LAW KAM SHEUNG DENNIS v. COMMISSIONER OF RATING AND VALUATION

LDRA 14-16/2023
(Consolidated)

[2023] HKLdT 60

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

RATING APPEAL NOS 14-16 OF 2023

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J U D G M E N T

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Introduction

1.  The present case concerns an appeal by the Appellant against the decision of the Respondent in refusing to grant exemption from rating assessment of a tenement on land held by him and his brothers under Government Land Licence S12017 (“the Government Land Licence”) situate in Demarcation District (“DD”) 217, off Hiram’s Highway, Tai Chung Hau, Sai Kung in the New Territories (hereinafter referred to as “the Tenement”).

2.  Under the Rating Ordinance (which is hereinafter referred to as “the Ordinance”), the unit of assessment is the tenement. Section 2 defines a "tenement" as

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

3.  It is undisputed that the Appellant’s father held the Government Land Licence (which was formerly called “Crown Land Licence” prior to the reversion of the sovereignty of Hong Kong to the People’s Republic of China in 1997) in the 60s of the last century. Then a wooden dwelling and temporary structures were built when the Appellant’s father rented also the adjacent land, ie Lot 929 and Lot 934 sB in DD 217 (“the Two Adjacent Lots”) for farming. According to the Appellant, his father’s communication with the landlord of the Two Adjacent Lots ceased in late 1980s but he continued the occupation paying no rent to anybody.

4.  On 5 March 1992, the Appellant’s father passed away. On 9 August 1994, the Government re-issued the Government Land Licence to the Appellant and his two brothers, Mr Law Yuk Kin and Mr Law Tin Tak for the purpose of accommodating “Kitchen, Porch, Storage, latrine, Well, Cemented Yard and Cultivation.”

5.  According to the Appellant, he and his mother jointly occupied the Adjacent Lots for farming. Later on 1 March 1996, the Appellant tried to run a Pei Pa[1] orchard on the Two Adjacent Lots. Then he, being the proprietor of Law Zhe Enterprise, applied to the Inland Revenue Department (“IRD”) for exemption from business registration under section 16 of the Business Registration Ordinance, Cap 310 which states, inter alia, that agriculture including market gardening would be exempted from business registration unless the business is run by a company incorporated in Hong Kong.

6.  Again, according to the Appellant, since May 2013 after his retirement from the Buildings Department as Chief Structural Engineer, in parallel with the farming business, he ran an additional sole proprietorship company, Messrs Law & Yung, for working part-time as an engineering consultant, based in the urban area[2], ie away from the Tenement or the Two Adjacent Lots. In November 2018, the Appellant had the main branch of this sole proprietorship company moved to Tai Chung Hau Village, Sai Kung close to the Tenement. By the business registration certificate dated 8 May 2018, this sole proprietorship company, Messrs Law & Yung, comprised gardening, engineering and landscaping.

7.  When COVID-19 broke out in 2020, the Appellant reviewed his business strategy and started business of lemon orchard. It is also undisputed that on 16 September 2020 and 22 June 2022, Messrs Law & Yung was granted Subsidies from Anti-epidemic Funds (“AEF”) to Local Primary Producers by the Agriculture, Fisheries and Conservation Department (“AFCD”)[3]. The Appellant explained that before the grants were approved, officials of AFCD had inspected and checked the on-site agricultural operations at the Two Adjacent Lots so as to verify validity and magnitude of his agricultural operation being greater than the area of 337 sq m in order to satisfy the funds’ granting criteria.

8.  Then on 8 June 2021, he returned Form R1K (Requisition for Particulars of Tenements) to the Rating and Valuation Department (“RVD”), stating that the Tenement comprising farm house and dwelling house was occupied in connection with agriculture. It has been the Appellant’s position that the dwelling house should be exempted from rating assessment under section 36(1)(b) (i) and (ii) of the Ordinance on the ground that:

(a)  he lives in the dwelling house and has been using the dwelling house mainly to carry on agricultural operations on the land under the Government Land Licence; and

(b)  he uses the dwelling house mainly to support agricultural operations in the Two Adjacent Lots.

9.  According to the Appellant’s Witness Statement dated 25 May 2023, he carries on organic gardening with two production lines:

(a)  The main production line is for lemon production for long-term agricultural investment, starting from Lot 934 s.B with an area of about 460 sq m (roughly 27m x 17m), expanding towards the remaining area of the Two Adjacent Lots; and

(b)  An ancillary production line is for growing ornamental green plants with minor investment on the land held under the Government Land Licence, in Lot 929 with an area of about 250 sq m (roughly 28m x 9 m), and in a tiny area of Lot 934 sB.

10.  As well, according to the Appellant’s Witness Statement dated 25 May 2023, his operations in the dwelling houses included the following activities in connection with his two production lines:

(a)  He keeps on using the dwelling house to charge batteries for the gardening equipment (like water pump and earth drill) and to repair the equipment.

(b)  He processes and stores food wastes for producing organic fertilizers in the dwelling house.

(c)  He makes organic insecticides from raw materials in the dwelling house.

11.  However, despite various communication and meetings between the Appellant and officials of RVD, the RVD issued the first ever rates assessment on the Tenement on 3 November 2022:

Rateable Value ($)	Effective Date
26,160	07/11/2020
26,160	01/04/2021
26,160	01/04/2022

Position of the Respondent

12.  On 28 May 2021, a form of “Requisition for Particulars of Tenements – Applicable to properties not yet included in the current Valuation Lit and/or Government Rent Roll” (ie Form R1K afore-mentioned in §8 above) was issued to the Appellant and his two brothers, Mr Law Yuk Kin and Mr Law Tin Tak, being licensees of the Government Land Licence.

13.  Following receipt of the completed Form R1K signed by the Appellant, on 4 October 2021, officials of RVD conducted inspection for interim valuation (“the First Inspection”) whereby the Appellant suggested that the Tenement should be assessed together with the Two Adjacent Lots which were used for agricultural purposes, thereby seeking exemption from rates assessment under section 36(1)(b) of the Rating Ordinance, Cap 116 (“the Ordinance”).

14.  Section 36 of the Ordinance provides as follows:

“(1) The following tenements, or parts thereof, shall be exempt from assessment to rates—

(a) agricultural land, and any building, other than a dwelling house, thereon used wholly or mainly in connection with such land, but not land which is part of an ornamental park, garden or pleasure ground or which is used wholly or mainly for the purpose of sport or recreation;

(b) any dwelling house in the New Territories (except New Kowloon) which—

(i) is occupied in connection with agricultural land; and

(ii) is used as the dwelling house of any person engaged wholly or mainly in carrying on or directing agricultural operations on that land or employed as an agricultural worker thereon;

(c) …”

15.  During the First Inspection and a further inspection on 24 June 2022 (“the Second Inspection”), officials of RVD found the following:

(i)  A main domestic area consisting of a living room with some furniture and electrical appliances including table, chair, wardrobe, plastic drawer, air-conditioner, fan, hair dryer, etc;

(ii)  A timber cockloft inside the Tenement shaded by a curtain with invisible inner condition;

(iii)  Two outhouses, one being a toilet and the other being bedroom with some furniture and electrical appliances including a bed, a sofa, television, air-conditioner, etc;

(iv)  An extension being a kitchen with some kitchen wares including refrigerator, rubbish bin, etc; and

(v)  A covered and enclosed yard and a covered yard used to store miscellaneous items like ladder, bucker, etc.

