Sogo Hong Kong Co Ltd v. Commissioner of Rating and Valuation

Read the full judgment text of LDGA 13/2017 on BabelCite. This LDGA judgment was delivered on 10 December 2019.

1. The consolidated appeals here arose from the respondent’s issuance of Notices of Decision dated 3 July 2017 [1] (“the Notices of Decision”) to the appellant demanding payment of rates and/or Government rent for:

Cites 7 cases

Case No.LDGA 13/2017
Court
LDGA
Date10 Dec 2019
Judge
Case Document
100%Judiciary

LDGA 13-19/2017
LDRA 270-274/2017

(Consolidated)

[2019] HKLdT 68

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

GOVERNMENT RENT APPEAL NOS 13-19 OF 2017

AND RATING APPEAL NOS 270-274 OF 2017

_____________________________

BETWEEN

  SOGO HONG KONG COMPANY LIMITED Appellant
  and
  COMMISSIONER OF RATING AND VALUATION Respondent

_____________________________

(Consolidated by Order of Mr Lawrence Pang,
Member of the Lands Tribunal dated 24th April 2018)

Before : His Honour Judge S Lo, Presiding Officer of the Lands Tribunal, and Mr Lawrence Pang, Member of the Lands Tribunal
Dates of Trial : 17-19 June, 13 August 2019
Date of Respondent’s Closing Submission : 17 July 2019
Date of Appellant’s Closing Submission : 31 July 2019
Date of Judgment : 10 December 2019

________________

J U D G M E N T

________________

Introduction

1.The consolidated appeals here arose from the respondent’s issuance of Notices of Decision dated 3 July 2017[1] (“the Notices of Decision”) to the appellant demanding payment of rates and/or Government rent for:

(1) 555 Hennessy Road, East Point Centre (New Wing), Advertising Sign 5 (“Sign 5”);

(2) 555 Hennessy Road, East Point Centre (Old Wing), Advertising Sign K (“Sign K”);

for various years of assessment in the total sum of $631,936.19.

2.Sign 5 and Sign K are the spaces located at the external wall of a well-known department store known as Jumbo Sogo Department Store (“the Department Store”) operated by the appellant.  Where appropriate, they are collectively referred to as “the said Signs”.  The Department Store consists of various floors from level B2 (ie basement 2) to level 10 of East Point Centre (Old Wing) (“the Old Wing”) and East Point Centre (New Wing) (“the New Wing”) (collectively “the Buildings”) situated at No 555 Hennessy Road, Causeway Bay, Hong Kong.

3.The appellant filed the Notices of Appeal on 7 August 2017 stating, inter alia, that the said Signs are not “tenements” within the meaning of section 2 of the Rating Ordinance, Cap 116 (“the Rating Ordinance”) and/or section 2 of the Government Rent (Assessment and Collection) Ordinance, Cap 515 (“the Rent Ordinance”) as they had never been respectively held or occupied under a separate tenancy, holding or licence.  In the Notices of Opposition dated 25 August 2017, the respondent maintained that the said Signs were liable under the corresponding Ordinances for assessment to rates and/or Government rent.

4.The appellant lodged the appeals only disputing the rateability, ie liability to pay rate but not the quantum of the rateable values of the said Signs, nor alleging that the said Signs shall be exempt from assessment pursuant to section 36 of the Rating Ordinance or section 4 of the Rent Ordinance.

Summary of the Consolidated Appeals

5.Set out below is a table summarising the details of the appeals:

  Appeal No Sign Concerned Year of Assessment Government rent / rates payable
(1) LDRA 270/2017 Sign 5 2014/2015 rates: $15,846.43
(with effect from 6 Feb 2015)
(2) LDRA 271/2017 2015/2016 rates: $99,400.00
(3) LDRA 272/2017 2016/2017 rates: $100,400.00
(4) LDRA 273/2017 Sign K 2015/2016 rates: $10,888.33
(with effect from 12 Nov 2015)
(5) LDRA 274/2017 2016/2017 rates: $24,200
(6) LDGA 13/2017 Sign 5 2010/2011 Government rent: $5,361.43
(with effect from 21 Feb 2011)
(7) LDGA 14/2017 2011/2012 Government rent: $62,640.00
(8) LDGA 15/2017 2012/2013 Government rent: $62,640.00
(9) LDGA 16/2017 2013/2014 Government rent: $62,640.00
(10) LDGA 17/2017 2014/2015 Government rent: $62,640.00
(11) LDGA 18/2017 2015/2016 Government rent: $62,640.00
(12) LDGA 19/2017 2016/2017 Government rent: $62,640.00

Background

6.The appellant is a wholly owned subsidiary of a listed company, Lifestyle International Holdings Limited (“Lifestyle”) (stock code: 1212). Various related companies of the appellant belonging to the Lifestyle Group are the owners of the Department Store. These companies include Congenial Company Limited (“Congenial”), Public Might Limited, Everwin Worldwide Limited and Eastlord Development Limited (“Eastlord”).

7.By clause 3(b) of the deed of mutual covenant of the Old Wing, the exclusive right to use the external walls of the Old Wing was reserved to Congenial. Clause 14(d) further provides that the owner of the exclusive right to hold, use and occupy the Department Store shall have the exclusive right to erect, construct, install, affix, exhibit, maintain, remove and exchange from time to time its own signs, sign boards, advertisements, and/or festive decorations on such of the exterior walls of the Old Wing.

8.By clause 8.4 of the deed of mutual covenant of the New Wing, Eastlord shall have the exclusive right to, inter alia, permit any person to erect, construct, install, paint, affix, maintain, alter, exchange, renew and remove any signs, billboards, placards, posters, sign boards, advertisements on any areas of the New Wing, so long as Eastlord remains the beneficial owner of any undivided share of the New Wing.

9.Notwithstanding the above, there is no dispute between the parties that the appellant shall be regarded as the “owner” of the said Signs for the purpose of section 2 of the Rent Ordinance and section 2 of the Rating Ordinance.

10.According to the extract of information contained in the valuation list dated 10 May 2018[2], the tenement described as “555 Hennessy Road East Point Centre Basmt 3 Basmt 2 Basmt 1 G/F (part), 1/F to 10/F & Roof Advertising Station” has been assessed by the respondent for 2018-2019 as one single tenement[3].

Evidence

11.For the purpose of these appeals, the appellant had originally filed the witness statements of two managers but they were not called by Mr C Y Li, SC (“Mr Li SC”), leading Mr Avery Chan, counsel for the appellant, at the trial. Therefore, as accepted by Mr Li SC, the Tribunal will not rely on these witness statements.

12.On the other hand, the respondent has adduced the witness statement, supplemental witness statement and the 2nd supplemental witness statement prepared by Mr Leung Ka Man (“Mr Leung”), a valuation surveyor employed by the respondent.  Mr Leung is a factual witness providing no expert evidence on valuation or assessment of rateable values of the said Signs. Although Mr Leung was called by the respondent to adopt his witness statements as his evidence in chief at the trial, Mr Li SC for the appellant decided not to cross-examine him.  Hence, Mr Leung’s witness statements as regards the factual background of these appeals are accepted in full by the Tribunal.

13.Apart from the agreed bundles of documents, the following exhibits are produced at trial:-

(1) Exhibit A1 being a letter dated 24 November 2015 from the respondent to the appellant with 2 photos showing the Advertising Station Sign K and Sign K (then called Advertising Sign H in the letter) as delineated by red line on the photos; and

(2) Exhibits R1(a), R1(b), R1(c) and R1(d) (collectively “Exhibits R”) being photographs taken by the respondent on 17 June 2019 showing the present situation of Sign K and the space underneath. 

Sign 5

14.Sign 5 is a space situated at the external wall of the New Wing facing Hennessy Road with a size of approximately 12 metres (height) by 12 metres (width). A photo was shown as Annex 2 attached to Mr Leung’s witness statement dated 30 August 2018. 

15.Between 21 February 2011 to 29 February 2016, Sign 5 was used by Prada Asia Pacific Limited (“Prada”), the concessionaire of the appellant pursuant to the following agreements both dated 10 August 2011:

(1)   The dealership agreement between the appellant and Prada (“Prada Dealership Agreement 2011”) provides, inter alia, that:-

(a)     The appellant shall make available to Prada and Prada shall use the Allocated Space at the location coloured in pink on the plan annexed thereto as First Schedule known as shop G-32 on the Ground Floor of the Department Store (“Shop G-32”) to sell fashion and accessories under the brand name “Miu Miu”. Prada shall pay to the appellant commission for the use of Shop G-32 at a percentage of the gross income from sales by Prada at Shop G-32 (clauses 1.1 and 3); and

(b)     The appellant shall allow Prada to make use of the façade facing Hennessy Road at the location coloured in yellow on the plan annexed thereto as First Schedule (ie Sign 5) for promoting its goods under the brand name “Miu Miu” (clause 5A.1(a) and the Second Schedule).

(2)   The sponsorship agreement between Pacific Trump Development Limited (“Pacific Trump[4]”) and Prada (“Sign 5 Agreement 2011”) provides, inter alia, that:-

(a)     Pacific Trump shall make available to Prada and Prada shall use Sign 5 (which was described as the façade including the underside of the canopy of the space) for erection of an outdoor advertising light-box or personalized façade to promote Prada’s products or business (Part 2 of Schedule);

(b)     Pacific Trump grants to Prada the sponsorship benefit as set out in Part 2 of the Schedule for the consideration and on the terms and conditions contained in Sign 5  Agreement 2011 (clause 1.1); and

(c)     In consideration of the benefit granted under Sign 5 Agreement 2011, Prada shall pay all costs and expenses of and incidental to the use of Sign 5, including without limitation all costs and expenses for the construction, installation, repair, maintenance, upkeeping, replacement and removal of the light-box and the contents therein or any part thereof, and reinstatement of Sign 5 upon the expiration of the term or earlier termination of Sign 5 Agreement 2011, all electricity charges and other outgoings in respect of Sign 5 and any erections and installations thereon (clauses 1.2 and 2.8).

16.Upon expiration of Prada Dealership Agreement 2011 and Sign 5 Agreement 2011, Sign 5 continued to be used by Prada pursuant to the following agreements both dated 5 January 2017:-

(1)   The dealership agreement between the appellant and Prada (“Prada Dealership Agreement 2017”), providing Prada with similar rights under the Prada Dealership Agreement 2011 to use Shop G-32 and Sign 5 from 1 March 2016 to 28 February 2018 in return for payment of commission to the appellant; and

(2)   The sponsorship agreement between Pacific Trump and Prada (“Sign 5 Agreement 2017”), providing Prada with similar rights under Sign 5 Agreement 2011 to use Sign 5 from 1 March 2016 to 28 February 2018.

