Rating — Rateable occupation — Whether mineral undertakers, engaged by water authority as contractors to deepen a reservoir by extraction of minerals such as sand and gravel, were in rateable occupation of the gravel substratum — The work involved the extraction of gravel down to the top of the London clay — The 20-year agreement between the undertakers and the authority provided for a programme and method of working, with some control by the authority’s engineer, but only to preserve the continuity of the water supply and the safety of the reservoir — The mineral undertakers had the exclusive right to excavate, process, remove and dispose of the minerals extracted for their own benefit, paying an agreed royalty — A local valuation court held that the undertakers were not in paramount occupation of the gravel stratum and therefore that it was not a rateable hereditament — On appeal the Lands Tribunal reversed this decision and the undertakers appealed to the Court of Appeal — Held by the court, after considering and distinguishing Arbuckle-Smith & Co Ltd v Greenock Corporation, that the tribunal were correct in finding that the undertakers were in rateable occupation of the gravel substratum — The four requirements mentioned in John Laing & Sons Ltd v Assessment Committee for Kingswood Assessment Area were satisfied, namely, actual occupation, occupation exclusive for the particular purposes of the possessor, value or benefit to the possessor and possession not of too transient a nature — The fact that the object of the scheme was the deepening of the reservoir and that the undertakers were contractors did not prevent them from being in rateable occupation — Appeal dismissed
This was an
appeal by Reservoir Aggregates Ltd from a decision of the Lands Tribunal (Mr J
H Emlyn Jones FRICS) reversing a decision of the local valuation court and
deciding that the appellants were in rateable occupation of the mineral
workings in the bed of Queen Mary Reservoir, Littleton, Staines. The reservoir
was originally owned by the Metropolitan Water Board but in 1974 was
transferred to the Thames Water Authority.
David
Widdicombe QC and G R G Roots (instructed by Linklaters & Paines) appeared
on behalf of the appellants; Alan Fletcher QC and David Mole (instructed by the
Solicitor of Inland Revenue) represented the respondent valuation officer.
Giving
judgment, FOX LJ said: This is an appeal by Reservoir Aggregates Ltd (‘RA’)
from a decision of the Lands Tribunal (Mr J H Emlyn Jones FRICS) whereby he
determined that RA were in exclusive occupation of the mineral workings in the
bed of Queen Mary Reservoir, Littleton (‘the reservoir’) for their own
purposes, and that their occupation was accordingly rateable.
The reservoir
was completed in 1925 and supplies water to large parts of London. Demand has
steadily increased over the years and has given rise to a need for deepening
the reservoir. It was formerly thought that problems of stratification in the
water causing unpleasant tastes and odours, which would, from time to time,
make the water unusable, would arise if water was stored at depths below 50
In 1962
consideration was given by the Metropolitan Water Board to the deepening of all
its reservoirs by extracting the ballast which overlay the London clay. The
Queen Mary Reservoir was thought to be particularly suitable, since it was
constructed above the original ground level by forming earth embankments
supporting a puddle clay core keyed into the underlying strata of London clay.
The clay floor of the reservoir was overlain by a stratum of gravel of a
thickness of some 12 ft, which is itself overlain by overburden material. The
average depth of the reservoir from the top of the water to the top of the
overburden is about 40 ft.
The Lands
Tribunal found that the deepening of the reservoir involves the excavation of
gravel down to the top of the London clay. This will increase the capacity of
the reservoir by about 1,500 million gallons.
The deepening
of the reservoir was authorised by the Metropolitan Water Board (Queen Mary
Reservoir) Order 1969. Articles 3 and 4 of that order provided as follows:
3 The Board being the owners of the reservoir
may deepen the reservoir by the extraction from the interior of the reservoir
of the whole or such part as they may think fit of the minerals and other
materials overlying the London clay.
4 The works authorised by this Order shall for
all purposes be deemed to form part of the undertaking.
Applications
for planning permission for the deepening works were made by the Metropolitan Water
Board. Two planning authorities were involved — namely Staines and Sunbury. The
permissions were granted in, so far as material, the following terms:
Staines: ‘The extraction of sand and gravel from 97 1/4 acres of land to
the west of the Queen Mary Reservoir’.
