TOWERICH LTD v. COMMISSIONER OF RATING AND VALUATION

LDMP 3/2009

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No. LDMP 3 of 2009

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DECISION

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Background

1.  This is the Applicant’s application made pursuant to section 10(2)(d)(i) of the Lands Tribunal Ordinance, Cap. 17 (“the LTO”) for enlargement of time to serve the Proposal for Alteration of Valuation List and Government Rent Roll against the entries of Horizon Suite Hotel, No. 29 On Chun Street, Ma On Shan, New Territories, Hong Kong (“the Property”) in the Valuation List and the Government Rent Roll for the Year of Assessment 2008/2009 under section 37 of the Rating Ordinance, Cap. 116 (“the RO”).

2.  Although the Government Rent Roll is governed by the Government Rent (Assessment and Collection) Ordinance, Cap. 515, section 16(2) of that Ordinance stipulates as follows:-

“A person may object to, or make a proposal on, or appeal against the rateable value of a tenement recorded in the Government Rent Roll only under the Rating Ordinance (Cap. 116) if the tenement is an identical tenement.”

3.  As the tenement in question is an identical tenement, the Applicant’s intended proposal for the alteration of the Valuation List and the Government Rent Roll would both be made under section 37 of the RO.

4.  The Applicant is the Government lessee and the registered owner of the Property, and has engaged its agent, Horizon Hotel & Suites Limited (“HHS”), to manage the Property.  Since the completion of the Property in 2002, the Respondent has made yearly assessments of the rateable value of the Property, and made corresponding entries in the Valuation List and the Government Rent Roll for each Year of Assessment.

5.  The Applicant has, through HHS, objected to each and every yearly assessment of the Respondent for the years 2002/2003 to 2007/2008 in the following manner:-

(a)  For years 2002/2003, 2003/2004 and 2004/2005, HHS filed a Notice of Objection to the Proposed Interim Valuation (Form R23A) on 23 December 2004;

(b)  For years 2005/2006, 2006/2007 and 2007/2008, HHS filed a Proposal for Alteration of Valuation List and Government Rent Roll (Form R20A) in all the respective years pursuant to section 37(1) of the RO.  These Proposals were all filed within the statutory time limit, i.e. within the months of April and May of each Year of Assessment (section 37(1) of the RO).

6.  Further, the Applicant has lodged appeals to the Lands Tribunal in respect of each of the Years of Assessment from 2002/2003 to 2007/2008 pursuant to section 42 of the RO.

7.  According to the Applicant, for the Year of Assessment 2008/2009, the Applicant also intended to object to the Respondent’s assessment just like the previous years, but due to its employees’ inadvertent mistakes, the intended Proposal for that year was not filed with the Respondent on time.  Thus, the Applicant seeks for enlargement of time to file the Proposal for 2008/2009 in this application.

The issues

8.  There are two issues in this application, namely:-

(a)  Whether the Lands Tribunal has jurisdiction under section 10(2)(d)(i) of the LTO to grant time enlargement in respect of the 2008/2009 Proposal; and

(b)  If so, whether the time enlargement should be granted in this case.

Jurisdiction of the Lands Tribunal

9.  Section 10(2)((d)(i) of the LTO stipulates that the Lands Tribunal may-

“for good cause, enlarge the time, whether or not that time has already expired, fixed by any Ordinance-

(i)  for the giving of any notice (and whether or not the notice relates to any proceedings);”

10.  The Applicant submits that this section empowers the Lands Tribunal to grant an extension of time to serve a proposal on the Respondent pursuant to section 37 of the RO, whereas the Respondent contends that the Lands Tribunal has no such jurisdiction under this section.  However, both parties have no dispute that a proposal under section 37 is in fact a form of notice which could be covered by the word “notice” in section 10(2)(d)(i) of the LTO and I also agree that this should be the case.  Having considered carefully the submissions made by both sides, I am of the view that section 10(2)(d)(i) of the LTO does give the Lands Tribunal jurisdiction to enlarge the time for serving a proposal under section 37 of the RO.

