Rating — General Rate Act 1967, section 20(1)(b) — ‘Tone of the list’ — Proposals for reductions in rates of industrial or commercial hereditaments situated just outside enterprise zone — Adverse effects of zones on values of premises situated outside — Whether it was correct to take into account, under section 20(1)(b), the designation of an enterprise zone in arriving at the ceiling provided for by the section — Appeal by valuation officer from decision of Lands Tribunal dismissing his appeal and holding that the adverse effects of the existence of the zone should properly be taken into account in accordance with section 20(1)(b) — Consideration of the statutory provisions and of the judgment of Sir Patrick Browne in K Shoe Shops Ltd v Hardy (Valuation Officer) and Westminster City Council — It was submitted on behalf of the appellant valuation officer that section 20(1)(b) was concerned with physical factors or at least with factors which affect the physical use and enjoyment of the hereditament, an interpretation disputed by the respondent ratepayers — The Court of Appeal accepted in general the valuation officer’s approach, but with important guidance as to the implications of their decision — At the material time there were no changes shown with a physical connotation consequential on the designation of the zone — The Lands Tribunal had been in error in taking account of the mere designation or existence of the zone — However, the zone might in due course create physical changes which could be capable of being taken into account for the purpose of section 20(1)(b) — If the existence of a zone affects the prosperity of an area in a manner which is manifest and can be observed, this should be taken into account — Appeal by valuation officer allowed
The following
cases are referred to in this report.
Baker
Britt & Co Ltd v Hampsher (VO) [1976] RA
69; (1976) 19 RRC 62; [1976] EGD 566; 239 EG 971, [1976] 2 EGLR 87
Dawkins v Ash Brothers & Heaton Ltd [1969] 2 AC 366; [1969] 2
WLR 1024; [1969] 2 All ER 246; (1969) 67 LGR 499, HL
K Shoe
Shops Ltd v Hardy (VO) and Westminster City
Council [1983] RA 26; [1983] EGD 749; (1982) 266 EG 119, [1983] 1 EGLR 139,
CA
Ladies
Hosiery & Underwear Ltd v West Middlesex
Assessment Committee [1932] 2 KB 679, CA
Sheerness
Steel Co plc v Maudling (VO) [1986] RA 45,
LT
This was an
appeal by the valuation officer (Mr P J Clement BSc ARICS) from a decision of
the Lands Tribunal (Mr J H Emlyn Jones CBE FRICS) holding that the ratepayers’
hereditaments situated outside the Lower Swansea Valley Enterprise Zone were
adversely affected by the existence of the zone and that this was a matter
which should be taken into account in their valuations pursuant to the
provisions of section 20(1)(b) of the General Rate Act 1967. The ratepayers
were Addis Ltd and the four others named in the table of gross and rateable
values on the two bases set out in Woolf LJ’s judgment. The Lands Tribunal’s
decision is reported at (1984) 271 EG 291, [1984] 2 EGLR 198.
Alan Fletcher
QC and David Mole (instructed by the Solicitor of Inland Revenue) appeared on
behalf of the appellant; Guy Roots (instructed by McKenna & Co) represented
the respondents, Addis Ltd; Matthew Horton (instructed by Roy Thomas Begley
& Co, of Swansea) represented the remaining respondents.
Giving the
first judgment at the invitation of O’Connor LJ, WOOLF LJ said: This is an
appeal by case stated from a decision of the Lands Tribunal given on June 21
1984. It relates to proposals for the reduction in rates of five hereditaments
which are industrial or commercial premises situated just outside the Lower
Swansea Valley Enterprise Zone (‘the zone’).
The appeal,
which is by the valuation officer against the dismissal of his appeal to the
Lands Tribunal, raises an issue of general importance as to the method of
determining valuations for the purpose of inserting or altering an entry in the
current valuation list. The proposals have been made on the grounds that the
establishment of the zone has adversely affected the value of the hereditaments.
The issue is whether, when making valuations for this purpose, it is right to
take into account changes in rental value caused by events of this character.
