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Neutral Citation Number: [2013] EWHC 1237 (Admin) |
|
|
Case No: CO/8616/2012 |
IN
THE
HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
|
|
Royal Courts of Justice Strand, London, WC2A 2LL |
|
|
14/05/2013 |
B e f o r e :
THE
HONOURABLE MR JUSTICE SALES
____________________
Between:
____________________
Mr Simon Myerson QC & Mr Jonathan Rule (instructed by Cullimore Dutton) for
the Public Safety Charitable Trust
Mr Cain Ormondroyd (instructed by
the
Councils) for
the
Councils
Hearing dates: 1/5/13
____________________
HTML VERSION OF JUDGMENT
____________________
Crown Copyright ©
Mr Justice Sales :
Introduction
- There are before
the
court three appeals by way of case stated from magistrates' courts which each raise
the
same central issue concerning
the
test for relief for charities from non-domestic rates in relation to
the
activities of
the Public Safety Charitable Trust
("
the
PSCT").
The
proceedings in each case concerned an application by
the
relevant rating authority to
the
magistrates' court for a liability order against
the
PSCT requiring payment of non-domestic rates by
the
PSCT in respect of commercial properties occupied by it. In this judgment I will refer to
the
rating authorities as "
the
Councils". In
the
first two cases (Milton Keynes and South Cambridgeshire)
the
Councils were successful and a liability order was imposed. In those cases,
the
PSCT is
the
appellant and
the
Councils are
the
respondents. In
the
third case (Cheshire West and Chester),
the
magistrates' court rejected
the
Council's application for a liability order. In that case,
the
Council is
the
appellant and
the
PSCT is
the
respondent. These cases are test cases.
The
PSCT has taken a large number of leases of commercial properties nationwide with a view to operating in
the
same way as in these cases and claiming relief from payment of non-domestic rates.
Factual Background
The
PSCT has a basic method of operation common across all three cases. It takes a lease of commercial premises in respect of which
the
owner would be liable to pay non-domestic rates (since there is a liability to pay rates in relation to unoccupied commercial premises). It claims to be entitled to relief from payment of rates in respect of
the
premises.
The
lease is for a nominal or peppercorn rent; it is subject to a short notice period (say, seven days); and
the
landlord pays
the
PSCT a "reverse premium" in respect of its occupation. In this way,
the
saving in terms of relief from liability for non-domestic rates is shared between
the
landlord and
the
PSCT,
the
loser being
the public
purse.
The
PSCT arranges for a broadcasting transmitter or transmitters, each similar in size to a domestic broadband box, to be placed at
the
premises. This equipment takes up a minimal amount of physical space at
the
premises. It is connected to
the
existing power supply. It provides free wireless internet access ("wifi") to anyone within range of
the
transmitter or transmitters, and they also broadcast Bluetooth messages on crime prevention and
public safety
related themes to willing recipients who are in range and have a Bluetooth enabled mobile phone.
The
provision of such a free wifi service and free messages is a service which is
charitable
in nature:
the
PSCT is a registered charity.
The
equipment remains in operation without human assistance, apart from occasional maintenance visits.
The
premises are otherwise unused.
The
PSCT becomes liable to pay non-domestic rates by reason of its tenancy of
the
premises. It claims relief on
the
basis that it is a charity in occupation of
the
relevant hereditament (i.e.
the
unit of property used for rating purposes) and
the
hereditament is "wholly or mainly used for
charitable
purposes" (section 43(6)(a) of
the
Local Government Finance Act 1988 – "
the
LGFA").
The
Milton Keynes case concerns office premises at 1st Floor, Marlborough Court, Sunrise Parkway, Milton Keynes.
The
premises were leased by
the
PSCT for one year from 1 April 2011. Four transmitters were installed.
The
Council, as billing authority, required
the
PSCT to pay £48,950.38 in rates for
the
period 1 April 2011 to 31 March 2012.
The
PSCT applied for 80% mandatory relief under section 43 of
the
LGFA and for a further 20% discretionary relief under section 47 of
the
LGFA in respect of those rates. Relief from rates was refused by
the
Council under section 43 on
the
basis that
the
hereditament was not wholly or mainly used for
charitable
purposes and under section 47 in
the
exercise of its discretion.
- Recovery proceedings were commenced in December 2011 seeking
the
sum of £48,975.38 in unpaid rates from
the
PSCT.
The
PSCT resisted payment of 80% of that amount, relying on section 43 of
the
LGFA. It was common ground that
the
PSCT is a charity and that it was
the
rateable occupier of
the
premises at
the
relevant time.