16.  Further, officials of RVD observed that the Two Adjacent Lots were unfenced and the unplanted area was largely covered by weeds. This, according to the officials of RVD, is against the usual practice of farmers who would remove any weeds found on their fields so as to prevent competition for sunlight and/or nutrients in the soil, leading to stunted growth of crops, thus reducing crop yields. In addition, as evidenced by the photographs taken during the two inspection, the vegetation appeared to be unsystematic and disorganized with no visible cultivation system. A map produced by RVD which showed the surrounding lots together with some site inspection photos taken on the First Inspection is at the Appendix of this judgment.

17.  On the basis of the above findings, the Respondent issued a form of “Rates and/or Government Rent – Notice of Interim Valuation (“Form R6”) to the Appellant on 3 November 2022 for years of assessment 2020/2021, 2021/2022 and 2022/2023.

18.  The Appellant lodged an objection to the Interim Valuation on 26 November 2022. Subsequent to that, on 6 February 2023, according to a tele-conversation with the Appellant, an official of RVD explained that in order to prove that the agricultural operations at the Tenement or the Two Adjacent Lots were sustainable, the Appellant could consider providing more sales records, purchasing receipts of seeds and fertilizers and other supporting evidence if any. The Appellant however replied that he could not provide any purchasing receipts of seeds and fertilizers as he was using the methods of transplanting and organic fertilizing in the agricultural operations and he was willing to arrange another site inspection to explain the above on site, which indeed took place on 24 February 2023 (“the Third Inspection”) when Ms Cheng Ka Fu (“Ms Cheng”), a Senior Valuation Officer of RVD and other officials attended.

19.  Ms Cheng gave evidence that there were then very few plants on the land under the Government Land Licence. She saw some 30 lemon trees of approximately 1.5m – 2.0m tall, a few clumps of lucky bamboos and evergreens (or rohdea) scattered unsystematically on the Two Adjacent Lots. Nevertheless, the lemon trees were grown in irregular spacing and the distance between each lemon tree is less than 2m. According to her, the vegetation was unsystematic and disorganized with no visible cultivation system employed; the cultivated area occupied less than 15% of the total area of the Adjacent Lots.[4] Then the structures at the Tenement were the same as that in the First Inspection and the Two Adjacent Lots remained unfenced.

20.  Ms Cheng was also told by the Appellant on site that whilst the Tenement was occupied by him as well as his two brothers and their relatives, the farm work was mainly done by him and Mr Law Tin Tak.[5]

21.  Ms Cheng or her colleague had asked for a copy of the Appellant’s profits tax return but was refused by the Appellant.

22.  Having considered the observations made by her and the other officers from the three inspection, as well as the evidence provided by the Appellant, Ms Cheng submitted an Objection Report to Ms Leung Yuen Kiu, Connie (“Ms Leung”), a Senior Valuation Surveyor of RVD who handles, among other duties, rating objections to interim valuation and exemption under the Ordinance, for consideration and approval. On 22 March 2023, a Notice of Decision was issued to the Appellant stating that the Tenement is liable for assessment to Rates (“the Decision”).

Legislative Background of section 36(1)(b) of the Ordinance

23.  While the Ordinance was in place in the beginning of the last century, there was a consolidation in 1973, following the rating changes under the English General Rate Act 1967.

24.  Ms Leung, in her witness statement dated 20 July 2023, provides the legislative background of section 36(1)(b) of the Ordinance as stated in the following paragraphs.

25.  The current rate exemption regime for agricultural dwellings in the New Territories under section 36(1)(b) of the Ordinance (“the Exemption”) came into effect upon passing of the Rating (Amendment) (No 2) Bill 1975 (“the Amendment Bill”). Paragraph 3 of the Explanatory Memorandum of the Amendment Bill stated, inter alia, as follows:[6]

“Clause 3 amends section 36 by adding exemptions from assessment to rates in respect of agricultural holdings in the New Territories and village houses situated within such areas of the New Territories as may be designated by the Governor for the purpose…”

26.  In a memo from the then Commissioner of Rating & Valuation (“then CRV”) dated 20 November 1974 to the Secretary for the New Territories (“the 1974 Memo”)[7], discussions were made as to the legislative intent of the rating exemption of village houses and agricultural dwellings as proposed in the Amendment Bill. The relevant paragraphs of the 1974 Memo read as follows:

“2. …

(i) Why exempt village houses?

Essentially because at the time, July 1949, this promise was given

(a) the rural villages enjoyed virtually none of the services rates, historically, were intended to cover (ie Police, Fire Services, water and street lighting);

(b) most of the assessments would have been below the then proposed minimum rateable value being, of course, related to the home of subsistence farmers and

(c) generally, collection of such small amount was considered uneconomic.

(ii) What has been promised?

(a) The first written commitment, of which I am aware, is a letter from DCNT[8] to Heung Yee Kuk dated 17^th July 1947, in which was stated:

“It is emphasized from the start that there is and will be no intention whatever to assess village houses of the type inhabited through-out the New Territories by poor farmers”.

(b) Comment by Commissioner of Rating & Valuation at meeting with Kuk on 28^th July 1947:

“I pointed out that it was proposed to introduce a minimum rateable value fixed so that village houses of poor farmers in the outlying villages would be exempted from rates”.

(c) In some notes prepared by Commissioner of Rating & Valuation on 18^th August 1949 which was given to Village Representatives, it was stated:

“It is proposed to have a minimum assessment of $300 per annum the rates on which would be $30 per annum. Any house or building with less than this will not be rated. The object being to exempt the village house of the poor farmers especially those in outlying villages.”

(d) …

(e) …

(f) …

3. In framing new proposals for the exemption of village houses from the payment of rates we have tried to have regard to the above, but it is, as you are aware, not easy to lay down clear definitions, particularly having regard to changes in the pattern of development in the New Territories. However, the proposals put to you so far meet most of the previous criteria in that

(i) …

(ii) …

(iii) we are proposing to exempt dwellings connected with agriculture, which meets the promise in regard to farmers and, in this connexion, we are not ruling out the landed gentry provided the premises are genuinely used by persons engaged in agriculture.

(iv) we are proposing, in view of the changing pattern of development, to define village houses in rather wider terms and thus afford exemption to all small dwellings in rural areas and in former village areas, but not small dwellings in town which do, not always have, enjoyed local services

(v) …”

27.  Thus, the 1974 Memo revealed that the Exemption was enacted pursuant to a promise made by the Government to the then villagers in the New Territories, in particular poor farmers, to exempt them from the statutory liability of paying rates to the Government.

