Rating — General Rate Act 1967, section 17 and Schedule 1 — Issue as to date when building known as the Angel Centre, Islington, was to be treated as completed for the purpose of Schedule 1, so as to fix date when ‘unoccupied rate’ became payable — Appeal by ratepayers to House of Lords from decision of Court of Appeal rejecting ratepayers’ main submission in their appeal from the county court — County court judge agreed with the view formed by the rating authority that the centre had been substantially completed by March 1 1983 and that the period reasonably required for subsequent ‘fitting-out’ work would be six months — The appeal to the House of Lords raised ‘points of pure construction of paragraph 9 of Schedule 1’ and in the view of the House both courts below had failed to analyse closely the language of that paragraph — The first question a judge should ask was ‘what kind of work is customarily done to a building of the type with which I am concerned after substantial completion?’ — The second was ‘what period is reasonably required for carrying out the customary work which remains to be done to the subject building?’ — Then the simple question was ‘when will the customary work period expire if it is assumed to begin on the date of completion of the subject building apart from the customary work?’ — It was clear in the present case that the centre was not complete, apart from the customary work of fitting-out, until August 31 1983 and it was from that date, not March 1, that the period reasonably required for fitting-out work must be assumed to run in order to arrive at the appropriate completion date — The appellants succeeded on this issue — The second question raised was whether, in calculating the period reasonably required for carrying out the customary work which remained, the time required for certain preparatory operations should be included, for example, the time required to complete outline design schemes for a building as large as the centre — On this question the appellants failed before the House — While some incidental operations going beyond the physical operations of craftsmen and labourers must be taken into account, the position was different in regard to what was merely preparatory and necessary to be undertaken before the work could be commenced at all — The remaining question concerned the remission of the case to the judge for reconsideration — As the judge would now be in a position to know as a fact what fitting-out work was done to complete the centre before its occupation, the basis of the remission would necessarily be different — The case would be remitted to the county court to determine in the light of the speeches in the House and any further evidence what period was reasonably required after August 31 1983 for carrying out the work then remaining and, consequently, on what date the centre was to be treated as completed for the purposes of Schedule 1 — Appeal allowed and case remitted accordingly
The following
cases are referred to in this report.
JLG
Investments Ltd v Sandwell District Council
[1977] RA 78; (1977) 75 LGR 643; 20 RRC 61; [1978] EGD 845; 245 EG 137, [1978]
1 EGLR 103
Ravenseft
Properties Ltd v Newham London Borough Council
[1976] QB 464; [1976] 2 WLR 131; [1976] 1 All ER 580; [1976] EGD 662; (1975)
237 EG 35, [1976] 1 EGLR 109, CA
Watford
Borough Council v Parcourt Property Investment
Co Ltd [1971] RA 97; (1971) 17 RRC 19; [1971] EGD 394; 218 EG 1006
This was an
appeal by the ratepayers, London Merchant Securities plc and Trendworthy Two
Ltd, against the decision of the Court of Appeal, reported at [1986] 2 EGLR
168, (1986) 279 EG 309, dismissing two of the appellants’ three grounds of
appeal from the decision of Judge Marder QC at Clerkenwell County Court in
regard to the rating of the Angel Centre in Islington. The respondents were the
rating authority, the London Borough of Islington.
William Glover
QC and Guy Roots (instructed by Michael Conn & Co) appeared on behalf of
the appellants; Matthew Horton and Nicholas Burton (instructed by the Legal
Department, London Borough of Islington) represented the respondents.
In his speech,
LORD BRIDGE OF HARWICH said: the Angel Centre is a large, modern office
development in Islington. It comprises two buildings. The net office floorspace
in one building is 162,000 sq ft, in the other 12,000 sq ft. The appellants are
the owners. They carried out the development for the purpose of providing
office space to be let. In this sense the development may be described as
speculative. The word is not used in any pejorative sense, but merely to
distinguish such a development from one which is carried out by or to the order
of the intending occupier. The distinction is of importance for this reason. In
the case of an occupier’s development, as I will call it, the building can be
planned and executed as a single operation because the detailed requirements of
the occupier as to how the building shall be fitted out are known in advance.
In the case of a speculative development, however, of shops, offices and
perhaps some other categories of building, the building operation will commonly
be carried out in two phases. The developer will provide the main structure of
the building complete with necessary services in the first phase. But the
addition of many features which, when they are provided, will certainly form
part of the building, as distinct from mere furnishings, will be postponed to a
second phase in order that they may be designed to meet the requirements of the
eventual occupier or occupiers. The most obvious example of this two-phase
process is a speculative development which comprises at ground-floor level a
row of small shops. On completion of the first phase these will be empty shells
with boarded fronts. All the shop fronts and fittings will be provided in the
second phase to suit the various requirements of the individual shopkeeper
tenants. The same two-phase process appears now to be commonly adopted in the
speculative development of modern office buildings.
