What is the correct approach in law to the rating of the site of a cash machine in a supermarket, shop, or petrol filling station? Are such sites capable in law of being separate hereditaments? And if so, who is in rateable occupation? Reportedly, the fate of more than £300m in rates refunds hung on the answers provided by the Court of Appeal in Cardtronics Europe Ltd v Sykes (Valuation Officer) [2018] EWCA Civ 2472.
The litigation resulted from changes to the rating list, as a result of which the sites of cash machines became listed as separate hereditaments with their own rateable values (even though the machines themselves were not rateable thanks to the Valuation for Rating (Plant and Machinery) (England) Regulations 2000). Sainsbury’s, Tesco and the Co-op, which all host cash machines provided by banks within their own corporate structures, and Cardtronics, the provider of more than 16,000 cash machines in convenience stores run by independent retailers, all appealed against the Valuation Office’s decisions.
The Upper Tribunal decided that cash machine sites that were permanent and substantial were capable of constituting separate hereditaments. Furthermore, the sites of external “hole in the wall” cash machines were in the rateable occupation of the banks that operated them because the machines served the public at large. But the sites of internal machines, aimed primarily at shoppers, were occupied by the stores.
The Court of Appeal disagreed. It reminded us that Westminster Council v Southern Railway Company Ltd [1936] AC 511 established that, in cases where persons occupy parts of a larger hereditament, if the owner of the hereditament (who is also in occupation himself or through his servants) retains to himself “general control” over the occupied parts, the owner will be treated as being in rateable occupation. But if the owner does not retain any control, the occupiers of the various parts will be treated as in rateable occupation of those parts.
Lindblom LJ, who spoke for the court, noted that the Upper Tribunal had taken into account the purposes for which the cash machines were used. But there was no need for the “general control” principle to be subordinated or made subject to such an enquiry. Such a test is not prescribed in the jurisprudence and is neither necessary or appropriate.
He also explained that the degree of control required will differ from case to case, depending on the facts. But, since less than total control will suffice, it is possible, in a case of concurrent occupation by two occupiers, for both to retain a degree of autonomy in their occupation without the owner of the premises being deprived of “general control”.
The retailers had not parted with possession of the cash machine sites in any of these cases. They shared occupation with the banks, but remained in possession and retained “general control”, in contractual, physical and functional terms. The machines complemented the retailers’ own offerings, needed to be loaded, serviced and maintained from within the stores with the retailers’ co-operation or consent (sometimes with help from members of the retailers’ own staff) and were functionally integrated with the retailers’ operations. Consequently, the court could not agree that any of the cash machine sites were separate hereditaments in the occupation of the banks.
Allyson Colby, property law consultant