Section 179 of
and Schedule 32 to the Local Government, Planning and Land Act 1980 authorised the
setting up of enterprise zones and the zone was established by the Lower
Swansea Valley Enterprise Zone Designation Order 1981 with effect from June 11
1981. With the exception of one proposal made by Addis Ltd on March 18 1981 all
the proposals were made in 1981 after the zone had been designated.
The object of
establishing enterprise zones is to encourage industrial and commercial
activities in run-down areas. This is achieved by providing fiscal and
administrative incentives within an enterprise zone for a period of 10 years
from the date when the zone comes into effect. The incentives apply both to new
and existing industrial enterprises within the zone. The incentives which are
available are described in the decision as follows: (1) Exemption from development
land tax. (2) Exemption from rates on industrial and commercial property. (3)
100% allowances for corporation and income tax purposes for capital expenditure
on industrial and commercial buildings. (4) Applications for certain customs
facilities for firms within the zones are processed as a matter of priority and
certain criteria are relaxed. (5) Industrial development certificates are not
needed. (6) Employers are exempt from industrial training levies and from the
requirement to supply information to industrial training boards. (7) A greatly
simplified planning regime; developments that can conform with a published
scheme in each zone will not require individual planning permission. (8) Those
controls remaining in force are to be administered more speedily. (9) The
Government’s requests for statistical information are reduced.
It is not
surprising that it is accepted that these substantial attractions of operating
a business in an enterprise zone have had an adverse effect on values of
premises situated outside, but in the same locality as, the zone. This adverse
effect will commence when it is known that an area is going to be designated
even though the designation has not yet come into effect, and so it is accepted
that the issue raised on this appeal applies equally to the proposal which was
made by Addis Ltd on March 18 1981 before the zone came into effect.
The current
valuation list came into force on April 1 1973 and it is not in dispute that
irrespective of the outcome of this appeal the values of the hereditaments at
the date of the proposals would be higher than their values on April 1 1973
before there was any question of there being an enterprise zone in the
locality. Having regard to the
however, important because if this were not the position the valuation would be
carried out solely under section 19 of the General Rate Act 1967 and it would
not be necessary to consider section 20 of the Act, which is the section which
has created the difficulties of interpretation on which the outcome of this
appeal depends.
Section 19
provides, so far as relevant:
(1) Subject to the provisions of this part 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. (2) In the case of a hereditament
consisting of one or more houses or other non-industrial buildings . . . the
net annual value of the hereditament shall be ascertained by deducting from its
gross value such amount, or an amount calculated in such manner, as may for the
time being be specified by the Minister by order in relation to the class of
such hereditaments to which the hereditament in question belongs. (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 the 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
. . . (6) In this section, the following expressions have the following
meanings respectively, that is to say — . . . ‘gross value’, in relation to a
hereditament, means the rent at which 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 the landlord undertook 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;
The general
approach to valuations under section 19 is now well established. In Dawkins
v Ash Brothers & Heaton Ltd [1969] 2 AC 366, at p 381, Lord Pearce
said:
Rating seeks
a standard by which every hereditament in this country can be measured in
relation to every other hereditament.
Later Lord
Pearson said (p 388) that the aim is
to produce a
just and true result, attributing to the hereditament its actual . . . value —
the real value of the beneficial occupation to the occupier.
Having regard
to this general approach, it is accepted by Mr Fletcher, on behalf of the
valuation officer, that on a valuation under section 19 it would be necessary
to take into account the effect of the zone being designated and the individual
benefits which I have set out which follow from the designation. It is also
accepted that under section 19 it is the valuer’s duty to take into account the
present effect of an anticipated event so that under section 19 the proposed
designation could be taken into account on the valuation following the proposal
made by Addis Ltd.
However, under
section 19 it is also necessary to carry out the valuation as at the date of
the proposal, and at times when rents are increasing rapidly this can create
substantial differences between the values originally inserted in the valuation
lists and subsequent valuations resulting from subsequent proposals. This
resulting lack of uniformity in valuations would be aggravated because it has
been established for many years that the fact that other hereditaments have
been assessed at a lower figure cannot be used to justify a reduction of an
assessment which would otherwise be appropriate. (See Ladies Hosiery &
Underwear Ltd v West Middlesex Assessment Committee [1932] 2 KB
679.)