11.  First of all, I accept the Applicant’s submission that, pursuant to section 8(4) and (5) of the LTO, the Lands Tribunal has jurisdiction generally over the specific ordinances listed in the Schedule.  As the RO is a scheduled ordinance, the Lands Tribunal does have jurisdiction over the current dispute in relation to the rateable value of the Property.  Section 8(4) and (5) of the LTO reads as follows:-

“(4)  The Tribunal shall have jurisdiction to determine any appeal submitted to it for determination under any Ordinance specified in the Schedule.

 (5)  The Tribunal shall have such other jurisdiction as may be vested in it under any Ordinance including any Ordinance specified in the Schedule.”

12.  The Respondent submits that in the context of our present case, section 8(4) only concerns with rating appeal under section 42 of the RO and the time that can be extended by section 10(2)(d)(i) of the LTO is related only to the time for lodging appeal to the Lands Tribunal under section 42(1) of the RO, and that there is no express provision under the RO to vest the Lands Tribunal with a power to enlarge the time under section 37 of the RO.  I disagree with this interpretation.  The provisions for filing a proposal and lodging an appeal are both contained in Part IX of the RO and they are inter-related.  Under section 37, a person can make a proposal in respect of the Respondent’s valuation as entered in the Valuation List.  The Respondent shall then issue a notice of decision stating its final decision pursuant to section 39.  If the person is still aggrieved by the Respondent’s decision, he can lodge an appeal to the Lands Tribunal pursuant to section 42, which expressly states that “A person on whom a notice of decision has been served under section 39 or 40 may, within 28 days of such service, appeal against the decision to the Lands Tribunal”.  It is clear to me that sections 37, 39 and 42 are procedural provisions linked closely with each other.  An appeal cannot be lodged under section 42 in respect of a decision under section 39 if the person has not gone through the procedures under section 37.

13.  Thus, when one considers the structure of Part IX of the RO, it is clear that the legislature intends a person and the Respondent to go through a negotiation process before referring the dispute to the Tribunal.  The serving of a proposal and the lodging of an appeal are just different steps in the same process.  After all, there is only one dispute involved – the valuation of the rateable value of the property in question.  When the Lands Tribunal has jurisdiction to hear this dispute, it naturally follows that it has jurisdiction to handle all the procedural matters related thereto, including the time for serving a proposal under section 37.  I do not think that it is necessary to have a separate and express reference in the RO to confer jurisdiction to the Lands Tribunal in respect of the proposal under section 37.  As long as the Lands Tribunal has jurisdiction over a section 42 appeal, then section 10(2)(d)(i) of the LTO can be invoked to enlarge the time for serving a proposal under section 37.

14.  Furthermore, when one looks at the history of section 10(2)(d)(i) of the LTO, one can see that the legislative intention is to widen the jurisdiction of the Lands Tribunal in granting extension of time for giving notices.  The present provision is that the Tribunal has power to enlarge the time fixed by any ordinance “for the giving of any notice (and whether or not the notice relates to any proceedings)” (emphasis added).  The previous version of section 10(2)(d)(i) reads:-

“… the Tribunal may –

(d)  for good cause, enlarge the time, whether or not that time has already expired, fixed by any Ordinance –

(i)  for the giving of any notice, either before or after any proceedings have commenced;…” (emphasis added)

15.  The statutory wordings changed from “either before or after any proceedings have commenced” to “whether or not the notice relates to any proceedings”.  Thus, it is clear that under the old provision, the notice must relate to certain proceedings, but this is no longer a requirement under the new provision.  Although the new provision was introduced as a result of some problems in the Landlord and Tenant (Consolidation) Ordinance, Cap. 7, it was not stated to be applicable only to the situations under that Ordinance.  Thus, the legislative intention must be that the new provision is also applicable to other cases beyond the Landlord and Tenant (Consolidation) Ordinance.

16.  The Respondent also submits that the procedures before the issuance of the notice of decision under section 39 of the RO are administrative, and it is only after such a notice is issued, then the Lands Tribunal has jurisdiction over the matter.  The Respondent is of the view that the Respondent’s administrative power should not be usurped by section 10(2)(d)(i) of the LTO, and the time limit under section 37 of the RO should be imperative.  In this regard, the Respondent relies on the Court of Appeal’s judgment in Tai Tung Industrial Equipment Ltd v. The Director of Lands, CACV No. 43 of 1995.  In that case, the Court of Appeal held that the time limit under section 12(2) of the Foreshore and Sea-bed (Reclamations) Ordinance, Cap. 127 (“the FS(R)O”) is to be treated as imperative.  Since the provisions in the FS(R)O are similar to the RO, the Respondent is of the view that the time limit under section 37 should also be treated as imperative.

