Rating — General Rate Act 1967, section 26(3) and (4) — Rating Act 1971, sections 1 and 2 — Exemptions from rating — Premises used as studs for breeding thoroughbred racing stock — Stud premises, including covering yards and paddocks, within or attached to agricultural land — Broad question, complicated by statutory language, was whether for rating purposes the breeding of such thoroughbred horses on premises with agricultural land attached or adjoining should be equated with the breeding of cattle and sheep on agricultural land — Review of English and Scottish authorities — Difference of past treatment in England and Scotland — Decision in Lord Glanely v Wightman misunderstood, but now distinguished — Issue in the present case, which arose on appeal from the Lands Tribunal, was whether the appellants’ stud buildings were agricultural buildings within the definition contained in section 26(4) of the General Rate Act 1967 as extended by section 1(1)(a) of the Rating Act 1971 — This issue turned on two questions of construction: first, whether the buildings, which were admittedly occupied together with agricultural land, were being used ‘solely in connection with agricultural operations’ on that land; and, second, whether, if not, horses bred for riding, hunting or racing were ‘livestock’ so as to bring the case within section 2(1)(a) of the 1971 Act — Held, dismissing the appeal, that the grazing of the thoroughbred stock in question was not an agricultural operation within section 26(4) of the 1967 Act, so that the question whether the buildings were being used, or used solely, in connection with agricultural operations did not strictly arise; and that the thoroughbred stock were not ‘livestock’ within section 2(1)(a) of the 1971 Act — Lloyd LJ, in contrast with Lawton and Balcombe LJJ, would have held that the buildings were used solely in connection with the operations if he had considered the latter agricultural — Appeal dismissed, but leave to appeal to House of Lords granted
The following
cases are referred to in this report.
Belmont
Farm Ltd v Minister of Housing and Local
Government (1962) 13 P&CR 417; 60 LGR 319, DC
Cresswell
(VO) v BOC Ltd [1980] 1 WLR 1556; [1980] 3
All ER 443; [1980] RA 213; [1980] EGD 831; (1980) 255 EG 1101, [1980] 2 EGLR
131, CA
Crowe
(VO) v Lloyds British Testing Co Ltd [1960]
1 QB 592; [1960] 2 WLR 227; [1960] 1 All ER 411; (1960) 58 LGR 101; 53 R&IT
54; 5 RRC 371, CA
Derby
(Lord) v Newmarket Assessment Committee (1930)
13 R&IT 50
Eastwood
(W & J B) Ltd v Herrod [1971] AC 160;
[1970] 2 WLR 775; [1970] 1 All ER 774, HL
Evans v Bailey (VO) [1981] EGD 730; (1981) 260 EG 61, [1981] 2
EGLR 221
Forth
Stud Ltd v East Lothian Assessor [1969] RA
35
Gilmore v Baker-Carr [1962] 1 WLR 1165; [1962] 3 All ER 230; [1962]
RVR 486; (1962) 9 RRC 240; [1962] RA 379, CA
Glanely
(Lord) v Wightman [1933] AC 618
Hardie v Assessor for West Lothian 1940 SC 329
Inland
Revenue v Ardross Estate Co 1930 SC 487
Kidson v Macdonald [1974] Ch 339; [1974] 2 WLR 566; [1974] 1 All ER
849; 49 TC 503
McClinton v McFall [1974] EGD 16; (1974) 232 EG 707, CA
Malcolm v Lockhart [1919] AC 463, HL
Minister
of Agriculture, Fisheries and Food v Appleton
[1970] 1 QB 221; [1969] 3 WLR 755; [1969] 3 All ER 105, DC
Normanton
(Earl of) v Giles [1980] 1 WLR 28; [1980] 1
All ER 106, HL
Peterborough
Royal Foxhound Show Society v Inland Revenue
Commissioners [1936] 2 KB 497
Sargaison v Roberts [1969] 1 WLR 951; [1969] 3 All ER 1072
This was an
appeal by Whitsbury Farm & Stud Ltd from a decision of the Lands Tribunal
rejecting the appellants’ contention that the stud hereditaments occupied by
them at Whitsbury, Hampshire, should be exempt from rating. The decision of the
Lands Tribunal (V G Wellings QC) is reported at [1985] 1 EGLR 227 and (1984)
274 EG 403.
W J Glover QC
and Alun Alesbury (instructed by Ward Bowie, agents for Rustons & Lloyd, of
Newmarket) appeared on behalf of the appellants; Alan Fletcher QC and Nicholas
Huskinson (instructed by the Solicitor of Inland Revenue) represented the
respondent valuation officer.
Giving
judgment, LAWTON LJ said: This is an appeal by Whitsbury Farm & Stud Ltd,
who are the owners of a stud for the breeding of thoroughbred racing stock,
against a refusal by the Lands Tribunal to declare divers buildings on their
land exempt from rating. The appeal raises issues which have been discussed and
litigated since at least 1930 and which are of interest to all who are engaged
in breeding thoroughbred racing stock.
The facts
The facts set
out in the case stated by the Lands. Tribunal can be stated shortly. The
appellants occupy at Whitsbury in Hampshire four separate stud hereditaments.
Each stud lies within, or is attached to, land which is agricultural land
within the meaning of section 26(3) of the General Rate Act 1967. At all
material times the stud buildings were in excellent condition and were
essential for accommodating and breeding thoroughbred racing stock. The
covering of mares by the stallions was usually accomplished in a covering yard;
but sometimes it took place outside in the adjoining paddocks. The stallions
were owned by a syndicate of 40 shareholders. The appellants were shareholders
in this syndicate. The syndicate made contracts with those owners who brought
mares to the stallions to be covered. The income from the service fees went to
such of the shareholders as sold the breeding rights. The appellants were paid
by the syndicate the cost of keeping the stallions. The mares which were
covered were either the appellants’ own property or visiting mares. Visiting
mares were kept at the stud until such time, usually 60 days, as it took to
discover whether they were in foal. Some of the appellants’ mares were sent to
other studs to be covered. Because of the Jockey Club’s rules for deciding the
age of racehorses, covering took place between February 15 and July 15 each
year. Nearly all the mares produced their foals at night in the foaling boxes,
but a few did so in the paddocks in daylight. All the mares and stallions had
access to paddocks and, save in frosty weather, the mares spent most of each
day in them. Paddocks were essential for the running of the appellants’ stud.
They afforded space for exercise; and for mares and foals the grass in them
provided during the growing season, that is from March until high summer,
nourishment of a kind which mares required for providing milk for their foals
and bringing them into season and foals for growth. The paddocks were well
looked after because producing good-quality grass was important for breeding.
From time to time, sheep and cattle were put into the paddocks, the object of
doing so being to keep the grass down and to stop seeding. The appellants’ stud
was run in the way in which studs are normally run. Lord Wright’s description
in Lord Glanely v Wightman [1933] AC 618 at pp 634 to 635 of how
Lord Glanely’s stud was run is much the same as that in the case stated in this
case. No more detail is necessary for providing the factual background to this
appeal.
The issues
Broadly
stated, this court has to ask itself this question: for rating purposes, should
breeding thoroughbred racing stock on premises with agricultural land attached
or adjoining be equated with the breeding of cattle and sheep on agricultural
land? If it should be, those who run
studs should have the benefit of the same exemptions from rating as the
occupiers of agricultural land enjoy. This broad question, however, has been
complicated by the statutory language in which Parliament has given the
occupiers of agricultural land their exemptions.
The
legislative history
Before 1896
farmers were rated just like other occupiers of land. The Agriculture Rates Act
of that year gave for a period of five years a 50% exemption from rates to the
occupiers of ‘agricultural land’, which was defined in section 9 as follows:
The
expression ‘agricultural land’ means any land used as arable, meadow,
or pasture ground only, cottage gardens exceeding one quarter of an acre,
market gardens, nursery grounds, orchards or allotments, but does not include
land occupied together with a house as a park, gardens, other than as
aforesaid, pleasure-grounds, or any land kept or preserved mainly or
exclusively for purposes of sport or recreation, or land used as a racecourse.
