Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Commissioner Of Rating And Valuation v Clp Power Hong Kong Ltd

Judgment Cited authorities 8 Cited in Precedent Map Related
Vincent
Judgment Date17 March 2017
Year2017
Citation(2017) 20 HKCFAR 168
Judgement NumberFACV7/2016
Subject MatterFinal Appeal (Civil)
CourtCourt of Final Appeal (Hong Kong)
FACV7/2016 COMMISSIONER OF RATING AND VALUATION v. CLP POWER HONG KONG LTD

FACV No. 7 of 2016

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 7 OF 2016 (CIVIL)

(ON APPEAL FROM CACV NO. 202 OF 2015)

____________________

BETWEEN

CLP POWER HONG KONG LIMITED Respondent
and
COMMISSIONER OF RATING AND VALUATION Appellant

____________________
Before : Chief Justice Ma, Mr Justice Ribeiro PJ, Mr Justice Tang PJ, Mr Justice Fok PJ and Lord Walker of Gestingthorpe NPJ
Date of Hearing : 27 February 2017
Date of Judgment : 17 March 2017

________________________

J U D G M E N T

________________________

Chief Justice Ma:

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

Mr Justice Ribeiro PJ:

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

Mr Justice Tang PJ:

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

Mr Justice Fok PJ:

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

Lord Walker of Gestingthorpe NPJ:

Introduction

5. The issue in this appeal is whether the Respondent, CLP Power Hong Kong Limited (“CLP”) is liable to be assessed under the Rating Ordinance, Cap 116, in respect of certain fixed equipment at its generating stations in the New Territories and at its stand-by generating station on Lantau. The Appellant is the Commissioner of Rating and Valuation (“the Commissioner”).

6. The appeal is from the judgment of the Court of Appeal (Cheung, Kwan and Barma JJA) given on 2 February 2016, remitting the matter to the Lands Tribunal for further consideration of the evidence. The nature of the fixed equipment, and the reasons for the Court of Appeal’s decision to make a remission, are considered below. Much turns on the relationship between two sections of the Rating Ordinance, and on the meaning, in the context of those sections, of the words “machinery” and “plant”.

7. This matter has a long history. In 2008 there were no fewer than eight outstanding appeals by CLP against assessments under the Rating Ordinance and the Government Rent (Assessment and Collection) Ordinance, Cap 515, the earliest relating to the 1999-2000 assessment year. But seven of the appeals were stayed by an order of Lam J made on 3 November 2008. The exception was CLP’s appeal against the rating assessment for 2004-5, which was chosen as a suitable “reference year”. Since then further assessments have been made for later years.

8. The appeal in relation to the 2004-5 assessment was heard by the Lands Tribunal (Au J and Mr W K Lo) over 44 days between February 2010 and February 2012, with evidence from numerous expert witnesses. Judgment was given on 24 April 2013. The written judgment extends to 391 paragraphs, of which only three relatively short groups of paragraphs are directly relevant to the issue in this appeal. Paragraphs 28 to 43 summarise the relevant statutory provisions in the context of CLP’s undertaking (part of which is in mainland China). Paragraphs 84 to 93 contain a finding (in the very different context of an argument about “interdependency”, which concerned the relative bargaining positions of the hypothetical landlord and the hypothetical tenant) that the hypothetical landlord’s fixed equipment (the rateability of which is in dispute) and the hypothetical tenant’s machinery (the value of which, as is common ground, is not to be taken into account for rating purposes) “have been designed and built as an integrated system”. Paragraphs 227 to 234 set out the competing arguments on the disputed items of fixed equipment and decide the point in favour of the Commissioner, and paragraph 384 records Mr Lo’s concurrence on that point.

9. However the Lands Tribunal decided other points of more central importance in favour of CLP and the appeal relating to the 2004-5 assessment was allowed to the extent summarised in paragraphs 235 and 387 of the Lands Tribunal’s judgment. On 3 January 2014 its decision was confirmed after a review. On 9 April 2015 the Lands Tribunal refused leave to appeal on any of three grounds relied on by CLP, but on 28 August 2015 the Court of Appeal (Kwan and Barma JJA) granted leave to appeal on one of the three grounds, that is the issue relating to the items of fixed equipment.

The facts

10. CLP has four generating stations in Hong Kong, on three different sites. The following summary is based on paragraphs 28 to 37 of the judgment of the Lands Tribunal.

