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Best Origin Ltd v Commissioner Of Rating And Valuation

Judgment Cited authorities 24 Cited in Precedent Map Related
Vincent
Judgment Date21 December 2012
Citation(2012) 15 HKCFAR 816
Judgement NumberFACV21/2011
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV21/2011 BEST ORIGIN LTD v. COMMISSIONER OF RATING AND VALUATION

FACV No. 21 of 2011

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 21 OF 2011 (CIVIL)

(ON APPEAL FROM CACV NO. 67 OF 2008)

_____________________

Between:

Best Origin Limited
 Applicant
(Appellant)
- and -
Commissioner of Rating and Valuation Respondent
(Respondent)

_____________________

Court: Chief Justice Ma CJ, Mr Justice Chan PJ Mr Justice Ribeiro PJ, Mr Justice Bokhary NPJ and Lord Walker of Gestingthorpe NPJ
Dates of Hearing : 26, 28-30 November 2012
Date of Judgment : 21 December 2012

_____________________

J U D G M E N T

_____________________

Chief Justice Ma :

1. This appeal concerns the question of the Government rent that is payable on construction sites used for development or redevelopment. That such sites are subject to the payment of Government rent can be seen from Regulation 2 of the Government Rent (Assessment and Collection) Regulation, Cap 515A.

2. For the reasons contained in the judgment of Lord Walker of Gestingthorpe NPJ, I would dismiss the appeal. The decisions of this Court in Commissioner of Rating and Valuation v Agrila Ltd (2001) 4 HKCFAR 83 and in the present appeal are to be regarded as providing the necessary guidance as to the assessability and assessment of Government rent in relation to construction sites used for development or redevelopment

Mr Justice Chan PJ :

3. I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Mr Justice Ribeiro PJ :

4. I agree with the judgment of Lord Walker of Gestingthorpe NPJ.

Mr Justice Bokhary NPJ :

5. I am in entire agreement with the judgment of Lord Walker of Gestingthorpe NPJ, and add only a word of my own. The nil or nominal rateable value for which Mr John Howell QC contends on the appellant’s behalf is obviously unrelated to reality. Among the ways in which Mr Howell skillfully endeavoured to cope with that difficulty in his path was to place reliance on a passage in Lord Asquith of Bishopstone’s speech in East End Dwellings Ltd v Finsbury Borough Council [1952] AC 109. That passage, which appears at pp 132- 133, reads:

“If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.”

6. Such a statement must nowadays be read subject to the imperative of purposiveness in statutory interpretation. Turning from the general to the particular, I begin by noting that in the present case, the “imaginary state of affairs”, to use Lord Asquith’s expression, is the one that arises whenever the nature of the tenement concerned is such that it would never in real life be taken on a year to year tenancy. It arises because of the statutory requirement that the rateable value of all tenements, even those of that nature, be ascertained in terms of the hypothetical year to year tenancy laid down by s 7(2) of the Rating Ordinance, Cap 116.

7. Needless to say, that rating hypothesis was not enacted for the purpose of creating unreality. Obviously, its objective is uniformity. And that means uniformity in the starting point from which to proceed when ascertaining rateable values. No such value is ultimately ascertained, as opposed to distorted, if purposiveness is laid aside and artificiality is carried to the point of a substantial value being artificially reduced to nothing or next to nothing. In my view, Lord Asquith’s statement quoted above does not compel anything of that kind.

Lord Walker of Gestingthorpe NPJ :

8. This appeal is the latest stage in protracted litigation concerned with the rent payable under Government leases of land which is in course of development or redevelopment. The problem came before this Court in 2001 in two consolidated appeals, one brought by the Commissioner of Rating and Valuation (“the Commissioner”) and the other (by way of cross-appeal) by Agrila Ltd and 58 other companies having the same, or a similar interest to that of Agrila Ltd: Commissioner of Rating and Valuation v Agrila Ltd and others (2001) 4 HKCFAR 83 (“Agrila”)[1]. This Court allowed the Commissioner’s appeal and dismissed the cross-appeal from the decision of the Court of Appeal [2000] 1 HKC 175, which was on an appeal from a decision of the Lands Tribunal issued on 20 February 1998. The Tribunal had, with the consent of the parties, restricted its decision to answering nine preliminary questions of law (a tenth question had been formulated but was disposed of by agreement). Best Origin Ltd (“Best Origin”), the appellant in the present appeal, is one of the other 58 companies which were parties to Agrila.