Sunbury: ‘Deepening of the Queen Mary Reservoir and the extraction of sand
and gravel from 6 3/4 acres of land to the west of the Queen Mary Reservoir’.
Planning
permission was not necessary as regards the reservoir itself.
On April 1
1974 the powers, functions and property of the Metropolitan Water Board were
transferred to the Thames Water Authority (‘TWA’).
On January 20
1969 the board had entered into an agreement (‘the agreement’) with RA, which
was a consortium of mineral undertakers which the tribunal found was ‘primarily
concerned in the extraction of sand, gravel and ballast in South East England’.
The agreement recited (inter alia) that the board proposed to deepen the
reservoir by the excavation of the minerals therein, and that RA was desirous
of carrying out the excavation of, and recovery of, the minerals. The agreement
granted to RA during a period of 20 years, subject to extension:
The exclusive
right of excavating, processing, removing and disposing of minerals, hard core
and ashes on and from the site.
The site was
defined as the reservoir and certain adjoining land. Clause 24 of the agreement
provided as follows:
Programme and
method of working
24 (1) RA
shall carry out its operations under this Agreement in accordance with a
programme and method of working and rate of working approved by the Engineer
(whose decision shall be final and without appeal) and the Engineer shall be
entitled by notice in writing to RA or to the representative of RA to require
such programme, method of working or rate of working to be varied from time to
time if necessary to ensure or preserve the continuity of supply to the Board’s
consumers, the safety of the reservoir or any other
Matters to
be observed by RA in working
(2) Without prejudice to the generality of the
provisions of sub-clause (1) of this Clause, the following conditions and stipulations
shall apply in respect of the carrying out of the operations under this
agreement, that is to say:
(b) With regard to the excavation of materials
from the reservoir and the operations connected therewith:
(i) Excavation for minerals and overburden shall
not be carried out within the area hatched with vertical broken black lines in
signed plan No 2 within 300 feet measured inwards into the reservoir from the
inside toe of the main embankment and as to part within 200 feet measured from
the toe of the baffle embankment;
(ii) Within the area to be excavated RA shall be
permitted to excavate to the top of the London clay;
(iii) RA shall be entitled to excavate the
overburden which covers the gravel in certain parts of the reservoir floor
within the area to be excavated and to dump this overburden in the deepest
hollows in the London clay in places and to levels to be approved by the
Engineer;
(iv) Where the ‘clay pits’ for the construction of
the reservoir have been filled with dirty gravel or spoil which is found to be
unsuitable for working, RA shall be permitted to leave this as a shoal area;
(v) RA shall not be required to cut drainage
channels in the clay bottom of the reservoir or through the shoal areas
referred to in paragraph (b)(iv) hereof. Except in relation to paragraphs
(b)(iv) and (v), the decision, approval and determination of the Engineer for
the purposes of this sub-clause shall be final and without appeal.
‘The Engineer’
was the engineer appointed by the board.
The agreement
made provision for royalties to be paid by RA to the board (including
provisions for a minimum royalty), and also for a programmed output at the rate
of 600,000 cu yds per year after the completion of the installation of the
necessary plant.
RA started the
work in July 1969. During 1969 and 1970 plant was erected on the adjoining land
for the grading, sieving, crushing etc, of the gravel to be extracted. In July
1970 the actual extraction of gravel was commenced; that was on the adjoining
land.
Dredging of the
reservoir began in September 1974. It involved the removal of mud, silt and
gravel down to the London clay. This is achieved either by a ‘grab’ dredger or
by a ‘pressair’ dredger by which a mixture of gravel, air and water is rifled
into a tube and lifted by air to the surface.
The tribunal
made the following finding regarding the control of dredging operations:
It is
necessary to control the dredger operations, partly to ensure that all gravel
is extracted, so far as is reasonably possible, thereby extending the capacity
of the reservoir, and partly to protect the stability of the embankments,
including the clay core wall from encroachment. In order to attain the
necessary degree of control, the reservoir has been surveyed and charted in 350
foot squares, each with a grid reference. RA normally are directed to work only
one square per dredger at a time, but there are occasions when the dredger
moves on before the dredging of the square is complete. In those circumstances,
it returns at a later date to complete the work. Positioning of the dredgers
was at one time carried out by the use of a sextant and experiments were also
made with laser beams. The present system involves the use of electronic
equipment known as a tellurometer. TWA and RA have agreed upon a method of
ascertaining whether a square has been fully dredged by means of random samples
and the application of statistical techniques. Daily records are kept by each
dredger operator showing the number of barges loaded and also by the recovery
plant operator of the quantities of material removed from the underwater stock
pile.