17.Although the terms of Sign 5 Agreement 2011 and Sign 5 Agreement 2017 were co-terminus with that of Prada Dealership Agreement 2011 and Prada Dealership Agreement 2017 respectively, they were independently terminable pursuant to their corresponding clause 3:

“3.1 This Agreement shall be co-terminus with the Dealership Agreement, unless sooner terminated by the written consent of the Company and the Sponsor.

3.2 …

3.3 Notwithstanding any other provisions in this Agreement, the termination of this Agreement shall not affect the legality, validity and enforceability of the Dealership Agreement.”

18.Where appropriate, Sign 5 Agreement 2011, Sign 5 Agreement 2017, Prada Dealership Agreement 2011 and Prada Dealership Agreement 2017 are collectively called “Prada Agreements” below.

19.According to Mr Leung, the respondent only became aware of Sign 5 upon a site inspection conducted on 19 May 2016.  Further on 12 August 2016, the respondent received a signed Requisition for Particulars of Tenement (Form R1U) from an agent for the appellant, in which the agent confirmed that Sign 5 was first occupied on 21 February 2011.

20.On 12 September 2016 and 1 March 2017 respectively, the respondent received from the appellant copies of Sign 5 Agreement 2011 and Sign 5 Agreement 2017.

21.Mr Leung took the view that Sign 5 was not occupied for any purpose other than exhibiting advertisement and was not owned by Prada. He formed the opinion that the circumstances fall squarely within section 9(1) of the Rating Ordinance and that Sign 5 is liable for assessment to rates.

22.After the commencement of the subject appeals (ie 7 August 2017), the respondent received further from the appellant copies of Prada Dealership Agreement 2011 and Prada Dealership Agreement 2017.

Sign K

23.Sign K is a space situated at the First Floor level across the external wall of the Old Wing facing East Point Road (around the corner with Hennessy Road).  Based on the plan AA-01 (Rev C) which was approved by the Building Authority on 17 August 2015 (“the Approved Plan”), the dimension of the structure protruded from Sign K is approximately 3.630 metres (height) x  9.438 metres (width) x 0.6 metre (thickness) which, according to Mr Leung, replaced a former advertising station subject to rating assessment[5]. The structure erected on Sign K was described in the Approved Plan as “New Wall Type Signboard” which was composed of “New Tempered Glass & Metal Display Surface Signboard” and “10 mm THK[6] Brushed Brass & 12 mm THK[7] Clear Acrylic w/ Backlit Logo”.

24.On 20 October 2014, the appellant entered into a dealership agreement with its concessionaire Bottega Veneta Hong Kong Ltd. (“Bottega”) for a term from 8 September 2014 to 31 August 2018 (“Bottega Dealership Agreement”) that contained, inter alia,  the following terms:-

(1)   The appellant shall make available to Bottega and Bottega shall use the Allocated Space at the location coloured in pink on the plan annexed thereto as Part II of the First Schedule known as Shop G-23 on the Ground Floor (“Shop G-23”) and Shop 1-13 on First Floor (“Shop 1-13”) of the Department Store to sell branded leather goods and accessories under the brand name “Bottega Veneta”. Bottega shall pay to the appellant commission for the use of Shop G-23 and Shop 1-13 at a percentage of the gross income from sales by Bottega at Shop G-23 and Shop 1-13 (clauses 1.1 and 3); and

(2)   The appellant shall allow Bottega to make use of the façade facing East Point Road at the location coloured in yellow on the plan annexed thereto as Part II of the First Schedule (ie Sign K) to promote its goods under the brand name “Bottega Veneta” (clause 5A and Part I of the Second Schedule).

25.On 14 September 2016, Pacific Trump entered into a sponsorship agreement (“Sign K Agreement”) with Bottega for a term from 8 September 2014 to 31 August 2018 that contained, inter alia,  the following terms:-

(1)   Pacific Trump shall make available to Bottega and Bottega shall use Sign K for erection of an outdoor advertising light-box or personalized façade to promote Bottega’s products or business which are promoted, marketed and/or sold by Bottega, or any business carried on by Bottega, in the Department Store under the Bottega Dealership Agreement (Part 2 of Schedule);

(2)   Pacific Trump grants to Bottega the sponsorship benefit as set out in Part 2 of the Schedule for the consideration and on the terms and conditions contained in Sign K Agreement (clause 1.1); and

(3)   Bottega shall pay all costs and expenses of and incidental to the use and occupation of Sign K, including without limitation all costs and expenses for the construction, installation, repair, maintenance, upkeeping, replacement and removal of the light-box and the contents therein or any part thereof, and reinstatement of Sign K upon the expiration of the term or earlier termination of Sign K Agreement, all electricity charges and other outgoings in respect of Sign K and any erections and installations thereon (clause 2.8).

26.Pursuant to the Bottega Dealership Agreement and Sign K Agreement (collectively “Bottega Agreements”), Sign K has been used exclusively by Bottega from January 2015 (after Sign K was modified and converted to its current state by Bottega) up to present in conjunction with its use of Shop G-23 and Shop 1-13.

27.Although the Bottega Dealership Agreement was co-terminus with Sign K Agreement, it was independently terminable pursuant to clause 3 which resembles that of the Prada Agreements.

28.According to Mr Leung, Sign K was identified upon a site inspection conducted on 12 November 2015. However, no Form R1U concerning Sign K was signed and returned by the appellant and/or its agent. Hence, the date of inspection on which Sign K was identified, ie 12 November 2015, was taken as its first occupation date.

29.On 1 March 2017, the respondent then received from the appellant a copy of Sign K Agreement.

30.Mr Leung took the similar view that Sign K was not occupied for any purpose other than exhibiting advertisement and was not owned by Bottega. He formed the opinion that the circumstances fall squarely within section 9(1) of the Rating Ordinance and that Sign K is liable for assessment to rates.

31.After the commencement of the subject appeals (ie 7 August 2017), the respondent received further from the appellant copy of the Bottega Dealership Agreement.

Main Issue of the Present Appeals

32.It is the position of the appellant that the Department Store (with the Roof Advertising Station) has been assessed to be a single tenement and therefore the said Signs are not separate tenements for the assessment of rates or Government rent and, in the case of Sign K or  the structure erected thereon, it is not an advertising sign but just the shop front of Shop G-23.

33.The main issue as posed by Mr Li SC for the appellant before the Tribunal is whether the said Signs would be liable as a separate tenement for assessment of rates under the Rating Ordinance and Government rent under the Rent Ordinance.

34.Such issue involves the question of statutory interpretation, especially the Rating Ordinance.  There is no dispute concerning the relevant legal principles for interpreting a statute.  In short, a purposive approach should be adopted but regard should also be paid to the context and wordings of the statutory provision[8]. The Tribunal shall bear in mind of the said legal principles when interpreting the Rating Ordinance. 

Section 9 of the Rating Ordinance and its legislative history

35.As a starting point, rates chargeable in Hong Kong are assessed annually on the rateable value of a unit known as “tenement” which is defined in section 2 of the Rating Ordinance:-

tenement (物業單位) means 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.”

36.The leading authority on the meaning of tenement is Yiu Lian Machinery Repairing Works Ltd & Others v Commisioner of R&V [1982] HKLTLR 32.  Judge Cruden said in the judgment (at 39D-39F): 

“… I now turn to consider the statutory definition in section 2 of the Hong Kong unit of assessment, namely ‘tenement’. I accept the appellants submission that the definition consists of two limbs. The first concerns the subject matter to be rated namely land, buildings and structures. The second limb only makes even those three species of property rateable, if they are held or occupied as a distinct and separate tenancy, holding or licence. …”

37.Yiu Lian’s case went on appeal but Judge Cruden’s ruling on the 2-limb definition of “tenement” was not disturbed by the Court of Appeal ([1985] 2 HKC 517).

38.It is noteworthy that the legal definition of tenement in Hong Kong is not the same as the unit for rates in the United Kingdom (“UK”) where the unit for rates is hereditament.  In the UK, “hereditament” is defined in section 115 (1) of the General Rate Act 1967 (“the 1967 Act”) as follows:

“hereditament means property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list;”

39.“Hereditament” is further defined in section 64 of the Local Government Finance Act 1988 (“the 1988 Act”)[9], the prevailing statute that governs the rating systems concerning land use for advertisement in the UK, as follows:

“64 Hereditaments

(1) A hereditament is anything which, by virtue of the definition of hereditament in section 115(1) of the 1967 Act, would have been a hereditament for the purposes of that Act had this Act not been passed.

(2) In addition, a right is a hereditament if it is a right to use any land for the purpose of exhibiting advertisements and

(a) the right is let out or reserved to any person other than the occupier of the land, or

(b) where the land is not occupied for any other purpose, the right is let out or reserved to any person other than the owner of the land.”

40.In Hong Kong, the relevant section that attracts the liability to pay rates concerning land use for advertisement is section 9 of the Rating Ordinance which is set out as follows:-

“Advertising stations

(1) Where the right to use land for the purpose of exhibiting advertisements is let, reserved or otherwise granted to a person other than the occupier of the land, or, where the land is not occupied for any other purpose, to any person other than the owner of the land, that right shall, subject to subsection (2), be deemed for rating purposes to be a separate tenement in the occupation of the person for the time being entitled to the right and, for the purpose of sections 7 and 7A,—

(a) in valuing that separate tenement for rating purposes, the rent at which it might be expected to be let shall be estimated as if the rent would include a proper amount in respect of any structure or sign for the time being available for use, for the purpose of exhibiting advertisement, by the occupier of the separate tenement, notwithstanding that the structure or sign was provided by him or was provided after the said right was let, reserved or otherwise granted;

(b) in valuing the land on which the separate tenement exists for rating purposes, no account shall be taken of any value or increased value arising from the use of the land for the purpose of exhibiting advertisements in accordance with the said right.

(2) The separate tenement aforesaid shall be treated as coming into existence at the earliest time at which either—

(a) any structure or sign is erected in exercise of the said right; or

(b) any advertisement is exhibited in pursuance of the right.

(3) For the purpose of section 24 the erection, dismantling or alteration of any structure or sign, in exercise of the right under subsection (1), shall be treated as a structural alteration of the tenement.