The
issue dividing
the
parties was whether
the
hereditament was wholly or mainly used for a
charitable
purpose. DJ Matthews sitting in
the
local magistrates' court granted an order requiring
the
PSCT to pay
the
full sum. She accepted
the
Council's submission that
the
PSCT did not so use
the
premises.
- In reaching that conclusion, DJ Matthews had regard to "
the
limited space within
the
hereditament used to further
the charitable
purposes (0.1% would be a realistic estimate),
the
time for which
the
hereditament is used for
charitable
purposes (24/7),
the
nature of
the
main use (i.e. empty space, or lack of use),
the
limited range of
the
provision of free wi fi and
the
fact that access is required to
the
premises infrequently" (para. [10] of her judgment, emphasis in original; also see para. [28]). At para. [30] she held:
"I find that
the
relevant part of
the
first floor was mainly redundant. Its main use was therefore not
charitable
. Marlborough Court had been designated as offices.
The
relevant part of
the
first floor office was but minimally in use and rarely attended by anyone.
The
operation did not require this amount of floor space, most of which was distinctly unused. I have already commented on
the
limited scope for use of
the
services.
The
constant transmission of messages and provision of free wi fi, and
the
constant use of electricity and phone lines does not detract from my view that
the
premises were not wholly or mainly used for
charitable
purposes" (emphasis in original).
The
South Cambridgeshire case concerns four sets of industrial/business premises: Unit N, Peek House, Sawston; Unit C, 1st Floor, Peek House, Sawston; Plot 2,
The
Grip, Linton; and Unit 10C,
The
Grip, Linton.
The
first and second were leased by
the
PSCT from 1 April 2011,
the
third and fourth from 1 July 2011. In each case,
the
lease was for 12 months at a rent of £1.
The
PSCT applied to
the
Council for relief from rates under sections 43 and 47 of
the
LGFA. Relief under section 47 was refused by
the
Council in its discretion. Relief under section 43 was originally refused by
the
Council on
the
grounds that
the
relevant hereditaments were not used "wholly or mainly" for
charitable
purposes.
The
Council also informed
the
Valuation Office Agency ("
the
VOA") about
the
nature of
the
PSCT's occupation of
the
premises, so that
the
VOA could consider whether
the
rating list should be amended.
The
VOA decided that
the
list should be amended, which it did on 14 September 2011 to list two distinct hereditaments for rating purposes in respect of each site:
the
premises ("
the
main hereditament") and
the
broadcasting equipment installed at
the
premises ("
the
wifi hereditament").
The
PSCT again sought relief from rates in relation to both hereditaments at each premises. Discretionary relief was again refused. Mandatory relief was granted by
the
Council in respect of
the
wifi hereditaments (which
the
Council accepted were wholly or mainly used for
charitable
purposes) but refused in respect of
the
main hereditaments, again because they were not wholly or mainly used for
charitable
purposes. In January 2012
the
Council issued proceedings in
the
local magistrates' court for a liability order in
the
sum of £35,339.18 in respect of unpaid rates in respect of
the
main hereditaments. On 29 March 2012 a bench of lay magistrates heard
the
case and made
the
order sought by
the
Council.
- According to
the
statement of case prepared by
the
magistrates, at paragraph 7, they were of
the
opinion that:
"…
b)
The
statutory test as to whether
the
main hereditaments were used "wholly or mainly" is a question of common sense looking at all of
the
evidence before us and deciding on a broad basis whether
the
properties were used wholly or mainly for
charitable
purposes; further,
the
nature and intended use of
the
Units is also a factor to be taken into consideration.
c)
The
precise boundary between
the
two hereditaments in each Unit had not been specified, but in any event we did not think that
the
use of one or two sockets or plugs in
the
main hereditaments would satisfy
the
statutory test.
d)
The
Units are clearly business/industrial premises and
the
use of them for
the charitable
purposes of
the
Appellant was not their intended use.
e) Commercial Links do not have
the
manpower and time to visit daily
the
numerous premises
the
Appellant leases in Cambridgeshire never mind their premises in
the
rest of
the
country.
f) Commercial Links had visited
the
premises infrequently as they could access
the
wi-fi equipment remotely if required. Accordingly,
the
use made by
the
appellant of
the
Units during
the
period spanning
the
Respondent's complaint for liability orders was minimal.
g) Because
the
use of
the
main hereditaments was minimal, and not what
the
buildings were originally intended to be used for, we concluded that
the
four main hereditaments were not being used wholly or mainly for
charitable
purposes."
