Glengary Pte Ltd v Chief Assessor

• Jurisdiction: Singapore
• Judge: Lai Siu Chiu J
• Judgment Date: 05 September 2012
• Neutral Citation: [2012] SGHC 183
• Court: High Court (Singapore)
• Docket Number: Originating Summons No 1075 of 2011
• Published date: 05 October 2012
• Year: 2012
• Hearing Date: 28 June 2012
• Plaintiff Counsel: Tan Kay Kheng, Tan Shao Tong and Novella Chan (WongPartnership LLP)
• Defendant Counsel: Joyce Chee and Lau Kai Lee (Inland Revenue Authority of Singapore)
• Subject Matter: Revenue Law,Property tax,Annual value
• Citation: [2012] SGHC 183

Lai Siu Chiu J: Introduction

This is an appeal against the decision of the Valuation Review Board (“the VRB”) in VRB Appeals No 236 of 2009 and No 237 of 2009: (see Glengary Pte Ltd v Chief Assessor [2012] SGVRB 1) in fixing the annual value of a piece of land at $51,409,000 for 2007 and 2008.

Factual background

The plot of land in question is TS 30 Lot LP 650 (“the Property”), the site on which a condominium development now known as The Sail@Marina Bay (“The Sail”) was built. The Property, which is located at Marina Boulevard, was acquired by Glengary Pte Ltd (“the Appellant”) from the state under the Government Land Sales scheme in 2002 on a 99-year lease with effect from 12 August 2002. The Sail comprises of a seven-storey car park/retail podium (which contains 22 retail units and the car park) and two residential tower blocks (consisting of 1,111 residential units).

In December 2003, the Appellant, through its architect, submitted an application to the Urban Redevelopment Authority (“URA”) for provisional permission to build residential and retail units at The Sail. The URA granted provisional permission in February 2004.

According to Ms Chua Beng Ee (“Ms Chua”), the property valuer engaged by the Appellant, units which are intended to be constructed may be launched for sale once the written planning permission, building plan approval, surveyor’s certificate on the floor areas of the units, and housing numbering certificate (collectively “the Approval Documents”) have been issued. Ms Chua stated that there was no requirement for any construction to have commenced on the site before the sales of the units to be constructed can take place. Conversely, such sales cannot take place (and construction cannot even begin) if the Approval Documents have not been issued.

Before construction of The Sail began, the Appellant launched in October 2004, the sale of the residential units which it intended to construct. Possession was granted to the building contractor on 22 November 2004. The vast majority of the residential units (1,106 units) were sold by the end of 2005, with four units sold in 2006 and the last unit sold in January 2007. While The Sail was under construction in 2007, the Chief Assessor (“the Respondent”) issued a notice under s 20 of the Property Tax Act (Cap 254, 2005 Rev Ed) (“the Act”) increasing the annual value of the Property to $59,091,000 with effect from 1 April 2007. The Appellant objected to this notice. The Appellant also objected to the annual value of $59,091,000 in the 2008 Valuation List. The Respondent disallowed both objections, relying on s 2(3)(b) of the Act to disregard the committed sales of the units in assessing the annual value of the Property. The Appellant appealed to the VRB against the Respondent’s decision.

The Temporary Occupation Permit (“TOP”) for Phase 1 of The Sail was issued on 29 May 2008 and the TOP for Phase 2 was issued on 29 September 2008. The entire development received its Certificate of Statutory Completion (“CSC”) on 17 April 2009.

The statutory provisions

Section 2 of the Act provides as follows:

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

...

“annual value” ... means the gross amount at which the [house or building or land or tenement] can reasonably be expected to be let from year to year ...

...

(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... The decision below

Both parties tendered an Agreed Statement of Facts (which set out many of the facts outlined above) to the VRB. In particular, they agreed on the quantum of the annual value of the Property depending on the interpretation of section 2(3)(b) of the Property Tax Act as follows: If the VRB were to decide that the basis of assessment under s 2(3)(b) of the Act is that any committed sales of the units in respect of the Property are to be disregarded (“Basis A”), the annual value shall be reduced to $51,409,000 with effect from 1 April 2007 and 1 January 2008 in respect of the two appeals; and If the VRB were to decide that the basis of assessment under s 2(3)(b) of the Act is that the committed sales of the units in respect of the Property are to be taken into consideration (“Basis B”), the annual value shall be reduced to $27,000,000 with effect from 1 April 2007 and 1 January 2008 in respect of the two appeals.

