SINGAPORE PROPERTY TAX LAW AS IT STANDS

Citation(2020) 32 SAcLJ 771
Date01 December 2020
Published date01 December 2020

The Rebus Sic Stantibus Principle and the Statutory Formula

The Singapore jurisprudence appears to have adopted the proposition that the rebus sic stantibus principle is to be disapplied where s 2(3) of the Singapore Property Tax Act (Cap 254, 2005 Rev Ed) is applied. This article argues that this proposition perhaps ought to be stated more precisely. The principle is only disapplied where s 2(3)(b) is applied because it would run contrary to the statutory fiction imposed by s 2(3)(b) that the land is to be valued as if it were vacant land. There should be no disapplication of the principle where s 2(3)(a) is applied due to the absence of any such conflict. In practice, the Chief Assessor and courts appear to have implicitly recognised this. However, the recent “Swiss Club case” (HSBC Trustee (Singapore) Ltd v Chief Assessor and Comptroller of Property Tax [2018] SGVRB 2) might have departed from this by disapplying the principle when s 2(3)(a) was applied. This provides an opportune moment to clarify the underlying proposition and its rationale.

I. Introduction

1 The rebus sic stantibus principle is an objective principle in property valuation that property should be valued as it stands, and as used and occupied when the assessment is made.2 It is an established principle of English origin3 which has been affirmed in Singapore on

several occasions.4 Section 2(3) of the Singapore Property Tax Act5 (“PTA”) (“the Statutory Formula”) is of local origin6 and allows the Chief Assessor to deem the annual value of a property to be 5% of the value of either (a) the estimated value of the property, including any buildings thereon; or (b) the estimated value of the land as if it were vacant land. Following the decisions of the Singapore Court of Appeal in Chief Assessor v Glengary Pte Ltd7 (“Glengary”) and Aspinden Holdings Ltd v Chief Assessor8 (“Aspinden”), it appears that there is a legal principle that the rebus sic stantibus principle is to be disapplied where the Statutory Formula is invoked by the Chief Assessor.9 This principle is supported by a string of cases before the Valuation Review Board (“VRB”), one decided before10 Glengary and Aspinden, and two decided after11 them.

2 While this legal principle has generally been formulated in broad terms to apply whenever the Statutory Formula is invoked, it bears remembering that the Statutory Formula has two limbs and the question arises whether the legal principle should apply to both limbs. Following the reasoning in Glengary, when s 2(3)(b) of the PTA is invoked by the Chief Assessor, the rebus sic stantibus principle must be disapplied because it runs contrary to the statutory fiction that the land is to be valued as if it were vacant land.12 However, the rebus sic stantibus principle appears to be perfectly capable of co-existing with s 2(3)(a) of the PTA, which allows a property to be valued including any buildings thereon. Indeed, a careful reading of Glengary13 and Aspinden14 suggests that these cases may support the proposition that the rebus sic stantibus principle may continue to apply where s 2(3)(a) of the PTA is invoked. Applying the (incorrect) broad principle that the rebus sic stantibus principle must be disapplied where s 2(3) of the PTA is invoked may not cause injustice in a situation where s 2(3)(b) of the PTA is invoked. In such a case, the

principle is merely imprecisely stated. However, where s 2(3)(a) of the PTA is invoked instead, as in the recent case of HSBC Trustee (Singapore) Ltd v Chief Assessor and Comptroller of Property Tax15 (“the Swiss Club case”), the issue of precisely when the rebus sic stantibus principle must be disapplied becomes a material one as it affects the basis on which land is valued under s 2(3) of the PTA.

3 This article aims to establish the propositions raised above: that the rebus sic stantibus principle ought to be disapplied only where it runs contrary to a statutory fiction, which would be the case where s 2(3)(b) of the PTA is applied, but not s 2(3)(a). It would appear that in practice, an implicit distinction is drawn between the cases where ss 2(3)(a) and 2(3)(b) are applied. The proposition is not applied in its general (broad) form, but rather, correctly applied in that the rebus sic stantibus principle is only disapplied where s 2(3)(b) is applied, and still applied where s 2(3)(a) is applied. However, in the recent Swiss Club case, it appears that the rebus sic stantibus principle was disapplied even though s 2(3)(a) of the PTA was applied.16 In light of this, it may be an opportune moment to consider the theoretical foundations of the proposition itself and clearly state its scope.