Parliament, by
the Local Government Act 1966, gave power to rating authorities to adopt a code
which enabled them for the first time to levy rates on unoccupied hereditaments.
The power to adopt the code is now found in section 17 of the General Rate Act
1967 (‘the Act’) and the code in Schedule 1 to the Act. Some amendments to
Schedule 1 made by the Local Government, Planning and Land Act 1980 can, for
present purposes, be ignored as having no relevance to any point raised in this
appeal. In a rating area where Schedule 1 applies, as it does in Islington, the
owner of a ‘relevant hereditament’ becomes liable to pay rates if the
hereditament remains unoccupied for a continuous period exceeding three months.
‘Relevant hereditament’ is defined by para 15 as meaning:
any
hereditament consisting of, or of part of, a house, shop, office, factory, mill
or other building whatsoever, together with any garden, yard, court or other
land ordinarily used or intended for use for the purposes of the building or
part; . . .
In enacting
the code, the legislature foresaw the necessity in the case of a newly erected
building standing empty to determine with precision a date which should be
taken as the commencement of the initial period of three months which must
elapse before any liability to pay rates can attach. It will be convenient to
refer to this as ‘the completion date.’
They clearly had in contemplation the two-phase process in certain forms
of speculative development which I have described and the relevant provisions,
as we shall see, are designed to ensure in relation to buildings erected in the
course of such development that buildings in which the first phase of development
has been completed may in due course attract liability to rates as unoccupied
hereditaments notwithstanding that the second phase may be postponed.
The first step
necessary to determine the completion date for a new building is the service of
a completion notice by the rating authority under para 8(1) of Schedule 1,
which provides:
Where a rating
authority are of opinion:–
(a) that the erection of a building within their
area has been completed; or
(b) that the work remaining to be done on a
building within their area is such that the erection of the building can
reasonably be expected to be completed within three months,
and that the
building is, or when completed will be, comprised in a relevant hereditament,
the authority may serve on the owner of the building a notice (hereafter in
this paragraph referred to as ‘a completion notice’) stating that the erection
of the building is to be treated for the purposes of this Schedule as completed
on the date of service of the notice or on such later date as may be specified
by the notice.
The effect of
para 8(2) to (5) may be summarised as follows. If the completion notice is not
varied by agreement, withdrawn or successfully appealed against, the date
specified in the notice as the date of actual or anticipated completion becomes
the completion date. But the owner has a right of appeal to the county court
under para 8(4) on the ground ‘that the erection of the building to which the
notice relates has not been or, as the case may be, cannot reasonably be
expected to be completed by the date specified by the notice.’ If the appeal is successful, the completion
date will be ‘such date as the court shall determine’ for the purposes of
Schedule 1.
If the
legislation stopped at that point the rating authority might never be able to
serve an effective completion notice on the owner of a building erected in the
course of speculative development and standing empty on completion of the first
phase but in which the second phase had not yet been commenced. In the case of,
say, a small shop where it would be apparent that the work of installing the
shop front and fittings could be comfortably completed within three months, a
notice served under para 8(1)(b) specifying a date three months after service
as the anticipated completion date could be appealed against on the ground that
the work of installing the shop front and shop fittings necessary to complete
the shop as a ‘completed building comprised in a relevant hereditament’ could
not reasonably be expected to be carried out until the shop was let and the
requirements of the tenant shopkeeper were known. But to meet this situation
para 9 of Schedule 1 provides:
In the case
of a building to which work remains to be done of a kind which is customarily
done to a building of the type in question after the erection of the building
has been substantially completed, it shall be assumed for the purposes of
paragraph 8 of this Schedule that the erection of the building has been or can
reasonably be expected to be completed at the expiration of such period
beginning with the date of its completion apart from the work as is reasonably
required for carrying out the work.
