Rating–Unoccupied property–When is a newly-erected building ‘completed’ for the purposes of the relevant provisions?–When it is ready for occupation, not when the structure alone has been erected–Rating authority’s notice quashed, and court refuses, in the absence of appropriate evidence, to fix a date for notice to take effect
These were
appeals by Newham London Borough Council from decisions of Judge Rankin at Bow
County Court on December 18 1974 quashing notices served by the council, as
rating authority, on the respondents, Ravenseft Properties Ltd, claiming that
certain blocks of new office buildings constructed within the borough and
collectively known as the Stratford Centre had been ‘completed’ for the
purposes of the First Schedule to the General Rate Act 1967.
Mr C S Fay
(instructed by the council’s chief executive) appeared for the appellants, and
Hon D M Trustram Eve QC and Mr M F C Fitzgerald (instructed by Nabarro,
Nathanson & Co) represented the respondents.
Giving
judgment, LORD DENNING said: In the East End of London there is a fine new
centre called the Stratford Centre which consists of two or three blocks of new
air-conditioned offices. It has been developed by the London Borough of Newham
in partnership with a property company called Ravenseft Properties Ltd. The
office blocks are not occupied as yet, but the London Borough of Newham wish to
charge Ravenseft Properties Ltd with rates upon them. At one time unoccupied
premises did not bear rates at all. ‘Voids,’ or ’empties,’ as they were called,
were not liable to pay rates during the time they were unoccupied. But since
1967 there has been a provision in the General Rate Act whereby, in the case of
office buildings, they are free of rates for the first three months while they
are unoccupied; but after three months, they are liable to pay rates even if
they are unoccupied. That is why the London Borough of Newham wish to charge
Ravenseft with rates. But–and here is the point in the case–the chargeability
only arises when the buildings are ‘completed.’
The controversy is whether these buildings were completed or not. The
London Borough of Newham say that they are complete as soon as they are
structurally complete, whereas Ravenseft Properties say that they are only
complete when they are ready for occupation. That is the broad issue between
the parties.
The London
Borough of Newham on October 10 1974 served notices on Ravenseft Properties in
which they gave notice that they regarded the 14 floors as completed: that the
building was comprised in a ‘relevant hereditament,’ and that it was to be
regarded as ‘completed’ within the meaning of paragraph 8 of the First Schedule
to the 1967 Act. Ravenseft Properties took a contrary view. They appealed to
the county court, saying that their offices were not completed and could not
reasonably be expected to be completed by that date. The dispute depends on the
state of the buildings. This has been agreed between the parties, and we have
photographs to show it. The big block, block A, has 14 storeys of reinforced
concrete construction. The whole of the structure, as a structure, is no doubt
completed. There are large floors all the way up the 14 storeys. On each of
these floors, at each end, toilets are installed. Central heating and air-conditioning
systems are installed. These vast floors have not been divided into rooms or
offices. There are no partitions in. Each of the 12 floors covers a rectangular
space of 8,385 sq ft, with nothing there except 10 structural columns in a
line. There is a fuse-box on each floor with wiring for a power circuit, but no
points have been installed for any outlets. There is no wiring for any lighting
system. There is no telephone system. No GPO cables have been installed. No
main distribution frame has been installed. Application has been made for a
telephone line in different places, but it is nine months before the telephone
can be installed. The main contest is as to these 12 floors. As I say, they are
enormous floors with columns down the middle but no divisions whatsoever into
rooms or into individual offices. It seems to me that they could not be
occupied or ready for occupation until they had been divided up by partitions
and rooms and so forth. So there we have the contest. The London Borough of
Newham say the buildings are complete because they are structurally complete.
Ravenseft Properties say no, they are not complete until they are ready for
occupation, and they are not ready. The county court judge held that they were
not ready. He rejected the claim of the London Borough of Newham. Now there is
an appeal to this court.