The
Cheshire West and Chester case concerns a four floor office building at 1 Heritage Court, Lower Bridge Street, Chester.
The
PSCT leased
the
premises from 12 December 2010 pursuant to a written lease completed on 7 February 2011.
The
rent was £1 p.a. with a reverse premium of £7,607.25 payable to
the
PSCT. There was a similar lease dated 14 February 2012 for
the
following year.
The
PSCT placed 13 transmitters in
the
building.
The
number could be increased or decreased as
the
PSCT saw fit, but it appears that
the
number of transmitters maintained at
the
building was constant over time.
- Relief against rates was originally granted by
the
Council, but that decision was later reviewed.
The
Council informed
the
VOA about
the
nature of
the
PSCT's occupation of
the
premises, and
the
VOA decided to amend
the
rating list with effect from 12 December 2010 to distinguish between a main hereditament for
the
building and a wifi hereditament in respect of
the
PSCT's equipment at
the
site.
The
description of
the
wifi hereditament in
the
list was given as "wifi site", and its address was given as "wifi site at 1, Heritage Court, Lower Bridge Street, CH1 1RD." Its rateable value is listed as £100. By contrast,
the
rateable value of
the
building constituting
the
main hereditament is £52,500.
The
Council allowed relief in relation to
the
wifi hereditament, but as in
the
other cases refused relief in relation to
the
main hereditament.
The
Council issued proceedings in
the
local magistrates' court for a liability order.
The
case was heard by DJ Sanders. In a written judgment dated 26 June 2012, he construed
the
wifi hereditament narrowly, as a hereditament comprising only one of
the
13 transmitters at
the
building (he did not specify which of
the
13 it was). That left
the
remaining 12 transmitters as located in
the
main hereditament. On that basis, he found that PSCT were using
the
main hereditament "wholly or mainly" for
charitable
purposes, there being no other use to which
the
main hereditament was being put.
- DJ Sanders was doubtful about
the
validity of
the
wifi hereditament: "I struggle to define
the
WiFi hereditament …" (para. [49] of
the
judgment); "I can find no precedent for
the
sort of moveable, transient hereditament which forms
the
subject of these proceedings …" (para. [51]). He recognised that it was not open to him to determine whether
the
VOA's decision to list
the
main hereditament and
the
wifi hereditament separately was lawful or not, since there was a distinct procedural route available to
the
PSCT to challenge that decision (paras. [52]-[54]). However, his concerns about
the
wifi hereditament led him to construe
the
entry for it in
the
list narrowly:
"55. I am however faced with
the
difficulty of interpreting that determination, and that is clearly something which I am entitled to consider. For reasons which I have already outlined,
the
determination is poorly worded, vague and extremely hard to reconcile with
the
factual basis of this case.
56. It seems to me that, where there is ambiguity or lack of clarity in
the
definition of
the
hereditament, then fairness dictates that
the
hereditament should be construed narrowly so as to benefit
the
person liable to pay
the
rates and not
the
person seeking to collect
the
rates. In those circumstances, I have to be satisfied that a separate hereditament exists somewhere within
the
building and that it contains a Bluetooth/Wi-Fi transmitter. As a matter of fact, I find that
the
individual transmitters, whilst forming part of a wireless network, are not physically connected and are separate entities.
57. However
the
VOA did not seek to create 13 separate hereditaments which must mean that at least 12 of
the
transmitters are located in
the
wider hereditament which comprises
the
office building and which is
the
subject of
the
current application for a liability order."
- In relation to
the
main hereditament, DJ Sanders identified
the
dispute between
the
parties as concerning whether
the
words "wholly or mainly used" in section 43(6) of
the
LGFA relate to "
the
amount of actual use of
the
hereditament" (as submitted by
the
Council) or "
the
purpose of
the
use of
the
hereditament" (as submitted by
the
PSCT): paras. [70]-[71]. After a review of authorities, he held that
the
latter approach is correct, and found that as
the
only use to which
the
PSCT put
the
hereditament was related to
the
provision of
the
Bluetooth/wifi service, which
the
Council accepted was a
charitable
purpose,
the
PSCT was entitled to mandatory relief from rates under section 43(6) of
the
LGFA: paras. [72]-[77].