The
development of the Angel Centre began in 1980. The first phase of the
development was finished in 1983. This phase of the development was carried out
under a single contract at a cost in excess of £16m. The architect issued his
certificate of practical completion of August 31 1983. On June 1 1983 the
respondent council as the rating authority served on the appellants under para
8(1)(b) of Schedule 1 to the Act a notice specifying September 1 1983 as the
date when the erection of the building could reasonably be expected to be
completed. The appellants appealed to the county court. After a hearing
extending over 11 days between November 5 and 26 1984, Judge Marder QC, sitting
in the Clerkenwell County Court, delivered judgment dismissing the appeal on
December 21 1984. The appellants appealed to the Court of Appeal on three
grounds. The appeal failed on two grounds, but succeeded on the third to the
extent that the Court of Appeal (Dillon LJ and Booth J) remitted the matter to
the judge to consider afresh in the light of their judgments, the appropriate
completion date. The appellants now appeal by leave of your Lordships’ House on
the two grounds on which they failed in the Court of Appeal, which raise points
of pure construction of para 9 of Schedule 1 to the Act. Although there is no
cross-appeal, the issue on which the Court of Appeal determined that the matter
called for remission has also been extensively canvassed in argument, primarily
at the instance of counsel for the rating authority, and, since the case, if
not resolved by agreement, will now have to go back to the county court in any
event, it seems to me inevitable that your Lordships should also examine and
give whatever guidance may be appropriate in relation to that issue.
The case for
the rating authority in the county court was that an inspection of the Angel
Centre buildings in March 1983 by council officials had shown that they must
have been substantially completed by the beginning of that month and that the
time reasonably required for carrying out the work which remained to be done of
a kind customarily done to office buildings after substantial completion, which
has throughout been compendiously and appropriately described as ‘fitting-out
work’, was not more than six months. It was on this basis that they claimed to
justify September 1 1983 as the completion date. The appellants proved, and the
judge accepted, that, inter alia, two items affecting the main building
had caused the architect to delay issuing his certificate of practical
completion until August 31 1983. The building was equipped with a full
air-conditioning plant. This had been condemned by the respondent council,
wearing a different hat than as rating authority, as being excessively noisy.
This defect had not been remedied until July 1983. Moreover, because the
building was air-conditioned, it was essential that window frames and seals be
correctly fitted. Many of these had been condemned by the architect when first
fitted and the work had to be done again. This work was not complete before the
end of August 1983.
Against this
background of undisputed fact the judge had to decide, on the true construction
of para 9, from what starting date the time reasonably required for the
fitting-out work began to run in order to arrive at the appropriate completion
date, March 1 1983 as the rating authority contended or August 31 1983 as the
appellants contended and still contend.
The judge
quoted the senior council official who made the March inspection, a Mr Edwards,
as saying:
My concept of
‘substantial completion’ is that you have to have walls, floors, ceilings,
windows, a water supply, electricity supply and lighting, lifts, toilets,
plastered walls and so on. All are required for substantial completion in a
building of this size and they were there in that building.
When the judge
addressed the issue of the construction of para 9 he said:
Substantial
completion, in my view, is a matter of objective fact, and the test adopted by
Mr Edwards is perhaps as near as one can get to a satisfactory definition. I
accept that much work still remained to be done before the erection of the
Angel Centre could be said to be complete but that was almost entirely
work of fitting-out or adaptation of the kind which it is agreed is customarily
done after substantial completion. Such other relatively minor work as
did not meet that description — for example adjusting the window seals, or
fitting a replacement air-conditioning unit — that work could readily be
accommodated (the word ‘subsumed’ was fashionable in the course of the hearing)
— could readily be subsumed in the fitting-out period . . .
The added
emphasis in this passage is mine and the reason for adding it will shortly
become apparent.
In the Court
of Appeal the judge’s approach to this issue was approved. Dillon LJ said:
On what I
regard as the sensible construction of para 9, the question whether a building
has been substantially completed is a broad question of fact; I would reject
the narrower construction that under para 9 there is only substantial
completion when there is nothing whatsoever but the fitting-out work to be
done.
Booth J,
having recited the appellants’ submission, continued:
I am unable
to accept that submission. It amounts in effect to saying that the
time reasonably required for the fitting-out work shall not be deemed to run
until the erection of the building is completed save and except for that work.
Had Parliament intended para 9 to have that meaning then the words used by the
draftsman would have made it clear. In my judgment the words ‘substantially
completed’ mean no more than that the building has reached the stage in its
construction when it would be practical for the fitting-out work to commence.
My Lords, I
have to say, with all respect to the judges in both courts below, that they
failed to analyse sufficiently closely the language of para 9. Had they done
so, they would have discovered that it bears the precise meaning for which the
appellants have throughout contended and indeed it seems to me to be capable of
no other meaning.