We have been
taken through this Schedule 1 of the 1967 Act dealing with the rating of
unoccupied property. We have been taken to the distinction between a
newly-erected building, on the one hand, and on the other hand a building which
has already been used but has been structurally altered so as to become another
hereditament. It does seem to me that the same test ought to be applied in
each. I do not propose to analyse the schedule in detail. I am only going to
take two cases which have come before the courts. The first is a case where
there was a newly-erected building. Watford Borough Council v Parcourt
Property Investment Co Ltd [1971] Rating Appeals 97 [(1971) 218 EG 1006].
There the Heinz company (the well-known company which makes baked beans among
its 57 varieties) were building a large office building in Watford. It was a
newly-erected building. Much of the building was erected, but Heinz, when they
took over the building, did a lot of work themselves. When they took it over it
was devoid of any internal partitioning at all. There were big floors rather
like the present case. It was held by Bridge J, as he then was, that this was
not a completed building. Both sides there had agreed that the appropriate test
was whether or not the building was ready for occupation. Bridge J held that it
was an incomplete building and therefore the company were not liable to be
rated in regard to it at all. If I may say so, that commends itself to me as
being a proper application of the word ‘completed’ in this context. The other
case is on the other branch of the argument: where there is an existing
building which has been structurally altered so as to become a different
building. This was the case of Easiwork Homes v Redbridge London
Borough Council [1970] 2 QB 406. The position there was that there was an
old-fashioned block of 16 flats in Wanstead. The company decided to modernise
the whole block of flats. The plumbing work had been removed; toilet fittings
were being replaced; electric wirings were being renewed, and even in some
cases flooring was being relaid. In that case there was an existing building,
the old hereditament. The old valuation list, unless it was altered, continued
to apply. It continued to apply to the building until there was a new
hereditament constructed, and so constructed as to be complete in that sense,
as ready for occupation. In that case the new modernised flats were not ready
for occupation: they were incomplete, so the old valuation list and the old
rating applied, as was held by the Divisional Court in that case. The court
said that it would be very odd if a person could avoid paying rates simply by
making a few removals of the sanitary fittings, part of the plumbing, and so
forth.
Those two
cases were, I think, correctly decided. They illustrate the problem which
arises under this schedule in respect of the two aspects: first, the
newly-erected building, and, secondly, the old building which has been
structurally altered. Now to come to the wording of the schedule, the important
paragraph here is paragraph 8 (1), which says:
Where a
rating authority are of opinion:
(a) that the erection of a building within their
area has been completed; or
(b) that the work remaining to be done on a
building within their area is such that the erection of the building can
reasonably be expected to be completed within three months,
and that the
building is, or when completed will be, comprised in a relevant hereditament,
the authority may serve on the owner of the building a notice (hereafter in
this paragraph referred to as ‘a complete notice’) stating that the erection of
the building is to be treated for the purposes of this schedule as completed on
the date of service of the notice or on such later date as may be specified by
the notice.
It seems to me
that the schedule uses the word ‘completed’ there as something different from
‘structural alterations’ in paragraphs 10 and 15, and from the words
‘substantially completed’ in paragraph 9; and I am impressed by the reference
to paragraph 6 which was made before us. The word ‘completed’ in paragraph 8
(1) seems to me to mean completed in the sense of being ready for occupation.
The test in this case is that the building should be ready for occupation. Once
it is completely ready for occupation, there is a free period of three months
during which rates are not payable, but after three months rates are payable.
That applies not only to a new building, but also if there is an alteration to
an old building.
The only
remaining point is what is to be done. The judge allowed the appeal. That was
all that he had to do, because the notice was not properly given: the building
was not complete. But there is a provision in paragraph 8 (5) which says that
if the appeal is in fact allowed ‘the erection of the building shall be treated
for those purposes as completed on such date as the court shall
determine.’ It seems to me plain the the
court cannot apply that provision unless there is evidence on the matter and
unless it is asked to do so; and I should have thought there ought to be
evidence to show when it was completed so that the court could determine it. If
it had the evidence it could determine the date on which it was completed But
in the present case, where there was no evidence given us and no application
until after judgment, it seems to me that that provision does not come into
operation. We had considerable discussion as to the telephone cables and the
electric wiring, and how far office buildings could be said to be complete if
the electric wiring had not been completed and the telephones were not
installed. I think that may give rise to difficult questions on other matters.