4 Following this introduction, Part II17 lays out the law on the rebus sic stantibus principle and how it has been applied in Singapore. Part III18 goes on to briefly analyse the Statutory Formula. Part IV19 considers the particular issue of the interaction between the rebus sic stantibus principle and the Statutory Formula in the Singapore jurisprudence, tracing its development over time, and ultimately submitting that the conflict is really between the rebus sic stantibus principle and s 2(3)(b) of the PTA, but not s 2(3)(a).

II. The rebus sic stantibus principle

5 The rebus sic stantibus principle is an objective principle which states that a property should be valued as it stands, and as used and

occupied.20 The principle, used in property valuation, aids in identifying comparable properties (for which actual valuation data exists), so as to provide an “anchor” for valuing the subject property (“the anchor valuation”), as well as in determining the need for and extent of adjustments to be made to said anchor valuation to derive the annual value21 of the subject property. There are two limbs to the rebus sic stantibus principle. The first limb relates to the physical state of the subject property, and the second limb relates to the use of the subject property.22
A. The first limb

6 The first limb of rebus sic stantibus requires that “matters affecting the physical state or physical enjoyment” of the property be considered at the valuation date.23 Comparable properties would thus be those whose physical state approximates, as closely as possible, that of the subject property. In ascertaining the “physical state” of the property, it is important to consider two sub-limbs: (a) how the subject property should be defined and delineated for the purposes of property tax;24 and having done so, (b) the extent to which the physical state of a property considered for comparative anchor valuation approximates that of the subject property.

(1) The first sub-limb: Defining and delineating the property to be assessed

7 As a general rule, properties are separately identified in the Valuation List25 and separately assessed.26 This general rule is not inflexible, however, and multiple separate properties may be assessed as one unit, thereby being jointly subjected to the application of the rebus sic stantibus principle. However, any such identification must not offend the rebus sic stantibus principle that the land should be valued “as it stands”.27

8 There are two principles applicable to the identification of a property: (a) the geographical test; and (b) the functional test. The primary test is the geographical test, but the functional test may sometimes be relevant.28

(a) The geographical test. The geographical test is based on visual or cartographic unity.29 Properties which are contiguous prima facie form one property for valuation purposes.30 However, contiguity is not the only factor. As Lord Sumption held in the leading English case of Woolway (Valuation Officer) v Mazars LLP:31

If adjoining houses in a terrace or vertically contiguous units in an office block do not intercommunicate and can be accessed only via other property … of which the common occupier is not in exclusive possession, this will be a strong indication that they are separate hereditaments.

(b) The functional test. Where two spaces are geographically distinct, the functional test may nevertheless enable them to be treated as a single property. Property A (“A”) would be valued together with a non-contiguous property B (“B”) if A is functionally essential to the enjoyment of B as B stands or

vice versa, but not if A and B are in themselves functionally independent and merely complement each other in some overarching purpose.32 Whether A is functionally essential to the enjoyment of B is to be objectively assessed.33 The test is commonly applied by asking whether the two sections could reasonably be let separately,34 though it is not the only test; a factual judgment on the part of the valuer and the exercise of a large measure of professional common sense is required.35

(c) Application of principles in Singapore law. In Aspinden, the Singapore Court of Appeal considered whether various strata lots in a shopping mall could be amalgamated and assessed as a single assessable entity. The court held that the rebus sic stantibus principle applied to strata lots, such that, where several lots were combined and occupied as one, they would be regarded as a single “tenement” and assessed as such on a combined basis.36 In coming to its decision, the Court of Appeal also considered the Chief Assessor's decisions in several older cases (“the Jalan Nuri cases”). The Jalan Nuri cases concerned several houses where a house and its garden each occupied a separate lot with no physical walls or dividing lines between them. The court held that the lots should have been assessed as an integral whole.37

9 In HSBC Institutional Trust Services (Singapore) Ltd v Chief Assessor,38 the VRB had to consider whether a carpark adjacent to a shopping mall should be exigible to assessment on a combined basis. The VRB held that the properties should be separately assessed because: (a) the carpark was physically separate and distinct from the shopping...

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