Rating — General Rate Act 1967 — General rates on occupied property — Application for judicial review — Whether a rating authority are entitled to recover rates based on a proposal by the valuation officer to increase the rateable value during the rating year, rather than on the rateable value appearing in the valuation list, notwithstanding that the proposed increase is the subject of a pending challenge by the ratepayers — The valuation officer had proposed a substantial increase in the rateable value of part of an office building on the ground that the hereditament had ceased to be affected by adjoining building works — The ratepayers had paid rates on the basis of the figure shown in the valuation list and magistrates’ court proceedings had been adjourned pending the result of the present application, which sought a declaration that the rating authority were not entitled to recover the amount claimed
turned on the true construction of the General Rate Act 1967 — It was noted
that the point was one of importance as it was said to be the general practice
of rating authorities to levy rates on the basis which was now being challenged
— The argument put forward on behalf of the applicants was based on sections
2(4)(b) and 67(6) of the 1967 Act and on statements made in the cases of B
Kettle Ltd v Newcastle under Lyme Borough Council and Debenhams Ltd v Ealing London
Borough Council — The gist of it was that no general rate can be levied except
on the values currently shown in the valuation list — The rating authority
relied on section 67(1) and (2), which required the valuation list to be
maintained showing the rateable value of each hereditament; the valuation
officer’s duty was to propose alterations to the list as and when he thought it
necessary to maintain it in correct and legal form; and the rating authority
might at any time make such amendments in a rate as appeared necessary to make
the rate conform with the correct rateable value — The Kettle and Debenhams
cases cited by the applicants showed that in certain (albeit different)
circumstances rates can be collected on the strength of a proposal as distinct
from an entry in the valuation list — The authority explained section 67(6) as
to be read with section 2(4)(b), the later section directing how the earlier
section was to be operated
rating authority’s submission was correct — It was plain from section 6(2) that
the Act intended ratepayers to pay first and argue later — The present case
fell within the general words of section 6(1), which enabled the authority to
amend the rate if (as was the case here) it appeared to the authority to be
necessary to make the rate conform with (in particular) section 19(1) and (3)
and the authority’s power or duty to make a rate — Section 67(6) is directed to
the enforcement of section 2(4)(b), but that subsection is subject to the
authority’s general powers under section 6 to amend the rate in appropriate
circumstances — Application dismissed
The following
cases are referred to in this report.
Debenhams
Ltd v Ealing London Borough Council [1981]
RA 194; (1981) 79 LGR 589; [1981] EGD 946; 258 EG 1184, [1981] 1 EGLR 124
Kettle
(B) Ltd v Newcastle-under-Lyme Borough Council
[1979] RA 223; (1979) 77 LGR 700; [1979] EGD 934; 251 EG 59, CA; [1977] RA 181;
[1978] EGD 852; (1977) 245 EG 1027, [1978] 1 EGLR 105, DC
Society
of Medical Officers of Health v Hope (VO)
[1960] AC 551; [1960] 2 WLR 404; [1960] 1 All ER 317; (1960) 58 LGR 165; 5 RRC
388; 53 R&IT 102, HL
This was an
application by S G Warburg Group Management Ltd for judicial review by which
they sought a declaration that the respondent rating authority, Hackney London
Borough Council, were not entitled to recover from the applicants certain
general occupation rates based on a rateable value proposed by the valuation
officer. The hereditament concerned consisted of the fourth to seventh floors
of 1 Finsbury Avenue, London EC2, and the rateable value proposed was
£1,182,472. The rateable value currently in the valuation list at the material
time was £694,763.
Michael
Fitzgerald QC and Christopher Lewsley (instructed by Macfarlanes) appeared on
behalf of the applicants; Nigel Macleod QC and John Male (instructed by the
directorate of legal services, London Borough of Hackney) represented the
respondents.
