The business rates decisions came thick and fast in 2018. As the year draws to a close, Blake Penfold reflects on the key cases.
Business rates continue to be a hot topic, not just for retailers and the press, but in the legal system too. This year has seen some important judgments handed down by the courts and some significant new legislation.
Iceland Foods
In Iceland Foods Ltd v Berry (VO) [2018] UKSC 15; [2018] EGLR 21, the Supreme Court determined that a specialised air handling system installed by Iceland, the frozen food retailer, at its stores was not a rateable item of plant and machinery. The air handling system was held by the court to be plant and machinery “used in connection with services mainly or exclusively as part of manufacturing operations or trade processes” and was therefore to be ignored when valuing the property for rating purposes.
Retailers and other occupiers will look carefully at specialist items of plant and machinery, where these are included in rating valuations, in the light of this decision.
Upper Tribunal decisions
There was an important series of decisions from the Upper Tribunal (Lands Chamber) (UT) regarding procedure in rating appeals. The first, Simpsons Malt Ltd and others v Jones (VO) and others [2017] UKUT 460 (LC), concerned appeals by five different appellants, in respect of eight different rating appeals, against refusals by the Valuation Tribunal for England (VTE) to reinstate appeals that had been struck out.
Each was reinstated and the UT’s judgment sets out clear and helpful guidance as to the position where there has been a breach of orders that give rise to the possibility of sanctions by the VTE.
Any application for relief from those sanctions needs to be considered in the light of the three stages set out in Denton v TH White Ltd [2014] 1 WLR 3926. First, consider the seriousness of the breach or failure; second, consider why the default occurred; and third, evaluate all the circumstances of the case, so as to enable the court to deal justly with the application. The UT made the important point that “compliance with rules is not to be regarded as an end in itself and should never be allowed to assume a greater importance than doing justice in each case”.
There was also plenty for the Valuation Office Agency (VOA) to consider in this decision. The Tribunal was clearly concerned that the VOA should not take advantage of procedural irregularities to support the striking out of appeals in cases where it is clear that the rating list is inaccurate.
The UT returned to the topic of appeals that had been incorrectly struck out in Re Thorntons plc and Clarion Solicitors Ltd [2018] UKUT 109 (LC); Re Ryan Fisher Carpet and Vinyl Showroom [2018] UKUT 153 (LC); and Re Benchmark Furniture Ltd [2018] UKUT 170 (LC), in each case reinstating the appeals concerned. However, these decisions should not lead practitioners to assume that directions from the Tribunal can be ignored. In Giraffe Concepts Ltd v Jackson (VO) [2018] UKUT 344 (LC), the UT struck out an appeal from the VTE because the appellant had failed to provide a statement of case to support its appeal.
Rates mitigation schemes
Rates mitigation schemes also came before the courts. The High Court found that a rates mitigation scheme operated by Principled Offsite Logistics Ltd represented beneficial occupation of property, capable of satisfying the tests of rateable occupation. In R (on the application of Principled Offsite Logistics Ltd) v Trafford Borough Council and others [2018] EWHC 1687 (Admin); [2018] PLSCS 125, the court found in favour of Principled on the question of whether its occupation of a property at Stretford Mall in Manchester was beneficial, but declined to quash a decision by Trafford Borough Council to lay information in respect of the property on the basis that it was unoccupied.
The occupation was beneficial to Principled and the approach adopted by Trafford was based on a misunderstanding of the law. The decision is an important one for landlords of vacant properties and for those operating, or seeking to operate, rates mitigation schemes in respect of such properties.
Expert witness
The UT decision in Gardiner & Theobald LLP v Jackson (VO) [2018] UKUT 253 (LC); [2018] PLSCS 143 is important because it sets out clearly the Tribunal’s expectations of those appearing before it as expert witnesses, and it is unusual, because the substantive matter of the appeal had been settled by the time of the tribunal’s hearing.
The appellants in the case were the occupiers of an office building in Tottenham Court Road in London. Their statement of case to the UT made clear that the appeal property was subject to a lease. The Valuation Officer (VO), who was the respondent to the ratepayer’s appeal, sought details of the lease of the appeal property, but these were not forthcoming.
