Chief Assessor v Glengary Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 25 April 2013
• Date: 25 April 2013
• Docket Number: Civil Appeal No 132 of 2012
• Court: Court of Appeal (Singapore)

Chief Assessor

Plaintiff

and

Glengary Pte Ltd

Defendant

[2013] SGCA 30

Sundaresh Menon CJ

,

Chao Hick Tin JA

and

Andrew Ang J

Civil Appeal No 132 of 2012

Court of Appeal

Revenue Law—Property tax—Units in development pre-sold—Property prices subsequently rise—Chief assessor ignored pre-sales in assessing annual value of land for tax purposes—Whether statutory fiction of ‘vacant land’ in s 2 (3) (b) Property Tax Act (Cap 254, 2005 Rev Ed) precluded consideration of pre-sales—Section 2 (3) (b) Property Tax Act (Cap 254, 2005 Rev Ed)

The Appellant was the Chief Assessor. The Respondent was the developer of the The Sail@Marina Bay (‘the Sail’), a mixed development located at Marina Boulevard (‘the Land’). By 2005, when the Sail was still at an early stage of construction, the Respondent had sold most of the residential units in the development (‘the pre-sales’). Thereafter, property prices rose sharply. Property tax on the Land for the years 2007 and 2008 was assessed by the Appellant pursuant to s 2 (3) (b) of the Property Tax Act (Cap 254, 2005 Rev Ed) (‘the Act’). The assessment, which disregarded the pre-sales, increased the value of the Land from $26,000,000 in 2005 to $59,091,000 in 2007 and 2008. The Respondent objected to this assessment. Its sole submission before the Valuation Review Board (‘VRB’) was that the Appellant had misinterpreted s 2 (3) (b) of the Act by disregarding the pre-sales.

The VRB dismissed the Respondent's appeal and found that s 2 (3) (b) of the Act precluded consideration of any process of development on the Land, including the pre-sales. On appeal before the High Court, the VRB's decision was reversed. The High Court Judge found that the deeming of the Property (which was then under development) as ‘vacant land’ under s 2 (3) (b) of the Act did not preclude the Appellant from taking into consideration the pre-sales in determining annual value, given that the pre-sales could occur without construction having commenced on a piece of land and could form part of the existing circumstances of the land at the time of valuation. The Appellant appealed.

Held, allowing the appeal:

(1) The fiction of ‘vacant land’ created in s 2 (3) (b) of the Act was to enable a piece of land to be assessed based on its potential use and occupation irrespective of what was already on the land or was in the process of being erected. It followed that the value of units in the building (already built or to be built) could not form part of the assessment as they constituted actual and potential use. While the immediate object behind granting an option to the local authorities to assess annual value based on the fiction of the land being vacant was to enable the authorities to collect more taxes from the land owner, its true aim was, through this fiscal measure, to incentivise the owner, in land-scarce Singapore, to develop the land to its full development potential rather than leaving the land undeveloped or underdeveloped for an indefinite period of time. Accordingly, any assessment of annual value which sought to tie the value of the land to the value of the pre-sales and thus restricted the potential use and occupation of the land, would run counter to the statutory fiction of ‘vacant land’ and in turn be inconsistent with the wording of s 2 (3) (b) of the Act: at [24] , [27] and [35] .

(2) The pre-sales were wholly unlike an easement. An easement was a restrictive burden on the use of servient land and could affect the development potential of the servient land and, in turn, its value. In contrast, the pre-sales were just contracts between the developer and the individual purchasers of the units whereby the former agreed to sell the unit to the purchasers at an agreed price. The fact that a caveat was lodged against the unit under the development to protect the purchaser's interest in the unit did not change the nature of the pre-sales as a caveat was merely a notice on the register which gave the caveator a chance to defend a potential interest in the land. It did not automatically signify that the caveator had an immutable proprietary interest to which any future purchaser had to be subject. The pre-sales protected by the caveats were not claims attached to the property and could not be an encumbrance affecting the value of the Land qua vacant land: at [28] and [29] .

(3) The pre-sales reflected individual bargains between the developer and purchasers of units in 2005. If the pre-sales were to be taken as indicative of the market value of the Land, this would amount to assessing the value of the Land for 2007 and 2008 by reference to 2005 prices. Such an assessment of annual value would be inconsistent with an assessment based on rental value. Where the rent was palpably low or the tenancy agreement was entered into a number of years ago when the market was either better or poorer than the current market conditions, the rental value which would be taken for determining annual value would be the hypothetical, and not the actual, rent. Sales data which are outdated, and, which could not and did not represent the current market value of a property, could be of no relevance in determining the capital value of the property: at [30] , [33] and [34] .