Thereafter
other Acts extended the period and increased the percentage of the exemption.
The Local Government Act 1929 derated agricultural land fully. The General Rate
Act 1967 consolidated various enactments relating to rating and valuation and
by section 26 continued the policy of the earlier statutes of derating
‘agricultural land’ and ‘agricultural buildings’. Agricultural land was defined
in the 1967 Act in substantially the same terms as in the 1896 Act: see section
26(3). Such differences as there are have no relevance to this appeal. The
relevant part of the definition of ‘agricultural buildings’ in section 26(4)
was as follows:
In this
section, the expression ‘agricultural buildings’ — (a) means buildings (other
than dwellings) occupied together with agricultural land or being or forming
part of a market garden, and in either case used solely in connection with
agricultural operations thereon; . . .
Farmers in
Scotland were given the same kind of exemption from rating as those in England
and Wales; but, as the rating system there was different, as was the legal
terminology for describing interests in land, different wording had to be used.
The first Scottish provision granting partial relief from rates was contained
in the Agricultural Rates, Congested Districts, and Burgh Land Tax Relief
(Scotland) Act 1896. A relevant modern provision was in section 7 of the
Valuation and Rating (Scotland) Act 1956. Subsection (2) was as follows:
‘agricultural
lands and heritages’ means any lands and heritages used for agricultural or
pastoral purposes only or as woodlands, market gardens, orchards, allotments or
allotment gardens and any lands exceeding one quarter of an acre used for the
purpose of poultry farming, but does not include any buildings thereon other
than agricultural buildings, or any garden, yard, garage, outhouse or pertinent
belonging to and occupied along with a dwelling-house, or any land kept or
preserved mainly or exclusively for sporting purposes;
‘agricultural
buildings’ means buildings (other than dwelling-houses) occupied together with
agricultural lands and heritages, or being or forming part of a market garden,
and in either case used solely in connection with agricultural operations
thereon;
Since 1945,
regulatory statutes have been passed which affect agricultural land, which in
the interests of precision and clarity has been defined. One such Act was the
Town and Country Planning Act 1947. By section 12(2) it provided as follows:
. . .
Provided that
the following operations or uses of land shall not be deemed . . . to involve
development of the land . . .
(e) the use of any land for the purposes of
agriculture . . .
Agriculture
was defined in section 119(1):
In this Act .
. . ‘agriculture’ includes . . . dairy farming, the breeding and keeping of
livestock (including any creature kept for the production of food, wool, skins
or fur, or for the purpose of its use in the farming of land) . . .
The 1947 Act
dealt with a subject-matter different from rating; but it was concerned, just
as the General Rate Act 1967 is, with the consequences which follow from
carrying on specified activities on land. It follows, in my judgment, that
decisions upon the construction of section 7(2) of the 1956 Act and section
119(1) of the 1947 Act provide some, but not conclusive, help in the construction
of section 26(3) and (4) of the 1967 Act. I conclude the legislative history
relating to the derating of agricultural land and agricultural buildings with
the Rating Act 1971, which was, according to its long title:
An Act to
extend the provisions relating to the exemption from rating of land and
buildings used in connection with agriculture.
This Act was
passed following the decision in W & J B Eastwood Ltd v Herrod
[1971] AC 160. The House of Lords had adjudged that broiler houses on a farm
were not exempt from rating because they were not ‘agricultural buildings’ as
defined by section 2(2) of the Rating and Valuation (Apportionment) Act 1928,
which was the statute in force when the dispute arose but which was superseded
by section 26(4) of the 1967 Act. The relevant part of the 1971 Act is in
section 2 and is as follows:
Subject to
subsections (2) to (4) of this section, each of the following is an
agricultural building by virtue of this section —
(a) any building used for the keeping or breeding
of livestock; . . .
(2) A building used as mentioned in subsection
(1)(a) of this section is not an agricultural building by virtue of this
section unless either
(a) it is solely so used; or
(b) it is occupied together with agricultural
land (as defined in the principal section) and used also in connection with
agricultural operations on that land, and that other use together with the use
mentioned in subsection (1)(a) of this section is its sole use.
The
English cases
Shortly after
the Local Government Act 1929 derated agricultural land and agricultural
buildings, seven occupiers of studs around Newmarket appealed to West Suffolk
Quarter Sessions against the refusal of the Newmarket Area Rating Assessment
Committee to regard them as exempt from rating on the ground that they were not
occupying agricultural buildings within the meaning of section 2(2) of the 1928
Act. The appeals failed, the court finding that ‘in the circumstances of this
case the breeding of livestock is not an agricultural operation’: see Derby
(Lord) v Newmarket Assessment Committee (1930) 13 R & IT 50. We
were told by counsel that quarter sessions in other parts of England followed
this decision.
Then came Lord
Glanely’s case (supra). It was not concerned with rating. The issue
was whether the fees which Lord Glanely had derived in respect of a stallion he
kept at stud should be assessed to income tax under Schedule D of the Income
Tax Acts, notwithstanding the fact that he had already been assessed under
Schedule B in respect of the occupation of land as occupied in part for
husbandry purposes and in part for stud and racing purposes. The House of Lords
adjudged that he should not be further assessed under Schedule D because the
fees were profits in respect of the occupation of land and were chargeable to
income tax under Schedule B. The decision turned on the construction of the
Income Tax Acts and the effect of a number of cases on the issue in dispute (see
per Lord Wright at pp 636 to 638). In the course of his speech Lord
Wright said at p 640.
On these
grounds I think that the service of the stallion is appurtenant to the soil and
a profit of the occupation in every case, so that in this regard it is immaterial
whether the service is to the appellant’s own mares or whether it is sold to
strangers; in the latter case the service is sold from the land and as a
product of the land, just as much as bullocks, potatoes, fruit or eggs are sold
from the land. Without the appellant’s stud farm or some other such stud farm
the stallions could not live or exercise their generating functions. The value
of these functions is inseparably connected with the occupation of land.
Rating
authorities in England concluded that Lord Glanely’s case entitled the
occupiers of stud farms of a similar kind to his to claim exemption from
rating. The reasoning behind granting exemption must have been that, since the
generative powers of stallions were, in Lord Wright’s words, ‘a product of the
land’, any land on which they grazed was agricultural land and any building in
which they were stabled was an agricultural building. This reasoning would have
made an enclosure in a zoo which accommodated any grazing animals agricultural
land. From about 1933 until 1980 the occupiers of studs in England were not
rated. Occupiers in Scotland were not so fortunate.
The
Scottish cases
In Forth
Stud Ltd v East Lothian Assessor [1969] RA 35, the Lands Valuation
Appeals Court considered a number of cases which had been decided under section
9(11) of the Rating and Valuation (Apportionment) Act 1928, the wording of
which had been similar to section 7(2) of the Valuation and Rating (Scotland)
Act 1956. The court also considered the relevant English cases, including Lord
Glanely’s case. The Forth Stud was run in much the same way as, but on a
smaller scale than, the appellants’ stud. The adjoining land was 25 acres in
extent and was used for grazing, exercising and taking a crop of hay. In an
earlier Scottish case, Inland Revenue v Ardross Estate Co 1930 SC
487, which was concerned with whether a silver fox farm was exempted from
rating as agricultural land, Lord Sands had said at p 490:
The use
extends only to the breeding of such animals as are associated with an ordinary
farm — horses, cattle, sheep, goats, pigs and poultry.
In yet another
Scottish case, Hardie v Assessor for West Lothian 1940 SC 329,
Lord Robertson had said:
As I understand
Lord Hunter’s opinion, he expressed the view that the breeding of livestock
might be an agricultural purpose although there was no pasturage of stock on
the land . . . In any event I am of opinion that the rearing of stock is, or
may be, an agricultural purpose, inferring an agricultural use of the land
within the meaning of the Act of 1928, without
crops raised on the land. But if the rearing of stock is to be regarded in
itself as an agricultural purpose the stock reared must be such as produces or
directly contributes to produce ‘the means of human subsistence’. I think that
this is the ratio of the judgment in Inland Revenue v Ardross Estates
Co.
