Rating – Valuation – Quarry – Appellant appealing against decision of Valuation Tribunal for England (VTE) confirming rateable value of cement production plant – Whether rate of extraction of minerals to be fixed by reference to material day for purpose of contractor’s basis valuation – Whether value of conveyor in inverse proportion to its length and to be given no value – Appeal dismissed
The appellant ratepayer owned a property at South Ferriby Works at Winteringham, located on the southern banks of the Humber in north Lincolnshire. It appeared in the rating list as a single hereditament comprising three components: (i) the cement production plant known as South Ferriby Works; (ii) a quarry known as the Middlegate Quarry from which chalk and clay were extracted; and (iii) a substantial mineral conveyor, which transported raw materials from the quarry to the works. The conveyor was elevated, crossing the B1204 at the village of South Ferriby.
The appellant appealed against a decision of the Valuation Tribunal for England (VTE) by which it dismissed the appellant’s appeal and confirmed the rateable value of the works at £1,660,000 with effect from 1 April 2010. The appeal arose out of a notice by the respondent valuation officer which entered the rateable value of the hereditament into the 2010 rating list at that figure, it having originally appeared in the compiled list at £1,800,000.
The appellant contended for a greater reduction to give a rateable value of £1,260,000. The respondent’s original valuation was £1,700,000. By the end of the hearing, following agreement of various elements between the parties, he considered the value determined by the VTE at £1,660,000 to be correct, and sought the dismissal of the appeal.
The appeal raised an issue of law concerning the effect of para 2(7)(c) of Schedule 6 to the Local Government Finance Act 1988.
Held: The appeal was dismissed.
(1) In assessing the rateable value of a hereditament in circumstances where a proposal had been made against the compiled rating list assessment in the 2010 list, a letting was assumed to have taken place on the antecedent valuation date (AVD), 1 April 2008, having regard to values and levels of demand at that date, but assuming the matters specific to the hereditament itself and its locality identified in para 2(7) were as they existed on 1 April 2010. The material day for an alteration to give effect to a “material change of circumstance” in a factor listed in para 2(7) was generally the date on which the valuation officer altered the list or the proposal was served on the valuation officer: Merlin Entertainments Group Ltd v Cox (VO) [2018] UKUT 406 (LC); [2019] PLSCS 3 followed.
(2) The language of para 2(7)(c) was straightforward and directed attention to two matters which had to be taken into account in determining the rateable value of the hereditament as they were at the material day. The first was the quantity of minerals or other substances in the hereditament. The second was the quantity of minerals extracted from the hereditament. Since the purpose of para 2(7) was to give effect to the reality principle in relation to the hereditament, there was no reason to limit the relevant information to a single figure representing the total amount extracted at any time from the site. It would be relevant to consider the period over which that quantity had been extracted and, in particular, the quantity extracted in the period immediately before the material day. The information ought therefore properly to include the historic rate of extraction of minerals from the quarry.
(3) Paragraph 2(7)(c) did not fix a rate of extraction which it had to be assumed would be achieved in the future. The statutory rating hypothesis was directed towards the determination of an annual rental value which was payable prospectively, without retrospective adjustment; that rent would necessarily reflect the value of the opportunity to take the unwon minerals from the quarry and process them at the works; it was not a rental value payable in respect of occupation which had already taken place or minerals which had already been won. It was a matter of valuation judgment what rent would be agreed to be payable prospectively on the letting of a mineral producing hereditament. The fact that in the preceding year a particular quantity of material had been extracted was information relevant to the formation of that judgment. Where it was expected that production would continue at a steady rate the previous year’s performance was likely to be regarded as a solid piece of evidence on which to base the expectation of production in the first year of the new letting. As a matter of valuation technique, the known output during the previous calendar year might be assumed to continue at the same rate during the forthcoming year. The risks of unfairness inherent in that method of valuation were limited by the opportunity to undertake a revaluation whenever a material change occurred in the quantity of minerals extracted from the hereditament, as was the Valuation Office Agency’s practice.
(4) The only practical way to transport material from the quarry to the works was via the conveyor. It was inconceivable that, considering the matter at April 2008, the hypothetical tenant would not increase his or her bid by a positive figure to have the use of the conveyor, even allowing for maintenance and repair costs, when the alternative of transporting materials by road, even if it were available, would cost something in the order of £3.3 million a year. If the conveyor did not exist, the owner of the quarry and the works would need to provide it and would regard the cost of doing so as a worthwhile investment to release the value of both. If a particular method of valuation produced a result which appeared, on the face of it, surprising or even perverse, it was necessary for the valuer to consider whether that method was appropriate. In the present case, the appellant had not persuaded the tribunal that the approach taken by the VTE was incorrect. Even after taking into account the various adjustments which had been agreed, the respondent’s valuation remained at the level determined by the VTE. It provided a reliable determination of the rateable value of the hereditament: Hardman (VO) v British Gas Trading [2015] UKUT 53 followed.
Luke Wilcox (instructed by Colliers International) appeared for the appellant; Hugh Flanagan (instructed by HMRC solicitor) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Cemex UK Operations Ltd v O’Dwyer (VO)
