for valuable consideration) shall
O for the purposes of this Ordinance be deemed to be a O
conveyance or transfer operating as a voluntary
P disposition inter vivos, and (except where marriage is the P
consideration) the consideration for any conveyance or
transfer shall not for this purpose be deemed to be
Q valuable consideration where the Collector is of opinion Q
that by reason of the inadequacy of the sum paid as
consideration or other circumstances the conveyance or
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transfer confers a substantial benefit on the person to
whom the property is conveyed or transferred.”
S S

23. By the operation of the DFA and the Assent, KS and KW have
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inherited a share in the Deceased’s estate which is in excess of the interest
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that they may inherit under the intestacy law. By the definitions in the

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aforesaid statutory provisions, the Deeds are deemed to be a conveyance C
or transfer operating as a voluntary disposition inter vivos under SDO
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s 27(4). The Deeds are therefore chargeable with ad valorem stamp duty.

E This is a clear conclusion and is supported by the authorities. E

F F
24. In Baker & anor v Inland Revenue Commissioners [1924] AC
G 270, the House of Lords has considered section 74(5) of the Finance Act G

1910 (which is identical to SDO s 27(4)) and said at 275-276:-


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I “Now I have to pass on to the second part of sub-s.5, which has I


a bearing upon that state of things. The sub-section proceeds:
“and (except where marriage is the consideration) the
J consideration for any conveyance or transfer shall not for this J
purpose be deemed to be valuable consideration where the
Commissioners are of the opinion that by reason of the
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inadequacy of the sum paid as consideration or other
circumstances the conveyance or transfer confers a substantial
L benefit on the person to whom the property is conveyed or L
transferred.” I think that means that a conveyance, although for
value, comes within the section if it confers upon the grantee
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a substantial benefit beyond what that grantee gives, or (in
other words) if it is in substance a gift to the person taking
N under it after allowing for any consideration which he brings in. N
In such cases the conveyance does confer a benefit – that is a
gift – on the person to whom the conveyance is made, and to
O that extent is to be treated as a voluntary disposition.” O
(Emphasis added)
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25. The same conclusion was reached by the Singapore High


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Court in Tan Kay Thye & ors v Commissioners for Stamp Duties [1991] 3
R MLJ 150. That case is factually similar to the present appeal. The R

appellants in that case by a deed of family arrangement and an assent


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acquired property which was more valuable than that they could have
T acquired under the intestacy rule. The Singapore High Court held that the T

assent in that case is chargeable with ad valorem stamp duty under section
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B B
16 of the Singapore Stamp Duties Act. That provision is identical to SDO

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s 27. C

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26. For the reasons above, it is clear that the Deeds are chargeable

E with ad valorem stamp duty. E

F F
QUESTION 2
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27. The parties agree that if KS and KW are right, the amount of
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stamp duty chargeable would be the one stated in paragraph 16 above. On
I the other hand, if the Collector is right, the amount of stamp duty would be I

the one set out in paragraph 15 above.


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K 28. KS and KW rely upon SDO s 10(2) and argue that the Sister K

has transferred half of her interest in the Property to each of them. KS and
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KW argue that there are 2 transfers, and each transfer is a distinct matter.
M They say that in accordance with SDO s 10(2), the stamp duty should be M

computed in the way as set out in paragraph 16 above. They further argue
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that the Collector’s computation as mentioned in paragraph 15 above
O would only be correct if the Sister transfers her entire interest in the O

Property to only one of them. This is not the case. The Collector’s
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computation therefore is not correct.
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29. As a matter of law, the Sister has never had any proprietary
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interest in the Property. It is trite that beneficiaries of the estate of a
S deceased do not have any proprietary interest in any particular asset in the S

estate before the execution of an assent by the executor or administrator.


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The position has been succinctly summarized in Williams, Mortimer &

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Sunnucks (20th Edition), §81-03:- C

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“Until assent or conveyance, a person interested under the will
or intestacy has an inchoate right transmissible to his own
E representatives. It is a chose in action capable of itself being E
settled or transmitted …”

F F
See also Commissioner of Stamp Duties (Queensland) v Livingston [1965]
G AC 694, 707-708. G

H H
30. Accordingly, it is not the Sister transferring her 1/3
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proprietary interest in the Property to KS and KW in equal shares, but the

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administrator with the Sister’s consent indicated in the DFA transferring J
the 1/3 proprietary interest in the Property to KS and KW by executing the
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Assent. The crux is whether that transfer is one matter or two separate

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distinct matters. L

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31. Mr Suen for the Collector refers me to Ansell v

N Commissioners of Inland Revenue [1929] 1 KB 608, which can shed light N


on this issue. In that case, in considering the true meaning of the Stamp
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Act 1891 s 4(a) (which is substantially similar to SDO s 10(2)), Rowlatt J
P said at 617:- P

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“It one turns to s.4 the distinct matters there must be distinct
matters for the purposes of the Stamp Act. If two different
R classes of property are being transferred by the same words of R
assignment in the same document, and those two different
classes of property in the same document are different from the
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point of view of the Stamp Act and taxation, it seems to me in
common sense that they must be distinct matters.” (Emphasis
T added) T

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32. Mr Suen submits that in the light of Ansell, “distinct matters”

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in SDO s 10(2) should be different classes of property being transferred in C
one instrument. In the present case, the Excessive Entitlement vested in
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KS and KW by way of voluntary disposition is simply the same kind of

E proprietary interest. So there is only one matter in the transfer effected by E


the Deeds, not two separate distinct matters.
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G 33. I accept Mr Suen’s submissions. While I understand KS and G

KW’s argument, with respect, their argument cannot be right. If they were
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right, SDO s 10(2) would have been invoked in each and every case where
I the conveyance is transferring a property to two or more persons holding I

the same as tenants in common. This simply cannot be something


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contemplated by the statutory provision. In my judgment, “distinct matters”
K in SDO s 10(2) are different classes of property being transferred in one K

instrument. The Excessive Entitlement transferred to in KS and KW by


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the Deeds is the same kind of proprietary interest, and hence KS and KW
M cannot derive assistance from SDO s 10(2). M

N N
34. The Collector’s computation of Stamp Duty as set out in
O paragraph 15 above is therefore correct and the amount of stamp duty O

stated therein is the correct amount.


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Q DISPOSITION Q

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35. For the reasons above, I dismiss the appeal.
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36. I have heard submissions on costs. In my view, costs should


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follow the event. I order that costs of this appeal (including all costs
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reserved, if any) be paid by KS and KW to the Collector, with a certificate

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for counsel, to be taxed if not agreed. C

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37. I further direct that upon KS and KW’s request, this judgment

E be interpreted to them by a court interpreter in the District Court at a E


mutually convenient time.
F F

G 38. Lastly, it remains for me to thank the parties for the assistance G

rendered to the court.


H H

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J J

K ( MK Liu ) K
District Judge
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Appellant was not represented and appeared in person


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Mr Suen Sze Yick, Government Counsel, of the Department of Justice, for


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the respondent

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