Gravel was
extracted by RA from the adjoining land in each of the eight years from 1970 to
1977. Gravel was also extracted by RA from the bed of the reservoir from 1974
onwards. Thus, from 1974 to 1977 gravel was extracted from both sources.
Throughout the
period of working, assessments were entered in the valuation list in respect of
the mineral working on the adjoining land, including the buildings and plant.
Those assessments are not in dispute. The proposals which have given rise to
the present dispute sought to increase these assessments by taking into account
the workings in the reservoir. The local valuation court held that RA was not
in paramount occupation of the gravel stratum under the reservoir and that,
therefore, it was not a rateable hereditament. That decision was reversed by
the Lands Tribunal. RA now appeal.
It is
submitted on behalf of RA that neither the owner nor the contractor is rateable
for a hereditament in course of construction, and there is no difference in
principle between this case where, it is said, RA was enlarging a reservoir for
TWA and the case of a contractor who is building a house for another.
The leading
authority in relation to the rateability of premises in the course of
construction or alteration is Arbuckle-Smith & Co Ltd v Greenock
Corporation [1960] AC 813. On March 1 1957 a company purchased a warehouse
for use as a bonded store. Considerable alterations to the premises were
required before the necessary consent of the Customs and Excise to such use
could be obtained. From March 3 1958 until June 16 1958 the work was carried
out. Provisional consent was given by the Customs and Excise on June 13 and
thereafter the company began to use the premises as a bonded store. The company
had never, prior thereto, used the premises as a bonded store or for any
purpose of their business as warehousemen. The local authority sought to rate
the premises for the year from Whitsun 1957 to Whitsun 1958 as being then in
the occupation of the company. The House of Lords held that, as there was no
user of the premises according to their nature, there was no occupation
attracting liability to rate.
Viscount
Kilmuir, at p 821, said:
The sole
purpose of the appellants in acquiring the premises was to use them as a bonded
store in connection with their business as warehousemen. The alterations were
necessary in order that this purpose might, if the alterations were approved by
the Customs and Excise, receive effect. Yet activity carried on in relation to
the premises, the sole object of which is to make the premises fit for the only
use which is contemplated, does not amount to the kind of actual user which is
essential to rateable occupation. So long as the activities were confined to
making the premises fit for a contemplated purpose, the premises were not
serving the appellants’ purposes as warehousemen.
Lord Reid, at
p 824, said:
And I think
that it would accord with the ordinary use of language to say that the owner
who in some way enjoys the accommodation is occupying the premises, but that
the owner who merely maintains, repairs or improves his premises is not thereby
occupying them. He is preparing for future occupation. . .
Lord
Radcliffe, at pp 828-829, said:
Since
language is not a precise instrument, it is possible to say that there was use
of the premises in the circumstance that they were entered and subjected to the
work of adaptation. I do not think, however, that it is this sort of user that
is relevant when the court is considering whether a warehouse was in rateable
occupation. There was no enjoyment of the value of the building as a warehouse.
The present
case is concerned with the stratum of gravel.
The principles
of the Arbuckle-Smith case may be as capable of application to such a
hereditament as to any other, but those principles, it seems to me, have no
application to the circumstances of the present case. In Arbuckle-Smith
there was, in Lord Radcliffe’s words, ‘no enjoyment of the value of the
building as a warehouse’. But in this case there is certainly enjoyment of the
value of the gravel by RA. Under the agreement, RA has the exclusive right of
excavating and disposing of the gravel, and it is doing so for its own benefit.
There is, therefore, actual enjoyment of the hereditament for the purpose of
obtaining valuable material from it. So far from the present case being
analogous to the situation which was in dispute in Arbuckle-Smith, it
is, I think, more truly analogous to the situation which arose in that case
after the alterations had been completed and the warehouse was ready for use as
a bonded store. Arbuckle-Smith turns on the fact that the premises were
not capable of enjoyment for the only purpose for which they were required. The
gravel, on the other hand, has at all material times in this case been
available for, and the subject of, beneficial enjoyment by RA.
