The High Court heard an appeal by way of originating motion.
The parties are:
- Appellant: Shell Company of the Federation of Malaya;
- Respondent: The President, Town Council, Bandar Penggaram, Batu Pahat.
Adams J delivered the High Court’s judgement on 27 May 1962.
Facts of the Case
Shell Company purchased a 15,615 sq ft land (about 0.35 acres) on Jalan Kluang in Bandar Penggaram. Shell then developed the land. They constructed a petrol station based on the plans submitted to and approved by the Batu Pahat Town Council. The development concluded around 23 September 1961.
The company submitted a return under s. 38, Johore Town Boards Enactment (No. 118), to the Batu Pahat Town Council on 12 October 1961. According to the return, Shell Company bought the property for a price of $45,000 in May 1961. The improvement cost $36,125.
Nine days later, the local government sent a letter to Shell Company to clarify whether the latter sum included the cost of tanks and other installations. Shell Company stated it included the tanks, but there were no other installations.
On 15 January 1962, the Batu Pahat Town Council served Shell Company with a notice proposing an assessment of the Holding … at an improved value of $81,125.
Shell Company replied to the notice with a letter on 18 January 1962. They argued that the underground tanks – which cost about $6,695 – should not be assessed.
On 27 January 1962, the Batu Pahat Town Council informed Shell Company that their 18 January 1962 letter “was accepted as an objection”. The Council will hear the objection on 12 February 1962.
During the hearing, the company representatives established that $36,125 included the cost of a brick pit containing one of the underground storage tanks. The included $6,695 referred only to the cost of the underground tanks.
At the hearing, Shell Company representative disclosed that the $36,125 included the cost of the brick pit which housed one of the two underground storage tanks. Both tanks cost $6,695. So, Shell Company argued, these tanks should not be assessed.
Issue before the Court
Adams J pointed out that the only issue comes down to the $6,695 tanks. Do the underground tanks improve the value of the holding?
s. 2, Town Boards Enactment (Johore Laws Enactment No. 118) defined the three pertinent terms as:-
- ‘Improved value‘ of land means the capital sum which the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona fide seller would require;
- ‘Holding‘ means any land, with or without buildings thereon, which is held under a separate document of title, provided that for the purposes of Part IV of this Enactment it shall not include mining land;
- ‘Building‘ includes any house, hut, shed or roofed enclosure, whether used for the purpose of a human habitation or otherwise, and also any wall, fence, platform, septic tank, staging, gate, post, pillar, paling, frame, hoarding, slip, deck, wharf, pier, jetty, landing-stage or bridge, or any structure connected with the foregoing;
The local council, per ss. 25 & 26 of the Enactment, can levy the rate. But what is this rate?
“Any rate or rates imposed under this Part shall be assessed upon the improved value of holdings.”s. 28(i), Town Boards Enactment (Johore Laws Enactment No. 118)
Arguments by the Appellant
The appellants presented several arguments:
- The fuel tanks could not fall under the Enactment’s definition for “building”. Because of that, it could not have improved the value of the land.
- “includes” is a device that expands the words and phrases in the body of that statute;
- A list that follows “include” does not limit, but calls for a comprehension-oriented interpretation;
- “include” could also be interpreted as “mean and include” (per Lord Watson in Dilworth v Commissioner of Stamps  AC 99).
- “Building” interpretation needs to be further elaborated:
- “Building” is anything … of substantial size, constructed in situ, only to be removed by demolition and it must be attached to the realty (per Jenkins J. in Cardiff Rating Authority v Guest Keen Baldwins Iron & Steel Co  1 All ER 27)
- A piece of plant that in its natural import was not a building or a structure connected to a building did not necessarily become so because it was large or because when set up in a battery and was of considerable size and height (per Denning L.J in BP Refinery (Kent) Ltd v Walker  1 All ER 700 716)
- Fuel tanks at a petrol station did not fall within purview of s. 24 of the Rating and Valuation Act, 1925, and the Plant & Machinery (Valuation for Rating) Order, 1927 and of Schedule 3 to the Act as settled by the Order of 1927 (Shell-Mex and BP, Ltd v Holyoak  1 All ER 391)
Arguments by the Respondents
On the other hand, the respondent put forward that since the assessment was based on the improved value, any improvement made to the land must improve the value.
