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Jake Van Der Kamp

The [flat purchase] document was signed by Cheng’s [Justice Secretary Teresa Cheng Yeuk-wah] husband, Otto Poon Lok-to, on her behalf but it specified Cheng as the buyer.
It also showed that Cheng paid HK$2.635 million in stamp duty – she should have had to shell out HK$9.3 million if she had not purchased it as a first-time buyer.
-- SCMP, January 23
But she apparently deemed herself a first-time buyer as the other properties she owns were bought through corporate name.
It’s a common enough dodge. Instead of buying a flat in your own name, you form a company and have the company buy it.
This way, the flat can change hands an infinite number of times in the future and yet never again be bought or sold. It is the company which has bought and sold.
The immediate advantage is that the stamp duty on the transfer of company shares amounts in total to only 0.2 per cent of the value of the transaction. The basic stamp duty on sales of homes, however, is 1.5 per cent for any transaction over HK$3 million (US$383,680) and only the tiniest micro flats now sell for less than that.
In addition, we now have further stinging stamp duty charges on non-first time and foreign buyers.
The drawback of going the company route is that to incorporate a flat held in your personal name requires that you first sell it to the company and pay the full property stamp duty. If your flat is not already incorporated, there is not much point in doing it.
You also bear the cost of forming the company, preparing and filing annual accounts for it, paying annual corporation fees and convincing buyers - should you choose to sell it - that your company did nothing but hold the flat. They don’t want to be surprised by undisclosed corporate obligations.
It is still an attractive option, however, and widely employed to evade high stamp duties. It is also fully legal.
A hoary old 19th century legal precedent Salomon vs. Salomon says that a corporate director is an entirely different person from that same person as an individual. Yeah, go figure.
But I also have in mind the reasoning behind a 2016 appeal court decision in a stamp duty dispute over the purchase of a flat in the New Territories. Here, cited in turn from earlier rulings, are a few of the important bits:
“The modern approach is to adopt a purposive approach interpretation and the context of a statutory provision should be taken in its widest sense...
And then again:
“The statute shall receive such fair, large and liberal construction as will best ensure the attainment of its object.”
And again:
“In interpreting a statute, the court’s task is to ascertain the intention of the legislature as expressed in the language of the statute.”
There is no mistaking the intent of the legislature in this case. It was to suppress speculative activity in the property market by imposing extra stamp duties on the purchase by any individual of more than one home.
Here, we have the purchase of a second home, bought by our present Secretary of Justice only a few months ago in her own name, and yet, she did not pay the extra stamp duty on it. Her other properties are held in corporate name.
If we are to interpret the law “in its widest sense” and “as will best ensure the attainment of its object,” you would think that the law should treat her and her 100-per cent owned property holding company as the same person.
But, no. The mystery of the law stands in the way of the evidence of your eyes here in the form of Salomon vs. Salomon.
Why then do our appeal court justices even bother to say that their task is to “ascertain the intention of the legislature”?
Good question. Ask them, if you will, why they waste their breath. I don’t know.
But, more to the immediate point, when a Secretary for Justice, no less, is discovered to have thumbed her nose at our legislation through her investment practices, she encourages disrespect of the law.
To our Chief Executive Carrie Lam Cheng Yuet-ngor: you cannot keep her, Teresa has to go. However difficult it may be to find a replacement, you must do it now.


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Jake's View

What happens when the justice secretary’s very action encourage people to disrespect the law?

Potential buyers queue up as Sun Hung Kai Properties launch St Barths, a residential project in Ma On Shan, for sale at the International Commerce Centre (ICC) in West Kowloon. 20JAN18 SCMP / Edward Wong

Secretary for Justice Teresa Cheng Yeuk-wah's property, at the 3/f, Sea Cliff Mansions, No.19C Repulse Bay Road. The flat, was bought by Secretary for Justice Teresa Cheng in September 2017, has illegal additions. 22JAN18 SCMP / Winson Wong