It will be readily
appreciated that at times of rising rents this inability to correct later
assessments by comparing them with assessments of similar hereditaments at
lower values at an earlier date can cause unfairness to those assessed at a
later date, since their burden in relation to rates would be higher than those
assessed at an earlier date. If section 19 stood alone, this unfairness could
be corrected only by frequent revaluations of all hereditaments, which in
itself would be administratively undesirable. Similar problems could arise at
times of falling values. Section 20 of the 1967 Act is designed to deal with
this mischief. Its provisions are as follows:
(1) For the purposes of any alteration of a
valuation list to be made under Part V of this Act in respect of a hereditament
in pursuance of a proposal, the value or altered value to be ascribed to the
hereditament under section 19 of this Act shall not exceed the value which
would have been ascribed thereto in that list if the hereditament had been
subsisting throughout the year before that in which the valuation list came
into force, on the assumptions that at the time by reference to which that
value would have been ascertained — (a) the hereditament was in the same state
as at the time of valuation and any relevant factors (as defined by subsection
(2) of this section) were those subsisting at the last-mentioned time; and (b)
the locality in which the hereditament is situated was in the same state, so
far as concerns the other premises situated in that locality and the occupation
and use of those premises, the transport services and other facilities
available in the locality, and other matters affecting the amenities of the
locality, as at the time of valuation.
(2) In this section, the expression ‘relevant
factors’ means any of the following, so far as material to the valuation of a
hereditament, namely — (a) the mode or category of occupation of the
hereditament; (b) the quantity of minerals or other substances in or extracted
from the hereditament; or (c) in the case of a public house, the volume of
trade or business carried on at the hereditament; and in paragraph (c) of this
subsection the expression ‘public house’ means a hereditament which consists of
or comprises premises licensed for the sale of intoxicating liquor for
consumption on the premises where the sale of such liquor is, or is apart from
any other trade or business ancillary or incidental to it, the only trade or
business carried on at the hereditament.
(3) References in this section to the time of
valuation are references to the time by reference to which the valuation of a
hereditament would have fallen to be ascertained if this section had not been
enacted.
(4) This section does not apply to a hereditament
which is occupied by a public utility undertaking and of which the value falls
to be ascertained on the profits basis.
Section 20 has
since been amended, but it is not necessary for the purposes of this judgment
to refer to those amendments.
In a judgment
which was subsequently described by Lord Templeman as ‘impeccable’ when the
case went to the House of Lords, Sir Patrick Browne in K Shoe Shops Ltd
v Hardy (Valuation Officer) and Westminster City Council [1983] RA 26 at
p 36* said:
The object of
section 20 and its predecessors was clearly to remedy this unfairness by
providing a ceiling which valuations on proposals made during the currency of
the list were not to exceed.
*Editor’s
note: Also reported at (1983) 266 EG 119 at p 123., [1983] 1 EGLR 139
Parliament
dealt with this unfairness in stages. The Valuation for Rating Act 1953 applied
only to dwelling-houses and private garage or private storage premises and
applied only to ‘the making or altering of the first valuation list made after
the passing of this Act’, which turned out to be the 1956 revaluation. The
effect of section 2 was to impose as a ceiling of value the rent at which the
hereditament might reasonably have been expected to let on or about June 30
1939. The assumptions required by section 2(3) to be made correspond closely
with those required by section 20(1) and (2) of the 1967 Act, but the 1953 Act,
unlike the 1967 Act, specified a date by reference to which the valuation was
to be made. Then came section 17 of the Local Government Act 1966, re-enacted
by section 20 of the 1967 Act. As the Lands Tribunal said [1980] RA 333, 344:
‘Section 20 of the General Rate Act 1967 is not one of those statutory
provisions that yield up their meaning at a glance’. But we have no doubt that
its general intention and effect were and are to protect ratepayers against the
effect of inflation since the coming into force of the list current at the date
of the proposals; at the date of the proposals in this case the relevant list
was the 1973 list. That figure is a ceiling — the value could be reduced below
it. Section 20 has no application in the making of a new valuation list. In Ryde
on Rating, 13th ed, p 479, it is said: ‘It cannot be doubted that the
intention of the legislature was to put an end to the rule in the Ladies
Hosiery case.’