Giving
judgment, BINGHAM LJ said: This application for judicial review raises a short
but important and difficult question: where a rateable value for a given
hereditament appears in the valuation list and during the rating year the
valuation officer proposes to increase the rateable value, such proposal being
accepted by the rating authority but challenged by the ratepayer, is the sum of
rates recoverable by the rating authority for that year to be assessed on the
rateable value appearing in the valuation list or the proposed new rateable
value?
The
applicants, S G Warburg Group Management Ltd, are the ratepayers.
The
hereditament in question is the fourth to seventh floors (inclusive) of 1
Finsbury Avenue, London EC2, which the applicants occupy.
The
respondents are the rating authority for the area which includes this
hereditament, which is spiritually within but geographically outside the City
of London.
The applicants
challenge a decision of the respondents to seek to recover from the applicants
occupied general rates on the above hereditament for the period April 1 1987 to
March 31 1988 based on the value of £1,182,472 proposed by the valuation
officer in his proposal dated April 30 1987 and not based on the rateable value
of £694,763 currently appearing in the valuation list for the Hackney rating
area.
The applicants
seek a declaration that the respondent rating authority is not entitled to
recover from the applicants occupied general rates in respect of 4th to 7th
Floors, 1 Finsbury Avenue, London EC2, based on the rateable value of
£1,182,472 proposed by the valuation officer in his proposal dated April 30
1987.
The grounds
upon which relief is sought are succinctly summarised in the application:
(1) At all material times the hereditament known
as 4th to 7th Floors, 1 Finsbury Avenue, London EC2 was entered in the relevant
valuation list at £694,763 rateable value. (2) In the circumstances, the
respondent rating authority must levy its rate in accordance with the valuation
list which is conclusive on value. (3) The amendment of the 1987/88 rate to
include the rateable value of £1,182,472 proposed by the valuation officer in
respect of the above hereditament was not necessary in order to make the rate
conform with the enactments relating thereto.
It is common
ground that the answer to the question before the court is to be found in a
correct interpretation and application of the General Rate Act 1967. But before
turning to the rival submissions on the Act I should briefly summarise the
facts as agreed between the parties.
The general
rate set by the respondents for the period April 1 1987 to March 31 1988 was
234.97p in the pound ‘on the rateable value of each hereditament as shown in
the valuation list and also such altered or added hereditaments as may be the
subject of a proposal and come within section 6 of General Rate Act 1967 . .
.’. This rate was set on March 25 1987. Before that date, in October 1986, the
valuation officer reached an agreement with the applicants’ surveyor that the
property should have attributed to it a gross value of £833,759 and a rateable
value of £694,763. Those values were subsequently proposed by the valuation
officer in a proposal dated February 13 1987 and entered in the valuation list.
So the entry then read:
|
Offices and premises |
1 Finsbury Avenue |
£833,759 |
|
(Affected by adjoining building works). |
4th-7th Floors |
£694,763 |
On April 30 1987, the valuation officer made a proposal to delete
the words ‘(Affected by adjoining building works)’ and to increase the gross
value to £1,419,000 and the rateable value to £1,182,472 on the ground that
‘the present assessment is incorrect and insufficient’. There has been no
material alteration to the property itself. The applicants objected to the
proposal and the valuation officer’s appeal against the objection is proceeding
to the local valuation court. It has not yet been heard.
The
respondents have demanded the rate payable on the new proposed rateable value,
the applicants have paid the amount due on the rateable value which appears in
the valuation list. Magistrates’ court proceedings have been adjourned pending
the decision on this application.
We have
affidavit evidence before us from the respondents’ chief rating officer. This
is not agreed, but nor is it challenged. We have no reason to doubt what is
said. The respondents received, as is normal practice, a copy of the valuation
officer’s proposal of April 30 1987 relating to the applicants. It was
considered by a rating officer. The valuation officer’s assessment and his
grounds for making the assessment were taken to be correct, there being no
reason to suspect that either was incorrect. It accordingly appeared to the
respondents that the former assessment was incorrect and did not conform with
the provisions of the 1967 Act. The respondents therefore amended the rate and
sought to recover rates from the applicants on the basis of the increased
value.