(4) Where land is used temporarily or permanently for, or for the erection of, a structure used for or in connection with, the exhibition of advertisements but is not otherwise occupied, and subsection (1) does not apply, the person permitting the land to be so used or, if that person cannot be ascertained, the owner of the land shall be deemed to be in occupation of the land and be liable to pay rates in respect thereof according to the value of that use of the land.

(5) Where a tenement, which is liable for assessment to rates in respect of its occupation for other purposes, is used temporarily or permanently for, or for the erection thereon of a structure used for or in connection with, the exhibition of advertisements, and subsection (1) does not apply, any estimate of the rateable value of the tenement for the purpose of sections 7 and 7A shall include the increased value arising from that use of the land.

(6) Where an advertisement is exhibited on any land, and subsections (1), (4) and (5) do not apply, the advertisement shall be deemed for rating purposes to be a separate tenement and shall be valued for rating purposes as if it were a separate tenement under subsection (1).

(7) In this section, land (土地) includes any structure, hoarding, frame, post or wall.”

41.Parties’ counsel accepted that there is no direct Hong Kong authority on the proper interpretation of section 9 of the Rating Ordinance and hence by adopting the purposive approach, the Tribunal has to look at the legislative history.

42.Section 9 of the Rating Ordinance was introduced by the Rating Bill 1973 gazetted on 29 December 1972. Under the relevant explanatory memorandum under the Hong Kong Hansard, 3 January 1973 at pp 306-307, para 7, it was stated that section 9 is “based on similar provisions in the United Kingdom”. The then Financial Secretary moved the Second Reading on 3 January 1973:

“Now as regards the bill generally, there are several points worth special mention …

Thirdly, as regards rating practice generally, by clause 8 the treatment of working expenses on machinery included as part of a tenement has been clarified, and by clause 9 the Commissioner’s position has been strengthened in regard to the assessment of advertising station.” (emphasis added)

43.The explanatory memorandum further provides:

“The purpose of the Bill is to repeal and replace the existing Rating Ordinance. The bill includes the new rating proposals contained in the 1972 Budget and allows for the payment of a percentage of rates to the Urban Council. The Bill also brings rating administration into line with current practice and generally improves and strengthens existing provisions.” (emphasis added)

44.Clause 9 is explained thus:

“7. Clause 9 is a new provision dealing with the rating of advertising stations. In the past, the rating of advertising structures and the right to exhibit advertisements has not been clear. This clause is based on similar provisions in the United Kingdom.” (emphasis added)

45.Resumption of debate of second reading on 17 January 1973 did not debate clause 9.  On 31 January 1973, the Third Reading included a minor amendment to add “structural’ to “alteration” in clause 9(3) which is irrelevant to the present appeals.

46.The said similar provision in the UK is section 28 of the 1967 Act, which mirrors section 9 of the Rating Ordinance in many material respects.  For instance, section 9(1) of the Rating Ordinance looks virtually the same as section 28(1) of the 1967 Act which almost resembled and contained almost the same wordings as section 56 of the Local Government Act 1948 (“the 1948 Act”).

47.It is also noteworthy that the definition of “land” in section 56 of the 1948 Act include “any hoarding, frame, post, wall or structure erected or to be erected on the land, and including also any wall or other part of a building” whereas that in section 28(1) of the 1967 Act includes “any structure or sign erected or to be erected on the land, and including also any wall or other part of a building”.   In section 28(5) of the 1967 Act, “structure” includes “a hoarding, frame, post or wall”.   On the other hand, the definition of “land” in section 9(7) of the Rating Ordinance includes “any structure, hoarding, frame, post or wall” but the words “erected or to be erected on the land, and including also any wall or other part of a building” are missing in section 9(1) of the Rating Ordinance whilst the word “erected” appears in section 9(2)(a) thereof and the word “erection” appears in section 9 (3), (4) and (5) thereof.  In short, the definition of “land” in section 9(7) of the Rating Ordinance is not exactly the same as that in the relevant sections of the 1948 Act and 1967 Act.

48.When section 28(1) of the 1967 Act was first introduced (as section 56 of the 1948 Act), it was stated as targeting English railway companies and electricity undertakings, which have conducted an increasing billposting business. This was most aptly seen in the House of Commons debate in discussing section 56 of the 1948 Act, in which a member of the Parliament made clear that:

“The purpose of the Clause is to restrict the advantages which the railway companies possess in the absence of the Clause. Without this Clause, that property would not be rated for local purposes and the Clause is moved in order to make it rated.”

49.It is not in dispute that such provision is necessary because, prior to the introduction of section 56 of the 1948 Act, rates were not payable for advertising rights provided to a party who was neither an occupier nor an owner of a hereditament in the UK.

50.Indeed, as the said railway companies and electricity undertakings were state owned entities, if they were to enter into direct contract with advertisers, no rates would be payable. It is against this background that the deeming provision of section 56 of the 1948 Act (and later section 28(1) of the 1967 Act) was enacted to resolve that mischief and prevent such inequality.

51.In spite of the above, Mr Li SC accepts that the operation of section 56 of the 1948 Act extends beyond railway companies and electricity undertakings and the provisions have effect on advertisements by any person other than the occupier.

52.The Rating and Valuation Department’s publication Property Rates in Hong Kong Assessment, Collection and Administration Second Edition, Foreword of Mrs Mimi Brown JP, the then Commissioner of Rating and Valuation, October 2013 sheds some light on the introduction of section 9 of the Rating Ordinance. The First Edition Foreword of Kenneth TW Pang JP, October 2006 explains the purpose of publication was to provide fundamental principles and practices of the rating system in Hong Kong.[10]

53.Chapter 3, Liability for Rates, under the heading of Rateability of Advertising Signs in pp 22-24, provides as follows:

“Prior to 1973, the Rating Ordinance did not clearly spell out the rateability of advertising signs. The Rating Ordinance 1973 added a new section (section 9) providing for the rating of advertising stations, taking into account the value of the right to exhibit an advertisement and the value of the advertising structure. Section 9 basically follows the provisions of section 28 of the now repealed General Rate Act 1967 of the UK.

The gist of section 9 is to regard the right to use land for exhibiting advertisements as a separate tenement (and thus rateable) and to include the value of the advertising station in the assessed rateable value of the land. ‘Land’ is defined in subsection (7) as including any structure, hoarding, frame, post or wall.

Where the right to exhibit advertisements is let, reserved or otherwise granted to a person other than the occupier of the land, or, where the land is vacant, to any person other than the owner of the land, that right is deemed to be a separate tenement occupied by the person for the time being entitled to the right. Thus, a vacant advertising station is still rateable if the advertising right is let, reserved or otherwise granted.” (emphasis added)

54.The author seems to suggest that the crucial factual determination was the grant of “the right”. If such right is granted and established factually, a separate tenement is deemed to exist. That tenement is thus rateable.

55.The Court of Final Appeal had discussed “tenement” in the context of valuation under section 7 of the Rating Ordinance in Hong Kong Electric Co Ltd v Commissioner of Rating and Valuation [2011] 4 HKC 509.  Litton NPJ explained why the term “hereditament” is not used in Hong Kong as follows:

“125. In Hong Kong virtually all land is held as leasehold land[11], in contrast to the situation in England where much land is owned in fee simple.  This explains why in the Rating Ordinance the term ‘hereditament’ is not used in Hong Kong to indicate the rateable asset, and ‘tenement’ is used instead.  ‘Hereditament’ in English law is real property whereas leases are held as personalty:  See Megarry and Wade: The Law of Real Property (7th Ed) 1-011 to 1-013.  Hence, where s2 of the Ordinance refers to tenement, it is land, building, structure etc held or occupied.  No greater significance attaches, in my view, to those disjunctive words ‘held or occupied’ in s2 upon which Mr Yu SC, counsel for the Commissioner, laid such great stress.

126. Fundamentally, valuation under s7(2) seeks to ascertain the value of occupation of all tenements in the valuation list.  The rating regime, based largely upon English law, part statute, part judicial decisions, focusses upon the value of occupation.  It would be a very odd thing if, on a crucial issue like this, Hong Kong law should vary from English law to the extent indicated by the Court of Appeal in this case.” (emphasis added)

56.In CLP Power Hong Kong Ltd v Commissioner of Rating and Valuation (2017) 20 HKCFAR 168, Lord Walker has further contributed to Hong Kong jurisprudence on statutory construction generally as well as determining the issue on appeal.  The issue was whether CLP was liable to be assessed under the Rating Ordinance in respect of certain fixed equipment at its generating stations. The issue turned on the correct construction of sections 8 and 8A of the Rating Ordinance but section 9 was also touched upon. Lord Walker said in para 13 that:

“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 s.8A (added by amendment in 1991) and the other in s.9 (which relates to advertising stations, and was amended in 1981).” (emphasis added)

57.Lord Walker pointed out further in para 35 that:

“The general principles of statutory construction are indeed general principles which apply even in specialised fields such as taxation, rating and compulsory purchase of land.”

58.His Lordship then cited a passage said by Kirby J of the Australian Federal Court in Commissioner of Taxation v Ryan (2000) 201 CLR 109, 146:

“It is hubris on the part of specialised lawyers to consider that ‘their Act’ is special and distinct from general movements in statutory construction which have been such a marked feature of our legal system in recent decades. The Act in question here is not different in this respect. It should be construed, like any other federal statute, to give effect to the ascertained purpose of the Parliament.”

59.Lord Walker in CLP’s case further addressed his view on deeming provisions in para 39:

“… But deeming provisions are not all of a kind. They do not all have the same force. As Lord Radcliffe said in St Aubyn v Attorney General (No 2) [1952] AC 15, 53, the expression may be ‘used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible’. Moreover in [9.5] and [9.9] of his judgment Cheung JA seems to me, with great respect, to have interpreted the words ‘whether or not such land, building or structure is otherwise a tenement’ in s.8A(1) ... The natural meaning of ‘otherwise’, in this context, is ‘in the absence of this section’ or ‘but for this section’. The section is to apply to any equipment which is plant by means of which any land, building or structure is occupied by a person ‘whether or not such land, building or structure is otherwise a tenement’. It achieves that result in two stages. Subsection (1) deems the land, building or structure (to the extent of its being occupied by the relevant plant) to be a separate tenement, and sub-s.(2) provides that the plant is to be regarded as part of that separate tenement for the purposes of ascertaining its rateable value. The word ‘regarded’ in sub-s.(2) indicates a less emphatic type of deeming.”