Aerial view of Secretary for Justice, Teresa Cheng Yeuk-wah's home (L) and her husband Otto Poon Lok-to (R) at Villa de Mer in Siu Lam, Tuen Mun, under construction. Buildings Department announced that it had approved a plan to remove three illegal structures of Cheng's house within two months. 23JAN18 SCMP / Winson Wong

Secretary for Justice Teresa Cheng Yeuk-wah attends a Commercial Radio programme in Kowloon Tong. In the Beautiful Sunday radio programme, Secretary for Justice Teresa Cheng Yeuk-wah apologised for failing to deal with the illegal additions at her home in Tuen Mun’s Villa De Mer estate. Photo: SCMP / Winson Wong

Amid Teresa Cheng’s illegal structures scandal, Hong Kong faces a growing crisis of confidence

Beleaguered Secretary for Justice Teresa Cheng talks to Financial Secretary Paul Chan Mo-po (right) at the Legislative Council last Thursday. Photo: Sam Tsang

Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor attends a Question and Answer session at the Legislative Council Complex in Tamar. 11JAN18 SCMP / K. Y. Cheng

Arbitration legal eagle Teresa Cheng tipped to be Hong Kong’s next justice secretary

Teresa Cheng is expected to take over from Rimsky Yuen in January. Photo: David Wong

Secretary for Justice Rimsky Yuen Kwok-keung meets the press after the Legislative Council debate motion on taking forward the follow-up tasks of co-location arrangement at the West Kowloon Station of the Guangzhou-Shenzhen-Hong Kong Express Rail Link, at the Legislative Council in Tamar. 15NOV17 SCMP / K. Y. Cheng

Don’t rush to judge Hong Kong justice chief Teresa Cheng over her illegal structures scandal

However reprehensible, illegal structures at ministers’ homes have not previously been treated as a resignation – or a prosecution – issue, and Cheng should not be treated differently. Illustration: Craig Stephens

Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor meets the press before the Executive Council meeting at the Central Government Offices in Tamar. 16JAN18 SCMP/ Nora Tam

Workers begin setting up scaffolding at Secretary for Justice, Teresa Cheng Yeuk-wah's home at Villa de Mer in Siu Lam, Tuen Mun. Newly appointed Secretary for Justice Teresa Cheng is afflicted by scandal involving illegal structures at her house. 11JAN18 SCMP / Winson Wong

Former Hong Kong Secretary for Development Mak Chai-Kwong (FRONT) and former Highways Department Assistant Director Tsang King-man (R1) leave Court of Final Appeal in Central. 06JAN16 SCMP/ K. Y. Cheng

Give justice chief Teresa Cheng space to explain ‘unfortunate’ illegal structures scandal, veteran government adviser says

Secretary for Justice Teresa Cheng (centre) is surrounded by the press after a question-and-answer session in Tamar. Photo: Sam Tsang

Laura Cha Shih May-lung, Chairman of Hong Kong’s Financial Services Department Council, speaks during an interview with Hong Kong media in Beijing. 11MAR16 === Photo by Simon Song ===

Drone view of new Justice Minister Teresa Cheng Yeuk-wah's personal house (centre left) at Villa de Mer in Siu Lam, Tuen Mun. Cheng is facing a scandal over illegal structures at her home. 09JAN18 SCMP / Winson Wong

Hong Kong justice secretary Teresa Cheng apologises on first day in office for controversy over ‘illegal structures’ in her home

But new minister stops short of admitting wrongdoing and only confirms she sought a professional to review the matter

Chief Executive Carrie Lam Cheng Yuet-ngor (left), and newly appointed Secretary for Justice Teresa Cheng Yeuk-wah (right), meet the media at CGO, Tamar. 05JAN18 SCMP / Felix Wong

A security guard stands at Villa de Mer, at Siu Lam in Tuen Mun, where is the new justice minister Teresa Cheng Yeuk-wah personal house. 06JAN18 SCMP / David Wong

The Secretary for Justice Teresa Cheng, SC (left), is sworn in by the Chief Executive Carrie Lam Yuet-ngor on January 6, 2018. Photo: ISD

Teresa Cheng’s house (middle unit) at Village de Mer in Tai Lam, Tuen Mun. Photo: David Wong

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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


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