28.  A memo from the then CRV to the Attorney General dated 5 August 1975 (“1975 Memo”)[9] revealed that there was a draft proposal for exempting agricultural dwellings, irrespective of their size, provided they are “suitable in character and size for such use …”. The then CRV expressed concern as to the drafting of the exemption. In their discussion as to whether a clause limiting the size of the agricultural dwelling concerned should be introduced in the Exemption, the then CRV made the following comment:

“3. … The danger of such a limitation, seemingly, would be that we would, in due course, find it difficult to refuse exemption to any dwelling within the specified size limit regardless of the degree of associated agricultural user eg a house of 900 sq ft where the occupant sold a few flowers to supplement his income.”

29.  In any event, the Amendment Bill and the subsequent enacted Exemption did not include any clause relating to the size of the agricultural dwelling. Notwithstanding this, it remains, in my view, “difficult to refuse exemption to any dwelling” “regardless of the degree of associated agricultural user” so long as the dwelling house is so used by a person engaged mainly in carrying on or directing agricultural operations on agricultural land occupied in connection.

RVD’s Implementation of the Exemption

30.  To provide guidance on the assessment of the Exemption in accordance with its legislative intent discussed above, RVD introduced a departmental guidance titled “Departmental Standing Technical Instruction No 701 Rating Exemptions”, which came into effect in February 1982 (“the 1982 Guidance”). The relevant parts of the 1982 Guidance read as follows:

“(1) To be exempted an agricultural dwelling must –

(a) be occupied in connection with agricultural land. Although it is not necessary for the dwelling to be situated actually on the agricultural land concerned it must be within a reasonable distance of it. For this purpose “agricultural land” is taken to include “agricultural buildings”.

(b) be the dwelling of the person engaged wholly or mainly in carrying on or directing agricultural operations on the land or employed as an agricultural worker thereon. It is envisaged that the dwellings of persons coming within the following categories are included in the exemption:-

(i) The farmer who works the farm himself provided that this is his main employment and/ or main source of income.

(ii) The farm owner or manager who manages and directs the farm workers provided that the farm is the owner’s or manager’s main source of income and most of his time is taken up with managing the farm.

(iii) Farm workers’ quarters provided that the workers are wholly or mainly engaged in working on the farm.”

31.  In determining the second limb of the Exemption, namely, whether a person engages “wholly or mainly” in carrying out or directing agricultural operations, it has been RVD’s practice to request for evidence including but not limited to sales and purchase receipts as proof of the degree of any alleged agricultural operations for the consideration of the Exemption.

32.  In such regard, the Appellant had produced the following transaction records:

Purchase:

Date	Item	Amount	Vendor
30 April 2020	花苗 (flower seedling as alleged)	HK$120.00	Illegible
30 April 2020	花苗 (綠蘿 “devil’s ivy” as alleged)	HK$240.00	Unnamed
6 June 2020	檸檬樹20盆 (20 pots of lemon trees)	HK$1,000.00	Ever Glorious Landscaping and Construction Co
20 May 2020	Earth Auger	US$434.00	Intradin (Shanghai) machinery Co, Ltd
10 November 2020	充電式澆菜水泵 (water pump)	¥695.00	西禾旗艦店
30 November 2020	充電式鋰電動綠籬修剪機 (grass mower)	¥950.00	Tomspower 旗艦店
16 February 2023	白喉（4”）及白灰 (pipe for irrigation and pesticides as alleged)	HK$892.00	Tung Hing Metal & Construction Material Co

Sale:

Date	Item	Amount
25 September 2020	富貴竹及萬年青各一束 (lucky bamboo & rohdea each)	HK$200.00
11 February 2022	富貴竹兩盆 (two pots of lucky bamboo)	HK$900.00
24 November 2022	萬年青兩盆 (two pots of rohdea)	HK$1,200.00
1 December 2022	富貴竹兩盆 (two pots of lucky bamboo)	HK $1,100.00
15 December 2022	有機檸檬 (organic lemon)	$50.00

33.  Ms Leung considered the records of sales receipts provided infrequent and irregular, with one sales receipt from 2020 and four from 2022, amounting to a mere total of HK$3,450 or HK$1,479 per year on average.

34.  Ms Leung made a similar observation on expenditure, which covered a period from April 2020 to February 2023. During the period, the Appellant only spent some HK$7,485 on planting activities, ie HK$2,557 per year on average.

35.  Ms Leung also referred to the Profit & Loss Account prepared by the Appellant for Messrs Law & Yung as follows:

	2020/2021[10]	2021/2022[11]	2022/2023[12]
Engineering consultant fee	$30,000	$73,400	$2,800
AEF	$10,000		$10,000
Sale of gardening products*		$1,220	$3,460

* The Appellant explained in the Profit & Loss Accounts for the years between 1 April 2020 to 31 March 2022 that “(g)ardening and landscaping work were in a preparatory stage in the fiscal year.”

36.  As regards the subsidies from the AEF granted by AFCD, Ms Leung was of the view that the total of HK$20,000 exceeded twice the expenditure the Appellant spent on his agricultural activities during the period.

37.  On the basis of the above, Ms Leung came to the conclusion that the agricultural activities of the Appellant were neither sustainable nor of a reasonable scale that could qualify for the Exemption.

38.  At trial, the Respondent has helpfully produced a table of the chronological events as shown below[13], trying to demonstrate that the Appellant’s agricultural operations were subject to query:

Date	Event
27 Apr 2020	The Appellant applied for AEF
30 Apr 2020	Purchase receipt for 8 pots of ornamental plants
4 May 2020	First site inspection by AFCD
15 May 2020	Second site inspection by AFCD
20 May 2020	Purchase record of auger
6 June 2020	Purchase receipt for 20 pots of lemon trees
17 Jul 2020	Third site inspection by AFCD
25 Sep 2020	Sales receipt for 2 pots of ornamental plants
Nov 2020	Purchase receipts for agricultural equipment
4 Oct 2021	First Inspection by RVD
11 Feb 2022	Sales receipt for 2 pots of ornamental plants
28 Feb 2022	The Appellant applied for AEF
3 Nov 2022	Notice of Interim Valuation issued by Respondent
24 Nov 2022	Sales receipt for 2 pots of ornamental plants
26 Nov 2022	The Appellant lodged Objection
1 Dec 2022	Sales receipt for 2 pots of ornamental plants
15 Dec 2022	Sales receipt for organic lemons
6 Feb 2023	The Appellant suggested Third Inspection by RVD
16 Feb 2023	Purchase receipts of irrigation equipment and pesticides
24 Feb 2023	Third Inspection by RVD

39.  The Appellant explained his agricultural operation in his witness statement dated 25 May 2023 as follows:

(a)  He grows ornamental green plants on the land under the Government Land Licence;

(b)  He uses battery-charged pump and water pipe network on the land under the Government Land Licence to irrigate the plants on the Two Adjacent Lots;

(c)  For instance, he grows lemon trees on Lot 934 sB, for the purpose of which he bought baby lemon trees in June 2020 for graft planting;

(d)  He processes organic fertilizers by fermentation in tanks and therefore buying chemical fertilizers is not necessary.