60.Lord Walker determined the linguistic and contextual challenges by Counsel for the Commissioner and held that the wordings of the section 8A read as a whole make it clear that the plant occupying that land may be either plant (for instance, a fibre-optic cable in a duct) that would not otherwise be recognised as a tenement at all, or plant (for instance, a steel support for a boiler) that would otherwise be treated as part of a larger tenement.[12]

61.Like section 9, section 8A(1) of the Rating Ordinance is a deeming provision. The words used are “shall … be deemed for rating purposes to be a separate tenement”, “that person shall be deemed for rating purposes”. The deeming words in section 9 of the Rating Ordinance are similar as follows:

(1) “the right shall … be deemed for rating purposes to be a separate tenement” in section 9(1);

(2) “the owner of the land shall be deemed to be in occupation” in section 9(4);

(3) “shall be deemed for rating purposes to be a separate tenement” in section 9(6).

The Rent Ordinance

62.The Rent Ordinance indeed adopts the same concept of rateability and rateable value as the Rating Ordinance for fixing the Government rent payable unless a specific provision exists governing the assessment of Government rent in any particular case.

63.Section 6(1) of the Rent Ordinance provides that:

“… the lessee of an applicable lease is liable to pay by way of Government rent to the Commissioner in accordance with this Ordinance an annual rent of an amount equal to 3% of the rateable value of the land leased.”

64.Section 8(2) of the Rent Ordinance further provides that:

“The Rating Ordinance (Cap. 116) applies to the ascertainment of rateable values under this Ordinance subject to any specific provisions of this Ordinance.”

65.Whereas all the present appeals regarding Government rent concern Sign 5 only, if no rate is payable for Sign 5, it is not disputed that no Government rent is also payable.

Appellant’s main arguments

66.Mr Li SC submitted that the said Signs would only be deemed a separate tenement chargeable for rates under section 9(1) of the Rating Ordinance if the right to exhibit advertisement on the land (as defined at section 9(7)) was let or reserved to a person who is neither an occupier nor owner of the land. It meant that the exception under section 9(1) (ie there is no separate tenement by reason that Prada and Bogetta occupy Sign 5 and Sign K respectively and they are not their owners) applies and hence section 9(6) is not applicable.

67.Mr Li SC also emphasised that Sign 5 belonged to the same tenement as Shop G-32 while Sign K belonged to the same tenement as Shop G-23 and Shop 1-13.

68.For Sign 5, Mr Li SC elaborated further as follows:-

(1) Shop G-32 and the right to erect advertisement on Sign 5 were both made available to Prada pursuant to Prada Dealership Agreement 2011 and Prada Dealership Agreement 2017.

(2) Sign 5 Agreement 2011 or Sign 5 Agreement 2017 was on terms to govern the management and use of Sign 5 and not meant to be a separate and distinct grant of landholding.

(3) This by itself is strong evidence that Shop G-32 and Sign 5 belonged to the same tenement as they were not held or occupied under a “distinct or separate” tenancy, holding or license as defined under section 2 of the Rating Ordinance.

(4) Further, as can be seen from the First Schedule of the Prada Dealership Agreement 2011 and the Prada Dealership Agreement 2017, Sign 5 is situated at the glass façade at the external wall of Shop G-32, essentially forming part of Shop G-32.

(5) Prada satisfied the four requirements for “occupation” under the Rating Ordinance for both Shop G-32 and Sign 5 in the following respects:-

(a) Prada was clearly in actual occupation of Shop G-32 and Sign 5 pursuant to the Prada Dealership Agreement 2011 and the Prada Dealership Agreement 2017;

(b) Such occupation is evidently exclusive pursuant to clauses 3 and 5A.1(a) of the Prada Dealership Agreement 2011 and the Prada Dealership Agreement 2017;

(c) Such occupation is obviously of benefit to Prada, who operates a shop at Shop G-32 and erected advertisement at Sign 5 in promoting its business and goods; and

(d) Such occupation was not at all transient with Prada occupying Shop G-32 and Sign 5 for at least 7 years.

(6) Given that (a) Prada occupied both Shop G-32 and Sign 5 at all material times; and (b) Sign 5 being situated at the external wall of Shop G-32, it is clear that the right to use Sign 5 for the purpose of exhibiting advertisements was not let, reserved or otherwise granted to a person other than the occupier of the land for the purpose of section 9(1) of the Rating Ordinance.

(7) Further, given that Prada was the occupier of both Shop G-32 and Sign 5 at all material times, such situation clearly does not fall into the mischief intended to be resolved by the enactment of section 9(1), namely to charge rate for advertising right that is not let to an occupier (if the land is occupied) or someone other than the owner (if the land is not occupied).

(8) Sign 5 and Shop G-32 comprises a single tenement created by the Prada Agreements. The fact is that rates have been paid for the whole of the Department Store including Shop G-32 (which in term would have covered Sign 5). If the respondent states that the assessment of the Department Store somehow does cover Shop G-32 but not Sign 5, the appellant would take position that the respondent has to prove its case.

(9) As regards section 9(6) which may be regarded as a catch-all provision, nothing has been said by the respondent as to the genesis of this section which is not found in the UK counterpart and the mischief it aims against.  Section 9(1) comprises an exception which exempts the appellant from liability for paying rates as Sign 5 was being occupied by the occupier, namely Prada. It will be wrong then to say that because one falls within the exception prescribed by a section, it means that the section does not apply at all.

(10) The proper construction is that once section 9(1) applies, then section 9(6) is not applicable. Here section 9(1) applies to render Sign 5 not caught by section 9(1), ie it applies to vindicate the legal position that Sign 5 is not caught by section 9(1).

(11) If there is any question or query on the correctness of the aforesaid construction of section 9(6), the appellant will rely on the legal principles that tax statutes must be construed strictly in the sense that the words must be clear, citing the dictum of Hartmann J (as he then was) in Hong Kong Flour Mills Ltd v Commissioner of Inland Revenue [2002] 2 HKLRD 121 in para 22:

“As an underlying principle, taxing statutes are to be interpreted strictly. This does not mean that they are to be interpreted restrictively against the tax collector. It means only that in a taxing statute, clear words are necessary to bring a person into the ambit of liability. It has been said that there is no equity in taxing statutes. They are essentially penal in nature. Often quoted as a summary of this principle are the words of Cairns LC in Partington v A-G (1869) LR 4 HL 100 (at p.122):

If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown, seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute. (Emphasis added)

(12) If section 9(6) is to be construed on the basis that even if one falls within the exception of section 9(1) then one would be still caught by section 9(6), then clear wordings would be required for such interpretation as it has the drastic if not draconian effect of wiping out the exceptions provided by section 9(1) with section 9(6) becoming a catch-all provision rendering section 9(1) meaningless.

69.As to rates allegedly payable in respect of Sign K, Mr Li SC makes the similar arguments to Sign 5 with the following further submissions:-

(1) Sign K was never used by Bottega for the purpose of advertisement. Rather it was converted to become part of the shop front of Shop G-23 in about January 2015.

(2) By reference to the photo record of Sign K, it constitutes part of Shop G-23, which was used by Bottega as a shop at all material times.

(3) Sign K is a protruded frame situated at the First Floor level across the external walls outside Shop 1-13, which is located right on top of the entrance of Shop G-23 displaying Bottega’s shop name on its lower part and with the upper and major part being window frames with opaque glasses. While this serves the purpose of informing the public that Bottega’s shop is located at Shop G-23, it could not be said to be an advertisement since it does no more than displaying Bottega’s name right above its shop.

(4) Since Sign K was never used by Bottega for the purpose of erecting any advertisement, the use of Sign K does not fall under the definition of “Advertising Station” under section 9 of the Rating Ordinance. Section 9 therefore does not apply to Sign K in its entirety.

(5) Holding Sign K liable for assessment of rates would essentially mean that any shop front that extends beyond its designated shop area and displaying its name with a backlit logo would also be liable to rate as an “advertising station”. This cannot be right. There is no legal definition of advertisement in the Rating Ordinance. If the display of the name of a shop on the front is regarded as an advertisement and hence a separate tenement for rating purpose, it would catch most of the shops in Hong Kong.

70.In summary, Mr Li SC contended that rates are not payable for the said Signs as separate tenements pursuant to section 9(1) of the Rating Ordinance for the following reasons:-

(1) Sign 5 belongs to the same tenement as Shop G-32;

(2) Sign K belongs to the same tenement as Shop G-23 and Shop 1-13; and

(3) The use of Sign K as part of the shop front of Shop G-23 for Bottega does not fall within the meaning of “Advertising stations” under section 9 of the Rating Ordinance;

(4) section 9(6) is inapplicable.

Respondent’s replies

71.Ms Liza Jane Cruden (“Ms Cruden”) for the respondent relied on the deeming provision of section 9(1) of the Rating Ordinance, under which the right to use Sign 5 or Sign K is deemed to be a separate tenement for rating purpose because the land where those rights are to be exercised is not used for any other purpose other than the exercise of the grant to Prada or Bottega respectively, to exhibit advertisements and neither Prada nor Bottega are the owner of the land.  There is no so-called “exception” created by section 9(1) as contended by the appellant.

72.Ms Cruden submitted that the definition of “land” in section 9(7) of the Rating Ordinance includes “any structure, hoarding, frame, post or wall” but does not include “Shop G-32 plus Sign 5” nor “Shop G-23 plus Sign K”.  If the Tribunal rules that the right to use the Signs is not separate tenement under section 9(1), they will then be caught by section 9(6).

73.Ms Cruden argued that consideration of occupation by reference to G-32 or Shop G-23 is inappropriate. The tenement in issue is the advertising right in terms of section 9.  As a matter of statutory construction, “the land” in section 9(1) does not refer to other parts of the building (namely, Shop G-32 and Shop G-23) granted for other purposes. It only includes “land” or a space used for exhibiting advertisement.

74.Ms Cruden cited Imperial Tobacco Company (of Great Britain and Ireland) Ltd v Pierson (Valuation Officer) [1961] AC 463, in which the House of Lords decided (by the majority) on the basis of the 1948 Act (but not the 1967 Act) that it was the grant of the right to use land for the purpose of exhibiting advertisements which is the rateable hereditament, not the exercise of the grant. Subsequently, the 1948 Act was replaced by the 1967 Act, in which the first part of section 28(2) provides that the separate tenement shall be treated as coming into existence at the earliest time at which either (a) any structure or sign is erected in the exercise of the right; or (b) any advertisement is exhibited in pursuance of the right.  Section 9(2) of the Rating Ordinance is exactly the same as the first part of section 28(2) the 1967 Act.