(4) Consideration of the pre-sales ran counter to the principle of reality and rebus sic stantibus. The reality was the market conditions prevailing in 2007 and 2008. The pre-sales in 2005 were not part of the reality of the circumstances surrounding the Land in 2007 and 2008. The developer could not be permitted to ‘freeze’ the value of the land at a price which followed market conditions prior to the date of valuation: at [36] .

Alrich Development Pte Ltd v Rafiq Jumabhoy [1993] 1 SLR (R) 598; [1993] 2 SLR 446 (refd)

Asiatic Enterprises (Pte) Ltd, The v United Overseas Bank Ltd [1999] 3 SLR (R) 976; [2000] 1 SLR 300 (refd)

Bata Shoe Co Ltd v Chief Assessor [1959-86] SPTC 71 (refd)

Chief Assessor v Town and City Properties Ltd [1965-1967] SLR (R) 477; [1965-1968] SLR 526 (refd)

Dawkins v Ash Brothers and Heaton Ltd [1969] 2 AC 366 (refd)

Shell Eastern Petroleum Pte Ltd v Chief Assesor [1998] 3 SLR (R) 874; [1999] 1 SLR 441 (refd)

Union of India v Jalyan Udyog (1994) 1 SCC 318; AIR 1994 SC 88 (refd)

Municipal (Amendment) Ordinance 1919 (SS Ord No 12 of 1919)

Property Tax Act (Cap 254, 2005 Rev Ed) ss 2 (1) , 2 (3) , 2 (3) (b) , 10, 20 (1)

Property Tax (Amendment) Act 1963 (Ord 25 of 1963)

Property Tax (Amendment) Act 1965 (Act 24 of 1965)

Property Tax Ordinance 1960 (No 72 of 1960) s 2

Quek Hui Ling, Joyce Chee, Lau Kai Lee and Pang Mei Yu (Inland Revenue Authority of Singapore) for the appellant

Tan Kay Kheng, Tan Shao Tong, Novella Chan and Jeremiah Soh (Wong Partnership LLP) for the respondent.

Judgment reserved.

Chao Hick Tin JA

(delivering the judgment of the court):

1 This appeal concerns the proper interpretation of s 2 (3) (b)of the Property Tax Act (Cap 254, 2005 Rev Ed) (‘the Act’), which permits the Chief Assessor to assess the annual value of a property under development with reference to the estimated value of the land ‘as if it were vacant land with no building erected, or being erected, thereon’.

2 The respondent in this appeal (‘the Respondent’) is the developer of The Sail@Marina Bay (‘The Sail’), a mixed development located at Marina Boulevard on the site TS 30 Lot LP 650 (henceforth referred to as ‘the Land’ or ‘the Property’ as may be appropriate). By 2005, when The Sail was still at an early stage of construction, the Respondent had sold most of the residential units in the development (‘the pre-sales’). Property tax on the Land for the years 2007 and 2008 was assessed by the Chief Assessor (henceforth referred to as ‘the Appellant’ or ‘the Chief Assessor’ as may be appropriate), pursuant to s 2 (3) (b) of the Act. The parties' arguments at the hearing below, as well as the arguments before us, essentially centred on two competing interpretations of ‘vacant land’ in s 2 (3) (b) of the Act, viz:

(a)‘vacant land’ precludes consideration of the pre-sales, which pertain to buildings on the Land or being erected thereon (‘interpretation (a)’); or

(b)‘vacant land’ allows for consideration of the pre-sales, which are encumbrances upon the Land (‘interpretation (b)’).

3 The parties had agreed that if interpretation (a) was correct, the annual value of the Land would be $51,409,000 with effect from 1 April 2007 and 1 January 2008, whereas if interpretation (b) was correct, the annual value of the Land would be $27,000,000 with effect from 1 April 2007 and 1 January 2008.

Background to the dispute

4 In 2002, a 99-year lease of the Land, with effect from 12 August 2002, was acquired by the Respondent from the State. In December 2003, the Respondent submitted an application through its architect to the Urban Redevelopment Authority for provisional permission to build residential and retail units on the Land. Provisional approval for the development plan was granted in February 2004.

5 The Respondent began pre-sales of the residential units in The Sail in October 2004, before construction began on 22 November 2004. Ms Chua Beng Ee, a property valuer engaged by the Respondent, testified that it was a common practice for developers to launch sales of...