We do not
agree. The effect of the section is not that correctness must now be sacrificed
to uniformity but that if the correct value of the hereditament as at the date
of a proposal is higher than the value which would have been ascribed to it in
the 1973 list, the extent to which effect can be given to the correct value is
limited; the date of the proposal is no longer to be the governing factor. If
the correct value is lower than the value ascribed in the list, effect can be
given to it. In Baker Britt & Co Ltd v Hampsher (VO) [1976]
RA 69, 85, Viscount Dilhorne at p 93 cited the Ladies Hosiery case with
approval (see also Lord Morris of Borth-y-Gest). In our view section 20 has no
application (except as to the date of valuation) to the ascertainment of the
value which would have been ascribed to a hereditament in the 1973 list; for
example, Ladies Hosiery still establishes that it would be no reason for
reducing the assessment of shops in Regent Street to show that shops in Oxford
Street or Bond Street were under-valued. The section deals merely with
proposals made for the valuation of new or altered hereditaments in the context
of the current valuation list, or the revaluation of hereditaments included in
the current list. As mentioned below, it seems that it was primarily the former
category which Parliament had in mind.
It is fair to
say that increases in value are now limited by the ‘tone’ of the 1973 list, in
the sense of the level of values appearing in that list, and the side note is
therefore a convenient label to the section.
Our
impression from the wording of section 20 is that Parliament had primarily in
mind hereditaments newly created after the passing of the Act, or so altered
after that date as to become new hereditaments, but having regard to the words
‘any alteration’ it must in our view apply to all hereditaments in
respect of which a proposal is made after that time, as counsel for the
valuation officer does not dispute.
Before this
court this extract from Sir Patrick Browne’s judgment has been accepted as
correct. However, before the tribunal the valuation officer submitted that the
agreed objective of section 20, having regard to the language of the section,
had to be achieved by ignoring the existence of the zone and the benefits it
offered. The
the consequences would be, depending upon which approach was correct, and these
are set out in the decision [at (1984) 271 EG 292) as being as follows:
|
|
The values properly to be ascribed in the valuation |
||||||
|
Appeal hereditament |
(a) the benefits available within the zone are not to |
(b) the benefits available within the zone are to be |
|||||
|
|
Gross value |
Rateable value |
Gross value |
Rateable value |
|||
|
£ |
£ |
£ |
£ |
||||
|
LVC/122&125/1983 |
45,500 |
|
36,500 |
|
|||
|
LVC/222/1982 |
790 |
630 |
675 |
534 |
|||
|
LVC/223/1982 |
3,325 |
2,742 |
2,825 |
2,326 |
|||
|
LVC/224/1982 |
5,300 |
4,388 |
4,500 |
3,722 |
|||
|
LVC/225/1982 |
8,950 |
7,430 |
7,600 |
6,305 |
|||
In alternative (b), however, where there are no cross-appeals by the
ratepayers, the values which can be determined on these appeals are limited in
the last three cases by the determinations of the local valuation court as
follows:
|
Gross value |
Rateable value |
|
|
£ |
£ |
|
|
LVC/223/1982 |
3,100 |
2,555 |
|
LVC/224/1982 |
4,950 |
4,097 |
|
LVC/225/1982 |
8,150 |
6,763 |
As it is the effects of the zone upon hereditaments which are agreed
to be in the same locality as the zone but outside the zone which it is
submitted should be taken into account, it is section 20(1)(b) and not section
20(1)(a) with which this case is directly concerned.
Before the
tribunal Mr Fletcher, on behalf of the valuation officer, submitted that the
subsection is concerned only with the physical characteristics of the locality
and furthermore is not concerned with the prospective changes which could occur
in the locality in consequence of the creation of a development zone. The
member of the tribunal Mr Emlyn Jones, in a decision of exemplary clarity,
rejected this view in accepting the arguments of the ratepayers. He concluded
his decision by saying:
. . .
wherever the line is to be drawn between physical factors and other factors and
between the res and other conditions which have an effect on value, I am
satisfied that the enterprise zone benefits are properly to be embraced within
the words of section 20(1)(b) when taken as whole, particularly when I have
regard to the mischief which the statutory provisions were designed to remedy.