- Thus it may be seen that on
the
main point of interpretation of section 43(6) in issue on these appeals, DJ Sanders came to
the
view that
the
formula in that provision requires a focus on
the
purpose for which premises which constitute a hereditament are used, whereas
the
other courts below came to
the
different conclusion that
the
formula requires a focus on
the
actual extent of use for
charitable
purposes to which such premises are put. In all three cases, if
the
proper approach is to examine both
the
purpose of
the
use to see that it is
charitable
and
the
actual extent of use of
the
premises for such purpose ("
the
extent of use interpretation"), that use appears very slight by contrast with
the
general non-use of
the
premises for any purpose. As DJ Matthews put it in
the
Milton Keynes case,
the
relevant part of
the
premises are mainly redundant, and on this approach it can be said that
the
main use of
the
premises is not for
charitable
purposes. On
the
other hand, in all three cases, if
the
proper approach is to examine only
the
purpose of
the
use of
the
premises ("
the
purpose of use interpretation"),
the
only purpose for which they are being used is a
charitable
purpose (since leaving them vacant is not to use them for a purpose), and it is plausible to say that they are wholly or mainly used for that
charitable
purpose, as DJ Sanders held in
the
Cheshire West and Chester case.
The
proper interpretation of section 43(6), and
the
choice between these two contrasting approaches, is
the
main point of law which arises for determination on these appeals.
- Other issues arise in each of
the
appeals. In
the
first two appeals,
the
PSCT submits that
the
magistrates' courts erred in law in certain respects, even if (contrary to
the
PSCT's primary submission)
the
extent of use interpretation is correct. In particular, it is said
the
courts erred by having regard to
the
nature or designation of
the
buildings in question, which is submitted to be an irrelevant consideration. In
the
third appeal,
the
Council submits that DJ Sanders erred in law in his approach to
the
wifi hereditament and, consequently, in his approach to
the
use of
the
main hereditament.
The
Legal Framework
The
system of non-domestic rates is found primarily in
the
LGFA and subordinate legislation.
The
unit of rateable occupation is
the
hereditament. By virtue of section 64(1) of
the
LGFA read with section 115(1) of
the
General Rate Act 1967, to which it refers, a hereditament is defined as:
"property which is or may become liable to a rate, being a unit of property which is, or would fall to be, shown as a separate items in
the
valuation list."
There is a considerable body of case-law in relation to questions concerning hereditaments and rating law generally that has built up over a considerable period of time.
The
LGFA establishes a dual set of responsibilities. Under section 41,
the
valuation officer for each billing authority is obliged to compile and maintain a local list of hereditaments for that authority's area. However, it is
the
billing authority (each Council in
the
present cases) which is responsible for issuing bills for rates and taking decisions about recovery of rates.
The
billing authority also has an obligation to inform a valuation officer of any matters which come to its attention which suggest that
the
local list might require alteration. In relation to
the
South Cambridgeshire and
the
Cheshire West and Chester cases,
the
local lists were amended in
the
light of information so provided by
the
Councils, so as to distinguish between
the
main hereditament and
the
wifi hereditament in each case.
- A valuation officer has power to alter
the
local list as part of his duty to maintain it under section 41 of
the
LGFA. There are also regulations in place -
the
Non-Domestic Rating (Alteration of Lists and Appeals)(England) Regulations 2009 - which provide for a procedure under which any interested person may make a proposal for alteration of hereditaments set out in
the
list. Where a proposal is validly made,
the
valuation officer has to decide whether to make
the
proposed alteration or not. Where he does not, there is a procedure for
the
disagreement to be referred to
the
Valuation Tribunal for England as an appeal by
the
proposer against
the
valuation officer's refusal to alter
the
list. Appeals lie from that Tribunal to
the
Upper Tribunal (Lands Chamber). It was because of
the
availability of this proposal and appeal procedure that DJ Sanders in
the
Cheshire West and Chester case considered that he was not entitled to disallow or disregard
the
wifi hereditament in that case, since any challenge to
the
separate listing of that hereditament in
the
local list should be made using this procedure, rather than raised upon an application by a billing authority to a magistrates' court for a liability order: see para. [26] below.
- Where a hereditament on
the
list is occupied,
the
ratepayer is
the
occupier: section 43(1) of
the
LGFA. Where a hereditament is not occupied, rates will continue to be payable by
the
owner (defined as "
the
person entitled to possession" of it) if it falls within a class prescribed in regulations: section 45(1) of
the
LGFA. All non-domestic hereditaments are prescribed, save for certain exceptions which are not relevant here. So if a commercial property is unlet and unoccupied,
the
owner of it will be liable (after a defined period) to pay rates in respect of it. This gives owners of such properties an incentive to let them for occupation by
the
PSCT and to pay a reverse premium in respect of such letting.