In order to
analyse para 9 it will be helpful to set it out in numbered clauses and for
clarity to vary the order in which these clauses appear, which may be done
without altering the sense of the paragraph. It will then read as follows:
In the case of
a building:–
(1) to which work remains to be done of a kind
which is customarily done to a building of the type in question after the
erection of the building has been substantially completed,
(2) it shall be assumed for the purposes of
paragraph 8 of this Schedule that the building has been or can reasonably be
expected to be completed at the expiration of such period . . . as is
reasonably required for carrying out the work,
(3) beginning with the date of its completion
apart from the work.
The words
‘substantially completed’ appear in clause (1) only and the concept of
substantial completion is relevant solely for the purpose of identifying a
certain kind of work which, in this analysis, I shall designate as ‘the
customary work’. The first question which a judge who has to apply this
paragraph must ask himself is: ‘What kind of work is customarily done to a
building of the type with which I am concerned after substantial
completion?’ Given the common practice
of speculative development in two phases of shop and office buildings which I
have earlier described, I apprehend that the answer to this question will not
normally be in dispute or, if in dispute, difficult to determine. In the case
of a shop, the customary work will be the installation of the shop front and
shop fittings. In the case of this office building there seems to have been no
dispute that the customary work embraced no more and no less than what was
described as the fitting-out work. Proceeding to clauses (2) and (3), it is
obvious that ‘the work’ referred to in each clause means the customary work.
The second question, therefore, which the judge must ask is: ‘What period is
reasonably required for carrying out the customary work which remains to be
done to the subject building?’ I will
call that ‘the customary work period’. To arrive at the date to be assumed as
the completion date for the purposes of para 8, clause (3) then poses the
simple question: ‘When will the customary work period expire if it is assumed
to begin on the date of completion of the subject building apart from the
customary work?’
This analysis
demonstrates that it never becomes necessary to ask under para 9 the question
when the subject building was substantially completed; the question to be asked
about the subject building is when it was complete apart from the customary
work. These two questions will produce different answers if the words
‘substantially completed’ mean, as Booth J put it, ‘no more than that the
building has reached the stage in its construction when it would be practical
for the fitting-out work to commence’. But the language of clause (3), in
choosing as the date when the period reasonably required for the customary work
is assumed to begin the date of the completion of the building apart from that
work, leaves no room for the assumption, on which all three judgments in the
courts below are based, that ordinary work to complete the building
(non-customary work) and fitting-out work (customary work) may be carried out
concurrently. It is clear that the Angel Centre was not complete apart from the
customary work of fitting-out until August 31 1983 and it is from that date,
not March 1, that the period reasonably required for carrying out the
fitting-out work must be assumed to run to arrive at the appropriate completion
date.
Counsel for
the rating authority was, I think, inclined to agree that this construction of
para 9 accords with the ordinary grammatical meaning of the language used. But
he submitted that the construction adopted by the courts below should
nevertheless be preferred in order to stem the tide of abuse which he suggested
would follow if speculative developers could leave buildings at a stage just
short of completion apart from the customary work, in which state they could
stand empty indefinitely without attracting the unoccupied rate. My Lords, I
would suppose that most speculative developers of shop and office properties
are primarily interested in carrying out their development as economically,
swiftly and efficiently as possible and in letting the property to secure an
early return on their investment. I doubt if they will devote much of their
ingenuity or energy to devising schemes to ensure that, if they cannot let the
property, they will escape liability for the unoccupied rate. There was
certainly not the slightest suggestion of any such artificial device being
involved in the instant case. But if my view of the ways of property developers
is unduly naive and the threat materialises of widespread avoidance of the unoccupied
rate on the lines adumbrated by counsel for the rating authority, it can only
be countered by amending legislation. The language of the statute as it stands
is clear and unambiguous and leaves no room for a construction designed to
counter rate avoidance in anticipation.
It follows
that, in my opinion, the appellants are entitled to succeed on the first issue
raised in the appeal.
The second
question directly raised in the appeal is whether, in calculating the period
reasonably required for carrying out the customary work which remains to be
done to the building, the period required for certain preparatory operations
should or should not be included in the calculation. The nature of the
preparatory operations in question is sufficiently indicated in the following
summary of the evidence of the appellants’ principal witness on the subject,
which I take from the judgment of Dillon LJ:
Mr Henderson,
who was called by the appellants as an expert on fitting-out of office
buildings, gave in a written report a short summary of the works which would be
involved which he costed at approximately £3m. He then said that, even without
any survey period to ascertain occupier’s requirements, the time taken to
complete the outline design schemes for a building of the size of the Angel
Centre incorporating the facilities he had described would be at least eight
weeks. He said that after the outline design schemes had been accepted by the
client, bills of quantities and contract documentation would be prepared and competitive
tenders would be sought; and the time required, including time for receiving
and analysing the tenders and appointing a contractor, would be about two
months. He produced a bar chart which showed a period of four months, before
the contractor went on site, for outline design, detailed design, local
authority approvals and (spanned by the foregoing) preparation of contract
documentation and tender period.