Normally a
contractor building or altering a house will not be rateable in respect of the
land (See Ryde on Rating, 13th Ed, p 44). He is not in occupation — in
many such cases, there will be nobody in occupation. It is said that while a
contractor in such a case is normally paid by money payments, in the present
case RA are being paid by being allowed to keep and sell the gravel, and that
this difference in the method of payment does not constitute a material
distinction. I do not think that proposition is correct. The contractor
building or altering a house would not be in rateable occupation of the house
because (even if his occupation were not too transient) he was not in enjoyment
of the hereditament according to its nature. But if the consideration for the
constructor’s work is the right to beneficial enjoyment of some hereditament
(as by taking gravel) I think that a quite different position arises. One must
then examine his rights in, and treatment of, that hereditament. The case of a
money consideration is not comparable.
In my view,
the fact that the reservoir is in course of alteration by deepening, and that RA
is carrying out the works, does not exclude the possibility that RA is in
rateable occupation of the stratum. Whether RA is or not will depend upon the
application of the four requirements for rateable occupation stated by Tucker
LJ in John Laing & Son Ltd v Assessment Committee for Kingswood
Assessment Area [1949] 1 KB 344 at p 350, namely:
First, there
must be actual occupation; secondly, that it must be exclusive for the
particular purposes of the possessor; thirdly, that the possession must be of
some value or benefit to the possessor; and, fourthly, the possession must not
be for too transient a period.
I will deal
with these in turn.
Occupation
The first
matters is the identification of the land which, it is asserted, is being
occupied. Subject to special enactments ‘people are rated as occupiers of land,
land being understood as including not only the surface of the earth but all
strata above or below’ (see Westminster City Council v Southern
Railway Co Ltd [1936] AC 511 at p 529 per Lord Russell of Killowen). A
mineral hereditament will comprise the stratum of mineral being worked, and the
stratum alters as the working proceeds (see R v Whaddon Overseers
(1875) LR 10 QB 230).
It seems to me
that there is actual occupation of the gravel stratum by RA. Under the
agreement RA has, during the 20-year period, ‘the exclusive right of excavating
processing removing and disposing of minerals . . . on and from the site’.
Those rights are being exercised by RA. It is quite true that what is being
done is the deepening of the reservoir and that RA is carrying out the works of
excavation under contract with (now) TWA. And, no doubt, as a result, it can be
said that a purpose of RA’s activity is the excavation of the reservoir. But I
see no reason why RA’s rights and activities in respect of the gravel should
not, nevertheless, constitute occupation of the gravel stratum in the
circumstances. It seems to me that, in view of RA’s right to win and work
minerals for its own benefit, and its exercise of these rights, RA is in a real
sense in actual enjoyment of the gravel stratum. I think that, as indicated by
Lord Reid in the passage I have quoted, it would accord with the ordinary use
of language to say that such a person is in occupation of the stratum. I would
conclude that RA is in occupation of the stratum.
Exclusivity
of occupation
In the present
case, the right of RA to work the gravel is subject to various restrictions
which are set out in the extract from clause 24 of the agreement, to which I
have already referred. But these are primarily for the preservation of the
structure of the reservoir and the quality and level of the water and to secure
orderly working.
In Andrews
v Hereford Rural District Council (1963) 10 RRC 1 Lord Parker CJ, at p
7, described the situation in that case as one where ‘the grantor of the
licence can go, as I understand it, from day to day and say: you shall not work
that bit, or: I want you to work this other bit’.