I should like to have further evidence as to the condition of a particular
building before giving any ruling on that matter. For the reasons I have given,
I think this appeal should be dismissed.
JAMES LJ: I
agree with the conclusion of my Lord that the appeal should be dismissed, and
substantially for the reasons that he has given. I will avoid being repetitious
by adding reasons of my own which merely conform to his. It seems to me that
the appeal raises two short points, the first being the meaning to be given to
the words ‘completed’ and ‘completion’ where they appear in relation to
hereditaments in schedule 1 to the General Rate Act of 1967. That is a schedule
that is not free from difficulty in construction, and if I may say so, not
absolutely clear in places. But I see no warrant whatsoever for importing the
word ‘structural’ into paragraph 8 of that schedule merely because that word
appears in paragraph 10, and there should be the same test for completion in
respect of newly-erected buildings as for hereditaments which have already been
on the valuation list and are subjected to structural alterations so that they
become different or different parts of hereditaments. It seems to me that to
adopt that construction, which is the basis of Mr Fay’s argument, strains the
meaning of the statutory words. On the other hand, if one looks at the
following provisions, one finds there strong indications all pointing to the
proposition for which the ratepayers contend in this case, namely, that the
test of completion is capability of occupation and that that is the test to be
applied to a newly-erected hereditament. Section 79 of the Act provides:
(1) Subject to subsection (2) of this section and
to the following provisions of this Act, namely, paragraph 6 (4) of schedule 1,
paragraph 5 (4) of schedule 4, paragraph 8 (4) of schedule 5, paragraphs 10 (b)
and 13 of schedule 6 and paragraphs 14 (b) and 15 of schedule 7, where an
alteration is made in a valuation list by virtue of sections 71 to 78 of this
Act, then, in relation to any rate current at the date when the proposal in
pursuance of which the amendment so made was served on the valuation officer,
or, where the proposal was made by the valuation officer, current at the date
when notice of the proposal was served on the occupier of the hereditament in
question, that alteration shall be deemed to have had effect as from the
commencement of the period in respect of which the rate was made, and shall,
subject to the provisions of this section, have effect for the purposes of any
subsequent rate.
(2) Notwithstanding anything in subsection (1) of
this section, where an alteration in the valuation list:
(a) consists of the inclusion in the valuation
list of a newly-erected or newly-constructed hereditament or an altered
hereditament which has been out of occupation on account of structural
alterations; or
(b) is made by reason of any of the events
specified in section 68 (4) (b) to (k) of this Act,
the
alteration shall have effect only as from the date when the new or altered
hereditament comes into occupation or as from the happening of the event by
reason of which the alteration is made as the case may be.
Paragraph 5
(1) of schedule 1 is:
Subject to
the provisions of this schedule, the rateable value of a hereditament for the
purposes of paragraph I thereof shall be the rateable value ascribed to it in
the valuation list in force for the area in which the hereditament is situated
or, if the hereditament is not included in that list, the first rateable value
subsequently ascribed to the hereditament in a valuation list in force for that
area.
Paragraph 6
reads:
(1) A rating authority may request the valuation
officer to make a proposal for including in the valuation list in force for
their area any unoccupied building in their area (together with any garden,
yard, court or other land intended for use for the purposes of the building)
which in their opinion is, or when completed will be, a newly-erected
dwelling-house; and if the valuation officer thinks fit to comply with the
request he may make a proposal for including the building (together with any
such garden, yard, court or other land as aforesaid) as a dwelling-house in
that list and for ascribing to it in the list such values as he considers are
appropriate or will be appropriate when the building is completed.
(2) Where such a request is made by a rating
authority and the valuation officer serves notice in writing by post or otherwise
on the authority stating that he does not propose to comply with the request,
the rating authority may, if they think fit, within the period of 28 days
beginning with the date of service of the notice, make a proposal for including
the building and any other land to which the request relates as a
dwelling-house in the list aforesaid and for ascribing to it in the list such
values as the authority consider are appropriate or will be appropriate when
the building is completed.