(e)  He uses battery-charged earth auger and other equipment for the farming operations;

(f)  He grows ornamental green plants on Lot 929, for the purpose of which he bought baby ornamental green plants in 2020.

40.  The Appellant further explained in his witness statement dated 2 August 2023 (“Supplemental Witness Statement”) that he had assigned an average space of 14.8 sq m for each tree to suit the site conditions. This is in conformity with a publication dated 1 February 2023 by the University of Florida, USA recommending a minimum space for planting lemon tree at 21 sq m approximately[14]. However substantial production would only be achievable when the lemon trees have been mature; he made reference to an on-line publication of New Mexico State University, USA dated 8 April 2000 which explained that lemon trees would produce lemons when they have reached the age of 5-15 years’ old[15].

41.  Thus, as at 24 February 2023, according to the Appellant, 31 lemon trees of about 1.5m high on average completely filled the 460 sq m. As at 2 August 2023, 41 lemon trees have been planted on Lot 934 sA and 934 sB. However, the lemon trees were only two years’ old and could not be mature enough to achieve substantial production. Therefore, sales records for substantial sale of products under the main production line were not available.

42.  As regards the sales records of ornamental green plants under the ancillary production line, the Appellant tried to compare such meagre income from Lot 929 with expected income from rice production by reference to the on-line Bulletin on National Grain Output in 2022 reported by National Bureau of Statistics of China dated 12 December 2022[16]. Assuming that Lot 929 would achieve the same grain yield of 5,790.9 kg per hectare in the Guangdong Province and the grain be rice, the Appellant expects that the rice yield per year would be 145 kg on the basis of an area of the lot at about 250 sq m. The Appellant then referred to the statistics of the Trade and Industry Department whereby the rice average import price from China in 2022 was $5.83/kg[17]. The Appellant calculated his income from selling ornamental green plants at $3,400 for three years was greater than that from rice production at $2,536 by proportion.

43.  With respect, I cannot agree with this latter comparison of the Appellant’s income from selling ornamental green plants with grain output in China. The Appellant is not comparing like with like.

Subsidies from Anti-epidemic Funds from AFCD

44.  In respect of the subsidies received by the Appellant from the Anti-epidemic Funds granted by AFCD, Ms Leung produced email correspondence between Ms Li Jingwen Cindy (“Ms Li”), Valuation Surveyor of RVD and Ms Poon Ka Yan, Karina (“Ms Poon”), Agricultural Management Officer of AFCD from 25 May 2023 to 29 June 2023, which are excerpted as follows:[18]

Email dated 1 June 2023 at 09:11 from Ms Poon in reply to queries raised by Ms Li

“According to our record, the appellant, Mr LAW Kam-sheung, Dennis, applied for the second and sixth round of Anti-epidemic Fund (Subsidy for Local Primary Producers) (ie “AEF2.0” and “AEF6.0”) on 29.4.2020 and 11.3.2022 respectively. After verification of the eligibility, both applications made by Mr Law were approved by this department.

Please find below the requested information for your reference:-

(i) The Eligibility to apply for AFCD’s second round of the Anti-epidemic Fund in 2020;

AEF2.0 subsidy would only be granted if the applicant fulfills all of the following criteria:

- The applicant must be a local primary producer (including owners/operators of vegetable farms, hydroponic farms, flower farms and nurseries, but excluding livestock farms);

- If the applicant performs open field cultivation, the cultivation area must be 0.5 dau chung (1 dau chung is equivalent to 7,260 square feet)[19] or above;

- Crop production must be operated in the applicant’s farm during 18 January 2020 to 17 April 2020; and

- …

(ii) The Eligibility to apply for AFCD’s sixth round of the Anti-epidemic Fund in 2022;

AEF6.0 subsidy would only be granted if the applicant fulfills all of the following criteria:

- The applicant must be a local primary producer (including owners/operators of vegetable farms, hydroponic farms, flower farms and nurseries, but excluding livestock farms, bee farms, orchards and bean curd factory);

- If the applicant performs open field cultivation, the cultivation area must be 0.5 dau chung or above;

- Crop production must be operated in the applicant’s farm during 16 November 2021 to 15 February 2022;

- If the applicant’s farm has not registered for any AFCD agricultural schemes/services, or has no successful grant/fund record in AFCD, supplementary document(s) and/or proofs must be requested and on-site visit must be conducted for vetting the application; and

- …

(iii) AFCD’s criteria of the fund granting and the relevant approval reports;

Before granting the AEF subsidies, AFCD would verify the applicants’ eligibility based on the internal records and farm inspection reports (if any) and/or other supplementary document(s) submitted by the applicants (eg sales record, lease/tenancy agreement/land use affidavit, etc). After considering the supporting documents provided by the appellant, AFCD granted approval of the AEF applications and cheques on grants were issued on 16 September 2020 and 22 June 2022.

(iv) AFCD’s Site Investigation Reports (if any);

Nil

(v) …

(vi) AFCD’s definition of agricultural operation and/or agricultural business.

The AEF subsidies aim to provide immediate financial relief to local primary producers, including owners/operators of vegetable farms, hydroponic farms, flower farms and nurseries engage in commercial production, whose business and operation have been considerably affected by the COVID-19 pandemic.”

Email dated 28 June 2023 at 15:13 from Ms Poon in reply to queries raised by Ms Li

“(i) According to the information provided by the appellant in the AEF2.0 application form and AFCD’s internal record, his farm had not been registered under any AFCD agricultural schemes/services before he submitted the application for AEF2.0

(ii) Site inspections were conducted on 4.5.2020, 15.5.2020 and 17.7.2020. It was found that the concerned farmlands at Lot Nos 929 and 934 sB both in DD217 were covered by various types of vegetation, including but not limited to grasses, ornamental plants, and fruit trees…

Taking into consideration the inspection findings and documents submitted by the appellant (including sworn declaration dated 6.5.2020 & 26.8.2020), we approved the application made by the appellant for receiving the AEF2.0 subsidy as a financial relief to primary producers, the business or operation of whom have been affected by the COVID-19 pandemic.

(iii) We requested the appellant to provide supplementary documents on 4.5.2020, including (i) sales record of the farm (from 18 January 2020 to 17 April 2020) and (ii) a copy of the valid leases/ tenancy agreements /sworn declaration as genuine user of the farmland.

(iv) The appellant did not submit any other supporting documents to substantiate his right to occupy the concerned private lots for agricultural use.

(v) The appellant submitted the sales records (ie hand-written sales records during December 2021 and a formal receipt dated 11.2.2022) for his AEF6.0 application.

(vi) Owing to COVID-19 epidemic, the declaration and oath services were temporarily suspended at that time, and therefore the appellant could only submit the sales records of his farm (ie sworn declaration made on 26.8.2020) in late August 2020.