Lord Fraser,
in the Forth Stud case, adjudged that racehorses are not animals associated
with an ordinary farm and they did not produce or directly contribute to
produce the means of human subsistence. Lord Avonside referred to what Lord
Robertson had said in the Hardie case and went on as follows at p 46:
Further,
rearing of stock as an agricultural or pastoral operation must, on any proper
view of the words, be rearing of stock which produces or contributes to produce
the means of human subsistence. Animals reared for sport or entertainment or
for their decorative qualities cannot, in my view, be regarded as being reared
in the course of the activity of farming, which in its broad sense covers
tillage and pasturing. The whole purpose of farming was and is, from the
earliest times until now, to produce the means of human subsistence and there
can be no doubt that that is why agricultural land, under legislation, enjoys
the substantial financial privilege of being omitted from the valuation roll.
The court
adjudged that the Forth Stud was not entitled to exemption from rating as
agricultural land and heritages.
I find this
case a most persuasive authority as to the overall legislative intention of
section 26(3) and (4) of the General Rate Act 1967. The question, however,
remains whether Parliament, by the words used in that Act and in the 1971 Act,
intended either to qualify or to extend the overall intention. In Evans
v Bailey (Valuation Officer) (1981) 260 EG 61, [1981] 2 EGLR 221, which
was concerned with a stud for breeding hunters, the Lands Tribunal treated the Forth
Stud case as a persuasive authority. That stud was not given exemption from
rating.
Construction
of the 1967 and 1971 Acts
Since the
intention of the 1971 Act was, inter alia, to extend the meaning of the
words ‘agricultural building’, it is convenient to consider whether the
buildings at the stud come within the extended definition. The appellants, on
the facts of this case, had to prove, first, that the buildings were used for
the keeping or breeding of livestock, as defined in section 1(3), and, second,
that that use came within either para (a) or (b) of subsection (2).
As I have
already said, I have no doubt that the overall intention of Parliament in
providing for the derating of agricultural land and agricultural buildings was
to help farmers. But, since rating is concerned with the occupation of land,
Parliament had to define what kind of occupied land or buildings should be
exempt from rating. This it did in section 26(3) and (4) of the 1967 Act and
sections 1 to 4 of the 1971 Act. The definitions are more extensive than what
in the ordinary usage of English would be meant by ‘farmland’ or
‘farmbuildings’; but, with the exception of the inclusion of use for ‘a
plantation or a wood or for the growth of saleable underwood’, all the other
uses relate to the production of products directly connected with human
subsistence. The words of exclusion at the end of subsection (3) strengthen
this construction. Silviculture as a source of fuel and building materials contributes
indirectly, if not directly, to human subsistence. In my judgment, the
definition of ‘agricultural land’ in section 26(3) was intended to cover land
used for purposes contributing to human subsistence. Since in both section
26(4) of the 1967 Act and section 2 of the 1971 Act the adjective
‘agricultural’ qualifies ‘buildings’ as well as land, it follows that a
building to be exempt from rating must be one which is used for a purpose
contributing to human subsistence and that ‘livestock’ in section 2(1)(a) means
mammals or birds which also do so. I cannot accept Mr Glover QC’s argument on
behalf of the appellants that, because the statutory definition in section 1(3)
of the 1971 Act starts with the words ‘In this part of this Act ‘livestock’
includes’ . . . , mammals such as thoroughbred racing stock which contribute
nothing to human subsistence should come within the ambit of an exempting
provision which is concerned with land used for purposes which do so
contribute. If, as Mr Fletcher QC pointed out, the word ‘livestock’ in the 1971
Act included all mammals, a building in which zebras or giraffes were kept
would be an agricultural building. In my judgment, the appellants’ buildings at
Whitsbury are not used for the keeping or breeding of livestock within the
meaning of section 2(1)(a) of the 1971 Act. In Belmont Farm Ltd v Minister
of Housing and Local Government (1962) 13 P&CR 417, which was a
planning case, Lord Parker CJ construed a provision of the Town and Country
Planning Act 1947, section 119(1), defining ‘livestock’ in an agricultural
context, in the same sense as I have done.
The next
question is whether the pasturing of racing stock in paddocks is an
agricultural operation within section 26(4)(a) of the 1967 Act. As I understood
Mr Glover QC’s submission, it was as follows. The respondents admitted that the
paddocks were agricultural land. This was because horses were grazed in them.
Putting horses out to graze so as to increase their breeding potential was an
agricultural operation and the buildings were used in connection with it. All
this brought the buildings within the ambit of section 26(4) of the 1967 Act.
In my judgment, it did not. I accept Mr Glover QC’s submission that section
26(3) is concerned with the use of land, not the purpose for which it is used.
The fact that the land is used in connection with the breeding of racing stock
does not, as Mr Fletcher QC accepted, disqualify it from being ‘agricultural
land’. But, in order to qualify for exemption from rating, it is not enough that
the buildings should be occupied together with agricultural land. They must be
used solely in connection with agricultural operations thereon. The use of the
word ‘operation’ is significant. It connotes action for a purpose. In this
case, for what purpose? The answer is —
the breeding of racing stock. This, in my judgment, in the context of the 1967
Act, is not an agricultural purpose and therefore grazing in connection with
breeding is not an agricultural operation. This finding is fatal to the
appellants’ case.
I should,
however, deal shortly with the other two issues in this appeal, namely if the
grazing, as part of the breeding activities, was an agricultural operation on
the land, were the buildings used in connection therewith? If yes, were they used solely in connection
therewith? In what was an otherwise
admirably clear and concisely stated case, the learned member did not ask
himself the right question when considering whether the buildings were used in
connection with the grazing for breeding purposes. He asked himself whether the
grazing and the buildings, being, as he found, ancillary to each other, were
ancillary to the entire stud operation. I am not satisfied that, in the
ordinary use of English, it can be said that the buildings were used in
connection with the grazing. The grazing was used in connection with the
buildings. Nor am I satisfied that the buildings were used solely in
connection with the grazing. The buildings were used for a number of purposes
connected with breeding. Grazing was but one of them.
I would
dismiss the appeal.
Agreeing,
BALCOMBE LJ said: It has at all times been conceded by the respondent valuation
officer — and rightly conceded — that the paddocks which constitute the land
(as opposed to the buildings) forming part of the appellants’ premises at
Whitsbury constitute ‘agricultural land’ within the meaning of section 26(3)(a)
of the General Rate Act 1967, as they are used as pasture ground only, for the
grazing of thoroughbred horses. The two questions which arise on this appeal
are:
(1) Are the stud buildings at Whitsbury used
solely in connection with agricultural operations on the paddocks?
(2) Are the buildings used for the keeping or
breeding of livestock?
If either
of these questions is answered in the affirmative, the appellants succeed on
this appeal.
I consider
these questions in the order in which I have set them out above. In order to
answer the first question it is necessary to answer the following subsidiary
questions:
(i) What are the operations which are being
carried out on the paddocks?
(ii) Are those operations agricultural?
(iii) Are the stud buildings used ‘in connection
with’ the operations on the paddocks? If
so
(iv) Are the buildings used ‘solely’ in connection
with those operations?
Nature of
the operations
Mr Glover QC
for the appellants submitted that the operations are either: (a) the grazing of
thoroughbred horses in the course of breeding and rearing; or (b) the breeding
of thoroughbred horses. In my judgment, his first submission is correct. It has
been held by the House of Lords that, in considering what are the operations in
question, one must look at what is being actually done on the land alone and
not at the combined purpose for which the land and buildings are being used.
See W & J B Eastwood Ltd v Herrod [1971] AC 160, 173G-174A;
178F-G; 180H-181B. So I turn to consider the
thoroughbreds for the purpose of breeding and rearing. (I prefer to use the
word ‘thoroughbreds’ rather than ‘racehorses’, since, although the object of
the breeding is to produce horses suitable for racing, that object is not
achieved in every case.)
Are the
operations agricultural?