The factual
accuracy of Mr Henderson’s estimate of four months for this preparatory work is
accepted by the rating authority, but they submit that, on the true
construction of para 9, these necessary preparations to enable the work to be
carried out are distinct from carrying out the work itself and accordingly that
no time is to be allowed on this account in calculating the period reasonably
required for carrying out the work. This submission was upheld by the judge and
the Court of Appeal. It is submitted for the appellants that the preparatory
work is incidental to the carrying out of the work. Counsel emphasises that
para 9 is a deeming provision and submits that, as against the ratepayer, it
should not be construed so as to require any greater assumption contrary to the
actual facts of the case than its language necessarily requires. In the case of
the Angel Centre the actual fact was that on completion of the building apart
from the fitting-out work no preparatory work of the kind described by Mr
Henderson had yet been undertaken. It follows, so it was submitted, that the
period of four months necessary for preparation must elapse before the
fitting-out work could be undertaken and therefore must be included in the
overall period reasonably required for carrying out that work.
It is to be
observed that Mr Henderson’s estimate excludes ‘any survey period to ascertain
the occupier’s requirements’. This exclusion was no doubt deliberately made in
the light of the decision of the Court of Appeal in JLG Investments Ltd
v Sandwell District Council (1977) 20 RRC 61. It was there held under
para 9 that the court could not take into account in calculating the period
reasonably required for carrying out the work the time taken in finding a
tenant. Delivering the leading judgment, Cairns LJ said at pp 65-66:
Counsel for
the ratepayer contends that para 9 is directed only to excluding unreasonable
delay, and that there has been no unreasonable delay in any respect on the part
of his clients here. He asks us to say that the words ‘required for
carrying out the work’ are not the same as ‘required in carrying out the
work’, and points to matters incidental to the carrying out of the work in
addition to the physical activities of performing it. He says that some
incidental matters must surely be taken into account, such as, for instance,
the time taken for the delivery of goods, and perhaps time taken for the
preparing of plans for the work and time taken in obtaining consent under
building regulations for it. I express no opinion upon any matters of that
kind. They might be regarded as something which was indeed incidental to the
carrying out of the work, in the sense that they were an essential part in
addition to the actual job of the workmen in putting in partitions and that
sort
time required for carrying out the work can include also the finding of a
tenant, however convenient it may be to do so, before the work is started.
The ratepayer
accordingly failed and the correctness of that decision is beyond dispute. But
here Mr Henderson’s estimate of the time required for preparatory work assumes
that at the moment when the Angel Centre was completed apart from fitting-out
work, the intending occupier had been identified and his requirements
ascertained in general terms. On this assumption what remained to be done
comprised the several steps described by Mr Henderson as necessary to translate
those general requirements into detailed plans, specifications and a concluded
contract enabling the contractor to go upon the site armed with all the necessary
statutory and byelaw permissions ready to commence the fitting-out work.
Your Lordships
must now decide the point left open by Cairns LJ. Like the Court of Appeal I do
not find it easy. There is much force in the submission made for the
appellants. I do not doubt that the phrase ‘carrying out the work’ is wide
enough to include some incidental operations going beyond the physical
activities of craftsmen and labourers employed to work on the building of which
account must be taken in estimating the period required for carrying out the
work. But it seems to me that a distinction must be drawn between what is truly
incidental and may prolong the period required once the work has been commenced
and what is merely preparatory and necessary to be undertaken before the work
can be commenced at all. We are here only concerned with activities in the
latter category. Nothing turns on the use of the preposition ‘for’ instead of
‘in’. It is dictated by the preceding verb ‘required’. It would be quite
ungrammatical to speak of the period required ‘in’ carrying out the work. If
one asked after the event what period was actually occupied in carrying out the
work, the answer would surely be arrived at by measuring the period between the
contractor’s starting and finishing dates. I can find no sufficient reason to
apply a different test when required by the statute to ask before the event
what period is reasonably required for carrying out the work. Accordingly, I
conclude that the appellants must fail on this second issue.
