Pan-United Marine Ltd v Chief Assessor

• Judge: Andrew Ang J
• Judgment Date: 20 May 2008
• Neutral Citation: [2008] SGCA 21
• Subject Matter: Whether floating dry docks are "buildings" within the meaning of s 2(1) Property Tax Act (Cap 254, 1997 Rev Ed),Whether floating dry docks are "machinery" within the meaning of s 2(2) Property Tax Act (Cap 254, 1997 Rev Ed),Property tax,Whether fixture test or enhancement test is correct test to apply,Whether floating dry docks are part of land for purposes of property tax,Annual value,Revenue Law,Assessment
• Plaintiff Counsel: Ong Sim Ho, Yang Shi Yong and Chng Teck Un Stanley (Drew & Napier LLC)
• Court: Court of Three Judges (Singapore)
• Published date: 04 June 2008
• Defendant Counsel: Julia Mohamed and Foo Hui Min (Inland Revenue Authority of Singapore)

20 May 2008 Judgment reserved.

Andrew Phang Boon Leong JA (delivering the judgment of the majority):

Introduction

1 The present appeal raises extremely interesting – albeit difficult – issues of interpretation and application in the context of the Property Tax Act (Cap 254, 2005 Rev Ed) (“the Act”).

The facts

2 The facts are undisputed and straightforward. The appellant, Pan United Marine Ltd, is the owner of a shipyard and a concrete batching plant located at 33 Tuas Crescent (“the Property”). The Property comprises five plots of land leased from Jurong Town Corporation (“JTC”) with an aggregate site area of 112,630m² and a water frontage of 359m at Tuas Bay. Three plots of land on which the Property sits were leased in 1982; the remaining two plots of land were leased in 1991 and 1993 respectively. All leases will expire simultaneously on 29 February 2012. Except for one plot of land, for which a lump sum premium was paid upfront, all the other lots were leased on annual land rents. Water frontage fees were also payable to JTC.

3 The Chief Assessor, the respondent in this appeal, had assessed the annual value of the Property under the Act to be $4,586,000 with effect from 1 January 2001. In his assessment, the respondent had adopted the “contractor’s test” method in determining the annual value of the Property under the Act and had sought to include, inter alia, the cost of three floating dry docks which were berthed above the seabed adjacent to the Property.

4 The three floating dry docks in question are afloat in Tuas Bay. The appellant has a temporary occupation licence (“TOL”) to use the seabed for the purpose of keeping the floating dry docks afloat in Tuas Bay. One of the docks was commissioned around 1987 (“the 1987 dock”); the other two were commissioned around 1992 and 1997 respectively.

5 The floating dry docks are hinged to pile-like structures which are permanently fixed to the seabed. The 1987 dock is held in place by means of anchor and anchor chains, and the remaining two docks are held by clamping collars to mooring pins. The floating dry docks are capable of being removed, towed away and reinstated, whether for a short or a long distance. The 1987 dock was moved several times for the purpose of repair as well as for getting it out of the way of vessels’ launch paths. The other two docks were not moved, although they could be moved, if required. An older dock which was used before the 1987 dock was towed away to Batam in 1993, and another dock built by the appellant in 1992 was towed to India to its buyer.

6 The floating dry docks are connected to the Property by a ramp, similar to a bridge. The ramp permits workers, material and machinery to get to the floating docks via the Property. Aside from the ramp, the floating docks are not connected to the Property.

7 It would be helpful at this juncture to set out briefly how a floating dry dock and a conventional dry dock (commonly referred to as a basin, or graving, dry dock) operate. For the floating dry dock, water is pumped into tanks of the dock so as to make it submerge in water. The ship is subsequently led in directly above the dock. Water is then pumped out to allow the dock to gradually resurface, thus lifting the ship above the water. A basin dry dock, on the other hand, uses a gate to control the water. The gate is first released to allow water to cover the dock, and the ship is led in. The gate is then closed and water is pumped out so that the ship will rest on the dock and above the water level. Notably, in the present appeal, the appellant did not own or utilise any basin dry docks.

8 Both floating dry docks and basin dry docks are used for ship repair, maintenance, as well as other work, but the former will float on water while the latter are excavated into land. Unlike a basin dry dock, a floating dry dock is cheaper and can be moved away when needed elsewhere. However, a floating dry dock cannot take bigger vessels, as it will not be able to support the weight of such ships properly. As such, basin dry docks are used for bigger ships.

The proceedings below

9 The appellant appealed at first instance to the Valuation Review Board (“the Board”) against the respondent’s assessment of the annual value of the Property. The appellant disputed, inter alia, the inclusion of the three floating docks in the assessment of the annual value. The appeal was heard by the Board in October 2004. The Board reserved judgment and, on 16 November 2004, the Board dismissed the appeal and confirmed the annual value of $4,586,000 proposed by the respondent (see Pan United Shipyard Pte Ltd v Chief Assessor [2006] SGVRB 1).

