Rating (Disabled Persons) Act 1978 — Conditions of rent rebate — Appeal by rating authority from decision of county court judge in favour of ratepayer — Act provides for mandatory rebate where a hereditament is used wholly for residential accommodation for persons suffering from illness or receiving after-care or partly for those purposes and partly for purposes ancillary thereto — Hereditament in question consisted of three component buildings all of which were used for the purposes contemplated by the Act, subject to one issue — In one of the buildings, a former hotel, there was a basement not suitable for residential accommodation, which had been converted by the proprietors into a public licensed bar — The bar was used as to about 95% by members of the public and as to about 5% by the patients — The county court judge held that the enjoyment of the bar facilities by the patients was an amenity sufficient to bring it within the ancillary purposes mentioned in the Act and he decided that the hereditament as a whole qualified for the rebate — Held by Court of Appeal, reversing this decision, that the entire hereditament must be used either for residential accommodation for the care or after-care of sick persons or for purposes ancillary thereto, and for no other purposes — The use of the basement as a public bar for the general public took the hereditament out of the exemption — Appeal by rating authority allowed
This was an
appeal by Rother District Council from a decision of Judge McManus at Hastings
County Court in favour of Robert Hebbes and David Christopher Lewis (trading as
H L Associates, a firm) on their claim for rate rebate in respect of three
properties which they had developed under the name of the Normanhurst Hotel.
C D Cochrane
(instructed by Sharpe, Pritchard & Co, agents for solicitor to Rother
District Council) appeared on behalf of the appellants; J Wendon (instructed by
Shuttleworth & Co, of Bexhill) represented the respondents.
Giving
judgment, CUMMING-BRUCE LJ said: This appeal raises a short point on the
construction of section 2(1)(b) of the Rating (Disabled Persons) Act 1978. In
the most general terms the purpose of that Act was to enact in language giving
rise to less difficulty of construction than in the existing legislation the
provision for exemption from rating in respect of properties having special
facilities for disabled persons. When one looks at section 1, that section
imposes on the rating authority the mandatory duty to grant a rebate in cases
of rates chargeable on any hereditament to which the section applies and in
subsection (2) there is set out a series of different hereditaments to which
the section applies. When one turns to section 2, that deals with institutions
for the disabled and provides:
2(1) Subject to the provisions of this Act, the
rating authority for any area in England and Wales shall grant a rebate in
respect of the rates chargeable on any hereditament situated in the area which
is occupied by a local authority or other body and is used —
(a) wholly for one or more of the purposes
specified in subsection (2) below; or
(b) partly for one or more of those purposes and
partly for purposes ancillary thereto.
The purpose
set out in section 2(2) relevant for the purpose of this appeal is:
(a) The provision of residential accommodation
for the care of persons suffering from illness or the after-care of persons who
have been suffering from illness.
The background
of the facts is as follows. The occupiers have developed under the name of the
Normanhurst Hotel three properties. One such property facing the seafront has,
as I understand it, always been, until the change of user to the user for which
the hotel is now devoted, an ordinary hotel. Behind that is another piece of
land and buildings which the occupiers of the hotel purchased and have been
using as a nursing home. Then there is a third building, also facing the
seafront, contiguous to the Normanhurst Hotel, formerly known as the Geneva
Hotel, which the proprietors bought and appropriated to use as an hotel for the
use of sick or disabled old people. So the whole single hereditament on the
valuation list has been these three components, looking at the history of
acquisition and use, and the present situation is that we have the Normanhurst
Hotel proper, which is used as a home or hotel for old, sick and disabled
persons, the Geneva Hotel, which is used for the same purpose, and behind those
two parts of the property there is the part which is now devoted to
nursing-home user.
The learned
judge was faced with an issue for decision as to whether those parts of the
hereditament which were used as residential accommodation for the care of
persons suffering from illness, or the after-care of persons who have been
suffering from illness, were exempted under section 2. He decided that question
in favour of the ratepayer and held that exemption should be granted by way of
a rebate in respect of such residential accommodation. Such premises came
within section 2(1)(a) and, on the judge’s finding which is not appealed, are wholly
used for the provision of residential accommodation within the meaning of
section 2(2)(a).
The second
issue is much more limited. When the Geneva Hotel was acquired, the proprietors
found, after consultation with public authorities, that the basement thereof
was not suitable for the provision of residential accommodation for the care of
persons within section 2(2)(a) and so they had to decide what to do about it
and what to use the basement for. They decided to convert the basement for the
purposes of use as a public licensed bar and the photograph at p 27 of the
bundle before us illustrates with clarity the appearance of the public entrance
to the Normanhurst Bar, being a bar to which members of the public may resort
during the hours of licensed drinking. In addition to the provision of
beverages in the bar, there are also provided hot and cold snacks such as are
illustrated by the menu of the bar food advertised on the advertisement shown
in the photograph at the front of the access to the Normanhurst Bar.