Although
section 26 of the 1967 Act contains definitions of ‘agricultural land’ and
‘agricultural buildings’, it contains no definition of ‘agricultural
operations’. The phrase ‘agricultural operations’ occurs in both subsections
(2) and (4) of section 26. Subsection (2) deals with the gross value for rating
of a house:
occupied in
connection with agricultural land and used as the dwelling of a person who
(a) is primarily engaged in carrying on or
directing agricultural operations on that land; or
(b) is employed in agricultural operations on
that land in the service of the occupier thereof . . .
Subsection (4)
defines ‘agricultural buildings’ as meaning:
buildings . .
. occupied together with agricultural land . . . and . . . used solely in
connection with agricultural operations thereon.
It is plain
that not all operations carried out on agricultural land are themselves
agricultural: indeed, if this were not so, it would have been sufficient simply
to refer to ‘operations on agricultural land’. Thus, pasture land, which is not
preserved mainly or exclusively for purposes of sport, may from time to time be
used for shooting. Shooting as such is not an agricultural operation and so a
keeper’s cottage would not come within subsection (2), nor would any hut used
for the purposes of the shooting be within subsection (4). Cf Earl of
Normanton v Giles [1980] 1 WLR 28. Nevertheless, the fact that not
all operations carried out on agricultural land are themselves agricultural
does not of itself meet Mr Glover’s submission that, if the operations in
question — in this case the grazing of horses — are such as to make the land on
which they are carried on agricultural land (as is here conceded), then they
must of necessity be agricultural operations. There is an obvious attraction in
this submission; however, I am not convinced that the reasoning behind it is
sound.
In the first
place, subsections (2) and (4) of section 26 must be read together and in
conjunction with the definition of ‘agricultural land’ in subsection (3). When
this is done, it is apparent that, in considering whether land is
agricultural, the court must look only at the actual use of the land and not to
the purpose of the occupier. On the other hand, in considering whether the operations
on that land are agricultural, there is no similar limitation, and the
references (in subsection (2)) to a person engaged or employed ‘in carrying on
agricultural operations’ and (in subsection (4)) to a building used ‘solely in
connection with agricultural operations’ — which, in its turn, contemplates the
use of a building partly in connection with agricultural operations —
suggest to me that in this context the court should look at the facts from the
point of view of the occupier of the land and is not limited merely to a
consideration of the use to which the land is put.
The next
submission of Mr Fletcher QC for the respondent was that the most extensive
category of land included in the definition of agricultural land is land ‘used
as arable, meadow or pasture ground only‘. If operations involving the
use of land for other purposes are carried out, the land ceases to be
agricultural and the question whether these operations are agricultural becomes
irrelevant. Accordingly, the draftsman must have envisaged that operations
which were not agricultural might be carried out on land used as arable, meadow
or pasture ground only. I can see some force in this submission, but its
strength is weakened when one considers that other parts of the definition of
agricultural land — eg cottage gardens exceeding one quarter of an acre, market
gardens, nursery grounds, orchards or allotments — do not refer to the use of
the land only for the specific purposes mentioned, and the draftsman was having
to provide for operations carried out on all types of agricultural land.
In the end,
what persuades me that the meaning of ‘agricultural’ in relation to operations
is not confined to the use to which the land is put is a consideration of the
consequences of the more limited meaning in the light of the purpose which the
section was clearly intended to achieve. The section wholly exempts
agricultural land and agricultural buildings from liability to be rated and
follows on similar provisions in earlier statutes dating back to 1896. The Shorter
Oxford English Dictionary definition of agriculture is:
The science
and art of cultivating the soil; including the gathering in of the crops and
the rearing of live stock; farming (in the widest sense).
Although the
definition of agricultural land in the section includes land used for forestry
and horticulture, it expressly excludes park land, pleasure grounds, land kept
or preserved mainly or exclusively for purposes of sport or recreation, and
land used as a racecourse. I am left with the distinct impression that the
object of the section is to benefit farming in the widest sense.
If that be
right, then in the case of land used as pasture only it is necessary to
consider the kind of animals which are pastured upon the land since, if they
are not farm animals, their grazing would not be an agricultural operation
carried on on the land. In his submissions for the respondent, Mr Fletcher gave
as an example the use of land by the occupier of a zoo for grazing zebras or
bison: an unlikely, but by no means impossible, use of land. In my judgment,
the grazing of such animals could not properly be described as an agricultural
operation.
So in the
present case the answer to the question turns upon the nature of the animals
which graze the paddocks. Of course, some kinds of horse may properly be
described as farm animals, in which case their grazing would be an agricultural
operation but, in my judgment, a person who carries on the business of breeding
thoroughbreds is not to be described as a farmer, and the operation of grazing
thoroughbreds for the purpose of breeding and rearing is not properly described
as agricultural.
Thus far I
have considered the question as if it were free from authority. The majority of
the cases support the conclusion at which I have arrived. In Gilmore v Baker-Carr
[1962] 1 WLR 1165, a case which turned on the same definitions of ‘agricultural
land’ and ‘agricultural buildings’ in the Rating and Valuation (Apportionment)
Act 1928, Lord Denning MR said (at p 1172):
The phrase ‘agricultural
operations’ is not defined but I should have thought that it meant operations
by way of cultivating the soil or rearing of livestock.
In Forth
Stud Ltd v East Lothian Assessor [1969] RA 35, the Lands Valuation
Appeal Court in Scotland was faced with the same question as we are: whether a
commercial stud for the breeding of thoroughbred horses was exempt from rating.
This turned upon the definition of ‘agricultural lands and heritages’ in
section 7(2) of Valuation and Rating (Scotland) Act 1956 as ‘lands and
heritages used for agricultural or pastoral purposes only’. The court held that
the stud was not exempt from rating, because land ‘used for agricultural or
pastoral purposes only’ meant, so far as the breeding of animals was concerned,
land used for animals which were associated with an ordinary farm. Although the
phrase which the court there had to construe was not the same as that which we
have to consider, I cannot identify any material difference. Further, I find
myself in complete agreement with the following passage from the judgment of
Lord Avonside at p 46:
Further,
rearing of stock as an agricultural or pastoral operation must, on any proper
view of the words, be rearing of stock which produces or contributes to produce
the means of human subsistence. Animals reared for sport or entertainment or
for their decorative qualities cannot, in my view, be regarded as being reared
in the course of the activity of farming, which in its broad sense covers
tillage and pasturing. The whole purpose of farming was and is, from the
earliest times until now, to produce human subsistence and there can be no
doubt that that is why agricultural land, under legislation, enjoys the
substantial financial privilege of being omitted from the valuation roll.
While this
case is not strictly binding upon us, it is of considerable persuasive
authority and, in considering the effect of statutes in similar terms which
apply in different parts of the United Kingdom, I adopt the approach of Foster
J in Kidson v Macdonald [1974] Ch 339 at p 348, following Megarry
J in Sargaison v Roberts [1969] 1 WLR 951 at pp 957-8, viz to
give the English statute a construction which looks at the realities of the
situation in the two systems of law (English and Scottish) at the expense of
the technicalities in any one system.
A similar
association of ‘agricultural’ with farming in its ordinary sense is to be found
in the speeches in W & J B Eastwood Ltd v Herrod — see per
Lord Reid at p 168C-D and per Viscount Dilhorne at p 180F-G.
Mr Glover
relies on the decision of the House of Lords in Lord Glanely v Wightman
[1933] AC 618, and in particular the speech of Lord Wright at pp 638-9, as
leading to a conclusion in the opposite sense. To understand that case, it is
necessary to consider carefully what was the issue before the House. Lord
Glanely owned and
stock. Not only did he use the stallions he maintained for covering his own
mares, but he also charged fees for letting out the services upon his stud farm
of those stallions to the thoroughbred mares of other owners. Under Schedule B
of the Income Tax Act 1918 tax was chargeable in respect of all lands in the
United Kingdom. The rate of tax chargeable under Schedule B depended upon
whether or not the land was used only or mainly for the purposes of husbandry.