10 Dissatisfied with the Board’s decision on the issue of including the floating docks as being assessable to property tax, the appellant further appealed to the High Court. The High Court heard the appeal on 2 November 2006 and reserved judgment. On 8 February 2007, the High Court judge (“the Judge”) dismissed the appeal and delivered his grounds of decision (see Pan United Marine Ltd v Chief Assessor [2007] 2 SLR 633 (“the GD”)).

11 In essence, the Judge found, inter alia, that:

(a) the floating docks fell within the definition of “buildings” under s 2(1) of the Act and were therefore liable to the charge of property tax under s 6(1) of the Act;

(b) the floating docks were to be assessed as part of the shipyard land; and

(c) the floating docks were not “machinery” within the meaning of s 2(2) of the Act.

Issues on appeal

12 The issues that arise in this appeal were identical to the issues raised before the Board and the Judge. In essence, the pith and marrow of the appeal was whether the three floating docks ought to be included in the assessment of the annual value of the Property. This question turned on the following three issues:

(a) Are the floating dry docks “buildings” within the meaning of s 2(1) of the Act?

(b) Are the floating dry docks part of the land for the purposes of the Act?

(c) Are the floating dry docks “machinery” within the meaning of s 2(2) of the Act?

Are the floating dry docks “buildings” within the meaning of section 2(1) of the Act?

13 Before discussing the substantive issues at hand, we wish to make one observation. Although the appellant is merely the lessee of the Property, it is nonetheless deemed to be the owner thereof by virtue of s 2(8) of the Act which reads as follows (cf also the Singapore Valuation Review Board decision of McAlister Developments Ltd v Chief Assessor [1969] 1 MLJ xlv at xlix):

In assessing the annual value of any property comprised in … a lease of property by a public authority [in this case, JTC] for a period exceeding 3 years —

(a) the grantee or lessee of the property shall be deemed to be the owner thereof;

…

14 The first issue stems from s 6(1) of the Act, which is the charging provision for the imposition of property tax. Section 6(1) of the Act reads as follows:

Charge of property tax

6.—(1) As from 1st January 1961, a property tax shall, subject to the provisions of this Act, be payable at the rate or rates specified in this Act for each year upon the annual value of all houses, buildings, lands and tenements whatsoever included in the Valuation List and amended from time to time in accordance with the provisions of this Act.

[emphasis added]

Accordingly, the floating dry docks must fall within “houses, buildings, lands or tenements” [emphasis added] in order for them to be included for the purposes of assessment to property tax.

15 The term “building” is defined in s 2(1) of the Act, as follows:

“building” means any structure erected on land and includes any house, hut, shed or similar roofed enclosure, whether used for the purposes of human habitation or otherwise, any slip, dock, wharf, pier, jetty, landing-stage, underground or overground tank for the storage of solids, liquids or gases, and any oil refinery; …

[emphasis added in italics and bold italics]

16 The emphasis in the above definition illustrates what is, in our view, an extremely important point: Although perhaps a little infelicitously phrased, the definition of “building” comprises two main parts, the second part of which comprises, in turn, two sub-parts, which are identified by italics and bold italics, respectively. Indeed, the Singapore Valuation Review Board, in Yat Yuen Hong Co Pte Ltd v Chief Assessor [1959-1986] SPTC 135 (“Yat Yuen Hong”), refers to three separate parts, but, for reasons that will be apparent in a moment, the latter two parts which the Board refers to correspond to the aforementioned two sub-parts which, taken together, actually comprise one integral whole – thus resulting in two main parts as just mentioned. That this demarcation exists is clear from the relevant legislative history.

17 There had, in fact, been no definition of “building” in the Act when it was first promulgated in 1960 as the Property Tax Ordinance (Ord 72 of 1960). The definition was inserted later by s 2(b) of the Property Tax (Amendment) Act 1965 (Act 24 of 1965). The definition then was a little different from that which exists in the Act at present, and read as follows (with the additional words that are now not present in the Act highlighted in italics):

“building” means any structure erected on land and includes any house, hut, shed or similar roofed enclosure, whether used for the purposes of human habitation or otherwise, and includes any slip, dock, wharf, pier, jetty, landing-stage, underground or overground tank for the storage of solids, liquids or gases, and any oil refinery; … [emphasis added]

18 It will immediately be seen that the definition, in its original form (as set out in the preceding paragraph), supports our view that the definition of “building” in the Act comprises two main parts (with the second main part comprising two sub-parts). The first main part is the general definition where a “building” is clearly stated to “mean” “any structure erected on land”. There follows the ...