17.  However, the Respondent has also fairly cited the case of Chan Sik Cheung & ors v. Director of Lands [1995] 3 HKC 199, in which Judge Cruden held that the time limit under section 12(2) of the FS(R)O can be enlarged by the Lands Tribunal under section 10(2)(d)(i) of the LTO.  Judge Cruden expressly said that in the Tai Tung case, section 10(2)(d)(i) of the LTO had not been considered by the Court of Appeal.  I agree with Judge Cruden.  His reasoning is similar to what I have stated above.  Had the Court of Appeal considered section 10(2)(d)(i) of the LTO, its judgment in the Tai Tung case might have been different.  Thus, I think the Tai Tung case should be distinguished from our present case.  In fact, our present case is an even stronger one on the issue of jurisdiction than the Chan Sik Cheung case, as Chan Sik Cheung was decided when the statutory wordings of section 10(2)(d)(i) was still in the old version.

18.  The Respondent argues that if the Lands Tribunal has the general power to enlarge the time limit, then a party, who fails to meet certain requirements of a valid notice under an Ordinance, may make good the notice and apply for filing it out of time and that the party may repeat doing the procedure afresh until the notice meets the requirements.  I do not think that this argument worth any consideration, as the Lands Tribunal would only enlarge the time when good cause is shown.

19.  The Respondent also argues that if the Lands Tribunal can extend the time limit beyond April and May in any year to another year, it may cause uncertainties affecting the rating valuation approach and inconsistencies in the Respondent’s approach resulting in unfairness to other ratepayers.  The Respondent’s argument is based on the wordings in section 7A(4) of the RO, in which it is stated “the rateable value of any tenement in respect of which a proposal has been made under section 37 shall be the value which would have been ascribed thereto on the relevant date on the assumption that at that date- (a) the tenement was in the same state as at 1 April of the year of the making of the proposal”.  The Respondent is of the view that when the actual making of the proposal is in another year, the valuation of the subject tenement would be different from the valuation of the other tenements for which the making of the proposal were within the statutory time limit.  I do not agree with this interpretation.  I think by necessary implication, the valuation of the subject tenement must still be in respect of the same year in which the proposal should have been made if it was not made out of time.  Thus, I do not think that there would be uncertainties or inconsistencies as suggested by the Respondent.

20.  By reasons aforesaid, I rule that the Lands Tribunal does have jurisdiction to enlarge the time for serving a proposal under section 37 of the RO.

Should the Tribunal exercise the jurisdiction in favour of the Applicant?

21.  The next question is whether the Tribunal should exercise its discretion under section 10(2)(d)(i) of the LTO and grant the Applicant time enlargement in respect of the serving of the 2008/2009 Proposal.

22.  Under section 10(2)(d)(i) of the LTO, the Tribunal may grant time enlargement “for good cause”.  In determining what amounts to a “good cause”, the Tribunal should take into account all the circumstances of the case.  This is a question of fact and the Lands Tribunal has discretion to decide what amounts to “good cause” and what does not.  Of course, as with all discretion, the Lands Tribunal must exercise it judicially.

23.  HHS’s accounting manager, Chong Mei King, has given evidence in details in her two affirmations in relation to the reasons for the delay.  In brief, the main reason for the delay is due to the mistaken belief of Ms. Chong’s predecessor, Mr. Keith Tang, that the 2008/2009 Proposal has already been filed, when in fact he had not done so.  Also, when Ms. Chong took over Mr. Tang’s position and responsibilities in June and July 2008, Mr. Tang omitted to explain to her about the Applicant’s ongoing dispute with the Respondent regarding the rateable value of the Property, including the previous steps taken by HHS.  Mr. Tang did not mention the 2008/2009 Proposal to Ms. Chong because he thought the same had already been filed.  After much inquiring and checking, it was not until late December 2008 that it became certain to Ms. Chong that the 2008/2009 Proposal had not been filed.