The VRB decided that the Respondent was entitled to treat the land as vacant land and disregard the committed sales in the valuation. A plain reading of s 2(3)(b) of the Act fully entitled the Respondent to treat the land as vacant land and to disregard the fact that there were buildings on the land or buildings in the process of being constructed on the land. The Appellant’s submission that the sale prices of the units were lower than the prices in 2007/2008 (due to the sharp increase in the interval) was held to be irrelevant as it was a commercial decision on the Appellant’s part to launch sales before the units were physically completed.

The VRB agreed with the Respondent that the fact that the units had been sold was connected to the fact that there were buildings being erected on the vacant land. The VRB held (at [10]) that since the committed sales clearly flowed from the fact that the buildings were under construction, they had to be disregarded as the only logical and reasonable interpretation of s 2(3)(b) of the Act. The VRB then considered a speech of the Minister for Finance, Lim Kim San (“the Minister’s speech”), during the second reading of the Property Tax (Amendment) Bill in Parliament (Singapore Parliamentary Debates, Official Report (30 December 1965) vol 24 at cols 774–775):

The Bill now before Parliament envisages two major changes of substance to the existing Property Tax Ordinance. Section 2 of the Ordinance defines “annual value” and gives the Chief Assessor the option of adopting as an annual value a sum equal to five per cent of the capital value of the property in certain circumstances. But in the operation of the Ordinance, it has been found that the provision is not adequate to cover all cases. Under the existing law, the option applies where buildings are erected on land and also where the land is vacant. There has been doubt as to whether the option applies while buildings are in the course of construction and some litigation has already resulted from this doubt. The amendment will make it clear beyond doubt that the Chief Assessor may adopt an annual value of five per cent of the capital value of any property whether vacant land, land with buildings erected thereon, or land with buildings being erected thereon.

[emphasis added in by the VRB]

The VRB found (at [13]) that it was “undeniably clear” from the Minister’s speech that Parliament intended to provide the Chief Assessor with a straightforward formula to assess the annual value of a property as if it were vacant land in all cases. The VRB stated (at [10]) that if the building being erected was to be disregarded, then it logically followed that anything which related to or was connected to the building being erected should likewise be disregarded.

The VRB opined (at [14]) that if the Appellant’s argument was accepted and the committed sales were taken into account, that would have been tantamount to including the value of the building on the land or the building to be erected on the land; the committed sales of the units in the development meant nothing more than a sale of the parts of a building which has yet to be fully constructed. The Appellant’s interpretation of s 2(3)(b) of the Act would have necessarily rendered the legislative amendment in 1965 meaningless and had to be rejected. Hence, the VRB rejected the Appellant’s arguments and, pursuant to Basis A, reduced the annual value of the Property to $51,409,000 for 2007 and 2008. The VRB also awarded costs of $3,000 to the Respondent.

The Appellant’s case

The Appellant submits that the 1965 amendment to the Act was made to enable the Respondent to have recourse to what is now s 2(3)(b) of the Act in order to determine the annual value at 5% of the land value, notwithstanding the fact that buildings were being constructed on the land. The Appellant notes that but for the 1965 amendment, this option might not have been available to the Respondent. The Appellant argues that the statutory fiction created by s 2(3)(b) of the Act only applies in relation to the physical state of the land and cannot be extended to create a further fiction that the units in respect of the Property have not been sold when they were in fact sold. The Appellant points out that there was no indication of such a further fiction in the Minister’s speech in 1965 when moving the amendment.

The Appellant cites the decision of the High Court of Australia in Spencer v The Commonwealth of Australia (1907) 5 CLR 418 (“Spencer”) for the proposition that all circumstances which might affect the value of the land must be taken into consideration. The Appellant submitted that the sale of units would clearly be one such circumstance, because once all units are sold the gross realisable sale proceeds for the project would have crystallised for the developer and the escalation of the market prices of units in the general market would not increase the gross development value of the particular site for the developer.

The Appellant also relies on a broader principle, of “the principle of reality”, which is essentially that all circumstances which exist in reality...