- Section 45A of
the
LGFA provides that where section 45 applies,
the
chargeable amount shall be zero in certain cases, including "where (a)
the
ratepayer is a charity or trustees for a charity, and (b) it appears that when next in use
the
hereditament will be wholly or mainly used for
charitable
purposes (whether of that charity or that and other charities)" (section 45A(2)). This formula corresponds to that used in section 43(6), which is in issue on these appeals.
The
collection and enforcement of non-domestic rates are governed by
the
Non-Domestic Rating (Collection and Enforcement)(Local Lists) Regulations 1989. A billing authority issues demand notices to persons who are liable to pay rates and, where they are not paid, may apply to
the
magistrates' court for a liability order. Regulation 23(1) provides that any matter which could be raised as an appeal under section 55 of
the
LGFA may not be raised in proceedings for a liability order in
the
magistrates' court.
- Section 43(1) of
the
LGFA (headed "Occupied hereditaments: liability") provides that a person shall be subject to a non-domestic rate if on
the
relevant day
the
person "is in occupation or all or part of
the
hereditament" (section 43(1)(a)), and
the
hereditament is shown for that day in
the
local non-domestic rating list (section 43(1)(b)). This formulation means that any degree of occupation of
the
hereditament is sufficient to give rise to a liability to rates on
the
part of a person occupying
the
property. Occupation is assessed according to long-standing principles, in particular as set out in Laing v Kingswood AAAC [1949] 1 KB 344.
- Section 43(5) provides for a formula for
the
chargeable amount for a chargeable day which is to operate where subsection (6) applies.
The
effect of
the
formula is that in cases falling within subsection (6) there is mandatory 80% relief from non-domestic rates. There is also a discretion under section 47 for a billing authority to waive liability to rates, including for
the
additional 20% in these cases, but
the
operation of section 47 is not in issue on these appeals.
- Section 43(6) of
the
LGFA provides in relevant part as follows:
"This subsection applies where on
the
day concerned –
(a)
the
ratepayer is a charity or trustees for a charity and
the
hereditament is wholly or mainly used for
charitable
purposes (whether of that charity or that and other charities) ..."
This is
the
provision in issue on these appeals.
- Before 1955 there was no statutory provision for
the
granting of relief from rates to charities. Section 8 of
the
Rating and Valuation Act 1955 provided for relief in respect of "any hereditament occupied for
the
purposes of an organisation (whether corporate or unincorporated) which is not established or conducted for profit and whose main objects are
charitable
or are otherwise concerned with
the
advancement of religion, education or social welfare". There was no requirement that
the
hereditament be wholly or mainly used for
charitable
purposes.
The
position was modified in 1961 to adopt
the
current formula. Section 11 of
the
Rating and Valuation Act 1961 provided for relief in respect of "any hereditament occupied by, or by trustees for, a charity and wholly or mainly used for
charitable
purposes (whether of that charity or of that and other charities)." Section 11 of
the
1961 Act was repealed by
the
General Rate Act 1967, but re-enacted in section 40 of that Act.
The
1967 Act was repealed and replaced by
the
LGFA.
Analysis
Construction of section 43(6) of
the
LGFA
The
dispute between
the
parties whether
the
proper construction of section 43(6) is
the
extent of use interpretation or
the
purpose interpretation has been resolved in a recent decision of
the
Divisional Court in favour of
the
extent of use interpretation as contended for by
the
Councils: see Kenya Aid Programme v Sheffield City Council [2013] EWHC 54 Admin, [32]-[35] per Treacy LJ, with King J agreeing at [66]. Having reviewed certain authorities to which I was also taken in
the
course of argument, at [35] Treacy LJ set out his conclusion on
the
proper interpretation of section 43(6) as follows:
"35. In my judgment there is force in
the
difference of emphasis which [counsel for
the
billing authority] highlights between "occupation" in Section 43(1) and "use" in Section 43(6), and also in her submission that
the
qualifying adverbs "wholly" and "mainly" are important in looking at
the
context of
the
use. I would hold that there is no reason for limiting
the
ambit of
the
phrase in
the
way contended for by
the
Appellant. As was pointed out in
the
English Speaking Union case [English Speaking Union Scottish Branches Educational Fund v City of Edinburgh Council [2009] SLT 1051] and again in argument before us,
the
Appellant's construction would substitute
the
word "solely" for
the
word "wholly". I see no reason why
the
statute should be thus narrowly confined.
The
natural reading and meaning of
the
words used are, in my judgment, apt to cover not only consideration of
the
purpose of
the
use, but also
the
extent or amount of
the
actual use. It follows therefore that I would hold that
the
judge was right to take account of and place weight upon
the
extent to which
the
premises were used."