The farm as a whole had been assessed to tax under Schedule B: the agricultural
part at one rate, the land used purely for stud and racing purposes at a different
rate — see per Lord Wright at p 634. So the issue whether that part of the land
used purely for stud and racing purposes was used only or mainly for the
purposes of husbandry was not before the House: it appears to have been
accepted that it was not so used. The Inland Revenue then sought to assess Lord
Glanely under Schedule D in respect of the fees he received in respect of the
services of his stallions in covering other owners’ mares on the stud farm. The
question before the House was whether that additional assessment was justified:
that is,
whether these fees are or are not covered by the general assessment made on the
lands under Schedule B
— per
Lord Wright at p 634. It was held that the fees were part of the profits in
respect of the occupation of the farm and chargeable to income tax under
Schedule B, not Schedule D. It was not disputed by the Crown that the
occupation of the land for the purposes of the stud farm was an occupation
within the meaning of Schedule B — see per Viscount Buckmaster at p 629,
per Lord Tomlin at p 632 — and, as I have already said, the question
whether the land was used only or mainly for the purposes of husbandry was not
in issue. The reasoning of the majority can be found in the following passages
from the speeches:
Now a stud
farm is plainly an occupation of the land, and the breeding and sale of foals
arises from that occupation, and for that purpose the use of the stallion is as
indispensable as the use of the mare. The services, therefore, of the stallion
upon the land are as much a breeding operation as the production of the foal by
the mare, and I find it difficult to see why, when other people’s mares are
sent on to the farm, and kept there, the payment for the services of the
stallion is not a normal part of the purposes for which the land is occupied
and inseparable therefrom
— per
Viscount Buckmaster at p 629.
Looking at
the matter apart from authority, I can see no reason in logic for
distinguishing between the profit derived from the reproductive capacity of the
female and the profit derived from the reproductive capacity of the male
— per
Lord Tomlin at p 632.
It was
conceded by the Crown, and necessarily conceded, that the normal receipts of a
thoroughbred stud farm include stud fees received for the service by the stud
farm stallions of mares which belong to other people and which are brought on
to the stud farm for that purpose. Those stud fees are therefore in my opinion
part of the gains of the appellant in respect of his occupation of this land.
By what right
can the Crown then claim to pick out one item from the various gains of the
appellant in respect of that occupation, and say that it is not covered with
the other gains by the assessment under Schedule B but is available as a
separate item for a separate assessment under Schedule D? I can envisage no principle which would
justify such a course . . .
— per Lord
Russell of Killowen at p 633.
Lord Wright
delivered a long speech, and Mr Glover relies in particular on the following
passages:
At pp 638-9:
If authority
were needed, the provisions just quoted do at least show that profits of
‘occupation’ include gains from the animal produce as well as the agricultural,
horticultural or arboricultural produce of the soil. And the references to
gardens, nurseries and woodlands show a scope of Schedule B beyond the use of
the land and its products for the provision of food; equally it is obvious that
the rearing of animals, regarded as they must be as products of the soil —
since it is from the soil that they draw their sustenance and on the soil that
they live — is a source of profit from the occupation of land, whether these
animals are for consumption as food (such as bullocks, pigs or chickens), or
for the provision of food (such as cows, goats or fowls), or for recreation
(such as hunters or racehorses), or for use (such as draught or plough horses).
All these animals are appurtenant to the soil, in the relevant sense for this
purpose, as much as trees, wheat crops, flowers or roots, though no doubt they
differ in obvious respects.
At p 640:
On these
grounds I think that the service of the stallion is appurtenant to the soil and
a profit of the occupation in every case, so that in this regard it is
immaterial whether the service is to the appellant’s own mares or whether it is
sold to strangers; in the latter case the service is sold from the land and as
a product of the land, just as much as bullocks, potatoes, fruit or eggs are
sold from the land. Without the appellant’s stud farm or some other such stud
farm the stallions could not live or exercise their generating functions.
Taken out of
context, Lord Wright’s remarks do undoubtedly support Mr Glover’s submissions
but, in my judgment, when properly understood, they are not authority for the
proposition that ‘agricultural operations’, in the context of a rating statute,
include the rearing of animals for the purposes of recreation. We were told
that, as a result of the decision in Lord Glanely v Wightman (supra),
stud farms were considered to be exempt from rating for nearly 50 years until
the decision of the Lands Tribunal in Evans v Bailey
(LVC/429/1980)*: I can only say that I find it surprising that the
misunderstanding of the decision in Lord Glanely v Wightman (supra)
lasted so long.
*Editor’s
note: Reported at (1981) 260 EG 61, [1981] 2 EGLR 221.
Accordingly, I
am of the view that the grazing of thoroughbreds for the purpose of breeding
and rearing was not, and is not, an agricultural operation within the meaning
of section 26(4) of the General Rate Act 1967.
If I am right
in this view, the remaining subsidiary questions under the first question do
not arise but, as the matter was fully argued before us, and in case this case
goes further I propose to deal with them.
Are the
stud buildings used ‘in connection’ with the operations on the paddocks?
The member of
the Lands Tribunal found the following facts as to the use of the stud
buildings:
I have
inspected the buildings and I find as a fact that they are of excellent quality
and that they are essential to the respondents’ activities. The buildings are
particularly important for reasons of security and safety of valuable animals,
that is to say, the stallions (in the public stud), the visiting mares and
their foals (whether at foot or born at Whitsbury), and for providing warmth in
winter and coolness in summer and protection from adverse weather, as premises
providing facilities for covering and for hay and concentrates to be dispensed,
and for veterinary examinations, weighing and measuring of foals, observation
of pregnant mares and grooming of yearlings to take place.
In the light
of these findings, it seems to me to be difficult, as a matter of ordinary
language, to say that the stud buildings are not partly used ‘in connection
with’ the operations on the paddocks, if these operations are, as I have said,
the grazing of thoroughbred horses in the course of breeding and rearing. In
particular, it seems to me that the use of the stud buildings for providing
shelter to the grazing animals must be a use in connection with the operations
on the paddocks. However, this phrase has also been the subject of judicial
consideration. In Gilmore v Baker-Carr [1962] 1 WLR 1165 at p
1175 Donovan LJ said:
But the clear
impression which I receive from the statutory language is that the buildings
exempted were to be ancillary or complementary to the agricultural purpose of
the land, and not vice versa.
This definition
was approved by Viscount Dilhorne in W & J B Eastwood Ltd v Herrod
[1971] AC 160 at p 181B, who added:
I think that
the language of the definition requires that buildings to come within it must
be used as adjuncts to the agricultural operations on the land . . .
In the same
case Lord Reid said (at p 168G):
I do not
foresee serious difficulty if ‘used in connection with’ is held to mean
consequential on or ancillary to the agricultural operations on the land which
is occupied together with the buildings.
I accept that
it would be difficult in the present case to describe the use of the stud
buildings as ancillary to the grazing of the thoroughbreds on the paddocks, but
I do not see why it cannot properly be described as complementary to those
operations. The Lands Tribunal’s decision on this matter — that the stud
buildings were not used in connection with the operations on the paddocks — is
not, as Mr Fletcher submits, a decision of fact which cannot be challenged on
appeal. It was an error of law based on a misapplication of the statutory test
to the primary facts as found by the tribunal. As such, it is open to review by
this court and, in my judgment, the stud buildings are used in connection with
the operations on the paddocks.
Are the
stud buildings used ‘solely’ in connection with the operations?
Here again, I
have the misfortune to differ from the decision of the
buildings as ‘premises providing facilities for covering’ and ‘for veterinary
examinations’ can be properly described as use in connection with the operation
of grazing the thoroughbreds. Accordingly, I would, if it were material, hold
that the stud buildings are not used solely in connection with the operations on
the paddocks. I turn now to the second main question:
Are the
buildings used for the keeping or breeding of livestock?
The Shorter
Oxford English Dictionary definition of ‘livestock’ is:
Domestic
animals generally; any animals kept or dealt in for use or profit.