75.Ms Cruden submitted that the Prada Dealership Agreement 2011, the Prada Dealership Agreement 2017 and the Bottega Dealership Agreement only provide for allowing use of the façade for advertisement purpose whilst the Sign 5 Agreement 2011, the Sign 5 Agreement 2017 and the Sign K Agreement are the operative agreements governing the grant, use and occupation of the façade and create a distinct or separate right which is independent of the right to use the shops within the Department Store.

76.Ms Cruden further argued that since Sign 5 and Shop G-32 (as well as Sign K and Shop G-23) are geographically distinct as Sign 5 (or Sign K), which is erected on the external wall, does not intercommunicate and cannot be accessed from or through Shop G-32 (or Shop G-23).  Both the geographical and functional tests in Woolway v Mazars [2015] UK SC 53 are not met and therefore, Sign 5 and Shop G-32 (as well as Sign K and Shop G-23) should not be taken as the same tenement.

77.Regarding the appellant’s argument that Sign K is not used for advertising purposes, Ms Cruden contended that Sign K displays the brand name “Bottega Veneta” on a 6.6m by 9.2m sign board on the external wall or the façade.  The purpose objectively construed is to promote the brand “Bottega Veneta” and to increase its brand recognition.  In addition, it is to notify the public that Bottega goods are available for purchase in the vicinity of where Sign K is located.  Thus, Sign K is for the purpose of advertisement.

78.Ms Cruden submitted that the words of section 9(6) are unambiguous and crystal clear, which states that if section 9(1), 9(4) and 9(5) “do not apply”, the advertisement “shall” be deemed for rating purposes to be a separate tenement.  In case the Tribunal finds that section 9(1) does not apply, the said Signs fall within section 9(6).

Discussion

79.Although the main issue is whether the said Signs would be respectively liable as a separate tenement for assessment of rates under section 9 of the Rating Ordinance, there are indeed many sub-issues raised by the parties, which will be dealt with by the Tribunal one by one below.

Any requirement of separate land holding under section 9?

80.One of the main arguments of Mr Li SC is that as the concept of “tenement” is unique to Hong Kong and in particular, the requirement that the property needs to be held as a distinct or separate tenancy, holding or license is absent in the definition of “hereditament” under the 1967 Act, the English cases that elaborate on the definition of “hereditament” are of no assistance for the interpretation of the term “tenement” for present purpose.  The word “right” as appeared in section 9(1) of the Rating Ordinance must be read in light of the definition of “tenement” under section 2 thereof to mean a right to use land under a separate tenancy, licence or land holding.  Hence, it is still the land holding but not a pure contractual right, which is rateable.

81.Although the Tribunal accepts that the definition of “tenement” in Hong Kong is not the same as the definition of “hereditament” in the UK, the Tribunal disagree with Mr Li SC’s contention.  In the very beginning of section 2 of the Rating Ordinance, it expressly provides “In this Ordinance, unless the context otherwise requires-”.  In our view, by adopting the purposive approach, the definition of “tenement” in section 2 is subject to section 9 which is a completely new deeming provision added to the Rating Ordinance in about 1973. It also contains its own definition of “land” in section 9(7) which covers the subject matter wider than that in section 2, such as hoarding, frame, post or wall.  As said by Lord Walker in para 13 of CLP’s case, section 9 (apart from section 8A) is one of the exceptions to the basic principle of rating law in Hong Kong.  His Lordship also said in para  41 thereof that under section 8A, land occupied by the items, eg cables, ducts, pipelines etc “is to be treated as a separate tenement, partly to avoid difficulty with the long-standing principle of rating law that a tenement can have only one person at a time in rateable occupation of it”.  The Tribunal considers that similar difficulty may have arisen for the right to use land for exhibiting advertisements before the enactment of section 9.  However, that potential difficulty is obviously met and overcome by its enactment which deems such right to be a “separate” tenement. The same remedial legislative drafting technique was adopted to achieve the same purpose. In both section 8A and section 9, a deeming provision has been enacted to create separate tenements. This removes any issues as to whether or not they are in fact separate tenements. They are simply deemed to be separate tenements. Hence, whether Sign 5 or Sign K would otherwise constitute separate tenements by application of section 2 makes no difference.

82.Further in accordance with the relevant explanatory memorandum under the Hong Kong Hansard, it was clearly stated that section 9 is to strengthen the Commissioner’s position in regard to the assessment of advertising station.  If there is an additional requirement to apply or satisfy the definition of tenement under section 2 to the advertising stations, the Tribunal fails to see how the newly implemented section 9 in about 1973 can strengthen the Commissioner’s position in this regard.  Besides, section 9 is drafted “based on similar provisions in the United Kingdom”, namely section 28 of the 1967 Act. We are of the view that for the purpose of the interpretation of section 9 of the Rating Ordinance, the English authorities concerning the interpretation of section 28 of the 1967 Act must be relevant and applicable; otherwise Hong Kong rating law would be substantially different from the English rating law.  That cannot be the legislative intent in the light of the relevant explanatory memorandum under the Hong Kong Hansard.  Similarly, for the English authorities relating to the interpretation of section 56 of the 1948 Act and section 64 of the 1988 Act, they are also relevant as section 28 of the 1967 Act only slightly modifies section 56 of the 1948 Act and section 64 of the 1988 Act further restructures section 28 of the 1967 Act without material changes.

83.Mr Li SC, in his closing submission cited paras. 36 to 40 in DCC Holdings (UK) Ltd v Revenue and Customs Commissioners [2011] STC 326, suggesting in short, one must still give the words in the statute or ordinance the natural and ordinary meaning consistent with the policy behind the legislative and the legal fiction of deeming provision can only be applied within bounds so as not to produce injustice and absurdity. We nonetheless consider that the comments made by Lord Walker in para 39 of CLP’s case[13] concerning the deeming provision in the context of the Rating Ordinance are more persuasive as CLP’s case is a later decision made by the Court of Final Appeal in 2017 whilst DCC Holdings’ case concerns a corporation tax legislation in the UK.  

84.In any event, as stated in the explanatory memorandum that the policy behind the Rating Bill is to improve and strengthen existing provisions of the Rating Ordinance, we fail to see how the deeming provision in section 9 would produce any injustice and absurdity.

85.In other words, the Tribunal considers that in the specific context of section 9 of the Rating Ordinance, there is no significant difference between “tenement” in Hong Kong and “hereditament” in the UK[14]. In our view, section 9 has expressly provided for a special type of tenement and in specific circumstances, and deemed it to be separate from other possible tenements with which it might be otherwise associated. There is no legal requirement that Sign 5 and Sign K need to be held or occupied under a distinct or separate tenancy, holding or license as argued by Mr Li SC.

Whether the right to use land is rateable?

86.Ms Cruden submitted that relying on the English authority Imperial Tobacco’s case concerning section 56 of the 1948 Act, it is the right to use land which is rateable.  Viscount Simonds (with whom Lord Morton of Henryton agreed) affirmed the decision of the English tribunal at p 472 of the judgment as follows:

“It is, I think, clear ….. from the use of the word ‘that’ that the right which is deemed for rating purposes to be a separate hereditament is the right to use any land in its extended meaning for the purpose of exhibiting advertisements which is let out or reserved, and to ascertain what that right is one must, I think, look at the terms of the document by which the grant is made or reserved …”

87.Viscount Simonds continued his judgment at pp 472-473 as follows:

“… But the appellants are not for rating purposes in occupation of a hereditament consisting of a structure. Whether there is a structure there or not, they are rateable in respect of a right which is deemed to be a separate hereditament in their occupation… It is irrelevant what was the structure which the appellants were ‘then using’ and it is …

I do not doubt that the result at which I have arrived marks a departure from the usual course of rating law, but the language of the relevant section is unambiguous, and I do not feel justified in ascribing to it any other than its natural meaning. …”

88.In the same judgment, Lord Reid concurred with Viscount Simonds and said at pp 474-475:

“But this is not an ordinary hereditament. The hereditament created by section 56 is not land but a right to use land, … The only right to use land which is let out or reserved to the appellants is that given to them by their agreement with the corporation, … No doubt it is unusual – possibly it is unique in rating law – that we do not have to look at the property which is being used. But, in my opinion, that is the result of the provisions of section 56 under which it is the user’s incorporeal right which is to be valued. …”

89.In the same judgment, Lord Cohen also added at p 476:

“… As I read the agreement …, the right thereby let out was the right to erect a physical thing on the premises of the corporation of Bradford … and to use it for the purpose of advertising. It is this right, and only this right, which had to be assessed as a separate hereditament at the date of the proposal … and it is, in my opinion, immaterial that at that date the sign had been erected and may have been a structure within the meaning of that word in section 56 …”

90.However, Lord Denning dissented and said at p 477:

“If the words of the section are taken literally, the Imperial Tobacco Co. would, I think, be right. But I am a little suspicious of a literal interpretation in this case, because it leads to such surprising results. It means that the Imperial Tobacco Co. would be liable to pay rates on the right to use the wall, even though they never exercised the right and never erected a structure at all….”

91.The Tribunal accepts that the English authority Imperial Tobacco’s case concerning section 56 of the 1948 Act has to be read with caution as the said section 56 was subsequently replaced by section 28 of the 1967 Act. In particular, section 28(2) provides “The separate hereditament aforesaid shall be treated as coming into existence at the earliest time at which either (a) any structure or sign is erected, after the right constituting the hereditament has been let out or reserved, for enabling the right to be exercised; or (b) any advertisement is exhibited in pursuance of the right…”  In our view, the enactment of section 28(2) of the 1967 Act is to remove the surprising results as remarked by Lord Denning.  In other words, after its enactment, the ratepayer is only liable to pay rates if and only if the structure is erected in exercise of the right to use land for the purpose of exhibiting advertisements or an advertisement is exhibited in pursuance of the said right.  It must be noted that section 9(2) of the Rating Ordinance almost resembles section 28(2) of the 1967 Act.