In my judgment, the appeal hereditaments were adversely affected at the
relevant dates by the designation or proposed designation of the enterprise
zone within the locality and that adverse effect is a matter which should
properly be taken into account in their valuation in accordance with the
provisions of section 20 of the Act.
Before this
court Mr Fletcher has modified the submission he made to the tribunal. He
submits that section 20(1)(b) is concerned with physical factors, or at least
factors which affect the physical use and enjoyment of the hereditament. He
gives as examples of such factors new public sewers, the opening of a street
market, no waiting restrictions on an adjacent highway or a change in the
Heathrow flight path bringing aircraft directly overhead. He further contends
that on their natural construction ‘other facilities’ and ‘other matters
affecting the amenities of the locality’ do not include benefits or disbenefits
that are merely financial or economic.
Mr Roots and
Mr Horton, who appeared on behalf of the ratepayers, accept, having regard to
the detailed provisions of section 20, that limits have to be placed on the
considerations which can be taken into account on a valuation for the purposes
of section 20. While seeking to uphold the approach of the tribunal to the
designation of the zone and rejecting the distinction which Mr Fletcher still
draws between physical and non-physical factors, understandably they prefer not
to take on the difficult task of saying where the line is to be drawn between
matters which can and cannot be taken into consideration.
I accept that
it would be consistent with the language of section 20(1) to adopt either the
approach of Mr Fletcher or the approach adopted by the tribunal. Furthermore,
notwithstanding Mr Fletcher’s arguments to the contrary, I can see nothing
inherently difficult in applying section 20 in accordance with the interpretation
adopted by the tribunal. However, when the language of section 20 is considered
as a whole in the context of the mischief it was designed to cure, I cannot
accept the approach of the tribunal. In general, and I emphasise the words ‘in
general’, I accept the approach of Mr Fletcher that section 20(1)(b) is limited
to physical factors or factors which affect the physical enjoyment of a
hereditament. In broad terms the way section 20(1) is intended to operate is
that you value the hereditament and any building upon it as it exists at the
date of proposal in the setting in which it is situated (with that setting
having the actual characteristics of the locality as they would be observed at
that date if the locality was to be inspected) on the basis of its 1973 value.
For the purposes of carrying out that valuation, it is the economic climate,
both local and national, of 1973 which has to be considered and not that at the
date of the proposal except to the extent that alterations in the economic
conditions result in changes in the locality which are capable of being
observed ‘on the ground’ in the locality.
Apart from the
fact that the language of section 20(1) gives the strong impression that it is
primarily concerned with physical matters, my reasons for adopting this
approach to the section are as follows:
(1) As Sir Patrick Browne pointed out, section 20
does not replace section 19 but only provides a ceiling above which a valuation
under section 19 cannot go. This provides at least a partial answer to cases
such as this where it is argued that a restrictive interpretation results in
unfairness. It must be remembered that in the majority of cases the restrictive
interpretation will in fact be in the interests of a ratepayer making a
proposal.
(2) I consider that there is considerable force
in Mr Fletcher’s submission that if his limitation is not placed upon the
effect of section 20(1) it is difficult to identify any other limitation which
can be placed upon the language which would avoid the consequence, which was
clearly not intended by Parliament, that on a section 20 valuation all relevant
factors have to be taken into account as they exist at the date of the
proposal.
(3) While the word ‘state’ can have different
meanings in different contexts and can be a word of very wide application, in
section 20(1)(a) it applies more naturally to the structural state of the
hereditament and in section 20(1)(b) its application is restricted by the words
‘so far as concerns’, with the result that regard can only be had to other
premises, the occupation and use of those premises, transport services, other
facilities and other matters affecting the amenities of the locality.
(4) While the word ‘amenities’ can be of wide
ambit and it is capable of applying to the business climate of the locality,
which would include its designation as a development zone, I regard ‘amenities’
as being used in a sense where it applies to those aspects of the locality
which are capable of affecting all the hereditaments in the locality and not
merely a category of hereditaments such as commercial premises. I am cautious
about adopting the same approach to the construction of the word ‘facilities’.