(vii) In general, the “cultivation area” refers to the area of farmland grown with agricultural produce, as well as the ploughed and levelled farmlands which can be readily utilized for crop production, but does not include abandoned farmlands and other non-agricultural lands.

(viii) …”

Email dated 28 June 2023 at 17:33 from Ms Li to Ms Poon

“Thank you for your reply. Apart from your responses on my email dated 20/6/2023, I am also given to understand the following as per our tele-conversation this morning:-

(i) For the application of AEF2.0, at first the appellant failed to provide any sales records and valid leases/ tenancy agreements to proof that he had the land use right of the two adjacent lots; thereafter he made a Statutory Declaration which affirmed that he had the right to occupy the 2 adjacent lots (ie DD217 Lot 929 and Lot 934 sB) for agricultural use from 5/3/1992 at Home Affairs Department/ Sai Kung District Office on 6/5/2020, and also made a Sworn Declaration in your office to explain why he was not able to provide any sales records as requested by AFCD, which mentioned that “自2019年1月起更新公司業務性質” which his company’s nature of business newly included “園藝工程及園林景觀” and he started to focus on landscaping business on the subject areas (ie the captioned tenement and the 2 adjacent lots). There two Declarations were the only supporting documents that the appellant had provided.

(ii) For the application of AEF6.0, the appellant provided (1) an official receipt of selling lucky bamboo (“富貴竹兩盤”) dated 11/2/2022 with an amount of HK$900, and (2) an hand-writing records for his sales records of December 2021, which include (a) selling lucky bamboo on 11/12/2021 with an amount of HK$100, (b) selling evergreen (“萬年青”) on 11/12/2021 with an amount of HK$100, and (c) selling lucky bamboo on 18/12/2021 with an amount of HK$120;

(iii) In general, once (a) the applicant has been recorded in AFCD’s system as qualified for receiving AEF2.0, (b) there is no change in the farm address provided in the application form and (c) the sales records are available for the application of AEF6.0, then the applicant might not be required to submit a copy of the valid leases/ tenancy agreements/ sworn declaration as genuine user of the farmland and AFCD might not conduct further site inspection.

(iv) AFCD has no specific requirement for the amount of the sales records provided since the fund is intended to provide immediate relief.”

Email dated 29 June 2023 at 13:18 from Ms Poon in reply to Ms Li

“With reference to our records, statements (i) – (iv) as stated in your email of 28.6.2023 are factually correct.”

45.  On the basis of the above, Ms Leung formed the view that the AEF was aimed to provide immediate financial relief to local primary producers whose business or operation had been affected by the COVID-19 pandemic. Given the difference in nature between AEF and the Exemption, the criteria are not comparable.

Discussion

46.  I am grateful for Ms Leung having set out the legislative background of section 36(1)(b) of the Ordinance. In the present case, however, I should only be concerned with if the Tenement shall be exempt from assessment to rates because it is a dwelling house (i) occupied in connection with agricultural land (“the First Limb”), and is used (ii) as such of any person engaged wholly or mainly in carrying on or directing agricultural operations on that land (“the Second Limb”).

47.  With regret, as the Appellant submitted, on the website of the RVD, in reply to the question of “4. What kinds of agricultural land and buildings are exempt from assessment to rates?”, it states, inter alia, as follows:[20]

“.... Dwelling houses are separately exempted if they are occupied in connection with agricultural land, or used as the dwelling of any person engaged wholly or mainly in the agricultural operations on that land.” (underline added)

That is, the word “or” is used here instead of “and” as stated in section 36(1)(b) of the Ordinance.

48.  Notwithstanding the above, this kind of guidance or even practice note cannot override the statutory provision of the Ordinance nor bind on the court.

49.  I am not aware of any precedent case in Hong Kong that has dealt with the similar issue. However, I find relevant parts of Schedule 5 to the Local Government Finance Act 1988 of the United Kingdom[21], as amended in 2003, as follows:

“1 A hereditament[22] is exempt to the extent that it consists of any of the following—

(a) agricultural land;

(b) agricultural buildings.

2(1) Agricultural land is—

(a) land used as arable, meadow or pasture ground only…

(b) …

(c) …

(d) anything which consists of a market garden, nursery ground, orchard or allotment (which here includes an allotment garden within the meaning of the Allotments Act 1922), or

(e) land occupied with, and used solely in connection with the use of, a building which (or buildings each of which) is an agricultural building by virtue of paragraph 4, 5, 6 or 7 below.

3 A building is an agricultural building if it is not a dwelling and—

(a) it is occupied together with agricultural land and is used solely in connection with agricultural operations on that or other agricultural land, or

(b) it is or forms part of a market garden[23] and is used solely in connection with agricultural land operations at the market garden.”

50.  By reference to the Explanatory Notes to the amendment made in 2003, the “that or other agricultural land” in the last sentence of paragraph 3(a) above broadened the exemption “so that where farmers work on other agricultural land, perhaps on a share or contract basis, or through the pooling of resources or machinery, the exemption will apply”. Save from this, this English provision appeared very much like section 36(1)(b)(i) of the Ordinance.[24]

51.  In this regard, Ms Bethany Chu (“Ms Chu”) for the Respondent submitted that the notion of “in connection with” in agricultural context was discussed in Whitsbury Farm and Stud Ltd v Hemens (Valuation Officer) [1988] AC 601, where the ratepayers occupied four hereditaments comprising stud buildings in or attached to land that was admittedly agricultural within the meaning of section 26(3) of the General Rate Act 1967.

52.  In that case, however, the House of Lords held that the stud buildings were not exempt under the predecessor provisions of paragraph 3(a) of Schedule 5 to the Local Government Finance Act 1988. Both the stud buildings and the pasture land were essential for the running of the stud. The covering of mares brought to the stallions was usually accomplished in the covering yard but sometimes took place outside in the paddocks. Most of the mares foaled at night in the foaling boxes, but a few did so in the paddocks in the daytime. All the mares were exercised in the paddocks, and the grass provided essential nourishment for both mares and foals. Lord Keith of Kinkel, with whose reasoning Lord Brandon of Oakbrook, Lord Griffiths and Lord Oliver of Aylmerton agreed, held that the buildings were not used “in connection with” agricultural operations on the pasture land. He referred to (at 611E) the meaning given to these words in an earlier predecessor provision in Gilmore (Valuation Officer) v Baker-Carr [1962] 1 WLR 1165 where Donovan LJ said at p 1175:

“But the clear impression which I receive from the statutory language is that the buildings exempted were to be ancillary or complementary to the agricultural purpose of the land, and not vice versa.” (underline added)

53.  Lord Keith then went on (at 611F-612C):

“This passage was approved by Viscount Dilhorne in W & J B Eastwood Ltd v Herrod [1971] AC 160, 181, who said that to come within the statutory definition the buildings must be used as adjuncts to the agricultural operations on the land, and that it was wrong to consider whether the enterprise as a whole, the land and the buildings taken together, was ‘a combined agricultural operation.’ In the same case Lord Reid said, at p.168:

‘Ordinary usage of the English language suggests that the buildings must be subsidiary or ancillary to the agricultural operations …. I do not foresee serious difficulty if ‘used in connection with’ is held to mean consequential on or ancillary to the agricultural operations on the land which is occupied together with the buildings.’

