City Developments Ltd v Chief Assessor

[2] CDL, an established property developer, had acquired a piece of land at Nos 5A to 5H and 5J to 5M Balmoral Park and 12 apartments thereon (“the subject property”) by way of an en bloc sale in February 2000. It then applied to the Urban Redevelopment Authority (“URA”) for written permission, which was granted in March 2001, to redevelop the subject property into a condominium. Not long after, CDL paid a development charge of $6.74m, which is a tax on the enhancement in land value resulting from the State approving a higher value development. In August 2003, it acquired the land adjacent to the subject property (40 Stevens Road) with a view to embarking on a larger condominium project than before; to that end, it applied again to the URA for permission to redevelop the subject property (in conjunction with 40 Stevens Road) as the previous permission had lapsed. Between 2002 and 2005, however, the subject property was not demolished but most of it was rented out to a variety of entities at significantly discounted rates (see the GD at [6]–[7] and [29]). Most of these entities were not related to CDL.

[3] The amount of property tax payable on a property depends on the latter’s annual value, and s 2 of the Property Tax Act (Cap 254, 1997 Rev Ed) (“the Act”) defines the ways in which “annual value” can be assessed. For the present case, there were two possible definitions applicable, viz;

(a) s 2(1) of the Act, ie, the gross amount at which the property can reasonably be expected to be let from year to year (“the hypothetical tenancy method”); or

(b) s 2(3)(b) of the Act, ie, 5% of the estimated market value of the land as if it were vacant land (“the 5% method”).

Both provisions are reproduced as follows:

In most situations, the hypothetical tenancy method would yield a lower annual value of the property (and therefore a lower property tax payable), but there is no doubt that s 2(3) of the Act expressly confers on the Chief Assessor the discretion to use that particular provision (embodying the 5% method) over other methods of assessment found in s 2. As a matter of practice, the Chief Assessor also distinguishes between developers and homeowners rebuilding their homes in that s 2(3) is applied to homeowners only at the point of demolition of the existing structures.

[4] Before 1 January 2002, the annual value of the subject property was assessed using the hypothetical tenancy method for each of the 12 apartments comprising the subject property. In November 2002, the Chief Assessor informed CDL that, with effect from 1 January 2002, the annual value of the subject property would be assessed using the 5% method instead. This translated to $160,400 of property tax payable per year, as opposed to some $38,000 if the hypothetical tenancy method was used. In other words, this was a figure which was more than four times the previous amount assessed.

[5] At the hearing before the VRB, the Chief Assessor defended his use of the 5% method in the light of a policy to encourage the development of land instead of the hoarding of it until the appropriate time to launch a redevelopment project. In the pre-hearing submissions to the VRB, it was submitted on behalf of the Chief Assessor that:[note: 1]

CDL thus argued before the Judge that the Chief Assessor had: (a) acted unfairly in exercising his discretion under s 2(3)(b) of the Act; and (b) acted ultra vires in having regard to wider planning considerations when determining the annual value of the subject property.

[6] The Judge dismissed those arguments, and held that:

(a) the Chief Assessor had the sole discretion under s 2(3) of the Act to determine which method of assessment ought to apply, and this discretion was fettered only by the duty to act fairly;

(b) the Chief Assessor was justified, on the facts of the case, in using the 5% method as there was a clear and definite intention on the part of CDL to redevelop the subject property;

(c) the distinction drawn between property developers and homeowners rebuilding their homes was a valid one; and

(d) the Chief Assessor’s policy to discourage land hoarding did not impinge on the powers and duties of other public authorities and was a legitimate and logical assessment of what was in the public interest.

[7] We agreed with the decision of the Judge. Indeed, although a number of arguments were raised on appeal before this court, they not only had no merit but were also (and more importantly) the same – or comprised variations of the same – arguments explored both before the VRB as well as before the Judge. However, we also wish to take this opportunity to elaborate on two important (and related) points, in particular, as follows:

(a) whether the adoption of the policy of discouraging property developers from land hoarding in land-scarce Singapore was an irrational one (since illegality was not an issue here); and

(b) whether the distinction drawn between homeowners and property developers was an irrational one.

[8] In so far as the two points highlighted in the preceding paragraph are concerned, counsel for CDL made the following arguments before us:

(a) by basing his decision to invoke s 2(3) on a planning consideration, the Chief Assessor had acted ultra vires as he was not only factoring in irrelevant considerations but was also neither empowered nor equipped to deal with such considerations, which fell within the ambit of other relevant government agencies; and

(b) the distinction drawn between homeowners and property developers was not endorsed anywhere in the Act, and, preliminarily speaking, there was no working definition of “developer”.

We now turn to address the first issue.