First, Shell Company bought an empty land (the holding). After that, the company constructed a petrol station on it. When the company sells the land at and the station at a reasonable value, the improved value in the form of the land’s capital value is realised. Selling the petrol station without the fuel storage tanks makes it a useless petrol station. The holding would be damaged if these tanks were removed.
The respondents submitted that the Court should take the commonsense view: once the fuel tanks are buried in their bed, they merge into the concrete pit in which the bed is laid and become ‘in the nature of a structure’ which is connected with the building which is the pit (per Lord Denning in Shell-Mex and BP, Ltd v Holyoak  1 All ER 391).
In response to the respondent’s arguments, the appellant contends that Lord Denning’s view was insufficient in the context of the Enactment. The Enactment requires one of two conditions to be satisfied:
- It falls within the definition of “building”; or
- It is a structure connected to the building.
In order to define “structure”, the appellant also urged the High Court to apply South Wales Aluminium Co Ltd v The Assessment Committee for the Neath Assessment Area  2 All ER 587.
By regarding that everything improving the holding on the holding at the time of assessment – regardless of whether it is a building or not – opens up a fallacious argument. The slippery slope would land trade fittings and other fittings that fail to meet the definition of “building” in a broad “improvement” classification.
With regards to the sale of the holdings, fuel tanks would be subject of a separate contract independent of the sale of the holding.
The Court’s Reasoning
If I am right in holding that the improved value of a holding must be based on the land and such things brought on to the land that attach to and form an integral part of the land, that is to say, on the facts of this case, the buildings, then the cost of the tanks must be excluded from the assessment because they are not buildings as defined under the Enactment. This I think must be correct. The basis upon which a ratepayer is to be assessed is a matter for the legislature. If the ratepayer were to be expected to pay on everything that he brought on to his holding for his own comfort or business which might in the widest sense be called an improvement, the law would have said so. It has not done so. It merely bases the assessment on the improved value of the holding which is the capital sum which the holding (that is to say the land and any buildings on it) would be expected to realise if offered for sale on such reasonable terms as a bona fide vendor would require.Ian Chin J
The High Court allowed the appeal. The assessment was revised by deleting the $6,695 from the original sum.
The Local Government Act 1976 was passed by the Parliament of Malaysia. The Bill received Royal Assent on 18 March 1976. That’s about 14 years after the judgement of the High Court. It became enforceable throughout all of Johor by 1 September 1979.
Per s. 166, the Local Government Act 1976 repeals all the laws listed in its Second Schedule. This included the Town Boards Enactment (Johore Laws Enactment No. 118) except for certain sections.
For context, the Act’s s. 2 interprets the terms as:
- ‘Improved value‘ of holding means the price that an owner willing, and not obliged to sell might reasonably expect to obtain from a willing purchaser with whom he was bargaining, for sale and purchase of the holding;
- ‘Holding‘ means any land, with or without buildings thereon, which is held under a separate document of title and in the case of subdivided buildings, the common property and any parcel thereof and, in the case of Penang and Malacca, “holding” includes messuages, buildings easements and hereditaments of any tenure, whether open or enclosed, whether built on or not, whether public or private, and whether maintained or not under statutory authority;
- ‘Building‘ includes any house, hut, shed or roofed enclosure, whether used for the purpose of human habitation or otherwise, and also any wall, fence, platform, underground tank, staging, gate, post, pillar, paling, frame, hoarding, slip, dock, wharf, pier, jetty, landing-stage, swimming pool, bridge, railway lines, transmission lines, cables, rediffusion lines, overhead or underground pipelines, or any other structure, support or foundation;
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