If the
question fell to be answered without any indication that this dictionary
meaning is to be qualified in any way, it is clear that thoroughbred horses
fall within the definition of ‘livestock’. However, the extension of the
definition of ‘agricultural buildings’ in section 26 of the General Rate Act
1967 to include any building used for the keeping or breeding of livestock is
contained in section 2(1)(a) of the Rating Act 1971 and section 1(3) of that
Act defines ‘livestock’ for the purposes (inter alia) of section 2 as
including:
any mammal or
bird kept for the production of food or wool or for the purpose of its use in
the farming of land.
These words
would be unnecessary if it were intended that ‘livestock’ should bear its
extensive dictionary meaning, and Mr Glover accepts that in this context
‘livestock’ does not include domestic animals of every description. He submits
that it does cover domestic animals found on agricultural premises or domestic
animals in an agricultural context. It will be apparent, from what I have
already said in relation to ‘agricultural operations’, that, in my judgment,
thoroughbred horses would not come within this definition.
Again, the
matter is not free from authority. In Belmont Farm Ltd v Minister of
Housing and Local Government (1962) 13 P&CR 417, a Divisional Court of
the Queen’s Bench Division held that the breeding and keeping of horses, not
intended for use in the farming of land, did not amount to ‘the breeding and
keeping of livestock’ and so was not a use of land for the purposes of
agriculture within the definition of agriculture contained in section 119(1) of
the Town and Country Planning Act 1947. We are not, of course, bound to follow
this decision, and I accept that it is a decision on a different definition of
‘livestock’ in a different Act. However, I find the reasoning of Lord Parker CJ
in that Act relevant to the question we have to answer. There ‘livestock’ was
defined as ‘including any creature kept for the production of food, wool,
skins, or fur, or for the purpose of its use in the farming of land’. Apropos
of this definition Lord Parker CJ said (at pp 421-2):
Granting that
the word ‘including’ has been used in an extensive sense, it seems to me
nonsense for the draftsman to use those words ‘any creature kept for the
production of food, wool, skins or fur, or for the purpose of its use in the
farming of land’, if the word ‘livestock’ was intended to cover the keeping of
any creature whether for its use in farming land or not. It seems to me that
these words show a clear intention that ‘livestock’, however it is interpreted,
does not extend to the breeding and keeping of horses unless it is for the
purpose of their use in the farming of land.
In my judgment,
the same reasoning applies, mutatis mutandis, to the definition of
‘livestock’ in the 1971 Act.
The Belmont
Farm case was followed by another Divisional Court of the Queen’s Bench
Division in Minister of Agriculture, Fisheries and Food v Appleton
[1970] 1 QB 221 — again a case on the meaning of ‘livestock’ within a
definition of ‘agriculture’, this time for the purposes of the Selective
Employment Payments Tax 1966. The Belmont Farm case was also approved by
Russell LJ in McClinton v McFall (1974) 232 EG 707 at p 709.
Mr Glover
seeks to rely on certain passages in the judgments of the Court of Appeal in Cresswell
(VO) v BOC Ltd [1980] RA 213. In that case the Court of Appeal held
that fish were not livestock within the definition contained in the Rating Act
1971. That was the issue before the court and it is in that context that the
passages on which Mr Glover relies are to be read. Thus, Eveleigh LJ said (at p
216):
For myself, I
would be inclined, at a first look at s2, to say that ‘livestock’ there
contemplates domestic animals or birds which are found on agricultural premises
and which are supported by the land.
It is clear
that no member of the court in that case was considering the question whether
thoroughbreds fell within the definition of ‘livestock’ — indeed, Watkins LJ
cited the Belmont Farm case with apparent approval — and, in my
judgment, that case does not support Mr Glover’s contention that ‘livestock’ in
the 1971 Act includes thoroughbreds.
Accordingly, I
answer the second main question also in the negative.
I would
dismiss this appeal.
Also agreeing,
LLOYD LJ said: In this case we have to determine whether certain buildings are
agricultural buildings within the definition contained in section 26(4) of the
General Rate Act 1967, as extended by section 1(1)(a) of the Rating Act 1971.
The outcome
turns on two short questions of construction: first, whether the buildings,
which were admittedly occupied together with agricultural land, were being used
‘solely in connection with agricultural operations’ on that land so as to bring
the case within section 26(4) of the former Act; and, second, whether, if not,
horses bred for riding, hunting or racing are ‘livestock’ so as to bring the
case within section 2(1)(a) of the latter Act.
Before
attempting to answer these questions, there are three preliminary observations
worth making.
In the first
place, I doubt if we get much help in a case such as the present by adopting
what is now called a purposive approach. When the legislative purpose is clear,
then it is always legitimate, and often very helpful, to have that purpose in
mind when approaching questions of construction. But, where the legislative
purpose is not so clear, it may be dangerous to speculate. In the present case
we are concerned with the derating of agricultural land and buildings. The
legislative history goes back nearly 100 years. Partial relief was introduced
by the Agricultural Rates Act 1896. Full relief was introduced by the Local
Government Act 1929. The same Act also introduced partial relief for industrial
hereditaments. It may be that the legislative purpose of Parliament in derating
agricultural land and buildings was to encourage the growing of food or the
means of human subsistence. But it is not obvious that Parliament may not have
had a wider purpose in mind, as is perhaps shown by the inclusion of woodland
in the definition of agricultural land.
Second, I
doubt if one gets much help by asking what would ordinarily be understood by an
agricultural building, still less by asking what sort of building one would
expect to find on an ordinary farm. On two occasions in recent years the courts
have taken a narrow view of the exempting provisions. On both occasions
Parliament has taken prompt action to extend the definition. I have in mind the
1971 Act itself, which was passed in the wake of W & J B Eastwood Ltd
v Herrod [1971] AC 160. Broilerhouses, which had been held not to fall
within section 26 of the 1967 Act on the ground that they could not be said to
have been used solely in connection with agricultural operations on agricultural
land, are now included in the extended definition. So also are buildings used
solely in connection with the keeping of bees. One would not perhaps normally
think of such buildings as being agricultural buildings; nor would one expect
to find such buildings on an ordinary farm. But they are now specifically
included.
The second
occasion on which Parliament has extended the definition in recent years
followed a decision of this court in Cresswell (Valuation Officer) v BOC
Ltd [1980] 1 WLR 1556. In that case this court held that a fish farm was
not exempt, on the ground that fish were not livestock within the 1971 Act.
Within a year Parliament had, by the Local Government, Planning and Land Act
1980, section 31, introduced a new section 26A in the General Rate Act 1967 so
as to exempt land and buildings used solely for or in connection with fish
farming.
So it would, I
think, be dangerous in this case to ask what Parliament must have intended to
include or exclude. Our task is to take the words that Parliament has actually
used, to note what is in fact included and excluded, and then apply the result
to this particular case.
The third
general consideration is of a different kind. In 1933 the House of Lords
decided Lord Glanely v Wightman [1933] AC 618. Although that case
was concerned with the liability to income tax, nevertheless the reasoning and,
in particular, the speech of Lord Wright, was treated as being applicable in
the rating field. Thereafter, for 50 years, it was accepted that stud farms were
exempt. Stud buildings were not in fact rated. The courts are always reluctant
to disturb such a long-continued practice. Nevertheless, we are bound to do so
if we are persuaded that the practice is based on a misunderstanding of Lord
Glanely’s case. It could not be argued —
reference to stud farms, and by extending the definition of agricultural land
and buildings in 1971, and again in 1980, Parliament has, as it were, given its
legislative approval to the practice based, rightly or wrongly, on the decision
of the House of Lords in 1933.
With those
preliminary observations, I turn to the language of the statute. The first
thing to notice is, of course, that ‘agricultural operations’ are not defined.