- In accordance with usual principles of judicial comity, I should follow another first instance decision unless I am convinced that
the
decision is wrong: R v HM Coroner for Greater Manchester, ex p. Tal [1985] QB 67, 81. That constraint has particular force where a puisne judge is invited to depart from a decision of a unanimous Divisional Court.
- Nevertheless, Mr Myerson QC for
the
PSCT did invite me to disagree with
the
ruling of
the
Divisional Court in Kenya Aid, and to adopt
the
purpose interpretation of section 43(6). I decline that invitation. Far from being convinced that
the
Divisional Court was wrong in adopting
the
extent of use interpretation of section 43(6), I think that it was right. It is worth mentioning that in my preparation for this case, before being referred to or reading
the
judgment in Kenya Aid, I had independently reached
the
same view as to
the
natural meaning of
the
words used as did Treacy LJ. In
the
context of this legislation and having regard to
the
language used, it is reasonable to infer that Parliament intended that
the
substantial mandatory exemption from rates for a charity in occupation of a building should depend upon
the
charity actually making extensive use of
the
premises for
charitable
purposes (i.e. use of
the
building which is substantially and in real terms for
the public
benefit, so as to justify exemption from ordinary tax in
the
form of non-domestic rates), rather than leaving them mainly unused.
- Moreover,
the
same interpretation of
the
formula, as used in section 4(2) of
the
Local Government (Financial Provisions, etc.) (Scotland) Act 1962, was adopted by Lord Bonomy in
the
Court of Session in
the
English Speaking Union case. In that case,
the
council refused to grant
charitable
relief for an office building occupied by
the
English Speaking Union, on
the
grounds that it only used
the
first floor of an eight storey building as offices, with
the
other seven floors being left vacant, so that
the
building was not "wholly or mainly used for
charitable
purposes".
The
court upheld that decision even though, so far as
the
purpose of
the
use was concerned, it was entirely
charitable
. This is further persuasive authority which supports
the
extent of use interpretation of section 43(6). Separate judges sitting in three different cases have all formed
the
view that
the
natural interpretation of
the
words used in section 43(6) is
the
extent of use interpretation.
- To my mind,
the
strongest of
the
arguments put forward by Mr Myerson against this construction of section 43(6) was that
the
extent of use interpretation would strip
the
word "wholly" of all sensible meaning in
the
context of that provision. He submitted that on
the
extent of use interpretation
the
issue would always resolve into a question of whether
the
hereditament is "mainly used" for
charitable
purposes, since buildings would typically be left unused at night, or areas within them would not be in actual use all
the
time. If that were right, and
the
word "wholly" were rendered meaningless upon this interpretation, it could be a strong textual indicator in favour of
the
alternative, purpose of use interpretation.
- However, I do not think that
the
argument can be sustained. A building may fairly and properly be described as being wholly used for a particular purpose even though not every square metre of floor space is in constant use all
the
time. For instance,
the
whole of a room used as an office can be described as being wholly used as an office, even though it is spacious and not crammed with people working. I also think it can fairly be described as being wholly used as an office, albeit it is closed and left vacant during
the
night. Even if that is not right, it is possible to imagine buildings which indeed are in constant use
the
whole time for
charitable
purposes (e.g. a permanent soup kitchen to feed
the
destitute or an office staffed 24 hours a day by
the
Samaritans to be available to give advice to people who feel suicidal). So it cannot be concluded that
the
word "wholly" in
the
phrase "wholly or mainly used for
charitable
purposes" has no meaning or proper function if
the
extent of use interpretation of section 43(6) is adopted.
- Mr Myerson also sought to argue that since
the
only use of
the
premises which constituted occupation of them by
the
PSCT was
the
installation and maintenance of
the
transmitters and wifi system, that should have been treated as
the
entire or only relevant use of
the
premises by
the
PSCT for
the
purposes of
the
test in section 43(6). I reject this contention as well.
The
concept of "occupation" as used in
the
LGFA, in particular in section 43(1), is different from
the
concept of "use" which appears in section 43(6).
The
terminology used is different. There is no good reason to equate
the
two in
the
way Mr Myerson sought to do. In fact,
the
condition for a liability to pay rates stated in section 43(1)(a) is that
the
ratepayer "is in occupation of all or part of
the
hereditament", which makes it clear that a person can have a liability to pay rates in respect of a hereditament even if they do not occupy
the
whole of it, but leave part of it unused. That language is again in strong contrast to
the
language in section 43(6), which states that
the
hereditament must be "wholly or mainly used for
charitable
purposes". There is no basis for reading
the
words used in section 43(6) as limited to consideration of
the
actual extent of occupation by
the
ratepayer.
