Fook Hong Enterprises Co Ltd v. Commissioner of Rating and Valuation
Read the full judgment text of LDRA 67/1983 on BabelCite. This LDRA judgment.
1. The appellant is the owner of 60 residential premises situate at Blocks 47 and 48 Baguio Villas, 550 Victoria Road, Hong Kong which form the subject tenements in this consolidated appeal. The appellant, pursuant to Section 42 of the Rating Ordinance, Cap. 116, has lodged appeals in respect of each of these tenements on the ground that they are valued below their proper rateable value.
|
LDRA000067/1983 Rating - appeals by ratepayer on ground 60 tenements valued below their rateable values - proper date for ascertaining rateable values where no date designated by Governor - projection of values to date when Valuation List comes into effect - if projection erroneous whether evidence after date projection is made is admissible - application of Bwllfa principle to rating valuations - correctness of valuation and tone of the list - effect of 1983 amendments to classification of Part II and Part IV tenements - Held: 1. Appeals upheld; 2. rateable values for 2 tenements of $49,800 each increased to $67,200 and rateable values for 58 tenements of $48,600 each increased to $66,000 - Sections 7, 11, 13, 14, 37, 39 and 42 Rating Ordinance, Cap. 116; Section 50(6)(m) and (10) Landlord and Tenant (Consolidation) Ordinance, Cap. 7. IN THE LANDS TRIBUNAL OF HONG KONG (Appellate Jurisdiction) Rating Appeals Nos. 14 to 73 (inclusive)
Coram: TRIBUNAL: His Honour Judge Cruden, Presiding Officer and M.W. Phillips, Esq., Member. Date: 5th day of November 1983 -------------------- JUDGMENT -------------------- 1. The appellant is the owner of 60 residential premises situate at Blocks 47 and 48 Baguio Villas, 550 Victoria Road, Hong Kong which form the subject tenements in this consolidated appeal. The appellant, pursuant to Section 42 of the Rating Ordinance, Cap. 116, has lodged appeals in respect of each of these tenements on the ground that they are valued below their proper rateable value. 2. Blocks 47 and 48 of Baguio Villas were completed in 1977 when these 60 tenements were leased to the Colonial Treasurer Incorporated for a period of 5 years from the 26th day of August 1977 as Government residential quarters. Under the then provisions of the Rating Ordinance the tenements were exempt from both assessment and payment of rates. That position was altered by the Rating (Amendment) Ordinance 1981. As a consequence, Section 36(1)(f) of the Rating Ordinance, with effect from the 1st day of July 1981, now only exempts from assessment tenements, inter alia, which are not only occupied but also owned by the Colonial Treasurer Incorporated. 3. However, while the tenements have therefore become assessable for rates, they have continued to be exempt from payment of rates. For under Section 36(2) the Governor in Council may by order declare any class of tenements to be exempt from the payment of rates. The Governor in Council has ordered certain classes of tenement to be exempt from payment of rates under the Rating (Miscellaneous Exemptions) Order Cap. 116. Item 2 of the Schedule to that Order exempts the subject tenements by reason of being occupied for public purposes by or on behalf of the Colonial Treasurer Incorporated. 4. These statutory changes required the Commissioner to assess these tenements for rates. This he proceeded to do issuing Notices of Interim Valuation on the 7th day of July 1982 in which the 2 tenements situate on the 31st floor were valued at $43,200 and the 58 tenements on the lower floors were each valued at $42,000. On the 28th day of March 1983 the appellant, pursuant to Section 37(d) served a proposal on the Commissioner for the alteration of the Valuation List on the ground that the tenements had been included in the Valuation List below their proper value. On the 6th day of June 1983 the Commissioner in reply, delivered his Notice of Decision in which he amended the rateable values by increasing the two 31st floor tenements to $49,800 and the remaining 58 tenements to $48,600. 5. From those amended increased valuations the appellant has appealed. The appellant claimed that these increases were inadequate. Mr. C.Y. Leung was called by the appellant to give evidence. Mr. Leung is the holder of a Bachelor of Science in Estate Management and is an Associate of the Royal Institute of Chartered Surveyors. He is the Manager of the Valuation Section of the Hong Kong branch of Jones Lang Wootton, Chartered Surveyors. Mr. Leung produced his Valuation Report and for the reasons set out therein was of the opinion that during March 1977 the value of the 60 tenements ranged from $70,800 to $80,400. In arriving at those values he relied principally on 4 comparables. One of these comparables was in fact the average rental produced from the actual rents of the 60 subject tenements. The other comparables were of single but identical tenements in the adjoining Blocks 45 and 46 which with Blocks 47 and 48 form one building. These 4 comparables were for lettings which commenced in July, August and October 1977. Mr. Leung estimated the increase in rentals between March and October 1977 averaged 5% and on this basis he adjusted the comparables down by the appropriate percentage to arrive at his rentals for March 1977. 6. The Commissioner called a Senior Rating and Valuation Surveyor, Mr. F.G. Heath, who is an Associate of the Royal Institute of Chartered Surveyors and been employed by the Commissioner since 1974. Mr. Heath in his investigations was aware of 34 private lettings in Blocks 28, 29, 30 and 31 Baguio Villas which form one building. These lettings were for periods from September 1974 down to March 1977. He understood he was obliged to place himself in the same position as a valuer who would have valued these tenements, had they existed throughout the year ended the 31st day of March 1977. The valuations in this locality for the Valuation List which came into effect on the 1st day of April 1977 were carried out in February, 1976. Mr. Heath approached his valuation on the notional basis that it was carried out in February 1976 and that the valuer would have attempted, on the basis of the information available at that date, to project his valuation forward to the 1st day of April 1977. 