(1) Station A at Castle Peak Power Station (“CPPS ‘A’”) consists of four generating units. Their primary fuel is coal but their design is such that they can also burn oil.

(2) Station B at Castle Peak Power Station (“CPPS ‘B’”) has four generating units similar to those at CPPS ‘A’, except that two of the units have been modified to burn natural gas.

(3) Black Point Power Station (“BPPS”) is on the coast four miles north of Castle Peak Power Station. It has eight generating units with a combined cycle gas-fired system.

(4) Penny’s Bay Power Station (“Penny’s Bay”) on Lantau Island has three 100MW gas turbines. It provides stand-by capacity to CLP’s network, to Hong Kong airport and to some other areas.

CLP’s assets and interests in mainland China are described in paragraphs 38 to 43.

11. The items of equipment in issue in this appeal are described as follows in paragraph 227 of the Lands Tribunal’s first judgment:

“(a) the boilers and supporting steelwork at CPPS ‘B’ and BPPS;

(b) the cooling water circuits at CPPS ‘B’ and BPPS; and

(c) ancillary pipework and electrical cables within the power stations.”

This summary contains at least one, and possibly two, serious errors. It is common ground between the parties that the reference in (a) above to “boilers” is mistaken. The reference should be to steelwork supporting the boilers, which are themselves machinery coming within section 8(b) of the Rating Ordinance (set out in paragraph 14 below). It is regrettable that this serious mistake was not formally corrected with the agreement of the parties when the Lands Tribunal reviewed its first judgment. It is even more regrettable that the other possible error (asserted by CLP and denied by the Commissioner) was not brought to the attention of this Court until the close of counsel’s oral submissions. The parties cannot even agree as to whether there is an issue as to the supporting steelwork at BPPS. It will therefore be necessary to return to this (paragraphs 66 to 69 below).

The Rating Ordinance

12. The issue in this appeal turns on the correct construction of sections 8 and 8A of the Rating Ordinance, and their application to the facts as found by the Lands Tribunal. The basic unit of assessment in Hong Kong is a “tenement”, defined in section 2 of the Rating Ordinance as -

“any land (including land covered with water) or any building, structure, or part thereof which is held or occupied as a distinct or separate tenancy or holding or under any licence.”

13. In English rating law the corresponding expression is “hereditament”. In Hong Kong, where almost all land is held under a Government lease, the word “tenement” (and its definition as set out above) express the importance of the notion of a holding of land. It has been a basic principle of rating law in Hong Kong that a rateable tenement is held and occupied by one person only. That principle now has two exceptions, one in section 8A (added by amendment in 1991) and the other in section 9 (which relates to advertising stations, and was amended in 1981). As explained below, the main (but not the sole) purpose of section 8A is to keep up with advances in equipment related to information technology, such as fibre-optic cables.

14. Section 8 has been part of the Rating Ordinance since its enactment in 1973 (as a consolidation, with amendments, of legislation going back to the 19th century; there is a summary of the history in the judgment of Cons JA in Commissioner of Rating and Valuation v Yiu Lian Machinery Repairing Works Ltd & Ors [1985] 2 HKC 517, 521-2 – “Yiu Lian”). The section was amended in 1981, but only by adding a reference to the new section 7A. It provides,

“For the purpose of ascertaining the rateable value of a tenement under section 7 and 7A -

(a) subject to paragraph (b), all machinery (including lifts) used as adjuncts to the tenement shall be regarded as part of the tenement, but the reasonable expenses incurred in working such machinery shall be allowed for in arriving at the rateable value of the tenement;

(b) no account shall be taken of the value of any machinery in or on the tenement for the purpose of manufacturing operations or trade processes.”

15. Section 8A provides,

“(1) Where any land (including land covered with water) or any building or structure is occupied by a person by means of any plant, such land, building or structure shall, to the extent that the land, building or structure is so occupied, be deemed for rating purposes to be a separate tenement, whether or not such land, building or structure is otherwise a tenement and that person shall be deemed for rating purposes to be the occupier of such tenement and liable for payment of rates assessed thereon.

(2) For the purposes of ascertaining the rateable value of such tenement, the plant by means of which the person is occupying the tenement shall be regarded as part of the tenement.

(3) In this section “plant” (工業裝置)　includes cables, ducts, pipelines, railway lines, tramway lines, oil tanks, settings and supports for plant or machinery.”

16. Section 10, by an amendment made in 1991, modifies the effect of the deeming provision in Section 8A by enabling the Commissioner to treat a number of...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT