Rating–Liability to surcharge on unused commercial building under section 17A of General Rate Act 1967 inserted by section
This was an
appeal to the Court of Appeal from a decision of the Divisional Court reversing
a decision of Oxford City magistrates who had held that the Post Office was
liable to a rating surcharge under section 17A of the General Rate Act 1967.
The premises in question consisted of an unused garage owned by the Post Office
at 69 to 74 St Aldates, Oxford.
D
Micklethwaite (instructed by the city solicitor, Oxford City Council) appeared
on behalf of the appellants; Guy Seward (instructed by the solicitor to the
Post Office) represented the respondents.
Giving the
first judgment at the invitation of Stephenson LJ, TEMPLEMAN LJ said: In the
City of Oxford, only a Cambridge man expects to find a factory or premises
similar to a factory. No one was surprised to discover at 69 to 74 St Aldates a
garage which dealt in motor cars and accessories, in the servicing and repair
of motor cars and in the supply of petrol. The garage premises comprised a car
showroom, repair shops, stores, a petrol filling area and offices and were
rated as commercial premises.
The premises
have not been used since December 1975 and the present appellants, the Oxford
City Council, imposed a rates surcharge on the respondent Post Office, the
present owners of the premises. The Post Office claims that the premises are
exempt from surcharge because they were constructed as a factory, or as
premises similar to a factory for use mainly for industrial purposes.
The Oxford
City magistrates crossed the road to inspect the premises and decided that the
premises were not a factory or similar to a factory and that they were
commercial premises.
On March 26
1979 the Divisional Court of the Queen’s Bench Division, Michael Davies J and
Neill J, reversed the magistrates. The city council appeal to this court.
The rates
surcharge is an invention of section 16 of the Local Government Act 1974, which
enables a surcharge to be imposed on a commercial building during periods of
non-use. The objects of the invention were to encourage owners of property to
make use of commercial property, to protect the rating authorities against loss
of revenue and to discourage the manoeuvre illustrated by Centre Point whereby
a developer generated more security and more cash by keeping vacant commercial
property in a town centre and benefiting from the increasing sums raisable by
mortgage or sale based on vacant possession value than he would have received after
taxation from leasing or using the property. Regulation 3 of the Rating
Surcharge (Exemption) Regulations 1974 (SI 1974 No 1563) exempted from the
rates surcharge ‘Hereditaments which have been and remain constructed or
adapted as factories, mills or other premises of a similar character for use
wholly or mainly for industrial purposes.’
I apprehend
that the exemption was made because factories and mills and similar premises
are unlikely to remain idle for long periods if they can in fact be usefully
occupied whereas commercial premises may fall into disuse for a variety of
reasons, particularly in city centres, to moulder awaiting inspiration and
inflation unless the owners are spurred into action. No doubt there is a
respectable or plausible reason in the present case for the melancholy void now
exceeding four years, but it is not surprising that the Oxford City Council
seek to recover a rates surcharge in respect of these premises.
The Post
Office claims that the garage at St Aldates was constructed as a factory or
similar to a factory because maintenance and repair works were carried out on
the premises.
The
legislative history to which we were referred does not shed light on the
problem whether a garage is a factory or similar to a factory or a shop or
similar to a shop.
Section 22 of
the Rating and Valuation Act 1925 provided for the ascertainment of the
rateable value of houses and buildings outside London excluding ‘Mills,
manufactories or premises of a similar character used wholly or mainly for industrial
purposes’; see the note to Part I of Schedule 2.
Section 3 of
the Rating and Valuation (Apportionment) Act 1928 defined an ‘Industrial
hereditament’ so as to include a factory or workshop unless it was primarily
occupied and used for the purposes of a retail shop and premises of a similar
character where retail trade or business (including repair work) was carried
on. This section was only relevant to the derating of industrial hereditaments
and was repealed by the Rating and Valuation Act 1961.
Section 5(3)
of the Rating and Valuation (Miscellaneous Provisions) Act 1955, amending
section 22 of the 1925 Act and applying that section with modifications for
London, defined the expression ‘non industrial building’ as ‘a building, or
part of a building, of any description, with the exception of factories, mills
and other premises of a similar character used wholly or mainly for industrial
purposes.’
The General
Rate Act 1967 replaced all the earlier legislation, and section 19(2) provided
for the ascertainment of the rateable value of ‘non industrial buildings’ by
deductions from gross annual value. By section 19(6) ‘non industrial building’
was defined as a building of any description other than ‘(a) factories, mills
and other premises of a similar character used wholly or mainly for industrial
purposes.’ Until the present dispute
arose the garage premises now under discussion were rated under section 19(2)
without demur.
The Local
Government Act 1974 amended the General Rate Act 1967. Section 17A(1) of the
General Rate Act 1967 now provides that if for a continuous period exceeding
six months a commercial building is not used for the purpose for which it was
constructed or has been adapted, then, subject to certain exceptions not
material, the surcharge is payable. A commercial building is defined by section
17B(2) as a hereditament whose net annual value falls to be ascertained under
section 19(2), in other words a ‘non industrial building.’
Finally, by
the Rating Surcharge (Exemption) Regulations 1974, made in exercise of powers
conferred by the General Rate Act 1967, it was provided in regulation 3 that no
surcharge shall be payable inter alia in respect of ‘(a) hereditaments
which have been and remain constructed or adapted as factories, mills or other premises
of a similar character for use wholly or mainly for industrial purposes.’ This regulation was necessary because non
industrial buildings included any building not in use.
We were not
referred to any authority which shed light on the question whether a garage
falls within the exemption accorded by the 1974 regulation.
For present
purposes I am prepared to assume that a single hereditament constructed
exclusively for repair work may be a factory or similar to a factory. In the
present case, however, the hereditament was constructed as a garage whose
facilities included repair work. Garage premises of the kind now in question
are constructed or adapted in order to attract and supply the requirements of
individual members of the public who seek to buy or sell motor cars and
accessories, spare parts and fuel and to obtain repairs and servicing of motor
cars. Such premises in my judgment are not a factory but are a retail establishment;
they are not similar to a factory, they are similar to a shop. It matters not
to the customer or the garage whether some or all of the repair and servicing
works are carried out on the premises; depending on the facilities of the
garage, the extent of the required repairs and the skill of
or elsewhere. Alternatively the customer may be persuaded to buy another motor
car. The hereditament in the present case was constructed for the purpose of
enabling the occupiers to supply goods and services directly to the public. In
my judgment such a hereditament is used for commercial purposes. A garage is
the name which identifies a particular class of goods and services which are offered
and supplied by the occupiers directly to the public. A retail shop which
supplies and repairs goods is not similar to a factory. A garage is similar to
a shop.
Mr Seward, who
appeared for the Post Office, pressed the arguments which convinced the Divisional
Court. The garage was registered under the Factories Acts; but those Acts were
intended to protect ‘the safety, health and welfare of employed persons’ and
apply to many premises which are not factories or similar to factories in
common parlance. The garage was a large garage; the proportion of the floor
space attributable to servicing and repairs was 72.5 per cent; the premises
included a repair shop, a paint spray shop and a panel work shop. In addition
Mr Seward relied on the fact that the garage employed mechanics and engineers.
In my judgment a garage which supplies goods and services to the public does
not cease to resemble a shop or begin to resemble a factory according to size
or distribution. The size of the garage, the precise proportion of the floor
space, or the turnover or income attributable to repairs and the presence or
absence of facilities or employees for particular kinds of repairs are all
matters of degree and not of kind. For the reasons I have endeavoured to
indicate, premises constructed for use as a garage of the kind now in question
are similar in character to a retail shop and not similar in character to a
factory. A garage is a commercial enterprise offering sales and repair services
and not an industrial enterprise albeit that on the garage premises some works
of repair similar to works which might be carried out by an industrial
enterprise in a factory or in premises similar to a factory are performed.
In the result
I would allow the appeal and restore the decision of the magistrates.
Agreeing,
STEPHENSON LJ said: Is this garage in St Aldates, Oxford, a hereditament
constructed (or adapted) as a factory, mill or other premises of a similar
character for use (wholly or) mainly for industrial purposes? If it is, it is exempted by regulation 3 of
the Rating Surcharge (Exemption) Regulations 1974 from the rates surcharge
provided for by section 16 of the Local Government Act 1974, as the Divisional
Court have held. If it is not, it was rightly surcharged by the Oxford City justices.
I agree that
the justices were right for the reasons so cogently given in the judgment of
Templeman LJ. Although the premises are registered as a factory under the
Factories Act 1961, I do not agree with the Divisional Court that they are a
factory. No one suggests that they are a mill. But I have doubted whether the
Divisional Court may not have been right in holding that if they are not a
factory, they are similar to a factory. Have they not something in common with
factories and indeed mills? If garage
premises, or at least garage premises of this kind, are not similar to
factories and mills, what premises are?
Or do garage premises lack the characteristic of being used for
industrial purposes and does that deficiency keep them out of the exempted class?
Templeman LJ
has traced the legislative history of this enactment. Its language goes, I
think, further than he went, right back to the dawn of legislation for the
protection of persons employed in mills and factories at the beginning of the
19th century with the Act of 42 Geo 3 c 73 ‘for the Preservation of the Health
and Morals of Apprentices and others employed in Cotton and other Mills, and
Cotton and other Factories.’ Later
legislation extended protection to non textile factories and workshops; Factory
and Workshop Acts continued to be passed until 1937, the precursor of the Act
of 1961. Shops have been the subject of separate legislation culminating in the
Shops Act of 1950 and the Offices, Shops and Railway Premises Act of 1963. But,
as has been pointed out, those Acts relate to the safety, health and welfare of
employed persons and do not decide what I agree is the right question here,
namely whether a garage is a factory or similar to a factory and for use mainly
for industrial purposes–or a shop or similar to a shop–and for use mainly for
commercial purposes.
The difficulty
is that it is similar to both. It is similar to a factory, as Mr Seward pointed
out, in being constructed for manual work and for engineering work; in having
shops or workshops for panel-beating, paint-spraying and repairing. And the
repair workshop of a garage is classified as light industry for the purposes of
planning legislation. On the other side, Mr Micklethwaite called attention to
the characteristics of a factory (or mill) which a garage lacks: production of
some product; dealing with that product in bulk and not with one car at a time
for one individual customer, in which it resembles a retail shop. And this
garage has been rated as non-industrial since 1925.
Faced with
these conflicting characteristics and treatments I would give the words in the
regulation their ordinary meaning which, in the words of the second ground of
appeal, ‘would not (then) include a motor car showroom and repair workshop.’ I do not find it possible to conclude that
because these premises are a factory as defined in section 175 of the Factories
Act 1961, they are also a factory constructed for use mainly for industrial
purposes within the General Rate Act 1967 and the 1974 regulations, or at the
very least bear a strong enough resemblance to a factory so constructed as to
come within the words of the statutory exemption. Looking, as the justices I
think did, at the real nature of these premises and at the object of the
statutory exemption, I agree that they are more similar to a shop than to a
factory and are constructed mainly for commercial purposes, and that we should,
therefore, allow the appeal and restore the justices’ decision.
I am
authorised by Bridge LJ, who is unable to be present, that he agrees with both
judgments.
Appeal
allowed with costs in the Court of Appeal and below. Leave to appeal to the
House of Lords was refused.