(3) Where a new valuation list is prepared for
any area, the valuation officer shall include in the list as transmitted to the
rating authority:
(a) any dwelling-house included in the current
list for that area in pursuance of a proposal under subparagraph (1) or (2) of
this paragraph; and
(b) any building (with or without other land) in
respect of which a proposal for its inclusion in the current list as a
dwelling-house has been made by him under the said subparagraph (1) and has not
been settled;
and if any
such proposal is made by him after the new list has been so transmitted, shall
cause that list to be altered so as to include the building (with or without
other land) as a dwelling-house in the new list.
(4) Where a newly-erected dwelling-house is first
occupied after its completion and a rateable value has, in pursuance of the
foregoing provisions of this paragraph, previously been ascribed to it in the
valuation list currently in force for the area in which it is situated, any
different rateable value subsequently ascribed to it in that list and which,
apart from this subparagraph, would have effect from the date when the
dwelling-house is first occupied as aforesaid shall be deemed to have effect
from the date on which the current list came into force or the date from which
the previous rateable value had effect, whichever is the later.
One looks
forward to the time, in considering a newly-erected hereditament, to the type
of hereditament which is being required and sees whether at the date of the
notice there is anything lacking which ought to be there in order to satisfy
the nature of that hereditament. If there is something lacking and that which
is lacking would, when done, fall to be part of the hereditament and taken into
account for the purposes of the valuation, then there is no completion in the
sense of capability of occupation.
On the other
point, which arises under the wording of paragraph 8 (5) of the schedule, my
view is that the trial judge rightly declined to determine a date upon which
the hereditament should be regarded as completed. Paragraph 8 provides a number
of methods whereby the date can be ascertained. Where the notice has been
served under subparagraph (1) the date is that specified in the notice or the
date of service of the notice. But there may be circumstances in which that has
happened and then the rating authorities and the ratepayers agree on a
different date. Paragraph 8 provides that the agreed date shall be the relevant
one. Having served the notice, the rating authority may, by reason of ascertaining
new facts, withdraw the notice and serve a new one. Then the date of service of
the new one or the date specified in the new one is the relevant date. As I
read subparagraph (5) of paragraph 8, that provides that, in the event of the
notice not being withdrawn, an appeal being brought, and the appeal not being
abandoned or dismissed (which is this case), then, although the word is
‘shall,’ the court can, if asked, short-circuit the means for serving a new
notice and going through the procedure afresh. That I think is the proper
construction to be applied to that subparagraph, and I think the county court
judge rightly declined in this case to specify the date.
BRIDGE LJ: I
also agree that this appeal should be dismissed, substantially for the reasons
given in both the judgments which have been delivered, and I too shall seek to
add the few observations that I wish to make in as short a compass as I may and
without setting out in extenso the elaborate and complex provisions of
the General Rate Act 1967 which have led me to the clear conclusion at which I
have arrived. The essential question for decision is what is the appropriate
test to be applied under paragraph 8 of the first schedule to the Act as to
when a building is properly regarded as completed. The key phrase in the
paragraph, in my judgment, is the phrase ‘and that the building is, or when
completed will be, comprised in a relevant hereditament.’ ‘Relevant hereditament’ is defined in
paragraph 15 of the same schedule as meaning ‘any hereditament consisting of,
or of part of, a house, shop, office, factory, mill or other building
whatsoever, together with any garden, yard, court or other land used or
intended for use for the purposes of the building or part.’ Bearing in mind that under the law as it
stood for centuries before unoccupied property became capable of rating,
occupation was always the test of liability, if construing this provision
without having regard to its wider context, I should say without hesitation
that what was contemplated was that the building should be completed so as to
be capable of occupation for the appropriate purposes of the particular
hereditament, ie as a house, shop, office, etc. If the building lacks features
which before it can be occupied will have to be provided, and when provided
will form part of the occupied hereditament and form the basis of the valuation
of that hereditament, then I would take the view, unless constrained to the
contrary, that that building was not within the meaning of the relevant provision
of a completed building.