Following a case management hearing, the UT made an order that the appeal would be struck out unless the appellant supplied the VO with a copy of the lease and a witness statement explaining the reasons for the failure to disclose this. The appellant supplied these and then gave notice to the UT that it proposed to change its expert witness. During the course of the change of expert, the appellant suggested that one of the reasons for wishing to change its expert witness was that the original expert had signed a declaration that he was not instructed under any conditional (success-related) fee arrangement, but that this was not, in fact, the case.
The UT was concerned by the possible existence of a conditional fee arrangement and gave the expert and his firm the opportunity to make further submissions in that respect at a hearing. Following that hearing, the UT issued a detailed decision that sets out the duties of expert witnesses and some important and helpful guidance regarding fee arrangements for them.
The decision sets out the fundamental duty of an expert witness: “It is the duty of an expert to help the Tribunal on matters within the expert’s expertise and this duty overrides any obligation to the person from whom the expert has received instructions or by whom the expert is paid”.
Although the decision stops short of finding that such a duty is always incompatible with any type of conditional fee agreement for the expert witness or for the firm that employs the expert, it does make absolutely clear that the existence of any conditional fee arrangement must always be disclosed.
In the particular case concerned, while the conditional fee arrangement did not apply to the provision of services as an expert witness, it did apply to other elements of work associated with the appeal and undertaken by the firm employing the expert witness.
The UT made clear its view that concerns about conditional fee arrangements “apply to any agreement for the provision of any service by an expert or the practice for which he works, where that person is acting as an expert witness in an appeal to the Tribunal, and the entitlement to the fee for that service is related to the outcome of the appeal, whether by a decision of the Tribunal or by the parties agreeing to settle the subject matter of the appeal.”
Valuation cases
Among all these cases dealing with procedural issues, there have also been some important valuation cases. In Telereal Trillium v Hewitt (VO) [2018] EWCA Civ 26; [2018] EGLR 12, the Court of Appeal reduced the rating assessment of a vacant office building in Blackpool to a nominal figure of rateable value £1 on the basis that, in the real world, there was no demand for the property at the relevant date, and that the hypothetical basis of valuation for rating did not mean that demand was to be assumed where none existed.
The decision gives significant guidance about the approach to valuation of large vacant buildings, but it is under appeal to the Supreme Court – to be heard in February 2019.
In Cardtronics Europe Ltd and others v Sykes (VO) and others [2018] EWCA Civ 2472; [2018] PLSCS 194, the Court of Appeal determined that ATM sites at retail properties were not rateable separately from the host store. Unfortunately, this writer is unable to go into the detail for reasons of direct involvement but, suffice it to say, further reading on the case is a must for rating practitioners.
Finally, in Home Office v Jackson (VO) [2018] UKUT 171 (LC), the dispute was purely one of valuation, but it is notable for the size of the rateable value under appeal (RV £24,960,000) and for the fact that the building that is subject to the appeal is partly occupied by the Ministry of Housing Communities and Local Government – the department with responsibility for business rates policy.
There were four aspects of the valuation that were in dispute between the parties: the basic value per square metre to be applied to the buildings; the allowance to be made for the size of the buildings (quantum); whether an allowance should be made for fragmentation as the property comprises three interconnecting buildings; and whether an addition should be made to value for the special security equipment installed by the occupier.
Applying its conclusions to these various valuation issues, the UT determined that the assessment should be reduced from RV £24,960,000 to RV £22,700,000 with effect from 1 April 2010. There is nothing especially noteworthy in that, but other commercial ratepayers can be forgiven for thinking that, when the rates burden becomes so great that even the government decides to appeal against it, there is something wrong with the system!
Key 2018 legislation
■ Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act – legislation designed to reverse the effects of Woolway (VO) v Mazars LLP [2015] UKSC 53; [2015] EGLR 56 (the so-called “staircase tax”) became law on 1 November 2018
■ The Non-Domestic Rating (Nursery Grounds) Act 2018 – legislation intended to exempt plant nursery buildings from rates, also became law on 1 November 2018
■ Non-Domestic Rating (Alteration of Lists and Appeals) (England) (Amendment) Regulations 2018 (SI 2018 No 398) – imposes civil penalties for inaccurate information supplied to the VOA under the “Check, Challenge, Appeal” procedure
Main image © Simone Brandt/imageBROKER/Rex/Shutterstock
Blake Penfold is a business rates consultant at blakepenfold.com