The
Normanhurst Bar is connected with the Normanhurst Hotel proper; that is to say
with that residential accommodation which is provided for the care of persons
suffering from illness or the after-care of persons who have been suffering
from illness. But that connection is only a back staircase and we were told
when Mr Cochrane opened the appeal that the evidence discloses that, as you
approach that staircase or the door leading thereto from the bar premises, it
is described as an emergency exit. On the facts, however, some persons, being
the residents in the residential accommodation, do use the Normanhurst Bar and
it is to that user that I now turn.
It is a public
bar and, on the evidence before the learned judge, it appears that roughly 95%
of the use of the facilities in the bar is user by members of the public who
have no connection with the residential accommodation; but some 5% odd of the
takings of the turnover is accounted for by user on the part of the patients
who enjoy the residential accommodation within the Normanhurst Hotel, being
persons suffering from illness or receiving after-care after they have suffered
from illness. When they want to go to the bar they usually leave the
Normanhurst Hotel proper, go out on to the seafront and then walk round and in
through the public entrance of the Normanhurst Bar, but if the weather is
inclement they may prefer, and it is open to them so to do, to use that back
staircase which connects the residential accommodation so that they go through
the door which I have described to get in and out of the bar.
I think for
the purposes of describing the history and the user of the bar, the facts which
I have summarised sufficiently set out the relevant material and the question
then becomes, looking at section 2(1)(b), are the premises appropriated by the
proprietors to the public bar premises, advertised as the Normanhurst Bar
premises, partly used for the provision of residential accommodation and partly
for the purposes ancillary thereto? In
order to aid construction of that subsection we were reminded of the way in
which it was put by Donaldson LJ (as he then was) in the case of Morgan
v Windsor and Maidenhead Royal Borough Council reported in [1981] RA
179, in the passage at p 184 where the learned lord justice said:
Having
established a right to apply as an ‘other body’ occupying premises, the
appellants must next show either that the premises are used wholly for one or
more of the purposes prescribed by subs (2) or that they are used partly for
one or more of those purposes and partly for purposes ancillary thereto. In
this context a purpose is ancillary to one which is described by subs (2) if it
is connected with and subordinate to such a purpose.
I am content to
derive assistance from Donaldson LJ’s description of the kind of purposes which
will be ancillary to the ones prescribed in subsection (2).
What does it
amount to? The main purpose, if one is
looking at the user of the bar, is manifestly the provision of licensed bar
facilities to members of the public. When I use the word ‘main’, I am
describing what happens on the ground, because the figures sufficiently show
that, since the bar was opened, about 95%, equating use with turnover, has been
use by members of the public. But there is no doubt, and it is found as a fact
by the learned judge, that there is some use made of the bar as a convenience
to the users of the residential accommodation. The learned judge (in my view
rightly) held that that use was more substantial than a minimal use and that a
user of some 5% attributable to residents in the residential home was a user
which was sufficiently significant to be outside the de minimis rule. So
here we find two kinds of user of the bar. Most of the user is user by members
of the public for the provision of ordinary public licensed bar facilities, but
those facilities are also enjoyed as to about 5% by patients who reside in the
residential accommodation. The learned judge held that the enjoyment of the
facilities offered by the bar to the residents in the residential accommodation
was an amenity element for the patients in the hotel and the nursing home
sufficient to bring it within subsection 1(b) of section 2. There the learned
judge is focusing his attention on the fact that those patients who contribute
some 5% of the takings of the bar find that the use of the bar and its
facilities offer the residents an amenity. The learned judge regarded that as
sufficient to bring the bar premises within subsection 2(1)(b).
As a matter of
construction it seems to me that there are great difficulties on that
construction of the subsection. When one looks at subsection 2(1)(a), there the
rebate bites upon premises which are wholly used for the purposes in subsection
(2) and clearly this bar was not wholly used for the provision of residential
accommodation for the care of persons suffering from illness. In truth and in
fact it was not used at all for the provision of such residential accommodation
and it is because it was not suitable for the provision of such residential
accommodation that the proprietors converted it into a public bar. So one comes
to subsection (b). The hereditament comprising the whole of the premises on the
valuation
namely all those parts of the premises which were residential accommodation for
the care of the persons specified in subsection (2)(a).
Was the bar,
as the other part of the hereditament, which was not used wholly for the
provision of residential accommodation, used partly for purposes ancillary
thereto? The answer is that it was used
partly for purposes ancillary thereto and partly for a third user, namely use
as a public bar by members of the public. As I construe subsection (b), the
intention of Parliament was that where a hereditament is not used wholly for
residential accommodation, it would still qualify for rebate if the other user
was entirely for purposes ancillary to the provision of residential
accommodation. On the construction which appealed to the learned judge, I would
have thought that the language of the draftsman would have had to be partly for
one or more of those purposes and partly for the purposes ancillary thereto, or
partly for other purposes as well. I find no indication in the section for
giving such a wide construction to section 2(1)(b) as to lead to the conclusion
that it was the intention of the draftsman, where the hereditament was not
wholly used for residential accommodation or any of the other purposes in
subsection (2) but was used partly for purposes ancillary thereto and partly
for some quite other purposes such as the provision of bar facilities for the
public as a whole, to include such premises within the exemption.