There is
further evidence before us which makes plain the far-reaching importance of the
point now in issue. Mr Palmer, on behalf of the respondents, deposed at para 3
of his affidavit:
If the court
is minded to grant leave to apply for judicial review, then I respectfully ask
the court to order the hearing of this matter to be expedited. The point raised
by the applicants is a fundamental point which affects the way in which all
rating authorities levy rates. To my knowledge it is the general practice of
rating authorities to levy rates on the basis of new or revised rateable values
of rateable hereditaments proposed by the valuation officer before the
resulting alteration is made in the valuation list. The challenge made by the
applicants to this practice puts the practice in doubt. It is therefore of
great importance to all rating authorities that the point be decided by the
court as quickly as possible so that rating authorities may know whether or not
this particular practice is lawful. I am aware that there is considerable
concern amongst rating authorities about this challenge because if it should
succeed it could encourage ratepayers to object to proposals to increase
rateable values. In my experience, such objections take, on average, between 18
and 36 months to determine by reason of the possibility of appeals to the local
valuation court and the Lands Tribunal. Interest is not payable on arrears of
rates. If the challenge succeeds, it could have serious financial implications
for rating authorities.
4. In
addition to raising a point of general application, the applicants’ challenge
has serious financial implications for the respondents. The amount outstanding
from the respondents is £1,962,212.15. It was due and payable on April 1 1987.
Under the General Rate Act 1967, no interest is payable on arrears of general
rates. Therefore each day of delay involves the respondents suffering a
substantial financial loss. I would calculate, using the interest rate of the
Public Works Loan Board, that over a year the respondents would lose interest
of £130,767.83 on rates owed by the applicants. Also, the respondents are not
alone in raising this particular point of challenge. In the same building as
the respondents (Number 1 Finsbury Avenue, London EC2) there are two other
ratepayers raising the same point. These ratepayers take up some 90-95% of the
building. The total arrears involved, including the arrears due from the
respondents, are £2,507,957.10. These represent a significant proportion of the
annual income which the respondents raised through levying rates.
5. Excluding
1 Finsbury Avenue the respondents envisage, by collecting on proposed values,
raising £3,000,000 by the end of the financial year (March 1988). I would
further add that the sums which the respondents say are due, have been budgeted
for and, if not collected by way of rates, would have to be found by borrowing
on the open market. Interest charged on this borrowing would ultimately have to
be met by the ratepayer. This would be a further strain on scarce resources.
Those
considerations form the background against which this question falls to be
decided. But we must of course, as in any other exercise of statutory
construction, seek to derive the intention of Parliament as expressed in the
Act. We cannot allow the interpretation of the Act to be dictated by
considerations of administrative convenience or expediency.
In a very
clear and succinct argument for the applicants Mr Fitzgerald QC relied in
particular on two subsections of the Act. The first was section 2(4)(b),
which is in these terms:
Subject to
the provisions of this Act, the general rate for any rating area — . . . (b)
shall be made and levied in accordance with the valuation list in force for the
time being, except that, where a new valuation list is to come into force for
that area, a rate for the year, or any part of the year, beginning with the day
on which the new list is to come into force shall be made, and applied in
relation to particular hereditaments, by reference to that new list.
The second was
section 67(6), which provides:
Subject to
subsection (7) of this section, the valuation list in accordance with which,
under section 2(4)(b) of this Act, any rate falls or fell to be made, as
in force (or about to come into force) at the date of the making of the rate,
shall be conclusive evidence for the purposes of the levying of that rate of
the values of the several hereditaments included in the list.
Subsection (7)
of section 67 provides:
As respects
any period during which, under this Act, an alteration of the valuation list
referred to in subsection (6) of this section is for the time being to be
treated as having had effect, the reference in the said subsection (6) to that
list shall be construed as a reference to that list as so altered.