The remaining
issue calling for examination is that which prompted the Court of Appeal to
remit the case to the judge for reconsideration. Before he could assess what
period was reasonably required for carrying out the fitting-out work which
remained to be done to the Angel Centre on the date of its completion apart
from that work, the judge had to decide the nature and scope of the work on
which to base his assessment. The appellant’s witnesses based their estimates
of the time required on a schedule of work which included the provision of such
facilities as kitchens, restaurants, dining rooms, an executive suite, a
computer suite and conference rooms, as well as office areas. A submission was
made by counsel for the rating authority that most, if not all, this work
should be disregarded. He based this submission on some observations of my own
in a case decided at first instance, Watford Borough Council v Parcourt
Property Investment Co Ltd (1971) 17 RRC 19. The judge accepted this
submission as the following paragraph from his judgment indicates:
In my view if
the statutory formula is to be satisfied a distinction must be drawn between on
the one hand work required to complete the erection of the building, that is to
say to render it capable of or available for occupation as an office building;
and on the other hand work required by the proposed occupier, to make his
occupation more convenient or more comfortable. The test, derived in particular
from the case of Watford Borough Council v Parcourt Property Investment
Co Ltd was correctly stated by Mr Horton in the course of his submissions.
It is not what an actual tenant may reasonably require but what further work is
essential for the purpose of occupation of that building qua office
building, and account is to be taken of that work, only in so far as it is, or
would be, part of the resulting hereditament. I do not think that (perhaps
subtle) distinction was always apparent, in the evidence of Mr Nash or Mr
Henderson and some of the work they postulated seemed to me to involve
overlapping or confusion of the two categories. That may be hard to avoid and
even harder to quantify, but I do seek to discount that overlapping effect in
considering the period of time reasonably required for carrying out the work.
The Watford
case was one in which the rating authority claimed rates on a newly erected and
unoccupied building in respect of a period before any completion notice had
been served. The first point for my decision was whether it was ‘a completed
building comprised in a relevant hereditament’ on a date when, to use for
convenience the terminology I have adopted in this opinion, the first phase of
development by the speculative developer was complete but none of the
fitting-out work had been done. It was accepted as common ground that the test
to be applied was whether the building was ready for occupation for office
purposes. I held that it was not, on the ground that, at least, the large open
floor areas would require to be divided before it was capable of being occupied
as offices and the partitioning could only be provided so as to form part of
the rateable hereditament. The later decision of the Court of Appeal in Ravenseft
Properties Ltd v Newham London Borough Council [1976] QB 464, to
which I was also a party, affirmed the test of readiness for occupation as the
appropriate test of completion in relation to a building which was the subject
of a completion of notice served under para 8(1)(a) of Schedule 1 to the Act.
In the Watford
case, by the time the case came on for trial the building was occupied and the
fitting-out work required by and provided for the occupier included a goods
lift, a special air-conditioning plant for a computer, a kitchen and a canteen.
I said in my judgment at p 27:
It was argued
by counsel, on behalf of the defendant company albeit with no great enthusiasm,
that the absence of the facilities subsequently provided by Heinz in the shape
of air-conditioning for the computer, a goods lift and a kitchen and canteen,
facilities which undoubtedly could only be provided in a form which would
become part of the hereditament, were themselves facilities necessary to the
occupation of the building. I am unable to take that view. It may be very usual
in these days for the occupier of an office building of this calibre to provide
a kitchen and canteen on the premises for his staff, but it is impossible to
say that it is essential and a fortiori it is impossible to say that it
is an essential feature of any office building to render it ready for occupation
that it should be furnished with a goods lift or with an air-conditioning plant
appropriate to the needs of a computer.
In the instant
case Dillon LJ, after citing the above passage from my judgment in the Watford
case, said:
I cannot think
that Bridge J, in thus dealing in 1971 with what was essentially a question of
fact in relation to a building which had been substantially completed in 1967,
was intending to lay down rules of law for all time . . . The Angel Centre
contains over twice as much office space as the 1967 building with which Bridge
J was concerned. The main building in the Angel Centre would, on the evidence,
have from 1,500 to 2,000 people working in it after it was occupied. In my
judgment it is customary for the fitting-out works for such a building to
include the provision of restaurant and canteen facilities and a directors’
suite as proposed by Mr Henderson. The judgment of Bridge J did not constrain
the judge to hold otherwise. Again computers are found so indispensable in business
nowadays that any new office development like the Angel Centre will be fitted
out with a computer room.
If therefore
the allowance for overlapping which the judge made was made comprehensively,
without regard to minor details, to exclude the kitchen facilities, restaurants
and dining rooms and the directors’ suite and the expenditure in respect of the
computer suite, the learned judge, in my judgment, misdirected himself.
