Bollywood Veggies Pte Ltd v Chief Assessor [2021] SGHC 233

This appeal engages the question of the basis for determining the annual value (“the AV”) for the purposes of property tax, the standard of review for decisions of the Chief Assessor (hereinafter also referred to as “the respondent”), and the material that may be relied upon in such a review.

Background

The appellant operates a property in Lim Chu Kang (“the Property”) which comprises a vegetable farm, and various buildings which amongst other things, include a bistro, event space, office, and workers’ quarters. The land is on a lease from the Singapore Land Authority (“SLA”) for a term of 20 years from 15 April 2001. On 1 December 2018, the Chief Assessor notified the appellant that the AV for the Property was amended from $87,000 to $107,100, and proposed that this would take effect from the same date, in accordance with s 20(1) of the Property Tax Act (Cap 254, 2005 Rev Ed) (“the PTA”).

The AV was assessed pursuant to s 2(3)(a) of the PTA, which provides that the Chief Assessor has the option of assessing 5% of the estimated value of a property as its AV. This is typical for farms given that agricultural properties are rarely rented out. As the Property consists of both land and buildings, the Chief Assessor’s representative had to account for both.

(a) For the land, the Chief Assessor’s representative took the annual rent payable by the appellant for the lease of the land as representative of the AV of the land. This was increased from $57,300 to $77,400 for the Year of Assessment 2018.

(b) For the buildings, as there was no evidence of their rental value, the Chief Assessor’s representative adopted the figure of 5% of the total building costs, which had been provided as $593,000 on 25 October 2010, or $29,650.

The assessed AV of $107,100 was therefore a summation of the annual land rent and the estimated value of the buildings, and rounded up from $107,050.

The figure in respect of the estimated value of the buildings had in fact been included in assessing the AV for the Property from 2015, following a review by the respondent in 2014. The amendment to the AV which led to the present proceedings was however based on the change in the annual rent for the appellant’s lease of the land.

The decision below

The VRB found that the appellant was unable to establish that the Chief Assessor had erred in the amended assessment of the Property’s AV. In its view, ss 2(1) and 6(1) of the PTA “make it clear that tax is chargeable on buildings”. In this regard, it did not see how a report by Jones Lang LaSalle (“the Report” and “JLL” respectively) valuing the market land rent of the Property at $77,400, which the appellant had tendered and relied on, assisted the appellant. The Report had been prepared for a previous appeal by the appellant against an increase in its land rent and the value of the buildings was not included in its terms of reference, as JLL had not been tasked to value them.

In its view, these provisions also did not make exemptions for buildings that could not be sublet, or which had been erected on land on relatively short leases. This was contrary to the appellant’s submission that farm structures ought not be included in the assessment of property tax as farmers were not allowed to sublet their property and such structures were temporary, being on land of 20-year leases.

Summary of the appellant’s case

The appellant further argues that the approach taken by JLL in the Report ought to be preferred. This is because it was “fact-sensitive and contextual”, with reference to, amongst other things, other market transactions, and the weaknesses and strengths of the Property. In the appellant’s view, such an approach usefully illustrates the threshold of reasonableness which ought to be expected of the assessments of the Chief Assessor. Additionally, although the Report did not specifically value the buildings on the Property, it had made reference to them, suggesting that the valuation arrived at did include such a value. Alternatively, JLL could have been of the view that the value of the buildings was negligible.

Summary of the respondent’s case

The respondent argues that the burden lies on the appellant to make out that the Chief Assessor was in error, ie, it must establish on the balance of probabilities that the Chief Assessor’s decision was unfair and unreasonable.

The respondent further argued that the appellant did not show that JLL’s valuation was a viable alternative to the Chief Assessor’s valuation of the Property as: (a) neither of its present contentions that the Report did include the value of the buildings on the Property or that JLL had concluded that the said value was negligible were put to the Chief Assessor’s representative; and (b) these contentions were “baseless afterthoughts” in any case.

My decision

I am satisfied that the appeal should be dismissed.