Lord Morris of Borth-y-Gest expressed the view, at p 174, that the buildings must be such as were needed as an adjunct or necessary aid for agricultural operations taking place on agricultural land. The concept is thus that of principal and accessory. The use of the agricultural land is contemplated as being the principal use and that of the buildings as being an accessory use.

In the present case the use of the buildings is for all the most important operations concerned with the breeding and rearing and keeping of thoroughbreds. The use of the agricultural land is for the pasturing of the same horses. It is that use and nothing else which makes the land agricultural within the definition. The use of the pasture land serves the purposes for which the buildings are used, namely the breeding, rearing and keeping of thoroughbreds. The use of the buildings does not serve the purpose for which the pasture land is used. It is not ancillary to it. It is an end and purpose in itself. I would therefore hold that the buildings are not used in connection with agricultural operations on the pasture land, and are certainly not used solely in connection with such operations.” (underline added)

54.  Lord Goff arrived at the same conclusion by a different route. In particular, he did not follow the principal / accessory analysis and cited as a reason for not doing so an example in modern day farming in which the buildings and land may be regarded as equally important. For Lord Goff, the litmus test was whether the operations being performed on the land, including the buildings, viewed as a whole were agricultural or not. Lord Goff expressly held that the operation of breeding and rearing of thoroughbred horses for the purposes broadly described as recreational does not properly fall within the definition of an agricultural operation.

55.  Adopting the majority of Whitsbury Farm, however, I agree with Ms Chu that in order for the Tenement to satisfy the First Limb, the Appellant has to demonstrate that the use of the Tenement is ancillary to the use of the Two Adjacent Lots. In other words, the existence of the Tenement is dependent on the use of the Two Adjacent Lots and not the vice versa.

56.  Unfortunately, according to the evidence before me, the Tenement is occupied by the Appellant, his brother and the latter family as a dwelling house which appears to be independent of the use of the Two Adjacent Lots. If the Appellant does not take the trouble to “move” to the Tenement for his agricultural operations as he alleges, the Tenement has been the dwelling house of his brother only.

57.  By reference to the Appellant’s application forms for the Anti-epidemic Fund, the number of people working on the farm is “one”[25] though in his Supplemental Witness Statement, the Appellant claimed that: “The farm is mainly carried out by me, with support by my brother LAW Tin Tak’s family members who are living at the dwelling.” With the meagre income as evidenced by the Appellant, I have difficulty in believing that the use of the Two Adjacent Lots for agricultural purpose as being the principal use and that of the Tenement as being an accessory use.

58.  I therefore hold that the Tenement is, or more properly was at the relevant dates[26], not used in connection with agricultural operations on the Two Adjacent Lots, and is certainly not used solely in connection with such operations.

59.  As regards the Second Limb, Ms Chu conceded that the Ordinance did not stipulate under what circumstances can a person be considered as engaging “wholly or mainly in carrying on or directing agricultural operations”. However, Ms Chu submitted that in view of the legislative intention, the Second Limb operates to exclude any person carrying on agricultural operations for leisure. In this respect, I do not agree.

60.  Firstly, I find no definition of “agricultural land” in the Ordinance though it should not be “land which is part of an ornamental park, garden or pleasure ground or which is used wholly or mainly for the purpose of sport or recreation”. Neither is there any definition of “agricultural operations”.

61.  Secondly, it is undisputed that the Appellant has retired from his other jobs, if any, and is 70 years old. What else can he do apart from, as he submitted, carrying on or directing agricultural operations on the Two Adjacent Lots as hobby or otherwise? The Appellant repeatedly claimed that he spent more than 90% of his working time on agricultural business as proof of farming being his main occupation[27]. At trial, the Appellant claimed that his eyesight has deteriorated since 2019 and that prevents him from continuing with the engineering consultancy works. The Respondent here cannot produce any evidence to rebut apart from pointing out that the Appellant may have his home in Sai Wan Ho where his wife and son now resides.

62.  In regard of the word “mainly”, Ms Chu referred to Fawcett Properties Ltd v Buckingham County Council [1961] AC 616 where a farmer wished to build a pair of farm-workers’ cottages for his employees. Planning permission was granted on condition that “the occupation of the houses shall be limited to persons whose employment or latest employment is or was employment in agriculture …or in an industry mainly dependent upon agriculture and including also the dependants of such persons as aforesaid.” This latter condition was in fact derived from section 34(2) of the Housing Act, 1980 (which then became section 115(2) of the Housing Act, 1986). As it happened, the farmer’s mortgagees conveyed the fee simple in the cottages as built to the appellants who wished to let the cottages to persons not qualified as occupants under the terms of the condition. One of the arguments by the appellant was that the condition was void for uncertainty and of no effect.

63.  Lord Morton of Henryton remarked at p 669 that:

“The word “mainly” at once gives rise to difficulties. Probably it means “more than half” and this was the meaning which this House gave to the phrase “the bulk thereof” in Bromley v Tryon[28].”

64.  Notwithstanding the above, Lord Morton of Henryton continued:

“Even so, one must ask “more than half of what?” There is no context in the condition which give any assistance. Does the word refer (for instance) to turnover, to value or volume of goods produced for agriculture, to value or volume of raw material supplied by agriculture, or to profits? There is no reason, in a planning condition, for selecting one alternative rather than another. Indeed, two or more of these possible alternatives were suggested from time to time in the course of the argument, … Moreover, all these factors may vary from time to time, and a business which is “mainly dependent” at one time may cease to be “mainly dependent” at another. …”

65.  With respect, I would find the word “mainly” in “mainly in carrying on or directing agricultural operations on that land” suffers from similar ambiguity. Thence, I agree with the Appellant’s submission that as an elderly, keeping the lemon orchard and ornamental plants covering an area of over 700 sq m entails a lot of time and effort in mainly if not wholly carrying on or directing agricultural operations.

66.  Then Ms Chu took issue on the Tenement not being used as the dwelling house of the Appellant. Ms Chu particularly referred to the premises at which the Appellant’s wife and son reside. The premises comprise three bedrooms, ie Bed Room 1, Bed Room 2 and Bed Room 3 as shown on the floor plan[29], extending to a saleable area of 74.2 sq m (799 sq ft). Ms Chu submitted, and I agree, that it is arbitrary for the Appellant to allege that he only used 6% of the premises domestically, ie 74.2 sq m x 6% = 4.45 sq m which is even smaller than Bed Room 1 that the Appellant submitted he only lived occasionally. It is unrealistic to expect or believe that the Appellant was prevented to use the other parts of the premises which include the living and dining room, the veranda thereof, the other bathroom, the kitchen and particularly the bathroom inside Bed Room 1. In other words, Ms Chu suggested that as at the material dates, the Appellant was not using the Tenement as dwelling house; the Appellant was dwelling at the premises in Sai Wan Ho.