The two main
arguments of Mr Fay to the contrary are based first upon the use of the phrase
‘the completion of the structural alteration’ in paragraph 10 of the schedule,
which I will not set out, and secondly upon the decision of the Divisional
Court to which I was a party in the case of Easiwork Homes Ltd v Redbridge
London Borough Council [1970] 2 QB 406. In assessing the strength of Mr
Fay’s submissions I take account of other aspects of the context in which the
provisions to be construed are found, aspects which have been forcibly drawn to
our attention by Mr Trustram Eve. The structural test of completion which is
suggested to us by Mr Fay seems to me to be an extraordinarily difficult one to
apply in the context of paragraph 9 of the schedule, which refers to
‘substantial completion’ and contemplates additional works being done after
substantial completion but before final completion. What on earth could they
be, if Mr Fay’s test of structural completion is the right test? Again, without looking at the detail of the
provisions, it is clear that by the operation of paragraph 5 (1) of the
schedule and sections 69 and 79 (2) of the Act, the first valuation which can
reach the valuation list and on which the liability to the unoccupied rate
pending occupation of a new building is retrospectively assessed is a valuation
of the new building as it exists when it is occupied. That is in sharp contrast
with the valuation possibilities which arise under the provisions of section 79
(2) (b) and section 68 (4) (b) in relation to an old hereditament undergoing
structural alteration. It is clear that in a situation where an old existing
hereditament has a valuation based on its occupiable value and is undergoing
radical structural alterations, it can be the subject of a proposal for an
alteration in the valuation list for, at all events, any substantial period
when by reason of the alteration it is incapable of occupation. That seems to
me to provide the answer to the problem of hardship to an owner which in the
Divisional Court we felt could arise in the Easiwork case.
In the light
of these considerations I come to the conclusion that capability of occupation
is the test of completion which should be applicable both under paragraph 8 to
a new building and under paragraph 10 to a new hereditament which comes into
existence by structural alteration of an old building. To adopt the
occupiability test advocated by Mr Trustram Eve, and not the structural
completion test advocated by Mr Fay, to my mind does no violence to the
language of paragraph 10, where the word ‘structural’ is used to describe the
nature of the operation to which the paragraph applies and not to indicate a
test of completion of that operation. Similarly, the argument based upon the
decision of the Divisional Court in the Easiwork case can be rejected
for this reason. Mr Fay submits that that case establishes that a ‘relevant
hereditament’ can exist notwithstanding that it is not capable of occupation;
and so it does. But in the special situation where an existing hereditament is
under alteration, then either by direct application of paragraph 10 of the
schedule or by an analogy with it, it is the clear result of express provision
that the old hereditament remains in existence and remains (subject to the
possibility of a proposal for any change) at the valuation shown in the
valuation list until the moment when the new hereditament comes into existence.
But it does not follow from that that it would be sensible or reasonable to
apply as the test of completion of a new building under paragraph 8, or of a
hereditament under paragraph 10, any other test than the completion of that
building to the point where it is capable of occupation as such.
On the
subsidiary point which has been raised as to the power of the county court
judge where, as here, on abundant material entitling him to do so, he has
concluded that the completion notice was incorrect in what it stated, namely,
that these buildings were complete, it is odd at first blush to find that the
only express power given to the court is the power to determine the date when
the building should be deemed to be completed. Paragraph 8 (5) provides: ‘If
the notice is not withdrawn and such an appeal is brought and is not abandoned
or dismissed, the erection of the building shall be treated for those purposes
as completed on such date as the court shall determine.’ In a case where the issue is canvassed and
fully explored, and evidence is put before the court showing that the building
has been completed, or if not, when it can reasonably be expected to be
completed, and the court has reached a conclusion upon those matters and is
asked by the local authority to substitute a new date for the date in the
notice, I have no doubt that that power can and should be exercised. But all
that happened here was that the appellants, the building owners, established
their ground of appeal against the completion notices which had been served and
showed that on the proper test the notices were incorrect; and at all events
until after the county court judge had given judgment, the question of
determining a fresh date of completion was never canvassed. In those
circumstances I do not see how it was open to the county court judge to
exercise in any way his powers under subparagraph (5). I think he was right not
to do so.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was refused.