Under the statutory scheme, the primary definition of the AV of a property under s 2(1) of the PTA refers to rent, or the “gross amount at which [a property] can reasonably be expected to be let from year to year” (Chief Assessor v National Shipbreakers Pte Ltd [1979–1980] SLR(R) 623 (“National Shipbreakers”) at [6]–[7]. Yet, such rent is only a notional or hypothetical one. A prohibition against renting out a property – as in the present case where the lease with the SLA prohibited the appellant from subletting the Property without its approval – does not prevent rental value from being ascribed to the same. Valuation under a hypothetical tenancy has been possible even where it is clear that there could be no hypothetical tenant other than the actual occupier (see for example F R Evans (Leeds) Ltd v English Electric Co Ltd [1978] 1 EGLR 93 at 94–95, where Donaldson J observed that “monopoly positions on either or both sides do not render hypothetical agreements impossible”).

Analysis

The analysis will proceed first to consider:

(a) The standard of review;

(b) The burden of proof; and

(c) The statutory basis for taxation.

Standard of Review

The present appeal to the General Division of the High Court from the decision of the VRB constitutes a rehearing. As provided in s 35 of the PTA:

The question that needs to be answered is what level of deference, if any, should be given to the decision of the Chief Assessor. The burden does lie on the taxpayer to show that the Chief Assessor was wrong, but the burden does not resolve the question of what degree that error must reach.

The respondent argues that while the appellate court has discretion to consider the entire evidence before it and “venture beyond determining the propriety of [the VRB’s] decision or inquiring into whether there had been manifest errors of fact or law”, this does not mean that the appellate court is to determine the substantive merits afresh, citing Valentino Globe BV v Pacific Rim Industries Inc [2009] 4 SLR(R) 577 (“Valentino Globe”) at [11]. Further, on findings of fact, the question to answer would be whether “no reasonable body of members constituting [the VRB] could have reached the findings reached by [it]”, citing Comptroller of Income Tax v AQQ and another appeal [2014] 2 SLR 847 (“AQQ”) at [123]. The respondent submits that although AQQ concerned an appeal from the Income Tax Board of Review, the same standard ought to apply to appeals from the VRB. This is because both types of appeal deal with “any question of law or of mixed law and fact” (s 81(2) of the Income Tax Act (Cap 134, 2014 Rev Ed) (“ITA”); s 35(3) of the PTA).

The appellant argues that the apparent reference to an applicable standard of Wednesbury unreasonableness (Associated Provincial Picture Houses, Limited v Wednesbury Corporation [1948] 1 KB 223) with regards an appeal from the VRB is a “novel proposition”. It argues that this standard was not used in cases such as HSBC Institutional Trust Services (Singapore) Ltd (trustee of Capitaland Mall Trust) v Chief Assessor [2020] 3 SLR 510 (“HSBC (HC)”) and Chief Assessor v Glengary Pte Ltd [2013] 3 SLR 339 (“Glengary”). In response, the respondent observes that Chionh JC in HSBC (HC) had adopted the “fair and reasonable” threshold in scrutinising the VRB’s decision.

Bearing in mind that the burden is on the appellant to show that the Chief Assessor was wrong, and the broad ambit given by the statutory regime to the Chief Assessor to determine the AV of a property, I find that the appropriate standard to be adopted by an appellate court is one of reasonableness and fairness in his ascribing of value. This is apparent from the case law, although the point does not appear to have been specifically argued before in respect of the PTA.

The question of whether the assessed AV was reasonable and fair was the standard adopted in HSBC (HC) (upheld on appeal in HSBC Institutional Trust Services (Singapore) Ltd (trustee of Capitaland Mall Trust) v Chief Assessor [2020] 1 SLR 621), in respect of, inter alia, AV as defined under s 2(1) of the PTA (at [131], [136], [152] and [165]). I note however that in City Developments Ltd v Chief Assessor [2008] 4 SLR(R) 150 (“City Developments”), where the appellant argued that the Chief Assessor had: (a) acted unfairly in exercising his discretion under s 2(3)(b) of the PTA; and (b) acted ultra vires in having regard to wider planning considerations in determining AV, the Court of Appeal stated that “this being, in essence, a case of administrative law, there were effectively only two ways in which [the appellant] 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” (at [9]).