24.  The Respondent argues that it is not a satisfactory explanation that only Mr. Tang in HHS knew of the 2008/2009 Proposal and only he was in charge of filing the same.  However, I accept Ms. Chong’s explanation that the fundamental issue between the Applicant and the Respondent regarding the rateable value of the Property is the basis of the valuation.  Since this issue is yet to be resolved, the Applicant has to make a Proposal under section 37 for each year in the same manner and for the same reasons.  As the filing of a Proposal has become a more or less a routine act pending the appeals, it is not unreasonable for HHS to delegate the relatively simple administrative work of filing a Proposal to Mr. Tang alone.

25.  The Respondent also argues that Joseph Lau, a director of HHS should also know about the Proposals.  However, I accept Ms. Chong’s explanation that Mr. Lau’s only involvement was signing the Proposals as an authorized signatory of HHS.  Since the preparation of a Proposal has been delegated to Mr. Tang, it cannot be realistically suggested that Mr. Lau should have remembered every single action that ought to be carried out or done by HHS.

26.  Thus, I accept that there is no deliberate delay or willful default on HSS’s or the Applicant’s part.  Mr. Tang was inadvertently mistaken and Ms. Chong did not even know about the filing of the 2008/2009 Proposal until mid-December 2008.  Thereafter, Ms. Chong did everything that she could reasonably can to find out what happened.  Even though Mr. Tang might not have performed his job duties as required, I find that the omission was unintentional, and the Applicant should not be punished for the inadvertent mistakes made by its employees.

27.  I also accept that there are some arguable grounds for serving the intended proposal and the intended appeal.  According to Landscope Surveyors Limited, the Applicant’s former surveying expert, the Respondent used the comparable method to value the Property, which is a hotel, and treated each individual room of the Property as a residential flat and compared it with nearby and similar residential properties.  The Applicant has subsequently instructed another surveyor firm, Cushman & Wakefield, which gave the opinion that the correct basis of valuation should be the receipts and expenditure method.  It is not necessary for me to consider the full merits of the appeals, but on the face of it, the Applicant does have an arguable ground regarding the method of valuation to lodge the proposal and an appeal.  In the interest of justice, the Applicant should not be denied its day in court to develop this argument fully in respect of the 2008/2009 assessment just because of an inadvertent delay in filing the 2008/2009 Proposal.

28.  The Respondent has failed to point out any detriment that it would suffer if the extension were granted, save and except the unfairness to other ratepayers as aforesaid.  However, as I have ruled above, I do not think that this is a real prejudice.  On the contrary, if time enlargement were not allowed, the Applicant would then be barred from lodging an appeal against the 2008/2009 assessment and there would be no other channel to correct the valuation.  The Applicant’s surveyors have estimated that the difference in rates and Government rent payable based on the Respondent’s rateable value and that preliminarily assessed by the Applicant’s surveyors is $5.3 million.  If in the appeals for the previous years the Tribunal’s decision is in favour of the Applicant’s method of assessment, then the Applicant will be deprived of the right to object to the Respondent’s 2008/2009 assessment, in which case, not only that the Applicant would be forced to pay $5.3 million more than it would otherwise be liable to pay, it would also be an anomaly.  I also do not find that the Applicant has not been proceeding with the other appeals diligently.

29.  In the interest of avoiding the potential injustice to the Applicant and the said anomaly, I am of the view that the Applicant should be granted the time enlargement as sought.

Conclusion

30.  For reasons set out above, I rule that the Applicant succeeds in this application.

31.  I therefore order as follows:-

(1)  The time fixed for the Applicant to serve the Proposal for Alteration of Valuation List and Government Rent Roll against the entries of Horizon Suite Hotel, No. 29 On Chun Street, Ma On Shan, New Territories, Hong Kong (“the Property”) in the Valuation List and the Government Rent Roll for the Year of Assessment 2008/2009 under section 37 of the Rating Ordinance, Cap. 116 be enlarged for 14 days from the date of this order.

(2)  Costs order nisi: The Respondent do pay the Applicant its costs of the application herein with certificate for counsel to be taxed on High Court Scale if not agreed. If there is no application in relation to costs within 14 days from today, the costs order nisi shall become absolute.