City Developments Ltd v Chief Assessor

JudgeAndrew Phang Boon Leong JA
Judgment Date10 July 2008
Neutral Citation[2008] SGCA 29
Citation[2008] SGCA 29
Defendant CounselLiu Hern Kuan and Quek Hui Ling (Inland Revenue Authority of Singapore)
Published date14 July 2008
Plaintiff CounselTan Kay Kheng and Tan Shao Tong (WongPartnership LLP)
Date10 July 2008
Docket NumberCivil Appeal No 96 of 2007
CourtCourt of Appeal (Singapore)
Subject MatterRevenue Law,Whether irrational to have regard to wider planning considerations,Section 2 Property Tax Act (Cap 254, 1997 Rev Ed),Administrative Law,Administrative discretion,Annual value,Property tax,Whether hypothetical tenancy method or 5% method of assessment should be used,Whether irrational to distinguish between property developers and homeowners,Inland Revenue Authority of Singapore,Assessing annual value of redevelopment property

10 July 2008

Andrew Phang Boon Leong JA (delivering the grounds of decision of the court):

Background

1 This is an appeal by City Developments Limited (“CDL”) against the decision of the judge below (“the Judge”) in Originating Summons No 1975 of 2006 (see City Developments Ltd v Chief Assessor [2008] 2 SLR 397 (“the GD”)), in which he dismissed CDL’s appeal against the decision of the Valuation Review Board (“VRB”). The VRB had earlier upheld the Chief Assessor’s dismissal of CDL’s objection to his assessment of the annual value of a property that CDL owns (see City Development Limited v The Chief Assessor [2007] SGVRB 1 (“the VRB decision”)). We dismissed the appeal with costs, and now provide the full reasons for our decision.

2 CDL, an established property developer, had acquired a piece of land at Nos 5A to 5H and 5J to 5M Balmoral Park and 12 apartments thereon (“the subject property”) by way of an en bloc sale in February 2000. It then applied to the Urban Redevelopment Authority (“URA”) for written permission, which was granted in March 2001, to redevelop the subject property into a condominium. Not long after, CDL paid a development charge of $6.74m, which is a tax on the enhancement in land value resulting from the State approving a higher value development. In August 2003, it acquired the land adjacent to the subject property (40 Stevens Road) with a view to embarking on a larger condominium project than before; to that end, it applied again to the URA for permission to redevelop the subject property (in conjunction with 40 Stevens Road) as the previous permission had lapsed. Between 2002 and 2005, however, the subject property was not demolished but most of it was rented out to a variety of entities at significantly discounted rates (see the GD at [6]–[7] and [29]). Most of these entities were not related to CDL.

3 The amount of property tax payable on a property depends on the latter’s annual value, and s 2 of the Property Tax Act (Cap 254, 1997 Rev Ed) (“the Act”) defines the ways in which “annual value” can be assessed. For the present case, there were two possible definitions applicable, viz;

(a) s 2(1) of the Act, ie, the gross amount at which the property can reasonably be expected to be let from year to year (“the hypothetical tenancy method”); or

(b) s 2(3)(b) of the Act, ie, 5% of the estimated market value of the land as if it were vacant land (“the 5% method”).

Both provisions are reproduced as follows:

2.—(1) In this Act, unless the context otherwise requires —

“annual value” —

(a) in relation to a house or building or land or tenement, not being a wharf, pier, jetty or landing-stage, means the gross amount at which the same can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than goods and services tax); …

(3) In assessing the annual value of any property, the annual value of the property shall, at the option of the Chief Assessor, be deemed to be the annual value as defined in this Act or the sum which is equivalent to the annual interest at 5% —

(a) on the estimated value of the property, including buildings, if any, thereon; or

(b) on the estimated value of the land as if it were vacant land with no buildings erected, or being erected, thereon.

In most situations, the hypothetical tenancy method would yield a lower annual value of the property (and therefore a lower property tax payable), but there is no doubt that s 2(3) of the Act expressly confers on the Chief Assessor the discretion to use that particular provision (embodying the 5% method) over other methods of assessment found in s 2. As a matter of practice, the Chief Assessor also distinguishes between developers and homeowners rebuilding their homes in that s 2(3) is applied to homeowners only at the point of demolition of the existing structures.

4 Before 1 January 2002, the annual value of the subject property was assessed using the hypothetical tenancy method for each of the 12 apartments comprising the subject property. In November 2002, the Chief Assessor informed CDL that, with effect from 1 January 2002, the annual value of the subject property would be assessed using the 5% method instead. This translated to $160,400 of property tax payable per year, as opposed to some $38,000 if the hypothetical tenancy method was used. In other words, this was a figure which was more than four times the previous amount assessed.