Yet, parties in the present case did not approach this appeal on the basis of these administrative law principles. These standards were also not applied in the subsequent case of Glengary concerning an appeal in respect of s 2(3)(b) of the PTA, albeit that it was approached by Lai J and the Court of Appeal as a question of interpretation, namely, whether committed sales could be taken into consideration in an assessment under s 2(3)(b). Subsequent appeals to the VRB in respect of s 2(3) of the PTA also dealt variously with whether the Chief Assessor’s assessments of various properties under the provision was excessive (The Legends Fort Canning Park Pte Ltd v Chief Assessor [2015] SGVRB 1 (“The Legends”) on s 2(3)(a) and City Developments Ltd v Chief Assessor [2021] SGVRB 3 on s 2(3)(b)); and how the Chief Assessor should arrive at estimating the value of the property, in particular whether the common law principle of rebus sic stantibus should apply (HSBC Trustee (Singapore) Ltd v Chief Assessor and Comptroller of Property Tax [2018] SGVRB 2 on s 2(3)(a)).

As such, the Court of Appeal’s observation in City Developments may be explained on the basis that the appellant had pursued an argument of ultra vires as a ground of appeal (City Developments Ltd v Chief Assessor [2008] 2 SLR(R) 397 at [1(a)]; City Developments at [8(a)]). It has less relevance in the present case, where parties’ submissions focused on whether the Chief Assessor’s assessment was reasonable and fair.

I turn to consider AQQ, as submitted by the respondent. There, the Court of Appeal in the context of the ITA held that the Comptroller of Income Tax (“the Comptroller”) had to exercise his powers in a “fair and reasonable manner” (at [124]). In coming to this conclusion, the Court of Appeal reserved any endorsement of Wednesbury unreasonableness in cases not concerned with administrative law (at [121]). It observed, inter alia, that the statutory provisions for appeals against “assessments” of the Comptroller also applied to the Comptroller’s exercise of discretion under the relevant provision of the ITA. This indicated that there was no need to have recourse to judicial review to challenge the Comptroller’s discretion. Given that reservation, I do not consider that it would be appropriate to apply the judicial review standard of Wednesbury unreasonableness. Judicial review is concerned with the legality of government actions, ie, the lawfulness of acts undertaken by other branches of the government, not with their merits (Jeyaretnam Kenneth Andrew v Attorney-General [2014] 1 SLR 345 at [56]; Tan Seet Eng v Attorney-General and another matter [2016] 1 SLR 779 at [47]). In contrast, the present appeal is concerned with the merits: s 20A of the PTA provides for “any owner aggrieved by…the [AV] ascribed [to his property]” to lodge an objection with the Chief Assessor, and for further appeal to the VRB if he is dissatisfied with the ensuing decision of the Chief Assessor (with further recourse to the General Division of the High Court under s 35 of the PTA).

It is also important, on the other side of the coin, to note that in AQQ, the Court of Appeal also did not endorse a full rehearing on the merits, at least as a norm in all cases. This was because regard should be had to the manner in which the Comptroller “did in fact exercise his discretion” (at [122]). It also noted that deference is extended in respect of findings of fact by the ITBR (at [123]). Such deference has similarly been shown in cases under the PTA. In First DCS Pte Ltd v Chief Assessor and another [2007] 3 SLR(R) 326 (“First DCS”), where the appellant appealed against an assessment of AV using the contractor’s test method and proposed an approach which included having regard to the rental value of a comparable property, Andrew Ang J noted that the VRB had rejected that other property as comparable and observed (at [51]):

While the guidance in AQQ was laid down in the context of the ITA, there is no reason why there cannot be a transposition of this approach to the PTA: the language and framework are fairly similar and there is nothing in the nature of the different taxes levied to call for a different approach.