7. Mr. Heath stated that the residential property market had peaked in 1973; suffered a sharp fall in late 1973 and 1974; was uncertain in 1975; and in early 1976 gave no firm indication of future trends. He considered that the subject tenements created the additional difficulty that they were a new relatively isolated development with a high number of vacancies. He therefore took a conservative view and in his projection to the 1st day of April 1977 allowed for no increase. In effect for the period from February 1976 to the 1st day of April 1977 he made a horizontal projection. 8. When the Commissioner in June 1983 reviewed that valuation, pursuant to the appellant's proposal for alteration, he accepted that his valuations even in February 1976 were too low and he increased them to the figures already indicated. In the interval between his interim valuation in July 1982 and his consideration of the proposal for alteration in June 1983 the Tribunal had delivered its decision in Mauriello v. Commissioner of Rating and Valuation R.A. No. 9/82 where we held that the Commissioner had failed to correct a projection which he should reasonably have known was inaccurate before the Valuation List was declared. 9. In an attempt to comply with this decision, the Commissioner considered that the last practical opportunity he would have had to correct the present projection would have been in October 1976. He therefore considered the evidence that would have been available to him at the end of October 1976. Mr. Heath stated that after doing so he considered there was still insufficient evidence to justify the Commissioner projecting the amended valuation to the 1st day of April 1977 at a higher figure. He therefore preserved a horizontal projection but on the higher amended valuation. 10. On the facts there were a number of issues on which the valuers would not agree. Mr. Leung considered that his comparables were superior to Mr. Heath's for they were identical to the subject tenements sharing the same amenities. It was undisputed that Mr. Heath's comparables were for smaller flats which included one less bathroom and were in a different area of Baguio Villas. We are of the view that for the reasons advanced at the hearing, that the location of both the subject tenements and Mr. Leung's comparables, were superior to Mr. Heath's comparables. However, Mr. Heath made no adjustment for this difference as in his view it was fully compensated by the fact that the smaller size of his comparables would create a higher rate per square foot. We consider that answer in the circumstances of this case to be simplistic. We find that Mr. Leung's comparables were superior to Mr. Heath's.
11. The subject tenements are included in a Valuation List which under Section 14 became effective on the 1st day of April 1977. The Commissioner is directed by the Governor, under Section 11, to prepare lists of rateable values and in 1981 that Section was amended to provide that the Governor may also designate a date by reference to which the rateable values of tenements shall be ascertained. There was no such statutory power in 1976 and it is common ground that for the purposes of appeal there is no designated date. 12. We considered this issue in Mauriello's Case and observed that where no date is designated there appeared to be two possible alternatives, namely the date when the Valuation List is declared under Section 13 or the date when it comes into effect under Section 14. The Valuation List is usually declared in March and comes into effect on the 1st day of April next following. In Mauriello's Case we preferred the later date under Section 14. We referred to the Tribunal's earlier contrary view in Wei Che-yan v. Commissioner of Rating and Valuation (1978) H.K.L.T. 192 that the date under Section 13 was the relevant date. As on the facts then before us, the valuations at both dates were the same, although we indicated our preference, we left the question open. We have now had the benefit of argument on this issue and have considered the recent English Court of Appeal decision K Shoe Shops Ltd. v. Hardy (Valuation Officer) & Anor (1983) R.A. 26, (1983) 266 Estates Gazette 119, where in considering the similar provisions of the General Rate Act 1967 the Court of Appeal held that the relevant date is the date when the list comes into force. At page 42 the Court of Appeal stated:
The Court of Appeal confirms our earlier preference and our rejection of Ryde. We now hold that in Hong Kong too, the same date applies. Accordingly, the relevant date is that when the list comes into effect under Section 14, which in this case is the 1st day of April 1977. 13. The more complex issue is the extent to which the Commissioner's projection is reviewable on appeal under Section 40, where he projects his valuation forward from some earlier date. This issue too was considered in Mauriello's Case. Before our decision in that case we understand that the Commissioner accepted that he was obliged to project his valuation forward to the Section 14 date but considered that if the projection was reasonable in the light of the evidence available when the projection was made, then it was not liable to be varied on appeal even if, with the benefit of hindsight, the projection turned out to be inaccurate. Where on an interim valuation the period of projection had passed and the Commissioner knew the actual rental movements during that period he still considered that he had to ignore them. In those circumstances - which are the present circumstances - he considered he had to notionally place himself in the same position as a valuer at the date when the projection was made and make a like projection on the basis of the information that would then have been available. 14. In addition to his understandable desire to maintain the tone of the list the Commissioner also understood that support for this view could be obtained from the Court of Appeal's decision in R. v. Paddington Valuation Officer ex parte Peachey Property Corporation Ltd. (1966) 1 Q.B. 380. However, in Mauriello's Case while conscious of the Commissioner's practical difficulties and aware of the importance of maintaining the tone of the list, we held that where evidence established major inaccuracies the correction of those inaccuracies will generally be given precedence over maintaining the tone of the list. We observed that:
15. On the particular facts of that case, it was sufficient for us to have held that after making the projection but before the list was declared, the Commissioner had sufficient notice that his projection was wrong and had adequate time to correct the erroneous projection. He failed to do so and on appeal we were obliged to alter the rateable value by making that correction. 16. The Commissioner submits that in the instant case he has meticulously followed the guidelines set out in the Mauriello's Case. In particular it was submitted that the end of October 1976 was the last practical time when the Commissioner could have reviewed any earlier projection and taken steps to correct any error. He submitted that by the end of October 1976 there was no satisfactory evidence to suggest that rents were to increase during the projection period to the 1st day of April 1977. A graph was produced as Exhibit R.2 which he claimed supported that submission. The Commissioner's attitude was that if by that date there was evidence that rents elsewhere in Hong Kong were rising, the isolation of Baguio Villas from those other areas and the fact that 58 out of 120 tenements were still vacant supported the decision not to project for any increase. 17. As to the reasonableness of the initial projection Mr. Leung, the appellant's valuer, stated that a large number of the vacant tenements had been purchased for speculation and that their owners kept them vacant deliberately to facilitate their resale. He stated that it was unreasonable to infer that the vacancies reflected poor rental demand. Mr. Heath agreed that with values rising after the fall in 1974 and the uncertainties of 1975, that a speculator might prefer to hold on to vacant flats in 1976 in the hope of enjoying the benefit of any later rise in the market. 18. However, before we can proceed to determine whether the projection was reasonable we have first to determine whether the reasonableness of the projection at the time it was made is relevant. During argument we raised this question with Counsel and have had the benefit of their submissions. For the fact is that by this hearing the date the valuation was projected to, namely the 1st day of April 1977, had long since passed. Indeed, because this appeal is based on an interim valuation necessarily made after the Valuation List came into effect under Section 14, the period of projection had even passed when the Commissioner carried out his physical valuation and elected to make a notional projection. The Valuation List came into effect on the 1st day of April 1977 and it was only in 1982 after the Rating (Amendment) Ordinance 1981 came into force that the valuation for the subject tenements were carried out. 19. The reality therefore is that when in 1982 the Commissioner carried out his projection for the period from the 1st day of February 1976 to the 1st day of April 1977 he already well know the actual movements in rents which had occurred, as distinct from any projected movement. Mr. Heath conceded that his actual knowledge when the valuations were carried out indicated that there had been a sharp rise in rentals in the last quarter to the 1st day of April 1977 and that with hindsight his horizontal projection was wrong. In those circumstances, it would seem as a matter of principle that, unless the law is otherwise to the contrary, actual known movements are to be preferred to the prophecy necessarily involved in any projection. 20. Where the Commissioner values a tenement after the Valuation List has come into effect or reviews that valuation or if an appeal is heard after the projected period has expired, is evidence of what actually occurred during the projected period admissible? The law is well settled that generally such evidence is admissible in accordance with the Bwllfa principle. That principle stems from the House of Lords decision in Bwllfa and Merthyr Dare Stream Collieries (1891) v. Pontypridd Waterworks Co. (1903) A.C. 426. The appellant claimed compensation for loss of profits arising from the respondent prohibiting the working of a coalfield. An estimate of future loss of profit based on the price of coal at the date of prohibition was made. By the time the dispute was ready for arbitration the price of coal had soared and actual figures and not mere estimates were available. The House of Lords held that these more recent and actual figures were admissible, Lord Macnaghten at page 431 declaring:
21. The facts before the House of Lords involved compensation but the same principle has been applied in many other fields where valuations are also required. For example the Court accepted that it was entitled to the benefit of hindsight in Re Goodwin (1969) 1 Ch. 283 where Megarry, J., as he then was, repeated these words from one of his earlier judgments:
The Scottish Lands Tribunal in Park Automobile Co. Ltd. v. Strathelyde Regional Council (1983) 266 E.G. 729 has this year relied on the Bwllfa principle in holding that:
22. However, there have been a few cases at first instance, of which Gaze & Anor v. Holden & Anor (1983) 266 E.G. 998 is an example, where the principle has not been applied. Until recently it was not clear the extent to which the principle applied to valuations for rating purposes. On this question we note that the House of Lords decision is not referred to in `Ryde On Rating' (13th Edn.). However, any doubt as to whether the Bwllfa principle does apply to rating law in England has been removed by K Shoe Shops Ltd. Case where the Court of Appeal rejected the respondents submission to the contrary and held:
23. In both the case before the Court of Appeal and in the case before us, the valuations were physically carried out long after the Valuation List had come into force. Apart from their understanding of the law, there was no practical reason why the valuers should have inhibited themselves by ignoring actual known rentals and preferring, on far less adequate and accurate information, to attempt to make a projection. 24. For valuation purposes generally in determining a rent as at the 1st day of April 1977, as a matter of principle, rents both before and after that date would be relevant. In most valuations comparables are used and rarely will these share a common relevant date. Some will be of transactions before the relevant date. Others will be of transactions after the relevant date. An important part of a valuer's basic and traditional skill is to adjust such comparables back or forward, as appropriate, to the relevant date. We know of no professional reason why the expertise necessary to adjust information provided by a comparable backwards, is any different or more difficult than adjusting a comparable forward. If the dates and rentals are accurate the exercise is basically the same. On this point we accept the observations of Williams J., in McCathie & Ors. v. The Federal Commissioner of Taxation (1944) 69 C.L.R. 1, 16:
25. It is true that in K Shoe Shops Ltd. Case the Court of Appeal merely expressly refers to market rents, during the period of projection, being admissible. However, that arose from the facts of that case, for the only period in dispute, was that between what was called the "Stop-date" and the date when the Valuation List came into force. The "Stop-date" was a phrase used by witnesses and by the English Lands Tribunal to describe the latest date at which current rentals were received before the valuation officer made his projection. 26. Where a projection is made it is accepted that almost inevitably it may be wrong. In K Shoe Shops Ltd. Case the upward projection, although rejected by the Tribunal, was upheld by the Court of Appeal because, perhaps exceptionally, it corresponded with the actual increase in rents during the period of projection. However, the Court of Appeal accepted and appeared unconcerned that where the evidence shows that projections are clearly wrong, no doubt further notices of proposals for alteration will be given by other parties detrimentally affected by similar projections. They too will no doubt, as a consequence, take steps to have their rateable values altered, p. 39:-
27. In that statement the Court of Appeal recognises that hindsight evidence is admissible to alter a valuation based on a projection which in the event proved to be erroneous. It is also a recognition that the concept of the tone of the list does not have a sanctity or primacy over other considerations such as substantial accuracy. On the other hand, it takes into account the preservation of the tone of the list to the extent that it recognises that even if the projection in the case before them was higher than actual rentals, it was not excessively higher. 28. It may be arguable that while this is a recognition of the desirability of preserving the tone of the list where reasonably possible, it may merely recognise the acceptable margin of difference between reputable valuers at arriving at conclusions which are not simply mathematical but include elements of art as well as of science. What is clear is that before an existing Valuation List will be disturbed, a projection will have to be shown to be materially wrong. This will at least indirectly tend to preserve the tone of the list. 29. When we heard Mauriello's Case, it was widely believed that the leading English case of Ladies Hoisery and Underwear Ltd. v. West Middlesex Assessment Committee (1932) 2 K.B. 679 had been largely if not wholly whittled down in England by what is now Section 20 of the General Rate Act 1967. The general principle of the Ladies Hoisery Case was that correctness must not be sacrificed to uniformity. Ryde p. 473 was of the opinion that instead of an excessive emphasis on accuracy Section 20 gave statutory recognition to the "tone of the list" concept. 30. Our Section 7 is largely based on the English Section 20. In Mauriello's Case we held that our Section 7 disposes of that part of the ratio of the Ladies Hoisery Case which held that the valuation of a new tenement which has come into existence since the date of the last general revaluation does not have to be valued by reference back to the date of that last valuation. Certainly Section 7 ensures, as in this case, that the tone of the list is maintained to the extent that the valuation of the subject tenements physically carried out in 1982 must be notionally ascertained as at the 1st day of April 1977. However, although valuations are now to be made as at a common date, we went on to accept the more important and fundamental principle of the Ladies Hoisery Case that the tone of the list can nevertheless only be preserved if the values on which it is based are correct. We recognised the importance but not the primacy of the tone of the list. 31. In fact unknown to us at the time, only two days before our judgment in Mauriello's Case, the English Court of Appeal in delivering judgment in K Shoe Shops Ltd. Case considered the same question whether the Ladies Hoisery Case had survived the statutory amendments. The Court of Appeal came to the same conclusion as the Tribunal that the fundamental principle continued to apply, observing at pages 36, 42:-
This statement by the Court of Appeal confirms our view that all Section 7 achieves is to ensure that valuations are to be ascertained as at a common date which in this case is the 1st day of April 1977. Accordingly if any subsequent valuations are effected on new properties, or properties which only become rateable after the 1st day of April 1977, the valuation must be back-dated to the current common date, namely the 1st day of April 1977. In all other respects, the principles in the Ladies Hoisery Case remain unaffected. In particular the well known principle enshrined in the words of Scrutton L.J. at page 688 continues to apply:-