Accordingly,
it was argued, the applicants’ hereditament was at all material times in the
valuation list at a rateable value of £694,763 and the rate could be made and
levied only in accordance with that rateable value. The respondents could
escape from that conclusion only by virtue of section 6 of the Act, and section
6 did not apply on the facts of this case.
Mr Fitzgerald
referred us to two authorities. In the first, B Kettle Ltd v Newcastle
under Lyme Borough Council [1979] RA 223 Geoffrey Lane LJ (as he then was)
referred to section 2(4)(b) of the Act and said at p 229:
The form of
the Act is, as Lord Denning MR has already said, to set out in section 2 and in
particular in section 2(4)(b) the normal way in which the rating
procedure should be carried out; and, under that general procedure, no general
rate can be levied except in accordance with the values which are currently
shown in the valuation list.
But Geoffrey
Lane LJ added:
But that is
not overriding because by the terms of section 6 there are certain ways in
which the procedures can be carried out not strictly in accordance with section
2 . . .
In the second
case, Debenhams Ltd v Ealing London Borough Council [1981] RA 194
Glidewell J (as he then was) said at p 204:
On this
question, counsel . . . made two submissions on behalf of the ratepayers: (a)
The general rule is to be found in section 2(4) of the 1967 Act, ie that the
general rate shall be made and levied in accordance with the valuation list in
force for the time being. Only if the particular circumstances of a case bring
it within the terms of section 6 can a rate be demanded on the basis of a
proposed amendment. Counsel for the rating authority accepted, as I do, that
this general proposition is correct.
In the course
of his most helpful argument for the respondents Mr Macleod QC accepted that
his first task was to bring himself within
6. (1) Subject to the provisions of this section,
the rating authority may at any time make such amendments in a rate (being
either the current or the last preceding rate) as appear to them necessary in
order to make the rate conform with the enactments relating thereto, and in
particular may — (a) correct any clerical or arithmetical error in the
rate; or (b) correct any
erroneous insertions or omissions or any misdescriptions; or (c) make such additions to or corrections in the
rate as appear to the authority to be necessary by reason of — (i) the coming into occupation of any hereditament
which has been newly erected or which was unoccupied at the time of the making
of the rate; or (ii) any change in the
occupation of any hereditament; or (iii)
any property previously rated as a single hereditament becoming liable
to be rated in parts.
(2) Where the effect of the amendment would be
either — (a) to alter, otherwise
than by way of correction of a clerical or arithmetical error, the value on
which a hereditament is rated; or (b) to charge to the rate a
hereditament not shown, or not separately shown, in the valuation list, the
rating authority shall not make any amendment of the rate unless either the
amendment is necessary to bring the rate into conformity with the valuation
list or a proposal for a corresponding alteration to the valuation list has
been made by the valuation officer; and if effect, or full effect, is
ultimately not given to such a proposal, and the amount of the rate levied in
pursuance of the amendment is affected, the difference — (i) if too much has been paid, shall be repaid or
allowed; or (ii) if too little has been
paid, shall be paid and may be recovered as if it were arrears of the rate.
Mr Macleod,
however, accepted (I am sure rightly) that there was much in those subsections
on which he could not rely. He relied on subsection (1) only in so far as it
provided:
Subject to
the provisions of this section, the rating authority may at any time make such
amendments in a rate (being either the current or the last preceding rate) as
appear to them necessary in order to make the rate conform with the enactments
relating thereto. . .
Reliance was
placed on subsection (2) only in so far as it provided:
Where the
effect of the amendment would be . . . (a) to alter, otherwise than by
way of correction of a clerical or arithmetical error, the value on which a
hereditament is rated . . . the rating authority shall not make any amendment
of the rate unless . . . a proposal for a corresponding alteration to the
valuation list has been made by the valuation officer; and if effect, or full
effect, is ultimately not given . . . etc.