Burden of Proof

As noted above, the respondent argued, correctly, on the case law, that the burden of proof lay on the appellant to show that the Chief Assessor was wrong (HSBC (HC) at [36]), and that the legal burden does not shift (Britestone Pte Ltd v Smith & Associates Far East, Ltd [2007] 4 SLR(R) 855 at [58]). There is a presumption that an administrative official such as the Chief Assessor has exercised his power in good faith and for public benefit, as observed by the VRB in Poh Hee Construction Pte Ltd v Chief Assessor (1992) 1 MSTC 5100, where it was argued that the Chief Assessor had erred in using the predecessor provision to s 2(3)(b) of the PTA (at 5103).

Statutory basis for taxation of property

The operative provision is s 6 of the PTA:

The AV is the basis of taxation of property. AV is defined in s 2(1) of the PTA as: “the gross amount at which the same can reasonably be expected to be let from year to year, the landlord paying the expenses of repair, insurance, maintenance or upkeep and all taxes (other than goods and services tax).”

AV is thus tied to the amount that can be obtained from an annual lease. I do not see any intention or language in this definition that imports treating the amount obtained from leasing the property to be more than a notional one. That is, it is not any actual rent. Hence the reference in the definition is to the amount that can reasonably be obtained (The London County Council v The Churchwardens and Overseers of the Poor of the Parish of Erith in the County of Kent, and the Assessment Committee of the Dartford Union [1893] AC 562 (“Erith”) at 587–588; Management Corporation Strata Title Plans Nos 1298 and 1304 v Chief Assessor and another [2006] 1 SLR(R) 465 (“MCST 1298”) at [48]–[51]; HSBC Institutional Trust Services (Singapore) Ltd v Chief Assessor [2013] 2 SLR 173 at [13]).

Section 2(3) of the PTA then expands AV, at the option of the Chief Assessor, to be equivalent to 5% of the estimated value of the property, including buildings:

Section 2(4) also allows the Chief Assessor to choose to equate AV to the annual equivalent of the gross rent at which the property is let:

The appellant argues that a contractual prohibition on leasing or renting out is material. It argues that s 2(3)(a) of the PTA ought to be read subject to the definition of AV in s 2(1). That is, in considering the capital value of a property under s 2(3)(a), the court must consider how much rent the owner can reasonably be expected to receive. If it can be proven that the building cannot reasonably be expected to be let out, no rent would be receivable and AV would be zero. The appellant submits that this is supported by s 2(4), which also refers to the concept of rent.

I am not convinced by the appellant’s submission that the valuation of a building depends on whether it can reasonably be let out. In my view, a prohibition against subleasing does not prevent the Chief Assessor from ascribing value to a property under s 2(1), much less s 2(3)(a) of the PTA, for the following reasons.

Firstly, the inquiry into the AV of a property has been said to be a “primarily economic” one into the real value of the property (Robinson Brothers (Brewers), Ltd v Assessment Committee for the No 7 or Houghton and Chester-le-Street Area of the County of Durham [1937] 2 KB 445 at 470–471). The test is whether the occupation under the hypothetical tenancy is such as to be of value (Telereal Trillium v Hewitt (Valuation Officer) [2019] UKSC 23 at [16], citing the decision of the Upper Tribunal in Hewitt (Valuation Officer) v Telereal Trillium [2016] UKUT 258 (LC) (“Telereal (UT)” at [97]). In this regard, it is no impediment that the actual occupier is the only possible tenant. For example, in Erith, the London County Council were the owners and occupiers of a pumping station and works, which they used as part of the Metropolitan sewage system and to enable them to discharge their statutory duties. The House of Lords held that the Council was to be considered as a possible hypothetical tenant in assessing rateable value, even if it was practically the only possible tenant and did not have the statutory power to become tenants of the property. It follows from this that the appellant’s submission that a building which cannot reasonably be expected to let out should receive a nil valuation cannot be supported.