92.In an English Court of Appeal case O’Brien v Secker 95 LGR 560[15] cited by Mr Li SC, the ratepayer, as licensee, entered into an agreement with the occupier of a building as licensor, to use for three years for advertising purposes the flank wall of the property. Under the terms of the agreement the ratepayer affixed a hoarding to the wall to which the advertisements were attached. The local valuation officer made an entry in respect of the hoarding being a hereditament on the rating list. A challenge to that entry was dismissed by the English Lands Tribunal which held, inter alia, that the agreement created a right rateable as a hereditament under section 64(2) of the 1988 Act. It stated, at p 20 of the English Lands Tribunal decision[16], that:

“… although the wording in the 1948 Act has been rearranged, the legislative framework under consideration has remained unchanged…

As it seems to me the flaw in that argument[17] lies in the mistaken use of the expression ‘the land’ where it occurs in s 64(2) (a). The ratepayer’s argument appears to rest on the proposition that ‘the land’ there refers to the hoarding, because a hoarding is included in the definition of land in s 64(11). In my view, it is clear that the reference in s 64(2)(a) to ‘the occupier of the land’ must relate back to ‘the right to use any land’ in the immediately preceding words of the section. The agreement … gave the right to use the flank wall for advertising purposes. That right was let out by the agreement to the ratepayer who was not the occupier of the flank wall. …

As Lord Simonds pointed out[18], the rating of advertising sites is not without complexity, but the artificial creation of a hereditament consisting of a contractual right is now long established.” (emphasis added)

93.The English Court of Appeal, dismissing the appeal by the ratepayer in O’Brien’s case, affirmed that by section 64(2) of the 1988 Act, the grant of the right to use the wall for advertising created a hereditament that was to be entered in the rating list if it was a right let out to the ratepayer to use any “land” for the purpose of exhibiting advertisement. Notwithstanding the wide definition of “land” in section 64(11) of the 1988 Act, section 64(2) was held not to be construed as requiring the fixture on the wall to be treated as being the “land’ but rather the wall on which the fixture was placed.

94.Schiemann LJ further said at p 564 of the English Court of Appeal judgment that the Imperial Tobacco’s case was reversed by the relevant UK legislation only to the extent that a separate hereditament was treated as coming into existence when either structure is erected or an advertisement is exhibited in pursuance of the right.  His Lordship continued to say at p 565 that the language of the relevant sections of the 1988 Act is not materially different from that of the provisions of section 56 of the 1948 Act considered in the Imperial Tobacco’s case.

95.Mr Li SC reminds the Tribunal that the Imperial Tobacco’s case was not about rateability but about rateable value as the ratepayer had conceded on the question of rateability.  Even though it may not be the ratio in this case, in our view, the obita that the right to use land for exhibiting advertisement is rateable must be correct and is applicable in Hong Kong but subject to section 9(2) of the Rating Ordinance, namely (1) a structure must be erected in exercise of the said right or (2) an advertisement must be exhibited in pursuance of the said right.  In other words, if the ratepayer is granted the right to use land for exhibiting advertisement but does not erect any structure or exhibit any advertisement, he will not be liable to pay rates until and unless one of the two requirements in section 9(2) is satisfied.  In short, we reject Mr Li SC’s argument that it is the land holding which is rateable under section 9.

96.In the present case, as there is no dispute that a structure has been erected or an advertisement[19] has been exhibited on the external wall of the Department Store ie Sign 5 and Sign K, in pursuance of the rights granted by the appellant to Prada under the Prada Agreements and to Bottega under the Bottega Agreements respectively, either of the two requirements in section 9(2) is satisfied.

Whether section 9(1) consists of 2 limbs or there is an exception?

97.Mr Li SC also contended that there is an exception to section 9(1) and that the appellant’s position falls within such exception. Ms Cruden submitted that upon proper construction, section 9(1) consists of 2 limbs and that the respondent is relying on the 2nd limb whereas there is no such exception as argued by the appellant.

98.In order to determine this issue which is a question of construction of section 9(1), the Tribunal considers that it is extremely useful to look at section 64(2) of the Act 1988[20] which replaces section 28 of the 1967 Act.  In our view, it is crystal clear from the wordings of section 64(2) that a right is a hereditament which attract the liability to pay rates in the UK if either of the following 2 limbs is satisfied:

(1) the right to use any land for the purpose of exhibiting advertisements is let out or reserved to any person other than the occupier of the land, or

(2) where the land is not occupied for any other purpose, the said right is let out or reserved to any person other than the owner of the land.

99.Section 64(2) of the Act 1988 simply rearranges section 28 of the 1967 Act into 2 parts without any material change in its meanings, which makes it easier to understand.  As section 9 of the Rating Ordinance is enacted based on section 28 of the 1967 Act, we are of the view that the proper construction of section 9 is the same as Section 64(2), namely a right shall be deemed to be a separate tenement which attract the liability to pay rates in Hong Kong if either of the following 2 limbs is satisfied:

(1) the right to use any land for the purpose of exhibiting advertisements is let, reserved or otherwise granted to any person other than the occupier of the land, or

(2) where the land is not occupied for any other purpose, the said right is let, reserved or otherwise granted to any person other than the owner of the land.

100.In our opinion, it is the Commissioner but not the ratepayer to choose either of the 2 limbs depending on the circumstances.  In the present case, we accept the submission of Ms Cruden that the respondent indeed relies on the 2nd limb (but not the 1st limb), namely where Sign 5 and Sign K are not occupied for any other purpose, the respective rights to use them for the purpose of exhibiting advertisements is granted to Prada and Bottega respectively other than the owner of the land, ie the appellant. 

101.Mr Li SC spent a lot of time in arguing that Prada and Bottega were the respective occupiers of Sign 5 and Sign K during the relevant period, citing for instance, Westminster City Council v Southern Railway and Company Limited & Others [1936] 2 All ER 322 (HL), [1936] AC 511. With respect, we are afraid that Mr Li SC has wrongly relied on the 1st limb of section 9(1).  The question of who is the occupier or rateable occupation is only relevant to the 1st limb but not the 2nd limb.  In other words, the appellant is not entitled to say that the company is not liable to pay rates on the sole reason that the 1st limb is not satisfied, namely Prada and Bottega are the respective occupiers of Sign 5 and Sign K.  We also disagree with Mr Li SC’s contention that there is any exception to section 9(1).  In the present case, the Tribunal indeed has to determine if the 2nd limb is satisfied.      

Whether the 2nd limb is satisfied?

102.For the purpose of determination of this issue, the Tribunal has to satisfy that first, the land is not occupied for any other purpose than exhibiting advertisements and that secondly, the right to use any land for the purpose of exhibiting advertisements is let, reserved or otherwise granted to any person other than the owner of the land.

103.For the question whether the land is not occupied for any other purpose than exhibiting advertisements, it is suggested by Mr Li SC in para 66 of his closing submission as a 2nd exception to section 9(1).  However, Mr Li SC submitted that this question is not relevant in the present case.  In any event, by reference to the photographs produced by the respondent, the Tribunal has no hesitation to find that Sign 5 and Sign K are not occupied for any other purpose than exhibiting advertisements save as to the appellant’s contention that structure erected on Sign K is not an advertisement, which will be discussed in the later part of the Judgment.

104.For the second question, the Tribunal also finds that under the Prada Agreements and the Bottega Agreements, Prada and Bottega were granted the right to use Sign 5 and Sign K, as the case may be, for erection of an outdoor advertising light-box or personalized façade to promote their products which are promoted, marketed and/or sold by them, or business carried on by them, in the Department Store and undoubtedly, Prada and Bottega are not the owner of Sign 5 and Sign K.  Accordingly, we are of the view that the 2nd limb in section 9(1) is satisfied.

Single tenement argument

105.Mr Li SC argued that Sign 5 belonged to the same tenement as Shop G-32 while Sign K belonged to the same tenement as Shop G-23 and Shop 1-13.  In other words, as “Shop G-32 together with Sign 5” constituted a single tenement and “Shop G-23 and Shop 1-13 together with Sign K” constituted a single tenement, Sign 5 alone and Sign K alone cannot be a tenement and thus not rateable. 

106.As a matter of fact which is undisputed, the Department Store together with the “Roof Advertising Station” has been assessed by the respondent as one single tenement.  Therefore, Shop G-32 alone has never been assessed as a single tenement and similarly, Shop G-23 and Shop 1-13 have not been assessed as a single tenement.  It seems that Mr Li SC was arguing that Shop G-32 (or Shop G-23 and Shop 1-13) alone is capable of being assessed as a single tenement.  In our view, this academic question is wholly out of the context which the Tribunal is not prepared to comment.  As mentioned above, the main issue is whether the said Signs are respectively liable as separate tenement for rates under section 9 of the Rating Ordinance but not whether “Shop G-32 together with Sign 5” (or “Shop G-23 and Shop 1-13 together with Sign K”) is liable as a single tenement for rates under section 9 of the Rating Ordinance. Undoubtedly, these shops which are not used for the purpose of exhibiting advertisements are not liable for rates under section 9 of the Rating Ordinance.  The question whether these shops are liable for rates under another section of the Rating Ordinance is not relevant in this case.  The fact that “Shop G-32 together with Sign 5” (or “Shop G-23 and Shop 1-13 together with Sign K”) is let to Prada under one single agreement ie the Prada Dealership Agreement 2011 and the Prada Dealership Agreement 2017 (or to Bettaga under the Bettaga Dealership Agreement) will not make “Shop G-32 together with Sign 5” (or “Shop G-23 and Shop 1-13 together with Sign K”) as one single tenement. This argument is in fact circulating with the issue whether section 9 is subject to section 2 (ie the definition of tenement), which has been discussed above.  In short, we do not consider that it is the legislative intent for the word “land” in section 9(1) to include any other tenement, such as a shop, which is separately liable for assessment to rates under another section, but only to include “land” used for exhibiting advertisements under section 9.  We therefore cannot accept Mr Li SC’s argument.

107.In any event, we are also satisfied that Sign 5 and Sign K are respectively capable of being a “distinct” holding under the definition of “tenement” and can be let separately to different persons whether or not they are reserved with a space inside the Department Store, on different terms or on different dates.  The reasons why the appellant and Prada or Bottega chose to make their arrangements and how they chose to draft or structure their agreements cannot circumvent the Rating Ordinance, in particular section 9.  In other words, the Tribunal disagrees that the parties who merge two distinct holdings into one by one single agreement can avoid the liability to pay rates under the Rating Ordinance.  Unlike the situation in the UK, under section 21(1) of the Rating Ordinance, the owner and occupier of a tenement shall both be liable to the Commissioner for payment of the rates assessed thereon.

108.Ms Cruden contended that “Shop G-32 together with Sign 5” (or “Shop G-23 and Shop 1-13 together with Sign K”) cannot constitute a single tenement based on the geographical and functional tests as laid down in Woolway v Mazars [2015] UKSC 53.  We note that the court in Woolway’s case was dealing with two units of real property but not one unit of real property and other is the right to use land for advertisement.  In any event, we find it unnecessary to comment on the applicability of the geographical and functional tests in the present case.

