Introduction

1. There were two recent property tax appeals against the Chief Assessor’s revised annual values which bore different results: one was successful, the other was not. Given the difference in results, a review of these two cases may help shed some light on how a potential appellant can better prepare for its property tax appeal to maximise its chances of success.
2. The experience from the two cases suggests that an appellant stands the highest chance of success if it does not limit its case to pure legal arguments, but also provide comprehensive and compelling expert evidence to show why its proposed annual value should be preferred over that of the Chief Assessor’s.

The cases

3. The first case is Bollywood Veggies Pte Ltd v. Chief Assessor [2021] SGVRB 1. The facts of the Bollywood Veggies case are as follows:

1. The appellant leased a plot of land at Neo Tiew Road from the Singapore Land Authority (SLA) for a period of 20 years from 2001. The property comprised of a vegetable farm and some buildings that the appellant later constructed on site to house among other things, a bistro, a food museum, and an event space.
2. In 2018, the Chief Assessor increased the annual value of the property from S$87,000 to S$107,100. The Chief Assessor calculated that annual value by adding 5% of the costs the appellant had purportedly incurred in 2009 to construct one of the buildings (which was S$29,650) to the annual land rent the appellant paid to the SLA that year (which was S$77,400).
3. The appellant objected to the Chief Assessor’s assessment, contending that the annual value of the property should be the same as the annual land rent that the appellant paid to the SLA. The appellant’s main ground of appeal was the buildings it had constructed were temporary (apparently because they had to be removed at the end of the lease period) and in any case, the lease prevented the appellant from subletting the buildings out.
4. In respect of the appellant’s case, the Valuation Review Board noted that the only supporting evidence produced by the appellant was a valuation report prepared by its valuer Jones Lang LaSalle (for an earlier rent review exercise between the appellant and SLA). The appellant did not lead any other evidence to prove that the buildings in question were only temporary, and/or that this temporal nature had affected their value. On JLL’s report, the VRB found that it had little probative value for the purposes of the appeal because the report was only meant to determine the land rent, and not the annual value of the property under the Property Tax Act. Indeed, JLL did not even consider the key issues in dispute there namely whether the buildings on the property were assessable to property tax, and if so, at what value.
5. In contrast, in respect of the Chief Assessor’s case, the VRB noted that the Chief Assessor’s choice of valuing the building at 5% of the construction costs was amply justified under the then section 2(3)(a) (now section 2(6)(a)) of the Property Tax Act.
6. Ultimately, the VRB held that the appellant did not discharge its burden of proving that the Chief Assessor’s assessment was excessive and proceeded to dismiss the appeal.

4. The appellant was dissatisfied with the VRB’s decision and appealed to the High Court (see Bollywood Veggies Pte Ltd v Chief Assessor [2022] 3 SLR 1028).

1. On appeal, the appellant appointed legal counsel and mounted three arguments, of which the last two were new, to try to reverse the VRB’s decision.
2. First, the appellant reiterated on appeal that since there was a prohibition in the lease against subletting, the appellant could not have reasonably leased out the buildings and correspondingly, the buildings should be excluded from the computation of the annual value of the property.
3. Second, the appellant argued that the construction costs that was incurred by the appellant in 2009 was historical and could not represent the value of the buildings in 2018. The appellant’s case was that since there was “no nexus between the building costs and the estimated value of the buildings”, those costs should be excluded.
4. Third, the appellant argued that even if the value of the buildings should be included, the construction costs that the Chief Assessor had relied on was based on an email by the appellant’s architect which was not only hearsay but unreliable because it was recanted by the said architect immediately after the email was sent.
5. The appeal was heard before Justice Aedit Abdullah.
6. On the appellant’s first argument, Justice Abdullah held it was well-settled that the hypothetical tenancy enquiry (i.e., the statutory test of annual value under the Property Tax Act) applied even if the actual tenant was the only possible hypothetical tenant in question. Hence, the appellant’s proposition (that the buildings should be excluded from valuation because it could not reasonably sublet the buildings) was unsustainable since that proposition would contradict the prevailing position at law.
7. Justice Abdullah held that in any case, the Chief Assessor was relying on section 2(3)(a) of the Property Tax to assess the annual value of the property in question and the application of that section did not depend on whether the buildings were tenanted or indeed, tenantable. Justice Abdullah further held that there was nothing wrong in the Chief Assessor choosing to apply section 2(3)(a) in the Bollywood Veggies case particularly when there were no useful comparable on the rental value of buildings in agricultural properties.
8. On the appellant’s second argument, Justice Abdullah reasoned that save for exceptional circumstances (such as the presence of an unusually high cost of maintenance), buildings would generally be expected to add some value to the property. Accordingly, there must – contrary to the appellant’s submissions – be a causal connection between the costs of constructing the building and the value of the property in which the building was situated.
9. On the appellant’s third argument, Justice Abdullah held that the evidential rule on hearsay was not offended because the Chief Assessor did not adduce the architect’s email as evidence of the costs of the building at the hearing; instead, the Chief Assessor referred to the email merely as proof that he had used the appellant’s own figures in his determination of the annual value of the property.
10. Justice Abdullah also found that the last two arguments were improperly raised on appeal (under the rule established in the case of Browne v. Dunn of obliging a party to put its case at trial to the other party) because they were not put to Chief Assessor’s witness at the VRB hearing, with the effect that the Chief Assessor’s witness was unfairly deprived of the chance to respond.
11. In the final analysis, Justice Abdullah found that the appellant did not adduce any credible evidence that can substantiate an annual value different from the Chief Assessor’s. Indeed, the appellant did not even challenge the costs of construction even though this information was well within its knowledge. Justice Abdullah thus held that the Chief Assessor’s assessment was reasonable and dismissed the appeal.