In this court
we do not know how far the judge, in deciding that the period for carrying out
the fitting work should be six months rather than the 12 months proposed by the
appellants, discounted for the fact that the work specified by Mr Henderson
could reasonably be done in several months less than 12 months, and how far he
discounted for supposed overlapping.
Before your
Lordships, counsel for the rating authority, while accepting that the remission
to the judge could not be challenged, in that the judge had failed to specify
the items included in the appellants’ schedule of fitting-out work which he
discounted for what Dillon LJ described as ‘supposed overlapping’, still
strenuously contended that on reconsidering the matter the judge would be
entitled to make a discount in calculating the period reasonably required for
carrying out the fitting-out work in respect of any facilities which were not
proved to be indispensable in an office building such as the Angel Centre.
My Lords,
Dillon LJ was, if I may respectfully say so, entirely right, in the passage
quoted, to point out that my decision in the Watford case was a decision
on the facts then before me and to draw attention to the factual differences
between that case and the instant case derived both from the difference in
scale of the two office buildings in question and from advances in office
technology. But there is a more fundamental reason why what I said in the Watford
case, correctly understood, is quite irrelevant to the question which the judge
here had to decide. The issue in the Watford case, as in the case of Ravenseft,
was whether the building in question was, in the condition as it stood when it
fell to be considered, a ‘completed building comprised in a relevant
hereditament’. Applying the test of readiness for occupation for office
purposes the court in both cases answered that question negatively. All I was
saying in the paragraph quoted from the Watford case referring to the
facilities later provided for an occupier (air-conditioning for the computer,
goods
per se, necessarily lead to the conclusion that the building was not
ready for occupation at that time.
Whenever a
notice is served under para 8(1)(a) of Schedule 1 to the Act specifying a date
when the rating authority assert that a building has been completed and is
comprised in a relevant hereditament, the court must determine whether the
building is ready for occupation on that date. But when a notice is served
under para 8(1)(b) specifying a future date as that on which the building can
reasonably be expected to be completed, the court’s approach must necessarily
be different. Under para 8(1)(b) the court must first determine the nature and
extent of ‘the work remaining to be done to the building’ in order to assess
the time when that work can reasonably be expected to be completed. In
construing this phrase I can see nothing in the context, still less in anything
I said in the Watford case, directed to a different issue, which would
justify the court in disregarding any of the work which was in fact intended to
be done in the completion of a building which on completion would be comprised
in a relevant hereditament on the ground that the facilities proposed to be
provided in the fitting-out work were more elaborate, lavish or extensive than
was strictly necessary to make the building fit for occupation. Thus in a case
where the fitting-out work has already begun when the notice is served and
there is no need to resort to para 9, the building owner will be entitled to
rely on the plans, specifications, contract or other evidence showing what work
is intended to be carried out in order to prove the extent of the work
remaining to be done and the court will base its estimate of the time
reasonably required for completion on that evidence.
If this is the
correct approach under para 8(1)(b) to ‘the work remaining to be done’, a
similar approach under para 9 to the question what work ‘remains to be done’
must, so far as practicable, also be adopted. I would emphasise that the adverb
‘customarily’ in this paragraph serves only to distinguish between work of a
kind done after substantial completion and that done before; it has nothing to
do with the extent of the work. If it is not known at the date of the hearing
of an appeal against a completion notice what fitting-out work is intended, as
was the case here before the judge, the proper test must, I think, be to ask
simply what work will probably be carried out. There is no warrant under either
para 8(1)(b) or para 9 for drawing a distinction such as the judge drew between
essential and inessential work. It goes without saying, of course, that a
distinction is to be drawn, on the ordinary principles of rating law, between
work which will enhance the value of the hereditament on which its eventual assessment
in the valuation list will be based and mere furnishings which will not affect
that assessment.
This brings me
to consideration of the proper disposal of these proceedings if the parties
cannot reach agreement. We have been told that the Angel Centre is now
completed and fully occupied. It seems to me that it would be quite
unreasonable now to remit the matter to Judge Marder on the basis that he
should apply the principles I have endeavoured to expound to the necessarily
speculative evidence he heard in November 1984 as to what the fitting-out work
was expected to involve. It is a principle of perfectly general application
that the court should not speculate when it knows. The court will now be in a
position to know what fitting-out work was done to complete the Angel Centre
before its occupation. If the work was done under a single contract in a
continuous operation, evidence of what that work comprised will, it seems to
me, be the best, if not conclusive, evidence of the extent of the work ‘remaining
to be done’ on August 31 1983 and the time actually taken in carrying out the
work will be cogent, though not, of course, conclusive, evidence as to the
period reasonably required for carrying it out. If the work was done under a
number of different contracts, different considerations may apply, but the
evidence of what was done in fact will still be very relevant to the
determination of the outstanding issue. If justice is to be done between the
parties and if either party wishes to rely on evidence of the kind to which I
have referred, I do not see how they can properly be denied that opportunity,
even though this would effectively mean a retrial of the issue.