Secondly, the statutory scheme and case law do not support the appellant’s proposition that s 2(3)(a) of the PTA should be read subject to the definition of AV in s 2(1). While the definition of AV is in the first place linked to annual rent, through the definition section in s 2 of the PTA, this is only a notional relationship. Section 2(3) of the PTA incorporates an alternative determination, based not on rental but 5% of the value of the property. The fact that an alternative definition is provided for in the same section of the PTA points to the fact that rental is only one possible measure. The provision also does not on its face make any reference to rental value, or impose any requirement that the property must be let out or reasonably capable of being let out. Section 2(4) of the PTA only allows an expanded notion of gross rent to cover consideration in any form, and is intended to “assess the person who is enjoying the full rental value paid by the occupier or occupiers of rateable premises” (Report of the Select Committee on the Local Government Bill 1956 (Second Session of the First Legislative Assembly, Part II) (16 May 1957) vol 3, col 114; MCST 1298 at [57]). This would include, for example, where a premium is paid for a tenancy (Leung Yew Kwong and See Wei Hwa, Property Tax in Singapore (LexisNexis, 3rd Ed, 2015) (“Leung and See, Property Tax”) at p 138).

Thus, the Court of Appeal in Glengary noted, in relation to s 2(3)(b) of the PTA, that the provision was “not introduced to provide a wholly different measure [to s (2)(1)]” but “intended to provide an alternative method of assessing [AV] to the one based on reasonably obtainable rental which proved inadequate in particular situations” (at [33]–[34]). Section 2(3), as observed by the VRB in Bata Shoe Co Ltd v Chief Assessor [1959–86] SPTC 71, in relation to the predecessor provision of s 2(b) of the Property Tax Ordinance 1960 (No 72 of 1960), was “designed…for a property which has no rental or where the landlord has assigned a rental which is palpably low” and so cannot be accepted by the Chief Assessor (at 84; Glengary at [33]). That being said, the Court of Appeal in Glengary emphasised that whether AV was assessed based on rental value or on capital value, “the assessment must always rest on the current market value” (at [34]).

Thirdly, it is clear from the language of s 2(3) of the PTA, which refers to “the option of the Chief Assessor”, that he has “the sole discretion” of when the provision is to apply and in which circumstances it is appropriate (National Shipbreakers at [32]; Lee Tat Development (Pte) Ltd v Chief Assessor [1995] 2 SLR(R) 785 at [19], on the predecessor provision of s 2(b) of the Property Tax Act (Cap 254, 1985 Rev Ed)). As stated by the Court of Appeal in City Developments, there is “no doubt” that s 2(3) of the PTA expressly confers on the Chief Assessor the discretion to use the provision over other methods of assessment in s 2 (at [3]). It therefore does not assist the appellant to argue that s 2(3)(a) of the PTA was not employed in HSBC (HC) or FC Retail. Those cases involved an assessment of AV under s 2(1) of the PTA and therefore inquired into the amount that is reasonably expected to be paid by a hypothetical tenant.

New points being raised on appeal

In my view, it is open to me to consider the arguments presently raised by the appellant. As noted at [21] above, the appeal before me operates as a rehearing brought pursuant to O 55 of the Rules of Court (Cap 322, R5, 2014 Rev Ed). This entails that, according to the commentary in Singapore Civil Procedure 2021 vol 1 (Cavinder Bull gen ed) (Sweet & Maxwell, 2021) at para 55/2/2, citing Valentino Globe:

That said, cost consequences may follow if the matters were not ventilated below. Furthermore, insofar as certain of the appellant’s arguments are based on contradictory facts which were not put to the Chief Assessor’s representative in the proceedings below, they cannot stand by virtue of the rule in Browne v Dunn, as I will subsequently address.

Nexus between building costs and the value of buildings

As for the argument that the buildings would become worthless eventually, this does not help the appellant at all. AV is determined with respect to a particular period of time: the AV would be revised from time to time, as is seen in s 20(1) of the PTA (as noted at [8] above). Thus, the fact that buildings may become worthless at some point in the future is immaterial if what is being disputed is the value before that point in the future. All things will perish under the sun, and only death and taxes will endure.