The
respondents argued that the amendment was one which appeared to them to be
necessary in order to make the rate conform with the enactments relating
thereto. The particular enactments relied on were section 19(1) and (3) of the
Act, which are in these terms:
19 — (1)
Subject to the provisions of this Part of this Act and of any scheme for the
time being in force such as is mentioned in section 117(7) of this Act, the
rateable value of a hereditament shall be taken to be the net annual value of
that hereditament ascertained in accordance with subsections (2) to (4) of this
section [and section 23 of this Act] . . .
(3) The net annual value of any other
hereditament shall be an amount equal to the rent at which it is estimated the
hereditament might reasonably be expected to let from year to year if the
tenant undertook to pay all usual tenant’s rates and taxes and to bear the cost
of the repairs and insurance and the other expenses, if any, necessary to
maintain the hereditament in a state to command that rent.
Reference was
also made to section 67(1), providing for maintenance of a valuation list, and
to section 67(2), governing the valuation officer’s power (and, it would seem,
duty: Society of Medical Officers of Health v Hope (Valuation
Officer) [1960] AC 551 at p 565 per Lord Radcliffe) to propose alterations.
Thus, on this
point, the argument was in a nutshell this. The rateable value shall be the
amount defined in section 19(3). The valuation list is to be maintained showing
the rateable value of each hereditament (section 67(1) and (2)). The valuation
officer, as an independent and neutral official, is to propose alterations to
the valuation list when and as he thinks necessary to maintain the list in
correct and legal form. The rating authority may at any time make such
amendments in a rate as appear to them to be necessary in order to make the
rate conform with the correct rateable value. Kettle and Debenhams
show that in certain (albeit different) circumstances rates can be collected on
the strength of a proposal, not an entry in the valuation list. Our attention
was drawn to two observations of Lord Widgery CJ when Kettle was heard
in the Queen’s Bench Divisional Court ([1977] RA 181). The first was at p 185:
So one finds
there, without any doubt at all, that Parliament in passing the General Rate
Act 1967 did contemplate that in the circumstances set out in section 6 the
rating authority could amend the rate — not the valuation list, but the rate —
with the result that the rate would then bear the obligations attributable to
its new form.
And then, with
reference to section 6(2), Lord Widgery said at p 186:
The effect of
this somewhat complex provision, as I see it, is to enable the rating authority
to obtain payment more quickly in cases of this kind, because that would be the
consequence if the argument of counsel for the rating authority succeeds.
The respondents’
second task was to show that section 67(6) did not override the construction of
section 6 which they advanced. Their argument was that section 67(6) was to be
read with section 2(4)(b), the later section directing how the earlier
section was to be operated. The object was to ensure that the general rate was
levied in accordance with the valuation list. But section 2(4) was prefaced by
the words: ‘Subject to the provisions of this Act’, and the provisions of the
Act included section 6(1) and (2), which enabled the respondents to follow the
course they did unfettered by sections 2(4)(b) and 67(6). Alternatively,
it was argued that section 67(6) applied only to rateable values included in
the valuation list and it had no application here because the respondents did
not rely on the valuation list to support the amount they claimed.
I have not
found this an easy question to resolve. I see force in the argument that if
section 6 had been intended to enable rating authorities to levy rates on the
basis of proposed valuations it could very simply have said so. I am not quite
sure that the draftsman would have been likely to foresee a proposal to double
a rateable value agreed little more than a year before. It is, however, plain
from section 6(2) that the Act intended ratepayers to pay first and argue
later. The section also makes plain that rating authorities may amend the rate
where a proposal for a ‘corresponding’ alteration to the valuation list has
been made by the valuation officer. I conclude that the present case falls
within the general words of section 6(1) and enables a rating authority to
amend the rate if (as with the respondents here) it appears to them to be
necessary in order to make the rate conform with, in particular, section 19(3)
and the authority’s power or duty to make a rate. Section 67(6) is, I think,
directed to enforcement of section 2(4)(b), but that subsection is in my
view subject to the authority’s general powers under section 6 to amend the
rate in appropriate circumstances.
For these
reasons I would refuse the applicants the relief sought and dismiss this
application.
HUTCHISON J
agreed and did not add anything.
The
application was dismissed with costs.