32. However, the Commissioner strongly submitted that provided the projection was reasonable at the time it was made, it should not be disturbed in order to uphold the overriding principle of the tone of the list. We have therefore looked beyond Section 7 to ascertain whether there is any statutory recognition in Hong Kong of this wider view of the tone of the list. We can find none. 33. If the tone of the list, in the wider sense, put forward by the Commissioner were to be preserved, it would have been a simple course for the Legislature to have done so when it enacted the amendments which now appear in our Section 7, which provide that all valuations must be ascertained as at a common date. A major difficulty facing the respondent is that, leaving to one side the date of ascertainment, the Commissioner is directed by Section 7(2) to value a tenement in accordance with its open market value. Section 7(2) provides:-
The Section then goes on to list further conditions of such a hypothetical tenancy which are conditions common to like tenancies in Hong Kong. The significant words in the Section which stipulate the criterion to be followed by the valuer are "... might reasonably be let ...". Those words are the same words used by the Legislature in a number of other statutory provisions where it has been held that the valuer's task is to assess the open market value of the premises-vide Sections 2, 49 and 115 Landlord and Tenant (Consolidation) Ordinance, Cap. 7. 34. There is no direction to the Commissioner in Section 7 or elsewhere in the Rating Ordinance that having so ascertained the market value, he must then adjust that value to any established tone of the list. On this issue we were referred to some early decisions of the Tribunal on the proper approach that should be adopted by a valuer. There is nothing in Yeung Ying-kit, Bill v. Commissioner of Rating and Valuation (1978) H.K.L.T.L.R. 242 which conflicts with our interpretation of Section 7. The later case of Tsang Chun-Biu v. Commissioner of Rating and Valuation (1978) H.K.L.T.L.R. 283 sets out two stages which it asserts the valuer should follow. The first stage corresponds with our view that the valuer has to ascertain the market value of the subject tenement as at the appropriate common date. The Tribunal suggested that the valuer should then turn to the comparable valuations in the Valuation List and if his valuation is higher he should adjust his valuation down to accord with the tone of the list. The Tribunal considered that authority for this downward adjustment is to be found in Section 7(3):-
35. With respect to the Tribunal's earlier decision, we cannot find in this subsection authority to adjust the valuation down to the tone of the list. What the subsection appears to us to do is to make express provision, in the case of interim valuations, that they too are to be ascertained not at the date of the proposal, but are to backdated to the date when the last general valuation came into effect under Section 14. 36. We are well satisfied that the valuation, as at that earlier date, has to be an accurate valuation. If it turns out to be higher than other inaccurate valuations as at that date, already forming part of the Valuation List and therefore contributing to the tone of the list, there is no statutory power under Section 7(3) to adjust the accurate valuation down to accord with the inaccurate valuations. 37. Nor is there any authority at Common law to adjust accurate valuations down to inaccurate valuations. The Ladies Hoisery Case is an emphatic statement to the contrary. Any doubt as to the continuing validity of the principle that uniformity should be obtained by correcting inaccuracies, rather than making inaccurate assessments, has been removed by the Court of Appeal in the K Shoe Shops Ltd. Case. 38. We were also referred by the Commissioner to the English Lands Tribunal decision ITM Corporation Ltd. v. Mooney (Valuation Officer) & Anor (1983) R.A., (1983) 266 Estates Gazette 1201, to which he appeared to give considerable weight. In that rating appeal the Tribunal was constituted by a Chartered Surveyor sitting alone who heard evidence from the 12th day of July 1982 but did not deliver his decision until the 22nd day of April 1983. After the hearing but before delivering judgment the decision of the Court of Appeal in K Shoe Shops Ltd. Case was delivered and the Tribunal states that it had the opportunity of reading that decision. The Tribunal did not, however, have the benefit of hearing submissions on the effect of the Court of Appeal's decision. With respect, the Tribunal's decision does not appear to give full effect to the Court of Appeal's decision. The Tribunal asserted that additional evidence available by hindsight, contrary to an earlier projection, was not enough by itself to upset an assessment. The Tribunal also gave an importance to maintaining the tone of the list which, if shared by some commentators, is not recognised by the law. On the other hand, the Tribunal recognised that evidence of hindsight not only between the date of the projection and the relevant date of valuation but also after that date was admissible. However, on the particular facts before the Tribunal, it found such evidence was insufficient to support the reduction sought by the ratepayers. 39. The Tribunal's decision therefore very much depends on its own facts. To the extent that it gives more importance to the tone of the list than K Shoe Shops Ltd. v. Hardy (Valuation Officer) we consider its statements are misleading. The Tribunal appears to have thought that the Court of Appeal held as a matter of law that there were two important dates. First, what the Tribunal called "the date of valuation" and secondly the time by reference to which the value is to be ascertained. To the contrary, the Court of Appeal held that only the latter date was legally significant. The date when physically a valuation is carried out, will vary from case to case and is of no legal significance. 