67.  Here Ms Chu referred to Macmillan & Co, Ltd v Rees [1946] 1 All ER 675 where certain premises to which Rent Restrictions Acts applied were let as a dwelling house to the appellant. By a previous lease, the premises had been let to someone else on condition that they were not to be used “for any other purpose than as office for the tenant’s business” but with a licence for the tenant or her partner to “sleep upon the premises should they so require.” When the landlord served a notice to the appellant purporting to terminate his contractual tenancy and to increase the rent to the standard rent of a dwelling house, the appellant there contended however the previous lease was a letting for business purpose only and not a letting of the premises as a dwelling house. The fact that the former tenant had for sometimes slept on the premises and had her meals there should not amount to user by the tenant as a dwelling house so as to give rise to a letting of the premises as a dwelling house during that time.

68.  The English Court of Appeal held (at 677G) that:

“… the use of the premises as a dwelling-house is by no means necessarily confined to their use by the tenant for sleeping and eating. The experience of great number of Englishmen during the last six years (during World War II) provides many instances of sleeping and eating upon premises which could by no fair use of language on that account be described as dwelling-houses. In other words, to sleep on particular premises at night, or to have one’s meals upon them by day, or both, ought not ipso facto to have the effect in law of making those premises a dwelling-house…”

69.  Owing to the peculiar background of Macmillan & Co, Ltd v Rees, I do not find it helpful to suggest that the mere sleeping and eating upon the Tenement by the Appellant did not amount to use of it as a dwelling house. In any event, as commented by me during trial, the Respondent has provided no evidence to show that the Appellant occupied the Tenement for mere occasional sleeping and eating.

70.  Ms Chu agreed that there is no definition of “dwelling house” in the Ordinance. However, section 115(1) of the General Rate Act 1967 defined “dwelling house” as a term which "means a hereditament which, in accordance with Schedule 13 to this Act, is used wholly for the purposes of a private dwelling or private dwellings". Schedule 13 to the General Rate Act 1967 only operated for determining whether any hereditament or premises was used wholly for the purposes of a private dwelling or private dwellings.

71.  In such regard, however, I share the view of the Respondent that, as a matter of fact and degree, the Appellant was not using the Tenement “wholly for the purposes of a private dwelling”; I do not accept the Appellant’s submission that he would no longer reside at the premises in Sai Wan Ho. On the basis of the evidence as a whole, most probably, the Appellant visits the Tenement from time to time and even stays there overnight.

72.  Pausing here, I note officials of RVD’s finding that the vegetation at the Two Adjacent Lots appeared to be unsystematic and disorganised with no visible cultivation system. Notwithstanding this, they found some 30 lemon trees of approximately 1.5m – 2.0m tall, a few clumps of lucky bamboos and evergreens scattered unsystematically on the Two Adjacent Lots. This was supported to a large extent when the AFCD found that “the concerned farmlands at Lot Nos 929 and 934 sB both in DD217 were covered by various types of vegetation, including but not limited to grasses, ornamental plants, and fruit trees…” and agreed though perhaps under different criteria certain agricultural operations were going on.

73.  Here, I accept Ms Leung’s analysis on sales receipts or expenditure produced by the Appellant. I agree with her observation that the Appellant’s agricultural operations had not generated decent profits. However, I also accept the Appellant’s explanation that the lemon trees take time to grow before they can achieve substantial production. In J. Beveridge & Co Limited v Assessor for Perth and Kinross [1968] SC 1, [1967] RA 482, Lord Hunter of the Court of Session agreed at p 7 of the judgment with the proposition of the occupier that agriculture and pasturage may properly include operations reasonably necessary to make the produce marketable or disposable for profit. As the Appellant claimed during cross-examination, mass production of the lemons may come in the future generating adequate income for family[30]. Thus I consider the Appellant’s preparatory works for the lemon tree production should qualify as agricultural operations. In my opinion, even if the Appellant’s operations could not produce adequate financial reward, he should be qualified as a poor farmer which the Exemption was envisaged in 1974. Here, I note of course the concept of beneficial occupation under the rating law which does not necessarily mean that the occupier does make a profit.[31]

74.  As stated in §29 above, absent any clause relating to the size of the agricultural dwelling, it is “difficult to refuse exemption to any dwelling”, “regardless of the degree of associated agricultural user” save for the requirement of the First Limb, so long as the dwelling house is so used by a person engaged mainly in carrying on or directing agricultural operations on agricultural land occupied in connection.

75.  Although the Respondent took issue that the Two Adjacent Lots are unfenced, this does not necessarily defeat occupation. Even in the case of adverse possession claims, the requirement to “exclude the world at large” does not mean that it is necessary to have the land securely fenced. By way of example, in Stanley v White (1811) 14 East 332, oak and ash trees in a belt of wood-land was found to be sufficiently defined by its physical structure without the need to be fenced. The decision of the Privy Council in Higgs & Anor v Nassauvian Ltd [1975] 1 All ER 95, at 101, confirmed that proposition.

76.  Having said that, I would also like to point out that section 36(1)(b) of the Ordinance does not require the Tenement and the agricultural land to be in the same ownership. In fact, in the law of rating, the legal status of the occupation – whether the occupier is owner, tenant, licensee and so on - does not matter. In Cheung Man Yee v Commissioner of Rating & Valuation, LDRA 41/1984 (unreported, dated 12 July 1985, the Tribunal remarked at §10 as follows:

“The definition of "rateable value" makes no reference to the legality or illegality of the tenement. It merely states that the rateable value of a tenement shall be the amount equal to the rent at which the tenement might reasonably be expected to let from year to year. The definition of "tenement" is wide and includes any structure held or occupied as a distinct separate tenancy or holding or under any licence.”

77.  Thus, Ms Leung’s finding that the Two Adjacent Lots are not in the ownership of parties related to the Appellant is not directly related to the requirement for the Exemption. I however accept her explanation that on occasions, such finding may help to decide whether the agricultural operations carried on the agricultural land is genuine and sustainable. For instance, absent legal title to the agricultural land, any interest party can challenge a person’s right to use the same and any agricultural operations thereon could come to a halt. At least, up to the present, the Appellant has not applied for any declaration from the court that he or his family has successfully established adverse possession against the registered owner of the Two Adjacent Lots.

78.  In any event, since I have already held that the Tenement was, at the relevant dates, not used in connection with agricultural operations on the Two Adjacent Lots, it does not qualify for the exemption under the First Limb of section 36(1)(b) of the Ordinance. As well, I am of the opinion that the Appellant, having a residing place in Sai Wan Ho where his wife and son reside, was not at the material dates, using the Tenement as the dwelling house as required by the Second Limb though I am satisfied that he was engaged mainly in carrying on agricultural operations on the Two Adjacent Lots.