But one thing is beyond dispute. ‘Agricultural’ in the phrase ‘agricultural
operations’ must have the same meaning as it has in the phrase ‘agricultural
land’. So I would agree with Mr Glover that the approach must be to ask, first,
whether the land is agricultural land; second, what are the agricultural
operations on that land and, third, whether the buildings which are occupied
together with the land are used solely in connection with those agricultural
operations. If authority be needed for that approach it is to be found in the
speech of Lord Morris in W & J B Eastwood Ltd v Herrod [1971]
AC 160 at p 173. I do not myself regard it as helpful to split up the third
question into two sub-questions, ie were the buildings used in connection with
agricultural operations on the land? If
so, were they used solely in connection with such operations? Both sub-questions are best considered
together. Failure to do so led the learned member of the Lands Tribunal to
include a passage in the reasons for his decision which is not altogether easy
to understand.
Is the land
agricultural land? Mr Fletcher for the
respondents concedes that it is. But it is necessary to examine the reasons for
that concession in a little detail. Mr Glover argues that the answer to the
first question is crucial in answering the second and the third.
The definition
of agricultural land in section 26(3) of the 1967 Act is both positive and
negative. In the first half, the subsection tells us what agricultural land is,
and in the second half it tells us what it is not. The two halves of the
definition are not altogether easy to fit together. There is no difficulty in
the case of land used for a plantation or a wood or for the growth of saleable
underwood. Such land is agricultural land, unless it is occupied together with
a house as a park, or unless it is kept or preserved ‘mainly or exclusively for
the purpose of sport or recreation’. So the occasional use of woodland for
shooting does not prevent its being agricultural land. But what about arable
and pasture? Unlike woodland, arable
meadow and pasture are only included in the definition of agricultural land if
the land is used as arable meadow or pasture ground only. Does that mean
that the occasional use of arable for shooting excludes it from the
definition? If woodland is included, in
spite of its being used as cover for pheasants reared for sport, it would seem
artificial to exclude a field of kale on that ground. Occasional use of land as
a racecourse prevents its being agricultural land, unless the use is de
minimis. But the exclusion of land used as a racecourse is not qualified by
the words ‘mainly or exclusively’.
So I would
think that the occasional use of arable meadow or pasture for purposes of sport
or recreation would not prevent its being agricultural land within the
definition, despite the word ‘only‘. But occasional use for other
purposes would so prevent it.
I now come to
the central issue in the case. Mr Fletcher concedes that the land is
agricultural land because it was used by horses for grazing. But he submits
that the breeding of horses, whether for use as hunters or in racing, is not an
agricultural operation. When you are deciding whether the land is agricultural
land, you look only, he submits, at the use made of the land. But, when you are
deciding whether the operation is an agricultural operation, you look at the
purpose of the occupier.
Mr Glover, on
the other hand, submits that there can be no distinction between the use made
of land, and the purpose for which land is used, whether as arable or woodland,
or for poultry farming or a market garden; and any distinction between the
purposes for which land is used and the operations on that land would be highly
artificial, at any rate on the facts of this case. Since it is conceded that
the use of this land for grazing these horses made the land
agricultural land, then it must follow that that use is an agricultural
operation. Of course, there may be operations on land which are not
agricultural operations. But here the operation in question, namely the grazing
of horses kept for breeding, is the very operation which makes the land
agricultural land. It would indeed be strange, he submits, if the operation
which makes the land agricultural land is not itself an agricultural operation.
Throughout the
hearing before us, I could see no answer to Mr Glover’s argument. It seemed to
me that Mr Fletcher was in a dilemma. Either the operation carried out on the
land which, for brevity, I will call the keeping of brood mares, is an
agricultural operation or it is not. If it is, cadit quaestio. If it is
not, then the land was not being used as arable meadow or pasture ground only,
in which case the land is not agricultural land within the definition. But it
is conceded that it is. So the operation must be an agricultural operation.
In Peterborough
Royal Foxhound Show Society v Commissioners of Inland Revenue [1936]
2 KB 497 Lawrence J (as he then was) seemed to regard it as self evident that
the breeding of hunters and racehorses takes place ‘in the ordinary course of
agriculture’. That dictum was quoted, without apparent disapproval, by Lord
Wilberforce in Normanton (Earl) v Giles [1980] 1 WLR 28 at p 32.
Similarly, the Court of Appeal in McClinton v McFall (1974) 232
EG 707 held that land let for use as a stud farm was an agricultural holding
within the meaning of the Agricultural Holdings Act 1948. Stamp LJ said:
The
activities in relation to the stud farm which I have described, so far as they
consist of the grazing of horses, pasturing of cattle and making of hay, are
clearly agricultural. So far as they consist of the breaking-in of horses for
riding, the little schooling that is done, the showing of horses to customers,
and the jumps and jumping on the five-acre field I have mentioned, they are
not, in my judgment, inconsistent with the agriculture carried on.
Moreover, the
distinction between the use made of the land, and the purposes of the occupier
— a distinction which lies at the heart of Mr Fletcher’s argument — is
difficult to reconcile with land which is held for the purposes of
poultry farming being included within the definition of agricultural land in
section 26(3)(a) of the 1967 Act. It is also difficult to reconcile with the
language of section 2 of the 1971 Act. Section 2(1)(a) provides that
‘agricultural building’ shall include any building used for breeding livestock.
Section 2(1)(b) provides that it shall also include any building used solely in
connection with the operations carried on in that building. This suggests that
there is no distinction to be drawn between the use of the first
building and the operations carried on in that building. If that is
right, why should there be any distinction between the use of the land and
operations on the land?
Mr Glover’s
argument also appeared to be consistent with the approach adopted by the courts
in construing other related provisions of the Rating and Valuation
(Apportionment) Act 1928, namely those relating to industrial hereditaments.
Thus, in Crowe (Valuation Officer) v Lloyds British Testing Company
Ltd [1960] 1 QB 592, a majority of this court held that ‘industrial
purposes’ in section 4(2) of the 1928 Act must mean those purposes which make
the premises in question a factory within the meaning ascribed by section 3(2)
of the Act. It is hard to believe that Parliament intended to draw a
distinction between ‘purposes’ in the phrase ‘industrial purposes’ and
‘operations’ in the phrase ‘agricultural operations’.
These are
powerful arguments. But, in the end, I have come to the conclusion that they
cannot succeed. There is no real dilemma. Parliament must clearly have
envisaged that operations which are not agricultural operations might be
carried out on land which nevertheless remains agricultural land. Otherwise,
there would have been no point in including the reference to ‘agricultural
operations’ in section 26(4)(a).
That being so,
there are only two possible explanations of the apparent impasse. Either the
reference to agricultural operations was intended to exclude, and exclude only,
buildings used in connection with sport or recreation for there is no other use
of the land which is consistent with the land remaining agricultural land
within section 26(3)(a). The alternative explanation is that Parliament did
indeed intend to draw a distinction, as Mr Fletcher submits, between the use to
which land is put and the operations thereon. I do not find either explanation
particularly satisfactory. But of the two I prefer the second. In other words,
lands may be used as pasture land only and so qualify as agricultural
land; but the operations carried out on the land, looked at from another
point of view, may be non-agricultural operations.
If that be
right, then the question whether the operation carried out on this land was an
agricultural operation becomes largely, if not entirely, a question of fact. We
cannot say, as a matter of law, that the operation was necessarily an
agricultural operation by reason of Mr Fletcher’s concession that the land is
agricultural land. It follows that I would reject, though not without
considerable hesitation, Mr
The learned
member has found, after carefully considering all the evidence, that the
operation here was not an agricultural operation. I am not persuaded that there
is any material on which we could or should disturb that finding.
Before leaving
the second question, I should, however, deal briefly with Lord Glanely
v Wightman, the case upon which Mr Glover principally relied. The
question in that case was whether the appellant, Lord Glanely, was liable to
tax under Schedule D on the stud fees earned by his stallion, Grand Parade. It
was held by the House of Lords, reversing a majority of the Court of Appeal,
that he was not so liable. There was no distinction to be drawn between the
profits earned from the reproductive capacity of the appellant’s stallion and
the profits earned from the reproductive capacity of the appellant’s mares.