5. The second case is Harmony Convention Holding Pte Ltd and Chief Assessor [2022] SGVRB 1. The facts of the Harmony Convention case are as follows.

1. The appellant – a joint venture between Suntec REIT and City Harvest Church – owned the Suntec Singapore Convention & Exhibition Centre which comprised a retail component and a meeting, incentives, convention, and exhibition facilities (MICE) component of approximately 60,282 sqm.
2. The appellant appointed an asset manager and a convention and exhibition services (CES) operator to manage and run the day-to-day operations of its MICE business. It paid the CES operator a fee of 3% of the gross revenue of the business per annum.
3. The Chief Assessor assessed the annual value of the MICE component using the profits method: which involved deducting expenses from the gross receipts of the business and applying a profit margin based on the tenant’s enterprise, business risk and interest on capital to determine the tenant’s and landlord’s respective shares of the profits. The landlord’s share would then form the expected annual rent.
4. The main issue in dispute resolves around the deductibility of the CES operator’s fee as an operating expense under the profits method: the appellant contended that the deduction of the CES operator’s fees must be allowed because it was after all a working expense that was incurred by the appellant in its MICE business; whereas the Chief Assessor argued that the scope of the CES operator’s business replicated the business of a typical MICE business operator with the effect that the CES operator’s fees was an unnecessary and not deductible expense.
5. The VRB (like the VRB in the Bollywood Veggies case) referred to the hypothetical tenancy enquiry (which as mentioned above is the statutory test of annual value under the Property Tax Act) and held that the hypothetical tenant should include the appellant. In turn, the expenses actually incurred by the appellant must be considered to properly measure the appellant’s expected profitability under the profits method.
6. The VRB then carefully reviewed the scope of the CES operator’s contractual duties and agreed with the appellant that the CES operator was indeed a third-party service operator, and its fees cannot reasonably be accounted for under the hypothetical tenant’s share; instead, it should be deducted as an expense because it was a fee paid by the appellant to earn the income of its MICE business.
7. The VRB thus held that the appellant had proven that the CES operator’s fees had not been appropriately accounted for under the Chief Assessor’s application of the profits method, and the appellant had proven that the Chief Assessor’s proposed annual value was excessive. The VRB thus allowed the appeal.

Analysis

6. It is apparent the appellant in the Bollywood Veggies case failed in its appeal before the VRB and later the High Court because it ran a purely legal argument that unfortunately contradicted not only established principles of valuation but also the fundamental hypothetical tenant enquiry.
7. The appellant in the Bollywood Veggies case did not otherwise explain – with reference to the necessary supporting expert evidence – how the Chief Assessor’s assessment of the annual value of the buildings was factually excessive. This omission meant that once the VRB rejected the appellant’s legal argument, the VRB would have no choice but to dismiss the appeal.
8. In comparison, the appellant in the Harmony Convention case not only made valid legal submissions as to how Chief Assessor had proceeded on a wrong legal premise when it failed to take the CES operator’s fees into account, the appellant also provided compelling evidence as to why the CES operator’s fees were reasonably incurred and in turn, why its proposed annual value was justifiable under the agreed profits method.
9. Indeed, in the Harmony Convention case, it was the Chief Assessor who did not produce any credible evidence to rebut the appellant’s case and/or to show that the Chief Assessor’s assessment of the annual value was fair and reasonable even if the Chief Assessor could be said to have misapplied the profits method.
10. While it is true that the main reason why property tax cases end up in litigation is due to the lack of an agreed methodology, or if the methodology is agreed, due to the lack of useful comparables (with the effect that the most relevant form of evidence required in a property tax appeal is often illusory), it does not invariably mean that there will also be a dearth of other forms of credible evidence.
11. It is incumbent on an appellant who intends to prosecute a property tax appeal to gather as much relevant, credible, and useful objective evidence as possible, and to refer to this evidence as the foundation to discredit the Chief Assessor’s assessment.
12. For instance, the appellant in the Bollywood Veggies case could have greatly strengthened its case by producing an expert report on how the costs of constructing the building in 2009 no longer represented the estimated value of the building in 2018 for the purposes of section 2(3)(a) of the Property Tax Act due to factors such as depreciation.
13. In addition, even if the appellant intends to run its highest case (i.e., to argue that the fixture in question such as the building in the Bollywood Veggies case should have zero value), it may still be worthwhile to put forward a more moderate but alternative case to have the platform to present all possible evidence before the VRB and maximise its chances of success.
14. Given the following observations of the High Court in the Bollywood Veggies case and the VRB in the Harmony Convention case, the approach suggested at paragraph 13 has become even more important:

1. Justice Abdullah in the Bollywood Veggies case opined at paragraph 30 of his judgment that even though the standard to be adopted in an appeal against a VRB’s decision should be to enquire into whether the Chief Assessor’s assessment was fair and reasonable, there should still be some deference to the VRB’s findings of facts.
2. The VRB in the Harmony Convention case opined - possibly for the first time ever - at paragraph 16 of its judgment that there is no statutory basis under the Valuation Review Board (Appeals Procedure) Regulations for an amendment to be made to a notice of appeal.

Conclusion

15. In closing, we would say that a potential appellant to a property tax appeal would be well-advised to carefully consider its primary and/or alternative case(s) and properly formulate all its possible arguments before it prosecutes an appeal. If the potential appellant decides to push ahead, the appellant must make the extra effort to adduce all necessary evidence in support of its case including in inter alia the selection of its witnesses and the crafting of the relevant witnesses’ affidavit evidence.
16. If the appellant decides to eschew the approach suggested above and take its chances, we suggest that the likelihood of a favourable outcome would be very much reduced. The appellant may end up not only having to bear the additional property tax imposed, it may also be out of pocket for the legal costs in an unsuccessful litigation.