Hong Kong Case Law: Decisions & Judgments

Topic

Weighted average cost of capital (wacc)

Legal area

Court

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…
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

LDGA224/2004

The Tribunal held that the R&E method is the primary valuation method and that the tenant's share should be assessed by reference to the Scheme of Control: the proper tenant return is the Permitted Return (PR) under the SOC applied to the hypothetical tenant's ANFA (PR x HT ANFA); HEC's proposed additional 25% allocation of DB for risk/enterprise was rejected as arbitrary; assets under construction are not rateable as a matter of law and should be adjusted out; the Contractor's Basis is inappropriate to capture monopoly and synergy value of this integrated electricity tenement.
3 Dec 2008

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

LDRA537/1999

The Tribunal interpreted s11A as creating a two-stage review procedure and held that the first-stage decision whether to review should not be made ex parte in ordinary cases; the respondent is prima facie entitled to be heard. Applying case management discretion, the judge found the applicants new arguments (prospect of refunds from increased WACC and a new 2008 appeal) were not cogent reasons to revisit the 3 November decision selecting a single test appeal and staying the others, and therefore refused the application to review and upheld the prior case management order.
15 Feb 1995

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation

Citation

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation
Court

Court of Appeal
Case number

CACV101/1994

The Court held that the Lands Tribunal did not err in principle: it lawfully valued on a yearly tenancy while assuming a probable four‑year continuation, valuation method choices (including treating end asset value differently, use of WACC and profits method) are matters of valuation judgment not errors of law, and the Tribunal had no power under s.11A(1) to alter the text of its earlier reasons; accordingly the Commissioner's main grounds failed but paragraph 3 of the second order (purporting to vary the first judgment) was set aside.
15 Feb 1995

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation

Citation

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation
Court

Court of Appeal
Case number

CACV83/1994

The Court held that the Lands Tribunal's valuation methodologies were matters of valuation judgment and did not disclose errors of law: valuing on a yearly tenancy with a probable four year duration was permissible; using WACC and the Tribunal's treatment of asset values in the profits method were valuation judgments; and therefore the Commissioner's substantive grounds failed. However paragraph 3 of the Tribunal's second order, which purported to alter the terms of its earlier reasons, was beyond its power and was set aside.

Hong Kong Case Law

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

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

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

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

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation

China Light & Power Co. Ltd. v. Commissioner for Rating & Valuation