- None of Mr Myerson's arguments give any good grounds to justify departing from
the
interpretation of section 43(6) arrived at by
the
Divisional Court in Kenya Aid. Therefore, on
the
main issue in
the
three appeals, I am persuaded that
the
Councils are correct. In relation to
the
appeals in
the
Milton Keynes and
the
South Cambridgeshire cases, this means that
the
primary ground of appeal for
the
PSCT is dismissed; and in relation to
the
Cheshire West and Chester case,
the
primary ground of appeal for
the
Council succeeds.
The
PSCT's further grounds of appeal in relation to
the
Milton Keynes and South Cambridgeshire cases
- In my judgment, none of
the
other grounds of appeal relied on by
the
PSCT is made out. I can detect no error of law or assessment in
the
decisions of
the
magistrates' courts in either of these cases.
- In relation to
the
Milton Keynes decision, Mr Myerson was critical of DJ Matthews for failing to have regard to technological advances, and
the
fact that what could now be achieved employing transmitters and minimal physical use of
the
building would formerly have required much more extensive use of
the
premises by staff and/or placement of bulkier equipment. He also said that her judgment did not contain a proper assessment of
the
evidence and that she erred by treating as relevant and giving weight to
the
fact that Marlborough Court had been designated as offices.
- I do not consider that there is any substance in any of these criticisms.
The
suggestion that
the
District Judge should have assessed
the
position by reference to what
the
PSCT might have had to do in years gone by to achieve delivery of a similar service is misconceived. She properly and correctly assessed
the
actual facts in
the
case before her. In
the
context of her judgment, her reference to
the
purpose for which Marlborough Court had been designated was an appropriate way of emphasising just how little actual use of
the
building
the
PSCT was in fact making. On a fair reading, it does not indicate any error of law or approach on her part.
- In relation to
the
South Cambridgeshire decision, Mr Myerson made a similar criticism in relation to
the
magistrates' references to
the
nature and intended use of
the
Units as a factor to be taken into consideration (see sub-paragraphs b), d) and g) of paragraph 7 of
the
Case Stated, set out above). In my view, however,
the
answer is
the
same as in relation to
the
judgment in
the
Milton Keynes. In
the
context of
the
decision,
the
reference to
the
nature and intended use of
the
Units was an appropriate way of emphasising just how little actual use of
the
buildings
the
PSCT was in fact making. Once again, on a fair reading of
the
reasons, it does not indicate any error of law or approach on
the
magistrates' part.
The
Council's further ground of appeal in
the
Cheshire West and Chester case:
the
extent of
the
wifi hereditament
- Mr Ormondroyd for
the
Council submitted that DJ Sanders also erred in his assessment of
the
extent of
the
main hereditament and
the
extent of
the
wifi hereditament. He said that
the
District Judge should have assessed
the
facts on
the
basis that
the
wifi hereditament comprised all 13 transmitters located in
the
building, and that none of
the
transmitters formed part of
the
main hereditament. Subject to such marginal matters as
the
use of electric sockets and such part of
the
physical structure of
the
building as supported
the
transmitters when they were put in position, this should have indicated that
the
extent of use of
the
main hereditament for
charitable
purposes was minimal.
- With all respect to DJ Sanders, I consider that this further ground of appeal is made out.
- Mr Ormondroyd took me to authority which indicated that
the
District Judge's concerns about
the
validity of
the
wifi hereditament were misplaced. Two hereditaments may be found to exist even if there is no clear physical dividing line between them: see e.g. Lancashire and Cheshire Telephone Exchange Co. v
The
Overseers of Manchester (1884-85) LR 14 QBD 267; Gilbert v Hickinbottom [1956] 2 QB 40, 53-54 per Parker LJ. Physical permanence in terms of attachment to
the
land is not required: see e.g. Thomas (Valuation Officer) v Witney Aquatic Co. Ltd [1972] RA 493 (a boat was a hereditament) and Field Place Caravan Park Ltd v Harding [1966] 2 QB 484 (caravans as hereditaments).
The
same land may be subject to rateable occupation for different purposes, on
the
footing that distinct hereditaments may exist in relation to
the
same land: R v Mayor of London (1790) 4 TR 21; Bartlett (Valuation Officer) v Reservoir Aggregates Ltd [1983] RA 254. There is no absolute requirement for physical contiguity in order for a single hereditament (such as
the
wifi network in this case) to exist - it may be sufficient that there is an essential functional link and a substantial degree of propinquity: Edwards v BP Refinery (Llandarcy) [1974] RA 1. These cases strongly suggest that it is lawful and proper for a valuation officer in cases of user of premises by
the
PSCT as in
the
present cases to identify
the
wifi network as a distinct hereditament.