[9] This being, in essence, a case of administrative law, there were effectively only two ways in which CDL could challenge the Chief Assessor’s exercise of discretion under s 2(3) of the Act, viz, that the Chief Assessor had either acted illegally, or he had acted irrationally, in adopting the policy of discouraging land hoarding. Either way, both hurdles would have been difficult to overcome even though CDL did not mount the argument of illegality. As was observed in Halsbury’s Laws of Singapore: Administrative and Constitutional Law, vol 1 (Butterworths Asia, 1999) at para 10.029 (“Halsbury’s vol 1”):

[10] The Singapore High Court decision of Lines International Holding (S) Pte Ltd v Singapore Tourist Promotion Board [1997] 2 SLR 584 (“Lines International”) is representative of the same points and is a useful case in specific relation to policy-based acts of discretion. In that case, the plaintiffs were cruise operators who sought judicial review of certain conditions imposed jointly by the Singapore Tourist Promotion Board (“STPB”) and the Port of Singapore Authority (“PSA”) which resulted in the plaintiffs having to reduce the number of cruise-to-nowhere cruises operated. These conditions emanated from concerns that such cruises were predominantly gambling cruises and, accordingly, the number of such cruises should be reduced. One of the plaintiffs’ arguments was that the STPB and the PSA had exceeded their statutory powers in imposing the conditions. Having examined both the English and local case law, Judith Prakash J dismissed the claim in the following terms (at [78]):

We should add that the passage by Prakash J quoted above was cited with approval by Yong Pung How CJ in JD Ltd v Comptroller of Income Tax [2006] 1 SLR 484 at [50] and by Chan Sek Keong CJ in Registrar of Vehicles v Komoco Motors Pte Ltd [2008] 3 SLR 340 (“Komoco Motors”), especially at [30]–[31]. The following passage from Lines International is also apposite for our purposes (at [80]):

[11] For all intents and purposes, it would have been impossible to argue that the policy (of discouraging land hoarding in Singapore) per se is either irrational or unknown to property developers, despite what CDL contends. Such a policy is premised on a very commonsensical notion (and which is in the public interest) of discouraging as well as preventing land hoarding in land-scarce Singapore.

[12] Indeed, the unique context pertaining to the scarcity of land in Singapore has, in fact, been recognised judicially by the local courts in a diverse variety of areas of Singapore law.

[13] In the decision of this court in RSP Architects Planners & Engineers v MCST Plan No 1075 [1999] 2 SLR 449, for example, which considered the tortious duty of care in relation to liability for pure economic loss, L P Thean JA, delivering the grounds of decision of the court, observed thus (at [43]):

[14] In another decision of this court, in Xpress Print Pte Ltd v Monocrafts Pte Ltd [2000] 3 SLR 545, which concerned the right of support to land in the Singapore context, Yong Pung How CJ, who delivered the judgment of the court, observed thus (at [48]):

[15] Finally, in the Singapore High Court decision of Teng Fuh Holdings Pte Ltd v Collector of Land Revenue [2006] 3 SLR 507 (affirmed by the Court of Appeal in Teng Fuh Holdings Pte Ltd v Collector of Land Revenue [2007] 2 SLR 568 (and see id at [26])), it was observed (in the context of land acquisition) as follows (at [36]):

[16] Likewise, the Chief Assessor’s practice of applying s 2(3) of the Act to redevelopment properties has been noted by local commentators for at least over the past ten years: see eg, Halsbury’s Laws of Singapore: Revenue and Taxation, vol 16 (LexisNexis, 2004) at para 200.584, Leung Yew Kwong & Mani Usilappan, Property Tax in Singapore and Malaysia (Butterworths Asia, 2nd Ed, 1997) at pp 44–49.

[17] In the premises, the policy of discouraging land hoarding could not be said to be an irrelevant consideration for the Chief Assessor, and adopting such a policy was not irrational. Ultimately, what the Chief Assessor did was merely, in the exercise of his discretion, factor in a policy that happens to be a policy that is considered predominantly (albeit, as we shall explain in a moment, not exclusively) by the Chief Planner. That was not an ultra vires act, and planning considerations are certainly not exclusively within the URA’s domain, even though such considerations would probably feature most prominently for that particular government body. Further, it has been observed in Halsbury’s vol 1 ([9] supra at para 10.040):

We refer, too, to the views in Sir William Wade & Christoper Forsyth, Administrative Law (Oxford University Press, 9th Ed, 2004) at p 381:

Thus, the Chief Assessor’s adoption of the policy of discouraging land hoarding, occasioned by a regard to a legitimate public interest and a wide range of considerations, meant that this court would be slow to interfere with his decision. The URA and the Inland Revenue Authority of Singapore are simply two bodies that oversee different aspects in the management of what is fundamentally a commodity common to both bodies’ purview, viz, land. It is only to be expected that government agencies do not operate in isolation and would adopt a common view towards policies. It is neither irrational nor unreasonable for government agencies to adopt an integrated and holistic approach towards the formulation as well as the implementation of government policies.