The decision below and the issues before us

5 At the hearing before the VRB, the Chief Assessor defended his use of the 5% method in the light of a policy to encourage the development of land instead of the hoarding of it until the appropriate time to launch a redevelopment project. In the pre-hearing submissions to the VRB, it was submitted on behalf of the Chief Assessor that:[note: 1]

The rationale for the Chief Assessor’s practice can be explained on two grounds. The first is a policy reason: that the higher rate will encourage redevelopment and rapid redevelopment of older properties is beneficial to Singapore. The Chief Assessor recognizes that the assessment of lands under section 2(3) even though there is no income derived from the land has a punitive effect. It discourages the hoarding of land by developers for speculative purposes. The exercise of the option under section 2(3) for redevelopment sites is aligned with the same policy intent to discourage land hoarding. [emphasis added]

CDL thus argued before the Judge that the Chief Assessor had: (a) acted unfairly in exercising his discretion under s 2(3)(b) of the Act; and (b) acted ultra vires in having regard to wider planning considerations when determining the annual value of the subject property.

6 The Judge dismissed those arguments, and held that:

(a) the Chief Assessor had the sole discretion under s 2(3) of the Act to determine which method of assessment ought to apply, and this discretion was fettered only by the duty to act fairly;

(b) the Chief Assessor was justified, on the facts of the case, in using the 5% method as there was a clear and definite intention on the part of CDL to redevelop the subject property;

(c) the distinction drawn between property developers and homeowners rebuilding their homes was a valid one; and

(d) the Chief Assessor’s policy to discourage land hoarding did not impinge on the powers and duties of other public authorities and was a legitimate and logical assessment of what was in the public interest.

7 We agreed with the decision of the Judge. Indeed, although a number of arguments were raised on appeal before this court, they not only had no merit but were also (and more importantly) the same – or comprised variations of the same – arguments explored both before the VRB as well as before the Judge. However, we also wish to take this opportunity to elaborate on two important (and related) points, in particular, as follows:

(a) whether the adoption of the policy of discouraging property developers from land hoarding in land-scarce Singapore was an irrational one (since illegality was not an issue here); and

(b) whether the distinction drawn between homeowners and property developers was an irrational one.

8 In so far as the two points highlighted in the preceding paragraph are concerned, counsel for CDL made the following arguments before us:

(a) by basing his decision to invoke s 2(3) on a planning consideration, the Chief Assessor had acted ultra vires as he was not only factoring in irrelevant considerations but was also neither empowered nor equipped to deal with such considerations, which fell within the ambit of other relevant government agencies; and

(b) the distinction drawn between homeowners and property developers was not endorsed anywhere in the Act, and, preliminarily speaking, there was no working definition of “developer”.

We now turn to address the first issue.

Whether the adoption of the policy of discouraging land hoarding was irrational

9 This being, in essence, a case of administrative law, there were effectively only two ways in which CDL could challenge the Chief Assessor’s exercise of discretion under s 2(3) of the Act, viz, that the Chief Assessor had either acted illegally, or he had acted irrationally, in adopting the policy of discouraging land hoarding. Either way, both hurdles would have been difficult to overcome even though CDL did not mount the argument of illegality. As was observed in Halsbury’s Laws of Singapore: Administrative and Constitutional Law, vol 1 (Butterworths Asia, 1999) at para 10.029 (“Halsbury’s vol 1”):

Any person or body of persons having legal authority to make decisions affecting the rights of persons is subject to the supervisory jurisdiction of the High Court. However the court’s power to intervene is limited to a review of the decision-making process and not with the merits of the decision itself, or with the findings of fact, as a general rule. Thus, the courts will intervene if the decision-making body has exceeded its authority, as by imposing unreasonable restrictions or conditions. A body invested with discretionary power to carry out its statutory functions and duties is entitled to adopt a general policy in the exercise of its statutory powers and duties provided that the policy is not unreasonable in the Wednesbury [Associated Provincial Picture Houses, Limited v Wednesbury Corporation [1948] 1 KB 223] sense.

10 The Singapore High Court decision of Lines International Holding (S) Pte Ltd v Singapore Tourist Promotion Board [1997] 2 SLR 584 (“Lines International”) is representative of the same points and is a useful case in specific relation to policy-based acts of discretion. In that case, the plaintiffs were cruise operators who sought judicial review of certain conditions imposed jointly by the Singapore Tourist Promotion Board (“STPB”) and the Port of Singapore Authority (“PSA”) which resulted in the plaintiffs...

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    • Singapore Academy of Law Journal No. 2017, December 2017
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