In the present
case the engineer can require the method and rate of working to be varied from
time to time, but principally only to preserve the continuity of supply of
water to TWA’s customers and the safety of the reservoir. Andrews, in
fact, bears no resemblance to the present case because the licence in Andrews
was not exclusive at all. The grantor would have been within his rights in
allowing other people to come on the land and take the gravel. More to the
point is Westminster City Council v Southern Railway. Lord
Russell of Killowen on p 536 said of the agreement with the Southern Railway
regarding the W H Smith bookstalls on railway stations:
It is in form
a licence to erect and continue in the stations such bookstalls as may be
necessary, the number, nature and position being subject to the general
manager’s approval who may order the removal of any bookstall to any other site
within the station. Access by all, whether servants or customers, is subject to
the Railway Company’s by-laws. The bookstall employees, while on the railway
premises, are to be under the control of the general manager and the station
master . . . the bookstall servants are not to obstruct the Railway Company’s
servants and are to conform to the Railway Company’s reasonable orders. . .
Finally, the Railway Company may exercise some control over what is sold at the
bookstalls.
It was said
that W H Smith were subject to such extensive controls by the railway company
that their occupation was only subsidiary to that of the company, and that the
company’s occupation was paramount in the same way as the landlord of a lodging
had paramount occupation of the whole premises including the rooms let to the
lodger. The House of Lords held, however, that the control exercisable by the
railway company was not inconsistent with W H Smith having rateable occupation
of the bookstalls. Any tenant ‘may be subject to restrictive covenants of a
stringent character. . . These restrictions do not in themselves save the
tenant from being rateable if he is an occupier in other respects’ (see pp
354-5 per Lord Wright).
Lord Russell,
at p 532, said:
In truth, the
effect of the alleged control upon the question of rateable occupation must
depend upon the facts in every case; and in my opinion in each case the degree
of the control must be examined, and the examination must be directed to the
extent to which its exercise would interfere with the enjoyment by the occupant
of the premises in his possession for the purposes for which he occupies them,
or would be inconsistent with his enjoyment of them to the substantial
exclusion of all other persons.
I think that,
as appears from this passage and indeed from Tucker LJ’s formulation in the John
Laing case, the question is whether the possession is exclusive for the
particular purposes of the possession in question. RA’s occupation of the
gravel stratum as beneficial owner of the right to take the gravel is, in my
view, exclusive for the purposes of taking the gravel, and not the less so
because RA is contractually bound to excavate for TWA’s purposes of deepening.
RA, it seems to me, is, in relation to the gravel stratum, in no different
position to that of any exclusive licensee of mineral rights. It is, of course,
subject to restrictions, but so (as was pointed out in the Southern Railway
case) are many lessees. If the degree of control exercised by the railway
company in the Southern Railway case was consistent with rateable
occupation by the licensee, so is the control in the present case. The control
is directed not at reducing RA’s ability to take the minerals but at protecting
the reservoir and its water. While it enables a degree of control to be
exercised for that purpose over the extraction of gravel, such extraction must
continue if the reservoir is to be deepened.
In my opinion,
RA’s occupation is exclusive for the purpose of extraction of gravel by RA as
beneficial owner. The contrary view cannot be reconciled with the facts. Here
is a body which owns the exclusive right to extract gravel for its own benefit
during a 20-year period and which is actively exercising that right. Its
control and enjoyment of the hereditament is really restricted only to an
extent necessary for the physical protection of an adjoining hereditament. The
facts which might be said to point the other way are three. First, TWA is the
owner of the freehold. But that ownership, as regards the gravel, has been
reduced by the agreement. Second, what TWA is engaged upon is the deepening of
its own reservoir, and it has employed RA to do that work. But again one has to
take account of the fact that, for the purpose of that deepening, TWA has
conferred certain rights on RA. It is these rights which are crucial to the
determination of the case. Third, there are TWA’s rights of control. The Southern
Railway case shows that they are not sufficient to exclude rateability.
We were
referred to Cobley (VO) v Horlock (Dredging) Co Ltd (1971) 18 RRC
322. All these cases depend very much upon their own facts, and whether Cobley
v Horlock was rightly decided is not, I think, a matter which it is
necessary for us to determine.
As to the
remaining two of the four requirements, these are plainly satisfied. RA’s
occupation is of value to RA. And a 20-year right to extract minerals cannot be
described as transitory.
In my view, RA
is in rateable occupation of the gravel. I think therefore that the Lands
Tribunal was right and the appeal should be dismissed.
LLOYD LJ and
SIR GEORGE WALLER agreed and did not add anything.
The appeal
was dismissed with costs. Leave to appeal to the House of Lords was refused.