40. This error of law led the Tribunal into a further error when it concluded that the post-1973 evidence was insufficient to support any opinion as to the comparable value when physically the valuation was carried out. For the time relationship of any comparable to the date when the valuation was carried out is irrelevant. What is relevant is the time relationship of the comparables to the quite different date, as at which, the values have to be ascertained. In fairness to the Tribunal we also appreciate that the decision can be interpreted as recognising the full import of the Court of Appeal decision but being unable to implement it to the extent it would have desired, due to insufficient valuation and other factual evidence having been adduced. For all these reasons we find the Tribunal's decision does not assist us in considering the instant appeals. 41. Counsel for the Commissioner expressly recognised the difficulties that K Shoe Shops Ltd. v. Hardy (Valuation Officer) & Anor created for the Commissioner. He submitted that it was not, of course, technically binding on the Tribunal and that in any event the highly volatile property market in Hong Kong compared with more settled property trends in England permitted the Tribunal to distinguish English decisions on the facts. We have considered this submission and are, of course, ever alert to the statutory direction contained in Section 3 of the Application of English Law Ordinance, Cap. 88. 42. We have had the assistance of Counsel in comparing our Section 7 with Section 20 of the English General Rate Act 1967 on which our Section is clearly modelled. The English Court of Appeal is strictly not binding on this Tribunal, but is certainly highly persuasive authority. The effect of a House of Lords decision on English legislation similar to Hong Kong legislation was declared by Lord Diplock in de Lasala v. de LaSala (1979) H.K.L.R. 214, 220, to be as follows:-
43. Here we are not concerned with House of Lords decisions but with two English Court of Appeal decisions. However, it seems to us that the spirit of Lord Diplock's dictum similarly applies to English Court of Appeal decisions in cases which came before this Tribunal. Nor do we see any real ground to distinguish the English decisions on the facts. Although not strictly bound by them, they are most helpful and we propose to apply them. 44. From this it follows that we are satisfied that when the Commissioner in 1982 determined the rateable value of the subject tenements he was obliged to ascertain their value as at the 1st day of April 1977 but in the light of all the relevant evidence available to him in 1982 when the physical valuation was done. This evidence would include in addition to the information available in February 1976 when valuations of other Baguio Villa tenements were made, the evidence that was available in 1982 of rents during the period of the projection and also evidence of rents for such period after the 1st day of April 1977 as may in the circumstances have been appropriate. Evidence of rents during all those three periods was relevant. Having obtained that evidence it was then for him to determine the weight he would give to such evidence in determining the rateable value as at the 1st day of April 1977. In other words, the Commissioner when he carried out these valuations in 1982 had the benefit of actual rentals which he did not possess in 1976 but because of his understanding of the law, deliberately elected not to use them. 45. We hold that the Commissioner erred as a matter of law in not taking into account rentals after the date of the projection. That evidence was available to him and should have been used. Whether that error of law has any appellate consequences depends on whether the projection was erroneous. In the K Shoe Shops Ltd. Case we have already seen that the projection was sufficiently accurate for the Court of Appeal to accept it as the final valuation. The Court of Appeal held that the decisive factor in the case before them was the common law rating principle of uniformity and fairness. This they held could only be achieved if valuations are carried out as at the same date. In the instant appeals that principle of uniformity and fairness is achieved as it is common gound that the valuations should be ascertained at a common date, namely the 1st day of April 1977. The Court of Appeal did not have expressly to consider the further question whether an earlier competently completed valuation projected to the appropriate date, on the basis of the then available evidence, was reviewable on appeal. 46. True, in dwelling on the position of the valuer, it held that he was under no duty to make an absolutely correct projection because that would be an impossibility. He must aim at the date when the Valuation List comes into effect and seek to achieve values which will then be correct. Where a projection competently calculated on the best evidence that could reasonably be obtained at the date of the projection, turns out to be incorrect, then we hold that the values may be altered on appeal unless the error is not excessive. For the issue before the Tribunal is not the reasonableness of the projection per se but rather what is the value of the tenements as at the 1st day of April 1977? The issue for the Commissioner when he makes a projection remains the same as that which faces the Tribunal. The only difference, if any, is as is the case when the Commissioner makes an interim valuation after the Valuation List comes into effect, that the Tribunal on an appeal, will have the benefit of actual rents not enjoyed by the Commissioner when he makes his projection. But this is merely an evidential matter. 