For that
reason, it is quite impossible, in my view, to hold that the main user of this
bar, which was the provision of bar facilities for members of the public, was
connected with, or subordinate to, any of the purposes in section 2(2); it had
nothing to do with the provision of residential accommodation and was in no way
subordinate thereto, subject only to a consideration of the point taken in the
respondents’ notice. With respect to the learned judge, therefore, I would hold
that, having regard to the proper construction of subsection 2(1)(b), it was not,
and is not, enough to qualify for a rebate that the bar happens to have an
amenity element for patients of the hotel and the nursing home.
The
construction preferred by the judge would have curious consequences. It would
mean that any premises which afforded an amenity for patients in the hotel
would for that reason qualify for rating rebate. That clearly cannot be the
intention. But I prefer to rest my decision not on consideration of anomalies
that flow from one construction or the other; it is simply that I found myself
upon the language of the draftsman in section 2(1)(b).
By
respondents’ notice the respondents seek to uphold the decision of the learned
judge on a different ground which was argued before the learned judge but which
did not commend itself to him. That is expressed in this way in the
respondents’ notice:
That the
learned judge, having found that the Normanhurst Residential Hotel and Nursing
Home was an institution within the meaning of section 2(2) of the Rating
(Disabled Persons) Act 1978, was by the evidence and in law entitled to find
further that a small part of the same hereditament, namely the public bar, was
used for an ancillary purpose within the meaning of section 2(1)(b) of the
aforesaid Act in that the purpose in opening and operating the said bar had at
all times been physically and financially connected with and subordinate to the
economical management of the Normanhurst as an institution for residents
suffering from the disabilities of old age under section 2(2) of the 1978 Act.
On analysis
that comes to this, that if the proprietors of the Normanhurst institution
decided to seek to subsidise (if that is the right word) their nursing home by
embarking on commercial activities which have nothing to do with the care of
the disabled, the fact that the profits from such an undertaking will be
devoted to the financing of the residential home is itself sufficient to bring
the premises in which those other commercial activities are going on within
subsection 2(1)(b). There is nothing in the language of the subsection which in
any way points to such unusual and extraordinary construction and, like the
learned judge, I find no difficulty in rejecting it.
For those
reasons I would move that the appeal be allowed, that the decision of the
learned judge that the hereditament as a whole qualified for the grant of a
rebate under section 2 of the Act should be reversed and that it should be
declared that the hereditament on the valuation list called ‘The Normanhurst
Hotel’ does not qualify for rebate under section 2 of the Act.
What the
practical consequence of this will be is not for me to speculate. It may be
that the proprietors, in order to qualify for a rating rebate, will decide to
close the bar. It may be that they will seek to persuade the valuation officer
on a revision of the valuation list and to enter in the valuation list one
hereditament being residential accommodation and a second hereditament being a
bar. But I refuse to be enticed into such speculation and I derive no assistance,
in spite of the efforts of Mr Wendon, from consideration of the tests in the
valuation list cases which lay down tests helping the court to decide whether
premises are a single hereditament or more than one hereditament.
I would move
accordingly.
Agreeing,
PARKER LJ said: In order to bring themselves within section 2 of the Rating
(Disabled Persons) Act, the appellants have to establish one of two things in
respect of a single hereditament known as the Normanhurst Residential Hotel and
Nursing Home. They must show that it is used either wholly for one or more of
the purposes specified in subsection (2) or partly for one or more of those
purposes and partly for purposes ancillary thereto.
It is conceded
that, by reason of the activities which go on in what was the basement of the
Geneva Hotel and which is now incorporated in the single hereditament, they
cannot bring themselves within the first of the alternatives set out in section
2(1)(a). They seek to bring themselves within the second of the two alternatives
by showing that, albeit not used wholly for one of the relevant purposes, it is
used partly for one or more of those purposes and partly for purposes ancillary
thereto. They can succeed only if they can establish that section 2(1)(b) goes
further than on its plain language it plainly does. The purpose is plain. If
you cannot show that the entire hereditament is used for the relevant purpose,
you have to show that the entire hereditament is used for the relevant purpose
and an ancillary purpose but for no other purpose. In the present case it is
clear that this single hereditament is used partly for one of the relevant
purposes, partly for a purpose ancillary thereto, namely to provide refreshment
in the bar for some of its patients, and partly for a wholly different purpose,
namely to provide bar facilities in a public bar for members of the public.
Accordingly
they cannot bring themselves within section 2(1) and I agree with the order
proposed.
The appeal
was allowed, with costs in the Court of Appeal. No order as to costs below,
judge’s order varied accordingly.