However, in relation to both amenities and facilities I do recognise that the
effects of an area being designated as a development zone, as happens with a
smokeless zone, can result in changes in the facilities and the amenities of
the locality which can be taken into account.
(5) It is interesting to note that section 2(5)
of the 1953 Act, to which Sir Patrick Browne referred, limits the effect of the
Rent Acts and scarcity of accommodation as factors to be taken into account on
carrying out a valuation at the June 30 1939 date. This suggests that the same
language which now appears in section 20(1)(a) and (b) was then regarded as
only having effect at the 1939 date and not the date of the proposal. This
would not be the position if the reasoning adopted by the tribunal were to be
applied to the similar provisions of section 2 of the 1953 Act.
On the
approach to the interpretation of section 20 which I regard as being correct,
the designation of a development zone is not a matter which can be taken into
account in arriving at the ceiling provided for by section 20. In coming to
this conclusion I regard it as proper to look at the effects of the development
zone as a whole rather than the individual benefitsit confers. However, I would
take the same view if I considered in turn each of the individual benefits
which exist in the zone, though I have reservations as to the special customs
facilities provided to businesses within the zone. However, by itself I doubt
very much whether that benefit could have any material effect upon a valuation.
I should,
however, emphasise that I do not accept Mr Fletcher’s submission that because a
consideration is of a financial nature it cannot be considered as it exists at
the date of the proposal because it is incapable of being converted into 1973
values. I would therefore regard it as perfectly appropriate in considering the
quality of transport services to take into account the level of fares charged
for the services as this could materially affect an assessment of the quality
of the service. Likewise, if the existence of a development zone affects the
prosperity of an area in a manner which is manifest and can be observed, this
should be taken into account. The features which demonstrate a change in
prosperity in this way could be properly taken into account as part of the
setting in which the valuation at 1973 values is to be made.
There remain
two further matters to which I should refer. The first is as to another
decision of a tribunal in relation to which it is intended that there should be
an appeal which could be affected by the result of this appeal. The second is
as to the way the question to be answered has been framed in the case stated
for this appeal.
The other
decision was that of the tribunal in Sheerness Steel Co plc v Maudling
(Valuation Officer) [1986] RA 45. That decision was given on February 17 1986
and followed the decision of the tribunal under appeal in this case. The
subsection under direct consideration was 20(1)(a) and not 20(1)(b). However,
the issue involved is clearly similar to that involved on this appeal. This
court therefore considered whether it would be right for our decision to be
given before hearing the proposed appeal in relation to the decision in the Sheerness
Steel Co case. We have decided to do so, in the absence of any application
that our decision should be adjourned, because although we felt it would have
been desirable to have heard the argument in the other appeal first, it is due
to the default of the parties to the later decision that the form of the case
has not yet even been settled, so that it is not possible to hear that appeal
in the relatively near future.
Mr Mallett,
the member who gave the decision in the Sheerness Steel Co case, in
earlier cases acceded to arguments advanced on behalf of valuation officers in
terms similar to the argument which was advanced by Mr Fletcher before the
tribunal in this case. However, he rejected those submissions in the Sheerness
Steel Co case and came to the conclusion that the word ‘state’ in
subsection (1)(a) was not limited to the physical state and that consideration
of the legal state of the hereditament at the date of the proposal was
therefore not excluded. The result was the ratepayer was entitled to have taken
into consideration in respect of a steel works a production and delivery quota
system which was introduced at the end of 1980 by the European Steel Community
which reduced production to a specified percentage of the works’ maximum
possible output.
This
interpretation of subsection 20(1)(a) is in conflict with the views which I
have expressed above. However, it is conceivable that the directives which
limited the production could be regarded as a ‘relevant factor’ which affected
the mode of occupation of the hereditament. As to this we have not heard full
argument and I therefore do not express my final view, since I appreciate it
could have wide application. For example, it could affect the question of
whether a refusal of planning permission which would have extended the lawful
use of a hereditament could be taken into account.
The question
set out in the case stated on this appeal is in the following terms:
The question
upon which the decision of the Honourable Court is desired is whether, in
considering what was the ‘state’ of the locality within the meaning of section
20(1)(b) of the General Rate Act 1967 I was correct in law in taking into
account the existence, actual or prospective, of premises within the area
designated by the Lower Swansea Valley Enterprise Zone Designation Order 1981,
and the benefits conferred or expected to be conferred on the owners and occupiers
of those premises.