AFCD’s definition of agricultural operation and/or agricultural business

79.  For the avoidance of doubt, I must point out that even though AFCD was ready to approve subsidies from Anti-epidemic Funds to the Appellant, this does not necessarily mean that the Respondent has to agree to AFCD’s definition of agricultural operation and/or agricultural business. The Government’s announcements on 25 April 2020 and 20 February 2022 respectively clearly showed that the AEF were aimed to provide immediate financial relief to local primary producers whose business or operation had been affected by the COVID-19 pandemic. As rightly pointed out by Ms Leung, given the difference in nature between AEF and the Exemption, the criteria are not comparable.

80.  For the purpose of illustration, in Post Office v. Oxford City Council (1978) 78 LCR 425, garage premises, although registered as a factory under the Factories Act 1961, were held to be commercial premises for the purposes of the General Rate Act 1967. Under subsidiary rating regulations hereditaments were entitled to certain rating exemptions if they were used "wholly or mainly for industrial purposes". The English Court of Appeal had warned against the dangers of assuming the universality of definitions, enacted only for the purposes of a particular Act. In that case premises were in effect industrial under the former Act but were not industrial under the latter Act.

81.  As well, in Crowe (Valuation Officer) v. Lloyd's British Testing Co Ltd (1960) 1 All ER 411, the ratepayer tested anchors and cables under authority which required that the testing company should be wholly independent of the manufacturer. The testing company's premises were registered as a factory under the Factory Acts. The English Court of Appeal had to consider whether premises registered as a factory were for the purpose of rating relief legislation, either an industrial or non-industrial building.

82.  Under the Rating and Valuation (Apportionment) Act 1928 the House of Lords, when considering the same premises, had much earlier held that they were used for non-industrial purposes - Grove v. Lloyd's British Testing Co Ltd (1931) AC 450. As a result of a 1955 Amendment to the Rating and Valuation Act 1925, the ratepayer again attempted to have the premises reclassified. The English Court of Appeal, by a majority, held that the premises were non-industrial. The English Court of Appeal reached that conclusion as a result of construing the relevant rating legislation as a whole, to avoid absurdity and because, on the facts, the limited testing function did not amount to manufacturing and therefore was not an industrial purpose.

83.  Even within Schedule 5 to the Local Government Finance Act 1988 itself, at paragraph 3, a building is an agricultural building if it is not a dwelling and it is “occupied together with” agricultural land. There is a different consideration of “occupied together with” in Farmer (Valuation Officer) v Buxted Poultry Ltd [1993] 2 WLR 34, [1993] AC 369 where Lord Slynn said

“… for one building to be 'occupied together with' another for the purposes of this Act they must be in the same occupation and the activities carried on in both must be jointly controlled or managed. I also consider that the buildings must be so occupied and the activities so controlled and managed at the same time. These are necessary conditions to be satisfied but to satisfy each of them separately or together is not sufficient to establish that one building is 'occupied together with' another for rating purposes. Nor is there any geographical test which gives a conclusive answer - though the distance between the buildings is a relevant consideration, as the Court of Appeal held.

It is not, however, sufficient to ask generally whether the buildings or buildings and land in question are all part of the same business enterprise. What it is necessary to show is that the two buildings, or as the case may be the buildings and agricultural land, are occupied together so as to form in a real sense a single agricultural unit. Contiguity or propinquity may go far to show that they are. Thus farm buildings surrounded by land which is farmed with other land nearby though not contiguous or even land in another neighbouring village may well as a matter of fact be found to be 'occupied together with' each other. On the other hand separation may indicate that they are not and the greater the distance the less likely they are to be one agricultural unit.

In view of the extension in the Act of 1971 to derate further hereditaments, it is not right now to ask whether the two premises constituted one 'farm' in the ordinary sense but Viscount Dilhorne in the passage quoted above, in my view, indicates the right direction. Though I consider that the actual decision in the case is to be treated as one on its special facts and the correctness of which may in any event be debatable, the sense of 'togetherness' referred to by Sir Michael Rowe Q.C. in Hilleshog Sugar Beet Breeding Co. Ltd. v. Wilkes (Valuation Officer) [1971] R.A. 275 perhaps equally shows that the important question is whether the two buildings or the buildings and land are worked together so as to form one agricultural unit.”

84.  Thus, if there were a similar provision in the Ordinance (which is none), the Appellant may qualify for the exemption if it is showed that the Tenement was, at the relevant dates, both “in the same occupation” as the Two Adjacent Lots, and jointly controlled and managed with it “so as to form one agricultural unit”.

85.  In any event, AFCD’s criteria of the AEF subsidies and its aim to provide immediate financial relief to local primary producers etc were in quite different terms from the statutory provisions of the Ordinance that the Respondent was called upon to apply, and as the decision of AFCD only, it could not in any event constitute useful authority on the statutory interpretation of section 36(1)(b).

Legislative Intention

86.  The Appellant submitted that it has been the legislative intention of section 36(1)(b) to exempt the tenements like the Tenement from assessment to rates when they are occupied by poor farmers.

87.  Here Ms Chu submitted, and I agree, that the principles for statutory interpretation are well established and summarised in Moulin Global Eyecare Trading Ltd (in Liquidation) v The Commissioner of Inland Revenue and Another [2012] 2 HKLRD 911 where Kwan JA stated at §31:

“The principles for statutory interpretation are well established. The modern approach is to adopt a purposive approach interpretation and the context of a statutory provision should be taken in its widest sense (HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568 at paras 11 to 14). The statute shall receive such fair, large and liberal construction as will best ensure the attainment of its object (Interpretation and General Clauses Ordinance, Cap 1, section 19). The relevant provisions of the legislation should be read together and in the context of the whole statute as a purposive unity in its appropriate legal and social setting; it is necessary to identify the interpretative considerations involved and, if they conflict, to weigh and balance them.”

88.  Paragraph 3(iii) of the 1974 Memo as stated in §26 above clearly demonstrates that section 36(1)(b) was proposed to exempt dwellings connected with agriculture. The majority of Whitsbury Farm has expounded the meaning of “used in connection with agricultural land” should contemplate the use of the agricultural land as being the principal use and that of the buildings as being an accessory use. It also emphasised that the buildings to be exempted have to be ancillary or complementary to the agricultural purpose of the land, and not vice versa. In the present case, the agricultural land at the Two Adjacent Lots, particularly in different ownership, is at most occupied together the Tenement and the agricultural operations of the Appellant appear however to be only ancillary to the use of the Tenement.

Conclusion

89.  Concluding the above, I agree with Ms Chu’s submission that the Appellant has failed to prove that the Respondent was wrong in making the Decision of refusing to grant exemption from rating assessment of the Tenement under section 36(1)(b) of the Ordinance.

90.  Again, for the avoidance of doubt, this does not preclude the Appellant from considering whether the exemption would be still applicable for the periods in the future on the basis of new evidence in due course.

91.  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 District 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.

Appendix