Double dipping argument

109.Mr Li SC for the appellant also argued that the respondent has to prove that the said Signs have not been rated by assessing the Department Store as a single tenement.  Since Mr Leung has never said in his witness statements that the assessment of the Department Store does not cover the external walls, where Sign 5 and Sign K are located, the respondent may well have double-dipped in charging rates and government rent by charging the external walls of the Department Store.

110.As fairly pointed out by Mr Li SC, Mr Leung explicitly said in para 4 of Mr Leung’s supplemental witness statement that “advertising signs (save and except the Subject Tenements which are under appeal) on the exterior walls of the Sogo Department Store” were separately assessed and further said in para 5 of the statement that “…the rateable value of the Advertising Station K was HK$224,400.  The rateable value of the Advertising sign K has been HK$564,000….”.  It is clear, in our view, that the relevant valuation list assessing the Department Store as a single tenement only makes reference to “Roof Advertising Station” but does not refer to any other advertising stations or signs.

111.Also by reference to the appellant’s letter dated 28 October 2015 to the respondent informing the latter that “(o)riginal 8 advertising stations (A-H) have been dismantled and 6 new adverting stations (A-F) have been installed… the advertising stations I, J and K[21] have been cancelled”, we consider that the said advertising stations have been separately assessed by the respondent in the past.  Besides, the appellant has its own sign on the roof, value of which is assessed and included in the Department Store by the respondent as “Roof Advertising Station” in the valuation list.  In our view, if the external walls are included in the assessment, it would also be expressly stated. However, that is not the case.  As Mr Leung’s evidence is not challenged by the appellant, we find as a fact that the assessment of the Department Store (together with Roof Advertising Station) as a single tenement does not cover the external walls.

112.Furthermore, the advertising signs can only be separately assessed under section 9(1) when and only when these signs are erected on the external wall of the Department Store as required by section 9(2).   Strictly speaking, it is the exercised right to use the external walls for advertising purpose but not the external walls themselves can be assessed.  Accordingly, there should not be any risk of double dipping as argued by Mr Li SC.  We are satisfied that the respondent has been rating the different advertising stations or signs consistently.

Advertisements

113.A further issue argued by the appellant is whether Sign K was used for the purpose of advertising or mere shop front.  The appellant said that it was “converted” to its current state by Bottega to make it part of the “shop front” of Shop G-23.  Mr Li SC for the appellant argued that that “a name cannot be an advertisement” and the use of Sign K does not fall under the definition of “Advertising Stations” under section 9 of the Rating Ordinance.

114.Section 2 and section 9 of the Rating Ordinance do not define “advertisements” as well as “Advertising stations”.  The words “Advertising stations” do not appear in the body of section 9 and this phrase is merely a heading.  Section 18(3) of the Interpretation and General Clauses Ordinance, Cap 1 (“IGCO”) provides that headings to any provisions shall not have any legislative effect. We are of the view that “Advertising Stations” is a largely historic term that encompasses what may more commonly be described as outdoor advertising displays or signs, and what is statutorily described as a structure or sign erected for the purpose of exhibiting advertisements.

115.The general principles under section 19 of IGCO are applicable to construction of “advertisements”, namely, that an Ordinance “shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation” as will attain the object of the Ordinance according to its “true intent, meaning and spirit”.

116.The common law requires a contextual and purposive construction of the word “advertisements[22]. Context includes:

(1) section 9(1) “the right to use land for the purpose of exhibiting advertisements is …granted”;

(2) section 9(2) “The separate tenement aforesaid shall be treated as coming into existence at the earliest time at which either –

(a) …; or 

(b) any advertisement is exhibited in pursuance of the right.”;

(3) section 9(6) “Where an advertisement is exhibited …”.

117.According to the Oxford English Dictionary, definitions of “advertisement” and “advertise” include:

(1) “advertisement” noun - “Admonition, instruction”, “Information, notification”, “A (written) statement calling attention to something; a notice to readers in a book etc.”, “Attention, observation”, “A public announcement (formerly by the town-crier, now usually in newspapers, on posters, by television etc.)…”;

(2) “advertise” verb - “Notify, admonish (a person of or concerning a thing, that… “Give notice of; make generally or publicly known. Call attention to by a published announcement; describe or present (goods, services) publicly with a view to promoting sales. Give warning or information of…, “Make an announcement in public place; describe or present goods publicly with a view to promoting sales”

118.The word “advertisement” does appear in other statutory provisions in the UK jurisdiction.  Authorities on other statutory provisions elucidate what may be included but may turn on the precise terms and purpose of that legislation.  In Butler v Derby City Council[23], the banner bore the words “Save Five Lamps” with the logo of the campaign group, its phone number and websites address was held to be an advertisement. Sullivan J considered the definition of advertisement under the Town and Country Planning Act 1990 as follows:

“17. For my part I would accept the submission that Parliament did not intend that the display of every message by any means whatsoever should be subject to the regulations. The display (to use a convenient shorthand for word, letter, model, sign etc) must be ‘in the nature of, and employed wholly or partly for the purposes of, advertisement, announcement or direction’.

18. There is a degree of circularity in this definition … If one asks, what is an advertisement, the answer is, at least in part, something that is ‘in the nature of, and employed wholly or partly for the purposes of, advertisements’. In this respect the definition of an advertisement is like the definition of the proverbial elephant. One knows an elephant (or advertisement) when one sees it because it is in the nature of an elephant (or advertisement).

19. …

20. I respectfully agree with Gray J[24] that ‘in its ordinary connotation’ today the word ‘advertisement’ has acquired a somewhat narrower meaning than any form of public announcement and that it is usually applied to the display of ‘material which promotes a product or service’ …

21. …

22. I have deliberately added the qualification ‘usually’ (or ‘especially’, see the Concise Oxford English Dictionary above), because I do not understand Gray J, in that short passage in para 19 of a judgment which was not principally concerned with the ambit of the Act or the regulations, to have been deciding that the ordinary meaning of advertisement was limited simply to material which promotes a product or service.

23. If the word ‘advertisement’ had stood alone in section 336(I) I would not have given it such a narrow meaning ….Parliament therefore made it clear beyond any doubt that ‘advertisement’ was to be given a very broad meaning for the purposes of the Act.”

119.In Westminster City Council v Secretary of State for the Environment and Bally Group Ltd [1990] 1 PLR 30, the canopy or blind over a shop front which bore the words “Bally of Switzerland” was also held to be an advertisement for the purpose of the Town and Country Planning (Control of Advertisements) Regulations 1984.

120.Although the aforesaid 2 cases have limitation as deciding the issue with reference to the particular statutory definition of “advertisement”, we find these 2 cases persuasive. Specifically, we agree with Popplewell J in Westminster City Council’s case, who said that one should apply common sense to decide whether some display is advertisement or otherwise. In our opinion, it is also necessary to look at the whole circumstances, including the relevant agreement for granting the right to advertise with all known particulars, including size, location, position of the structure erected and how it displayed.

121.In our view, Sign K appears more than a mere shop front of Shop G-23. The structure erected thereon comprises a “New Wall Type Signboard” which is composed of “New Tempered Glass and Metal Display Surface Signboard” and “10mm thick Brushed Brass and 12mm thick Clear Acrylic w/Backlit Logo” according to the Approved Plan[25]. As the dimensions of the structure on Sign K are 9438mm (width) x 3630mm (height) x 600mm (thickness), it is no doubt huge in size, like an elephant as described by Sullivan J in Butler’s case. It is erected on the external wall of the Department Store, facing East Point Road, which we disagree to be regarded as the shop front of Shop G-23 since the customers have to enter into Shop G-23 through the lobby of the Department Store but not directly from East Point Road according to the Approved Plan. The photograph dated 12 November 2015 produced by the respondent appears to be consistent with the description above and also be consistent with the photographs at Exhibit R1(a)-(d). Although the latter were taken on the first day of the trial, the difference in dates, on the evidence, does not detract from their evidential value. The appellant’s opening states that Sign K has been used by Bottega “from January 2015 (after Sign K was modified and converted to its current state by Bottega to make it part of the shop front of Shop G-23) up to the present.” In any event, the appellant accepts that Sign K at the relevant period under these appeals is as shown in these recent photos.[26]

122.We consider that the usage of Sign K is clearly for advertising. Under the Bottega Agreements, the façade is made available to Bottega to promote Bottega’s products or business.  According to clause 2.6 of Sign K Agreement, Bottega warrants that it owns the brand name and the logo as set out in the Schedule thereto.  Sign K displays the brand name “BOTTEGA VENETA[27], which is in fact Bottega’s logo according to the Approved Plan, on the sign board erected on the external wall of the Building.  The purpose objectively construed is to promote the brand“BOTTEGA VENETA”.  This will certainly increase its brand recognition. 

123.On an objective assessment, in addition to promoting “BOTTEGA VENETA”, Sign K notifies the public that Bottega’s goods may be available for purchase in the vicinity of where it is located.  The purpose is to attract customers to the Department Store where they may find Shop G-23 and Shop 1-13 so as to purchase Bottega’s goods. 

124.In our view, the position and the location of Sign K are on the side of, or otherwise proximate of, Shop G-23 or Shop 1-13 (rather than the front or the front above) supports and reinforces the fact that the usage and purpose are for advertising.  The position of Sign K on the external wall of the Department Store approximately outside Shop 1-13 facing East Point Road notifies people on the busy shopping street outside the Department Store that Bottega’s goods may be sold inside thereby promoting Bottega’s products and goods sold in the Department Store.  With Sign K being located close to the entrance to the Department Store where upon entry, customers can then find Shop G-23 and Shop 1-13 with Bottega goods available for sale.  This will certainly add value to these 2 shops or the goods to be sold inside and is strong evidence that the structure erected thereon is for advertising purposes. The proximity to Shop G-23 and Shop 1-13 gives additional utility as distinct from an advertisement in a location remote from any shop selling Bottega goods.  In addition to raising brand awareness or recognition, the obvious inference from the position and location of Sign K is that the structure erected on Sign K is for advertising purposes. The appellant’s attempt to take Sign K outside the meaning and ambit of “advertisement” is without substance.  It is contrary to the circumstances such as the position, location, size, usage and purpose.

125.The purpose of erecting a structure on Sign K, objectively construed, is “to inform”, “notify” and “call attention to” the brand name of “BOTTEGA VENETA”. It makes Bottega “generally or publically known”, “with a view to promoting” Bottega. It is an “announcement in a public place”, on East Point Road, the heart of Causeway Bay, a busy shopping district.   Having considered all the relevant circumstances and applying the common sense, we find that the structure erected on Sign K constitutes an advertisement for the purpose of section 9.