47. This conclusion does not conflict with Peachey's Case which considered the duty placed on a valuer where he is obliged to make a projection. Peachey's Case was analysed in K Shoe Shops Case and it is implicit in the latter Court of Appeal's judgment, that even if a valuer makes a reasonable projection on the basis of the information then available to him, the valuation may still be altered at a later stage on appeal, on the basis of market rents which become available as evidence after the date of the projection. 48. It follows that the fact that the Commissioner may have reasonably discharged his duty at the date he makes the projection, cannot guarantee that his valuation will not be subject to alteration, either by himself annually on receipt of a notice of a proposal under Section 37, or by the Tribunal on appeal under Section 42. The fact that as a prior or alternative step to any possible later appeal, an aggrieved party in respect of existing Valuation Lists has the statutory right annually to submit a proposal to the Commissioner for alteration of an established Valuation List, is indicative of the fact that such a projected valuation, once the projected period has expired, is far from inviolable. The statutory machinery makes liberal provision for any such errors to be speedily and easily corrected. 49. Unless any errors in the projection which become apparent after the projected period has expired are not excessive, then in terms of the Ladies Hosery Case, those errors should be corrected whatever the effect to the tone of the list. The errors may be corrected either in the first instance by the Commissioner on receipt of the appropriate proposal under Section 37 or if the error is not corrected by him at that stage, then subsequently by the Tribunal on appeal. 50. In these appeals, the appellant asserts that the projection was erroneous. The Commissioner concedes that the projection turned out to be erroneous but claims it was a reasonable projection on the basis of all the information that could properly be considered at the date when the projection was made. However, on the evidence it is clear that the Commissioner failed to make any allowance for the superiority, on several grounds, of the subject tenements to his comparables. He was content to assert that any such superiority was counterbalanced by the higher rate per square foot of his smaller comparables. In respect of none of these differences did he test his conclusion by any analysis. We reject his contention that the higher rate per unit area was sufficient to neutralise the other advantages of the subject tenements. 51. In addition, both the Commissioner's knowledge in October 1976 of the general increase in rents elsewhere and his actual knowledge of rental movements in Baguio Villas as shown in his graph produced as Exhibit R.2, justified an upward projection to the 1st day of April 1977. Indicative of his contrary approach was the acceptance of the presence of empty flats at Baguio Villas as evidence of low demand at the rents then sought and to make no allowance for the probability that many of them may have been held empty by speculators. 52. In both fixing his base values and in refusing to make any upward projection the Commissioner was excessively conservative. A reasonable projection based on the information available to the Commissioner in October 1976 would have exceeded $50,000 and could have been in the region of $60,000. We therefore find as a fact that even on the limited information available to the Commissioner in October 1976, his base values and the projection were not reasonable. 53. However, because of our conclusion on the law, it is unnecessary for us to determine the precise extent to which an upward projection should, on the then available evidence, have been made. Instead, we merely have to answer the narrower and at this stage far simpler question, what was the rateable value of the subject tenements as at the 1st day of April 1977? In determining that value we confirm that all relevant evidence is admissible. Evidence of rentals during the whole of 1976 and 1977 would therefore be admissible although the weight that should be given to each rental will vary according to the circumstances. 54. During the hearing the parties valuers were able to agree on the values they would give to the subject tenements with the advantage of hindsight up to the 1st day of April 1977. The agreed valuations disclosed to us by the parties on this basis were:-
55. We would record that the Commissioner, while agreeing to these figures under a valuation carried out on this basis, did not concede that this was the proper method of valuation. These agreed values are rather lower than Mr. Leung's values in his Report. However, Mr. Leung's separate figures were based on comparables after the 1st day of April 1977 and were arrived at after making a time adjustment back to the 1st day of April 1977. We note that the appellant's Counsel in agreeing to these values indicated that they were assessed on the basis of evidence up to but not after the 1st day of April 1977. 56. In our view, evidence of rents after that date were also admissible. Mr. Heath had at the hearing also provided other 1977 comparables which were lower than Mr. Leung's 4 comparables. We accept that when account is taken of these additional comparables, Mr. Leung would no doubt, in any event, have adjusted his initial valuations down. Against this background the agreed valuations appear, on the basis of the evidence adduced before us, to be not unreasonable. Accordingly we do not propose, in the circumstances, to go behind that agreement in determining the actual rateable values as at the 1st day of April 1977. 57. To what extent, if any, should those values be adjusted in accordance with the tone of the list? To the extent that they were ascertained at the same common date, namely the 1st day of April 1977, they already contribute to that tone. On the other hand, they are higher than the Commissioner's initial valuations which, it was claimed, more closely preserve the existing tone. In further taking the tone of the list into account, we would be prepared to give it the additional weight which is perhaps implicit in K Shoe Shops Ltd. Case and would support the Commissioner's values as notified in his Notices of Decision, if any errors therein were not excessive or were within the acceptable margin or range for such valuations. 58. Were the errors contained in this particular projection excessive? We do not propose nor would it be desirable to define in these appeals any guideline of what would be excessive. Each case must necessarily depend on its own facts. What is established on the Commissioner's own valuation and by his subsequent agreement are the following values:
59. The admitted difference between the projected values and the actual values is in the region of 35% and is therefore well outside any acceptable margin of error. On these figures the errors in the projection were clearly excessive. Certainly the gap between the correct and erroneous valuations is too large to be bridged by invoking the principle of the tone of the list. Accordingly, rejecting the Commissioner's submissions and accepting the agreed values as soundly based, we determine the rateable values in terms of those agreed valuations. 60. Perhaps we should add that so long as the subject tenements are occupied by the Colonial Treasurer Incorporated, then while they will be liable to assessment, they will still be exempt from payment of rates. This is another similarity between these appeals and Mauriello's Case for in that case too, although the appeal was contested under the Rating Ordinance the tenement was exempt from payment of rates but by virtue of the Consular Privileges Ordinance, Cap. 189. 61. Counsel for the Commissioner informed the Tribunal the practical importance of these appeals related to whether the subject tenements will fall within Part II or Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Mr. Heath's evidence was that the contractual tenancy having expired occupation has continued under Part II but the parties have not agreed on any new rent. Properties within Part II are subject to restrictions on rent and give the tenant certain security of tenure. Under Part IV there are no rent restrictions but there is a limited security of tenure. The subject tenements are at present within Part II. 62. Rateable values are used as the basis for classifying domestic premises into either Part II or Part IV. Under Section 50(6)(m) of the Landlord and Tenant (Consolidation) Ordinance domestic premises having rateable values under $60,000 fall into Part II and those of $60,000 or over fall within Part IV. On the 19th day of December 1983 the sum of $60,000 will be reduced to $50,000. In relation to these statutory rateable values it is interesting that the Commissioner's rateable values of the subject tenements ranged from $48,600 to $49,800. 63. For completeness we should add that when we held in the Mauriello Case that the rateable value should be increased from $57,000 to $66,000 and directed the Commissioner to amend the Valuation List accordingly, that amendment thereby transferred the tenement from Part II to Part IV. However, that previously simple and necessary result, has all been changed by the interesting provisions of Section 11(g) of the Landlord and Tenant (Consolidation) (Amendment) Ordinance, No. 29/83, enacted after Mauriello's Case, which came into force on the 10th day of June 1983. Section 11(g) enacted what is now Section 50(10) of the principal Ordinance:
64. The effect of the amendment is that for the purposes of the Landlord and Tenant (Consolidation) Ordinance the rateable values appearing in the Valuation List will no longer conclusively determine whether a property is in Part II or Part IV. Where a property was included in the Valuation List declared under Section 13 in March 1977, then the rateable value for the purposes of Parts II and IV will be that contained in the list on the 10th day of June 1983. Any alterations after the 10th day of June 1983 are to be ignored. 65. Any person making enquiries under the Landlord and Tenant (Consolidation) Ordinance, can therefore no longer rely on the published Valuation List as being conclusive. Where the property being investigated was in the list declared in March 1977, it must be further ascertained whether the current rateable value includes any alteration since the 10th day of June 1983. If so, then such alteration must be ignored. 66. The practical effect of this amendment, where a property was in the Valuation List declared in March 1977, is that if it were a Part II property, no alteration of the rateable value by the Lands Tribunal on appeal after the 10th day of June 1983, will enable it to be transferred into Part IV. That perhaps potential advantage previously enjoyed by an owner is now lost. All that would result from such an appeal increasing the rateable value, would be that the successful appellant would be liable to pay increased rates. 67. Where, as in the case of 60 tenements the subject of this appeal, a property was not included in the Valuation List declared in March 1977, the position is different. In that event, as is provided in subsection (10)(b), the rateable value will be the value certified by the Commissioner for the purposes of Section 50. Any such Certificate by the Commissioner is expressly stated to be final and binding which would appear to prevent any Court from going behind the Certificate. Nor does the new subsection require the Commissioner to certify the same rateable value for the purposes of Section 50, as the rateable value which appears in the Valuation List. 68. So the outcome of this appeal will not have the automatic consequences under the Landlord and Tenant (Consolidation) Ordinance that our similar order had in the Mauriello Case. 69. For the foregoing reasons it follows that the appeals are upheld in respect of all 60 of the subject tenements. We make the following orders:-
70. Liberty to apply for costs or any other consequential matters is reserved. DATED this 5th day of November 1983.
Representation: Mr. Henry Litton, Q.C. with him Miss Maria Yuen instructed by Yung, Yu, Yuen & Co. for the appellant. Mr. J. Burdett, Crown Counsel, for the respondent. |