9. The questions answered by the Tribunal, and subsequently considered by the Court of Appeal and this Court, related to the validity, interpretation and application of statutory provisions under which rents payable under Government leases of land in course of development or redevelopment are to be calculated by reference to rateable value. There is no longer any issue as to the validity of these provisions, but their correct interpretation and application is still contested. Agrila raised issues of great public importance and considerable difficulty. Several of those issues have been clearly and authoritatively answered, leaving no room for further dispute. But the preliminary nature of some of the questions raised in Agrila inevitably led to a degree of generality in the answers given by this Court. In the present appeal, by contrast, there is a detailed and comprehensive decision of the Tribunal given after it had considered a large volume of oral and documentary evidence.

10. It is best to start with a very general explanation of the problem. In Hong Kong the law of rating is based on the English law of rating, which has a long history, as Tang Ag CJHC remarked at the beginning of his judgment in the Court of Appeal. It has (in striking contrast to other forms of taxation, which are subject to frequent legislative intervention) shown remarkable stability over the years. Instead the courts have undertaken the task of interpreting and adapting the traditional statutory formula so as to apply it to modern conditions. All this was explained by Viscount Hailsham LC in Railway Assessment Authority v Southern Railway Company [1936] AC 266, 273, cited by Tang Ag CJHC in para 2 of his judgment.

11. On this occasion the legislature has intervened, and the courts have to work out the full implications of the intervention. It has for a long time been a fundamental proposition of rating law (as Sir Anthony Mason NPJ put it in Agrila, para 48 (99C), citing Lord Radcliffe in London County Council v Wilkins (Valuation Officer) [1957] AC 362, 380) that:

“Building sites themselves are not treated as hereditaments [the English rating equivalent for tenements] while the work of building is in progress.”

That is because a building site is not in rateable occupation, a term of art indicating occupation which is (i) actual, (ii) exclusive, (iii) beneficial in the sense of being of value to the occupier, and (iv) not too transient. These requirements apply under the Rating Ordinance: Yiu Lian Machinery Repairing Works v Commissioner for Rating and Valuation [1982] HKDCLR 32, 39, cited by Sir Anthony Mason NPJ in Agrila at para 47 (98I-99B).

12. It is now clear and no longer in dispute, as a result of this Court’s decision in Agrila, that s 2 of the Government Rent (Assessment and Collection) Regulation, Cap 515A (“the Rent Regulation”), made under s 34 of the Government Rent (Assessment and Collection) Ordinance, Cap 515 (“the Rent Ordinance”), is valid and changes (though only for the purposes of Government rent) the “fundamental proposition” that a building site is not a rateable tenement. Section 2 (set out in para 24 below) is a “deeming” provision under which a building site is to be treated, for the purposes of the Rent Ordinance, as if it were a rateable tenement. But, as Sir Anthony Mason NPJ observed in Agrila, para 49 (99F-G), s 2 says nothing about how the rateable value is to be ascertained. That question was raised as point 4 before the Tribunal in Agrila, and it received an answer, in general terms, in the judgment of Sir Anthony Mason NPJ, with which the other members of this Court agreed. But it is argued that the Tribunal made an error of law in applying that guidance in the present case.

13. As is apparent from the differences of opinion between the Court of Appeal and this Court in Agrila, it is not easy to see how the deeming provision in s 2 of the Rent Regulation is intended to fit in with the scheme of the rules as to the ascertainment of rateable value set out in ss 7 and 7A of the Rating Ordinance, Cap 116. Those rules themselves contain some provisions of a hypothetical character, in particular the requirement to ascertain “the rent at which the tenement might reasonably be expected to let, from year to year”. Lord Wilberforce commented on the corresponding words in English rating statutes, in Dawkins (Valuation Officer) v Ash Brothers and Heaton Ltd [1969] 2 AC 366, 385:

“The interpretation of these words has come over the years to be invested with a good deal of...

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