Applicability of section 9(6)

126.It is entirely unnecessary for the Tribunal to decide whether section 9(6) is applicable in the present case as we have already found that the 2nd limb of section 9(1) applies.

127.For the sake of completeness, we have the following observations on this issue.

128.The relevant explanatory memorandum under the Hong Kong Hansard has said nothing about section 9(6) and there is no counterpart in the UK legislation whereas Mr Li SC described it as a catch-all provision in his opening.   He also submitted that if the legislature intended to make all advertisement exhibited on land to be rateable as a separate tenement, then one would expect to find a simple provision to such effect and there is no need for sections 9(1), 9(4), 9(5) and then 9(6). Without any authority or explanation as to the mischief targeted by section 9(6), the application of section 9(6) when one is not being caught by sections 9(1), 9(4) and 9(5) will produce very unreasonable consequences and should be rejected. Apart from the Hong Kong Flour Mills Ltd’s case decided by Hartmann J (as he then was), Mr Li SC further relied on Halsbury’s Laws of Hong Kong 2nd ed Vol 45:

“[365.064] Consequences to be disregarded where statute is unambiguous It is the duty of judges to give fair and full effect to statutes which are plain and unambiguous without regard to the particular consequence in the special case, or to what the legislature would have done if a particular case had been presented to its notice, for it may be presumed that the framers of a statute contemplated matters of ordinary occurrence. However, it must not be assumed that the legislature foresees every result which may accrue from the use of a particular word, and where a study of the statute as a whole leads inexorably to the conclusion that the legislature has erred in its choice of words to such an extent that the error defeats the intention of the statute, the court should eliminate the error by interpretation, if the language of the statute is susceptible of being so modified.”

129.Indeed, the wordings of section 9(6) is easy to understand, plain and unambiguous.  It says that if section 9(1), 9(4) and 9(5) “do not apply”, the advertisement exhibited on any land “shall” be deemed for rating purposes to be a separate tenement.  It is then valued “as if” it were a separate tenement under section 9(1).  We cannot find anything unclear about section 9(6).  We consider that the enactment of section 9 as a whole is to strengthen the Commissioner’s position in respect of charging rates for advertisements exhibited on any land.  That is the legislative intent in Hong Kong which has wider scope than that in the UK.  In the present case, if section 9(1) does not apply for whatever reason, we find that section 9(6) applies and the said Signs are still rateable.

Sign 5 is liable for Government rent

130.As regards the issue whether Government rent is payable by the appellant, the answer is simple. So long as Sign 5 is rateable and it has been assigned a rateable value (on which the appellant has no dispute), we have to find that Government rent is payable for Sign 5 under the Rent Ordinance.

Burden of Proof

131.The parties are also in dispute over the question of burden of proof.  Ms Cruden relied on the following three cases to illustrate the legal and evidential burden on the appellant but not the respondent.

132.In Kader Industrial Co Ltd v Commissioner of Rating and Valuation[1958] HKDCLR 207, at pp 210 & 211, the District Court proceeded on the assumption that the burden of proof was upon the appellant company to show that the assessment was beyond the rateable value of the tenement to which it related that should be arrived at on the basis of the statutory definition of “rateable value”.  The burden was not upon the respondent to show that the assessment was correct as upon such basis.

133.In United Theaters Corp Limited. v Commissioner of Rating and Valuation [1978] HKLTLR 298, the Commissioner had not produced any evidence to establish his assumption that cinemas which had similar box office receipts had similar profitability.  The appellant there had not placed before the Tribunal any acceptable evidence to establish that the assumption was incorrect.  The Tribunal held the onus was on the appellant to establish upon the balance of probabilities that the assessment of the Commissioner was wrong.  The assumption was not inherently unreasonable and had not been shown to be wrong by the appellant.  At p 304, the Tribunal held:

“Given that the onus is on the appellant, we are satisfied that we should, in such circumstances, accept the approach of the Commissioner as a correct one”.

134.In Uni-Group Consultants Limited v Commissioner of Rating and Valuation, LDRA 85/2009 (unreported, dated 10 March 2010), the appellant did not adduce any rental evidence to substantiate the appeal nor call any expert evidence.The Tribunal held that the appellant had not discharged the burden of proof.[28]

135.Similarly, in CLP’s case, supra, Lord Walker stated in para 63, “If expert evidence on that point was required, it was for CLP, rather than for the Commissioner, to adduce it….”

136.Ms Cruden for the respondent submits that the appellant has failed to discharge its burden to adduce any substantive evidence to prove that the respondent’s assessment of Sign 5 and Sign K as separate tenements is wrong. Further, it has failed to establish that Sign K was not used for the purpose of advertisement.

137.In this regard, Mr Li SC responds that all these cases are on appeals against rateable value rather than rateability of a tenement. Thus, there is no clear discussion on the question of burden of proof regarding rateability in these cases.  He also relied on rule 61 of the Lands Tribunal Rules, Cap 17A to argue that the respondent has failed to state in the Notice of Opposition “the facts relied upon by him[29] in sufficient detail to enable the appellant to know the case he has to meet”.  

138.In view of our reasons for decision as mentioned above, the Tribunal does not think necessary to determine who has the burden (whether evidential or legal) of proof regarding rateability in rating appeals.  Just for the sake of completeness, the Tribunal considers that there is no good logic or reason for the burden of proof regarding rateability on the respondent whilst that regarding rateable value on the appellant.  In other words, we accept the submission of Ms Cruden that as the present proceedings are commenced by way of an appeal, the burden of proof is on the appellant to adduce evidence to establish upon the balance of probabilities that the respondent's assessment on rateability is incorrect and that it is not upon the respondent to show that such assessment is correct.

139.For rule 61 of the Lands Tribunal Rules, even if the respondent might fail to comply with this rule, Mr Leung’s witness statements have already stated the sufficient facts relied upon by the respondent to enable the appellant to know the case it has to meet.  There is no real or substantial prejudice on the part of the appellant.

140.If the legal burden of proof is on the respondent, the Tribunal is satisfied that based on the evidence adduced by the parties, the respondent has discharged such burden to prove the issue of rateability under the 2nd limb of section 9(1).

Conclusion

141.We conclude that Sign 5 and Sign K each constitute separate tenement under section 9 of the Rating Ordinance and are respectively liable for rates.   Whereas this is the case, we accept that Sign 5 was properly assessed to the corresponding Government rent during the relevant period[30]. For the aforesaid reasons, the Tribunal gives the following orders:

(1) The appellant’s consolidated appeals be dismissed; and

(2) Costs order nisi that the respondent’s costs be paid by the appellant at the High Court scale, to be taxed if not agreed; either party may apply to vary the same within 14 days from today after which the costs order nisi shall become absolute.

142.Lastly, we would like to thank the parties’ counsel and their respective legal teams for the valuable assistance in this matter.

His Honour Judge S Lo Lawrence Pang
Presiding Officer Member
Lands Tribunal Lands Tribunal

Mr C Y Li SC and Mr Avery Chan, instructed by Sit, Fung, Kwong & Shum, for the appellant

Ms Liza Jane Cruden, instructed by Department of Justice, for the respondent



[1] See Trial Bundle III, pp 542-550

[2] See Trial Bundle I, p 231

[3] Under section 21 of the Rating Ordinance, the owner and occupier of a tenement shall both be liable to the Commissioner for payment of the rates assessed thereon but where, under section 10, 2 or more tenements are valued together as a single tenement, the rates assessed on the single tenement shall be paid by any one of the owners or occupiers of the tenement who may be required by the Commissioner to adjust their respective shares of payment of such rates amongst themselves.

[4] Pacific Trump is a wholly owned subsidiary of the appellant authorised by the appellant to handle all administrative and logistic arrangements with Prada.

[5] According to Mr Leung, this former advertising station (which was identified as “Advertising Station K”) with a separate assessment number had been deleted from the Valuation List since its dismantlement on 12 November 2015.

[6] “THK” stands for “thick”.

[7] Ditto.

[8] See section 19 of Interpretation and General Clauses Ordinance Cap. 1, HKSAR v Lam Kwong Wai & Anor (2006) 9 HKCFAR 574 in paras 63, 74, 77, HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 in paras 11-14

[9] This Act revised the basis of rating in the UK, mainly removing domestic accommodation from rateability.

[10] Lord Walker in CLP Power Hong Kong Ltd v Commissioner of Rating and Valuation (2017) 20 HKCFAR 168, at p 184, para 32 considering the legislative history of section 8A of the Rating Ordinance set out by Cheung JA in the judgment under appeal, refers to the book as “an illuminating extract from a work by Mrs Mimi Brown, written in 2013 when she was Commissioner.”

[11] The only exception is St John’s Cathedral Church.  See para 17.7 of Land Compensation & Valuation Law in Hong Kong, 4th ed

[12] See para 43 of CLP Power Hong Kong Ltd v Commissioner of Rating and Valuation (2017) 20 HKCFAR 168.

[13] See para 59 above

[14] In Lai Kit Lau Mutual Aid Committee and Tsuen Wing Lau Mutual Aid Committee v Commissioner of R&V, CACV 160/1984, a case concerning section 7 of the Rating Ordinance, para 8 of the judgment said “…It is not suggested that any distinction is to be drawn between the use of the word "hereditament" in the English legislation and "tenement" in that of Hong Kong.”

[15] Ms Cruden referred to the English Lands Tribunal decision [1995] RA 13 but Mr Li SC referred to the English Court of Appeal’s decision which in any event dismissed the appeal by the ratepayer.

[16] [1995] RA 13

[17] The ratepayer’s argument

[18] In Imperial Tobacco’s case

[19] The appellant’s argument as to whether the structure erected on Sign K is an advertisement will be dealt with in the later part of the Judgment.

[20] See para 39 above

[21] This advertising station K which has been dismantled (or converted) must be distinguished from Sign K which is currently put up in its place.

[22] See HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568, and HKSAR v Furgo Geotechnical Services Ltd (2014) 17 HKCFAR 755

[23] [2005] EWHC 2835 (Admin)

[24] In Westminster City Council v Brian Haw [2002] EWHC 2073 (QB)

[25] See Trial Bundle II, p 391

[26] See para 81 of the appellant’s closing submission.

[27] All are block letters

[28] At pp 14-15, para 27 of the judgment

[29] The Commissioner of R&V

[30] The periods for both rates and Government rents charged are not disputed by the appellant.