The parties
accept that this question is not happily worded and the parties should have
sought to have it amended. It was never contended on behalf of the valuation
officer that premises already existing within the area designated could not be
taken into account. Clearly such a contention would be unsustainable.
Furthermore, the question does not, as I feel it should, raise the effect not
of the benefits conferred by the zone but of the designation of the zone
itself. However, in this judgment I hope I have sufficiently set out my views
as to the issue which in fact separates the parties. The position is that the
designation itself cannot be taken into account, but the consequences of the
designation, when they exist, are capable of being taken into account if they
fall within my interpretation as to the effect of section 20 of the Act.
It only
remains for me to acknowledge the particularly clear and helpful submissions of
counsel on this appeal and to indicate that I would like to hear further
argument as to the appropriate order which should be made having regard to the
decision to which this court has come.
Agreeing, SIR
GEORGE WALLER said: I will briefly state my reasons. The decision depends on
the meaning of the word ‘state’. How should the word be construed? Mr Fletcher submitted that it should be
limited to physical matters. Mr Roots and Mr Horton supported the decision of
the Lands Tribunal, namely that ‘state’ went beyond physical bounds and should
include the existence of an enterprise zone with all the tax and other
financial advantages for those in business within it. If this were a new
application for an assessment of a new hereditament the case would be
considered under section 19 of the General Rate Act 1967 and the existence of
an enterprise zone would be a matter to be taken into consideration. It would
have been a simple matter to apply the same principles to an alteration of a
valuation list. But Parliament has not done that but instead has specified the
matters which have to be taken into account.
In this case
no problem arises on section 20(1)(a); the hereditament had not changed and the
mode of occupation was the same as in 1973. It is section 20(1)(b) on which the
respondents rely. The member said:
. . . if the
Lower Swansea Valley Enterprise Zone had existed [at the time when the
valuation list came into force] or there had been the immediate prospect of its
designation, then the effect which such a zone would have on the value of
properties immediately outside the zone would have been a factor properly to be
taken into account constituting one of the actual conditions affecting the
hereditament.
The respondents
submit that in considering the state of the locality it is not only the
physical state which has to be considered, but also that one of the factors to
be considered is the existence of the enterprise zone even though no physical
change has taken place.
In K Shoe
Shops Ltd v Hardy [1983] RA 26 at p 36 Sir Patrick Browne, in a
judgment approved by the House of Lords, said, referring to section 20:
But we have
no doubt that its general intention and effect were and are to protect
ratepayers against the effect of inflation since the coming into force of the
list current at the date of the proposals, . . .
The section,
therefore, is to protect against the effects of inflation, and in this phrase I
would include rising rents and not just the retail price index.
In
interpreting the section it is necessary to consider the matters which
Parliament provided should be taken into consideration. Occupation would be
part of the physical state and use would be associated with the physical state.
Similarly, transport services and other facilities in the locality, although
not a physical part of the locality, would be associated physically with the
locality. This would also apply to ‘other matters affecting the amenities of
the locality’. The Oxford English Dictionary gives a number of meanings
of ‘state’, most of which would be difficult to apply to a locality. Those which
could apply either specify physical matters or describe matters which are
mainly physical. The nearest to a non-physical enterprise zone would be a
‘combination of circumstances or attributes belonging to a person or thing’.
I have come to
the conclusion that the Lands Tribunal was in error in taking the mere
existence of an enterprise zone into consideration. The enterprise zone in due
course may create physical changes which would be relevant to the state of the
locality. If so it would be open to the respondents to seek to have their
assessments reduced. At the time when this valuation was being made, there were
no physical changes whatever, nor were there any changes with a physical
connotation. Accordingly I would allow this appeal.
Also agreeing,
O’CONNOR LJ said: The appeal should be allowed for the reasons given in the
judgments of Woolf LJ and Sir George Waller.
The appeal
was allowed, the valuation officer to have the costs of the appeal before the
Lands Tribunal and of this appeal. Leave to appeal to the House of Lords was
refused.
