Hong Kong Case Law: Decisions & Judgments

Topic

Receipts and expenditure method

Legal area

Court

3 Jan 2014

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA367/2004

The Tribunal held that interpolation from CLP's actual 2004 accounts to derive economic growth as at the AVD was impermissible hindsight and not preferred; it adopted Mr Davis' Original Method (using accounts to 31 Dec 2003 with per‑customer adjustment for physical growth to 1 Apr 2004) for R&E projections; HT AUC and CS remain in HT asset base while HL AUC/CS are excluded; wayleaves, pole sites and DCS need not be separately included in the HL asset base for asset split because their effect is captured in the DB; where capitalisation is required the decapitalisation rate adopted is 12.35%; C…
3 Jan 2014

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA369/2004

Tribunal holds that use of full post‑List‑Date (calendar 2004) accounts as employed by CRV/Ms Jim to interpolate per‑customer profitability for valuation at AVD is impermissible; adopt Mr Davis' Original Method to reflect physical and economic state at List Date; HT's AUC and capital stores may be included in HT asset base while HL's AUC/CS are excluded; wayleaves, pole sites and DCS need not be separately included in HL asset base for the asset split because their contributions are captured in the divisible balance, but if separately valued they must be capitalised using the tribunal's decap…
24 Apr 2013

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA365/2004

The Tribunal held the correct valuation method is the receipts and expenditure method with the tenant's share apportioned by an asset-split using depreciated replacement cost as proxy for market value, rejecting the Commissioner's WACC approach and rejecting use of the contractor's basis as a reliable adjunct; the China assets materially contributed and warranted an uplift, assets under construction are not rateable and appropriate deductions must be made, while dedicated substations and the identified plant, cables and pipework are rateable under s8A.
24 Apr 2013

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA367/2004

The Lands Tribunal held the R&E method is the appropriate valuation approach, rejected the CRV's WACC approach for fixing the hypothetical tenant's share, accepted an asset-split approach adjusted to reflect the economic contribution of CLP's China assets, rejected separate uplifts for effort and risk and rejected use of the contractor's basis as a reliable adjunct; assets under construction are non-rateable and deductions must be made; dedicated substations and specified plant, cables and pipework are rateable under s8A; accordingly CRV's assessment for 2004/05 was set aside and the appeals…
24 Apr 2013

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA366/2004

The tribunal held that the R&E method is the appropriate primary valuation method; the Commissioner's WACC‑based approach to fix the tenant's share was rejected; an asset‑split approach using DRC as proxy for market value is adopted for apportioning the divisible balance, with a specific uplift to reflect the contribution of the China assets; the contractor's basis is not a reliable adjunct or cross‑check and separate uplifts for effort and risk were rejected; assets under construction are non‑rateable and should be deducted; dedicated substations and specified plant/cables fall within s8A an…
24 Apr 2013

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA369/2004

The Tribunal held that the proper method was the receipts and expenditure method; it rejected the Commissionerʹs WACC-based approach and adopted an asset-split approach using DRC as the best proxy for market value, with an uplift to reflect the contribution of China assets, but rejected separate additional awards for tenantʹs effort and risk and rejected use of the contractorʹs-basis as an adjunct; assets under construction are non-rateable and should be deducted; dedicated substations and specified plant/cables/pipework are rateable under s8A.
24 Apr 2013

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

CLP POWER HONG KONG LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA368/2004

Appeals allowed. The proper valuation method is the R&E method with the tenant's share apportioned by an asset-split using DRC as proxy for market value, with a specific uplift to reflect significant contribution of China assets; the Commissioners WACC approach (tenant's share = WACC x ANFA) is rejected; the contractor's basis is not adopted as an adjunct or cross-check; separate additional awards for tenant's effort and risk are rejected; assets under construction are not rateable and must be excluded; dedicated substations and the identified plant, pipework and cables are rateable under s8…
21 Jun 2011

THE HONGKONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

THE HONGKONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Court of Final Appeal
Case number

FACV12/2010

The Court unanimously held the Lands Tribunalʹs valuation methodology (receipts and expenditure with the tenantʹs share assessed on the basis accepted by the Tribunal) was lawful and that assets under construction which were not capable of occupation at the relevant date are not part of the rateable tenement and must be excluded, requiring adjustment to the divisible balance; the Court of Appeal erred in law by misapplying principles from other valuation methodologies, by treating Agrila and statutory provisions inconsistently, and by substituting its own valuation reasoning, and the Lands Tr…
14 Sept 2010

THE HONG KONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

THE HONG KONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Court of Appeal
Case number

CACV27/2010

The Lands Tribunal erred in law by adopting the permitted return approach based on the Scheme of Control to determine the hypothetical tenant's share; in the circumstances the appropriate method is the cost of capital (WACC) approach using a suitable proxy WACC. The tribunal's novel 'capable of being occupied' test for rateability of assets under construction has no legal basis and is rejected; unoccupied or under-construction tenements can be rateable under the Rating Ordinance. The tribunal's orders are set aside and appeal allowed.
30 Nov 2009

THE HONG KONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION

Citation

THE HONG KONG ELECTRIC CO LTD v. COMMISSIONER OF RATING AND VALUATION
Court

Lands Tribunal
Case number

LDRA358/2004

The appeals are allowed: the proper valuation method is the Receipts & Expenditure method with the hypothetical Scheme of Control assumed; the tenant's share is to be computed by reference to the SOC permitted return applied to the tenant's Average Net Fixed Assets (PR×HT ANFA) (subject to agreed depreciation adjustments and an adjustment excluding non-rateable AUC). Assets under construction are not rateable as a matter of law. The Contractor's Basis is inappropriate to capture the Tenement's monopoly and synergy value, and WACC is not adopted as the primary measure of the tenant's share in…