Since the latter were admittedly profits of the appellant’s occupation of the
land, and therefore assessable to tax under Schedule B and not under Schedule
D, so also were the former. Mr Glover relied in particular on a paragraph of
Lord Wright’s speech (at p 638):
If authority
were needed, the provisions just quoted do at least show that profits of
‘occupation’ include gains from the animal produce as well as the agricultural,
horticultural or arboricultural produce of the soil. And the references to
gardens, nurseries and woodlands show a scope of Schedule B beyond the use of
the land and its products for the provision of food; equally it is obvious that
the rearing of animals, regarded as they must be as products of the soil —
since it is from the soil that they draw their sustenance and on the soil that
they live — is a source of profit from the occupation of land, whether these
animals are for consumption as food (such as bullocks, pigs or chickens), or
for the provision of food (such as cows, goats or fowls), or for recreation
(such as hunters or racehorses), or for use (such as draught or plough horses).
All these animals are appurtenant to the soil, in the relevant sense for this
purpose, as much as trees, wheat crops, flowers or roots, though no doubt they
differ in obvious respects.
But the
question in Lord Glanely’s case, as Mr Fletcher pointed out, was whether
the stud fees were severable from the profits of the breeding operation as a
whole. There was no issue in the case whether the breeding operation was an
agricultural operation. As Lord Wright himself pointed out at p 633, that
question did not arise. Mr Glover argued that, though Lord Wright left that
question open, the whole tenor of his speech was consistent only with his view
being that breeding racehorses is an agricultural operation. I do not agree.
Indeed, it is significant that the ground on which Wilfred Greene KC (as he
then was) sought to distinguish Malcolm v Lockhart [1919] AC 463,
a previous decision of the House of Lords, was that in Malcolm v Lockhart
the farm was an agricultural farm:
Supplying the
services of a stallion is no part of the business of an agricultural farmer,
and the fees for those services were easily severable from the profits of the
farm. The case of a stud farm is quite different.
That
distinction is reflected in Viscount Buckmaster’s speech. At p 631 he said:
The whole
case
that is to say
Malcolm v Lockhart
was based upon
the occupation of the land being for ordinary farm purposes, and there was no
reason to displace the finding of the Courts that the sale of the services of
the stallion when taken round the countryside formed no part of that business.
So I do not
consider that Mr Glover gets any assistance from Lord Glanely’s case.
The case is authority for the proposition (i) that stud fees earned on a stud
farm cannot be severed from the other receipts of the stud farm and (ii) that
the profits of a stud farm are profits in respect of the occupation of land,
and are therefore taxable under Schedule B. It is not authority for the
proposition that stud farms are an agricultural operation within the meaning of
section 26(4) of the General Rate Act 1967. If, therefore, the practice of
exempting the buildings on stud farms was based, as I assume it was, on Lord
Glanely’s case, then I am bound to conclude that it was based on a
misunderstanding of that case.
I now turn to
the third question. Assuming there were agricultural operations on the land,
were these buildings used solely in connection with those operations? If I am right on the second question, then
the third question does not arise. But it was fully argued before us. So I
mention it briefly.
I have no
doubt that, if stud farming as carried on by these appellants was an
agricultural operation, then these buildings were used solely in connection
with that operation. They serve no other purpose. It is unnecessary to inquire
whether the buildings were more important than the land, or vice versa. I agree
with Mr Glover’s submission that the relative importance of the buildings and
the land is irrelevant. There may perhaps be cases where the use of the land is
so insignificant compared with the use of the buildings that the proper
conclusion on the facts would be that the building was not occupied solely in
connection with agricultural operations on the land, even though the buildings
have no other use. W & J B Eastwood Ltd v Herrod (supra)
was such a case on the facts. But, in general, the question to be asked is not
whether the buildings are more or less important than the land, but whether
they serve any purpose other than the agricultural operations on the land. If
not, then in the great majority of cases they will be used solely in connection
with agricultural operations.
Various
expressions were suggested in Eastwood v Herrod as synonyms for
the statutory language, including the word ‘ancillary’. It may be that that
word has led to the idea that the use of the buildings must be of minor
importance only. That would be a misunderstanding. It would be inconsistent
with what Lord Morris said in Eastwood v Herrod at p 174:
The words of
the definition of ‘agricultural buildings’ suggest to my mind buildings that
are needed as an adjunct or a necessary aid to agricultural operations taking
place on agricultural land and used solely in connection with those operations.
This does not necessarily involve that the use to which the buildings are put
must be of minor or minimal importance but it does involve that no part of the
use is unconnected with the agricultural operations on the land.
If a synonym is
needed, then I would suggest ‘complementary’ rather than ‘ancillary’. But it is
better to apply the statutory language as it stands.
The learned
member held that buildings were not occupied in connection with the
agricultural operations on the land because, as he puts it, so far from the use
of the buildings being ancillary to the use of the land, or the use of the land
being ancillary to the use of the buildings, each was ancillary to the
enterprise as a whole. I find this hard to understand. If the enterprise as a
whole had been an agricultural operation, then the fact that the use of the
land was ‘ancillary’ to that operation would not have prevented the use of the
buildings being ancillary to the operation on the land. So the learned member
must, I think, have misdirected himself as to the correct test. This is
confirmed by the learned member’s puzzling observation that, if he had found
that the buildings were being used in connection with agricultural operations,
then he would have found they were being solely so used.
Since the
learned member applied the wrong test, I should, had it been relevant, have
felt free to reach a different conclusion on the facts. Both counsel agreed
that in those circumstances, we should draw our own inference from the
evidence. The evidence is very well summarised in the case. It was hardly, if
at all, in dispute. Having read the evidence, I am left in no doubt that the
use of the buildings was not only essential to the operations on the land, as
the learned member himself has found, but was also confined to those
operations. In other words, the buildings served no other purpose.
It follows
that, if I could have accepted Mr Glover’s central submission on the first main
question, I should have been in favour of allowing the appeal.
Finally, I
turn to the second main question of construction, which I can deal with much
more briefly. Sections 1 and 2 of the 1971 Act provide that ‘agricultural
buildings’ shall include any building which is used solely for the keeping or
breeding of livestock. It was accepted that the buildings were used solely for
the keeping and breeding of thoroughbred horses. The question is whether
thoroughbreds are ‘livestock’.
The dictionary
meaning of ‘livestock’ is ‘domestic animals generally’. This is clearly too
wide, since it would presumably include cats and dogs. So the meaning must be
confined to domestic animals in an agricultural context. This would cover all
domestic animals normally found on a farm, such as cattle, sheep and pigs, and
might also include deer other than ornamental deer. But does it include horses?
I have already
referred to the dictum of Lawrence J in Peterborough Royal Foxhound Show
Society v Commissioners of Inland Revenue. He clearly regarded
horses as livestock. Others might share his view if the words stood alone. But,
in the present case, we must have regard to the definition of livestock
contained in section 1(3) as including ‘any mammal or bird kept for the
production of food or wool or for the purpose of its use in the farming
of land’. It is not suggested by Mr Glover that these horses fall within that
definition. They are clearly not kept for the production of food or wool, or
for use in farming. But Mr Glover points out that the definition is inclusive,
not exclusive. It does not prohibit the inclusion of horses if they would
otherwise be regarded as livestock.
A similar
argument was advanced in Cresswell v BOC, to which I have already
referred. In that case the question was whether fish are livestock. It was
argued that, though the fish were not mammals or birds, they were certainly
being kept for the production of food. They should therefore be treated as
livestock for the purposes of the Act. This court had no hesitation in
rejecting that argument. Megaw LJ in particular made it clear that the meaning
of ‘livestock’ must take colour from the definition, even if the definition is
not exclusive. In Belmont Farm Ltd v Minister of Housing and Local
Government (1962) 13 P&CR 417, Lord Parker CJ, after referring to
Lawrence J’s dictum, held that thoroughbreds are not livestock. That decision
was expressly approved by this court in McClinton v McFall (supra).
Though I have doubt on the first main question, for the reasons I have
mentioned, I have no doubt on the second. We are obliged to hold by authorities
binding on this court that these horses are not livestock within the meaning of
the 1971 Act.
For the reasons
I have mentioned, I, too, would dismiss the appeal.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was granted.