[18] In that connection, it might be useful to refer to the recent decision of this court in Komoco Motors ([10] supra). That case involved a car importer (“Komoco”) seeking judicial review of the decision of the Registrar of Vehicles (“the Registrar”) on the amount of additional registration fees (“ARF”) to be levied on over 17,000 vehicles imported by Komoco. Since 1968, the assessment of the ARF had been based on the open market value (“OMV”) of the vehicle in question – and the OMV of a vehicle has always been determined by the Singapore Customs (“Customs”), a separate body responsible for imposing, inter alia, excise duties. Since r 7(3) of the Road Traffic (Motor Vehicles, Registration and Licensing) Rules (Cap 276, R 5, 2004 Rev Ed) states that “the value of a motor vehicle shall be determined by the Registrar after making such enquiries, if any, as he thinks fit”, the Registrar was, in theory, entitled to calculate the ARF payable based on the OMV as determined by Customs. In fact, this was an arrangement that had been accepted by the industry for the last 40 years without protest vis-à-vis its propriety, legality or reasonableness. Komoco alleged, however, that in this instance, the Registrar had vested absolute trust in Customs by accepting the latter’s valuation of the vehicles’ OMV and, as a result, had fettered his discretion under r 7(3) as well as abrogated that discretion to Customs. Chan Sek Keong CJ, delivering the judgment of the court, noted that Customs had better resources (than the Registrar) in determining the OMVs of motor vehicles and observed (at [70]):

There is therefore nothing unusual or indeed irrational about the Chief Assessor adopting a policy that is (arguably) predominantly under the consideration of the Chief Planner.

[19] Of course, it was rather unfortunate that certain portions of the Chief Assessor’s submissions to the VRB were, to say the least, drafted inelegantly, and might have led to a possible misunderstanding. Specifically, it will be recalled that the Chief Assessor had conceded that the use of s 2(3) of the Act had a “punitive effect” on property developers (see [5] above). CDL was (quite understandably) of the view that the Chief Assessor was not vested with the power to punish property developers, but that was not, in our view, the effective substance of what was intended by the Chief Assessor. In the premises, those words did not, in and of themselves, detract from the fact that the Chief Assessor had not acted irrationally when he adopted the policy of discouraging land hoarding.

[20] One of the other legs on which the appellant’s argument, that the Chief Assessor was acting irrationally, stood was that he (viz, the Chief Assessor) had drawn an irrational distinction between property developers and homeowners. To recapitulate, the distinction is that s 2(3) of the Act is only applied to homeowners at the point of the demolition of their houses. CDL attempted to argue, as a preliminary point, that there were “definitional issues” as to who could be considered a “property developer”, but we were of the view that it was very obvious that CDL was a property developer. It is of course entirely possible that there can be entities that blur the line between the two said classes, but that was not the case here. In situations where there might be a possible blurring of the line, then the pertinent question for the court would be which use of the land constitutes the predominant use. As we have just mentioned, in so far as the present appeal is concerned, it was clear beyond peradventure that the predominant use was for redevelopment. Indeed, we would even go so far as to state that redevelopment was virtually the sole use in which the appellant was interested. The relevant facts bear this out. The rental which was received by the appellant was clearly below the prevailing market rate (see the GD at [12] and [29]). And, as the Judge pertinently observed (see the GD at [27]):

We also note that CDL had acquired an adjoining property which was subsequently amalgamated together with the property for redevelopment as one composite whole (see the GD at [13] and [28]).

[21] In any event, the Chief Assessor explained the differentiation between property developers and homeowners in these terms:[note: 2]

[22] It is hard to fault the logic of the explanation as set out in the preceding paragraph (see also the GD at [33]). It is wholly consistent with the general policy of discouraging as well as preventing land hoarding in land-scarce Singapore (which we have dealt with in detail above at [11]–[17]) for the focus in this particular regard to be on property developers rather than homeowners who do not, ex hypothesi, hoard land in the first place. There is, in the circumstances, nothing irrational (still less, illegal) in the adoption of such a policy. Indeed, the argument by CDL to the effect that it had been made a “sacrificial victim” by the policy of the Chief Assessor in using the 5% method was disingenuous in the extreme. In point of fact, CDL was not only alive to its commercial interests but also ensured that such interests were secured throughout (see also the observations by the Judge at [27] of the GD quoted above at [20]).

