Non-domestic rating – Alteration of list – Material change of circumstances – Paragraph 2(7)(d) of Schedule 6 to Local Government Finance Act 1988 – Matters physically manifest in locality of hereditament – Valuation tribunal allowing reduction in rateable value of airport lounges on ground of reduced passenger numbers resulting from New York’s World Trade Center attacks in 2001 – Whether attacks a relevant matter – Whether changes “physically manifest” – Appeal allowed
The ratepayer operated two airport lounges at Heathrow Airport for passengers who were considered to be commercially important. The 2000 rating list gave their rateable values as £161,000 for the lounge at terminal 1 and £175,000 for the lounge at terminal 2. In late 2001, the ratepayer submitted proposals to reduce the rateable values on the ground that the September 2001 attacks on the World Trade Center in New York had had the effect of significantly reducing passenger numbers and aircraft movements and, consequently, the rateable value of the hereditaments. It submitted that this was a “material change of circumstances” justifying an alteration in the list within the meaning of regulation 4A(1)(b) of the Non-Domestic Rating (Alteration of Lists and Appeals) Regulations 1993, in that the reductions were matters that were “physically manifest”” in the locality of the hereditament within para 2(7)(d) of Schedule 6 to the Local Government Finance Act 1988. The appellant valuation officer rejected the proposals and the ratepayer appealed.
Allowing the appeal, the valuation tribunal (VT) found that the attacks could amount to a material change of circumstances but that their true effect upon the appeal properties was likely to be masked by the wider statistics concerning passenger numbers and aircraft movements at the airport and by global economic factors. However, it concluded that the effects on the lounges would none the less have been observable or perceptible so as to be physically manifest in their locality and that despite difficulties in quantifying the effect of the attacks on the properties and in removing non-physical economic changes and the trading difficulties of particular carriers, a reduction of 10% was fair and reasonable.
On appeal, the appellant contended that the VT had not been entitled to find that any relevant changes were physically manifest in the locality of the airport given his findings that they were masked and not discernible.
Decision: The appeal was allowed.
Rateable values fell to be determined as they stood on the material day for the purpose of alteration. The question to be asked, under para 2(7)(d) of Schedule 6 to the 1988 Act, was what, on the material day, were the matters that although not affecting the physical state of the locality in which the hereditament was situated, were none the less “physically manifest” there. The VT had erred in treating the World Trade Center attacks as being such matters since they had occurred in the past and were not matters that existed on the material day. However, the consequences of such events could be relevant matters if they endured on the material day. The attitude of air passengers to air travel as a result of the attacks could qualify provided that it was physically manifest in the locality of the hereditament; changes in economic conditions could fall within para 2(7)(d) where the effects were observable on the ground in that locality: Chilton-Merryweather (Listing Officer) v Hunt [2008] EWCA Civ 1025; [2008] RA 357 applied. However, mere observation of changes in passenger numbers and aircraft movements was not sufficient to show that the effects were physically manifest because it revealed nothing about the factors that had caused the numbers to fall. Levels of movement were the outcome of a range of economic and other factors. Although conclusions concering particular factors could be reached by the expert study of the relevant data, supported by market research, the hypothetical landlord and tenant would draw no conclusions from mere observation of passenger and aircraft movements. That was, effectively, what the VT had found in determining that the actual effects of the attacks had been “masked” by the other economic factors affecting such movements. An effect that was “masked” could not be said to be “manifest”. A finding that the effects of the attacks was masked amounted to a finding that they were not physically manifest in the locality of the appeal properties, but were merely an indefinable contributor to the observed decline in movements. Consequently, the VT had not been entitled to find that the rateable value should be reduced.
Tim Buley (instructed by the legal department of HM Revenue & Customs) appeared for the appellant; there was no respondent to the appeal.
Sally Dobson, barrister