- However,
the
basis on which I find that this ground of appeal is made out is that I consider that it was not properly open to
the
District Judge to question or set aside
the
wifi hereditament (as he himself acknowledged), and that on proper and ordinary construction of
the
entry for
the
wifi hereditament in
the
local rating list he should have held that it covered
the
entire wifi network installed at
the
building, not just a single transmitter thereof.
- As explained in paras. [23] and [26] above, there is a separate dedicated avenue available to
the
PSCT to challenge
the
identification of a wifi hereditament as a hereditament distinct from a main hereditament at a building, by making a proposal for amendment of
the
list and pursuing an appeal to
the
Valuation Tribunal for England and
the
Upper Tribunal if necessary.
The
validity of a hereditament is not open to challenge in enforcement proceedings in
the
magistrates' court.
- In
the
context of this statutory regime, in enforcement proceedings it is incumbent on
the
magistrates' court to give a fair and proper interpretation to
the
description of any relevant hereditament as set out in
the
list, so that all legal issues arising in relation to that hereditament - which might, for example, include whether it is used in particular ways at particular times, and
the
extent of such use, as may be relevant under section 43(6),(6B), (6C) and (6D) of
the
LGFA - can be properly addressed. If
the
magistrates' court does not examine
the
issues before it on
the
basis of a proper interpretation of
the
description of
the
hereditament or hereditaments in question, it will err in law. Until such time as
the
designation of a hereditament in
the
list is challenged by
the
proper avenue and changed, it is conclusive in law as to
the
meaning of
the
hereditament.
- In
the
present case, I consider that
the
District Judge erred in giving
the
wifi hereditament
the
extraordinary and limited interpretation which he preferred. On a fair reading of
the
description of
the
wifi hereditament in
the
rating list, in
the
context in which it had been created, it applied to
the
whole wifi system installed at
the
address.
The
very fact that it did not identify a set number of transmitters is a strong indicator that it was not intended to delimit
the
hereditament by reference to any particular number of transmitters, but rather to designate
the
entire wifi network installed at
the
site as
the
hereditament. By necessary implication from reading
the
entries for
the
wifi hereditament and for
the
main hereditament in
the
list,
the
entire wifi network was not part of
the
distinct main hereditament at
the
site.
- Although this is sufficient to find that this ground of appeal is made out, I should add that I also think that there is force in
the
submission by Mr Ormondroyd that
the
District Judge erred in para. [56] of his judgment in saying that "fairness dictates that
the
hereditament should be construed narrowly". In
the
context of interpretation of
the
extent of a hereditament, fairness provides no sound basis for assuming that a narrow construction should be adopted. Sometimes a narrow construction may be beneficial to
the
taxpayer, but at other times a wider construction may be beneficial to
the
taxpayer.
The
true meaning of a hereditament as described in
the
list cannot vary depending on whether, on
the
particular circumstances of a case, it might suit
the
taxpayer to argue for a wider or narrower construction.
The
task for
the
magistrates' court, rather, is to construe
the
description of
the
hereditament in
the
list in an objective way which is neutral as between
the
billing authority and
the
taxpayer. There is no special reason of fairness why a different approach should be adopted: if
the
taxpayer is dissatisfied with
the
description in
the
list, he can make a proposal for a different or clearer description, and may then appeal to
the
Valuation Tribunal for England if that proposal is not accepted.
The
District Judge should therefore have approached
the
question of
the
application of section 43(6) to
the
main hereditament on
the
footing that
the
main hereditament did not include any part of
the
wifi network at
the
site. Since, however, he treated 12 of
the
13 transmitters as being part of
the
main hereditament, this amounted to a further material error of law on his part.
Conclusion
- For
the
reasons given above, I dismiss
the
appeals in
the
Milton Keynes case and
the
South Cambridgeshire case. I allow
the
Council's appeal in
the
Cheshire West and Chester case.
- There was debate with counsel at
the
hearing what
the
proper course should be relation to
the
Cheshire West and Chester case. Since issues of occupation and extent of use might arise in relation to
the
main hereditament which may possibly require further examination of relevant facts, it was agreed that I should remit
the
case to
the
magistrates' court for it to examine
the
case afresh on
the basis of a correct legal approach.
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URL: http://www.bailii.org/ew/cases/EWHC/Admin/2013/1237.html