Evidence for annual value

There was sufficient evidence of the value of the buildings and hence the AV.

Hearing and reception of evidence

With regards to the evidence to be presented in the hearing before the VRB, the PTA and the Valuation Review Board (Appeals Procedure) Regulations 1990 reg 2 (“VRB Regulations”) contemplate that evidence will be given. It is also expected that figures or valuations underlying the various concepts used in determining the AV would be prime candidates for evidential disputes.

Section 32 of the PTA provides that:

Regulation 5(2) of the VRB Regulations in turn provides that the VRB may require an appellant to submit a statement “setting out the contentions or particulars of any facts which the appellant intends to rely on during the hearing of the appeal, including particulars of comparable rents or sales”. The VRB will then forward a copy of the statement to the Chief Assessor and may require him to submit a response to the statement (Regulation 5(4)). Such a submission would include the basis of his assessment of the AV (Leung and See, Property Tax at p 388). Furthermore, Regulation 9 provides for the taking of evidence in an appeal before the VRB, and expresses that these are “subject to” the provisions of the Regulations, the Evidence Act (Cap 97, 1997 Rev Ed) and “any other written law relating to evidence”. As such, although proceedings before the VRB are generally informal, there would be the expectation that the general evidential rules apply.

Assessment on the facts

I am satisfied that on the evidence before the Court, the Chief Assessor’s assessment should not be disturbed.

The appellant submits that unlike the approach adopted by the Chief Assessor in HSBC (HC), the method here was not reasonable or fair. It was also not necessary for the appellant to put forward an alternative method: the obligation was only to show that the Chief Assessor was wrong. It argues that the use of an unconfirmed figure was not reasonable and fair. Rather, the Report ought to be preferred, as it was based on the annual market land rent, obtained by direct comparison, looking at market transactions. According to the appellant, it could be inferred that the valuation therein did take into consideration the value of the buildings. Alternatively, the inference would be that the building’s value was negligible.

As for the contents of the 25 October 2010 email, the respondent submits that the Architect’s statement that the email was void did not bar the Chief Assessor from relying on it, given that the reason for this was not because of any doubt about the accuracy of the figure. The Architect’s recanting of the email did not affect the reliability or accuracy of the email. The Architect’s position was that the Chief Assessor was to communicate with the appellant’s representatives directly, and not the Architect. No evidence was given to contradict the figure of $593,000 provided. Moreover, the VRB had not erred in admitting the email. It was not hearsay. JLL’s valuation was also not a viable alternative. The respondent argues that the appellant’s interpretations of the Report as including the buildings in its valuation or assessing their value as negligible were not put to the Chief Assessor’s representative at the hearing, and these interpretations were not supported by the evidence. The interpretations were at odds with the language and considerations in the Report: JLL was commissioned to assess the land, and the buildings on the Property were not considered. The respondent submits that the appellant’s arguments are only afterthoughts.

It was to my mind a valid objection by the respondent in respect of the appellant’s interpretations of the Report not being put to the Chief Assessor’s representative. This is indeed a situation in which the Browne v Dunn rule would operate, since the Chief Assessor was precluded from putting his response in through his representative. The fact that the appellant acted in person below is not a sufficient excuse justifying a departure from Browne v Dunn. The appellant’s position on the Report, namely that it did take into account the value of the buildings, ought to have put before the Chief Assessor’s representative, so evidence could be given for the Chief Assessor’s position.

In any event, no other evidence was put forward to substantiate a competing AV based on the value derived from the Report. On the face of it, the Report put forward a value without the buildings, and this was not therefore a useful comparator against what the Chief Assessor did. The Report was not, for this reason, material in showing that the Chief Assessor’s assessment was not reasonable or fair. The burden was on the appellant to bring in evidence to show that the Chief Assessor was wrong in the determination of the AV. Given the problems with the Report, the appellant did not discharge this burden.

Use of a lower figure

Conclusion

In view of the above, the appeal is without merit, and is thus dismissed.