I should add
that in all the circumstances it seems to me that a specific remission to Judge
Marder may no longer be necessary. In saying that I imply no personal criticism
of Judge Marder whatsoever. I have no doubt he is fully competent to retry the
case. But if there has to be a retrial a simple remission to the Clerkenwell
County Court may be more convenient to all concerned. It will, of course, be
open to the parties to apply to the court to have the matter assigned for
rehearing to Judge Marder, if they think that to be the most convenient course.
Accordingly, I
would allow the appeal to the extent that I would substitute for para 2 of the
order of the Court of Appeal an order in the following terms:
that this
matter be remitted to the Clerkenwell County Court to determine in the light of
the speeches delivered in the House of Lords and in the light of any further
evidence led by the parties what period was reasonably required after August 31
1983 for carrying out the work then remaining to be done to the Angel Centre
and accordingly on what date the Angel Centre was to be treated as completed
for the purposes of Schedule 1 to the General Rate Act 1967.
Paras (3) and
(4) of the order of the Court of Appeal relate to costs and I apprehend your
Lordships would wish to hear counsel’s submissions in the light of the speeches
delivered before reaching any decision as to that part of the order or as to
the costs of the appeal to this House.
Agreeing, LORD
BRANDON OF OAKBROOK said: I have had the advantage of reading in draft the
speech prepared by my noble and learned friend, Lord Bridge of Harwich. I agree
with it, and for the reasons which he gives I would allow the appeal to the
extent proposed by him.
LORD MACKAY OF
CLASHFERN said: I have had the advantage of reading in draft the speech
delivered by my noble and learned friend Lord Bridge of Harwich. I agree with
the conclusion that he has reached and with the reasons that he has given for
it, subject to a minor reservation.
My noble and
learned friend has stated that there is a fundamental reason why what he said
in the Watford Borough Council v Parcourt Property Investment Co Ltd
(1971) 17 RRC 19, case, correctly understood, is quite irrelevant to the
question which the judge here had to decide. That fundamental reason was that
the issue in the Watford case, as in the case of Ravenseft Properties
Ltd v Newham London Borough Council [1976] QB 464, was whether the
building in question was, in the condition as it stood when it fell to be
considered, a completed building comprised in a relevant hereditament. It seems
to me that considerations which point to whether or not a building has been
completed on a particular date in the past may also be relevant to considering
whether a building can reasonably be expected to be completed at a particular
date in the future. One must look forward to what one can reasonably expect to
be the state of the building at the future date which is in question and to ask
oneself then whether or not, at that date in the light of the reasonable
expectations which are entertained, the building will, at that date, be
completed.
Supposing one
were looking at the building considered in the Watford case before the
partitioning was put in place and it was known that the partitioning would be
completed within a month, the argument could still have been advanced that
since at the end of the month it would have no goods lift or air-conditioning
plant appropriate to the needs of a computer it could not be said to be
completed at the end of the month. It respectfully appears to me that this
consideration would be as aptly disposed of by the remarks my noble and learned
friend made in the Watford case as was the argument that the building
had not been completed on the date in the past that was being considered by
reason of the absence of the goods lift and the air-conditioning plant on that past
date. The mere fact that the date of completion being considered is in the
future rather than in the past does not appear to me to alter the meaning of
completion nor the circumstances that would qualify the building to be
considered as completed.
Although I do
not agree that there is such a fundamental difference between the test to be
applied in respect of past completion under section 8(1)(a) and future
completion under section 8(1)(b) and section 9, I entirely agree that it is not
correct to seek to distinguish between work required to complete the erection
of the building and work required to make the occupation more convenient or
more comfortable since work may fall into both categories. In my opinion, what
one has to do is to look, in the case of a building to be completed, at the
work that is likely to be done to reach that completion to the standard that is
likely to be attained. If the accommodation to be provided is of a higher
standard than normal this may well require the finishing work to take longer
than it would if a lesser standard of accommodation were being aimed at.
LORD ACKNER
and LORD GOFF OF CHIEVELEY agreed with the speech of Lord Bridge of Harwich and
were in favour of allowing the appeal to the extent proposed and for the
reasons given by him.