[23] While we have established that the Chief Assessor had not acted irrationally, given that CDL had referred to a number of cases to support its appeal before this court, we would make some brief observations as to why those cases did not advance CDL’s arguments. The first case is that of the Singapore High Court in Lee Tat Development (Pte) Ltd v Chief Assessor [1995] 3 SLR 855 (“Lee Tat”). In that case, the property in question was a large piece of land on which two adjacent houses sat. The houses were in various stages of disuse and disrepair, and there was no evidence that the property would be rented out. Provisional permission to develop the land was subsequently granted. The Chief Assessor used the then equivalent of s 2(3) of the Act to assess the property’s annual value, and this was upheld in both the VRB and the High Court. Before us, CDL focused much of its energies in attempting to argue, inter alia, that Lee Tat had propounded a stage-by-stage test (as opposed to a holistic test), viz, in deciding whether to use s 2(3) of the Act, one had to first consider whether the property was lettable before other factors could be considered.

[24] In our view, the above argument was not borne out from a close analysis of the judgment in Lee Tat itself: see 861–862, [23]–[27] of Lee Tat as well as the GD at [25]–[26]. In fact, citing Lee Tat was actually detrimental to CDL’s case. The annual value of the property in Lee Tat was assessed using the then equivalent of s 2(3) of the Act (and the property was therefore subject to higher property tax) even though the property was not rented out; here, in contrast, CDL had derived extra income from the rental proceeds. Hence, contrary to what CDL argues, the nexus between having a property that is rented out and using s 2(3) of the Act is far from clear. The only thing that is clear is that the Chief Assessor, in exercising his sole discretion, has to act fairly, taking into account all the relevant circumstances of the case (per Chao Hick Tin J in Lee Tat at 861, [25]). In any event, it was clear that the predominant (if not the sole) purpose of CDL with regard to the subject property was redevelopment (as opposed to rental): see generally above at [20].

[25] CDL also relied on a previous VRB decision, Oxley Lights Pte Ltd v Chief of Assessor Valuation Review Board Appeal No 41 of 2004 (“Oxley Lights”). As the Judge had already dealt with the facts of that case extensively (GD at [36]–[47]), we will not repeat the endeavour here. Suffice it to state, however, that Oxley Lights was of limited assistance to us. For one, it was a decision without written grounds, so we could not be apprised of the exact reasoning of the tribunal. The importance of this last-mentioned point is, in fact, accentuated in view of CDL’s claim that this was a very pivotal case for them. All we know was that the VRB there allowed the appeal on the basis that Lee Tat could be distinguished. Another point is this: The permission to redevelop the property in that case had already lapsed but extension was not sought, signifying a lesser intention to redevelop the property. To that extent, Oxley Lights is distinguishable; here, CDL had, as we have seen, always intended to redevelop the property, but had merely bided its time. Furthermore, the Judge had stated that he did “not necessarily endorse the finding of fact” in Oxley Lights and “might well have taken a different view of the matter if it had come up before [him]” (see the GD at [47]). To sum up, Oxley Lights could not, with respect, be accorded any serious weight, if at all.

[26] Poh Hee Construction Pte Ltd v Chief Assessor (1992) 1 MSTC 5,100 (“Poh Hee”) is the final case that needs to be addressed. There, a large piece of land with an old detached house thereon was assessed using the 5% method. The house was vacant and there was no evidence of any intention to rent it out, and hence the VRB held that the Chief Assessor had exercised his discretion properly. However, the VRB also added (at 5,103):

It is pertinent to observe (as the VRB, in fact, did (see the VRB decision ([1] supra) at [18])) that the subject property was not, in any event, let at a fair market rental. And, much as CDL asserts it to be an “overriding principle”, it has failed to demonstrate why the fact that the annual value of a property can be determined by actual rent requires the Chief Assessor to fetter his discretion conveyed by s 2(3) of the Act. Indeed, to do so would run counter to the decision in Lee Tat itself. In that case, Chao J observed thus (at 861, [24]):

The above observations apply equally (in principle and logic) to a situation such as the present (although an actual, as opposed to a hypothetical, rent is involved). Further, we are left in the dark as to the precise circumstances under which the tribunal might have arrived at a different conclusion. Most importantly, perhaps, the at least implicit premise contained in the above-quoted observations of the VRB in Poh Hee is that the predominant (or sole) purpose with regard to the property in question relates to renting (and not redevelopment). This was, as we have already observed, not the situation on the facts of the present appeal.

[note: 1]Record of Appeal, Vol III Part A, at p 254.

[note: 2]Respondent’s Case, at paras 49 and 52.